ICARUS EXCLUSIVE: Trade Play – ASX.RVR – Red River Resources – Icarus Signals. The home of economic insight

The River Run Redeth? RVR. Trade Insight.

Quick Sum
RVR (Red River Resources Ltd) are a minor metal player, based in the Australian State of Queensland (QLD). Zinc and Lead is their game with a bit of copper/gold/silver thrown in for some icing. Market Cap of $75m. Seen solid steady trend up recently with some good news supporting it. Writing about it here as Team Söze think we are on the cusp of a minerals super cycle. And if we are, then small caps are where your 10 baggers are going to be found.

Their website says “RVR is seeking to build a multi-asset operating business focused on base and precious metals with the objective of delivering prosperity through lean and clever resource development.”

One look at the quality of their website and annual report, and it’s clear they are running a ‘lean’ ship. Absolutely no money spent on those at all. Which I like…. Great websites and glossy annual reports are ridiculous. E.g. BRK spend less that $5 per year on their site. I digress, but is RVR ‘clever’? Let’s dig a little deeper (see what I just did there!!… Fvk I crack myself up!!)

Cash Stitch
Table : Revenue Breakdown – RVR Annual Report FY19

Had a Steller FY19, building on a solid base in FY18. All this is reflected in the growth stats at the bottom of the next table.

Table : Eikon Financials

Chart by Söze
Need to consider what they actually mine. All three key metals are trending up in 2020. Heading the right way, and so is RVR’s share price.

Eikon : RVR 1 Year

IBKR – RVR Weekly

Notice the strong vol pushing the stock up, and very weak vol pulling it down on the 12^th. In fact the two most recent pullbacks have both had small volume attached to it. Got to love that.

Interesting Stuff
Running a high PE at 55.77 as quoted by ASX, or 66.83 by Eikon (check for yourself, I can’t do everything for you) but this doesn’t take much with such low earnings, with the growth that we have seen, this PE will come down, or the share price will go up. Take your pick (another mining dig😊).

Stock saw a 6%ish drop on the 12^th, probably a reflection of the weakness in the ASX200, Gold taking a 7 year record 24hour punch to the balls, and some profit taking. But none of this affects the fundamental potential of RVR.

Note their FY20 reporting date 28^th August (I think). We have seen a poorer year on zinc, copper and lead prices from FY19, so the reporting date is key. Historically, FY18 to 19 to 20 have seen falling prices on these commodities, but the balance sheet outperformed in FY19. Can they keep this up in FY20?

China is the worlds largest producer of Zinc by far, and when you look at the trade war dates with Trump, Zinc responded well to it. So if your macro trading an escalation in hostilities between US and China, here is one to add to your watch list.

Key Seniors
MD – Mr Palancian has more degrees than a compass, came up from the bottom of the mine (literally, was a truck driver at one point), worked in senior roles at Oz Minerals, MMG and Newcrest. Been at RVR for 6 years. All of which we love

Chairman – Mr Fletcher – Is also the new CEO of Ravenswood Gold and been at plenty of other solid mining performers over the years. Tick Tick Tick.

ED – Mr Garner has a high vis shirt on his LinkedIn page, what more do you need to know !! (means he makes lots of money), not as experienced as the first two, but the yellow shirt makes up for it. Plus he has one of the “alphabet-like” list of degrees. So that helps.

CFO – Mr Lovelady – No I’m not shitting you, that is his name. I’m buying this stock just for that… Has come from an operations background, then realised he liked calculators and $s. (who doesn’t)… Been at Oz, Newcrest and some places in Norway. Has moved around a bit, but probably just chasing tail all over the place.

Key Shareholders
Key management have small parcels (1-2ish%) of which none of them sold any last FY. Which is a great sign, at the depth of the KungFlu in March, they held steady !! I like it. But nor did they buy any, so perhaps they were cash flow poor (aren’t most of us atm??, except our mates in the central banks).

Usual suspects in the investment game are on the list, but none are major equity holders, UBS tops the list at 4.86%. Tribeca Investments sold off heavily and steadily from the 23/01/20 up till 27/02/20 distributing 10.7m shares back onto the market. Make of that what you will, doesn’t phase me too much.

Recent Development
10/08/20

Reconnaissance sampling from Orient prospect confirms presence of high-grade silver-indium-lead-zinc mineralisation
East Orient sampling returned assays up to 1,365 g/t Ag, 444 g/t In, 25.8% Pb and 18.7% Zn
West Orient sampling returned assays up to 1,730 g/t Ag, 356 g/t In, 39.1% Pb and 32.1% Zn 30/07/2020
Red River granted two new polymetallic projects hosting the highest-grade known indium deposits in Australia: Isabel Project includes Isabel massive sulphide deposit and Isabel Extended exploration target
Orient Project includes the West Orient epithermal deposit and East Orient exploration target
Indium is identified as a critical mineral by Geoscience Australia

Keyser Söze Disclaimer: I don’t claim to be a rock nerd, but indium is used in technology applications. Used a lot in your TV and semi-conductors. But just because it is critical, doesn’t mean it’s rare. For all the other stats, they are fairly good, but for a detailed breakdown, go to your local bar, find the guy that none of the girls are talking to, there probably a geologist, ask them.

Valuation
RVR is heavily influenced by prices of Zinc. Follows it very closely, which it should. Based on share price today, and share price on historical zinc pricing on November 2019, stock is, in my opinion, trading at fair value. But they have been steadily increasing profitability, and have found potential new sites to mine they have rights over.

As with most miners, it’s a high beta on the underlying commodity, but lags the rise in Zinc.

Zinc Price in April 2018 $2900
RVR Price in April 2018 $0.22
Zinc Price Today $2390
RVR Price Today $0.14

So we are talking for a roughly 21% rise in Zinc prices, we see a 60% rise in RVR.