Kaiser Media Watch Blog - June 1, 2016 to June 30, 2016
Kaiser Media Watch Blog enables John Kaiser to share online content from other media he deems interesting or relevant to Kaiser Research Online audiences. He collects links to such content and writes a brief explanation. The KMW Blog gets updated during the evening KRO update. After a week or so the current KMW Blog gets archived and a new one is started. Tweets are sent with a link to the item in the KMW Blog when it is of particular interest. Right clicking the JK header allows one to share or copy a link directly to that specific blog post.
On June 14, 2016 I gave a presentation, Criticality of Supply in the Age of Trump, at Dave Hodge's Zimtu Commodity Investment Forum in Vancouver, Canada. In light of the surprise Brexit Leave vote on June 23 my message about a case for gold unrelated to fiat currency debasement and for metals in general thanks to security of supply issues arising from the populist attack on globalization, I am even more emphatic that the resource rally has running room until at least the November elections, at which point I am not at all sure the status quo in the form of Hillary Clinton will take the White House.
Much to my surprise I spoke to a bigger audience than I did during my Newsletter session at PDAC on March 6, a strong sign that audiences are warming up to the idea that we are back in a bull cycle. For some great shots of the crowd check out the Zimtu Photo Gallery. Greg Klein of ResourceClips reports on the buzz in A capacity crowd attends the first annual Vancouver Commodity Forum. A few days ahead of the conference he tapped me for an interview about the theme of my talk: John Kaiser talks Trump, turmoil, gold, scandium and the juniors. Dave Hodge's intention may have been to provide an interim mini-conference to compensate for Cambridge's decision not to do a June show this year, but I would not be surprised if he becomes competition for Cambridge which has thrown its lot in with the ever self-serving Marin Katusa, formerly of Casey Research where he specialized in telling subscribers to buy stocks at stink bid prices well below market, and when the stocks surged higher, turning his implicit sell recommendations into losses, continued to work for a publisher that used the stink bid prices as the basis for calculating the big gains Katusa delivered to his audiences.
During the Zimtu Commodity Investor Forum on June 14, 2016 Teresa Matich of Investing News Network interviewed John about 5 favorites: Sirios Resources Inc, Arizona Mining Inc, Peregrine Diamonds Ltd, Scandium Intl Mining Corp, and Uravan Minerals Inc. The link includes a transcript.
In the second interview Jocelyn Aspa of INN interviews John about the future of zinc, during which John mentions InZinc Mining Ltd.
The Zombie Search and Rescue Mission is a collaboration between Allan Barry Laboucan of AllanBarryReports and John Kaiser of Kaiser Research Online where the goal is to demonstrate the research of distressed juniors by using the KRO Search Engine and other KRO features to search for "zombie" companies and check them out in order to make a "yes", "maybe" or "no" decision as to whether or not the junior deserves to be rescued from the Zombie Wasteland. For more background see KMW Blog: ZSRM Episode #1.
Where Allan and John are unanimous about a yes or no, that company will be tagged as a Zombie Rescue Target - Yes or Zombie Rescue Target - No. The rest will be tagged as Zombie Rescue Target - Maybe. The 3 zombie categories are available as Special Parameter criteria in the KRO Search Engine (the 3 links above are direct links). The table below does not tell you what the judgment was, but it does take you directly to each zombie's segment. Those who are full KRO members are urged to check the links above to see which zombies ended up where, and use the table below to find the segment where that zombie is discussed. (First Time Registrations or Returning Members.)
The Zombie Search criteria consist of "listed and trading companies," and "only resource companies" in the Special Parameters box, "less than $0.10" in the Price Range box, "negative $1,000,000 to positive $199,000" ranges in the Working Capital box, and all the Project Priority boxes unchecked (the companies with no projects will otherwise not show up). The $0-$199,000 working capital range is included in the zombie definition because that is barely enough money to stay alive for another year, and in many cases the true working capital is negative because current assets include non-cash equivalents such as "receivables" that will never be received or "marketable securities" that have no bid. For this search to work one must be logged on as an active KRO member. If the search does not deliver too many hits, clicking "all pages" after the first group displays will display the entire list.
Episode #2 investigates zombies beginning with the letter F which yielded 12 zombies as of June 27, 2016. Three juniors were tagged as yes, five as no and four as maybe. Episode #2 is almost two hours long because John and Allan waste a fair bit of time trying to make sense of companies who do a really bad job of explaining what they are all about or trying to do to fix their zombie status. But they also wander off on tangents involving general interest topics triggered by stuff they see while looking at the profiles, people trees, web sites and news releases. What has become apparent to John and Allan after two episodes is how truly difficult it is to recover the back-story of once well-funded juniors that crashed and burned. This history is very important to understanding the "mood" of the remaining shareholder base, and the willingness of current management to "redeem" the junior. Once John and Allan decide on an alphabet letter for an episode, John simply makes sure the KRO profile for the zombies that show up is reasonably up to date. Management is not interviewed ahead of a ZSRM episode because the purpose of the ZSRM is to demonstrate how investors can start filtering using tools like the KRO Search Engine to discard junk.
The 90:10 rule applies to resource junior research in the sense that you can get rid of as duds 90% of the possibilites in 10% of your research time, but expect to spend 90% of your time budget reducing the remaining 10% to the 1% you want to support or buy. Interviewing management to understand the past, present and future requires one to first research the history of a junior and understand its current circumstances. If you cannot quickly establish to management that you have knowledge of the zombie junior's history, all that will be sent your way is mint-laced garlic breath. That assumes you can even get a conversation going. Very often that requires management to believe that you are stupid and nevertheless have a lot of money, or are stupid and somehow still have influence over other people's money. All interactions with resource juniors should be understood in the context of predator-prey system with clarity as to who is which often lacking. It is always wise to assume one is the prey.
Over the decades John and Allan have witnessed management teams who agonized as their junior story crashed and burned, while others just shrugged it off as the natural outcome of a mindset whose prime objective is the concentration of the wealth of the many into the pockets of the few. This is a loathsome aspect of the resource junior game, though by no means a universal. The current incarnation of Full Metal Minerals Ltd seems to be a very cynical manifestation of this lamentable mindset. In the Full Metal segment John refers to a KMW Blog he wrote in reference to an interview with BNN's Andrew Bell about the zombie plague where he discusses how zombies can be turned into free paper manufacturing machines (Apr 29, 2016: Andrew Bell seeks perspective from John Kaiser on the TSXV Zombie Plague).
But there is a Jekyll & Hyde aspect to the junior game. Full Metal's Michael Williams and Cale Moodie are pulling modest compensation out of their current primary focus, Vendetta Mining Corp, which has a zinc project in Australia called Pegmont. Vendetta still shows up in the Zombie Search, but the junior in May 2016 bit the dilution bullet and raised $2.5 million through a private placement of 50 million units at $0.05 (full $0.10 two year warrant) sprayed among 86 placees that included insiders at less than $100,000 chunks. RCF and Solitario, neither of them stupid entities, are backers. Insiders who look like greedy pigs in the case of Full Metal have sacrificed a good chunk of their upside in the case Vendetta to push their fundamentals based dream toward reality. Sometimes things are black and white in the resource junior game, but often they alternate to produce a perplexing shade of gray. Most often when you encounter the pure white, you discover that the funding needed to deliver the fundamentals stays away. A revolution is needed to smash apart this perverse obstruction to unleashing the geological creativity of resource junior teams that want to deliver a fundamental success, not just a story enabling backers to blow off their paper. John Kaiser is now involved in a startup called OVS that will deliver this revolution. For a sneak preview check out the Uravan - Outer Ring Outcome Visualization and the Nevada Expl Inc - Kelly Basin Outcome Visualization, both juniors whose innovation based stories have been over-looked by the street.
The Zombie Search and Rescue Mission is a collaboration between Allan Barry Laboucan of AllanBarryReports and John Kaiser of Kaiser Research Online where the goal is to demonstrate the research of distressed juniors by using the KRO Search Engine and other KRO features to search for "zombie" companies and check them out in order to make a "yes", "maybe" or "no" decision as to whether or not the junior deserves to be rescued from the Zombie Wasteland. Where Allan and John are unanimous about a yes or no, that company will be tagged as a Zombie Rescue Target - Yes or Zombie Rescue Target - No. The rest will be tagged as Zombie Rescue Target - Maybe. The 3 zombie categories are available as Special Parameter criteria in the KRO Search Engine (the 3 links above are direct links).
Episode #1 investigates zombies beginning with the letter T. Four juniors were tagged as yes and added to a couple other juniors flagged by Allan and John in earlier ABR interviews (Adamera Minerals Corp and Fjordland Explorations Inc). Eight were tagged as no and five as maybe. Episode #1 is two hours long because it introduces the concept. Every week or so Allan and John will tackle another letter and also check out how the rescue targets are faring. Several of the zombies turned out to be shells, some of which one day will do very well. One even turned out be suspended. These shells like the one controlled by Aziz Shariff are difficult to buy and do not need rescuing, but they sometimes are good off-ramps for Allan and John to talk about track records and industry issues. Their primary goal is to find zombie juniors will real stories and management teams that are liquid at cheap prices because management has so far not brutalized their shareholders with a rollback.
In checking out a zombie Allan and John are demonstrating to the audience how one goes about with preliminary research of distressed juniors using the core criteria: history, people, structure, capital and story. A zombie junior is defined as a company with negative working capital and little or no long term assets that could be sold to pay off liabilities, technically an insolvent company that is probably in violation of listing requirements. Although such companies have no ability to create new wealth, these persist as active listings like the living dead called "zombies". Some observers have called for a mass delisting of such companies which represent more than 800 of the 1,500 or so "resource" companies covered by KRO. John and Allan, however, disagree with this idea because there are some juniors who have ended up among the "living dead" due to bad luck and the circumstances of the severe resource sector bear market that began in March 2011 and ended in the third week of January 2016. While many of the afflicted zombie juniors are run by "life-style" management teams and truly deserve to disappear, others are run by real people and often have projects with stories that deserve to be revived. Through a lantern in the form of interactive use of KRO and a querying dialogue Allan and John try to figure out which ones deserve to escape the fate of Sodom and Gomorrah.
The rationale for doing so resides in the very cheap prices of these juniors often accompanied by good liquidity. This is far riskier than bottom-fishing which seeks 500% plus gains from resource juniors rising from the trough of a bear market. The 2016 Bottom-Fish 100 Index is up 137% from the start of the year as of June 9, 2016. Zombie Rescue Targets offer 500% plus gains just by achieving a normal bottom-fish valuation. The downside is that the stock gets suspended and never comes back for an instant 100% loss. John Kaiser monitors the Zombie Rescue Target list for possible additions to the 2016 Bottom-Fish Edition.
The Zombie Search criteria consist of "listed and trading companies," and "only resource companies" in the Special Parameters box, "less than $0.10" in the Price Range box, "negative $1,000,000 to positive $199,000" in the Working Capital box, and all the Project Priority boxes unchecked. The $0-$199,000 working capital range is included in the zombie definition because that is barely enough money to stay alive for another year, and in many cases the true working capital is negative because current assets include non-cash equivalents such as "receivables" that will never be received or "marketable securities" that have no bid. For this search to work one must be logged on as an active KRO member. If the search does not deliver too many hits, clicking "all pages" after the first group displays will display the entire list. The graphic above separates the the total positive and negative working capital of companies in each price range for 1,190 TSXV listed juniors featured in KRO. The scary number is that TSXV listed zombies trading below $0.10 collectively owe $1.6 billion while non-zombie listings below $0.10 have about $374 million in working capital.