AMC has an “Answer Team” team comprised of staff and public relations affiliates (Yellow Jersey PR) to respond to questions submitted to our web address of firstname.lastname@example.org. Our team’s intent is to provide shareholders with accurate and factual information. Price sensitive questions cannot be addressed in this forum in accordance with LSE regulatory constraints. Such information will be provided in an RNS. We look forward to your questions.
“How much nickel and cobalt is in an Electric Vehicle (EV) battery? Is it significant to our project?”
Answer Team: The composition of EV batteries varies by manufacturer. Let’s limit this response to the Tesla Model S, which generally comes equipped with a 70 kWh battery (providing about three miles per kWh). This battery weighs about 450 kilograms or 1,000 pounds, nearly 25% of the total vehicle weight.
An EV battery for the Tesla Model S is comprised of four components: an anode, a cathode, the electrolyte and the rest (the container basically). The cathode represents about 50 to 60% of the total weight of the battery and is composed of nickel, cobalt and aluminum. In this version of the battery, the cathode consists of about 80% nickel, 15% cobalt and 5% aluminum. Therefore, the nickel content of this battery is in the order of 440 pounds or 200 kilograms per battery.
At Kun-Manie, we have about 738,000 tonnes of nickel in our resource. If we could mine every tonne of the nickel at a metallurgical recovery of 80%, the total nickel would allow for the manufacture of about 3.0 million batteries. This may sound like a large number of batteries but Chinese EV manufacturers are projecting 4.5 million new unit purchases per year by 2020. With the potential of this sole market being so large, we obviously have been and are watching this space very closely.
As for cobalt, there is about 15,000 tonnes in the resource inventory at Kun-Manie. At a metallurgical recovery of 60%, this represents 9,120 available tonnes of available cobalt. The Tesla battery contains an estimated 80 kilograms of cobalt which would allow for the manufacture of just over 110,000 batteries.
The EV market alone represents a substantial opportunity to Amur Minerals Corporation with new EV units predicted to grow at about 30% year on year. As you can see, our Kun-Manie deposit alone could not meet the demand of a single year’s production of EV batteries in 2020 for China alone. We believe that the nickel market will continue to demonstrate firm price support on the back of this EV industry alone, whilst long term demand for all other nickel products such as stainless steel will also continue to grow.
“The following link, http://www.r28.fss.ru/files/139258/20_06_2017.xls, states funding has been granted to ZAO Kun-Manie. Why has this not been announced?”
Answer Team: Because it is not funding. It is a registry for companies that have approved health and safety insurance. This insurance is obligatory and is paid into a fund (pool) every field season. In case of the need for health and safety expenditures, this fund sources monies for costs such as emergency health problems, evacuation requirements, etc.
“When do the new Memorandum and Articles take effect?”
Answer Team: Upon the close of the General Meeting held 28 July 2017, our British Virgin Island’s (BVI) counsel (Maples and Calder) were informed of the approval by shareholders of the newly proposed Memorandum and Articles (M&A). Our counsel relayed instructions to the BVI Company Registry – Registrar of Corporate Affairs which has stamped the M&A which then take immediate effect. The process was promptly completed and the M&A is therefore in effect.
“Overview of the General Meeting, held on 28 July 2017”
Answer Team: The Board of Directors and Executive Management extend their appreciation to shareholders that attended and participated in the Meeting, the Question and Answer (Q&A) session and the informal open forum discussion with our Board of Directors. The Board of Directors were pleased to have been able to hold direct one to one discussions with our shareholders and looks forward to the Company hosting similar forums in the future. Thank you.
“The RNS, dated 17 July 2017, revealed that a cost of $1.78 per delivered pound of nickel was a good result for the Company. Is this a C1 cost (Net Direct Cash Cost)?”
Answer Team: Within the mining industry, there are three methods used to report costs. The definitions for each of the methods below are derived by Brook Hunt, a Wood Mackenzie company.
- Net Direct Cash Cost (C1) is the cash cost for all site activities through to recoverable metal delivered to the market, less net by-product credits. These costs include mining, ore haulage / transport, processing, site administration, royalties and general expenses. In addition, concentrate freight and related smelting fees and penalties are to be included if the product is toll smelted.
- Production Cost (C2) includes C1 costs and consideration of depreciation, depletion and amortization.
- Fully Allocated Cost (C3) which is the C2 cost plus indirect costs and net interest charges.
In the case of Kun-Manie, the reported $1.78 cost per pound of nickel delivered in concentrate to our planned rail siding does not include the costs related to the two options available to the Company for sale of its nickel and other metals. The operating costs for a toll smelt of the concentrate must be added to provide a final C1 cost for a toll smelting option.
The second alternative would be the costs related to our operation of an owner-operated furnace, to treat the concentrate providing for the generation of a low grade matte. These two optional cost components are under evaluation for inclusion in the update to the Prefeasibility Study (PFS).
“How do I ensure I can attend the General Meeting?”
Answer Team: You need to be a shareholder to attend the 3:00 pm General Meeting. Unverified or non-shareholders shall not be admitted to the Meeting, however, all interested individuals will be admitted to the Q and A forum to be held upon adjournment of the Meeting. The Meeting will be held at the offices of Fieldfisher LLP, Riverbank House, 2 Swan Lane, London EC4R 3TT.
As with last year’s Annual General Meeting of 9 September 2017, representatives of Capita IRG Trustees Limited, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom will be present to verify each shareholder’s status. This requires a shareholder provides the correct and necessary documentation allowing for Capita to verify their holdings with the Share Registry.
It is the responsibility of the shareholder to obtain the necessary, proper and acceptable documentation and that it is in their possession to gain admittance to participate in the Meeting. To assist our shareholders in obtaining attendance to the Meeting, the information below is provided. In addition, we request that all shareholders, whether attending or not, fully familiarize themselves with all information related to the Meeting. Links to the necessary documentation are provided at the end of this FAQ.
For those that hold shares in certificated format and have received a form of proxy (available via a link below), you are entitled to attend and vote at the meeting and the number of votes which may be cast thereat will be determined by reference to the Register of Members of the Company at close of business (UK Time) on 26 July 2017. Changes to entries on the Register of Members after that time shall be disregarded in determining the rights of any person to attend and vote at the meeting.
For those that hold shares in CREST through the Depository Interest facility and would like to attend the Meeting, you will need to advise your CREST Custodian (Depositary Interest Holder) to provide a Letter of Representation for you by contacting the Depository at Capita IRG Trustees Limited, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom or by email: http://email@example.com by no later than 3.00p.m. (BST) on 25 July 2017. Please do not delay as the response time to provide the necessary documentation can vary significantly.
We reiterate, it is important that all Company-provided information is fully reviewed by the shareholder to ensure participation in voting the held shares prior to or at the Meeting. Again, it is the responsibility of the shareholder to obtain admittance based on valid information if you should wish to attend. For convenience, we provide the following links related to the Meeting and we request you fully review this important information.
“At Kubuk, why are the new drill holes at the left side of the drawing in the PDF presentation look like these should be dip limit holes and not new resource holes? Are we really expanding the resource?”
Answer Team: The five holes consisting of C453 and C463 – C466 are expanding the known limits of the mineralisation along a 500 metre east-west length in this area. Previous drilling had not identified the limits of the potentially economic mineral along eastern (right part) 300 metre area where resource modeling was truncated because of a lack of drill results. Therefore, what looks like a dip limit determination is actually expansion.
As for the western (left) part, two holes C463 and C464 were drilled deeper and have intersected mineralisation of economic potential. The three holes you see on the drawing located below C463 and C464 intersect up dip thin and limited sub-economic mineral therefore no resource was projected to exist in this area. Additional drilling to the north of these holes is necessary and may also contribute to additional mineralised tonnages.
“The Medea release looks good for the Company, congratulations.”
Answer Team: The results of the Medea Capital Partners Ltd survey are certainly encouraging. As a junior company, one of the major concerns is being able to fund a large scale project such as Kun-Manie. The results indicate that Amur’s wholly owned project is of interest to financial institutions capable of providing project construction funding. This is a solid step forward given our status as a Junior and the Company’s rights to one of the world’s largest new mining projects to come on stream in the future. Thank you.
“The new 1.0% nickel resource at Ikenskoe is better than all the other deposits, this should be mined first!”
Answer Team: We will need more information and analysis before we are able to confirm this but we are optimistic based on the first reported results of 26 June 2017. A substantial amount of work has to be done to confirm whether this area could be our first production area. The first step is infill drilling to confirm the continuity of the mineralisation for both thickness and grade. The drill programme is constantly under review and we are assessing and modifying our original drill plan for this summer’s Ikenskoe / Sobolevsky drill programme.
Also, we cannot officially call this a “resource” according to JORC standards but we believe it could be an Inferred or Indicated resource with successful infill drilling. According to JORC, this is an Exploration Target as we have no independent final Alex Stewart Laboratory analyses or resource model based on the current drill results.
Should this area be proved up by additional drilling and the nickel only high average be confirmed, it could indeed become a priority production target for early stage mining if projected operating profits per tonne support this consideration. The following table presents our 10 February 2017 Mineral Resource Estimate grades by deposit which does indicate the potential of the newly discovered Exploration Target could be an early stage production area.
|Deposit||Average Nickel Only Grade||Average Nickel Equivalent Grade (Ni, Cu, Co, Pt and Pd Included)|
|Maly Kurumkon / Flangovy||0.78%||1.05%|
|Ikenskoe / Sobolevsky||0.69%||0.96%|
It is noted that metallurgical test work is required to confirm the potential operating profits of this new high grade block and its placement within the production schedule.
“Examination of the 20 June 2017 RNS pdf’s shows we are systematically drilling Kubuk but but do not appear to be doing this at Ikenskoy where there is a large gap. Why is this?”
Answer Team: At the beginning of each field season, the road and drill pad construction team comes about the same day we begin drilling. Therefore, we begin our drilling along existing roads and drill sites so drilling can be implemented immediately whilst the road construction teams begin the construction of additional access roads and drill pads.
This year at Kubuk, we began drilling infill holes within the 10 million tonne Inferred resource area which was originally defined by wider spaced holes, hence existing roads were already available to allow for drilling to begin. The dip limit hole area was also available to drilling. This has enabled the road access construction equipment to work to the west of Kubuk toward Ikenskoe / Sobolevsky where step out drilling is presently underway.
For the Ikenskoe / Sobolevsky deposit, we have also been able to start drilling where existing drill roads were available including a limited amount of access to the east and southeast of the 10 February 2017 defined resource area for step out drilling purposes. Equipment is now working on the extension of existing roads and the creation of new roads to allow the Company to complete infill drilling on any newly discovered mineralisation.
Road and drill pad construction is challenging. The step out drilling is located within terrain that is steep and characterised by permafrost. In addition, a great deal of the area where we anticipate the construction of drill roads is comprised of near solid rock requiring ripping with dozers and jackhammering by our excavators.
With the terrain being steep (slopes of 25 to 35 degrees), operations must be carefully staged and planned. Any rock that is excavated during the construction process can tumble and bounce down the slope causing a serious danger to any personnel or equipment working below an operating area. As we have a daily need to refuel, change shifts and return the core from the drill sites, it is possible that rock can be knocked loose from any access road as well. So for safety purposes, we never allow anyone to work below these areas including the access roads. Safety first! Therefore, road construction and drilling must be carefully scheduled and our drilling will therefore not be as systematically implemented as is previous drill seasons.
Lastly, permafrost can also create dangerous conditions. During the day, exposed permafrost will thaw and then refreeze at night creating a highly slippery surface for the steel tracked equipment in the early hours of operation. There is substantially reduced grip and care must be taken. This is especially true of any north facing slopes where drilling is planned.
“Cobalt? There is a massive amount of this metal and it is not being highlighted by Amur. Why not?”
Answer Team: The optimisation of a polymetallic deposit such as Kun-Manie must be based on the commodities that will provide the majority of the profitable cash flow. In the case of Kun-Manie, it is the nickel and copper production that must be optimised as it represents about 85% of the value of the project. Based on metallurgical recoveries derived by Gipronickel Institute, a 5% increase in the nickel price from $4.00 a pound to $4.20 per pound adds the same value (about $270 million) as a cobalt price increase of 73% from $16.90 to $29.20 per pound (used in the 10 February 2017 RNS).
Given the majority of the value is related to nickel and copper, this is our basis for design optimisation. However, we are pleased that by-product metals will be possible contributors to revenue and do monitor the prices of cobalt, platinum and palladium as they represent about 15% of the metal value defined at Kun-Manie. Globally, these by-products represent a significant potential to the value of the project.
“The nickel price does not look very good, how does this affect management’s strategy with advancing Kun-Manie now and not waiting till later when the nickel price has recovered?”
Answer Team: There are two options available to a company of our profile as an exploration and preproduction company. Hold off until the price recovers and resume activities or be ready when the nickel price recovery begins. We opt to be as far along in project evaluation stage or ready for when the nickel price recovery begins.
If we suspend all activities in advancing the project and wait for the price recovery, we would likely have several outstanding questions that would need to be answered which would require time to answer. We could miss a key part of the upside price cycle, maybe as much as the first four years of improved pricing could potentially be lost.
By continuing our activities related to engineering and preproduction, we are not “wasting” the resource as we are not in production. This provides us with an advantage that today’s nickel producers do not have. Many of those still in production need to mine higher grades to remain in survival mode (as much as 50% of the nickel production today is projected to be operating at a loss) or maintain an operating profit. In our opinion, this approach to production provides us with an advantage. With operating companies having to mine higher grade material now, it will not be available for the next up cycle in the nickel market and overall ore grades available to production will be reduced.
We therefore view the current low price in the nickel cycle as a period of opportunity. Study, analyse, optimise is our mantra. This approach will allow us to advance toward a final detailed operational design and plan allowing us to ready the company for a production decision earlier in the earlier nickel price recovery cycle than if we are on hold.
“I would like to see the results of drilling issued as soon as possible. Can something be done to provide us with more timely information? We have already been drilling for three weeks! I would like to see weekly reports.”
Answer Team: The Company has historically presented drill results on a near monthly basis and shall continue to do so. By issuing reports in this manner, it is possible to obtain a better understanding of the impact of the results and to establish a more accurate potential impact to Amur. A more representative picture is provided. Issuing a weekly report would not provide us with an appropriate representation and understanding of the drill results. A weekly report is also unreasonable as there are deep holes planned for this year that will take as long 4 to 5 days to drill, not including move time from a completed hole to the new drill hole site or setup time. We also undertake highly important monthly preventative maintenance at each of our rigs which typically consists of a day of lost drill time.
However, the configuration of this year’s programme provides an opportunity to report results more often. We are drilling two deposits and therefore plan to segregate and report the results specific to each of Ikenskoe / Sobolevsky and Kubuk. This enables us to provide two drill reports per month, one for each of the deposits we are drilling. We also intend to provide a monthly update of the global drill results related to total metres drilled so it will be possible to track our progress toward 20,000 metres and to provide a comparison of our internal laboratory results with those of Alex Stewart Laboratory results.
We are also drilling hydrological holes which are important as we will need to have sufficient potable and plant required water available to operate the project. This will also be reported as a standalone RNS.
We therefore intend to issue a drill update on a near weekly rolling basis with results reported individually from Ikenskoe / Sobolevsky, Kubuk, Hydrology and global progress to date. We shall endeavor to maintain the weekly reporting of results, however, other information and activities could shift the schedule. The first report is planned to be related to the global progress with actual drill results (analytical results) presented in the ensuing reports by individual deposit.
“In Robin Young’s May webcast with IG, he speaks about detailed drilling to get Russian mining permits. What does this mean, does this mean none of the drilling can be used?”
Answer Team: Of course all of our drilling can and will be used. Worldwide, prudent mining companies should always infill drill planned early stage production to ensure a minimum of variance will be encountered during the critical start-up stage of a mine when repayment of loans is very important.
Within Russia, this stage (preproduction drilling in the west) is included as a part of granting a final approved mine plan and production permit, a part of the TEO report required of all mining companies. How it works is best described in an example. Say a limited area has been drilled (100 metre spaced holes) and has a resource estimate containing one million tonnes of ore averaging 0.8%. By infill drilling to a 50 metre spacing, a new estimate is calculated using both the old and new holes is compiled. The two results should be mutually supportive with the new results approximating the original tonnage of one million tonnes and 0.8% grade based on the wider spaced drill grid. This provides a certainty that there will be no production surprises and that a loan is based on solid information. Only limited portions of a deposit need to be tested using this approach.
In addition, the detailed mine plans are also required for the final signoff / completion of an Environmental and Social Impact Assessment (ESIA).
“It has been said in FAQ’s and in various issued RNS announcements that most of the production will be from underground. This is more expensive than open pit mining! Can’t we just mine this massive reserve by open pit only which is simpler?”
Answer Team: Firstly, we have not reported a reserve based on the updated resources in February 2017. We have resources at this time and require the completion of the current operating cost audit by RungePincockMinarco before we can derive the reserve. It is also important to note that a reported resource should be potentially economic given that a set of circumstances has confirmed this. This includes consideration as to where it’s mineable, metallurgical recoveries, operating costs and at various metal prices. Presently, our cutoff grade for reporting resources is 0.4% nickel only.
As you note, Kun-Manie is a large nickel copper project and yes substantial portions are potentially recoverable by open pit mining methods. This does provide a possible mining scenario where only open pit production is an option. However, studies indicate that underground mining could present a higher operating profit per mined tonne of ore than if the same tonne was mined by open pit.
Very simplistically, you can establish an approximate point at which underground mining provides better economic potential than open pit. By example and keeping the math simple, assume the cost to mine an underground tonne of ore is US$ 11.00 and the cost to mine that exact same tonne of ore in the open pit is US$ 1.00. This provides a ratio of about 10 tonnes of waste per open pit ore tonne. As open pit mining progresses deeper, the underground tonne becomes more financially attractive as the total cost per open pit ore tonne increases with increasing depth. When the open pit ore cost plus total open pit waste cost needed to mine the open pit ore tonne equals that of the underground mining cost, this indicates a potential mining method change over point from open pit to underground requires assessment.
There are numerous other factors that must be taken into account to identify the precise optimised change over point, from open pit to underground which include the geometry of the ore zones, topographic variability, thickness of the mineralisation, open pit mine slope angles, in pit road designs, underground access designs, continuity of the mineable mineral, etc.
“The latest RNS cited that we have added a new drill objective which is infill drilling to allow for Amur to get its permits from the Russian government. Could you elaborate on what has to be done?”
Answer Team: Final approvals from the Russian government require our compilation of a Permanent Conditions TEO which is the Russian equivalent of a bankable study which is utilised to acquire all operating permits for constructing and operating a mining operation. This is, and always has been, included in our work programme and is a component of detailed engineering studies. In this case we are speaking of the permits related to mining activities only.
The infill TEO programme tests a selected area. For instance, let’s assume that an area is drilled with holes spaced on a 100 metre grid and it is estimated that it contains an estimated 10 million tonnes at 0.8% nickel. The infill process consists of the drilling holes within the area located between the 100 metre spaced existing holes. Once the infill drill results are available, a new estimate of the mineralisation is compiled using the old and new holes. This new estimate should approximate the old estimate of 10 million tonnes at 0.8% based on the 100 metre spaced holes. The new estimate will not exactly replicate the previous numbers but should be highly similar. This provides confirmatory support that the continuity of the mineralisation with regard to both tonnage and grade are reasonable.
In our case, we are targeting about 5% of the resource tonnage (as estimated by RungePincockMinarco) in each deposit. An advantage that we have is large blocks of mineralisation are located very near the surface and contain large ore tonnages at all of our deposits. Therefore the TEO related drilling will target these near surface and shallower areas and will not represent a large component of our drill programme. From these infill hole sites, we will also drill metallurgical holes allowing for a reduction in rig move times thereby increasing our drill efficiency whilst simultaneously generating metallurgical sample for the ongoing metallurgical testing programme.
“I am concerned about the lack of volume in Amur trading. More information would increase the volume and improve our share price.”
Answer Team: Share price change is based on many dynamics beyond just volume as an indicator of share price movement. It alone can be misleading and we encourage all investors to obtain qualified advice when investing in any company. To develop a better understanding of the true trading history of the market and how Amur stands with regard to its trading on the Alternative Investment Market (AIM), there is excellent information readily available. Please use the following link to the London Stock Exchange (LSE) which provides comprehensive monthly trading updates on AIM. The monthly reports by Industry Sector(s) and individual company information. Amur Minerals Corporation is a part of the Mining Sector (Code 1770).
For your convenience, we have compiled some brief information which we believe will be helpful in getting started by providing the link to access actual trading information. Based on the April 2017 monthly report, there are 967 AIM listed companies. Organised into 40 Industry Sectors, the Mining Sector includes a total of 109 companies (11% of all AIM companies). The Mining Sector is a significant component of AIM and is presently the second largest by total market cap behind the General Retailers.
We have also compiled a company list of the Top 10 companies ranked by total value traded during April which also provides additional insight into volumes traded and what they represent for each company. These 10 companies have a combined market cap of £2.2 billion while the remaining 99 companies had a cumulative market cap of £2.6billion. Based on traded value, Amur ranked 9th among the 109 Mining Sector companies during April 2017. Approximately 13.9% (82.6 million) of Amur’s shares “changed hands”. For the Top 10, the average percentage change of shareholding was 13.4% placing Amur firmly in the middle of the pack of the Top 10 based on the percentage shareholder change over the course of the month. Historically, Amur has often ranked in this Top 10 monthly traded value group.
|Issuer Name||TIDM||Value Traded (£m)||April 2017 Volume||Closing Price||Authorised Shares (m)||Market Capital (m)||% of Company Traded|
|HIGHLAND GOLD MINING LTD||HGM||102.6||60,939,294||144.50||325.2||470||18.7%|
|MARIANA RESOURCES LD||MARL||26.6||30,698,567||90.00||128.4||116||23.9%|
|BUSHVELD MINERALS LIMITED||BMN||13.6||172,438,643||8.15||761.9||62||22.6%|
|PAN AFRICAN RESOURCES PLC||PAF||12.9||83,962,465||15.00||2,234.7||335||3.8%|
|CENTRAL ASIA METALS PLC||CAML||10.0||4,262,515||227.50||111.6||254||3.8%|
|PREMIER AFRICAN MINERALS LIMITED||PREM||6.7||1,242,728,566||0.60||4,391.0||26||28.3%|
|AMUR MINERALS CORPORATION||AMC||5.6||82,633,063||6.25||595.7||37||13.9%|
|JUBILEE PLATINUM PLC||JLP||5.2||103,981,005||4.93||1,118.4||55||9.3%|
|MINING SECTOR TOTAL||4,832|
*Authorised Shares may vary slightly.
Source London Stock Exchange
For a pure share volume trading comparison, we refer you to Pan African Resource PLC (PAF) which traded very nearly the same number of shares as Amur did (about 83 million each) during April 2017. Even though the number of shares traded is nearly the same, the traded value was substantially different with Amur’s trades representing about 13.9% of market cap (£5.6 million) while PAF was only 3.8% of market cap (£12.9 million). We cannot and do not make any recommendations on the meaning of these results. However, we felt that providing this link will be of interest to many investors and provide access to factual and valuable information.
“It has been stated on the Bulletin Boards that it should only take about three months to report reserves after the resource statement is issued. Is this a realistic expectation?”
Answer Team: Yes, if you have one mine using one mining method for consideration and evaluation. This is most certainly not the case for Kun-Manie, as the resources has are contained within four deposits (essentially four mines) and production from within these deposits will most likely be a combination of open pit and underground production. Hence, we do not fit into a typical one and done analysis as we have eight potential reserve estimates to compile. Each deposit will likely have two ore reserve estimates, one for the open pit component and one for the underground component. Also, definition of a reserve is an iterative process often requiring two or more passes to provide an optimised reserve.
Beyond the fact that there are a minimum of eight analyses required to define the reserves of Kun-Manie, there are additional factors that increase the number of scenarios to be assessed for the final identification and statement of the reserve. These include the following:
- Metal price variation to test global project and individual deposit economic robustness.
- Metallurgical recoveries vary by deposit and mined grade. It is known that metal recoveries increase within increasing mined grade hence a single recovery cannot be used for a deposit.
- Optimisation of mine production based on mining method will result in two reserves being compiled for each deposit. At least three of our four deposits may be mined by a combination of open pit and underground production methods as already proven by a tradeoff study at Maly Kurumkon / Flagovy. The cutoff grade by mining method will vary at each of the deposits as the operating costs and metallurgical recoveries also vary . The interface between the open pit and underground production areas will likely vary based on metal price, operating costs, metallurgical recovery, mining costs etc. This could also result highly differing reserve numbers by shifting ore tonnes from open pit to underground or underground to open pit.
- Once the reserves are identified with the consideration of all above options available to Amur, a final review of the operating costs will be implemented to determine the final mining capital fleet and unit costs. Should the costs be significantly reduced or increased, the mine reserve can be updated and reported.
As results become available, we look forward to releasing the information. We again emphasise that the Kun-Manie deposit is complex and derivation of the reserves must be carefully implemented given the variability of all components used to derive cutoff grades and operating profit per ore tonne.
“The Gipronickel report provides better metallurgical recovery results than the grade recovery curves indicate. Why is this?”
Answer Team: The recoverable nickel and copper at Kun-Manie occurs within a suite of sulphide minerals and is the source of our nickel and copper recovered into the concentrate. The predominant majority of the nickel is contained with nickel enriched pyrrhotite and pentlandite with the copper being contained within chalcopyrite. Relatively speaking, these minerals have a tendency to oxidise when exposed to air. Hence older samples having large surface areas used in test work will likely produce an estimate of lower recovery potential than will be attained on a near immediate mine to mill production basis.
To fully understand the difference, we note that the sample used by Gipronickel Institute consisted of half core whilst the samples available to SGS Minerals for grade recovery curve determination were comprised of coarse crushed sample. The half core has far less surface area susceptible to oxidation than does a crushed sample(s). As for the SGS Minerals samples used to derive the grade recovery curves needed to representative of the total limits of a deposit, the samples had to be selected throughout each deposit. To attain samples of sufficient size for the grade recovery work, it was necessary to use samples acquired over the life of the exploration programme. As these grade recovery samples were comprised of crushed coarse sample, a much greater surface area is available allowing for the contained nickel and copper mineral to oxidise and hence potentially reduced recoveries could be derived and reported.
For a specific comparison and based on results from the Maly Kurumkon / Flangovy deposit, the Gipronickel Institute work (based on half core averaging 0.70% nickel and 0.17% copper) provided metallurgical recoveries of 80.63% for nickel and 83.78% for copper. The SGS Minerals grade recovery curves for Maly Kurumkkon / Flangovy ore at a grade of 0.70% nickel and 0.17% copper projected metallurgical recoveries of 69.2% (approximately 11.4% lower than Gipronickel) for nickel and 77.9% (approximately 3.9% lower than Gipronickel) for copper. Hence, the SGS grade recovery work is considered to be a conservative but this work does confirm that grade recovery increases with increasing grade. This is a very important fact.
We see similar relationships at the other deposits based on a comparison of grade recovery results versus metallurgical tests on entire uncrushed core samples completed by SGS Minerals and Sibsvetmetniproyect.
Lastly, we specifically opted to use the crushed sample in the SGS Minerals grade recovery work and not to use the archived half of the core. By maintaining a comprehensive inventory of our drill core, we have physical proof of drilling and any independent sampling of our core for any specific reason is possible.
“Can you please provide additional information regarding cobalt? We have 15,000 tonnes, how important is this to us?”
Answer Team:Yes, we do have cobalt which will be recovered as a by-product. First, we will not recover 100% of the reported resource tonnes as there will be metallurgical losses during the treatment of the nickel ores at Kun-Manie. Projections are that we will recover about 60% of the cobalt meaning about 9,000 tonnes should be contained within our concentrate.
Today’s cobalt price is nearly US$25 per pound or about US$55,000 per tonne. The cobalt value within the concentrate is therefore in the order of US$ 495 million before treatment costs at a smelter or in a Company owned furnace.
Market studies by CRU project that about half the world’s cobalt production will be used in lithium batteries by the year 2021. The remaining major uses for cobalt fall into the categories of metallurgical and non-metallurgical (typically chemical uses). Between today and 2021, CRU anticipates increased cobalt consumption to expand by about 30% to around 130,000 tonnes of refined cobalt. Based on current cobalt output, mine production will have to significantly accelerate to keep pace with demand.
In order to keep pace with the anticipated increase in cobalt demand, new mine sources and the reopening of artisanal mines is projected to be necessary. According to the United States Geological Survey (USGS), there are about 380 worldwide projects with 246 being located in Australia (106), Canada (97), the DRC (30) and the Philippines (13).
The demand is growing with the increase in Electronic Vehicle and increased use of lithium ion batteries. As an example, cobalt use in our daily life is often overlooked but is a key component as it is used in mobile phones (18 g), laptops need 20 to 75 g, and tablets nearly 30 g. On a grander usage scale, an airplane engine requires about 800 kg.
“In January of this year, Robin Young presented at a Proactive Investor evening where he stressed that reserves are far more important than having a large resource, and that the use of the term ‘World Class’ should be carefully used. Could you please elaborate on this?”
Answer Team: When we asked Robin Young to provide input on this, he directed the Answer Team to a presentation by Richard Schodde of MinEx Consulting in August 2010. This presentation provides insight into the language used to describe a deposit as World Class or Tier One. For convenience, the link to the presentation is provided below and we encourage our readers to fully examine this highly informative presentation.
Key to the presentation is that it differentiates a Giant Deposit from that of a World Class Mine. Mr. Schodde suggests that the term “World Class” should be attributed to a deposit that can be turned into a large mine while being large, having a long mine life, be low cost and highly profitable, as well as being immune to the business cycle. He also states that Giant Deposits are not the same as World Class Mines as it is mines that generate money, not deposits. As a company, we believe that we have the potential to become a World Class Mine based on our engineering results obtained to date.
Our exploration programme of the Kun-Manie project has always been focused on the identification of resources that have a high probability of being mined by open pit or underground mining methods. We consider the definition of resources that will ultimately be convertible to reserves to be critical to our success in developing Kun-Manie and we believe this approach is more in line with Mr. Schodde’s definition. For example, the RungePincockMinarco trade off study at Maly Kurumkon / Flangovy “mined” 87.5% (at an average grade of 0.75% nickel) of the resource tonnage. This is a very high proportion of the MKF orebody, (based on the resource model that excluded the 2016 resource expansion related to the highly successful drill programme), when compared to most explorers and miners which report between 45% and 55% of Measured and Indicated resources as reserve. We attribute our high ‘resource to reserve’ conversion rate to executive management’s knowledge and experience in what is required to develop a mine and not a resource.
We are not focused on being labelled World Class or Tier One usage. It is our opinion that these terms have been over used by too many companies across all sectors of the mining industry and that real numbers (reserves) leading to a producing mine are far more important. Ultimately, we believe we will develop a viable mine that can ultimately be considered a World Class Mine.
“Can you inform me of the safety considerations associated with the equipment and supplies we haul over the ice road?”
Answer Team: When the ice road begins to form in December as winter fully settles in, we monitor the formation of the ice which generally reaches the necessary thickness to support the weight of our convoys in early February. The ice thickness, suitable for transportation, lasts until about late March when temperatures start to exceed ‘freezing’ during the day when the spring thaw begins. Whilst we continually monitor the thickness of the ice road, it can be used until about mid-April.
A typical vehicle load for us is about 10 tonnes. This requires an ice thickness ranging from 15 to 20 inches. For heavy equipment such as dozers and excavators, ice thickness must have a span of between 20 and 30 inches. As we move the equipment in convoys, the team maintains a spacing of 10’s of meters between vehicles, which reduces the load on the ice. Anytime the convoy pauses for a break, the vehicles are parked on a well-spaced basis between each vehicle, in areas of greater ice thickness or on the adjacent riverbanks. This ensures that the quality of the ice is maintained and our personnel are safe.
We average between 7.5 km/hr and 15.0 km/hr whilst moving. This allows us to complete a round trip totaling about 720 kilometres over the course of a four to five day period.
“This week, a note from Edison was issued which is paid-for research. It states that there will be a placing for $140 million and dilution to the company will be nearly 300%, taking the total shares to nearly two billion outstanding shares. Is this true and why has this not been announced?”
Answer Team: Edison Investment Research (Edison) is an FCA registered company, which must adhere to the regulatory requirements, just as Amur does. As this is paid for research, which is the norm for nearly every junior company to do, Edison has access to public information from which it draws data in order to report its evaluation of a company.
Though we cannot speak directly for Edison, its research attempts to identify the positive and negative aspects of a company without bias. Taking this approach, the Edison materials are intended to provide another source of information to potential investors and existing shareholders.
The Edison research note states that there will be a placing of $140 million resulting in substantial dilution, which should have been announced. You are correct, and if such an agreement existed, Amur would have released such key and specific information in an RNS. The scenario provided by Edison is intended to show a potential funding alternative, which it has selected and reported upon. To avoid any further confusion, Edison responded to a question from a reader of the document stating its position. The response from Edison is provided below:
“In fact, the Edison model assumes US$140m will be raised via the issue of 1.3bn shares at 11 US cents per share. Hence, the number of shares in issue is currently around 0.6bn and by the end of 2017 (on this basis), I would assume that there will be 1.9bn in issue.”
“However, Edison has no idea when these shares might be issued. As a default position, Edison therefore assumes that they will be issued and the funds raised around mid-year. That being the case, the weighted average number of shares for the year (which you see in the Income Statement) is a weighted average of 0.6bn and 1.9bn, which is 1.3bn. For subsequent years, the weighted average number is the same 1.9bn as the number of shares in issue.”
“What is the next step in evaluation of the access road to Kun-Manie?”
Answer Team: Indeed, the road is an important component in the successful development of the Kun-Manie project. It will allow us to move the concentrate from the mine to the Ulak rail station, located on the Baikal Amur rail line. Once the concentrate is delivered to the Ulak station, it can be rail transported to a smelting company for further processing. Alternatively, we are evaluating treatment of the concentrate in a company owned furnace generating a Low Grade Matte, which will then require transport to a refiner.
In addition, the road will allow us to supply the mine site with fuel, additional consumables for mining and processing of the ore to generate the concentrate. Personnel changeovers will also be required. These are all necessary considerations in the design of the road to allow for support of the planned operation.
The road design process consists of a series of evaluations to be completed in a phased approach. Currently, detailed topographic maps and hydrological parameters are being compiled for use in the designation of a preliminary route design and preliminary and more accurate costing of the road. It is anticipated that the topographic work will be available within the next month and work can begin on this stage of the road design. Once the preliminary route is defined, a field inspection of the route will be completed, which will allow for verification of the acceptability of the route, and any adjustments to the route will be included subsequent to the field inspection. This will include bridge designs where necessary and any other water diversions or crossings.
Subsequent phases of work will include geological studies (soil analyses, source of construction materials, final hydrological assessments, final detailed road design, final detailed bridge design and land use designation) allowing for the construction of a “Technical Road”, which will be owned by the company. By constructing a “Technical Road”, the certification and approval process to be completed by the by various Russian agencies will be reduced.
“The old Preliminary Economic Analysis (PEA) states that production will be derived equally from underground and open pit mining with about three million tonnes being mined per year by each method. With the new Runge (RungePincockMinarco – RPM) design at Maly Kurumkon / Flangovy (MKF) indicating that the majority of the production will be from underground, is it possible to mine six million tonnes per year from underground and have periods where no open pit production is required?”
Answer Team: Within the PEA, production is based on open pit mining commencing first, providing the majority of the mined ore during the first half of the mine life. As the mine life advances, the underground production increases, replacing open pit production and ultimately reaching the point where all ores are mined by underground methods.
The newly defined RPM mining potential at MKF indicates substantially higher grades of ore, and greater tonnages can be mined using underground methods. For example, the average underground mined nickel grade defined in the RPM trade-off study is 0.79% nickel. The PEA estimated underground mined grade for the same deposit to be 0.53% nickel. A direct comparison between the PEA (resource model dated H1 2015) and RPM numbers (resource model dated H1 2016) should not be made. The models differed significantly. In addition, there will be substantially greater difference as neither model included the highly successful drill results of the 2016 exploration programme, which expanded the H1 2016 resource model by adding 900 metres of additional length to the 2,100 metre long deposit used in the H1 2016 resource update.
As for being able to mine 6.0 million tonnes per year by underground only, this is possible and will be established during the compilation of the Mining Ore Reserve (MOR) estimates. During determination of the MOR, a production schedule will be generated that optimises mining, and the extent of the blending of production (open pit vs underground) will be based on the operating profit per tonne. As we have four deposits available to determination of reserves and the production schedule, production may be derived from two or more deposits at the same time. The cost to transport the ore to the mill will vary by deposit. To fully answer this question, it is necessary to complete the MOR and its production schedule. Underground production could well attain 6.0 million ore tonnes planned per year. It is a matter of having sufficient production faces available to attain this level of production and the MKF deposit is believed to have this potential due to its newly increased size, grade and physical configuration.
“We have metallurgical recoveries at the mine to make our concentrate. Does the “Mineral Resource” take into account the smelter losses and if not how much will be lost there?”
Answer Team: It is important to clarify that the current plan consists of the generation of the sulphide concentrate at the mine as well as the generation of a Low Grade Matte (LGM) at a proposed concentrate treatment facility which is to be located at the Ulak rail station area. We have reported the metallurgical recoveries expected to be achieved at the mine during generation of the concentrate, which is based on test work completed by Sibsvetmetniproyect, SGS Minerals and Gipronickel Institute within several RNS releases. There will be additional metallurgical losses during the treatment of the LGM. At the concentrate treatment facility in Ulak, the anticipated losses for nickel and copper are based on typical smelting and refining recoveries reported by companies that operate their own facilities. It is noted that there are losses that range between 2.5% and 5.0% with losses for cobalt, platinum and palladium being in the order of 15%. These Gipronickel reported losses must be verified by additional metallurgical test work have been included within our analyses related to the project and are typical recoveries to be expected during the treatment of the concentrate in the generation of a LGM.
“What cutoff grade was used to define the reserves stated in the 10 February 2017 RNS?”
Answer Team: The 10 February 2017 RNS was a statement of “Mineral Resources” and not reserves. As noted in the RNS (within the Glossary at the end of the release), the “Mineral Resource” was specifically defined and is an integral part of the RNS and must be read in conjunction with the entirety of the release. For clarification and in accordance with JORC 2012 standards, a “Mineral Resource” is defined as a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. These categories are also defined within this section and should be examined carefully to allow for a full understanding of how the three categories differ.
It is noted that the “Mineral Resource” is based on a nickel cutoff grade of 0.4%.
“How are we positioned with regard to funds to pay for exploration during this next summer session of drilling? Are we better funded than most companies?”
Answer Team: Firstly, it is important to note that it is our policy to only report our cash position based on financially audited or reviewed results. Our last cash positon reported at the end of H1 2016 was US$11.5 million, up from US$9.6 million at the start of 2016.
Our information on other companies funding position is gleaned from public information. The most relevant and current data has been sourced for Austex Unique Research based in Australia. They report that there are 687 Australian listed resource companies. Of these, about 588 are planning to conduct exploration during the upcoming year.
Total exploration expenditures are projected to be AU$348 (based on H1 2017 numbers) with one company representing nearly 5% of the total. Nearly 102 companies report no exploration expenditures are planned.
On a cash basis, Austex reports 225 companies have more than AU$3 million. Last year, 178 companies were reported to be in this position. This would indicate a potential improvement in the mineral resource sector with regard to cash on hand (at least in Australia). On the low side, 180 companies have less than AU$0.5 million.
“In Robin Young’s presentation at the Proactive Investor conference in the middle of January, there was a slide showing how much more exploration potential remains at our licence. What evidence is there that indicates the Ikenskoe and Kubuk may be one deposit?”
Answer Team: The exploration results in the area between Ikenskoe / Sobolovelsky and Kubuk are very similar to the information that we had between the Maly Kurumkon (MK) and Gorny deposits. It was the information between the Maly Kurumkon and Gorny deposits that led the Company to drilling eastward from MK where we discovered the Flangovy extension (immediately to the east of Maly Kurumkon) which resulted in the doubling of its size. About 500 meters of undrilled area remains to be tested to determine if Gorny is a continuation of the MK deposit.
Between Ikenskoe / Sobolevsky and Kubuk, the supportive information includes geological mapping, surface chip samples, soil samples and surface based geophysical surveys. With such similar results, this represents a resource expansion target that must be drilled. This of course does not guarantee that the mineralisation is continuous forming a single six kilometre long deposit but step out drilling is obviously required.
“There is or was (maybe it has expired) an MOU signed on using zeppelins to haul materials to and from the mine. It has not been mentioned for a long time. What about the Airlander 50, can’t this be used to get rid of the road?”
Answer Team: We continue to monitor the development of the zeppelins, which could provide an interesting alternative to the construction of the road and reduce the project footprint. The reported capacity of the Airlander 50 is about 50 tonnes. At this capacity, it would require approximately 20 trips a day to move the concentrate from the mine (not including additional trips for personnel changeovers). Assuming that it will take six hours per round trip allowing for loading, travel time and unloading, we would need to purchase a minimum of four, totaling nearly US$400 million (reportedly US$100 million each). At present, the road cost is projected to be substantially less.
In addition, loads required during the anticipated construction phase of the operation consist of single pieces exceeding the current maximum capacity of 50 tonnes. These components are typically related to the off road mining equipment (especially to implement the open pit mining portion of the planned operation).
“How do the Gipronickel Institute metallurgical recoveries impact the mining study recently released?”
Answer Team: The metal delivered to the processing plant in each tonne of mined ore will not change. It is the total amount of economic metals contained within the concentrate that will be increased. With increased recovery, this means that more of the metal will be recovered from each mined tonne while the operating cost per tonne is not anticipated to significantly change. So this additional recovered metal will add to the revenue derived per tonne of ore, which will increase the operating profit.
It is also noted that the grade of the metallurgical sample was 0.70% nickel and the average grade of the “mined” ore in the mining trade off study was 0.75% nickel. Grade recovery curves indicate that the recovery increases with increasing grade. Mining at these projected grades within Maly Kurumkon / Flangovy could be improved from the Gipronickel Institute recovery numbers, derived for the large scale production sample that has been processed.
“Mr. Ljupco Naumovski was appointed as a non-executive director to the board and not as a director. It was not stated how long he was appointed for and what his time commitment is to our Company. Please clarify this.”
Answer Team: There are two types of director positions. The first is that of an Executive Director, who is employed by the Company. This is Mr. Young’s role as he is the Chief Executive Officer. All other directors are titled as Non-Executive Directors.
In accordance with the Company’s Memorandum and Articles of Association, at every Annual General Meeting (AGM), one third of the existing board members must resign and be re-nominated by the shareholders. This requires a 50% approval of the voting shareholders. As the Company has a total of 5 board members currently, this means that two board members must resign and be approved at each AGM. It is also mandated that any newly appointed members must resign for re-nomination at the first AGM subsequent to their appointment. Hence, the two board members that will available for re-nomination at the next AGM will be Mr Naumovski and Mr Gazzard.
As for work commitments, it is expected that each Non-Executive Director commit to a minimum of nine days in support of the Company per quarter.
“The newly reported information on the mining reserve at Maly Kurumkon / Flangovy says the average grade of the nickel will be 0.75% and 0.19% for copper. The PEA or your Blueprint reports average life of mine grades at 0.56% nickel and 0.15% copper. How do the new results change the PEA?”
Answer Team: The PEA (Preliminary Economic Assessment) “mined” about 500,000 tonnes of nickel and 135,000 tonnes of copper during a proposed 15 year period. About half of the PEA “mined” material came from the Maly Kurumkon / Flanovy deposit. This means about 250,000 tonnes of nickel and 67,500 tonnes of copper in the PEA would be replaced by the newly reported 334,000 tonnes of nickel and 85,000 tonnes of copper. So the potential PEA mined tonnes of nickel increases from 500,000 to 584,000 tonnes (about 17% total nickel) and copper also increased from 135,000 to about 150,000 tonnes (about 11% total copper). The new tonnes of metal should be recovered at little or no additional operating cost.
This increased mining potential does not reflect the 2016 drill results, which expanded Maly Kurumkon / Flangovy by 900 meters to a total length of 3,000 metres. From this newly defined mineral, we anticipate additional ore to be identified for mining at Maly Kurumkon / Flangovy further altering the PEA ore projections. Also, the PEA included Inferred resources at Maly Kurumkon / Flangovy and this deposit has now been drilled at the spacing where the majority of the deposit, if not all, will likely be considered to be indicated. Indicated resources can be used to define Mining Ore Reserves (MOR) according to JORC (Dec 2012) standards.
Lastly, the production in the PEA was indicated to be a near equal blend from open pit and underground production. The new mining trade-off study indicates that the production tonnages from underground mining (especially at Maly Kurumkon / Flangovy) will be substantially larger than projected in the PEA, with nearly 75% of the production at this deposit alone being from underground.
“In the past you have talked about streaming opportunities for cobalt and the PMGs, but there has been no mention of this in recent RNS’s. Is streaming still on option?”
Answer Team: Streaming of cobalt and the PMGs is an option, discussions with organisations that offer this form of financing will be more productive when we are closer to the completion of the DFS, so it is an option that will be considered as we move closer to completion of the DFS.
“Can you clarify further the DFS and the TEO in terms of what is the similarities and differences between them, why both are required and how they are connected to funding?”
Answer Team: The Permanent Conditions TEO (TEO translates from Russian to ‘Technical Economic Explanation’) is a document mandated within our Mining Production Licence and a requirement on any company looking to commence a mining operation in Russia. It is part of the technical process to take Amur from exploration into production and is necessary for the operational approvals process, just like in any mining jurisdiction around the world. The main sections of the TEO describe in great detail project engineering requirements, reserves, environmental considerations for the project and related infrastructure needs such as power and access road support. This also includes capital and operating costs for the operation.
The DFS is a document with a broader scope than the TEO as it includes much of the same information as the TEO plus inclusion of additional environmental work done to EQUATOR principles (a framework that financial institutions such as the EBRD, IFC and most large western financial institutions use for determining, assessing and managing environmental and social impact). A DFS is necessary to access western funding sources, such as construction financing of infrastructure, mobile equipment fleets, processing plants etc. Without a DFS, western and multinational funding sources generally cannot be accessed.
If in the hypothetical event all funding was to be derived from Russian and / or other non-western sources such as China, then the DFS as a completed document would likely not be required. However, some elements of the DFS not present in the TEO may still need to be produced for a select portion of Russian funding sources as they too will require the detailed information on which to make commercial decisions.
Funding is not always predicated on the completion of the DFS as individual components of the DFS can unlock commitments to funding ahead of the completion of the DFS. For example, completion of the detailed road design or completion of the smelter design will provide the necessary information for funding sources that specialise in this form of infrastructure/production process to undertake their funding decisions.
In summary, the DFS in combination with the mandatory TEO (which has always been included as a part of the DFS) represents a substantial undertaking to which Amur is committed allowing for our transition from exploration into production. The combination simultaneously provides us with multiple funding options. We note that it is too simplistic to state that they are a single path activity from start to finish. As the work progresses, the Company will continue to undertake discussions with project funding sources whenever appropriate milestones are attained.
“I would like to attend the AGM on Friday 9th September. What do I have to do, do I have to register in advance?”
Answer Team: The AGM attendance requires that you are a verified shareholder. As normal with AGM’s, non shareholders will not be admitted. If you hold your shares in certificated form, we have a list which will be provided by our registrar on the day preceding the AGM.
Depository Interest holders wishing to attend the meeting should contact the Depository at Capita IRG Trustees Limited, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom or by email: firstname.lastname@example.org to request a Letter of Representation by no later than 11.00a.m. (BST) on 06 September 2016.
“As the Crede financing arrangement looks likely to cover 2 or more share allotment authorities, could you please clarify how the issuance of shares and warrants relate to previous, current and future share allotment authorities?”
Answer Team: The Company had the authority to issue up to 100 million shares until the 17 December 2015. The first tranche of the Crede financing agreement occurred on 14 December 2015 and therefore falls within this authority. Therefore all shares and warrants issued, and for the avoidance of doubt, all shares that the warrants are converted to fall within this authority.
The Company obtained the authority to issue up to 200 million shares at the AGM on 17 December 2015 (the “2015 Authority”) and the 2015 Authority will be valid up until the date of the next AGM. The subsequent tranches under the Crede financing agreement that were announced on 17 March 2016 and 20 June 2016 relate to the 2015 authority. Therefore the shares and warrants issued, and for the avoidance of doubt, all shares that the warrants are converted to from these tranches will be satisfied from this authority.
The Directors of Amur are not empowered to issue more shares than the authority granted at the Company’s AGM, as per Amur’s memorandum and articles of association.