Argonaut Securities: Initiation: Tiris, positioned for development - SPEC BUY - Price Target A$0.40

Quick Read

We are initiating coverage on Aura Energy (AEE AU) with a SPEC BUY rating and set a price target of A$0.40. AEE is focussed on developing its Tiris project, which following recent FEED and mining license approval is development ready pending financing. We expect an FID to be taken in 2025 which together with updates on contracting and funding are key near-term catalysts. Tiris key risk is beneficiation, which will see mine grade of 246ppm lift to 1,500-2,000ppm prior to processing. We believe the timing of Tiris development and ramp-up coincides with tightness in the uranium market, driving economic upside from our near-term bullish price outlook. AEE also has upside leverage on the large Haggan polymetallic project should uranium mining laws change in Sweden

Key points

Beneficiation key at Tiris: The Tiris project, based in Mauritania, is AEE flagship project which is development ready. AEE has undertaken an enhanced DFS in 2023 and FEED in 2024, highlighting robust economics. It is targeting an FID in early 2025, followed by 18 months of construction followed by first production. Our forecasts (largely in line with studies) assume first production in CY27, ramping up to peak production of 2.25mlb pa by 2030 at AISC of US$37.07/lb. Beneficiation, which will lift grade from ~246ppm to ~1,500-2,000ppm is the key to the economic viability of the project.

Optionality for Haggan: While the 2023 Haggan scoping study highlighted attractive economics (NPV ~US$456-1,307m), we do not currently forecast development of the project in our base case due to the ban on uranium extraction in Sweden. However, we do ascribe a nominal A$30m in value given the large resource base and strategic optionality should the ban be overturned in the longer-term.

Uranium leverage: AEE has recently restructured the Curzon offtake agreement, which should provide it increased leverage to the rising uranium contract price. We note that contract prices (and floors and ceilings) have been progressively increasing, thus positioning AEE to maximise the margin on its sales and contract book. Updates on contracts and funding (we assume debt of A$350m and equity of A$150m) remains key near-term catalysts for AEE.

Valuation & recommendation

We are initiating coverage on Aura Energy (AEE AU) with a SPEC BUY rating and a price target of A$0.40. Our price target is derived from a 50/50 blend of our NPV using Argonauts uranium price outlook and current spot prices. AEE has progressed Tiris to a development ready stage, with FID and funding updates expected in the near-term. Haggan project leverage on a uranium ban overturn in Sweden is also a long term catalyst.