We attended a field trip to EurOmax’ properties, and visited the Trun project in Bulgaria and the Ilovitza Copper- Gold project in Macedonia. We were lucky to meet with Dimitar Dimitrov, EurOmax’ VP of exploration who has been involved in the Balkan properties since 2003, who guided us around.
EurOmax Resources Ltd. – Site Visit to Southeastern Europe
Introduction
EurOmax Resources Ltd. is a Canadian company with three core properties in Bulgaria, Serbia and Macedonia. They are focused on identifying, acquiring and developing mineral resources in Southeastern Europe with the objective of becoming a world-class mining company in that region.
We attended a field trip to EurOmax’ properties, and visited the Trun project in Bulgaria and the Ilovitza Copper-Gold project in Macedonia. We were lucky to meet with Dimitar Dimitrov, EurOmax’ VP of exploration who has been involved in the Balkan properties since 2003, who guided us around.
Ilovitza Project, Macedonia
Ilovitza currently hosts a resource estimate of 3.2Moz Au and 1.6B lbs Cu in the inferred categories, but we expect this number to increase to 4.5Moz Au and 2.5B lbs Cu in the resource update, expected later this quarter. The project remains open in all directions (mostly east and southeast), so there is still considerable upside potential to increase the resource base.
Our main issues with Ilovitza are the low grades and recoveries. The average grade is currently approx. 0.32g/t gold and 0.23%Cu (2008 numbers), with recoveries expected around 60%. However, we feel these recovery rates could (and should) go up, as more metallurgical tests will be concluded.
Unfortunately, for an operation with 0.2g/t Au and 0.15%Cu recoverable, the required daily throughput is quite high. We would expect a 75ktpd throughput would be the minimum to make this operation profitable. The main problem here is that such large operations usually require a gigantic capital expenditure. A 75,000tpd operation would probably cost around a billion dollars, and yield an output of 160kozpa gold, at a cash cost of $575/oz. Please note, the company hasn’t completed a PEA or Scoping Study on Ilovitza, so all these numbers are back-of-the-envelope calculations.
The best solution for Ilovitza and EurOmax would be to sell the project to a major mining company after the resource update, or find a suitable joint venture partner now that Freeport hasn’t exercised its back-in right.
Trun Project, Bulgaria
We visited the Zlata and KD tenements on the southern part of the Trun project, and are quite optimistic on those prospects. As Zlata is a past-producing mine, regulation and re-opening of the mine should be relatively easy and cheap. Resource estimates on these tenements are expected in Q3.
Unfortunately, the company announced in January that they are expecting a downward revision of the resource estimate at the Logo zone, where they currently have 2.1M ounces of gold in the inferred category. Whilst this is bad news, we are quite confident the updated resource estimate would still contain in excess of 1.5M ounces of gold. EurOmax raised $3.8 million the same week as the announcement of this pending revision and Quinton Hennigh came on board as Chief Geologist, so we aren’t nervous about this future revision.
Breznik Project, Bulgaria
Located approximately 30 km from the Trun Project, Breznik hosts a high-grade resource estimate of approximately 0.5Moz of gold and 2Moz of silver. The most important thing about Breznik is that it is within trucking distance from the Trun project. Compared to the size of their other projects, EurOmax would most likely prefer to monetize this project. Failing completion of this sale, combining it with Trun may be an option.
Both the Trun and Breznik projects were meant to be stand-alone operations, but we could actually consider Trun and Breznik to be two parts of one district. We’d be curious to see the results of a scoping study combining these two parts in one production plan and compare it to the possible standalone scenarios. It would make sense to investigate the possibility of one central mill, where the lower-grade Trun ore could be blended with the higher-grade Breznik ore.
KMC Project, Serbia
We didn’t have enough time to drive down to the KMC Project in Serbia, but Dimitar Dimitrov gave us a quick rundown on the story. The preliminary results at KMC are very encouraging, and it’s very well possible the project is a higher-grade version of the Macedonian Ilovitza project. EurOmax completed a 2,500m drill program at KMC, and we are eager to see the results. KMC might very well be another bulk tonnage deposit, and could be as big as half a billion tonnes.
Management Team
Mark Gustafson – President & CEO
- 20 years of experience in oil and gas companies
- 2005 -2009 CEO of Triangle Petroleum (AMEX: TPLM)
Dr. Quinton Hennigh – Chief Geologist
- Over 20 years of mineral exploration experience including positions with Newmont Mining Corp., Newcrest Mining, Homestake Mining and Evolving Gold Corp.
- Currently President and CEO of Novo Resources Corp. and a technical advisor/director to Gold Canyon and NV Gold Corp.
Dimitar Dimitrov – Senior VP Exploration
- 25 years experience in the mineral prospecting, exploration, and acquisition in the Balkans for Royal gold, Grameks, and Phelps- Dodge
- Formerly head of the Geology Department for the Bulgarian government
Dr. Roger Moss – Technical Advisory Board
- Over 15 years of international exploration experience
- Senior management positions with Amerigo Resources, Nikos Explorations and Los Andes Copper
Conclusion
As EurOmax just raised 3.8M at C$0.22, they currently have around $4M+ in the treasury, giving them an Enterprise Value of approximately $34M, which gives their ounces in the ground a cheap valuation.
We’d recommend the company to fast-track exploration at Trun, and release NI43-compliant resource estimates on Zlata, Nadejda and Ruy, as well as an updated resource estimate at Logo. We think that with approximately 12,000m of drilling in H1 2012, these 4 tenements could have in excess of 2.5M ounces altogether, which should be the base of a scoping study/PEA to be completed by year’s end.
We are looking forward to the resource update at Ilovitza, and hope the next update will be a platform to start negotiations with possible joint venture partners on this project to bring it to the development stage, as it’s quite clear EurOmax won’t be able to do it by themselves.
With Dimitar Dimitrov and newly-appointed Quinton Hennigh, EurOmax has the right people to move forward with their projects. We believe 2012 will be a transformational year as EurOmax will prove up more ounces, and create a clear strategy with distinguished priorities. If the company really adds more ounces towards our estimated 7.5Moz mark by the end of 2012, the shareprice could be a multiple from where it is now.
Disclosure: The author has visited the Trun project in Bulgaria and the Ilovitza project in Macedonia during December 2011, and his costs have been reimbursed by the company. The author holds a long position in Euromax Resources Ltd. Please see our disclaimer for current positions.
