Hi Benz and fellow old timers ( Altzheimers ?), Very thoughtful...

Hi Benz and fellow old timers ( Altzheimers ?),

Very thoughtful posts . God save the King Duck. Long may we live supported by the hidden gems in the crown he leaves behind.

I got a few mentions and hope everyone does their own research to ensure my thoughts are not misguided. Investing in mining companies is as high risk as equity investing can get but the lure is the big wins that can be made if you invest wisely when Good Assets are going for a song when the chips are down.

Worth noting where Australia's two richest people have made their fortunes getting in early and cheaply.

A few things I've learnt along the journey give me confidence not to search for .... well.... a different pond in which to paddle with the duck.

The pond we are in holds good promise if my past plays are any sort of indication.

For those interested in what leads me to that thought.

Mines:

Have you ever wondered why a buried bomb that is designed to seriously maim anyone who comes in contact with it is called a Mine.

Debt.

Debt is fine if you have a very reliable recurring income stream that delivers a lot more free cash flow than the expected interest bill.

Debt is a road to potential ruin if you borrow to plant a crop that needs the grace of god to be successful or to dig a big hole in ground that will invariably have hidden booby traps and the only cash flow coming is a way down the track and relies on a lot of untested assumptions.


Mistakes.

Investing is a "mine field" (that mine word keeps cropping up ) but the more you loose the better you get as an investor. Only, however, if you are able to learn along the way and are not into continuing to make the same mistakes.

(1) My first mistake was thinking that the market knew what was going on and if the price was falling bad news was coming and vice versa.

(2) My second mistake was searching for research reports and listening to what they were predicting and naively thinking that brokers were on top of what was going on.

(3) My third mistake was thinking that the people who made the investment decisions for big investments houses were driven by far superior knowledge than that which I possessed.

How wrong I was.

(1) Share prices fall because of short term pressure on profits, actual or forecast or because someone is driven to selling quickly because of some personal reason or rule book, not because there is any reason for long term concern that the assets have ceased to be valuable.

(2) Once you realise that Brokers only do research on companies when they have shares in the company to sell the penny drops.

(3) When you ring a guy who you know supported an IPO and say why are you selling and he tells you because I have to. You learn that the people who make the investments decisions for institutions are controlled by an "operations manual" that is there to protect the directors who rely on a due diligence defence if things go wrong.
"I have to sell because the MC has dropped below $100m and the percentage we can own has to be less than 2% and the minimum amount we can have invested at the current share price is $2m"

Proof in the pudding

Excuse me if I'm repeating myself.

My biggest cheque so far come from a Mining company that a bunch of London Institutions contributed $6 a share to get the company into production in a massive mining operation with $2,75 a share worth of plant equipment and infrastructure.

During the ramp up in late 2015 in the commodities downturn their main metal dropped to 30% of the DFS forecast. The share price dropped, the London Funds operation manual's caps and collars came into play, they were covenant bound to sell and smashed the share price down to 22c on their way out.

I thought, as I did with HGO, golly gosh, thats 10% of replacement value of a very good suite of assets. The next thought was the world needs paint and glazes and they can't be produced at the current prices profitably. Which led to the next question "can the company survive until prices bounce back". The quick answer was probably but they also have a lot of family jewels they can sell if they have to.

The quick return came after they sold enough jewels to strengthen the balance sheet which kicked the net asset backing down to $1.75 and the share price up to $1 in the following months as the metal price bounced back. In August 2018 a take over offer at $1.60 was accepted, when it was raised to the Magic Millions price of $1.75 that the investors who strengthened the balance sheet at 40c demanded.

Good to be in with a chance and staying well clear of having a few dollars on number 2 in the 2nd on this lovely Saturday in paradise.