What Asiamet Resources does:
Asiamet Resources Limited (LON:ARS) is an AIM-listed mine developer. It owns large copper-gold and polymetallic deposits on the Indonesian islands of Kalimantan and Sumatra. The deposits are adjacent to the key growth markets in Asia.
The group’s ‘flagship’ Beruang Kanan Main (BKM) Copper Project is northwest of Palangkaraya, the regional capital of Central Kalimantan, and is part of the Kalimantan Surya Kencana (KSK) district projects, which are 100%-owned by the company.
The Beruang Kanan Zinc (BKZ) polymetallic project is within the south-eastern area of the KSK, less than 800 metres north of the BKM copper project.
The wider KSK district also incorporates a number of targets in addition to BKM and BKZ, including the BK South (BKS) and BK West (BKW) copper prospects, and the Baroi polymetallic system prospect.
On Sumatra, the Beutong Project - in which Asiamet has an 80% equity interest –comprises the Beutong East Porphyry (BEP), Beutong West Porphyry (BWP) and the Beutong Skarn (BSK).
How’s it doing?
In June, Asiamet brought the market a trio of updates, all from BKM.
The company revealed that a ‘detailed and comprehensive’ feasibility study has confirmed a robust project based on open pit mining and solvent extraction-electro-winning (SX-EW) copper heap leach processing. At the same time, it defined a metal reserve for the project and provided an updated assessment of resources. With three meaningful milestones delivered the company is now looking ahead towards development and, ultimately, production. Of course, funding is the intermediate step.
Highlights of the feasibility study
- It detailed an initial nine year production life for the proposed mine, with output pitched at 25,000 tonnes of copper cathode per year
- It projected some US$1.27bn of life-of-mine revenue, and, pitched the project’s post tax net present value at US$133.5mln
- Initial capital expenditure is estimated at US$192mln and the C1 cash costs are forecast at US$1.65 per pound of copper
Maiden ore reserve
BKM’s first ore reserve comprised 21.1mln tonnes in the proved category, at a grade of 0.6%, representing some 137,000 tonnes of contained copper. It also had 30.4mln tonnes at 0.5% in the probable reserve category, for a further 166,000 tonnes of contained copper.
New resource update
The new resource estimate comprised 69.6mln tonnes in total with a grade of 0.6%, giving an aggregate of 451,900 tonnes of contained copper. It is made up of 20.6mln tonnes, at 0.7%, in the measured resource category plus 34.1mln tonnes, at 0.6%, in the indicated and 15mln tonnes, at 0.6%, in the inferred category.
Since the feasibility, Asiamet has been working on ways to reduce potential coast at the project even further.
China Non-Ferrous, which is already active in Indonesia through its development of the Dairi zinc mine in North Sumatra, will carry out a detailed evaluation of the technical and financial aspects of BKM and suggest ways of sourcing locally and from China to lower some of the BFS capital cost inputs.
One option is to use a different port (Sampit) to the one in the original feasibility study as the government in Indonesia has said it will upgrade infrastructure on the island. This will save several million over the life of the mine.
What the brokers say
The independent research house Arden Partners restated its positive stance on copper mine developer in late July with a price target of 23p. This compared with a share price at the time of just 5p, that, according to Arden, fails to reflect the progress to date at the BKM copper project, in central Kalimantan, Indonesia. City broker Liberum, which while not quite as bullish, rates the stock a ‘buy’ up to 16p – which still leaves significant upside.
So, what’s the problem?
Well, according to Arden, the market took a contrary view of the company’s BKM feasibility study, which along with a slight softening in the copper price, wiped out 2019’s gains. It’s worth noting that in the first-quarter, Asiamet had been one of AIM’s star performers with a 75% advance.
Setting aside the fickle short-term nature of London’s junior bourse, the company offers significant long-term potential, according to Arden, which ranks it among its top picks. “We see good value at current levels, particularly when taking a longer-term view of the stock and the value creation to come through Beutong,” the research house said in a note. Beutong, described in some quarters as Asiamet’s ‘jewel in the crown’, is a large porphyry copper-gold system located on the island of Sumartra, Indonesia.
Berenberg, in September, added that the new bridge being constructed at Samba will open up the Sampit port as a hub for the import of supplies and export of copper production.
"The improvement of infrastructure and logistics is a very meaningful positive as the opex saving should come without any incremental capex"
The broker has an 11p target price.