The week has not began in any respect properly for Eurasia Mining (LSE: EUA). The share price is down 44% in early buying and selling, as I write on Monday morning.

What’s going on – and will this sudden price collapse provide a shopping for alternative for my portfolio?

Ongoing deal with exiting Russia

The corporate issued an announcement immediately (10 June) concerning a current leap within the Eurasia Mining share price. Certainly, even after the autumn immediately, the shares are properly above the place they stood on the finish of Could (and virtually quadruple the place they had been 5 years in the past!)

The assertion mentioned the corporate notes the current sharp share price improve, together with on-line hypothesis concerning a key feasibility research for its Monchetundra challenge in Russia. However, as Eurasia factors out, that research was accomplished final summer season. Since then, the positioning has been maintained however there have been no “material developments” regarding the research.

The assertion concludes: “The primary focus of the Company remains the possible sale of its Russian assets although, as ever, there can be no guarantee that Eurasia will enter into binding agreements regarding the sale”.

Uncommon price motion a possible signal of frothiness

The form of apparently unfounded surge adopted by sudden crash we’ve seen within the Eurasia Mining share price over the previous 10 days is a purple flag to me as an investor.

In some unspecified time in the future, many share costs turn out to be considerably decoupled from their enterprise fundamentals. However when a price swings by this a lot, primarily on account of hearsay, it may be an indication that speculators not traders have charged in – generally solely to then cost out fairly quick.

That threat is normally elevated in smaller firms with fewer accessible shares accessible out there. Eurasia Mining is a penny share and its present market capitalisation is just a bit over £50m.

Deal with the enterprise prospects

By itself although, that doesn’t essentially hassle me. As a long-term investor, I deal with the funding case for a given enterprise. Sudden swings like that seen within the Eurasia Mining share price might even give me a shopping for alternative for a share I like.

Within the case oF Eurasia although, I had no plans to purchase in Could or through the price surge earlier this month – and I’ve not modified my view.

The constantly lossmaking firm has seen its previously modest income tumble, to simply £0.1m final yr. In opposition to these financials, the market capitalisation appears excessive to me.

As with many small mining firms, the valuation displays how traders understand the enterprise’s potential, not its present efficiency.

Its Russian property might but end up to generate lots of money when bought. However, for now, with regards to western firms offloading property, Russia appears like a purchaser’s not a vendor’s market. As the corporate reiterated immediately, there isn’t any assure a deal will likely be struck to promote its property there.