Blue Ocean sets eye-catching 70c price target for Venturex Resources
12th April 2019
Resources Rising Stars
Sydney-based institutional broker Blue Ocean Equities has upgraded its recommendation on copper-zinc developer Venturex Resources (ASX: VXR) to “Top Pick” and lifted its price target for the stock to 70c – a healthy premium to its closing price on Friday of 21.5c.
Blue Ocean analyst Steuart McIntyre – who made some big (and accurate) early calls on stocks like Pilbara Minerals (ASX: PLS) and Dacian Gold (DCN) – said in a new research note released last week that Venturex is pursuing two key opportunities which could “materially enhance” its value proposition.
Venturex is developing the Sulphur Springs copper-zinc project in WA which, on Blue Ocean’s forecasts, it says has a “compelling post-tax IRR of almost 50% at spot prices.”
The company first attracted McIntyre’s attention at the Diggers & Dealers Mining Forum last year, and it has already rallied around 30 per cent since he initiated coverage.
“Over the next few months we expect to see (1) exploration results at both the Sulphur Springs project and regionally and (2) results of the gas-power opportunity which could reduce costs and further enhance economics,” McIntyre wrote in the new research report.
He says other key upcoming price catalysts include sign-off from WA’s Environmental Protection Authority (EPA) and Mining Licence amendment to allow open pit mining, confirmation that project debt is in place, a potential deal on off-take and a potential deal to sell a stake in the project.
“With a post-tax NPV of ~A$435 million at spot prices versus a market cap of only ~A$65 million, it’s safe to say we see substantial upside potential for Venturex’s share price,” McIntyre said.
“Given the company’s high-calibre team, supportive major shareholder in Northern Star, which holds 19%, and undemanding valuation, we upgrade Venturex to Top Pick and lift out target to 70c.
“Our forecasts assume the copper price rallies from ~US$2.94/lb to US$3.20/lb over the next ~12 months. Sulphur Springs’ key advantage is its superior ~3% CuEq grade.”
Blue Ocean also cite the significant exploration potential across the broader VMS district at Sulphur Springs, known as the Panorama Trend, as being a key attribute of the story.
“Venturex believes a renewed focus on exploration, making use of modern exploration techniques, could potentially unlock the potential of this prospective district,” McIntyre says.
“Venturex sees excellent potential to discover additional resources through ongoing systematic and focused exploration.”
The Company is currently gearing up for a new phase of exploration at Sulphur Springs following its recently completed $3.65 million institutional placement and will deploy drilling rigs as soon as access and weather conditions permit, following the recent cyclonic weather activity in WA’s far north.
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