Barry FitzGerald: Can Aeris get runs on the board ahead of copper liftoff?

“Garimpeiro” columnist Barry FitzGerald has covered the resources industry for 35 years. Now he’s sharing the benefits of his experience with Stockhead readers.

Andre Labuschagne padded up for a presentation on copper/gold producer Aeris Resources (ASX:AIS) to the Melbourne Mining Club on Tuesday night.

It was a good innings too by the company’s executive chairman judging by the chatter that followed afterwards at a nearby watering hole for a debrief.

Labuschagne has been busy since his arrival at the crease 10 years ago at Aeris when the copper producer was a one mine company with a messy balance sheet.

There has been a number of acquisitions since to make Aeris a three mine company with another three restart/development projects in the mix. The balance sheet is also under control.

There have been some beamers along the way though, notably the need to put the Jaguar copper/zinc mine, north of Leonora in WA, on a care and maintenance footing in September 2023 having only acquired the operation in April 2022.

Putting Jaguar on C & M was a shock to the market at the time. So what was a 70c stock in the months before quickly became a 20c stock. As it is, Aeris was trading during the week at 18c for a market cap of $175 million.

Brokers that follow the stock have price targets ranging from 25-35c a share, which is no surprise given that as an established producer, Aeris is benefitting from elevated copper and gold prices.

But Garimpeiro came away from Labuschagne’s presentation wondering if the market and the brokers following the stock are being overly mean on the basis that Aeris is actually a copper dynamo in the making, with cashflows from its existing copper and gold production the enabler.

Aeris is forecasting FY2025 copper equivalent production of 40,000-48,000t which can be broken down into 27,000-32,000t of copper, 50,000-62,000oz of gold, with some silver thrown in the mix.

Copper equivalents are fine, but it is the pure copper as it were that is Garimpeiro’s focus as of all the metals it is the one that stands to benefit from the global electrification of everything.

The copper deficit is coming

A supply deficit for the red metal is coming so prices will have to be pushed higher to incentivise new and expanded supply sources.

It is why BHP in recent times acquired OZ Minerals for $9.6 billion and paid $3.2 billion for half of two undeveloped copper projects in Argentina. Oh, it also tried and failed to acquire Anglo American for $75 billion to get its hands on their South American copper assets.

All that from a company that already held the world’s biggest copper resource base before making the moves anyway.

Aeris’ forecast of copper production of 27,000-32,000t for FY2025 already makes it one of the biggest copper producers on the ASX, certainly among the junior and mid-cap ranks.

But Garimpeiro reckons that the Aeris portfolio of mines, development projects and potential restarts (Jaguar) means it could well push production to 50,000-55,000tpa levels in the next five years or so, just as the copper price “flies up” as BHP puts it.

Assuming a strong tailwind from the copper price, that sort of production, and indeed production potential, is routinely valued by the market in other companies at $1 billion or more.

Aeris will have to get some runs on the board before getting anywhere near that sort of market rating.

But the buildings blocks are already in place. The existing Tritton mine in central western NSW, Jaguar, and the undeveloped Stockman project near Omeo in Victoria’s East Gippsland.

Garimpeiro reckons it is fair enough to think of 30,000tpa from Tritton, 10,000tpa from a restarted Jaguar (assuming it is not sold), and 15,000tpa from a development at Stockman, originally a WMC discovery dating back to 1978.

That is just the copper in all cases. It’s the metal that will increasingly be the focus of the market although all of the projects mentioned come with the other base and precious metals, remembering too that Aeris has nice earner in the Cracow gold mine in central Queensland.

The capex bill at Stockman would be a multiple of Aeris’ current market cap. But as suggested, there would be plenty of market support for the project in the right price environment. Besides, companies producing close to 50,000tpa of copper are few and far between.

Finally, it is worth mentioning that the $12.5 billion investment house Washington H. Soul Pattinson is on board with a 31.4% stake, a throwback to the cash and shares sale of its Round Oak mining business, which included Jaguar, to Aeris in 2022.

The views, information, or opinions expressed in this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.