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Has Amur Minerals Corporation Risen Too Far Too Fast?

Over the past 12 months, Amur Minerals’ (LSE: AMC) shares have risen by a staggering 580% on a wave of good news. 

These gains have accelerated over the past month. Since the end of April, Amur’s shares have jumped by around 55%.

But has Amur got ahead of itself?

The company is still in its development stage, and there is plenty of work to do before Amur starts to generate cash. Have the company’s shares risen too far too fast? 

Approval received

Amur’s gains over the past month have been driven by the approval of the company’s “Detailed Exploration and Mine Production Licence” for its Kun-Manie project in the Far East of Russia. 

In many respects, this approval surprised many analysts. The Russian licencing system is notoriously difficult to navigate especially for a small Western company. 

The Kun Maine project is considered to be a world-class nickel/polymetallic project due to its size and resource base. The company’s newly approved 36 square km license for the project is valid until December 2034, giving the group plenty of time to extract a sizeable amount of resource from the prospect. 

To complete the licencing, all that remains is for Amur to compensate the Russian Government with a one-time payment of approximately $480,000.

Plenty of work to be done

There’s still plenty of work to be done before Amur can begin production at its Kun-Manie project. 

The “Detailed Exploration and Mine Production Licence” was granted with caveats that need to be fulfilled.

These include:

  1. The approval of detailed exploration plans by the appropriate agencies.
  2. Additional work related to metallurgy and engineering studies to be compiled in a final feasibility study to be approved by the State Reserves Committee.
  3. Amur’s detailed exploration plan, which establishes the basic parameters and volumes of work for the next phase of development. Once again, this plan will need to be approved by the regional authorities.

Basic access 

Amur’s Kun-Manie project really is in its early stages of production.

Indeed, while management waits for certain approvals, the company is weighing up its options for building a permanent access road to the project.

The road, to the nearest suitable rail line, would cost an estimated $312m and stretch across 320km. If this option isn’t viable in the near term, Amur is contemplating leasing a Zeppelin to fly equipment to the Kun-Manie prospect. 

Funding issues

Ultimately, Amur will have to build a permanent access road. Unfortunately, the cost of the road highlights the financial hurdles Amur is facing. 

With a market cap. of only £86m, Amur is facing the prospect of taking on a near-crippling amount of debt just to fund the construction of the access road. 

Still, there’s no doubt that the scale of the world-class Kun-Manie project could attract another partner with deeper pockets than Amur. Moreover, Amur could be acquired by a larger peer that’s looking to get its hands on a quality asset at a low price. 

The bottom line

All in all, Amur has a long way to go before its Kun-Manie mine is operational, and the company starts generating cash.

And with this being the case, it's difficult to value Amur's shares and judge if they're overvalued or not at present. Although it's clear that there are plenty of risks ahead. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.