Liberum Capital has reiterated a ‘buy’ rating and 20p price target on Asiamet Resources PLC (LON:ARS) shares after the group’s latest assay results provided further confirmation of resource upside at the Beutong prospect in Indonesia and also indicated that the East and West Porphyrys may unite at depth.
In a note to clients, Liberum analyst Richard Knights said: “The key takeaway from hole BEU1350-02 was strong copper mineralisation being encountered at depth, with the final four meters of the hole assaying 1.00% CuEq (0.82% Cu, 0.03g/t Au, 75ppm Mo).”
He added: “Management noted that the presence of molybdenum at the bottom of the hole has increased the potential for the high grade copper core to continue at depth - Mo is typically an associate mineral in porphyry deposits as the grade rises.”
The analyst noted: “While the existing resource of 2.4mt of copper and 2.1moz of gold exists above 500m depth, there is plenty of evidence to suggest the market will value deeper copper resources if there is grade.
“The clearest example of this is Solgold PLC (LON:SOLG), which delineated a maiden resource at its Cascabel project in December last year containing 7.35mt of contained copper equivalent metal, including a high grade core of 220mt (indicated and inferred) at c.1.5% Cu equiv.
“The upper part of the high grade mineralisation at Cascabel commences around 500 metres below surface, below the entire maiden resource at Beutong.”
He pointed out that Solgold trades at US$61 per tonne of copper equivalent resource versus Beutong at US$37 per tonne - without backing out the development-ready BKM asset in Kalimantan, which he values at US$181mln, well above Asiamet's current market cap of US$108mln.
Knights said: “If Beutong can find mineralisation at similar grades at depth, there is scope to add large scale tonnes to the existing resource which could drastically increase the value of the asset.
“While the deeper mineralisation would require a withdrawal of the concentrate export ban or an increase in domestic smelting capacity to be developed, the long-lead time on block cave developments would leave plenty of time to address these challenges.”
The Liberum analyst also noted that in the past few months private equity firm EMR Capital - where Asiamet executive chairman (and 3.3% shareholder) Tony Manini is an executive director - has completed two large transactions with Indonesian partners.
He pointed out that the deals highlight the strong links and ability to conduct business in Indonesia at board level within Asiamet.
Knights concluded: “Following the completion of the feasibility study at BKM, Asiamet will be seeking to bring in an Indonesian partner to fund the equity cheque for development of the asset - EMR's recent deals add to validation that the company has the capability to deliver an accretive transaction.”
The analyst pointed out that the next catalyst for Asiamet is publication of the feasibility study for the BKM project in Kalimantan, due next month.
In late afternoon trading, Asiamet shares were 2.8% higher at 9.10p.