How does Sipa turn it around?

So I've been running the ruler over my portfolio and I must admit I too have been in a "do I finally just dump Sipa?" frame of mind of late. Long-term holders are justifiably frustrated with the stock. The share price is stuck at close to its record low. And the next round of drilling seems far in the distance. And we're yet to see an economic grade in any drilling thus far. Dark times for Sipa shareholders.

All that being said, I've decided I'm going to hold on to my SRI shares for now. I thought it might be useful to outline why. I can't stress too much that what follows is only the opinion of this mug punter/investor. I'm not a trader of financial adviser, just a buy-and-hold type investor who tries to throw a few speccy stocks into the portfolio in the hope one eventually takes off. Do your own research etc etc.

The question I keep coming back to is: what's going to change that will reverse this long-term drop in the share price? Essentially I can only see three potential answers. Here they are, in order of what I think the potential impact could be.

1. Sipa hits the mother lode. This is the dream scenario and probably the reason many of us have held Sipa over the years - be it copper at Thaduna back in the day, nickel in Uganda or gold/copper/etc at Paterson. Sipa is stalking potential big finds both in Uganda and Paterson - though there hasn't been much stalking in Uganda of late. While there is still the chance this could happen in any upcoming round of drilling - we suddenly strike whopping grades in economic quantities - I tend to think it's unlikely right now. Not that Sipa doesn't know what they're doing - finding these ore bodies is slow, calculated work. It takes a lot of time and money. Sipa has been doing good work and seems to be getting a good understanding of where their target(s) may lay. But it lacks the funds to drill extensively and has to be agonisingly slow and cautious in its approach. So all in all, while I'd love to see this, I have to consider the immediate chances remote.

2. Sipa finds a joint-venture partner with deeper pockets. The company has made no secret about looking for one. It has far too much ground to explore with the meagre funds it can drum up from weary investors such as us. Not only that, it just took on more ground in Paterson. Uganda is very promising ground (apologies for using the 'p' word) - and Sipa is a genuine first-mover in an exciting exploration region there. But it just requires too much drilling for the company's coffers to cover. Similarly, they could use a hand with Paterson. I think this finding a big partner scenario is more likely, even though no such partner has been forthcoming to date. The resources sector seems to be picking up a bit of steam again. Copper price is moving north. Nickel looks like it could be breaking out of the doldrums as well, though it's more volatile. In short, I reckon a few things are moving in favour of a predator kicking the tyres on companies like Sipa that have good ground but can't afford to drill it all. Just because it hasn't happened yet doesn't mean it won't. These things move in cycles and I have a gut feeling that cycle is turning in our favour on this front. I'd rather have 50% of something valuable than 100% of nothing (or however it is carved up). This could be a good catalyst for the share price to head north again in a significant way. Here's hoping.

3. Sipa's drilling hits much better grades, but still misses the mother lode. Again, I could see this happening. In Paterson in particular the company seems quite excited about the geology and their growing understanding of it. So while I'm doubtful they're about to hit the mother lode, it wouldn't surprise me if they hit something far better there than what they have to date when they get drilling again in 2018. I wouldn't see this sending the share price soaring. More like stopping the rot temporarily and maybe getting it back to the point where they can get another capital raising away off the back of the better grades and an upward tick in the share price. So, less impact than the first two possibilities, but still a positive the company could build on to keep some money in the kitty and the drill turning.

So, apologies for the long post. That's it. Coupled with the fact that selling now only hands me a fat tax loss and I can't see much upside in that. No judgment at all on those who have sold - as I said, I've been a whisker away from it myself. No rose-coloured glasses either. There are many headwinds ahead for Sipa. That last capital raising was worrying - struggling to convince holders to pony up cash to keep the drill turning. The company surely must be aware of what they're up against - hence the pursuit of a JV partner. But for now I'm gonna keep the faith.