Pretium 2017 recap – “they will not have a mine producing 425,000 oz. a year for the next 20 years”

(Pretium has a US$1.8B market cap and the borrow is in the low single digits.  I have written about this stock previously.)

Back in 2013, Strathcona resigned from the Brucejack gold project due to disagreements over what Pretium was telling investors.  Graham Farquharson (Strathcona’s head honcho) was being a gentleman and allowed Pretium to disclose on their own terms (with their own PR spin).  Unfortunately, Pretium instead tried to discredit Strathcona.

So, Farquharson did an interview with The Northern Miner, a trade publication.  You can read the interview on the website (no paywall):

Yes, and we told them that it has an excellent chance of being a small-tonnage, high-grade mine in the Cleopatra vein, and a couple of other similar occurrences that they found in the last drilling program.  If they lined all those up, there’s an excellent chance that they could have a small-tonnage, high-grade gold mine. But they will not have a mine producing 425,000 oz. a year for the next 20 years, as they have been advertising so far.

Here’s the crazy part.  This is 2017 and Pretium is almost finished building that mine.

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Exxon Mobil put options

(Unfortunately I did not have the time to fully research this.)

Improvements in shale extraction technology and a glut of capital have basically destroyed oil and natural gas prices.  While Exxon’s management is ok, the company cannot defy commodity prices.  Its upstream assets aren’t worth that much anymore because they’re inherently leveraged to oil prices.  But despite the dramatic decline in oil prices, Exxon’s share price remains high.

The put options are interesting to me since implied volatility is low (20-30%+) and the company is overvalued.  The options are barely more expensive than SPY puts (in terms of implied volatility), except that oil prices fell by half and America’s GDP did not.

A back of the envelope calculation puts Exxon’s private market value at <$129B versus a market cap of $359B.

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Coach’s brand transformation fake-out

Victor Luis, Coach’s CEO, has told investors about his brand transformation plans.  In practice however, many aspects of his brand transformation plan have not panned out.  Coach has succeeded in discouraging its fans from shopping at retail/mainline stores without actually reducing the discounting of the brand.

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Hollysys: these guys are really good at putting up phenomenal numbers

(*Disclosure: I am short.)

Hollysys is a Chinese company that designs high-tech stuff.  Interestingly enough, they were able to grow revenues, profits, and operating cash flow without having to increase capex.  See the chart on the left from page 31 from the latest investor presentation:

investor-presentation-page-31

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CONN 10-K update

Key points in CONN’s latest 10-K

  1. Omitted the static loss table found in previous 10-Ks and 10-Qs.
  2. Removed the following sentence: “Under our current policy, the maximum number of months an account can be re-aged over the life of the account is limited to 12 months.”

I guess I will continue to hold my short position in CONN.  While I don’t entirely know what’s going on, this does not smell right.  (*The borrow is expensive.)

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(Valeant) Shipping drugs knowing that you probably won’t be paid

Somewhere around July 27, 2015, Isolani became aware that Russell Reitz was withholding reimbursement checks from R&O’s accounts.  You might think that this would force the business to halt operations.  An Isolani court filing (page 8) against Reitz states:

As a result of Reitz’s and R&O’s material breaches of the MSA, Isolani will be forced to shut down operations at the Pharmacy within the next 10 days.

In fact, operations did not shut down.  Documents filed with the court suggest that Philidor continued to ship out drugs on R&O’s behalf until August 31, 2015.

I find this very strange.  Why send out drugs when it is highly uncertain as to whether or not your company will be paid?

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Ever-Glory (EVK) – Domain registration + web footprint

EVK’s English/investor website is at everglorygroup.com.  The site’s domain registration shows the Registrant Organization as “JIANGSU EVER-GLORY INTERNATIONAL GROUP CORPORATION” and “JiangSu Ever-glory Group Co., Ltd.”.

According to EVK’s 10-K, this does not seem to correspond to any of EVK’s subsidiaries or the parent company (see the subsidiary diagram in the 10-K).

image21i subsidiary chartevk-domain-registration

It does seem to correspond to Jiangsu Ever-Glory International Group Corporation (“Jiangsu Ever-Glory”) [emphasis mine].  The 10-K describes this related-party entity as follows:

Jiangsu Ever-Glory International Group Corporation (“Jiangsu Ever-Glory”)

[…]

Jiangsu Ever-Glory is an entity engaged in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by Mr. Kang.

This is a little strange.  Normally companies put their own information in their own domain registrations.  (To be fair, you can put in whatever you want for a domain registration.  One benefit of accurate domain registration information is that following ICANN rules can help companies in ownership and trademark disputes over a domain name.)

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