Alio Gold, with Mark Backens at the helm, has done more soul-searching than is common for a small producer. As a result, it has rapidly been transformed into an enterprise with few illusions and a no-nonsense mission.
At Fahy Capital Management, we typically invest in the deposit first and management second, but the reverse is true with Alio Gold. With this particular investment, we are primarily investors in Mark Backens, as he has made the hard choices required to bolster shareholder confidence.
From the bold sale of non-core assets and the negotiation of a smart financing package with Sprott to the recent lease agreement with Caterpillar and the swift development of a critical Phase II leach pad, Backens has attacked Florida Canyon with a laudable all-or-nothing attitude. He has spearheaded a right-sized capital spending program that is effecting material results for shareholders. He has transitioned San Francisco to residual leach, while pursuing a potential monetization of the mine. Meanwhile, spending at Ana Paula has been reduced to holding costs until the asset is monetized or a JV** is in place.
In closing, as we are confident that Alio Gold will boost production by up to 50% at Florida Canyon in 2020 and grow mineral inventory through brown field exploration, we have boosted our stake for the 3rd time in 24 months.
*For the time-being, we have included an approximately 12,500 ozs. of residual leach output from San Francisco in our valuation model. This will taper down over time.
**We think a JV is the ideal path forward for Ana Paula, an asset on which we have spent a lot of research hours, as well as one that we believe will prove of value to shareholders in the latter half of the decade.
Like substantially de-risked Prairie Creek, NorZinc’s 1.3B lbs. of ZnEq in Newfoundland is not currently reflected in the company’s market cap, further deepening the special value proposition open to patient, risk-tolerant speculators.
Net Profit Margin is slim and Absolute Cost Structure is bad but scale works nonetheless for Tower Hill Mines, a fact that hasn’t gone unnoticed by the likes of John Paulson and Electrum. We became shareholders on 31 December 2019.
Firstly, the present informal arrangement that SOPerior has struck with Lippo Group-backed Tamra Mining in Milford is unnecessarily opaque. Secondly, the dearth of updates from the company over the last year regarding pilot plant debt financing is shameful. In light of these factors alone, SOPerior’s recent down-rating is justified.
Getting into bed with the Lippo Group, firstly, is a generally bad idea, as Lippo is known for its rapacious business practices. If financing is secured by SOPerior over the next handful of quarters, one must pray that it isn’t from Lippo. That financing would likely result in a management appointment, total financial control, bankruptcy and the acquisition of Blawn Mountain by Bill Clinton campaign fraudster James Riady’s Lippo China Resources (LCR).
This isn’t to suggest that SOPerior is in any way presently in cahoots with Lippo or any of its affiliates, but Riady is on the prowl in the neighborhood and has already demonstrated suction in Milford and environs.
Regarding SOPerior’s proposed pilot plant: LCR currently owns the plant’s debt, which it bought in 2016 at a hefty 31% discount, and which gave it a 28% equity interest in the Waterloo-owned plant (LCR subsidiary!), which would clearly enable LCR to exert undue and likely detrimental influence on SOPerior. One can surmise that it was the intention of LCR to lure SOPerior into the same trap in which CS Mining found itself ensnared in 2011.
We are of the earnest opinion that it is of paramount importance for SOPerior’s Board to reconsider its proposed partnership with LCR, presently masquerading in Milford as Tamra Mining. We believe there are safer means by which to secure debt financing, and that Blawn Mountain — a true national resource treasure — should remain out of the reach of foreign hands.
We won’t pay up for Cameco, as we still think the downside for the stock is substantial, especially in light of unabated Japanese uranium stockpile sales since August.
While the Japanese flood the market at and below spot, these are the levels we are watching in Cameco:
Weak buying at $7.67, mild support at $6.35 and thin air below to $4.21. We are tentative buyers from $6.35 and committed buyers from $4.21.
Needless to say, this also implies that the bulk of our uranium book will be smashed to smithereens once window dressing season has concluded, which is our secret hope, as we would love to add aggressively 50-75% lower in our holdings. After all, it’s all crap and we love to be alone with the infernal stink of shit companies that are likely to get shittier, poop scoopers that we are.
Over the last 12 months I have dropped 50 lbs. in order to conduct a strength-to-weight ratio ‘experiment’ (read: stay alive). My hope was to drop up to 50 lbs. while boosting the ratio.
Strength, interestingly, is now improving at a measurably higher rate in all lifts than was measured at the previous max body weight. More importantly, I am no longer suffering from sleep apnea and dreaming of the afterlife.
Overall Strength-to-Weight Ratio improvement:
I also am experimenting with a daily 7g dose of diferuloylmethane, as I am of the opinion that it functions as a BAT proliferator, NF-B inhibitor and myostatin down-regulator, resulting in enhanced hypertrophy.