Asiamet Resources (LSE:ARS) has secured long-term mining tenure with the Government of Indonesia for its copper deposit BKM, bringing it another step closer to becoming a low-cost metal producer. A signing ceremony was held on 14 March 2018 that saw the two parties agree long-term mining tenure secured for up to 50 years. They also agreed that no divestment would be required until after a decade of production at BKM. Through the production of copper cathode, BKM supports the Government of Indonesia’s in-country processing initiatives. Shares rose 1.9pc, or 0.2p, to 11.7p on the news.
The agreement, made through the company’s Indonesian operating subsidiary KSK, concludes lengthy negotiations around Asiamet’s contract of work ahead of moving into BKM’s financing and development stages. BKM, which boasts an impressive measured and indicated resource of 711.3Mlbs of copper, is currently in the feasibility stage, with planned study completion in mid-2018. BKM has an initial expected mine life of eight years, during which Asiamet will target production of 25,000 tonnes per annum
Following completion of the feasibility study, Asiamet plans to begin construction and commissioning of BKM in 2019. Production is then expected to start at the end of 2019 or the beginning of 2020. This will mark a significant step in the company’s transition from an exploration-development company into a low-cost copper producer.
Asiamet said today that securing long-term tenure puts it in a strong position to deliver the project and deliver further value through regional exploration work. The firm is also developing a pipeline of other opportunities such as the zinc-rich BKZ polymetallic discovery and the BKS, BKW and Baroia prospects.
It will now continue to focus on its 2018 work programme, supported by a £7.2m fundraise carried out earlier this month. Among other goals, this work programme will see Asiamet complete the feasibility study on BKM, deliver a maiden resource for its BKZ polymetallic project, securing a finance package for development of BKM, and increase its stake in the Beutong CU-AU project from 40pc to 80pc.
Peter Bird, Asiamet’s chief executive, said: ‘Working closely with the Government of Indonesia to achieve this outcome represents a significant milestone for Asiamet. Signing the amendment to the KSK contract of work is a major de-risking milestone for the company as we head into the project financing and development stage for our flagship BKM copper project. The company is firmly of the view that the KSK contract of work has the potential to host a district scale pipeline of copper-gold and polymetallic mineral prospects which are yet to be fully understood or appreciated.’
‘Achieving security of tenure and the fiscal framework for the KSK project significantly enhances our ability to deliver value for all our stakeholders both through the development of the BKM Copper Project and the discovery of further nearby value creating opportunities such as the recent BKZ polymetallic deposit. Asiamet is very committed to building sustainable long-term value for all its stakeholders and looks forward to continuing its work with the GOI and the local communities to build a significant business in Indonesia.’
As we have written before, Asiamet is on the verge of making its first big step towards becoming a low-cost metal producer with its copper-rich BKM asset. It is due to begin producing at a time where a long-term rise in copper prices seems a safe bet due to a looming deficit in supply as demand grows. The business is also making steady exploration progress at BKZ and Beutong, its sizeable copper-gold resource. Although these sites will require more work, their potential upside makes them well worth keeping an eye on. With an estimated operating cost of $1.28 a pound of copper, production would offer a healthy margin against current copper prices. Although the firm’s half-year results for 2017 revealed a loss of around $2m, its transition to a producer is likely to improve its financial situation.
Author: Daniel Flynn
The author of this piece does not hold shares in the company mentioned.