After a period of relative quietness for Avrupa Minerals (TSXV:AVU)(OTC:AVPMF), things are becoming more active again as Alvalade drilling is completed with results coming from the labs soon. Exploration planning including first drilling on the first Finnish project will be commencing in June, as the company was recently granted permits. Besides this, Avrupa completed a definitive agreement at May 10, 2023 with Western Tethyan Resources (WTR) regarding the small 100koz @ 4.8g/t Au Slivova gold project in Kosovo, initially seeing WTR going to a 85% interest, and potentially looking all the way to production.
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Although I don’t see the definitive agreement really having much of an impact on the valuation of Avrupa, as a.the upcoming Slivova PEA NPV probably doesn’t go way beyond US$40-50M as it is a small project, and a 15% interest (=US$6-7.5M) is normally discounted quite a bit for derisked stage (around 70-85% for PEA), b. the company stands to receive just about C$100k in payments before year end while being free carried by WTR developing the project towards PEA, FS, permitting and ultimately production, where the Avrupa interest will likely be diluted to a 1% NSR as c. I don’t see Avrupa as a prospect generator participating in future capex funding as capex will likely be US$25-30M (15% pro rata for Avrupa will be US$3.75-4.5M, which is over 2 times current market cap), the share price got out of a C$0.025-0.035 trading range that lasted since October last year, and traded as high as C$0.05 on the day the Slivova news was announced:
Share price, 1 year time frame (Source: tmxmoney.com)
Because of the tiny market cap of C$2.4M, it is easy to see Avrupa as a cheap, debt-free listed shell, with assets like Alvalade, the Finnish assets and Slivova as bonuses, all needing lots of work before adding significant value. With the backing of Pacific Opportunity Capital (owned by Chairman Mark Brown) and European institutional Fruchtexpress there will always be enough cash to keep the lights on, but the company has been operating on a shoe-string budget the last few years, mostly dependent on JV partner Sandfire/MATSA for news flow about Alvalade, which doesn’t seem to be in much of a hurry as it is focusing on its producing assets. At least Sandfire shows more initiative, assigning more budget to Alvalade and using 2 drill rigs instead of the single one always used by MATSA.
Besides Alvalade, management saw other opportunities to add value, and therefore entered into a JV with a private Finnish exploration company, and optioned several base metal projects in Finland. After a lengthy and thorough permitting process which is typical for Finland, the first project finally has received its exploration permit. The copper-zinc Kangasjärvi project didn’t see any appeals, so exploration could begin here. As far as the Kolima copper-zinc project goes, the Finnish mining bureau approved the exploration permit, but now the courts must work through three appeals submitted in a 37-day comment and appeal period after approval. For now, ongoing exploration work has been temporarily suspended until the courts have made their decisions. Drilling is planned for the end of June on Kangasjärvi.
JV partner AFOy (run by my countryman Jan Akkerman as a coincidence) and Avrupa plan to initiate drill testing of a promising deep EM anomaly adjacent to the historic Kangasjärvi zinc mine, along with continued review and compilation of substantial amounts of historic geological and drilling data from around the license area. Details of this initial campaign and expected timing will be reported as plans are readied. CEO Paul Kuhn is looking forward to the action:
“We are excited about getting started on the Kangasjärvi exploration program. Initial work in the area suggests that there are several compelling targets in the immediate vicinity of the historic mine workings, as well as numerous targets around the license area that are not well-tested. We are planning to initiate a first-pass drilling program in June to test the immediate Kangasjärvi Mine vicinity, as well as review drill core from a large number of holes previously drilled around the property.”
As a reminder, Kangasjärvi was an historic zinc mine, and potentially part of a VMS project. Lots of data have been obtained for the project, including historic drilling, and a small historic, open pittable resource (300kt @ 5.4%Zn, of which 85kt already has been mined out) is present. Regarding Kolima, historic exploration efforts defined a 2000 x 200-400m zone with zinc mineralization, but also numerous boulders containing zinc and copper are present, in typical VMS fashion and geology. A resource wasn’t defined despite 70 drill holes completed. A SkyTEM survey indicated two important electromagnetic (EM) targets, which will be drilled as soon as the permits are fully granted.
The main project for Avrupa Minerals is the Alvalade project, in JV with Sandfire/MATSA. They are drilling eight to nine holes at the moment with 2 drill rigs, accounting for another 4,000 to 6000m. The JV is targeting from north to south Casas Novas, Azinheira, Monte da Bela Vista, Lousal North West, and potential extensions to the Sesmarias massive sulfide deposit, as well as promising satellite targets.
Sandfire/MATSA is exploring across the entire Alvalade license at the moment, as the initial 3-year phase of the license expires in June. The renewal application for two more years of license validity was filed in mid-April, according to Portuguese regulations. Because exploration work is ongoing, the company submitted the renewal application without any size reduction.
Eleven exploration holes of the ongoing program have been completed, totaling 5,470 meters. Most of the holes targeted VTEM geophysical anomalies along the Pyrite Belt trend, consisting of six holes in the Lousal NW sector, one in the Azinheira sector, one in the Casas Novas sector, and one in the Caveira sector. With the startup of the second drill rig, two holes have been completed in the Sesmarias area. While some assays have been reported for the Lousal NW area, nothing else is available at this point. The assays are expected back from the labs in a few weeks from now. At present, one drill is working in the Sesmarias area, and one rig is working in the Caveira area.
Overall, Avrupa and Sandfire/MATSA completed 29 drill holes for a total of 14,984 meters at Alvalade, including 8,900m at the Sesmarias North target (which outlined an estimated 15-18Mt mineralized envelope so far), 614m at Caveira (which did not return any economic results unfortunately), and the aforementioned 5,470m of exploration drilling at Lousal NW, Azinheira, Casas Novas, and the Sesmarias area, with assays pending.
As the JV has been busy with further re-processing of the VTEM data and an airborne gravity survey to cover the entire license, with the results from the gravity survey pending since the news release of March 3, 2023, I wondered what the outcomes were. CEO Kuhn stated: “The compilation work is ongoing, and a number of holes have been collared/targeted using the new data. Exploration results have been mixed, as the intercepted EM targets have mostly been the pyritic black shales that host mineralization at Sesmarias, Lousal, Caveira, and other sites along the trend. Geochemical indicators suggest proximity of mineralization, but the complicated, post-mineral structural modifications of the potential mineral target zones have given us plenty of difficulties. Re-evaluation of the gravity signature at and around Sesmarias supports our work there, and we have returned to the Sesmarias deposit for more drilling there.”
The third project with Avrupa involvement is the Slivova Gold project in Kosovo. After WTR signed the agreement recently, there are 4 earn-in stages up to a construction decision. WTR has paid €70k in cash after signing, and has to pay another €30k in cash at the start of Stage 1 of the earn-in. Besides this, WTR has exploration commitments to the tune of €1.8M, and the obligation to complete an EIS, FS and mining license application for 85% of the project. This is followed by success payments to previous joint venture partner Byrnecut International, accounting for €375k and 850 gold ounces in total during first 3 years of commercial production. Another €70-100k in cash is always welcome of course, and let’s see if WTR can create some more value for Avrupa here over time.
With the Alvalade drill results around the corner now, the first exploration permit in Finland being granted to Avrupa with drilling planned to start in June, and the WTR deal signed and on the move, it seems Avrupa and their partners are ready to advance their projects in a meaningful way now, and produce hopefully actionable news. I am really curious what comes out of the Alvalade assays, and see if a 50Mt target could become a reality for Sandfire/MATSA. Besides this, drilling at the Kangasjärvi copper-zinc project could provide a second chance on a solid base metal project, but it is still early days here. Stay tuned!
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