Australian (ASX) Stock Market Forum

VAU - Vault Minerals

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Kerry Sun in Market Index - Evening Wrap

Red 5 (ASX: RED)​

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An solid example of a 'continuation' setup​

A couple of gold stocks in today's ChartWatch for obvious reasons: Look where the strength is I always say! In recent Evening Wraps we've investigated larger capitalisation ASX gold stocks, so this time around I thought I'd look at two near the smaller end of the curve.

First up is RED. At a $1.4 billion market cap it's hardly a minnow, and with forecast FY 2024 production of 195-215koz from its King of the Hill operation near Leonora in WA's gold belt, its hardly a minnow in terms of annual production, either.

That's not why I'm interested, though. You know I just like the chart! Bottom left-top-right tells me there's plenty of excess demand. This is what I call a 'continuation setup'.

In this setup I trust those with cash know what they're doing by hoovering up shares - even if it means having to obtain them at even higher prices. Just as trustworthy are those shareholders, or lack thereof, who are selling. They're also likely in the know of RED's fundamental checkmarks, and this is why they're so clearly hanging on for more.

Trends, price action, candles, and a lack of overhead historical supply equals a healthy technical picture. The short term trend remains up as long as the price continues to close above the historical point of demand at $0.33.
 
April update: Seems the main stream commentators are seeing the trend that's been evident since Aug 23.

Price continues to make new yearly highs due to the strong rally in the POG.

March 24 Qtrly report: 4th consecutive qtr >50koz AISC = A$1926/oz (Dec Qtr A$2328/oz) good cost reduction

Red 5 and Silver Lake to merge.

Red 5 was included in the S&P ASX200 index (Effective March 24).
 
May 24 update: Further drilling results confirm that there's more gold and the likelihood to extend the mine life.

POG upward momentum has paused and RED along with many other gold stocks are seeing prices fall a little.
 
June 2024 update: Price has continued to fall lower as the POG falls. We await renewed demand for gold.

RED's buyout of SLR becomes effective. A few Board and Management changes going forward.
 
July 2024 update : Jun Qrtly results not reported yet but preliminary results reported earlier.

Capital reconstruction after the merger with Silver Lake is proceeding. Forward sales and hedging programs for both companies being consolidated. Outstanding debt has been repaid ($93M). Red 5 now has no debt and $360M cash. Forward sales hedged at A$2800.

Production from King of The Hills, Mount Monger and Deflector operations met or exceeded sales guidance figures.
 
Gonna be checking this out tonight. It's rallying right at support during a generally down day (needless to say) and with a prior daily hammer candle!

Not Held

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August 2024 update: FY24 results.

Shareholders to vote on name change, Vault Minerals (VAU) in order to reset investor appeal after its merger with Silver Lake.

Red 5 err Vault holds $453M cash and bullion and has no corporate debt.

Gold sales in FY25 is forecast to be 390K - 430K ounces at an ASIC of A$2250 - A$2450.
Hedging 291K ounces at A$2769 seems crazy with the current gold price A$3700/oz. Assume it was a requirement in order to build KOTH production.

Red 5 err Vault needs to hit production and sales guidance, get rid of the hedging and start to make money for their shareholders. One more thing, how about consolidating the number of shares 10:1 please. Issued capital of 6.8B is embarrassing.

The current share price selloff doesn't look promising considering the rising POG. There may be a reversal trading opp in RED err VAU later in the year.
 
Greg Canavan of 'fat tail investment advisory' has slapped a SELL on this, suggesting to put the proceeds into an unhedged miner such as GOR or WAF. As implied, his main reason for selling is RED's hedging 'fiasco' (my histrionic word) which reduces his sophisticated price valuation to the current price - 0.325. He is also wary of their cash and bullion build-up fearing they'll stuff it up with a misallocation decision. RED has previously been BUY from him.

Not Held
 
RED has gone the opposite direction to a lot of gold stocks over the past 4 months. Maybe it's just because it had such a great run since Aug 23 and coming back to the pack.

Looks like it found that support and now hitting a little resistance. Looks interesting.

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October 24 update: Finally rallying off lows as the gold price continues to make new highs.

Pleased to read of changes in management after the merger between Red 5 and SLR. The new mgt team have the simple job to increase production and reduce AISC costs.

Recent qrtly report mostly Red 5 details with only 12 days of SLR included. The next report will be more important.

I maintain a bullish outlook for VAU now that the merger is complete and mgt has changed. Price has rallied off the recent lows and should continue as the gold rally continues strongly. VAU should get back to ATH and beyond.
 
I like the look of the company now but they need to do something with the number of shares outstanding - 6.8 billion. Seriously???

A huge buy back is needed to help the sp push considerably higher I would think.
 
Agree on the reduction of issued cap. Not sure a buy-back will do much as they're restricted to a small percentage. A share consolidation of 5:1 or 10:1 will make it look better but really does nothing for the shareholders. I didn't like that there were 14 pages in the last report detailing the remuneration process. Mgt seems to have spent more time detailing their pay than on the business.
 
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