Brokers can't agree on how much AIC Mines Ltd (ASX: A1M) shares will go up, but two of them agree the company is currently undervalued.
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New production guidance impressing analysts
Both Bell Potter and Barrenjoey have published new research reports on AIC in the past few days, after the company announced guidance for the current year and a three-year growth outlook for its Eloise and Jericho copper mines.
The company said it was "an exciting time" as it transitioned from a small-scale, single-mine operation to a 1.5 million tonne per annum dual-mine operation producing 25,000 tonnes per annum of copper concentrate.
For the current year, AIC said it expected to produce 17,500 to 18,000 tonnes of copper, weighted to the second half of the year.
Guidance for the following year was for production of 20,000 to 22,000 tonnes, increasing to 25,000 to 27,000 tonnes in FY29.
The company added:
The Stage 2 Eloise plant expansion to 1.5Mtpa is now targeted to be completed in the December 2028 Quarter, approximately 2 years earlier than previously planned. This expansion, along with accelerated underground development at Jericho, is expected to increase copper production by a further 25% to over 25,000tpa in concentrate from FY29. No additional funding is required for the Stage 2 Eloise plant expansion or accelerated underground development at Jericho. However, the US$40 million Trafigura Prepayment Facility for the Eloise Expansion Project (currently drawn to US$30 million) has recently been expanded by US$10 million to a total US$50 million to ensure cost overruns or production delays can be managed, if required.
Bell Potter increased its price target on AIC shares following the announcement, boosting it from 90 cents to 95 cents.
The Bell Potter analysts said the accelerated stage 2 expansion was a positive and had not previously been incorporated into their modelling.
They added that the company "has a strong track record of delivering to guidance and a well-credentialed management team''.
Second broker even more positive
Barrenjoey has an even more bullish price target of $1.20 on AIC shares, compared to 64.75 cents currently.
They said regarding the announcement:
In our view the market should like the guidance and plans to grow further at reasonable costs/capex and an upsized debt facility. In the short term, FY27 is guided to be a more productive/cash generative year than we expected. We lift our FY27 production forecast by 16% to 17.5kt, at the lower end of A1M's guidance, allowing for some execution risk. This drives an uplift in our FY27 EBITDA by 9% to $181m and an increase in free cash flow by about A$40m to now be $11m (from -$33m before), which means a better balance sheet position.
