This helped the company achieve a $3 million EBITDA from its Thalanga operations in Queensland for the quarter.
Red River’s zinc concentrate production figure was 6,199 dry metric tonnes (DMT) in the period, while lead concentration production was 2,016 DMT and copper concentrate production was 1,372 DMT.
Canaccord Genuity and Hartleys have maintained their speculative buy rating for Red River with a target price of 35 cents per share and 39 cents per share respectively.
Stoped ore is expected to contribute ~70% of mined feed from Far West, benefitting from multiple mining fronts that have been developed (1,363m of decline completed) in advance of first production.
We expect copper grade to materially lift vs West 45 (1.6% vs 0.6% Cu) and grade to ramp by MarQ’20 towards reserve grade (1.4Mt at 1.3% Cu+1.6% Pb+5% Zn for 12% ZnEq), with RVR expected to employ grade control measures (sludge drilling, increased sampling) to be more predictive on short-term planning.
With mining method (LHS) leading to a similar productivity (~400ktpa) and cost profile (~A$70/t mined) as West 45, grade presents as the key lever, with infill and extensional drilling also expected ahead of an updated resource estimate.
Valuation and view: We have rolled our model forward for SepQ’19 and made slight adjustments to the Far West ramp-up over FY20 to our Thalanga (NPV8%) valuation. With recent sentiment improving in the zinc market (TC/RC’s peaked, Glencore guidance -85kt over CY19), we view RVR's current trading multiple (P/NAV 0.5, 3x FY20 EV/ EBITDA) as undemanding and retain our SPEC BUY rating and A$0.35/share PT.
Model updated for Thalanga production guide: Spec Buy
We have updated our Thalanga model off the full release of the SepQ report. Our Thalanga NPV8 is largely unchanged at 32cps. RVR has guided ore mined/processed of 90-100kt for the DecQ, at assumed better grades than delivered in the SepQ. Far West will be the dominant ore source following the completion of mining at West 45. Far West has higher copper grades but slightly lower zinc and lead grades than West 45 in the upper parts of the underground mine. Our forecast for the DecQ is payable zinc metal production of ~7.5Mlb at C1 cash cost (pay) of ~US$0.60/lb Zn.
We maintain our Speculative Buy recommendation. Our RVR NAV is 43cps, current spot NAV is 50cps and latest price target is 39cps (unchanged). The recent Hillgrove acquisition is also expected to add significant value over time, and we conservatively see +A$32M (or 6cps) of value