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Further Resource Upgrades Likely
Amur Minerals (LON:AMC) is a London AIM listed minerals exploration and Development Company, currently focussed on developing the Kun Manie project, located in the far east of Russia. The project is primarily a nickel project, but with significant by products of copper, cobalt, platinum and palladium.
A Large Scale Project
The Kun-Manie project hosts sulphidic resources of 101Mt @ 0.8% Nickel (with Copper, Cobalt, Platinum and Palladium by products), making this the largest undeveloped nickel deposit in Asia. We note that the main orebodies appear structurally controlled, and further drilling (during 1H18) is likely to result in further resource upgrades as the company look to join up two neighbouring targets which look likely to be contiguous. Despite having completed a prefeasibility study (PFS) in 2015, current better understanding of the resource base through additional drilling and metallurgical testwork means the company are currently completing an updated PFS which will scope out the best options for development. From our understanding, the most likely development option is a large scale open pit (the company recently announced that 77% of the existing resource is feasible to mine via open pit) and underground operation; and shipping and sale of a bulk concentrate (i.e. a concentrate containing all the co-products in one stream) for sale into the Asian markets.
The key upcoming catalyst will be the updated PFS, which will allow the market to better estimate the potential value of Kun-Manie, this is due by the end of CY2017. Further drilling and Bankable Feasibility (BFS) work will progress through 2018, with a view to a final BFS in 2019. Concurrently, the company are surveying the capital markets, where they have already found some appetite for funding the potential US$450-550m required for such a project. At present our best guess at first production would be around 2020. We also note that the company already holds a 25 year mining license for the deposit, thus mitigating any major regulatory risk.
Nickel market set to strengthen
Nickel demand is set to dramatically grow as nickel is a non-substitutable and essential commodity for the Electric Vehicle (EV) battery market; for example, accounting for 80% of the raw materials in NCA batteries (manufactured by Tesla). Furthermore, around 50% of current global nickel production is Ferro-Nickel production, which is not suitable for battery grade nickel, thus there is likely to be heavy demand for sulphide nickel resources (of which Kun-Manie is one) in coming years, as electric vehicle production burgeons.
The company appears to have a highly experienced management team, who appear to be taking a very thorough and comprehensive pathway in developing this project, rather than attempting to rush a partially understood project to market.
Amur Minerals possesses a large-scale nickel sulphide deposit, in close proximity to the key Asian markets, which will target production at a time when nickel demand should be increasing. That said, with potential production still some years away, the key for those investing at this stage of project development is further discovery and de-risking of the project, so milestone such as the PFS, Resource upgrades, offtake agreements, and funding newsflow should be the key drivers for the short to medium term.
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