#EUA – Alta_Traako guest post

My good friend Alta has put together his thoughts on the RNS 26.3.21 – Sharing so more can see :

The Rosgeo Agreement allows Eurasia to gain a 75% equity stake in each of the nine new mining assets (the “Additional Assets”). The remaining 25% equity stakes will continue to be held by Rosgeo.
• 75% stake in 9 different assets
• US$0.5 million paid initially for access to all 9 assets.
• Free to choose which, if any, assets we want. No penalty if we withdraw.

Further payments due should EUA progress to development of any assets.

Four key points about further payments

  1. The earn out structure means we do not need to fork out cash that we cannot afford to potentially not profit. Cost is spread out as we develop (i.e. not risky).
  2. the cost we need to pay is capped at 75% of the value that would have been attained if the sites were auctioned. This is crucial as it does NOT mean that it is 75% of the current or future value, but 75% of the auction cost. (i.e. very cheap)
  3. No upfront cost
  4. Rosgeo at “arm’s length”. No interference. Peace for us. Free money for them. Win win.
    The Additional Assets have a total of 104.6 Moz Platinum equivalent resources = $124billion.
    Feasibility study done and reserves approved by state (i.e. no exploration risk). EUA has already invested some US$8.3 million across the Additional Assets so likely know most of it very well through previous campaigns. Will implement EPCF to develop.
    4 pits have already been worked on extensively around our current MT licence so EUA know them well. The ore at these 4 pits are suitable for toll treatment (i.e. using current infrastructure the MT plant to generate immediate cash from at a very low cost low cost). Everything is already in place for this to start ASAP. They are also open pit so usual benefits apply (fast development, less risk, significantly lower costs etc. etc.)
    5 more pits seem to be a mix on open and underground. DD and analyses have done here too but likely not as well-known as the 4 pits that sit beside out current licences. Exact make up not specified. Also, no mention off toll treatment so likely far more expensive to develop and operate that the other 4.
    Key for us and likely the development of these Additional Assets is that this does not affect the FSP. “The Company’s existing mining operations in West Kytlim and Monchetundra will not be affected by the JV”. FSP still underway meaning everything we were waiting on is still coming but with an additional $124billion worth of metal to play with.

Scenarios I see listed from most to least likely (my opinion).

Full sale of MT and WK. We get the sale that we initially expected then have the Additional Assets for future dividends or another sale/ series of sales. This makes share holders happy with the biggest pay off plus more to come. From BOD perspective this keeps all long term/ short term investors and institutions very happy while maintaining their dominant status in the region going forward.

Full sale of MT, WK, and Additional Assets (the one I want but cannot allow myself to think about). Bidders may have wanted access to the whole area. So EUA get that access and sell it on. Would be an amazing buyout but seems like it is too expensive to buy at once (in my mind) and we have a 2- year period to agree to develop and then the earn out structure becomes active. Seems strange to get all of this in place to then sell it on. BOD will do what is best for shareholders though.

Sell MT and JV at WK and Additional Assets. Selling MT gives shareholders the initial dividend but also allows the company to keep some of the proceeds for WK development. The current EPCF mentioned for the Additional Assets obviously cannot be used at WK so we would need to finance tis another way. Selling MT could allow this without getting another part involved in the financing while keeping shareholders happy with a much-deserved dividend.

Sell WK and JV at MT and the Additional Assets. Selling WK brings in cash to help develop MT, Additional assets. No need for WK since the Additional Assets are ready to generate cash flow short and long term. Toll treatment on turn-key basis.