Mining minnow Eurasia Mining (LSE: EUA) is surging today after the company announced that it had been granted a mining licence for its West Kytlim project in Russia.
Eurasia jumped by as much as 46% this morning, before the company’s shares were suspended and management revealed the good news. The shares have since resumed trading.
The mining licence has been granted to Eurasia’s subsidiary, ZAO Kosvinsky Kamen, on the basis of first discovery and cover 21.5 square kilometres. The rights are for the extraction of platinum and gold across the stated area.
All that remains now is for Eurasia, and its subsidiary, to pay a one-off lump-sum payment to the government of £24,000 within 30 days. Assuming the payment is made on time, the licence should be granted in late August or early September.
Commenting on the licence approval, Christian Schaffalitzky Managing Director of Eurasia said:
“Today is a great day for Eurasia…This approval and receipt of the licence will enable Eurasia to shift from exploration into development and platinum production.”
Making progress
Eurasia’s next move will be to complete a detailed development plan for West Kytlim, which it must submit to the government after formal licence documentation is issued. The company has stated that its work on this plan is already in progress.
And Eurasia believes that once all the formalities are out of the way, the company can move from planning to production at West Kytlim relatively quickly. Management believes that the initial platinum extraction from West Kytlim will be straightforward and will allow the company to generate cash flow to fund the rest of its plans.
However, as with all early-stage miners, cash is a key consideration for Eurasia. At year-end 2014 the company reported a cash balance of £210,160 and has since raised £1.5m through the sale of shares, a cash infusion from peer Metal Tiger, and director loans.
Another key asset
But Eurasia is not a one-trick pony and the company has another key asset in the form of an interest in the Monchetundra platinum licence on the Kola Peninsula.
Here, Eurasia is working with joint venture partner Anglo Platinum to assess the potential of the prospects and the company has already received “significant interest from third parties”.
This gives Eurasia some flexibility. If the company receives an offer for its interest in Monchetundra it could unlock the cash needed to develop West Kytlim — an option not available to other small-cap miners.
Highly attractive prospect
West Kytlim itself is a highly attractive prospect. It’s estimated that the cash cost of production per ounce of platinum is between $400 and $450 per ounce for the prospect, 60% lower than the industry average.
With these favourable economics, it’s highly likely that the company will find a partner to help it develop the prospect.
Nevertheless, as of yet Eurasia has no partner. The company’s success is dependent upon its ability to raise the funds needed for the development of West Kytlim.
So, with this being the case, Eurasia is a highly speculative play.