Interview with Scott Moore, President & CEO of Euro Sun Mining (TSX:ESM). Euro Sun Mining is a Canadian-based development-stage mining company focused on generating value for its shareholders by advancing its 100%-owned Rovina Valley Project, located in west-central Romania.
This property hosts the second largest gold deposit in Europe. In May 2016, the Company strengthened its management team and board of directors with the addition of a technical team with extensive mine development and operations experience in preparation for the advancement of the Rovina Valley Project.
1:44 - COVID-19's Impact in Romania
2:38 - Company Overview
3:38 - DFS Didn't Excite the Market, Why?
5:45 - Forbes & Manhattan as Shareholders: What's Their Influence at Present?
6:39 - Environmental Assessment Process & Timeline
8:24 - Appointment of Peter Vukanovich as Exec. Chairman, Why?
9:00 - Listing on LSE: Timeline, Costs, & Confidence
10:51 - DFS Highlights & Impact on Discussions with Financiers
14:56 - Romania as Jurisdiction & Poor Perception at Market
18:10 - The Catalyst Moment for Euro Sun Mining
19:48 - Options for Raising Least-Dilutive Equity
Matthew Gordon: Scott, how are you, sir?
Scott Moore: Hey, good to see you this morning.
Matthew Gordon: Good to see you. Where are you?
Scott Moore: I’m in Romania. I’ve been here for a couple of months, escaping the Covid in Canada but hopefully, things are getting better everywhere.
Matthew Gordon: I thought you were permanently based in Romania. So, you skipped home for a bit, did you?
Scott Moore: I go back and forth but back and forth is challenging with air travel these days so better off to stay close to the project here while we’re going through some critical items and successfully moving forward.
Matthew Gordon: True. How is the Romanian government doing with everything?
Scott Moore: Yeah, they go back and forth between light lockdowns and the heavier lockdowns, but I think that’s generally the consensus across Europe. They are also talking about having everybody vaccinated by June 1st, and everything wide open. Let’s see if that’s the case.
Matthew Gordon: Remind me, is Romania inside the EU, or is it attempting to get into the EU?
Scott Moore: Yeah, it’s in the EU properly. It’s one of the 27 member states. It’s advantageous to get around and move people and goods and everything else. We can bring in people from anywhere to work on the project but mainly the team for us is all Romanian.
Matthew Gordon: As a Brit, I’m very jealous. I wish we still were.
Scott Moore: You miss that, oh yeah.
Matthew Gordon: Yeah. That’s happened. Right, better not talk about depressing matters like that. We’re going to talk about you. Scott, do us a favour. We spoke in October but for people new to this story, can you give us that 1-minute overview of the business and I’ll pick it up from there?
Scott Moore: Sure. I guess going back from October, Euro Sun Mining is a single mining asset company. We’re developing the Rovina Valley Gold and Copper project here in Romania. It’s large, it’s the second-largest Gold mine in Europe. One of the top 14 underdeveloped Gold and Copper projects globally. It’s big, simple, and holds about 7Moz of Gold and about 1.5Bnlb of Copper. It’s 2 open pits and 1 underground. We’ve had a big success getting the mining licence ratified by the federal government and now we’re in the final stages of the environmental permitting and rezoning plans, and we just delivered a very robust Definitive Feasibility Study on the project just a month ago, on March 1st.
Matthew Gordon: You have. I saw it. But no one cares. Your market cap is $54M. No one is listening. Why not?
Scott Moore: Yeah, I would say for us it’s driving ahead on the project and ticking the boxes. It’s de-risking milestones, it’s continually delivering on permitting, permitting, permitting. We’ve checked the box now on the technical side of things. That report will be on SEDAR in a couple of days. Everybody can read the whole 600-pages. Romania is always viewed as an anti-mining jurisdiction when in fact it’s not. We have a big overhang with a company called Gabriel Resources that tried to build a very similar-sized mine to ours, but they use Cyanide, they use wet tailings, it’s a UNESCO world heritage site for Roman ruins, they had to move a village. All those horrible things that everybody likes to go against from the NGO perspective, we have none of them. It’s a different project, a different process, and hence the government’s been approving the permits as we go along through the - I wouldn’t say it’s a heavily bureaucratic process, but it is a process that’s very clear-cut on what you have to do and it’s just continuing checking the boxes as we go forward.
Matthew Gordon: Okay so as far as you’re concerned, Gabriel Resources is a very specific case doing things that you’re not, so no one should draw comparisons to that. Romania is a good jurisdiction for mining. Is that what you’re trying to tell us?
Scott Moore: Yes, there are lots of mines here. Most of them historically have been state-owned because as a communist country up until the 1990s, state-owned everything. There’s not been a lot of foreign activity but what the foreign activity is, is a company listed on that, on AIM is also down here. They’ve got a big, state-owned Copper mine, similar-sized project to ours. It’s not like they don’t have large-scale mining. They have underground mining, hole mining, open-pit mining. It’s just not heavily in the news, particularly as most of it is state-owned still.
Matthew Gordon: Okay. I do want to talk about the project and I definitely want to talk about the DFS because the numbers look really interesting, but let’s deal with some of the other objections I think that people are putting up here. Forbes and Manhattan, not a very well-liked group for some reason, are they still a shareholder, are they still an influencer in the way that you go about running this business?
Scott Moore: No, in fact, that’s not the case at all. Euro Sun completely left the group back in May 2020. We did a large financing, brought in some very significant institutional shareholders at that time, restructured the company, added new board members, new independent chair, all leading up to somewhat of a divorce if you want to call it that. As far as we know, they don’t have any shares in the company and we’re a fully independent company on our own, operating without any influence or at all from-
Matthew Gordon: Right okay. Let’s talk about the announcement you made earlier last week, talking about the environmental assessment process. I think people have been concerned in the past about you going through a rezoning as well, and in terms of the EIA, it’s a very long, drawn-out process, isn’t it?
Scott Moore: Not necessarily. Just to reiterate, it is a very well laid out process on how you deliver the permitting here. Right now, yes part 1 is the urbanisation certificate for the land, which is a rezoning plan. You have pastoral land, forest land, you have to rezone it. This is left over from the Soviet system to go through this rezoning plan process. The second part of that same process is the strategic environmental assessment, which is done at the county level with the local EPA. It’s basically checking the box, assembling all the studies that we have on the project, and getting sign offs or opinions from local administrative bodies like the police department, the army. Everybody has to check the box. We’ll have a public audience on the ground in September, public consultations. We expect to complete the urbanisation certificate for the land in the fall. Then we are able to file our EIA process, with the state-level government here in Bucharest, and once you have a positive decision on that, you get a construction licence delivered within 30-days. The EIA process at the state level is quasi-technical. You have to deliver, not quite detailed engineering but high-level engineering in order to get the construction licence. That’s all now flowing out of the Feasibility Study, which we just delivered.
Matthew Gordon: Okay. The other thing I noticed was Peter Vukanovich has come on as exec chairman. Why has he been brought in? What’s he going to give you?
Scott Moore: Again, ESG principles are very key for us. We have the big E here with the environmental side of things, having dry stack tailings and on Cyanide. On the social side of things, we have a tremendous opportunity on the ground here with local support, country support, and federal support as demonstrated by the mining licence, and the government side has continued having independent chairs. I’m the only exec on the board. And also, we are anticipating going forward with a listing on the London Stock Exchange this quarter, and an independent chair is definitely a requirement for a listing in London. Again, we are delivering electric metals from the European Union into the European Union and having a London listing and putting the eyeballs on the European story. I think this is a big part of how we can raise the market awareness and the share price of the company in a big rerating way.
Matthew Gordon: Sorry, are you aiming for the main board, or on AIM?
Scott Moore: It’s a main board listing, yes. They call it a standard listing. We are listed on the main board of Toronto, so we don’t have to go down the AIM route. We are not a venture-listed company, we are a serious company with a serious asset, and this would be an LSE main board listing.
Matthew Gordon: That costs money, right? You raised some money last June, but the market cap is the market cap, and raising money at this level would be pretty expensive. What gives you the confidence that Europe is going to be interested in your story?
Scott Moore: I think it’s the whole narrative of electric metals and EVs, and everything else coming into the European Union. This is a big market, it’s going to continue to grow, and for us being one of the near-term projects to deliver Copper into the European Union to support all that infrastructure, the growth of EVs throughout Europe, even the infrastructure associated with electric vehicles takes a tremendous amount of Copper. With the Feasibility Study, we’re now bringing in our second open-pit deposit, which is mostly Copper. We are effectively a Copper company. We only make Copper concentrate. It happens to have high-grade Gold in it but we’re a Copper company that has 60-40 Gold on Copper on a revenue split. We only make a Copper concentrate, and we would deliver that likely to a smelter within the European Union as well.
Matthew Gordon: Right okay, let’s talk about this DFS, the numbers that came out of it. Why don’t you give us the highlights, first of all?
Scott Moore: Sure. The big change from the PEA in 2019 is longer mine life. We’re looking at a 17-year mine life versus 12-year from the PEA. We’ll probably have about another 2-years’ worth of stockpiles after that. That’s not included in the Feasibility Study. We’ve put a pin in the Capex. Sub $400M Capex. Porphyry systems tend to be $1Bn Capex but all the infrastructure of being in a first-world area like Romania, we can drive to site on main paved highways, everybody lives in a house, you don’t have to build a camp - these are all important factors for lowering that Capex number. They are actual bids, so that adds a very high level of confidence in a Feasibility Study, +/-10%. Every piece of equipment has an actual quote on it. Land movement, everything else is all included. That confidence level, putting that pin in what we show right now is 146,000oz a year for the first 10-years, 132,000oz over the life of mine, at an ASIC of 8.13. This first quartile in terms of all-in sustaining costs. It’s a big, simple mine that makes a lot of money. If I look at the Feasibility was done at 1550 and 330 Copper, NPV is USD$360M, 19% IRR. If I look at spot pricing, the NPV doubles. It’s about USD$650M, the NPV almost 27%. Highly levered to Gold and Copper prices, as you would expect with porphyry systems. We’re going to mine 7Mt a year, somewhere down the road we might want to mine 14Mt a year. But you want a project you can build, start, operate, and scale at a later date.
Matthew Gordon: Okay, given you’ve got the DFS numbers out there, given you’re talking the story of battery metals within the EV ecosystem there in Europe, conversations with banks, with debt providers on this sub-$400M number, have you had any?
Scott Moore: A number of them have already started. Everybody is waiting for that actual document to be filed on our SEDAR process, which is 2-days away. We’ll have that filed on roughly the 14th of April. Everybody can read the exciting 400 or 600-pages, or whatever it is. That’s the key point. We’ve also had NVAs already signed with some of the major French banks, which participate in project finance on a global basis. Look at Natixis, BNP Paribas, lots of discussions already starting on going with the German development banks again, delivering Copper into the European Union as key, and looking for support. European bank or reconstruction development, ongoing discussions there on participation in the project. That side is well advanced, including a number of private equity debt funds as well, and creditor funds. The ability to bring capital into Romania is easy. More importantly, it’s very easy to get money out of Romania, which is very challenging in some places, in mining. We’re in the European Union, want to drop $100M in Romania, you can take the $100M out tomorrow. You can’t do that in a lot of Latin American countries or African countries. It’s very difficult to flow capital in and out in some jurisdictions. It’s very easy here. We’ve got a stable currency. We’re not on the euro; this is a big, important factor too from a cost perspective. We’re a power-intensive company because we are mining and milling, but power is inexpensive here. Most of it is generated through Hydroelectric or Nuclear power in Romania. We’re connected to the national grid. This is clean power. We’re conveying materials instead of trucking for the most part. All lowering our Carbon footprint on the project. When you look at dry stacking, no wet tails, conveying where you are, green power, we’re ticking all the buttons on ESG that you could possibly think of to make sure that this project fits into the highest and best standards for environmental stewardship.
Matthew Gordon: See, that’s an interesting point you just made. You compared yourself to South American countries, but I’d say one of the big objections that people have, one of the things they’re slightly nervous about, is doing business in Romania. I don’t think it’s entirely down to what happened with Gabriel Resources. It’s a case of no one knows it and no one understands it. What are you arguing? That you’re a better jurisdiction than a few of the South American countries that you talk about?
Scott Moore: Yeah, I spent a long time in Peru, in the challenging jurisdictions. A lot of it is bureaucratic governments, governments that change a lot. It’s capital flows, social opposition. These are all the challenges that you have in Latin American countries, or the EU. We’re getting Germany, right? Everybody is driving around in Audis and BMWs, and Skodas, you name it. Every major corporation that you think of operates in Romania. Microsoft, Oracle, Continental Tyres, Renault, Ford, you name it. It is a proper jurisdiction and I think because it’s in Eastern Europe, it’s been a bit off the map for quite some time but it’s one of the best jurisdictions I’ve operated in, particularly for the permitting phase of things. Yes, it’s bureaucratic as you would expect coming out of post-communism, but it’s a process. It’s design. You go through the process, you check the box, you move to the next step. We’re a big project, our project footprint is like 505 hectares over 1,000 acres. As you can expect, this is a big complex project that takes time. It’s going to take probably 1.5-years to build. It’s big but the process is well-defined and we’re checking the boxes and getting continued support. The biggest challenge was getting that money licence ratified by 6 senior ministers and the prime minister. That’s published in the national official Gazette. All the success is there to move this project forward. We’ve just got to keep hitting all the investors, saying, ‘Guys, wake up, this is $60M, it’s a crazy price for 150,000oz of production for 2-decades with a Capex of under $400M, with a mining licence in hand. I think that’s the big focus for us. Continue to put forward that permitting is going well. It’s moving forward. Yes, it’s bureaucratic, doesn’t move fast. No permitting in mining moves fast, as we all know. The government isn’t flip-flopping, going back and forward, like Ecuador, saying, ‘Here’s a brand-new moratorium on mining. No, we don’t have that here. It just keeps moving forward. The country has been in the European Union since 2007, it continues to mature as you would expect. Again, our project is following all Romanian and European Union regulations which as you can expect, are somewhat onerous when it comes to the environmental side of things. Again, dry stacking and no Cyanide. This is the best environmental Copper and Gold project out there right now being built.
Matthew Gordon: You’ve had a tough run of it. You’ve had to deal with people’s perceptions of Manhattan Forbes, the country itself, the ability to get permits, the ability to get a mining licence. It’s one thing after another. What’s the moment, you think, looking forward with this project, that people are going to start paying attention? Is it the London listing? Is it the EIA approval? How do we get a sense of the timing that we’re looking at here?
Scott Moore: Listen, people can look at what happened in our shareholder base in 2020. We brought in a large financing with Sprott Capital Partners. We brought in 3 of the larger Gold funds, institutional funds out there, with Ruffer, Franklin Templeton, and the ASA Gold Fund, Merk, BNP Paribas’ fund IXIOS, APAC out of Hong Kong. A very strong institutional shareholder base, which is probably now over 50% of our shareholders are institutional. The classic uptake in the Lassonde Curve as we move into the development phase. Every new piece of news that we put out that demonstrates positive permitting progress I think will be absolutely well-received by all investors going forward. We’re going to start going through the financing phase and putting financing packages together. Very keen interest from the French banks, the Germans, private equity funds, credit funds. It’s Europe. It’s not Africa or Latin America. When you talk about country risk, there’s no country risk. You can get your money in; you can get your money out. That’s the important factor that we’re dealing with here.
Matthew Gordon: Talking about raising money, and I get the debt component you’re going after on the Capex off the back of the DFS. You’re going to have to put some equity in and at the current $54M level, that’s expensive equity. That’s potentially very dilutive to you. What are the options there for you to minimise dilution or damaging that capital structure?
Scott Moore: We have to get the share price higher. Full stop. You’re not raising $150M of equity with a $50M market cap. You just don’t do that. One thing we have been able to achieve is we’ve kept the cap structure wide open. We have no debt, no streams, no Royalties other than state Royalties here. No Gold loans, no prepays, no off-take agreements yet so we have a lot of optionality in how we fund the project, but the equity side is all about share price. We’re focused on delivering continued news on positive permit progress, and the technical side shows that this is a robust project. At some point, the share price has to - investors have to look at it and say, ‘Hey, this makes a lot of sense. Let’s get in.’ Certainly, at this price, it’s a steal. I think the idea that we continue to demonstrate good news means the value will surface. It has to. We’re very positive about that as well.
Matthew Gordon: Okay, it’s a steal. Are you buying any shares?
Scott Moore: I’m allowed to buy after the 15th.
Matthew Gordon: I look forward to seeing that.
Scott Moore: One thing everybody forgets is that CEOs have all this news and blackout periods and everything else. Until you’ve filed that technical report, you are blacked out. I think at that point we’ll be in a position to start buying some shares as well, which is what I said in our goal.
Matthew Gordon: Beautiful. Okay, Scott, I appreciate the update here. You’re getting through that tick list of yours. I look forward to speaking to you again soon.
Scott Moore: We’ve got a big spreadsheet, we’re ticking away. Thanks very much.
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