Oreninc Blog

Oreninc Blog

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Interview Series: Exclusive Interview with Mickey Fulp

Interview Series: Exclusive Interview with Mickey Fulp


We are kicking off our new interview series with the Mercenary Geologist, Mickey Fulp. On a bi-weekly basis, we will be speaking to Mickey and discuss with him developments in the...
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Brain Drain in the Mining Business

We are losing young people in the mining business and without them, the industry has no future. On the bright side, the young people who are sticking it out through the hellish situation could be in for a great recovery."

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The Poor Are Liquidated

The difference between the rich and the poor is the poor are liquidated, and in this case Rio Tinto is doing the liquidating of the poor at the bottom of the market. 

Inova Resources, we barely knew you.

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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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Eaten at Both Ends

Being a small cap investor in this market is hell and that’s because your portfolio is being eaten at both ends. 

At one end, your winners are being looked at like raw sushi by majors/mid-tier producers, who know a deal when they see it and know that if you buy in a down market you do not overpay. I think we are going to see lots of companies that could have been real winners go away for pennies on the dollar.  Imagine a whole fresh copper river salmon going for the price of six salmon rolls (and that’s at the cheap sushi place around the corner from Teck’s office on Bentel). 

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So You’re the Guys That Rank the Bankers

I was stuck on a long layover that turned into a longer layover in Houston, and I pitched Oreninc to the CEO of a mid-tier oil and gas company who was sitting a row ahead of me on the plane. 

After listening to me talk about Oreninc, he had four key points in response:
 
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