Contact: Robert Tyson
robert@t1ps.com
robert@t1ps.com
020 7562 3370
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| 22nd October 2007 |
Contact: Robert Tyson
robert@t1ps.com
020 7562 3370 |
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Amur Minerals – Initiation of coverage with a speculative buy recommendation at 20.75p with 12 month target price of 56p |
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Amur Minerals is an AIM listed explorer for base metals in the Far East of Russia. Its expansion has been accelerated by the successful acquisition of two additional exploration properties in the 12 months following its admission to AIM in March 2006 while maintaining exploration of its flagship Kun-Manie nickel-copper project, in the Amur Province. At Kun-Manie, the exploration licence covers an area of over 950 square kilometres although the project work itself has primarily concentrated on the 15 kilometre section of the 40km Krumkon Trend where a large, low-grade disseminated nickel-copper deposit has been identified with an associated JORC compliant resource of more than a quarter of a million tonnes of contained nickel. The fact that Amur has already proved up a JORC compliant resource and has clear additional exploration upside and is fully funded for at least 12 months to exploit that upside is not, we believe, discounted in the current 20.75p share price. We initiate our coverage with a stance of speculative buy and a 12 month target price based on a sum-of-the parts valuation of 56p.
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Company Background |
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Amur Minerals was formed in early 2004, with the purpose of acquiring, exploring and developing mineral properties in the Far East of Russia. The company aims to develop projects into mines in the mineral-rich Amur Province and nearby Khabarovsk region. The initial seed capital for Amur was $2.2 million and prior to the company’s listing on AIM in March 2006; the company raised a total of $7.5 million in three rounds of private financing. The four founding partners, three of which are Russian and the other British, have very good knowledge of the Far East Russian Federation region, and are no longer involved in the running of the company but maintain an average 7-7.5% shareholding.
On the 15th March 2006, Amur Minerals listed on AIM raising £4.1 million through the placing of 12.36 million new ordinary shares at a price of 33p per ordinary share. Following the company’s listing, its market capitalisation was £28.4 million. Post IPO, the company raised an additional £2.79 million in April 2007 in a share placement of 15.5 million shares at 18p per share. The funds raised are being used to support the continuous development of the Kun-Manie project, exploration of the Anadjakan copper-gold project and other selected projects in the far-East of Russia. Amur Minerals’ flagship asset is the 100% owned Kun-Manie exploration licence, a nickel-copper deposit located in the mineral-rich Amur Province. The 950 square kilometre license was acquired in 2004 and is located 700 km North East of Amur Province’s capital city of Blagoveshchensk on the Chinese border. When ZAO Kun-Manie, a wholly owned subsidiary of Amur, acquired the licence area in April 2004 it had no resource, despite previous work by Falconbridge and Russian explorers. Since 2004, Amur has managed to increase the resource base in each year of exploration and believes that given the large area yet to be explored there is real scope for it to achieve further material increases. In February 2007, Amur acquired the Kustakskaya exploration/mining licence for $240,000. The project has nickel, copper and copper-molybdenum targets located adjacent to and immediately east of the Kun-Manie project. The 25 year exploration and production licence covers 1,034 square kilometres with two distinct geological terrains. The southern part of the licence exhibits similar nickel mineralisation characteristics to the Kun-Manie exploration license and is interpreted to be a continuation of the Krumkon Trend. The northern part of the licence is characterised by Mesozoic porphyry copper style intrusions, with Russian results indicative of the potential presence of copper, molybdenum, cobalt and minor nickel to be present. The company aims to conduct exploration in a phased approach, starting from 2008. The second property bought since flotation is the Anadjakan copper-gold exploration licence, located in the Khabarovsk region which covers an area of 250 square kilometres. The Anadjakan licence is valid for a term of five years, convertible into a 20 year mining licence following a commercial discovery. During 2007, Amur conducted its first field season work at Anadjakan, which included geological mapping and a comprehensive soil sampling programme designed to confirm historical data and assess previously untested areas. |
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| Project Overview | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Kun-Manie Project Kun-Manie represents Amur’s principal asset, and is potentially one of the five largest new nickel sulphide discoveries since Voisey’s Bay. The company has undertaken exploration and drilling work for the past three seasons and in each year it has successfully expanded its resource base. This year’s work, which started in May and completed in October, represents the fourth field season and aims to increase and upgrade the resource base by 20%.The primary exploration target within the licence area is the 40 kilometre long Krumkon Trend, within which a 15 kilometre long segment has been primarily explored with four identified zones (Vodorazdelny, Ikenskoe, Falcon and more recently Maly Krumkon). This 15 kilometre long segment currently has three ore bodies (Vodorazdelny, Ikenskoe and Maly Krumkon) with a JORC compliant resource of 53.3 million tonnes of nickel at grades of 0.47% nickel and 0.14% copper, with a combined metal resource estimate of 254,500 tonnes nickel and 73,000 tonnes copper. In addition, the company has identified three more drill targets, Chornie Ispelene, Kubuk and Yan Hegd. The last two are due to be subject to drilling in next season’s exploration programme. Amur has recently completed its 4th field season of exploration and development work that included 5,000 metres of infill and step out drilling, with analytical results due to be made available within the last quarter of 2007. Based on these results, Amur is expected to release an updated resource estimate and valuation of the Kun-Manie project in early 2008.
Concurrently, Amur is in the process of completing a pre-feasibility study on the Kun-Manie project, due to be released in the fourth quarter of 2007, which will include a scoping study assessing the potential of producing final saleable nickel-copper product on or near the site. During this period and with the release of this season’s analytical results, the company will make its first filings to GKZ to have parts of the Kun-Manie licence area classified as C1 and C2 reserves under the Russian system. Once a Certificate of Discovery is issued, it will pave the way for converting portions of the exploration licence into a mining licence. By the middle of 2008, Amur plans to apply for an extension of the exploration acreage not covered by the mining concession. Brief overview of Licence Tenure & Field Season Work The Kun-Manie exploration licence was issued in April 2004 and runs until December 2008. Under the terms of the licence, this can be converted into a mining licence if economic mineralisation can be defined, subject to the Ministry of Natural Resources’ approval. The stipulations of the licence include several key targets that have to be met at different dates during the licence tenure, such as the completion of airborne geophysics, geological surveys, drilling, trenching and the preparation of annual reports on work completed. These have been carried out by Amur between 2004 and 2006, with related follow-up work completed in 2007. The next two phases are the certification of the project’s resource into a Russian C2 resource by December 2008 and an outline for a bankable study on the nickel-copper mineralisation by December 2008. Due to climate & weather conditions, field season work at Kun-Manie starts around May and finishes in late September or early October. The previous three field seasons which, put together, represent approximately 12 months of work, have taken Kun-Manie from a grassroots exploration prospect to a resource of 53.3 million tonnes of near surface mineralisation containing 254,500 tonnes nickel and 73,000 tonnes copper. This year’s field season aims to increase the resource by 20%. Drilling is handled by Dalgeophysica, a state-owned Russian company, under the supervision of Amur’s geological team, headed by CEO Robin Young and Dr. Vladimir Prokhodko. A brief overview of each field season follows below. During 2005, the company raised $5.5 million through a private equity placing and increased its combined metal resource estimate from 125,000 tonnes Ni to 209,000 tonnes Ni and 58,000 tonnes Cu on the Kun-Manie nickel-copper licence, through the completion of a second field season drilling programme. The programme completed 39 drill holes for a total of 5,235 metres in its primary target areas of Vodorazdelny and Ikenskoe. This increased the 20.9 million tonnes of Russian category resource estimate to 46.1 million tonnes JORC compliant resource, of which 28.4 million was in the indicated category. As a result of the significant increase in the resource and the contained metal estimates, SRK Consulting increased the project value from US$25-35 million to US$60-80 million. In addition, the program identified a new mineralisation zone and an environmental baseline study was conducted. In 2006, Amur completed its third field season on the Kun-Manie licence through 54 diamond core drill holes for a total of 3,224 metres. The primary focus of the programme was within the Vodorazhdelny and Ikenskoe areas, with scout holes completed in the newly discovered area of Maly Krumkon. This work resulted in the increase of the overall geological resource from 46.1 million tonnes to 54 million tonnes of mineralisation and a 21% increase of its estimate resource to 254,500 tonnes Ni and 73,000 tonnes Cu. The in-ground valuation was raised by 43% from US$60-80 million to US$100 million. The progress increased the confidence levels of the company in ultimately converting these resources into mineable reserves, and advancing the project towards production. In addition, the company confirmed the discovery of the Maly Krumkon zone with drilling as well as identifying additional drill targets in and around Maly Krumkon and Ikenskoe, and discovering a new target area, located to the north of the main trend, known as Yan Hegd. The company also initiated a prefeasibility study ahead of schedule and added to its exploration acreage by being awarded the Anadjakan copper-gold exploration licence in the summer of 2006. The 2007 field season, started in early June and initially targeted 5,500 metres of drilling, focusing on resource expansion in targeted areas in the Maly Krumkon area, continued development drilling at Ikenskoe and Vodorazdelny in the form of in-fill and step out drilling, and geophysical surveys at Yan Hegd, a recently discovered mineralisation zone outside the Krumkon trend. Amur is confident that the 2007 field season exploration work will result in an increase of the resource by approximately 50,000 tonnes of contained nickel (ca. 20% increase). As at early September, Amur had completed approximately 4,000 metres of drilling with the view of increasing the company’s confidence levels in the continuity of mineralisation and to define its limits. Amur expects analytical results shortly which will pave the way for an updated resource estimate and project valuation at Kun-Manie. Mineralisation and Geological Resource The Kun-Manie licence area sits in the Siberian Platform and contains outcrops of sulphide enriched mafic and ultramafic sills and dykes. Within the 40 kilometre long and 2 kilometre wide Krumkon Trend more than 100 targets have been identified for further exploration and development. The nickel-copper and Platinum Group Metals (PGM) mineralisation is disseminated and veinlet in character, with the better grades contained in websterites. Past drill results returned an average nickel content of ca. 0.45% with higher grades, in excess of 2%, identified toward the base of the sills. The geometry of Kun-Manie is conducive to open-pit mining with a low waste to ore ratio. This promises relatively low mine extraction costs and due to its large size and low grade nickel deposit, it is highly dependant on the price of nickel as well as the potential expansion of the resource base. The 40 kilometre long Krumkon Trend is host to a number of significant nickel deposits, with 6 zones identified, two of which contain all of the Measured and Indicated resources. There is an abundance of targets waiting to undergo drilling, with geochemical sampling indicating more potential for an increased resource base along the trend. Work carried out so far, in the form of diamond core drilling, trenching and geological mapping, has identified four mineralised targets within the Krumkon trend known as Vodorazdelny, Falcon, Ikenskoe and Maly Krumkon zones.
Source: Amur Minerals Corporation Two more additional drill targets have been identified within the trend, through geological mapping, limited trenching and grab sampling programmes. These are Chorney Ispelene and Kubuk. An additional mineralisation zone was identified off-the-trend with a possible vertical structure, known as Yan Hegd. Overall, these 6 zones are located along half of the Krumkon Trend 40 kilometre length, with the remainder of the trend showing additional potential based on identified anomalous mineralised host structures. We look at each zone-deposit within the Krumkon Trend in more detail below.
Ikenskoe Zone The Ikenskoe target is oval in shape and covers an area of approximately 3.8 square kilometres. The entire area has been examined using both airborne and ground based geophysics as well as detailed geological mapping and geochemical sampling. The work indicates mineralisation may be present throughout the entire extent. Within this large target, only a limited portion has been explored in detail. The NorthWest and very Northern edge of the target is assessable by road. This area is where Amur has focused its drilling and trenching as the mineralisation is readily amenable to open pit mining. A total of three near flat lying host sills are present with the lowest being the primary drill target. These zones extend to the South East beneath a mountain peak and exploration remains to be conducted on this extensive area. Positive results could result in additional resource potential where a combination of open pit and underground operations may well be suited to recover additional resources. This large area of untested potential offers the company an opportunity to significantly enlarge the resource of Kun-Manie and is targeted for 2008. The drilled portion of the Ikenskoe deposit covers an area of approximately 0.8 square kilometres. Conceptual pit analyses confirm the currently drilled area is recoverable by open pit mining methods. Approximately 84% (135Kt/160Kt) of the drill defined mineralisation falls within an SRK Consulting conceptual pit design. The total drill defined resource is 36.4 million tonnes at 0.45% Ni and 0.13% Cu. By resource category, the conceptual pit also contains most of the Measured and Indicated category (83.8%) of resource which totals 162,700 and 46,000 tonnes for nickel and copper, respectively. This year’s exploration drill programme is focused on infill drilling of the area allowing for an upgrade in the resource categories and to assist in providing suitable drill spacing for conversion of this area of the exploration licence to a mining licence. In addition, condemnation drilling is being conducted along the north and west edge of the conceptual pits to allow pit limit definition and assist in the identifying appropriate locations for waste dumps. Vodorazdelny and Falcon Zones The two zones are adjacent to each other. Vodorazdelny is presently the most well defined deposit on the property. It consists of three distinct pods, two of which contain drill defined resources. The average grade is the highest of the drilled deposits and contains an estimated 5.9 million tonnes at 0.71% Ni and 0.20% Cu, with contained metal of 41,800 tonnes Ni and 11,800 tonnes Cu. The mineralisation within the two pods is exposed on the surface and sits on the crest of a ridge which offers a very low waste to ore open pit opportunity. This has also been confirmed in conceptual pit analyses and it may well be the first deposit scheduled for mining should the global mining reserve be large enough to indicate the project is economically viable. The third pod contains limited narrow zones of mineralisation and is presently assigned a low exploration priority. This year’s exploration effort is comprised of infill drilling, additional trenching and some ground based geophysics within the two pods in order to upgrade the resource to a measured category increasing the value of the project as well as establishing a drill spacing suitable for reporting to the GKZ and subsequent conversion to a mining licence. The Falcon zone is located adjacent to and east of Vodorazdelny. Limited core drilling has been conducted and no resource has been reported to date. Two, possibly three, layered sills ranging in thickness from 2 to 6 metres have been identified. The sills dip at about 25 degrees to the northeast and can be observed at the surface for a length approaching two kilometres. The area requires more drilling however Amur has given this area a lower priority for this year as there are an abundance of additional targets available for drilling which are believed to have better potential. Work is tentatively planned for 2008. Maly Krumkon Zone The Maly Krumkon deposit is an exciting prospect hosting nickel-copper sulphides within an abundance of websterite sills. The area contains as many as 8 sills along a length of 6 kilometres, of which only 800 metres of the zone has been subjected to core drilling including four holes and some limited trenching. These trenches and holes are located at the very West end of the zone leaving the remaining five kilometres to the East untested and representing significant upside potential for resource expansion. These few intercepts have established an Inferred category resource of 11 million tonnes at 0.45% Ni and 0.14% Cu, with contained values of 50,000 tonnes Ni and 15,200 tonnes Cu. Exploration drilling this field season is intended to provide infill holes to both confirm continuity of the mineralisation and to upgrade the resource category within the area where drilling and trenching was previously completed. These holes may well also expand the size of the Maly Krumkon resource in this vicinity. The company’s target for Maly Krumkon is to increase the resource by addition of another 50,000 tonnes Ni. To the East of the area toward Vodorazdelny, the zone has been identified by geological mapping and geochemical sampling. 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