A mine employee shows a piece of copper ore at the Kilembe mines
A mine employee shows a piece of copper ore at the Kilembe mines, in the foothills of the Rwenzori Mountains, 497km (309 miles) west of Uganda's capital Kampala, January 31, 2013. The Kilembe copper-cobalt mine operated from 1956 to 1972, when it closed due to a drop in world copper prices and now lay in ruins. Uganda's President Yoweri Museveni has promised to rehabilitate the Kilembe mines. Reuters/James Akena

After securing its production license and making necessary development plants and payment, Russian nickel and copper miner Amur Minerals Corporation (London AIM: AMC) has released its operational blueprint for the development of its flagship Kun-Manie project located in the Russian Far East. Shares rose by as much as 23 percent in early trade last Monday, reaching as high as 35.75 per share and closing at 26.20.

The blueprint establishes an operational plan for the usage of mined sulphide ores from the Kun-Manie project. The company plans to have its own smelter or refinery that will generate final metal products to be sold on the international market.

According to the blueprint, existing resources can sustain a 15-year mine life with a production of six million tonnes per year, provided that infill drilling is done. Production will come from four open pits and two underground operations, while a simple flotation concentrate will be generated to be smelted by the company itself and verified by Outotec.

Amur Minerals estimates an operating cost of US$34.86 [$45.58] per tonne of ore. The total initial capital expenditure is projected to be US$1.38 billion over a two-year construction period, while sustaining capital is approximately US$474 million over 15 years. On this basis, the net present value using a 10 percent discount rate is projected to be US$0.71 billion and US$1.44 billion using long term nickel prices of US$7.50 per pound and US$9.50 per pound. These estimates already include an owner-operated smelter and refinery. While it is very difficult to predict future commodity prices, it could be useful to remember that at nickel's peak in 2007, the price of the metal soared to above US$20 per pound.

The company's operational blueprint has shown a total redesign of the project after 10 years of successful exploration at Kun-Manie, according to Amur Minerals CEO Robin Young. "As we worked on the study, we challenged all past and previous assumptions. As a result, mining will best be performed using a combination of underground and open pit productions, power will be generated on site, a substantial access road upgrade can be supported and the construction of own smelter and refinery," he said.

In a separate statement, Amur Minerals revealed cash reserves of US$1.39 million at the end of 2014, indicating a healthy cash position that is enough to fund the start of the pre-production assessment phase, which is the next step after the procurement of the production license. The next phase will include a definitive feasibility study (DFS), from which production and financing decisions will stem. This will be followed by infill drilling at Flangovy and Kubuk deposits, while additional metallurgy test work will be required to determine how ores will respond to treatment at the plant and what final products will be derived from a potential smelter.

Contact the writer: a.lu@ibtimes.com.au

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