Transaction to Vend New Alger Project Creates Exciting Opportunities for Renforth Resources

Commentary has been presented for more than a year to highlight that Renforth Resources Inc. (CA:RFR – $0.08 & US:RFHRF – $0.06 & GER:9RR – €0.04) is creating shareholder value through the exploration strategy underway at multiple properties. This week the Company reported emphatic confirmation of that fact, as a transaction has been arranged with another Quebec-focused explorer to vend the New Alger property. Radisson Mining Resources Inc. [TSXV – RDS] has entered into a binding agreement to buy 100% ownership of the project for cash and shares.

Under the terms of the deal, Radisson will issue 12 million shares to Renforth upon closing. Renforth will also be paid $500,000 in cash at that time. An additional contingent payment was also agreed to, in the event that Radisson advances to achieve commercial production at New Alger, or if there is a change of control of Radisson, or alternately if New Alger is subsequently sold for a transaction price of $40 million or more. The conditional payment of a further $1.5 million in cash would be due if any of the above three contingencies comes to pass.

In addition, Renforth is proceeding with a financing to raise $3.24 million in cash through the issuance of flow through shares to Radisson at 13.5 cents per unit. This subscription enables Radisson to secure 9.6% minority ownership of Renforth at closing. In effect, the property transaction involves a secondary partnership component as each of the two companies will hold significant ownership in the other following the close.

The deal significantly strengthens the balance sheet for Renforth. The Company will no longer have to issue equity placements to maintain project funding. This will limit dilution of the capital structure and ensure shareholders retain greater leverage to future success.

Partnership with Radisson Enhances the Prospects for Successful Development of New Alger

There are a number of appealing factors to consider for the longer term strategy. Renforth has been able to advance activity with a remarkable restraint in its spending obligations. Few companies in the entire sector can match this financial efficiency for every dollar of exploration spending. Despite this discipline, the Company has achieved enormous success to deliver results in the field. In the aftermath of the transaction Renforth will be positioned with a lavishly funded treasury and no debt outstanding.

Renforth will continue to benefit from a successful development at New Alger as the baton passes to Radisson, through the minority share ownership secured in the transaction. In effect, Renforth will own a slice of a much larger pie, as Radisson also controls the adjacent O’Brien and Kewagama properties. The combined property area will now span more than 5800 hectares. Within this consolidated land position the primary Cadillac Break structure extends for a strike length of nearly 6km, highlighted by three past producing gold mines. There will be the potential to realize synergies through this consolidation that makes the combined project area more attractive than the individual pieces.

Also, Radisson remains fully funded to carry out significant exploration programs at the consolidated project. This advantage may move it along the value curve faster towards a mine development decision. An exploration program is currently underway at O’Brien, budgeted for approximately 60,000 meters of total drilling. This is an ambitious campaign and also serves to emphasize the value for the combined property package.

Future Prospects Remain Attractive

With the ownership of New Alger passing to a partner company, shareholders need not be concerned that Renforth may lose momentum in the ambition to deliver a candidate for mine development. The current roster of property assets includes five other projects and exploration plans have already been announced for several of them.

The focus will now shift to the Parbec Property. Many people consider Parbec to be an even more attractive asset with exceptional upside remaining to be realized. A Beep Mat survey was launched at Parbec to better delineate structural targets under overburden. Diamond drilling is planned to commence after Labor Day. Drilling will target the Cadillac Break structure, along with the diorite splay zone that was outlined in the Pontiac sediments. Renforth will now have the opportunity to complete a larger program if desired with the additional financial clout available. Parbec itself is also a potential target for an acquisition deal in the future due to the presence of the largest open pit gold mine in Canada at its boundary.

Meanwhile the Surimeau Project, also adjacent to the Canadian Malartic mine, is moving to the front burner for exploration activity. Several attractive mineral occurrences are documented historically assays are pending from initial fieldwork. This setting is similar to the resource zones of Canadian Malartic.

Conclusion

Earlier this year, Renforth achieved a milestone in the evolution of a junior explorer when the Company presented expanded gold resources for the New Alger and Parbec properties. In effect, it represented a statement that Renforth had arrived as a successful exploration story to be taken seriously. With the transaction announced this week, Renforth has now trumped its own accomplishments. Attracting a high quality partner in a deal structured as the elusive win-win transaction validates the caliber of the Renforth management team.

The total value of the deal, including a potential contingency bonus payment, amounts to about $9.5 million. To put this in perspective, that is more than the entire market valuation for Renforth not too far in the past. This handsomely repays all of the investments to acquire and advance the project, and creates a substantial capital gain that may now be deployed for the next value creation endeavor.

The transaction has now established the Company among the ranks of highly productive junior explorers to watch, in the midst of an emerging resource bull market. While the transfer of ownership for a superb project like New Alger to another company is somewhat bittersweet, the deal has created tremendous opportunity for Renforth. The partnership with Radisson will also position Renforth amidst a new network of shareholders, contacts and relationships.

Last week Renforth announced that it has closed the final tranche of a private placement, securing an additional $499,600 in cash through the offering. As warrants outstanding from previous placements are exercised, plus the additional contribution of nearly $3.75 million through the Radisson transaction, suffice to say that Renforth will be funded to aggressively continue with its exploration strategy going forward.

Exploration will now shift to other projects without the prospect of additional dilution of the share structure to fund future work. Even under the duress of a fairly limited exploration budget during previous quarters, Renforth developed a reputation as one of the most aggressive explorers in Canada. How much more can shareholders now look forward to the future with the treasury fully funded and a suite of property holdings that await further investigation? Smallcaps Recommendation: BUY.

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