Aurelia Metals Limited

AMI Details

Investor Conference Notification: Aurelia Metals Limited (ASX: AMI) is involved in the extraction of gold copper, lead, zinc, and silver minerals and the development of projects in New South Wales.

The management including the CEO & MD, Dan Clifford, CFO, Ian Poole, and others will host a conference call on 27 January 2022 at 11.00 AM. They will present the Q2FY22 report, updates on the Federation exploration project, and the results of the Great Cobar Pre-Feasibility Study).

Change in Shareholding: Commonwealth Bank of Australia (CBA) ceased to be a substantial holder on 31/12/2021.

Q1FY22 (ended 30 September 2021) Results:

• The gold production increased by ~20% QoQ to 27,350 oz primarily driven by a robust contribution (~107% QoQ) from the Dargues mine.
• The zinc production increased by ~38% QoQ because of the higher processed ore volumes at the Peak mine and stronger grades at Peak and Hera mines.
• Exceptional copper-gold mineralisation results were returned from the drilling at the Great Cobar deposit and strong copper mineralisation was identified from the extensional drilling at the Kairos deposit. AMI has started a Pre-Feasibility Study (PFS) to assess an initial mining area within the larger Great Cobar Mineral Resource and expects to complete it in the current quarter.
• AMI held ~$1 million cash balance as of 30 September 2021 after incurring ~$7.9 million growth capital expenditure and ~$4.1 million debt repayment in Q1FY22.

Key Metrics, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces adverse fluctuations in the gold price and demand. The continuing threat of COVID-19 may worsen or continue to affect labour movement, availability, and wage costs.

Outlook:

• For FY22, the gold production is expected to be in the range of ~112 – ~123Koz compared to ~104Koz in FY21. Zinc production is estimated to increase to ~31.0 – ~34.5 Kt in FY22 versus ~25.1Kt in FY21.
• The AISC is expected to increase in the range of $1,500 – 1,700/oz and sustaining capital is forecasted to increase to ~$61 - $69 million in FY22.
• AMI plans to declare the December 2021 quarter (Q2FY22) results on 27 January 2022 on ASX.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of AMI gave a positive return of ~14.11% in the past month and a positive return of ~25.97% in the past three months. The stock is currently trading very near to its 52-weeks’ high level of $0.490. The stock of AMI has a support level of ~$0.438 and a resistance level of ~$0.570. The stock has been valued using the Enterprise Value to EBITDA based illustrative relative valuation method and arrived at a target price with a correction of a high single-digit (in % terms). The company might trade at a slight premium than its peers’ mean EV/EBITDA multiple, considering the improved outlook for gold & zinc production and further improvement forecasted in the gold output, average grade, and AISC across the Dargues mine life. For this purpose of valuation, a few peers like OceanaGold Corp Limited (ASX: OGC), MacMohan Holdings Limited (ASX: MAH), Regis Resources Limited (ASX: RRL), and others have been considered. Considering the current trading levels, decent returns in the past month and the past three months, and indicative downside in valuation, we suggest investors book profit and give a ‘Sell’ rating on the stock at the current market price of $0.485, as of 20 January 2022, 1:02 PM (GMT+10), Sydney, Eastern Australia.

AMI Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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