ACF Equity Research NKT JORC Report, Underpin Our Current Valuation For Eurasia Mining (LON: EUA)

Eurasia Mining PLC is an international mineral exploration company, listed on the Alternative Investment Market (AIM), focusing on Russia.

Eurasia’s stated objective is to explore for platinum group metals (PGMs) and gold through self-funded own exploration targets and joint venture partnerships with strategic operators and local partners. Operations are funded from the company’s own equity funds and funded joint venture agreements. Projects are subject to an initial evaluation for viability and once this is established further exploration work is carried out to feasibility study level. It is then the company’s intention to either proceed to develop the project to production or partner the project with a suitable operator.

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WAI JORC de-risks Monchetundra Flanks

Eurasia Mining (EUA.L) an AiM-quoted Russian Pd / battery metals dominated PGM miner RNS 16 Dec 21 announced a JORC from Wardell Armstrong Intl. (WAI) for NKT (part of M Flanks Kola and north of West Nittis (WN). WAI assigns a low end NPV of US $1,188m, of which 80% is attributable to EUA shareholders. The deposit Inferred Mineral Resource are 50% Ni, 33% Pd and 13% Cu et al. We consider the WAI JORC de-risks Flanks in part. We may also use the inferred resources JORC to raise part of our mineral assumptions. WAI uses a much lower WACC than our NPV. Our new WACC is still approx. 33% higher vs. WAI. Our EUA EV rises to $3.5bn. We use significantly lower long run Ni price and Cu price and a 20% higher Pd price vs. spot, suggesting an Implied EUA VR GBp 115-127. If we use Pd spot price our valuation still rises.

EUA operations plan delayed 12 to 24 months due to 7m suspension and Formal Sale Process

2020-2023E

 

Rh production excluded from valuation for all but West Kytlim;

License granted 15 Moz Flanks by Sevzapnedra, reducing flanks risk;

Pd supply constrained;

PGM prices significantly exceed our valuation assumptions.

Research Note

PGM Market Outlook Remains Strong

The Platinum Group Metals refers to six metals – ruthenium, rhodium, palladium, osmium, iridium, and platinum. Of these, the two most important are palladium and platinum. EUA focuses on the mining of these two metals.

Despite the Covid-19 driven correction (and V-shaped recovery) in Pd prices the underlying upward price drivers remain very largely unabated in a supply deficit market. We believe the Pd supply constraint, and rising demand in what is an inelastic largely non-substitutable good, is further sheltered by its tiny % contribution to overall auto costs. These characteristics of the Pd market leave headroom for far higher prices than seen prior to the recent and ongoing pandemic.

EUA sum of the parts valuation £2.96bn operations contributions – it is still all about Monchetundra

(Yet to include Rosgeo JV, Iridium resource from projects or Monchetundra Lo+Wn+Flanks Rhodium resource, PGM price assumptions highly conservative vs. 2021 average and current spot prices)

1) Potential resources within the existing company licence and the flanks application of ~15 million oz.

2) Potential resources occurring within 5km of the Monchetundra mining license and areas neighbouring the company’s deposits of ~4 million oz.

3) Potential resources within the wider Monchegorsk district in which the Monchetundra license is located of ~21 million oz.

Research Note

Eurasia Mining valuation catalysts

  • Monchetundra Rosgeo JV DFS and geology information;
  • Development of Monchetundra flanks;
  • Installation of 3 more wash plants at WK;
  • Covid-19 accelerated policies for regional or a global green hydrogen transport economy

extractives@acfequityresearch.com

+44 20 7419 7928

https://www.eurasiamining.co.uk/

ACF Equity Research LTD (FRN 607274) is an Appointed Representative of City & Merchant Limited (FRN 154182) which is authorised and regulated by the Financial Conduct Authority. | Copyright © 2020 ACF Equity Research.


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