Aurelia Metals Ltd (ASX:AMI) has received ministerial consent for the change in control of Peak Mines’ exploration licences.
This is a watershed event for Aurelia as it allows the company to make an extremely value accretive acquisition in Peak Mines.
Hartleys Research analyst Mike Millikan said: “The Peak Mines acquisition will transform Aurelia into a leading gold and base metal producer in the Cobar Basin.
“The contribution from Peak Mines will more than double Aurelia’s fiscal 2019 production levels and cash generation”
Price target implies upside of 45%
Millikan is forecasting Aurelia to produce nearly 200,000 ounces of gold equivalent in fiscal 2019, generating a net profit of $94 million.
This translates into earnings per share of about 11 cents, implying a PE multiple of less than four relative to the company’s current share price of 40 cents.
Consequently, there would appear to be scope for the company to push up towards Millikan’s price target of 58 cents as the impact of the acquisition is absorbed by investors.
Base metal credits drive costs down
Millikan noted that Aurelia has the strongest all-in sustaining cost (AISC) margin on the ASX, reporting $1,140 per ounce in the first half of fiscal 2018.
This is a function of the substantial base metal credits that the company achieves through the production of silver and base metals.
This trend could even strengthen given contributions of copper from the Peak operation.