Kermode Resources: The joy of hyper-speculation
Kermode Resources (KLM.V) plunged 25% on Friday. From $0.02 to $0.015. I’m in at $0.02 and I am not in the least bit worried. (My at-market order today was filled at $0.02…missed the low.)
I have a little tiny bit of my investments in what I call hyper speculative shares. Penny dreadfuls, being another term for it. These are pure crapshoots. But, and it is a big but, it is very inexpensive to establish a position and the share price can rocket if there is a glimmer of good news.
That said, you need an edge. In the case of KLM, my edge is that I have been following and have gotten to know Peter Bell, its new CEO, over the past few years.
Peter is a math finance guy. He is also an astute follower and commentator on the junior market. He is a prolific, if sometimes surreal, writer with real insights into how companies work and how the market works. Plus he is a student of the history of the junior market place and the great promoters.
Peter and lawyer, eminence grise, Peter Clausi, took Kermode over in a fairly unfriendly boardroom scrape. Water under the bridge, but they got a husk of a listed company with a bare treasury and no projects worth talking about. In a down market.
All of which Peter told me over a beer in a very dark corner in Victoria’s venerable Union Club. Peter is just enough of a young fogey - early 30s - that he’s been a member for a while.
There is a plan. It is the same plan promoters have used for 150 years. Acquire projects or options on projects in exchange for shares, warrants and, for all I know, options in Kermode. This is pure bootstrap. Right now the company’s shares are worth next to nothing and there are a lot (about 110,000,000) out.
The proposition Peter is making to the vendors is that if they give Kermode a stake in their property and do some work on that property, they are going to get a lot of shares and those shares, because the property is prospective and will have work done on it, will become more valuable. If that happens the vendor makes out like a bandit and the shares will begin their long trajectory to the moon. Or, well, at least, treetop level.
Risky? You bet. But a bootstrap company can minimize the risk by finding overlooked but promising projects and by keeping its expenses as close to zero cash as possible. Officers defer salaries, there are no expense accounts, no office. What cash there is goes to listing fees and that is about it.
Peter’s secret weapon is the other Peter, Peter Clausi. Clausi is something of a switchboard in the junior mining world. He sees a lot of deals, arranges financings, does commentary and has a laptop full of bullet proof legal “precedents” - fancy term for document templates - to “paper” almost any deal. He also has years of experience in the junior mining sector.
Bell did a deal to acquire the Little Bay copper project in Newfoundland from the Grassroots Prospecting group at the end of April in an all share transaction.
This transaction is in addition to the company’s earlier deal with Gold Range to lease the Rye Patch Silver Mine in Nevada. (You can read all about the Rye Patch deal and property in Keiran Robertson’s excellent article over at Equity Guru https://equity.guru/2022/03/16/kermode-resources-klm-v-a-good-day-to-rye/ )
So, my hyper-speculative bet on KLM was based on my respect for Peter Bell’s brain and his analytic capacity and his energy combined with Peter Clausi’s experience, deal flow and legal expertise. But now Kermode has two prospective properties. Which means Peter will have newsflow. And he has the attention of Chris Perry over at Equity Guru.
Peter has some pretty serious work to do. It is annoying that there is - at least on a few searches - no Kermode Resources website (Well there is a proto site: linktr.ee/kermoderesources - but it is not up to much.). Which means finding press releases is hit and miss. (On the other hand, you can read Peter’s play by play at CEO.CA https://ceo.ca/klm. Hugely entertaining!) Plus interviews and so on. But a more coherent communications strategy needs to happen before the market is going to take KLM seriously. The work of an afternoon. (Actually, I checked with Peter on the website and he told me the “real'' website is on hold while Kermode, “rebrands and rebuilds”.)
Getting the communications in order is important, but, more important is having something to communicate. There are lots of pictures of very shiny rock from Little Bay. Shiny rock is a good thing but it does not really set off the market. Rather, if anything, it pushes the market in the direction the market wants to go.
The trigger event for KLM will be one news release with significant, assayed, results.
Which is where the hyper-speculation thesis kicks in. At the moment, you can buy 100,000 KLM shares for $2000. Money which would be 100% at risk. However, it is almost certain that Peter will rebrand, get a website, put out press releases and report assayed results. Just doing that should add value to the company and the shares should trade higher. (And, yes, I do know the market sucks.)
A few decent assays from Little Bay or Rye Patch and, very quickly, the penny stock becomes the $0.10 stock.
Not for the faint of heart. Fortune favours the brave!
Disclosure: Peter Bell is a friend. I own shares in Kermode Resources (KLM.V) and may buy more or sell some or all at any time. This is not investment advice. Do your own due diligence.