A couple of weeks ago, the Ferret provided some speculative commentary (see below) on AUG's 6,000,000 oz Morobe resource being worth up to $3.00 per share.
That sounds quite incredible for a stock selling in the teens (with most of the market cap. backed by cash), so some observations are in order:
- The release of a bankable feasibility study for the six million oz. Morobe resource is a few weeks over due. If favourable, which it apparently should be, the share price should surge and buyers for the mine should be significantly more interested. - Morobe is in PNG and not yet developed. AUG wants to concentrate on Australia and is looking for a buyer for its 50% share. However, Aurora plan to develop the resource themselves if there are no buyers at a reasonable price. 5-6 million ounces of mainly gold and some silver have been claimed so far and at least 10 million is possible on the basis of work done so far. Ongoing costs will be less than half the current price of gold and mine development costs are naturally expected to be far less than what the known resource is worth. Output should be at least 300,000 oz. p.a., thus ensuring a long mine life. - AUG fell a very long way from grace in the last few years for a number of reasons. These include severe people problems in Indonesia (a country they will probably have left completely in a matter of weeks), the usual hedging issues and naturally the fall in the gold price. The loss of the main Indonesian mine involved a one off write down of tens of millions of dollars. - AUG's share price has not enjoyed the same level of appreciation as most others of a similar nature in recent times. In part this has been a lack of obviously encouraging news and hangover perceptions from Indonesian experiences. There is some resistance on the charts around the very low 20's which goes back a couple of years. Should that level be breached, which it could be very soon if gold holds up and / or the feasibility study is released, there is a lot of blue sky as I see it. The market depth suggests there are a reasonable number of shares still available today for punters who are interested. - If the gold boom stops or Morobe doesn't get a good report, AUG shares will slip. However, the cash backing, relatively small rise so far and a few other interests the company has, indicate there is far less down side than most other gold stocks at the moment. Given the potential upside on good news about Morobe, the risk reward ration seems to be unusually good.
As an aside, I'm haven't been overly impressed with the "fundamental" reasons being bandied about in the media for gold "needing" to fly high at this point in time. However, if stocks are going up, why not go along for the ride? I'm more than doubtful about the $3 Morobe valuation as well, but even if it's only worth a few cents, AUG seems very interesting. Of the smaller gold producers, AUG has quite strong fundamentals and significant potential in its own right, which makes me feel better about getting involved. Only time will tell if the market and those looking over Morobe are willing to forgive and forget past let downs in mainly Indonesia.
"AURORA GOLD seems to have "Capital Return" written all over it. This was the writing on the wall when the GUINNESS PEAT GROUP acquired RIO's 35 per cent share some twelve months ago - making a 10c per share offer for AUG when its cash backing was some 17c - and now has some 40 per cent of the miner. GSP is sitting in the box seat, with its representative Michael Jefferies seconded to be managing director and CEO of AUG. Aurora at March 31 had 12.5c a share in cash. Its principal asset, 50 per cent of the 6.3 million Morobe gold resource is up for sale and could be worth an extra $3 a share. Shares of Aurora yesterday sold at 17.5c."
