short-sellers target engineers, page-5

As Michael West reported last fortnight “If Boart Longyear was a mate down at the pub, he’d be the sort of mate who’d hit you up for a few dollars, just to tide him over. Then he’d nip down to the TAB, punt the lot on the fourth at Doomben and be back in no time at all with another hard-luck story”.

Now BLY has gone down to Cash Converters and pawned, lock stock and barrel, everything they have to pay off their credit card debt (US bank revolver loan account) so that they go down to the TAB (mining and exploration drilling industry) for that last punt on the nose of good old Number 9 (future equity investment into the mining and exploration industry through new IPO’s and listed capital raisings)!!!

But, here’s the thing that we all don’t know; how long is it before “Number 9” comes in, and in what shape will BLY be when that pony comes in? I certainly don’t know (but I do know the industry).

BLY has only swapped one debt for another. Though, this one has more interest and tighter terms. As we are yet to see how the first restructure has gone (roll on December), its financial position remains basically the same, and operating within the same conditions before their financial restructure. I did on 16/05/13 08:10 @ 82.5c post “Debt refinancing. Has to be done if the continued slide in turnover is maintained. Obliviously, before they lose totally support of their lenders and any breaches in their lending agreements.” I know see that my CR call (posted at the same time) was premature, and that the board have done this the right way around. However, my CR call still stands because now they have no alternative other than this option for future funds, should the industry remain the same for any length of time. BLY is yet to show the market at what level of utilisation are they able to make money or even just to break-even.

Here’s my simple take on why I advise the people I do, to alter their position but to remain mainly short (for the time being, but not to the same levels we did from earlier). Equity to mining and exploration has not yet returned, therefore BLY are going to operating to very tight in-house economic constraints. BLY has always been from my personal experience, and extremely expensive (cost per drilled meter) company to contract. There is currently an oversupply of equipment and others can operate at lesser margins to win work. There are plenty of sharp, professional operators running the same equipment and SMS (Safety Management Systems) as BLY. So I see BLY being one of the last companies to see any benefit to a return to equity to the industry (there will always be a place for BLY on certain jobs, but not enough of them to sustain on). I do not see this Cash Converters loan lasting until a return of levels of utilisation, where BLY do make money. This loan is a noose around the operating systems of BLY.

I have said it before, where there is no sun, people will always find some i.e. Director share purchases. Now obviously done, to show to whoever the counter lady was at Cash Converters to get as much as they could for their goods on Pawn!!

This company is a basket case and the worst is yet to come. Shorting is a risk and I have little doubt that we’ll take a hit (from what direction I do not know). So far it has been a far more rewarding information based strategy than the buy and holders, the oversolders, the message shooters and the thumbs up crowd and I’ll continue.

Good luck to you all.