Last week saw Russia-focused Eurasia Mining (LSE:EUA) reveal that it has majorly surpassed production expectations and submitted an increased reserves estimate at its West Kytlim platinum project. With Eurasia’s shares now sitting at 0.4p, we asked chairman Christian Schaffalitzky to explain the positive impact that last week’s news could have on the firm’s operations moving forward.
West Kytlim project is the world’s second largest alluvial platinum mine, containing 2,283kg of raw platinum reserves with an additional 10ts of the metal sitting in resources potential. The project is made up of several areas including Malaya Sosnovka, where Eurasia has identified a total of 84kg platinum, and Kluchiki, where it has found another 319kg.
Eurasia uses a low-cost production process called alluvial mining at the site. This technique involves trucking free digging river sediments to a washplant where material is washed and separated by size. It then collects heavy platinum and gold-bearing nuggets and turns them into a black sand concentrate. It then upgrades this into a saleable product at an onsite laboratory.
This year has marked the first of ‘significant production’ for Eurasia at the mine, with one washplant operating at an industrial scale on site since May. Sediment initially came solely from Malaya Sosnovka, but mining began at Kluchiki in the summer.
With the mining season now complete, Eurasia reported last week that total platinum production has come in at around 165kg this year, surpassing its 100kg estimate for the period. Aside from a highly efficient mining technique – courtesy of a new contractor - Schaffalitzky told us this production increase comes down mainly to something called the ‘nugget effect’.
In layman’s terms, this is the process in which a firm discounts larger grades of platinum identified during a reserve estimate because it does not see them as representative of average classes in an area. Schaffalitzky said this means that when a business captures these larger, coarse nuggets during actual mining, they can often lead to a dramatic increase in grades, boosting total production in the process.
‘When you are working on alluvials, the platinum deposited is running in a stream system. When the velocity of the water changes very quickly, these nuggets can settle out unevenly into pockets. We do not measure these when we do a reserve estimate, which means that if we get them in a significant amount when we are mining, it can really upgrade the deposit. This process has helped us greatly here- we thought we would produce around 100kilos this season and, in the end, we produced 160kgs, so that is great.’
Throughout 2017 and 2018, Eurasia has also been carrying out a programme of infill reserves upgrade drilling at Kluchiki. The work forms part of a broader and continuing reserves drilling program that will eventually see it target an area called Bolshaya Sosnovka, which it plans to develop after Kluchiki.
In last week’s update, Eurasia said it has now completed 895m of conventional core drilling at Kluchiki, with a further 67m or large diameter core drilled to verify regular core grades. The company said the grades it recovered are in line with expectations from its existing state-approved resource and also found evidence of bonanza-grade ore pockets in the drilling results.
It has now submitted a new calculation of the site’s reserves showing an increase in total contained platinum for Kluchiki to Uralnedra, the official body qualifying state-approved reserves locally. Although Eurasia cannot yet comment on the upgraded figures specifically, Schaffalitzky said the firm hopes to get them passed in time for the next mining season. If this occurs, he expects that enough reserves will be present to support the introduction of a second washplant:
‘We have been completed this infill and exploration drilling in batches as we have been mining and this round has really improved our outlook for the Kluchiki area. In Russia, we cannot upgrade resources to reserves until the government has approved them, and we have now submitted the necessary documents for this to happen. We plan to have enough reserves in place by next drilling season to support two wash plants, which would hopefully enable us to double production. Beyond this, we hope to have three washplants in full production across the whole of West Kytlim by 2020.
Elsewhere in last week’s update, Eurasia said it is continuing to work on progressing the mine permit application for its flagship Monchetundra Project in Russia’s Kola Peninsula. Monchetundra contains state-approved reserves and resources of 2MMozs palladium and platinum along with substantial amounts of copper, nickel, and gold as by-products. Eurasia’s timeline to development for Monchetundra can be seen below.
In the update, Eurasia said the relevant authorities have answered its recent communications around the licence, adding that it hopes for a definite conclusion to the process over the near-term. The company’s shares rose by 47pc in a day earlier this year when it announced that Russia’s Ministry of Natural Resources had approved its application for a Mining permit at Monchetundra. Schaffalitzky added that once the license has been approved, the company expects to begin delivering plenty of further newsflow from the project:
‘Moving forward, Monchetundra will be a big driver for us, as it is a huge, very exciting project. Once we get the mining licence, there will be a lot of activity after that as we have a very clear timeline to development in place that we are looking forward to progressing.’
Author: Daniel Flynn
Disclosure: The author does not own shares in the company mentioned in this article