East Asia Minerals Out of the Ashes with Gold for $1 an ounce
East Asia Minerals has had a couple of tough years. The company peaked in 2010 and promptly fell into a 99.5% decline. Tocqueville Gold Fund remains the major shareholder and demanded a change of management in early 2017. That has taken place and the company turned around.
EAS shows two major projects in Indonesia. The Sangihe gold project had a 43-101 resource of 800,000 ounces in the inferred category reported in 2010. The company continued drilling and brought the resource to 114,000 ounces in indicated and 266,000 ounces in near surface oxide material. That’s $300 million dollars worth of gold you can process on a leach pad.
Their larger project is the Miwah gold property with a 2011 43-101 resource of 3.1 million ounces. This is the project that broke the pick of the EAS run by prior management. It’s located in an environmentally protected area of forest. Talks have been going on with the local government for years to bring the project into compliance with local and federal regulations for mining.
So in total between the two projects, the company has reported a 43-101 resource of just less than 4 million ounces. At today’s price of the stock, the company has a market cap of $2.5 million but is in the process of completing a $2 raise that would bring the number of shares to around 100 million. At today’s stock price you can pick up 43-101 ounces for $.50 and with the increased number of shares outstanding after the private placement, you are still paying under $1 an ounce. That’s cheap.
EAS has generated its Indonesian Feasibility Study and Environmental Report on the 800,000 ounce Sangihe project. They are in the final stages of meetings with the Mines Department on upgrading their Contract of Works Mining License to convert it to Production Permits License. Once that is completed, the company anticipates initial construction of their heap leach pads and gold processing facilities in Q4 of 2018 with initial production in H1 of 2019.
East Asia is aiming at 1,000 ounces per month production in the first year with upping the target to 2,000 ounces per month in the second year. Targeted production after that will depend on results from the infill drill program.
EAS negotiated a $15 million gold off-take agreement with Isatis Capital of Montreal. They are in the process of closing that financing now. It will fund the entire cost of construction and startup of mining as well as fund the infill drilling at Sangihe to bring the resource up to a higher level of confidence.
This sort of absurd market cap for a company about to begin production isn’t going to last for long. If the only asset EAS had was the 800,000 ounces at Sangihe, the company would be absurdly cheap. But when you toss the 3.1 million ounces at Miwah into the picture it’s easy to see why the market cap was so much higher in the past.
Miwah is the carrot on the end of the stick in front of the mule. Should EAS and president Terry Filbert deliver on time and as promised, the chances of Indonesia granting a mining license for Miwah get into the excellent category. I like it when management has to operate under pressure. It’s amazing how creative you can be when you have a gun pointed at your head. In this case there is no gun pointed at them but a giant sweet and golden carrot if they produce.
When you go to Vegas and toss some money down on a crap table to make a bet, you want to know two things. What are the odds against me and what is the payoff?
I don’t have any better idea than anyone else if EAS will succeed or not. Another management team with the same assets drove it into the ground and cost investors 99.5% of their investment. But with a $15 million line of credit, 266,000 ounces of near surface oxide gold and construction beginning shortly, this is the lowest risk and highest payoff I have seen in years.
True, the stock could go from $.05 to zero and a lot of companies have floated away to money heaven. But production of 25,000 ounces a year of heap leach gold ought to be worth $100 million and that would make them a 20 bagger. Should they impress the Indonesian authorities as I believe possible, the 3.1 million ounces should make the company worth a lot more and at that point they become self-financing.
That’s why I have bought shares in the open market at even lower prices and participated in two different private placements. The company is now an advertiser so naturally I am biased.
East Asia Minerals