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Asiamet’s first production looks likely to hit a sweet spot in the copper market

Published: 03:25 01 Oct 2015 EDT

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Keep on trucking: The company is targeting quick production.

The current iteration of Asiamet Resources (LON:ARS) goes back to March 2014.

That was when the company, under its previous name of Kalimantan Gold, was left standing on a key Indonesian asset by former joint venture partner Freeport McMoRan.

“The company had to stand on its own two feet in a pretty bad market,” says new chief executive Tony Manini.

It wasn’t easy, but Kalimantan had two things going for it. One was an established suite of gold and copper assets in Indonesia. The other was some powerful allies on the share register.

Indeed Manini arrival on the scene is no accident.

For the past few years he’s been chief executive of Tigers Realm, a private mining investment vehicle he formed with partner Owen Hegarty, following the A$6bn sale of their previous company Oxiana Resources.

Yes, that’s right, A$6bn - these are people with a track record of taking a little and turning into a lot, and in this part of the world too.

Oxiana had assets in Laos and the Philippines, and also Indonesia and Manini is certainly no stranger to the country.

He can talk at length about its politics and its permitting processes, and how and why certain companies manage to get on where others fail.

With that knowledge to fall back on Tigers Realm has been a long-standing backer of Asiamet on the strength of the diversity of its portfolio and the professional way in which it manages its assets on the ground and in amongst the respective local communities.

Nevertheless, when Freeport walked away from the KSK copper project Tigers Realm recognised an imbalance.

“I had some projects in Tigers Realm,” says Manini. “And KSK is a very good project in its own right. But I was looking to do something and at the end of last year Kalimantan was struggling to attract funding.”

The natural solution was some form of amalgamation.

“I said, why don’t we put our bigger asset behind this other asset, KSK.”

And so it was that, in exchange for shares, Kalimantan acquired a 40% interest in the Beutong copper-gold-molybdenum project, along with Manini late in November 2014.

The idea now is to create the classic growth model for a junior miner. To bring the smaller project, KSK, into production in double quick time, and then to use the cash flow from that to finance development work at the much larger, and richer project, Beutong.

“KSK could produce at 20,000 tonnes per year,” says Manini. “It has solid potential at a capital cost approaching something a small company can manage even in these difficult times.”

Of course what a small company run by Tony Manini can manage may differ from what a small company run by somebody else can manage.

After all, not everyone has a A$6bn success to fall back on and the considerable and enterprising support of Owen Hegarty.

But be that as it may, the idea is to get KSK up and running for a ballpark back-of-the-envelope A$175mln using a fairly standard debt equity split, once all the requisite economic studies are completed and permitting has been secured.

“The idea is to get it through the studies, into construction and then into operation,” says Manini. “And then sitting behind it is this 500mln tonne porphyry, this large growth option at Beutong.”

It’s an enticing prospect, managed as it is by people who’ve done this sort of thing before.

But how long will it be before investors can start to see words being translated into value?

Not long, is the short answer.

Work on KSK continues, and the plan is to get a scoping study or a preliminary economic assessment out into the market in the first quarter of next year.

So exactly what parameters any potential mine will have remains to be seen. Manini’s talk of a potential 20,000 tonnes per year operation is purely hypothetical and if the market won’t wear it, the beauty of the KSK project is that it’s scaleable.

A 5,000 tonnes per year operation could equally wash its face, although obviously overall returns would be lower.

What may tip the balance for investors though may not be the clear and well established potential at KSK and Beutong, but rather the cold realisation that copper is likely to revert back into deficit in about two years’ time, just in time for Asiamet to start selling into much stronger demand.

So even if copper is currently under severe pressure, that dynamic is likely to have changed dramatically by the time Asiamet delivers its first production.

When investors wake up to that, the effect on the market could be significant indeed.

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