Commodities | 11:19 AM
The current share price for Aurelia Metals represents "compelling value" according to new research by Shaw and Partners as the company transitions to a greater focus on copper.
-Aurelia Metals transitions to a higher copper exposure
-New Federation mine ramps-up, Great Cobar in development
-Shaw sees compelling value
By Mark Woodruff
Even before the latest volatility triggered by President Trump's proposed 50% tariff on US copper imports, Aurelia Metals' ((AMI)) share price had already begun to soften. The company's mid-June investor day had delivered underwhelming FY26 guidance.
Regardless, Ord Minnett's positive investment thesis remains largely intact, anchored by the key value drivers of the business, the Federation mine and development at Great Cobar, which together comprise approximately 90% of the broker's net asset value.
The smaller Peak South operation was responsible for a large portion of the guidance downgrade as zinc/lead grades are expected to be lower for the remaining life-of-mine.
Overall, Ord Minnett anticipates upside for the share price from near-term delivery of projects and free cash flow (FCF) inflection around FY27.
In similar vein, newly released research from Shaw and Partners describes Aurelia's current valuation as a "compelling" entry point for investors into a multi-metal producer with multiple growth catalysts.
Operating a portfolio of base metal and gold assets in the Cobar Basin, NSW, management is actively shifting its production profile toward a copper-dominant mix, transitioning away from its previous focus on gold, zinc, and lead.
Primarily driven by the ongoing ramp-up of the high-grade Federation mine and the development of the Great Cobar project, Shaw highlights the company's revenue mix will become approximately 50% copper-gold and 50% zinc-lead. Management plans to maximise gold recovery in the near term to fund the transition.
In FY24, Aurelia reported a revenue composition of approximately 56% from precious metals (primarily gold) and 44% from base metals (copper, lead, and zinc).
The company is leveraging existing infrastructure at its Peak Operations and sequencing Great Cobar ore with current New Cobar sources. Great Cobar is a copper-gold deposit located around three km north of the Peak processing plant, within the Peak North mine corridor.
The Great Cobar project (representing a return to the historic Great Cobar mine, the origin of copper discovery in the region in 1869) is a satellite underground operation at the Peak Mine producing up to 500ktpa of mill feed over an eight-year period.
As recent market concerns emanating from the investor day are now largely priced in, Shaw believes the investment case for Aurelia is strengthened by a clear strategy and an improving growth trajectory.
Moelis noted during its initiation of coverage in May the company is well capitalised, with no debt and around $107m in cash, and is positioned to grow through the delivery of multiple organic projects.
At interim results in February, CEO Bryan Quinn credited "robust operating performance" for a 53% jump in underlying earnings, noting operating cash flow fully funded capital needs for growth.
Thus, management may internally finance its growth pipeline, explains Shaw, which includes the ongoing development of Federation, the Great Cobar project, and optimisation initiatives at the existing Peak operations.
A "strong" balance sheet differentiates Aurelia from peers, highlighted Macquarie following the investor day, noting management was effectively unfairly penalised (via the share price) for providing a detailed level of disclosure.
A brief history
Originally operating under the name YTC Resources Limited, and listed on the ASX in May 2007, the company was subsequently renamed Aurelia Metals Limited in June 2014.
In 2009, the company entered the Cobar Basin in New South Wales through the acquisition of the Hera Mine from CBH Resources.
Aurelia acquired its now flagship Peak mine in 2018, including the Nymagee and Great Cobar development projects. The Federation deposit was identified in April 2019.
In October last year, management released its Cobar Basin Optimisation update, outlining the expansion of the Peak processing plant to 1.1-1.2mtpa, effectively allowing Peak to process all Federation ores.
First ore was processed at the Peak plant in December 2024, and in April this year the company formally sanctioned the Great Cobar project.
The Cobar region is "ripe for corporate consolidation," suggests Moelis, due to its cluster of mid-tier producers and developers with both operating assets and latent processing capacity. Recent M&A and infrastructure access agreements have only reinforced this strategic potential, suggests the broker.
Aurelia is seen as positioned for growth through the execution of several organic projects, including an expansion of the existing processing circuit at Peak. In addition, management aims to develop the copper-rich Great Cobar mine to the north of the existing workings underground at Peak, while exploration potential across the tenements remains high.
Recent activities include the ramp-up of the high-grade Federation mine, receiving board approval for development of the Great Cobar project, and ongoing exploration to expand resources.
Shaw highlights Aurelia's extensive tenement portfolio, underpinned by numerous historical workings, pointing to substantial untapped resource potential. At the Federation deposit the company advanced from discovery to production in just four years.
Peer comparison
Relative to domestic peers, Aurelia offers greater operational diversification than Hillgrove Resources ((HGO)), suggests Moelis. Hillgrove is similarly focused on copper production, primarily through its flagship Kanmantoo Copper Mine located about 55 km from Adelaide in South Australia.
Aurelia also shares key similarities with AIC Mines' ((A1M)) Eloise and Jericho operations in North Queensland, particularly the potential for significant earnings growth from FY27 as new projects come online, explains the broker.
Significantly, Aurelia benefits from stronger near-term cash flow than peers, supported by its current exposure to gold.
FY25 production guidance
Yesterday's performance and guidance update showed Aurelia has achieved production guidance for all metals in the fourth quarter of FY25.
Management also noted the balance sheet remains strong with cash on hand at $110m while the US$23.6m Loan Note facility remains available and undrawn.
Production of gold, copper, and lead came in below expectations held by Moelis, while zinc production beat this broker's estimate.
FY25 production landed within guidance across all metals, broadly aligning with midpoints.
Shaw retains its bullish stance and now awaits the release of costs and capital in the June report scheduled for release on July 21, before making any changes to its forecasts.
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