Amur Minerals Exploration Update: Awaiting New PFS

Amur Minerals (AMC.L) has received its third extension to its right to explore its 950km2 Kun-Manie Ni-Cu sulphide deposit. This extension is valid until 31 December 2014. Amur will now resupply its site in readiness to commence 2013’s exploration and resource definition programme which, previously, has continued to reveal the potential for Kun-Manie (current total resource 68.5Mt @ 0.5% Ni) to host a district-scale nickel sulphide deposit. In the last two exploration announcements drilling has doubled the length of the Maly Kurumkon deposit to c 2km by joining up with the east-bound Flangovy block. Results across Flangovy indicate nickel and copper grades 46% and 36% higher respectively than those used in SRK’s outdated 2007 PFS (undertaken on only three deposits). Amur has targeted Q113 to initiate an update of its resources and reserves (release will follow completion of this work) leading to a revised PFS.

Mining licence – Further changes in country
The delay in Amur’s mining licence is the result of the Ministry of Economic Development (MED) not providing a value of the nickel and copper concentrates to be produced at Kun-Manie. This was required to calculate a one-time payment on conversion of a portion of the exploration licence area to the mining licence. As a result of these delays (affecting mining companies in general) this task has been reassigned to Rosnedra and new procedures are now being finalised.

Leading up to a revised PFS (work begins Q113)
The drilling and exploration work undertaken while Amur has pursued approval of its mining licence, which has also coincided with a low nickel price reflecting a struggling steel industry amidst a sluggish global recovery, could be viewed as a silver lining. This is because the increased scale and improved grades and metallurgical data achieved over the last two years have prompted Amur to revise the SRK 2007 PFS. Management is yet to provide a timeframe to complete this study.

Valuation: Outdated and awaiting new PFS
Until Amur collates all its recent exploration and metallurgical test work results into a revised financial model for Kun-Manie, we reiterate our previous estimate of this project’s value of US$394m or £0.71 per share (at US$20,000/t Ni and 10% discount). This was primarily based on the old 2007 SRK Consulting pre-feasibility study, which will now be revised in light of the new exploration results. This valuation should be considered conservative in light of the recent developments at Kun-Manie and with regards to its metallurgy. We will update our valuation when the PFS is released.

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