RE:skyrocketing earnings > deeply undervalued assetsGullible, I share your frusterations however I disagree with your conclusions. Saying that, your arguement is logical and I always fully respect someones need or will to liquidate position. I also commend you for taking a small loss and moving on. Too many investors lack that disipline.
I am not sure where the concept of NSU selling out for a 50% premium to the current low came from. Its as if its a set reality on this board. From my experience, and I have experience on that side of the fence, market prices sometimes initiate a transaction, but valuations are based on assets and a model for discounted cashflow plus some premium. This is the reasoning why sometimes you see takeover premiums of 20% and sometimes 200%. A bid, hostile or not, tends to bring a share price a lot closer to a companies value relative to its peers assets.
Saying that, there are a lot of unknowns in this scenerio that if a bid were to arrive today, I am not sure what the premium would be ( LZ Timok plus other properties) but I suggest NSU might receive a higher valuation for RMC than they paid given the work done on the property ( some that has been disclosed and some not ) and that it would be an open book to the mining world unlike when NSU came in and stole it from LUN. Many other comapnies didn't even know what was happening and the Timok opportunity is very rare. The war room would be opened up. Bisha would also be sold for a valuation far above its current market. The truth is the copper issue is far overblown by the market and that the asset is one of the more attractive high grade producing mines in the world irrespective of its geography. It is not large enough to get the majors excited, but its a very attractive asset for mid tier producers and throws off 100m cashflow with significant upside potential.
I agree that mining has its fair share of risk, but every industry does. You are correct, a commodity entity has its risks and it all comes down to price, cost, and size. That is one of the most attractive realities of NSU. As someone else stated " grade is king" and that has allowed Bisha to generate over a billion dollars in cashflow during some difficult mining years. Their assets moving forward are similar in nature which derisks the play because it makes them one of the lowest cost players out there. Outside of mining, yes companies have a different set of risks. Your brand and patents can go a long way in protecting your intellectual properity, but markets change as well. The popular brand today is not always the popular brand tomorrow, and the rate on innovation in our society as way of making patents worth very little in short periods of time. Every industry has its own set of risks that need to be hedged by a good management team.
My experience is the market is a swinging pendulum, rarely correct, always one way or the other. Mining stocks tend to be more volatile than many which is why you must take that into account regarding how and when you buy them. Saying that, over the longer term, the market becomes pretty efficient at its valuation becomes more appartent through drilling and development. The market values assets based on discounted cash flow projection and although a great earnings earnings report can move a stock short term, as soon as its released, its yesterdays news. Mining stocks become exciting as the asset is proven up, the market values based on discounted future cash flow change rapidly. The drill bit can create a lot of valuation very quickly.
I am heavily invested in this story. I believe in it and the people driving the ship. I have invested in resource plays for many years and have certain rules that I follow that ensure my success in the long term. I can handle the volatility and have my eye on the end game. Saying that, I never knock someone from walking away. Everyone has their own risk levels and parameters that they establish through their own investing history. GLTA