Sunday, December 25, 2011

Euromax Resources (EOXFF) Strategizes In The Balkans

Gold explorers usually stick to areas in the Western U.S., Canada, and other areas with well-known geology.  Most people don't think of looking for gold in southern Europe; then again, those ancient European empires had to get their gold from somewhere.  Euromax Resources (EOXFF) is exploring the Balkans for metals.

The company's technical advisers have quite strong backgrounds, but there is no indication they are onsite in the Balkans.  The executive team is somewhat strong, with the CEO and Executive Chairman both having managerial backgrounds in the resource sector (although they are not trained geologists).  Euromax has heretofore been an exploration company.  Changing their strategy to that of a production company is hard and will require focus.

Comparing their properties invites questions about their intended strategy.  The company plans to develop its Trun property in Bulgaria first because they own it 100% with no concessions to outsiders.  This may be a classic case of a sunk cost instead.  The company has spent millions exploring Trun and still does not have enough drill holes to definitively establish a development plan; that's why they're planning more drilling at the Logo site.  Recent drilling results at Trun indicating 1.23g/t at the longest intercept are not encouraging.  The potential bonanza hole at 7.13g/t has an extremely short length.

IMHO the company's most valuable project is the Ilovitza, Croatia property and recent metallurgical results reveal that an amazingly concentrated 16.6g/t of gold can be culled from an 0.25g/t ore body.  Sometimes simple drill results can underestimate the amount of recoverable ore.  The Ilovitza property appears to have roads on site and water sources less than 200m from the drill holes, which will greatly facilitate mining.  All they need is a dedicated power source and the logistics trifecta will be complete.  Once the back-in rights from another mining company expire on January 23, 2012, Euromax will be able to develop Ilovitza free and clear if they have sufficient financing.

Here's a brief note on financing.  Euromax had over C$4M in cash on hand at the end of September and has an apparent burn rate of about C$300K/month, based on their most recent unaudited quarterly statement.  They can survive for about a year, but if they expect to start production at any of their sites they will need a lot more cash very soon.  Alternatively, they can continue to option out interests in their properties so larger miners can do the heavy lifting.

Euromax deserves a chance to succeed if it gets its strategy right.  It is still a high risk stock due to its changing strategy, unaudited financial statements, and curious focus on a 100% owned unknown property (Trun) over a more encouraging property with a defined metallurgical process (Ilovitza).

Full disclosure:  No position in EOXFF at this time.