Eurasia Mining plc, the palladium, platinum, rhodium, iridium and gold producing company, operating the established West Kytlim Mine in the Urals, and also the operator of the Monchetundra Project comprising two predominately palladium open pit deposits located 3km away from Severonickel.
One of Norilsk Nickel’s largest base metals and PGM processing facilities, near the town of Monchegorsk on the Kola Peninsula, provides a general and operational update.
The Company’s shares remain suspended pending further notification.
This update is made further to the announcement of 11 February 2020 which stated that, following social media speculation, trading in the Company’s ordinary shares was suspended pending clarification of its relationship with CITIC.
The Company clarifies that its conversations with CITIC to date have been with CITIC Merchant Co. Limited (‘CITIC Merchant’), the merchant banking arm of the CITIC Group Corporate Limited. CITIC Merchant is 51% owned by CITIC International Assets Management Limited, which in turn is a 46% subsidiary of CITIC International Financial Holdings Limited (a wholly owned subsidiary of the CITIC Group):
CITIC Merchant provides M&A advisory, corporate finance, asset management, principal investment and fund management services.
This Company’s discussions on its projects have continued with potential buyers at and after the global mining conferences of Indaba and PDAC, and following the temporary closure of the PGM mining industry in South Africa which has the capacity to produce 70-80% of global platinum and 40-50% of global palladium supply. The restart for some South African PGM miners may also prove difficult especially as there may be limited access to financing after all credit agencies (S&P, Moody’s and Fitch) downgraded South Africa below the investment grade into ‘junk’ territory coupled with continued volatility in PGM prices (particularly platinum). The Company reiterates that at this stage there can be no guarantee that any transaction will occur .
Cash and liquidity
The Company confirms that it has no debt, and that it maintains an unused credit line (the “Credit Line”) of US$1m from its largest shareholder put in place in June 2018 and its current cash position is circa £0.6m. Further details of the Credit Line are set out below. The Company’s cash position is after the expenditure on capital items required for West Kytlim discussed below and the additional purchases of a new washplant, mining equipment and ancillary capital items made at the end of last year and the start of this year. The capital expenditure is targeted at expanding production and increasing the value of the asset at West Kytlim. The Director’s believe the Company’s cash reserves and the unused Credit Line of US$1m, as well as the revenue from the operations, expanded by the above-mentioned investments, all strengthen the position of the Company in its ongoing strategic discussions.
Impact of Covid-19 on liquidity
The Company has assessed the impact of Covid-19 on the business, and has decided to be prudent and will aim to maintain its cash position of £0.6m which, along with existing operations, should allow Eurasia to continue to trade without using the Credit Line for at least 12 months, even if there are interruptions in production. The Board believes these interruptions to be an unlikely scenario due to the open pit nature of the mine, that enables employees to limit interaction; in addition the employees’ ability to social distance whilst using the mining equipment and individual crew shelters; and the personal protection gear that the Company has provided to them, should result in the operations being unaffected.
Corporate Governance Update
The Company continues to work on strengthening its board and advisors while completing an update of its corporate governance procedures, reflecting the progress made in growing the business. As previously announced, Alexei Churakov joined the senior management team as a Strategic Advisor to the Board in September 2019, this was followed by the appointment of Alexander Sushchev as a Strategic Advisor in November 2019, and James Nieuwenhuys as a non-executive Director in November 2019. Progress is being made on further proposed board changes, including new appointments, with an announcement expected shortly.
Full details of the Company’s mining activities in the last mining season at West Kytlim are set out in the announcement dated 26th November 2019.
Machinery and equipment
In addition to the existing machinery and equipment already owned by the Company as described in the announcement dated 26 November 2019, a le ase agreement has been signed with Leasing-Trade in relation to the following:
· Two new Hitachi ZX 330LC-5G excavators that have already been shipped and are currently operating at site, and a further Hitachi ZX300LC-5A excavator awaiting shipment;
· A 30 ton Chetra T15 bulldozer arrived on site on 15 March 2020; and
· The lease agreement also provides for the delivery to site during April 2020 of additional 4 Kamaz 20-tonne ore haulage trucks.
A fuel truck, that was purchased by the Company, completes the mobile fleet at site.
New crew shelters for 56 people have arrived and have been installed at the mining site, and the washplant with its associated pumps, generators and other peripherals that were utilised last year is now being serviced for use in this mining season, while mined ore is stockpiled in preparation for enrichment. Both the crew shelters and the mining equipment allow people to operate in social isolation conditions thanks to the open pit mining nature of the project. Eurasia has also purchased and delivered hand sanitisers and other precautions to provide individual protection for its employees. Operations at site therefore currently continue as normal, without any impact from COVID 19. Updates will be provided on this as required.
The Company is working on a Feasibility Study for the entire mining license area at West Kytlim, instead of at the Bolshaya Sosnovka area only, as originally proposed. Due to reserve and operational data generated over several seasons of mining , the Company has been able to strengthen its geological knowledge and apply this information to all resources on the mining license. As a result, the amount of drilling already undertaken is considered sufficient to raise the resources on the mining license to mineable categories pursuant to the Russian mining standard (GOST). The Feasibility Study now being worked on aims to raise all resources on the property to mineable categories within a single Feasibility Study and without further drilling. This is aimed to accelerate the development of multiple sites in parallel, which should significantly increase production volumes.
Tipil Area at West Kytlim
The Tipil area is immediately adjacent and to the west of the West Kytlim Flanks application area. The potential for further discoveries of palladium, platinum, rhodium, iridium and gold is supported by past exploration data and extrapolation of resource and exploration work on the neighbouring Ust-Tylai area of the current mining license. The Tipil license area has achieved approval at all federal agencies (see RNS dated 09 December 2019) and awaits a formal issue of the appropriate license.
As previously announced the application for the Flanks areas at Monchetundra received Ministry of Defence approval (see RNS dated 17 December 2019). Approval by the Federal Security Service (FSB), the last remaining federal body, whose approval is required for the flanks licence application, was also subsequently confirmed to the Company by Sevzapnedra. The Directors expect the license to be issued by Sevzapnedra soon as per standard process.
RUSSIAN CURRENCY DEVALUATION
Eurasia’s cost of production is already in the lowest quartile of the global cost curve. The Company notes that the Russian currency has devalued against the US Dollar by c.30% since mid-January 2020 with the result, that the operating costs in US Dollar terms are reduced further.
RELATED PARTY TRANSACTION
The Company confirms that the credit line referenced above is provided by way of a loan agreement dated 25 June 2018 made between Eurasia and Hamomelia Services Limited (“HSL”), a company owned and controlled by Dmitry Suschov, a director of Eurasia (the “Agreement”). Pursuant to the Agreement, which was referenced in the Company’s Annual Report and Accounts for the period ended 31 December 2017 HSL made available an unsecured US$1m draw down facility to the Company. This facility which has not yet been used by the Company, can be drawdown by Eurasia, at the sole discretion of HSL, at any time until 31 August 2020. Interest accrues on any drawdown at the rate of 9% per annum and the amount is repayable five years after the date of drawdown.
The announcement of 28 June 2018 confirmed the above stating, “In June 2018 the Group entered into a loan agreement with a company controlled by a non-executive director D. Suschov, to borrow up to $1 million from June 2018. Loan bears interest at 9% per annum payable quarterly. The loan is repayable in full in five years from the first drawdown date.”
However, the execution of this Agreement was a transaction with a related party and was subject to AIM Rule 13 of the AIM Rules for Companies. The Company did not comply with the requirements of AIM Rule 13 in respect of this agreement at the time it was entered into.
PROPOSED CHANGE OF NOMINATED ADVISER AND BROKER
The Company is in advanced discussions with a new Nominated Adviser (“Nomad”) and Broker. WH Ireland has given notice to resign as Nomad and Joint Broker and the notice period is due to expire on 30 April 2020. WH Ireland will be working with the Company to ensure a smooth transition to the new Nomad.
The Board believes that the appointment of the new Nomad will take place before the WH Ireland notice period expires. However, pursuant to Rule 1 of the AIM Rules for Companies, if a Nomad is not appointed by 7am on 30 April 2020, admission of the Company’s shares to trading on AIM will remain suspended, and if a new Nomad is not appointed by 7am on 29 May 2020 admission of the Company’s shares to trading on AIM will be cancelled.
Christian Schaffalitzky, Executive Chairman commented: ‘ The Board is pleased to make progress on the operational side, on the appointment of the new Nomad, and on its strategic discussions. Although our mining operations are of an open pit nature and are ongoing without any impact of COVID-19, the Directors have decided to be prudent and not to invest all the Company’s cash into production expansion but to keep a cushion on top of the unused credit facility. With our flanks application imminent, a developing supply crunch from stalled production by the major PGM producers and the recovery of PGM demand from China underway in March 2020 with both Industrial PMI and Composite PMI above 50, we are in a good shape and, although all companies are affected by the uncertainties of the current environment, I believe we are well positioned to take advantage of the right strategic options for our assets “.
Eurasia Mining Plc
Christian Schaffalitzky/ Keith Byrne
+44 (0)207 932 0418