Valuations

With the end of the financial year, three broker reports on RVR have hit my desk. The reports below are from Hartleys at 45c value and Cannaccord at 35c value, I can't get the Baillieu's report to cut and paste but their price was 36c. As I post this the sp is 17c!! That is less than HALF what the most pessimistic broker has on it. I have a lot of RVR and if I had some spare cash I would buy more!

Hartleys
RED RIVER RESOURCES LTD (RVR)
Set to acquire the Hillgrove Gold-Antimony Project
Red River Resources (RVR) is set to acquire 100% of the Hillgrove Gold/Antimony Project in NSW. The total purchase price for Hillgrove is A$4M,payable in RVR scrip (23M shares, escrowed for 12 months) to the projectvendors (private company Bracken Resources Pty Ltd). The completion ofthe deal remains subject to approval from the NSW Minister for Energy andEnvironment, which should take ~4-6 weeks (early August).
Historical mine, significant infrastructure and +1Moz gold
Hillgrove is located near Armidale in NSW, within a mining district with a longoperational history (started in 1857), and since 2004 over A$180M has beeninvested in the Hillgrove underground mine, processing plant (250ktpa) andassociated infrastructure. Bracken purchased Hillgrove from StraitsResources (now Aeris Resources (AIS)) in 2013, paying ~A$33M, and theninvested over A$40M to refurbish/upgrade the processing plant to producerefractory gold and antimony-gold concentrates. Low antimony prices in 2016,contributed to the mine being placed on care and maintenance thereafter.
The plant can currently produce saleable antimony-gold and refractory goldconcentrates, and with minor upgrade/refurbishment has the potential for golddoré and antimony metal production. Current JORC 2012 resources are2.8Mt grading 5.1g/t Au and 1.7% Sb for 459koz gold and 48kt antimony.In addition, the project contains other deposits with JORC 2004 resources of~3.9Mt grading 4.7g/t Au and 1.3% Sb for 597koz gold and 50kt antimony;highlighting potential for a +1Moz gold resource (with ~100kt antimony).Project tenure spans ~425km2, containing +200 known mineral occurrences.
What is Antimony (Sb) and what is it used for?
Antimony (Sb) is a relatively small market (~140kt in 2018), used in flameretardants, in lead-acid batteries and ammunition. The metal is not traded onthe LME, rather prices are negotiated between producers and end users(smelters, traders etc). Pricing depends on form and purity, with concentratesdiscounted by payable terms and benchmarked to a number of Metal Bulletinquotations. China dominates supply (+70% of global production) but primaryantimony mines are increasingly uneconomic at current prices, and mostneed precious metal credits to be profitable operations. Antimony has beenidentified as a Strategic/Critical Raw Material by the US and the EuropeanUnion on the basis of China’s dominant supply position and the military andindustrial uses of antimony (similar to light and heavy rare earth elements).
Pathway to staged production but study work planned first
The Hillgrove acquisition provides a clear pathway to gold (with antimony)production, and study work to optimise the processing flowsheet (minor plantupgrades) and mine plan (improve confidence) is planned prior to restart. Atthis stage, we have included Hillgrove in our exploration value. We will revisitour modelling upon completion of the transaction, with the restart study (due~12 months), considered a key piece of work required to de-risk the project.A production update for the Thalanga Operation for the JunQ is expected inthe coming weeks, we had previously forecast slightly higher zinc productionqoq, but anticipate lower revenues due to softer metal prices during theperiod.
Our RVR NAV is 46cps, current spot NAV is 50cps and latest pricetarget is 45cps. We maintain our Buy recommendation.

Canaccord
JunQ'19
reportSolid JunQ’19:Cash balance builds
Conc. production of Zinc (9.1kt vs 9.0kt), Lead and Copper was in line with CGe. WhileZinc grades dropped 15% QoQ, access to higher grade Lens 6 ore body over SepQ’19 islikely to lift grade towards reserve (15% ZnEq.). Cu recovery (stable at 71%) remains akey focus as grades lift (0.5% to 1.5% Cu) over FY20 as Far West commences.
Costs (C3) were in line at US$0.87/lb payable Zn; however, site EBITDA ($7.6m) wasbelow CGe ($10.6m) due to lower Zn prices and rising TC/RCs (up three-fold over CY19).Mining costs at West 45 were higher to expose more Lens 6 ore, which is expected tolift SepQ'19 head grade. All up, RVR generated $4.7m in free cash flow, ahead of CGe($2.6m), leading to $25.9m cash at JunQ’19.
FY20 Outlook: Zinc production likely flat, Copper to riseWhile grades from West 45 are expected to lift, mine life will conclude over DecQ’19leading to lower grade over FY20 as Far West feed commences. While initial mine costsare expected to rise, several levels of ore drive development are in place, mitigatingramp-up risk to 400ktpa rates, in our view. RVR are expected to move to quarterly stateroyalty payments over FY20 after $4.2m is incurred over SepQ’19 for FY19.
Overall, we expect Zn production will be flat over FY20 (~20kt) with only modestincreases in Cu production. With flat zinc pricing and rising mining costs, we expect RVRto only be modestly cash flow positive over FY20.

Hillgrove acquisition: Hasten slowlyDuring July’19
RVR acquired 100% of the Hillgrove Gold-Antimony Project in New SouthWales plus $4.3m in environmental bonds for $4m purchased through 23m RVR shares.Conditions Precedent include written ministerial approval (SepQ’19) with tenementslikely to require near term renewal as part of the current mine licence. The asset hasproduced 730koz gold (dore +conc) with antimony metal being prioritised before theasset was placed on C+M in 2016 due to low Antimony pricing.
Over A$180m has been spent at the site since 2004 to upgrade the circuit to alsoproduce a gold/antimony and refractory concentrate through selective flotation alongwith dore production though standard gold cyanide and pressure oxidation leaching.Beside $3m of holding costs, capital outlay is limited to desk top studies assessingprevious plant performance and geological data.
Of the current resource (2.8Mt at 5.1g/t Au and 1.7% Sb) the nearest-term opportunitiesin our view include developing a suitable mine plan at the partially developed high gradeSunlight deposit (680kt at 8g/t Au) and assess lifting conc. payabilities and grades. RVRis expected to phase the work program over H2’FY20 after which time we will be able toascribe value to the project beyond the purchase price of A$4m.
Valuation and recommendation: Our valuation has decreased to A$0.35/sh (previouslyA$0.40/sh) after updating our estimates for the JunQ’19 results and revising our FY20assumptions leading to a flat production profile as Far West ramps up. Our valuationis based on a DCF analysis (NPV8%) for the Thalanga project, plus nominal explorationvalue, net of corporate and other adjustments. We have diluted our share count for thepending Hillgrove transaction and valued the project at cost.