The Bargain Basement Zone series was perhaps fortunate in starting during March as we went into lockdown and just days before the lockdown and the stock market bottomed out. At the time it did appear that a select bunch of companies in the small caps area were painfully mispriced, and as it turned out there was a decent rebound in the share price, particularly in the resources space.
Indeed, given the way that Russia focused Amur Minerals is some 30% off its March floor it could be said that there has been a recovery of sorts. But it could very well be that the new fundamentals of the stock have yet to be played out in share price terms as much as the company merits. Of course, with resources companies under £20m there are not than many levers to pull, whether financially or strategically, and hence it can be the strength of the management which ultimately decides their fate and that of the shareholders.
New Board Member
This could very well be the case for Amur Minerals in coming months as we witness the aftermath of recent new board member Adam Habib as Senior Advisor. While most of us are familiar with the cliché of a “big fish in a small pond,” in this case we have a whale splashing around in what may now be a paddling pool, but it is one which batting to back Amur Mineral’s cause. Adam Habib’s investment background started with Credit Suisse and culminated in ICBC Standard Bank – the largest sponsor of global commodities transactions in the world. In particular, both of these companies are specialists in Russian mining.
Habib’s management roles at these two entities and others does of course look good on the Amur Minerals headed note paper. But what is most relevant for the position the company finds itself in currently is Habib’s Rolodex – his network and how this can be utilized most efficiently. Clearly, the goal at Amur Minerals is common to many mining companies, to get to production as quickly and cost effectively as possible. In particular, Habib has experience of bring in large Tier 1 off-takers such as Glencore to projects, to enable assets to be liberated.
Stock Market Perception
This “been there, done that” aspect to his arrival has already changed perceptions as far as both the stock market’s perception of Amur, as well as the mining industry. Previously, it appeared the company had a mountain to climb in terms of its flagship Kun-Manie Nickel Copper Project. Now with the arrival of Adam Habib, and given the way that the asset is of global and strategic significance, all options appear open – even including a sale down the line. Nevertheless, Habib has made it clear that the priority for Amur Minerals is to transition from being about exploration to production. This process will no doubt be made that much easier by the way that Adam Habib’s peers will have seen how he has put his name to Kun-Manie, and is set to develop it to the standard global players demand.
To this end this summer we are witnessing potential off-takers provide information to Amur as to how much they could offer for the payable Nickel and Copper at Kun-Manie. By December we should receive clarity as to the NPV and potential profitability of the mine in accordance with Russian license requirements. Binding off-take agreements should be forthcoming from this process, providing cash for a Banking Feasibility Study.
The $64,000 question is of course who the off-takers would be – and this relates to the “bargain basement” status of Amur Minerals currently. Given Adam Habib’s track record, and with potentially 1.5m tonnes of Nickel and several hundred thousand tonnes of Copper (as well as significant other precious metals quantities), any deal is likely to be struck with a significant mining giant.
Acquiring Producing Assets
An added positive kicker for observers of Amur Minerals is that while Kun-Manie is gestating, the company will be looking to acquire producing assets in order to tide it over in terms of developing Kun-Manie to its desired binding off-take destination. In the meantime the door will be open to any player that wishes to go for Amur’s main asset – lock, stock and barrel. In a sector where the post Covid-19 period has witnessed a resurgence in M&A this aspect should not be ignored.
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