Post by
Shylock on Sep 17, 2014 3:20pm
Update and Current Thoughts
Dear Board:
Sorry for disappearing yesterday. I had intended to comment on the Jay Taylor interview with Ivan Bebek but it was one of those "O'Sullivan's Corollary to Murphy's Law" days and I got preoccupied.
For those who did not still but want to hear the interview on Taylor's site, it can be found here:
https://www.voiceamerica.com/episode/80408/winning-investment-strategies-for-these-troubled-times
Look for the Bebek interview from yesterday. His segment starts at precisely 12:09 into the recording.
As for the interview itself, it was much as expected: Bebek did a 180 from previous public comments and instead of singing the praises of Cayden, now cast a light of doubt on it. What if . . . this problem or that problem happened? What if it never became a gold mine? What if there was no gold? Stuff like that. At the same time, he extolled the virtues of the "shareholders enjoying (yeah, he actually used that word!) the "lack of risk"' in the loving hands of AEM. He attempted to be convincing of the virtues (endless) of AEM as if it ever got to $100 per share, that would equate to CYD at $6.30 per share (Canadian dollars)! Whoopee! He did his dead-level best to convince listeners that everyone will be a winner but perhaps less of a winner. (That is for sure.) Why be a big winner when you can be a little winner, right?
He basically repudiated the virtues of this junior explorer, CYD, as being "too risky" whereas the major producer (and there is some doubt as to whether AEM even IS a major producer like Goldcorp or Newmont) was more of a sure bet. Since the AEM deal just "came along" out of the blue, he considered it was more prudent to jump on it than to continue to watch the price of CYD shares climb (sarcasm intended).
It was clear that we CYD shareholders would be totally dependent upon AEM. He stated that was a good thing, less risky, and he was going to hold all his AEM shares. "A bird in the hand" logic. The problem is that if we had wanted the assurance of safety, or should I say the perception of safety, we would nave bought a "major producer" in the first place, n'est-ce pas?
I am at this point reminded of something Benjamin Franklin said in 1755, Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety. Let's substitute the word "Liberty" with the word "Profit."
At the end of the interview, one of Jay's subscribers posed the question, which he read to Bebek, as to why this company had been sold for a pittance and as to whether it had been shopped around. Bebek, despite his many glowing commentaries of the virtues of Cayden in previous commentaries, stated the price was actually a good price and he did not answer whether it had been "shopped around" for a better price as he considered the AEM price good. He immediately reverted to the "What if" scenarios of risk again, so as to throw doubt upon the minds of shareholders that they were actually better off in AEM's grasp. He said that all CYD really had was "potential." Well, what does any junior explorer really have but potential? But how many junior explorers are looking at a district, not a single mine, and what is the probability that gold would be found in commercial quantities at NONE of these mines, particularly in light of the superb drill core results and with more to come out??? This is where he struggled to make his case but Jay could not come out and rebut them for obvious reasons but I sensed he wanted to.
Think about this: if CYD has all of a sudden become so risky, why does Sean Boyd want to make a $200,000,000.00 gamble? Does anyone really believe AEM does not KNOW there is gold in "them thar hills?!"
At the end of the day, it is the same old story. Management gets the gold, the shareholders get the shaft. This is why so many investors have given up on the manipulated gold sector which is full of so many self-serving individuals, IMHO, as Bebek. He got the opportunity for a quick cash-out and simply took it. That is my opinion. The shareholders get hauled along for the ride for a fraction of what this company could have brought and therefore are the real losers. Unless . . . Unless there is a competing bid. Now, most do not expect that, and I will admit the possibility is slim, but the synergies which Goldcorp would enjoy with Cayden properties are considerable. This is the only way I see of upping the returns to shareholders. A single bidder basically has a monopoly on price paid.
It is disingenuous of Bebek to state, in effect, that "we are in good hands with Allstate (AEM) because they are a major and a sure thing." They are not a sure thing. CYD's share price held much more upside promise relatively than any major. Bebek himself said that AEM would have to be at $100 for CYD to be at $6.30. CYD was already knocking on the door of $4 and went up with each positive drill core. How long would it take to get to $6? Against that backdrop, how long would it take, will it take, for AEM to get to $100? Yesterday, CYD rose 2.35%. AEM rose 0.87%.
So, what to do? I can't tell you all what to do but this is what I am going to do. I am going to hold my CYD shares as they will rise disproportionately on up days, higer percentage-wise than AEM. If a competing bid comes along, the price will be anticipated to rise, perhaps significantly. Remember, a competing bid may not come along until very, very close to the finish. Despite remonstrations to the contrary, Goldcorp IMO would be the most likely competing suitor.
If no competing suitor emerges, depending what the prices of CYD and AEM are, if CYD is relatively substantially higher than AEM, I will sell before the deal closes. If they are at equilibrium, I will hold to receive the AEM shares as it will cut down on admistrative, tax, etc. hassles. If we are in a rising gold price environment, AEM definitely will rise. It is not a bad company, it just does not have the leverage of a junior explorer. I think we all realize that. No risk, no reward. If I am still holding CYD at the time of the shareholder vote part of this circus, I will DEFINITELY vote "NO" and would encourage all shareholders to do likewise. Further, I will never again invest in any company with which Bebek is affiliated because I do not like being sold down the river. Him first, everyone else second. Leopards do not change their spots.
Someone has mentioned Merrex Gold here on this board as a company worth looking at. I would put thumbs down on this one. Two reasons: they have two properties, zinc in Cape Breton, NS and gold in Mali, West Africa. I have no interest in zinc in this economy and Nova Scotia in my experience (I grew up in Cape Breton) does not have a good record, or should I say "attitude," of being "successfully friendly" towards industry judging by the province's many failures and secondly the Ebola scourge in West Africa is getting worse. It may get so bad that Mali is enveloped as well. This will be the death blow to any miner there as there will be no one to work the project. My opinion only but an informed one. If you are not concerned by these points, then have at it. It is too bad we live in such difficult and dangerous times but such is life.
https://www.ghana.gov.gh/index.php/2012-02-08-08-32-47/general-news/6159-ghana-niger-mali-borders-prone-to-ebola-spread
With the PM sector becoming so snake-infested and with continuing crushing manipulation, I am personally going to move an increasing portion of my investments to an entirely different sector, one out of favor now but not for long, especially in light of what is going on in Africa and Russia (Ebola and war, respectively). That sector is the ag sector. After all, we all have to eat. The company which interests me and in which I hold a number of shares is Arianne Phosphates which is located in Quebec, one of the most mining-friendly jurisdictions in the world. This company has stumbled upon what is appearing to become the largest, purest deposit of phosphates in the world. Phosphates are necessary to increase crop yields. The former sources of these phosphates were Tunisia, Morocco and Russia. As Ebola becomes worse, North Africa is going to be distanced and the supply from Russia is questionable. Moreover, the Quebec project, Lac a Paul, has far purer phosphates which require less purifying and therefore lower cost. Transportation costs are far lower for obvious reasons as well. The management thus far has been stellar. The province of Quebec has been very supportive and is actually defraying the cost of building out this huge property (see more below on this facet). The infrastructure is taking shape. The true size of the mine has not yet been fully deliineated but it is now estimated to be a 50 year mine and possibly may become a 100 year mine because the deposit is so large. This has obvoius economic ramifications for the province and that is why Quebec is economically supportive. First Nations sentiment is supportive and discussions are ongoing. Permitting is yet to be done but no problems are forseen to my knowledge. The share price now is around a buck and will rise as the project is further de-risked and the price of commercial phosphates rises. It is now on the low end of the scale.
To be clear, this company is not yet a producer but plans to become one, probably with a JV partner. Right now it is occupied with contnued delineation of the resource and issues related to commencing the building of the mine.
As in all commodities, prices run in cycles. This in my view makes it a good time to buy and my Cayden money, all other things considered, will no doubt find its way into a larger stake in DAN, which is its symbol.
I know this does not sound very glamorous. CYD was glamorous. Phosphates are a necessity and glamor does not pay bills. Fair returns on money invested do. I believe this company is forthright and solid or else I would not have taken a stake in it.
I would suggest those with an interest check this one out. You may be glad you did. As a legal disclaimer, I am not responsible for any losses you may or could incur in this or any other company. Consult with your qualified financial consultant (if you can find one!).
All opinions expressed in this note are my own.
GLTA