Eurasia Mining PLC (LON: EUA) seems to be doing many of the right things in its public announcements. Each of those sensible things produces a boost to the share price at Eurasia. But those boosts never seem to stick. Rather than moving the share price up to a new and sustained level, each announcement appears to just provide Eurasia with that boost which then faces back.
Of course, any series of regular price movements creates a trading strategy, and with a spread on the stock of 1 pence (4%, about) then if the regularity continues there is that strategy right there. Buy the dips, sell the peaks, rinse, repeat and continue. The problem with such a trading strategy is that a past pattern is no guarantee at all of the future being the same.
The latest announcement was that the dividend policy had been agreed at Eurasia. The full Eurasia dividend policy is here. They’re willing to pay out up to 80% of net income as the dividend. The importance of this is that we can take this as a declaration that the company does not intend to build up a store chest of profits from current projects to then spend on others. Shareholders will – likely – gain the profits from current activities that is, rather than their being used on further possibly risky projects.
OK, this reduces uncertainty, which should be good for the Eurasia Mining share price. And yet the effect, while there, has faded. Eurasia shares jumped 10% (note, more than the spread, so trading this was possible) but the effect is now fading away again.
We’ve seen this before though. When Eurasia reconfirmed its title to the Russian assets by linking up with ERDC we saw a jump which then rather faded again. Eurasia announced nickel resources and gained a 10% jump which hasn’t really stuck around.
It isn’t true that share price patterns will necessarily repeat. But we do seem to have a series of announcements from Eurasia Mining which all point in the right direction. Things are being done, sensible things are being done, yet none of them lead to a breakout change in the company share price.
We might therefore usefully assume that this is likely to continue. Until and unless there is significant news then we could expect Eurasia’s share price to continue to trade within the current range. Volatile enough to make in and out trades feasible even if at a certain risk. The big question is, of course, what might that significant news to break the pattern be?
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Tim Worstall is a freelance writer specialising in economics and the financial markets.