Eurasian Minerals Inc: Shaken and Not Stirred

A Monday Morning Musing from Mickey the Mercenary Geologist
Contact@MercenaryGeologist.com
March 22, 2010
My chosen profession, economic geologist, can be an exciting, adventurous, dynamic and sometimes dangerous avocation. The junior resource sector operates with venture capital that comes from financial centers thru out the world to Toronto or Vancouver and then flows to where risk is lowest and reward is highest. That often involves projects in emerging market countries.

I wrote previously about assessing geopolitical risk and geological reward in these emerging environments (International Mining, August 2009). A particularly successful junior that works in these challenging regions is one of my favorite companies, Eurasian Minerals Inc (EMX.V). I first reported on it early last summer (Mercenary Musing, June 15, 2009).

The previous exploration boom in the early to mid 1990s took geologists to many unexplored areas and resulted in discoveries of world class nickel, diamond, and gold mines by junior resource companies. That boom ended abruptly in 1997-1998 because of three concurrent factors: Falling metals prices, the Bre-X scandal, and failed globalization spawned by Thailand’s currency failure.

However, the net result was that many frontier exploration regions on the Earth in the ‘90s were no longer frontiers in the ‘00s.

Giant ore deposits are most likely to be discovered where geologists have not trod every kilometer of ground before. In the 21st Century, these prospective regions are remote, inaccessible, dangerous, and/or high risk.
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In the current exploration boom, now approaching its seventh year, geologists have gone farther afield and worked in areas where geopolitical risk was unacceptable 15 or 20 years ago. Previously off-limit countries now included on our target lists are located in Central and South America, the former Soviet Union, sub-Sahara Africa, and eastern Asia.

In addition, giant ore deposits are usually located on major crustal discontinuities, i.e., along plate tectonic boundaries.

In lay terms, giant cracks in the Earth’s crust penetrate down to the upper mantle and provide the plumbing for molten rock containing or encountering metal-bearing hot waters to rise, concentrate, and solidify into giant mineral deposits.

There is always an element of danger involved in frontier areas, be it climatic, cultural, or political. As exploration geologists, we choose to work in high risk geopolitical environments because of potentially high geological rewards.

But how many junior resource companies and geologists actually consider the real risk of catastrophic geological events in the areas we explore?

It’s really rather simple: We work on plate tectonic boundaries and the major faults associated with them. These faults are the loci of the Earth’s largest earthquakes and active volcanoes. Most of us in the field tend to ignore these risks.

I’ll admit to not seriously considering geo-hazards despite working in places such as the Callejon de Huaylas in Peru where 30,000 people were buried by an earthquake-caused avalanche in 1971. That’s despite the fact that I have been within 100 km of two major earthquakes that killed people: In Chile in October, 1997 and in Peru in June, 2001.

A recent geological event really hit home on January 12, 2010:

The massive 7.3 magnitude earthquake that struck Port-au-Prince, Haiti was one of the most devastating in our Earth’s recorded history. Current estimates of the total dead are over 150,000 with millions injured and homeless. Large areas of the capital city were leveled and rich and poor alike have been affected.

If you are a dedicated reader, you know that I visited Haiti in May 2009 and spent three memorable hours negotiating my way around the Port-au-Prince airport arranging passage to the northern port of Cap Haitien (Mercenary Musing, June 15, 2009). After a trying 24 hours of improvised travel, I was reunited with my party in time to examine two of Eurasian Minerals projects located in the Massif du Nord that parallels the northern coast:

Eurasian Minerals’ Concessions in Haiti
There is little doubt that Eurasian Minerals was severely impacted by the earthquake. On that particular day, there was no one in the field in northern Haiti or in Cap Haitien. Ironically, the entire in-country professional staffs of EMX and its joint venture partner Newmont Mining Corporation were in Port-au-Prince for a health, safety, and loss control course. Eurasian’s two guest houses in the city were destroyed, its office was damaged beyond use, and two geologists were injured. The very good news is there were no fatalities among the staff or their families.

Eurasian immediately went into action, suspended all exploration activities in the country, marshaled its considerable financial resources, personnel forces, and in-country contacts, initiated emergency response procedures, provided for staff and families, and flew in rescue and relief supplies to help the people of Haiti. EMX and Newmont delivered freight containers of medical supplies, food, and water, and provided local transportation of people and supplies.

Once the rescue and relief situation was stabilized, Eurasian’s next task at hand was to relocate all its operations to Cap Haitien. This northern coastal city is easily reached by commercial plane from several Caribbean cities other than Port-au-Prince. Eurasian Minerals expects to be exploring again by the first of April. I am duly impressed by how quickly the company has recovered.

Given its strong commitment to investment in the mineral deposits and business development of Haiti, EMX continues to assist in recovery operations with its in-country assets and will contribute to future rebuilding efforts.

Much like a James Bond martini, Eurasian Minerals Inc. was shaken and not stirred.

The company’s share structure, people, and projects were detailed in my previous musing and will not be reviewed here, only updated.

Since my last report nine months ago, several positive events have occurred for EMX:

� Newmont selected the Treuil and La Mine concessions as a designated project area and can earn 65% interest by spending $20 million on exploration and development or delivering a feasibility study.

� Asian-Pacific and Scandinavian exploration and acquisition programs were established.

� Bronco Creek Exploration, a private US company was acquired. Included are 14 copper and gold projects in Arizona, Nevada, and Wyoming with nine currently funded by joint venture partners, and a staff of experienced geologists in Tucson, Arizona.

� Results from the initial round of drilling on Grand Bois’ oxide gold cap were released. Highlights of the 2200 m program include these intercepts starting at or very near the surface: 21 m of 1.2 g/t Au, 12 m of 4.3 g/t Au, 30 m of 6.8 g/t Au, 20 m of 3.2 g/t Au, 28 m of 20. 5 g/t Au, and 21 m of 10.2 g/t Au.

� A $5 million private placement was completed at $2.06 with the International Financing Corporation, financing arm of the World Bank. The IFC now owns 7.5% of Eurasian’s outstanding stock.

With the Bronco Creek acquisition and IFC financing, Eurasian Minerals has 34.2 million shares outstanding and 40.8 million fully diluted. There are 1.3 million warrants at $2.50 expiring in late April, 1.1 million at $2.00 expiring in January 2012, and 2.0 million at $2.88 expiring in April 2015. 2.3 million options are set at 80 cents to $1.81 with expiries ranging from December 2010 to February 2015. The share structure remains tightly held at 39% insiders, including major holders the Rule Family Trust, International Finance Corporation, Newmont Mining, Lundin Mining, Barrick, and David Cole. Various institutional funds control at least 14% and an estimated eight million shares are in the public float. Current market capitalization is about $70 million with working capital of cash and marketable securities at $14.0 million.

Eurasian Minerals’ burn rate is not low. But it has a worldwide reach and joint venture partners explore its properties to the company’s benefit. The company expects to spend about $3.0 to 3.5 million in 2010 to support seven offices and conduct grassroots exploration developing projects available for joint venture. EMX’ partners will spend over $10 million to earn-in to its properties this year.

The company has traded markedly higher than the $1.35 when my initial musing was released on June 15.

Last summer was a little off-kilter with the usual summer doldrums occurring in June then an overall rally during the typical low season of mid July to early September. EMX followed that general trend reaching lows of about $1.15 in late July followed by a general uptick into late November at $1.80. Initial drill results with a bonanza gold intercept on a twinned hole boosted the stock briefly to $2.80 in early December.

Eurasian was trading at $2.20 when the earthquake struck and a significant sell off took the stock down to the $1.70 range. Until recently, the price was flat with a steep rally commencing in early March and driven by mention on Business News Network, positive drill results at Grand Bois, a booth at the PDAC, and closing of the IFC financing. It has recently traded at or above $2.00. The 52 week high/low is $2.80 to 94 cents and the 30 day is $2.17 to $1.67.

In my opinion, Eurasian Minerals is a well-run junior resource company with the requisite share structure, people, and projects to reward its shareholders. It is one of the most aggressive prospect generators in our business and has been called “a junior with a major’s portfolio”. Although its most attractive flagship projects are in Haiti, Eurasian has joint venture projects in the Western United States, Turkey, and the Kyrgyz Republic, and active reconnaissance exploration programs in Scandinavia, Eastern Europe, and the Asia Pacific regions:

Eurasian Minerals’ Worldwide Project Portfolio

I think that positive news will continue to emulate from Haiti during the spring and summer. In addition, we can expect drill results during the summer and fall from various joint ventured Bronco Creek properties.

Assuming the gold price remains strong and stable and the junior resource stock market continues to be robust, catalysts such as these make me bullish on the long term future of Eurasian Minerals.
As always, I am a shareholder of Eurasian Minerals, it pays a fee as a sponsor of my website, and my opinions about the company are financially compromised. But folks, you know that I only invest in and write about companies that I think are winners. I put my Mercenary money where my mouth is.

I trust this update allows you to be better informed about a stable, disciplined, and successful prospect generator in the junior resource sector. Do your own due diligence and decide if it meets your investment criteria.

And stay tuned; given luck with the drill bit, the returns could be seismic.

Ciao for now,

Mickey Fulp
Mercenary Geologist

P.S. It has been little over two months since the massive earthquake devastated Port-au-Prince, Haiti. Yet I have seen nothing on mainstream American news about this horrible event for nearly a month. The infrastructure, economic, and political situation in Haiti is still grim and the people of Haiti continue to need our generous help. Please, as I have done once again today, consider a donation to a legitimate Haitian relief organization. My personal choice is the American Red Cross Haiti Relief Fund.
The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia.
Mickey has worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia.
Mickey is well-known throughout the mining and exploration community due to his ongoing work as an analyst, newsletter writer, and speaker.
Contact: Contact@MercenaryGeologist.com
Disclaimer: I am a shareholder of the company and it is a paying sponsor of my website. I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.
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Debtor Nation

March 22, 2010 Only a few decades ago, the United States was the world’s largest creditor nation. American capital spanned the globe financing all types of investments in virtually every country. But that dominance began to erode in the 1960s because growth in consumption in the United States was starting to outpace new production. Wealth built up over generations was being consumed.

To compensate for the resulting decline in living standards, the nation turned to debt, rather than hard work and savings. This trend continued through the next decade. A focus on consumption and a seemingly unstoppable reliance on debt at all levels of American society had become the dominant force in economic activity.

By the 1980s, the inevitable happened. As generations of accumulated wealth disappeared, a line was crossed. America now owed more to the rest of the world than the world owed to it. The United States had become a debtor nation, and it has continued to run up the tab in the decades since.

The mindset of policymakers today continues to be one of debt and consumption instead of savings, investment and production. We see this way of thinking in their pronouncements and actions. Worryingly, the tipping point appears to have been reached. Not only is the United States living beyond its means, it is now borrowing beyond its means, as graphically illustrated in the following chart prepared by Nathan Martin.

Here’s is how Mr. Martin explains the crucial message from this chart.
“This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes…[but now] total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!”

The US is digging itself into a hole, and if the message in the above chart was not clear enough, another bell tolled last week. Moody’s warned that the triple-A credit rating of the United States is at risk of being downgraded if the nation fails to come to grips with its growing debt. It warned:

“Preserving debt affordability at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.” [Emphasis added]

It is an unusually stark assessment with profound implications that require thoughtful attention. Debt has always been and will always be a two-edged sword. Iceland now knows that lesson well. So do Dubai and Greece. Other nations including the United States are about to learn that lesson too.
As I see it, a lot of the federal government’s promises are about to be broken. The collapse of the once almighty dollar is rapidly approaching.

Gold & Silver Daily: A Bear Raid in the Precious Metals – Mar 11, 2010

A Bear Raid in the Precious Metals
Gold did nothing worth mentioning in Far East trading yesterday, but was up about $5 by lunchtime in London. From there it declined slowly… losing about $8 going into the London p.m. gold fix at 3:00 p.m. London time… 10:00 a.m. in New York. The moment ‘the fix was in’… gold rallied sharply, only to run into a wall of selling by the New York bullion banks at 11:05 a.m. Eastern time… five minutes after London closed for the day… which is 4:00 p.m. local time in London.

By the time that the not-for-profit selling came to an end about 70 minutes later, gold had ‘fallen’ from its absolute New York high of $1,128.90 spot… to it’s absolute New York low of $1,102.10 spot. From there, gold gained back about six bucks before the close of electronic trading in New York at 5:15 p.m. Eastern time.

It was the same story across the entire precious metals complex… silver, platinum and palladium included. All took off to the upside after the London afternoon gold fix… only to get crushed at 11:05 a.m. in New York… about 65 minutes later. Silver in particular got it in the neck… as it was breaking out to new highs, but got smacked for 75 cents from its absolute high of the day, which was $17.67 spot.

From its highs to its lows, platinum got hit for $48… almost 3 percent. It was the only precious metal that, despite getting creamed, finished up on the day.

Considering the damage done to both gold and silver prices [and sentiment] yesterday, the response of the shares was pretty muted. They started the day in positive territory but then sold off starting shortly after 11:00 a.m. Eastern time when the bullion banks showed up… and the decline ended at exactly 12:30 p.m. From there, the shares traded sideways until the equity market closed at 4:00 p.m. The HUI only lost 1.42%. For the moment, I’m encouraged by that.

The dollar was an interesting study yesterday. From exactly 3:00 a.m. until exactly 11:00 a.m. the dollar gained 50 basis points. If you check the gold chart above, you’ll see that during that time period, gold rose a whole five bucks. But starting at exactly 11:00 a.m… the U.S. dollar reversed course… and over the next hour and a half, gained back about 23 basis points of that 50 basis point loss. Five minutes after the dollar headed north… all the precious metals got slammed for multiple percentage declines. This was too precise an operation to be the free markets operating… in my opinion, this was a well planned bear raid.

As far as open interest goes, I mentioned yesterday that I was hoping that Tuesday’s rally might involve some short covering. Well, that may have been the case, as gold open interest fell 2,383 contracts on volume of 184,500 contracts. That may have been the case in silver as well because, despite it’s nice rally yesterday, silver open interest was only up a very small 452 contracts… and that positive amount may represent the bullion banks going long rather than covering their short positions. Volume was a decent 38,779 contracts. This data, too, will be in tomorrow’s Commitment of Traders report, as Tuesday was the cut-off date.

The CME Daily Delivery Report for Wednesday showed that 11 gold and 152 silver contracts were posted for delivery on Friday. JPMorgan was the big issuer in silver… and the whole report is linked here. Neither GLD or SLV posted any changes yesterday… but the U.S. Mint reported selling another 6,500 one-ounce gold eagles and had no update to silver eagle sales. It was another busy day over at the Comex-approved depositories on Tuesday, as all warehouses reported activity… and they showed that 726,638 ounces of silver were taken into inventory. Tuesday’s action is linked here.

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I only have four stories today, which is just as well, because the last one is a really big read. The first story is another chapter in the ongoing Greek saga. This one also involves Britain as well. It’s a story out of The Telegraph in London… and it’s another offering by their international business editor, Ambrose Evans-Pritchard. The headline reads “Fitch warns Britain and questions Greek rescue as sovereign risks grow”… “Fitch Ratings has delivered a serious blow to the credibility of the Government’s budget plans, warning that Britain risks a loss of investor confidence and erosion of its AAA rating unless it maps out clear austerity measures.” E-P also points out, correctly, that “While the EU game of ‘constructive ambiguity’ [regarding Greece] has succeeded in calming the markets, the agency noted that not a single “hard cent” has been put on the table so far.” It’s a short article… and definitely worth your time… and the link is here.

The next story is a real eye-opener that showed up posted over at Bloomberg yesterday. The headline is almost unbelievable… and reads “U.S. Posts Record Budget Deficit of $221 Billion in February”. The litany of woes contained in the article takes about five minutes to read… and the link is here.

Here’s the first of my two must read offerings for the day. This rather large read is posted over at jessescrossroadscafe.com. and bears the headline “Propaganda Campaign Attempts to Mask the Economic Risks and Reality”. The smallish introduction leads to a much larger essay by Yves Smith posted over at nakedcapitalism.com. The title to this essay reads “The Empire Continues to Strike Back: Team Obama Propaganda Campaign Reaches a Fever Pitch”. Both the introduction and the essay are well worth your time… and the link is here.

And lastly comes this piece from the March/April edition of Foreign Affairs… published by the Council on Foreign Relations… and posted over at informationclearinghouse.com. It’s written by Niall Ferguson and is titled “Complexity and Collapse: Empires on the Edge of Chaos”. The summary statement says the following… “Imperial collapse may come much more suddenly than many historians imagine. A combination of fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice.” As I said, I feel this is a must read, even though it will take the better part of half an hour to run through it. I thank reader Roy Stephens for bringing it to my attention… and the link is here.

In the piece I posted above from jessescrossroadscafe.com piece above, came these words… “I have never seen such a load of rubbish being put forward with regard to the markets in US financial assets and commodities, and I’ve seen quite a bit in the last twenty years. In particular, the campaigns against gold and silver are heavy-handed, obvious, and reaching the point of hysteria.”

That would just about sum up what happened on Wednesday… as it was certainly “heavy-handed and obvious”. On Tuesday I included a 6-month gold graph along with the following commentary… “You’ll note that in the last four trading days, it seems like the gold price is rolling over. It’s hard to say whether this is going to correct itself… or if it’s going to go lower. If it does go lower from here… it will certainly not be due to any free market forces that I can think of… but it’s too soon to tell right now.” If you wish to refresh your memory, the link to Tuesday’s column is here… and the graph is near the bottom.

Anyway, here’s what the 6-month gold graph looks like two days later. Yesterday we closed slightly below the 50-day moving average… and if we don’t recover well above it either today or Friday, it’s my bet that the gold price may re-test the 200-day moving average, which has now snuck up to $1,039 spot.

One thing that you must remember looking at this chart is that it’s 100% made in the U.S.A. by the Fed, the Treasury and the PPT… with the bullion banks doing the dirty work. There is no free market price to be seen on this graph anywhere.

Ted Butler feels strongly that we are in the final stages of the bullion banks covering as many of their short positions as they can… and this final push to the downside [if it comes] fits right into the grand scheme of things… but a couple of more days of market activity will be needed to confirm this one way or another, so we’ll have to wait for the bullion banks’ next trick.

Not much happened during Hong Kong trading during their Thursday session, but I did note that silver hit a new low. Volume so far this morning [4:53 a.m. Eastern time] for gold is 19,791 contracts… and in silver it’s a reasonably heavy 4,565 contracts.

The preliminary volume numbers for Wednesday’s trading are now up on the CME’s website… and they show that a massive 235,814 contracts were traded in gold yesterday… and in silver it was 47,681 contracts. The open interest numbers will be worth looking at when they’re posted later this morning. I’m expecting some short covering to be reported. Of course none of these numbers will be in tomorrow’s COT report… as all this very interesting activity took place the day after the cut-off… and won’t show up until next Friday’s report. And as you already know, dear reader, ‘doing the dirty’ on a Wednesday is one of the bullion banks’ favourite tricks.

As I sign off on this column, I see that London has been open for a bit… and not much is happening their, either. It will be [once again] up to the U.S. bullion banks to provide today’s entertainment in the precious metals market when the Comex opens… and after yesterday’s performance… I’m sure they won’t disappoint us.

I hope your Thursday goes well… and I’ll see you tomorrow.