Auric Mining Ltd (ASX:AWJ) is trading well below its intrinsic value, according to new research from Canary Capital.
The investment firm’s recently released equity research report covering the gold exploration junior finds that Auric is “poised for significant growth due to the significant potential in their flagship gold projects”.
Auric owns a high-quality portfolio of gold assets in the prolific Widgiemooltha-Norseman region of Western Australia.
Canary Capital values the company, on a discounted cash flow basis, at $0.34 to $0.37 per share — well in excess of Auric’s current share price of around 7.5 cents per share.
Further, this valuation is based on a gold price of A$2,600 per ounce, which is below the current spot gold price of around A$3,000 per ounce.
Munda Gold Deposit
The company’s flagship project is the Munda Gold Deposit, which hosts a sizeable indicated and inferred mineral resource of 198,700 ounces at 1.38 g/t gold.
Canary Capital noted that a June 2023 scoping study on Munda outlined exceptional economics with a projected positive cashflow of $76.9 million over a 13-quarter mine life.
This was based on a “conservative gold price assumption” of A$2,600/ounce, as compared to the current gold spot price of around A$3,000/ounce and points to potential surplus cash flows being “substantially higher”.
Based on the scoping study, Auric will commence operations at Munda with a starter pit with a mine life of three months and a low capital investment of $1.3 million. The starter pit will also require a working capital investment of around $6 million and is expected to produce $8.7 million in surplus cash.
Jeffreys Find Gold Mine
During the past six months, Auric’s focus has been on production from Jeffreys Find Gold Mine under a joint venture with BML Ventures, an experienced mining contractor.
Stage 1 at the project is now complete and 9,741 ounces were produced. Auric has now received three cash surplus payments totalling $4.8 million from Jeffreys Find.
This cash is expected to sufficiently fund Auric during 2024 until Stage 2 is developed, which is expected to generate between $3.3 million and $6.6 million in cash for Auric, based on the conservative A$2,600 per ounce gold price.
"Our preferred ASX gold company"
Canary Capital highlights that despite the significant cash flow potential of the company’s projects, its current market capitalisation is just $8.8 million.
It said: “We view this as presenting investors with an opportunity to invest in Auric at a fraction of the real intrinsic value of the company.
“With its projects either operational or about to come online, no debt, upcoming catalysts and a strong management team, the company offers a compelling investment case with significant upside.
“Auric is our preferred ASX-listed company to participate in the current favourable macro environment for gold.”
Canary Capital’s full equity research report on Auric Mining can be found on Auric's website here.