This represents significant upside for the zinc producer with the stock trading at 26 cents.
The price target is also almost 59% higher than the company’s 12-month high of 41 cents reached on February 2, 2018.
Hartleys' report was issued after Red River’s March quarterly results which showed that the Thalanga operations performed well with recoveries improving and concentrates of a very high quality.
This came despite bad weather impacting operations at the North Queensland project.
The weather caused a number of grid power outages and resulted in lower than anticipated underground ore mined and milled during the quarter.
Additional power safeguards
Red River is implementing additional safeguards to ensure the power interruptions do not impact production during the next wet season.
There were 4,428 dmt of zinc concentrate, 1,523 dmt of lead concentrate and 484 dmt of copper concentrate produced in the March quarter.
The following is an extract from the report:
Zinc recoveries are moving closer to the targeted level of around 89%, up over 14% quarter-on-quarter (qoq) for 86.5% and lead recoveries have also increased over 4% qoq for 73.5% (target about 80%).
While copper recoveries have increased from 36.6% to 50.6%, they are well below the targeted levels of about 80% and further improvements are expected.
The plant was running at the annualised rate of around 320 ktpa in the December quarter, but only achieved a rate of about 250 ktpa in the March quarter.
Filling more mill capacity a key focus
Filling more of the idle mill capacity is a key focus area for RVR, and we envisage increased throughput in coming quarters, especially as stoping production from West 45 underground continues to improve.
Processed grades were lower qoq, but are expected to increase as the ‘honey-pot’ area of high-grade is accessed within West 45.
RVR has introduced a QP hedging program for sales of zinc and lead metal produced, to offset the risk of price volatility during the sales period.
The quarter generated sales revenue of $16.5 million ($17.5 million Dec quarter) for site EBITDA of $3.7 million ($8.6 million Dec quarter).
Costs were higher qoq with payable zinc metal of 4.8Mlb (down from 6.9Mlb) and reported payable C1 cash costs of US$0.84/lb zinc and C3 cash costs of US$1.67/lb zinc.
This was impacted by lower production (and reduced credits), along with increased development and use of cemented rock-fill.
The use of cemented rock-fill is not for the entire mine, just at this stage for the crown pillar level to enable stoping.
Development costs for West 45 are expected to reduce, especially as the decline is now at the bottom of the current mine plan.
Cash at bank at the end of the March quarter was $17.5 million, down from $23.2 million, but additional sales were received in early April of $5.2 million for cash of $22.7 million.
Exploration drilling was somewhat impacted by the higher than average rainfall for the quarter but more outstanding results were reported from Liontown East.
This continues to demonstrate good mineralised continuity with the high-grade system still open.
Maiden Liontown East resource
A maiden resource for Liontown East is expected before the end of 2018.
We see the potential for Liontown and Liontown East to come into the Thalanga mine plan over time.
RVR has significant exploration upside from its portfolio of VMS prospects within the highly prospective Mt Windsor Belt, with the discovery of further high-grade polymetallic mineralisation within the region as highly probable.