Time for Asiamet to shine?
“…Although Aeturnum had not given notice for the meeting ‘in a valid form’, giving Asiamet breathing space, the damage had been done. The company’s share price, which had shot up from just over 2p to nearly 6p following news of the acquisition, immediately plummeted back down to its former levels…”
Asiamet Resources (AIM:ARS), an emerging producer focused on the development of a portfolio of copper, copper-gold and polymetallic deposits in Indonesia, is seeking to travel the long road back to regaining investor confidence after a year in which the company’s fortunes waxed and waned dramatically.
Asiamet’s most clearly defined prospects are a cluster of copper, gold and polymetallic assets within a 100pc-owned licence referred to as the Kalimantan Surya Kencana Contract of Work (KSK CoW), covering 390 square kilometres in the Indonesian portion of the island of Borneo.
The company’s flagship venture within the KSW SoW is the BKM Copper Project, which according to a 2019 Feasibility Study has total Measured, Indicated and Inferred Resources of 69.6Mt @ 0.6pc Cu for 451.9kt of contained copper. Estimated to be capable of producing up to 25,000 tonnes of copper cathode per annum for nine years the Project promises a Life of Mine revenue of $1.27bn. The Study estimates the initial capital spend at $192m.
The BKZ Polymetallic Project, located adjacent to existing and proposed infrastructure for the BKM Project, is focused on a veined lead, zinc, silver and gold mineralisation system split into two zones. The BKZ Upper Polymetallic Zone offers a High Grade Domain of 750,000 tonnes at 8.0pc zinc, 3.4pc lead, 50 g/t silver and 0.35 g/t gold containing 132 Mlbs zinc, 57 Mlbs lead, 1.2 Moz silver and 8,400 oz gold at 4pc zinc cut-off grade. The BKZ Lower Copper Zone promises a High Grade Domain of 1.1 million tonnes at 1.1pc copper and 13g/t silver containing 26 Mlbs copper and 460,000 ounces silver at a 0.5pc copper cut-off grade.
The BKS prospect, a kilometre south of the BKM project, is a well-defined copper in soil anomaly with historic rock chip sampling reporting highly anomalous gold, silver and copper values, including a rock chip outcrop sample assaying 12.3pc copper, 18.2 g/t gold and 41 g/t silver. The neighbouring BKW prospect comprises multiple copper mineralised sheeted vein zones with historic rock chip samples assaying up to 7.1pc copper.
The Baroi prospect, within 20 kilometres of the BKM prospect, has consistently returned copper grades of 1 to 5pc with samples grading up to over 10pc copper with elevated zinc, lead, and silver. Permit applications have been submitted for a scout drilling programme at the prospect.
In addition to its KSK CoW deposits Asiamet has an 80pc interest in the Beutong Copper Gold Project, a 10,000 hectare porphyry copper-gold system on the Indonesian island of Sumartra, close to existing infrastructure and 60 kilometres from a large power station and seaport.
Comprising the Beutong East Porphyry (BEP), Beutong West Porphyry (BWP) and the Beutong Skarn (BSK) prospects, the Project has JORC compliant Resources containing 2.4 Mt (5.3 Blb) copper, 2.1 Moz gold and 20.6 Moz silver on a 100pc basis and 1.95 Mt (4.30 Blb) copper, 1.69 Moz gold and 16.73 Moz silver on an 80pc attributable basis. In Asiamet’s assessment the project offers the potential for the discovery of a high grade core similar to that seen in world class porphyry systems such as Wafi Golpu, PNG (Newcrest) and Cascabel, Ecuador (Solgold).
Asiamet is led by Director & Executive Chairman Tony Manini, who has held various technical, commercial, senior management and executive roles in exploration, project evaluation, project development and business development at Rio Tinto and Oxiana, and is a founder of Tigers Realm Minerals and Tigers Realm Coal. The company has appointed metallurgist Andrew Neale as General Manager for the KSK Project to manage all aspects of the pre-development technical works and permitting required to prepare the BKM project for construction and operations.
The deal that fell through
Asiamet looked liked it might be beginning to realise the value of its assets last March when Singapore based commodities trader Aeturnum Energy came on board as the company’s largest shareholder, taking a 19.9pc stake worth £3.36m. Asiamet entered into an exclusivity agreement with Aeturnum to secure financing for the KSK CoW, and last October a non-binding Heads of Agreement committed Aeturnum to acquire the KSW CoW through PT WIN, an Indonesian shell company, for a total staged consideration of $163.4m.
According to the agreement’s somewhat labyrinthine terms PT WIN would have acquired the licence after raising funds through an IPO on the Indonesian Stock Exchange, the IDX, early this year before moving ahead with the development of the BKM Copper Project. Asiamet would retain a 22.5pc interest in the KSK CoW through a shareholding in PT WIN, and flush with some $50m would pursue the development of the Beutong project. All seemed set fair when the partners entered into a conditional binding Share Purchase Agreement just before Christmas, with discussions underway with Indonesian financial institutions to underwrite the IPO.
But three weeks later the delicate arrangement started to unravel, Asiamet announcing that an initial payment from PT WIN of $2.5m due within 10 days of signing the SPA had yet to be received. A week later Asiamet announced it had terminated the SPA, having received no ‘reasonable explanation’ for the delay. The following week the plot thickened further, Asiamet revealing that Aeturnum had requested that a Special General Meeting of the company’s shareholders be convened to vote on the replacement of Asiamet’s current directors with Aeturnum nominees.
Aeturnum, it seemed, had scuppered the KSW CoW acquisition with a view to taking control. Or in Asiamet’s politic words: ‘When a 19.98pc shareholder is seeking to convene a Special General Meeting of shareholders to remove the current Board of Directors without justification or explanation, and immediately after one of its controlled entities has materially breached a binding sales and purchase agreement to acquire one of the Company’s primary assets, its motivations for not fulfilling its obligations under that binding agreement need to be questioned.’
Although Aeturnum had not given notice for the meeting ‘in a valid form’, giving Asiamet breathing space, the damage had been done. The company’s share price, which had shot up from just over 2p to nearly 6p following news of the acquisition, immediately plummeted back down to its former levels.
Steadying the ship
Asiamet set on the long road back to restoring faith in the company a few weeks later with a £10m fundraise to allow it to resume project development work. The funds would be used to complete a second phase value engineering programme at BKM, and begin early stage detailed engineering and design works for a copper mine at the prospect. Talks with new financial partners would be pursued, with the company open to the possibility of an IPO on the Indonesian Stock Exchange or undertaking a partial asset sale to secure the necessary equity finance. The completion of the permitting process for BKM would be pursued with Indonesian regulators following the securing of significant approvals earlier this year. And community engagement and development work at Beutong would continue.
In March Asiamet reported that metallurgical test work undertaken as part of value enhancement initiatives for the BKM copper project had highlighted highly encouraging project efficiencies. A concentrate tank leach processing technique promised to increase total copper recoveries by up to 40pc, maintain copper production at full capacity of 25 Ktpa for eight years, and produce a secondary pyrite concentrate for sale into the Indonesian laterite nickel industry. The following month the company reported that a ground-based geophysical programme comprising approximately 30 line-kilometres of ground-based IP (Induced Polarisation) will be completed to better define and extend several of the high potential drill targets in the near vicinity of the BKM deposit.
A few weeks later Asiamet confirmed it intends to recommence field activities at Beutong during 2021 with a plan to drill extensions below the current defined resource envelope. And in June it said it was on the point of drilling high-priority targets close to BKM to expand the Project’s resource potential. The same announcement brought news on the permitting and financial fronts, with conditional approval for environmental permit expected over ‘the next 4-6 weeks’ and the signing of confidentiality agreements with ‘a small number of serious investors’ with whom discussions are ‘progressing well’. The company held its AGM on 30 June, at which all resolutions passed without incident.
Copper’s long bull run
Asiamet’s turbulent year has unfolded against the background of a thriving copper market. As covered in TMS last month copper, iron ore, palladium and timber all hit record highs in May, and the price of agricultural commodities including grains, oilseeds, sugar and dairy has also jumped. The Bloomberg Commodity index has gained 15pc this year, recording its highest levels since 2015.
The price of copper, a fundamental metal for green transition technologies – an electric vehicle for example contains five times more copper than a car fitted with an internal combustion engine – has almost doubled in the past year, hitting a record high of $10,460 a tonne last month. The United States Copper index fund and the WisdomTree Copper ETC have recorded 80pc gains in recent months, and China, which consumes half of the world’s copper, has imported nearly 10pc more of the metal than the previous year. The International Energy Agency reports that copper’s market share will have to grow almost sevenfold between 2020 and 2030 if net zero emissions are going to be achieved by 2050.
Prices are being forced up further by supply pressures. Just as demand is surging the copper market is close to peak supply, with big miners curtailing investment in new projects. The industry has dramatically scaled back spending since the last commodity boom, when too many indulged in overpriced deals and over ambitious projects that brought them close to financial ruin. The mining industry has since focused on returning to cash to shareholders through dividends rather than signing off on new projects. Other pressures on price include the increasing difficulty of find high grade copper projects in safe mining jurisdictions, and the rundown of ageing mines with declining ore grades: it can take up to 10 years to develop a new copper project, even once all the regulatory approvals have been secured.
The story continues
Despite everything, then, Asiamet can continue to make the case for the fundamental value of a set of development ready copper prospects that seem tailor made for today’s tight copper market. The company’s share price has so far been unmoved by the flurry of development updates over the past few months, hardly surprising given the trust forfeited through the PT WIN debacle. The KSK CoW and Beutong projects will be expensive to bring to market, and Asiamet, at least in its present form, may not be the agent that does so. But investors seeking new opportunities to take advantage of what seems set to be a prolonged bull market for the metals they produce may want to continue to keep an eye on their development.
