According to mining analyst Pierre Vaillancourt of Haywood Capital Markets, the NSR royalty agreement between Franco-Nevada and Red Pine Exploration is a significant financial boost for Red Pine. This agreement enables Red Pine to advance its drill program and work towards a resource estimate by Q224 without diluting its equity. Vaillancourt adjusted his predictions in light of recent market conditions, lowering the stock’s price target to C$0.40 per share from the previous target of C$0.80.
As per the terms of the agreement, once Red Pine completes a feasibility study at Wawa, Franco-Nevada has the option to purchase an additional 0.5% NSR royalty. The cost of this acquisition will be based on the value of mineral reserves determined by the feasibility study, with consideration given to a 5% discount rate and the current analyst consensus on commodity prices.
This deal strengthens Red Pine’s financial position, as it now has a cash reserve of over C$10 million. This allows Red Pine to move forward with its ambitious 20,000-meter drill program. Vaillancourt remains bullish on the company and recommends a long-term “buy,” as funding for the drilling program extends into 2024. He sees this financing deal as a fantastic opportunity for Red Pine to showcase the potential of the Wawa project.
The focus of Red Pine’s program is open pit exploration, which accounts for 90% of the team’s efforts. The remaining 10% is dedicated to exploring areas outside the open pit or at depths exceeding 500 meters. Vaillancourt anticipates regular drill updates from Red Pine, along with an expanded underground mineral resource at both the Surluga and Minto deposits in Wawa. He believes these updates will likely lead to an increase in Red Pine’s stock value.