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If I had put £1,000 in a penny shilling Eurasia Mining (LSE: EUA) five years ago, I would have an investment worth more than £2,000 now. That's due to EUA's share price rising 102% over that period.
That might sound good. Even if it's big. But in reality, stocks are going up a lot 3,690% between the last five years and the next year, 2020. So at one point my potential investment of £1,000 would have been worth around £38,000.
EUA has clearly captured the imagination of some investors over the past few years. Even now, although it is well below its previous high, the five-year chart shows excellent returns.
Can the good times return – and should I invest and wait?
On the block
Let me start with my conclusion. I have no plans for EUA's share price even though it stands at just a few cents.
The company describes itself as “Palladium, platinum, rhodium, iridium and gold mining company“. But in the first half it recorded zero sales. That is because, although it owns the mining concession, it is not currently extracting those precious metals commercially and selling them. Instead, Eurasia has been trying to sell its assets for a long time.
As the company explained in an interim results statement last month, “our strategy continues to focus primarily on the potential sales of the company's assets in Russia“.
The longer that process drags on, the greater the revenue risk from ongoing maintenance and administrative costs facing Eurasia. Just last month it entered into an exchange-traded fund to provide additional funding.
Thinking like an investor
That wild ride in EUA's share price over the past few years – and arguably its current market capitalization of £62m – points to something. There is, potentially, significant value in the company's assets.
But having potential value and unlocking that value are two different things. Sometimes they can be very close. In some cases they may be too far apart.
Eurasia has been looking for potential buyers for its goods for a long time. It may get one, but the lack of visible progress so far is not particularly encouraging. It hopes to sell Russian goods to what is essentially a buyer's market. That can affect the chance of getting a deal and certainly can affect the chance of getting a deal at a very attractive price.
Eurasia can still sell its Russian assets and, even at a lower price, may see more than a return on its current markets. That could send the price of EUA up. Arguably, if the price were good enough, the penny share would rise. Whether it may double will depend on how good that price was.
But the risks involved (like not selling at all) are huge. At the moment, this sounds more like speculation than investment to me, so I have no investment plans.
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