Investors have clamoured for Eurasia Mining (LSE: EUA) shares over the last week. In fact, the penny stock was recently the most popular pick among Hargreaves Lansdown clients. That’s right — this AIM-listed resource play was more in demand than FTSE 100 members such as IAG and Lloyds Bank.

All this has helped the Eurasia Mining shares more than double in value since 27 August. That leaves it with a market capitalisation of over £1bn. My Foolish colleague Roland Head noted at the start of the month that investors are keen to get exposure to the Russia-focused miner. This is due to its focus on extracting palladium, platinum, rhodium, and iridium. These should all be in huge demand going forward. 

Today however, I’m highlighting another penny stock that could be about to spring violently to life. 

Is this penny stock next to pop?

Would-be producer Horizonte Minerals (LSE: HZM) is a share I’ve owned for five long years. Partly due to the electric vehicle revolution, it’s my play on what’s set to be a booming nickel market.

The AIM-listed company owns two Tier-1 projects, Araguaia and Vermelho, in Brazil. Right now, it’s the former that’s really in focus. News of how Aragiua will be financed into production is due by the end of Q3. It could be the catalyst for some serious share price action.

At least that’s what I’m hoping. Mining companies aren’t known for their willingness/ability to stick to deadlines. If there’s a delay, HZM shares could experience some sharp selling pressure as short-term traders head for the exits.

Even if the news arrives, it’s a question as to whether the terms of that financing are beneficial for existing owners like me. They might not be. Covid-19 could also impact construction at Araguaia on top of this. 

Horizonte vs EUA

A positive to owning Eurasia Mining shares over Horizonte’s are that the company already has one project in production. Obviously, HZM won’t be ready to deliver the goods for a while yet. 

The company’s mergers and acquisitions officer Dmitry Suschova owns a big portion of EUA. That’s another thing I like. This is through a direct holding and a controlling interest in Deloan Investments Limited. This should mean his interests are aligned with those of private investors. By sharp contrast, managerial ownership of Horizonte’s stock leaves a lot to be desired.

Then again, the latter’s shareholder register is hardly shabby. Teck Resources — Canada’s largest diversified miner — owns a little over 12% of the company. London-listed Glencore owns another 5.2% of HZM’s stock. There are worse bedfellows to have! 

At £130m, Horizonte’s market-cap also feels far more palatable. For perspective, EUA is now eligible for inclusion in the FTSE 250 index. That’s if it were to list on the main market, of course. Does this make sense? I’m not sure it does. The company barely makes any revenue and generates zero profit. It could also be forced to tap investors for more cash going forward.

Staying diversified

I’m keeping my fingers crossed that HZM is able to replicate some of the recent performance seen in Eurasia Mining shares. A near-24% rise in the last month bodes well.

Nevertheless, I’m not getting ahead of myself. As always, I’ll be ensuring that the rest of my portfolio is diversified into other sectors, just in case.

The post Eurasia Mining (EUA) shares have soared. Is this penny stock next? appeared first on The Motley Fool UK.

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Paul Summers owns shares in Horizonte Minerals. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. 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.

The Eurasia Mining (LSE: EUA) share price has surged recently, jumping from around 0.5p at the end of October, to 2.9p at the time of writing. Investors have rushed to buy the stock following the publication of a trading update issued on October 25, in which management informed investors the company is “not planning any new share placings in the foreseeable future” because the firm now has enough resources to push ahead with mining at its West Kytlim prospect next year. 

Plenty of cash

Eurasia has been able to raise additional funds through the sale of metal from the operating West Kytlim mine. According to its update, the latest payment will include “a final payment for other metals, namely palladium, iridium, rhodium and gold.” It seems management believes this final payment will unlock enough cash to keep the lights on without further shareholder support for some time. 

The company is now preparing for a “significant increase in production” at the West Kytlim mine in 2020. Cash generated from metal sales will be used to upgrade mining equipment, which, as management is keen to point out, is now “wholly owned.” Eurasia is no longer using a subcontractor to do its dirty work, which could cost more in the long run, but allows the firm to operate with larger profit margins. 

No dilution

The fact the company has enough cash in the bank to continue development without further fundraising is great news for investors. Since May 2017, the number of shares in issue has ballooned (from 1.5bn to around 2.6bn today) as Eurasia has leaned heavily on shareholders to keep going.

An even more significant development is the engagement by the company of investment banks CITIC and VTB Capital to explore the sale of its two primary assets, the Kola and Urals mining projects (that includes the West Kytlim mine).

If a buyer is found for these assets, it could then unlock significant value for Eurasia and its shareholders. But at the time of writing, no deal has been agreed in there’s no guarantee any offer will materialise.

It is also quite challenging to place a value on these assets because they’ll be worth more to big mining groups rather than smaller operators. On that basis, I don’t think it’s sensible to invest in Eurasia based on the prospect of a deal alone. Instead, I think it’s better to concentrate on the company’s long-term earnings potential from its West Kytlim mine. 

Unfortunately, we don’t have much to go on in the way of figures here. West Kytlim has been operational since May but, in the six months to the end of June, the firm reported a gross loss of £3,000 on sales of £13,316. That suggests the mine is currently costing more to run than it’s earning from sales. 

Still, as West Kytlim ramps up next year, we should get a better idea of its potential. Although, in the meantime, it’s going to be challenging to try and place a value on Eurasia’s shares.

The post Can the Eurasia Mining (EUA) share price double your money? appeared first on The Motley Fool UK.

More reading

• Are we approaching a full-blown stock market crash?
• This S&P 500 giant is building a global super app
• How to target a £1m Stocks and Shares ISA by investing £511 a month
• How much do investors need in an ISA to target a £31,353 yearly passive income
• These 3 ‘secret’ dividend shares could be top stocks to buy in May!

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.

Eurasia jumped by as much as 46% this morning, before the company’s shares were suspended and management revealed the good news. The shares have since resumed trading. 

The mining licence has been granted to Eurasia’s subsidiary, ZAO Kosvinsky Kamen, on the basis of first discovery and cover 21.5 square kilometres. The rights are for the extraction of platinum and gold across the stated area. 

All that remains now is for Eurasia, and its subsidiary, to pay a one-off lump-sum payment to the government of £24,000 within 30 days. Assuming the payment is made on time, the licence should be granted in late August or early September.

Commenting on the licence approval, Christian Schaffalitzky Managing Director of Eurasia said:

“Today is a great day for Eurasia…This approval and receipt of the licence will enable Eurasia to shift from exploration into development and platinum production.”

Making progress 

Eurasia’s next move will be to complete a detailed development plan for West Kytlim, which it must submit to the government after formal licence documentation is issued. The company has stated that its work on this plan is already in progress. 

And Eurasia believes that once all the formalities are out of the way, the company can move from planning to production at West Kytlim relatively quickly. Management believes that the initial platinum extraction from West Kytlim will be straightforward and will allow the company to generate cash flow to fund the rest of its plans. 

However, as with all early-stage miners, cash is a key consideration for Eurasia. At year-end 2014 the company reported a cash balance of £210,160 and has since raised £1.5m through the sale of shares, a cash infusion from peer Metal Tiger, and director loans. 

Another key asset

But Eurasia is not a one-trick pony and the company has another key asset in the form of an interest in the Monchetundra platinum licence on the Kola Peninsula.

Here, Eurasia is working with joint venture partner Anglo Platinum to assess the potential of the prospects and the company has already received “significant interest from third parties”. 

This gives Eurasia some flexibility. If the company receives an offer for its interest in Monchetundra it could unlock the cash needed to develop West Kytlim — an option not available to other small-cap miners. 

Highly attractive prospect

West Kytlim itself is a highly attractive prospect. It’s estimated that the cash cost of production per ounce of platinum is between $400 and $450 per ounce for the prospect, 60% lower than the industry average.

With these favourable economics, it’s highly likely that the company will find a partner to help it develop the prospect. 

Nevertheless, as of yet Eurasia has no partner. The company’s success is dependent upon its ability to raise the funds needed for the development of West Kytlim. 

So, with this being the case, Eurasia is a highly speculative play. 

The post Eurasia Mining plc Surges On Licence Approval appeared first on The Motley Fool UK.

More reading

• Are we approaching a full-blown stock market crash?
• This S&P 500 giant is building a global super app
• How to target a £1m Stocks and Shares ISA by investing £511 a month
• How much do investors need in an ISA to target a £31,353 yearly passive income
• These 3 ‘secret’ dividend shares could be top stocks to buy in May!

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.