AIM Resources 3,4,5 Metals & Mining 11 May 2006 BUY 7.5p AIM AIMR Year end 30 June Sales (A$m) Pre-tax (A$m) Normalised (A$m) EPS (A¢) PER (x) DPS (A¢) Yield (%) EV/Sales (x) EV/EBITDA (x) 2005A 0.0 -4.0 -4.0 -0.9 nm 0.0 0.0 nm nm 2006E 0.0 -4.4 -4.4 -0.8 nm 0.0 0.0 nm nm 2007E 0.0 -4.5 -4.5 -0.6 nm 0.0 0.0 nm nm 2 008E 130.8 99.7 64.8 7.5 2.4 1.5 8.3 0.8 1.0 Source: Seymour Pierce Limited Company Note AIM Resources is pushing ahead with the development of the Perkoa zinc project in Burkina Faso. Snowden Mining Industry Consultants has completed a bankable feasibility study on the project, which estimates a net present value of US$147.7m (US$405m when recently recalculated using spot metals prices), equivalent to approximately 14p/share (37p/share). We consider that the shares are markedly undervalued and rate them a strong Buy. The feasibility study on the Perkoa project was published in December 2005 and estimated that the operation could be brought to production at a capital cost of approximately US$72.5m. This would enable extraction of a proven and probable reserve of 6.27Mt at an average grade of 14.5% zinc. With a mine life of about 14 years, and operating expenses of US$53.50/t, the mine should be highly profitable, hence the NPV of US$147.7m estimated by the consultant. This yields an internal rate of return of 43.5%. Burkina Faso has a well-developed infrastructure and a stable political system, unlike its neighbours to the south west. The new mining law is well constructed and provides good security of tenure, which should allay some investment concerns. AIM Resources has two other African projects, of which the Mumbwa joint venture with BHP Billiton in Zambia is probably of most interest. The other project comprises platinum group metal exploration in South Africa. We value AIM Resources at 16p/share after allowing for the issue of additional shares to part-fund development of Perkoa, and ascribing value to its other exploration assets. Using current metals prices we see upside to at least 24p/share. We have no hesitation in rating the shares a Buy. 3,4,5 Please see regulatory disclosure notes at the end of this document A draft of this research has been shown to the company following which minor factual amendments have been made. Perkoa delights No of shares (m) 589.5 Market cap (£m) 44.2 Net cash (£m) 3.0 Enterprise value (£m) 41.2 (%) 1m 3m 12m FTA relative 46.5 91.0 222.9 12 month high/low (p) 7.75/1.62 Next news Debt commitment – June 2006 Business Development of the Perkoa zinc project in Burkina Faso and exploration for copper, gold and platinum elsewhere in Africa. www.aimresources.com.au Price and price relative (-1y) Bushveld Igneous Complex (
AIM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)