A rising RMM share price

Rambler is a copper and gold producer that operates within the Baie Verte Peninsula in Canada. In recent years the company has been struggling. And once Covid-19 hit, it actually came close to insolvency. But based on the latest set of published results, it seems that this risk has receded for now.

The management team successfully completed the sale of its gold circuit as well as other exploration properties and royalties to Maritime Resources for US$2m (all monetary figures are in US dollars). In addition, it was able to perform a major financial restructuring through an oversubscribed share placement that raised a further $10.5m.

Using these funds, the firm negotiated new financing agreements and satisfied existing creditors that brought the overall level of debt back under control. After all this, total debt was reduced from $13.8m in 2019 to $3.5m at the end of 2020. Similarly, the cash on the balance sheet rose from $1.9m to $6.2m.

And so, with a much stronger financial position, the business not only survived the impact of the pandemic but also came out stronger, in my opinion. Therefore the recent surge in the RMM share price doesn’t surprise me.

What’s next for the business?

With the looming threat of bankruptcy no longer a primary concern, all focus is being placed on restoring production volumes to pre-pandemic levels. Ming Mine is the firm’s primary asset and its production levels dropped considerably last year.

The management team has begun restoring Ming to its full capacity of 1,350 tonnes per day. This process is expected to be completed by December this year at the latest. What’s more, the company is also investing in expanding this production capability to 2,000 tonnes per day by 2022. And at the same time, it’s establishing an ore sorting facility at the Ming Mine site to improve operational efficiency.

Needless to say, this sounds very promising. But it’s worth remembering that any delays or further disruptions to its operations could cause significant volatility for the RMM share price. Also, because this is a mining business, it is very susceptible to fluctuating commodity prices. Copper is in high demand at the moment, which has increased its value. But as more mines become operational and the metals shortage nears an end, these increased prices may not last. This could have a negative impact on Rambler’s operating profits.

The bottom line

I believe the worst has passed for Rambler. The business appears to be back on track, and if it can increase its production volumes to the forecast level, I think the RMM share price can continue to rise.

Having said that, like many small-cap mining companies, it still carries a considerable level of risk. Personally, I’m going to wait and see how it progresses in restoring Ming’s production volumes before adding any shares to my portfolio.

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And it seems possible this could be just the start of a more significant move higher for the stock as the group progresses with its development plans. 

Rambler Metals and Mining share price outlook 

The most positive news to emerge from the group last month was the announcement that the business had closed the previously announced sale of non-core assets to Maritime Resources Corp.

The disposed assets include Rambler’s existing gold circuit at the Nugget Pond metallurgical facility and several Canadian exploration properties and royalties. The firm has received $2m of cash for the assets and CAD$0.5m worth of Maritime shares. 

As well as this positive update, the company also published its audited financial results for the year ended 31 December 2020. 

Management described 2020 as a “year of rethinking and replanning.” The coronavirus crisis pushed Rambler to undertake a “major financial restructuring and rescue.” This ultimately resulted in the company’s debt being restructured and several share placings to raise $15m. 

Investors seemed happy to support this cash call, providing the company with more than enough funding to progress with its restructuring and accelerate its strategy. 

And this is why I think the outlook for the Rambler Metals and Mining share price is so positive. The company ended 2020 with cash on the balance sheet of $6.2m and net debts of $3.5m. At the end of 2019, the firm reported a cash balance of just $1.9m with net debts of $13.8m. 

Restored production 

This should provide the firm with enough capital to restore copper and gold production at its flagship Ming Mine to 1,350 tonnes per day, or 493,000 tonnes per year. That’s ahead of 2019’s production level of 406,000 tonnes. 

If the company can hit this level of production, I think it has a bright outlook. In 2019, earnings before interest tax depreciation and amortisation (EBITDA) were negative to the tune of $2.6m. However, that was based on an overall cash cost per pound of copper for the year of $2.58. Today, the price of copper is above $4.30 per pound. 

As such, I’d buy this firm for my portfolio as a speculative growth play. If it can increase production at its flagship asset, I reckon profits could rip higher, which could send the Rambler Metals and Mining share price surging. 

That said, investing in small-cap mining enterprises is an incredibly speculative pastime. Therefore, this stock may not be suitable for all investors. The stock was suspended for an extended period last year when the company’s survival was called into question. There’s no guarantee the business won’t be able to stay away from the edge as we advance.

What’s more, commodity prices can be incredibly volatile. Just because the copper price is high today doesn’t mean it will remain at the current level for the rest of the year. If the price of copper suddenly slumps, the Rambler Metals and Mining share price could follow suit.

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