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Shares in Eurasia Mining were suspended on the London Stock Exchange yesterday, with the announcement that the company was seeking clarification from CITIC, presumably on the possible sale of one or both of its mines, although this was not stated.

The company has two platinum/palladium projects in Russia: West Kytlim and Monchetundra, of which at present only West Kytlim is producing. In autumn last year Eurasia started talking to Russia’s VTB Bank and China’s CITIC about potentially selling one or both assets. The banks are understood to be working on a success fee basis.

No decision has been made yet because it would require approval from shareholders. At this stage we believe that none of the plans have been finalised and therefore shareholders have not been consulted.

Eurasia Mining: strategic investment for China?

We know that Chinese investors remain very interested in Russian mining plays, particularly any which can provide a strategic source of precious and rare earth metals required for next generation industrial needs.

Kytlim could fetch a good price given the current situation in the market in terms of consolidation in the platinum industry and the high demand for platinum. If Eurasia were to sell either one or both mines they would likely look to funnel the money into new projects.

West Kytlim is an alluvial mine; it means it is dug from the open, not into the ground and therefore it operates on a seasonal basis. Pre starts in March and Eurasia mines there from April until the autumn, and then stops for the winter.

Kytlim is dormant at the moment but will start producing in April. Eurasia’s other mine, Monchetundra, is actually not producing metal yet.

Pipeline of mining projects in Russia

Eurasia Mining have a pipeline of projects they are looking at, having been in Russia for 20 years, but the challenge will be establishing the ownership rights of future projects or dealing with other operational obstacles that will require an additional injection of cash.

After the shares were suspended, over 30 million warrants and options were exercised by stakeholders in Eurasia Mining, including 20 million from Sanderson Capital Partners and 2 million from Optiva Securities. Employees of the company reportedly exercised over 8 million options.

The sales of both mines would deliver a large amount of cash to the miner which could be used for future projects, but no active mine and less speculative upside would mean that Eurasia Mining would likely trade at a discount. This would certainly be the case of palladium and/or platinum prices start to consolidate.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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