Euromax Resources raises $240 million backed by sovereign state
To paraphrase Charles Dickens: “It is the best of times, it is the worst of times.”
The DJIA has reached a new all-time high—but there is a vapour of panic rising from the general euphoria.
With investors twisting their necks left and right—unsure whether to charge forward or run for cover—the big opportunities may be in politically de-risked commodity companies capable of generating hard cold cash.
Euromax Resources Ltd. (TSX.V: EOX) (OTCPK: EOXFF) (WKN: A1J6XZ) is focused on building and operating a mammoth copper/gold project in Macedonia. As many juniors struggle to raise money, EOX has signed a 10-year offtake with the Pirdop plant in Bulgaria, owned by the German company, Aurubis, triggering a $240 million secured investment.
Germany is the world’s second largest importer of copper. The government guarantees the development of new copper mines supplying its domestic market. As a result, financial institutions can lend to Euromax with a full sovereign guarantee from the world’s 4th biggest economy.
“The backing of the German government allows us to borrow $240 million and repay it over 12 years,” stated Euromax President and CEO, Steven Sharpe, in an exclusive interview. “When you’ve got a 23-year mine life, a 12-year debt scenario creates positive economics for the shareholders”.
The management team of Euromax is transplanted from European Gold Fields that developed a project in Greece that sold for $2.5 billion in a stock transaction.
“We have a simple business model which is to return all free cash flow to shareholders,” stated Sharpe.
For many years, Sharpe and his team eye-balled Euromax as an acquisition target because the Ilovica Project copper-gold porphyry has almost identical geology to the Gold Fields’ asset. But at that time, Freeport had back-in rights.
“The business model of the former Euromax management was predicated on being taken out by Freeport,” explains Sharpe. “So when Freeport failed to exercise its option, it created an opportunity. After our success in Greece, we were confident that we had a clear path to developing a business that will generate $100 million a year.”
After acquiring the asset for about $20 million, Sharpe’s team rolled up their sleeves and took an inferred resource to a PEA, a PFS, a definitive feasibility study, and then recently to an NI 43-101 reserve.
Sharpe describes the last four years as, “moving an asset up through the value curve.” The project advancement has coincided with the worst commodity down-cycle in a generation, so the share price today is similar to the share price when Sharpe and his team first acquired the asset.
Macedonia is not a well-known mining jurisdiction but Euromax has found it to be transparent, pragmatic and flexible.
“Foreign investment is the cornerstone of Macedonia’s economic policy,” explains Sharpe. “The average age of the ministers is 30 years old. Early in the process, I was granted a meeting with the Prime Minister. At that time, concessions were only granted for two years. I explained to the Prime Minister that was insufficient time to collect base-line data and do an environmental study.”
The Prime Minister listened to what Sharpe said, called a special meeting of Parliament, and passed the law extending the time period to four years. With steady advancement of the asset and zero permitting issues, Euromax is attracting attention from institutional investment groups.
“A couple of weeks ago, I did a road show in Montreal, Toronto, New York, San Francisco and Vancouver,” stated Sharpe. “There was a remarkable transformation in mood. The big funds wheeled out their chief investment officers. They like the idea that every Euromax share is directly correlated to the performance of a mine. It’s a business proposition, not a roulette wheel.”
Euromax Resources just received final approval to graduate from the TSX Venture Exchange and list its common shares on the TSX, under the existing symbol ‘EOX’.
“At European Gold Fields, we were on the main board, so we were already following these regulatory protocols,” stated Sharpe. “With our bookkeeping fully compliant, we just had to demonstrate that we have 18 months of working capital.”
The Ilovica project wouldn’t work in Canada because the infrastructural costs are too high. A simple open pit mine works in Macedonia because the operating costs are low and the strip ratio is 1:1. The gold and the copper mineralisation begins at surface. Euromax does not have to dig down to start making money.
“Euromax has professional management with a clear path to bring the Ilovica project into production under a strong social mandate,” stated Anthony P. Fierro, an Institutional Broker with PI Financial Corp. “More than likely, Euromax will become a leveraged mid-size Cu-Au producer going into the next commodity cycle.”
“The Ilovica Project is on the grid. There is a paved highway to the site and there is a smelter 240 kilometers away,” explains Sharpe. “We estimate our transportation costs at about $20 a tonne, compared to sea transport which is typically $120 a tonne. The cost of power is cheap. The labor’s cheap. The corporate tax rate in Macedonia is 10%, and you only pay it when you distribute.”
Meanwhile, the IMF has slashed global growth projections, the S&P 500 earnings index are down 6% , while the safe-haven Junior Gold Miners ETF (NYSE: GDXJ) surged 115% in the last year.
Copper prices also recently rose to their highest level in 60 days, supported by strong demand data from China and a weakening U.S. dollar.
As the battle for the hearts and minds of investors continues, savvy investors are buying metal-in-the ground.
This story was provided by Market One for commercial purposes.