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Is the Eurasia Mining share price ready to explode?

by | Last updated 27 Nov, 2022 | Materials

Key Points

  • Eurasia Mining has increased its exploration capacity at West Kytlim platinum group metals and gold mine
  • Eurasia Mining share price has shown an outstanding growth of 113% since 2020.
  • The mining company is undergoing a high cash burn.

Eurasia Mining Plc (LSE:EUA) is an international mining and mineral exploration company listed in the United Kingdom. It owns the West Kytlim platinum group metals and gold mine in the Urals. Recently, the company was granted an additional exploration license at this facility.

So, is the Eurasia Mining share price on the verge of surging upward? And should I be considering this business for my portfolio? Let’s explore.

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Looking at past performance

Eurasia Mining shares are currently trading at around 6p on the London Stock Exchange. Even though the price levels seem fairly low, what piques my interest as an investor is the exceptional returns generated in the past two years.

Eurasia Mining stock was trading at 3.8p at the start of 2020. Within less than 12 months, the stock had surged to over 40p. That’s roughly a 950% return in the space of less than a year!

The upward momentum was primarily driven by an exciting progress update on its 75% owned Monchetundra project. It consists of nine battery metal mines expanding the group’s portfolio to contain palladium, copper, nickel, platinum, and cobalt.

However, it seems most investors skipped the part where management announced it would take a minimum of two years before any production could begin. And a pre-feasibility study still needed to be completed. And once the hype died down, impatient investors quickly lost interest.

Since then, the stock has cooled off. And when paired with the tragic conflict in Eastern Europe, seeing Eurasia Mining’s stock tumble is hardly surprising. Although it’s worth noting that it remains firmly ahead of pre-pandemic levels.

Looking at the past trend, as an investor, my foremost question is, can the Eurasia Mining share price surge once again?

Can the Eurasia Mining share price rise?

Since Eurasia Mining operates in Russia, it was hugely affected by the Russian-Ukraine conflict. However, the announcement from the company officials that no individual or entity associated with Eurasia Mining had been subject to Western sanctions was a breath of fresh air for investors.

Moreover, the company has seen great improvement in its sales revenue. From £48,012 revenue in the first half of 2020 to £425,965 for the same period in 2021 is outstanding. Yes, the revenue stream remains minute, but it’s clearly heading in the right direction. Furthermore, owing to a private placement, the mining company’s cash balance rose from £50,000 to £16m as of the end of June last year.

Needless to say, seeing the balance sheet of a young mining business becoming flooded with cash is an encouraging sight. At least, that’s what I think. And providing that the tragic conflict in Eastern Europe doesn’t lead to any future disruptions of operations, the Eurasia Mining share price could be overdue for some upward momentum, in my opinion.

Challenges along the way

Undoubtedly, the increase in revenue and the additional explorational capacity are good signs for investors. But Eurasia Mining is not free from challenges and risks. The mining company’s high rate of cash burn raises many concerns amongst investors like me. Even more so, considering this is an unprofitable enterprise.

With the cost of raising external capital getting more expensive thanks to rising interest rates, the Eurasia Mining share price may have a tough time ahead if drilling results from its existing mining sites reveal some bad news. And that’s a risk almost all young mining businesses have to contend with.

RELATED: How to analyse drilling results

Is the Eurasia Mining share a good buy?

Currently, the mined palladium production is limited in South Africa and Russia. Moreover, these countries are facing challenges regarding adding new supplies to meet demand. In such a situation, Eurasia Mining provides exposure to low-risk, ESG-friendly palladium supply.

Entering a market that is in a sustained deficit will thrust the company towards new highs, I feel. And following that logic, Eurasia Mining’s share price should be able to follow suit. Therefore, despite the high-risk nature, I am tempted to add shares of Eurasia Mining to my portfolio today.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.

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