Could this near-term gold producer deliver outsized returns even in today’s market?

By Richard Mason


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Euro Sun Mining (TSX:ESM, OTCQB:CPNFF)

Dramatic headlines, threats of global pandemic, alarm at corporate debt and plummeting stock prices; these are the stock market themes of 2020.

There’s no avoiding it.

We’re in for an extremely unpredictable year, with a US Presidential Election thrown in for good measure.

And which asset class thrives the most in times of such great uncertainty?


As the definitive “safe haven”, it’s no wonder we’ve seen the precious metal race to multi-year highs over recent months.

We may still be a little shy of the $1,895/oz. all-time record set in September 2011, but with the way things are going it would be no surprise to see this blown away in the not-too-distant future.

$1,700/oz. is the next big psychological threshold, and if the price sails through that level then $1,800/oz. could be hit in short order.

Who knows, perhaps $2,000/oz. is even on the cards?

After all, markets move quickest and most explosively when investors run scared.

And at the moment you can smell the fear.

Euro Sun Mining (TSX:ESM, OTCQB:CPNFF) – a near-term gold-copper producer, with 10 million measured and indicated equivalent ounces valued at only $3/oz.

It’s a harsh fact, but the coronavirus sell-off will create substantial opportunities in the market.

For gold bulls, the prospects could be exceptional.

Whatever the genuine consequences of COVID-19, one point is evident. We’re experiencing the early days of a classic flight to safety.

If history is anything to go by, it won’t be long before this renewed hunger for the yellow metal shifts its focus to its source.

Mining stocks, and junior mining stocks in particular, could be primed for a sudden surge higher.

The longer the current crisis continues, the greater the likelihood of this move happening. The underlying trend was already up for gold, so the latest crisis has simply added further upwards pressure to this.

The trick now will be to add the right stocks to your portfolio before the starting gun fires.

One company certainly worth taking a close look at is Euro Sun Mining (TSX:ESM, OTCQB:CPNFF).

Developing the European Union’s second-largest gold-copper deposit in a surprising place

In the dark rich soils of Transylvania, Romania, there are vast quantities of gold.

Tens of millions of ounces have been extracted from the region since Roman times and there is much more where that came from.

Euro Sun’s (TSX:ESM, OTCQB:CPNFF) flagship Rovina Valley gold-copper project, located in this historic mining powerhouse, contains 10 million equivalent ounces of the precious metal in the most valuable Measured and Indicated categories.

Now Transylvania may evoke images of vampires, bats and spooky hills, but modern reality is completely at odds with this outdated view.

Thanks to the region’s mining tradition, Transylvania boasts excellent infrastructure, a robust power supply and is home to a highly-skilled and dedicated workforce. In short, it provides an ideal location to set up a new mine.

What’s more, following Romania’s sweeping economic, social and political reforms over recent years, the country has opened itself up for business as a full member of the EU’s Common Market.

This provides Euro Sun (TSX:ESM, OTCQB:CPNFF) and its backers with a great deal of confidence that Rovina Valley can fulfil its long-term potential. As the company is keen to point out, there simply aren’t that many huge metal deposits left in the world in reliable jurisdictions with the kind of direct market access for their ores that Romania can offer.

When it comes to project funding for Rovina Valley, all this combines to give Euro Sun (TSX:ESM, OTCQB:CPNFF) a crucial competitive edge, but how did the company secure its position?

The simple answer is through a decade of hard work.

Under the shrewd leadership of CEO Scott Moore, Euro Sun (TSX:ESM, OTCQB:CPNFF) has dedicated an incredible amount of energy establishing itself as a trusted major player in the Romanian mining space and with the local community.

These efforts were richly rewarded in November 2018, when the firm became the first and only private company to be awarded a full mining license.

The significance of this cannot be overstated.

In 2000, a major accident at another Romanian mine released a great deal of cyanide contamination into the country’s water supply. The ill effects of this were felt for years and led to the introduction of stringent mining controls.

However, thanks to Moore’s dedicated commitment to Environmental, Social, and Governance (“ESG”) principles in designing the mine at Rovina Valley, Euro Sun (TSX:ESM, OTCQB:CPNFF) was able to navigate its way successfully through the lengthy permitting process.

Thanks to this, Euro Sun (TSX:ESM, OTCQB:CPNFF) now has one of the most environmentally responsible near-term gold projects anywhere in the world.

What might 2020 bring for Euro Sun (TSX:ESM, OTCQB:CPNFF)?

Over 2020, Moore’s goal for Euro Sun (TSX:ESM, OTCQB:CPNFF) is categorical – Rovina Valley will be “shovel ready” by 2021.

In other words, the project will be ready for commissioning work to begin on its $264 million central plant at the start of next year. From that point, Rovina Valley will be only 24 months away from pouring its first metal.

To fulfil its mission in 2020, Euro Sun (TSX:ESM, OTCQB:CPNFF) has to secure two more permits and complete its Bankable Feasibility Study.

The last item is by far the most important.

Once Euro Sun (TSX:ESM, OTCQB:CPNFF) has completed the Bankable Feasibility Study, Rovina Valley will be ready for bona fide project financing. This is a giant step for any mine, but the company’s shareholders might not have to wait that long before seeing a huge return.

Given Euro Sun’s (TSX:ESM, OTCQB:CPNFF) market cap is only C$30 million, Rovina Valley’s proven ounces of gold equivalent are valued at roughly $3/oz.

When you consider that comparable projects, some not even as developed as Rovina Valley, can trade at over $20/oz. the upside potential is easily recognizable. 

And that’s not all.

Some extremely smart money has moved into Euro Sun (TSX:ESM, OTCQB:CPNFF) in anticipation of a big move ahead.

Specialist resource investor Orion Mine Finance already held 4% of the company’s stock, while in January, billion-dollar fund manager Ruffer took a 10% strategic stake. The timing of the Ruffer investment looks particularly significant. As Moore put it to us:

But why would Ruffer break from its normal investing profile to take a strategic stake in a near-term gold producer?

Could it be that as a single project company, with a 10 million equivalent ounce gold deposit in one of the safest jurisdictions and largest markets in the world, Euro Sun (TSX:ESM, OTCQB:CPNFF) might be an extremely attractive takeover target?



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Author: Richard Mason

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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