Asiamet Resources (TSXV: ARS) hasn’t let changes to Indonesia’s mining law in 2014 impact its vision for an open-pit, heap-leachable copper mine at its Beruang Kanan Main (BKM) deposit, 180 km north of Palangkaraya, the capital city of Kalimantan, Indonesia.
With a new preliminary economic assessment (PEA) in hand, the Vancouver-based copper junior says the project could deliver 25,000 tonnes copper cathode per year over an initial eight-year mine life at a low cash cost of US$1.28 per lb. copper.
Assuming a US$3.25 per lb. copper price, the mine would have an after-tax net present value (NPV) and internal rate of return (IRR) of US$204.3 million and 38.7%, at a 10% discount rate. At US$2.75 per lb. copper, the NPV drops to US$75 million and the IRR to 21.6%. Copper last traded at US$2.16 per lb.
Tony Manini, CEO and deputy chairman, tells The Northern Miner during a phone interview that the PEA has been a milestone for the company, and he’s “extremely pleased” with the results.
“When your share price is around two or three cents, it’s hard to have a meaningful discussion with potential partners or investors,” he says. “We now have a negotiation point, not around our share price, but around the project … and we’ll progress with those discussions vigorously over the next few months.”
Manini is no stranger to striking deals. He was instrumental in taking junior Oxiana Resources from a company worth A$3 million to A$5.6 billion culminating in a merger with zinc miner Zinifex to form OZ Minerals in 2008.
Since joining Asiamet — formerly Kalimantan Gold — 16 months ago, Manini says that the company has advanced BKM “up the curve.”
He explains that the open-ended, intrusive-related resource at BKM is at the base of a low-angle thrust that follows the dip-slope of a hill.
Over time, rain and oxygen reacted with copper sulphide minerals and converted them into a black and blue crust of chalcocite and covellite — called a “supergene” blanket — which extends for at least 2 sq. km at surface, and up to 450 metres deep.
Assuming a 0.2% copper cut-off, resources are 15 million indicated tonnes of 0.7% copper for 231 million lb. copper, plus 49.7 million inferred tonnes of 0.6% copper for 657 million lb. copper.
And Manini says the resource could grow.
“We proved up enough resource to do the PEA, and the upside we see in and around the deposit is still significant,” he says, noting that copper-in-soil anomalies at the adjacent BKS and BKW targets are similar in scale to BKM.
Drilling at BKS last year returned 10 metres of 2.5% copper, whereas BKW has never been drill-tested, though grades have ranged from 0.1% to 0.2% copper, Manini says.
The study estimates it would cost US$163.8 million to build the mine, which would include a solvent extraction–electrowinning facility to produce London Metal Exchange grade, 99.999% copper on-site.
This purity is important, considering that the Indonesian government could ban raw concentrate exports by 2017, forcing miners to build smelters and refineries in the country.
Although the mining law was introduced in 2009, Manini says the government took a “hard-line” approach in 2014 when it slapped hefty export taxes on all raw ore shipments, and required that foreign-owned companies hand over a stake in their businesses.
The ban became a bone of contention between the government and companies operating in the country, such as Freeport-McMoRan (NYSE: FCX) at its Grasberg copper-gold mine in West Papua, and Newmont Mining (TSX: NMC; NYSE: NEM) at its Batu Hijau mine in western Sumbawa.
The two firms account for 97% of Indonesia’s copper exports.
“From a copper producer’s view, they’ve already spent a lot of money upgrading their facilities to produce a higher-grade copper concentrate,” he says. “And while they’re happy to supply smelters with material, it’s an entirely different business to run one, and it doesn’t make any sense for them to get involved.”
As the deadline for the ban looms, negotiations between the companies and the government are ongoing.
“Indonesia recognizes that there needs to be a discussion about the level of processing for different metals. And while no changes have been made yet, everyone is still searching for the middle ground,” he says.
Freeport is seeking to delay a $530-million bond on a $2.3-billion expansion to Indonesia’s only copper smelter, Gresik in eastern Java, that would bump up capacity to 1.8 million copper concentrate per year.
Negotiations also continue over the 10.6% divestment price in the company’s Indonesian subsidiary.
Meanwhile, Newmont intends to leave the country and sell its stake of Batu Hijau, with one Indonesian-consortium bidder valuing the business at US$2.2 billion.
The political uncertainly also sparked an exodus of junior explorers.
“From a Western junior’s perspective, there are very few operating in the country — there are more leaving than coming — but at the same time, there’s a much bigger homegrown industry, and there’s a lot of Asian investment coming into the sector,” Manini says. “Indonesia is next to China, the world’s main driver — your product is at the doorstep of the people who are going to consume it.”
But for Asiamet, Manini doesn’t foresee any issues, noting that the company has “strong relationships at all levels” of government in the country.
“We’re not viewed as a company that is out to make a quick dollar while the market is in an upcycle. We have 25 years of experience working in the country, and that demonstrates our commitment and backs our credibility,” Manini says.
Asiamet Resources has traded within a 52-week range of 1¢ to 8¢ per share, and closed at 5¢ at press time. The company as 394.7 million shares outstanding for a $28.6-million market capitalization.