A simple technique I have used for many years to make assessment/judgement of situations/investments etc in addition to SWOT and PESTLE is to simplify the rationale down to 1) People 2) Property 3) Information and 4) Reputation. When originally investing into QPM, I assessed the following;
- People - I ticked this box in the belief that the cumulative corporate experience of the board was solid.
- Property - I ticked this box. Landsdown ECO Industrial Precinct was secure and supply contracts with New Caledonia solid.
- Information - I ticked this box. the successful pilot plant announcement initiated a long period of positive news resulting in SP appreciation.
- Reputation - I ticked this box because the DNi technology looked solid, the board was getting strengthened with key personnel, government's were taking notice, good news stories were flowing regularly, SP appreciation meant the board was seen as doing their job which enhanced their reputation and money was relatively easy to raise.
As such, I have consistently increased my position over the last 3+ years.
However, I now need to ask myself some serious questions, not just about; could I afford to lose the money? am I an investor or trader? etc, but deeper questions that go to the heart of potentially being played as a fool and so easily parted with a substantial amount of capital.
I now assess the above technique as follows;
- People - Leaning towards a cross now. Unfortunately a combination of global events and a substantial shift in global capital has applied the blowtorch to any small cap board of director's. In the case of QPM, the lack of easy money, the need for manufacturer performance guarantees, the non-binding promises of debt funding from multiple international governments, inflationary pressure on materials and labour etc, etc has seen the board continue with expansionary projects such as QPME at a time when the global scenario is contractionary with tightening money policy. Without being dictated to by the SP, one must now question if the board isn't so comfortable with their own salaries, options and other benefits, that they have nothing to lose if this project were to fall over other than reputation. I now lean to this thought process as a distinct possibility given the SP with the thought that if this whole concept is as good as is promised then big money would be flowing in to ensure it's success. I don't wee that happening.
- Property - I still place a tick on this although if the whole project were to fall over, the property (TCC) and the agreements with NC actually mean nothing.
- Information - I have to put a cross here. There has been such a poor flow of information over the last 12-18 months with scant regard for the values of marketing, story telling and building confidence. I understand that SG is very well connected and obviously held in high esteem by global mining, engineering, BEOT and governments that open doors for him and QPM, but this is not translating into speeding up engineering solutions with performance guarantees nor is it allowing timely finalisation of term sheets leading into FID. As for the DFS, a lot of people felt betrayed by the announcement of the AFS and yet we still wait for DFS and FID that if it does drop in 1H2024 it will only be about 2-years behind.
- Reputation - Unfortunately I have to put a cross here now. In my minds eye, the age of the board generally, in conjunction with the salaries, options and benefits on offer make this little offering too sweet a temptation for being a departure lounge offering into retirement. While I genuinely think they would like QPM to be a raging success story, they and their families are at a very comfortable juncture regardless of success or failure of QPM. That tends to leave the retail investor's in a not too dissimilar position to the gas situated in the Bowen basin - "Stranded asset."
So, all in all, this is not a vitriolic attack on the board, for I genuinely hope QPM can succeed against the myriad challenges and go on to become an incredible success story. Nonetheless, these are probably more musings to consolidate one's own thoughts at a time of wondering whether or not a considerable loss will be materialised and to consider how rationally I would move forward and not chuck the baby out with the bath water when it comes to investing.
In closing this is my opinion only with views put forward that may or may not generate reasonable contributions from other investors/posters. BTW, I've just changed my sentiment from Buy to None, but with no intention of selling.
Good luck all QPMer's.
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