AMI is a profitable gold & base metals producer with operations around Cobar, NSW. AMI recently announced the acquisition of the Dargues gold mine for $200M which it's funding with a combination of cash reserves and the issue of new equity at $0.43 cents a piece. This capital raise in combination with a slide in gold prices has put a bit of pressure of the share price recently which has pushed down into my buy zone below $0.40
AMI currently produce 90k ounces of gold p.a. and with the addition of Dargues, this will increase closer to 150k ounces p.a. AMI also produce a combination of Lead/Zinc/Copper & Silver from their Cobar operations which make a significant contribution to earnings (30%) and buffer the business from the recent fall in gold prices.
The mine lives of the current operations at Cobar are shortening up as mining reserves are depleted quicker than they can be replenished but in saying that, AMI have made a major new gold/base metal discovery at their Federation prospect which is only 10kms from their Hera mine so capital cost of bringing that into production will be very low and should occur within the next 2 yrs.
The Cobar operations are about to tap into some very high grade gold ore that they have been working on accessing in their underground operations over the past 12 months. This ore is due to be mined starting from the March 21 qtr and should lead to a jump in gold output and drop in AISC from this operation over the medium term.
AMI are generating about $20M of FCF per quarter and have no debt and no gold hedging in place so they are fully exposed to high gold prices. The Dargues gold acquisition will increase the FCF contribution to the overall operations and add some much needed longevity and exploration upside to the overall portfolio. AMI also have plenty of exploration upside in the Cobar tenements including the Nymagee copper deposit which already has a JORC compliant copper reserve of 25kt from the preliminary drilling that occurred there a few years ago. This prospect was put on hold due to low copper prices at the time but is one they could look at again now that copper has taken off.
Federation Exploration Update
Some good drilling results. SP up 7.62% today.
I hold AMI
02-Jun-2020: AMI was up a whopping +23.94% today (from 35.5c to 44cps) on the back of this Quarter-To-Date Production Report
The main driver of that move was this key point: "Aurelia on track for a significantly improved quarter-on-quarter production result."
It pays to keep in mind however that at 44c, Aurelia Metals (AMI) are only now back within that 40c to 50c channel that they've spent most of the past 12 months in, and they're still below their 90c levels in January 2019 - it's been mostly downhill since then, with the odd relief-rally (like today).
I don't hold AMI shares. They produce some gold, but they also produce copper, lead and zinc, and I think they lost their way last year. I held them in 2018 (and made money), but haven't been following them closely since early 2019 after I sold out, having lost faith in their management for various reasons. I see better opportunities elsewhere. Big move today however!