Red Rock Resources - the value investor's perspective

As readers will know, Mining Maven's approach is always from a value investors perspective. Identifying and following opportunities where value is not fully reflected in the current share price. We usually start with the balance sheet, where very often we find value cosseted in complex project portfolios. But the real opportunities rest in identifying current, not historic value; and this often also requires thorough analysis and careful investor assessment of the Company's up to date plans and prospects.

So, we were rather pleased to note the latest Edison research update on Red Rock Resources (LON: RRR), which also demonstrates the value which, as yet, the market does not reflect. In this case, the Edison Investment Research Report (click here to view) indicates that the Company's market cap could be undervalued by up to a bewildering 89%. The report analyses Red Rock Resources in depth and provides various valuation scenarios, which we recommend readers review for themselves in detail. But their top end scenario indicates a share price in excess of 16 pence reflecting net assets (on the assumptions given) of £93million. Given the current market cap of aorund £9.6m, thats some uplift!

Of course, we don't anticipate the share price will miraculously leap to 16 pence overnight, however, the pathway to that level has been mapped out within the Edison report and it is clear that as Red Rock continue to crystallise value from various elements of its portfolio, the value of the company could move up accordingly, giving reason for the share price to follow. Currently valued at 1.725p per share, Red Rock is significantly short of even Edison's Worst Case, scenario, so if you are after value, Red Rock certainly deserves consideration. Investors may recall that the FT were wise to the undervaluation back in December 09 (click here to read the article).