AR1
Are there any copper bargains on the ASX?Austral Resources looms as a standout copper bargain.
Listed in 2021, Austral (ASX:AR1) has a market cap of just $108.1 million according to Commsec.
Austral when it comes to standalone ASX-listed copper producers.Austral is the cheapest of the lot. Yet, it is the most advanced down the copper market value chain.
Other producers deliver a concentrate which is then sold on to smelters. Austral goes a step further, selling a 99.9% pure copper cathode that gives it far higher payabilities and exposure to changes in the price of copper metal.
Morningstar has an undervalued rating on AR1, currently trading at 21c, putting a fair value on its shares of 46c.
It’s not the only company that rates AR1 highly amid what is a bullish copper outlook – Peloton Capital resource analyst Ian Spence has placed a 50c price target on the stock, 2 ½ times its current going rate.Its Mt Kelly Heap Leach plant near Mt Isa is the only one operated by an ASX company using the solvent extraction electrowinning production method, producing 130,000t of LME A-grade copper cathode since 2007.
At rates of 1000t per month – Austral hit 33.5t per day within operating cost budget throughout February despite heavy rainfall in north Queensland – the company is using just a third of Mt Kelly’s capacity, providing ample room for growth.
“AR1 is a rare, substantially de-risked opportunity to invest in an established domestic copper producer with realistic strong aspirations of attaining substantial share price growth through increased revenue from planned scheduled increased production as well as leverage upside from a planned fully funded aggressive exploration and resource development drive,” Spence said in his February 28 note.
“Whilst there are plenty of junior copper companies currently listed on the ASX, only a tiny few are currently able to take advantage and leverage off current and forecasted high copper prices by producing physical metal.”
