Euro.Mins. Share Discussion Threads

[tonudiki] 08/12/2006 09:51

A nicely bullish article from "Resource Investor" yesterday......

[simon54] 23/11/2006 22:46

Thanks, ram, for the brokers' notes. I increased my position earlier today. I'd be happy enough with anything beginning with a six in a year's time, I must say! This seems to me now to be relatively low risk, so I'm pretty optimistic (relatively speaking ;-)).

[donaferentes] 23/11/2006 22:37

I am sure someone bigger thaqn EUM taking it over would be able to offer the Bank at least as good - probably better - covenants in addition to the charge on the EUM operation and the hedged gold sales, so why would they object?

As to hedging EUM would still be th elegal entity honouring its contracts, even if no longer plc.

What price do you reckon it's worth. Somewhere around 75p as a pure guess? Who are the institutional shareholders who will effectively decide the outcome of a bid?

[rambutan2] 23/11/2006 13:45

the more i think about it the more likely i think that eum will get taken out. for next 10 months ie say to sept 07 it looks like a sitting duck. is there anything to stop someone from bidding for it now? ie legalise in bank loans, hedging, contractor etc etc.

[donaferentes] 23/11/2006 12:27

Thanks Rambutan - interesting, positive articles.

[rambutan2] 23/11/2006 00:55

posted in canada recently...

Growth Stocks Weekly
www.gsweekly.com


Performance: Year ended April 1996 116.9%; 1997 28.1%; 1998 36.4%; 1999 39.4%; 2000 180.9%; 2001 -50.5%; 2002 18.7%; 2003 28.8%; 2004 166.7%; 2005 28.2%; 2006 153.3%


Junior Gold and Natural Resource Sector Report

October 29, 2006


_______________________________________________________________________

Overlooked Emerging Producer



UPDATE


EUROPEAN MINERALS CORPORATION (EPM-TSX, EUM-London AIM)


Weekly chart, High $1.44, Low $0.44, Last Trade $0.87


HIGHLIGHTS:


· Construction now fully funded after $81 million equity raise & recent US$75 million debt facility

· October 2007 commissioning expected with $50 million in working capital position

· Very low $62 (US$55) market cap per oz of gold using base-case scenario

· Production estimated at 145,000 oz/yr at US$67 cost per oz over 1st 5 years

· Payback < 22 months at US$400/oz gold, US$1.10/lb copper

· Life of mine operating costs expected to be US$237 per oz

· Share price severely discounts NPV – potential takeover target

· Life of mine 15+ years

Overview of the Varvarinskoye Project

The 100% owned Varvarinskoye project is a gold-copper deposit in the development phase. The project has current resources of 3.8 million oz with proven and probable reserves of 2.34 million ounces of gold and 269 million pounds of copper at metal prices of US$375/ounce for gold and US$1.00/pound for copper. The deposit has simple metallurgy, strong economics and potential for expansion, and is expected to treat 4.2 million tons of ore per annum with a waste to ore stripping ratio of 4.17:1 and has a current mine life of 15 years.

Varvarinskoye is in a rural area close to the industrial city of Kustanai which has a well established mining services sector. The area has excellent infrastructure including roads, railways and power close to the project. Water is readily accessible and the flat terrain and mining culture in existence are considered positive attributes. The climate is dry hot summers (average 20°c) and cold snowy winters (average -15°c) which has been taken into account in the plant design, construction schedule and operating plan, and allows operations 24/7 for 358 days per year.

Gold Hedging Facility
A gold hedging facility implemented in December 2005 remains in place. The company sold into the hedge a total of 443,000 ounces of gold at a price of US$574.25 per ounce. The hedge is in the form of a monthly US dollar flat forward un-margined gold sale facility for the eight year term of the project debt facility. The 443,000 ounces hedged represents 50% of the gold production scheduled during the term of the debt, but less than 20% of the reserves at Varvarinskoye. The implementation of the gold hedging facility satisfied a condition of drawdown of the debt facility.


Kazakhstan

The Republic of Kazakhstan is a landlocked country in central Asia and the second largest (after Russia) of the former Soviet Republics. It is geographically diverse, comprising extensive grassland, semi desert and mountainous areas. It is bordered by Russia, China, Kyrgyzstan, Uzbekistan, Turkmenistan and the Caspian Sea. The population of 14 million is highly literate and well educated. The country has good infrastructure with a well developed national grid and network of all-year roads, railways and airports.

Kazakhstan is a stable democratic country and is considered a "model transition economy" in gaining its independence from Soviet centralized command economy to become a free market economy. The country is headed by Nursultan Nazarbayev who was re-elected in 2005 for a seven year term. Under Nazarbayev's presidency, Kazakhstan has made significant progress towards developing a free market economy. The country has a friendly foreign investment climate and is a member of the United Nations, the World Customs Organization the Organization for Security and Cooperation in Europe among others. Kazakhstan is also an observer at the World Trade Organization and an active participant in the North Atlantic Treaty Organization's (NATO) Partnership for Peace program.

Minerals Resources in Kazakhstan

Kazakhstan possesses significant mineral and metal deposits, along with fossil fuel reserves; its industrial sector is based on the extraction and processing of these natural resources. Since gaining its independence in 1991 after the break up of the Soviet Union, Kazakhstan has experienced rapid economic growth, mostly attributed to its natural resources. According to the EBRD, Kazakhstan's GDP grew by 9.5% in 2004 and was projected to grow by 7.0% in 2005. The economic expansion is due to increased production of oil, minerals and other commodities, supported by high oil prices and rising foreign investments.

Mineral resources include the world's largest chromium, vanadium, bismuth and fluorine reserves. The country is also a major producer of iron, coal, uranium, lead, zinc, tungsten, molybdenum, borates, phosphorite, copper, potassium and cadmium. It ranks third amongst CIS countries in terms of gold reserves, and is the eighth largest copper producing country in the world.

Almost all gold mining companies and properties have been fully privatized in Kazakhstan, the only country within the former Soviet Union to have done so. This allows gold doré and gold-copper concentrates to be freely exported and sold.

The laws of Kazakhstan have established a single investment regime for both domestic and foreign investors. The country guarantees stability of contracts where investors enter into contracts with Kazakh State agencies, with the exception of a change of law intended for national or ecological security, public health or morality, or if it affects the procedure or conditions of import, production and/or sales of excisable goods.

Kazakhstan's bond rating has recently been upgraded by Moody's to BAA3 with a positive outlook, which is similar to Mexico.

Compelling Takeover Target

The abrupt turn up in the fortunes of world commodity markets has reflected a confluence of factors on both the demand and supply sides of the equation. Over the past decade, demand for most commodities picked up strongly, owing to rapid industrialization of China, India and other developing economies. In contrast, the supply of commodities lagged behind, constrained by cuts to exploration budgets in the 1990s. Accordingly, supply-demand balances for many commodities have tightened significantly. Other global factors also swung in support of commodity prices, including a structural decline in the U.S. dollar and the rekindling of global inflationary pressures that provided a boost to real asset prices.


We are seeing a global move towards consolidation in the resource and gold sectors at a time when most groups are generating surplus cash, adding significant fuel to the process. So far, M&A activity has largely been restricted to the top end of the market, as we are still living off the successes of previous cycles from 10 and 20 years ago. While there has not been much focus in the mid-cap and small cap area yet, inevitably the increasing buildup of cash and the lure of deeply discounted discoveries and ready-to-deliver projects with technical and financial risk removed will prove to be an irresistible draw. European Minerals qualifies as a timely acquisition target for a mid-tier growth-seeking producer.

It has been estimated that as much as $100 billion in investment funds have been directed into commodities worldwide over the past few years. While an improvement in fundamentals got the ball rolling in 2002-03, the momentum has been sustained in part by growing investor enthusiasm. Notably, the commodity market has also become increasingly attractive to large institutional investors – such as hedge funds and pension funds – in view of abundant liquidity, declining relative returns on fixed-income investments and the launch of exchange-traded funds (ETFs) and other investment vehicles that have facilitated direct investor participation in commodities. While volatility can be expected, the trends are strong and likely to continue.


Technicals & Summary

With European now half-way through building their mine, investors have an opportunity to lock in returns with the geological and financial risk virtually eliminated. Post-financing, and with little promotional news to keep investor interest, the share price saw a severe drop to 50% off recent highs where a double-top spike telegraphed a warning. Price found support on its long term uptrend line at around $0.70 and has started to lift, now flirting with resistance at the $0.90 area.


The company is substantially undervalued given its development-stage, compared with gold companies' average market capitalization per ounce of gold reserves and resources at about $120. European, with a market cap of roughly $236 million at 87 cents, and 3.82 million ounces in reserves/resources, has a market cap per ounce of only $63. This is calculated with European's base case scenario, with gold valued at $375/oz and copper at $1 per pound. Metal prices are obviously a lot higher now, leaving substantial inherent upside for patient bargain and value investors.


One near term event that may spike investor interest early is a new development plan and scoping study is due out over the next month or two. This will likely provide a higher base case valuation. In addition, the Varvarinskoye orebody is actually designed with several mining pits that, with higher metal prices, may end up being combined into one big pit, thereby further increasing project economics.



as was this Aton comment...

8 November 2006, Wednesday
European Minerals. Site visit confirms continued progress
European Minerals yesterday reported neutral 3Q06 CA GAAP results, including a net loss of $2.1mn, which is an improvement of 11% on the net loss of $2.4mn the company posted for 2Q06. SG&A costs fell 40% q-o-q, mainly due to stock-based compensation of $1mn in 3Q06 compared to $2.8mn in 2Q06. However, the company reported a foreign exchange loss of $0.3mn (following a gain of $1mn in 2Q06).

The company reported capex of $18mn for the development of its Varvarinskoye gold/copper project near Kustanai, which pushed the company's cash position down to $21mn at end-3Q06. Subsequently, the company secured $75mn in financing.

Our visit to Varvarinskoye last weekend reassured us the project is coming along well, despite the company's recent announcement that the plant's commissioning has been delayed. All of EPM's mining fleet was on site, continuing with pre-stripping and preparing the ground for the stockpiling of ore.

The trucks consume about 15,000 liters of diesel per day, using fuel purchased at $0.50/l-$0.70/l from refineries in Russia (2.5-month bulk purchases).

Civil engineering work on the water storage and tailings dam is nearing completion. A newly constructed 70km power-line will provide electricity at 2.8USc/kWh (under a fixed-price five-year contract).

A delay in the delivery of structural steel from Russia pushed the installation of plant equipment back to April 2007. Although this November's unusually mild weather (as the pictures show) allowed more work to be done on site, the lack of steel beams means the plant is unlikely to be completed before October 2007.

As of end-October, European Minerals had spent a total of $95mn on the project and plans to spend another $63mn before the plant's scheduled commissioning in October 2007.

We view the continued progress on site as positive and reiterate our Buy recommendation on European Minerals, with an end-2007 fair value of $1.28.



and a new (november) presentation...

[rambutan2] 23/11/2006 00:35

the president is in the UK at the mo - opened the lse and met the queen...

[simon54] 22/11/2006 22:28

Any view on the setback today? Same with HMB, also Kaz-based.

[mariannejane] 06/11/2006 12:30

EUROPEAN MINERALS


European Minerals: Finish line finally in sight.
By: Ian Mclelland

Vital statistics Date: 6th November 2006
Epic: EUM
Shares Issued: 278.77 million (fully diluted 416 million)
Share Price: 40.5p (88 cents)
Market Cap: £112.9 million ($235 m)
1 Year Range: 68.5p-29p (144c-63c)
Sector: Precious Base Metals
News: Latest
Market Data: Charts
Website: European Minerals
Other Articles:




DUAL LISTED AIM: EUM/ TSX: EPM

EPM Many investors often talk about the risks associated with minerals exploration and the difficulties in accomplishing all manners of tasks from drilling to interpretation of data. Once a project passes the bankable feasibility stage it, it is often labelled as "de-risked". De-risked the project may be, but with out risks is certainly is not, just ask Tony Williams, Chairman of European Minerals!

European Minerals' Varvarinskoye Copper/Gold Project isn't a new project on the block. European Minerals has been involved since 1995, and conducted a bankable feasibility study into the project in 1998 which deemed that the then current weak metal prices did not justify the large capital expenditure required to build the mine. Oh what a difference a few years can make! Varvarinskoye came back to life in 2004 and is now scheduled to move into production in the fourth quarter of 2007, almost one year behind the original ambition. When it does it will be one of the largest copper/gold deposits that London has seen move all the way from exploration to production for some time – and the path has been littered with challenges.





Excluding all of the sneering attacks in the press questioning the mineralogy of Varvarinskoye, and less tasteful digs at its colourful Chairman Tony Williams, the project has faced some big challenges, most notably when one of its contractors, MDM Ferroman was sacked in January. This meant the bank financing for the project had to be renegotiated as the new contractor, SENET CC, was not part of the lenders original due diligence process that the funding was based on. Nine long months later, European Minerals has finally completed a new facility for US$75.4 million which consist of a $28 million commercial loan, a $39.4 million loan facility and an $8 million convertible loan facility. The change of contractor and subsequent renegotiation of the debt has pushed the project cost up by only 9% to $158 million, still a relatively small increase given significant cost pressures experienced in the industry.

European Minerals already has in place a gold hedge for a total of 443,000 ounces of gold at a price of $574.25. This represents half of the gold that will be produced during the term of the debt, but less than 20% of the reserves. Speaking of reserves, the mine optimisation plan is currently undergoing a slight jig to adjust for robust copper and gold prices. It is widely expected that the new plan will include a deeper pit, which in turn should boost the resource estimate of the current mine. The new mine plan is anticipated to be completed before the end of November, so it may be on shareholders laps just in time for Christmas.

Beyond the financing hurdles that uropean Minerals has managed to finally clear up, the project is more or less ticking along as one would expect. There have been some delays, and there will probably be a few more. By the end of September 2006 the entire mining fleet had been purchased and delivered to site on budget. The 70km dedicated power line is completed and 6.2 million tonnes of pre-strip material has been removed on schedule and preparations are being made for stockpiling of ore. Civil engineering work on the water storage and tailings dams is also nearing completion and the processing plant equipment is arriving on site. Work on infrastructure buildings, including accommodation, is progressing to plan.


Varvarinskoye is located in northern Kazakhstan, and has a proven and probable reserve of 2.34 million ounces of gold and 269 million pounds of copper based on a metal price of $375/ounce for gold and $1.00/pound for copper. This reserve is based on over 1000 drill holes and 168,000 meters of drill core data. Once in production the plant will treat 4.2 million tonnes (Mt) of ore per annum and have a mine life of 15 years. It seems very plausible that Varvarinskoye will in fact produce at either larger rates or have a considerably longer mine life, as there is still plenty of potential to add to the reserve base in the future. Varvarinskoye will pump out 145,000 ounces of gold and 18.4 million pounds of copper per annum for the first decade of the operation - it is expected to take less than 3 years to pay back the debt facilities. Even with 50% of the gold hedged roughly 5% below this weeks gold price, this project is going to throw of cash if commodity prices maintain there current strength.

It has been a long an arduous road for European Minerals. But as the move to production nears, the current market capitalisation looks less and less likely to stay this low.

*The founders of Proactive Investors Ltd own warrants in European Minerals.

[mikehardman] 04/11/2006 15:49

rambutan2 - thanks for the link to the Dubai presentation; I have added it to the header

donaferentes and other newer arrivals - welcome

[rambutan2] 01/11/2006 10:43

real loss is missing out completely on the 2007 cu mkt which is looking good. by 08 more new production kicking in etc etc.

[adam] 01/11/2006 10:35

mentions own mining fleet outright - not leased
fully funded to production
that will be one larger open pit down to 225m with some smaller satellites - this due to higher metals prices, announced shortly
500 workers, mostly Kazakh
Below open pit there has been drilling to 350m or more and shows continuity. There will be an underground mine there in time too.
Expecting resources/reserves to expand as they mine (hardly unusual)
Mining lease covers small area of their tenament and no idea what's there, could be possibility of another Varvarinskoye... i guess this just to say that it is prospective and once up and running it will expand. So nowt new.

[rambutan2] 01/11/2006 08:27

listen to presentation from 31/10/06...

[wassapper] 23/10/2006 21:27

Mention in Minesite weekly round up this week - routine stuff

[rambutan2] 18/10/2006 20:34

well that's a relief!

and hopefully the end of the rather drawn out, and expensive, bad luck for this project. but i wouldn't bet the house on it.

not tried to work out the full cost implications of where we stand now ie debt terms, later start, same hedge etc, as i'm sure adam will do the honours.

[simon54] 18/10/2006 16:03

Very significant news today - and the market took a while to wake up to it! That should remove the major anxieties surrounding this share - so here's looking forward to the progress towards production!

(not a lot of punters interested in this one then!)

[thomas11] 21/9/2006 11:08

Nice rise, does someone know something about the financing !!

[adam] 20/9/2006 15:18

I don't think much of a political discount. Mostly down to debt funding IMHO.
Gold/Copper tend to correlate on price, so interesting to note at current prices copper output (18m lbs) adds 100k oz to reach 250k oz equivalent per annum. Although that would raise the cash costs depending on how things are quoted...

[mikehardman] 20/9/2006 15:04

good RI article

[simon54] 20/9/2006 14:56

Hi Adam - I hold MCR & UGY as well, in fact - yes, it's an interesting comparison! An exaggerated political discount applying to EUM at the moment, I am hoping.

[adam] 20/9/2006 12:49

Hi. IF article correct, assume expanded share capital ~$200m. Compare to non-producer, near term start-up 2007 like Mercator (MCR).
MCR have m/cap $100m, plant, and start-up scheduled H1 2007, production of 150k oz at cash costs circa $300/oz. Hence half the price of EUM, but nowhere near as profitable. Cash costs of EUM nearer $100/oz which is a difference of $30m/pa.
UGY in production at 100k oz circa cash costs $200/oz, $180m m/cap. So EUM would have much cheaper production, and mroe of it.
One could argue prospectivity is different, but who really knows?
So I am in agreement with the article EUM looks good value on a comparitive basis. I also hold MCR and UGY.
MCR/UGY will suffer more at lower gold prices due to higher cost bases.
I have not allowed for warrant dilution which are so far out of the money now they don't figure highly. At these prices one would hope that EUM could become a bid prospect too.

[simon54] 20/9/2006 11:46

Hello. It's nice and quiet on here :-)