It is not every day that a mining junior or mid-cap becomes part of the research coverage universe of a big end of town broker.

When it does happen, it is as good a signal as there is that the junior or mid-cap in question has finally arrived as a serious investment proposition.

But that doesn’t matter much for investors if the “initiation’’ of coverage by a big name broker comes with a share price target on the stock at, or near, the current market price.

What investors want to see is a target price with serious upside to the market price, in the opinion of the broker anyway.

The juniors are…

All that is by way of background to recent interest in two juniors/mid-caps which have caught the eye of Macquarie analysts for the first time – Aurelia Metals (ASX:AMI), and one written up here previously by Garimpeiro, Bellevue Gold (ASX:BGL).

Macquarie has just initiated coverage on the pair and has set target prices well above the current market prices.

Aurelia has had a big year share price wise thanks to its successful acquisition of the Peak gold mine in January which expanded its central NSW footprint. So much so that it is now more of a mid-cap than a junior.

On Macquarie’s figures, the combination of the Peak mine and Aurelia’s existing Hera gold-silver-lead-zinc mine are good for 200,000 oz a year of gold equivalent production (it gives the lead and zinc a gold value) over the next three years at an impressive all-in sustaining cost of $A650 an oz, with another seven years of production to follow as things now stand.

Macquarie said Aurelia was “trading at a discount to most ASX midcap gold producers”.

It has an “outperform’’ rating and has set a 90c target price on the stock, compared to the 70-odd cents it was trailing at in December.

Until Macquarie came along the only other broker of note following the stock was Hartleys. In its most recent research note (October 23), the Perth broker also set a 90c price target.

Macquarie’s initiation note identified a number of “imminent’’ re-rating catalysts.

Apart from the widely accepted exploration upside at the Peak and Hera operations, Macquarie also raised the potential for Aurelia to be included in the big exchange traded fund focussed on the global junior and mid-tier gold stocks, GDXJ.

Re-rating catalysts

Garimpeiro’s particular interest in likely re-rating catalysts for Aurelia is on the potential of the recent Dominion copper-lead-zinc-gold discovery, 11km south of Hera, to shape up into something special.

The shallow and seriously broad intersections of 1 per cent copper in the oxide zone with other metal values was interesting enough.

Testing the potential for high-grade sulphide material at depth and along strike could excite.

Bellevue has been mentioned here in the past on the strength of its spectacular high-grade Viago lode at the company’s namesake historic mining operation in WA.

The company has now discovered three new lodes at the former high-grade operation in quick fashion, taking the resource base past 1m oz at an impressive 12.3g/t gold.

More recent drilling has indicated that the original Bellevue lode has a lot more gold to give as well, a taste of which might come with a resource upgrade due in the March quarter.

Macquarie has initiated coverage of the stock with a 70c price target, compared to the 40c mark it was priced at in December. The target is based on modelling suggesting a 116,000 oz a year gold mining operation is in the offing, with AISC of $A840 an oz.

But that would seem to be a base case given the coming resource upgrade, with the eyes of the industry now on the potential for Bellevue to become a high-grade multi-million oz deposit.

Whether Bellevue itself gets to develop the project remains to be seen. Macquarie and just about everyone else in the industry reckons the company is an attractive takeover target for the many gold miners in the region with hungry treatment plants to fill.

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