Eurasia Mining plc (AIM: EUA)
("Eurasia" or the "Company")
West Kytlim capital expansion and exploration funding
The Company is pleased to further update on material changes to the sub-contracting agreement at the West Kytlim Alluvial platinum and gold mine and in the working arrangements between the parties. Capital expansion by the contractor has been assured for 2017 and subsequent years. In addition, funding has been secured for a five year detailed exploration programme to upgrade resource areas to reserves ahead of mining.
The agreement (see RNS dated 25 May 2016) between Eurasia's Russian subsidiary Kosvinsky Kamen ('KK') and Region Stroy ('SKRS') has now been superseded by a new agreement between KK and Region Metall ('RGML' or 'the Contractor') an affiliate of SKRS, 100% focused on the mining operation at West Kytlim. The new agreement further outlines responsibilities for both parties and guarantees capital expansion by the Contractor.
· RGML commits to provide capital expansion for the project, sufficient to satisfy a mining schedule agreed in advance by both parties.
· KK have moved the mining rights from SKRS to RGML, conditional on certain milestones being achieved, including production according to an agreed 17 year Life of Mine Production schedule.
· Revised schedule for mining over the next 12 years will cover all resources plus reserves on the license. One washplant is already on site, a further three washplants to be added by 2020.
· Resource drilling and all other third party exploration costs to be funded by RGML and undertaken under the supervision of KK's director of exploration.
· This funding is structured as an interest free loan from RGML to KK, deployed according to a detailed 5 year exploration schedule. Total third party exploration costs over the 5 year plan are circa $1,000,000 or(57m RUR)
· Repayment schedule for the interest free loan commences in 2018 but will be a function of mining grade, as 2016 mined grades were found to be 20% higher than reserves.
· The split on top line sales is unchanged at 70:30, however the Contractor must achieve a number of milestones and production parameters.
All-party meetings, held in Ekaterinburg (in advance of the mining season) concluded successfully with agreement on a new mining schedule which foresees significant capital expansion at the project in 2017 and subsequent years to a 12 year life of mine. Mining operations and site preparation are to commence in February, with first gravel washing anticipated in early summer 2017. The washplant used for 2017 production will be re-commissioned and a further washplant will be built in the second half of the 2017 production season. Further washplants will be added as required, to ensure production targets stipulated in the production schedule are met, up to four operational units by year 5(2020). The production schedule is a cornerstone of the mining rights awarded to the contractor, such that failure to meet production targets may result in an annulment of mining rights.
Mining in 2017 will continue at Malaya Sosnovka and later progress to Kluchki (see map on Eurasia's website www.eurasiamining.co.uk before the end of the season. Overall it is expected that approximately 100kg raw platinum will be produced in 2017, of which 30kg is attributable to Eurasia. Stripping of overburden and mining to stockpiles will commence in March 2017 with washing expected by early summer.
A five year exploration program has been agreed and already approved by the Ministry for Subsoil use. RGML have agreed to fund this program by means of an interest free loan to KK to cover all third party exploration costs including regular, large diameter and hydro geological drilling. KK will manage these exploration programs and, as the mining license holder, will continue to calculate and make applications for reserves approval and permitting.
MD Christian Schaffalitzky commented: "We are pleased to have refreshed our agreement with the Contractor at West Kytlim and to have ensured fresh capital to the project, again without diluting our shareholders and without changing the revenue split formula, which remains favorable for Eurasia. Our working relationship with the Contractor throughout 2016 was both amicable and mutually beneficial. It was however imperative from a KK point of view to ensure the Contractor deploys the necessary capital to allow the project to expand, at no cost to our shareholders, in the second year of production. A further positive result from this new arrangement is that the Contractor has committed to support exploration expenditure by means of a loan to KK, and this without a review of the revenue split. This work is essential to ensure sufficient supply of ore to the washplants.
We feel the project is now well in hand for 2017 and are delighted to remove the additional exploration cost from our budgets for 2017 and subsequent years. Our team in the Urals are doing a great job supervising both the mining and the exploration and this is set to continue. All the technical issues have now been solved and the project is set to have a full and we are confident successful mining season in 2017."
Eurasia Mining Plc
Christian Schaffalitzky/Michael de Villiers
+44 (0)207 932 0418
WH Ireland Limited
Katy Mitchell/Nick Prowting
+44 (0)161 832 2174
+44 (0)207 382 8300