Musings on Investing

Avoid Commodity Price Speculation

Maritime Resources (MAE)

I have never met anyone who succeeds in speculating in commodities. Most commodity speculators come to believe in the bright future of a certain commodity using oft-repeated slogans and soundbites entering a sort of trance and calling themselves contrarians while staying in the emotional “safety” of their echo chamber. And then the situation gets worse, much worse. They then “invest” in mining companies for leverage. This is a very dangerous cocktail, something that is responsible for so many people losing their homes and making the mining industry a loss-making sector of the economy.

I spoke on the above at the recently held Vancouver Resource Investment Conference (VRIC). Here is a discussion, I had with Fergus Hodgson on the same theme:

On investments…

Maritime Resources (MAE; C$0.09) has done a pre-feasibility study (PFS) on a small, high-grade deposit they have in Newfoundland. Last year, Anaconda Mining made a failed attempt to takeover MAE. In the same area as that of MAE is another company, Rambler Metals. According to their PFS, MAE is expected to use the process plant of Rambler Metals.

A few months back, Sprott Capital Partners and Dundee Resources financed MAE at C$0.11 per unit. Since then the index of early-stage mining companies has gone up nicely, but MAE has stagnated.

MAE has a market capitalization of C$12 million. It has C$2.5 million in cash. Based on my calculations there is an easy 50% upside in owning MAE. There is also enough evidence that the project can be looked at differently than it has been in the PFS, to improve the economics. Moreover, the company changed its management last week, an event that went unnoticed by the market. The new management will likely find it easier to give another look at a merger with Anaconda. Perhaps they should also invite Rambler to the negotiation table.

The combined market capitalization of the above three companies is less than C$100 million. There should be a lot of synergies—operational, scheduling, tax-related, and in terms of financing required for the projects—in combining the three companies. Just the savings in administrative expenses will be huge. If such a merger happens, there is extra money to be made in owning MAE.

On other matters…

In my view, the US is lucky to have Trump as its President. The US is one of the best countries in the world, but there are forces at play—given democracy and the resulting rapid rise of culturally Marxist values in the institutions—that means that Trump can succeed in only delaying the degradation of the US. As Doug Casey says “America” is an idea whose home has so far been the US.

Next month, I will be speaking at PDAC, on how East Asia is the future of humanity. This is not just about economic growth, which I see continuing to happen, but more importantly about how the idea of America and the western civilization is setting its roots in East Asia.

Warm regards,

Jayant Bhandari

Associate: Rajni Bala

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