Thanks for the positive response, folks. Half expected to cop a smacking!
Mk1977, I don't purport to be a better investor than Mike King; I don't know anything about him, but there are a few observations I'd make on his piece.
Rainfall: There are divided opinions on whether the climate is radicalising in Australia (and the world) or not. What we definitely do know is that we have been in a La Nina pattern the last couple of years, which broke the long drought caused by the previous El Nino pattern. Most global warming theory supporters say that Australia will actually become more drought prone, not wetter. They do predict more extreme weather, but this includes longer droughts. So firstly, the current La Nina pattern will give way to a different pattern with time, and secondly, if global warming is indeed a long term phenomenon then rainfall is likely to return to its long term mean and in fact below it.
Writing off Jabiluka: Foolish in my opinion. Never bet against human greed. Some might imagine that aboriginal people don't care about huge sums of money because of cultural factors, but I believe that is a utopian view. Look at what has happened with the American Indians, eventually dominating the gambling licensing industry in the US when given an oppportunity for big bucks. Money doesn't always talk, but don't bet against it. I suspect that a small number of elders are wielding most of the power in the negotiations with ERA and that as the population in the area evolves with traditional elders passing away, things will change. I'm no soothsayer, I just think that's the bet that history would recommend.
High AUD hurting ERA: Absolutely, which is another reason why now is a better time to be getting into the stock. Would you rather buy when the AUD is substantially below its long term median price vs the greenback, with a presumably much higher share price and significant currency risk, or buy when the AUD is way above its long term median on the trade weighted index and the share price is low? This is my whole problem with brokers by the way, they always want to put you into stocks where everything is rosy and the price is high. Negatives that are likely to change over time are the investors best friend.
No mention whatsoever of exploration: Mike King inexplicably fails to mention the planned major exploration programme ERA have planned. Forty million buys a fair bit of exploration, and everything I've read about the area suggests that it is highly prospective. Not sure why he's cynical about that programme, but considering the amount of capital raised I don't see any reason to doubt that it will happen. He appears to be treating the exploration money as a writeoff. Very premature.
One could mount the argument for substandard management, considering the destruction of wealth that has occurred, albeit partly due to external factors. I have no problem with that viewpoint and I have great sympathy for long term holders. I do believe though that one has to draw a distinction between the past and the present. Buying ERA this year is not the same as buying five years ago, even though management may be similar. Five years ago you were paying multiples more for the stock, no doubt there was some 'management premium'. Now there is almost certainly a big 'management discount'.
When you have bad management in a large company it's rather more likely to get better than get worse, as apart from large shareholder agitation (perhaps not a factor I'm afraid, with Rio the major holder) there is the simple fact of more room on the upside than the downside. Similar reason as to why low cap speculative stocks can sometimes be great buys if you are patient; they all have a maximum 100% downside, but some have thousands of percent upside. The closer to hopeless that management get, the cheaper the stock gets and the more potential for major improvement in management. (Crooked management is another matter of course, and hopefully not relevant to this discussion.) Again I reiterate that I feel for long term holders, but for new investors in the stock, bad management may have contributed to you getting a bargain. The jury is, of course, still out on that!
ERA Price at posting:
$1.76 Sentiment: LT Buy Disclosure: Held
(20min delay)