Canaccord says Red 5’s June quarter ‘above forecast’, confirms 35c price target

Canaccord Genuity says gold production of 15.2koz from Red 5’s (ASX: RED) Darlot gold mine for the June quarter was above its forecast of 13.3koz, largely driven by higher plant throughput.
16th July 2021
Resources Rising Stars

Canaccord has a Speculative Buy recommendation on the $434 million gold miner, with a price target of 35c-a-share, well above its current price of 18.5c.

“AISC of A$2,461/oz was slightly higher than Canaccord’s estimate of A$2,445/oz with higher volumes mined and milled causing the variance,” said Canaccord analyst Henry Renshaw.

“The result takes production for the full FY21 to 76.1koz at an AISC of A$2,273/oz, which is within the recently revised guidance range of 74-78koz at an AISC of A$2,240-2,290/oz.”

Red 5 reported cash at the end of the quarter of $50 million, inclusive of $28.5 million within a restricted accounted. “KOTH construction consumed $40 million during the period,” Canaccord noted.

“The US$175 million debt facility was undrawn at the end of June, the first draw-down occurred in July.”

Red 5 said in its quarterly that it has completed a detailed review process and is evaluating a number of initiatives to enhance the life of Darlot, including accelerating mine development to access future resource areas. Guidance for FY22 production and costs is expected this quarter.

The company’s King of the Hills mine development remains on track to pour first gold in the June 2022 Quarter.

Macmahon Holdings has been awarded the contract for open pit and underground mining for the first five years, and substantial steel deliveries and major long-lead items are on-site, Canaccord noted. 

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