Picture supply: Getty Photos
If I had put £1,000 into penny share Eurasia Mining (LSE: EUA) 5 years in the past, I’d have an funding price over £2,000 now. That’s because of the EUA share value rising 102% in that interval.
Which may sound good. And even nice. However in actual fact, the shares rose as a lot as 3,690% between 5 years in the past and the next 12 months, 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 buyers over the previous few years. Even now, although it’s effectively under its former highs, the five-year chart reveals a really optimistic return.
Might the great instances return – and ought I to spend money on anticipation?
On the block
Let me begin with my conclusion. I’ve no plans to behave on the EUA share value despite the fact 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 present 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 could be very far aside.
Eurasia has been in search of potential patrons for its belongings for a while. It might but discover one, however the lack of obvious progress to this point shouldn’t be 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 prospect of getting a deal and definitely might have an effect on the prospect of getting a deal at a extremely engaging value.
Eurasia might but promote its Russian belongings and, even at a knockdown value, it might realise greater than its present market capitalisation. That would ship the EUA share value upwards. Conceivably, if the worth was ok, the penny share might surge. Whether or not it’d double once more would rely on simply how good that value was.
However the dangers concerned (comparable to no sale in any respect) are substantial. For now, this feels extra like hypothesis than funding to me, so I’ve no plans to speculate.
