Eurasia Mining (LON:EUA) released an update to the market on Monday announcing that it had received State approval for expanded multi-site reserves at its West Kytlim alluvial Platinum project in Russia. The announcement marks a key step forward on the pathway to production at West Kytlim and we hope that the following Q&A with Managing Director Christian Schaffalitzky will help investors better understand the significance of this news:
CS: Registering reserves is the first key step in obtaining a mining licence. Reserves must be 'put on the state balance sheet' (originally a Soviet requirement) before they can be licenced. To do this, the feasibility study submitted must meet criteria that demonstrate commerciality. This is a major task, largely done with our own staff and a few independent consultants. While this reserve has been approved, back in the UK, alluvial deposits are not dealt with under the JORC/PERC codes. However the AIM rules allow such reserves filed in Russia to be published if they are approved by the authorities. Once we have received confirmation of their formal registration, we will publish this update in the same format we have used previously. The key result here is that we have enough reserves to support at least two operating sites, which increases the commercial value of the project.
CS: After the reserves have been put 'on the state balance sheet', we then file for a Discovery Certificate. This is formal confirmation that it is Eurasia's company in Russia that has made the discovery, and gives us the exclusive right to apply for a production licence. It also means that if for some reason, such as the strategic investment law, a production licence was refused, compensation would have to be paid to the discoverer. Once this certificate is obtained, the production licence is applied for, which will cover the area of the reserves plus adequate space for the processing facilities etc.
CS: In a perfect world, it is possible that a Discovery Certificate could be issued within 2 months, with the production licence following also within 2-3 months. In this event, it would be possible to see some early production in the 2014 calendar year. However this assumes no hitches and also uninterrupted processing of documentation by the authorities. Eurasia is unable to say how long the process will actually take.
CS: Our plan is to commence production with one mining site in year 1, with the second site following in year 2. The operation is capable of producing for 9-10 years, based on the reserves identified to date. We will update shareholders on this once the timescale has become clearer.
CS:Eurasia was offered a production licence on a very small area about three years ago but this would have been a small operation more suited to a local company's operation. During the application process for this licence, the company was passed under the strategic investment law, which must be done for any platinum project. The new amendments, which have had their first reading in the Russian Duma (parliament), provide for all alluvial mining projects to be exempt from the strategic investment law. It's enactment will mean Eurasia can skip this step in the application process and also it means that the state would not challenge the Discovery Certificate for this reason.