Monday, 9 April 2012

Rodinia Lithium's financing deal praised by's Deadlock

Rodinia Lithium's (CVE:RM)(OTCQX:RDNAF) recent $3 million private placement received positive commentary from's lead analyst and publisher Danny Deadlock.
In a recent article, Deadlock said the company was "the poster child for financing juniors in a tough market".
Rodinia Lithium is a Canadian mineral exploration and development company with a primary focus on lithium exploration and development in North and South America.
It is focused on developing Argentina's Salar de Diablillos lithium brine project, which contains a recoverable resource of 2.82 million tonnes lithium carbonate equivalent and 11.27 million tonnes of potassium chloride equivalent.
The project contains a recoverable inferred resource of 952 million cubic metres grading 556 milligrams per litre lithium and 6,206 milligrams per litre potassium.
Last week, the company "took the high road to protect the interests of existing shareholders", Deadlock said, by announcing a $3 million financing using subscription receipts.
The financing involved a structure tied to future production of potash with a conversion feature priced at 45 cents per share – 100 percent higher than the recent trading price.
The financing monetizes the potash from this project as a by-product, creating a "potash stream preferred share" that is interest-bearing and has a one-half common share warrant exercisable at 45 cents.
The company has until 2015 to produce potash and if delayed, it would incur a production penalty, the report noted.
"Rodinia has a world class project in Argentina and is working to prove up a positive feasibility study by the end of 2012. Results to date have been very impressive and as noted back in November, the early economics are very encouraging," Deadlock wrote on
MicroCap's Deadlock highlighted that Rodinia's financing approach was different from other junior resource companies who "finance near the bottom of their charts" by issuing "more cheap paper than they need to" and attaching warrants that make dilution even worse.
"As the stock moves higher, those who participated in the financing often dump their original investment and sit on the warrants. All this excess paper and selling pressure makes it very difficult for existing shareholders to recover their investment," Deadlock wrote.
When speaking of Rodinia's method, Deadlock said: "Not everyone is able to find investors willing to finance under such creative terms, but it demonstrates management’s commitment to protecting and building shareholder value."
In 2012, Rodinia Lithium will focus on continuing to develop the Diablillos project by completing additional drilling and advancing it through to feasibility study.
In November 2011, the company's preliminary economic assessment for Diablillos indicated a potentially low cost operation with a net present value as high as US$964 million, and a mine life of greater than 20 years.
In March, Rodinia said that it started the construction and operation of a pilot production facility at its Argentina project.
The facility is to produce battery-grade lithium carbonate on site, including production of by-products potash and boric acid, giving a glimpse of how a potential final production facility would operate.
Deadlock said he thinks the company is maintaining talks with its strategic partner Shanshan, a major lithium player in China, and with other parties "that may be interested in off-take production agreements".

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