Shares in Eurasia Mining (LSE:EUA) are now up 86% since 20 November. This reflects demand for palladium and the surge in shares since late November also demonstrates the impact of the rise in that metal on this miner. The Armchair Trader first covered Eurasia Mining on 20 November.
There are a number of factors behind why we thought it looked like an interesting stock. As we said then:
“We think palladium has more legs to its and one way of getting exposure to this growth story will be through stocks like Eurasia Mining.”
We thought it would be a good proxy for increased buying in the palladium market as well as associated dynamics in platinum prices.
Other factors to recommend Eurasia Mining shares include the fact that the company has been around for a while now, having listed on AIM in 1996 and having been active in the Russia mining market for quite some time. It has established production of platinum, palladium, iridium and rhodium as well as gold.
Eurasia Mining could uncover further platinum deposits
Eurasia Mining has the second largest alluvial PGM mine globally at West Kytlim as well as its open pit mine at Monchetundra, which produces platinum. Eurasia has been claiming it could be on the verge of further platinum group discoveries in the Monchetundra area, with the potential for 40 million ounces up for grabs.
While Eurasia Mining may not be in a position to exploit all of this, as some of the opportunities lie outside its existing license areas, it could still be well positioned for a slice of the action.
Looking at the fundamentals, however, there does not seem to be a let up in demand for palladium. The metal is a key ingredient for autocatalysts in petrol engines which help to keep exhaust emissions down. There is still tight physical supply for palladium and this is what is driving prices higher.
Dieselgate is driving palladium prices
One of the core catalysts has been ‘Dieselgate’ in 2015, the vehicle emissions scandal involving Volkswagen, which forced the motor industry and governments to revisit the whole exhaust emissions issue. Car firms are very wary of cutting corners on emissions, especially in the current environment when climate change is now firmly on the table.
Twelve months ago palladium was trading at around $1389/oz, but has seen some real growth in price since August, breaking the key $2000 level in early January. So far it has set a high of $2502. According to the London Bullion Market Association, palladium could realistically hit $3200/oz. However, some analysts are also expecting some volatility in the market in Q1, with the metal potentially falling back as far as $1700/oz.
Be that as it may, if you are bullish on palladium, there are worse places to be than Eurasia Mining, especially if it can leverage its existing mines with some new discoveries in its immediate license area.
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