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Over the course of time, some shares do higher than others – generally much better. There will not be many penny shares that transfer up by 380% in worth over 5 years. One which has is Eurasia Mining (LSE: EUA). However whereas the EUA share worth development has been unimaginable over 5 years, previously 12 months the share has dropped by over a fifth.
The corporate introduced in the summertime that it had “a limited cash runway in the United Kingdom”, with working capital ample just for the subsequent few months. The shares had been suspended from buying and selling.
Nonetheless, they’re now buying and selling usually as soon as extra. Might this provide a chance for me as an investor?
Extra readability in regards to the medium time period
The shares had been restored to buying and selling standing this month following the belated publication of Eurasia’s outcomes for final yr.
Revenues grew tenfold to £2m, whereas the corporate’s complete complete loss fell however nonetheless got here in at £4.8m. The corporate continued to discover attainable gross sales of its Russian belongings, however thus far to no avail. The potential sale of these belongings is the first strategic focus of the corporate for now.
This month, EUA introduced it has agreed a convertible commerce finance mortgage to fulfill its working capital necessities. The preliminary drawdown on that mortgage, roughly 40% of what would possibly in the end be obtainable, is predicted to see the corporate by means of one other yr. On high of the mortgage, a tax refund might assist Eurasia’s money place.
Between a rock and a tough place
So within the brief to medium time period no less than, Eurasia’s monetary place appears to have been strengthened. That was not a painless course of. All its administrators have agreed to defer cost of accrued charges and bills from the previous 12 months in addition to any future compensation due, till the mortgage is repaid in full.
However whereas the mortgage buys a lot wanted time, what in regards to the underlying well being of the enterprise?
Eurasia is attempting to promote Russian belongings, because it has been for a while already, in what’s successfully a purchaser’s market. That will not bode effectively for the value it could obtain. However the longer it waits to promote, the extra working capital it could find yourself needing. That would result in additional loans, if they’re obtainable, or doubtlessly share dilution.
Set towards that’s the £62m market capitalisation of the corporate. I believe that presupposes important worth within the Russian belongings. That appears affordable to me and, if these belongings are efficiently bought at a very good worth, I reckon the present EUA share worth might come to be seen as a cut price on reflection.
The issue as I see it’s that there isn’t a assure {that a} sale will occur. Even when it does, it may very well be that the value will not be a very good one given the restricted pool of potential patrons.
On that foundation, that is too speculative an funding story for me proper now. From right here, I believe the EUA share worth might but soar if it strikes an ideal deal to promote its Russian belongings – however equally it would sink if it doesn’t. I’ve no plans to speculate.
