Last weekend we presented Rusoro Mining Ltd. (RMLFF) (RML.V) as a stock with 7x to 12x upside after it entered into a settlement with the Venezuelan government to the tune of $1.28 billion U.S. It rose from $0.22 to $0.29 in Canada on the week, fueled by strength in Friday's trading after a mid-week pullback from a hot Monday. After an updated release as to the timing of the payments the company is to receive from Venezuela, we are updating our target to $0.60 U.S. or $0.80 Canadian. While we maintain that the stock has several times the upside, we are confident based on sufficiently conservative assumptions that the stock is worth this much today based on risk-adjusted cash flows. We are up to 711 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have over 3,000 followers on Twitter as well.
Before getting into the numbers, we would like to remind readers of this very important point from last week's news release:
"Rusoro Mining has Received a Settlement Proposal from the Bolivarian Republic of Venezuela
VANCOUVER, Oct. 11, 2018 /CNW/ - Rusoro Mining Ltd. (the "Company" or "Rusoro") announces that it has agreed on the terms of a settlement proposal ("Settlement Proposal") with the Bolivarian Republic of Venezuela ("Venezuela") by which Venezuela agrees to pay Rusoro over US$1.28 billion to acquire the Company's mining data and for full release of the arbitral award (the "Award") issued in favor of the Company in August 2016 by a tribunal constituted pursuant to the Additional Facility of the International Centre for Settlement of Investment Disputes. In addition, it is contemplated that the parties will constitute a Mixed Commission to assess the current status of Rusoro's Choco 10 and San Rafael - El Placer former projects and on the basis of such assessments may by the end of January 2019 partner to exploit those projects. Rusoro expects to sign the formal settlement agreement (the "Settlement Agreement") shortly after completion of the schedules to the Settlement Agreement.
Note that Rusoro received a settlement proposal from Venezuela and has agreed to it. This means that Venezuela is not reluctantly resigned to the deal like it has been with other billion dollar awards mandated by arbitration; it has actively put forth a proposal which has been accepted by Rusoro. This proposal presumably has a payment timetable which is acceptable to the company. If Venezuela wants to remain in good faith with the deal that the country itself has put forth, it will do whatever it can to abide by it. Likely in lieu of other settlement deals where it was not the aggressor in settlement like it was here, but passive acceptance of its fate.
The Rusoro deal is the Venezuelan equivalent of a consumer proposal to get out of debt with their creditors, wanting to maintain a good relationship and keep whatever credibility the country has left. Rusoro is led and significantly owned by father and son duo Vladimir and Andre Agapov, Russian businessmen with influence. Rusoro once produced two-thirds of all gold mined in Venezuela.
The news release on Friday states:
Rusoro Mining Executes Settlement Agreement with Bolivarian Republic of Venezuela
VANCOUVER, Oct. 19, 2018 /CNW/ - Rusoro Mining Ltd. (the "Company" or "Rusoro") announces that it has executed a settlement agreement ("Settlement Agreement") with the Bolivarian Republic of Venezuela ("Venezuela") by which Venezuela agrees to pay Rusoro over US$1.28 billion to acquire the Company's mining data and for full release of the arbitral award (the "Award") issued in favor of the Company in August 2016 by a tribunal constituted pursuant to the Additional Facility of the International Centre for Settlement of Investment Disputes.
The Settlement Agreement includes, among other terms:
Venezuela has agreed to pay the Company an initial payment of US$100 million in November 2018. Upon completion of that initial payment, the Company will suspend the legal enforcement of the Award and deliver the Company's mining data to Venezuela.
Venezuela has agreed to pay the balance of the amounts due under the Settlement Agreement in monthly installments over five years, starting in January 2019.
Upon the final and full payment of the Settlement Agreement, the Company will cease all legal activities related to the collection of the Award.
The Company may resume the legal enforcement of the Award if any payment due under the Settlement Agreement is not received by the Company within the periods provided in the Settlement Agreement. The Company may also terminate the Settlement Agreement in certain scenarios if Venezuela defaults on its obligations.
Venezuela retains the right to continue the proceedings to set aside the Award at the seat of the arbitration in Paris. If the Award were set aside, Rusoro will retain any payments made until that date as consideration for the termination of its mining rights and acquisition of its mining data.
In addition, the parties will constitute a Mixed Commission to evaluate the status of Rusoro's former projects and determine if the parties should proceed with a joint venture.
"The signing of this agreement represents a significant milestone in our continued relationship with Venezuela and we are excited for the Company and its shareholders to begin this new chapter," commented Vladimir Agapov, Chairman of Rusoro.
Signing the agreement is a significant development that should result in bullish movement on the stock. How much so? We think RML is worth $0.80 CAD or $0.60 US for RMLFF based on the risk-adjusted present value of the cash flows. As time passes and payments are collected from Venezuela, that target increases towards the $2 vicinity we mentioned in our prior write up.
Rusoro is getting over $1.28 billion US dollars broken down as:
1. $100 million upfront due in November.
2. The remaining $1.18 billion will get split into 60 monthly installments over five years. That comes to $19.7 million US per quarter.
Because Venezuela's finances are in a poor state, we are using a heavy discount rate of 2% per month in order to come up with a present value of the cash flows. The present value of an annuity can be seen here, with P = $19.7 million, r = 2% and n = 60. This would be roughly equivalent to 5 years of $236 million per annum payments at a 24% discount rate. Because payments start in January, this must be discounted for another 2 months at 2% each (annuity formula present values the cash flows to December).
The 60 payments totaling $1.18 billion are worth $683.6 million, about 58% of their face value. The $100 million payment discounted at 2% for one month is $98 million. That comes to a total of $755 million.
From there we have to subtract the costs. We are assuming that the contingent success fees and the fees owed to Calunius Litigation Risk Fund LP will take up 40% of the cash flows and will be paid at the time of receipt. If you read our last piece, you will see that we feel that 40% will be the higher limit, but we have chosen this to be conservative. $755 million multiplied by 60% is $453 million in net profits. Because Rusoro has an accumulated deficit of $882 million, we are assuming that it has sufficient tax loss carryforwards where this net profit will not be subject to income tax.
$453 million in net profits less $97 million in liabilities listed on Rusoro's last balance sheet leads to a net asset value of $356 million. With 585 million fully diluted shares outstanding, this leads to a per share value of approximately $0.60 for RMLFF. Translating these figures to Canadian dollars leads to a $0.80 per share value for RML. We expect the market to react positively to this news on Monday. RML closed at $0.29 in Canada on Friday before trading was halted. If Rusoro trades at a discount to this target on Monday, we view that as a continued investment opportunity because the market is using a more aggressive discount on the cash flows than we are. Under this circumstance, we would assume the stock would have a more substantial rise upon cash flows coming in and on time, starting in 2-6 weeks.
Again, this is our target value for Rusoro today after the settlement news. This should rise with time to $1.00 to $2.00 and possibly more than that upon successful collection of the upfront and monthly payments. We are fairly confident that Venezuela will make these payments a priority because Rusoro once produced two-thirds of all gold mined in Venezuela and the country wants to get back into the good graces with this company to get the mine up and running and the Russians and Chinese in general after the nationalization that took place under the Chavez regime.
Disclosure: We are long Rusoro Mining
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The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
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The dividend stock report from dividendstocksonline.com
Before getting into the numbers, we would like to remind readers of this very important point from last week's news release:
"Rusoro Mining has Received a Settlement Proposal from the Bolivarian Republic of Venezuela
VANCOUVER, Oct. 11, 2018 /CNW/ - Rusoro Mining Ltd. (the "Company" or "Rusoro") announces that it has agreed on the terms of a settlement proposal ("Settlement Proposal") with the Bolivarian Republic of Venezuela ("Venezuela") by which Venezuela agrees to pay Rusoro over US$1.28 billion to acquire the Company's mining data and for full release of the arbitral award (the "Award") issued in favor of the Company in August 2016 by a tribunal constituted pursuant to the Additional Facility of the International Centre for Settlement of Investment Disputes. In addition, it is contemplated that the parties will constitute a Mixed Commission to assess the current status of Rusoro's Choco 10 and San Rafael - El Placer former projects and on the basis of such assessments may by the end of January 2019 partner to exploit those projects. Rusoro expects to sign the formal settlement agreement (the "Settlement Agreement") shortly after completion of the schedules to the Settlement Agreement.
Note that Rusoro received a settlement proposal from Venezuela and has agreed to it. This means that Venezuela is not reluctantly resigned to the deal like it has been with other billion dollar awards mandated by arbitration; it has actively put forth a proposal which has been accepted by Rusoro. This proposal presumably has a payment timetable which is acceptable to the company. If Venezuela wants to remain in good faith with the deal that the country itself has put forth, it will do whatever it can to abide by it. Likely in lieu of other settlement deals where it was not the aggressor in settlement like it was here, but passive acceptance of its fate.
The Rusoro deal is the Venezuelan equivalent of a consumer proposal to get out of debt with their creditors, wanting to maintain a good relationship and keep whatever credibility the country has left. Rusoro is led and significantly owned by father and son duo Vladimir and Andre Agapov, Russian businessmen with influence. Rusoro once produced two-thirds of all gold mined in Venezuela.
The news release on Friday states:
Rusoro Mining Executes Settlement Agreement with Bolivarian Republic of Venezuela
VANCOUVER, Oct. 19, 2018 /CNW/ - Rusoro Mining Ltd. (the "Company" or "Rusoro") announces that it has executed a settlement agreement ("Settlement Agreement") with the Bolivarian Republic of Venezuela ("Venezuela") by which Venezuela agrees to pay Rusoro over US$1.28 billion to acquire the Company's mining data and for full release of the arbitral award (the "Award") issued in favor of the Company in August 2016 by a tribunal constituted pursuant to the Additional Facility of the International Centre for Settlement of Investment Disputes.
The Settlement Agreement includes, among other terms:
Venezuela has agreed to pay the Company an initial payment of US$100 million in November 2018. Upon completion of that initial payment, the Company will suspend the legal enforcement of the Award and deliver the Company's mining data to Venezuela.
Venezuela has agreed to pay the balance of the amounts due under the Settlement Agreement in monthly installments over five years, starting in January 2019.
Upon the final and full payment of the Settlement Agreement, the Company will cease all legal activities related to the collection of the Award.
The Company may resume the legal enforcement of the Award if any payment due under the Settlement Agreement is not received by the Company within the periods provided in the Settlement Agreement. The Company may also terminate the Settlement Agreement in certain scenarios if Venezuela defaults on its obligations.
Venezuela retains the right to continue the proceedings to set aside the Award at the seat of the arbitration in Paris. If the Award were set aside, Rusoro will retain any payments made until that date as consideration for the termination of its mining rights and acquisition of its mining data.
In addition, the parties will constitute a Mixed Commission to evaluate the status of Rusoro's former projects and determine if the parties should proceed with a joint venture.
"The signing of this agreement represents a significant milestone in our continued relationship with Venezuela and we are excited for the Company and its shareholders to begin this new chapter," commented Vladimir Agapov, Chairman of Rusoro.
Signing the agreement is a significant development that should result in bullish movement on the stock. How much so? We think RML is worth $0.80 CAD or $0.60 US for RMLFF based on the risk-adjusted present value of the cash flows. As time passes and payments are collected from Venezuela, that target increases towards the $2 vicinity we mentioned in our prior write up.
Rusoro is getting over $1.28 billion US dollars broken down as:
1. $100 million upfront due in November.
2. The remaining $1.18 billion will get split into 60 monthly installments over five years. That comes to $19.7 million US per quarter.
Because Venezuela's finances are in a poor state, we are using a heavy discount rate of 2% per month in order to come up with a present value of the cash flows. The present value of an annuity can be seen here, with P = $19.7 million, r = 2% and n = 60. This would be roughly equivalent to 5 years of $236 million per annum payments at a 24% discount rate. Because payments start in January, this must be discounted for another 2 months at 2% each (annuity formula present values the cash flows to December).
The 60 payments totaling $1.18 billion are worth $683.6 million, about 58% of their face value. The $100 million payment discounted at 2% for one month is $98 million. That comes to a total of $755 million.
From there we have to subtract the costs. We are assuming that the contingent success fees and the fees owed to Calunius Litigation Risk Fund LP will take up 40% of the cash flows and will be paid at the time of receipt. If you read our last piece, you will see that we feel that 40% will be the higher limit, but we have chosen this to be conservative. $755 million multiplied by 60% is $453 million in net profits. Because Rusoro has an accumulated deficit of $882 million, we are assuming that it has sufficient tax loss carryforwards where this net profit will not be subject to income tax.
$453 million in net profits less $97 million in liabilities listed on Rusoro's last balance sheet leads to a net asset value of $356 million. With 585 million fully diluted shares outstanding, this leads to a per share value of approximately $0.60 for RMLFF. Translating these figures to Canadian dollars leads to a $0.80 per share value for RML. We expect the market to react positively to this news on Monday. RML closed at $0.29 in Canada on Friday before trading was halted. If Rusoro trades at a discount to this target on Monday, we view that as a continued investment opportunity because the market is using a more aggressive discount on the cash flows than we are. Under this circumstance, we would assume the stock would have a more substantial rise upon cash flows coming in and on time, starting in 2-6 weeks.
Again, this is our target value for Rusoro today after the settlement news. This should rise with time to $1.00 to $2.00 and possibly more than that upon successful collection of the upfront and monthly payments. We are fairly confident that Venezuela will make these payments a priority because Rusoro once produced two-thirds of all gold mined in Venezuela and the country wants to get back into the good graces with this company to get the mine up and running and the Russians and Chinese in general after the nationalization that took place under the Chavez regime.
Disclosure: We are long Rusoro Mining
Bitcoin has gone from a concept worth pennies a few years ago to worth thousands of dollars. It may appear to some who are late to the game that the opportunity to get rich is gone. However, there are still plenty of ways to make some money trading in bitcoin and other cryptocurrency. Here are some links to valuable reports and strategies:
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
Microcap Millionaires Free Video: Cheap Gold Miner Set to Soar in Fall 2017
The dividend stock report from dividendstocksonline.com
The dividend stock report from Dividend Stocks Rock
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
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