Edison ups Red Rock Resources asset valuation, says discount to NAV could be 89%

Edison Investment Research has revisited its stance of Red Rock Resources (AIM: RRR), saying the iron ore focused investor could be trading at a 89% discount to its NAV (net asset value) after revising its valuation of exploration assets following an analysis of the gold market.

The previously calculated average in-ground value of resources stood at US$380.66/oz and US$30.74/oz for the measured and indicated categories respectively, which have now risen to US$403.53/oz and US$85.94/oz for ounces listed in London and US$283.68/oz and US$243.76 for ounces listed in Canada.

The research house said that Red Rock, currently valued at 1.725 pence, was trading  at a 17% discount to its NAV based solely on the value of its shareholdings in Jupiter Mines (ASX: JMS), Cue Resources (TSX-V: CUE) and Edison’s estimate of the cash on the company’s balance sheet after a recent equity issue that bagged Red Rock £240,000.

The discount then rises to 48% if the company’s balance sheet is taken into account along with its shareholdings in Kansai Mining (TSX-V: KAN) and Resources Star (ASX: RSL) whose shares are currently suspended from trading.
Should the Mid Migori assets be ascribed the average value of resources in the London and Canadian market and the Cue Resources assets partially revalue, the discount will climb to 88% and to 89% assuming the full revaluation of Cue Resources and the exercise of the Mt Alfred and Mid Migori options.

Edison noted Red Rock’s immediate focus on speeding up exploration at Mid Migori, particularly on tailings dams and also the largest historic anomaly within its leases, saying that both of them had the potential to add hundreds of thousands of ounces to the company’s resource base.

Independent research group Growth Equities and Company Research (GE&CR) maintained its “speculative buy” rating for the stock at the end of January, saying that Red Rock’s shareholdings in Jupiter Mines and Resource Star are currently valued in excess of £12 million, versus Red Rock’s £9.2 million market cap as of 28 January. Therefore its own 1.17 million ounce gold resource and its other operations are valued by the market at ‘less than nothing’, said GE&CR.

http://www.proactiveinvestors.co.uk/companies/news/13487/edison-ups-red-rock-resources-asset-valuation-says-discount-to-nav-could-be-89-13487.html