Renforth hives off New Alger, stock gains 15%

2020.08.11

Renforth Resources (CSE:RFN) was rocking Monday, as the market digested news of a buyout regarding its New Alger gold property in Quebec. 

Reaching $0.085 at time of writing, the tiny gold junior, now valued at $17.5 million, has more than doubled over the past month, on news of visible gold found at the Discovery Vein blast area, and the Aug. 10 news release announcing that Radisson Mining (TSX-:RDS) has agreed to acquire the New Alger property for a combination of cash and shares. 

According to the companies, 

The transaction will significantly expand Radisson’s claims in the Bousquet-Cadillac mining camp, which will create scale, and which Radisson believes will enhance its exploration potential and increase [its adjacent property] O’Brien’s appeal to investors and larger producers. In addition, the deal significantly bolsters Renforth’s balance sheet and allows for a significant expansion in planned exploration spending aimed at realizing the full potential of its attractive project portfolio that includes Parbec, Nixon Bartleman, Malartic West, Surimeau and Denain-Pershing. 

Under the arrangement, Radisson will acquire a 100% interest in New Alger and enter into a long-term strategic relationship through a 9.6% equity investment by Radisson in Renforth. 

To fully own New Alger, Radisson will issue Renforth 12 million shares and $500,000 cash upon the transaction closing. A $1.5 million cash contingent payment is payable upon commercial production at New Alger, a sale of New Alger for more than CAD$40 million, or a change of control at Radisson, whichever comes first. 

Renforth plans to do a concurrent financing to raise approximately $3.24 million, to be backed by Radisson’s 9.6% investment in Renforth. The financing is expected to be charity flow-through, whereby Renforth plans to issue 24 million flow-through shares at $0.135/sh, which would represent a 145% premium to Renforth’s most recent financing.

The potential transaction value to Renforth (including contingent payments) is estimated at around $9.5 million, based on Radisson’s three-day volume weighted average share price.

Benefits to Renforth shareholders include:

• Attractive price realized for New Alger while retaining a 5.7% equity interest in Radisson, for continued exposure to upside from the combined O’Brien and New Alger properties.
• Exposure to the ongoing 60,000m drill program at O’Brien as well as the recently completed 1,782 m drill program at New Alger for which assays are pending. 
• A capital infusion at a significant premium to market which, when completed, will increase Renforth’s cash position to approximately $4.7 million proforma the transaction, which represents an 385% increase from pre-transaction levels. This does not include warrants and options which, if exercised, could generate additional cash proceeds of approximately $1.8 million. 

“This transaction delivers to Renforth’s shareholders a significant return on our investment to date in New Alger. This re-positions Renforth as extremely well funded, with cash and securities, to allow us to continue exploration on several of our properties, including our Parbec open pit constrained gold resource. Renforth will not need to carry out any additional, dilutive, funding transactions for the foreseeable future. I believe getting out from under the need to repeatedly raise money, and dilute shareholders, is transformative for Renforth,” said Nicole Brewster, Renforth’s President and CEO. 

The August 10 announcement followed a news release dated Aug. 7 regarding the completion of Renforth’s 1,782-meter drill program at New Alger. 

The 9-hole program targeted the past-producing Thompson-Cadillac mine; and the Discovery Veins, an open-pit target about 250m south of the mine where blasting recently took place as part of a bulk sample program.  

Eight holes were in the Discovery Vein area, including one step-out hole 300m west of the Discovery Veins; the ninth hole was within the former mine area. Assay results are pending. 

Visible gold was identified in the blast rubble/ pits of the Discovery Veins. According to Brewster, the company considers the drill program a success, due to each hole encountering mineralization, such as biotite or sericite alteration, pyrite and arsenopyrite. 

“We did intersect Veins #1 and #2, so together with the previous Vein #3, we did get it all in this area, which is good,” she said. “We have concluded we likely found a fault – an area of structural interest on this property. Something else to learn more about.” 

Historical drill results were used to compile an inferred resource of 237,000 ounces at the mine area, at a grade of 2.1 grams per tonne, in 2014. An updated resource estimate shows 61,500 indicated ounces in a pit-constrained resources, and 123,300 oz inferred, at a respective 1.88 and 1.65 g/t. 

At the Discovery Veins, a large surface stripping campaign in 2017 uncovered 275m of bedrock that exposed gold in quartz veins, found to extend up to 120m deep. 

A 2019 exploration program intersected all three main veins at the Thompson-Cadillac mine, including 4.8m of 5.38 g/t gold, and identified a new exploration target, 200m below the inferred resources. Conceptual tonnage for this area is between 1.7 million tonnes and 2.2Mt, at a grade range of 2.0 to 2.35 g/t. 

A new Sericite Zone within the Cadillac Break assayed 11.2 g/t over half a meter, and remains open on strike. 

Renforth has also identified a 565-square-meter bulk sample area with an average grade of 0.76 g/t in two veins, with a setting in the Pontiac sediments, similar to nearby Canadian Malartic, Canada’s largest gold mine. The veins are the same as those found in the Thompson-Cadillac mine/Cadillac Break part of the property. 

The mini-bulk sample feeds into Renforth’s plan to generate a source of cash, by having the material they dig up processed at one of the area’s many mills, through a toll milling arrangement. Toll milling a limited amount of mini-bulk-sampled material makes sense. It would yield Renforth sufficient cash flow to do additional drilling, and lessen the need to seek financing. 

The area’s mines are mining deep. Volumes are slowing and decreasing. They would likely welcome another source of ore that could easily be crushed and trucked in from Renforth.

“There’s definitely opportunity to utilize excess capacity and vulnerability,” said Brewster. 

Remember, Renforth doesn’t have to hunt for mineralization, they already have it at New Alger, Parbec, Malartic West and Surimeau. 

With the company cashed up from the New Alger acquisition, Renforth is planning on turning its attention to Parbec, where an updated resource filed in May 2020, shows a pit-constrained 101,400 oz in the indicated category, and 100,300 oz inferred. 

Your author likes the deal with Radisson. A boatload of Radisson shares, cash in the bank and a new outlook on life as a prospect generator bodes well for Renforth.

Renforth Resources
CSE:RFR
Cdn$0.05, 2020.07.10
Shares Outstanding 213,836,539m
Market cap Cdn$10.69m
RFR website

Richard (Rick) Mills
aheadoftheherd.com

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