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Austral Resources (AR1) – what does MM think?

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    Austral Resources (AR1) – what does MM think?

    Hi MM, Two questions: 1) What do you think of AR1 for copper exposure as a recently re-capitalised junior producer? Is MM bullish on it and is it a stock MM would consider for its Emerging companies portfolio? I note that Shaw and Partners rates AR1 Buy, High Risk, PT $0.42 (if the information I am looking at is correct). Do you broadly agree with Shaw's views? 2) More generally (not related to AR1 in particular), I have noticed for some time that certain brokers tend, on average (not in all cases), to have higher price targets for stocks than many of the other brokers for the same stocks. Do you agree with this observation? (I am happy to be corrected.) If you do agree, why do you think this is the case? I ask as part of understanding how much credence to give to various broker's price targets. I already tend to take more conservative brokers more seriously. I assume understanding this landscape is right in your wheelhouse. Thanks, Darren

    Answer

    Hi Darren,

    Firstly, Shaw’s do own a stake in MM but we are totally independent from them on view and opinions.

    They do indeed have a 42c PT, which they cut by 16% this week. They are the only broker that covers AR1.

    AR1 is a $200mn Queensland-based copper producer operating the Mt Kelly processing plant near Mt Isa, producing copper cathode from oxide ore while developing further copper resources in the region. In FY25 it delivered $3.5mn in revenue which is forecast to ramp up to $480mn by FY27 as production comes on.

    The company raised $65mn at 9c last month with the lead investor being QIC Critical Minerals & Battery Technology Fund ($15m commitment). In addition, they are raising $5mn through a SPP, following these raises the company with be debt free and have $97mn in cash.

    It’s important to recognise that AR1 has been a serial disappointment over the years but it looks like a good risk/reward “punt” around todays 9.3c, given their balance sheet is now in better condition.

    The reason that many analysts have different PTs for stocks is modelling and assumptions. These can vary wildly, particularly at the smaller end of the market. Coming up with price targets is as much an art as it is a science!

    When we look at different analysts research, we do take into consideration their track record, and we have a handy rating system through Bloomberg, which gives each of them a score based on historical accuracy on a particular stock.

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    Austral Resources Ltd (AR1)
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