Wednesday, January 16, 2019

By the numbers - Alex Black's RIO2 - Update II

Here's the Information Circular related to the merger, all 267 pages of it. First to emerge is that RIO's adviser, Raymond James, was retained on April 28, 2018. That means their involvement lasted 30 days as the deal closed on May 31st. Unknown how many millions that cost.
BMO began it's 'advising' services to Atacama in May 2017, butt (_O_), those services were all about soliciting, and 3 live ones eventually came forward. RIO was rejected. After a score of months the preferred deal didn't fly and RIO was then selected. It appears BMO services vis-a-vis RIO specifically was no more than 4 months. So we can conclude the $3.4m to 'advisors' was paid out for a combined 5 months of 'services' provided towards the completed deal.
We've been pouring over RIO2 numbers and the result is more questions ... for sure no answers. Since Mr. Alex Black has seen fit to offer guidance about 'expenses' lets see what it means. $1.2m in accounting/legal. Black neglects to mention the majority of that went to his BridgeMark connected director/arsecrack DLA Piper lawyer Daniel Kenney.

$ 3.4m to 'advisors'. Black states 2 advisors billed for a whooping $3.4m. MORE THAN 30% of the financing to 'advisors' who will never confirm nor deny receiving a penny. This is patently unbelievable and very much so. It fairly reeks, strongly.
Notwithstanding a mountain of 'expenses' that don't appear anywhere, it beggers disbelief that a $10m financing results in less than 12% of it benefiting shareholders. 88% of it went into the ether, and that ether is appearing to be the capitalization into a property of dubious economics where absolutely zero work has been done and where no valuations for that 'asset' exist, either before or after the merger.

Black expects us to believe the closed mouth advisors made out like bandits and 'did' next to nothing to earn it.
RIO2 now has about 110m shares out giving a MC around $55m. Atacama had around 60m shares out and was capped around $36m before the merger. In it's simplest terms the amount of paper has doubled and MC has increased 60% ... while absolutely nothing has gone into the 'asset'. A paper swap does NOT create value. The opposite is true.
I have been unable to explain the rush of insiders to the market at the end of the PP hold period. Black even went so far as to issue an unusual NR breathlessly disclosing his $ 350k odd insider buys. This is VERY BridgeMark. This event implies two things. 1) insiders acted in concert, and 2) the money for the purchases came from somewhere. Did insiders win a lottery? If they didn't it sure appears their money came from kickbacks from the PP. The timing cannot be explained any other way. This is similar to BridgeMark.
RIO2's project is a low grade heap leach proposition. It is almost certainly a non-starter at current gold prices. Best estimates gave an IRR of 12% @ a gold price of $ 1350. Our current PoG is $1287. It was below $1200 at the time of the merger.

Most recent from Alex Black, undisclosed in any NR or the co's website; "Rio2 Limited intends to be qualified to file a short form prospectus under NI 44-101." A 'Short Form Prospectus' allows a public company to avoid disclosures whilst raising MORE money. Black seems to feel his aresome chit carries no stench at all and that ought to be recognized by the regulator.
Black is consumed about what folks are saying in public these days. In my experience a public company with nothing to hide cares not at all. Those with something to hide will try to keep it that way, including threats of litigation. (SLAPP - Strategic Litigation against Public Participation) Black responded to an e-mail ... "I am not going to waste any more time on this with you. I suggest you stop forthwith before you make yourself look worse than you already do."

This monkey isn't running a popularity contest. My reply "RUNNING AWAY from the simplest of questions isn't helping you 'Sir'. We have some disclosure about costs, fees, and yes, the take-over provisions. That might be $ 4m. Your disclosure regarding where the rest of the dough would be going is false and an open lie from day one."
I don't and can't 'know' the answers because the information isn't there. That is by design in this opinion. This isn't the standard BridgeMark scam, although some elements are identical. Other BridgeMark connected chit correctly reports the expenses as such. That isn't the case with RIO2. One must rely on the improbable sputum of Alex Black AND the eventual appearance of audited numbers to confirm precisely how worthless this dopey paper now is.