Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Aureus Mining set to close valuation gap

For Aureus, which has a decent following among the analyst fraternity, the valuation range for the stock, which is currently changing hands for 25p, is 27p to 66p.
Aureus Mining set to close valuation gap

There are opportunities, admittedly rare, where the market gets its risk-reward calculation wrong.

Though irritating for the companies in question, they present an opportunity for the eagle-eyed investor.

A case in point is Aureus Mining (LON:AUE), the Liberia-focused gold company that should be in production from the end of the first quarter next year.

Fully funded, work on its New Liberty mine and plant is 75% complete.

Output is slated to be 120,000 ounces of the precious metal per annum for the first six years, which should generate US$206mln of free cash after debt repayment.

It is not uncommon to see stock in companies such as Aureus mark time as they prepare to go into production.

Few investors get excited as a new piece of plant or equipment is installed on time and to budget, while other potential backers will exercise caution until operation is successfully up and running.

Aureus Mining’s shares are currently changing hands for less than half of their net asset value (NAV).

Normally when the project is built, the stock would trade at 0.8 or 0.9 times NAV and up to 1.2 times NAV when the mine is producing.

But there’s always a lag before these valuations are achieved, which provides the opportunity to acquire an investment at a discount to its real worth.

For Aureus, which has a decent following among the analyst fraternity, the valuation range for the stock, which is currently changing hands for 25p, is 27p to 66p.

The consensus is around the 50p mark, which would provide significant upside were this target to be achieved.

For those looking for exposure to gold in this region, Aureus’s New Liberty operation is the only West African mine currently under construction.

Many of the deposits in the area, although boasting larger resources, certainly don’t have the high grade of the New Liberty deposit.

And none has had to stress test its model in the way the group had in preparing a bankable feasibility study.

“We are the only project in West Africa of the developers with a bankable feasibility study. This makes us unique.

“And having been through the six months to one year of bank due diligence, we have been thoroughly stress tested.

The sleeper in this investment proposition is the Ndablama deposit. Just 40 kilometres north-east of New Liberty, Ndablama is part of a five kilometre mineralised, pressure shadow zone which is located within a 13km shear corridor, highlighted by continuous gold in soil anomalies.

The recent drill results provided a continuation of what had already been found, namely a shallow dipping, potentially low strip ratio opportunity grading between two grams to three grams per tonne of gold.

The resource currently stands at 451,000 ounces, but the recent exploratory work points to a significant upgrade once the assay results have been collated.

Aureus hopes to give an updated estimate in October.

“We would look to something a lot more substantive this time. Certainly the drilling says we will at least double that [the resource],” Reading said.

Crucially, the gravity recovery of gold is very high at over 70%, which means the group could, if it goes ahead with mining, produce a concentrate that would then be shipped to New Liberty.

This would cut both the processing and capital costs of Ndablama.

View full ASO profile View Profile

Avesoro Resources Timeline

Related Articles

Copper in periodic table
May 02 2018
Bezant has a huge copper resource under licence in the Philippines
zeolite mine
September 14 2018
Zeolite may not be the most well-known mineral but it has wide applications, such as use in animal feed, as a pozzolan in cement and as an additive to soil, which could be used for cannabis plants
Gold on paperwork
April 16 2018
Dr Rodney Boucher leads on-ground exploration activities as the company pushes on in Victoria.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use