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Red River Resources Limited (ASX: RVR) is a company from the metals and mining sector, engaged in the zinc, copper and lead concentrate production mineral exploration.

On 15th April 2019, Red River Resources Limited provided the market with an update on quarterly activities and the cash flow report for the period ended 31 March 2019.

The stock of RVR closed the day’s trading at A$0.210 (on 15 April 2019), up by 16.667% as compared to its previous closing price. RVR holds a market capitalisation of $88.19 million with approximately 489.93 million outstanding shares.

The March quarter noted a record mine production as well as the mill throughput. The quarterly production of zinc, lead and copper concentrates hit a record high. The quarterly EBITDA from the Thalanga operations was $12.5 million, up by $10.8 million over the previous quarter. As a result of the increased sales of zinc, lead and copper concentrate, the revenue in the March 2019 quarter was $14.4 million higher than the previous quarter. Also, the sales realisation expenses were $2.7 million higher as a result of increased concentrate sales as well as increased zinc concentrate treatment charges. The operating cost also went up by $0.9 million driven by increased production and sales tonnage.

The actual cash costs plus notional costs (C1 Cash cost) declined by 69% as compared to the prior quarter. The decline in the C1 Cash cost was driven by the 21% increase in payable zinc metal, followed by a 52% increase in the value of by-product credits, partially offset by the increased treatment charges for zinc concentrates.

By the end of the quarter on 31 March 2019, the cash at bank was $21.2 million (an increase of $8.5 million), after making an investment of $4.5 million in mine development. As a result of extreme weather conditions, the exploration expenditure was significantly lower during the period. However, the exploration expenditure is expected to increase in the fourth quarter of FY2019, once the drilling activities at the Thalanga begins.

Thalanga Operations - The production of zinc concentrate was 8,952 DMT, which increased by 16% from the second quarter FY2019. The production of lead concentrate was reported as 3,763 DMT, up by 25% from Q2 FY2019 and copper concentrate production was 1,694 DMT, up by 134% from Q2 FY19.

The development activities at Thalanga involved a total underground development at Far West, which exceeded 1,700m during the quarter. The installation of the vent fan was completed during the quarter followed by the successful processing of the 9kt of Far West development ore. The company invested $0.4 million in the exploration activities and $4.5 million in capital development mainly in the Far West mine.

The company generated revenue of $32.6 million from the concentrate sales. The C1 cash cost was down by 69% to US$0.14 per pound zinc as compared to Q2 FY2019. Similarly, C2 cash cost was down by 49% to US$0.37 per pound zinc from the previous quarter, and C3 cash cost declined by 37% to US$0.58 per pound zinc as compared to Q2 FY2019.

Along with the cash balance of $21.2 million, the company had additional cash backed security bond deposits worth $8.5 million by the end of Q3 FY2019. The working capital facility worth US$10 million remained undrawn during the period.

Royalty Update

As announced on 25th February 2019, the company announced that the Thalanga Copper Mines Pty Ltd (TCM) had started the legal proceeding with respect to the payment of royalties against the company and its 100% owned subsidiary, Cromarty Resources. The first case hearing was on 22 March 2019 and is still going on.

In the last six months, the shares of RVR generated a negative return of 5.26%. However, it has given a decent YTD return of 20%.


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