aston metals looks good

I've been doing some research on our proposed acquisition of Aston Metals. The big picture is that it has been acquired from the receivers for US$1 and effectively takes us from a junior to a mid-weight.

There is a $20m non-recourse loan and $7m in options involved but my understanding is that if the Aston works for AQR the loan will be paid by the creditors exercising their AQR options. If not then Aston and the loan can be handed back.

While this is somewhat complicated it looks like a good deal for us - a really good asset acquired for a very good price.

Aston Metals has 3,600km of exploration tenements in a proven base metal (Copper +) producing province (Mt Isa).

The jewel in the crown, Walford Creek project has a 2004 JORC compliant resource of 687kt Cu Eq. This compares favourably with Sirius (641 kt Cu Eq) and Sandfire (790 kt Cu Eq). Moreover, the resource grade of 1.42% Cu Eq is well above a peer median grade of 1.01% Cu Eq.

The upside potential is large as only 4km of the 25km Fish River Fault zone has been defined. The mineralisation appears to be largely structurally controlled so there is considerable potential for resource extensions along the strike length.

The 2014/15 drill program is targeting a resource upgrade from 48Mt to at least 70mt.

If we call the purchase price $27m, this equates to US $0.016/lb i.e. US $35/t of Cu Eq resource. ASX listed peers trade at an average of US $0.04/lb or US $88/t so AQR has acquired Aston from receivership for a considerable discount.

Aston metals consists of a number of other projects but if we just continue to concentrate on Walford Creek, it has been calculated that the resource has an in-situ value of US $4.8 bn and is believed to be approx 27% Copper, 23% Cobalt, 19% Zinc, 17% Lead and 14% Silver.

Again, all in all this looks like a really good prospect acquired very cheaply. The $8m capital raising will be used to drill out and expand the Walford Creek JORC'd resource as well as my favourite - to deep drill 7B at AQR's existing tenements near Monto.

7B started life as a copper rich gossan poking out of the ground which was surface mined a long, long time ago. However, recent drilling and analysis considers this to originally be a molten (VMS) deposit which made its way to the surface through a fissure. The geos apparently believe that they're within 500 metres of the source - that's why I can't wait for this to be deep drilled (in the next few weeks). I do wish they'd done this before the recent capital raising because if they'd hit something the SP for the raise would have been a lot more than 12c and it wouldn't have been as dilutionary (but apparently they didn't have the money for the diamond drilling..?.)

I think AQR is in for an exciting time and I'm going to be supporting the 4 resolutions at the EGM in favour of the Aston Metals Acquisition.