$RNX Major Red Flags 

 The single major red flag for $RNX share prices would be a loss of momentum. Will the hype continue to advance the share price? Sprott and $RNX may have used up his ammunition on a gambit to incite a mania.

Secondly, they have no production and no mill. Once the fascination with the gold find is abated, the problem becomes the balance sheet. Will the blasting of high grade ore shoots be enough? The balance of the ore in the mine grades 15g/t.

The Perth Mint will not be processing ore, just the immediately available unrefined doré that comes out of the blasting ad hoc not attached to rock. The appetite for buying boulders that need to be locked in a vault may be very low. That brings you back to the problem of processing ore. They have no toll processing agreement with anyone.

Toll processing will require a net smelter royalty to be paid for pouring gold into doré bars. But, as we’ve seen in from $MMX, $RNX owes them all of the royalty formerly owed to GFI. A 6% royalty on all of the proceeds of the mine, including a net smelter royalty of 1.5%. This staggering royalty added to toll processing at a distant mill and transportation costs will make any mine grading 15g/t more like 13.5g/t.

Any variation to the grade or width of ore will also mean a variation in returns. The whole problem of the royalties owed to $MMX was cautiously kept undisclosed. No mining major will ever consider snapping up BETA Hunt because of the encumbrances, and GFI will have considered this before selling the royalties to $MMX.

Then there’s the question of mining method. They are by default at the moment shrinkage stoping. Should the vein outside the ore shoot require shrinkage stoping and not long hole stoping, this presents another labour-intensive obstacle to reaping consistent profits significantly lower than the high grading they’re doing now.

Should momentum in $RNX be lost, GFI need only wait to make a lowball offer far below the value of the mine. GFI will also have to prise back their royalties from the clutches of $MMX. This drastically increases the cost of purchasing the mining project to bring back 100% control, especially since $RNX will have been high grading their mine and only picking up the gold nuggets, leaving the ore unprocessed. The offer for the mine is with $MMX, not $RNX. It is no longer worthwhile for GFI to even consider buying out $MMX let alone $RNX, because GFI owns a substantial portion of $MMX.

Then you have to wonder whether Sprott can pull another rabbit out of a hat. If GFI is well appraised of its colossal error, then leaving things as they are is the path of least resistance. Sprott May have used up their ability to promote the play and will be very costly to fry short sellers as happened in the first week once more  plus cash warrants for a prospect that cherry picks its nuggets for processing, which they will owe a total of 7.5% royalties just to process.

Sprott likes control of the prospects he invests in. Will it be worth his while (or anybody’s) to spend tens of millions of dollars cashing warrants in a company that owes royalties to a third party and does not have a mill on site and an astronomical float?

The solution is for GFI to allow processing of the BETA Hunt gold ore at their St. Ives mill, without an NSR. But $RNX will still have to pay $MMX royalties, part of which goes back to GFI anyway. Obviously $RNX needs to table a mine plan and reverse split its shares 10:1. $RNX so far has strenuously avoided any declaration they have a mine. They have also kept drilling programmes completed under wraps.

In addition to whether GFI will allow or simply refuse a toll milling agreement, there is no production coming out of the BETA Hunt mine, that was presumably having its ore toll milled at the South Kalgoorlie Operation, belonging to Northern Star Resources.  Northern Star recently purchased the SKO from Westgold Resources in a cash and shares deal.  The filings for RNC Minerals are impossible to sort out since the South Kalgoorlie Operation was bought outright.

CONCLUSION:  What seems obvious under the circumstances is that the company had run out of money, not being  able to rely on toll milling, and unable to sell ore boulders, because the specimen rock was deemed an artifact by the Australian Government.  They were out of money completely, but should the considerable number of warrants be cashed, they will have available money to continue as a going concern.   What was reported in the quarterly MD&A as production numbers were presumably pro-forma, probably in the same amount expected to be raised by warrants being cashed.


-F6