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Why has the Eurasia Mining (EUA) share price flopped?

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The Eurasia Mining (LSE:EUA) share price hasn’t been the best performer in 2021. In fact, since the start of the year, the stock’s fallen by just over 30%. It’s worth noting that in 2020, the stock surged by around 750%. So, seeing some volatility in the EUA share price isn’t too surprising. And despite this year’s decline, the stock’s 12-month performance is still flat.

So, what’s going on? And is this recent downward trajectory a sign of trouble or a buying opportunity for my portfolio? Let’s take a closer look.

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Surging commodity prices

I’ve previously explored this business before. As a quick reminder, Eurasia is an early-stage mining company. Its business model isn’t unique, but its focus on extracting precious metals critical to battery production has made it an alluring prospect for many investors. After all, with surging demand for electric vehicles and renewable energy technologies, the price of metals such as platinum and palladium have skyrocketed.

Needless to say, that’s fantastic news for this business. And it’s why the EUA share price exploded last year. What’s more, with the western world investing aggressively to eliminate carbon emissions by 2050, this increased demand doesn’t look like it’s going to disappear anytime soon. So, why’s the EUA share price falling?

The Eurasia Mining EUA share price has its risks

The lacklustre Eurasia Mining share price performance

There are undoubtedly multiple factors influencing the recently weak performance of the EUA share price. But its inflated valuation seems to be a primary cause. As promising as Eurasia’s strategy is, the surge in its stock last year pushed the valuation to exceptionally high levels.

Today, even after the recent fall in the EUA share price, the company has a market capitalisation of around £590m. By comparison, revenue in 2020 came in at a relatively tiny £0.9m.

Eurasia’s inflated market capitalisation seems to stem from shareholder expectations of its Monchetundra project. Based outside Monchegorsk in Russia, the project has nine open-pit mines containing palladium, platinum, copper, nickel and cobalt. In total, there are an estimated 104.6 million ounces of platinum equivalents to extract.

That’s an exceptional growth opportunity, especially since Eurasia recently secured a 75% equity stake. However, there remains a long road ahead. The development of these sites isn’t going to be cheap. And based on the management forecasts, the process may take up to two years before any extraction can begin. Meanwhile, half of the proposed drilling sites have yet to even complete a pre-feasibility study.

All of this means it could be a long time before the company can reap any rewards. And looking at the recent trend in the EUA share price, it seems trader interest and patience is starting to thin.

The bottom line

I can’t deny the immense growth potential this business has. However, to me at least, this potential is already baked into the EUA share price. Overall, my views on this business haven’t changed since the last time I looked at it. Despite the progress made, the risks still seem too high for my tastes. Therefore, it’s staying on my watchlist for now.

Instead, I'm far more tempted by a different growth opportunity...

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Zaven Boyrazian 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.

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