06/01/2011
December 3, 2017
05/21/2011
December 3, 2017

05/29/2011

Do you have an opinion on Sierra Gold Corp, SGCP?

I’ve never heard of it. Sorry


Kuppy,
I enjoyed reading your thesis on Energold. I haven’t looked at drillers in the past so can you help me understand pricing. If Energold is able to add rigs at such a fast pace, shouldn’t others be able to add as well? Why should we expect pricing to hold up at these levels over time? To an outsider it sounds as though a strong price environment would cause a rig supply response…what am I missing?

You are correct, but there are multi-year lags and demand is growing VERY quickly. It is almost impossible for drillers to keep up with the growth because you can build rigs, but it takes years to train drillers. The people is the bottleneck. Energold is somewhat excluded from this because they can train people much more rapidly as their equipment is much easier to operate.


Having read several regulatory filings of EGD I am curious how you got comfortable with the unfocused nature of the company and management activities. The CEO is also CEO of publicly traded IMPACT Silver. Money is being spent in non-drilling equipment and services areas, namely Dominican Republic resource play. All of this when EGD is a diamond drilling equipment and services play. How do you get comfortable with this? Do you have conflicting or related investments with any of the affiliates of EGD?

Normally, I would agree with you. However, Fred Davidson is unlike you and me in his ability to do brilliant things. I actually own a whole lot of Impact silver as I didnt’ feel like I had enough exposure through my Energold stake. The Dominican Assets are a legacy asset that they’ve had for years and they are in the process of spinning it off so they can focus the company better. I wish they had gotten rid of the Dominican assets more quickly, but such is life. This is all a concern, but I really am not that worried.


Hi Kuppy,

I enjoy reading your posts and appreciate the insights. I wish you would post more 🙂
With regards to your post on Energold, I saw that it is traded only in OTC. And consequently is not very liquid. Is there any way to circumvent this problem? Looks like, on some days there is no trading activity

Energold primarily trades in Canada on the Venture exchange .It’s relatively liquid there.


On Bloomberg “Fibrek said Q1 sales fell to C$132.1 m from C$138.1, hurt by lower sales volume related almost entirely to RBK pulp.”
Its traded off a few % since the report and it was reiterated a SELL at Danbury. Has anything in the report caused you to rethink your thesis?

Earnings were a bit light and RBK is a disaster. It doesn’t change my thesis. I am focused on NBSK where the market continues to get tighter. Cash flow continued to increase this quarter. Clearly, MERC is the better investment thus far, but I’m holding my FBK as well.


FYI:

http://www.indexuniverse.com/hot-topics/9282-van-eck-plans-mongolia-equities-etf-.html

Yup, Everyone wants to find a way to invest in the fastest emerging market out there. The problem is that buying a few copper and coal companies that are publicly traded in the Western world isn’t the way to play this trend…. You need to buy companies in Mongolia. The biggest company on the Mongolian stock exchange has a 18% dividend yield and has grown the dividend at a very impressive rate. If the biggest company is this cheap, just imagine how cheap all the other companies are…..