My Two Cents
All,
We have seen a recent increase in the number of bearish posters. I personally welcome all points of view as long as they are conveyed with proper decorum.
What we have here is a SPEC PLAY, pure and simple. SPEC as in SPECULATIVE! Anyone who is uncomfortable with the RISK involved shouldn't be here. Try Canada Savings Bonds.
Is there DOWNSIDE RISK in KBG? Definitely. No one can argue that. There are no guarantees in life. There are NO GUARANTEES that the gold discovered on KBG properties to date will lead to an economical ore body.
Is there UPSIDE POTENTIAL in KBG? Definitely. No one can argue that either. With properties so close to past or present mines there is a distinct POSSIBILITY that KBG will come up with one (or more) economical ore bodies.
So it is all about balance. Risk vs. Reward.
I like KBG because of:
1. Their Business Plan. They have multiple properties in established gold producing areas. It is a lot cheaper to explore where the infrastructure is in place than out in the middle of nowhere. It is even cheaper when you own your own drill rigs and other equipment. The economics of a ore body change when you are close to existing mines. You don't need an ore body that is large enough to justify a mine, mill, refinery, infrastructure... You need to justify a mine and a road or rail link to your neighbour. Or JV/Sell the asset and let your neighbour worry about mining it.
2. The obvious effort that Rick and his team are putting into this. As I attempted to illustrate in my Friday post, these guys are very active. I much prefer having my money with guys who are "working it" rather than the guys sitting in their highrise Vancouver offices admiring the view of the Harbour and Northshore Mountains (I've been taken on that ride once too often).
3. I am bullish on Gold.
Do I have concerns? Yes.
1. Some of their past JV's haven't worked out but hopefully they will have better luck in the future.
2. This is very early stage stuff. They are going to make mistakes, everyone does. So far, IMHO, they have a good track record of correcting problems and moving on.
3. The insider trading is high but not extreme, IMO. On Howe Street I think they call it "Distribution". Call it what you like, Insiders are taking some money off the table. At this point I don't have a problem with the numbers but I will continue to monitor insider transactions (as you should do with any stock you own or are thinking of buying). I would be more concerned if the stock was rising on light volume and dropping on heavy volume but it is doing the opposite. The 5 heaviest volume days 8/27, 9/23, 11/10, 11/13, & 11/14 were all up days. The dips after the run ups have been on lighter volume.
4. The Gold market has been very much in our favour, up to now, but this won't last forever.
So what do you do with your risk capital? Some people put it in a jar for their kids college fund. Some buy GICs. Some buy Spec Stocks. Some buy lottery tickets. Some buy the National Enquiror. I choose to put SOME of my risk capital into KBG. I don't expect everyone to. Do your own DD and make your own decisions.
GLTA
Herve