Forget the Eurasia share price, I’ve set my sights on FTSE 100 faller Glencore!
The Motley Fool
Published Aug 14, 2020 14:36
Forget the Eurasia share price, I’ve set my sights on FTSE 100 faller Glencore!
Eurasia Mining (LSE:EUA) is a highly attractive palladium, platinum, and gold producer. With the price of precious metals enjoying a surge, does this mean Eurasia is a good stock to buy? Miners are risky, no matter how favourable the underlying assets, and this one particularly so. The Eurasia share price has soared 487% year-to-date. Despite this I think Glencore (LON:GLEN) is a preferred growth stock to buy.
Has optimism skewed the share price? The Eurasia share price was suspended at 7.2p between February and July. This was because of social media speculation of a potential takeover. Since resuming trading on AIM, its share price has shot up above 22p. This week, Eurasia obtained a new licence to explore for platinum next to one of its existing assets. The share price rise is based on two key factors. One, the company is for sale, and two, the price of platinum and other precious metals is rising. However, there are no guarantees it will find a buyer. Geopolitical tensions are running high, Covid-19 is wreaking havoc, and it is not an ideal time to be selling up.
In its results for 2019, Eurasia posted a pre-tax loss of £796,268, which was an improvement on the year before. In April it confirmed it was in a debt-free position, with cash above $0.5m and $1m in credit available. This, along with its producing assets, shows it has something to offer. The recent share price hike may have already priced the positive speculation in.
The company now has a £600m market cap, but if a low-ball offer is accepted, many shareholders will be out of pocket. Unfortunately, I think investors looking to cash in on a big share price rise at Eurasia have probably missed the boat.
Can this FTSE 100 faller rise again? Glencore (LSE:GLEN), on the other hand, does not seem to have much going for it at first glance. Its share price has taken a beating since 2018 and it is struggling against a backdrop of geopolitical and pandemic challenges. Nevertheless, I think it has promise.
Worldwide lockdowns have reduced demand for many products, including electric cars, which means the elements used to make them, such as nickel, are also seeing a reduction in demand. This has led Glencore to cut its full-year guidance for production of nickel and coal, although it left its guidance for copper, cobalt, zinc, and ferrochrome unchanged.
The thing is, the world is changing fast, particularly in its use of electric vehicles, and when we recover from the pandemic, demand will return. At nearly 50 years old, Glencore is an established multinational commodity trading and mining company with a diverse portfolio of natural resources and market cap of £22bn. It cancelled its dividend for this year and earnings per share are negative, but it is focussing on paying down debt and undergoing a major restructuring.
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The FTSE 100 slid at the end of the week, bringing most stocks down with it. I think stock market volatility is to be expected until the pandemic is resolved, therefore focussing on the future is key in a long-term investor’s approach to investing. With that in mind, I think Swiss mining giant Glencore looks like a good addition to a value investor’s portfolio.
The post Forget the Eurasia share price, I’ve set my sights on FTSE 100 faller Glencore! appeared first on The Motley Fool UK.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool
Written By: The Motley Fool
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