Aeris Resources Limited
3Q23: Softer on confluence of events, FY23 guidance downgraded
AIS released a softer 3Q result where a confluence of events at Tritton,
Jaguar and Mt Colin led to the Company to downgrading FY23 copper
production (~6kt Cu) and EBITDA guidance (~A$50-70m). Positively, this
new revised copper production target was not too dissimilar to our target
(FY23: 28-32kt Cu vs OMLe: ~30.6 Kt Cu) as we saw risks to the higher grade
Budgerygar material coming online at Tritton. We adjust our numbers to
account for the revised guidance, taking a slightly more conservative
approach at Tritton (17-18kt Cu vs OMLe:~16.9Kt Cu). This sees our EBITDA
estimates reduce 26% in FY23, whilst our capital assumptions reduce in
line with management commentary – which similarly protects the balance
sheet (OMLe 4Q cash: A$30m, no debt). Our Target Price falls to A$0.90/sh
and we retain our Buy Rec. with 89% TSR. We reiterate that delivery to plan
(especially at Tritton) is key to seeing this discount unwind.
Soft result – shining light is market was partially there
▪
Soft result (vs OMLe) where production at Tritton (-20% vs OMLe) was
impacted by delayed access to Budgerygar (ventilation related delays) and
Jaguar (-35% vs OMLe) was impacted by seismicity. This more than offset
a better Cracow (+14% vs OMLe) and ultimately resulted in AIS
downgrading guidance for Tritton (~6kt Cu), although new Group guidance
(57-71Kt CuEq) was broadly in line with our expectations.
▪
Lower capital expenditure through the quarter resulted in AIS surpassing
our estimated cash position (+25%), preserving the balance sheet.
We continue see value upside in AIS despite our revised lower production. To
see this value unlocked, investors will need to see demonstrated delivery in 4Q
and 1H24 to guidance/market expectations. This, in our view, would improve
the markets confidence in AIS’s ability to not only deliver on these longer-term
organic growth / value opportunities (e.g. Constellation from FY25) but self-fund
them as well through operating cash flows.
Earnings and valuation impact
We incorporate the result, make downward revisions to our near-term
estimates, largely at Tritton / Jaguar, and adjust stockpiles sale at Mt Colin. Our
FY23 earnings reduce (~50%) on the back of this whilst our FY24 estimates
reduce by ~9% as we normalise our cost assumptions across the asset base.
Our Target Price falls 3% due to the lower forecast near term (1-year) cash
flow. We retain our Buy Recommendation with 89% TSR.
FY21A
431.3
164.7
78.5
61.2
2.8
66.4
3.0
6.0
15.8
36.1
FY22A
386.6
93.7
19.3
6.0
0.2
16.0
0.4
(85.5)
17.3
6.8
FY23E
609.2
69.9
(54.3)
(66.4)
(9.6)
(59.0)
(8.5)
4.6
-
Copper
ASX Code
52 Week Range ($)
Market Cap ($m)
Shares Outstanding (m)
Av Daily Turnover ($m)
3 Month Total Return (%)
12 Month Total Return (%)
Benchmark 12 Month Return (%)
NTA FY23E (¢ per share)
Net Cash FY23E ($m)
AIS
0.30 - 0.82
328.2
690.9
1.1
-30.7
-43.5
1.0
44.4
9.3
Relative Price Performance
110
100
Value here, just needs delivery to unlock it
Year-end June ($)
Revenue ($m)
EBITDA ($m)
EBIT ($m)
Reported NPAT ($m)
Reported EPS (c)
Normalised NPAT ($m)
Normalised EPS (c)
EPS Growth (%)
Dividend (c)
Net Yield (%)
EV/EBITDA (X)
Normalised P/E (x)
Normalised ROE (%)
Last Price
A$0.48
Target Price
A$0.90 (Previously A$0.93)
Recommendation
Buy
Risk
Higher
FY24E
699.6
201.9
75.9
77.4
11.2
77.4
11.2
1.3
4.2
23.6
FY25E
573.1
164.4
75.4
78.8
11.4
78.8
11.4
1.7
1.1
4.2
20.8
90
80
70
60
50
40
30
Apr-22
Jul-22
Oct-22
AIS
Jan-23
Apr-23
S&P ASX 200 / Materials Sector
Source: FactSet
Consensus Earnings
NPAT (C) ($m)
NPAT (OM) ($m)
EPS (C) (c)
EPS (OM) (c)
FY23E
17.6
(59.0)
2.4
(8.5)
FY24E
83.4
77.4
11.6
11.2
Source: OML, Iress, Aeris Resources Limited
Paul Kaner
Senior Research Analyst
(07) 3214 5514
pkaner@ords.com.au
Will Thurlow
Research Associate
(02) 8216 6623
wthurlow@ords.com.au
Source: OML, Iress, Aeris Resources Limited
1
29 April 2023
Aeris Resources Limited
Ord Minnett Research
Figure 1: AIS operating and financial summary
All AUD unless noted
Key Details
Year End June 30
Ratio Metrics
Target Price
$/sh
Recommendation
Risk Assessment
FY22
FY23E
FY24E
$/sh
0.00
-0.09
0.11
0.11
-5.6x
4.2x
4.2x
0.25
0.90
Earnings - Adjusted
Buy
P/E Multiple
x
108.9x
FY25E
Higher
CFPS (CFO)
$/sh
0.03
0.10
0.30
Share Price
$/sh
$0.475
FCFPS (CFO-capex-expl.)
$/sh
0.01
-0.16
0.09
0.12
2022E Dividend
$/sh
$0.00
P/CF Multiple
x
18.8x
4.6x
1.6x
1.9x
NAV
FCF Yield
25.3%
$/sh
$0.86
Implied Total Return
%
89%
Dividends Per Share
P/NAV
x
0.6x
No Shares
m
691
Market Cap
M$
$328
Enterprise Value
M$
$283
Prices & Exchange Rates
FY22
FY23E
FY24E
FY25E
LT - 2026E
%
2.3%
(32.8% )
19.2%
$/sh
0.00
0.00
0.00
0.00
Dividend Yield
%
0.0%
0.0%
0.0%
0.0%
Gearing (ND: ND+E)
%
-0.92
-0.11
-0.36
-0.76
Return on Equity (ROE)
%
5.6%
(19.2% )
22.1%
19.3%
Return on Capital (ROIC)
%
3.7%
(9.8% )
12.0%
11.2%
FY22
FY23E
FY24E
FY25E
P&L Statement
Copper Price
US$/lb
4.35
3.78
3.85
3.95
4.10
Revenue
M$
$387
$609
$700
$573
Gold Price
US$/oz
1834
1824
1863
1825
1750
Operating Costs
M$
($293)
($539)
($498)
($409)
Silver Price
US$/oz
23.5
21.4
23.3
23.4
23.2
EBITDA
M$
$94
$70
$202
$164
Lead Price
US$/lb
1.04
0.94
0.96
0.98
1.01
D&A
M$
$74
$124
$126
$89
Zinc Price
US$/lb
1.59
1.41
1.35
1.32
1.27
EBIT
M$
$19
($54)
$76
$75
AUD:USD
0.73
0.68
0.72
0.73
0.73
Other Income/Expenses
M$
($3)
($1)
$2
$3
FY22
FY23E
FY24E
FY25E
FY26E
EBT
M$
$16
($56)
$77
$79
23.9
23.3
34.2
195
188
224
Exchange rate
Production, Costs & Guidance
Tritton
Production
kt Cu
18.6
16.9
Guidance
kt Cu
18.5-19.5
17-18
Operating cost (exlc. Royalty)
M$
183
187
Guidance
M$
185-224
Taxes
M$
$0
($3)
$0
$0
Net Income - Adjusted
M$
$16
($59)
$77
$79
Adjustments
M$
($10)
($7)
$0
$0
Net Income - Reported
M$
$6
($66)
$77
$79
M
3,674
691
691
691
FY22
FY23E
FY24E
FY25E
Weighted average diluted shares
Cracow
Cash Flow Statement
Production
koz Au
53.9
48.3
Guidance
koz Au
56-59
48-59
Operating cost (exlc. Royalty)
M$
77
92
Guidance
M$
49.7
49.7
0.0
94
94
0
81-98
Jaguar
Production
kt Zn
Guidance
kt Zn
Production
kt Cu
Guidance
n.a.
25.3
M$
Guidance
M$
30.9
30.9
4.5
4.5
4.5
143
134
130
24-29
n.a.
3.5
kt CuEq
Operating cost (exlc. Royalty)
30.9
3-5
n.a.
154
kt Cu
132-160
Guidance
kt Cu
Operating cost (exlc. Royalty)
M$
Guidance
M$
n.a.
8.3
10.0
0.0
73
0
83
76-92
Capex Breakdown
M$
$16
($59)
$77
$79
D&A
M$
$74
$124
$126
$89
Taxes Paid
M$
$0
($3)
$0
$0
Non Recurring/Other
M$
$0
$0
$0
$0
Operating Cash Flow
M$
$90
$62
$203
$168
Changes in Working Capital
M$
$3
$9
$4
$2
Net Operating Cash flow
M$
$93
$71
$207
$170
Capital Expenditure
M$
($110)
($120)
($125)
($75)
Other (Acquisitions)
M$
($3)
($70)
($19)
($12)
Net Investing Cash Flow
M$
($113)
($190)
($144)
($87)
Cash Flows From Financing Activities
8-9
n.a.
Net Income
Cash Flows From Investing Activities
Mt Colin
Production
Cash Flows from Operating Activities
FY22
FY23E
FY24E
FY25E
FY26E
Equity Issues (net of costs)
M$
$95
$17
$0
$0
Net Borrowings
M$
($28)
($0)
$0
$0
Dividends Paid & Other
M$
($7)
($5)
$0
$0
Net Financing Cash Flow
M$
$61
$12
$0
$0
($108)
$63
$83
Sustaining Capex
M$
43.8
73.1
85.0
55.8
36.1
Increase (Decrease) in Cash
M$
$41
Expansionary Capex
M$
66.3
47.4
40.3
19.1
4.7
Cash at End of Year
M$
$138
$30
$93
$176
Exploration
M$
7.4
22.1
19.1
12.3
7.5
Operating Free Cash Flow
M$
($17)
($50)
$82
$95
Total
M$
117.4
142.5
144.3
87.1
48.3
Free Cash Flow
M$
($20)
($120)
$63
$83
FY22
FY23E
FY24E
FY25E
Attributable Reserves & Resources
Balance Sheet
Cu (kt)
EV ($/kt)
Cash & Equivalents
M$
$138
$30
$93
$176
Proven/Probable Reserve (P&P)
285
$1.0
Other Current Assets
M$
$41
$108
$108
$108
Measured/Indicated Resource (M&I)
735
$0.4
PP&E & Mining Interests
M$
$208
$407
$406
$392
Inferred Resource
272
$1.0
Other Long Term Assets
M$
$52
$58
$39
$29
Total Resource
1007
$0.3
Total Assets
M$
$438
$603
$646
$704
Current Liabilities
M$
$86
$151
$151
$151
Long Term Debt
M$
$0
$0
$0
$0
Other Long Term Liabilities
M$
$64
$145
$145
$145
Total Liabilities
M$
$150
$296
$296
$296
Shareholder Equity
M$
$288
$307
$350
$408
Total Liabilities & Shareholder Equity
M$
$438
$603
$646
$704
80
12% NAV
60
21%
40
4%
20
64%
FY25E
FY24E
FY23E
Tritton
Cracow
Jaguar
Mt Colin
DR (%)
($m)
A$/Sh
NAV (%)
Share Price vs. Copper
Tritton
11%
$251
0.36
64%
Cracow
11%
$15
0.02
4%
Jaguar
11%
$81
0.12
21%
Mt Colin
11%
$47
0.07
12%
Total
$393
$0.57
100%
Exploration (assets)
$205
0.30
Listed investments
$0
0.00
Cash
$45
0.07
40
Corporate G&A
($60)
-0.09
20
Operating Value
180
Debt
concentrate recievables
Other
Total Net Asset Value
P/NAV
Source: Company reports, OMLe
2
$0
0.00
$11
0.02
$594
$0.86
0.55x
12,000
AIS Share (A$/sh)
160
10,000
140
120
8,000
100
6,000
80
60
0
2014
4,000
2,000
2015
2016 2017
AIS (A$/sh)
2018 2019 2020 2021 2022
Copper - LME Cash (USD$/t)
Copper - LME Cash (USD$/t)
Net Asset Value (Attrib)
FY22
0
FY21
Production (kt CuEq)
Group Production and NAV Breakdown
Aeris Resources Limited
Ord Minnett Research
Result reconciliation
▪
Softer result (vs OMLe) where production at Tritton (-20% vs OMLe) was
impacted by delayed access to Budgerygar (ventilation related delays) and
Jaguar (-35% vs OMLe) was impacted by seismicity. This more than offset a
better Cracow (+14% vs OMLe) and has ultimately resulted in the company
downgrading guidance for Tritton (~6kt Cu), although new Group guidance
(57-71Kt CuEq) is broadly in line with our expectations.
▪
FY23 EBITDA guidance has been revised lower by ~A$60m. Lower capital
expenditure through the quarter meant the company beat our closing cash
position (+25).
Figure 2: Result summary of the quarter vs our estimates
Actual
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Copper and Gold Production
Unit
Tritton
Kt Cu
4.9
4.0
5.1
3.8
4.1
Cracow
Koz Au
15.9
11.6
11.7
10.4
11.0
Jaguar
Kt Zn
NA
NA
NA
8.1
7.3
Mt Colin (NWQ operations)
Kt Cu
NA
NA
NA
2.0
1.5
OMLe
Actual
Mar-23
Dec-22
Beat / Miss
(%)
4.8
3.9
-20%
11.7
13.3
14%
6.5
4.2
-35%
1.9
1.6
-18%
All-in Sustaining Cost*
Tritton
A$/Ib
4.9
5.9
5.0
6.9
5.5
6.0
6.0
0%
Cracow
A$/oz
1563
1867
2361
2558
2397
2397
2229
-7%
Jaguar
A$/lb Zn
NA
NA
NA
1.5
1.7
1.8
3.1
75%
Mt Colin (NWQ operations)
A$/lb Cu
NA
NA
NA
3.8
4.8
4.1
4.2
3%
Capital expenditure (sustaining + growth)
A$m
27
29
32
29
30
37
32
-13%
Exploration + corporate
A$m
2
2
2
5
9
7
4
-42%
Cash
A$m
69
59
138
52
67
36
45
25%
Debt
A$m
0
0
0
0
0
0
0.0
n.a.
Net Debt (Cash)
A$m
-69
-59
-138
-52
-67
-36
-45
26%
Capex breakdown
Balance sheet
Source: Company reports, OMLe. *AISC calculated on a produced (not payable) basis
Key takeaways:
▪
3
Production: Group production was lower than expected, on softer than
expected performance from Tritton, Jaguar and Mt Colin, only partially offset
by Cracow.
-
Tritton: 3.9kt Cu (-20% vs OMLe: 4.8kt Cu). A softer production
result that arose from lower mine throughput and grade. The key
driver was delays accessing higher grade ore from Budgerygar,
due to ongoing works to establish the ventilation raise – now
expected to complete mid-May, after which stoping can
commence.
-
Cracow: 13.3koz Au (+14% vs OMLe: 11.7koz Au). Better than
expected grades (2.8g/t Au vs OMLe: 2.5g/t Au) drove a stronger
production result, more than offsetting slightly weaker
throughput. Grade is noted to be expected to improve further into
the 4Q on lower development ore contribution.
-
Jaguar: 4.2kt Zn (-35% vs OMLe: 6.5kt Zn). Weaker zinc grades
(-36% vs OMLe) drove the production underperformance, as the
mine schedule was disrupted by a seismic event and poor ground
conditions, in addition to lower grade ore in the stope sequence.
Aeris Resources Limited
▪
▪
▪
Ord Minnett Research
-
Mt Colin: 1.6kt Cu (-18% vs OMLe: 1.9kt Cu). Production was
impacted by delays in toll treating mined ore at Ernest Henry (due
to the significant rainfall event which has disrupted the
operation). Mined copper for the quarter was 3.15kt Cu, +5% vs
OMLe, and approximately 135kt at 2.4% Cu is stored in
stockpiles pending processing. AIS guide that ~90kt of stockpiled
ore will remain by end 4Q23 due to expected capacity constraints
for toll-treating at Ernest Henry / Mt Isa.
-
Tritton: A$6.1/lb Cu (in-line vs OMLe: A$6.0/lb Cu). Flat QoQ on
a A$m basis, which combined with lower production drove the
unit cost result.
-
Cracow: A$2,229/oz Au (-7% vs OMLe: A$2,397/oz Au).
Production result flowed through to costs, helping drive the unit
rate down.
-
Jaguar: A$3.1/lb Zn (+75% vs OMLe: A$1.8/lb Zn). Decreased
zinc production drove unit costs higher.
-
Mt Colin: A$4.2/lb Cu (in-line vs OMLe: A$4.1/lb Cu).
Costs:
Capital Spend:
-
Capital expenditure: A$32m (-13% vs OMLe: A$37m). Lower
than expected capital spend was driven by delayed timing of
expenses, particularly in relation to growth capital at Jaguar, with
capital associated with the Turbo Lens pushed into FY24.
-
FY23 Guidance (Figure xx below): Production guidance has
been downwardly revised at Tritton (-17%) and Mt Colin (-23%),
alongside reduced capital spend (-17) and exploration (-24%)
spend.
Balance Sheet:
-
Cash: A$45m (+25% vs OMLe: A$36m). Reduced capital spend
(vs OMLe) helped offset the weaker group production result and
subsequent impact to the cash balance.
-
Debt: A$0m (in-line).
Figure 3: FY23 guidance
Guidance
FY23
FY23
Change
OMLe
Difference
Production
Unit
Prev
New
(%)
Tritton
Kt Cu
19-23
17-18
-17%
16.9
-3%
Jaguar
Kt Zn
24-29
24-29
0
25.3
-4%
Mt Colin
Kt Cu
10-12
8-9
-23%
8.3
-2%
Cracow
Koz Au
48-59
48-59
0
48.3
-10%
(%)
Operating costs
Tritton
A$M
185-224
185-224
0
186.8
-9%
Jaguar
A$M
132-160
132-160
0
154.3
6%
Mt Colin
A$M
76-92
76-92
0
83.2
-1%
Cracow
A$M
81-98
81-98
0
92.4
3%
Sustaining + growth
A$M
141-174
114-146
-17%
120.5
-7%
Exploration
Source: Company reports, OMLe
A$M
23-28
16-23
-24%
22.1
13%
Capital costs
4
Aeris Resources Limited
Ord Minnett Research
Earnings and valuation impact
▪
We incorporate the result, roll our model forward and make several changes
to both adjust against revised guidance and our cost assumptions. The key
changes made include:
o
Production profile: With new guidance in mind we adjust the rampup of Avoca Tank / Budgerygar at Tritton, with commensurate
impacts to head grades, alongside similar adjustments at Jaguar. We
further reflect the stockpiled material at Mt Colin, inclusive of material
to process into FY24.
o
Cost assumptions: We normalise our cost assumptions across the
asset base through 4Q23 and into FY24.
▪
These changes significantly decrease (-50%) our FY23 earnings, the majority
of which is driven by adjusting against revised guidance. Our latter year
earnings are similarly impacted as we normalise our cost assumptions across
the asset base.
▪
Our target price increases incrementally to A$0.90/sh (89% TSR) and we
retain our Buy Recommendation on valuation appeal. However, we remind
investors of near-term deliverability risks at Tritton and Jaguar.
Figure 4: Our changes
FY22
Actual
Current
FY23E
Previous
Change
Current
FY24E
Previous
Change
Current
FY25E
Previous
Change
(18%)
Underlying Net Profit
A$m
16.0
-59.0
-39.4
(50%)
77.4
84.9
(9%)
78.8
96.3
Underlying EBITDA
A$m
93.7
69.9
95.5
(27%)
201.9
205.0
(2%)
164.4
181.5
(9%)
¢
2.5
10.2
13.9
(26%)
30.0
30.6
(2%)
24.6
27.3
(10%)
CFPS
FCFPS
Copper Production
¢
2.0
1.1
1.1
0%
-15.6
-14.3
(9%)
9.1
9.0
1%
kt CuEq
40.8
54.4
58.4
(7%)
69.9
67.9
3%
57.3
57.2
0%
NAV
A$/share
0.86
0.85
1%
12 Month TP:
A$/share
0.90
0.93
(3%)
Source: Company reports, OMLe
5
Aeris Resources Limited
Ord Minnett Research
Catalysts, comps and relative performance
Catalysts
▪
Quarterly operational performance from Tritton, Cracow, Jaguar and Mt
Colin – demonstrating the robustness of the current mine plan, deliverability,
and cash flow generation. Key milestones include bringing new components
of the mine plan into production at stated throughput rates – for instance Avoca
Tank (first ore 4Q23) and Budgerygar at Tritton.
▪
Stockman DFS and comprehensive project update due end of FY23.
▪
Ongoing exploration results from the Company’s extensive tenement
package – giving investors’ confidence of likely reserve and resource
additions/replenishment.
Comps
Figure 5: AIS comps across our coverage list
OML Estimates
Company
Aeris Resources
AIC Mines
29Metals
Sandfire Resource
Average
Ticker
Analyst
AIS
A1M
29M
SFR
PK
PK
DK
PK
Market RecommenCap ($m)
dation
328
190
570
2974
Buy
Spec. Buy
Hold
Accumulate
OML Valuation
Risk
Price
($/sh)
Target
price ($/sh)
Implied
TSR (%)
Higher
Higher
Higher
Medium
0.48
0.41
1.19
6.51
0.90
0.65
1.95
7.50
89%
59%
69%
15%
P/NAV (x)
EV/EBITDA
(x) FY23e
P/E (x)
FY23e
P/CF (x)
FY23e
FCF yield
(%) FY23e
0.6
0.7
0.4
1.0
0.7
3.7
7.0
3.6
9.9
6.1
-4.9
-44.2
-14.7
-33.8
-24.4
4.6
6.0
-9.3
13.8
3.8
-21.9%
-17.1%
-33.3%
-10.8%
-20.7%
Source: Company reports, OMLe.
Relative performance (12-months)
1.8
10
1.6
9
1.4
OZL
1.2
A1M
1
Copper
0.8
29M
0.6
SFR
0.4
0
Jul-22
Sep-22
Nov-22
Source: Company reports, OMLe
6
7
6
5
4
Jan-23
Mar-23
SFR
3
2
AIS
0.2
OZL
8
Market Cap (A$b)
FY23 performance (1 Jul 2022 = 1)
Figure 6: AIS relative performance vs ASX peers
1
0
-40%
29M
AIS
A1M
-20%
0%
20%
40%
FY23 YTD perfromance (%)
60%
80%
Aeris Resources Limited
Valuation and risks
Valuation
Our A$0.90/share target price is based on a 50:50 blended DACF and NAV valuation.
Our target multiples of 6x DACF and 1x NAV are in line with other emerging
producers within the Australian market and are commensurate with mine life, margin
and overall risk profile. Our target price and 33% TSR support our Buy rating.
▪
NAV: Sum-of-the-parts (SOTP) NAV incorporates life-of-mine DCFs on
Tritton, Jaguar, Cracow and Mt Colin, based on reserve and minor
volumes of resource material, discounted at an ~8% WACC. Additional
SOTP items include: exploration value, cash and bullion and corporate
G&A. We utilise a 1x P/NAV multiple, in line with historical trading of
emerging producers, and apply no risk weighting to any of the projects.
▪
DACF: Debt-adjusted cash flow multiple of 6x in line with ASX
emerging peers when considering production, mine life and reserve
growth potential.
Risks
7
▪
Copper price and currency: The most significant risk to our forecasts
remains the copper price. Our estimates assume a long-term price of
~US$4.2/Ib, with a long term USD:AUD exchange rate of ~73c.
▪
Development risk at Tritton / Jaguar: We believe there is risk
involved with the various moving parts that make up the mine plan at
both assets. In particular, Tritton incorporates multiple development
projects that are required to come online on schedule to ensure there
is no retracement in production or disruptions to processing. Jaguar, on
the other hand, requires development of new orebodies (i.e. Turbo) and
operations within legacy mine areas (Jaguar).
▪
Resource/reserve delivery: Inferred material in the underground mine
plan forms part of the reserve. We believe this conversion is likely and
have incorporated a small portion of this material in our base case. Our
confidence in this materials inclusion is based upon the fact it is
contiguous to the existing reserve or M&I resource and would require
minimal additional capex.
▪
COVID-19 and labour pressures: Any further pressures and/or
COVID-19-related disruptions (i.e. productivity) could see downside
risk to our estimates.
Ord Minnett Research
Aeris Resources Limited
Ord Minnett Research
AIS key charts
Figure 7: We expect production and earnings improving into FY24
6.0
40
Production outlook
25
3.0
20
15
2.0
10
1.0
250
200
A$M
30
4.0
300
Production (kt CuEq)
5.0
A$/lb CuEq
Earnings outlook
35
100
50
5
0.0
150
0
FY21
FY22
FY23E
FY24E
FY25E
0
FY21
FY22
FY23E
Net Cash Cost
AISC
FY24E
FY25E
NPAT (at spot)
Production (CuEq t)
NPAT
EBITDA (at spot)
EBITDA
Source: Company reports, OMLe
Figure 8: AIS FY23E cost curve positioning against 2022 AISC cost curve (LHS) and OML current NAV
assumptions (RHS)
2022 Global Copper Mine Cost Curve
Net Asset Value (NAV)
5.0
Mt Colin
11%
4.5
4.0
AIS FY23E
Jaguar
22%
AISC US$/lb Cu
3.5
3.0
2.5
Average
2.0
1.5
Tritton
63%
Cracow
4%
1.0
0.5
​
Tritton
0.0
Cracow
Jaguar
Mt Colin
Source: Company reports, OMLe, CRU, Trafigura
Figure 9: OML cash-flow outlook – we see FCF increasing after an FY23 investment phase
250
Cash flow
Free-cash-flow
200
200
150
150
100
50
A$M
A$m
100
0
-50
50
0
FY21
-50
-100
-150
FY22
FY23E
FY24E
-100
-200
-250
FY21
Operating cash flow
FY22
FY23E
Investing cash flow
Source: Company reports, OMLe
8
FY24E
FY25E
Financing cash flow
FCF (at spot)
FCF
FY25E
Aeris Resources Limited
Ord Minnett Research
Buy
Aeris Resources Limited
PROFIT & LOSS (A$m)
Revenue
Operating costs
Operating EBITDA
D&A
EBIT
Net interest
Pre-tax profit
Net tax (expense) / benefit
Significant items/Adj.
Normalised NPAT
Reported NPAT
Normalised dil. EPS (cps)
Reported EPS (cps)
2021A
431.3
266.6
164.7
86.2
78.5
(9.9)
68.6
(2.2)
(5.1)
66.4
61.2
3.0
2.8
2022A
386.6
292.9
93.7
74.3
19.3
(3.3)
16.0
(10.0)
16.0
6.0
0.4
0.2
2023E
609.2
539.2
69.9
124.3
(54.3)
(1.5)
(55.8)
(3.2)
(7.4)
(59.0)
(66.4)
(8.5)
(9.6)
2024E
699.6
497.7
201.9
126.0
75.9
1.6
77.4
77.4
77.4
11.2
11.2
2025E
573.1
408.7
164.4
89.0
75.4
3.4
78.8
78.8
78.8
11.4
11.4
Effective tax rate (%)
DPS (cps)
DPS (cps)
Dividend yield (%)
Payout ratio (%)
Diluted # of shares (m)
(3.2)
2,207.4
3,674.0
5.7
690.9
690.9
690.9
CASH FLOW (A$m)
Net Interest (paid)/received
Income tax paid
Other operating items
Operating Cash Flow
Capex
Acquisitions
Other investing items
Investing Cash Flow
Inc/(Dec) in borrowings
Dividends paid
Other financing items
Financing Cash Flow
Net Inc/(Dec) in Cash
2021A
(7.8)
169.7
(87.9)
(65.5)
(153.4)
(18.9)
(4.1)
27.3
43.5
2022A
(2.9)
93.0
(117.4)
4.5
(112.9)
(27.6)
(6.8)
60.6
40.7
2023E
(1.3)
3.2
70.8
(142.5)
(47.8)
(190.3)
(0.0)
(5.4)
11.7
(107.8)
2024E
1.6
207.3
(144.3)
(144.3)
63.0
2025E
3.4
170.2
(87.1)
(87.1)
83.1
BALANCE SHEET (A$m)
Cash
Receivables
Inventory
Other current assets
PP & E
Investments
Financial Assets
Intangibles
Other non-current assets
Total Assets
Short term debt
Payables
Other current liabilities
Long term debt
Other non-current liabilities
Total Liabilities
Total Equity
Net debt (cash)
2021A
97.4
12.3
32.4
8.0
150.4
51.8
374.3
6.1
68.9
17.8
29.5
20.4
190.4
183.9
(61.7)
2022A
138.1
7.4
29.2
4.1
207.7
51.5
438.2
6.2
56.7
5.6
9.6
17.0
150.2
287.9
(122.2)
2023E
30.2
22.5
79.6
5.6
406.6
53.1
602.7
8.0
101.1
18.3
12.9
18.0
296.1
306.7
(9.3)
2024E
93.2
22.5
79.6
5.6
405.8
30.3
646.0
8.0
101.1
18.3
12.9
18.0
296.1
349.9
(72.3)
2025E
176.3
22.5
79.6
5.5
391.7
15.6
704.2
8.0
101.1
18.3
12.9
18.0
296.1
408.1
(155.4)
9
DIVISIONS
2021A
2022A
2023E
2024E
2025E
KEY METRICS (%)
Revenue growth
EBITDA growth
EBIT growth
Normalised EPS growth
EBITDA margin
OCF /EBITDA
EBIT margin
Return on assets
Return on equity
2021A
38.2
107.8
18.2
21.6
36.1
2022A
(10.4)
(43.1)
(75.4)
(85.5)
24.2
102.4
5.0
4.8
6.8
2023E
57.6
(25.3)
11.5
98.6
-
2024E
14.8
188.6
28.9
101.9
10.8
12.1
23.6
2025E
(18.1)
(18.6)
(0.6)
1.7
28.7
101.5
13.2
11.2
20.8
VALUATION RATIOS (x)
Reported P/E
Normalised P/E
Price To Free Cash Flow
Price To NTA
EV / EBITDA
EV / EBIT
2021A
17.1
15.8
12.8
5.7
6.0
12.6
2022A
289.8
6.1
17.3
84.0
2023E
1.1
4.6
-
2024E
4.2
4.2
5.2
0.9
1.3
3.4
2025E
4.2
4.2
3.9
0.8
1.1
2.3
LEVERAGE
ND / (ND + Equity) (%)
Net Debt / EBITDA (%)
EBIT Interest Cover (x)
EBITDA Interest Cover (x)
2021A
(50.5)
(37.5)
7.9
16.6
2022A
(73.7)
(130.5)
5.8
28.3
2023E
(3.1)
(13.3)
47.7
2024E
(26.1)
(35.8)
-
2025E
(61.5)
(94.5)
-
m
209.5
68.3
19.1
%
30.3%
9.9%
2.8%
SUBSTANTIAL HOLDERS
Washington H Soul Pattinson & Co Ltd
Tudor Court Ltd
Paradice Investment Management Pty Ltd
VALUATION
Cost of Equity (%)
Cost of debt (after tax) (%)
WACC (%)
12.2
5.5
10.5
Equity NPV ($m)
Equity NPV Per Share ($)
593.6
0.86
Multiples valuation method
Multiples
Multiples valuation
P/DACF
6.0
0.93
Multiples valuation method
Multiples
Multiples valuation
P/NAV
1.0
0.86
Target Price ($)
Valuation disc. / (prem.) to share price (%)
0.90
88.5
Aeris Resources Limited
Ord Minnett Research
Institutional Research
Alastair Hunter
Head of Institutional Research
+61 3 9608 4168
ahunter@ords.com.au
Malcolm Wood
Macro Strategy Analyst
+61 2 8216 6777
mwood@ords.com.au
Nicolas Burgess
Senior Research Analyst
+61 3 9602 9379
nburgess@ords.com.au
James Casey
Senior Research Analyst
+61 3 9602 9265
jamescasey@ords.com.au
Phillip Chippindale
Senior Research Analyst
+61 2 8216 6346
pchippindale@ords.com.au
Tom Godfrey
Senior Research Analyst
+61 7 3214 5587
tgodfrey@ords.com.au
Paul Kaner
Senior Research Analyst
+61 7 3214 5514
pkaner@ords.com.au
Ian Munro
Senior Research Analyst
+61 3 9608 4127
ian.munro@ords.com.au
John O'Shea
Senior Research Analyst
+61 3 9608 4146
joshea@ords.com.au
Leanne Truong
Senior Research Analyst
+61 2 8216 6367
ltruong@ords.com.au
Rushil Paiva
Research Analyst
+61 3 9608 4155
rpaiva@ords.com.au
Tim Elder
Research Associate
+61 7 3214 5565
telder @ords.com.au
Milo Ferris
Research Associate
+61 2 8216 6691
mferris@ords.com.au
Dylan Jones
Research Associate
+61 3 9608 4104
djones@ords.com.au
William Thurlow
Research Associate
+61 2 8216 6623
wthurlow@ords.com.au
Benjamin Yun
Research Associate
+61 2 8216 6646
byun@ords.com.au
Oliver Burston
Research Associate
+61 3 9608 4166
oburston@ords.com.au
Institutional Sales (Australia)
Angus Esslemont
Head of Institutional Equities
+61 2 8216 6363
aesslemont@ords.com.au
Jim Bromley
Institutional Equities Sales
+61 2 8216 6343
jbromley@ords.com.au
Stephen Jolly
Institutional Equities Sales
+61 2 8216 6424
sjolly@ords.com.au
Isaac Morris
Institutional Equities Sales
+61 2 8216 6370
imorris@ords.com.au
Scott Ramsay
Institutional Equities Sales
+61 3 9608 4100
sramsay@ords.com.au
Matt White
Institutional Equities Sales
+61 3 9608 4133
mwhite@ords.com.au
Zac Whitehead
Institutional Equities Sales
+61 2 8216 6350
zwhitehead@ords.com.au
Trent Stewart
Institutional Derivatives Sales
+61 2 8216 6622
trent.stewart@ords.com.au
Brendan Sweeney
Operator
+61 2 8216 6781
bsweeney@ords.com.au
+61 2 8216 6362
cmoore@ords.com.hk
Institutional Sales (Hong Kong)
Chris Moore
Institutional Equities Sales
Ord Minnett Offices
Adelaide
Level 5
100 Pirie Street
Adelaide SA 5000
Tel: (08) 8203 2500
Brisbane
Level 34
71 Eagle Street
Brisbane QLD 4000
Tel: (07) 3214 5555
Buderim (Sunshine Coast)
1/99 Burnett Street
Buderim QLD 4556
Tel: (07) 5430 4444
Canberra
101 Northbourne Avenue
Canberra ACT 2600
Tel: (02) 6206 1700
Hobart
Ground Floor
85 Macquarie Street
Hobart TAS 7000
Tel: (03) 6161 9300
Melbourne
Level 22
35 Collins Street
Melbourne VIC 3000
Tel: (03) 9608 4111
Geelong
Office 3, Suite 4
200 Malop Street
Geelong VIC 3220
Tel: (03) 4210 0200
Mackay
45 Gordon Street
Mackay QLD 4740
Tel: (07) 4969 4888
Newcastle
426 King Street
Newcastle NSW 2300
Tel: (02) 4910 2400
Mildura
128 Lime Avenue
Mildura VIC 3500
Tel: (03) 9608 4111
Perth
Level 27
108 St Georges Terrace
Perth WA 6000
Tel: (02) 4910 2400
Gold Coast
Level 7
50 Appel Street
Surfers Paradise QLD 4217
Tel: (07) 5557 3333
Head Office
Sydney
Level 18, Grosvenor Place
225 George Street
Sydney NSW 2000
Tel: (02) 8216 6300
www.ords.com.au
International
Hong Kong
1801 Ruttonjee House
11 Duddell Street
Central, Hong Kong
Tel: +852 2912 8980
www.ords.com.hk
Aeris Resources Limited
Ord Minnett Research
Guide to Ord Minnett Recommendations
Our recommendations are based on the total return of a stock – nominal dividend yield plus capital appreciation – and have a 12-month
time horizon.
SPECULATIVE BUY
We expect the stock’s total return (nominal yield plus capital appreciation) to exceed 20% over 12 months.
The investment may have a strong capital appreciation but also has high degree of risk and there is a
significant risk of capital loss.
BUY
The stock’s total return (nominal dividend yield plus capital appreciation) is expected to exceed 15% over the
next 12 months.
ACCUMULATE
We expect a total return of between 5% and 15%. Investors should consider adding to holdings or taking a
position in the stock on share price weakness.
HOLD
We expect the stock to return between 0% and 5%, and believe the stock is fairly priced.
LIGHTEN
We expect the stock’s return to be between 0% and negative 15%. Investors should consider decreasing their
holdings.
SELL
We expect the total return to lose 15% or more.
RISK ASSESSMENT
Classified as Lower, Medium or Higher, the risk assessment denotes the relative assessment of an individual
stock’s risk based on an appraisal of its disclosed financial information, historical volatility of its share price,
nature of its operations and other relevant quantitative and qualitative criteria. Risk is assessed by
comparison with other Australian stocks, not across other asset classes such as Cash or Fixed Interest.
Disclosure: Ord Minnett is the trading brand of Ord Minnett Limited ABN 86 002 733 048, holder of AFS Licence Number 237121 and is an ASX Group Participant, a
Participant of Cboe Australia Pty Ltd and a wholly owned subsidiary of Ord Minnett Holdings Pty Limited ABN 32 062 323 728. Ord Minnett Limited and/or its
associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities referred to in this document. This
document is not available for distribution outside Australia, New Zealand and Hong Kong and may not be passed on to any third party or person without the prior
written consent of Ord Minnett Limited. Further, Ord Minnett and/or its affiliated companies may have acted as manager or co-manager of a public offering of any
such securities in the past three years. Ord Minnett and/or its affiliated companies may provide or may have provided corporate finance to the companies referred to
in the report.
Ord Minnett and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies
covered in its research reports. As a result, investors should be aware that the firm or other such persons may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
This document is current as at the date of the issue but may be superseded by future publications. You can confirm the currency of this document by checking
Ord Minnett’s internet site.
Disclaimer: Ord Minnett Limited believes that the information contained in this document has been obtained from sources that are accurate, but has not checked or
verified this information. Except to the extent that liability cannot be excluded, Ord Minnett Limited and its associated entities accept no liability for any loss or
damage caused by any error in, or omission from, this document. This document is intended to provide general securities advice only, and has been prepared
without taking account of your objectives, financial situation or needs, and therefore before acting on advice contained in this document, you should consider its
appropriateness having regard to your objectives, financial situation and needs. If any advice in this document relates to the acquisition or possible acquisition of a
particular financial product, you should obtain a copy of and consider the Product Disclosure Statement for that product before making any decision. Investments can
go up and down. Past performance is not necessarily indicative of future performance.
Analyst Certification: The analyst certifies that: (1) all of the views expressed in this research accurately reflect their personal views about any and all of the subject
securities or issuers; (2) no part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein.
Ord Minnett Hong Kong: This document is issued in Hong Kong by Ord Minnett Hong Kong Limited, CR Number 1792608, which is licensed by the Securities and
Futures Commission (CE number BAI183) for Dealing in Securities (Type 1 Regulated Activity) and Advising on Securities (Type 4 Regulated Activity) and Asset
Management (Type 9 Regulated Activity) in Hong Kong. Ord Minnett Hong Kong Limited believes that the information contained in this document has been obtained
from sources that are accurate, but has not checked or verified this information. Except to the extent that liability cannot be excluded, Ord Minnett Hong Kong
Limited and its associated entities accept no liability for any loss or damage caused by any error in, or omission from, this document. This document is provided for
information purposes only and does not constitute an offer to sell (or solicitation of an offer to purchase) the securities mentioned or to participate in any particular
trading strategy. The investments described have not been, and will not be, authorized by the Hong Kong Securities and Futures Commission.
For summary information about the qualifications and experience of the Ord Minnett Limited research service, please visit http://www.ords.com.au/our-team-2/
For information regarding Ord Minnett Research’s coverage criteria, methodology and spread of ratings, please visit http://www.ords.com.au/methodology/
For information regarding any potential conflicts of interest and analyst holdings, please visit http://www.ords.com.au/methodology/
The analyst has certified that they were not in receipt of inside information when preparing this report, whether or not it contains company recommendations. Any
reports in this publication have been authorised for distribution by Alastair Hunter, Head of Institutional Research at Ord Minnett.