Shares in Asiamet Resources Limited (LON:ARS)(TSX-V:ARS) enjoyed a strong burst of energy at the end of the first quarter of 2016 as the company released details of a preliminary economic assessment on its Beruang Kanan Main copper project in Indonesia.
From a year of being range-bound between about 1.1p and 1.6p they suddenly shot up to an 18 month high of just over 4p, before dipping back on profit taking to around 3.4p.
It was an astonishing performance, given the long absence of bullish sentiment in the mining sector, an ongoing weakness in the copper price, a general sector-wide unwillingness to invest. But as the old mining adage goes, if you mix good assets and good people, you can have success even in the trickiest of markets.
Asiamet has been on the ground in Indonesia for some time now, but it’s only since chief executive Tony Manini took effective control at the beginning of 2015 that things have really got motoring.
Manini has an extensive track record in building mining companies, most recently as a key participant in the creation and expansion of OZ Minerals, before it was taken out by Zinifex towards the end of the last boom.
He clearly liked what he saw inside the Asiamet portfolio as he put his own money in to take a 2.6% stake on his appointment.
Since then Beruang Kanan Main (BKM) has emerged as the clear portfolio leader, to the point where Australian consultants Orelogy have now taken it through the pre-feasibility stage with eye-catching results.
The Orelogy study showed that BKM is capable of producing 25,000 tonnes of copper cathode per year over an eight year mine life to generate gross revenue of US$1.27bn, assuming an average copper price of US$3.25 per pound.
On that price assumption, the post-tax net present value of the project works out at US$204.3 mln and the post-tax internal rate of return (IRR) rings in at 38.7%.
Adjusting for a weaker copper price of US$2.75 per pound and the NPV drops to US$74.6 mln and the IRR to 21.6%, all at a 10% discount.
All told the Orelogy work clearly demonstrates that the project merits further work, and to that end Asiamet will now proceed with exploration around the known mineralisation at BKM, which is known to be open in several directions, including at depth, in order to expand the overall footprint of the project.
FROM THE BOSS
"Asiamet is extremely pleased with the results of the BKM project PEA,” said company chief executive Tony Manini. “The Company considers the PEA base case economics to be highly attractive and is firmly of the view that additional detailed study work and exploration in and around BKM will further enhance the value of the project.”
WHAT THE BROKER SAYS
SP Angel argues that Asiamet has “demonstrated a robust copper project at BKM.” The broker also took note of the potential for expansion beyond the currently mooted 25,000 tonnes per year target.