When might investors warm to Amur Minerals?

Investing in AIM-listed miners can be exciting, but the road to production is long and fraught with huge risk. It's been a hard slog for Amur Minerals, too, so I met chief executive Robin Young and non-executive director Paul Gazzard for breakfast this week to find out what's happened to the teenage mining hopeful.

Thirteen years old, the company, which one day hopes to mine nickel in eastern Siberia, has shifted from exploration to pre-production after securing a 20-year production licence for its remote Kun-Manie prospect.

Despite the difficult geography of the asset, management find the corporate backdrop supportive of its targets, with President Vladimir Putin still willing to provide economic support for the region through agencies and incentive programmes. It also helps that Amur is perfectly placed for the largest nickel markets in China, South Korea and Japan.

The Kun-Manie mine is now thought to be one of the top 20 global nickel sulphide depositsIt usually takes about 16 years for a company to get a prospect from a chunk of land into a producing mine, Young tells me. Amur is in year 14 of this cycle, but, given the harsh local weather in the far east of Russia, he thinks it's more like year eight. Using this time scale, Amur is ahead of schedule, which is why it's "kicking ass", according to its American boss.

Initially thought to be one of the top 25 global nickel sulphide deposits, upgrades have nudged Kun-Manie into the top 20. Young reckons it could be in the top five when a Definitive Feasibility Study (DFS) is released by the end of next year. A lot of background work has been done to underpin the study, and everything is on track, I'm told.

After drilling 19,785 metres during the 2016 field season, Amur now knows the Kun-Manie nickel deposit could be 2,100-3,000 metres long - 40% larger than previously thought. With recent tests suggesting nickel mining grades of 0.6-0.8% and metallurgical recovery range of 61-83%, the DFS will more than likely upgrade reserve estimate next year.

The DFS will replace the out-dated 2007 pre-feasibility study that estimated a 4 million-tonne per annum operation. Broker Edison's most recent research note pencils in an annual production target of 6 million tonnes.

Amur also wants to build a smelter in the project to get value for money. Signing a letter of intent with IG Copper over the scope for future refining deals aims to put Amur on the map and highlight evidence of demand should any third parties wish to get involved.

Luckily the Kun-Manie nickel is a sulphide mineral instead of laterite, which makes the process of extraction much easier and cheaper. The group will be able to use both open pit and underground mining. As Amur wraps up this year's field season, which racked up $1.65 million (£1.32 million) in exploration costs, management reckons it will upgrade resource estimates soon.

Discussion board darling

The discussion board darling is an AIM tiddler, with a share price of around 3.5p reflecting a £23 million market capitalisation. It takes a long time to get a plot of land to production and the road is laden with risks.

With no institutional shareholders, Amur's share price is exposed to volatility and speculationRight now, the risk/reward balance doesn't warrant anything much higher. A major catalyst is needed to drive demand.

Amur's management has been accelerating the crucial, but less visible, background work that has increased the inherent value of the company. This would be recognised if a takeover attempt surfaced, an event the pair think is "highly possible but not probable".

"The value of the company has slowly been increased through so many different areas," says Gazzard.

Of course, getting this project to production will cost a fortune - estimates sit at around $1.4 billion. So the group is looking for joint ventures to share the financial burden, although it's not sitting idle.

Earlier this week, it penned a loose deal with Chinese engineering and construction group Jinchuan over the future development of the flagship project. Nothing is set in stone, but it is encouraging.

With no institutional shareholders, Amur's share price is exposed to volatility and speculation - it's a firm discussion board favourite.

The shares rocketed to 44p last year following approval from the Russians for its project. But these gains have now completely unwound. Watch this space as the group seeks the backing of a big shareholder.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.