Musings on Investing

China: Exponential Growth to Continue

Condor Resources (CN)

Many people get figuratively lost in the ghost cities of China. Others refuse to take China seriously, for they cannot stop worrying about its debts. Then there are those who cannot even contemplate that a non-democratic country can do well. For them, China is all smoke and mirrors. They completely ignore the fact that so much of what we consume today comes from China.

China has grown exponentially over the last three decades, doing a lot of good to its own people and those outside it. Its currency has been among the best-performing currencies in the world.

My view is that China will continue to grow–for now exponentially–and will avoid the middle-income trap, on its path to becoming a developed country:

On investments…

While it is understandable why people like branded products for consumption, this shouldn’t be the case when investing. We invest to make money, not to consume. I prefer to buy a Dell or an HP as my laptop but see no reason to invest in these companies, for the upside they offer is often limited. When investing, I am not after sexy-names, but simple positive differentials between the values I get and the prices I pay.

Chakana Copper has done a decent job at their not-yet-owned Soledad project in Peru. Chakana is a C$45 million company. Eyes are on Chakana, but most investors–as is usually the case–have forgotten to look at Condor Resources (CN; C$0.06), which actually owns Soledad, and will retain 2% NSR royalty (of which 1% can be bought by Chakana for US$2 million) on not just the project but also on the area of influence, which includes the two new, adjoining projects Chakana has acquired.

CN is a mere C$6 million company. Apart from its ownership in the royalty, CN will get paid cash by Chakana, which will be more than CN’s current market capitalization.

Apart from Soledad, CN has several other projects.

CN has far too many shares and warrants. 8 million warrants with an exercise price of C$0.075 expire later this year. They have more than 25 million options and warrants with an average exercise price of ~C$0.10. This will keep CN’s share price under pressure. Hence I see no reason to chase CN, but also I see limited downside risk at its current share price of C$0.06.

Warm regards,

Jayant Bhandari

 

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