Amur Minerals Corporation

SPECULATIVE BUY

13/07/2011 Robert Tyerman

As Amur Minerals (AMC) awaits a Russian mining licence for its Kun-Manie nickel project, it is working to boost prospective recoveries and net present value. Chief executive officer Robin Young hopes that re-assaying samples and other work on the 31.7m-tonne project in Russia's Far East could boost the estimated recovery rate from 76% to 86%, which he suggests could add $100m (£62.5m) to the net value of the project, which is intended to produce 20,000 tonnes of nickel a year, along with copper cobalt, platinum and palladium.

It is understood Russian studies have suggested a potential grade at Kun -Manie of 0.65%, against the 0.55% taken by Amur's independent consultant, which could add 3,000 tonnes a year to production and lift net present value further. Young is thought to cherish the idea of Amur building its own smelter, at a possible cost of $250m, which might save the company, once in production, from ceding 35% of its nickel value, half its copper and all its ancillary metals to a smelter operator.

The project's economics have been worked out on the basis of nickel at $7.5 a lb, against today's market price of nearer $11, and bulls insist every extra dollar above $7.5 could add another $100m to net present value of Kun-Manie, which some analysts have estimated to be worth at least $300m. A former mining consultant, Young, who insists the Russian authorities are good to work with provided you play by their rules, envisages an eventual 60-40 debt/equity funding for the project.

Amur, which raised £2.5m in March at 10p from shareholder Lanstead Capital, is drilling to see if the different zones in Kun-Manie are connected and remains fully funded for its current programme, declares Young. The shares, which fell from 2006's 33p float price to a mere 3.88p during the past year, have rallied to 12p.

Despite the obvious risks, they could repay a strong-nerved recovery punt.

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