Musings on Investing

Demonetization of the Indian Currency

Treasury Metals (TML)

On 8th November 2016, India suddenly removed 86% of its currency from circulation. The decision had been made by the Prime Minister without taking into confidence his economic adviser, the Finance Minister or the head of the Reserve Bank of India. It was a naive and destructive step. He then imposed a new indirect taxation, which has created massive chaos among businesses. He also imposed a national ID card, on a society that is largely illiterate. These are nothing but his attempts to convert India into a Zimbabwe-kind of tyranny. I wrote seventeen articles on Acting Man to report on a weekly basis what was going on. At the recently concluded Mines & Money show in Hong Kong, I summarized the key points:

On investments…

Treasury Metals (TML; C$0.425) has fallen quite a bit. Recently, a financing that they closed in December 2017 has come free-trading, and some options have expired, which has also resulted in some insider selling. With gold price being soft, what I consider to be a bad share-structure of TML has put added selling pressure.

TML has 123 million shares outstanding, 17 million warrants (with average an exercise price of C$0.74) and 6 million options (with an average exercise price of C$0.54). Exercise prices of warrants/options often dampen how much the share price can go up. TML also has a long-term debt. Despite that the debt is in friendly hands, the market–quite rightly–does not like venture companies to be indebted.

Despite the above, which have likely brought TML to its current lows, there is an upside in owning TML. Based on the PEA on its Goliath project, it will produce a million ounces of gold and two million ounces of silver. Updated resources and pre-feasibility is expected over the next few months. The project is in Ontario. For me, property-rights respecting jurisdiction is extremely important.

At C$0.425, TML is cheap and acquirers must be eyeing TML. Would the current management of TML let the company go?

TML is short of cash and I dislike writing about companies that might do a financing soon, for financing are often done at a discount and with a further issue of warrants. That said, given the value that I see in TML, I am happy to accumulate slowly, on any weakness.

One of the most talked-about investors in the mining space is Rick Rule. I recall a life-changing day more than ten years back when I was sitting in the audience of what is now known as Sprott Natural Resource Symposium. Several speakers did not turn up that day and Mr Rule filled up those spots. He talked at great length about his investment philosophy and value-investing. For me as a new analyst, his talks that day put me on track and taught me how to fish.

I run a yearly libertarian/philosophy seminar, Capitalism & Morality, in Vancouver every year. The next one will be on 21st July 2018, immediately after the end of Sprott’s conference. Here is Albert Lu and Mr Rule talking about both the events:

If you register for Capitalism & Morality, you can enjoy a 10% discount on the registration of Sprott’s conference.

Warm regards,

Jayant Bhandari


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