RE: MD&A is outReading these efforts of management discussing and analysing the results of their actions [or should that be inaction] is not informative, but it certainly is entertaining. I certainly get the feeling that the writers and proof readers of these reports have a background in promotion and not financial analysis or mining. As we move from one report to the next, there has been some improvement in the obvious copy of the prior report - there are far fewer errors in dates than used to be the case.
I also note that in the last couple of reports the convoluted explanation of stock based compensation has been discontinued. This seems to coincide with the fact that during this period, there are now three of the Dream Team on a fixed monthly fee and expense allowance arrangement that's a cash outlay, not stock based compensation. The direct cash cost of retaining three members of the Dream Team, including an allowance for their vehicles is now $152,100 per quarter. Another member picked up $34,219 in fees last quarter, and a retiring Dream Teamer got paid $100, 000 for "transition services". It cost $30,000 [paid to a "related party"] to provide the office space required to house this Dream Team. Of course there are also the other general and administrative expenses required to support such an active group of corporate whizzes.
Although it might be presumed that with "inhouse" executive and legal talent worth $282,000 for Q3, there would be little need for outside talent - but this is not the case. It cost another $278,173 in professional fees, and $134,633 to relate with investors.
So cutting through all the rhetoric involving management's assessment of their performance, let's look at what was achieved in the quarter in relation to the $838,000 expended to administer this conglomerate.
On the financial side, the income was $110,000, this was more than offset by a $448,000 loss in value of marketable securities. That measure of performance indicates that a comprehensive loss of $1.2 million was achieved in Q3.
Of course there are other activities that should be considered. The major asset of this conglomerate is mineral properties. A portion of the $838,00 administration costs might be attributed to overseeing $485,000 in expenditure on the major asset. This measurement of performance might seem a bit out of whack to some observers - a comment on another forum was "However when management fees and expenses make up more than 50% of the drilling expense - RUN!" In Q3 management fees and expenses were 213% of drilling expenses - I guess the author on the other forum might conclude - RUN FASTER!
There are other considerations to be considered. Management includes a section on capital management, which I take to mean the approaches taken to preserve and enhance shareholder value. So let's have a look at the balance sheet and anything that was achieved in adding to the value of the company's assets.
-The major asset, in terms of cost is the mineral properties - $28 million in cost that may or may not provide a return to the company. In Q3, despite an indication from management of a NI43-101 update on $19 million Langmuir costs during the quarter, there was no progress in that effort. Since quarter end, there has been no comment on when the update that was expected in early May can now be expected. The economic viability report originally promised for release in 2008 seems as far away after Q3, as it was after Q2.
-Management decided some time ago, to allocate $6 million of the company treasury to a 4% loan to an undisclosed private company. The Q3 changes in this company asset was that unpaid interest brought the loan total to $6.4 million. The value of the collateral security declined by almost $1 million (13%) in the quarter, and the collateral value did not cover the loan amount at the end of Q3.
-Management also decided some time ago to get involved in an investment strategy in a penny stock, which management decided was poorly managed. During Q3, the outcome of ISM efforts to change management was determined. Although there is no mention of the embarrassing failure of ISM efforts, there is disclosure that the penny stock was trading $375,000 over cost at the end of the quarter, and that the legal fees expended on this failed adventure totalled $200,000 in Q3. Overall results in Q3 showed a $451,000 loss of value in the marketable securities portfolio managed by ISM. At the end of the quarter ISM continues to hold 13 million shares in the company that ISM management feels is poorly managed.
I find it difficult to find anything positive in the Q3 results achieved by management, in my opinion dismal is not a strong enough word to describe the achievements. Of course, three months is not long enough to evaluate management activities - but in this ISM's case, I'd come to a similar conclusion after reviewing the past 60 months of operations.
In spite of forays into equity investment in other public companies and low rate, long term loans to private companies, this company is pinning it's hopes on mining exploration. The continuing failure to demonstrate that their $28 million investment should not be written down as a failed project has to be cause for concern by shareholders. Another concern is that the author[s] and proof readers, given responsibility for issuing the Management Discussion and Analysis disclosure, don't seem to have a basic knowledge of mining terminology and/or disclosure regulations. They continue to claim that ISM has "indicated nickel mineralization reserves" and "economic nickel mineralization", when they know, or should know, that such statements are misleading and in contravention of disclosure regulations. An executive team of a public mining corporation receiving $600,000 per annum should be capable of avoiding this sort of thing.