The Eurasia Mining share price has shot higher. This is what I’d do about the stock now

The Eurasia Mining share price’s recent performance could be a sign of things to come, but investors might benefit from taking some profits.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Eurasia Mining (LSE: EUA) share price has exploded higher in the past few weeks. Since the end of September, shares in the mining group have increased by 84%. This has made the stock one of the best-performing investments on the London market in October. 

Following this performance, some investors might be wondering if it’s worth continuing to hold on to the stock, or if it’s time to take profits. Today I’m going to try and answer that question. 

Eurasia Mining share price growth 

Investor sentiment towards Eurasia Mining has dramatically improved this year as the company has put itself up for sale. Despite owning some potentially lucrative mining prospects, particularly its West Kytlim project, management has decided the best course of action is to sell the business and realise value for shoulders that way. 

This makes plenty of sense. Many mining companies struggle in their early days. Especially small-cap mining stocks, which lack the size and scale to compete effectively in the market. More often than not, these corporations collapse or are taken over by a larger competitor. 

With that being the case, a sale of the business may produce the best return for Eurasia Mining’s investors. A larger competitor would be able to push down prices and use economies of scale to increase output and profit margins at the firm’s mining prospects. 

So, a lot rests on Eurasia’s ability to find a buyer. Luckily, the business is not in a rush. While a sale is the preferred outcome, its latest trading update showed that the firm’s balance sheet is considerably stronger than at any point in the past. In August, it raised $10m through an institutional share placing.

As well as the additional institutional capital, West Kytlim is now fully operational. This is producing much-needed cash flow to help support the group through the sale process. 

Buy, sell or hold?

It looks as if the mining group is on the up and up. The big question is, what’s the Eurasia Mining share price really worth? How much would a buyer be willing to pay for the business in the best-case scenario? 

Estimates suggest that the total value of resources at the firm’s mining operations could exceed $2bn (£1.5bn). The eventual figure may be significantly more or less than this initial projection, but it gives us a rough idea. 

After its recent share price performance, the company has a market capitalisation of around £900m. That looks cheap compared to the estimated value of the resources it owns. 

As such, I think there could be further upside for the stock from current levels in the best-case scenario. That said, I should note that these are only estimated figures. Therefore, it may be sensible for investors to take some profits after the recent share price performance while leaving some money on the table to profit if a buyer emerges. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Here’s how I’m using a £20k ISA to target £11k+ in income 30 years from now

Is it realistic to put £20k in an ISA now and earn over half that amount every year in passive…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

If I could only keep 5 UK stocks from my portfolio I’d save these

Harvey Jones is running through his portfolio of top UK stocks to see which ones he couldn't bear to do…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »

Investing Articles

Will this lesser-known £28bn growth stock be joining the FTSE 100 soon?

As the powers that be plan a reorganisation of Footsie listing rules, this massive under-the-radar growth stock could find its…

Read more »

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

How I’m trying to make a million from passive income

Invest as much as possible, regularly, and use the passive income to plough back into more shares. Here's how millionaires…

Read more »

Investing Articles

I’d buy 30,434 shares of this UK dividend stock to target £175 a month in passive income

A top insider has spent over £1m buying this 9%-yielding passive income share over the last year. Roland Head explains…

Read more »