The current Regency mines market cap of £3.5m has no relation to the assets of the business.
Regency have a diverse portfolio of assets covering different commodities and jurisdictions. A portfolio that offers significant opportunities and manages the potential risks associated with businesses that have one business in one area.
The following graphic indicates the diverse nature of the business, its potential and the minimum expected revenue.
The slight delays to the coal projects are just that. A much larger deal is anticipated from that previously envisaged.
We know Legacy Hill have been carrying out due diligence. We will soon know the partners involved in the bigger project deal.
Rumours are circulating that a large coal deal is about to be announced. Longterm Regency shareholders await the news with anticipation.
The share price will react on the coal news and the bashers of the stock will disappear into the either.
We then have the following news coming:
1. Conclusion of the deal from the HHL shares sale to Alba.
2. Mambare Nickel/Cobalt News.
3. Motzfeldt news.
Regency Mines market cap will then IMHO be much higher than the current £3.5m.
Regency issue newsletter highlighting their plans for coal production (see here).
Some of the key highlights:
- Regency focusing on ‘cheap production of expensive coals‘
- Focusing on metallurgical coal rather than dirty coal. Required for steel production.
- Rosa announced coal reserve of 453,000 tons is very low as:
- Based on 300′ auger rather than 1200′ Highwaller mining.
- more coal identified
- Val has 100,000 tons/month production target
- production / revenue stream imminent.
- RGM have first mover advantage.
- Rosa coal at $130/t = $4.5m net attributable profit.
As news is released the share price will react accordingly. It is clear from the newsletter that further information is going to be released to the market.
The business is aware figures released to the market are conservative. We await the revised NI 43 101 report and also for RGM to release actual coal outputs. The market will then realise the business is undervalued.
The Regency Mines RNS today (see here) highlighted two significant developments:
1. Rosa – mine permits in place and production has commenced with a weekly revenue stream.
2. Vali Carbon Corporation – 50,000 tpm offtake contract being negotiated.
The following graphic indicates that based on Vali Carbon Corporation alone the revenue for RGM will be a minimum of £9.3m per year and if output reaches 100,000 tpm £18.6m.
These revenue figures take no account of:
- Rosa – year 2 production expected to be 120,000 tpm = revenue of £22.32m/year.
- Rosa – Highwaller production could reach 600,000 tpm = revenue of £111.6m/ year. Being conservative and assume only 50% efficient = £55.8m
- Washed coal revenue of $8 / ton
- Other coal opportunities indicated in the above graphic.
- Regency Mines interests in Motzfeldt, Horse Hill, Mambae and Curzon Energy.
Based on information in the public domain you have to question how the market cap of the business can remain c£5m for much longer.
What will be the catalyst resulting in a share price rerate?
Will it be?
1. The 50,000 tpm offtake contract currently being negotiated being announced to the market.
2. Market realising the implications of the revenue streams and significant under valuation of the business.
3. Announcements from the company regarding their other investment interests.