Shares in Asiamet (LSE:ARS) dropped 11.7pc to 4.7p on Friday following the release of series of updates for its BKM copper deposit in Central Kalimantan, Indonesia. Among the updates, Asiamet revealed that it has now completed a feasibility study on developing BKM using open pit mining and a solvent extraction-electrowinning copper heap leach.
The work gave the project an initial nine-year mine life producing up to 25,000ts of copper cathode per annum alongside initial capital expenditure of $192m. What’s more, the study highlighted additional value enhancement opportunities at the project with the potential to improve valuation by a minimum of $35 million on a risked weighted basis.
However, some investors were left underwhelmed by the study’s post-tax NPV(8) for the project of $133.5m and its 19.5pc internal rate of return. In comparison, a previous PEA for the project gave it an after tax NPV10 of $204m and an after rax IRR of 39pc, according to Asiamet’s website. What’s more, the study applied an economic assumption of a long-term copper price of $3.30/lb, a significant premium to where the metal is currently trading.
However, some would argue that this assumption reflects the belief of many that the red metal is entering an exciting phase moving forward that could make it a stand-out medium to long-term investment. As we covered in our recent ‘View from the City’ article on Asiamet, these forecasts are driven by an expected lack of supply as demand for copper increases from the electric vehicle and developing economies like China.
In a further update on Friday, Asiamet revealed a maiden ore reserve for BKM. This comprised 137k contained tonnes of copper in the proved category, 166k contained tonnes of copper in the probable category, and, in turn, 303k contained tonnes of copper in the proved and probable category. Finally, the firm also released an update copper resource for the asset that gave it total resources of 69.6Mt at 0.6pc copper for 451.9k of contained copper.
Regardless of investors’ reactions to the feasibility study, Asiamet said the results pave the way for it to enter detailed discussions with potential partners and financial institutions who have expressed an interest in BKM. Asiamet’s chief executive Peter Bird added that the project evaluation ‘greatly exceeds’ the company’s current £48.5m market cap. He said that limited value has also been ascribed to the other high potential project’s in the business’s portfolio, which include BKZ and the large Beutong project.
‘Completion of the BFS is a major milestone for Asiamet. We are very pleased with the outputs derived as they deliver a technically and financially robust project that can be significantly further improved through a number of clearly defined initiatives,’ he said.
‘The value enhancement initiatives together with the exceptional exploration upside identified proximal to the BKM project have the potential to extend mine life and provide a substantial uplift in overall project value. Evaluation of these items is next on the agenda with resultant outcomes to be considered and followed by the detailed engineering and design phase.’
‘Having successfully completed the Feasibility Study, we are now in a position to complete detailed discussions with potential partners and advance an array of debt and equity financing opportunities. We look forward to providing an update on these initiatives over the coming weeks and months.’
To read an analysis of Asiamet and its prospects from our sister site ValueTheMarkets in its recent ‘View from the City’ report, please click here.
Author: Daniel Flynn
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