Hi Guys,
I think it's worthwhile considering Vector's points. I hold a large number of RVR but it is always good to look at the other side of the argument.
Every time I go back to look at the original re-start study I am always reminded about the relatively low NPV for the project of c. A$84m. Removing the cash component from RVR's balance places the EV and NPV within spitting distance of each other.
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I then go and see what has changed since then on the pricing assumptions. Again, I am often surprised at the relatively small upside provided by the current USD prices for Zn, Pb, Cu, Au and Ag relative to the inputs used in the study, especially if using 2018 prices which is when commercial production kicks in.
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So, I think based on the Restart Study, RVR is fairly priced at this point, especially considering that the commissioning and ramp up often presents risks for a mine.
The upside, however, does exist. It simply isn't 'official' or 'proven' yet but, on the balance of probability and the announcements that have been forthcoming over the past several months, it will be soon IMO.
The immediate and most probable upside lies in the LOM extensions from the continued infill and extensional drilling of the to-be-mined ore bodies. West 45, currently being mined is open along strike and at depth:
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Looking at where the drill intersections have hit high grade ore relative to the existing reserve, this ore body could extend considerably and add a material amount of new reserves at nil capex to the mine plan.
Far West, the second ore body to be brought into the mine plan, is likewise showing that there is more ore outside of the existing resource model:
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The third ore body, Waterloo, also shows evidence that there is economic ore outside of the existing resource model that simply needs to be drilled further to add to the resource/ reserve:
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Secondly, it would appear that the current pricing and the now secured off-take agreement will allow more resources, of lower grade, to be added to the reserves, assuming prices hold or improve further. This was highlighted in the recent D&D presentation.
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Looking at the latest R&R Table, which will soon be updated, there is plenty of resources at West 45, Far West and Waterloo (2.9mt) that could be added to the mine plan if the above holds and
possibly adjacent marginal ore that has not been included in resources due to grade that may now be mined:
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Then, looking further afield, ore from Liontown and Liontown East could be added to the mine plan over time:
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... and Liontown East is higher grade than Liontown, but earlier stage:
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So, Investbest, if you look simply at the Restart Plan then fair enough - RVR is at about fair value.
However, I think that on the balance of probability there is a very good chance that the LOM at Thalanga is going to be extended for a very long time past the initial 5 year mine life - that is the speculation.
That is not even considering the regional exploration prospects such as Scarecrow, which based on how these VMS deposits form (in clusters on the seafloor), have every possibility of producing analogue ore bodies at similar depths to what RVR are currently finding.
Whilst I am often wrong, I am comfortable in focusing where I think the ball is going for RVR vs. where it currently is. I think that is the only way to achieve the following as an investor:
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Cheers
John
