This was a great post from the poster Driver, over at ADVFN forum;
“This post is from my EUA W/app group of LTH’s showing the figures valuation of $2b in the early article is only for 2m Oz’s without the flanks.
Alexei Chakarov, Strategic advisor for EUA has given an interview to a local publicist.
- News media is very much used as part of negotiations in this part of the world. So it sounds like Alexei Chukarov is drawing the line in the sand. Also note that the 2bn+ (which needs to be corrected from the 1bn+ in the published article, workings shown below) is for the 1.9moz (60 tonne) 130k per annum (4 tonne) production only. The flanks aren't even factored in yet!
- The calculations are as follows. But please note, operation costs will increase with inflation over time.
- Our total resource is 1,900,000 x Pd spot price used ($2300) = $4,370,000,000
(over the 14.6 years)
- Our total costs are 1,900,000 x $325 = $617,500,000
- Our gross profit is $4,370,000,000 - $617,500,000 = $3,752,500,000
- EBITDA = $3,752,500,000 / 14.6 year = $257,020,547 ($250,000,000 like in the article)
- Multiply the $257,020,547 by 8.6 to give you..... $2bn +
- The 8.6 multiplication factor is used to find market value and is taken from averages of other deals in the past, over certain sectors. Source below.
- Please note this is purely an average across the Oil/Gas/Mining sector. It could be much lower, or higher. This is where negotiations will be taking place. To agree the terms of Pd price used and the EBITDA multiplier.
- Also note the higher the Pd price. This goes directly on to their bottom line so it all increases exponentially.
The following was posted from a well respected Russian investor who closely follows Eurasia Mining, and has over 78k followers on telegram:
“The rally continues in the palladium market. So, if for the whole of 2019, the cost of palladium increased by 40%, then since the beginning of 2020, prices have added another 20%. It seems that I sold the shares of Norilsk Nickel early; there is a feeling to add more.
At the same time, fortunately, the light on the Norilsk Nickel did not converge. Recently, he has repeatedly written about Eurasia Mining (EUA LN), a palladium producer that develops deposits in the Kola Peninsula and the Urals. I keep the paper in one of the BidKogan service portfolios; the position profit is approximately 31%. The company's shares are a direct investment in palladium and rhodium, the price of which has also increased (over the year from $ 3,000 to $ 8,500 per ounce).
As already noted, the demand for palladium is growing due to an increase in the demand for the automotive industry for the production of catalysts used in gasoline engines. Dieselgate (those who still do not know, they are welcome to Google) in some way turned the picture of demand: platinum used in diesel ICEs has faded into the background, and now everyone needs palladium, the supply of which is very limited in the world. According to the forecasts of Norilsk Nickel, the world's largest producer of platinoids, the palladium deficit may last until 2025.
This is the main reason for the rise of Eurasia Mining quotes, which in 2019 increased several times. The fields owned by the company are very promising, especially given the beginning of the development of the flanks. The company's quarterly report, citing Rosgeology, indicated that the estimated resources (Inferred category according to JORC international classification) of deposit flanks on the Kola Peninsula is about 15 million ounces of palladium.
I note that against the backdrop of explosive growth, the leading media began to pay attention to a company hitherto not very well known. We already wrote about this at the very beginning of January: the material was published in the magazine "Company".
And then Kommersant published an article on palladium deficiency with a mention of Eurasia Mining.
As for the shares of the company, I believe that the growth of quotations may continue. In addition to increasing demand and, accordingly, palladium prices, there is another trigger for the company - possible interest and subsequent takeover by a large strategic investor. I carefully monitor the situation."
Very promising to know leading media and press in Russia, along with several other well respected business tycoons have an eager interest in Eurasia.
(telegram BitKogan link)
That's very true, Mac.
The giants in the industry need to secure their source of future Palladium reserves - if they don't, they run the risk of somebody else controlling the monopoly or worse - a technological change which would cost them A LOT of money (over $10bn) over the years. Why lose $10bn... when you can make $90bn from 40MoZ?
Pressure is on now. Buyers should be looking to finalise and secure their bids.
Palladium ASK: $2555
Rhodium ASK: $8750
Platinum ASK: $1023
EUA Close: 3.92p
A VERY good week for shareholders.
I think flanks or something brewing in the background. 3-4 months since negotiations started (that we know of).
A major player in an article today wrote:
“As for the shares of the company, I believe that the growth of quotations may continue. In addition to increasing demand and, consequently, palladium prices, there is another trigger for the company - possible interest and subsequent takeover by a large strategic investor. I carefully monitor the situation.”
PS. Palladium live price at time of writing this: $2471
($29 bucks away from the glorious $2500)
Eurasiamining are exploring options for assets could make this the biggest sale in palladium's history due to favourable price environment for PGM.nOnce the respective licence arrives - EUA's assets in the KOLA region with 40M Oz potential = major game changer
"Further thoughts on #EUA and what the increase in approved resources to 15Moz at MT could mean when formally approved... if they can improve the production plan >4 tons, EBITDA will increase beyond $250m. Eye watering numbers, who could afford to build a bigger mine?"
The Kommersant interview, which is essentially Russia's equivalent of the "Financial Times" recognise Eurasia Mining's value and its potential worth. Eye watering indeed! Can see a massive figure for an asset sale - it will be interesting who the highest bidder was, and by how much.
Nickel_disruptors can jog on.
Meanwhile, on the PGM front:
1. Palladium $2268
2. Platinum: $1023
3. Rhodium: $7900
Looking exceptionally strong! Both mines should be looking extremely attractive right now
Excellent post, as usual Ian!
Hope you are recovering well. Also I nicked a portion of your post to use on twitter, hope that's O.K. It was just too good of a summary.
Excellent post from brother Ian on LSE RE: EUA fundamentals @EurasiaMining
Great summary on the importance of #PGM prices & the most #precious & valuable metals Palladium & Rhodium - found in both of Eurasia's OpenPit mines
PLATINUM: Breached $1000 now
PALLADIUM: Breached $2200 now
RHODIUM: Breached past $8000 before and looking to attack again.
What a time to be alive. #EUA
With regards to Monchetundra Project:
- two predominately palladium open pit deposits
- located 3km away from Severonickel
- Severonickel is one of the largest NORILSK Nickel's base metals AND PGM processing facility
- near the town of Monchegorsk on the Kola Peninsula.
- The Russian Ministry of Defence (MoD) HAS APPROVED the Monchetundra Flanks application!
- Now awaiting final approval from SevZapNedra [the regional licensing body]
- The approval from the Russian Ministry of Defence is an IMPORTANT STEP in obtaining the Flanks licence.
- Eurasia is happy to confirm the Flanks application process is progressing as planned.
- EUA expect to receive the respective licence in due course. (Further updates will be provided)
The ever anticipated note from chairman: Christian Schaffalitzky:
- “The Directors are pleased that all our applications including the Monchetundra Flanks are progressing well and on schedule.
- We look forward to the formal license issue (which is in line with our strategy to become one of the largest alluvial PGM operations globally
- We believe we are now established as an important player in the PGM space in both the Urals and Kola regions
- look forward to scaling up operations at West Kytlim perhaps the lowest cost PGM operation that is potentially sustainable over several decades.
1. Cash cushion
2. Our zero debt
3. Progress on the Monchetundra Flanks and
4. Favourable price environment for PGM (particularly for palladium and rhodium)
are helping us in our ongoing talks and discussions, and we believe this strengthens our negotiating position as we continue to explore options for our assets.”
Eurasia Mining's flanks application progressing very well towards officially obtaining the Flanks licence [approved by Russian MoD]. Hurling our 1.9moz ownership towards a whopping 15moz of the most valuable metal on Earth - Palladium, which has breached $2100/oz and is set to soar past $2500 within the first half of 2020.
#EUA is established as the dominant player in Kola PGM with production license to 2038 & its exclusive right for the flanks under applicable laws; Receipt of approval for the flanks will allow Monchetundra (@EurasiaMining) to be a new global centre for PGM on the Kola Peninsula
Not to mention Rhodium "The world’s most precious metal leaves everything else in the dust"
- Bloomberg Article https://www.bloomberg.com/news/articles/2020-01-13/most-precious-metal-rhodium-leaves-everything-else-in-the-dust
“The main driver by the beginning of January was physical demand from Asia, which might be also automotive related,” said Andreas Daniel, a trader at refiner Heraeus Holding GmbH. “Buying triggered more buying and in an unregulated market the effect was massive, with a price move which is only seen maybe every 10 years.”
Demand cooled late last week, according to Daniel. Prices hit $8 200 on Wednesday, before retreating in the following two days.
"Rhodium could top the record $10 100 set in 2008, according to Afshin Nabavi, head of trading at refiner MKS PAMP in Switzerland. Still, those lofty prices a decade ago prompted autocatalyst makers to switch to platinum and palladium, which are also used for cleaning emissions.
It’s much harder to invest in rhodium than in other precious metals. It isn’t traded on exchanges, the market for bars or coins is tiny compared with gold or silver and most deals are between suppliers and industrial users. Global production is equal to little more than a 10th of platinum or palladium output.
South Africa’s dominance also means production risks hang over the market. Power shortages last year temporarily interrupted some mining operations and there have been long mine strikes in previous years by workers wanting higher pay."
Just a reminder from Christian Schaffalitzky, Chairman at Eurasia from RNS on 4th December:
"-West Kytlim Flanks applications are progressing well and on schedule.
- And we look forward to the formal license issue, which is in line with our strategy to expand the production volumes at West Kytlim, to further increase our presence in the West Kytlim area and;
- aim to grow the mine to strengthen our position as the largest alluvial operation globally
- We believe we are now established as a dominant player in the PGM space in the region and look forward to scaling up our operation providing a low cost PGM solution that is sustainable over potentially several decades."
It remains to be seen where the market will take palladium prices in 2020, but we reasonably can assume that with stricter emissions standards in highly populated developing countries and without any predicted forecast of increased supply, palladium will continue to sell at a premium.
1. Demand for platinum group metals (PGMs) in India and China should offset declining demand from slowing western economies.
2. Palladium is expected to continue selling at a premium to platinum.
3. Autocatalyst recycling is the second largest contributor to PGM world supply.
Thanks builder and stockdale. Amers is on my filter list. I usually find green boxes follow swiftly after the factual posts. No problem, lot's of material out there in EUA's favour. Just need to read the RNS's and check the Rhodium and Palladium prices and forecasts.
Palladium keeps smashing records as regulators chase clean air (#Palladium >$2100) "sky really is the limit according to market sources"
#EUA Flanks are progressing well and on schedule, in line with strategy to be largest alluvial PGM operations globally
"With the $2,000/oz hurdle now easily cleared, the sky really is the limit according to market sources. Emissions standards are set to get tougher as global governments step up efforts to avert a climate catastrophe. "
#EUA According to the Russian Cadastre, there are potential resources within existing Company licence & the flanks application of c.15M oz;
The Pd to Pt ratio in Monchetundra varies from 1.7-5.8 Pd/Pt ratio, a similar range is observed in the Flanks area. #Palladium at $2119/oz
To summarise, according to the Russian Cadastre;
- There are potential resources within the existing Company licence and the flanks application of c.15M oz;
- Additional potential resources within 5km of the Monchetundra Mining license of c.7M oz and;
- Total potential resources within the wider Monchegorsk district, according to the Russian Cadastre, of c.40M oz of PGMs.
The total potential resources in the Russian Cadastre breaks down as:
· c.15M oz of PGM within the Flanks application for which the Company has exclusive rights, and inclusive of the Company's c.2M oz reserve and resource.
· c.4M oz (in addition to the above c.15M oz of PGM also within 5Km) neighbouring the Monchetundra Project and within 5Km.
The total amount potentially controlled by Eurasia and under flanks exclusivity right application is c.15M oz of PGM as per the Russian cadastre of state resources;
· Further potential resources of c. 21Moz in established & unlicensed resources and reserves in the district surrounding the town of Monchegorsk, that is located 8Km from Monchetundra
"West Kytlim (WK), an established PGM mine also owned by #EUA. Sorted out contractor issues, scheduled to start mining this month as per RNS 26.11 - nice cash cow to have alongside MT options. So many reasons to be looking at Eurasia Mining this month" - @GMF782
Yes, based on the sale of MT alone. If we sold for say $2.45bn - then if the special divi was for example 20p, and if they decided to use the 30p equivalent on WK and cash in the bank, then our SP would reflect the 30p (plus WK's current worth).
Although, personally I don't feel they would distribute say £500m to shareholders and keep £1bn in the bank. Considering MT only needs $177 for sinosteel, and the lower costs of exploration & WK development, it wouldn't make much sense.
Especially as the board have a considerable holding and would most likely wish to pursue future projects etc, would make sense to give it all up (I.e selling WK too).
But should EUA keep WK then I don't think we would need more than a couple of hundred million dollars for aggressive expansion or exploration. But as I said, should they still wish to keep the value in the bank - it would reflect in the SP. So although we would not get it in the dividend - our shares would be 30p (allowing us to slice however much we wish. Or almost all of it should we wish to get the 50p, in this instance).
Regardless, the asset sale price here is the most important factor - heavily dependant on the average $/oz negotiated.
Whilst it would be a fantastic result, would it be classified as "dreaming" or "optimistic"?
An asset sale of $2.45bn = 50p/ share (after 5% bank fees, 80% ownership and full dilution).
That is $163/oz. Which is
- the same as half the cost of extraction;
- less than 8% of todays Pd prices;
- cheaper than the recent NAP sale;
- Cheaper than what you would get using Optiva's $188/oz in their previous valuation (when Pd prices were $1000, as opposed to $2100);
- The last non-consolidated palladium play in a bull market, where Palladium is at it's highest prices, large structural deficit set to continue, demand set to rise in the coming decade.
Moreover, unlike other sales of companies or assets, Eurasia mining do not need to sell this asset for anything less than they deem it to be worth. Therefore, the ball is technically in their court. Sinosteel is in place in order to get us up & running.
Then you have the location of the mine MT:
- Quite literally beside the giant Norilsk Nickel's processing facilities
- Lowest operational costs globally
- NN have recently invested just under $4bn in the Artic tundra project - where it's not really feasible to produce cheap palladium in the near future
- They have been open about investing up to $12bn in the next 5 years
- NN removing divi payments for investments
- In the past they have paid 50% above a competitors bid to secure something they've wanted - for $6bn. Is it so outrageous for them to spend under $3bn on this mine in their backyard - in order to keep it out of the hands of the MULTIPLE interested parties that EUA are speaking to, in their on-going negotiations/ talks (as per recent RNS')?
Just looking at it logically, not trying to ramp or whisper promises in anybody's ears either. I would personally be happy with anything above 25-30p+. But $167/oz to yield 50p/share works out well for shareholders and the buyer alike (cheap for them, assuming they already nearby facilities in place - saving hundreds of millions of $).
Additionally; Since negotiations began - the in-situ value went from approximately $27bn to over $30bn for the 15mOz alone.
An asset sale of $2.45bn (50p or so) is cheaper than the in ground value increase ($3bn!) over the last few months.
This doesn't include the 4moz in our licence area. It doesn't include the 21moz palladium (more than double!) in the nearby areas, which EUA/the buyer will have a strong chance of achieving licences for. $2.24bn isn't very expensive at all for 15 million ounces of Pd. This also doesn't even include a potential disposal of WK.
I would be happy with using 10% of averages of Q3/Q4 prices of Pd. A sale of $3bn+ would be even better. But just throwing it out there, this is a world class asset. It doesn't take much research on Palladium & its deficit, and Monchetundra and benchmarking against other Palladium mines in production to know that this is clearly very valuable.
Naturally invites numerous botflies with incorrect facts. our 13moz resource which will add significant value to our asset at Monchetundra once the flanks are officially awarded.
Loads of green boxes so thought I'd share my "filter list" again, for those users who wanted a cleaner read.
JAdam robjprofit bunsenburner123 TrickyDickyTwo Sam12345 Siborg76 BullSTOP jimjam (and all forms of JimJam) JezTheFez Simonthezealot Elenor jimjamuk dimsum3 newtothisgame2 nennyb Dodge100 jarosg Juxtaposition LB29 trafffc Amers fflintdenby69 okfornow Blackadder1 erifles mtmind lamtree
Ah I can see it in sight. It’s so close and things are progressing well, sp is doing better than holding up and big buyers getting, what appears to be, the last call in.
Yeah, a few sewer rats here and there but the light is shining bright at the end of the tunnel.
Look forward to the asset sale(s), & Russian Xmas and NYE :)
Now, I’d better get a life, go back to sleep before I start a power trip and buy another 500k tomorrow.
Keep up the good posts stockdale & others (you Know who you are!)