Aeon Metals Limited (AML) Major Resource upgrade sets the tone...

Aeon Metals Limited (AML) Major Resource upgrade sets the tone Recommendation Buy (unchanged) Price $0.28 Target (12 months) $0.48 (previously $0.43) Risk Speculative Analyst David Coates 612 8224 2887 Authorisation Duncan Hughes 618 9326 7667 GICS Sector Materials Expected Return Capital growth 71.4% Dividend yield 0.0% Total expected return 71.4% Company Data & Ratios Enterprise value $156.8m Market cap $162.6m Issued capital 580.6m Free float 70% Avg. daily val. (52wk) $170,225 12 month price range $0.13-$0.35 Price Performance BELL POTTER SECURITIES LIMITED ACN 25 006 390 7721 AFSL 243480. DISCLOSURE: BELL POTTER SECURITIES ACTED AS LEAD MANAGER TO THE $30.0M PLACEMENT IN DECEMBER 2017 AND MANAGER TO THE $5.5M PLACEMENT IN AUGUST 2017 AND RECEIVED FEES FOR THAT SERVICE. Resource estimate doubles AML has released a major Resource upgrade for its 100%-owned Walford Creek copper-cobalt project in QLD. It reported a new copper-cobalt Resource of 15.7Mt @ 1.24% Cu and 0.15% Co for 194kt Cu contained and 24kt Co contained. This more than doubles the size of the previous Vardy Resource (6.6mt @ 1.25% Cu and 0.16% Co).The Resource was upgraded following last year’s highly successful drilling campaign which was targeted using a new geological model for the deposit. AML has also declared a maiden Cobalt Peripheral Resource of 18.0Mt @ 0.11% Co for 19.5kt contained cobalt. This Resource is exclusive of and adjacent to the copper Resource and, combined, the two latest estimates contain a total of 43.5kt cobalt, making it one of the larger, higher grade sulphide hosted cobalt Resources in Australia. Well-funded, risk profile reduced post raising Following a successful equity raising of $30.0m in December 2017 a repayment of $15.5m was made to OCP leaving a current balance of approximately $14.2m. This amount can be substantially repaid with the proceeds of OCP’s 85m warrants (exercisable at $0.16 before December 2019 for $13.6m). This materially reduces AML’s risk profile and leaves it extremely well positioned for 2018. A further 30,000m of drilling is planned to commence in April to further expand the Resource. Given the successful targeting of the 2017 program and positive geological indications of scale and continuity it is, in our view, highly likely this is just the start of a major Resource expansion at Walford Creek. Investment thesis – Buy, (Speculative), valuation $0.48/sh We reiterate our view that AML has entered an exciting period of cost effective discovery and growth. The increased Resource extends the mine life of the base-case production scenario at Walford Creek and increases our NPV-based valuation by 12% to $0.48/sh. AML remains one of our Top Picks for 2018 and we retain our Buy (Speculative) recommendation.