I decided to kill two birds with one stone and answer two readers persistent emails that asked:
1- If you could buy only one of your Grandich Client companies, which one would it be?
2- The second question was about such company and why don’t they have much “skin in the game”?
The answer to #1 was tough because by far, most of what’s left of my portfolio is spread among just three clients/companies:
- Geologix Explorations
- Oromin Explorations
- Sunridge Gold
Obviously the answer to #1 question is among those three companies.
GIX has a well-advanced project that the company continues to state it has a multiple avenues it hopes it can travel to take the project to production. With its current market cap less than 5% of its NAV, there appears to be little downside risk from here (but never ever think a .12 stock can’t go to .06, which is still a 50% loss).
OLE has become a belated takeover target but the chances of them pulling something out of the hat to make the current bid from TGZ worth a lot more seems nil. I do want to suggest listening to the TGZ annual meeting tomorrow to see if TGZ speaks in a way that could suggest they have entertained OLE management claim in their Directors circular of wanting to talk to TGZ about a higher bid. But in the end, I feel my OLE holdings (which according to the OLE circular, I owned more share than all management except Chet) will become TGZ shares and hope for the best.
SGC in recent days has become my single largest holdings (don’t get too exciting as doing similar moves in recent years has cost me plenty). I’ve done so for two key reasons:
- They have the most attractive portfolio of projects that can bring the fastest and highest returns to a major or majors and a source that has been very alert to companies going into play feels Asian-based metals and mining companies are all over the part of the world SGC is located and SGC is dirt cheap for them.
- Management has gone quiet on this front and while I’m not trying to read into something that’s not there to begin with, I’ve known some of the SGC players for well more than a decade and I’m speculating I’ve learn to read their voices (I also do windows).
I also believe neighbor Nevsun Resources (who some key players at SGC were once part of and I believe remains friends with) would IMHO not let SGC go out cheap. They have more than enough cash and/or equity to acquire SGC and in the end, I’m speculating SGC management would have a higher comfort level with NSU management versus an Asian-based firm – all things being equal.
We found the .20 level resistance yesterday (I bought 500k more shares yesterday) and it should be since the 200-Day M.A. sits there. I would limit any buying with a .20 limit but also wouldn’t try much below there on the belief whether or not a possible deal is coming, the share price is heading much higher. The answer to the natural typical follow-up question is “what do you think its worth?”. Some where between 3x-5x its current price.
The second question about skin in the game is legit. Unfortunately, when it comes to juniors, most historically don’t have much skin in the game because:
- The principles involved are usually not very wealthy themselves
- Feel they are putting the elbows to the ground in their job and the options they receive are their leverage to success
- May have skin in game but do it in ways that they don’t have to report it regulatory wise (offshore, in other names, companies, etc)
In SGC case, I’ve known management for years and their work level is as high as it can be no matter how many shares one may own or not. That’s why I’m not concern about a supposed lack of incentive to do their best.