Aeris Resources Ltd. is back from the brink after over five years of repair, and Executive Chairman Andre Labuschagne believes that it is finally in the position to successfully hunt majors' noncore copper assets to better compete as a midtier producer.
Labuschagne has been rebuilding the company since taking over its previous iteration, Straits Resources, in December 2012, changing its name to Aeris in December 2015 then restructuring its debt portfolio in February 2018, cutting senior debt by 53% to US$30 million and its share capital by 50%.
Meanwhile, its flagship Tritton operations in western New South Wales, Australia, was rescued from producing just 22,000 tonnes of copper and losing A$2 million a month to producing 30,000 tonnes and generating cash.
Labuschagne said the rescue effort made it easier for Standard Chartered Bank to restructure Aeris' debt because "if the guys at the mine didn't do that and kept it at 22,000 tonnes, the bank would have just foreclosed."
The chairman told S&P Global Market Intelligence that Aeris had bid for Glencore PLC's Cobar underground copper mine and the Peak mine, both in New South Wales, the latter of which Aurelia Metals Ltd. acquired in 2017. However, Aeris was unable to seal any deals due to its overleveraged position and just half of its stock being traded at the time.
Labuschagne said Aeris believes that Cobar is still a noncore asset for Glencore and is one of a raft of options that would make sense as it looks for potential acquisitions, though he did not specifically say Aeris would bid for it again.
"We are serious about growth, and now that our debt and equity structures are all clean, we would have a much better run at [taking over assets]," the executive said.
Labuschagne believes that Aeris is particularly well positioned, having effectively relocated much of Norton Gold Fields Ltd.'s team — COO Ian Sheppard, Norton's general manager; and CFO Robert Brainsbury and group financial controller Dane van Heerden, both with the same roles at Norton — that was there before Zijin Mining Group Co. Ltd. took it over in 2012.
Aeris also has a "very supportive" 30% shareholder in Hong Kong private equity group PAG, which manages more than US$20 billion in capital and backed the junior through the restructure with working capital. It also helped refinance the debt position and, as part of the process, got its equity stake "basically for free," part-shared with Standard Chartered, Labuschagne said.
Aeris' stock has also nearly doubled from 15 Australian cents per share to nearly 30 cents since Euroz Securities initiated coverage on Aeris on July 12 as "the forgotten midtier," referring to its production level as opposed to market capitalization.
Investable proposition with good M&A sentiment
With these factors, Euroz analyst Andrew Clayton told S&P Global Market Intelligence that his firm backed Aeris as the junior is "back as an equity play," having demonstrated the ability to operate in "pretty difficult conditions."
For Clayton, Aeris' difficult past and future plants brought to mind Evolution Mining Ltd., which attracted market backing having transformed some "arguably reasonably average assets; and Aeris has ambitions to fill that midcap breach and rival [copper producer] Sandfire Resources NL."
Clayton said there is certainly an appetite for copper acquisitions, with Finders Resources Ltd. in a protracted hostile takeover attempt by Indonesian company Eastern Field Developments Ltd. and with OZ Minerals Ltd. swallowing Avanco Resources Ltd. in an offer that by June 7 was worth a 131% premium to Avanco's share price prior to the announcement of the transaction.
EMR Capital Group has also been very active in the copper space, acquiring BHP Billiton Group's Chilean Cerro Colorado copper mine and taking an 80% stake in the Lubambe copper joint venture in Zambia from African Rainbow Minerals Ltd. and Vale SA. The private equity group also acquired the Kestrel coal mine in Queensland from Rio Tinto in the iron ore major's exit from Australian coal.