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If I had put £1,000 into penny share Eurasia Mining (LSE: EUA) 5 years in the past, I might have an funding price over £2,000 now. That’s due to the EUA share value rising 102% in that interval.
That may sound good. And even nice. However in truth, the shares rose as a lot as 3,690% between 5 years in the past and the next yr, 2020. So at one level my potential £1,000 funding would have been valued at nearly £38,000.
EUA has clearly captured the creativeness of some traders over the previous few years. Even now, although it’s effectively beneath its former highs, the five-year chart exhibits a really optimistic return.
Might the nice occasions return – and ought I to put money into anticipation?
On the block
Let me begin with my conclusion. I’ve no plans to behave on the EUA share value regardless that it stands at simply a few pence.
The agency describes itself as a “palladium, platinum, rhodium, iridium and gold mining company”. However within the first half it recorded zero gross sales. That’s as a result of, whereas it owns mining concessions, it’s not at the moment extracting these treasured metals commercially and promoting them. As an alternative, Eurasia has been making an attempt to promote its belongings for a while.
As the corporate defined in its interim outcomes assertion final month, “our strategy continues to focus primarily on the potential sale of the company’s assets in Russia”.
The longer that course of drags on, the upper the liquidity threat that arises from the continuing upkeep and administrative prices confronted by Eurasia. Simply final month it entered right into a commerce finance facility to supply extra liquidity.
Considering as an investor
That wild journey within the EUA share value over the previous few years – and arguably its present £62m market capitalisation – factors to one thing. There’s, doubtlessly, vital worth within the firm’s belongings.
However having potential worth and unlocking that worth are two various things. Typically they are often very shut collectively. On different events they might be very far aside.
Eurasia has been searching for potential consumers for its belongings for a while. It could but discover one, however the lack of obvious progress up to now isn’t particularly encouraging. It’s hoping to promote the Russian belongings in what’s successfully a purchaser’s market. That would have an effect on the possibility of getting a deal and definitely may have an effect on the possibility of getting a deal at a extremely enticing value.
Eurasia may but promote its Russian belongings and, even at a knockdown value, it could realise greater than its present market capitalisation. That would ship the EUA share value upwards. Conceivably, if the worth was adequate, the penny share may surge. Whether or not it would double once more would depend upon simply how good that value was.
However the dangers concerned (resembling no sale in any respect) are substantial. For now, this feels extra like hypothesis than funding to me, so I’ve no plans to take a position.
