December 3, 2017
December 3, 2017


Though Mr. Market seems to be looking the other way, you’ve noted for readers that Apex’s operating results have steadily improved in 2010. I noticed in the November update that Mark Ashley promised an updated resource estimate would be released as soon as this week. Given that the 2009 resource estimates were much larger than the figures for 2008, do you think there is room for further resource gains in 2010? If so, could it be a small catalyst for the stock?

I think it’s likely that the resource estimate will show increased resources for a number of reasons. Mainly that they’ve continued to explore the property, gold prices are up significantly so they will likely use a lower cut-off grade and they quite honestly haven’t produced all that much gold this year (unfortunately) so there won’t be much depletion. Will the market care? Who knows. This thing has disappointed so many people for so long that it might take quite a while for anyone to take it seriously.

I read your bit on BDSec which I find very intriguing.  Your thesis sounds like a no-brainer as long as their slice of the growing pie doesn’t decrease disproportionately.  Do you see any risk in big international competitors coming in or would they protect local Mongolian companies from what you know?  A few other points…

Does it make any sense for them to dual-list on a foreign exchange

Considering Mongolia has such strong potential for supplying resources to China, would there not be stronger interest in a company like BDSec by Chinese investors.  Are there some barriers that exist for Chinese investors, or is it just lack of information.

Does Mongolia have a good track record when it comes to assets owned by foreigners.  ie. no asset controls or seizures

Thanks again for the fine work.

I am not that worried about competition right now. BDS is the industry leader and those competitive advantages are hard to erode. Of course, it’s something to watch longer term.

I don’t think they will dual list b/c it just would cost too much money for such a small company.

Anyone can invest to the best of my knowlege. Chinese investors can buy shares if they wanted to. Mongolia has not siezed assets owned by foreigners in the recent past. I am not particularly worried about that happening.

Great note on the Discovery Channel episode, greenfield/junior mining is indeed full of turds than toads.
But that aside, what do you think of the long-term trend of aging population (U.S., Europe, Japan and even China) and where the opportunities are?
There are many VC investments in the DNA, molecular-level medical technologies, but I don’t really have a clue on them. Medical devices, healthcare, etc.. are where the biz sounds more ‘simple to understand’.
But my concern is, given the populations profile do not change due to war, disasters, etc. in the coming 20 years, there seems a need to drastically change the way these developed countries’ governments and citizens, to adapt to this.
What do you think?

It’s a serious trend to look at. I just don’t know enough about the technology aspects. Over time, technology is usually a pretty awful place to invest–especially with government intervention in the pricing mechanism. I think the world will have to get used to a much less pyramid shaped age distribution. That will impact all sorts of things, especially government entitlement programs. I don’t know how it all shakes out, but I think a lot of people will be disappointed when they learn that they paid into a ponzi scheme.

Thanks for a great write up on Bernanke. The pending bond bubble and U.S. dollar bubble seams so obvious to me and many, many otheres that I’m amazed they have held up as well as they have for this long. It feels like I’m watching a bad movie in super slow motion.

My questions are about Energold. 1) what is their competitive advantage, if they have one? It can’t be their rigs because they buy them from a 3rd party. 2) You said they are one of the “best run companies…” In what regard are you referring to? I trust your judgement, just looking for more color/details. BTW, how “great” can the CEO be if his capital raising is more dilutive than it should be (referring to the blind pool deal)? IMO, the truely great founder/CEOs have been both great at running the business AND great at financing it.

1) I’ve answered this a few times now. Please use “search.” Basically, they can drill in places that no one else can and they can do it at a 1000 bp cost advantage in places where there is competition. Finally, it’s a green technology that brings the communities into the mining process (good for permits) and the majors want to be seen as more ‘green’. You just win every way on this technology. I think that in a few years, EGD rigs will have a $20-$50 premium built into the pricing over conventional drilling because of these factors. No one (not even Fred expects this, but the majors need this technology and I think they will eventually pay up quite a lot for it). The rigs are 3rd party, but they have an exclusive.

2) It’s best run in that I’ve dealt with hundreds of companies over the years, Fred is just a better operator. This is a very tough business to operate in dozens of different countries. Fred does it cheaper and better than anyone else in drilling and frankly better than just about any other CEO I’ve met. So what if he gave up a bit on the capital raise? I mean, the difference between raising at 4.00 and 3.70 is chump change for dilution really. He needed the money and he took it. If they perform like I expect them to, this will not matter in a year or two. Don’t forget, he could have done the deal at 2.25 where it was trading a few months earlier. He waited for a near double before raising the capital. That’s more than I can say about most CEOs in the world. This is still my favorite idea currently and it’s my largest position at cost.