Shares in platinum/palladium miner Eurasia Mining, have shot up in recent weeks, but have they got further to rise?
Forget tonight at the Palladium, for Eurasia shares every night could be palladium night.
“We will be the last one to die,” said the Eurasia non-executive director Dmitry Suschov in an interview with Proactive Investors.
He was talking about what might happen to platinum, and specifically palladium, miners in the region of the world where Eurasia Mining operates, should the price of the mineral collapse. Something he said was “unlikely.”
For the company, the cost of mining the minerals forming the platinum group is between $300 and $400 an ounce. The price of palladium is $900 an ounce, the price of some of the other minerals that it mines is much higher. That seems like a good starting point.
The share price soared from a mere 0.44p in September to 4p a few weeks ago, before falling back to 3.10p as I write.
Does that mean the good news is now priced in, and that anyone looking to jump aboard has missed their opportunity?
Well, let’s consider one expert who might not agree with that. Dmitry Suschov really does know his mining, especially in the region of Russia where Eurasia operates. He bought into the company ten years or so ago at a share price of 5p. Either that investment was a huge mistake by a man who knows more about mining platinum and other minerals falling into the platinum group or PGMs in his little finger than you and I know put together, or he knew something the markets had not worked out. On its own, that seems to be like a reason to at least consider the stock.
Let’s consider another point; the company is valued at £82 million, which means that before the recent surge in the share price, it was valued at around £11m. Now factor in that the company says that its mines are sitting on around 15 million ounces of palladium. Let’s see, at $900 an ounce minus say $400 costs, that’s worth around...well you do the maths, it’s a lot more than £82 million.
One of the other PGM minerals that it mines is rhodium which is trading at $5,000 an ounce.
There was a time when the Eurasia share price stood at £45, which was back in the year 2000 when it must have been valued at around a billion pounds. The question is, might it one day return to that valuation?
Russia has long been a rich source of platinum supply — it has been mined for 200 years — but in recent years the traditional source of minerals (from dredging rivers) has been close to running on empty. So instead, the focus has been on underground excavation and that means big upfront costs and long payback periods. For a more detailed overview, read this:
Furthermore, some of the companies operating in the region are not as transparent as investors, trying to quantify the potential value, would like.
Eurasia, on the other hand, has been making something of a big splash. Its West Kytlim mine has been at the industrial operation stage since 2018 and in September it bought out its contractors, which, or so suggested Dmitry Suschov, means the company makes 100 per cent of the margin and production is more stable.
If you are of a certain age, you may recall a TV show called Sunday-night at the Palladium. Excuse my ignorance, but in researching this article I discovered that these days there is a successor to the show, Tonight at the Palladium, presented by Bradley Walsh. I don’t know how hot the show is, but it does seem to me that the mineral known as palladium is hot. It has several applications, including as a key component in reducing the carbon emissions in catalytic conversions.
What is especially interesting about Eurasia is its improving cash position. With the jump in the share price, a number of the company’s backers have said they are willing to “exercise their warrants and hold these shares long term.”
In his interview, Dmitry Suschov talked about the company paying dividends, me thinks this is something he, a major shareholder, is anxious to see. “We have a pile of cash” he said and it “makes sense to give to shareholders like myself.”
Some pundits raised a concern that the company was still loss making, creating a risk. I am not so sure. Since it bought out contractors, its share of the profits from mining has risen to 100 per cent. Its West Kytlim mining licence has been increased from 20 square kilometres to 100 square kilometres and VTB Capital and CITIC Group are working, on a success fee basis, to assist with ‘strategic options’ at its Kola and Urals mining assets. Or in other words, it is actively looking at selling its assets.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees