Red River Resources Limited (ASX:RVR) put in a strong opening quarter to 2018 and as at March 31, the zinc producer had cash of $17.5 million.
The company also had an additional $5.2 million in cash relating to the quarter’s sales from its Queensland-based Thalanga project, received subsequent to the end of March.
The company is in a robust financial position, as it also has financial assets of $8.8 million and an undrawn working capital facility of US$10 million.
Zinc sales lead the way
During the March quarter, Red River generated sales of $16.5 million with $10.4 million from the sale of zinc metal in concentrate.
Sales of lead metal in concentrate generated revenue of $2.8 million, while $3.2 million was received from sales of copper metal in concentrate and precious metals contained in concentrates.
Thalanga generating strong earnings
Thalanga’s quarterly EBITDA was $3.7 million, resulting in the fiscal year-to-date EBITDA standing at $12.3 million.
Canaccord is forecasting group EBITDA of $23.8 million in fiscal 2018, increasing to $63.3 million in fiscal 2019, courtesy of a near doubling in zinc production from Thalanga.
Following a 25% retracement in the company’s share price, it is now trading at a steep discount to the broker’s price target of 50 cents.
Compelling 2019 fundamentals
The company is very much a 2019 story from a valuation perspective and perhaps some investors have lost sight of the company’s medium-term compelling fundamentals.
Canaccord is forecasting zinc production to increase from 11,200 tonnes in 2018 to 21,200 tonnes in 2019, and copper production is projected to increase more than three-fold.
Furthermore, this growth is expected to be sustained into fiscal 2020 with zinc production increasing to 26,800 tonnes.
The broker is forecasting a net profit of $39.5 million in fiscal 2019, representing earnings per share of 8 cents.
This sees the company trading on a forward PE multiple of less than four relative to Friday morning’s opening price of 30 cents.