Trading at a 50% year-to-date drop at 15¢ per share, Red Pine Exploration (TSXV: RPX; US-OTC: RDEXF) has signed an agreement with Franco-Nevada (TSX; FNV; NYSE: FNV) securing an immediate cash injection of $6.8 million.
Red Pine sold a 1.5% net smelter return (NSR) royalty on the Wawa gold project, in the Michipicoten Greenstone Belt of northern Ontario, near Wawa.
“This NSR royalty agreement throws Red Pine a financial lifeline,” said Haywood Capital Markets mining analyst, Pierre Vaillancourt in a note. “It allows them to advance their drill program and aim for a resource estimate by Q224 without heavily diluting their equity.”
However, in light of recent market conditions, Vaillancourt adjusted his predictions, cutting the stock’s price target in half to 40¢ from the previous target of 80¢ per share.
Under the terms of the agreement, after Red Pine completes a feasibility study at Wawa, Franco-Nevada can opt to buy an additional 0.5% NSR royalty. The cost of this acquisition will depend on the mineral reserves' value from the feasibility study, considering a 5% discount rate and the current analyst consensus on commodity prices.