FinnCap analyst Martin Potts says the market does not recognise the significance of impending first cash flows.
The start of production at the New Liberty mine in Liberia, expected in four months’ time, will set the group on its way to generating US$10mln per month, the analyst points out.
“Aureus Mining is close to completing construction of its New Liberty gold mine in Liberia, West Africa. The gold resource has an unusually high grade (around twice that of most other open pit gold mines) and so the mine will be highly profitable even at current depressed gold prices,” Potts said.
A ‘buy’ recommendation with a 45p price target identifies some 145% of upside to the current price of 18.4p.
Potts does, however, see potential risks such as gold price volatility and the Ebola outbreak - the disease has been prevalent in other parts of the West African country, but there have been no cases near the mine.
Nevertheless, he believes Aureus represents something of an anomaly in the otherwise pressured mining sector.
“The mining industry is currently close to the bottom of the cycle, with many companies struggling to survive,” the analyst said.
“Only companies with the very best of the various proposed mines have been able to raise the capital to fund construction. Aureus is the only company operating in West Africa that is currently constructing a gold mine.”
Looking across the other nine stocks highlighted by finnCap and the broker’s key theme is “self-help”.
FinnCap reckons it remains a market for selective ‘stock-picking’ rather than broader ‘macro’ calls, and it favours opportunities whereby organic growth and/or restructuring unlocks the ability for management to increase value despite economic challenges.
Electronics firm Acal (LON:ACL) is one such example of adding value via ‘self-help’ says analyst Guy Hewett who highlights growth at twice the rate of peers, despite the group’s ‘heavy exposure’ to Europe.
Renold (LON:RNO), meanwhile, is a ‘classic self-help story’ according to David Buxton who expects business rationalisation and process improvement could transform the equipment firm’s earnings.
Communication technology group CityFibre (LON:CFHL) is another FinnCap ‘pick’ as Andrew Darley believes the UK’s only provider of ‘gigabit’ speed dark fibre could outdo the broker’s own bullish forecasts.
Mark Paddon reckons PhotoMe (LON:PHTM) could clean up in 2015 as the group’s roll out of laundry business could drive forecast upgrades.
Electronic gaming machine maker Quixant (LON:QXT) is seen as a beneficiary of outsourcing, according to Lorne Daniel, who says revenues could over time grow 10-fold (from US$30mln at present).
Vectura (LON:VEC) is the favoured biotech, as Keith Redpath sees ‘a good spread’ of risk and growth for the firm which has steady royalty streams from approved drugs as well as a pipeline of 12 clinical programmes.
Palm oil producer MP Evans (LON:MPE) could benefit if the sector’s recent mergers and acquisition activity continues.
And South East England focussed house builder Inland Homes (LON:INL) is favoured by the broker because of its 4,000 plot land bank, which is not being recognised in the stock market value.
Ithaca Energy (LON:IAE), meanwhile, is FinnCap’s best choice for the oil sector. Analyst Dougie Youngson reckons the North Sea oil producer has no exploration risk and sees the high impact Stella field coming online in 2015.
He estimates the group’s overall break even oil price to be US$32 per barrel, and says that 50% of group production is hedged at US$102 per barrel is “the icing on the cake” for investors.