[apologies in advance for the length of this post... it kinda grew legs as it went]
Hello Noor,
Firstly, my heart goes out to you. The stock market can be a high-risk punishing teacher - especially in the mining space. Only you can decided whether to stay or sell your holdings in POS.
Twiggy (Forrest) is a master of self branding. I don't say that in a derogatory way. It's just that he is a big risk taker, who also cultivates a philanthropic side to his brand, which can attract beneficial press. Sadly, you are probably not the first to think that by following him into POS everything will be ok. This is business and philanthropy doesn't live here. Since I've been tracking POS , Twiggy's stake been diluted in half, from ~28% to (now) ~14%. He has lost money on this investment too. Judging from what we read in the press from time to time, it can be tempting to think that very successful people are gods. I suspect you know they are not, but the allure to ride their coattails can be very, very tempting. Again, he has very strong branding Kung Fu. But it wasn't always the case. He got badly burned (financially and reputationally) on the Murrin Murrin project years ago. Alas, I digress.
There's an old saying about the stock market that goes something like, "only invest with the money you can afford to lose". You've probably heard it before. Investing with your own savings (i.e. not using borrowed money) is one measure that satisfies that rule of thumb, but there is also the issue of psychological capital that is very often completely and utterly overlooked. That is, ask yourself how it would affect you emotionally to lose all of your investment, even though it was not made using borrowed money. This needs to be considered in light of your own tolerance to risk and also your personal circumstances (e.g. financial, family situation, etc...). You see, from a purely technical (mathematical) perspective, losing your own money means you are back to zero. It's not flash, but it's not as bad as losing borrowed money, which would put you in a hole that you would have to fill before you could get back to zero. But we humans are not purely technical beasts. We're emotional too (oh sooo emotional - twitch, twich). So, we should also apply this rule of thumb with one eye to the emotional issues and it will go a long way to developing a self-awareness on whether this stock market caper is something you feel you want to pursue further. If the answer is "yes", then your must take the next step in a very long path and educate yourself (and I DON'T mean mean buying a ticket to an "educational" course/system from a stock market guru!). If the answer is "no", then participate no further and rejoice in the future losses you will have most like saved yourself. (Sure, you would also be doing yourself out of the future wins, but don't believe the "easy money" fantasy surrounding the stock market. In truth, it's exactly the opposite!) Ok, that hopefully covers the larger philosophical elements to "should I stay, or should I go.
To answer some of your questions, imo, management in POS has been structured the way it has because they were gearing themselves up to be a producer. International Ni market events have stymied their plans which keep getting pushed back and back on the hope (prayer) that Ni prices will return to the levels required to start operations. They, imo, are demonstrating an (undue?) ongoing optimism about the chances of entering production in the near-to-medium term. In some respects, they are a product of the resources industry as a whole. You've got to be a hopeless romantic optimist in the mining game. But it must be tempered with commercial reality. Short answer: they're currently in denial, imo.
Regarding paying management using shares v. cash: well, paying in shares conserves cash flow (the life blood of a company), but continually issuing shares will dilute value per share (all other things remaining unchanged). So, with the overheads we currently have, we either pay in cash and run out of it in ~3-5 months or pay in shares and do a slow burn through ever-decreasing share price values. The second option promises to keep the company afloat until "things turn around", but for... how.... long? Make no mistake, the international Ni price is the single largest adverse factor here. BUT, in tough times like we continue to experience in the Ni space, management's ability to do it's job, including making some tough calls, comes under glaring scrutiny. In boom times, the opposite it true, whereby management mistakes can be easily hidden by rising Ni prices and buoyant sentiment. In the last year years this company has been diluted by ~42%!
One of the best pieces of financial advice I received when I was younger was to pay off the family home before investing in risky ventures. The risk/return equation is very attractive. So is the tax-free status of the family home. If you ever lose your job and you have no debt against the family home, you have a massive buffer that works in your favour until you can find another job. (These comments are based on the fact that you are already a home owner.)
Hope some of these ramblings help somewhat.
Z
Expand
(20min delay)