Mostly: Classical

[amarksp]

mostly as a trade, looking for C$.75 and will sell 50% of position if it gets there, maybe more...

here is the rationale, posted at SI http://www.siliconinvestor.com/readmsg.aspx?msgid=22810610 :
FWIW, below is minesite article on EPM which came out 9/12/06. No new developments and certainly no report of anything gone astray. This minesite article is consistent with what I was told/learned at the AGM. Below is repost of my annual shareholder meeting notes. Really not much has changed here either. Be sure to read item 5) again on 43-101 and mine expansion economics.

Continue to think its the PP warrants and options coming due in October. Here is my message to Detective T a few days ago:
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Looking to add to EPM as well. However, please note the October options and warrants coming due in Oct.

3M shares at C$.75, Oct 11th
2.6M shares C$.41 on Oct 1 and Oct 15

Am waiting for a large 2M+ share cross in late Sept or Oct, and will add then.
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FWIW, I decided not to wait and added to EPM today at C$.69 and C$.70. Anything below the C$.75 should work out okay, IMO. Will look to add more in next few days/weeks, especially if EPM gets to $.65/$.66 which should be support if C$.69 is not... My rationale is EPM will release news before October so that those PP warrant holders can exercise at prices above C$.75. We'll see...
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In regard to my Annual Meeting final remarks, nothing has changed my mind here either:
"Within the next 4 months, we should get news on 43-101 new resource estimate, debt facility being finalized, and the new mine expansion economics."
[4 months would be Nov 1, 2006]

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European Minerals Awaits News Of Progress From Banks
http://www.minesite.com/storyFull5.php?storySeq=3787

By Rob Davies

Varvarinskoye is a gold-copper deposit being developed by AIM and Toronto listed European Minerals in north-west Kazakhstan. Construction of the mine is well underway, pre-stripping of the overburden has commenced already and the company expects to encounter ore this month. Virtually all of the mining fleet has been delivered and the bulk of the concrete work is in place and work on the tailings dam, leach tanks and workshops is going according to plan.

However, as Chairman Tony Williams said in his June update “We have successfully overcome numerous financial and operational challenges and we are still on schedule to become a significant gold producer by mid 2007. Our debt facility lenders continue to be extremely supportive and we hope to finalise the conditions to allow debt drawdown soon.” This statement refers to the problems the company faced after its initial contractor, MDM, encountered financial difficulties relating to a totally separate project in Africa. As a result European Minerals had to find a new contractor, which it has with Senet, but it also meant that it set the clock back with the banks, Investec and Nedbank, who are providing the project finance.

Over the last few months the company and its consultants have been working hard to recover the situation and Tony Williams is pleased with progress since the new arrangements were put in place. Part and parcel of the financing is a gold hedge it took out in December 2005 for 445,000 ounces of gold at US$574.25 an ounce. At the time it was hailed as a fantastic deal, but trying to forecast the gold price, currently US$590/oz, has made more than one trader look embarrassed. That hedge lasts for eight years and at the time was hailed as an innovative way of raising the finance for the mine development. Those funds are tied up in the total US$75million project financing and to keep things moving along the company raised US$65million in an equity placing earlier this year and that is enabling the mine to be built.

Production at the mine is due to start in the second quarter of 2007 at an annual rate of 4.2 million tonnes a year and the current plan is for a 15 year life. The reserve estimate is based on a copper price of US$1 /lb for copper and US$375/oz for gold. While these figures look outdated, and the market is eagerly awaiting a revised estimate using more up to date metal prices, in reality a new estimate will not make a large difference to the project but will ensure that mine planning is accurate. In particular an increase to the gold reserve will give everyone more comfort that the company has not given away too much of the upside by hedging half the gold originally estimated to be in the ground.

One point in the company’s favour is that it is working in Kazakhstan and not in one of the other countries in the region where ownership and tax disputes are making life troublesome for foreign investors. Currently capitalised at £117million with US$55million in the bank, the market is keenly waiting on news of progress from the banks, no one more so than the management. In the meantime mine construction continues apace.
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EPM Annual General Meeting Notes

Attended the AGM in London on 6/23/06. EPM had enough coffee and pastries for 50 people, but my daughter and I were the only shareholders that attended the meeting… About 12 people showed up altogether, with most being EPM management, bankers, and Canaccord Investor Relations.

EPM appeared disappointed with the turnout. Besides having enough Danish for 50 people, EPM had a new presentation and was fully prepared to respond to shareholders questions. But I was the only one asking questions and making comments.

1) Debt Facility/SENET - EPM very confident that this debt facility will be finalized and this project debt furnished. With SENET taking over from MDM, all the paperwork and bank review had to be redone completely. Also, my impression is the S African Export Credit for this debt facility may also be slowing down the process (both SENET and MDM are S African firms, so EPM entitled to S Africa export credit on this contract). If you were to put a gun to my head, then I would predict debt facility to be finalized before 2Q06 financials are out (around Aug 15).

2) In the unlikely event the debt facility is not finalized, then EPM will issue $30M of more stock via a PP and finance the mine 100% equity. One way or the other, this mine will be brought into production in early 2007.

3) In hindsight, EPM somewhat regrets not going 100% equity finance in the first place. Not having the debt facility in place has delayed mine completion by 4 months or so, primarily by not timely ordering some certain capex needs like steel for the process plant. EPM is very happy with the Kazakh construction company (JSC Consolidated Development Corporation) performing the work.

4) EPM will be updating 43-101 with new gold and copper prices that will thus show a healthy increase in reserves.

5) Concurrent/after completion of new 43-101 EPM will consider mine expansion to increase annual production by deepening the pit operations or by other means. This would require only marginal capex increase relative to the new gold ounces produced. Thus, I was concerned about a new PP and voiced my opinion that internally financing mine expansion would be much preferable. EPM stated they currently had no plans for any new PP to finance mine expansion and would first have to get results of the 43-101, economics of revised mine plan for expansion, gold prices, EPM share price, etc. Mine expansion economics should be complete about Sept 06. The good news is EPM can likely increase annual production with only a modest capex increase and apparently EPM has no plans for mine expansion financing at current low share price.

6) When asked why Charlemagne Capital not present at AGM, was advised that Charlemagne calls them at least once per week to get an update, they had called this week, and apparently Charlemagne increased their shareholding very recently (not confirmed by London AIM news release as of today).

7) In regard to copper hedging, EPM is actively pursuing hedging its copper production which is quite significant in the early years. Was advised that copper hedges, unlike gold, cannot be rolled forward easily. If you have copper hedge for June 07 delivery, then you bloody well better have the copper delivered in June, since you cannot simply roll over the contract to the next month. My impression is EPM will likely hedge some of its copper if and when copper production delivery is 95+% assured. Personally, I hope EPM hedges some copper and buys $750 gold calls with the proceeds to reduce their gold hedges.

8) In regard to consumables and maintenance, a very key concern of mine given harsh cold winter climate, we discussed tires, consumables, and CAT maintenance contract. This is still a key concern of mine but EPM is aware of the problem and is actively managing this potential problem.

9) When modeling EPM copper concentrate revenue, one can use 80% of the copper price.

The EPM presentation that included many powerpoint slides, lasted about 40 minutes and was interrupted several times (about 15 minutes of the 40) by my questions and comments seeking clarification. Am disappointed that EPM has not put this AGM presentation on their website, as EPM obviously spent a great deal of time on preparing this presentation which included several new slides. Was hoping this AGM presentation would be on website by now to jar my recollection on certain of my other questions. In any event, was happy EPM went to all the trouble to prepare the AGM for my sole benefit and EPM was happy to answer all my questions.

EPM appears to be currently undervalued and I remain very confident that the drawdown of its US$75 million debt facility is a done deal. Just my opinion… Within the next 4 months, we should get news on 43-101 new resource estimate, debt facility being finalized, and the new mine expansion economics.