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Tempted by Eurasia Mining’s share price? Here’s what you need to know

The Eurasia Mining (LSE: EUA) share price is one of the best-performing stocks on the London market this year. Shares in the mining minnow started the year at just under 4p. They’re currently changing hands at around 19.4p. That’s a gain of nearly 400% in just over six months. 

Following this performance, investors may be tempted to buy into the growth story. However, before you click that ‘buy’ button, there are several things potential investors should know about the share price.

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Eurasia Mining share price growth 

The story behind the Eurasia Mining performance this year is a little different to that of most companies.

For the majority of 2020, the shares have been suspended. The stock was suspended earlier in the year when management, investors, and the market wanted further information on the company’s relationship with the Chinese investment bank CITIC

The status of the relationship was revealed earlier this month. CITIC is now one of the investment bankers for Eurasia along with UBS. Together, the parties are looking for a buyer for the mining group. 

When trading resumed in the Eurasia Mining share price a week after the announcement that the firm is now seeking to sell itself, the stock jumped. However, at this stage, there’s no guarantee an offer will be made. Indeed, the company has been seeking a buyer for its assets for some time. Towards the end of 2019, Eurasia was looking at selling its two primary assets, the Kola and Urals mining projects.

Platinum is Eurasia’s principal revenue source, with palladium, iridium, rhodium, and gold adding marginally to the revenues as well. But the company is still only in its early stages.

It only really became self-sufficient last year. Towards the end of 2019, management announced the firm had enough cash to maintain operations without issuing any new shares. 

What’s more, since February, the price of platinum has fallen by around 15%. That might put off buyers, especially at a time when the prices of other precious metals, such as gold, are surging.

No set price 

After the recent Eurasia share price performance, the company is valued at £460m. It’s not clear if a buyer would be willing to pay that much to buy the firm’s assets. The final cost will depend on many different factors, including who’s doing the buying and the experience they have in the sector. It also depends on how desperate Eurasia is to be sold. 

Therefore, there’s a good chance the company will never find a buyer at the current price. That would be an adverse outcome for the share price.

With so much uncertainty surrounding the company’s future potential, it may be a good idea for investors to take some money off the table after the stock’s recent performance.

While there’s still a chance a buyer might emerge with a higher offer, there’s also a high chance the stock will fall back if no buyer appears. As such, taking some profits right now may make a lot of sense. 

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Rupert Hargreaves owns no share 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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