Amur Minerals — Kunning

Amur Minerals has a 100% interest in the Kun-Manie project in the north-east corner of the Amur Oblast in Russia’s Far East. Notwithstanding a pre-feasibility study (PFS) completed on the project in 2007, Amur has continued with exploration activity and, to date, has delineated a resource of 155.1Mt of ore containing 1,157kt of nickel or 1,525kt of nickel equivalent (NiE), making it the largest undeveloped nickel sulphide deposit in the region encompassing its largest consumers, namely China, Japan and Korea. Amur was awarded a production licence by the Russian government in May 2015, but has since continued its exploration programmes ahead of producing either a Russian (TEO) or western feasibility study prior to development. On 26 February, Amur announced the results of an updated pre-feasibility study (PFS) at Kun-Manie. In contrast to previous studies, the PFS considered just two options, namely a toll smelt option and a low-grade matte option, the results for which are shown in the table below:

Based on a combination of the NPVs published by Amur for the toll smelt and low-grade matte development options at Kun-Manie and the EV/NPV multiples calculated in our report Gold stars and Black holes – Analysing the discount: From resource to sanction , published in January 2019, we calculate an immediate valuation for Amur of US$60.8m (or 8.7c/share) based on the toll smelt option, or US$97.8m (or 14.0c/share), based on the low-grade matte option (excluding net cash/debt). However, given the strong early stage correlation between EV/NPV ratios and project IRRs and the projects’ relatively high IRRs, these valuations could be as high as US$79.9m (or 11.4c/share) for the toll smelt option and US$157.0m (or 22.5c/share) for the low-grade matte option. By contrast, we calculate an 8c/share valuation based on the net present value of the (fully diluted) stream of dividends that results from the proposed toll smelting development of Kun-Manie in FY19 (using a 10% discount rate) and a 12c/share valuation from the low-grade matte option.

A 10% change in the base case nickel price results in a c 5–7c change in valuation for the toll smelt option, but a 2–4c change for the low-grade matte option (based on our discounted dividend valuations). By contrast, a 10% change in costs results in a 1–3c change in valuation for either development scenario (see page 18).

Since entering into a US$10m convertible loan agreement in February 2018, we estimate that Amur has converted US$2.4m of an initial US$4m advance via the issue of 59.6m shares, leaving US$1.2m (net) of the initial advance outstanding. As of 22 March, Amur has renegotiated the convertible’s terms and drawn down an additional US$0.5m, such that US$5.5m remains undrawn. As at 30 June 2018, Amur had US$1.0m of net cash after US$2.5m of cash outflows (before financing) in H118. We estimate a further US$2.1m of cash outflows in H218, resulting in estimated US$1.1m of net debt as at 31 December 2018 (funded by the convertible loan – see page 18).

Amur Minerals has a 100% interest in the Kun-Manie project in the north-east corner of the Amur Oblast in Russia’s Far East. The Kun-Manie project encompasses a 36.2km2 area within the 950km2 Kun-Manie exploration licence area and is located 700km north-east of the capital city of Blagoveshchensk on the Chinese border.

In April 2004 ZAO Kun-Manie, a wholly owned subsidiary of Amur, was granted an exploration licence to explore for nickel and related metals, including copper, cobalt, palladium and platinum, in the Kun-Manie licence area. Amur commenced seasonal field work (running from June to October) on the licence in 2004 and issued a JORC-compliant statement in 2007 covering three deposits located on the 40km-long Kurumkon trend, namely Maly Kurumkon, Vodorazdelny and Ikenskoe.

In November 2007, consultants SRK completed a pre-feasibility study for Amur, concluding that a project designed to produce a nickel concentrate had a net present value of US$89m at a discount rate of 10% and nickel and copper prices of US$7.50/lb and US$1.50/lb, respectively.

Since 2007, exploration and drilling has been conducted on an ongoing basis and an updated resource estimate was compiled in late 2013 (and subsequently upgraded in April 2015, March-April 2016, February 2017 and March 2018), which included two additional deposits on the trend: Kubuk and Gorny.

In 2008, Kun-Manie was designated a Federally Strategic Project according to the 2008 amendment of Russia’s subsoil law, the practical relevance of which is that ‘strategic’ projects must complete exploration activities before a production licence can be granted. To this end, a new protocol established that this exploration phase had now been completed.

In June 2014, Amurnedra (a sub-agency and regional representative of Rosnedra, the state licensing agency) completed its review of Amur’s exploration activities and subsequently issued a protocol confirming that the initial exploration phase of the Kun-Manie project had indeed been completed and that the company had met its obligations in the 950km2 licence area under the terms of its original exploration licence – a key precursor in the conversion of a Federally Strategic Project held as an exploration licence to that of a production licence. In particular, the protocol confirmed that Amur had completed sufficient and substantial work to identify a 36.2km2 area of economic interest, which supported the boundary limits for the mining application. In addition, it confirmed that the area located outside the area of mining interest had also been sufficiently explored, which allowed Amur to return 913.8km2 of unwanted territory to the Russian government.

As the initial exploration phase of the project had, at that point, been completed, the way was paved to progress to the next phase of development under the Russian system, namely a detailed exploration and production assessment of the project, conducted under the terms of a new production licence (see Permitting section, below).

Initially, Amur undertook an extensive soil geochemical survey covering two areas of its Kun-Manie lease, totalling 57.5km2. The 15km long and 2.5km wide Kurumkon Trend contains the deposits of Maly Kurumkon-Flangovy, Vodorazdelny, Ikenskoe-Sobolevesky and Kubuk, which are located within the limits of the licence and are the subject of Amur's mining licence (and the PFS). The locations of all these deposits (all within the area that is the subject of Amur’s 36km2 mining licence) are shown in Exhibit 3 below.

By expanding its short-term exploration strategy while simultaneously pursuing its mining licence, Amur greatly improved its understanding of the geological controls on Kun-Manie’s mineralisation.

The host rocks at Kun-Manie are early Archaean meta-gabbros, crystalline schists, gneisses and granite gneisses. A series of outcropping mafic and ultramafic sills dipping from near horizontal up to 60° to the northeast contain the sulphidic nickel, copper, cobalt and PGM mineralisation. The sills are tablular in shape and range from c 1m to more than 100m in thickness. The primary minerals of economic interest are nickel-bearing pyrrhotite and pentlandite and copper-bearing chalcopyrite, which occur in both disseminated and veinlet form, predominantly within the ultramafic sills and rarely in the mafic sills. The mineralised ultramafic sills are websterite by composition being pyroxenitic with near equal parts of orthopyroxene and clinopyroxene, including minor, locally variable amounts of olivine, plagioclase feldspar and amphibole.

On 20 March 2018, Amur announced an updated mineral resource estimate, as compiled by consultants RPM, as follows:

The mineral resource update followed the exploration work that Amur conducted during the 2017 field season, which indicated possible linkage between the Ikenskoe and Kubuk deposits. This was later confirmed by 2018 drilling. However, the results of the 2018 field programme have not been included in the PFS results, notwithstanding the fact that the two deposits together (see Exhibit 3) constitute the largest single mineralised zone at Kun-Manie.

As the deposits are all near surface, it may be expected that a high rate of conversion from mineral resource to mineable reserve is possible. In addition, a further 37.0Mt of inferred resource may also be upgraded to reserve status. To date, Amur’s PFS envisages that 89.4Mt, or 57.7%, of the total resource tonnage will be mined, comprising 71.5Mt from the measured and indicated categories (60.5%) and 17.9Mt from the inferred category (48.4%).

In nickel and gold (as an illustrative exercise) equivalent, Amur’s total mineral resource can therefore be stated as follows (at prevailing metal prices at the time of writing):

Based on Edison’s estimated end-FY18 net cash position of US$2.2m, Amur’s enterprise value of US$25.5m equates to US$22.02 per total nickel resource tonne.

In May 2015, Amur announced that Russian Prime Minister Dmitry Medvedev had approved the company’s detailed exploration and mine production licence for Kun-Manie until July 2035. This then enabled the Ministry of Natural Resources (MNR) and Rosnedra to issue the licence, subject to Amur paying RUB23.6m (c US$429,000 at the time of payment) within 30 days of the registration of the final document, which was duly done. The licence grants Amur’s wholly owned subsidiary ZAO Kun-Manie the rights to recover all value from the minerals defined to be present at Kun-Manie, including nickel, copper, cobalt, platinum, palladium, etc. Note that all drilled mineralisation lies within the limits of the production licence. In due course, additional work related to metallurgy and engineering will be compiled in a final, permanent Russian feasibility study (TEO) to be approved by the GKZ (the State Reserves Committee), including additional results for detailed exploration.

Included in Amur’s responsibilities under the terms of its new licence are:

If, during the life of the licence, exploration results further increase the size of the resource and/or reserve, the company can apply to have the production licence expanded and extended.

In late 2007, the design, configuration and economics of a project at Kun-Manie were outlined in a pre-feasibility study (PFS) undertaken by SRK, based on the resources defined to be present in a portion of Maly Kurumkon, Vodorazdelny and Ikenskoe at the time. The study indicated that the defined mineralisation could support three open-pit mines; that subsequent treatment of the (sulphide) ores could be achieved by conventional crushing, grinding and flotation; and that the final concentrate would be suitable for contract smelting, with Amur receiving an estimated 70% of the value of the nickel and 50% of the value of the copper contained in the concentrate (note that no payable value was attributed to cobalt, platinum and/or palladium by-products). Assuming production and processing at a rate of 4.0Mtpa over a 10-year life, SRK estimated production of c 15,900t Ni and 4,300t Cu in concentrate pa and a project net present value (discounted at 10%) of nearly US$89m at nickel and copper prices of US$7.50/lb (US$16,538/t) and US$1.50/lb (US$3,308/t), respectively. Since then, Amur has announced a series of other technical milestones relating to the project, including:

On 26 February 2019, Amur announced the results of its updated pre-feasibility study (PFS) into its Kun-Manie project. The PFS is based on information available in June 2018 and therefore includes the mineral resource estimate depicted in Exhibit 4, but not the subsequent results of the 2018 field season. In future therefore, there may be the potential to increase the resources and reserves on which this PFS is based and thereby the life of mine of the operations. There is also potential to optimise the production schedule and thereby to move revenues forward and generate enhanced early cash flow during the first 10 years of production. The biggest opportunity in this respect is the potential to merge the pits relating to the Ikenskoe and Kubuk operations into a single ‘mega-shell’, thereby simultaneously creating economies of scale and operating synergies as well as reducing the overall strip ratio of the operation. Additional enhancements include metallurgical test work to reduce the magnesium oxide content of the concentrate on which penalty fees are levied, the potential to generate a separate copper concentrate, improved off-take terms and accessing low-cost Russian government infrastructure loans to construct the access road. Exclusive of these factors, at a long-term nickel price of US$8.00/lb (US$17,640/t), the headline results of AMC’s pre-feasibility study are shown in Exhibit 6, below. As before, more than one development option was considered (in this case both toll smelt and low-grade matte options); unlike before, no consideration was given to two further options, namely the high-grade matte and refined product options. However, these are not precluded by the decision to develop the project as either a toll smelt or a low-grade matte option and can be effectively added to the project via the expenditure of additional capital at a later stage, at least partly funded by internally generated cash flows.

Calculated C1 cash costs for each development option fall within the second lowest cost quartile of industry reported costs, while capital intensity is well below the average of US$54,826/t and towards the middle of the modal range of US$20,000–30,000/t of 16 selected nickel sulphide projects globally.

After a three-year construction period, production will be sourced from four open-pit and one underground (MKFL) mining operations to generate c 90Mt of ore over 15 years.

During the first 12 years of mine production, the overwhelming majority (ie 98.6%) of material will be derived from measured and indicated resources. All production thereafter will be derived from open-pit recoverable, higher-grade inferred resources.

Once mined, ore will then be processed to concentrate at a rate of 6.0Mtpa using a conventional sulphide flotation plant to produce 5.74m wet metric tonnes of concentrate – equivalent to 5.37m dry metric tonnes of concentrate (ie implying a mass-pull of 6.0%) at a grade of 9.7% Ni, containing 518.7kt nickel metal, at the following metallurgical recoveries:

Concentrate will then be transported 338km on Amur’s access road from the mine site to a rail station to be constructed on the Baikal-Amur Mainline (BAM) at an average rate of 382.7kt per annum over 15 years, with the return trip being used by the concentrate haul fleet to resupply the on-site operation.

In the case of the toll smelt development option, the wet concentrate would simply be loaded onto rail cars for shipment by Russian Railways to the port of Vladivostok.

In the case of the low-grade matte option, where before we had assumed that a smelter would be located at Ulak, in the PFS it has been assumed that an electric furnace/flash smelter would be constructed at a station on the Baikal-Amur mainline (BAM) to produce approximately 184kt of low-grade nickel matte per annum (2.76Mt over the life of operations) – ie approximately half the tonnage of the concentrate) – at an average grade of c 18.8% nickel (ie approximately double the grade). In reducing the total saleable product tonnage while doubling its contained metal content, the low-grade matte development option consequently approximately halves product transportation costs, while simultaneously attracting improved terms from off-take purchasers.

Traditional demand for nickel is as an alloying element, in which form it contributes to the longevity, corrosion resistance and low maintenance of stainless steel goods. The total size of the global nickel market in 2018 is estimated to be c 2.26Mtpa and is expected to rise to c 2.45Mtpa, underpinned by annual stainless steel output growth of c 5.0% per annum.

Between 2000 and 2010, global nickel supply increased at a rate of c 3.0% per annum – less than the average growth rate of consumption of 3.8% per annum for the period 2000–16. However, the rate of growth in supply increased to c 5.5% in the period 2010–16, at least partly in response to the start of nickel pig iron (NPI) production in China from 2005. Among other things, the development and expansion of NPI has been instrumental in effecting a decline in the proportion of nickel produced from sulphides (the traditional means of producing nickel) from c 55% in 2008 to c 33% in 2018.

Demand for nickel rose strongly in 2017 owing to increased consumption by both China (53% of consumption) and the stainless steel industry (69% of consumption). However, since it banned the export of unprocessed ores, including nickel, in 2014, Indonesia has emerged as a nexus of new developments (and pricing uncertainty) in the global marketplace. These include:

Since 2017, the global market for steel has also been variously unbalanced by a combination of mining restrictions in the Philippines, the prospects for new nickel mine construction in Australia, fears of a US-China trade war and fears of US sanctions being imposed on one of the world’s largest producers, Russia’s Nornickel (formerly Norilsk Nickel).

Since hitting a record in 2007, the nickel price has fallen for two years, risen for two years, fallen for two years, risen for one year, fallen for two (to its lowest level since 2002, in 2016) before rising for two years to 2018. While the nickel price has exhibited material volatility in the past – eg its move from US$4,855/t on 28 September 2001 to US$48,800/t on 30 March 2007 (a tenfold change in the price in the space of five and a half years) – over the long term, since 1945, on an annual average basis, its price has shown an extremely close correlation to the price of oil:

Measured by the Pearson product moment coefficient, the correlation between the two is 0.83 over the timeframe under consideration, which is statistically significant at the 5% level; that is to say, there is less than a 5% chance that the observed correlation occurred by chance. On the basis of Edison’s long-term price for crude oil of US$70/bbl (cf US$67.35/bbl at the time of writing), the implied long-term price of nickel, derived from its observed long-term correlation with the price of oil, is US$15,820/t (US$7.17/lb), which is, by coincidence, almost identical to its average real price, since 1945, of US$15,961/t (US$7.24/lb), when expressed in 2019 dollar terms:

As a result, Edison has decided to adopt, for the purposes of its valuation, below, a long-term nickel price of US$15,820/t (US$7.17/lb) cf a spot price at the time of writing of US$5.88/lb, or US$12,965/t and a forecast long-term price of US$7.50/lb (US$16,538/t) used in our last valuation.

The largest upside risk to the nickel price concerns its use in the cathode of lithium-ion batteries. Consumption of nickel in this form is supported not only by expectations of rapid growth in the development of the electric vehicle market, but also by the increased intensity of its use as a result of efforts to improve the energy density of batteries and extend driving range.

Nickel for batteries is typically consumed in the form of nickel sulphate, which is a premium grade salt that is itself typically synthesised from Class 1 nickel metal refined from sulphide deposits and produced by only a select few market practitioners. As a result, nickel production in the form of nickel pig iron or ferronickel to supply the Chinese and, increasingly, Indonesian, stainless steel industries will not be available as a source of ready supply to battery manufacturers, leading to a possible bifurcation of the market.

There are approximately seven important types of lithium-ion battery; nickel is an important component in the three highlighted:

Unlike the consumer electronics market, which typically favours high-cobalt LCO batteries, the car manufacturing industry increasingly favours nickel-rich NMC and NCA batteries, owing to their relative cheapness to manufacture. Tesla’s electric vehicles, for example, use an NCA chemistry that requires a cathode that is 80% nickel. As a result, Porsche, among others, expects the ratio of nickel to cobalt and manganese in a typical battery to rise eightfold as electric cars evolve.

Estimates of the future uptake of electric vehicles vary widely, from approximately 14m in 2025 at the more conservative end of the spectrum, to c 70m at the upper end. Both represent a relatively small (c 1.1–5.5%) penetration of the total stock of vehicles of c 1.3bn globally. However, a shift of just 10% of the global car fleet to electric vehicles would create demand for 400,000t of nickel annually within a 2.26Mtpa market (currently) and research by Glencore indicates that demand for electric vehicles will require the production of an additional 1Mt of nickel per annum by 2030.

Amur’s updated capex estimates for the two development scenarios in the light of the pre-feasibility study are as shown in Exhibit 12, below, including a comparison with our prior assumptions, made in March 2018. Note that ‘Underground development’ capex will not be implemented during the initial development phase, but instead after operational start-up has been achieved, with the open pit being considered as the ‘initial’ source of production. As a result, this item has been included in ‘sustaining’, rather than ‘initial’, capex:

Note that, on the basis of these estimates, for just an additional 22.7% increase in initial capital outlay and a 11.7% increase in total capital, the NPV10 of the project increases by 60.7% in upgrading the toll smelt development option to the low-grade matte one.

Additional items included by AMC in its capex estimates include US$2m of closure costs, more than offset by US$5.8m in salvage value recapture and US$39.3m in initial working capital requirements, which are modelled by Edison in relation to debtor and creditor days and stock turnover for the purposes of our valuations, below.

As stated previously, 2019’s PFS considered only two possible development options for Kun-Manie, namely a toll smelt option and a low-grade matte option, whereas previous scenarios also included the possibility of a high-grade matte option and a refinery plus a phased development option from toll smelt to refinery over four years with internal cash flows largely funding each incremental development phase.

A summary of the PFS’s major operating and financial assumptions (common to both development options) together with Edison’s long-term nickel price assumption of US$7.17/lb (cf the US$8.00/lb used in the PFS) is as follows:

Finally, for the purposes of valuing Amur, we have assumed that the company raises sufficient equity at the currently prevailing share price so that its financial leverage ratio (debt/[debt+equity]) is no more than 80% at its maximum extent (in both cases in FY21). This would entail raising US$116.6m in equity in the case of the toll smelt development option and US$167.3m in the case of the low-grade matte development option. In our base case valuations on pages 15–16, below, we assume that these equity financings are conducted at the prevailing share price. Valuation sensitivities surrounding the assumptions behind each these funding scenarios are provided on pages 16–17, below.

In valuing Amur, Edison has used two methods: one based on the typical multiples of project NPV that pre-production junior exploration companies typically trade on and the other based on the present value of the forecast stream of dividends to investors from 80:20 debt:equity financing and development of the project at the prevailing share price.

In our report Gold stars and Black holes – Analysing the discount: From resource to sanction, published in January 2019, we calculated that, excluding outliers, the average value of companies with projects at PFS stage is 9.9% of attributable NPV, within a range between -15.4% and 51.3%. On the basis of Amur’s published NPVs (at US$8.00/lb Ni), this would imply a valuation for the company of US$60.8m (or 8.7c/share) based on the toll smelt option, or US$97.8m (or 14.0c/share), based on the low-grade matte option (excluding net cash/debt). However, given the strong (positive) correlation between valuations and IRRs observed in our report, coupled with both scenarios’ high IRRs, we estimate these percentages could increase to 13.0% for the toll smelt option and 15.9% for the low-grade matte option, implying valuations of US$79.9m (or 11.4c/share) and US$157.0m (or 22.5c/share), respectively. Notwithstanding these results for a project at PFS stage of development, at the BFS/DFS stage, the average enterprise value of a company typically increases from 9.9% of attributable NPV to 30.9% (within a range from -10.1% to 133.5%), which would imply a valuation for the company of US$189.9m (26.9c/share currently) based on the toll smelt option, or US$305.1m (43.3c/share currently) based on the low-grade matte option assuming that a BFS/DFS is completed as planned in 2020.

We calculate that the stream of dividends that results from the proposed toll smelting development of Kun-Manie averages 2.8 US cents per share per annum (cf 3.7c/share in April 2018) and potentially reaches as high as 5.5c/share (fully diluted). When discounted at a rate of 10% pa, the net present value of this dividend stream to investors is US$0.08 per share in FY19, rising to US$0.17 in FY26, by which time we estimate that debt will have been repaid and a first dividend could theoretically be paid to shareholders.

For the low-grade matte development option, the stream of dividends averages 3.1 US cents per share per annum and potentially reaches as high as 5.2c/share (fully diluted). When discounted at a rate of 10% pa, the net present value of this dividend stream to investors is US$0.12 per share in FY19, rising to US$0.20 in FY24:

Directly comparable results for each of the two development options, expressed relative to varying discount rates, are shown in Exhibit 17 below:

Investors’ attention is drawn to the decline in the forecast amount of equity to be raised for the toll smelt option (US$116.6m vs US$138.1m), but in the increase in the amount required for the low-grade matte option (US$167.3m vs US$148.4m).

A key factor in determining our ultimate valuation for Amur is the degree and price of future equity funding. For the purposes of our modelling, equity funding is presumed to occur at Amur’s prevailing share price (ie 2.61p at the time of writing). Variations from this ‘base case’ are considered in the tables below:

As stated previously, our base case scenario assumes 80% financial leverage. However, the sensitivity of the valuation of the two development options to variances in this funding mix is provided in the tables below, from zero equity raised (ie debt funding alone) with the associated maximum leverage ratio shown to 70% leverage (defined as net debt/[net debt+equity]):

We assume that investors are aware that there are certain risks inherent in investing in Russia at the current time, including the issue of sanctions, which could, among other things, complicate the import of capital goods. Notwithstanding its high profile in the daily news however, Russia ranks in the top third of jurisdictions for mining investment, according to the Fraser Institute’s 2018 survey of jurisdictions’ Investment Attractiveness:

Not only does Russia rank relatively highly in terms of Investment Attractiveness, according to the Fraser Institute’s 2018 survey, but it has also been on a broadly ascending trend since at least 2010/11.

Otherwise, technical risks associated with the project include geological, engineering, metallurgical and logistical risks (including the distance of the project from ports and rail infrastructure). In terms of its development, the project is effectively at the pre-feasibility study (PFS) stage of development, compared to preliminary economic assessment (PEA) stage previously. In due course, the project will be upgraded to bankable status (either western or Russian).

In quantitative terms, a summary of the sensitivity of the two development options to metals prices is shown below (note that the nickel price at the time of writing is US$5.88/lb, or US$12,965/t):

Among other things, investors should notice, in particular, the much greater valuation gearing of the toll smelt development option to the price of nickel than the low-grade matte development option, which may be attributed to the latter’s relatively higher margins.

By contrast, Amur’s valuation sensitivity relative to costs is as follows:

As such, it can be seen that a 10% change in the nickel price results in a c 5–7c change in valuation for the toll smelt option, but a 2–4c change for the low-grade matte option. By contrast, a 10% change in costs results in a 1–3c change in valuation for either development scenario.

On 13 February 2018, Amur entered into a US$10m convertible loan facility with Cuart Investments PCC and YA II PN Ltd, of which it received a US$4m advance on 13 February 2018. The loan was unsecured, bore 8% annual compound interest and was repayable in 12 monthly instalments. Amur could elect to make monthly repayments of interest and principal in accordance with the repayment schedule. Should the group not make the repayments, the investors could elect to receive full repayment at the end of the 12-month period or to periodically convert the amounts into shares at the lower of:

Since entering into the agreement, we estimate that Amur has converted US$2.4m of the initial US$4m advance via the issue of 59.6m shares (c 10% dilution), leaving US$1.6m (gross) of the initial advance outstanding (US$1.2m net as at 22 March 2019). On 22 March 2019, it restructured the loan to extend its maturity to March 2020 as well as drawing down an additional US$0.5m. Under the terms of the restructuring, the outstanding US$1.2m of the convertible is repayable in 12 monthly instalments at 110% of the principal portion of the repayment and its accrued interest (to the extent not having been converted into new ordinary shares), with the first repayment in respect of the initial advance becoming due on 20 April 2019. The further advance of US$0.5m (net of an implementation fee, which will also be drawn down and immediately paid to the investors) is repayable in 12 monthly instalments, also at 110% of the principal portion of the repayment and its accrued interest (to the extent not having been converted into new ordinary shares), with the first repayment in respect of the further advance becoming due on 20 April 2019. In return for the amended terms, the company is issuing the investors with 10,902,956 warrants with an exercise price of 3.76p.

Otherwise, Amur had US$1.0m of net cash as at 30 June 2018 after US$2.5m of cash outflows (before financing) over the course of the first six months of the year. We estimate a further US$2.1m of cash outflows in H218, resulting in US$1.1m of net debt as at 31 December 2018, which would have been funded by the amount of the group’s convertible outstanding. Note that, for the purposes of our valuations, above, and our financial summary, below, the balance of the convertible is treated as conventional debt (owing to the difficulty/impossibility of forecasting a likely conversion price for the convertible stock).