Amur Minerals Might Be Selling The Mine – What Happens Next?

Amur Minerals Corp (LON: AMC) shares are up some 100% over the past 5 days. The reason behind this is that there’s been press speculation that Amur had received an offer to buy them out of their nickel, copper sulphide mine in Russia’s Far East.

Amur Minerals is also facing that grand question that all junior miners have to face at some point. A junior miner normally meaning a company not actually producing anything as yet but exploring, or investigating, in the varied stages before production can begin. Which is exactly where Amur Minerals are.

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Amur has identified a useful deposit containing nickel, copper, platinum and palladium. This isn’t a million miles away from the mineralisation at the other end of Russia, Norlisk and the Kola peninsula. So, how to mine, process, these are things already known.

However, while known this isn’t necessarily cheap to do. It might even be wildly profitable but it is going to require capital. Vast amounts of it. Amur is currently valued at some £50 million, which is a tiny capital base from which to try to raise a £billion or three to get a full blown mine into operation.

Thus that decision which all junior miners have to make. Having prospected, gained licences, proven the existence of an economic deposit, well, what next? Try to raise the capital to exploit the mine? Or sell on to someone who already has that capital? It’s akin to research pharmaceuticals, once something seems to work in Phase I or II trials then try to go it alone to market or tie up with/sell out to a major?

As Amur Minerals has announced that press speculation has something to it. There is interest in purchasing the only major project the company owns at perhaps £100 million. Whether an actual deal will take place is as yet unknown. It might well be sensible to take the money and run. This is a very profitable piece of exploration and rights assemblage after all. Or perhaps the price on offer won’t quite be enough to remove the temptation to try to go it alone and develop independently.

Time will tell, obviously and that’s clearly part of the speculation here. But there’s another level to it as well. Say that Amur does sell out, collects £100 million – then what? Do they simply return the capital to shareholders and have lashings of ginger beer all around? Or will they collect that and then spend it on the next prospecting adventure?

It’s that second which is so hard to value. Do we think that lightning strikes in the same place twice? Or perhaps we’d bank on an experienced and successful management team to do it again?

This first 100% rise in the Amur Minerals share price isn’t the end of it that is. Sale and return of capital might well mean a further rise – in due time. Collection of the capital and its spending on new projects, well, that could go either way.