Red Rock Resources
A 30th January 2019 update from Red Rock Resources (RRR) included Chairman Andrew Bell “now quite positive on the prospects for our main Congolese licenses”, seeing progress in Kenya towards “regaining our 1.2m oz gold Resource there, with all its exploration and expansion potential” and noting prospective “ground level entry would give us exposure at reasonable cost to ABM’s interesting portfolio of assets in a company that would be debt-free and with funding in place for the next phase of exploration”. So what’s the full story here?
The Congolese interests are early-stage, though the company notes neighbours such as Glencore, China Railways and China Hydro, Jinchuan, and Gécamines and that the Congo “is the prime location” for high-grade deposits of both “cobalt, a material for which demand is rapidly increasing for use in battery cathodes, and the fundamental supply and demand factors for copper also appear positive in the short and long term”. In December the company reported some promising initial exploration results suggesting the presence of copper and cobalt mineralisation at depth. Elections have seen little further progress since, though, with the results now announced, there are preparations for activities to re-start after the rainy season ends in March.
In Kenya, October saw a legal settlement “with no order as to costs, that the applicants (Red Rock and its local partner) are at liberty to apply for licenses under section 225(6) of the Mining Act 2016, and that previous decisions will not be prejudicial to such applications”. Red Rock noted it “has caused the appropriate applications to be made”.
“ABM” is African Battery Metals plc, a holder of exploration licenses in Ivory Coast, Cameroon, and Congo and where Red Rock sees common interests to be developed, and possible synergies to be unlocked. The (AIM-traded) shares in the company were suspended in December after it was unable to secure equity finance from its largest shareholders. A proposed refinancing would see Red Rock with 25 million shares for £0.1 million and its services in connection with the refinancing proposals, with Andrew Bell also becoming Chairman of African Battery Metals.
Meanwhile, results for Red Rock’s year end, 30th June 2018, announced in late November included “Jupiter’s dividend stream more than covering the overhead costs of our business”. This refers to Jupiter Mines, an Australian public company and owner of 49.9% of the producing Tshipi manganese mine in South Africa, in which Red Rock holds 18,524,914 shares (they currently Australian$0.24 each, equating to an overall £2.5 million). The report also included “in relation to our Colombian gold asset… the build-up in the royalty stream we expected to impact our profits was delayed and only now begins at the levels we had expected… at Para Resources where we hold stock” and “Steelmin (ferrosilicon smelter in Bosnia) began production, after repaying in full our loan, and our 22% therefore has some apparent value. The plant is currently closed: it needs some adjustments to achieve its potential and the sharp rise in electricity prices just as it came on stream means that a pause for negotiation of a longer-term tariff will be beneficial”.
The year ended 30th June 2018 results showed net finance income of £0.56 million and administrative expenses of £0.85 million – with the balance sheet showing cash of £2.3 million and total current assets of £3.3 million and non-current assets of £10.6 million (investments in associates and joint ventures, financial assets and receivables) against total liabilities of £2.7 million. They also included;
“The directors are confident in the company’s ability to fund its basic operations from the ongoing stream of dividends from Jupiter Mines expected to continue on a biannual basis, and currently averaging nearly £1m per annum to the company. This quantum is expected to cover the company’s basic overhead costs several times over and allow for additional investment in the company’s projects. Over the longer term, the company expects to receive additional revenue from any transaction involving the company’s gold licences in Kenya as well as from the ongoing development of its investment in Steelmin, which operates a ferrosilicon smelter in Bosnia. Beyond this, the company expects to receive an improved royalty stream from Colombia, as the operator of the gold assets there appears set for significant increases in production during 2018-19.”
This section of the results statement included “our key opportunities for growth and expansion in the near future we expect to be in our Kenyan and Congolese activities. We shall therefore concentrate on the maximisation, by transactions, exploration, or development planning, of the value of these assets to our shareholders and our share price”, “we shall renew and refresh our marketing, public relations, and social media as part of a process of shareholder engagement and regular market updating” and “as we raise our revenues and profitability, we shall turn our focus on to how we may best return some of that that value to shareholders. Our next target will be to obtain a level of stable revenue that will permit either share buybacks or a sustainable dividend”.
This compares to a current share price of 0.65p capitalising the company at below £4 million. The noted asset-backing together with particularly the Kenya (licence regaining) and Congo (including possible pilot programme trucking operation for nearby processing) potential suggest possibly significant upside scope from here.