New leadership, a new asset and a concerted effort to finally tell investors about its strategy are reasons to look at Kalimantan Gold (KLG:AIM) at 1.2p, soon to be renamed Asiamet Resources.

The company has historically failed to engage with investors and suffered at the hands of strategic partners who controlled the pace of newsflow. Now that has finally changed, we see stronger prospects for the share price.

New broom

Tony Manini has been recruited as the new chief executive, bringing extensive experience in discovering and developing mines in Asia and Australia, including 14 years at FTSE 100 resource giant Rio Tinto (RIO).

Manini was the exploration manager at Oxiana which was merged in 2008 with Zinifex to become Oz Minerals (OZL:ASX), once a great force in the mid-cap mining space before it struggled with high debts. Oxiana already has a history with Kalimantan as a former joint venture partner which walked away in 2007 after deciding the latter’s KSK copper project in Indonesia wasn’t good enough to advance.

Interestingly, KSK still forms the backbone of Kalimantan today. Manini says the project now looks more viable thanks to infrastructure improvements in the local area. ‘It was considered a remote project historically, that’s why majors would only look for mega projects to justify the cost of infrastructure,’ he notes.

Manini believes part of KSK is good enough to mine from surface and run as a heap leach project to make copper cathode. This year will see a new drilling programme with the aim of expanding the resource by 30% to 50% and to improve confidence in the quality of the ore body. It already has the necessary funding for this drilling and metallurgical test work, thanks to a £1.3 million placing in May.

The new CEO hopes that KSK could become a 15,000 to 20,000 tonnes per year project within three years, costing $150 million to $175 million to build with ‘well under’ $2 per pound operating cost. That compares favourably to the present copper price which trades at $2.61 per pound.

Growth: HIGH

Plenty of exploration upside across two copper projects and a 3-year path to production.

Risk: HIGH

Funds are ok for now; but Kalimantan will need more cash next year to support work.

Quality: MEDIUM

KSK is a satisfactory starter project, but Beutong looks a better bet for the long-term.

Route to cash

A clear route to cash generation could be the swinging factor for previous Kalimantan naysayers. It is also a positive stepping stone for developing the new asset called Beutong. This has the potential to be a large copper/gold open pit project.

Manini believes the $800 million potential build cost is ‘very cheap’ compared to most new, large mine developments in the world. ‘We’re next to a highway, 50 kilometres from a new port and new power station and the coast. If this project was anywhere else in the world, you’d have to build all that infrastructure from scratch.’

One strategy would be to use cash generation from KSK production to help advance Beutong’s development. A strategic partner is also a possible route, although Kalimantan must first convert the exploration licence to a mining permit, something that may take 12 months according to Manini. Kalimantan plans to sell or farm-out a gold asset called Jelai.

The share price experienced a sudden spike in September 2014 which Manini attributes to day-trader hype. He is confident these individuals have now exited, leaving supportive shareholders with longer-term horizons in place. Manini co-founded investment vehicle Tiger Realms which has an 11.8% stake in Kalimantan. Hong Kong fund MK TRM owns 7.1%; and two of Manini’s friends in Australia hold a combined 7.2%.

This is a highly speculative investment but anyone bullish on the copper price and/or able to recognise the positive effects new management can have on a resources stock - even if just temporarily - should get on board.

Kalimantan Gold (KLG:AIM) 1.2p

Stop loss: 0.84p

Market value: £6 million

Prospective PE Dec 2015: n/a

Prospective PE Dec 2016: n/a

Prospective dividend yield: n/a

Bid/offer spread: 8%

Analyst price target: 3.2p*

*House broker VSA Capital, 11 June 2015