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Research: Metals & Mining
On 26 February, Amur announced the long-awaited results of its updated pre-feasibility study (PFS) into its Kun-Manie project in Russia’s Far East. In contrast to previous studies, the PFS considered just two options, namely a toll smelt option and a low-grade matte option, and dispensed with the high-grade matte and refinery options. Detailed financial models are not yet available. However, both considered a 6Mtpa mining operation and results are comparable to those published by Edison in our note, Cobalt-plated nickel, published on 16 April 2018.
Amur Minerals |
Gaining traction |
Updated PFS results |
Metals & mining |
27 February 2019 |
Share price performance
Business description
Next events
Analyst
Amur Minerals is a research client of Edison Investment Research Limited |
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On 26 February, Amur announced the long-awaited results of its updated pre-feasibility study (PFS) into its Kun-Manie project in Russia’s Far East. In contrast to previous studies, the PFS considered just two options, namely a toll smelt option and a low-grade matte option, and dispensed with the high-grade matte and refinery options. Detailed financial models are not yet available. However, both considered a 6Mtpa mining operation and results are comparable to those published by Edison in our note, Cobalt-plated nickel, published on 16 April 2018.
Year |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
0.0 |
(3.8) |
(0.7) |
0.0 |
N/A |
N/A |
12/17 |
0.0 |
(1.9) |
(0.3) |
0.0 |
N/A |
N/A |
12/18e |
0.0 |
(2.7) |
(0.4) |
0.0 |
N/A |
N/A |
12/19e |
0.0 |
(3.7) |
(0.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Good comparability to earlier estimates
Amur’s updated PFS on the toll smelt option calculated an NPV10 of US$614.5m and an IRR of 29.3% at a nickel price of US$8.00/lb (US$17,640/t) cf a spot price at the time of writing of US$5.88/lb (US$12,975/t). That compares with an Edison calculated NPV10 of US$398.0m at a nickel price of US$7.50/lb in April 2018 or US$533.7m at US$8.00/lb Ni. Its updated PFS on the low-grade matte option calculated an NPV10 of US$987.4m and an IRR of 34.7% at US$8.00/lb, which compares with an Edison calculated NPV10 of US$822.2m at US$7.50/lb Ni or US$967.2m at US$8.00/lb Ni. Initial capex for the toll smelt option is estimated at US$570.4m cf US$541.8m in our comparable model. For the low-grade matte option, it is US$695.0m cf our US$660.0m. C1 cash costs were estimated to be US$3.87/lb and US$2.34/lb for the toll smelt and low-grade matte scenarios, respectively, putting both in the second lowest-cost quartile globally.
Valuation: 8.7–22.5cps cf a share price of 4.4c
In our report, Gold stars and Black holes: Analysing the discount: From resource to sanction, published in January 2019, we calculated that, excluding outliers, the average value of companies with projects at PFS stage is 9.9% of attributable NPV, with a range between -15.4% and 51.3%. On the basis of Amur’s published NPVs (at US$8.00/lb Ni), this would imply a valuation for the company of US$60.8m (or 8.7c/share) based on the toll smelt option, or US$97.8m (or 14.0c/share), based on the low-grade matte option. However, given the relationship between valuations and IRRs seen in our report, coupled with both scenarios’ high IRRs, these percentages could increase to 13.0% for the toll smelt option and 15.9% for the low-grade matte option, implying valuations of US$79.9m (or 11.4c/share) and US$157.0m (or 22.5c/share), respectively. These compare with valuations calculated in our April 2018 note of 15c and 27c respectively, based on a 10% discount rate applied to forecast dividends (although these were calculated at a nickel price of US$7.50/lb and assumed equity dilution at a 4.4p share price). Note that our detailed valuations will be updated as soon as practicably possible.
Exhibit 1: Financial summary
US$'000s |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018e |
2019e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(1,928) |
(2,892) |
(1,750) |
(2,539) |
(2,358) |
(4,114) |
(3,768) |
(1,924) |
(2,236) |
(3,768) |
Operating Profit (before GW and except.) |
(1,928) |
(2,892) |
(1,750) |
(2,539) |
(2,358) |
(4,114) |
(3,768) |
(1,924) |
(2,236) |
(3,768) |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
(328) |
(1,505) |
(435) |
(151) |
1,158 |
1,184 |
(2,007) |
767 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(2,256) |
(4,397) |
(2,185) |
(2,690) |
(1,200) |
(2,930) |
(5,775) |
(1,157) |
(2,236) |
(3,768) |
||
Net Interest |
0 |
(211) |
(1,813) |
(1,141) |
(161) |
2,224 |
4 |
3 |
(452) |
33 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(1,928) |
(3,103) |
(3,563) |
(3,680) |
(2,519) |
(1,890) |
(3,764) |
(1,921) |
(2,688) |
(3,735) |
Profit Before Tax (FRS 3) |
|
|
(2,256) |
(4,608) |
(3,998) |
(3,831) |
(1,361) |
(706) |
(5,771) |
(1,154) |
(2,688) |
(3,735) |
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(1,928) |
(3,103) |
(3,563) |
(3,680) |
(2,519) |
(1,890) |
(3,764) |
(1,921) |
(2,688) |
(3,735) |
||
Profit After Tax (FRS 3) |
(2,256) |
(4,608) |
(3,998) |
(3,831) |
(1,361) |
(706) |
(5,771) |
(1,154) |
(2,688) |
(3,735) |
||
Average Number of Shares Outstanding (m) |
193.9 |
271.8 |
345.1 |
387.2 |
431.2 |
445.7 |
547.9 |
613.3 |
660.2 |
692.5 |
||
EPS - normalised (c) |
|
|
(1.0) |
(1.1) |
(1.0) |
(1.0) |
(0.6) |
(0.4) |
(0.7) |
(0.3) |
(0.4) |
(0.5) |
EPS - FRS 3 (c) |
|
|
(1.2) |
(1.7) |
(1.2) |
(1.0) |
(0.3) |
(0.2) |
(1.1) |
(0.2) |
(0.4) |
(0.5) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||||||||
Fixed Assets |
|
|
14,151 |
13,903 |
17,928 |
18,955 |
12,035 |
12,162 |
19,903 |
25,260 |
27,944 |
35,612 |
Intangible Assets |
13,685 |
13,503 |
17,084 |
18,318 |
11,783 |
11,513 |
17,167 |
22,376 |
24,964 |
24,964 |
||
Tangible Assets |
466 |
400 |
844 |
637 |
252 |
649 |
2,736 |
2,884 |
2,980 |
10,648 |
||
Other receivables |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
7,215 |
7,386 |
8,389 |
11,074 |
9,090 |
11,355 |
9,723 |
4,065 |
3,740 |
1,510 |
Stocks |
167 |
165 |
224 |
269 |
237 |
512 |
756 |
769 |
769 |
769 |
||
Trade Debtors |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Cash |
3,066 |
4,436 |
2,048 |
2,392 |
1,389 |
9,613 |
8,199 |
2,555 |
2,230 |
0 |
||
Other receivables/other |
3,982 |
2,785 |
6,117 |
8,413 |
7,464 |
1,230 |
768 |
741 |
741 |
741 |
||
Current Liabilities |
|
|
(109) |
(102) |
(119) |
(123) |
(407) |
(539) |
(416) |
(768) |
(768) |
(9,537) |
Creditors |
(109) |
(102) |
(119) |
(123) |
(407) |
(539) |
(416) |
(768) |
(768) |
(768) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
(8,769) |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
(509) |
(3,461) |
(176) |
(176) |
(176) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
(509) |
(3,461) |
(176) |
(176) |
(176) |
||
Net Assets |
|
|
21,257 |
21,187 |
26,198 |
29,906 |
20,718 |
22,469 |
25,749 |
28,381 |
30,740 |
27,409 |
CASH FLOW |
||||||||||||
Operating Cash Flow |
|
|
(1,201) |
(2,761) |
(1,071) |
(1,556) |
(1,960) |
(3,090) |
(2,210) |
(2,703) |
(2,236) |
(3,768) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
0 |
4 |
3 |
(452) |
33 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(492) |
(20) |
(3,482) |
(2,315) |
(748) |
(2,751) |
(4,533) |
(3,704) |
(2,684) |
(7,668) |
||
Acquisitions/disposals |
363 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
3,527 |
4,344 |
2,165 |
4,242 |
1,841 |
14,407 |
6,589 |
570 |
5,046 |
404 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
2,197 |
1,563 |
(2,388) |
371 |
(867) |
8,566 |
(150) |
(5,834) |
(326) |
(10,999) |
||
Opening net debt/(cash) |
|
|
(997) |
(3,066) |
(4,436) |
(2,048) |
(2,392) |
(1,389) |
(9,613) |
(8,199) |
(2,555) |
(2,230) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(128) |
(193) |
0 |
(27) |
(136) |
(342) |
(1,264) |
190 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(3,066) |
(4,436) |
(2,048) |
(2,392) |
(1,389) |
(9,613) |
(8,199) |
(2,555) |
(2,230) |
8,769 |
Source: Company sources, Edison Investment Research
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Research: Energy & Resources
Renergen has announced that US government agency, Overseas Private Investment Corporation (OPIC), has approved a US$40m loan facility in favour of the Renergen subsidiary Tetra4’s Virginia gas field project. The funds, which have a 12-year term and 30 months’ grace period, are to be utilised for the first phase of development and commercialisation of a 36.4bcf natural gas and 0.87bcf helium field in South Africa’s Free State province. First phase development includes the construction and operation of a 52km gas gathering system and new liquefied natural gas (LNG) and helium liquefaction plant. Renergen now has funding in place for phase one development providing visibility on first gas sales, which we currently assume at the end of 2020. Our last published NAV valuation stood at ZAR21.8/share based on a 15% discount rate and US$280/mcf crude helium price. Renergen is looking at an Australian Stock Exchange (ASX) dual listing to increase liquidity. We expect further details to be released in early 2019.