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Asiamet Resources yet to be rewarded for significant progress it has made

Snapshot

  • Focused on two large copper-gold and polymetallic deposits
  • Flagship BKM project on the Indonesian island of Kalimantan
  • Beutong on the adjacent island of Sumatra
Copper mine

Quick facts: Asiamet Resources

Price: 1.4 GBX

AIM:ARS
Market: AIM
Market Cap: £12.99 m
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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).

In January 2020 Asiamet said it plans to relocate its corporate head office function to Jakarta, Indonesia from Melbourne, Australia.

 

How’s it doing?

At the end of 2019, Asiamet said BKM boasted an ore reserve of 21.1mln tonnes grading 0.6% copper in the proven category, and 30.4mln tonnes grading 0.5% copper in the probably category.

A subsequent feasibility study highlighted the operating parameters of a potential mine at BKM, including an initial nine year production run producing 25,000 tonnes of copper cathode per year, to generate revenue of US$1.27bn.

The company is also currently working on up four strategic targets in close proximity to the BKM copper project to further add life through satellite discoveries. 

Both of Asiamet’s licences are in full compliance and in good standing. The company is awaiting a drilling permit for further exploration work over the proposed production area to be granted from the government.   

At Beutong, the strategy remains to test the deeper targets and the higher grade copper-gold zones of the porphyry system. 

And, from a corporate perspective, strategic discussions with respect to partnering continue with highly reputable and interested parties. Asiamet said a number of participants are active in the corporate data room. 

The company also noted that global copper inventories are starting to fall, with restocking across Asia providing some short term support to the copper price. 

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 costs.

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 when 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.   

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