Rerating coming, but not yet

Rerating coming, but not yet

At some point in the not so far future Austral Gold will get rerated, but we are not there yet. Austral first has to overcome the following two issues:

1)single shareholder owns/controls ~ 87% which reduces liquidity and makes minority shareholders very nervous. I think this issue will be sufficiently mitigated if they can bring this down to below 60%. Company has plans to address this thru M&A. They have a good track record of shrewd M&A so far with Amancaya purchase from Yamana, the whole of Argentex, and Casposo mine from Troy, and the 2 properties from Revelo. I am eagerly anticipating their next move.

2)While Austral has ambitions to be a leading South American precious metals producer, they have not yet shown that they have a world class project. They now have only 3 small mines of ~ 50K oz each: Guanaco, Amancaya and Casposo. Austral will need to convince the market that they have a world class mine in the making, which would be a minimum of 100K+ oz/yr along with being low cost and long lived. Of these 3 only Amancaya looks to have this potential, but that may take another year or two to demonstrate thru further high grade drill results. Pinguino looks very promising but it looks to be still 2-3 years away from production start.

Austral can kill two birds with one stone by aggressively moving forward on the M&A front. There are still some good projects that are languishing in the hands of undercapitalized juniors and where a win/win can be created for both acquirer and acquiree by rolling them up into Austral. A very undervalued share price can actually be an asset rather than a liability, as Austral shares are a very valuable currency to convince someone to part with their promising asset and yet reap long term appreciation by holding the shares they receive in return.