Before the latest debacle RYO was trading in the $2 range. Now it has $75mUS in additional debt, and is back on track, for a while anyways. The interest rate, was reported by someone to be LIBOR +6.5%. The fees associated with this manouevre are probably $9mUS. That leaves $66mUS=$100mCDN. That will quickly disappear, because we are still months from full operations. The debt load that RYO carries, requires those operations to come close to planned costs 120-130%). If there are many snafus on the path to profitability the senior creditors will once again be in the drivers seat. Like the previous sr. ceditors, these new ones aren't in it just for LIBOR+. I think this is a game where the sr. creditors have the odds stacked in their favour, not the shareholders, and PEG, because she has no options, gets in deeper.
If you take 250,000 oz.s, and $130 cash cost, including transport, full operations would generate $42.5m/yr. at $300 gold. Of that at least $33m goes to pay interest. Non-cash items,the other operations and corporate overhead would be other expenses leaving little or no earnings to distribute. Every $10 increase in cost/oz. reduces rev. $2.5m. So to think you can make money on this stock, let alone lose your shirt, you need to believe, that 1) present management can meet their financial objectives, 2) the price of gold will go up. Otherwise I can't see how you can make money here?
Someone also stated that the amortization period on this new debt was two years. The term may be two years, because the cashflows don't support such a short amortization period.
Comment welcome.
Sincerely,
Al Cern |
