Selwyn Resources is being taken over by activist investors who will likely liquidate the company. Originally the proxy argued that Selwyn would be able to distribute a 10 cent/share dividend. Because Selwyn trades at 0.8/0.85 cents, the return may be attractive. However, the company burns through a lot of cash and there may be complications to actually liquidating the company. As well, there is a healthy dose of drama.
*Disclosure: I am long Selwyn.
I used to assume that large mining companies would not chase projects with negative returns. This is a dangerous assumption that I need to rethink. I’m starting to realize that most large miners regularly chase projects with poor return. Or, they engage in business decisions that don’t make a lot of sense. I shouldn’t rely on the due diligence of senior mining companies when trying to value the assets of a junior.
Here’s my analysis of various large mining companies and why they are crazy.
