Not really that difficult to work out why brokers targets have changed, the last quarter has just shown us that not every quarter will be stellar so they are just reflecting the fact it has changed their previous production estimates hence profit targets...of course at the moment sentiment in the sector is low for obvious reasons so not helping.
The brokers reports are estimates based around set targets for exchange rates, metal prices, grades, recovery rates and production and as we can see from the three reports last month their new shareprice targets vary from 48c to 65c...I always prefer to use the conservative one and it still very good...
As none of us can predict the future on any of the variables involved in these reports so we will always be using educated guesses.
Below is from the latest Baillieu report
"Mine and mill performance better than expected: Early in March, RVR
management flagged significant weather-related disruptions to mining and
processing at Thalanga. The result was mined ore of 65,000t (in line with
previous quarter) and processed ore of 62,000t (down 21% on the
previous quarter) which were not as bad as we expected.
The recoveries
to concentrate and concentrate grades, which are more important as the
production process ramps up, are more important from our perspective
and these showed ongoing improvement. Next quarter we will be looking
for an improvement in ore grades as the mix of ore moves from
development to stope ore. Payable zinc production was 4.8Mlbs at a C1
cash cost of US$0.84/lb.
In good financial shape: RVR generated sales revenue of $16.5m in the
quarter – $10.4m from zinc in concentrate, $2.8m from lead in concentrate,
$1.6m from copper in concentrate, and $1.6m from gold and silver in
concentrate. The Thalanga site EBITDA for the March quarter was $3.7m
(YTD now $12.3m) and RVR finished the quarter with $17.5m in cash in
the bank.
Factoring in some costs this quarter:
The company highlighted that
costs in $million terms are tracking well and that costs in $/lb terms are
being impacted by production volumes rather than anything abnormal. We
have adjusted our ramp-up rates slightly and included additional cemented
fill costs in the June quarter, which has reduced our FY18 NPAT by $6.2m
to $21.7m.
In FY19, our NPAT forecast has increased $5.6m to $46.8m
after factoring in better recoveries and a lowering in cemented fill costs."
By any measure this will be a very profitable venture if these estimates prove correct , there is plenty of fat to cover if they are on the low side and plenty of potential on the upside if exceeded...IMO the risk reward is very much in favour of reward at the current shareprice for a longterm holder and also plenty of scope for dividends ...I think the price of ZINC and the exchange rate will have a lot more influence than the production metrics going forward..
In Summary, forget what the market has on our shareprice, it's dealing with today. If you believe tomorrow and going forward will be better based on your own research then if offers a wonderful longterm buying opportunity but as always carries no guarantee...
Cheers Whisky
