JK on Avrupa Minerals Ltd. (AVU-V), a prospect generator focused in Europe, produce an interesting volcanic massive suphide (VMS) intersection of copper and zinc in the Iberian Pyrite Belt project called Alvalade, with Antofagasta Minerals (ANTO:LSE) as the partner. That stirred hopes that maybe it was on to the edge of a Neves-Corvo type deposit, which is the second largest VMS deposit in the world. Follow-up drilling so far has hit additional mineralization, but hasn't really tied it together to make Antofagasta confident that it is a major system. Then, last week in Kosovo, another partner of Avrupa's intersected 126 meters of 6 grams per ton (6 g/t) gold, which is an extremely impressive intersection. Although the geological context is such that one cannot very easily at this point assign multimillion-ounce gold growth potential to this hole, it was a grassroots play in an area that had never been drilled. It was generated in the old-fashioned manner of going into a region that's been underexplored and assessing the geology.
I think the nature of the mineralization is such that this has to be related to a very big system. It is a jigsaw puzzle because there's been local faulting that has moved the pieces around, but with this type of intersection, there is room for a significant discovery. That is an example of something that was off everybody's radar coming through with a surprise discovery hole.
TGR: It looks as if the market indeed got excited. The price went from $0.20/share to almost $0.35, which is amazing in this environment.
JK: Yes. The market seemed to recognize it as a selling opportunity just as much as others recognized it as a buying opportunity. The largest shareholder managed to sell 400,000 shares on the day the news came out at an average price of $0.26, which helped snuff out some of the momentum. Because Avrupa is a prospect generator, it farms out with a net interest of anywhere from 30% to 15%—in this case 15% of the project. Some 60 million shares fully diluted at $0.30/share gives the project an implied valuation of $130 million ($130M).
Of course, we need to see more results to show that there's some running room for this intersection. The project could ultimately be worth $1–2B, in which case we could see a valuation of $300–400M eventually emerging, which would mean maybe a doubling or tripling of the stock price.
Because of the fractional ownership, Avrupa would not go to the moon, but could inspire the market to exercise all those warrants between $0.25 and $0.50 and give the company the money and the green light to drill some projects 100% rather than farm them out on punitive terms. This is the drawback of the prospect generator farm-out model in a bear market where the junior gets very poor terms, so that even if it delivers a major discovery, the impact on the share price is relatively muted.
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