REG - Asiamet Res Ltd - Updated BKM FS Delivers Excellent Economics

Asiamet ResourcesAnnouncement

10/05/2023 10:30

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RNS Number : 9518Y  Asiamet Resources Limited  10 May 2023

10 May 2023

 

Updated BKM Feasibility Study Delivers Excellent Economic Outcomes

 

Asiamet Resources Limited (Asiamet or the Company) is pleased to announce the
results of the updated Feasibility Study (FS) for its 100% owned BKM Project
located in Central Kalimantan, Indonesia.

In line with significant changes in the macro-environment for new projects, a
very comprehensive update to the previously announced 2019 FS for the BKM
copper deposit has now been completed. The updated 2023 study is based on open
pit mining, and heap leaching of crushed ore followed by solvent extraction
and electrowinning ('SX-EW') to produce LME Grade-A copper cathode (the
'Project') for sale into local and export markets.

Completion of the updated study enables the Company to accelerate its
engagement with key financial institutions, commodity traders and equipment
suppliers for a project finance package to develop the BKM copper mine. The
proposed development timeline for the BKM Copper Project is well timed to take
advantage of the looming copper supply constraints predicted by leading
industry analysts. Development of this initial mine and associated
infrastructure is expected to unlock significant potential for further mine
developments based on deposits already identified within the KSK Contract of
Work.

A summary of the highlights of the Feasibility Study are detailed below and
the Executive Summary of the Feasibility Study is available on the Company's
website at www.asiametresouces.com (http://www.asiametresouces.com)

Highlights - 2023 BKM FS Update:

·        Initial 9.2 year mine life producing up to 20ktpa of copper
cathode per annum

·        Life of Mine ('LOM') Revenue of $1.4 billion and EBITDA of
$655.3 million

·        Capital cost of $208.7 million (excluding growth and contingency
$26.7 million)

·        Post Tax NPV(8) $162.8 million, IRR 21.0% (post tax, excluding
closure costs)

·        Payback Period 3.4 years

·        C1 cash costs of $1.91/lb and AISC of $2.25/lb

·        Base case uses consensus long term copper price of $3.98/lb

·       Total Measured, Indicated and Inferred Resources unchanged at
69.6Mt @ 0.6% Cu for 451.9kt of contained copper.

·        Updated Ore Reserves of 40.8M tonnes @ 0.7% total Cu (272kt
contained total copper) and 0.5% soluble Cu (198kt contained soluble copper).

·        Additional opportunities identified to further reduce capital
will be explored through the engineering design phase.

·      Strategic starter project - establishes infrastructure springboard
for delivering future phases of development from the Beruang Kanan district
and KSK Contract of Work.

·         (approval to use forest area) permit requirements well
advanced. All aspects of the project maintained in compliance with regulatory
requirements.

The majority of commodities analysts are predicting elevated long term copper
prices primarily driven by the inability of mine supply to meet demand as the
build out of renewable energy infrastructure and transport systems accelerates
to meet the 2050 net zero emissions targets committed to by many of the
advanced economies. Development of the BKM copper project is well timed to
capture this opportunity.

Table 1 compares 2023 BKM FS key economic metrics using a US$3.98/lb long term
copper price, the year to date (1 January 2023 to 28 April 2023) average of
$4.06/lb, and a recent Goldman Sachs long term copper price forecast of
$10,000/t ($4.54/lb).

Table 1 BKM Copper Project Sensitivity to Copper Price

 Copper Price                      US$/lb  3.98     4.06     4.54
 Revenues                          US$M    1,396.6  1,415.0  1,580.5
 EBITDA                            US$M    655.3    673.2    833.7
 NPAT                              US$M    378.6    396.2    552.5
 NPV(8) (post-tax, excl. closure)  US$M    162.8    171.2    260.9
 IRR (post-tax, excl. closure)     %       21.0     21.3     27.3
 Payback Period                    Yrs     3.4      3.4      2.8

1.     Average YTD copper price 1 January 2023 to 28 April 2023

2.     Goldman Sachs Copper Top Projects 2022, A Deficit on the Horizon

Next Steps

The release of this 2023 Feasibility Study is a significant de-risking
milestone for the Company. Along with the indicative timeline (as per
appendix) the following key milestones are expected to be completed leading
into the first phase construction:

·    Completion and compilation of all Chapters of the 2023 BKM Project FS
Update.

·    Formally appoint lead bank for the project financing.

·    Lead bank-appointed Independent Technical Expert ('ITE') will complete
a detailed review of the 2023 FS documentation.  Likely to be the same ITE
that reviewed the 2019 FS on behalf of the Company prior to commencing the
update studies.

·    Close out outstanding work on capital and operating costs savings
opportunities as outlined in the Project Opportunities section (as detailed in
the Appendix).

·    Commence engineering design works.

·    Commence formal project financing including engaging parties in
relation to product offtake finance, equipment finance, and export credit
finance.

·    Commence early works at site.

 

Darryn McClelland, Asiamet's Chief Executive Officer commented:

I am pleased to be able to release the details of the 2023 BKM Copper Project
FS update today, delivering what is a significant milestone for the company.
The time has come to deliver BKM to the market, with a project that not only
has strong operating and financial fundamentals on current long-term copper
pricing, but offers significant upside considering forecast supply/demand
imbalance in the copper market looking 2-3 years into the future. The work
completed during the BKM copper project Feasibility Study (BKM FS) update has
given all those involved greater confidence in the execution of this important
project with risk areas investigated, understood, and accounted for in the
current project design. Delivering a smaller footprint project with higher
grade has delivered a robust technical and financial outcome, reduced the
disturbance area, and contributed to a lower overall level of environmental
impact for the development.

Formally releasing the outcome of the FS update is a trigger to progress
several activities related to project finance. The Company can now accelerate
discussions with banks on debt financing and commence the engagement with a
bank-appointed ITE as soon as practicable. In parallel with this the Company
will engage with various groups on opportunities for delivering the
significant equity funding component of the project financing including those
interested in securing the Grade-A copper cathode BKM will produce. The
Company is looking forward to discussing opportunities for co-operation with
parties who see the value of advancing BKM to production and unlocking the
much bigger opportunity to develop multiple mines within the broader Beruang
Kanan mineral district and greater KSK Contract of Work.

To reiterate, we are very pleased to be able to share the positive outcomes of
the BKM FS update, however, this is just one step on the exciting journey
towards becoming Asia's newest copper mine. Asiamet greatly appreciates the
strong support received from all its stakeholders to date. We are now focused
on delivering the project in a safe, environmentally conscious manner, and
effectively engaging with our local communities to ensure the benefits of
development are realised.  I would like to thank all who have contributed to
the BKM FS Update and look forward to working with them as we take the project
into the next phase of development.

 

Investor Call

 

A management presentation to discuss the results of the updated Feasibility
Study on the Investor Meet Company platform will take place at 11am-12pm
tomorrow (Thursday 11 May 2023). To register for the presentation, investors
can sign up to Investor Meet Company and add to meet ASIAMET RESOURCES
LIMITED via:
https://www.investormeetcompany.com/asiamet-resources-limited/register-investor
(https://www.investormeetcompany.com/asiamet-resources-limited/register-investor)

Investors who already follow ASIAMET RESOURCES LIMITED on the Investor Meet
Company platform will automatically be invited.

 

Qualified Person and Competent Person's Statement

The Ore Reserves referred to in this release have been completed by Australian
Mine Design and Development Pty Ltd ("AMDAD") and are reported in accordance
with the requirements of the JORC Code (2012) (see RNS dated 10 May 2023).

The information in this release and the report to which this statement is
attached that relates to the estimation of Ore Reserves is based on
information compiled by Mr John Wyche, a full-time employee of AMDAD, and who
has acted as the Competent Person on the Ore Reserve Estimation of the BKM
Project.  Mr Wyche is a Member of The Australasian Institute of Mining and
Metallurgy. He has 35 years of relevant experience in operations and
consulting for open pit metalliferous mines, being sufficient experience that
is relevant to the style of mineralisation and type of deposit under
consideration and to the activity being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the 'Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves'.  Mr Wyche
consents to the inclusion in the report and this release of the matters based
on his information in the form and context in which it appears.  Mr Wyche
confirms that he is not aware of any new information or data that materially
affects the information included in the relevant market announcements, and
that the form and context in which the information has been presented has not
been materially modified.

Data disclosed in this press release has been reviewed and verified by Mr John
Wyche, FAusIMM (Fellow of the Australian Institute of Mining and Metallurgy)
acting as a qualified appointed adviser to Asiamet.  Mr Wyche is a Competent
Person within the meaning of the JORC Code 2012 and a Qualified Person for the
purposes of the AIM Rules for Companies.

 

ON BEHALF OF THE BOARD OF DIRECTORS

Darryn McClelland, Chief Executive Officer

For further information, please contact:
-Ends-

Darryn McClelland
CEO, Asiamet Resources Limited

Email: darryn.mcclelland (mailto:darryn.mcclelland@asiametresources.com) @
(mailto:darryn.mcclelland@asiametresources.com) asiametresources
(mailto:darryn.mcclelland@asiametresources.com) .com
(mailto:darryn.mcclelland@asiametresources.com)

Tony Manini
Executive Chairman, Asiamet Resources Limited

Email: tony.manini@ (mailto:tony.manini@asiametresources.com) asiametresources
(mailto:tony.manini@asiametresources.com) .com
(mailto:tony.manini@asiametresources.com)

FlowComms Limited

Sasha Sethi

Telephone: +44 (0) 7891 677 441

Email: Sasha@flowcomms.com (mailto:Sasha@flowcomms.com)

Asiamet Resources Nominated Adviser
RFC Ambrian Limited

Andrew Thomson / Stephen Allen

Telephone: +61 8 9480 2500

Email: Andrew.Thomson@rfcambrian.com (mailto:Andrew.Thomson@rfcambrian.com) /
Stephen.Allen@rfcambrian.com (mailto:Oliver.Morse@rfcambrian.com)

Optiva Securities Limited
Christian Dennis

Telephone: +44 20 3137 1903

Email: Christian.Dennis@optivasecurities.com
(mailto:Christian.Dennis@optivasecurities.com)

 

This news release contains forward-looking statements that are based on the
Company's current expectations and estimates. Forward-looking statements are
frequently characterised by words such as "plan", "expect", "project",
"intend", "believe", "anticipate", "estimate", "suggest", "indicate" and other
similar words or statements that certain events or conditions "may" or "will"
occur. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause actual events or results to
differ materially from estimated or anticipated events or results implied or
expressed in such forward-looking statements.   Such factors include, among
others: the actual results of current exploration activities; conclusions of
economic evaluations; changes in project parameters as plans continue to be
refined; possible variations in ore grade or recovery rates; accidents, labour
disputes and other risks of the mining industry; delays in obtaining
governmental approvals or financing; and fluctuations in metal prices.  There
may be other factors that cause actions, events or results not to be as
anticipated, estimated or intended.  Any forward-looking statement speaks
only as of the date on which it is made and, except as may be required by
applicable securities laws, the Company disclaims any intent or obligation to
update any forward-looking statement, whether as a result of new information,
future events or results or otherwise. Forward-looking statements are not
guarantees of future performance and accordingly undue reliance should not be
put on such statements due to the inherent uncertainty therein.

 

This announcement contains inside information as stipulated under the Market
Abuse Regulations (EU) no. 596/2014 ("MAR").

APPENDIX - BKM PROJECT FEASIBILITY STUDY DETAILS

The BKM Feasibility Study Life of Mine key metrics are included in Table 2
below.  The following economic assumptions were utilised:

·        Long term copper price of $3.98/lb LME (London Metal Exchange);

·        Discount rate 8% (after tax, Real);

·        Indonesian corporate income tax ('CIT') rate of 22% 1 ; and

·        Indonesian Government Royalty of 2% (of revenue).

Note : All references to ($) dollars in the tables below are US Dollars.
 Tables with decimals may not add due to rounding.

Table 2: Summary LOM BKM Feasibility Study Metrics

 Production                  Ore mined                                  Mt         38.4
                             Waste mined                                Mt         52.5
                             Strip ratio                                Waste:Ore  1.37:1
                             Average soluble copper grade               %          0.51
                             Soluble copper recovery (from Heap Leach)  %          78.6
                             Copper cathode produced                    Kt         156.3
 Capital                     Initial project capital (ex. contingency)  $M         208.7
                             Contingency                                $M         26.7
                             Sustaining capital                         $M         35.4
 Closure and Rehabilitation  Closure costs                              $M         45.7
 Economic                    Copper price                               $/lb       3.98
 Assumptions                 Discount factor                            % (real)   8.00
 Financials                  Revenue                                    $M         1,396.6
                             Operating costs (ex. royalties)            $M         657.3
                             Other indirect costs (inc. royalties)      $M         38.3
                             NPV(8) post-tax                            $M (real)  146.9
                             NPV(8) post-tax, pre-closure               $M (real)  162.8
                             IRR post-tax                               % (real)   20.4
                             IRR post-tax, pre-closure                  % (real)   21.0
                             Payback period                             Years      3.4
                             Initial mine life                          Years      9.2
                             EBITDA                                     $M         655.3
                             NPAT                                       $M         378.6
                             C1 costs                                   $/lb       1.91
                             AISC                                       $/lb       2.25

 

 

The estimated initial construction capital costs are in summarised in Table 3
below.

Table 3: Capital Costs

 Mining Facilities                               5.4
 Crushing, Agglomeration and Stacking            19.0
 Heap Leach                                      31.7
 SX-EW (incl. Neutralisation)                    27.1
 Process Area Services and Utilities             17.6
 On Site Infrastructure and Bulk Earthworks      30.9
 Off Site Infrastructure                         14.2
 Sub-Total Direct Costs                          145.9
 Construction Indirect Costs                     27.7
 Spares and First Fills                          6.9
 EPCM & Owners Costs                             28.1
 Total Capital Estimate (excluding contingency)  208.7
 Contingency                                     26.7
 Total Capital Estimate                          235.4

The capital cost estimate in Table 3 relates to the project construction costs
and excludes sustaining capital and mine closure costs. These costs have been
included as part of the financial model and can be referred to in Table 4.

The total Life of Mine (LOM) operating costs for the Project as adopted in the
financial model are shown in Table 4.

Table 4 LOM Operating Costs

 Mining                                     305.9  0.89
 Processing                                 234.3  0.68
 Transport, Logistics and Support Services  117.1  0.34
 LOM C1 Cash Cost                           657.3  1.91
 Other Indirect (incl. Royalties)           38.3   0.11
 Sustaining Capex                           35.4   0.10
 Rehabilitation and Closure                 45.7   0.13
 AISC                                       776.8  2.25

Approximately 70% of the total operating costs are incurred in the mining and
processing activities. A mine operations life of 9.2 years and heap leach
operations life of 10 years leads to no major replacement or rebuilds being
necessary on major equipment. Sustaining capex needs for the project are
dominated by required increases in ARD water management capacity in the mine
and processing. The other primary requirement for sustaining capital relates
to the planned installation of inter-lift liners within the heap leach
facility.

The majority of the mining works, namely site preparation, blast hole drilling
and load and haul requirements will be performed by a primary mining
contractor. Some smaller pieces of the mining scope will be completed by
support contractors. The mining LOM cost is forecast to be $3.37 per tonne of
material mined inclusive of mine geology (including dedicated grade control)
and ancillary mining activities.

The LOM processing costs equate to $6.10 per tonne ore stacked, with the key
component being electricity consumption.  Power is proposed to be sourced
from the development of a new, dedicated biomass power station located within
135km of the site with a dedicated transmission line connecting the power
station and BKM. The biomass power station will be built and operated by a
third-party supplier. The current cost model adopted for the project delivers
an average unit cost of 11.4c per kilowatt hour over the life of the heap
leach facility.

Support Service costs include transport and logistics (contracted), site camp
services (contracted), Supply Chain Management, Information Technology,
Environmental, Sustainability and Governance and overhead administration
activities. The LOM unit cost of these activities in the financial model is
$3.05 per tonne ore processed or $0.34 per pound copper produced.

The charts below show the Life of Mine (LOM) production (Figure 1) and cash
flows after tax (Figure 3). Ore mined is slightly lower in years 1-3 as higher
grades of soluble copper are mined first (Figure 2), delivering strong
early-stage cash flows to the project. The LOM strip ratio is low at 1.37:1,
adding to the high margin and highly profitable project.

Figure 1 LOM Mining Production

Figure 2 LOM Ore Stacked and Soluble Copper Grade

pper Cathode Production

 

Figure 4 LOM Project Cash Flows - US$M(1)

1.     Yr1 Figure 4 represents first year of expenditure on the project, Yr4
represents Yr1 of production as shown in the production figures.

Strong free cash flow generation is expected from the project with the LOM net
operating cash flows of $695.1 million.  This strong cash flow generation
underpinned by a long-term copper price of $3.98/lb results in a 3.4 year
payback period for the Project.

As part of the Feasibility Study, a sensitivity analysis was conducted to
determine the effect of key variables on the base case NPV(8) of $162.8
million (post tax and excluding closure costs).  The results of this analysis
are shown in Figure 5 and Table 5.

 

Figure 5  Project Sensitivities - US$M Base NPV(8) (Post-tax, Real)

 

Table 5 provides a sensitivity of +/- 2% for the Company's 8% weighted average
cost of capital (WACC).

Table 5 Weighted Average Cost of Capital Sensitivity

 NPV Post-tax                189.8  146.9  111.1
 NPV Post-tax (pre-closure)  210.7  162.8  123.3

 

Project Opportunities 2 

Several opportunities to further de-risk the project will be addressed prior
to, and during, the detailed engineering design phase. Promising outcomes from
this work will be used as the basis for detailed engineering design.  These
include:

·    Relocation of the Heap Leach Facility - an expected 25% to 30%
reduction in earthworks volume associated with Heap Leach Pad construction. A
more straightforward location to build with an expected reduction in costs,
material movement and an overall reduction in construction time.

·    Open Pit Mine Design and Schedule - iterative design review of the
open pit slopes based on outcomes of the geotechnical and hydrogeological
study completed as part of FS update. Opportunity to review pit slope
parameters in certain areas of the open pit that could lead to reduced waste
mining.

·    Engineering services review - review options to execute additional
engineering services in Indonesia and China through partnerships established
during development of the FS update.  This is part of the Company's overall
lower-cost sourcing initiative.

·    Contracting Strategy - full review of contracting strategy for
execution of the project and the transition from construction to operations.

·      Acid Mine Drainage Water Treatment - review wider range of options
for treatment of mine impacted water with a specific focus on the opportunity
to increase recovery of copper.

 1  Tax holiday (subject to successful application of regulation, PMK-130
(130/PMK.010/2020)) of a 100% Corporate Income Tax reduction for 7 years
followed by a further 2 years at a 50% reduction.

 2  Asiamet cautions the Project Opportunities described above are preliminary
in nature and have only been subjected to high-level preliminary assessment.
It is uncertain if further evaluation and or exploration work will result in
the implementation of any of the potential opportunities or whether any
additional economic benefit will be realised.

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