Every resource investor ought to be very familiar with the Lassonde Curve (named after Pierre Lassonde one of the founders of Franco-Nevada the original "royalty company". This is my overlay of PAM on a "generic" Lassonde Curve.
BUT YOU HAVE TO REMEMBER ... this is for only 1 Asset (RK Lithium Project). So effectively just about 4 years from the time of initial drilling to where we are now - what may be the bottom of the "Orphan Period" (yes the share price $0.054 and Enterprise Value $10.6M is well below that when PAM first listed $0.20 SP and $21M EV) ... but you can see the process laid out. And insomuch as RKLP, been through the maiden MRE and infill drilling to get to a Resource in M&I that can support a PFS/DFS (if needed) and we sit in that trough in the Orphan Period ... waiting for funding and Strategic Partner(s).
And its really hard to overlay the key risks, but we are certainly see the "Permitting", "Commodity Price" and "Funding" risks playing out in a big way, which for me explains the drop more than anything else. Commodity Price where we are now, at tail end of "Orphan Period" with PFS/Partner ready Resource, is a fraction of what it was when Discovery/Maiden MRE was completed.
Then as a company we would have to add in the Tama-Atacama Brine Project (TABP) and Rosario Copper Project (RCP) into the mix.
TABP is pretty much still in the Concept/Desktop Studies phase . We have "suspects" but nothing definitive (yet). We might get a partner on a punt in Chile but given the Commodity Price risk its hard to see value for PAM at this point.
RCP though is another matter (IMO). PAM is doing the work needed for "Target Generation" and from that its a short step to Initial Drilling - and I'm expecting good news flow will get speculators entering (and if it follows the normal course of the Lassonde Curve) and we'll see share price appreciation. If/when a copper oxide (resource) discovery is made ... well the chart explains.
Trouble is, not every company makes it through and not every discovery gets funded/mined - economics matter, and capital ALWAYS flows to the project that have the greatest return for the least risk (aka rational investing)
No one is free of the "behavioural finance" biases (unless you're an algorithm). If you read the blog you might say "Crikey Aussie, you have "Loss Aversion" (hanging on to a loss longer than you should) with a helping of "Confirmation Bias" (you've form fitted PAM onto the Lassonde Curve because you want to believe it fits) and a super-sized serving of Over Confidence (taking on too much risk because you've overestimated your knowledge) ... etc.
Now that may (or may not) be true, and to guard against those behaviours I diversify. I diversify between commodities (so lithium, copper, silver, gold, rare earths) between companies in those commodities (so in lithium we have Brine/Hardrock/DLE/Int Refiners, geography (Aust, USA, Can, S. America, Europe) and also size (those with scale: ALB, ALTM, PLS ... to those that are speculative e.g. PAM). And I think long term ... the Lassonde curve on average is ~8 - 12 years. And then of course "commodities" is only 1 "sector" of an asset class (equities).
Whether or not PAM is a winner (and I'm in because I believe they offer reasonable risk adjusted reward) I won't be a loser because I'm not risking more than what is a reasonable for the reward on offer. And assessing what that is varies between investors and why "the market" exists.
My sentiment remains "Hold" because I'm not adding to my position (nor am I selling either) even though I think the entry is attractive. It means no room in the portfolio to add additional risk with this specific company.
PAM Price at posting:
5.4¢ Sentiment: Hold Disclosure: Held
