Vault Minerals stock rating upgraded by RBC Capital on valuation

RBC Capital upgraded Vault Minerals Ltd (ASX:VAU) to Outperform with a AUD0.55 price target, citing compelling valuation and reduced near-term downside risk after a KOTH Reserve grade adjustment. The firm projects 367,000 ounces of production for FY26, implying a 2.5x EV/EBITDA despite significant hedging, with metrics improving to 1.8x EV/EBITDA and a 22% free cash flow yield by FY27 as hedges expire. RBC further highlighted Vault's AUD625 million net cash position and 0.76x price-to-NAV, supporting the implied 36% upside to their target.

Analysis

RBC Capital has upgraded Vault Minerals Ltd (VAU) to Outperform with an AUD0.55 price target, driven by a compelling valuation and what it views as reduced near-term risk. A key factor in this assessment is a recent downward revision of the KOTH Reserve grade to 0.62g/t, which RBC suggests has alleviated downside concerns. The firm's FY26 production forecast of 367,000 ounces, described as potentially conservative, implies a 2.5x EV/EBITDA multiple even with approximately 35% of EBITDA being negatively impacted by gold hedging. The investment thesis strengthens for FY27, as expiring hedges are projected to cause the EV/EBITDA multiple to fall to 1.8x and generate a sustainable free cash flow yield of 22%. This outlook is supported by a strong balance sheet, including an AUD625 million net cash position, and a discounted valuation at a 0.76x price-to-NAV ratio, which implies a 36% upside to RBC's target. However, it is noteworthy that a separate quantitative analysis cited in the article did not highlight VAU as a top-tier undervalued stock, presenting a divergent view.

Key Decisions for Investors

• Investors may consider the stock based on the catalysts identified by RBC, particularly the significant valuation improvement expected in FY27 as costly gold hedges expire, which is projected to unlock a 22% free cash flow yield.
• The company's robust AUD625 million net cash balance and discounted 0.76x price-to-NAV multiple could be viewed as providing a margin of safety against downside volatility.
• It is critical to monitor the substantial near-term headwind from the hedging program, which will absorb an estimated 35% of FY26 EBITDA, before the anticipated financial improvement.
• Balance the bullish fundamental upgrade from RBC against the contradictory signal from an AI-driven quantitative screen that did not rank VAU as a top undervalued opportunity.