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Eurasia Mining has doubled in February. Will it crash like Sirius Minerals?

Alan Oscroft
A miner down a mine shaft

Do you remember when Sirius Minerals (LSE: SXX) shares doubled in value in just a few weeks back in 2016? I do, and I felt very pleased with myself when I bought some a few months later after they’d crashed back down again.

Something similar has just happened to the Eurasia Mining (LSE: EUA) share price. Well, the doubling part, at least. At market close on Monday, the shares had doubled since their end of January price.

Penny shares?

Before I look closer, I want to air one note of caution. People sometimes point to gains like this as examples of the riches you can make from penny shares. After all, even after the big jump, Eurasia shares are still only priced at 6.7p. But you know what? If Eurasia had only one tenth as many shares in existence at 10 times the price (at 67p), I expect the same would have happened.

And the biggest potential loss from a share is exactly the same whatever the price. It’s 100%.

The latest bullishness is not the first in Eurasia’s history, as my colleague Michael Baxter’s words from December show. Just two months ago, Eurasia was on the up, and Michael was asking whether a great buying opportunity had passed. He thought not and suggested the shares were still good value, and it looks like he’s been proven right. But let’s not forget Sirius just yet!

Eurasia boom

The Eurasia boom seems to be all about rising demand for palladium and platinum. Palladium prices have soared by almost 70% over the past 12 months, with a big spike since the start of 2020. And just like gold, investing in precious and rare metals miners can provide better rewards than buying the metals themselves.

Analysts are getting more bullish too, about both palladium and about Eurasia Mining itself. And there are rumours going round that Eurasia insiders have been buying stock too — but, pinch of salt and all that.

Sirius bust

Back to Sirius Minerals and the question of whether Eurasia Mining could go the same way. Well, there is speculative risk with Eurasia, just as there was with Sirius. Eurasia has been burning cash and recording losses, which is one thing EUA and SXX have in common.

But the big risk for Sirius, which turned out bigger than I’d expected, was that it simply did not have the capital in place to get close to being productive. It was sat on a very desirable asset in its potash reserves, and had a long list of customers lined up. 

But there was never going to be any potash production for a number of years, and it needed huge further investment.

Productive

By contrast, Eurasia Mining has been listed on AIM since 1996 and is in production today. It’s churning out palladium, platinum, gold and other rare metals from its Russian assets. And it’s been suggesting it’s close to further platinum group discoveries. 

So no, I don’t see Eurasia as facing anything like the risks of Sirius Minerals. It’s still speculative, but I think there could be more share price rises to come.

The post Eurasia Mining has doubled in February. Will it crash like Sirius Minerals? appeared first on The Motley Fool UK.

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Alan Oscroft owns shares of Sirius Minerals. 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.

Motley Fool UK 2020