Aeris Resources: Could we see a 10 bagger from last year’s placement price of $0.03 per share? Drilling is the truth!
The Aeris Resources (ASX: AIS) Executive Chairman, Andre Labuschagne, continues to show all the tenacity of his son, Marnus. When the Montgomery Small Companies Fund took up the placement in AIS just over a year ago at $0.03 per share, the thesis was simple.
As I wrote in the blog here the recently acquired Cracow gold mine, whilst in decline, had a strong record of reserve and resource replacement. AIS proposed spending around $26 million over Fiscal 2021 and Fiscal 2022, with the objective of upgrading the approximate 389,000 ounces of Indicated to Inferred to Measured and thus extending the mine life until at least Fiscal 2026.
While this thesis remains intact, the six-fold share price increase to $0.18 has been largely attributable to the Company’s drilling success around the Tritton copper mine, located 50 kilometres north-west of Nyngan in North-Western NSW, where the life of the mine looks like it could double to at least six years. In conjunction with the recent drilling at the nearby Constellation Deposit (45 kilometres north-east of Tritton and within trucking distance of the mill), the strong Copper price and the recent $50 million capital raising (288 million shares at $0.175 each), AIS – with a market capitalisation of $406 million and a strong balance sheet – has now attracted the interest of several “Smaller Company Funds”.
For a junior Resource Company, “drilling is the truth”, and only time will tell if AIS can maintain its annual copper production at around 23,000 tonnes and its annual gold production at around 60,000 ounces for at least five more years. At today’ prices of A$12,000 tonne for Copper and A$2,370/oz for Gold, AIS has the potential to record annual Earnings before Interest and Tax (EBITDA) of $140 million, putting the Company on a prospective Enterprise Value to EBITDA ratio of sub 3.0 times.
Continuing drilling success particularly near Tritton and at Constellation should lead to further optimism for the Company. Importantly, the longer and more sustainable the Company’s Copper and Gold production profile, the more likely AIS will re-rate to a prospective EV/EBITDA ratio of say 5 times. And this could yield a share price target on the current 2,255 million shares on issue of $0.31.
The Montgomery Small Companies Fund owns shares inAeris Resources Limited. This article was prepared 21 June 2021 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Aeris Resources Limited you should seek financial advice.