In terms of impact on share price, CMR is currently rated at such a ridiculously low value, that any type of analysis is not possible. Once financing is arranged, even without the details, one could safely assume:
1. Technology works.
2. Plant works.
Ralph, is this really so?
If the current valuation is 'ridiculously low' why doesn't some sharp cookie come in and snap up the whole company. Boone Pickens did that to Gulf Oil in the 80's right? It was cheaper to buy oil on Wall Street than to drill for it.
As noted, I hope they pull it off. I'm already out about 150k US and if they don't pull it off, there goes another 33k or so [and for the record I haven't sold any shares but will probably be forced to partially liquidate for school fees in August (look for a rally in Sept!) Anyhow, I hope it goes to 200.
However:
1) Has the company ever made a profit?
2) Other than 1 bulk sample, has there been any production
3) Does the management team have experience in running a refinery or a mine? Not part time consultants or directors, but any of the main players.
4) You will note that recently WMC reported significant drill results in WA. WMC, as I recall, built a Ni company out of nothing, starting in the 60's and has been profitable for over 20 years (corrections welcomed). Anyhow, WMC has a proven track record. How much did the stock move, $2, because there is a big difference between a 'resource' in the ground and an operating mine. How many companies with promising resources never become profitable mines?
Let's review probability theory. Say it's 50-50 for the refinery, and the 95% confidence interval contains both 0 (failure) and 100 (smashing success). Assume for the moment, that cash flow from the refinery will support a share price of $2. 50% probability gives you $1, time cost of money (before production realized) takes you down to current price.
One could (and it would be nice if some fat cat analyst in Montreal or Toronto would) calculate similar valuations for Maskwa (500 mil US ore value, production in 2 years, production to start only if refinery successful, 60 million shares, likelihood of succesful production 50% (for sake of argument) [even with all those assumptions Maskwa seems to be worth at least 1.25, so market seems to be really discounting success at Maskwa, why?]
Anyhow, I would argue that market action (stable price in .70s, no takeover attempts) argues that price is realistic.
Anything the company can do to shift perception of odds ratio of succesful production at Refinery or Maskwa will shift price upward. I again argue that succesful retrofitting, commisioning (whatever) of refinery, succesful negotiation for finance will be reflected with increases in both volume and price.
Days of no volume and downward prices would suggest to me that the situation on the ground has not changed much. |
