Eurasia Mining (LSE:EUA) is up for sale. The owners are looking to benefit from the rise in platinum, palladium, and gold prices and exit when all is good with the company. During the first half of this year, Eurasia’s revenues increased from £13k to £48k. It also raised $10m in a private share placing in August.
The 2020 bull run on metal prices has helped increase demand and improve the Eurasia Mining share price. Platinum prices have bounced back from earlier this year and the price of palladium and gold are both up more than 26% year on year. The pandemic initially reduced supply and demand of platinum, but the negative effects are not as bad as the company first thought.
Eurasia Mining produces platinum and gold from its West Kytlim mine in the Ural Mountains, where it’s been mining since 2018. It took full control of this asset in June, after investing heavily in necessary equipment. This was partly to blame for the massive increase in net losses, from £106k to £1m, in the first half of the year. The company also owns the Monchetundra mine in the north of Russia. This is not yet producing but boasts a two-million-ounce resource, thought to have a value of over $2bn. Permits are in place and it has the potential to produce platinum, iridium, palladium, and gold. Eurasia also searches for gold and silver at its Semenovsky mine tailings operation. From 1943 to 1998 this was a processing plant. Eurasia, now reprocesses waste material found there, to double check it for traces of gold and silver.
Will Eurasia Mining find a buyer?
Whether Eurasia will find a buyer and get a good price for the business remains to be seen. The pandemic is causing so much uncertainty that banks are unwilling to lend, particularly to riskier ventures. The company says it’s in no rush to sell, which gives it an upper hand, but only for so long. If there’s no interest and it drags on, the company will have to ensure it’s still operating in a lucrative manner. However, considering platinum group metals are highly sought after by China’s car producers, I think it’s likely it will find a buyer.
West Kytlim Mine – Source: Eurasia Mining
The Russian jurisdiction puts many investors off buying shares in Eurasia Mining for a variety of reasons, particularly the unpredictability and lack of transparency surrounding Russian operations. Meanwhile, negative headlines, such as the recent poisoning of Russian opposition figure and anti-corruption activist Alexei Navalny, and US–Russia tensions, don’t help the country’s image.
Climate change must also be a consideration, and companies operating in Russia will have to step up to reduce their carbon footprint. However, being a colder climate means the unforeseen and devastating effects of climate change will take longer to hit. Initially, the areas most likely to suffer are hot regions, as we saw with the Australian bush fires at the beginning of the year. Meanwhile colder countries, such as Russia, may in a better position to thrive.
For shareholders looking to create a diversified portfolio, it may be worth contemplating. Its £896m market cap remains lower than the estimated value of its assets. I think Eurasia Mining remains a risky buy, but for those looking for diversification it may prove lucrative.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020