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Eurasia Mining: is there more to come from this palladium play?


Eurasia Mining is the hot mining stock of the week at the moment. The miner is being seen as a potential play on the price of palladium, which is now regarded as the most expensive precious metal out there. Palldium has suffered recently because it is a by-product of platinum production, and while palladium is in demand, platinum is not. This has create a shortage and the consequent price spike we saw at the end of October and into the first half of November.

Eurasia Mining has seen massive demand for its shares as palladium has climbed: stock in the junior miner was priced at 47p on 22 October but it now trading at around £3.60 in what has been a major boost to the miner’s value. While investors coming to the party now will have missed out on much of this growth, it will be worth keeping a watch on the company because of the ongoing dynamics in both platinum and palladium.

Eurasia Mining: an established Russian palladium play

Eurasia Mining is not a newcomer when it comes to mining stocks: it listed on the AIM in 1996 and was one of those mining companies that was active in Russia not long after it opened up to foreign-backed mining interests. It has been working on a number of projects, producing platinum, palladium, irridium and rhodium, as well as gold. Importantly, it runs the second largest alluvial PGM mine globally at West Kytlim, and a second mine Monchetundra, which is a platinum-producing open pit mine.

Monchetundra seems to be generating the most interest at the moment, as it is fully financed and yet to start production. It was financed through a $176 million turnkey EPCF (engineering, procurement, construction and financing) agreement with China’s SinoSteel.

With two mines up and running, Eurasia Mining will be diversifying away from the risk of having a single pit.

The firm is managed by a highly experienced team that has a record of exploiting useful discoveries in both Russia and further afield. They are very familiar with the ups and downs of doing business in Russia and have demonstrated their ability to get West Kytlim up and running and have stayed in business.

Palladium looks set to be supported by ongoing demand for the metal in catalytic converters, including for gasoline engines in cars. This is well before you factor in its potential uses for electric cars. Markets like China are waking up to the fact that they need to cut down the exhaust emissions from the ever-growing number of vehicles on China’s roads and this is creating a support level for palldium prices.

We think palladium has more legs to it and one way of getting exposure to this growth story will be through stocks like Eurasia Mining. Even over the last week we have seen palladium marching between the two poles of around $1320 and $1370 an ounce. This is at a time when gold is trading at $1469. The two metals are very close in value.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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