Hartleys sets 55c target for Venturex following $100m debt deal

Perth broker Hartleys has upgraded its 12-month price target for base metal developer Venturex Resources’ (ASX: VXR) to 55c-a-share in the wake of a landmark $100 million term sheet for senior debt funding for its Sulphur Springs copper-zinc project
13th September 2019
Resources Rising Stars

Perth broker Hartleys has upgraded its 12-month price target for base metal developer Venturex Resources’ (ASX: VXR) to 55c-a-share in the wake of a landmark $100 million term sheet for senior debt funding for its Sulphur Springs copper-zinc project in WA.

Hartleys resource analyst Paul Howard says Sulphur Springs is one of “a handful of quality global base metal development stories” and the timing of its development is “still compelling” despite some recent slippage.

The new research note follows the signing of a US$70 million (A$100 million) funding package with global commodity giant Trafigura, comprising a 4-year copper and zinc concentrate pre-payment facility.

“While it is not the cheapest form of senior debt, it is a good outcome for VXR in the present market and refinancing options are still available,” Howard said.

Pre-production capital in Venturex’s 2018 DFS was $170 million and, given the working capital requirement, Hartleys says that one could expect a total funding requirement in the order of $200-210 million.

“Of the $210 million we model, Venturex has secured $100 million from Trafigura and could receive $30 million through the Northern Australia Infrastructure Facility (NAIF) fund.

“The remaining $80 million is assumed to come through equity, and major shareholder Northern Star Resources would need to contribute ~$14 million to maintain its ~18% holding in VXR,” he adds.

Hartleys notes that Venturex has still to secure EPA approval for Sulphur Springs, with the company working closely with the EPA to gain the necessary approvals.

“The Trafigura debt package and off-take has helped de-risk the project but delays in EPA approval has pushed back our assumptions for commencement of mining; however, the impact on our valuation is net neutral,” Howard wrote.

“The soft commodity prices of late and lack of resolution on approvals has no doubt had a bearing on VXR coming off its recent share price highs of February this year.

“Despite this, our NAV remains 54c. Recent Sulphur Springs and Breakers drill results have highlighted additional potential and M&A activity in the base metals space is hotting up.

“Our 12-month price target is now 55cps

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