There’s a good chance that things will start to move pretty fast for Euro Sun Mining Inc (TSX:ESM, OTC:CPNFF, FRA:OL11), now that the mining licence for the Rovina project has been approved at the highest level by the Romanian government.
Rovina is the second largest gold-copper project in Europe, boasting a resource of over 7mln ounces of gold and 233,000 tonnes of copper, and – unlike another famous project in Romania – is untroubled by any major environmental or regulatory obstacles.
The recent government approvals mean that Euro Sun’s chief executive Scott Moore is now able to turn his attention towards the intricate matter of getting the project financed, and to help that process along the company is expected to list in London shortly.
Once that’s done, negotiations with debt and equity providers can begin in earnest along the standard lines. The thinking at the moment is that the debt package will provide around 60% of the US$400mln that’s required for the construction at Rovina, with the equity component making up the rest.
Why is London the more appropriate location for this sort of financing, given that Euro Sun has a long and established association with the Toronto Stock Exchange?
The answer is broadly geographical.
Yes, London has a global reach financially. But actually the real narrative is all about keeping it local, or more precisely European.
In the aftermath of Donald Trump’s trade wars and the subsequent supply chain uncertainties wrought by the coronavirus, governments the world over are starting to worry about securing reliable sources of raw materials.
On account particularly of its significant copper component, Rovina is therefore being positioned as a project that it will be in the strategic interests of the Europeans to nurture.
“We’re Europe-focussed,” says Scott Moore. “Rovina will be a European supplier to a European market. Especially since the European Union is taking steps to cut its reliance on China”.
Copper from Africa, once the mainstay of European manufacturing is increasingly being diverted east, most notably in the recent past with the acquisition of the huge Tenke Fungurume project by China Moly.
Rovina will be able to make up some of that deficit, with annual copper production slated at around 9,000 tonnes.
It’s an enticing prospect, from several angles. But a degree of caution is also warranted. The ongoing controversies around the nearby Rosia Montana project have caused Euro Sun to play it absolutely by the book when it comes to acquiring its social licence to operate.
Environmentally, the region has suffered some significant failures over the past few decades, which is why dry stack tailings will be used and rehabilitation will be on an ongoing basis rather than simply when the project is mined out. There will be no cyanide in the system whatsoever, and what trees that do need to be felled will be replaced threefold by an ambitious reforestation project.
Furthermore, between 1,200 and 2,000 jobs will be created for a generation of local people, because even on current plans Rovina boasts a 17 year mine life. And if some geological projections turn out to be correct, it could last for a lot more. So, it’s a mine that could underpin the wealth of a region for the foreseeable future.
“The community’s finally realising that someone’s going to get it across the line,” says Moore.
A full scale environmental impact assessment will be filed by the end of this year, and an application to local authorities for change of land use needs to be completed, and then after that the plan is to break ground in 2022 and for production to commence in 2024.
On the base case that was modelled in the definitive feasibility study that was completed earlier this year, payback should take just under five years, although using spot metals prices that drops to around 3.8 years. Overall, the project is expected to generate free cash flow of US$700mln and gross revenues of over US$3.3bn.
Converting the copper into gold equivalent and you get a project with 10mln equivalent ounces in the ground with the all-in sustaining production cost of each ounce ringing in at US$813. That allows for very comfortable margin on today’s gold price, and plenty of opportunity for Euro Sun to spread the wealth around, from its Romanian stakeholders to its equity investors.
It’s big, and it could be very beautiful.