The Eurasia Mining (LSE:EUA) share price has crashed since this time last year. Immediately after Russia invaded Ukraine, Eurasia’s shares plummeted. And, they haven’t recovered since. In fact, they’re down a massive 80% over the period. That’s unsurprising given that the company has interests in gold, copper and platinum mines in the Ural Mountains and Kola Peninsula in Russia.
All that glitters is not gold
The company is losing money, which could also have contributed to the decline in the share price. From its formation in 1996, through to 30 June 2022, it accumulated losses of £30.5m.
And its recent financial performance was equally poor, despite looking better on the surface.
The company made a profit in the six months to June 2022. But this was entirely due to the appreciation of the Russian rouble against sterling. It restated its rouble-denominated monetary items, resulting in a substantial one-off gain of £6.1m.
This was partly offset by a £1m loss on the revaluation of its stock of platinum concentrate.
If these two items were removed, the loss before tax would have been £1.23m.
| Half-year figures (£k) | 30.6.21 | 31.12.21 | 30.6.22 |
| Sales | 425 | 1,905 | 102 |
| Gross profit or (loss) | (239) | (14) | 66 |
| Loss before tax | (1,466) | (1,673) | 3,852 |
Although minimal sales revenue was recorded in the first six months of 2022, the company did mine 167kg of PGM (platinum, iridium, palladium and rhodium) concentrate that it decided not to sell. Due to market volatility, the directors decided they could sell the product for more at a later date.
On the plus side, in December last year, Eurasia provided an update on its latest cash position. It had cash in the bank of £4m which — the directors were keen to stress — was held outside of Russia. In addition, there was £5.6m of mined product available for sale. And the company has few borrowings or lease liabilities.
Time to buy?
To be honest, I’m not sure what to make of Eurasia Mining.
It has said that UK and European sanctions haven’t affected its business, yet it remains heavily loss-making.
It’s looking to sell its Russian interests but, at the moment, it doesn’t have any other assets generating revenue. A new office has been established in Japan, although it hasn’t managed to secure any business.
The company plans to progress green hydrogen and mining projects in other “friendly” countries. But these are at an early stage, and are unlikely to generate revenue soon.
It also has a policy to pay 80% of adjusted net income in dividends. Yet the company doesn’t make a profit.
Oddly, on 16 May last year, its shares were suspended from the Alternative Investment Market pending “an announcement“. The next day a statement was issued advising that there were “no material new developments to notify“. On 18 May, trading in the shares re-commenced!
As a risk-averse investor, I’m not comfortable buying shares in Eurasia Mining. Of course, this might be a mistake. The company currently has a market cap in excess of £100m, so it clearly retains the support of a large number of investors. But I see this as a strangely huge valuation for such a small unprofitable mining company. I don’t think it’s the bargain it seems.
