16 April 2015
AMUR MINERALS CORPORATION
(AIM: AMC)
Owner Operated Smelter EBITDA Analysis
Capital Cost Assessment Underway
Amur Minerals Corporation ("Amur" or the "Company"), the exploration and development company focused on base metal projects located in the Far East of Russia, reports it is has completed the first of two internal assessments for constructing an Owner Operated Smelter ("OOS") in lieu of contract smelting of the Kun-Manie nickel copper concentrate by a Toll Smelter ("TS"). Based on a 15 year mine life producing six million tonnes of nickel copper sulphide ore per year, the composition of the sulphide concentrate and its variability over the proposed mine life has been defined. Definition of the composition of the concentrate has allowed the Company to determine specific operating costs related to an OOS option. Based on the projected costs, the EBITDA ("Earnings Before Interest, Tax, Depreciation and Amortisation") per ore tonne has been determined for four alternatives available for the treatment of the concentrate.
In addition to the 2007 base case TS option, the Company has determined that three potential product streams can be derived from an OOS option. The three products consist of the production of a Low Grade Matte ("LGM"), a High Grade Matte ("HGM") or Final Metal Cathodes / Precipitate ("Cathode"). The EBITDA for the OSS options are substantially higher than that of the TS option. The TS life of mine EBITDA is projected to be US$ 1.17 billion whilst the highest OSS (Cathode) life of mine EBITDA is projected to be US$ 3.48 billion. Having defined the associated operating costs for each of the three OSS product options, the final step has been initiated to identify which of the three final product streams provides the best indicated Net Present Value for Kun-Manie. A nickel price of US$ 7.50 per pound (US$ 16,530 per tonne) was used in the assessment. Highlights follow:
· EBITDA per ore tonne for Toll Smelting is projected to be US$ 12.96 per ore tonne.
· The Owner Operated Low Grade Matte EBITDA estimated value is US$ 29.38 per ore tonne.
· The Owner Operated High Grade Matte EBITDA projected value is US$ 31.40 per ore tonne.
· The Owner Operated Cathode / Precipitate Product EBITDA value per ore tonne is estimated to be approximately US$ 38.70.
· The capital cost to generate the three product stream options for the OSS alternative varies substantially. The Low Grade Matte option would be the lowest capital cost whilst that of Cathode production is substantially higher. The capital cost estimates are being finalised to establish the preferred product option for the Kun-Manie operation.
The evaluation of the OOS is the final step in establishing the base case design for Kun-Manie and allowing for release of an economic assessment of the project. The previous design basis from 2007 was to smelt the concentrate using a toll smelting option wherein numerous penalties and payments adversely impact the EBITDA. The financially burdensome aspect of a TS option is attributable to the lost revenue as toll smelting does not pay for all recovered metals. For Kun-Manie, the TS revenue penalties include losses approaching 30% of the recovered nickel (123,500 life of mine tonnes), 50% of the recovered copper (62,500 life of mine tonnes) and 100% of any other metals including cobalt (6,500 life of mine tonnes), platinum (253,000 life of mine ounces) and palladium (288,000 life of mine ounces). An additional substantial cost to the Company is the high cost of rail transport and magnesium oxide penalties to the toll smelter. The combined cost for these two centres exceeds US$ 1.4 billion over the projected 15 year mine life.
The determination of the EBITDA is the first phase of the evaluation of the OOS option. The composition of the concentrate and its variability over the proposed mine life has been established. This included determination of the economic mineral content as well as that of the slag (waste) forming elements both of which impact the operating costs and the final metal content of the saleable products. Three product streams available to an AMC OOS and are summarized below:
· Low Grade Matte: Using an Electric Arc Furnace ("EAF") the concentrate would be smelted generating a LGM that can be sold onward for further smelting and refining. In this configuration, the matte would contain approximately 25% combined nickel, copper and cobalt.
· High Grade Matte: To generate a HGM, an oxygen plant, a converting furnace and an off-gas converter would be added to the EAF. The resultant product derived from the LGM would be a higher quality matte. This HGM would contain approximately 70% combined nickel, copper and cobalt. The product would be sold to a refinery for further processing.
· Cathode / Precipitate Metal: Further processing of the HGM would include the addition of a refinery which would include a leaching, solvent extraction - electrowinning and a precipitation plant. The recovered metal would include nickel cathodes, copper cathodes, cobalt precipitate, platinum and palladium metal. The products could be sold onto various end users.
In calculation of the operating costs associated with the OOS option, the OSS would be located on the Baikal Amur Rail Line ("BAM") near Verknezeisk or Gorny. To smelt the concentrate, it will be necessary to blend the material with coal and limestone. By locating the smelter on the BAM, it will be possible to supply the necessary coal and limestone required to smelt Kun-Manie concentrate while avoiding the transport of smelter consumables to site. The location will also provide the potential to toll smelt sulphide concentrates sourced from other mines and operations provided there is sufficient capacity. Both the coal and limestone required to undertake the smelting of the concentrate are available, and most could be sourced from Amur Oblast.
As the metal content improves with each step in the smelting process, the capital cost will also increase. The composition of the concentrate impacts the capital expenditure. The capital costs related to each product stream are now being examined to determine the Net Present Value ("NPV") for each option allowing for the final selection of the OSS configuration.
Robin Young, CEO of Amur Minerals Corporation, commented:
"We are pleased to inform the shareholders that the construction of an Owner Operated Smelting facility located along the Baikal Amur Rail system could substantially increase the economic potential by a near tripling of the EBITDA of the Kun-Manie nickel sulphide project. Recently released information on the resources, reserves and potential mine production from both open pit and underground operations indicates that Kun-Manie has the potential to support a long term, large scale operation. This increased scale indicates that the construction of a captive smelter is likely to be highly beneficial to Amur. A near tripling of the EBITDA from contract smelting is highly encouraging. Our last step in the assessment is the determination of the capital cost for the smelting option and the three products that could be generated. This will allow for the definition of the base design of Kun-Manie. We look forward to releasing the final results of the smelter analysis in due course."
Enquiries:
Company Amur Minerals Corp. |
Nomad and Broker S.P. Angel Corporate Finance LLP |
Public Relations Yellow Jersey |
Robin Young CEO |
Ewan Leggat Katy Birkin |
Dominic Barretto Kelsey Traynor |
+44 (0) 7981 126 818 |
+44 (0) 20 3470 0470 |
+44 (0) 77 6853 7739 |
Notes to Editors
The information contained in this announcement has been reviewed and approved by the CEO of Amur, Mr. Robin Young. Mr. Young is a Geological Engineer (cum laude) and is a Qualified Professional Geologist, as defined by the Toronto and Vancouver Stock Exchanges. An employee of Amur for 10 years, previously Mr. Young was employed as an independent consultant with Fluor Engineers, Fluor Australia and Western Services Engineering, Inc. during which time his responsibilities included the independent compilation of resources and reserves in accordance with JORC standards. In addition, he was the lead engineer and participant of numerous studies and projects requiring the compilation of independent Bankable Studies utilised to finance small to large scale projects located worldwide. Mr. Young is responsible for the content of this RNS.
For further information, see the Company website at www.amurminerals.com.
