Amur Minerals(LSE: AMC) has had an eventful12 months. This time last year the company was trading at 3.4p per share before rocketing to a high of 43p per share during June, a gain of 1200%.
Unfortunately, the companys shares have now fallen by more than 50% from their June peak. But have these falls presented an opportunity to buy? How much lower can Amur go before its fortunes turn around?
Plenty of risks
Of course, as with all equity investments, theres a chance that Amurs shares could fall to zero, wiping out shareholders. This is, of course, the worst-case scenario.
That said, Amur is at a crucial point in its corporate life. The companysKun-Manie mine is a world-class asset, with a net present value between $0.71bn and $1.44bn. However, Amur still has to raise the cash needed to fund the construction of Kun-Manie, which is estimated to be around$1.4bn over a two-year period.
Amur had less than $2m in the bank at the end of 2014, so the companys survival depends on its ability to unlock additional financing. Placings could help keep the lights on while the company looks for a partner and discusses lending with banks, but ultimately, theres no denying Amur is running out of time to secure its future.
A plan is needed
Even though the company is running out of time, Amur isnt heading for the rocksanytimesoon.
During 2014 Amur spent $2.4m or 1.5m running its operations. On that basis, after taking into account the companys current market capitalisation of 86m, its easy to conclude that Amur can continue to operate as a going concern for the foreseeable future by using a number of small placings. Also, the company could attempt a rights issue to raise a lump sum and remove a certain amount of uncertainty about its future.
Still, right now uncertainty prevails. Until Amur has laid out a detailed financing plan and roadmap for the mines development, its going to be difficult to value the companys shares.
Indeed, the companys only major asset at present is the Kun-Manie mine. And while Kun-Manie is worth nearly 20 times more than Amurs current market cap, it is still undeveloped. As a result, I believe it is overoptimistic to value Amur based on this one prospective asset.
With this being the case, its difficult to judge how much lower Amurs shares can go.
The bottom line
All in all, Amur could head a lot lower from present levels. For long-termholders, however, this shouldnt be an issue if the company can get Kun-Maine into production, shareholders are set for a hefty payoff.
Nevertheless, Amur has a long way to go before production begins at Kun-Maine, and theres still plenty that can go wrong.
So, if you already own Amur, it might be sensible to sit back and ignore the company for a few years while keeping an eye onyourother investments.
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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.