Baillieu Holst and Canaccord Genuity (Australia) both have speculative buy recommendations on Red River, and their price targets have been lifted.
Baillieu now targets $0.51, with Canaccord $0.45. Following are extracts from the reports.
Ore in the mill: Baillieu
Production and sales start at Thalanga: The Thalanga mill was fully commissioned in the September Quarter and processed low to medium grade ore at a rate of 325ktpa with treated ore at only 16.6kt.
Zinc concentrate production started on 8th September with a total of 1,433t of concentrate produced and RVR’s first shipment of 150t of Zinc concentrate on 11th October.
We were positively surprised by the ramp-up and the rate achieved.
The first stope was fired at the West 45 underground mine on 8th September with this ore feeding the mill in the December Quarter and beyond. RVR finished the quarter with $15.5m in cash and no debt.
Investment view: As discussed in our Initiation (17 October) we assume that the restart plan being followed by the company is only an interim option and will be superseded by the development of a longer life development of more than three orebodies.
Our modelling indicates that the orebody developments can maintain 300-450ktpa of treatments without having to resort to an additional equity funding.
We maintain our BUY recommendation and increase our price target to 51cps in line with our valuation.
Zinc Production underway, increasing reserves next: Canaccord
RVR has transitioned to first production at Thalanga under time and budget validating the strong operating credentials and credibility of management.
First concentrate sales have commenced at an ideal time for RVR with the Zinc price maintaining multi-year highs as a result of continued tightness in the concentrate market.
We expect this to assist in immediate FCF generation and combined with a healthy balance sheet ($15.6m cash, no debt), ideally positions RVR to increase attention towards near mine extensions and testing more regional exploration targets.
Following an update to our production assumptions we have increased our price target to $0.45/share (from $0.35/sh,) and maintain our SPEC BUY rating.
Valuation: As a result of a model roll forward and refining our production assumptions our target price moves to $0.45/share.
This is based on a NPV8% for the company's operating assets with a nominal valuation being ascribed to exploration assets, net of corporate and other adjustments.