Asiamet Resources#: PEA Announcement
Asiamet Resources (LON:ARS) has now announced the results of its PEA for the Beruang Kanan Main (BKM) project, in Indonesia, which as expected indicates the potential for a robust low cost copper mine capable of producing up to 25ktpa.
At the BKM Deposit, ARS has now confirmed the potential for a 25ktpa mine producing copper cathode at an average cash cost of US$1.28/lb (US$2,822/t) over the life of mine which is currently projected at eight years. Initial capital of US$163.8m implies low capital intensity and the potential for a rapid return on capital.
Further Geological Upside Remains
With only scout drilling having been completed in the adjacent BK South, West and BKZ tenements, there is significant potential to further expand the resource base. This would enable the mine life to be extended to over ten years, in our view, and could also ultimately support a higher rate of production.
Attractive Exposure to Copper Market
Although copper prices have rallied 10% from 4 year lows since January 2016 production at the BKM project is not due to commence until 2019 and it is our positive medium to long term copper view which dominates the investment case for ARS. We believe that recent macro data from China points to a recovery in demand whilst mounting challenges on the supply side suggest growing deficits in the medium term and a recovery in prices.
Recommendation and Target Price
The delivery of the PEA represents another successful milestone completion. The confirmation of the potential for a low cost project combined is positive and given the geological upside we believe exists there is significant further value to be unlocked.
As a result, we maintain our SPECULATIVE BUY recommendation, and upgrade our target price to 6.2p/sh.