One day, Asiamet Resources Ltd (LON:ARS) could join the ranks of the 100,000 tonnes per year copper producers. That’s no small aspiration, as delivered by Tony Manini, the company’s chief executive.
But he’s done it before. He was a key man in the development and growth of Australian copper giant Oxiana which, like Asiamet now, was also focussed on Asia.
Oxiana eventually merged with Zinifex to become OZ Minerals, and then slipped under the control of Chinese interests.
And it’s the Chinese will also be key to the fate of Asiamet, although at least at this stage in the development of the company, rather more indirectly.
As it stands, at the smaller of Asiamet’s two copper projects, Beruang Kanan Main (BKM), the company stands to make a cash margin of U$0.90 on every pound of copper produced. That number is drawn from data published in a preliminary economic assessment published last year, and may yet be improved upon as a result of the full-blown feasibility that’s now ongoing.
But if Asiamet manages to shave a few more cents off the operating costs, the real margin upside will nevertheless come from the overall supply and demand picture in the copper market – and that, in a large part, is down to China.
Manini is a frequent visitor to China, and he is able to gauge the mood pretty well. He talks of the One Belt, One Road strategy as being meaningful and realistic to businessmen inside the country and, perhaps what’s more pertinent, of the central role Indonesia and its resources will play in that strategy.
Under the One Belt, One Road idea, China is aiming to develop two separate China-centric economic zones of influence, one running overland north and west – the “belt” – and one running across the South China Sea and out over the Indian Ocean – the (maritime) “road”.
The fostering of co-operation among the countries encompassed in this idea, which range from Germany and Italy in the west, is key to China’s idea of global growth in the coming decades, and the demand stimulated by associated infrastructure development and other economic stimulation will be key to the future pricing of copper.
At the moment, Manini is comfortable that Asiamet is working up BKM at the right time.
“We think that it’s a very good time in the cycle to be building,” he says. “Consultants are short of work. The price of things has come down. It’s a good time actually to be doing what we’re doing. The mining business is counter-cyclical and this is the time to catch the up-cycle when it comes.”
Hence, BKM is well advanced through feasibility, mining and geotechnical consultants have been appointed, and the work should be completed fairly soon.
Because there will come a time when copper comes good again and the US$0.90 margin that can be spoken of at BKM will morph much higher. Manini
“We’ll be producing copper into significantly increased demand and widely forecasted structural supply deficits” says Manini. “And the anticipation and expectation of all the forecasters is that prices into 2018 - 2019 will really begin to lift.” He adds that “when the world does see a big uptick in the copper price that all hell will break loose for the share price of those few listed developers with quality copper projects”
Even now, the market’s pretty much in balance, he says.
But if the global economy, including China, starts to improve, then demand will pick up. That will be the time for Asiamet to hit the market with product, so that it can recycle cash into the development of the much larger Butong project, which could deliver production at three-to-four times the levels of BKM.
This, then, is the long-term upside of which Manini speaks: a copper price that’s set to rise, a short-term production profile with strength in depth coming from a second, larger project.
It’s not a bad position to be in, and even if the shares have come off the highs they hit in the late spring, it’s worth remembering too that at the current 2.4p they’re still trading at more than double the 12 month low of 1.05p.
With more newsflow likely to come soon from the ongoing work on the feasibility study and some “extremely interesting” conversations with potential strategic partners in the region, Manini thinks that Asiamet could be on the “cusp of game changing things”.