Big news at Venturex, says veteran stock-picker

9th November 2018
Resources Rising Stars

Venturex Resources’ (ASX: VXR) recent definitive feasibility study (DFS) release has dispensed of many uncertainties around its proposed Sulphur Springs Copper-Zinc Project in the Pilbara, reports veteran small-cap writer Trevor Hoey in the Finfeed stock forum.

Unfortunately for the company, the DFS was released as global equity markets were in freefall, arguably muting the response to what was an impressive set of numbers pointing to the commercial viability of the project, he wrote.

On this note, Hartleys’ resource analyst, Paul Howard, recently described Venturex as ‘severely undervalued’, and his price target of 42 cents was well ahead of the company’s 16.5 cent share price.

Steuart McIntyre from Blue Ocean Equities is even more bullish on the stock. Following the release of the DFS, he initiated coverage of the company with a buy recommendation and a price target of 60 cents.

Commenting on the underlying metrics of the project McIntyre said, “With a post-tax NPV of approximately $310 million at spot prices versus a market capitalisation of only $40 million, it’s safe to say we see substantial upside potential for Venturex’s share price.

“Our forecasts assume the copper price recovers from US$2.87 per pound to US$3.20 per pound over the next 12 months, yielding a higher post-tax NPV of $393 million.”

He went on to emphasise that Sulphur Springs’ key advantage is its superior copper equivalent grade of approximately 3%.

Sulphur Springs is Venturex’s flagship project and the company has made excellent progress during the exploration stages, establishing a sizeable resource to use as a base for the DFS, Hoey continues.

“Not only has this assisted the company in establishing a sizeable resource, but it has also positioned it to move to production relatively quickly with analysts projecting maiden production in fiscal 2020.”

The project has a JORC-compliant Resource of 13.8 million tonnes at 1.5% copper and 3.8% zinc for approximately 200,000 tonnes of contained copper and 520,000 tonnes of contained zinc.

“The main game for Venturex is the Sulphur Springs project and with the DFS now completed, the next logical step is organising project funding to commence development,” Hoey says.

“On this note it wouldn’t be surprising to see major shareholder Northern Star Resources (ASX: NST) assist in the initial funding which is estimated to be $160 million.

“While Northern Star’s core operations are focused on gold, it has been an active supporter of the Sulphur Springs project.

“Not only does the company have a stake of approximately 20% in Venturex, as recently as September it advanced a $2 million unsecured loan to assist in completing the DFS.”

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