Horse TradingMany have made some excellent points regarding risk. It is rational to look carefully at risk because it is obvious that if all goes well it will go very well indeed, and therefore it is worthwhile to consider possible adverse outcomes, however implausible. It is a commonly held and oft cited precept that political risk in the natural resource industry resides in developing countries and not in developed countries. While there is some merit to the idea of well defined statute, and checks and balances of the courts (summarised as "rule of law"), I have always found this perceived binary risk skew to be an inaccurate relfexion of reality. Although much improved, mining activity always has at least some adverse impact on the environment and society. Since First World countries are reasonably prosperous, many, including those in power and able to affect policy, take the view that it is an unnecessary evil, a barbarous relic. Not in my back yard. New mining projects are treated with suspicion and it often takes a great deal of work to persuade locals, native groups, NGOs, environmentalists, voters, politicians and regulators that a project has merit well beyond its potential for damage. As a result, the cost of studies, permitting, and wining and dining the various veto-holders, as well as the time required to permit can escalate without bound, or at least enough to obliterate the net present value, conservatively calculated, of the project as a capital investment. Add to this the fact that in the developed world the economic characteristics of the mineralisation of most proposed projects are marginal, and it is rare that a truly economic discovery is made. I perceive plenty of risk in almost every exploration- or development-stage (non-producing) mining project in every developed country. Now, take a country in which the majority of citizens live in poverty, which has weak institutions, a volatile political climate, poorly established legal framework and a great deal of power vested in a single individual who wields it whimsically and destructively for his own enrichment, glorification and preservation of power. A country which has vast reserves of mineral resources of every kind, truly an embarrassment of riches, yet no other significant means of generating export income. I would say that this is a country where these resources are going to be exploited come hell or high water. The only questions is who will benefit. The fact that foreign capital and expertise is needed for beneficiation is no guarantee that it will always be welcome, because a dictatorship may not act even in its short-term or long-term best interest. However, expropriation is something which is strategically sound after the point that all capital has been sunk, near the point of production, which is a ways off. (Even then, sustaining and expansion capital is required.) But there is plenty of time between now and then for metal prices and market sentiment to turn. Expropriation is a binary outcome, perhaps predictable with enough information, so probabilities may have limited applicability. But from a frequentist perspective, it would be interesting to know what proportion of projects has been outright stolen. Certainly, there have been some high profile ones in the DRC, but I would postulate that the overall percentage is still low. Furthermore, in the case of First Quantum, which some have described as a total loss, the company was able to recover its sunk cost (albeit years later) with the help of political pressure and international courts. Certainly, it is still a worry. Chinese state partners provide some comfort in this respect, as I imagine they wield a good deal of soft power in Kinshasa, not quite calling the shots, but influencing. One could take the opposite view that having two bullies at the table is potentially more dangerous, but in any case the mining expertise and capital is much needed, and if the company continues to deliver on the exploration side I can imagine Zijin being reasonably fair. The objective of Zijin is to buy out the mine, and the Chairman is a skilful negotiator. The idea of conflict copper is interesting, but I would wager that China abroad will be much less concerned with the perception that it is upholding human rights than in furthering its economic agenda. They will buy that copper which they have already half paid for in capital, so long as they can physically get it out of the country. If this means implementing a coup d'etat then only US Intelligence may stop them. Now just looking at the balance sheet, it strikes me as a rare sight for a mining exploration company to have nearly USD 500 million in cash or near-cash, net of all liabilities. Given the limited capital requirement ex-Zijin contribution and the potential to monetise mineral assets, one could look at Kamoa as a giant royalty with exploration potential, aside from the pile of cash sitting in a vault. Given the other two projects, which are quite good as well, and the enormous pile of cash, I would say that the worst possible political outcome is not necessarily even a total loss, unless it occurs after going all in on investment in construction, which is a ways off. Looking at the relentless progress made by this company in advancing the projects over the past several years, good communication, and a high level of professionalism which is scarce among junior mining companies, I would describe this as one of the few companies in the industry which truly create value. Warren Buffett said "time is the friend of the wonderful business." In this light, having come to terms with lamentations about not buying more than a whole lot of shares in the 50 cent range, I am still a buyer and a holder. Some clever traders will nimbly divest and reload down at 60 cents, but given that the potential upside is quite a bit more than 25 cents, I take a page out of Jesse Livermore's book: "It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine-that is, they made no real money out of it. Men who can both be right and sit tight are uncommon."