Friday 2nd December 2016

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Economic Geology

Eurasian Minerals Leverages Risk over 97 Properties in 10 Countries

By Kevin Michael Grace

If a man can be characterized by his vocabulary, then the words that best sum up David Cole, President and CEO of Eurasian Minerals Inc, are “passion,” “intellect,” and “astute.” Passion is what Cole feels for geology, intellect is what he most highly regards among those who work for him, and astute are the investments he seeks to make.

Geology runs in Cole’s Colorado family. His grandfather owned Blackhawk Placer there, and his father is a soil chemist. A master’s degree graduate from Colorado State University, he worked “all over planet earth” for Newmont Mining Corp for 18 years, and his “passion was always the early stages of exploration and discovery.” Cole remains close to Newmont, and many of his geologists are Newmont alumni.

Eurasian Minerals Leverages Risk over 97 Properties in 10 Countries

Cole founded Eurasian in 2003. It is an unusually various company, even more diverse than its name indicates, with 97 projects in 10 countries over four continents: North America, Europe, Asia and Australia. This wide distribution of projects is no accident. It is the direct result of Cole’s guiding philosophy: the prospect generation business model. In other words, avoiding big bets on small portfolios.

Cole explains, “Geological risk is vastly higher than most people will ever admit to you and vastly higher than the promoter of any given project will ever tell you. The truth of the matter is that most projects fail. So in order to be successful in our industry you have to manage the cost of failure, and a very powerful way to do that is to have somebody else pay for the exploration. We acquire large tracts of prospective mineralized real estate and add value by doing astute geology. We leverage our value by being the landlord and by having the intellect to advance those projects into deals that have favourable terms for our shareholders using other people’s money.”

Of Eurasian’s 97 projects, eight are royalty properties, and 46 are joint ventures, with partners investing $10 million annually. Haiti and Turkey are two examples of Cole’s OPM business practice. Newmont pays for Haitian exploration, while Centerra Gold Inc bears the costs of exploring Eurasian’s Akarca project in Turkey.

Akarca reported December 1 results of 3.42 grams per tonne gold over 30.8 metres, including 5.71 g/t gold over 16.8 metres and 21.23 g/t gold and 22.71 g/t silver over 3.6 metres. This followed October 29 results which included 0.96 g/t gold over 71.9 metres and 0.57 g/t gold over 166.7 metres.

To manage Eurasian’s vast interests in Turkey, Cole hired geologist Mesut Soylu. What Soylu has in common with Eurasian’s other regional project managers, Cole says, is that he “knows the geology and the political, environmental and exploration histories of the various parts of the world where we work.”

Given that Eurasian’s projects included operations in the Kyrgyz Republic, as well as Turkey and Haiti, leveraging political risk is a subject about which Cole has strong opinions. “Geological risk tends to be larger than political risk,” Cole contends, “even though the market doesn’t understand that. So if we’re able to take on a limited degree of political risk for a substantial decrease in geological risk, at the end of the day that is a substantial win for the shareholders of Eurasian.

To be successful in our industry you have to manage the cost of failure - David Cole

“We came into Haiti,” Cole reports, “and there was almost zero competition. Because of the perceived political risk we were able to go in and acquire a large package—1,100 square miles—for very little expenditure.” Highlights of Eurasian’s most recent results, September 30, from its Grand Bois project there are 2.65 g/t gold over 42.6 metres, including 13.04 g/t over 3.2 metres. But this is not the “big fish” Eurasian and Newmont seek in Haiti; they want “district-scale opportunities.”

Haiti was devastated by an earthquake earlier this year. This, Cole says, “delayed our projects about four to five months. We switched our efforts to a humanitarian focus and devoted all the resources we could to helping the Haitians. We’ve become attached to the people, and over the long term the best thing we can do for them is create jobs, create a minerals sector, which we believe will have a demonstrable effect on quality of life and life expectancy.” Having moved its office from Port-au-Prince to Cap-Haïtien, Eurasian has resumed operations.

Because of Eurasian’s global scope, this article can only mention its projects in Sweden and the western United States, its purchase of Bronco Exploration and its creation of a royalty subsidiary, Eurasian Capital. With $32 million in cash and tradeable securities, Cole promises Eurasian will continue to be “aggressive with organic growth, that is, the mineralized properties acquisitions central to the prospect generation business model.”

Cole believes there are three possible paths forward for Eurasian, current market cap $132 million. If projects such as in Haiti reveal big resources, they may be bought out by partners such as Newmont. Alternately, “We continue to grow a portfolio of royalties and carried positions and ultimately become a takeover candidate for a royalty company, such as Franco-Nevada or Royal Gold.” Or, “We simply grow the company into a major holder of mineral assets globally.” He concludes, “The traditional model is broken, and our model is vastly superior. Our company has never been in a stronger position, and our stock is ripe for an upward revaluation.”


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