London, UK, 17 January 2020
Edison issues outlook on Auriant Mining (AUR)
After a few months of delays, Auriant Mining's Tardan CIL project has now been operating since mid-November. Production guidance for FY19 is 550kg from the Tardan heap leach operation and 150kg from the CIL operation plus c 64.2kg from alluvial operations at Solcocon (total 764.2kg, or 24,570oz). With the CIL plant at full capacity, however, this is expected to increase sharply, to c 29,272oz per year (average) at steady-state, before being supplemented by production of another c 64,041oz per year (average) from Kara-Beldyr from FY24.
On the basis that management executes the Tardan CIL project and the Kara-Beldyr project according to the operational and financial parameters expected, we estimate that Auriant is capable of generating average cash flows of US$48.5m, average earnings of US$41.5m and average EPS of US$0.187 in the nine-year period from FY25-33 (inclusive), thus allowing it to pay maximum potential dividends to shareholders in the order of 21.7c per share in the period FY26-33 (inclusive). Discounted at Edison's customary 10% discount rate, such a stream of dividends has a value of US$0.68 per share (SEK6.56/share), rising to US$1.20/share on the cusp of the company's maiden dividend in FY26. Stated alternatively, investors buying Auriant shares at the current share price of SEK3.15, or US$0.326, may look forward to an internal rate of return of 18.4% pa (fully diluted) over 16 years to FY35 in US dollar terms.
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