Yeah, yeah, but how much is it worth?It's a moving target. Every time I do a valuation they come out with a bombshell press release about a new discovery, extension, economic study, or transaction that materially improves the firm's position, and I am told it is obsolete even before the ink is dry. The way I figure, I can put a price on the assets - that is, if I stretch my imagination and remember my scientific notation - but what price can I put on the management? I have in my employ one of the great globetrotting entrepreneurs, a first-rate back office team doing an underappreciated job of keeping the wheels of this juggernaut well oiled, and a geology department which has turned up several once-in-a-century mineral discoveries in a matter of a few years. So tell me, how do I do an NPV on that?
In 1965 when Berkshire Hathaway was at 7 and had a book value of 10, you might have said, it's trading below book, and buy on the cheap. In reality, the principal assets were a textile mill in Massachusetts, a white elephant and a vestige of a dying industry. And they proved not quite worthless, but in fact worth considerably less than zero, as a sinkhole for capital for many years to come. Really, Berkshire was a bet on a rising star in finance. And in the grand scheme of things, did it matter whether you bought it for 0.9x book, or 1.2x book? If you don't know which way the next wiggle is going to go, but you know the value is growing all the time, what is the rational thing to do?
So what is harder, operating a mine in the Congo, or running a textile mill in post-industrial north-eastern United States, in an industry producing an increasingly commoditised product with no brand recognition, cutthroat competition, a unionised labour force, and low-cost imports mercilessly crushing the domestic sector into rapid extinction?
According to a Chinese proverb, "the safest place appears most dangerous." Call me naive or a Pollyanna, but I never thought the Congo was risky. In fact, it might be one of the best places in the world to be operating a mine. This is a country that needs the jobs, tax revenue and investments in infrastructure. The people can be materially uplifted by development. And those who hold the strings can decide where the money goes. No red tape. To mine eye, the glass is seven-eighths full. Countries which emerge from decades of war, famine, and genocide tend not to want more of it. And it takes time, but they often come out stronger. Think Germany or Japan. Russia, China, or South-East Asia. I would like to see the Congo become rich...very rich. In an economic renaissance with higher education and technology, lasting democracy and peace. It will take time. South Africa is further along this road. And it has come a long way from slavery, colonialism, and Apartheid. Mineral exploitation is an enormous opportunity to alleviate poverty. And these people deserve it.
Westerners hold sacred property rights and the rule of law, which are essentially virtues of civilisation going back to the Protestant Reformation (the people of the book) and even as far back as Roman Times. The former harnesses the power of incentive. (The heel of the gardener is the best fertiliser.) The latter allowed fairness and the confidence to plan upon an objective rule. They helped villages grow into great empires. Legal experts say the Congolese mining code is self-contradictory. So they are ironing out the details. US and Canadian corporate law is quite complex and even subjective in its application too. What matters is, are we working together here? Do we have an understanding? Is everybody benefitting?
As for leadership, the people at the top are there because they fought to get there, and they want, and will have, a big slice of the pie. It's the same everywhere. With great power comes great responsibility. If the chairman can put a spell on a room full of investment bankers and fund managers, if he can pit Inco against Falconbridge in a battle to be the premier nickel miner with the trophy assets, in an auction with 10-digit bid increments, if he can swing deals with Kinross, RTZ, the Chinese and Japanese governments, do you think maybe he can put himself in the shoes of an African president and all his ministers, share his vision with them, and describe the plan in such a way that they can all get behind it?
As far as the people are concerned, observe the principle that those who treat others with respect and dignity, and give more than they take, will be for ever welcome. And that is the only way to proceed. There is so much treasure here that the green-eyed monster cannot even fathom. So I think everybody is going to come together to harness the power of these assets, for the betterment of all involved, and most importantly for the good of the Congolese people. This is a win-win-win situation.
I work awfully hard to find underappreciated equities, as well as superior businesses with honest and capable management. I must have looked at a thousand resource companies if I looked at one. And the conclusion I have drawn is this: if you want to be in the mineral exploration business, these are the guys and gals you want to be with. I really don't think of shares as pieces of paper - or electrons, as the case may be today - to serve as trading inventory. I think of myself as a partner in a business. And in my considered opinion, this is truly a great business.
So, right or wrong, if you want my stock certificates, you're going to have to pry them from my cold dead hand. Because I would like to see automated solar-powered mines, clean air in China, schools in Africa, and flying electric cars. In for a farthing, in for a golden guinea.