Amur Minerals Corporation (AMC)

Far East Russian exploration and development Company last week announced that it had raised £1.24 million by way of a placing at 3.5p each. The current mid-price is above the placing price. In addition, the Company has agreed to issue a further 1,428,570 new ordinary shares at 3.5p to its CEO Robin Young in lieu of salary that is owed to him.





The proceeds will be used to fund the ongoing programmes at Kun-Manie, the Company's main nickel exploration project. Work is focused on the areas between the drilled deposits where successful results have the potential to enlarge the stated resource and reserve.


The total Russian approved reserve currently stands at 31.7 million tonnes of ore and averages 0.64% nickel and 0.18% copper. An independently compiled pre-feasibility study of Kun-Manie carried out in 2007 incorporating a $7.50/lb nickel price, indicates a Post Tax NPV (10%) of $84 million with an IRR of 15.7% which will be updated in the near term using information acquired over the last two years. This placing provides a stable source of funds from a cornerstone investor.




Concurrent with the placing, the board has been restructured. Willie McLucas and Eric McAuslan have resigned as Non Executive Directors of the Company and on the same date Brian Charles Savage has been appointed as a Non-Executive Director of the Company.


Brian is a founder of Frontier Mining Limited and served as a Director since that company's formation in August 1998, acting as Chief Executive Officer between 2001 and 2009.


Amur Minerals gained a Certificate of Discovery in April 2009 which is the intermediate stage to being awarded a Mining Licence. In order to encourage exploration in Russia, the government could compensate exploration companies that have gained a Certificate of Discovery but then subsequently fail to be issued with a Mining Licence. For nickel projects, this compensation runs at 140% of sunk costs. The management team has a track record of working their way through the Russia mining licensing system to gain valuable licences, permits and approvals.


The board has reported that progress has been made towards gaining a Mining Licence and a decision is expected in the next six months. Given the scale of compensation available, it appears to us unlikely that the award of a Certificate of Discovery would not be followed by the granting of a Mining Licence.


In recent decades there have been few economic nickel sulphide discoveries. To meet increasing demand lateritic nickel projects have been developed that require very expensive processing plants resulting in much higher costs of production.


In the coming years the demand from the emerging countries, plus a return of positive growth from the developed world, is expected to increase stainless steel production. Peer group analysis suggests that Amur Minerals could attract a valuation similar to nickel sulphide exploration companies such as Starfield Resources or Victory Nickel of around £23.7 million to £25.7 million.


The Pre-Feasibility Study gave the project a NPV of $84 million which equates to 23.5p per share. This could be the target price when a Mining Licence is granted. At these levels, we recommend picking up stock.