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If I had put £1,000 into penny share Eurasia Mining (LSE: EUA) 5 years in the past, I’d have an funding value over £2,000 now. That’s because of the EUA share worth rising 102% in that interval.
Which 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 12 months, 2020. So at one level my potential £1,000 funding would have been valued at virtually £38,000.
EUA has clearly captured the creativeness of some buyers over the previous few years. Even now, although it’s properly under its former highs, the five-year chart reveals a really optimistic return.
May the great 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 worth regardless that it stands at simply a few pence.
The agency describes itself as a “palladium, platinum, rhodium, iridium and gold mining firm”. However within the first half it recorded zero gross sales. That’s as a result of, whereas it owns mining concessions, it isn’t presently extracting these treasured metals commercially and promoting them. As a substitute, 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 technique continues to focus totally on the potential sale of the corporate’s belongings in Russia”.
The longer that course of drags on, the upper the liquidity danger that arises from the continuing upkeep and administrative prices confronted by Eurasia. Simply final month it entered right into a commerce finance facility to offer further liquidity.
Pondering as an investor
That wild experience within the EUA share worth over the previous few years – and arguably its present £62m market capitalisation – factors to one thing. There may be, probably, 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 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 might have an effect on the possibility of getting a deal and definitely might have an effect on the possibility of getting a deal at a extremely engaging worth.
Eurasia might but promote its Russian belongings and, even at a knockdown worth, it might realise greater than its present market capitalisation. That might ship the EUA share worth upwards. Conceivably, if the value was adequate, the penny share might surge. Whether or not it would double once more would depend upon simply how good that worth 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 take a position.
