Red River Resources’ Share Price Up on High-Grade Find (ASX:RVR)

Red River Resources’ Share Price Up on High-Grade Find (ASX:RVR)

The share price of Red River Resources Ltd [ASX:RVR] has given back its recent gains following an announcement from its Isabel project in Northern Queensland.

The news from Isabel comes just days after RVR announced a resource increase at its Hillgrove gold project ahead of its scheduled restart.

RVR shares rose 3.57% on Monday following the Hillgrove upgrade.

That momentum continued into Tuesday, when the share price gained a further 3.45%.

Investors acted cautiously this morning, sending shares down 3.45% at the beginning of trade.

At the time of writing, RVR shares are up 6.90% to trade at 15.5 cents per share.

Shares are chained to the gold price

RVR is set to become a gold producer by the end of the year, pending the restart of the historic Hillgrove gold mine.

RVR already produces copper, which is having a run akin to gold.

There is an interesting pattern beginning to emerge with RVR.

Its share price action appears to have become closely correlated with the price of gold…

…and less so with copper.

Although, RVR does already produce a very small amount of gold from historic tailings.

Let me explain why this matters.

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We usually expect shares in blue-chip stocks to fluctuate with macro-economic conditions.

Because these are large, diversified entities, smaller events usually are of little importance to the share price.

For example, yesterday Rio Tinto Ltd [ASX:RIO] downgraded its refined copper guidance because of an issue at one of its sites.

The share price was largely unphased by this.

Today, RVR announced that reconnaissance sampling from Isabel confirms the presence of high-grade silver-indium-lead-zinc mineralisation.

One assay returned a result of 1,347 grams per tonne of silver.

Other assays also returned extremely high grades.

Keep in mind, this is not massive news.

But it is positive, seeing as RVR was only granted the project last month.

Yet the share price initially sank.

In my opinion, that’s because the gold price also sank.

ASX RVR Share Price Chart - Red River Shares

Source: TradingView

 

Notice, from the red line onwards, the correlation of the RVR share price action and the price of gold.

This relationship could become even stronger once the Hillgrove project begins operations.

Red River Resources’ silver lining

The market was slow to react to RVR’s news this morning, opening lower before heading upwards.

Silver grades globally have been on the decline for years.

Silver Mining Grades Trend Chart

Source: Moneymetals.com

This graph shows the average silver grades from the top global producers.

Even in Australia, grades have tapered off dramatically.

In 2005, the Cannington Mine produced 44Moz of silver at an average grade of 515 g/t.

Compare that to 2018’s average grade of 194 g/t.

RVR’s initial assays might suggest some serious potential.

According to the company, Isabel hosts one of the two known highest-grade silver-indium deposits in Australia.

It is still very earlier days, and RVR is yet to acquire unreleased historic drill data from the site.

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Kind regards,

Lachlan Tierney,

The Daily Reckoning Australia