Broker update:
Ord Minnett rates AMI as Buy
Aurelia Metals has announced geological complexities at its newly acquired Dargues gold mine that will impact grade expectations, but Ord Minnett notes the update doesn't change its valuation.
The company anticipates the discovery will reduce grades -15% and cost $60-80m by way of an impairment charge. However the project retains an expected four-year mine life at a 45-55,000 ounce per annum production.
Incorporating a $70m impairment charge into Ord Minnett's second half forecasts sees net profit fall to -$23m from $47m.
The Buy rating is retained and the target price decreases to $0.95 from $1.00.
Target price is $0.95.Current Price is $0.49. Difference: $0.46 - (brackets indicate current price is over target). If AMI meets the Ord Minnett target it will return approximately 48% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Aurelia Metals reduced grade expectations from its recently acquired Dargues gold mine is only a minor setback, Ord Minnett says. Ord Minnett now expects annual gold production from the southeast Australian mine, which Aurelia acquired for A$230 million in December 2020, of 50,000 oz, compared with its previous expectation of 65,000 oz. Still, Ord Minnett thinks its overall thesis around valuation and brown-field growth remains intact. It maintains a buy rating and trims its target price by 5% to A$0.95, also incorporating a Aurelia's announcement of a A$60 million-A$80 million non-cash impairment in its 2H results.
(20min delay)