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Northland Capital Partners View on the City Rockwell Diamonds and Nektan

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Rockwell Diamonds (TSE:RDI) – CORP: FY15 results

Market Cap: CAD$12m; Current Price: 23c

Saxendrift to wind down as Remhoogte/Holsloot wind up

  • Loss for the year attributable to equity holders of parent Co. (14.0) (9.4) 49
  • Source: Northland Capital Partners estimates
  • Rockwell expects to close the acquisition of the Remhoogte/Holsloot Project at the end of May 2015 as all the conditions precedent have been met.
  • The declining grades at Saxendrift mean that Rockwell is planning to reduce operations at the Mine and redeploy the plant at its other development projects.
  • Forecasts, rating and price target remain under review.

NORTHLAND CAPITAL PARTNERS VIEW: Wednesday’s announcement was the start of what we hope will be the rebirth of Rockwell Diamonds. FY15 has been difficult year for Rockwell with a 54% increase in total income for the Company YoY outweighed by a 52% increase in total costs, resulting in a 49% increase in the attributable loss YoY. During the financial year the Company closed the Saxendrift Hill Mine, put Niewejaarskraal on care and maintenance while the geological model is refined and the processing capacity is increased and is now looking to close operations at the flagship Saxendrift Mine due to the declining grades. The securing of a bridge financing facility (27/05/15) is a major development for Rockwell Diamonds that allows the Company to close the acquisition of the Remhoogte/Holsloot Project, associated fleet and three plants. Once Rockwell closes the transaction with Bondeo, expected at the end of May 2015, and owns the projects outright it should then be easier for the Company to secure a longer term finance facility. The acquisition of the Remhoogte/Holsloot Project will be a transformational event giving the Company a higher margin operation that should move Rockwell forward.

 

Nektan (LON:NKTN): Financing

Market Cap: £37m; Current Price: 166p

£8m financing complete 

  • Nektan raised a further £0.9m through the fundraising over-allotment which will be used to further support the growth strategy. The amount consists of £0.75m non-VCT convertible loan notes at the same terms as the previous notes announced on 28 April 2015. Furthermore, a total of 89,552 new ordinary shares have been placed at 167.5p (£0.15m) makes up the remainder.
  • This takes the total funds raised to £8m including the financing of c. £6.7m from existing, new institutional and private shareholders announced on 28 April 2015, of which a proportion to the value of £4.7m was comprised of convertible notes at c. 167.5p and a DTL loan facility for a further £0.6m. DTL has agreed to exchange £0.45m of the remaining £0.6m drawdown under the loan facility for a subscription of non-VCT notes of equivalent value.
  • The funding will support the Company’s expansion in the US tribal and commercial casino market where it has now signed 18 contracts and/or letters of intent with licensed casino operators. Furthermore, the funding will support the continued growth of the Company’s European business where 16 white label partners have gone live on the Evolve platform with a further 14 contracts signed in the past 90 days and finally the funding will enable the business to launch its partnership with The Sun in the UK where it will operate white-label real money gaming from the end of the current financial year (June 2015). 

NORTHLAND CAPITAL PARTNERS VIEW: As alluded to previously despite the funding (£8m) being secured at what looks to be a c. 29% discount to the IPO price in November 2014, the additional funding not only puts the business in a good position to execute on recently signed contracts in the US and white-label solutions in Europe but also provides additional firepower for further growth so the news should be well received by the market in this regard.     


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