Veris Gold: The end is near…

Yukon Gold is an illiquid $58M market cap gold miner with an expensive borrow (over 10%).  I’ve mentioned Yukon-Nevada Gold / Veris Gold 3 times in the past.  The most relevant post explains why it is a value trap.

On Jan 29, 2014 it issued a press release saying that it defaulted on its gold loan with Deutsche Bank (press release).  The company blames it on a fire that happened on Dec. 19, 2013.  This fire was reported in the Dec 30, 2013 press release entitled “Veris Gold Corp. Reports on Production and Toll Milling for November“.  Apparently the company did not think that the fire was important enough to report right away.  It’s not like defaulting on your debt is a big deal right?

In any case, fire or no fire, I think that Veris Gold would have defaulted anyways.  The mine should never have been restarted and has continually lost money since.

*Disclosure:  I am short common shares of Veris Gold.  In hindsight I should have shorted this earlier (e.g. a year and a half ago).

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Shorting VIC (ValueInvestorsClub.com), PRXI, PVG

Occasionally, I find myself shorting long ideas that are written up on VIC (ValueInvestorsClub.com).  VIC is an exclusive website where a mix of professional money managers and non-Wall Streeters post investment ideas.  Non-members like myself can sign up for a guest account and see ideas with a 45-day delay.

Here are situations where I have taken the opposite side of their trades.

Mistakes that institutional investors should have avoided

Here are two: RX Gold and Veris Gold

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.