CEO.CA Chairman's Briefing

NOTE: The company recently announced that the Canadian shares will be de-listed at the end of February.  Shareholders currently on the Canadian register may request to have depositary interests ("DIs") in respect of their holdings issued to a broker/nominee within CREST, the United Kingdom ("UK") settlement system.  The shares will continue to trade on AIM under the ticker "ARS".  US-based investors should be able to continue trading the OTC-shares under the ticker "KMGLF".  Please confirm the details with your broker.

ASIAMET RESOURCES - $ARS.L $ARS.V $KMGLF

COMPANY OVERVIEW

Management Team

• Tony Manini 
  CEO and Deputy Chairman
  Tony Manini has over 25 years of global resource industry experience across a diverse range of commodities in over 20 countries. His experience includes 14 years with Rio Tinto Limited and 8 years with Oxiana Limited (now OZ Minerals Limited). As a founding member of the Oxiana Limited executive team he was responsible for establishing and managing the company's highly successful exploration and resources group and closely involved in the discovery and/or acquisition and development of Oxiana Limited/OZ Minerals Limited's four operating mines. Mr Manini is a founder of Tigers Realm, the team who brought you NexGen Energy $NXE. Mr Manini holds an Honours Degree in Geology and is a Fellow of the Australian Institute of Mining and Metallurgy and the Society of Economic Geologists.
• Stephen Hughes
  Vice President Exploration
  Stephen Gregory Hughes (aged 43), is a geologist with over 20 years technical and management experience in copper-gold exploration and open pit and underground mine geology. He is recognized in Indonesia as a leading expert on copper-gold systems, and has evaluated more than 30 copper-gold deposits across Indonesia and the Philippines. His experience includes 12 years with Freeport-McMoRan Copper & Gold, managing their regional exploration activities and underground mine geology group, and he was also involved in the Grasberg open pit mine geology operations. He joined Oxiana Limited / OZ Minerals as Exploration Manager in 2007, focused on growing the company through exploration and acquisition of advanced copper-gold opportunities in Indonesia.
  
• Dr. Peter Pollard
  Non-Executive Chairman
  Peter Pollard is a consulting economic geologist with more than 20 years experience. He holds a PhD from James Cook University, Australia and is a Member of the Australasian Institute of Mining and Metallurgy and a Fellow of the Society of Economic Geologists. Dr Pollard has consulted widely on porphyry copper-gold and iron oxide copper-gold deposits. He has worked on some of the world's major porphyry copper-gold deposits including Grasberg (Indonesia), Escondida Norte (Chile) and Oyu Tolgoi (Mongolia).

Share Structure

• Issued and Outstanding Shares: 709.94 million
• Options and Warrants: 45.24 million
• Fully Diluted Share Count: 755.18 million

Financials

• Working capital ~£2.23 million / US$2.8 million

Market Capitalization and Enterprise Value

• Market Cap: US$26.28 million
  
• Fully Diluted Enterprise Value: US$25.14 million
  

Assets

• KSK Copper-Gold Project (100%)
  
• Beutong Copper-Gold Project (40% earning up to 80%)
  
• Jelai Gold Project (100%)
  

3-Year Stock Chart

ASSETS

Kalimantan Surya Kencana ("KSK") Copper Project

The company has spent >US$50M on surveys and drilling at the KSK Copper Project, which is more than double the current market cap of Asiamet Resources.  Within the KSK Copper Project is the feasibility stage Beruang Kanan Main ("BKM") copper deposit. The BKM is a very shallow (0-60m), low-strip (1.23:1), open-pittable heap leach deposit with a resource of 65Mt at over 0.60% CuEq for 888Mlbs of contained copper. A resource update is expected in April followed by a pre-feasibility study in 2Q17 and a bankable feasibility study by the end of the year. 

A Preliminary Economic Assessment completed in April 2016 delivered the following highlights (LOM copper price of US$3.25/lb):

The company hopes the BKM deposit is the foundation on which to build a mid-tier mining company. While the current tonnage of the BKM is modest, the project area is large with many opportunities to expand the resource.  

The BKM remains open with nearby prospects BK South ("BKS"), BK West ("BKW") and BKZ within trucking distance of the main deposit.  Highlights from scout drilling at BKS include 10m @ 2.52% Cu. Highlights from scout drilling at BKZ include 16m @ 5.8%Zn, 2.8% Pb, 0.64g/t Au, 58g/t Ag and 0.16% Cu. Below is a map showing copper-in-soil anomalies at Beruang Kanan:

Another promising target within the KSK Copper Project is the Baroi Prospect. Highlights include:

• 11.05m @ 11.05% Cu and 296g/t Ag;
  
• 18m @ 3.20% Cu and 60.4g/t Ag; and
• 31.45m @ 3.63% Cu and 115g/t Ag (from surface) and 24.0m @ 4.59% Cu and 88.5g/t Ag (from 41.45m). 

Beutong Project

While the BKM deposit is the most advanced project in the company's portfolio, the crown jewel is the massive Beutong Project. The Beutong Project weighs in at a whopping 511Mt @ ~60% CuEq for a contained 5.3 Billion pounds of copper and 2.1 Million ounces of gold. The company currently owns 40% of the project and can earn up to 80%. Drill highlights include:

• 147.5m @ 1.32% Cu and 0.25g/t Au (from 2.5m);
  
• 173.0m @ 1.18% Cu and 0.20g/t Au (from 2.8m); and
  
• 347.1m @ 1.06% Cu and 0.18g/t Au (from 3.0m).
  

There is also a higher grade Cu-Au skarn 200m north of Beutong East and is open in all directions. Drill results include:

• 33m @ 2.31% Cu and 1.23g/t Au
  

The Beutong Project enjoys a distinct infrastructure advantage, being located just 60km inland from the township of Meulaboh. There also exists a coal power station and seaport approximately 5km southeast of Meulaboh. 

Jelai Gold Project

The final project in Asiamet's robust portfolio of assets is the Jelai Gold Project - a low-sulphidation epithermal gold vein deposit. Approximately 2,000m of strike length remains to be tested. Drill highlights include:

• 4.75m @ 19.7g/t Au and 102.3g/t Ag (from 22.75m), and
  
• 6.90m @ 22.5g/t Au and 22.5g/t Ag (from 34.3m).
  

The company is currently working to monetize the Jelai Gold Project via joint venture or divestment.

VALUATION

At current valuations (~US$25M), the company is trading at just 12-13% of the NPV of the near-production BKM project (~$204.3M).  When also accounting for the large Beutong Copper-Gold porphyry, it becomes clear the the company is being completely overlooked by the market.

Assuming 200,000 tpd; 360 mining days per year; and a 1.5:1 waste to ore ratio, I get 28Mt of ore per year for a 15 year mine life. At 0.5% Cu and 0.13g/t Au and assuming 70% Cu and 85% Au recoveries, Beutong could produce 100kt Cu (or 220Mlbs) and 102koz Au per year.

The above would compare well to the Zaldivar copper mine in Chile, which is also a 200,000 tpd heap leach operation exploiting a shallow, open-pit deposit grading roughly 0.5% Cu. In 2014, Zaldivar produced approximately 100kt Cu at a net cash cost of around US$1.80/lb and generated ~US$240M of EBITDA @ US$3.25/lb Cu.

In 2015, Antofagasta bought 50% of the Zaldivar mine for US$1.005 Billion.

For a more straight-forward exercise I compared prices paid per pound in recent takeovers of copper assets comparable to Beutong:

As can be seen above, Antofagasta paid ~$0.07 per pound for 50% of Zaldivar while Audley Capital paid ~$0.06 per pound (and up to ~$0.09 depending on certain conditions) for the Norte complex. It should be noted that, although the overall resource tonnage and grades are comparable to Beutong, the above transactions were for operating mines. As a general rule, I've used $0.03-$0.05 per pound to calculate takeover values for undeveloped medium to large copper deposits.

For a more apples-to-apples exercise, I've compared Asiamet Resources against Regulus Resources $REG, another company many market voices are calling "cheap", to illustrate the relative undervaluation:

$REG is trading at a fully diluted enterprise value of about $0.0155 per pound of global resource vs. Asiamet at $0.0074 per pound of global resource (40% of Beutong). If Asiamet earns their full 80% of Beutong, the relative undervaluation becomes even more extreme with Asiamet at just $0.0043 per pound. Therefore, Asiamet would have to double or quadruple just to catch up to $REG's valuation.

Any way you really slice it, Asiamet seems to offer compelling value and a cheap option in an improving copper environment.  As such, I have bought shares and will continue to accumulate at under 6 pence per share.