Seneca's special situation

This gold royalty is trading at a 40% discount and management has just put up the 'for sale' sign.

February 13, 2026 16:15

Seneca Financial Solutions

When it comes to generating returns in small caps, there are many ways to skin a cat.

The Seneca Australian Small Companies Fund has generated 36.7% over the last 12 months, but no single idea type has been the source of performance. Instead, we continue to apply our process. With discipline. Every single day.

In the face of recent market volatility, we spotlight an under-the-radar small cap with a near-term break-up catalyst that could see shareholders crystallise value from shares trading at 60 cents on the dollar.

VENUS METALS (ASX: VMC)

What it is

VMC trades on a ~$40m market cap.

We think it owns ~$70m of tangible value.

VMC management has commenced a strategic review on 29 January 2026, which we expect to take 4-6 weeks to complete and realise value to shareholders via the sale of the royalty or a takeover of the whole company.

Assets overview

50,000,000 shares in Rox Resources (ASX: RXL), valued at $26 million at the market price for RXL @ $0.52. Rox is the highest grade standalone gold developer in Australia, following Ramelius Resources (ASX: RMS)'s acquisition of Spartan (ASX: SPR). Broker price targets for RXL range from $1.06 - $1.15 (Euroz Hartleys, Canaccord). We expect RXL to rally towards 1.0x NPV as Rox derisks to production (noting gold price and construction risks). Rox expects to produce an average of 117kozpa @ 5g/t gold over an initial 7 year mine life from Youanmi, which is strategically located on the same structure as Ramelius' Penny Gold mine (just 20km away), and sits just 50km from Ramelius' Mt Magnet mill. Rox is well funded, having raised a chunky $218 million in equity late last year to build the project.
1% royalty (NSR) over the Youanmi project, operated by Rox Resources, targeting first production in Q2 CY27. We expect Rox to extend the initial mine life as they access the underground mine for further drilling. The royalty is independently valued at $40 million, which broadly aligns with our own assumptions, though we see upside potential from extending the mine life as Rox advances deeper underground and builds confidence in orebody extensions.
Sandstone gold project. Independently valued at $4.4 million, the Sandstone gold project sits on a granted mining lease and hosts a resource of 31.4koz @ 1.27g/t Au, within an exploration target of 45-60koz, potentially truckable to the proposed Youanmi processing plant ~70 km away. The deal-hungry Brightstar Resources (ASX: BTR) sits next door with its own Sandstone gold project and is looking to build its own mill there too, so VMC can potentially monetise this resource.
Cash: $1.38m as at 31 December 2025. Venus can sell RXL shares to avoid raising additional capital.
Other exploration assets - we ascribe zero value.

In total, we ascribe $70 million of tangible value to VMC shareholders, or $0.35 per share. Depending on your view of RXL value - ours is moderately positive - this number can shift, but we see a significant margin of safety at current VMC trading prices around $0.20.

How we found it

We have followed Rox's Youanmi project for years. The knock on the project was the refractory component. The takeover of De Grey (ASX: DEG) and its refractory Hemi orebody by major miner Northern Star Resources (ASX: NST) has validated the merits of gold deposits with a refractory component, provided the geology is understood and processing solutions are designed accordingly. Plus, a rising gold price forgives many sins.

We met with Rox's CEO, Phil Wilding, last year, and we were impressed by his go-getter attitude and his action plan to rapidly advance the project to construction. Phil Wilding was the ex-COO of Westgold (ASX: WGX), brought into Rox by major shareholder Hawke's Point. In the last year, Rox has drilled out the deposit, progressed dewatering, done a definitive feasibility study, funded the equity component of the project with a large equity raise, and today appointed MACA as the EPC contractor.

We've also closely followed the royalties held by ASX-listed companies. Red Hill Minerals (ASX: RHI) is the other most notable one, discussed here, where we called royalties "the best business model on the ASX". In an inflationary environment, miners' margins erode, but royalties don't (they have only top-line exposure, which benefits from commodity price inflation).

Venus historically held the Youanmi project under a joint venture with Rox, before Rox assumed full control in 2023. In exchange, VMC retained shares in RXL as well as a 1% royalty over the project.

Venus has been relatively successful as a project generator, recycling capital to avoid the dilution spiral of capital raises that plague some junior explorers, so has a tight share structure with 197.6m shares on issue.

VMC has lagged RXL due to its lower profile in the market ($40m market cap vs $700m), lower liquidity, and perception as an explorer. We think there's a catch-up trade in VMC, which should trade in lock-step with RXL for the most part, given how correlated their respective values are to the Youanmi project. The disconnect is particularly pronounced given that Rox's share count has tripled (incorporating recent capital raisings), whereas VMC's share structure is unchanged, and the royalty of course has dilution protection.

Source: Factset, Good Research — *Source: Factset,* *Good Research*

It's one thing to find an undervalued company, and another to realise said value, via a catalyst. Regular readers would know that we have a keen eye for takeover targets - we went 4 for 8 in this Livewire article. We believe the latent value will be unlocked in VMC by asset sales or a takeover.

In November 2025, VMC major shareholder QGold lobbed a (low-ball) takeover bid at $0.17, which was rejected by the board. On 9 January 2026, QGold upped its takeover bid to $0.21, declaring this offer as "last and final". QGold is controlled by mining magnate Chris Wallin, and saw the opportunity to buy some VMC shares on the cheap, but didn't manage to grab many, increasing its holding in VMC from 26.4% to 31.8%. The 21c bid lapsed on 30 January 2026.

We think this has fired the starter gun to realise value for VMC shareholders. Management is aligned, with CEO Matt Hogan owning 6.6m shares, 4m performance rights, and 2.5m options (note: exercisable at 30c).

How we think it will play out

Venus announced a strategic review on 29 January 2026, appointing an independent financial advisor aiming at "optimising Venus’ portfolio of highly prospective exploration and development assets, to maximise value for shareholders". We expect this to take 4-6 weeks, and we should get an update on this by March.

In our opinion, this is how VMC plays out:

VMC receives an offer for the royalty from a specialist royalty player, of which there would be numerous likely candidates (see below), with very low cost of capital (can bid overs and still make it stack up). On 8 December 2025, Venus cited in its takeover defence announcement that the company "has since received multiple approaches from third parties expressing interest in purchasing some or all of the royalty".

Vox Royalty Corp (NASDAQ: VOXR) - hoovering up overlooked royalties all around Australia. Vox recently did a gold deal, buying assets off Deterra. Also just extinguished debt, and with an undrawn US$75 million credit facility, has ample acquisition capacity.
Regal Resources Royalties Fund - holds royalties spanning multiple commodities with assets in Australia. Typically raises $50-100m capital to fund purchases (extra FUM for ASX: RPL to manage). We'd be surprised if Regal's small caps fund didn’t own shares in RXL.
Red Hill Minerals (ASX: RHI): recently purchased a gold royalty in WA for $4m. Printing $35m p.a. cash flow form existing royalty assets.
Deterra Royalties (ASX: DRR) - needs to do a deal to justify corporate overheads and business development team.
Franco Nevada (NYSE: FNV) - large, offshore gold royalty player.
Wheaton Precious Metals (NYSE: WPM) - large, offshore gold royalty player.
Metalla Royalty & Streaming (NYSE: MTA) - large, offshore gold royalty player.
Royal Gold (NYSE: RGLD) - large, offshore gold royalty player. Just bought Sandstorm Gold.
Triple Flag (TSE: TPFM) - large, offshore gold royalty player. Just bought Orogen Royalties for its Silicon gold royalty.
Elemental Altus Royalties (TSXV: ELE) - backed by Tether, focus on gold royalties. Deal-hungry, just merged with EMX Royalty Corp.

2. Rox bids for VMC in a scrip based deal to eliminate the royalty.

Rox is entering into a debt financing process, which would be easier and cheaper if it didn't have a third party royalty hanging over its head. It also enhances the overall project NPV.
Rox could cancel the RXL shares held by Venus to act as a pseudo-buyback, or at least make it cheaper for Rox to buy the residual royalty.
We believe RXL has not yet come to the table with a bid because it has been waiting for QGold’s offer to lapse. Given that QGold is also a major shareholder of Rox, Rox’s management may be reluctant to antagonise a significant shareholder by encouraging or engaging with a concurrent counterbid while QGold’s proposal remains on foot.
QGold would likely support an offer with a knock-out premium.

We see a clear near-term catalyst for VMC, with a pathway to unlocking 35c of value versus its current ~20c share price, and expect value-accretive action within the next few months. As such, we hold shares in VMC.

Final word

If you found this interesting, we'll leave you with 3 options of what to do next.

Sign up to Luke's weekly note here (free) - Luke Laretive will detail 2 more special situations in next week's newsletter.
For access to our best intellectual property, Seneca actively manages and holds companies discussed in this article within the Seneca Australian Small Companies Fund, available exclusively to wholesale investors. The fund has a 0% management fee and a 20% performance fee above the RBA cash rate. Reach out to discuss, or apply directly here.
For self-directed investors looking for ideas, we outline our thesis for 2 of these kinds of ideas each and every month over at Good Research.

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The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Ben Richards, Seneca Financial Solutions, its Directors and its associated entities may have or had interests in the companies mentioned. They also may have or have had a relationship with or may provide or have provided capital markets and/or other financial services to those companies mentioned. Although every effort has been made to verify the accuracy of the information contained in this article, all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this email or any loss or damage suffered by any person directly or indirectly through relying on this information.