Canaccord continue to rate the stock a speculative buy with a $0.50 price target, well above the last traded price of $0.29. The following is an extract from their latest report.
Site visit: Thalanga improving, West 45 coming good:
We came away from our site visit confident that various factors (weather, stope cycling, power reliability) that impacted MarQ’18 production are behind RVR.
An additional underground drill rig, combined with more efficient CRF rates are likely to speed up stoping cycles at West 45.
This is likely to translate to more consistent mill feed and has driven slight upwards revisions to our short-term estimates.
We expect 80kt of mined feed out of West 45 over JunQ’18 (+20% QoQ) for 3.6kt of Zinc production at A$1.24/lb C3 costs (net credits).
We have also adjusted FY19 grade as mining moves into higher grade mineralised lenses.
An updated mine plan is expect to generate maiden production guidance which we expect to be released in early FY19.
Far West development begins, first ore early 2019:
Blasting for the box cut took place in late May’18 with portal development now commencing.
Contractor selection for underground development is expected over the next few weeks with total capital expenditure of ~A$8m comfortably funded by current cash position ($17m at end of MarQ’18).
The current resource remains open at depth and any success to extend the current resource (1.7Mt at 12% Zn Eq.) provides RVR additional feed to utilise the ~50% spare capacity of the Thalanga mill.
Liontown East Resource due mid-2018:
RVR has maintained a dedicated resource definition program at Liontown East with a maiden resource to augment the current resource 700m away at Liontown (2Mt at 8.3% Zn Eq.) due in the coming weeks.
In parallel, RVR has also stepped out to 150m intervals to test mineralisation along strike towards Liontown to verify IP anomalies that were encountered in early geological studies.
Attractive Base Metals exposure:
We expect that as Thalanga stabilises and cost and production guidance are provided, the attractive multiples that RVR trades on will start to get attention.
At a 2.8x FY19 P/CF, RVR is trading at a healthy discount to more established producers such Sandfire Resources (ASX-SFR: $8.71 | HOLD | Patrick Chang) at 7.1x with a comparable mine life (~6 years).
Valuation and Recommendation:
As a result of minor changes to modelled production and cost estimates, our target price remains unchanged at A$0.50/share with a current P/NAV of 0.6x supporting our SPEC BUY recommendation.
Our valuation is based on a NAV 8% for operating assets net of corporate and other adjustments.
We view the price weakness that has prevailed since a soft MarQ’18 was flagged is long dated and not reflective of the key improvement we observed that should lift production QoQ over JunQ’18.
With a limited choice of base metals producers and several upcoming potential catalysts we view RVR as attractively priced at these levels.