$POTRF: SOPerior Fertilizer Corp. — 2020 Tote Board

“It is wise not to treat something that is very very unlikely as if it were impossible.” -Nigel Turner

This is a live example of the current tote for POTRF. Null values do not imply that additional price-points are improbable. Rather, we do not have historical precedents on which to run our tote algorithms.

Uranium: The Downside, Probabilistically Speaking

PREAMBLE


First and foremost, we are traders. We play the odds. Sometimes the odds aren’t good, but even poor odds at a fair price can be profitable. And at the end of the day, that’s what matters to us: making money. But in order to do that, one must preserve one’s independence. That means being willing to hold an unpopular opinion and to not be beholden. Being beholden to peers or to the management of the companies in which one invests, unduly colors judgement to the extent that the odds are no longer perceived in the cold, calculating light in which they must be regarded.

Someday, the odds for long trades in uranium stocks will improve. We look forward to that day. In the meantime, we are happy to hold the unpopular opinion that the bear lives and breathes, even if it costs us ‘friendships.’

ADDENDUM


Probabilities are a sport for me and for my business partner, my beautiful wife Tina. We have developed rigorous buy and sell standards that leverage probabilities, but there is one sector on which we broke every rule and subverted every standard, buying against all odds, when all indicators pointed to trades with an exceptionally low probability of success: uranium.

Every last one of our uranium holdings represents a bad bet. We were suckers. Bad bets at good prices are forgivable, but we can’t even claim to have bought any uranium names, save for Forsys, at a good price.

My mantra has always been ‘lower for longer,’ but I never imagined that I’d still be saying lower for longer 3 years after taking our initial stake in Goviex. I’m still, gulp, saying it.

We have never participated in a sector with bleaker prospects — prospects that grow dimmer daily. Yet we plan to hold our uranium book in spite of the odds against it, as we are allocated in a way that guarantees that we can not be annihilated in the worst of downturns.

However, this may not be the case for all of you. Are you allocated in a way that will enable you to weather a fierce acceleration of the uranium bear market? Will you live to fight another day if your portfolio’s uranium constituents drop by 50%? 75%? Are you hedged?

So here it is: I can’t think of a single thing about the sector to which one may look forward and consequently, I am officially a bear, albeit a long/hedged bear. I see uranium oozing out of every sewer drain and sidewalk crack. Every dish is served with a side of it. I find it behind my son’s ears when he’s taking a bath. There’s just too goddamn much of it. And until there isn’t, the high probability setups belong to the shorts.

$DYLLF : Deep Yellow to Fast Track Tumas PFS

The impressive results from the [Scoping] Study clearly demonstrate advancing this project to the pre-feasibility study stage is justified, appreciating that uranium prices are expected to improve strongly over the next two to three years. With this approach, the Company has a significant opportunity to continue prudently advancing the Tumas palaeochannel deposits in a cost effective and timely manner and assist in achieving our aim of establishing Deep Yellow as a tier-one uranium producer.

John Borshoff, “Positive Scoping Study Delivers Pre-Feasibility Study Go-Ahead”

內業 : The Way, Way Back, 350–300 BCE

The concept of “philosophical Taoism” is, to a large extent, a modern fiction, which has been developed and embraced by people around the world for specific and identifiable social, intellectual, and historical reasons.

Russell Kirkland, “Varieties of Taoism in Ancient China

Neiye

Translated by Bruce R. Linnell

Always : the essence of creatures –
This then makes them live.
Below, it gives birth to the five grains;
Above, it acts to arrange the stars.
When it flows in the space between heaven and earth
We call them ghosts and spirits.
When it collects in the center of the breast of people,
We call them sages.

Thus the Qi of the citizens :
Is it bright?
As though ascending to heaven.
Is it dark and quiet?
As though entering into an abyss.
Is it wide and spacious?
As though residing in the ocean.
Is it close[A]?
As though residing in oneself.

Thus this Qi –
Can not be brought to rest by using force,
But can be calmed by using De.
Can not be summoned by using your voice,
But can be made welcome by using your intent.

When you can respectfully* maintain it, and never lose it,
This is called developed De.
When De develops, and wisdom* arises,
The bounty of the ten thousand creatures is attained.

(more…)

Rosenberg on Gold

Gold is inversely correlated with either near zero rates, zero rates, or negative rates which makes it an ideal investment. Mark Twain coined the phrase “Lies, damned lies, and statistics”. But the thing about charts is that they don’t lie. Gold went through a long-term, multi-year basing period. Now, it has broken out and the chart looks fantastic. Also, gold is no country’s liability. For example, in the United States M2 growth is running at double digits. So when you compare the new supply of gold against the supply of money coming into the system from Central Banks, to me it’s a very clear cut case that you want to have very high exposure to bullion.

David Rosenberg, “Gold is an Ideal Investment” themarket.ch

$UURAF : Ucore Rare Metals — Independent Economic Analysis

Present Estimated Bokan Basket Price Case$75.85/kg.
Flagship ProjectBokan Mountain
Ownership100%
Mineral Resources (M&I)23,752,458 kg REOs
Shares Outstanding365,120,000
Market Cap$59,405,024
Average Annual Production2,051,349 kg
LoM11 Years
Payable REOs22,564,836 kg
True All-in Cost (TAIC) $51.73/kg.
Gross Revenue$1,711,629,598
Royalty($34,232,592)
Gross Income$1,677,397,006
Total Operating Costs($636,000,000)
Operating Profit$1,041,397,006
Total Capital Costs($221,000,000)
Income Taxes($275,970,207)
Net Income$544,426,799
Net Profit Margin32%
Absolute Cost Structure (ACS)68%
MTQ Score0.5
True Value$1.49/sh.
Cash Flow Multiple5x
Net Average Annual Cash Flow$49,478,538
Future Market Cap$247,392,688
Market Cap Growth316%
Target$0.68/sh.

Notes: All Values in U.S. Dollars

FCM 2020 BOKAN MOUNTAIN BASKET PRICE CASE BREAKDOWN
UpdatedHeavy Rare Earth MetalsLast 2020 Price ($/kg)TOTAL PRODUCTION (kg)
17-Jan-20Europium Oxide (Eu₂O₃)$30.6275,537
17-Jan-20Gadolinium Oxide (Gd₂O₃)$23.69778,320
17-Jan-20Terbium Oxide (Tb₄O₇)$513.87133,350
17 -Jan-20Dysprosium Oxide (Dy₂O₃)$248.57889,121
17-Jan-20Erbium Oxide (Er₂O₃)$22.96388,222
17 -Jan-20Yttrium Oxide (Y₂O₃)$2.924,782,634
   
UpdatedLight Rare Earth MetalsLast 2020 Price ($/kg) 
17 -Jan-20Lanthanum Oxide (La₂O₃)$1.712,009,622
17 -Jan-20Cerium Oxide (CeO₂)$1.686,096,947
17 -Jan-20Praseodymium Oxide (Pr₂O₃)$48.10758,162
17 -Jan-20Didymium Oxide (Nd₂O₃Pr₂O₃)$40.742,940,686
17 -Jan-20Neodymium Oxide (Nd₂O₃)$42.422,940,686
17 -Jan-20Samarium Oxide (Sm₂O₃)$1.82771,549

It’s important to keep in mind that we performed our Ucore analysis at prevailing rare earth prices (Table), so its 100%-owned Bokan Mountain Project is viable today with an admirable 32% Net Profit Margin.

Ucore’s IBAS bid partnership with high performance alloy supplier Materion is a plus, too.

How does Ucore compare to Texas Mineral Resources?

Upon completion of a bankable feasibility study, TMRC’s stake in Round Top will be reduced by 70%. Its stake will be further reduced by an additional 10% following a one-time $3M payment by U.S. Rare Earths. We can’t justify holding shares for an extended period in a company with a future stake of but 20% in its core asset. If management is looking for an exit, we are, too.

UPDATE, 19 January 2020

Readers* were kind enough to point out that a few pieces of data in our analysis were dated, including share count, which has grown by 29% since our first analysis was completed on 30 September 2019. This has had the effect of reducing our True Value and Target by 25%.

In addition, our Lanthanum Oxide price was printed incorrectly, which has altered both our estimated prevailing basket price and Gross Revenue.

*Not all readers were kind nor gracious. You would think they had a paying subscription to the site and were owed something.

GOLD:SPX Racing Form, 1975-2020

The Gold:SPX has successfully retraced 78.6% of its 2000-2011 move, and appears to be moments away from completing its post parade…

Bettors, it’s almost post time!

I’ve got Equinox and Victoria down for an Exacta in the first race and thoroughbred banker First Majestic to Win and quarter horse Fortuna to Place in the second, though we like to keep tabs on Endeavour, which tends to find its legs in the backstretch. I’m a sucker for long-shots so I plan to stick around late for the third race and place a big bet on colt Aurcana to Win in its maiden race with bug boy Brian Briggs in the saddle.

Incorrigible mudlark Bear Creek is another favorite. We think his post parade shenanigans with lead ponies, tendency to bolt in the homestretch and graceful nodding across the finish line are classy traits.

$TSRMF : Treasury Metals — Independent Economic Analysis

Updated, 14 January 2020

Long-Term Price Case$1,700/oz. Au & $24/oz. Ag
Flagship ProjectGoliath
Ownership100%
Mineral Resources (Measured & Indicated)1,174,668 AuEq ozs.
Shares Outstanding159,570,255
Market Cap$33,749,109
Average Annual Production90,100 AuEq ozs.
Recovery95.5%
Payable Product1,171,294 AuEq ozs.
LoM13 years
True All-in Cost (TAIC) $1,001/oz.
Gross Revenue$1,991,199,800
Smelting & Refining($5,376,239)
Total Operating Costs($622,637,915)
EBITDA$1,363,185,646
Taxes($340,796,412)
Total Capital Costs ($203,581,223)
Net Income$818,808,011
Net Profit Margin41%
Absolute Cost Structure (ACS)59%
MTQ Score0.7
True Value $5.13/sh.
True Value Discount96%
Cash Flow Multiple10x
Average Net Annual Cash Flow62,679,900
Future Market Cap629,799,000
Future Market Cap Growth1,766%
Target$3.95/sh.

Notes: All Values in U.S. Dollars

Were Goliath in production at $1,400/oz. Au, it would earn roughly 34 cents on every dollar it collects. From there, Net Profit Margins improve incrementally as the fundamental gold picture improves. An Absolute Cost Structure (ACS) of 59%* makes this possible. What is more, the ACS declines by ~11% as gold prices move from $1,400 to $1,700. It is this factor which underpins the improvement in Net Profit Margins.

We have learned to shy away from enterprises (catastrophes?) that cannot manage to rein in their ACS, but Treasury Metals is an example of a future gold producer that makes the cut.

*You’ll see plenty of ballyhooed Before-Tax Cost Structures below 50%, but they aren’t an accurate representation of reality. If you can find a gold producer with an ACS under 70%, you may have stumbled upon a real gem, though abiding by non-GAAP in your analysis won’t help you find gems. Which is to say, one must find new methodologies that enable one to push beyond AISC & All-in Costs in pursuit of extended valuation factors such as True All-in Cost and Absolute Cost Structure.