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James Emerson, CFA

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  • 4 Cash Positive Small Cap Stocks Keeping Debt To A Minimum [View article]
    The screen could be improved by adding a condition for revenues to be greater than $0. That would eliminate companies like TRX which have raised equity capital but are burning through cash.
    Aug 29 02:07 PM | 1 Like Like |Link to Comment
  • The Bullish Case For Tanzanian Royalty Exploration [View article]
    A NI43-101 compliant resource estimate is just a document. It is exactly what it purports to be an ESTIMATE. That estimate needs to be prepared in accordance with certain standards and attested to by a qualified person. There is no government oversight or verification of the methods and test results. Investors are relying on the veracity of the qualified person. Note that TRX's qualified person is located outside of Canadian jurisdiction. Nor does the qualified person work for a firm whose business would be destroyed if its reputation where tarnished. Think Arthur Anderson and Enron. I am not saying that there is fraud. However, the likelihood of error, misrepresentation or fraud is greater if the qualified person would suffer no real consequences from making a false attestation. All other things being equal, having a Canadian geologist at an international firm carries more weight than having a foreign internal geologist. Compare to how institutional investors perform due diligence on alternative investments by examining the quality and pedigree of the audit firm.
    Jun 17 12:19 PM | Likes Like |Link to Comment
  • Tanzanian Royalty And The 'New Frontier' Of Mining [View article]
    Just curious, how much illegal naked short selling do you think is going on in a stock that trades a mere 600K shares per day, has essentially no fails to deliver, and is generally available to borrow? I believe that GDX, a passive index fund, holds over 3 million shares. I am confident that they freely lend their holdings in order to enhance the returns to the fund.
    May 29 08:23 PM | Likes Like |Link to Comment
  • A Unique Class Of Preferreds: The Perfect Income Security? [View article]
    Pfd stocks represent permanent capital and margin is short term variable rate financing. From the perspective of the fund if short term rates rise, the cost of borrowing on margin will increase. With pfd stock, the cost of financing is fixed. To determine whether it is economical to call the pfds, look at the spread versus long rates.
    May 27 12:37 PM | Likes Like |Link to Comment
  • Tanzanian Royalty And The 'New Frontier' Of Mining [View article]
    First of all a National Instrument 43-101 report is just a report. It meets certain standards and the signatory is a qualified person. Compliance with 43-101 standards is not a validation of the information contained in the report. Additionally, the qualified person for the TRX reports is located outside of Canadian jurisdiction rendering that imprimatur somewhat meaningless.

    The company did that math for you in the preliminary economic assessment.
    May 23 01:47 PM | Likes Like |Link to Comment
  • 30% Undervalued, Staples May Acquire Office Depot, OfficeMax [View article]
    FTC already blocked a SPLS ODP combination on anit-trust grounds in the 90s. It is unlikely that SPLS would revisit a transaction.
    Mar 23 12:50 PM | 2 Likes Like |Link to Comment
  • Here's Why Tanzanian Royalty Will Continue Outperforming Peers [View article]
    @ sonnygold

    Top 4 reasons TRX is not attractive for a lender.
    1) No Cash Flow. It is hard to pay the interest let alone the principal without it. Production at Kigosi is nil. The company does not even have a mining license for the property. TRX has been stating that the license would be forthcoming for quite some time. Yet, TRX just recently commenced the PEA which is a prerequisite to obtain a license. In my opinion, management was either misreprenting the status of the license or incompetent in their handling of the license application. Royalties at Kabanga are nil as well. Chairmain Sinclair as much as said that Jichuan isn't going to do anything right now. I think his exact words when asked about a production decision were "there is no contractual obligation". So my read is that Jichuan can take their time and wait to see if nickel rebounds.

    2) No collateral. Gold in the ground doesn't count since it costs money to extract. The Buckreef licenses were purchased for $3 million. There is no way a lender will finance a $250 million project with a mere $3 million in equity. TRX needs to produce a bankable feasibility study and raise cash in order to secure a loan. Look at Bulyanhulu, a decade ago the preliminary cost was about $45 million. The best TRX can muster between money in the bank and proceeds from the exercise of warrants is that amount. I'm sure that things are more expensive now. Switch perspective, if it were so easy to borrow money for this project would STAMICO have sold a 55% interest to TRX for $3 million? TRX is using third parties to do the vast majority of the work. STAMICO could have easily done the same. There is a reason they resold the license after IAM Gold abandoned it.

    3) No track record as a miner. No track record as a royalty company. Zero revenue period.

    Finally, what happened to Mr. Sinclair's no debt stance?
    Mar 15 01:42 PM | 3 Likes Like |Link to Comment
  • Here's Why Tanzanian Royalty Will Continue Outperforming Peers [View article]
    @ciga_sai Mr. Patel's calls on this stock have been terrible. On Aug. 23, 2011 he recommended it when the stock was at $5.82. After his November recommendation the stock traded down to $2.11. My track record on this stock blows his away.

    Mr. Patel is right the stock is up about 300% off its lows. That is not the time I would enter a long position. Still has a long way to go to get back to the $5.82 level.

    In terms of the fundamentals, I don't think anything has really changed since my last article and the other comments I've made.
    The main positive is that with the stock trading above $4 the outstanding warrants are in the money. The company will probably receive another $20 million when they are exercised. The total probably funds the company through most of the Buckreef feasibility studies.

    The bull case for this stock seems to be a repetition of and blind acceptance of managements assertions. I listened to the AGM webcast. Management didn't answer any of the tough questions.

    The flaw in Mr. Patel's balance sheet analysis is that he doesn't account for TRX's contractual commitments to the Buckreef project. To date management has yet to quantify that amount. The AGM presentation made nebulous references to potential lenders and asset based loans.

    The bottom line is TRX paid $3 million for Buckreef at the end of 2010 and drilled a few more holes. This is the self described anchor project. The way I look at stocks, a $3 million asset and $27 million of cash does not warrant a $460 million market cap.

    Mar 13 01:33 AM | 1 Like Like |Link to Comment
  • Tanzanian Royalty And The 'New Frontier' Of Mining [View article]
    The fair market value of Buckreef is $3 million. TRX has $30 million of cash. STAMICO estimates that the project will cost $280 million. To me that doesn't seem like enough collateral for a $250 million loan.

    Anyway none of the banks or quasi-government organizations that Mr. Sinclair alludes to are likely to make a loan on this project. I challenge you to name one.
    Dec 11 12:34 PM | Likes Like |Link to Comment
  • The Bullish Case For Tanzanian Royalty Exploration [View article]
    No that is exactly what he has invested in TRX. He received shares in TRX when his company merged into TRX. He now has fewer shares than at the time of the merger, including those owned by his family. That means that he has sold more shares than he has purchased in private placements. So he has no new money in TRX. Plus he has sold a portion of the shares he received for his company. Therefore, his basis is the cost of the stock in his original company. He has no outstanding loans to the company. In fact he owes the company a small amount of money for expenses related to his website which the company pays.
    Dec 11 11:57 AM | Likes Like |Link to Comment
  • Tanzanian Royalty And The 'New Frontier' Of Mining [View article]
    Interestingly enough, TRX still doesn't have a license to mine Kigosi and that license may never be granted. Simply giving STAMICO an interest in the project equal to what would have been required under the mining act does not guarantee or increase the likelihood that the Tanzanian Government will grant the license. In my opinion, the resource estimate is very disappointing anyway. The grades are mostly below 1 g/t. On most measures of valuation the stock is overvalued. So, I seriously doubt that there is a hostile acquirer lurking about. The shareholder rights plan is essentially meaningless. Then the elephant in the room is the impending dilution that will be required to raise the cash to pay for the Buckreef project.
    Dec 9 01:59 PM | Likes Like |Link to Comment
  • The Bullish Case For Tanzanian Royalty Exploration [View article]
    His cummulative stock purchases over the years may have totaled $21 million; however his net investment is significantly less. Nor did any private placement approach that amount. Mr. Sinclair turned around and sold the stock he purchased with great fanfare He currently holds about $4.5 million of stock. Only Mr. SInclair knows what his cost basis is but my estimate is less than $0.50 per share. To me that represents $2.25 million of his own money in the project, not counting the appreciation in share price since TRX merged with his company.
    Dec 9 01:29 PM | Likes Like |Link to Comment
  • Massive Sell-Off In Tanzanian Royalty Exploration Creates Welcome Buying Opportunity [View article]
    With respect to your points,
    1) How exactly is this company going to generate cash flow? According to the company work has been suspended at its other projects to concentrate on Buckreef. The Kabanga nickel project for which the company might receive royalties from the Chinese company developing it is at least two years from potential production. The Itetemia project is likewise at least two years from potential production. Additionally, the penny stock company that controls that site has been unable to raise the capital to meet its obligations to TRX. Lastly, TRX does not have a mining license for the Kigosi project, let alone a 43-101 compliant resource report.

    2) Just how much is Buckreef going to cost and what is TRX's capital commitment to the STAMICO JV? The company has yet to release any details of that agreement such as required expenditures and milestones. IAMGold thought this project was not economical and said so publically contrary to TRX CEO SInclair's assertion that the reasons were known only to IAMGold. IAMGold wrote off $100 million associated with this project. The cost to develope this project is probably in excess of $100 million and the annual costs of nearby projects in Tanzania are in the $20 million range. TRX only has approximately $30 million in cash, some of which has already been allocated to feasibility studies. Where is the cash to fund this project going to come from? An additional equity offering will be extremely dilutive to current shareholders.

    3) Without any earnings let alone cash flow it is ridiculous to mention dividends. As for short interest, it has been declining and for the most recent period was down 24% in two weeks. The reporting period doesn't even include the most recent drop. I would expect that short interest will have dropped even more when the data is reported. No short squeeze materialized when the stock was over $7 and the short interest was over twice what it is now. Why do you think that covering by shorts will propel this stock higher now that it is trading with a $2 handle? With the exception of people who bought last week, everyone who purchased this stock in the last two years is underwater, many are drowning. If this stock were to start an uptrend, I predict this stock would have significant resistance as shareholders would sell when they got to break even. I doubt that they'll have much of a chance to do that though given the fundamentals.

    When Geier International Strategies purchased its stake, TRX put out a press release trumpeting the buy as a vote of confidence. Although Mr. SInclair didn't acknowledge the reciprocal transaction in a similar manner, the market sure took the sale as a vote of no confidence.
    Nov 14 12:31 AM | 2 Likes Like |Link to Comment
  • Tanzanian Royalty Exploration And The Curious Incident [View article]
    Thanks. Now to find the next one.
    Nov 10 11:47 AM | Likes Like |Link to Comment
  • Tanzanian Royalty And The 'New Frontier' Of Mining [View article]
    Every profitable transaction has the same characteristics, the sale price is higher than the purchase price. TRX presented a very profitable transaction opportunity. If you limit yourself to transactions where the purchase preceeds the sale in time, you reduce your potential profits. Public markets provide participants the opportunity to execute transactions where the sale comes before the purchase. The best investors take advantage of those opportunities as they arise. Long only investing is just one of many strategies available.
    Nov 2 12:00 PM | Likes Like |Link to Comment