Is Investor Relations “pushing rope”? Freeze the rope and you can push it in any direction you like, yes, including up hill.
Pushing rope, a wet noodle, water up hill – exercises in futility. In the current junior stock market climate, I’ve heard and used these analogies when querying whether to invest hard dollars into Investor Relations for a small public company, particularly in the mining sector.
Money is so tight, cuts made, programs culled or shut down. And, on the other side, investors have zero to limited appetite. They may be courteous to an old friend, be polite enough or don’t have anything else to do but listen to a story, more likely if they hear it over lunch at your expense.
Will they buy your stock?
The fabled PDAC is approaching. In Toronto, Canada, March 6-9 http://www.pdac.ca/convention, junior mining exploration and production companies will spend precious IR dollars to rent a booth, share their stories and hope for a return on their investment of hard dollars, significant preparation and management time. In days of yore, companies would only have to manage their order books, “sorry Jake, I had to cut your allocation, we were over subscribed. I’m just glad I could get you any.” (Even in the hay days, wiser veterans I know would have taken the money anyway as you never know when you’re going to get the next chance to raise cash, or as a morning letter writer I follow signs off, “take the money” – thanks Ed http://pennockideahub.com/ ). In the upside of the “super cycle”, there was a decidedly different tone.
At the conclusion of PDAC 2015, we wrote, “It’s Not Different this Time”. http://www.kappa-advisors.com/pdac-2015-its-not-different-this-time/
We continue to hold to that opinion. The farther they rise, the harder they fall. The corollary tends to be true but not necessarily with the same force. Gravity needs to be overcome on the way up. Nonetheless, with next to zero exploration being conducted in these dire times, when demand recovers, there will be a panic to fill the empty pipeline.
As we lead into PDAC 2016, we’ve seen Franco Nevada finance US$500m+ on the royalty side, and more encouraging are the several small ex and near production gold mines which have recently secured capital. Gold is attracting attention as a growing chorus is calling that it has bottomed. Graphite and other “electric metals” are seeing selective interest. Uranium? Expecting strength any time now. Copper and other base commodities continue to struggle with the vagaries of global growth scenarios. (Full disclosure: the writer is long both gold and graphite).
Back to PDAC, IR and stocks: The wisdom speaks, if you freeze the rope, you can easily push it in any direction you want.
Well, the truth is, when it comes to stocks, there is a huge number of living dead on the TSX-V which you can’t push anywhere. They should be kicked off the exchange and ashes scattered in the place of their choosing.
The other and more important truth is that there are several stocks run by strong management teams holding sound projects. They have been ignored and washed out with the bath water. Whenever they have made progress and their stock prices reflect it, a poor, beaten up speculator hits the bid to cover losses on the many losers in the portfolio, or just to pay the household bills. It has been quite a trap in the junior mining space.
The pain of 2008 is now eight (!) years away, although we all know it still lingers…
Dare I say “yes”?, now is the time for the soundly managed, bright light companies to invest in IR and re-show themselves, that the turn is near?
On the down side, attendance and tone at both the January Roundup in Vancouver and the February Mining Indaba in Cape Town were poor.
Markets led into the 2015 PDAC with some financing activity and signs of life. It fizzled. Here we are again in 2016. …
