Q: How to make a small fortune in precious metals mining?
A: Start with a large fortune and… (etc)
The guy who recently filed a 42m shareholding, Fernando Palazuelo, is a Spanish born property developer who moved to Peru maybe 10 years ago after getting into trouble with the law in his native country. Since then he’s been doing the same sort of buy-renovate-sell business in Peru and with great success too (to the point where he’s branched out and started to do the same to properties in Detroit USA). Anyway, he was one of the guys suckered into buying part of that 35c placement back in November by Kallpa, but instead of putting the loss down to experience and realizing he’s been ripped off, his ego has got in the way and he seems to have decided to become a gold mine magnate. To that effect, he’s bought more shares at the current levels but more importantly, he’s negotiating to buy out the debt positions of Orion, Liberty and Stracon at distressed levels (this desk has heard 26c on the dollar, though that’s unconfirmed). These negotiations have been going on for weeks and R.to has been telling people off record that a “holistic solution” was about to be revealed to the world all that time…any minute now….like next week….no, make that a few more days (etc etc) so there’s obviously some sort of hitch to it all (my guess, Graña). We know Orion are desperate to get out and will happily accept this type of deep haircut in order to recuperate at least some money.
Assuming that happens, he’d then be in tacit control of R.to and would then inject capital via a dilutive raising (lets guess at 200m shares at 10c), which would give R.to the cash needed to pay down its very large and problematic accounts payables (i.e. the local suppliers who have not seen a penny recently).
Bottom line: Fernando Palazuelo is paying something around $50m or $60m to become the one third owner of R.to shares and hold all its debt position as well, in a re-capitalized company that he believes will then be able to get on wit the job of producing gold and making him rich. And that last part of the plan is where it all falls down, because he may be good at property development but he’s obviously a dumbass about precious metals mining, this one might start well in 2018 but he’s destined to lose every single penny of his new hobby.
So now you know.