Silver Standard sells shares of Pretium in secondary offering

Here is Pretium’s press release.  Silver Standard seems to be in a strong financing position given that the company has around $671M in current assets (versus $333M in total liabilities), a producing mine, and a book value of $837M.  Instead of investing this capital in producing assets, the company is selling a mining asset (part of its stake in Pretium) for cash.  In my opinion, Silver Standard is not making a mistake.

*Disclosure:  I am short Pretium common shares and will be holding onto my position.  I don’t follow Silver Standard and have no interest in it.

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CTGO: Closed my position

Contango Ore is a company that should be releasing news but isn’t.  The reason to own it is if you think that it has a promising deposit that has very good chances of turning into a mine.  In that scenario, the logical next steps for CORE are:

1. Complete a resource estimate and then a pre-feasibility study.
2. Start hiring people with mine engineering experience.
3. Start working on financing.  The company could bring in a partner that brings mining experience and some financing, e.g. seniors like Goldcorp, Agnico Eagle, Teck, etc.
4. Perform additional drilling and/or announce plans for the next exploration season.

The lack of news makes me very antsy.  Something may not be right, e.g. the company has had difficulty selling the deposit or raising capital because the deposit is a dud.

CACC Part 3: Why Credit Acceptance is brilliant

In my opinion, Credit Acceptance has excellent execution across all areas of its operations:

1. Creating value for dealerships.
2. Servicing loans efficiently and keeping costs low.
3. Learning how to underwrite well across a wide range of situations.
4. Being disciplined in underwriting.

Very few companies do all four of these things well.

CACC Part 2: The fundamentals of subprime auto financing

Originally, there was a segment of subprime auto financing that was a fairly low-risk for dealers extending credit to their customers.  If the downpayment is equal to what the dealer paid for a car, then risk management is much simpler and underwriting skill doesn’t matter much.  The dealer could lend money to even the riskiest customers.  Dealers could break even on the initial sale and hope to profit from the financing of the car.

CACC Part 1: A wonderful business buying back its shares

Credit Acceptance Corporation is a $2.7B company that finances and services subprime auto loans.  Brett A. Roberts has generated an impressive track record since becoming CEO in January 2002.  The share price, book value per share, and earnings per share (not shown) have grown at impressive rates.

The share count has dropped from 43.3M (diluted) at YE2002 to 24.0M at YE2013.  The company continues to repurchase shares through open market repurchases and tender offers, sometimes issuing debt to repurchase shares.

I’m very impressed by the way the CEO communicates with shareholders.  The company website contains the CEO’s letters to shareholders and answers to shareholder questions.  The shareholder letters explains the risks in the business, explains the CEO’s thinking on risk and underwriting quality, explains distortions caused by GAAP accounting, and helps investors to understand the business.  It is obvious that Brett Roberts is influenced by Warren Buffett in his writings.

Yongye encoutering some problems with “logistics”

Yongye filed two interesting 8-Ks on June 23 (last week) and 30 (today).  The latest press release states that “the parties are still working on the logistics to complete the amended going private transaction”.  What does the press release mean by “working on the logistics”?

Alderon suspends work on its Kami project

Here’s my interpretation of Alderon’s June 30, 2014 press release (PDF) issued today.  The key piece of material information is sandwiched between two slices of public relations spin: