David Constable of The Supervised Fund has named two resources stocks that look to have massive upside potential.
In the fund’s most recent monthly report, Mr Constable said tiny copper producer Hillgrove Resources Limited (ASX:HGO) could generate $104m in free cash to equity holders by September 2020.
This compares very favourably to Hillgrove’s market value of $51 million at the current Hillgrove share price of around 9 cents. The free cash estimate was based on the remaining mine life, with 40% of expected future copper production currently fixed at or above the current A$ copper price.
Mr Constable said Hillgrove released a favourable March quarterly report. Copper production was the highest since December 2013. The company reiterated FY18 guidance for production and costs, stating it is still on track to pay off debt and return all creditors to normal terms by the end of this calendar year.
Hillgrove Resources operates the Kanmantoo Copper-Gold Open Pit in the south-east of South Australia.
Hillgrove Resources is a chunky 13 per cent position in The Supervised Fund.
The Hillgrove Resources share price has gained 30 per cent in the last 12 months.
Mr Constable also named Po Valley Energy Limited (ASX:PVE) in the fund’s most recent letter, saying he continues to believe Po Valley is undervalued, with an independent expert’s report released to the ASX in March valuing the company’s Italian gas fields Selva and Teodorico alone at €46.8m (about A$75m or 12.6c per share).
This was a 213% premium to the company’s market value of $24m or 4.1c per share. Since the letter was written, the Po Valley Energy Limited share price has fallen back to 3.4 cents.
Po Valley Energy is an 8 per cent position in The Supervised Fund.