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If I had put £1,000 into penny share Mining in Eurasia (LSE: USA) Five years ago, you would now have an investment worth more than £2,000. This is because the price of US stocks increased by 102% in that period.
That may sound good. Or even great. But in fact, the stock rose as much as 3,690% between five years ago and the following year, 2020. So, at one point, my potential £1,000 investment would have been valued at almost £38,000.
The EUA has clearly captured the imagination of some investors in recent years. Even now, although it is well below its previous highs, the five-year chart shows very positive performance.
Could the good times come back? Should you invest early?
on the block
Let me start with my conclusion. I have no plans to act on the US share price even though it is only a couple of pence.
The firm describes itself as “Palladium, platinum, rhodium, iridium and gold mining company.”. But in the first half it did not register sales. This is because, although it has mining concessions, it does not currently extract these precious metals commercially or sell them. On the other hand, Eurasia has been trying to sell its assets for some time.
As the company explained in its interim earnings statement last month, “Our strategy continues to focus primarily on the potential sale of the company's assets in Russia.”.
The longer that process drags on, the greater the liquidity risk arising from the ongoing administrative and maintenance costs facing Eurasia. Last month it entered into a trade finance facility to provide additional liquidity.
Think like an investor
That wild rise in the US share price in recent years – and possibly its current market capitalization of £62 million – points to something. There is potentially significant value in the company's assets.
But having potential value and unlocking that value are two different things. Sometimes they can be very close together. At other times they may be very far away.
Eurasia has been looking for potential buyers for its assets for some time. You may still find it, but the lack of apparent progress so far isn't particularly encouraging. It hopes to sell the Russian assets in what is effectively a buyers' market. That could affect the chances of getting a deal and it certainly could affect the chances of getting a deal at a very attractive price.
Eurasia could still sell its Russian assets and, even at a knockdown price, could get more than its current market capitalization. That could push up the price of US stocks. Possibly, if the price was good enough, the penny stock could rise. Whether it could double again would depend on how good that price was.
But the risks involved (such as no sale being made) are substantial. For now, this seems more like speculation than an investment to me, so I have no plans to invest.
