Aura Energy Limited (LON: AURA)

Aura Energy Limited is an FTSE AIM All-Share listed Australia-based mineral company that is focused on developing a low capex, high-grade uranium project. Moreover, the Company is engaged in the exploration and evaluation of its projects in Sweden and Mauritania.

Growth Prospects

• Operational Progress: AURA had made accelerated progress on the Tiris Uranium Project. Meanwhile, the Company is also involved in Häggån Vanadium Project in Sweden and theTasiast South Gold Project in Mauritania.
• Oversubscribed Shares Placement: The Company had recently raised AUD 8.80 million from several new institutional investors from Australia and overseas, including Canada and the United Kingdom, to accelerate the progress of the Tiris Uranium Project.

Key Risks 

• Negligible Revenue: AURA is generating negligible revenue as the mining operations are not commenced yet.
• Interest Rate Hike: The Federal Reserve announced a first interest rate hike (by 0.25%) in over three years and indicated seven rate hikes in 2022.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• Record UK Inflation: British inflation hit a 30-year high of around 6.2% during February 2022, which may cause a further interest rate hike.

Key Fundamental and Shareholders Statistics of Aura Energy Limited.

The Lind Partners, LLC is the most significant shareholder as it holds nearly 69.98 million shares as of 31 December 2021.   

Financial Highlights (for the six months ended 31 December 2021, as of 08 March 2022)

(Source: Company Filings)

• Reduced Losses: AURA had reported a loss of AUD 624,048 during H1 FY22 (H1 FY21: AUD 1,699,461).
• Increase in Cash Reserves: As of 31 December 2021, the Company had cash reserves of AUD 3.26 million. In comparison it had cash reserves of AUD 3.21 million as of 30 June 2021.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 23 March 2022 at 11:00 AM GMT, AURA’s shares were trading at GBX 14.97, down by around 0.18% against the previous day closing price. Stock 52-week High and Low were GBX 19.00 and GBX 3.69, respectively.

On a daily chart, the MACD line has given a bullish crossover against the signal line. Hence, there could be an uptick in the stock price in the near term.

Valuation Methodology: Price/Book Approach (FY21) (Illustrative)

Business Outlook

The outlook for the Uranium market seems to be strong as nuclear energy will play a critical role in the energy mix of a Net Zero Emission world. Moreover, AURA aims to commence the engineering phase for the Tiris Project as it would appoint the Engineering Consultant and initiate the Front-End Engineering Design (FEED) study. The procurement and construction are expected to be completed by 2023. In a nutshell, AURA has a long-term strategy to generate superior return for the stakeholders through the exploration and evaluation of uranium, vanadium and gold and base metals in Mauritania and Sweden.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the reduced losses, increase in net assets, decent financial ratios, positive outlook for Uranium, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Aura Energy Limited at the current price of GBX 14.97 (as of 23 March 2022 at 11:00 AM GMT), with lower-double digit upside potential based on 5.43x Price/NTM book value per share (approx.) on FY21 book value per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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