I'm mostly annoyed about all the false starts sales. Those are what are now causing the limited market reaction to positive announcements and why we'll need to see real profits before we will be re-assessed now.
There's some positives coming now with Bayan having the ability to bring the dreams of management into fruition but it's costing us a lot to have them onboard (nearly 2/3s of the company) in exchange for a project that has had a dubious past and is difficult to value until we see if Bayan are actually able to make it profitable. The real value of the deal is in their ability to get the company into production.
If you feel that I or the market are being unfair with the claims of false starts just think about what hasn't eventuated over the course of the last 18 months.
KI the company maker was announced to fanfare but hasn't been mentioned in announcments for about a year now following the tussle with BHP over who owns the right to mine here. We may well come out on top eventually but it does seem to have been swept under the carpet with the distraction of the Bayan tie-up. Personally I'd swap Pakar for the rights to KI in a heatbeat if it had infrastructure in place.
GPK again caused fanfare and was the subject of a great deal of buildup as our first mine going into production on what seemed an almost impossible schedule. In retrospect it does seem to have been impossible as after one load of coal it got put on maintenance and then up for sale. Now it's being kept with announcements coming that it is going to be part of our future 3 pronged production strategy. So what did our previous "production" consist of ? I'm picturiung half a dozen guys with shovels and a couple of wheelbarrows myself but draw your own conclusions.
Mamahak was also touted as a company maker but this time as source of cash flow to finance work on other projects and give the company some self sufficiency. Indeed this would have made the company because it was becoming increasingly evident that things just couldn't be gotten moving without some sort of capital. Unfortunately the river flows decided to match our cash flows and this also proved a dead end as the dry season meant no coal could be sent down the river.
We've seen at least 2 contracts for coal purchases (China and Japan) announced but of course we have no coal to sell them. That's a bit of an oversight don't you think. It's a pity because the money could have saved us from some serios pain care of the convertible notes. The attaching warrants were the killer here and will be haunting us for years to come thanks to the long expiry. There are over 100million shares available for selling into the market after paying the 13cents exercise price. Anytime the price gets over 14 cents there's a profit to be made and the warrants cost the holders nothing so anything over 14cents is pure profit. I expect these to be sold into every run the share price has for years to come.
I could go on but I think I've made my point. There's a perception out there that people will believe KRL is going to be a big thing when they see it. The false starts have cost us dearly in terms of credibility in the market. You only have to look at how readily the SP flew to 30 cents when deals began being announced under the new management 18 months ago and compare it to how little movement we get these days for something like the Bayan deal and the new JORC figures.
Simply put it will be a slow climb for KRL because it will have to prove itself every step of the way. The days the company flying on the sniff of possible action are long gone. And as it makes it's slow move forward it will be carrying the warrant holders and low SP entrants on its back slowing down every run it tries to makes.
So the question is why stay. Partly because I think the forward move is coming and a slow sustainable rise is a good thing. And partly because it doesn't suit my circumstances to pull out at the moment. I'm watching things closely and am very interested in seeing how things progress with Bayan driving production. If it goes well I will probably keep a good portion of my holding. If it doesn't seem to be working out then most or all of my holdings will be liquidated before the end of the year. Either way it's likely that I will sell down a significant portion within 6 months.
I hope that clears up my take on things and my reasons for being cautious about the future whilst still holding.
KRL Price at posting:
15.5¢ Sentiment: None Disclosure: Held
