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Orenthink

Market Correlation...In Your Distant Past

We went from a period of complete market correlation, where everything traded up and down on the same issues, to the current market where nothing makes much sense. 

Exhibit A: Freight rates have gone up 4-8 times for iron ore vessels over the last year and BHP/Rio/Vale are shipping lots of iron ore and getting good prices for it. At the same time, Vale is trading for $16 per share (which is a stupid-low price for that amount of profit) and iron ore juniors are trading for even less. Clearly, the freight rate got the message and someone is demanding ore, but the equity market did not get the memo. 

Exhibit B: Gold juniors are trading for less than $5 per ounce of reserves, but the price of gold is still over $1,300. If gold is a storehouse of value, would it not make sense to buy it in the ground where it is nice, safe, and can wait to be mined until it is needed? Right now, gold junior prices have no connection to the actual price of gold.

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Northern Dynasty and Option Value

I was at the Cambridge House Toronto show last week talking about how cheap Northern Dynasty was, and this week Anglo pulls out of the project. 

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The reasons why I think Northern Dynasty is cheap still hold:

 

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Orenthink: Recovery

The step you hit one step after rock bottom.

I have been accused of writing everything I write in religious and food terms, so let’s start talking about the public markets in addiction terms.

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Rollbacks

Everyone is looking for solutions to this crisis.

One of the popular ones is the concept of a rollback; theoretically, if you roll back a company you end up with less shares and more value per share. So if you had 100m share at 5 cents per share outstanding and you did a 10x roll back, you end up with 10m shares at 50 cents per share. Do that a couple of times with a $2-4m raise each time and the original shareholders own 10% of the company (maybe). Rollbacks rarely work and the reason is simple: usually, they are used as a bandaid over a heart that needs a quad bypass. 

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When You Cannot Act, Plan

Which are you: a Mack truck, a deer, or a planner? Figure it out.

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