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UPDATE - Red Rock Resources says completion of El Limón sale is imminent

UPDATE - Red Rock Resources says completion of El Limón sale is imminent


Red Rock Resources (LON:RRR) said completion of the sale of its El Limón gold assets in Colombia is imminent. 

The closing process began yesterday with executed transfers and original certificates sent by courier to the buyer's lawyer who is holding documents in escrow, the company told investors. 

Payment will occur when all documents have been exchanged and received. 

Shares rose 6.5% to 0.0905p on the news.

Dowgate Capital has been crunching the numbers and come up with a price target for Red Rock that offers 288% potential upside.

"With the near conclusion of Red Rock’s Colombian gold project sale of up to $5m and positive updates from several other projects/assets, we have re-visited our numbers from last October to calculate a revised sum-of-the-parts valuation," the broker said, as it revealed a 0.33p price target, down from 0.63p previously, reflecting the higher number of shares in issue now.

The broker says that, having demonstrated its ability to negotiate an asset sale, it may now be able to focus on extracting value from the remaining business or seeking a joint venture partner for other interests such as the Greenland iron ore and Kenyan gold projects.

A more likely near-term asset realisation could come from Red Rock’s interest in Aussie firm Resource Star, Dowgate suggested.

Last week the ASX-listed company announced it had conditionally agreed to acquire a controlling interest

in Sugar Dragon, which has an exclusive licence to produce and distribute Candy Crush branded confectionery in Greater China. 

"Given that Resource Star Ltd has now moved away from its original remit to invest in uranium projects, Red Rock may choose to dispose of its equity and option stake, which currently has a market value of around

£0.47mln," Dowgate speculated.  

Red Rock also has a 1.2% stake in Jupiter Mines, which the company values at £4.23mln, and it may be able to find willing buyers, given the improved performance of Jupiter's manganese mine in South Africa, and the possibility of Jupiter entering the ranks of dividend payers.

"We could witness further upward revisions to the net asset value and perhaps an exit route opening up from a Chinese or Indian buyer," Dowgate suggested.

"With a number of valuation catalysts possible in the near future from Jupiter Mines and Ivory Coast and with the balance sheet looking much cleaner following recent loan note conversions, Dowgate Capital continues with its ‘Buy’ recommendation on the stock," the broker concluded.

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