Eurasia, Greatland, Andrada, Voyager and URA: Monday unpacked

Sep 09, 2024

Good morning MININGAIM and welcome to Monday. There's a fair bit to get through today, so with no further ado -

Eurasia Euphoria?

I want to quickly chat about Eurasia - the stock is in the doldrums, the company went into a suspension from which only today is it returning, and the mood music is all over the place.

I'm not going to talk about the assets; suffice to say they are objectively far more valuable than the current market cap, but also geographically politically difficult.

Here's a few things to consider:

The trade finance loan with Sanderson Capital Partners for £2.5 million is a good deal - Sanderson is definitely one of the better players on the chess board, and has a history of holding shares it takes in payment for monies lent rather than selling (or in the case of other operators, actively damaging the partner company for its own profit).
Chair Christian Schaffalitzky has pledged circa 95 million shares (almost his whole shareholding) as the only collateral; while this may look noble, the stock is worthless without this finance anyway.
The loan is marketed as interest free (though there is a 12.5% 'financing' fee at 2.3p per share - a bit sneaky) and convertible at an average of 2.7p per share (a 17% premium, but nothing in the context of the assets).
The last £1 million of the loan is 'subject to the Company entering into a term sheet to sell its Russian assets and signing a share purchase agreement relating to such a sale.'
Sanderson also gets circa 55 million warrants over two years at 4p per share.
The initial £1 million will provide working capital to September 2025.

Eurasia will also generate capital from stockpiled PGM concentrates in addition to VAT refunds worth £323,000 from HMRC. There's a decent chance too that the company will recover some £1.3 million from 'a third party in relation to a previous transaction' - we can all guess which one, but the bottom line is that Eurasia is now capitalised.

For context, there is now £5 million of mined material stockpiled at West Kytlim, and this is not theoretical - £2.07 million was generated from a test sale of the concentrate produced at the mine at the end of 2023.

Monchetundra also remains highly valuable, with significant upside given the NKT project - final approvals were received last summer and the DFS has been completed for some time. The good news is that a DFS typically remains valid for three years post approval - and therefore there is a decent amount of time to achieve a sale.

It's also worth mentioning the litigation against tax authorities which was won at the Supreme Court recently. Excessive mining tax of $1.3 million including legal costs and interest is being returned to EUA as well.

Of course, the game is to achieve Russian asset sales:

'During the year, a number of parties were in discussions with the Company regarding the potential acquisition of our Russian assets. Eurasia continues to seek a complete exit from Russia via either selling all remaining Russian assets (comprising West Kytlim, Monchetundra and NKT) via a competitive process among strategic investors, or via the option of a transaction involving Russian management, in partnership with a strategic investor.'

This is politically delicate given the Russian sanctions situation - and a sale of assets has taken longer than many expected. There is also a tension in that shareholders with high averages will want a sale that makes them whole, while others would be happy to make back a fraction of their capital.

Sanderson clearly thinks asset sales will happen - but note that the capital provided will last at least a year. I think a very good trade is in the making, though it is likely worth biding time until the stock is out of the headlines again...asset sales are not going to be tomorrow, and you may have to hold for a long time to get your win.

The only thing guaranteed is volatility.

Greatland Glimmers

A reputable news source today noted that GGP has 'has pulled the trigger on a much-anticipated $500 million equity raising.'

Canaccord Genuity is reaching out to potential investors with already heavily involved Andrew Forrest planning to cornerstone with $100 million. This acquisition will be used to underpin an ASX listing, and Greatland has long been very clear that this was the ambition.

At this juncture of the most open secret in mining history, there are a couple of points to make; first, the valuation made by Grant Samuel of Telfer and Havieron by Newmont in my view purposely undervalued the assets to make a sale price realistic for Greatland - second, if GGP gets its way, it will soon become a mine builder (and this comes with a whole new set of fun issues!).

But the critical factor is how GGP plans to (a) finance the acquisitions and in what proportion of debt, equity or cash and (b) financially get Havieron mining-ready and (c) rectify the issues at an ageing Telfer - to what extent will Newmont 'refurbish' the plant outside of the tailings storage they are liable for?

In the suspension RNS following the AFR article, GGP confirmed 'that it is in advanced negotiations with Newmont in respect of the Potential Acquisition, which remain incomplete, and that existing cornerstone shareholder Wyloo is intending to provide material support for the Potential Acquisition. Greatland and Newmont have entered into a binding exclusivity agreement which provides for a period of exclusivity to finalise and enter into binding transaction documentation in respect of the Potential Acquisition.'

I remain of the view that anything under 5.8p represents great value on a fundamental basis. And gold is at record highs...though I venture volatility will be insane when it comes back.

URA Unleashed?

URA Holdings is looking attractive at these pricing levels - emerald production started at Gravelotte in April, teething problems have been resolved (there are always teething problems), and 'processing and sorting have moved to a recovery level of over 80%.'

As of July, processing is proceeding at approximately 60-70 tonnes per day, with an average emerald grade of around 6 grams (30 carats) per tonne being achieved. The mine has historically only produced smaller stones, but one 50-carat emerald was recovered in July suggesting upside potential.

The key ore sorter is working efficiently, meaning fewer workers will be needed when the mine is fully up and running - and gems will be sold via auction, with a test sale planned by Bonas (a big gun) for later this month.

Importantly, URA has also 'entered into an agreement with DelGatto Diamond Finance Fund, a leading global finance company. This partnership will provide financial flexibility for the sales process and open future possibilities for financing to support the Company's strategic objectives.'

The financial model for the inferred JORC resource at the two pits is excellent - and arguably a little too conservative. URA has also received an additional Prospecting Licence for an area adjacent to the current mining licence, and final Ministerial approval has been received for the company's acquisition of Gravelotte.

I'm not going to talk about Curlew yet - but there's £716,000 in cash in the bank, and Premier Milton has taken its shareholding to 10.33%.

First sales and financial viability in practice are something to keep an eye on - what will the emeralds fetch in the test sale?

Voyager sets out?

Voyager is under the radar on the helium plays, and it shouldn't be.

The company has an option to acquire M3 Helium, a producer of helium based in Kansas and with an interest in six wells.

Pre-production is underway at the flagship Rost 1-26 well, Fort Dodge Prospect - owned by M3 Helium - with sales expected to start 'by end of September 2024.'

This well has previously been tested by Shamrock Gas Analysis and found to contain 5.1% helium, while Thurmond-McGlothlin:

'also tested a well pressure at 302.7 psi in July 2024, at the same time as taking the samples. These tests follow on from a flow rate that was measured at 47,100 cubic feet per day (47.1 Mcfd), with this result being achieved even though brine levels were 1,058 feet over the perforations.'

Flow rate should also be ameliorated by de-watering (to start soon), with water tanks already at site.

A pump is at site, and the Pressure-Swing Adsorption modular processing unit has been delivered. Commissioning begins this week, and will take 10 days - produced helium will be concentrated to around 20 - 50% onsite using the PSA, ensuring the lowest possible transport costs to a local processing plant. Discussions with two off-takers are ongoing.

CEO Nick Tulloch enthuses that 'M3 Helium management are optimistic that, when the well comes on production, it will be a significant contributor to its operations.'

I will be covering the stock in depth soon as part of the wider helium coverage.

As long as the first well is profitable, this could take off quickly.

Andrada Amazes

One feels that Andrada CEO Anthony Viljoen may currently be sipping a glass of whisky from one hand, with a cigar in the other - as 'How You Like Me Now?' by The Heavy plays in the background.

This deal for Lithium Ridge with titan SQM is a gamechanger for the company - with tin in its ascendancy and lithium turning, it looks very well poised and the current 18% share price gain is perhaps a weak response to an excellent RNS.

Under the Agreement, SQM can earn into GSI (ATM subsidiary) by solely funding exploration and at some point a DFS. SQM is paying $2 million in cash and $20 million over three and a half years in staged investment to earn 40% ownership. Funding the DFS thereafter will get it to 50%.

In addition, if a JORC resource over 40 million tonnes is declared, there will be a one-off success fee to Andrada based on the lithium oxide content.

There will be a joint development committee but Andrada runs the show (think SVML).

While Anthony has the standard words, SQM International Lithium division CEO Mark Fones is the man to pay attention to on this one:

'We are excited to announce the completion of this agreement, which confirms our commitment on finding the best lithium assets in the world that efficiently diversify our portfolio. Namibia is among the top mining jurisdictions in the region, and we are pleased to begin exploration with a proven partner like Andrada Mining.'

ATM has only returned to early July levels - and is now a bargain.

- Charles Archer, 9/9/2024