Many of us here will be familiar with Tony Locantro, a market professional who follows the micro cap explorers on the ASX with particular dedication.
Following the recent quarterly, he reported on RDM. Here it is. (I assume Tony won't mind this being shared now).
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RED METAL (RDM) Two potential "company makers" and 105 million ounces of silver........
As traders focus on instant gratification and the next “moderate” breakout in yet another lithium meetoo, quality juniors such as RDM continue to languish. On the likes of Hotcopper you will see ridiculous posts on the so-called “Lack of action”, “Lack of hope” and “Lack of share price performance". I doubt many realise that the management team are industry professionals and won’t jump on the next fad simply to appease anxious daytraders.
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I continue to rate RDM up to 10c a “VERY STRONG SPECULATIVE BUY” based on,
· Despite being listed since 2003, RDM still has only 174m shares on issue. RDM have prudent with capital and wish to maintain a share structure conducive for significant upside.
· Robert Rutherford is one of the most respected leaders in the junior resource sector. He has been most professional in all my dealings with him over many years, and the respect the industry has for him has been highlighted at a number of SMEDG events and mining conferences.
· Despite the lack of performance relative to your generic lithium junior, RDM since listing has enjoyed some decent spikes from low bases since 2003.
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· The first potential “company maker” to be drilled in the near-term is the
Irindina Project in the Northern Territory. The project is a one heck of a copper-cobalt target and if the 200-300m proof of concept hole is mineralized then I would expect an all-out assault on what provide multiples of the current share price.
· Drilling at Irindina has been delayed by heavy rains and drill rig access and this has seen the share price drift on a lack of news and impatient shareholders. Why anyone would sell out in almost spiteful fashion is beyond me so close to a potential major catalyst.
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* The second potential company maker is the Lawn Hill Project which is prospective for silver-lead-zinc and copper. Red Metal has secured a large ground position surrounding the giant Century zinc-lead-silver deposit following a new basin-wide structural and stratigraphic analysis. There are a number of
strong conductors and the targets are huge for size and potential grade (8%-10% Zinc-Lead). This project rates highly by RDM management but is rarely discussed or factored in elsewhere. In the event of a major discovery this could be of benefit as it will be relatively fresh.
Speculators should be cognisant that in the event of a discovery a stock is likely to be overvalued in the short-term regardless of past share price performance. You only have to look at SIR, SYR and SFR (note the pattern) for this to be supported. Even the industrials often look disheveled and literally “loveless” before they are re-rated on a breakout quarterly.
*RDM’s market capitalisation is more than underpinned (in fact is hideously undervalued) by the Maronan deposit. Maronan is defined by a JORC 2012 compliant Inferred Resource of 30.75Mt @ 6.5% lead, 106g/t silver (using a 3% lead cut-off grade) and 11Mt @ 1.6% copper and 0.8g/t gold (using a 1.0% copper cut-off grade). This equates to about 2Mt of lead metal, 104.9Moz of silver plus 170,000t of copper and 300,000oz of gold. There are companies with lower-grade silver, lower ounces capped well over $50m. RDM could come in for attention based on the inventory of silver and proximity to South 32’s Cannington Mine that in the days of the silver bubble returned >4x its capex every year. Maronan alone should at the bare minimum equate to 18c+ for RDM’s share price.
Although the sell side appears stacked and RDM’s share price continues to drift between 9c-10c, I am suggesting to clients that the sellers are impatient and don’t realise the quality of the company/value of the assets that they are soon to bail out of. In a market that rewards lithium wannabees and meetoos with $80m+ market caps on nothing more than a dream, RDM provides us with an opportunity to own a junior with a suite of potential company makers (there are more I haven’t covered in this piece) that is underpinned by a resource likely to grow exponentially at depth once funding is attained.
Maintain STRONG SPECULATIVE BUY up to 10c as I see on a risk/reward downside to 6.5c (another buying opportunity) and an upside case of 25c-30c for starters.
(20min delay)