Recent management additions to EurOmax Resources (CVE:EOX) are expected to drive a "substantial upward rerating" of the miner's shares, according to a recent report from First Berlin Equity Research.
Berlin has rated the company with a "buy" recommendation and a price
target of 50 cents, up from its previous target of 45 cents.
Earlier this month, it was announced that three former high-ranking members of European Goldfields' (EGU) management team have taken charge at EurOmax.
significance of this move, said First Berlin analyst Simon Scholes, is
that EurOmax's 6.76 million ounces of gold resource base will now be
combined "with the proven ability of the former EGU management team to
In December of 2011, Canadian gold mining company Eldorado Gold (TSE:ELD) (NYSE:EGO) announced the takover of London-based European Goldfields for C$2.5 billion.
has reserves in Greece at the Olympias and Skouries projects, and in
Romania at the Certej project totalling 9.2 million ounces of gold.
EurOmax Resources is a Canadian mineral explorer that is advancing three core properties in Bulgaria, Serbia and Macedonia.
At the EurOmax annual general meeting on May 22, three members of European Goldfields'
former management team - former executive chairman and president Martyn
Konig, former treasurer Varshan Gokool and former senior vice president
of business development Steven Sharpe - were elected as directors of
What's more, First Berlin noted that the newly elected directors and other ex-European Goldfields associates will invest C$6.3 million in a private placement of 42 million EurOmax shares at 15 Canadian cents each.
money raised will be used to fund the forthcoming infill drilling
program at its Ilovitza copper-gold porphyry project in Macedonia as
well as general working capital requirements.
analyst Scholes also took note of further "high quality additions" to
the EurOmax management team on the technical and engineering side, which
are in progress. Arrangements are already in place and new hires in
this area are expected to be announced later this year.
share is trading at a large discount to its peer group reflecting past
doubts as to whether any of the company’s properties would go into
production," Scholes said.
"We expect the last few days’ newsflow to dispel this scepticism and drive a substantial upward rerating of the share."
who has more than 25 years of corporate and project finance experience,
is EurOmax's new president and CEO based in London, and will replace
Mark Gustafson, who moves to the COO position.
In addition to
starting up the mining finance businesses of Rothschild and Standard
Bank in the 1990s, Sharpe arranged over US$3.5bn in the debt market,
receiving two Euromoney Project Finance Awards.
Gokool is the new CFO and before joining European Goldfields in 2009, he was treasurer of Katanga Mining
Limited, where he arranged funding for the Kamoto copper project in the
Democratic Republic of Congo. Gokool has also held positions at Société
Générale in London, where he was a vice president of the mining finance
team, and at Ashanti Goldfields, where he managed the hedgebook.
Konig is the new non-executive chairman and became executive chairman and president of European Goldfields
in October 2009. Konig was brought in to re-focus the company and
prepare it for financing and development as well as to raise its profile
in the international financial markets.
Konig has 30 years
experience in investment banking and the commodity markets and is also a
non-executive director of TSX listed Newgold Inc.
First Berlin noted he has "extensive experience in the natural resource sector", and for 15 years and held senior positions at Goldman Sachs and UBS.
of the principal highlights of Konig's tenure was the orchestration of a
US$750m debt facility comprised of US$600m from Qatar Holding and
US$150m from existing shareholders which secured EGU’s financing to
"We understand that this financing package was the catalyst for the Eldorado takeover," the report said.
Berlin noted that from conversations with the new management team, it
gathers that were two key drivers of their decision to join EurOmax,
including similarities between Ilovitza and European's Skouries project,
and the attraction of EurOmax's undervaluation.
Skouries are similar style deposits (both are copper-gold porphyries)
and are in the same geological belt. Management’s understanding of and
experience with permitting in the region (both in Greece and Romania)
positions EOX well for the permitting process," said the research
In addition, First Berlin analyst Scholes said the
initial focus of the new management team will be the advancement of the
Ilovitza property, with "Trun in Bulgaria following close behind and KMC
providing the blue-sky upside."
A program of infill drilling at
Ilovitza is planned to improve the quality of the resource estimate from
inferred to indicated and measured.
EurOmax is transitioning
from a pure exploration play, currently listed on the TSX-Venture
Exchange, to an exploration and development company with a London
listing in early 2013. The company plans on rebranding with a move in
headquarters from Vancouver to London.
Management is targeting an AIM
listing for the second quarter of 2013, First Berlin said, on the back
of a pre-feasibility study to be completed in the first quarter of next
With regards to the pre-AGM management team, Gustafson
moves from CEO to COO, while Dimitar Dimitrov remains senior VP of
exploration and Quinton Hennigh remains chief geologist.
First Berlin concluded that EurOmax is trading at an "unwarranted discount to peers."
"Our peer group comparison now shows an average EV/oz of C$27.19 for the peers and C$4.55 for EOX."