VANCOUVER — CEII Roma, a mining-focused fund based in the Cayman Islands and advised by private equity firm Plinian Capital, is offering to inject a gross £10.5 million ($19.1 million) into Rambler Metals and Mining (TSXV: RAB; LSE-AIM: RMM) to help expand the company’s Ming copper mine, 17 km east of the town of Baie Verte in north-central Newfoundland.
The investment, priced at 4 pence (7.4¢) per share, would give CEII Roma 261 million shares in Rambler, for a 63% stake in the company, along with another 200 million warrants exercisable within two years at 5 pence (9.2¢) apiece. If exercised, the entire financing package would gross £20.5 million ($37.7 million) and result in CEII Roma owning 75.1% of Rambler.
The initial subscription would be at a 3% discount rate to Rambler’s April 20 closing price, and a 13.6% premium above the 60-day, volume-weighted average price.
Bradford A. Mills and Mark Sander — both senior executives at gold-silver miner Mandalay Resources (TSX: MND), and co-founders of Plinian — would join Rambler’s board as two of the four new non-executives.
“It’s been difficult to find a partner in this market, so a financing of this nature really strengthens our working capital and brings life to our operations,” Rambler president and CEO Norman Williams tells The Northern Miner during a phone interview. “It’s a dilutive financing to our shareholders, but it demonstrates that there are groups out there that see the large potential at the Ming mine, and we’re excited to unlock its value.”
For the second quarter ended Jan. 31, 2016, of Rambler’s fiscal 2016, the company produced 960 tonnes copper metal, 1,889 oz. gold and 12,860 contained oz. silver in 3,621 tonnes of concentrate, down 3% from the first quarter and up 3% from the year-ago quarter.
This led to a quarterly loss of $1.5 million on revenue of $8.3 million, comapred to a loss of $4.3 million on revenue of $10.5 million in the year-ago quarter. On Jan. 31, Rambler had $1.7 million in cash and equivalents and $16.4 million in interest-bearing loans and borrowings.
For the 2016 fiscal year, Rambler forecasts production at Ming of 4,500 and 6,000 tonnes copper metal, plus up to 6,500 oz. gold and 57,000 oz. silver.
The firm has been seeking more financing since completing a prefeasibility study on the project last year, which added lower-grade reserves into the underground mine plan.
Williams says this new material could extend the mine life from six to 21 years, but it would require $66 million in capital expenses to double production to the 1,250 tonnes per day envisaged in the study.
Total proven and probable reserves are 8.7 million tonnes at 1.8% copper and 0.52 gram gold per tonne, for a total 348.1 million lb. copper and 145,300 oz. gold.
The expansion could have a $62.1-million after-tax net present value at a 5% discount rate and a 45% internal rate of return, assuming US$2.79 per lb. copper, US$1,100 per oz. gold and a long-term exchange rate of US88¢ to one Canadian dollar.
“We worked with Plinian on what we thought was a reasonable copper price deck, they have a wealth of experience and connections in the market,” he says. “We’re forecasting a fairly modest US$2.20 per lb. copper in August, then slowly going to US$2.40, then US$2.60 per lb.”
Williams adds that “should we see that level of rebound, there won’t be any further capital injections required for the project,” as the company would fund the rest of the expansion through internal cash flows from operations.
“We’re at the bottom of the market, so this cash injection is quite timely,” he says. “It will allow us to focus on getting the production up just ahead of the next potential rise in the copper price.”
Rambler’s board unanimously supports the deal, and Rambler says directors and certain other shareholder representing 52% of the outstanding shares will vote in favour of it.
If the deal is approved at Rambler’s annual general meeting, scheduled for May 27, Williams says the company will begin most construction in the first half of 2017, and he expects production could ramp up over the next few years.
The company will also look at ways to lower cash costs at the operation using dense-media separation — a processing technology that would concentrate ore before it reaches its Nugget Pond mill, 40 km east of the mine site.
It could also re-establish an existing mine shaft for hoisting.
Williams says the idea is to push throughput upward to 2,000 tonnes per day and mill 1,500 tonnes per day through the separation process, which would essentially remove the waste to hopefully drive copper cash costs down to US$1.50 or US$1.70 per lb.
“Once we get into that range, we can manage any dips in the commodity market that may occur over its mine life,” he says
As for the potential additions to Rambler’s board, Williams is “looking forward to working with the new team and bringing their ideas into play.”
He says that “they have a really sound track record and bring a lot of expertise to the board. They invested in Mandalay, which has a similar story to ours. They started with a main asset, and since then they’ve added to their portfolio. So our aim is to shoot high and go for something similar.
Rambler shares have traded within a 52-week range of 5¢ to 25¢, and last closed at 7¢, two weeks after the Plinian deal announcement. The company has 152.9 million shares outstanding for a $10.7-million market capitalization.
Wow , existing shareholders just got creamed. Kudos to rambler management, with virtually no skin in the game have managed to save the company, at the bottom of the copper cycle. Its easy to give something away when its not yours