Red 5’s King of the Hills project “bigger than market perception”, says Argonaut

Experienced resource analysts James Wilson and Matt Keane from Perth-based broking firm Argonaut Securities attended a recent site visit to Red 5’s (ASX: RED) King of the Hills Project (KOTH).
13th December 2019
Resources Rising Stars

Experienced resource analysts James Wilson and Matt Keane from Perth-based broking firm Argonaut Securities attended a recent site visit to Red 5’s (ASX: RED) King of the Hills Project (KOTH).

And they were impressed by what they saw.

In a new note, they say the scale of King of the Hills is “bigger than the market perception”, with the project offering numerous “add-ons” to consider over and above the current Feasibility Study (due in mid-2020).

“While the KOTH PFS considered only the open pit opportunity, we see scope for a bolt-on underground to complement the open pit operations, as well as satellite deposit feed,” they said.

“RED is building cash and should exit FY2020 with close to $100 million and a funding gap of $120 million based on the projected $220 million CAPEX for KOTH.

“If gold prices maintain their historic highs, we think this will be a relatively straightforward execution with multiple ore sources.”

Argonaut say that while some geotechnical considerations are still being assessed, such as Geotech drilling to better define the historical slips in the open pit, the company is doing everything to de-risk these areas prior to completion of the Feasibility Study.

“RED also offers discovery appeal by tracing the mineralised contact zone of the ultramafic/granitoid contact which persists for a significant distance down-plunge and across strike.

“Historic drilling has already shown high-grade intercepts up to 600m from the lip of the pit and 300-500m from the existing underground development,” Wilson and Keane say.

They add that the other key takeaways from the site visit include the potential to increase sale while maintaining grade by utilising bulk stopes, and the project’s substantial exploration upside.

“Exploration remains a significant area to add value – and historic drilling suggests high-grade mineralisation persists well beyond the existing development,” they wrote.

“The Feasibility Study is likely to include other areas beyond the open pit cut-back. Around 700-800kos of underground Resources sit beyond the current $1,800/oz open pit shell which are not included in the PFS.”

Red 5 is unrated by Argonaut at this stage. The note can be accessed here

 

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