Edging Closer to Production Day by Day: Everything You Need to Know about Amur Minerals’s Kun-Manie Project

Hide↑

Edging Closer to Production Day by Day: Everything You Need to Know about Amur Minerals’s Kun-Manie Project

24.12.2014, 15:25

Alessandra Miguel-Descalso

Investment websites are all abuzz with news about Amur Minerals Corporation’s (AIM: AMC) Kun-Manie Project after the junior miner received the approval of Russia’s Ministry of Economic Development for its application to convert its exploration license into a mining license. From investors’ community websites to large news outlets, there has been much talk about how Amur Minerals quickly gained traction in recent months due to the application’s approval. The company has been working steadily in obtaining its license from the Russian government to be able to mine the site, which it has full ownership of.

Kun-Manie Background

Kun-Manie is a mine owned by Amur Minerals that is situated in Amur Oblast, a federal subject of Russia. Amur Oblast, which also comes by the names Amurskaya, Priamurye, and Priamurie, is located on the banks of the Amur and Zeya Rivers, some 8,000 kilometers from Moscow. The subject has a population of 817,000 based on 2012 data and covers a land area of 361,913 sq. km according to RussiaTrek.org.

The region’s administrative center is Blagoveshchensk. It is accessible via the Trans-Siberian railway and Baikal-Amur Mainline.

Amur Oblast has been blessed with an abundance of beautiful rolling hills, terrains interrupted by benevolent streams, alpine tundra and a skyline dotted by dwarf Siberian pine, larch and fir-spruce. These are also apparent in the backdrop of Amur Minerals’s Kun-Manie project, which is nestled by mountain ranges.

In the project brief it published on its website, Amur Minerals said that it possesses a 95,000-hectare license for the exploration of Kun-Manie. The company acquired the license in 2004.

Amur Oblast Industries

The Amur Oblast region is replete with natural resources like precious, base and rare metals, as well as precious and half-precious gems, other minerals, construction raw materials, and fresh and spring water. The area has a fertile land mass that is suitable for agriculture and farming. Russiatrek.org notes that the primary branches of agriculture in the area are “crop-growing and meat- and milk-producing, soy-beans growing.” Folks from the northern part of the region, meanwhile, engage in breeding reindeers, while those in the south-east and middle of the region practice bee-keeping and fur trade.

The website adds that the Amur region is replete with power sources as well, “including thermo-electric power stations consuming local coal as well as Zeyskaya and Bureyskaya hydro-power stations.” The region’s main industries, meanwhile, include electrical engineering, gold and coal mining, timber, wood processing, the manufacture of raw building materials, and food processing.

Kun-Manie’s Resource and Reserve

The Kun-Manie mine rests on a massif that possesses mineable amounts of sulphide nickel, copper, cobalt, platinum and palladium. Explorations done by Amur Minerals in the past has discovered the presence of a 40 kilometre long by 2 kilometre wide structure that it identifies as the Kurumkon Trend. The trend boasts of hypogene deposits of sulphide nickel and copper. The project site is divided into five pits Maly Kurumkon, Gorny, Vodorazdelny, Ikenskoe, and Kubuk—the most recent addition to the site.

Amur Minerals’s Pre-Feasibility Study

Amur Minerals enlisted the services of SRK Consulting (Russia) Ltd. to do a pre-feasibility study on the Kun-Manie project in December 2007. SRK Consulting utilized research from Soviet data and engineering reports.

According to SRK Consulting’s preliminary projections then, the site’s post tax net present value is $84 million. The site could yield 4 million tons of open-pit mined ore yearly and a total of 38.2 million tons of ore (at 0.55 percent nickel and 0.15 percent copper). This is equivalent to 16,000 tonnes of nickel contained in a sulphide concentrate that could be smelted.

Findings of the pre-feasibility study also suggest that the company would have to shell out for an initial capital expenditure of $331 million. This is considered to be on the cost-effective side as the total operating cost of generating and delivering a nickel pound to the nearest railroad is just $2.51. The pre-feasibility study has also proven that the project “is economic at a nickel price of $16, 530 per ton.”

Following the release of the above results, key positive results that are up for consideration in the company’s engineering updates include recommendations for the mine’s optimization. Since then, Amur Minerals has finished more explorations and engineering works on the site.

The Application Process

Amur chief executive Robin Young told Proactive Investors last year that the company had to meet the requirements of two regulatory frameworks in acquiring its license. The first framework, he said was the subsoil law, a law of the Russian Federation established in February 21, 1992. The second framework was the strategic investment law, which was enacted in 2008, and regulates the business activities of foreign companies from select sectors in Russia.

The second framework requires the company to register with the anti-monopoly board (FAS) and partner with a Russian business. But the company was able to obtain foreign ownership of its Russian subsidiary that same year, thereby meeting its obligations.

“In the case of Amur, the “strategic investments law” resulted in our being classified as a “deposit of federal significance”. This was based on our having GKZ state registered reserves of nickel and PGM’s that automatically place a mineral project on the “strategic list,” Young explained the reason behind the government’s decision to exempt it from the second legal framework.

Early in November, the company’s application to convert its exploration license into a mining license was approved by Russia’s Ministry of Economic Development (MED). MED has then forwarded its recommendations to Rosnedra—the second of the multi-step approval process. Rosnedra, the Federal Agency for Subsoil Use, is an agency operating under the Ministry of Natural Resources. On November 19, Rosnedra has submitted its summary report and recommendations to its parent organization, the MNR. If the application gets okayed by the MNR, the MNR will pass it along to the office of Prime Minister Dmitry Medvedev for final consideration and approval.

Project Updates

According to its company website, Amur Minerals has replenished its project site with fuel, spares and supplies. The company noted that its equipment are ready for its road and drill site construction and site support once it gets its mining production license.

Currently, the company is zeroing in on completing its requirements to push its post mining license application forward and is focused on improving the engineering aspects of the proposed pit designs of the site.

Revenues Ahead

In an interview with Proactive Investors in August, Amur Minerals CEO Robin Young said the company now ranks as one of the top 20 nickel projects globally after the company has successfully increased the site’s reserves by 24.5 percent to 39.2 million tons. That represents around 219,000 tons of nickel and 58,100 tons of copper, a rise of 28 percent and 22.3 percent.

The company’s upgraded reserve presents a revenue-generating opportunity for Amur Minerals. According to Minesite.com, the company could earn around $726 million based on a nickel price of $8.50 per pound, or a little bit over US$1bn based on a nickel price of US$9.50 per pound.

“Having nearly a three quarter of a billion dollar EBITDA at today's metal prices is highly encouraging and supports the board's belief that Kun-Manie will ultimately become one of the largest nickel sulphide projects in the world,” chief executive Robin Young told the mining news source.

The company was reported to possess a mineable indicated resource of 20 million tons. On top of this, the company has another 70 million tons of inferred resources that the company can upgrade through infill drilling.

“In light of the fact that there are presently 70 million tons of Inferred Resource not available for inclusion in our current Reserve assessment and that our historical infill drill success rate has been high. We anticipate an opportunity to take advantage of the economy of scale by increasing the annual production rate at Kun-Manie,” Young told Proactive Investors.

SP Angel, Amur Minerals’s broker, reported the company’s shares have jumped 90 percent “since the beginning of November.”

Sources:

http://russiatrek.org/amur-oblast

http://amurminerals.com/project-details/kun-manie/

http://amurminerals.com/amc/wp-content/uploads/PFS_Results_v7_1112071.pdf

http://amurminerals.com/project-details/kun-manie/maly-kurumkon/

http://amurminerals.com/project-details/kun-manie/gorny/

http://amurminerals.com/project-details/kun-manie/vodorazdelny/

http://amurminerals.com/project-details/kun-manie/ikenskoe/

http://amurminerals.com/project-details/kun-manie/kubuk/

http://amurminerals.com/amc/wp-content/uploads/Amur-2014-Interim-Financial-Report.pdf

http://amurminerals.com/mining-licence-update-ministry-of-economic-development-approval/