Amur shares surge on publication of Kun-Manie study

Russia-focussed nickel-copper sulphide exploration and development company Amur Minerals released its pre-feasibility study (PFS) on its Kun-Manie nickel-copper sulphide project on Tuesday.

The AIM-traded firm said the study was a “significant” milestone, reinforcing the project's technical and economic viability, with the board saying it consolidated Amur’s commitment to delivering the “best outcomes” for the project and its shareholders.

It said the PFS covered two production scenarios for an annual mining production rate of six million tonnes per annum.

The first option was the ‘Toll Smelt’ (TS) option, which provides the swiftest path to revenue generation, where the concentrate would be sold to a purchaser.

On the other hand, the second option was where the company constructed and operated an electric furnace flash smelter (the FFS option), converting the concentrate to a low-grade matte (LGM) which would allow for the capture of additional revenues from the by-product metals of copper, cobalt, platinum and palladium.

Amur said Kun-Manie’s JORC mineral resource estimate contained 155.1 million ore tonnes, comprising a nickel equivalent grade of 1.02%, equating to a total of 1.58 million equivalent tonnes of nickel

The study assumed a three-year construction period and a 15-year production period, with upside potential to extend the life-of-mine.

Production would derive from four open pits and one underground mining operation, the board said.

Looking at the economics of the TS option, the company said the net present value post-tax at a 10% discount rate would be $614.5m, using a long-term nickel price of $8.00 per pound.

The post-tax internal rate of return would be 29.3%, with total free post-tax cash flow reaching $2.04bn.

The FFS option carried a net present value post-tax at a 10% discount rate of $987.4m, also using a long-term nickel price of $8.00 per pound.

The post-tax internal rate of return would be 34.7%, with total post-tax free cash flow reaching $2.98bn.

Amur said Kun-Manie would be a low-cost operation either way, with C1 costs within the second lower quartile for nickel producers.

Costs for the TS option were estimated to total $3.87 per pound of payable nickel, while costs form the FFS Option were estimated to be $2.34 per pound, including additional by-product revenues.

Pre-production capital expenditure would total $570.4m for the TS option, with a payback period occurring over three years, while it would be $695m for the FFS option, with a payback period over three years as well.

Looking at the project upside potential, Amur said the 2018 drill programme would be incorporated to lead to an increase in the mineral resource estimate, an expansion of the mine’s life, and optimisation of the production schedule.

The board also said metallurgical test work would be carried out to reduce the magnesium oxide content, with the potential to generate a separate copper concentrate stream.

It explained that the “strength” of the pre-feasibility study put Amur and the project in an “attractive position” for the board to continue the implementation of its strategic plan, and identify partnerships that would add to and complement its experience and influence in order to bring Kun-Manie into development.

“The PFS provides a robust review of Kun-Manie's value, scale and viability and it is our intention to explore further the strategic options that will enhance the company's continued development of the project,” said Amur chief executive officer Robin Young.

“We believe that it puts the company in a strong position and provides attractive economics to invite discussions with varied parties to strengthen our team and deliver production at Kun-Manie.”

Additionally, Young said there was “significant potential” for further upside to the study, following its successful drill programme last year, which yielded a number of positive results including expansion of the mineral resource estimate and mine life.

“As a company, we are encouraged by the PFS and the further step it has created in positioning the project to attractive partners that will support Amur's goal of seeing Kun-Manie being developed further and value delivered to shareholders.”

As at 1220 GMT, shares in Amur Minerals Corporation were up 12.37% at 3.26p.