Team LME
I had a chance to review LME’s FAQ from yesterday and share the following thoughts for those who may be asking “Why continue to own this stock” or “Why buy this stock”.
It seems to me that there are three positive scenarios that could play out in the next 12 months for the firm.
In each of the positive scenarios outlined below the stock price goes up from the current level. I offer some negative scenarios to consider as well.
How much of an increase / decrease in each scenario is anyone’s guess. My estimates are by by nature quite conservative to both the upside and downside.
Scenario 1
Current leadership and the board are able to secure a buyer based on the data they have in hand now - no further 43-101 type reports are required.
A sale is announced at a buy out price somewhere above the current trading price - my view is that the transaction will be above $2.00 per share.
I have no facts to validate that sale number since there has been no capital market standard reporting released on the properties GEO’s to date other than the waste pile from an old mine.
Keep in mind that the properties aggregate geological data is in LME’s computerized black box and has not yet been made available to the public. In this scenario, someone who has seen inside it, have the geologists and bankers to fully validate it, is satisfied with the data and is willing to make an binding offer.
Probability of this scenario occuring: LOW
Scenario 2
Current LME leadership and the board determine that a capital market verified type report i.e. Mineral Resource Estimate (MRE) is required on the property, either due to a hard requirement from a buyer as part of a deal, or they determine that no party will step forward with an offer without a completed MRE on some portion of the property.
In this two part scenario, the MRE plus the LME black box data would add up to enough of a fact set for a purchaser to make an offer. Again, the sale price I envision is somewhere above $2.00 per share.
In the second part of this scenario, assuming that the MRE is at least “middle of the road” good news, and focuses on a small portion of the Ishkoday property, it is fair to expect that the stock price will increase as leadership has finally produced something that capital markets will accept as fact about the property.
This MRE release could lead to initiation of analyst coverage and more interest in the property from retail and institutional investors who are “old school” 43-101 devotees.
Depending on the exact area of the MRE that has been reported on, and a possible LME commitment to updating the initial MRE by expanding the reporting zone going forward, the stock price should line up with with other similar properties with completed MRE’s without a sale of the property takimg place.
Probability of either parts of this scenario occuring: HIGH
Scenario 3
Current leadership determines that the existing board is not qualified to move the sale forward on their own and outside expertise is brought in to assist with the asset disposition strategy. Mining banker experts are brought in to help in the marketing of the property.
This news would signal that current leadership is serious about a disposition and I expect that the stock price would increase on the expectation that the parties hired are able to complete the task they were hired to perform.
I see this scenario adding 25% to 50% to the current stock price.
Probability of this scenario occuring: MEDIUM
Of course it is only fair to ask what scenarios I think could push the stock price down?
Negative Scenario 1
A poor showing at the upcoming AGM.
Should Cynthia come off to investors as arrogant, stubborn and evasive when answering basic questions from investors she risks alienating retail investors, will test the financial patience of friends and family and risk losing future tax driven investors.
Many people have been supporting her for a long time but they note that she and the current board failed to deliver a sale of the property in 2022 - despite a great deal of LME communication about an impending transaction and the same failure may be on the record by the time the 2023 AGM takes place.
If she insists on providing transparency that is nothing more than her “trust my black box data” message and doubles down in her faith in the current board to complete the sale going forward with no timeline for it’s completion, coupled with an unwillingness to change the leadership team, the stock price may fall to half it's current value.
This scenario seems unlikely to me at present as she acknowledged in the FAQ that she is open to an MRE and open to adding outside expertise should the need arise.
Probability of this scenario occuring: LOW
Negative Scenario 2
Since all of the leadership teams mining expertise rests solely on Cynthia - none of the current board members have any geological or mining industry expertise - the company is very highly reliant on her alone.
Since she may be over 60 years old, a health scare or loss of her life could result in a share price drop. This is true with any small company but becomes more of a risk management concern when key leaders pass certain ages.
Probability of this scenario occuring: LOW
In closing, I think the case to own and buy LME stock is more positive than ever before.
Open to comments and suggestions as usual. Have I missed some possible scenario either to the positive or negative?
I remain long.
Time and Money