A feasibility study on Asiamet Resources’ (ARS:AIM) BKM copper mine is a bit of a flop with project economics a lot worse compared to a previous study three years ago.
Its shares fell 11.5% to 4.73p after the study on the Indonesian project only showed a 19.5% internal rate of return – used to measure the potential profitability of an investment – at a $3.30 per pound copper price, 20% higher than the current price. A previous study in 2016 estimated the IRR to be 38.7%.
Shore Capital analyst Yuen Low said the results were ‘hugely disappointing’ and left him ‘entirely unimpressed’.
Costs have gone up, recovery rates have fallen, and production rates have been downgraded versus the preliminary economic assessment (PEA) in 2016.
Berenberg analyst Michael Stoner said: ‘We always anticipated higher costs and capital expenditure relative to the PEA. The softening of the economics of the project is greater than expected.’
Low said the net present value of the mine using the current market price of copper would be zero at an 8% discount rate, or less at a discount rate of 10%.
The latest study showed an initial nine-year mine life producing up to 25,000 tonnes of copper cathode a year. The start-up costs of the mine are pegged at $223m including a $31m contingency.
In addition, the study showed scope to add a further $35m in value to the project as well as extend the mine life through other targets close to the current deposit.
Low described the mine life as ‘short’ and added that a ‘mere 10% reduction’ in the assumed copper price would halve the value of the mine.
He said the results were ‘particularly disappointing’ given the feasibility study had been repeatedly pushed back so the firm could do more drilling to try and find more copper and make the figures stack up better.
Asiamet chief executive Peter Bird said the company was ‘very pleased’ with the results as they deliver a ‘technically and financially robust project’.