One of the biggest mine deals of the year has been concluded without much fanfare.

Garimpeiro is talking about the $US950-$US1.1 billion acquisition from Glencore of the CSA copper mine near Cobar by the US listed Metals Acquisition Ltd (MAC), formerly a special purpose acquisition vehicle.

The value range up to $US1.1 billion – or a stunning $1.73 billion in Aussie dollars – is due to the consideration including a $US150m payment contingent on high copper prices.

Oh, there is also a life of mine 1.5% net smelter return royalty on CSA’s copper production.

For its truckloads of moolah MAC gets a mine producing about 40,000t of copper annually from a high-grade orebody. It is an expensive deal any way it is cut but needs to be seen through MAC’s belief in the copper thematic, and its confidence in making CSA bigger and longer-lived overtime.

Good luck to MAC. But today’s interest is in something more in Garimpeiro’s sandpit – ASX-listed Aurelia Metals (ASX:AMI) which traded mid-week at 9.7c for a market Cap of $160 million.

It too is a Cobar producer, more weighted to gold at the moment but with base metals to become more important over time.

With a new mine development underway, and a strategy to “fill’’ its two under-capacity treatment plants in the Cobar region, it too could be a 40,000tpa producer, at least on a copper equivalent basis.

Lots of work to do before it gets to that sort of level, but the potential is there. It is why industry watchers have taken to doing some “comps’’ between Aurelia with its $160m market cap, and what MAC paid for CSA.

Mike Evans, executive director of Acova Capital, is one to have done so in his regular “Mike’s Miner Musings.’

“There’s a fundamentally large valuation gap here which we think will start to unwind in the short-term. We expect this unwind will most likely be from Aurelia re-rating upwards (after a horror few years of performance), rather than MAC derating as such,’’ Evans mused.

He was certainly right about Aurelia’s horror few years when it took its eye off the ball at its mainstay Peak mine near Cobar, forcing it in to a stop-start progression of the new Federation mine near Nymagee, 100kms southeast of Cobar.

But the fix-up and clean-up work needed is well underway with former BHP and OZ Minerals operative Bryan Quinn recently clocking up 100 days as Aurelia’s new managing director and chief executive.

There were signs of progress on the operating performance front in the September quarter with development rates underground at Peak more than doubling, and its unit costs of production falling 8% to $127/t.

It also reported that the decline development at Federation was ahead of schedule, increasing confidence that first high-grade ore from the mine will be delivered to Peak for processing in the first quarter of 2025.

Metal production was off at both the Peak and the Dargues gold mine near Canberra (to be closed in 2025 and now throwing off plenty of cash given development work has stopped and high-grade pillars can be retreat mined).

Production guidance for the FY2024 was nevertheless maintained at 60-65,000oz of gold, 2,800-3,100t of copper, 19,000-22,000t of lead and 17,500-20,000t of zinc at for an all-in sustaining cost of $A1,850-$A2,050oz after non-gold credits.

Commenting on the September quarterly, Macquarie said Aurelia had a mixed first quarter “with stronger than expected gold production offset by weaker base metals production and higher than expected costs.’’

“Positively, Aurelia has maintained FY2024 guidance,’’ Macquarie said.

There was no musing from Macquarie on the Aurelia’s market cap compared with the price MAC paid for the CSA mine.

But it does have a 12-month price on the stock of 21c (October 20) which is more than double the current share price.

Aurelia had $110m in cash on the balance sheet on September 30 and ongoing cashflows from Peak and Dargues to make Federation happen.

To Garimpeiro’s way of thinking, the current market cap qualifies Aurelia as a potential takeover target, with MAC the logical bidder.
 
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