Eurasia Mining PLC

Eurasia Mining PLC (LON: EUA) is an FTSE AIM 100 index listed UK-based mineral exploration company. The Company is focused on the exploration and development of platinum group metals (PGM), gold and other minerals in Russia.

Growth Prospects

• Strategic Initiatives: EUA remained committed on prioritising nickel as the main metal as the Company had formed a separate subsidiary to consolidate operating nickel mines. The subsidiary was named as Kola Nickel LLC.
• Dual Listing: The Company had evaluated the potential benefits of a Dual Listing on the the Moscow Exchange, including provision of an opportunity for Russian investors to have easier access to a facility for the trading of shares in the Company.
• Exploration & Development Activities: EUA had made accelerated progress on the world's largest soft rock PGM project as it had obtained the Flanks License at the West Kytlim project.

Key Risks

• Failure to Discover Substantial Reserves: The failure in discovering substantial reserves could adversely affect the EUA’s future performance as exploration and development are capital-intensive activities.
• Financial Risk: EUA is exposed to the financial risks associated with fluctuation in the foreign exchange & interest rates, availability of adequate working capital, and credit defaults.
• Covid-19 Pandemic: The new variant of the Covid-19 pandemic, Omicron, has caused a significant decline in the UK Equities.

Gold Industry Dynamics

• Robust Demand Outlook: Several factors such as rising inflation worldwide, the spread of Omicron variant of the Covid-19 pandemic and increasing industrial demand for Gold may support gold price over the medium term.
• Gold ETF: Meanwhile, Gold ETF had witnessed a year-on-year drop of around 5% to 3.57 kilo tonnes during 2021. While the Asset under management declined year-on-year by almost 9% to USD 209 billion at the end of 2021. The losses of 2021 were dominated by North American funds.
• Growth Drivers: The recently released Federal Reserve meeting minutes indicating a sooner-than-expected interest rate hike and the US inflation touching 40-years high during December 2021 had weakened the US Dollar Index. Thus, it had benefitted the gold price.

(Source: REFINITIV; Analysis done by Kalkine Group)

On a daily chart, COMEX Gold Futures' price (USD 1,816.70) is sustaining above the 20-days exponential moving average of GBX 1,808.90, indicating an upside direction for the commodity. At the same time, the MACD line remained above the signal line, reflecting a bullish price momentum. 

After understanding the industry dynamics, we will analyse some key fundamental and shareholders statistics of Eurasia Mining PLC.

Suschov (Dmitry) is the most significant shareholder as it holds nearly 465.65 million shares as of 31 December 2021.            

Financial and Operational Highlights (for the six months periods ended 30 June 2021 as on 30 September 2021)

(Source: Company Website)

• Excellent Revenue Growth: The Company had shown a nearly nine-fold increase in mine revenue compared to the same period last year.
• Net Loss: The Company’s net loss remained negative £1.47 million during the first six months of 2021.

Financial Ratios (H1 FY21)

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 17 January 2022, at 09:43 AM GMT, EUA’s shares were trading at GBX 27.00, same as the previous day closing price. Stock 52-week High and Low were 39.90 and GBX 13.01, respectively.

From a technical perspective, the stock price is hovering above the 20-days exponential moving average of GBX 24.22, indicating an upside potential in the stock price. Moreover, the MACD line remained above the signal line. Hence, there could be an uptick in the stock price.

Over the last six months, EUA’s stock price had delivered a positive return of around 32.17%, while the FTSE AIM 100 index (benchmark index) had produced a return of negative 4.79% and the FTSE All-Share Industrial Metals & Mining index generated a return of approximately 12.05%.

Valuation Methodology: Price/Book Approach (FY21) (Illustrative)

Business Outlook

The Company had tasted success on the operational and commercial front during the first six months of 2021. Moreover, EUA had eliminated single asset risk as three plants became operational during H1 FY21 in comparison to one in previous seasons. Meanwhile, the Company aimed to split nickel, PGM and hydrogen projects into separate subsidiary companies. However, EUA may undergo sizeable corrections because of the rising interest rates prospect, global inflation, and Omicron variant of the coronavirus. Thus, it may depend on the risk appetite of the investors to take a reasonable position in this company having several operational growth catalysts.

Considering the robust production volumes, strong balance sheet, robust financial & liquidity position, higher profitability margins, lower leverage ratios, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Eurasia Mining PLC at the current market price of GBX 27.00 (as on 17 January 2022 at 09:43 AM GMT), with lower-double digit upside potential based on 106.22x Price/NTM Book value per share (approx.) on FY21E book value per share (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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