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Hartleys Research - Perth
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Column 1 RVR.asx
Recommendation: Buy
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[/table]
Red River Resources Ltd (RVR)
Thalanga reaches production milestone and ramp-up
Red River Resources (RVR) Thalanga mill was commissioned in Sep’17 for first production of zinc, copper and lead concentrates. The restart of the Thalanga zinc mine (100%-owned by RVR) was a major milestone for the Company, and well timed for concentrate sales into improving base metal prices. Zinc prices, in particular remain strong and recently traded at decade high prices of ~US$1.54/lb Zn.
The restart of production at Thalanga was achieved ahead of schedule and slightly under budget (pre-production capex was ~A$17M), with the plant now ramped up to a run-rate of 325ktpa. The mill has capacity to process ore at a rate of 650ktpa and RVR remains focused on finding more ore to increase mill utilisation while extending the mine life of the operation. An updated reserve for West 45 and a maiden reserve for Far West have already extended mine life. Importantly, both underground deposits remain open along strike and at depth, with further mine extensions anticipated.
Quality zinc production with significant exploration upside; Buy
RVR offers quality zinc production exposure (plus other base and precious metal credits) and has significant exploration upside from its portfolio of VMS prospects within the highly prospective Mt Windsor Belt. We have made modest adjustments to our Thalanga model from updated reserves and resources (West 45 and Far West) which have improved our valuation.
We have a strong conviction in our Buy recommendation for RVR. The Company is currently trading a significant discount to our updated NAV of 54cps (up from 45cps), and current spot NAV of 78cps. Our latest 12-month price target is 60cps (up from 45cps), implies upside potential of 100%. RVR is fully funded and remains debt free (undrawn facility for US$10M) with cash (est) of A$15.6M.
Thalanga commissioned with optimised mine plan due MarQ
Recent commissioning saw the processing of 16,645t of low-med grade ore for the total production of 1,433t of concentrate. The first delivery of zinc concentrate was made in early Oct’17, delivered to offtake partner Trafigura, who has a 3-year offtake agreement for zinc and lead concentrates. RVR has received its first payment from the sale of zinc concentrate. Commercial production is anticipated in early Q1 CY18. The current mine plan is based on the mining of three high-grade deposits (West 45, Far West and Waterloo). A maiden reserve from Far West (1.5Mt @ 12.0% ZnEq) was recently released which will update the mine plan. Reserves for West 45 (0.6Mt @ 11.6% ZnEq) have also been updated. The 10% increase in contained metal for the reserve is expected to extend mine life at West 45 to CY19 and provide an opportunity to increase production when the second underground mine (Far West) comes online (2H CY18). The optimised Thalanga mine plan is also expected to be released in Q1 CY18.
Increased exploration in 2018 = Big value driver
We anticipate increased exploration expenditure in CY18. RVR has a portfolio of high-grade deposits and targets within the Mt Windsor Belt to infill and extend to grow mine life and provide opportunities to increase plant utilisation, lifting production. The Mt Windsor Belt remains one of the most prospective geological provinces for VMS mineralisation in Australia.
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8 Jan 2018
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Share Price| |
$0.30
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Valuation| | |
$0.54
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Price Target (12 month)| |
$0.60
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Brief Business Description:| | |
Base metals explorer & developer|
Hartleys Brief Investment Conclusion|
Thalanga operations restarted and now Australia's newest zinc producer with copper, lead, gold, and silver credits. Mine life extending.|
Chairman & MD| | | |
Brett Fletcher (Chairman)|
Mel Palancian (MD)|
Donald Garner (Exec Director)| | | | |
Top Shareholders| | |
Tribeca Investment| |
6.2%
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Directors & Management| |
3.9%
| | | | | | | | |
Company Address| | |
Level 6, 350 Collins Street|
Melbourne, VIC, 3000|
Issued Capital| | |
489.9m
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- fully diluted| |
502.4m
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Market Cap| |
A$148m
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- fully diluted| |
A$152m
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Cash (est)| |
A$15.6m
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Debt (est)| |
A$0.0m
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Debt (undrawn)| |
US$10m
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EV -current| |
A$132.6m
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EV- fully diluted| |
A$134.0m
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Prelim. (A$m)
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FY17a
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FY18e
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FY19e
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Prod (Kt ZnEq)|
0
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15
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33
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Op Cash Flw|
-2.2
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16
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49
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Norm NPAT|
-1.8
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11
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31
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CF/Share (cps)|
-0.8
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3
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9
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EPS (cps)|
-0.8
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3
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9
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P/E|
-40.2
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9.3
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3.5
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Mt
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ZnEq (%)
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Resources | |
5.6
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13.1
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Reserves| |
2.1
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11.9
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Mike Millikan| | | |
Resources Analyst| | |
Ph: +61 8 9268 2805| | |
E: [email protected]| |
Hartleys has completed a capital raising in the past 12 months for RVR for which it has earned fees. Hartleys has provided corporate advice within the past 12 months and continues to provide corporate advice to RVR for which it has earned and continues to earn fees. The analyst has a beneficial interest in RVR shares.| [/table]
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Mike Millikan | Resources Analyst
Level 6, 141 St Georges Terrace | Perth WA 6000 | Australia
AFSL 230052
P +618 9268 2805 | F +618 9268 2800 | M +61 419 907 450
E [email protected]| W www.hartleys.com.au
Hartleys Limited ABN 33 104 195 057, its Directors and their Associates declare that they from time to time hold interests in/and earn brokerage, fees, commissions or other benefits mentioned in documents to clients. Any financial product advice contained in this document is unsolicited general information only. Do not act on advice without first consulting your Investment Adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs. Hartleys Limited believes that any information or advice (including any financial product advice) contained in this document is accurate when issued. Hartleys Limited however, does not warrant its accuracy or reliability. Hartleys Limited, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. Hartleys Limited may collect information from you in order to provide any services you have requested. A copy of Hartleys Limited's privacy policy is available on www.hartleys.com.au
Disclaimer/Disclosure
The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities. Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice mentioned in publications to clients.
Hartleys has completed a capital raising in the past 12 months for RVR for which it has earned fees. Hartleys has provided corporate advice within the past 12 months and continues to provide corporate advice to RVR for which it has earned and continues to earn fees. The analyst has a beneficial interest in RVR shares.
Any financial product advice contained in this document is unsolicited general information only. Do not act on this advice without first consulting your investment adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs. Hartleys believes that any information or advice (including any financial product advice) contained in this document is accurate when issued. Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law.
The information in this email is confidential and may be privileged or subject to copyright. It is intended for the exclusive use of the addressee(s). If you are not the addressee, please do not copy, distribute or otherwise act on the email. If you have received the email in error, please contact the sender immediately and delete the email. The unauthorised use of this email may result in liability for breach of confidentiality, privilege or copyright. Hartleys Limited ABN 33 104 195 057, its Directors and their Associates declare they may hold interests in/and earn brokerage, fees, commissions or other benefits from financial products mentioned in documents sent. Any financial product advice contained in this document is unsolicited general information only and does not take into account your objectives, financial situation or needs. Do not act on advice without first consulting your Investment Adviser to determine whether the advice is appropriate for you. If the advice relates to the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure Statement relating to the product, if relevant, before making any decision. Hartleys believes that any information or advice (including any financial product advice) contained in this document was accurate when issued. Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. Hartleys may collect information from you in order to provide any services you have requested. A copy of Hartleys Privacy Policy is available on
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