Royal Nickel Corp. RNKLF

Sage advise from a Royal Gold investor

[CatamaranFund]

Sage advice & valuable perspective worth sharing from ceo.ca contributor;
@lexcon All this conspiracy talk about lending shares to shorters and it being a driving force for narrative and the obvious “manipulation” anyone can exert on a chat room is so funny to read. First off, seems like many people don’t even understand what shorting is and how it works. It is a valid LEGAL and ETHICAL trading technique that has been around for ages. When someone thinks a companies shares are overvalued and they think it will go lower for fundamental reasons they can go to a broker and borrow shares, legally issued and held shares, that they then sell to a buyer. That buyer is actually supporting the company shares, since the person going short is selling shares to someone who is long. That is a positive thing for the SP initially in most cases. Then, when/if share price does decline the person that sold short enters the market and purchases shares to return to the broker to repay the loan of shares. This also is a positive for the SP since it sets a floor under the shares, when the share price is in decline and other purchasers are less inclined to buy shares the people that are “short” often times comprise a much needed pool of ready buyers (at the price point they have targeted to rebuy). Now, today shorters have a bad image and there are some real reasons they have that negative image. Up until recent times shares could not be shorted in a falling market, if price was dropping (red) they couldn’t sell short, they could only sell shares they had borrowed on a positive price movement or at the very least a level price point. That “up-tick rule” was revoked and now people (but more likely large trading houses, hedge funds and algo’s) can and do continue to sell short into a declining SP. That just keeps the price dropping under the added pressure to whatever natural downward pressure there may be. Also, there is illegal “naked shorting” taking place. That is when an entity DOES NOT borrow shares, they simply enter a sales order to sell shares they don’t own (think about that, can any of the retail people here place a sell order for shares not in their account? Probably not, I know my broker would flag the order and say you don’t have that number of shares to sell…it’s happened to me before when I inadvertently entered a number of shares larger than the number I held in my account). So, WHO actually are the naked shorters? It has to be some company/fund/house that has the ability to enter orders directly into the market….they are in essence counterfeiting shares since the are selling shares that don’t exist…so, if there was not a ready market of people willing to allow their shares to be borrowed it seems that the potential for more abuse of naked shorting would be more likely as well. In that sense the lenders of shares are offering a limitation against naked shorting. Now, Eric Sprott has mentioned his efforts to rectify the shorting problem (and there is a problem)…the problem is NOT legal shorting of borrowed shares (I would be surprised if ES himself is not making supplemental income himself from shares of his being lent to shorters too)…the problem is the lack of the uptick rule (listen to his interview on the subject) and the issue of algo’s run amok and naked shorting. Those specific issues need to be addressed. So, now lets address the foolishness that is being spread that for some reason I have become negative on RNC shares simply to drive the borrowing of my shares…that’s hilarious. First off, I doubt anyone sophisticated enough to be shorting the shares are getting their perspective of the chances of the shares dropping in price from a chat room, second, even though I did make some supplemental income over the last year from interest payments on lending shares (and RNC paid some juicy interest) it only amounted to about 6% of my overall gains over the past year so it’s not a huge factor, I certainly would have made more money had RNC shares gone up on a steady basis than any income from lending. Then there is this fact they convieniently overlook, yes I was a vocal supporter of RNC for a long time, I was a blue sky bull for a period of time….but my shares of RNC were on loan since November 2018, over a year ago. The bulk of the borrowing of my shares occurred during the months of Nov 2018 thru about late April 2019. And all during that time I was a staunch defender of the company and a positive poster. So lending shares had nothing to do with my “negative” attitude. Since that time, the primary time my RNC shares were borrowed was from about a week prior to the announced BD in august (when they borrowed 100% of the shares) until the day the BD closed, when they returned 89% of the shares to cover….the funny thing is, every.single.time. the BD/PP were ready to occur my shares got borrowed a week to ten days prior to the announcement, they remained on loan until the placement closed, then many to most were returned….that tells two things. SOMEONE, the underwriters, the houses they lined up, who knows, someone KNEW about the placements ahead of time and shorted the shares before they could drop. And second, they were able to replace the shares using the low cost shares they bought in the placement. THAT is a problem. And I sent two emails to Rob and Mark Selby that told them the action that was happening, and they didn’t say a thing about it. Here is another thought, part of the reason I was able to hold onto a significant sized position through all the ups and downs of the share price over the past year is because the revenue the interest payment brought in helped offset the average cost basis enough it made it easier to remain long. Without the interest revenue coming in, in all probability I would have sold those same shares that had been borrowed into the market, to offload them myself to reduce position size and exposure….and since I wasn’t short I would not necessarily have been a built in buyer like the short borrower was. I have no say so over what gets borrowed, its pure supply and demand. The broker can borrow any shares that are in demand at any time and rhen lend them out. I have had probably 10-12 different companies shares get loaned out over the past year. Sometimes for a week or two, seldom for more than three…with the exception of RNC, which always seemed to have a demand for the shares due to the management of the company. I have had shares borrowed of other companies I am a solid long on and never had it cause me to make negative comments on those companies….why not? If the working thesis is that I’m a negative person because I want my shares loaned, why does getting other shares borrowed not make me post negatively?? Because those companies haven’t undergone a slow steady change in the direction of the company. A year ago, there were 477 FD shares of RNC on the market, today there are 677 FD shares, a dilution of 200k shares. A year ago they had hit the FDV lode, and they stopped trying to mine it out, its been over a year and as far as we know for sure they “probably” are stopeing that section now, finally. Yes they stopped to drill the WF and north A zone, but they could have mined the FDV from oct 2018 until the drills started turning in late Jan 2019, then again from May 2019 thru today…but they didn’t, they wanted to come up with a game plan…and what is the plan? Why it is to extract 100% of the vein. Well, what was stopping them from extracting 100% of the vein prior to now? Then we have the internal power struggle in the management…it looked like MS wanted to promote the mine and find a buyer, at one time we were told to look for a sale by September 2019 (Crux interview) but PH and BOD wanted to make this a mine, so they bought a mill….and a large package of low grade resources…and today they are almost breaking even mining and milling low grade open pit and 3 g/t bulk from B-H to produce 8k per month. Yes that is steady production, good for about 96-100k per year, like many other juniors with better balance sheets and less shares so that is not a huge positive factor for me. But, but, the high grade coarse gold is going to add to that…yes it will. They found 5k+ coarse gold in sept and it looks like they have maybe processed 2.5k of it during oct/nov (500 oz oct, 2k nov)…because the mill is incapable of processing the coarse gold efficiently. SO at 2k per month process of coarse gold that would add 24k of UHG coarse to the 96k bulk and we have a 120k annual producer. Not a unique situation, plenty of others in the market like it. No, my change of perspective on the company has zero to do with lending of my shares…it is entirely due to the way the prospect of the company has evolved over the past 12 months. I still hold some shares, maybe 40-45% of my peak position, and will ride them for a couple quarters to see if the market is happy with the financial performance of this junior in that time. If it grows and the shares grow in value I’ll be glad to still be owning them, if it doesn’t then its time to sell the remaining shares and move on from what at one time was something that had potential.
https://ceo.ca/rnx%20dd?9ec40c4ca053

Cheers to the patient investor