• Aurelia Metals falls tumble as capital raising rumours overshadow Federation feasibility study
  • AMI MD Dan Clifford disappointed rumours of placement talks leaked, investors disappointed in general
  • Big three Pilbara iron ore miners the sole standouts in bad day for markets


I have two gripes with the slurry pipeline of announcements Aurelia Metals (ASX:AMI) has rolled out today, supporting the completion of a study into its much-hyped Federation mine in the greater Cobar region of New South Wales.

First is the nigh on unreadable grey-tinged print, in font so small and so stuffed with detail it feels like the purpose was in some strange way to obfuscate whatever message the gold and base metals miner was trying to get across.

Then there was the furious pace with which a slew of separate announcements were released to the market.

Regardless, they were all overshadowed by reports from the AFR that AMI was looking to raise $60 million through Bank of America Merrill-Lynch to bankroll the bulk of the $108 million capex bill to get Federation – which will be replaced with a new, traditional owner advised Indigenous identifier – up and running.

“Aurelia is considering a range of funding options to obtain the necessary funding for the Federation base metals project and will continue to keep the market fully informed in line with its continuous disclosure obligations,” was Aurelia’s ‘response to market speculation’ today.

Not an outright denial.

ASX-listed companies sometimes have a funny definition of fully-informed, though with available cash of $46m as of September 30, it stands to reason the firm would be in the market for cash to make the satellite development of Federation, 10km south of its operating Hera mine, a reality.

If there’s one thing investors hate, and they hate many, many things, it’s being diluted.

And the fear of that is a likely reason Aurelia’s feasibility announcement was met with a groan, with AMI shares down 32.56% today, a decline that’s been accelerating through the afternoon.


Aurelia Metals (ASX:AMI) share price today:



The breakdown

Aurelia, which had 1.237 billion shares on issue and a market cap of $266 million before today, is now worth around $175 million.

But let’s get these numbers standing on their own.

The Federation mine, which contains a maiden reserve of 2.2Mt at 8.9% zinc, 5.3% lead, 1.4g/t gold, 6g/t silver and 0.3% copper and resource of 5Mt at 9.2% zinc, 5.4% lead, 0.9g/t gold, 6g/t silver and 0.3% copper with a production target of 4Mt at 8.6% Zn, 5.1% Pb, 1g/t and, you guessed it, 6g/t silver and 0.3% copper.

That would be mined at a rate of 600,000tpa for around 8 years, delivering 44,000t of zinc, 25,000t of lead, 11,000oz of gold and 74,000oz of silver a year.

According to the study, Federation has an NPV of $186m, IRR of 37% and payback period of 3.2 years at consensus prices, and $415m, 71% and 1.6 years at spot prices.

The plan is to forgo more expensive standalone development of Federation by processing its ore through existing plants at Peak and Hera.

At the same time, an exploration decline has been paused “to enable the appropriate financing structure to be put in place”.

How that funding will all be put together remains to be seen, with boss Dan Clifford taking aim at the leaks that saw talks with shareholders on the proposed capital raising revealed today.

“We have been in discussions and I’ve gotta say it’s pretty disappointing to see leaks like that but that’s the market we work within,” he said on a conference call today.

“The answer is yes, we have had some discussions but we’ve opted now as a business to pause, take stock of where we are, settle the existing assets and work through what is the best funding package for the business including the development of Federation into the future.

“It’s like with the feasibility we took a little extra time to get it right, and with the funding we need to do the same.

“It’s a pretty choppy market out there with what’s happening internationally and I think taking a little bit of time to do that is right.

“I see the speculation came, yes we have had discussions with major shareholders.”

So can they rule out any raise in the immediate future?

“We are looking at all our options, we’ve got to assess what they are,” Clifford said.

“The reality is at the moment that we’ve got the Federation decline on pause, so we’ve got to retain that flexibility to find the best funding package to do it.

“It may be a mixture of debt, equity, strategic interest in either asset or head co. level with offtakers or other strategic businesses.

“Those options are available to all businesses all the time and we will assess what that looks like going forward.”


Were there any Monstars today?

There really were none, outside from lukewarm responses to the big three Pilbara miners.

The return of China from its week long National Day holiday saw iron ore futures hike 2.16% in Singapore to US$96.10/t, pulling BHP (ASX:BHP) into the winner’s list (by a bare 0.02%) along with Rio Tinto (ASX:RIO) and FMG (ASX:FMG).

The success of the big miners, who make up a substantial portion of the ASX 200 materials index, dragged the sector to a creditable 0.93% loss against a broader 1.4% fall for the ASX 200.

Pretty much every other large and mid cap miner ran out of puff though, unable to swim against what was a particularly bearish rip.

The energy sector fell 1.15% with big coal and lithium miners all sliding back from record highs.