Eurasia Mining makes understated progress

Eurasia Mining are not renowned for their newsflow. In fact, shareholders could be forgiven for thinking that very little was actually being achieved in either of the company?s main theatres of operations. But they have broken new ground in the last month, with three announcements in quick succession?.

The first of these was the news that £1 million of staged funding plus a potential £2 million of further funds (via warrants in lieu of interest) had been raised using a convertible loan note from a Russian controlled investment house. Eurasia is in a difficult position regarding on-going funding for their work outside the Amplats JVs, because the share price is presently below the 5p par value of the shares. This precludes them from raising finance in the conventional way of a placing to interested parties unless they can find individuals or institutions willing to pay a significant premium to the current market price. As most such potential placees expect a significant discount, Eurasia?s opportunities in this area are limited!

Nonetheless, Eurasia?s new Russian partner is clearly convinced that the loan note will provide them with future value, as it converts at 5p ? the par value of the shares ? which is a significant premium to the current market price and quite an achievement for Eurasia in current market conditions. The attached warrants also are exercisable at par. The funds are to be drawn in tranches of £250,000 during the course of the next year, and each tranche ? if not already converted ? will convert to shares on the 12 month anniversary of the draw down. Eurasia do have the option to repay in cash with note-holder?s agreement, but if all tranches are converted, and warrants exercised, this new investor will own almost 30% of the company and will have contributed £3 million to its coffers. Eurasia see this deal not just as a source of funds but, as chairman Michael Martineau, commenting later in the company?s financial results published on 25 June, said: ?The Directors and I believe this transaction represents a successful first step in securing a new Russian partner and that with their support Eurasia can look forward to exploring potential new acquisitions in Russia.?  He continued: ?This transaction has been long in the making, and it underscores our intention to establish a firm production base, while continuing our exploration and development efforts in a country where so much untapped potential remains.?

Meanwhile, back at the sharp end, Eurasia is developing two distinct project areas in Russia: pursuing hard rock mineralisation in the Kola Peninsula at Volchetundra, Monchetundra and West Imandra and working on an alluvial deposit in the Urals at West Kytlim.

Both projects are being developed in joint venture with Anglo Platinum, who currently provide 100% of the funding as per the terms of their earn-in agreements, with Eurasia as project operator.  The Kola projects are subject to an earn-in by Amplats of 40% in return for $10 million-worth of exploration expenditure, which should be enough to see the work programme through until at least the end of this year. At West Kytlim, it?s Amplats? obligation to fund through to a bankable feasibility study in order to earn half of Eurasia?s 75% interest in the project.

At Volchetundra ? a 27km long and largely untested intrusion - two distinct areas of mineralisation have been indentified just under 4km apart. Drilling in late 2006 at the Ol?che target intersected 44.6m at 1.7 g/t Pt+Pd at 68m depth, running with a high Pd:Pt ratio of between 1.5-3:1. At 145m down, a further 18.5m found 1.9 g/t, but here the palladium:platinum ratio was more favourable at 0.3-1.1:1. Deepest of all, at 170m depth, lay a 1m section assaying 11 g/t Pt+Pd, again with a favourable Pd:Pt ratio of 0.8:1. In April, Eurasia announced the results of a follow-up hole, VT27, some 600m further south, which encountered low-to-medium grade Pt+Pd from surface down to 68m, the best intersection being 27.7m at 1.6 g/t from 31.3m depth. Here, however, the Pd:Pt ratio is less favourable than at depth, running at an average of about 4:1. Nonetheless, it confirms the initial indication from the discovery hole of significant open pittable mineralisation in this target area.

Meanwhile, some 3km further south along trend, hole VT40 at Yukspor showed good grades of up to 14.7 g/t over 3 narrow intersections between 217 and 200 m below surface.

Eurasia believe that these two holes illustrate excellent potential for large scale bulk open pit mining at Volchetundra, and compare their results with those achieved by Barrick at Federova, some 70km east of Volchetundra in a very similar geological setting. At Federova, Barrick have recently published an inferred resource running at 1.4 g/t (Pt+Pd) which has demonstrated recoveries of 80+% in pre-feasibility metallurgical testing.

2008?s workload at Volchetundra is focused on drilling at both Ol?che and Yukspor, and exploratory drilling in between to establish whether there is continuity of mineralisation along strike between the two target areas. Monechetundra will also be further drilled this year, after last season?s successful results which delivered grades from  1.7 g/t Pt+Pd at 75m depth to 8.4 g/t Pt+Pd at 190m depth, a potential target for underground mining. In another hole, lower grade but potentially economic open-pittable mineralisation included 6.7m at 1.8 Pt+Pd some 90m below surface and 36m at 1.8 g/t Pt+Pd only 75m down. Overall, given the current prices of the two metals, the platinum:palladium ratio was encouraging at 0.6:1. The 2008 programme will include some 6,000m of drilling working towards a resource, and testing new targets identified by a geophysical survey carried out during late 2007.

The alluvial operation at West Kytlim is now ready for mining, and some 5 years-worth of mine reserves have been delineated over the last 12 months in the Bolshaya Sosnovka area of the licence. Further resource drilling on the Tylai Terrace areas is ongoing, to expand the project resource base. But Eurasia are still awaiting the issue of mining permits from the lengthy and seemingly amorphous Russian system, and the company feel it unlikely that their original target of producing PGMs from West Kytlim this year is going to be met. They do however seem confident of being able to start production by mid-2009.

Regular Russia watchers will be aware that the system for assessing resources and reserves in Russia is completely different from that used by western authorities such as JORC, CIM and SAMREC. Similarly, a standard western bankable feasibility study cuts little ice with the Russian ministry, who require a ?TEO?, the Russian equivalent. Companies operating in Russia are therefore in a double bind: western markets won?t accept Russian reporting codes as properly valid, but for permitting purposes, the government mining department won?t accept western reporting codes! So everything has to be done twice?.  And the rules and the administrative procedures change on a regular basis. Eurasia is fortunate that its long years in Russia have led to an intimate knowledge of how this long-drawn-out system works and lets them adapt with relative ease to changes in procedures and legislation.

Elsewhere in Russia, Eurasia have been pursuing in their own right ? hence their requirement for independent funding outside the Amplats commitments - some seven gold projects, all of which are under application for exploration licences. Sadly, the procedures for acquiring such licences are just as lengthy as that required for mining permits. However, the Baronskoye gold-palladium project in the Urals is being advanced and a metallurgical bulk sample study is underway to identify an optimum ore processing route. Eurasia ? with the help of their new Russian partner ? are also actively seeking new targets for exploration and potential development.

Patience is still the main attribute required of any Eurasia investor. Even after all this time, progress in Russia is excruciatingly slow and, on the surface, the company still appears to be proceeding at a snail?s pace. However, there is a slightly rosier glow on the horizon now that the company have been able to attract a Russian partner, whose involvement should help significantly with project acquisition and development in the future. With just 141 million shares in issue, the market cap at 3.25p per share is well under £5 million. Last time we reported on this quiet and reclusive company we suggested that investors needed tolerance and tenacity.

Plus ca change, plus c?est la meme chose!