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Eurasia Mining Continues Strategic Reorganisation – But What Of Political Risk?

Tim Worstall
Tim Worstall trader
Updated 18 Feb 2022

Trade Eurasia Mining Shares Your Capital Is At Risk

Key points:

Eurasia Mining PLC (LON: EUA) shares could be said to be a bit of a disappointment. For the company seems to be doing most of the right things. It’s in the nickel and platinum group metals markets, both looking pretty sexy considering the electric vehicle revolution coming down the pike. It’s opening up old mines which are known to have resources. It’s structuring itself to be agile strategically if that’s needed. So, what’s holding the shares back?

In this short term, it might well be a political risk concerning Russia and Ukraine. If Putin does decide to go for it – which is a big if – then there are threats of substantial sanctions on the Russian economy. That’ll hold back the equity valuations of anyone producing in Russia for the global market of course.

As we’ve said before about Eurasia they do seem to be doing a lot of things right by our lights. It is true that exploration and exploitation techniques in mining improve over time – technology does march on after all. So, there’s a thriving trade – and always has been – in going back to sites of old mines and re-evaluating whether they make sense now. Perhaps prices, or techs, have changed enough to make them worthwhile now when they weren’t then. This is what Eurasia is going with old nickel and pgm mines.

Eurasia Mining operations

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One risk in Russia is that one might think one owns something but then find out – perhaps after proving that it is in fact valuable – that one doesn't really own it. As we’ve also said about Eurasia they seem to be taking this risk seriously and doing something about it. They’ve reached agreement with ERDC which involves a confirmation of their licence rights for example.

There’s also the specific sector they’re in. Assume that hydrogen becomes a major part of the transport revolution – that’s supportable, batteries are unlikely to work for trucks – and the PGMs will be in greater demand. Nickel is required for certain battery technologies. So, yes, looking for what might be considered the right elements too.

So, we could evaluate Eurasia Mining as doing much the right things the right way. They’re also organising the company – here and here – in what might be considered a sensible manner, vertical integration by product line.

So, what’s the problem then? There is always that little issue of whether what is thought to be in the mine actually turns out to be there. The efficiency of management in getting it out, the predictions of market size and price of course, but those are common to all miners.

The current issue at Eurasia Mining is simple political risk – this Ukraine thing. If the Russians go in then the threat back from the EU and US is of considerable sanctions upon the Russian economy. This would hit people who produce in Russia then expert to the global market – Eurasia for example. The uncertainty over what Russia will do in Ukraine can therefore be said to be holding back the Eurasia share price. Markets and prices don’t like uncertainty so it’s possible to think that there will be no proper consideration of the underlying prospects until that uncertainty is resolved.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.