The Eurasia Mining (LSE:EUA) share price exploded this month, almost doubling within the first week. Since then, the stock has cooled off a bit and been on a downward trajectory. However, it’s worth noting that it’s still up more than 30% over the last 12 months.
The recent upward momentum was triggered by an encouraging progress update for the mining company’s Monchetundra project. However, more information has come to light since then, and it could make the entire venture far more lucrative. Let’s take a closer look.
EUA share price potential is rising
Last week, management released its previously announced five-year mining plan for two (West Nittis and Loipishnune) of the nine sites within the Monchetundra project. While having a plan of action is undoubtedly a good step forward, the firm has also made some additional discoveries that could lead to a rapid rise in the EUA share price, in my opinion.
Eurasia has completed a more detailed block-modelling analysis of the two sites, in addition to implementing further open-pit optimisations. As a result, the company now estimates that annual ore production in the first phase of development will actually be 70% higher than what was initially anticipated in the 2017 feasibility study.
What’s more, it has also revised the production profiles of both mines, increasing the ore grades. West Nittis is now predicted to contain 2.6 g/t (grams per tonne) of palladium, while Loipishnune stands at 1.8g/t. These are both significantly ahead of the original average estimate of 1.3g/t. And the updated figures only get larger when including the platinum and gold also detected at both sites.
Combining all this information, Eurasia is on track to produce 128 Koz of palladium and equivalents each year throughout phase one of development. Based on today’s prices, that’s roughly equal to £182m, or £136.1m when adjusting for the firm’s 75% equity stake. Needless to say, these are excellent results. So why didn’t the EUA share price react more positively to the news?
The road ahead
Despite the encouraging progress being made at Monchetundra, it seems many investors are holding their breath. Production at these sites is still a couple of years out. And during that time, other mining businesses are flooding the market with palladium and other battery metals to meet the current demand. It’s entirely possible that the market becomes saturated, resulting in lower metal prices. So, by the time Eurasia Mining enters the picture, the £136.1m prospect could be worth considerably less.
With that in mind, seeing a lacklustre response from investors and is not that surprising.
The bottom line
A lot of speculation and expectations have built up over the last 18 months surrounding the EUA share price. Over the long term, if the company can deliver, the stock might be in for some explosive growth. But currently, it seems investor patience is starting to wear thin, which could explain why some decided to close their positions after the steep rise earlier this month.
Personally, my opinion remains unchanged. Eurasia Mining looks like it has great potential. But it’s simply too soon for me to invest.
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.