Any explanation for the sharp drop in share price for AAR over the last month or so? Need more positive announcements!!
Fat Prophets Mining has a highly enthusiastic write-up of AAR in their weekly newslettter today.
They said members should 'await a buying opportunity', which could come "any day now" on the back of an announcement re the Koongie Park Pre-Feasibility Study results.
Personally I think AAR will be out of reach "any day now", so I got in this morning.
(Tho it went up at the open from .063 to .064, which means it's still cheap.)
It's only FP Mining's second buy recommendation of 2007. Some quotes:
FP believes AAR is 'very modestly valued', and 'should certainly be on the radar screen of those Members wanting base metal exposure'.
'Given the clear and sustained break above the 6-year base formation, the long term outlook for AAR is positive.'
'Given our bullish stance on base metals, we are constantly on the lookout for new, undervalued oportunities for members. We believe that Anglo Australian Resources represents one such opportunity. We believe the upside is enormous.'
And on to describe AAR's Mandilla gold project in WA, whose 'first gold production has exceeded all expectations'. Mandilla 'is expected to generate $8-10 million nett cash after costs this year'.
'When we look at the mammoth share price performances from our previously recommended emerging base metals opportunities like Fox Resources, Terramin Australia and Copper Strike, we believe AAR has a lot of potential upside, with no significant downside.'
Then to describe AAR's second signature project:
'AAR owns 100% of the Koongie Park Project, which comprises an advanced lead-copper-zinc deposit at Halls Creek... AAR has completed extensive work worth around $7 million on the project and we await the release of results any day now from a Pre-Feasibility Study.'
'The surge in base metals prices in recent years has undoubtedly boosted the development economics of the project.'
'Our back of the envelope calculations suggest a possible production scenario could generate 30,000 tons of zinc metal annually with a cash operating cost of .08c per pound. This wuld generate a very healthy operatiung margin indeed, compared to a current spot zinc price around $1.90 per pound.
'Accordingly, we keenly await the release of the Pre-Feasibility Study.
'AAR could receive a substantial re-rating on the back of the development potential of its Koongie Park project."
Etc etc. It is the most glowing write-up published by Fat Prophets since well back into 2006 IMO.
I am of the firmly of the opinion that AAR is now primed for a takeover.
Reasoning:
- low market Capitalisation of $29m
- trading at p/e of approx 17:1
- no indicated debt
- $1.7m cash on hand as at Dec 2006
- forcast to have over $10m cash in 2007
- self funded PFS for Koongie Park
- unhedged Gold reserves from Mandilla
- unhedged Zn resource at Koongie Park
- Koongie Park with and estimated Zn resource value of over US$800m
- Koongie Park with and estimated Zn resource value of over US$400m
- Mandilla indicated as having expansion potential
- very low current sp
- I haven't placed a value on the indicated Ag resource estimate. However at 29.6 g/t of a total indicated resource of 4.5Mt and Ag at around US$14oz the value is obvious.
Source: AAR report Jan 2007:
[*]Sandiego Deposit - 2.4 Mt @ 5.3% Zn, 1.3% Cu, 0.5% Pb, 26.2g/t Ag
[*]Onedin Deposit - 2.3 Mt @ 4.9% Zn, 1.1% Cu, 1.0% Pb, 32.8g/t Ag
[*]Virtually all Mineral Resources are classified under the JORC Code as
Indicated Resources
[*]Total Indicated Resources are 4.65 Mt @ 5.2% Zn, 1.2% Cu, 0.8% Pb,
29.6 g/t Ag
In my view AAR at .058cents is clearly undervalued and a prime target for takeover or at minimum will attract a significant investor to develop Koongie Park. Will it be TRY? I really don't know. What I find interesting though is two of the board members of TRY are also board members of AAR, who would be clearly aware of AAR potential and real position and TRY is cashed up for some reason from the recent cap raising. I see a re-rating about to occur.
Fundamentally AAR is a classic shares investment opportunity at ground floor level with the potential of significant returns on capital.
How can you have a price P/E when the company isn't earning making any money? You can't.
Your quite right..if it isn't making money then there can't be a PE Ratio.
But it is making money......gold producer.
You should read the December 206 report displaying earnings of .34cents per share and $1.7m profit.
I suggest you also look at the recent gold sales from Mandilla production in 2007 and unsold processed gold.
All quantifiable and indicated in company reports.
which is adding to the puzzle of why such a low SP. The market never lies, in that the SP always reflects market sentiment rather than actual company value; but you have got to wonder why sentiment is not been with this stock.
There are explorers out there that have a significant higher SP with a much less estimated resource that are not even producing
P/E of 17 isn't cheap!
Even for a resources bull market
I'd rather look at a company of cashflow multiples or future projections, if its 8 or under then not too bad.
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