We are not yet three months into the year and already Eurasia Mining (LSE: EUA) — usually known as EUA — has performed spectacularly. Specifically, the EUA share price is up 189%. Yes, that is close to tripling in just two months!
What on earth is going on – and could I still aim to make some money if I buy the shares today?
The difference between investing and speculating
Let me answer the second question first. I have no plans to put money into Eurasia Mining shares.
That is because I like to invest in what I see as great businesses that are trading at an attractive share price. By contrast, buying Eurasia Mining shares seems to me more like speculation than investment in the current geopolitical environment.
It is what is sometimes known in the City as a “special situation”. Special situations can be very lucrative (as the soaring EUA share price has lately shown), but also risky.
Right assets, wrong place, wrong time
So, what is Eurasia’s situation?
It owns some potentially valuable mining assets. They are not currently generating meaningful revenue.
That puts me off to a large extent, but it is not uncommon. A lot of small mining companies with a share price in pennies (as EUA has) own mines that are not in full production, or simply the rights to mine an area.
The challenge with Eurasia’s mining assets is that they are in Russia. For some time it was trying to find a buyer for them, in what looked more like a buyer’s than a seller’s market.
The share price has jumped on hope more than facts
So, does the 189% jump in the EUA share price reflect a deal being struck? That would be an obvious conclusion to draw as to why a company that last year was facing liquidity challenges now has a market capitalisation of £180m.
In fact though, Eurasia’a situation has not changed. It has not issued any news to the stock exchange this year about any possible sale of its assets.
But then what is going on with the share price leap?
I think the most likely answer is that investors (or speculators) think the recent shift in US policy towards Russia could presage a more constructive business environment there again for western companies.
Maybe they will. Maybe Eurasia will find a buyer more easily. Or maybe it will end up being able to work its own mines in Russia.
To me though, that all seems highly speculative for now – and certainly does not adequately justify 189% share price growth in two short months.
I would rather invest on the basis of a proven business model and what look like healthy commercial prospects, at an attractive share price. Eurasia’s long-term stock market history does not speak to a proven business model.
As for its commercial prospects, for now little is certain and the geopolitical risks remain very high even before getting into the specifics of the company’s business. I have no plans to buy.
