In its most recent update regarding its West Kytlim mine, Eurasia Mining (LSE:EUA) announced preparation work is underway ahead of first production. This is likely to commence in April once the seasonal thaw sets in. West Kytlim is located in the prolific platinum-producing region of the Ural Mountains of Russia, and the alluvial process relies heavily on running water. This is obviously problematic when everything is frozen solid. We caught up with Executive Chairman Christian Schaffalitzky to find out more about how Eurasia plans to ramp up its activities in Russia, once winter has loosened its grip.
Eurasia is focused on two main projects, which are at different stages of development. Aside from the West Kytlim mine - which Eurasia brought online in spring 2017 – Eurasia is targeting first production on its Monchetundra license by 2021. Monchetundra is located in the Kola Peninsula in the far Northwest of Russia, and is the largest of Eurasia’s projects. State approved reserves and resources amount to 1.9 million ounces of palladium equivalent, which includes platinum and gold. Eurasia received the mining license certificate for Monchetundra in December 2018, and can now look to advance the project through construction. In addition, a third smaller project is a gold and silver tailings project at Semenovsky.
West Kytlim Potential
As the stockpiling of ore commences in the chilly Ural Mountains, Eurasia can look back on a successful first full season of production at West Kytlim. 2018 production totalled 165kg of raw platinum, well in excess of the 100kg target.
Eurasia will continue to work with the same team of contractors in 2019. The directors of Techstroy, the contractor who ran the front-end processing of the mine last year, have registered a new company Uralmetmash specifically to focus on the project.
Uralmetmash is in the process of making operational tweaks to further improve extraction efficiency. A hopper to improve loading is to be added, improving the flow of material and the addition of a jig at the end of the process is being considered. Tailings from the alluvial process are being tested and may contain significant fine platinum fractions, which could be extracted in this manner.
Eurasia is now turning its attention to building its available reserves and resources base, to extend the life of the mine and add value to the project. As Christian Schaffalitzky explained to MiningMaven, the reserves are there, they just need rubber-stamping;
“We already have worked on wider areas of the license at an exploration level but when we came to apply for the mining license we could only apply for the areas that we had proved to be reserves and advanced resources. We dropped the rest of the license area because we hadn’t got to the reserves definition stage yet, but we know there’s platinum in those areas, so that’s going to add to the future life of the mine.”
And the potential reserves are plentiful;
“We’re talking of the potential of certainly doubling the reserve or resource base, but that’s speculation at this stage until we receive official confirmation.” Schaffalitzky adds.
State approved reserves are currently being mined at the Kluchiki area A revised reserves calculation for this area was submitted for approval in October 2018. This will increase the mineable reserves allowing Eurasia to take a decision on adding a second washplant to expand its operations. A larger development program is now being finalized, to upgrade all of the currently identified resources and reserves on the mining license to mineable reserves. This reserves development program will be specifically tailored to suit proposed ore schedules.
Operating in Russia
You might expect operating in Russia could be problematic, but Schaffalitzky tells us this is simply not true.
“We have successfully applied for and have been granted two mining licences on two areas in Russia. We have been operating since 1996 in Russia, exploring and now mining, and at no stage have we had any obstacles relating to the jurisdiction.
The only delaying factor is a bureaucratic one.
We have a certain amount of reserves to mine this year but really want to extend our active reserves further and that required another report to the government, and then the government, in this case at local level, becomes the logjam.”
Schaffalitzky also told us that he feels the market can underestimate how long bureaucratic processes can take when progressing an asset through to production. This is particularly the case when aspiring to develop larger projects such as Monchetundra.
Monchetundra
In 2016, Eurasia completed a Feasibility study for two open pits at Monchetundra – West Nittis and Loipishnune. This culminated in the granting of a mining license for 2m ounces of palladium-lead mineralisation, including platinum, gold, nickel, and copper.
Having received the official certificate a month ago, Eurasia now looks forward to progressing the project on a number of fronts. Work is starting on an engineering and development plan for the mine. Outline terms for an Engineering Procurement and Construction (EPC) contract have been agreed with Sinosteel, the Chinese state-owned equipment manufacturing and engineering firm. Under the terms of the agreement, Sinosteel would provide finance to the tune of $151m. That’s 85% of the estimated $178m costs required to build the mine.
“Sinosteel will carry that loan on their books until the plant is fully operational. The remaining 15%, roughly $24m, is to be Eurasia’s equity contribution.” says Schaffalitzky.
That’s not pocket change for Eurasia to find, however another factor of the deal may make potential investment in the project even more attractive. There is to be a cash back element from Sinosteel, which will accelerate the return on investment back to Eurasia. Sinosteel will sub-contract Eurasia to do certain proprietary works such as geo-technical work for the mine, road infrastructure and so on. Schaffalitzky says this could equate to $50m less what it costs to do the works, over the total construction period of roughly two years. The mine is expected to take 18-24 months to build and will have the capacity to produce around 120,000 ounces of Palladium-lead mineralisation per annum.
Although there is still much to do to piece together the Monchetundra puzzle, Schaffalitzky highlights the project is perfectly located.
“The Monchetundra project is within 6km of a town of 50,000 people, there’s power, rail, and main roads. The infrastructure is fantastic, this is really unusual in Russia, for people to be so close to potential work.
There’s even a nickel-copper refinery near the town. It’s not running at full capacity anymore, but there used to be other nickel-copper mines in the district which supplied it, so it’s actually running with spare capacity at the moment.”
Steady progress
With some commodities, notably palladium and gold, starting to show signs of recovery, there is cause for some optimism across the junior resource sector. Palladium has had an incredible run hitting around $1450 an ounce this month. The move, which has coincided with a sharp decline in the platinum price, is likely down to news headlines condemning diesel vehicles in favour of petrol – diesel vehicles require platinum while petrol favour palladium.
Schaffalitzky believes a ‘crunch’ may happen in the platinum supply since many labour-intensive South African mining companies are running at a loss with the platinum spot price so low. Subsequently, it seems likely that platinum will eventually recover, once the widespread headlines become chip-paper.
Regardless of the current cyclic dip in commodity prices, Schaffalitzky told MiningMaven the market should anticipate steady progress over the next 6 months across all of its projects. The company seems on course for a positive start to 2019.
Author: Stuart Langelaan
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