Musings on Investing

The India-China Border Issue

TMAC Resources, etc.

A few weeks back, China intruded into the Indian territory and killed twenty Indian soldiers. While it seems that China has been the culprit, the situation is far more complex than what India has made it out to be. And while India can proudly claim to be a non-expansionary nation, history does not bear that out. India is a product of the accumulation of three hundred or so kingdoms and principalities, with many forced into the union. Linked in the following image are my thoughts on the current crisis:

On Investments

As a value investor, I have often made mistakes by investing in what turned out to be value-traps. Here is one such case. Jubilee Gold Exploration (JUB) has a very large portfolio of projects and royalties. It has a market capitalization of a mere $4 million. The CEO owns>90% shares. I am likely the second-largest shareholder. The reason I bought JUB many years back is that I saw a huge value in the company. In my view, there is a 1,000% upside.

Among the many royalties that JUB owns is a 2.5% NSR royalty on the Springpole project owned by First Mining Gold, a royalty that could easily be worth $30 million. JUB has been trying to go private. As a step towards it, their fairness opinion consultant, William Troup of Alcanex Ltd., gives a mere $0.098 million as the value to this royalty, a small fraction of its market value. One day, I will probably have to sort this out in the court, but will all this wait and a court hassle have been worth it?

Here is the valuation chart from page-7 of JUB’s latest MDA, and note Springpole NSR royalty 8th in the list:

Finally, I have been a buyer of TMAC Resources (TMR; C$1.40). The government has been delaying making a decision on whether to allow it to be acquired by Shandong Gold, a Chinese company. I am ambivalent about the outcome. If the merger goes ahead, I will get C$1.75 for each share, a 25% profit. If the merger does not go ahead, I don’t see much downside risk. TMR will then likely get released from the shackles of the cash offer and take-off as other gold development-stage mining companies have. There is no hurry to buy TMR, as a decision will likely take time to come out.

Warm regards,

Jayant Bhandari

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