On 28th April Red Rock Resources (AIM:RRR) announced that it had entered into a loan agreement in order to secure a substantial investment in a South American resource asset. Yesterday the company provided the market with confirmation of that investment stating that it has entered into a Funding and Cooperation Agreement with the operator of two high grade Gold mines in Columbia!
When it comes to deal making, Red Rock shareholders have grown used to expecting the unexpected. The successfully completed JV with Pallinghurst proved to be a seminal event for the company, and demonstrated how they could punch well above their weight, whilst landing a significant stake in Jupiter Mines currently worth some £13m (or 2.1p per RRR share).
The latest deal has all of the creative hallmarks of Red Rock Resources (LON:RRR) , but more significantly, it also marks a major step change for the company and is a clear demonstration of their scope and the Managements ability to seek out and capitalise on some serious value-generative opportunities. Despite a sharply positive share price reaction to yesterday's news, when it comes to recognition of Red Rocks' true value and growth potential, we still feel that the market is seriously behind the curve.
The agreement is certainly worth further study (we have already gone over this several times and will continue to do so over the weekend), but we thought it would be opportune to ask Chairman Andrew Bell, (who is still in Colombia) to expand on the significance of this deal.
As usual, he was only too pleased to oblige:
MM: In your Chairman's statement from the half yearly report you stated that Red Rock would be focusing its efforts on Migori and 'only opportunities that offer exceptional promise and are a strategic fit are being considered'. Do you feel this transaction represents such an opportunity and if so, could you expand on why this is the case?
AB: First, it is a producing asset with cash flow. It is a step forward for any junior to have regular cash flow, as you know. We have been looking for this for some time. With this project, the combination of interest, advisory fees, and profit share make our revenue stream a proxy for equity earnings initially, while if we exercise our option we…
