That sounds like a glib thing to say, and certainly, such throwaway lines abound on this platform. But in the case of Variscan right now, I don't think there is much question that the company is being valued at less than the assets it controls.
I'll highlight one recent company announcement from a different stock, which, in my opinion, starkly illustrates this point.
Up until 2020, Variscan was a major shareholder in another listed exploration company, Thomson Resources.
About a month ago, Thomson announced the disposal of one of their projects, the Texas project, in southern Queensland for $ 3.5 million. (TMZ: 'Sale of Texas Project, 06/12/22')
This Texas project is certainly not one of Thomson's top-tier assets: in the above announcement the company described it as a 'non-core project'.
And yet, in December, Thomson still managed to sell this 'non-core project' for a sum almost equivalent to the entire current market-cap of Variscan, the company which, once upon a time, controlled more than a tenth of TMZ's shares.
Truly, how the mighty have fallen...
The point I making here is that, assuming all of the assets of this company were put on the market for sale, in the current environment, Variscan's assets would surely fetch far above the four million dollar mark.
In an inflationary environment, as we are in now, companies sitting on hard assets, should in theory become more valuable, as high interest rates and low unemployment rates make it expensive to build and develop new assets.
In such an environment, a company that owns a factory, for example, becomes more valued, as potential competitors are faced with more cost barriers to replicate such a facility. Similarly, a mining company that has been developing a mineral deposit for years should also be perceived as being more attractive in a time of high inflation, as rivals would find it hard to track down skilled workers to develop alternative projects.
But Variscan aren't just sitting on a promising mineral deposit, they control an actual mine.
The San Jose project in Cantabria was shut down in the 1990s as a result of the low zinc price, but zinc prices today are way above what they were in the 90s, even accounting for the recent fall in the price of the base metal.
And here I am completely ignoring the other assets controlled by the company, such as Rosario in Chile
So why is Variscan so cheap? Well, apart from the likelihood of an imminent capital raising, I'd have to concur with what has been stated by others here, that it is largely down to poor management.
It is hard to otherwise explain why the market cap of Variscan sits at just a fraction of those of other exploration companies: Metallica, for example, is currently priced at over 30 million, Surefire Resources is priced at over 15 million, and even Thomson, bombed out as it is, is still worth over 10 million at time of writing.
I don't think Stewart Dickson is lazy, unethical or dodgy. But unfortunately, he's scored too many own goals.
When he joined the company in 2017, I wasn't too bothered about his lack of experience, as I tend to feel that everyone needs a chance to find their feet.
However, after years in the top job, Dickson was still making amateur mistakes.
One example that I recall relates to the aforementioned company, Thomson. Back in 2020, TMZ announced a rights-issue at what seemed then like a rock-bottom price, 1.5 c per share.
The announcement was greeted with enthusiasm by market players, with plenty of buy orders stacked up around the 2 cent mark in the days after the announcement.
This presented a neat opportunity to make some coin for the major holders: they could potentially sell off at around 2c, and then buy their shares back in the capital raising for 1.5 cents, keeping the difference.
I expected Variscan to take advantage of the situation. And sure enough, after a few days there was some heavy selling, and the TMZ share price got beaten right down to 1.5 c.
However, it soon became apparent that the seller wasn't Variscan: it was the other substantial holder in TMZ, Minotaur Resources.
So, Variscan were too slow off the mark, and missed out. This was dissapointing, but things then got worse.
On the third of July, 2020, Thomson put out an announcement reminding shareholders that the rights-issue closed on the 8th of July, and noted that
...The Company will NOT be extending the close period...
At the time, I had a bad feeling that the line above was directly aimed at Variscan, who I think were trying to pressure the TMZ management to give them more time to take part in the raising.
At any cost, Variscan didn't partake in the offer. To make things even worse, they then also dumped all of their shares at a rock-bottom price.
The break-up with Thomson was unnecessarily messy, and Variscan ultimately squeezed very little value out of the TMZ shares they owned.
That was over two years ago now, but unfortunately, even in recent months, I still get a sense that Stewart isn't entirely on the ball.
For example, on the 17/11/22, I recieved an email from 'Stewart', headed 'Invitation to meet Managing Director Stewart Dickson in Sydney and Perth'.
The email finished by asking 'Would you like a meeting with Variscan MD and CEO Stewart Dickson', and in a line below this: RSVP: [email protected]
I sent a message to the above email address, confirming that I was indeed interested. And guess what? No one got back to me.
Shortly after these meetings, I also noticed what looked suspiciously like a paid or smurf account pop up on this forum, providing a glowing account of the proceedings. In the event, this seemed rather pointless, given that a genuine shareholder in attendance at the meeting had already posted their observations about the meeting.
In short, it seems to me that Variscan are paying these 'Capital Network' people to market the company, but I think it is just wasted money. Since November, when Variscan held these meetings, the share price has gone on to hit record lows. I wonder how many other shareholders were met with a non-response from the Capital Network after expressing interest in attending these meetings? Is that one reason why some shareholders have dumped stock over recent weeks?
So, there is something wrong with the way Variscan is being run, and I think much of this has to be pinned on Dickson. I sometimes get the impression that he is overly concerned about 'saving face', and because of this, he is reluctant to ask for help, learning instead through trial and error, which unfortunately has proven rather expensive for shareholders. I also suspect that this makes him susceptible to hucksters like the Capital Network people.
I think it is plausible that Variscan's cash-flow troubles could be resolved if they just sold off one of their projects, such as Rosario, for a fair price, although it remains to be seen whether the MD is up to it.
But all things considered, it is hard not to conclude that there is a great deal of negativity priced into this stock right now, and you would have to assume that there is plenty of upside if just a few things go right. It looks to me as if some of the larger holders have given up out of frustation due to the poor management of the company, and this has driven the share price to the current bargain-basement levels.
