(The synopsis of this post is that I still haven’t been able to put all of the pieces of the puzzle together.)
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writeups – shorts
More Pretium questions
Pretium questions from a reader of this blog
Pretium update: Apparently all the gold is there?!
Today, Pretium dropped a bomb of a press release: Bulk Sample Surpasses Target of 4,000 Ounces of Gold; Processing Continues. The preliminary results are that there is 4,215 ounces of gold in the 8,090 tonnes processed so far. It looks like the bulk sample results will exceed the resource estimate; this would be strong evidence that there is more gold in the deposit than originally thought. I’d be curious as to how much gold should have been in the 8,090 tonnes processed so far (according to Snowden’s resource model) as the press release does not say. Anyways, here are some possible scenarios for the current results:
- Strathcona messed up. In my opinion, this would be the least bizarre explanation and the most plausible.
- The preliminary results from the bulk sample are fraudulent due to assay problems. (Less likely.)
- Somebody added millions of dollars worth of gold to the bulk sample. (Least likely.)
Crocs: I guess I’m shorting this company now
I was wrong about John McCarvel. The way I judge a CEO’s operating ability is by looking at his or her prior track record. McCarvel had a run of a few very good years immediately after he became CEO in Feb 2010. In this situation, extrapolating from the past did not work. Currently, it seems like McCarvel was riding off of the momentum from the prior CEO (John Duerden) and is on track to slowly destroy Crocs. His decision to mislead investors with the share repurchase fakeout is bizarre and stupid. He is quickly destroying his credibility. And why exactly does he feel the need to mislead investors?
New position: Chesapeake put options + other minor trades
This is a small position for me that I bought puts yesterday (Nov 5). At the time, I did not realize that earnings was today. The implied volatility on CHK options is in the low 30s for the 2016 LEAPs and seems to be rather low. The historical volatility in the past 3 years was 40.97 according to Morningstar. I think that the stock is a little overvalued (see my CHK post) and that the put options are a little undervalued. This trade doesn’t have the greatest margin of safety.
TransGlobe Energy: this company is silly
The bulk of TransGlobe’s operation is in Egypt, where all oil production goes through the Egyptian General Petroleum Corporation (“EGPC”). The problem is that the EGPC has not been paying oil companies on time and owes massive debts. At YE2012 TransGlobe had $221M in accounts receivables (the majority of it is due from the EGPC). At this point, some common sense should kick in. Egypt is not a place where you want to do business. The government will likely keep most of the oil profits… if not all of the profits. Despite the obvious, TransGlobe continues to expand heavily in Egypt.
*Disclosure: No position in TGA. I have no intention of shorting it.
