Amur Minerals Corporation (LON:AMC) Chief Executive Officer Robin Young caught up with DirectorsTalk for an exclusive interview to discuss the company’s current position and their ‘Operational Blueprint’ master plan
Q1. The status of Amur Minerals has changed markedly since the announcement of the award of the production licence on 22nd May and then its registration on the 10th of June. With this major milestone accomplished, will there be a substantial repositioning of the company and if that’s the case, what main change or changes can we expect to see from the Company? Is there a master plan?
A1: Yes, you know the award of the 20 year production licence has been pretty transformational for the company. We’ve been able to maintain a high percent of the extraction rights on this deposit and it’s one of the top 20 nickel sulphide projects in the world and we believe it’s going to become substantially larger. At the same time, we see this as a real transition period for the company where we’re taking the step from exploration into that of being a potential large scale producer where we’re going to deliver nickel and copper into three of the top international metals consumer nations in the world, China, Japan and South Korea. Since we’re located right in the heart of that area, we have a geographical advantage with our rail connections that lead from the Baikal Amur line into China and also to year-round access ports at Nahodka and Vanina, giving us the ability to ship into places like South Korea and Japan as well. So our assessable for the Baikal Amur has really provided us with advantage especially as we already have a presence on the line itself which we use to resupply the site itself. So geographically, we’re really in a position of advantage with the major nickel producers sitting right there in the backyard of the largest consumers in the world.
We have been working on a master plan, so to speak, we actually call it an ‘Operational Blueprint’. It is a forward looking comprehensive plan that would cover a 15 year production mine life and it’s also set up to maximize our operating profits. By setting up the long term perspective like this, it enables us to develop a really fully integrated design which takes advantage of all the variable options we have available to the company which would include optimized mine plans and underground operations, the plant itself and considerations of smelting of the product itself. So as a part of that blueprint, what we have is really defined a path to production and the decision point, at which point in time we can consider ultimately taking on funding and construction of this large nickel operation. So the blueprint itself will have two benchmark targets, one is the ultimate development of a definitive feasibility study, which would also include the associated financing to construct the operation, and the second would be making sure that we’ve met all of the Russian requirements related to engineering approval, our engineering design works for porting and also for permitting itself. The blueprint itself is rather visionary and it’s ambitious but it does lay out a development plan that can be obtained for the Kun-Manie operation itself.
Q2: The Blueprint that you mentioned, is it your plan to take Kun-Manie into production on your own or in a partnership of sorts? Would this require a phased approach?
A2: The Blueprint is really a standalone plan and this standalone plan allows for a company, doesn’t have to be us, but it would set out the markers that we need to accomplish, to take the project itself into production and it’s really independent of corporate structure or ownership or any kind of partnership being formed, that’s the key to this plan, it lets us set our benchmarks. The development of a large scale operation like this require a lot of quality work and effort, good solid engineering, design work, planning and construction to develop really the most efficient and profitable operation that we have in front of us. Shortcuts rarely produce acceptable results and at this point in time, we do have some milestones that we need to obtain and if we stay focused on what we have today, we will end up in a situation where we won’t be able to take advantage of the full operation. For this reason we really need to take a look at our integrated operation, it takes a look at a 15 year operation itself.
We’re going to continue to advance projects through to an operational decision, construction and ultimately into production. Each step that we take is going to take some of the risk away from the project and ultimately add incremental value to the company. With the licence in hand, the country risk has been substantially removed and we’ve also have proven that we can successfully work within the Russian system, this is something a lot of companies have not been capable of doing and many have even left Russia because of the challenges that have been brought forward.
A plan of this magnitude is of course best tackled in a series of phases and our primary phase at this point in time is to make sure that the drilled metal that we’ve got defined to this point in time can support this long term operation. Everything is inter-related and the programme, this year, will be focused on first phase which is really infill drilling. This years’ target will be the Flangovy project followed up by Kubuk next year. So with successful drilling on both of those, there’s no need for us to step out and find additional reserves. Once we’ve completed this infill programme, we have a programme set to step out and drill the lateral to four to five deposits where we don’t know the limits of mineralization have been defined at this point. So we’ve got tremendous potential for resource expansion but right now, we’re going to stay focused on the reserves itself which take us through to a decision on whether this is going to be a full scale minable operation. By doing this kind of different phases, it allows us to further optimize down line work, results generally will guide you to a better step on the follow on process.
Phased approach is definitively the best way to go especially when you’re taking a look at mine designs, process designs, infrastructure development and the smelting options that we have available to us. At this point in time with the phased approach, we’re reasonably funded and we’re going to continue to remove the risk with this initial kick-off of the infill drilling of the resources and also we’re going to undertake metallurgical test work of existing samples that we have today to help us define what that final plant design will look like.
Q3: So the next phase is ready to be implemented. Can it be kicked off this year or is it too late to accomplish the plan of infill drilling on the Flangovy area?
A3: What happens when the license is awarded and registered, there’s a report that needs to be compiled and essentially authorized and approved by the local Russian geological experts. So to begin any field work programme, these local geological experts have to have reviewed and approved our plan which is referred to as a Project. The Project would include our detailed exploration plan especially with the Flangovy and the Kubuk drilling as well as the long term design plan and the schedule that would ultimately lead production. The plan is in accordance with the terms and conditions of the licence and we actually have until the end of this year to compile and obtain the approval. We are quite a way ahead of the game plan on this in that we anticipated the award of the licence several months ago and at that point in time, we actually started compiling our project in the last quarter of last year. We had it ready in April and we’d already been in contact with the local experts telling them that we’re on the way and with the registration of the licence that has allowed us to already be in position to have something in the documents that are under review at this point in time. So as soon as we have their approval, we’ll be able to mobilize our drill crews to the site, all other preparations are ready so we can begin drilling within days of the approval.
At this point in time, what we’re looking at is the product itself, 650,000 tonnes of nickel and 180,000 tonnes of copper in resource inventory. The preliminary mine plans do substantiate that what we have drilled at this point is substantial enough to support a 6 million tonne a year operation for about 15 years. At this point in time, that’s all we need to focus our efforts on, as I mentioned earlier, about 50% of what we believe to be minable reserve at this point has been drilled sufficiently and that we’re going to need to focus on pursuing the resource conversion at Flangovy. There, we believe we can convert about 20 million tonnes of resource into reserve and then we’ll pick up another 20-30 million tonnes of resource conversion at Kubuk itself.
So with that in hand, we are planning on drilling 6,000 metres at Flangovy this year. We average about 1,500 to 2,000 metres a month and we can drill through the month of October so we have the capability of over a 4 month period drilling at 6,000 – 8,000 metres. We are ready to move, we’ve identified our drill crews, we don’t believe it’s going to take very long for the approval process as we have been interacting with the committee on a frequent basis and anticipate that we’ll be able to accomplish our 6,000 metres of drilling that we have planned for this upcoming season. On my last trip to Khabarovsk, we triggered a compilation of core samples specifically from metallurgical test work and we’re going to target the Flangovy/Kubuk areas where we have limited information at this point in time, these will all go up to an external laboratory for analysis. Over the next few months, we’re really looking at undertaking additional engineering works at Kun-Manie which will include a comprehensive review of the economic assessment that is now under final edits and we should have that out very shortly. The other things that we need to look at are things like road design considerations; they are critical to the operation, it’s going to be a 320 kilometre road, the bridges that are required, the environmental footprint, hydrological studies that are better associated with the road itself as well as the production on site. We’ve got lots of things that we can focus on right now and are in position to undertake. With each one of these steps, we’re going to of course de-risk the project a little bit and it’s going to present new options and new alternatives to us as the results are generated and we anticipate consistent incremental increase in the value to the company, to the shareholders.
Q4: The market capitalisation of Amur is now significantly higher than when we last spoke, it’s at around £160 million and your share price is over ten times higher than it was a year ago. If you got the chance, what message would you give to your investors?
A4: It’s been a real challenge getting here. It’s been ten years of pretty hard graft and it’s been accomplished by the dedication of our employees, our team and the participation of the Russian government in getting the licence granted. We believe we have one of the world’s largest nickel copper sulphide deposits and we believe that we’re going to continue to meet complicated and challenging geopolitical environment that’s presented in Russia and we’ve proven in the past.
We’ve done ten years, we now have a licence where we control 100% of the resources and we can move the project forward. A lot of companies would have abandoned their positions and have but we stayed the course for ten years so we’re now at a real penultimate stage of defining what could be one of the world class nickel producers in the heart of the largest nickel consumer markets in the world. We have to build a road but the thing that we must bear in mind is that we are dead square in the centre of China, South Korea and Japan which are the largest nickel consumers so we’re sitting quite pleasantly when you start taking a look at other sources of nickel coming out of Australia, Canada and the western limits of Russia. We’re looking at continuing this de-risking process and moving the decision point closer to when we decide to possibly go into production and ultimately, what our production footprint will look like based on this blueprint that we’ve come up with.
We’re going to continue our discussions with all the various financial institutions that we have over the years, we’re going to keep them apprised of our situation and if there’s any other interested funding sources that would come in to access and help out with us, we’ll take a look at and we’ll consider them at that point in time. Right now our intent is to shorten this decision cycle and get that into a development decision as soon as possible at Kun-Manie. So we’re going to stay fully dedicated, focused and continue step by step de-risking.
