Amur Minerals fleshes out Kun-Manie plans

Last year was all about laying the foundations for Amur Minerals - and the hard work paid off. It achieved two major milestones early in the year and won approval from the Russians late May. That's catapulted Amur shares fourfold in the past five weeks to new highs, although there is plenty of ground to cover before Kun-Manie is up and running.

Amur's Siberian project at Kun-Manie is one of the 20 largest nickel copper sulphide plays in the world, and management hopes further exploration potential could lead to upgrades. Early numbers suggest net present value (NPV) of the new 15-year production design ranges of $709 million to $1.4 billion, depending on a nickel price of $7.50 or $9.50 per pound, respectively.

Chiefs think it's going to cost almost $1.4 billion to get the mine up and running, with $475 million earmarked to keep it going over its 15 year life. Thankfully, under the production licence, all the revenue generated from the metal mined at Kun-Marnie will go to Amur, specifically from nickel, copper, cobalt, platinum, palladium, gold and silver.

"One has to chuckle," commented Roger Bade, an analyst at Whitman Howard. "Bearing in mind a spot price of US$5.60 per pound ($/lb.) for nickel has just cracked again and a move down to $5.00/lb. seems likely, assuming $7.50/lb. the after tax Internal Rate of Return is only 21%, while the after-tax Net Present Value, assuming a 10% discount rate is $0.71bn. There is a long argument why this Operational Review is only a Preliminary Economic Assessment under JORC."

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The market is clearly pinning a lot on hitting this year's two milestones - the issue and registration of the 20 year Detailed Exploration and Production Licence, and compilation of a Preliminary Economic Assessment. Since May, the share price has rocketed by as much as 350% to 45p. This had softened to 30p on Monday, up 3% on the previous close, but that's still up nine-fold on the year.

Management admit there is a lot of work ahead. The group is ready to drill 6,000 metres to firm up its quantity and quality of resource expectations, starting at Flangovy and Kubuk. There are also infrastructure difficulties for the design and construction of site access from the road. Tasks that are usually left to much later in a project's life - like the acquisition of water rights - have already been completed so management can now focus on development.

The group's total current assets have dropped 18% in value over the year, however, with cash and its equivalents falling from $2.4 million. Losses before tax shrank from $3.8 million to $1.4 million.

Amur stayed debt free last year, ending the period with just under $1.4 million cash reserves at the end of December. The surge in share price since the period end has meant payments from Lanstead Capital financing agreement had boosted the group's cash position to $6 million at 17 June. This will carry Amur to the start of the preproduction assessment phase. Then the group is going to need financing, and a lot of it. Management is currently in talks with potential investors.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.