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One of the most undervalued gold stocks around? Euro Sun Mining (TSX:ESM | OTCQB:CPNFF)

Euro Sun Mining

THERE ARE NO TWO WAYS ABOUT IT; GOLD IS BOOMING.

The ultimate safe-haven asset has shot up almost 30% over the last 12 months and recently crossed $1,800 an ounce (“/oz”) for the first time since 2011.

This already puts the precious metal among this year’s top performers.

Still, many analysts expect the bull run to continue well into the future – some even see the precious metal passing through $5,000/oz!

Institutional investors are now on the hunt for the highest-quality gold developers likely to prosper the most in these conditions.

After all, if history has taught us anything, it’s that we are likely approaching an intense phase of gold market M&A activity, as cashed-up gold miners look for ways to boost their reserves.

Against this backdrop, one stock that has just captured incredible institutional backing is Euro Sun Mining (TSX:ESM | OTCQB:CPNFF).

This Canadian gold developer has attracted more than $20 million of smart money in the last three months alone to accelerate advancement of its 100%-owned Rovina Valley gold and copper project in Romania.

With few milestones remaining before this 10-million-ounce monster can enter the construction phase, a re-rate of Euro Sun’s current C$53.2 million market cap could very well be on the cards.

Euro Sun – winning world-class support

Back in May, Euro Sun announced the launch of a C$12 million bought deal public offering underwritten by mining legend Sprott Capital Partners.

For those who don’t know, a “bought deal” is a securities offering where the underwriter commits to buying the value of the entire offering from its client.

In other words – it ensured that Euro Sun would raise its intended amount in full and represented a strong vote of confidence from Sprott.

Sprott’s instincts were vindicated twice over when Euro Sun quickly upsized the placement to C$20 million in response to market demand before eventually raising a total of C$22.3 million.

Among those who took part was long-term investor Ruffer LLP – among the UK’s biggest investment companies, with some $19 billion of client assets under management.

Having doubled down on its support for Euro Sun, Ruffer today sits as the company’s largest investor with a 9% stake.

Joining Ruffer in the raise was world-leading asset manager Franklin Templeton, which took a new 8% position in Euro Sun through its $331 million Franklin Gold fund.

Meanwhile, ASA Gold and Precious Metals – one of the world’s oldest metals and mining-focused investment management firms – also entered the fray, taking a 7% position.

With Euro Sun continuing to enjoy support from the likes of BNP Paribas’ Ixios Gold fund (2%) and Hong Kong’s APAC Resources (2%) the institutional presence across its shareholder base is truly remarkable.

After all, these are long-term investors – not only is there an opportunity for them to add to their stakes, but also their involvement and interest places Euro Sun on the radar of yet more professional investors.

Euro Sun is not just winning institutional support either – it’s courting some of the industry’s top management figures.

In June, it added Peter Vukanavich and Paul Perrow to its board of directors.

Over a 30-year career, Vukanavich sat as president and chief executive of both Genworth Financial Canada/GE Capital Mortgage Insurance Canada and CFF Bank (now Home Bank).

Perrow, meanwhile, was senior vice president, director of sales and marketing with CI Investments and currently sits on the board of CI Financial – one of Canada’s largest investment management firm by assets under management.

Rovina Valley – the Romanian gold project causing a stir

So, what is it about Euro Sun is causing such a stir among these gold mining and financial powerhouses?

For starters, with 10.11 million equivalent ounces of gold in the highly prized Measured and Indicated categories, Rovina Valley sits as the second-largest commercial gold resource in Europe.

And that’s not even counting the upside potential at the neighbouring Stanija prospecting permit, where sampling has returned grades of up to 25.9 grams per tonne gold and 0.34% copper.

As if this strong grounding in one of the world’s most stable and supportive mining jurisdictions was not enough, Euro Sun also leads the bulk of its peers when it comes to bringing its project into production:

  1. Existing infrastructure and labour are already in place thanks to the nearby presence of the historic Barza mine.
  2. In November 2018, Euro Sun became the first-ever non-state-owned firm in Romania to be awarded a mining licence thanks to its deep-set rooting in sustainable environmental, social, and governmental principles.
  3. The firm has devised a two-phase to Rovina Valley’s development to maximize its net present value and internal rate of return.

    Phase I will see the firm bring two pits called Rovina and Colnic into production as open-pits. An updated Preliminary Economic Assessment (“PEA”) in 2019 put Colnic’s output at 139,000 ounces of gold equivalent annually for 12 years at an average all-in sustaining cost of $752 an ounce.

    Following this, Euro Sun will bring a third deposit called Ciresata into production as an underground deposit during Phase 2.

Taking all this into account, Eurosun is highly leveraged against gold prices.

When its PEA for Colnic was completed using a gold price of $1,325/oz, the project’s pre-tax Net Present Value (“NPV5”) came in at $228.1 million.

If we use today’s spot gold price, which has risen by 35% to roughly $1,808/oz, then this same NPV5 increases by 280% to $634 million!

The road to a re-rate

Despite the increasing world-class interest being generated by Rovina Valley’s huge promise, an enormously persuasive argument for Euro Sun’s undervaluation exists elsewhere.

With a market cap of C$53.2 million, it is presently valued at just C$5.30 an ounce – far below the $20/ounce usually commanded by projects of such size and advanced status.

After its recent recapitalization through May’s placing, Euro Sun is now in a better position than ever to close this gap – and this could be just around the corner.

The firm is confident this money will see through the completion of all of the work needed to deliver a bankable feasibility study and win Land and Project Urbanization Certificates for Rovina Valley before end-2020.

Why is this so critical?

Because Rovina Valley will be construction-ready at this point, and Euro Sun’s focus will shift onto winning debt financing and construction permits.

With the support of financiers and the Romanian government on its side, Euro Sun’s long-term future at Rovina Valley is looking very bright.

As it pushes through these critical near-term project milestones against such a hot gold market backdrop, the inevitable re-rate can only be prolonged for so long.


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