Canada Lithium: why I sold out

In short, I don’t know how to verify the economics of its project.

I used to assume that (pre-)feasibility studies can be trusted to some degree.  However, I looked into Consolidated Thompson’s technical reports on the Bloom Lake project and then I looked at Cliffs’ numbers– there is a huge discrepancy.  The technical reports show operating costs of around $30-31/ton (see page 135 of the PDF for operating costs) while Cliffs is currently reporting cash costs around $85-90/ton.  So now I feel like I really don’t know what I’m doing… it seems like you can’t take anything seriously when it comes to juniors.

Continue reading

Yukon-Nevada Gold (YNG.TO): definitely a value trap

Mines are a depleting resource.  Usually you mine the most economic ore first.  This causes the economics of the mine to get worse and worse as the mine ages.  Yukon Nevada owns the Jerritt Canyon project which is on its last legs.  Not surprisingly, its economics have gotten worse and worse.

Some value investors see value in Yukon Nevada (see VIC writeup).  I disagree.  The mine has negative cash flow and therefore is not making money.  It will probably lose even more money in the future and it should be closed.  That’s the reason why it was recently closed. Continue reading

Liberty Ventures: not that interesting at $40

Now that Ventures (see old writeup) is trading, it seems that its price is fair and not particularly undervalued.  (I don’t know if I made a mistake as to Venture’s cash balance and how the cash payment on the Motorola debt was handled.  Ventures may have ended up with more cash than I thought it would.)

So last time I checked, Ventures had a liquidation value of around $643M.  There are roughly 28.6M shares out Ventures outstanding (both A and B, pre-rights offering; the number may be a little off due to buybacks).  Ventures at $44.85 gives a market cap of $1.56B.  You can divide by 0.9375 to account for the dilution from the rights offering… this gives an adjusted market cap of $1.664B.

The difference between $1.664B and $0.643B can be thought of as the discount on Ventures’ various deferred tax liabilities.  That’s a $1021M discount on $2,435M of total deferred tax liabilities.  To put it another way, the market is saying that the $2,435M Ventures will have to pay in tax is worth about $1,414M right now.  (Or you can say that it is similar to $1,414M in debt with a 8% interest rate due in 7.06 years.  Or 6% interest rate debt due in 9.3 years.)

At $20-30 I will probably get interested in Ventures.  I guess I am disappointed that it is trading so high.  This memo to Liberty Interactive employees suggested a trading price of $20 for LVNTA shares (“20.0  LVNTA Market Price post-distribution”).  Damn you efficient markets.

Imax: short thesis

The main reasons to short Imax (in my opinion):

  1. Overvalued.  The P/E ratio is roughly 50 (higher if you ignore profits from tax-related reasons).
  2. They are close to saturating their markets and therefore Imax’s profits will start dropping in the future.
  3. Historically, the company has not made money and still has negative retained earnings.  The economics of its niche is not good.
  4. Slightly aggressive accounting that inflates profits.

I don’t think that I am the only person with this idea as Google Finance shows that Imax has 65.89M shares outstanding and the short interest has shot up to 12.2M shares short (see NASDAQ site).  That’s roughly 18.5% of outstanding shares short.  The borrow is very cheap. Continue reading

Iron ore miners (mainly in the Labrador trough)

So right now I am going through the miners in the Labrador trough area:

  • Alderon (Altius Minerals owns a large stake in Alderon)
  • MFC Industrial (MIL) owns a royalty on Cliffs’ Wabush mine
  • Cliffs (CLF)
  • Champion Minerals (CHM.TO)
  • Labrador Iron Ore Royalty Corporation (LIF.UN)
  • New Millennium Iron Corp (NML)
  • Adriana Resources
  • Zone Resources
  • Oceanic Iron Ore Corp.

(I am obsessed with Altius Minerals ok?  See somebody else’s writeup on VIC.) Continue reading