AMI (Aurelia Metals Ltd, +11.8% to 28.5cps, m.cap A$236m, Gold:...

AMI (Aurelia Metals Ltd, +11.8% to 28.5cps, m.cap A$236m, Gold: Producer): Mike Millikan

• Latest exploration update from Hera and Peak highlights potential for resource growth/mine life extensions.

• At Federation (located 10km SSW of Hera) shallow drilling along strike has intersected high-grade base metals (Pb+Zn) and gold, reporting:
  • 15.4m @ 47.4% Pb+Zn & 10.7g/t Au from 244m (incl. 2.4m @ 47.8% Pb+Zn & 64.5g/t Au from 249.6m)

  • 18.6m @ 49.2% Pb+Zn & 1.1g/t Au from 348m (incl. 9m @ 59.5% Pb+Zn & 1.9g/t Au from 353m)

  • 10m @ 40.5% Pb+Zn & 5.9g/t Au from 308m

  • Remains open along strike and at depth, and displaying Cobar-style geometry which implies a relatively short strike length but strong vertical continuity.

  • Drilling ongoing to progress towards a maiden resource, which at this stage is anticipated in July (part of the annual reserve and resource update)

  • Initial met-testwork provides encouraging base metal recoveries +90% for lead and zinc to a bulk concentrate, further work required for gold recoveries

  • Baseline environmental to commence this quarter to fast-track approvals for a potential mining and processing option (for Hera)

• At Kairos (Peak) deep drilling from surface intersected multiple wide zones of rhyolite with areas of visual low to moderate grade copper mineralisation reported.
  • Some of the better assays included 2m @ 2.2% Cu from 1,477m and 1m @ 2.0g/t Au from, 1,867m – from the first deep surface hole

  • A second deep hole has now been completed with assays pending and DHEM surveys awaiting interp.

  • Further drilling is proposed but likely to be undertaken via underground drill platforms

• We recently updated our modelling for Peak and Hera off the expectation of a soft MarQ production result similar to that of the DecQ.

• We have adjusted our FY20 forecasts and now assume production of ~83.5koz (down from 89.4koz) at an ~A$1,355/oz AISC (up from ~A$1,230/oz AISC), though this assumes more normal production in the JunQ, which remains subject to change.

• Our latest AMI NAV is 70cps (from 68cps), improved by our latest gold price assumptions, though we have softened our base metal prices for the next few quarters. Our spot NAV is 86cps and our Price Target is 60cps (from 68cps).

• We continue to see good value in AMI and maintain our Speculative Buyrecommendation.

• Aurelia Metals Ltd (AMI) - 1 April 2020

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