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The Green River Intrinsic Value fund is a relatively concentrated, long/short equity strategy. The fund seeks long-term absolute returns investing in deeply mispriced securities which are identified through a careful process of methodical fundamental research and due diligence.
  • A Response To Meson's Latest Attack On OMEX 5 comments
    Mar 13, 2014 9:30 AM | about stocks: OMEX

    Morris has it all wrong again. He accuses Odyssey Marine of ramping up its PR machine to attract shareholder capital with false claims of hope around SS CA and Oceanica. Yet rational and balanced investors have concluded, ironically, that it is Morris who is guilty of trying to manipulate shareholders with deceptive PR.

    What Ryan Morris's work lacks in analysis, it makes up in strength of conviction. Do you remember when he told us "The CEO has publicly stated they do not have enough cash to operate through the end of 2014" or "FWG [Ferlita, Walsh & Gonzalez P.A.] has also been investigated numerous times by the Public Company Accounting Oversight Board (the organization that audits auditors)" or "Underwater Phosphate mining has never been completed in history" or "We believe Oceanica is not viable and worthless" or "John Morris is a full-time consultant." He's made so many utterly definitive, yet factually incorrect statements, it's hard to decide which examples to quote. Still, he repeats the same tricks over and again, hoping each time that the market will believe his slanted story.

    Odyssey has done nothing to warrant Morris's latest high conviction tirade. While Morris claims that the company has put it's PR-distortion techniques into overdrive, the truth is that OMEX simply issued a press release saying they'd been selected to salvage the SS CA. That's it. The end. The company never made claims about any gold on the SS Central America - whether it be passenger or Army gold. Read the press release and judge for yourself.

    Morris claims that Craig Hallum "reported speculative and unsubstantiated data that the ship may contain a secret shipment of army gold worth as much as $500 million." But Craig Hallum made not a single mention of army gold in its report.

    My blog seems to be the primary catalyst for Morris's outburst, yet this blog was an honest attempt at a balanced accounting of what might be found in the SS CA debris field. The blog clearly acknowledges the inherent uncertainty involved in the salvage; "I believe OMEX will ultimately net somewhere between $25 and $100mn from the excavation, but the range of possible outcomes runs from zero to north of $500mn." I also noted that the existence of the Army shipment "remains controversial," and that "the worst case scenario is that there is no gold to be recovered." There was nothing definitive in my wording, and it was all backed by legitimate sources. Morris, on the other hand, shows no doubt about the outcome, stating, "there is clearly little to no treasure left aboard." How's that for conviction?

    The Receiver doesn't have as much conviction as Morris, but does seem better placed to give us an estimate as to what might be onboard the SS CA. That Receiver was quoted estimating that $93,000 worth of commercial gold and between $250,000 and $1,280,000 worth of passenger gold lay in the wreckage (1857 values). The small amount of commercial gold, which equates to roughly 4,650 oz. might be worth anywhere between $6mn and $16mn if it's in the form of ingot, more if it's in the form of coinage. The passenger gold would be worth roughly $60mn at the low end and $320mn at the high end of the Receiver's estimate, assuming that 90% of passenger gold was in the form of coin.

    Despite Morris's assertions to the contrary, none of us knows how much gold is still in the wreckage of the SS CA. There's good reason to assume rescued passengers carried very little to no gold with them when they left the SS CA. When the Marine (which carried the bulk of rescued passengers) was rescued by a tug, the SS CA passengers couldn't even come up with the five-hundred dollar fee (25 double eagle coins) to pay the tug's captain (they eventually scraped together just $300). The Marine's captain noted, "that everyone had left what money they had on the sinking steamer" (Kinder pg. 197). Bob Evans, Chief Historian for Columbus Exploration, spent his career doing excruciatingly detailed work understanding the SS CA and its passengers. He felt that passenger gold likely approximated the commercial shipment. Yet Ryan Morris believes he knows better based on his few days undertaking a, "detailed analysis of the life boats and the 150+ people who were able to evacuate SS Central America safely."

    Though it may be a bit of a long-shot, we can't dismiss the possibility that the Army cache may be on board. Dr. Charles Herendorf, Professor Emeritus of Oceanography at The Ohio State University, and former Chief Scientist with Columbus Exploration was on board the ship with Thompson during each of the three years they conducted salvage operations. Dr. Herendorf also holds a copy of the 1971 letter from the Center of Military History which acknowledges the Army shipment. BTW, this isn't a brief memo. It's a long, detailed letter which notes how this gold shipment was boxed, what the boxes looked like, and where it might be found.

    Professor Herendorf explained that there would have to be a very thorough excavation to access the area where he believes the gold would lie. He reiterated that Columbus Exploration only looked at five percent of the wreckage in any detail during the three year excavation, so there is much work left to be done. It's also worth noting that Judge Kellam awarded Columbus Exploration 100 percent of this Army gold, should it be recovered, in his 1996 ruling (Kinder pg. 505).

    Regardless, the fact is that we can only make guesses. It's pointless to argue how much gold will be recovered because none of us knows the correct answer. Yet for Morris to declare that someone is definitively wrong based on his one-sided, circumstantial evidence displays an enormous amount of arrogance. Rather than get into a tit-for-tat, I'm content to let the salvage speak for itself. We'll have our answer in a few months.

    On the subject of Oceanica, Morris again displays an embarrassing lack of understanding:

    "Oceanica's initial assay results further appear to be far worse than even we had imagined with <20% P2O5 concentrations. The gross tonnage is less important in mining, the quality of the ore is key to the economics. We understand <20% P2O5 concentrations would be considered "waste clay" and the standard grade is 32-33% P2O5 for much less expensive on-shore mining."

    The 18.5% to 20.1% average grades that describe Oceanica are some of the best that you'll find among modern-day mining endeavors. Look at the $4bn Wa'ad Al-Shimal project in which Mosaic just invested $1bn. This "world-class" mine will produce grades between 17% and 19.6%. Mosaic invested in a smaller high-grade mine in Bayovar, Peru where grades were said to range between 12% and 18%. That mine was valued at $1bn. Arianne Phosphate is starting a mine with an average grade of 7.1%. That mine has an NPV of $1.9bn, but capital and operating costs are so high that there's little room for equity value. Eagle Star Minerals noted its "high-grade phosphate" drilling results in Chile where they characterized high grade mineralization as 10% or greater P2O5 concentrations.

    Morris is obviously deeply mistaken in portraying 18-20% rock as "waste clay." It's true that Phosphate rock can be found in higher concentration (though usually in older mines), but it is also actively mined in much lower concentrations. Perhaps he is confused because most mines characterize their tonnage in a standard concentration format (roughly 32%) as they will beneficiate the raw rock to that level before selling it.

    One top industry consultant, with whom I exchanged emails, was quick to characterize Oceanica as a 300Mt project at 32% grade (19%/32% = 59% * 505Mt). If we assume a price/ton of $100, not allowing for the fact that phosphate has had a major rally in the last few months (finished products up as much as 33% off the bottom), this would equate to approximately $30bn in sales over the project's lifetime. Further, because this project is likely to be low-cost, the equity value could be substantial. This said, I believe that ultimately Oceanica will prove to be quite a bit larger than 505Mt.

    The last point regarding Oceanica is that Ryan Morris is likely less qualified to assess the viability of the resource than the independent Qualified Person (QP) who signed Oceanica's preliminary assessment. According to Wikipedia, a Mineral Resource is, "a concentration or occurrence of material of intrinsic economic interest in or on the earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction." So, the QP is making a statement about not only the size and grading of the deposit but also to the likelihood of its economic viability. How many mineral assessments has Ryan Morris authored as a QP? Morris's statements that the project is worthless and not viable carry an abundance of conviction but precious little weight.

    Disclosure: I am long OMEX.

    Stocks: OMEX
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Comments (5)
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  • Papaoomowmow
    , contributor
    Comments (371) | Send Message
    Superb, GR!


    ....looks like you are stuck with the "refuting Morris" job....


    that must get old in a hurry ; - )
    13 Mar 2014, 10:42 AM Reply Like
  • Green River Asset
    , contributor
    Comments (309) | Send Message
    Author’s reply » Thk u Papa. I'm happy to pass the job onto anyone who'd like it.
    13 Mar 2014, 01:28 PM Reply Like
  • Green River Asset
    , contributor
    Comments (309) | Send Message
    Author’s reply » A couple additional points:


    Morris says “the entire site was thoroughly surveyed” while the Receiver and OMEX say in their press release “less than 5% of the site was investigated.” Can he explain this discrepancy?


    Anyone associated with Columbus Exploration was instructed by Thompson to deny the existence of the Army gold. Thompson only loosened up on his rules around 1993 after some court victories.


    Morris’s quotes from Judge Sheeran are taken out of context. If we look at some of the wording around Morris’s two quotes, the Judge’s point is better understood. “Likewise, Mr. Evans’ valuation of the Down Treasure at $150 million is also without merit. At this juncture, given the history of the past several years, the Down Treasure is more like a person holding a lottery ticket, with PowerBall type odds against him. While that could change, it simply cannot under the current, and long-standing, state of affairs.” Judge Sheeran was arguing for the appointment of a Receiver and was making the point that the odds of recovery without appointing a Receiver to manage RLP’s assets were remote. He noted that the long odds could change if the state of affairs changed. None of this context was important enough for Morris to make note of, however. It didn’t really serve his purpose.


    Morris identifies the Williamson plaintiffs as SS CA investors. He doesn’t seem to realize that these were the Sonar techs that Thompson hired. They have good reason to want their claim paid before trying to recover the Down Treasure – they won’t get paid for Down Treasure (or their percentage is relatively small if they do retain some share) so they want the certainty of the money the Receiver has today rather than be paid with uncertain proceeds later.


    Morris states, “Do you think if there was an army stash of 15+ tons of gold on board the US government would be transporting it in unrefined ingot rocks and tiny coins?” According to the CMH, the shipment would have been in the form of ingot. I don’t really understand why this would be so incredible to Morris. The commercial shipment was in the form of ingot and coin.


    In Morris’s section 6. He asserts that Multiple Historic Documents from 1857 Confirm No Army Gold. Well, that’s the point, right? This was a secret shipment of gold after all. If it was published in the New York Herald it would hardly be a secret would it?


    Later Morris asks, “if the Army had 20 tons of gold sitting on the bottom of the ocean and the government knew about it, why wouldn't the Navy just go get it?” He then asserts that,”The Navy has far more sophistication and salvage ability than Odyssey.” First, the record of the gold could have easily been lost in the sands of time. Second, it might surprise Mr. Morris to know that the military has called on Odyssey to help with multiple salvages in the past. Odyssey has met with success helping with these recoveries on multiple occasions. Of course the military has deep pockets and great equipment, but the fact is that they don’t spend all of their time doing the work that Odyssey does, so they don’t have all the man-hours and expertise that Odyssey has.
    13 Mar 2014, 01:11 PM Reply Like
  • Long_OMEX
    , contributor
    Comments (21) | Send Message
    You should also include what the Judge really said about the SS CA site….see:



    including (among others):


    “…this Court hopes to greatly encourage the Receiver to make every effort to retrieve the
    Down Treasure, not abandon it. And, given the rudderless operations that for years now
    have preceded the Receiver’s appointment this day, this Court has long wondered why no
    other salvors have ever appeared…”




    "...the opportunity to see so many shake their heads in awe..."
    13 Mar 2014, 01:30 PM Reply Like
  • Green River Asset
    , contributor
    Comments (309) | Send Message
    Author’s reply » Thanks for that, Long.
    13 Mar 2014, 01:32 PM Reply Like
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