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The Eurasia Mining share price leaps 20%! New golden goose or the next SXX?

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CORRECTION: This article originally stated that Eurasia discovered bonanza grade ore pockets in October this year, whereas the discovery was in fact made in October 2018.

The Eurasia Mining (LSE:EUA) share price has seen massive investor interest over the past two weeks with prices rising far beyond previous ranges.

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The stock has soared four-fold since the gold and platinum miner reported the potential to double production at West Kytlim in Russia.

The share price has bumbled along in the 0.5p to 1.5p range for the past 10 years so this marks quite the departure for the UK miner.

What to buy

The Eurasia share price is trading for mere pennies at the moment. And there are other good signs when we dig a little deeper.

In interim results out in September 2018, Schaffalitzky said that the company had cleared all of the debt off its balance sheet. Non-existent levels of debt are extremely rare for mining operations, which require many years and tens of millions of pounds of investment before any discoveries can be made. Compare this to the likes of FTSE 100 stalwart Rio Tinto and you will see what I mean.

It’s not the only mine Eurasia has in operation. The company won an exploration permit from the Russian Federal Securities Board in June 2018 to dig for platinum in Monche-Tundra, on the very tip of the northwest Russian coast, bordering Finland.

Eurasia signed a construction deal with Chinese firm Sinosteel earlier this year, saying at the time that the tie-up was worth $176m.

But I would be wary of claims of nine-figure valuations, especially for a company with a market cap short of £65m.

All that glitters

Sudden interest in a previously unheard-of mining company should come with an investor’s disclaimer.

We all remember what happened with Sirius Minerals (LSE:SXX). Tens of thousands of small retail investors pumped their retirement savings into the Yorkshire polyhalite mining project when Sirius managed to sell a gleaming dream to get in on the ground floor of the biggest new UK drilling project for decades.

But when costs spiralled and the company was forced to cancel a $500m corporate bond issue, workers had to down tools and the mine was left unfinished.

There may still be value in the SXX share price, of course. Certainly investors who have lost thousands on paper are mostly unwilling to sell to realise those losses. But Sirius needs a massive capital injection — and hence, probably a large share dilution — before it can start making any money and pay shareholders back.

The difference here is that Eurasia’s mines are up and running.

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Tom has no position in 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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