Wednesday, 27 March 2013

Rambler Metals & Mining eyeing M&A in its own back yard

Moving into the black for the first time is a justifiable excuse to splash out on the cigars and a bottle of two of champagne but Rambler Metals and Mining (LON:RMM, CVE:RAB) has plenty of productive uses in mind for its cash flow.
The second quarter of its fiscal year saw the company make its maiden profit in what was its first full quarter as a commercial copper and gold producer.
In the three months to January 31, 2013, the group logged a pre-tax profit of C$1.93mln, compared to a loss in the corresponding quarter of last year of C$1.04mln.
Cash resources at the end of January were C$7.3mln and had declined to C$5.0mln by March 27. However, operating cash flows are anticipated to continue to build throughout the balance of the fiscal year now the revenues are flowing in.
As the company’s treasury increases, the immediate plan is to pay down any outstanding debts but beyond that, the company has its eye on a number of junior miners in Canada that have decent assets but lack the financial firepower to exploit them.
Paying down the debt on the company’s loan makes financial sense, George Ogilvie, president and chief executive officer of Rambler, told Proactive Investors, because the company is paying an annual interest on its debt of 9.25%.
“We want to pay off the debt and then, obviously, these markets are very dire for junior mining or exploration companies, they are finding it very difficult to raise capital, and we’ve been in conversation with several juniors in our own back yard about potentially assisting them or acquiring their properties.
“We think over the next 12 to 18 months, if these markets continue, it’s an ideal opportunity to look at mergers & acquisitions,” Ogilvie said.
In the company’s result statement, Ogilvie said: “We have retained the financial flexibility to fulfil our operational goals of continuing development and exploration of the Ming Copper-Gold Mine while optimising the Nugget Pond processing facility. We will also continue the work we started in Q1 2013, to reduce costs and improve efficiencies.”
In his conversation with Proactive he explained a bit more about the plans for the processing facility at Nugget Pond in Baie Vert, and how this ties in with the acquisition opportunities.
“We’re particularly interested in copper and gold. The reason why is, obviously the mill that we have at Baie Vert is both a gold hydromet [hydrometallurgical] and a copper mill, and we’d like to try to leverage and take advantage of that facility.
“So, one of the things we’d like to do in the next 12 to 18 months as well is put in another crushing and grinding circuit at the Nugget pond mill; it feeds right into our copper flotation plant.
“As soon as we do that, then both the gold mill and the copper mill can be operated independently of one another but also simultaneously,” Ogilvie explained.
Such a development would see the mills processing capability go up from about 650 wet metric tons (wmt) a day to about 1,000 wmt a day.
“Rambler could realise a 30 to 40% revenue increase on its copper production, because the mine is capable of producing at a thousand tonnes a day, and then, suddenly, the gold hydromet is now able to be run simultaneously and we could recognise gold revenue from a separate circuit,” Ogilvie said.
Most win-win scenarios involve victories for two parties; in this win-win case, Rambler gets what in vernacular terms is called “double bubble”.
With clearly identifiable opportunities to achieve a turbo boost to revenue and earnings, the future looks bright but Ogilvie is aware of the potential pitfalls.
“The biggest risk we have in our company at the moment is all of our eggs are in one basket, in that we only have one mine in production,” Ogilvie said.
“If we’ve got the opportunity to diversify a little bit, but stay in our own geographical location, and utilise the assets that we’ve got … it’s going to put the company in a much, much stronger position."
Shares in Rambler rose to 35.75p at one point before drifting back to 33.25p, up 0.375p on the day.

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