Musings on Investing

Over-automation Increases Inefficiencies

Orla Mining (OLA.V)

Every person and society has an optimal level at which they benefit the most from technology. If they automate more, the cost of living and doing business goes up.

Almost three months back, I bought a Delhi-London ticket using an Indian e-commerce company. Money left my bank account, but I never got the ticket. So far, no one knows where the money went. In India’s thoroughly convoluted and corrupt system where the concept of service does not exist, I don’t even know who to blame. I have had to send someone to the bank every single day to ensure that the matter does fall through the cracks.

I will of course never again use an Indian e-commerce company. For the same reason, I refuse to own a credit card and, as much as I can, avoid use of debit card in India.

What works in India is cash.

What about forced use of digital money that Indian Prime Minister Narendra Modi has shoved down the throats of India’s citizens after he demonetized 86% of the monetary value of currency in circulation?

Over the last few months, it has become amply clear that electronic money has significantly increased the cost of doing business in India, hampering growth and forcing businesses to close.

By default, cash is rapidly coming back into existence, something that I will explore in more details in my next article for Acting Man.

Here is a recently discussion on the same subject:

As I have written earlier, western institutions when forced on these alien, poor, backward countries merely make them worse off. The problem is that Western governments, the World Bank, the IMF and even the locals in these poor countries think that they need to impose more Western institutions to deal with increased problems. This would have been perfectly fine as long as Western people also ran these societies, but except for HK, Singapore and Dubai there aren’t many societies that have such open-mindedness.

On investments…

Orla Mining (OLA; $1.30) is in the process of acquiring Camino Rojo project in Mexico from Goldcorp. Assuming there are no major legal hiccups, I see this as a very accretive acquisition. More than $300 million have been spent on the project. A PEA was done on the project in 2009. Even after adjusting for increased capital and operating costs, the net value that the project will have brought to OLA is likely as much as the current market capitalization of the company. I wouldn’t be surprised if there is a 100% upside in owning OLA, assuming the acquisition closes.

OLA has a very impressive board of Directors; and the CEO is Marc Prefontaine. Marc was earlier the CEO of Grayd Resources, where he assembled a land package in Mexico that ultimately became the La India Project. He grew Grayd from a small exploration company with a market capitalization of $5 million to a successful development-stage company culminating with its 2011 acquisition by Agnico Eagle for $275 million.

Finally, please be aware that most of the seats for the next Capitalism & Morality seminar have been sold. Please register now to avoid missing out.

Warm regards,

Jayant Bhandari

Associate: Rajni Bala



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