Asiamet, As JP Morgan Circle

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As JP Morgan issues a major vote of confidence to Asiamet, should you be having a look too?

Indonesia-focused resources player Asiamet climbed 14.5pc to 5.3p last Wednesday, a price it has not hit in months. The move came after large institutional backer JP Morgan AM purchased an additional c.94m of the company’s shares, taking its total stake to 9.37pc.

JP Morgan’s purchase comes at a pivotal time for Asiamet, which is continuing to make considerable progress towards its goal of becoming a mid-tier copper producer. However, due to bearish macro conditions on both the global and local stage, the firm’s shares have fallen from highs of 14p to their current 5p over the last year.  

With this in mind, could this critical vote of confidence from a major City player be a bullish sign for Asiamet’s share price over the coming months?

Busy at BKM

Asiamet has delivered plenty of critical updates across its portfolio in recent months.

Principally, the firm has been busy carrying out additional drilling at the BKM copper deposit, which is currently the most advanced part of its 100pc-owned KSK project. This work is required for a bankable feasibility study at the asset. This is expected to precede the delivery of a final feasibility study by the close of H1 2019 and first production by the end of the year.

Asiamet has already carried out an attractive preliminary economic assessment at BKM, which gave the site an after-tax NPV10 of $204m and after-tax IRR of 39pc. This calculation was based around a 25ktpa copper cathode heap leach operation to be carried out over an initial eight years.

The NPV for BKM alone dwarfs Asiamet’s current £51.1m (c.$65.7m) market cap considerably. What’s more, while BKM is estimated to contain 432kt of copper, the business believes that the broader KSK project area will present a much more substantial ‘district-scale’ opportunity.

Wider drilling 

While Asiamet’s recent news flow has been focused around BKM, the company has also been updating investors on its plans to progress its broader KSK holdings.

For example, although a recent $3.3m placing was designed chiefly to complete the BKM feasibility study, more than $1m of the proceeds will be used to drill other KSK targets. Specifically, this involves extending the company’s BKZ resource and drilling its Baroi prospect – subject to permitting.

BKZ is a high quality deposit located fewer than 800m from BKM. It contains massive sulphide or vein-style mineralisation intersected over an area of 300m x 110m. This has been found to be polymetallic, containing copper, lead, silver, zinc, and gold. It is also thought to remain open in multiple directions. Drilling has so far led the company to say it is confident that BKZ could hold its own as a standalone operation. This would, of course, share infrastructure with nearby BKM.

Meanwhile, Baroi is a polymetallic system containing four identified zones of mineralisation. Located 17km from BKM, Asiamet calls it a ‘proven example’ of the district-scale opportunity in Kalimantan, the Indonesian Island where KSK is located. Encouragingly, the company says historic work at Baroi has yielded the most extensive and intense mineralisation in 30 years of KSK exploration.

Beutong business

Asiamet’s progress and plans have not been limited to KSK, either. Indeed, the firm said c.$350k of the recent placing proceeds would also be allocated to its 80pc-held Beutong copper-gold project. Here, it hopes to continue corporate social responsibility work and continue to evaluate strategic development options.

This work will follow extensive drilling at the Sumatra-based prophyry deposit that delivered intercepts of up to 456m at 1.2pc copper and 445m at 0.54pc copper and 0.17g/t gold from 7m. Asiamet says the work has confirmed a large-tonnage copper development opportunity close to existing infrastructure.

Finally, on the corporate side, the company has held meetings with numerous potential strategic investors and partners in Jakarta. In December, it said the level of interest in its portfolio ‘remains high’, adding that several groups have signed confidentiality agreements and are actively engaged in technical due diligence.

‘Discussions with several other parties are continuing with a view to upscaling diligence activity early in the New Year,’ it added in an update.

Macro struggle

Since peaking at more than 10p in October last year, Asiamet has seen huge amounts of value wiped off its share price. Thankfully for long-term investors, this appears to have stemmed from temporary and cyclical issues rather than operational changes impacting the firm’s fundamental investment case.

For example, Asiamet fell prey to the commodity bear market that haunted almost every resource stock towards the end of last year. This related to sentiment-driven macro concerns around slowing growth, rising interest rates, and the risks of a US/China trade war. So far this year, conditions have been less bearish. However, many stocks – like Asiamet – have yet to see their shares recover.

Compounding this, Asiamet lost more than a quarter of its value in a day in October due to social media rumours. Investors headed to the door en-masse after an article was published detailing protests near Beutong. Despite the firm confirming that the project was fully compliant and in good standing, sentiment took a hit. It has struggled to stage a full recovery since.

Those who know

At this point, it is worth remembering that JP Morgan was a huge supporter of Asiamet in a £7.2m placing at 11p per share last year. The City stalwart purchased c.6.5m shares, taking its position to 8.4pc.

One could argue that the willingness of a company that supported Asiamet at share price highs to accumulate at a depressed valuation is a highly bullish indicator. The move suggests that JP Morgan’s fundamental reason for investing in Asiamet has not changed. It also implies that the business now views Asiamet as highly undervalued, so is using the opportunity to stock up ahead of an anticipated re-rate.

If this turns out to be the case, then it could be an interesting buying opportunity. JP Morgan is unlikely to be one to throw its money around, so its support is a huge vote of confidence. With plenty of activity and potential share price catalysts on the horizon across Asiamet’s portfolio, private investors may want to follow the institutional powerhouse into the stock at its current valuation.major vote of confidence to Asiamet, should you be having a look too?

Indonesia-focused resources player Asiamet climbed 14.5pc to 5.3p last Wednesday, a price it has not hit in months. The move came after large institutional backer JP Morgan AM purchased an additional c.94m of the company’s shares, taking its total stake to 9.37pc.

JP Morgan’s purchase comes at a pivotal time for Asiamet, which is continuing to make considerable progress towards its goal of becoming a mid-tier copper producer. However, due to bearish macro conditions on both the global and local stage, the firm’s shares have fallen from highs of 14p to their current 5p over the last year.  

With this in mind, could this critical vote of confidence from a major City player be a bullish sign for Asiamet’s share price over the coming months?

Busy at BKM

Asiamet has delivered plenty of critical updates across its portfolio in recent months.

Principally, the firm has been busy carrying out additional drilling at the BKM copper deposit, which is currently the most advanced part of its 100pc-owned KSK project. This work is required for a bankable feasibility study at the asset. This is expected to precede the delivery of a final feasibility study by the close of H1 2019 and first production by the end of the year.

Asiamet has already carried out an attractive preliminary economic assessment at BKM, which gave the site an after-tax NPV10 of $204m and after-tax IRR of 39pc. This calculation was based around a 25ktpa copper cathode heap leach operation to be carried out over an initial eight years.

The NPV for BKM alone dwarfs Asiamet’s current £51.1m (c.$65.7m) market cap considerably. What’s more, while BKM is estimated to contain 432kt of copper, the business believes that the broader KSK project area will present a much more substantial ‘district-scale’ opportunity.

Wider drilling

While Asiamet’s recent news flow has been focused around BKM, the company has also been updating investors on its plans to progress its broader KSK holdings.

For example, although a recent $3.3m placing was designed chiefly to complete the BKM feasibility study, more than $1m of the proceeds will be used to drill other KSK targets. Specifically, this involves extending the company’s BKZ resource and drilling its Baroi prospect – subject to permitting.

BKZ is a high quality deposit located fewer than 800m from BKM. It contains massive sulphide or vein-style mineralisation intersected over an area of 300m x 110m. This has been found to be polymetallic, containing copper, lead, silver, zinc, and gold. It is also thought to remain open in multiple directions. Drilling has so far led the company to say it is confident that BKZ could hold its own as a standalone operation. This would, of course, share infrastructure with nearby BKM.

Meanwhile, Baroi is a polymetallic system containing four identified zones of mineralisation. Located 17km from BKM, Asiamet calls it a ‘proven example’ of the district-scale opportunity in Kalimantan, the Indonesian Island where KSK is located. Encouragingly, the company says historic work at Baroi has yielded the most extensive and intense mineralisation in 30 years of KSK exploration.

Beutong business

Asiamet’s progress and plans have not been limited to KSK, either. Indeed, the firm said c.$350k of the recent placing proceeds would also be allocated to its 80pc-held Beutong copper-gold project. Here, it hopes to continue corporate social responsibility work and continue to evaluate strategic development options.

This work will follow extensive drilling at the Sumatra-based prophyry deposit that delivered intercepts of up to 456m at 1.2pc copper and 445m at 0.54pc copper and 0.17g/t gold from 7m. Asiamet says the work has confirmed a large-tonnage copper development opportunity close to existing infrastructure.

Finally, on the corporate side, the company has held meetings with numerous potential strategic investors and partners in Jakarta. In December, it said the level of interest in its portfolio ‘remains high’, adding that several groups have signed confidentiality agreements and are actively engaged in technical due diligence.

‘Discussions with several other parties are continuing with a view to upscaling diligence activity early in the New Year,’ it added in an update.

Macro struggle

Since peaking at more than 10p in October last year, Asiamet has seen huge amounts of value wiped off its share price. Thankfully for long-term investors, this appears to have stemmed from temporary and cyclical issues rather than operational changes impacting the firm’s fundamental investment case.

For example, Asiamet fell prey to the commodity bear market that haunted almost every resource stock towards the end of last year. This related to sentiment-driven macro concerns around slowing growth, rising interest rates, and the risks of a US/China trade war. So far this year, conditions have been less bearish. However, many stocks – like Asiamet – have yet to see their shares recover.

Compounding this, Asiamet lost more than a quarter of its value in a day in October due to social media rumours. Investors headed to the door en-masse after an article was published detailing protests near Beutong. Despite the firm confirming that the project was fully compliant and in good standing, sentiment took a hit. It has struggled to stage a full recovery since.

Those who know

At this point, it is worth remembering that JP Morgan was a huge supporter of Asiamet in a £7.2m placing at 11p per share last year. The City stalwart purchased c.6.5m shares, taking its position to 8.4pc.

One could argue that the willingness of a company that supported Asiamet at share price highs to accumulate at a depressed valuation is a highly bullish indicator. The move suggests that JP Morgan’s fundamental reason for investing in Asiamet has not changed. It also implies that the business now views Asiamet as highly undervalued, so is using the opportunity to stock up ahead of an anticipated re-rate.

If this turns out to be the case, then it could be an interesting buying opportunity. JP Morgan is unlikely to be one to throw its money around, so its support is a huge vote of confidence. With plenty of activity and potential share price catalysts on the horizon across Asiamet’s portfolio, private investors may want to follow the institutional powerhouse into the stock at its current valuation.

Tony Manini Talks To Andrew Scott At Mines & Money 2018

The author was remunerated but does not hold shares


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