Euro Sun Says Rovina Shines Bright Despite Falling Shares

Canadian miner Euro Sun Mining (TSX:ESM,OTC Pink:CPNFF) released a preliminary economic assessment (PEA) for a portion of its Rovina gold-copper project in Romania on Wednesday (February 20).

The PEA was for the mining of the Colnic open-pit mine, “the initial phase of development of its Rovina Valley gold and copper project,” said the company, which is the 100-percent owner of the large-scale project which sits atop almost 400 million tonnes of ore.

On the Toronto Stock Exchange, where Euro Sun is listed, the company’s shares fell more than 14 percent over the day following the release.

In an email to the Investing News Network (INN), company CEO Scott Moore waved away queries about the stock price falling with the news, saying that it was in line with the current cycle of ‘sell on news’ being “experienced by virtually every junior out there.”

“The PEA issued today outlines a 139,000 (gold equivalent) ounce producer with a 12-year mine life and reasonable capital expenditure (CAPEX ) while only utilizing 28 percent of the measured and indicated resources at the project,” he said, adding that the “Rovina (deposit) is also an open-pit at surface resource, which could be brought onstream at any time given the similarity of ore being processed.”

In the release, the company said that it was opting for a staged multi-phase development approach with three target deposits; Colnic and Rovina as open-pit mines and Ciresata as an underground operation.

“The 2019 PEA highlights a positive economic project for our initial phase of development at the Rovina Valley project,” said Moore in the release.

“Colnic will form the foundation of a multi-decade operation with the expectation of bringing the Rovina pit on-line using pre-installed infrastructure followed by the Ciresata deposit.”

Euro Sun got the thumbs up from Bucharest in late 2018, receiving the first exploitation and mining permit for a non-state mining entity in the formerly communist country.

Looking at the numbers released today, Euro Sun reported that Colnic has a pre-tax net present value (NPV) of US$218.1 million with an internal rate of return (IRR) of 15.4 percent, and a post-tax NPV of US$168.8 million with an IRR of 13.5 percent.

The above base case for developing the Colnic deposit envisages a gold price of US$1,325 per ounce of gold, and US$3.10 per pound of copper.

The PEA estimates CAPEX of US$339.7 million for a total CAPEX of US$352 million for the operation, which will produce 108,000 ounces of gold (from an average grade of 0.58 grams per tonne) and 13.3 million pounds of copper (from an average grade of 0.1 percent) per year.

In his email to INN, Moore reiterated the numbers from the PEA, and explained that the CAPEX being installed in this PEA would build a central processing facility to serve all three deposits on the mining license.

“This is just the first phase of the project development. You would not need another plant to be installed beyond this,” he added.

“As with any DCF (discounted cash flow) model the value of future cash flows beyond 8 years is virtually zero hence the NPV is not particularly relevant on a project this size. Once CAPEX is paid back in the first 5 years you will deliver consistent cash flow for another 7 years and phase 2 at Rovina comes onstream for another decade and you still have 5 million ounces to mine at Ciresata.”

He concluded: “The key point is this project is a big, simple, multi-decade asset with predictive cash flows, which is actively coveted by large diversified miners.”

Earlier in 2019, Euro Sun announced a market financing of up to C$10 million to fund the completion of the PEA that was released today, before withdrawing its equity offering a week later, citing current market conditions.

In 2018, Euro Sun was part of an attempted buyout of fellow Canadian miner Nevsun Resources (TSX:NSU) to secure its Bisha zinc mine in Eritrea. Nevsun spurned Euro Sun and and its partner in the Lundin Mining (TSX:LUN,OTC Pink:LUNMF) and went on to be bought out by Zijin Mining (HKEX:2899,OTC Pink:ZIJMF) for C$1.86 billion.

Euro Sun was trading at C$0.245 by market close on Wednesday, down 14.04 percent.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.