The Eurasia Mining (LSE: EUA) share price has jumped in value over the past six months. Since the beginning of January, shares in the mining minnow have gained more than 700%. And there could be further gains to come.
With that in mind, here are five things you should know about the stock before you buy.
Eurasia Mining share price: merger plans
At first glance, shares in Eurasia seem to have produced tremendous returns for investors this year. However, the majority of the stock’s gains came at the beginning of July after the Russia-focused miner returned to AIM following the clarification of its relationship with Chinese group CITIC Merchant Co Limited.
There has been talk of a tie-up between these two parties for some time. As of yet, no deal has emerged. Still, Eurasia continues to actively explore strategic options with CITIC and its bankers at UBS. So there’s always a chance a deal could appear.
Eurasia’s flagship project is the West Kytlim platinum group metals mine in Russia. According to the business, activity at this project hasn’t been affected by the pandemic, and it’s producing cash flow. This cash is being reinvested back into the operation.
The company’s growth potential is also supporting the Eurasia Mining share price.
Eurasia has a long track record of successfully operating in Russia. This undoubtedly helped the company gain a licence for the Monchetundra Flanks project in the country. The project comprises two predominantly palladium open pit deposits and builds on Eurasia’s existing resources of palladium, platinum, rhodium, iridium and gold at the West Kytlim mine.
The group’s financial position could impact investor sentiment towards the Eurasia Mining share price. Despite the incoming cash flow from production at West Kytlim, the firm recently raised $10m via a share placing to help scale up production.
I think this fundraising shows Eurasia is still a long way from self-sufficiency. There could be further fundraisings from the company in future as a result.
Finally, I think investors need to consider the political situation inside Russia carefully before buying the Eurasia Mining share price.
The company seems to have a good relationship with authorities in the country, but that could change suddenly. There’s a long list of operations that have not survived in Russia’s unpredictable business environment.
Time to buy he Eurasia Mining share price?
All in all, I think Eurasia has bright prospects, but we can’t ignore the risks facing the business.
As such, it may be best to hold the stock as part of a diversified portfolio. Doing so would allow investors to profit from the company’s growth while limiting risk if it runs out of money, or falls foul of Russian authorities.
Rupert Hargreaves 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.