We are reiterating our HOLD rating and A$0.50 price target on RED after incorporating the Sliver Lake Resources assets into our forecasts. The merger should see RED produce 424koz in FY25 and 431koz in FY26, with growth in output at King of the Hills and a re-start of Sugar Zone offsetting forecast declining output at Deflector. We estimate RED’s net cash balance will rise beyond A$500m by the end of 2024. The strong cash balance presents RED with the optionality to accelerate mining at King of the Hills and expand the process plant, which could lift group production by ~50kozpa and presents upside risk to our base case forecasts. Exploration success at Deflector that extends the mine could also provide a positive catalyst for RED.
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