Amara Mining: Shares At Only Modest Premium To Cost Of Discovery
Edison | Apr 04, 2013 03:21AM ET
After three reported quarters and with production figures for Q4 already known, there were few surprises in Amara Mining's (AMA.L) FY12 results. Excluding a one-off, non-cash exceptional charge of US$4.4m, basic EPS for the full year was 2.56c (vs Edison’s expectation of 2.58c), while implied Q4 basic EPS was 0.18c (vs 0.21c expected). Of more significance, however, was AMA’s control of operating costs, which look to have declined 9.6% on a unit basis between Q3 and Q4, and its increase in resources.
Shares at only modest premium to cost of discovery
In return for its exploration budget of c US$25m in FY12, Amara increased its resource base by 1.6Moz to 6.1Moz on a gross basis, and by 1.4Moz to 5.8Moz on an attributable basis (excluding the Sega acquisition). This puts AMA shares on a resource multiple of just US$11.24/oz, compared to a global average for producers and explorers of US$108/oz. Stated alternatively, at global average costs of discovery, it would cost a company US$56.7m simply to define Amara’s attributable resource of 5.8Moz in the ratio 3 ‘measured’ to 56 ‘indicated’ to 41 ‘inferred’. It would cost US$60.0m to define a resource of 6.1Moz in the same proportions.
Yaoure +0.91Moz ? +2.5Moz ?
Given the drilling already completed, Edison estimates that the total resource inventory at Yaoure could be 2.95Moz compared to the 2.04Moz currently defined (at a cut-off grade of 0.8g/t). Including future step-out drilling however, management believes that the final Yaoure mineral resource inventory could be as much as 4-5Moz. In the light of Amara’s share price reaction to the Yaoure resource upgrade in March, Edison estimates that the addition of a further 2.5Moz to resources at Yaoure (with categorisation pro-rata to that currently existing) could add an immediate 9.7c/share (attributable) to Amara’s valuation but probably would add 4.7c/share (less incremental drilling costs).
Valuation: Shares at cheapest for a decade
Below 50p Amara shares are trading at their cheapest level in over 10 years (with the exception of the onset of the global financial crisis in 2008/09) despite the company having successfully brought Kalsaka into profitable production in 2009. It is also trading at a 52% discount to year-end book value of US$0.96 per share. Given current mining and cost schedules, Edison estimates a value for Amara of US$2.12 (£1.40) per share, based on the maximum potential stream of dividends payable to investors as a result of the execution of the Kalsaka, Sega and Baomahun mine plans. Including other assets, the valuation is US$2.24 (£1.48).
Get The News You Want
To Read the Entire Report Please Click on the pdf File Below.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.