Trading, Investing and Timing
I am horrible at timing markets and spotting share price bottoms. A few weeks ago I called Eloro (ELO.T) a buy at $2.67, it fell all the way to $1.67. I made a little money on my trading position in Orezone (ORE.T), buying at $0.83, and selling at $0.92. I bought a small position in Marathon Gold (MOZ.T) for $0.56 and it’s trading at $0.55.
Here is the sad truth, I am really not a “trader”, sliding into a position cheap and selling for a few pennies more than I paid. I wish I was. But I am not.
I dug deep into each of these companies, their deposits and their likely prospects and I very much liked what I saw. Each of the companies has huge potential, each is a very attractive buyout target and each is very well-managed. In fact, while no one was ever fired for taking a profit, I am regretting my sale of ORE.
Trading stock is all about getting the timing right. I know people who trade successfully based largely on how a stock is charting and paying next to no attention to what the company is doing or what its potential is. There are pro traders and algos which buy and sell shares purely on price signals. They are effectively anti-investors who make their money reading the price signals real investors are actually sending. While CEOs hate them, these traders are important to companies as they provide liquidity in often very small volume shares.
Investors are playing the longer game. Frustrating as it is, the reality is going from a reconnaissance hole to a mine often takes a decade. ELO is actually remarkable in that it has taken less than 3 years at Iska Iska to go from a few exploration holes to a 43-101 Mineral Resource estimate of over a billion silver equivalent ounces. With much more to come and significant steps taken on metallurgy and modern mining technology. Plus a largely untested tin showing.
From the investor’s point of view, day-to-day share price, while often depressing, is very much not the game. The game is finding good companies at a price which does not reflect their long-term value. Essentially, the investor is looking for situations in which you can buy shares at a fraction of what their prospective value is likely to be. It is still a gamble and there are a few shares in my spreadsheets which have lost 90% of their value. (But, to be fair, they were pure exploration stories and, unless they run out of money, may yet hit the valuable rock their promoters are pretty sure is there somewhere.)
ORE is actually producing gold as I write. And lots of it. In its last Quarterly production report October 6th, it reported over 30,000 ounces produced and is on target for an annual production of 140,000 plus ounces. This last quarter was the rainy season so production was expected to be down a bit. But the company is socking away money, paying down debt and upgrading its production facilities. It is trading at less than a dollar largely due to worries about the political environment in Burkina Faso. Worries which seem to be fading. The somewhat depressed gold price is not helping.
I wrote about MOZ last week and don’t have a lot to add. It is planning to produce gold in Q1 2025 and there is no reason to doubt that will happen. It is well financed and has a very strong strategic investor in Franco Nevada. It is in the “orphan” phase of the Lassonde curve, but its 4 Moz of 43-101 MRE gold, with expansion likely, has to put MOZ at the top of any number of larger companies’ acquisition lists.
ELO has clawed its way back to almost $2.00 on very light trading volumes. Tom Larsen was quoted as saying, in a note to a shareholder, “Eloro came off quickly in early September due to certain margin calls, and redemption of resource funds.” With that selling out of the way, ELO has advanced smartly from a low of $1.69 on October 3 to its close October 10 of $1.96. If I was “trading” Eloro, depending on my entry points, I might be delighted or depressed at the share price action. But I am not. I’m taking any spare cash I have and buying ELO at market.
The ELO payoff may take years or we could be done by Christmas if a big player wanted to bid for the sure thing silver or the potential bonanza tin or both. One thing I do know, ELO is going to eventually sell for rather more than my $4.00 average cost per share. 3X would be great but disappointing. 10X would be fantastic but a bit of a surprise.
Charlie Munger said, “The big money is not in the buying and selling ... but in the waiting.”
The investor is all about the waiting. Just hoping Charlie is right.
[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.
I currently hold shares in MOZ, ORE and ELO. Holding for now, may add a bit. Waiting.]