Musings on Investing

More on Emerging Markets

Anfield Gold (ANF.V)

In the recent past, I have written quite a bit about my rather negative views on the so-called emerging markets. “Nationalism” and religious fanaticism are getting out of hand in many of these countries.

These days in India you can be killed for the “crime” of transporting cows, and you can be beaten up and charged for treason for not standing up during the legally-required playing of national anthem at the start of each movie in cinema halls.

The situation in most of these backward societies is similar.

The situation in South Africa continues to worsen. Based on the latest news, black ownership in mining companies must now be 30% instead of the previous 26%. Moreover this ownership must be maintained even if the blacks decide to sell their shares. Apart from continuing to destroy the economy, all these have created unprecedented moral problems in South Africa. Moreover, most of Africa and many poor countries around the world look up to South Africa as an example to emulate.

Malaysia and Turkey, among the better examples of “emerging markets,” are becoming increasingly fundamentalist.

Put together, apart from China and a couple of small countries, I see no hope from these so-called emerging markets.

Here is my latest conversation with Maurice Jackson on the subject:

Degradation of these so-called emerging markets is almost impossible to stop. Corruption—particularly cultural corruption—is multi-layered, entrenched and extremely convoluted in these poor societies, something that I reflect on in the linked article.

Despite the above, I would invest in these countries if I saw value on a risk-adjusted basis.

One company that I have followed in the past and have taken renewed interest in is Anfield Gold (ANF.V; $0.45).

ANF recently came out with new resources for their Coringa project that were significantly lower than the market’s expectations. ANF crashed as a result. My view is that, despite lower resources, this project will likely still have a positive NPV, albeit as a much smaller operation.

ANF is expected to release feasibility report on Coringa in July 2017.

Permitting is a key challenge, and while they await this there is a significant cash burn rate on-site with the existing staffing levels and ongoing pre-construction work. If they get the permit and can lay the foundations before the start of the rainy reason, it is entirely likely that the project can be in production later next year.

The current market capitalization is equivalent to the value of the cash in the treasury and receivables. You are getting the project mostly for free.

Ross Beaty, serially successful entrepreneur, owns 23% of ANF.

In the past, Ross Beatty’s shell-companies have traded for as much as the market capitalization of ANF. Now, I would not invest for this reason, but if I got this upside for free, I have no problems with it.

Finally, don’t forget to register for the next gathering of philosophers. Use the linked page for details and to register.

Warm regards,

Jayant Bhandari

Associate: Rajni Bala



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