Ending 2014 with cash reserves of around $1.389 million, Russian miner and top AIM performer Amur Minerals Corporation (OTC:AMC) continues to be debt-free, with enough funds to start the pre-production assessment phase of its flagship Kun-Manie nickel and copper sulfide project. In the company's latest annual report, Amur Minerals highlighted two major milestones in 2015 that were achieved through efforts made in 2014.
The first milestone is the Russian government's awarding of the production license to the Kun-Manie project in May 2015, which allows the company to recover all revenues from 100 percent of the mined metal, which includes nickel, copper, cobalt, platinum, palladium, gold, and silver. As one of the top 20 largest nickel copper sulfide projects in the world, Kun-Manie has the potential to upgrade its reserves through further exploration. The license will last through July 1, 2035 and can be extended if additional reserves are discovered.
Another milestone is the issuance of the company-compiled Preliminary Economic Assessment (PEA), which establishes a current technical and economic assessment correlative to the terms and conditions of the production license. Preliminary unaudited results indicate that potential net present value (NPV), discounted at 10 percent, of the new 15-year production design ranges from $709 million at $7.50 per nickel pound to $1.436 billion at $9.50 per nickel pound. Amur Minerals estimates initial capital cost at $1.38 billion, with an additional sustaining capital requirement of $475 million, over the 15-year mine life.
Aside from these huge milestones, the company also posted additional accomplishments, such as the mobilization of the infill drilling program at Flangovy, completion of the mandatory detailed exploration and preliminary development program, establishment of the next phase of metallurgical test work at Flangovy and Kubuk, and the identification of a water source for the proposed operation.
The company's pretax losses also improved considerably, from $3.83 million in 2013 to $1.36 million in 2014. This was due to a reduction in finance expenses, as well as a one-off benefit from a positive fair value movement on derivative financial assets. However, Amur Minerals' total current assets have dropped 18 percent in value over the year, with cash and its equivalents falling from $2.4 million.
Nevertheless, the price of the company's shares skyrocketed by as much as 350 percent to 45 per pence since last May. Though prices have softened as of late, payments from Lanstead Capital financing agreement had boosted Amur Minerals' cash position to $6 million this June.
Amur Minerals' management admits that there is still a lot of work to do. "There is a great deal that remains to be accomplished on such a large scale Kun-Manie project," said Robert W. Schafer, Amur Minerals' non-executive chairman. "Infill drilling at Flangovy and Kubuk will kick off this era. Additional metallurgical test work is required to determine how ores will respond to treatment at the plant and what final products will be derived from a potential smelter. More infrastructure challenges remain in the design and construction of an access road to the site. It will be challenging and rewarding as results continue to add to establishing one of the world's largest nickel operations."
The company also plans to work with financial institutions and assess potential partners for possible financing of the initial construction costs once the pre-production assessment phase is over. Though negative investor sentiment in Russia might make it difficult for Amur Minerals to find potential partners, the company's attractive fundamentals might prove to be enough for many investors looking to put their money in rising small cap stocks.
