Lalit, this is an excerpt of Jay's December News Letter. Philosophical question: what is more important: IPM-like management or Naxos-like ore body? <VBG> Kurt
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Naxos Sold at $7.50 for a 196% Gain.
On May 28, 1990, this newsletter recommended purchase of Naxos Resources at $2.53. On November 15, 1997, we recommended the sale of this stock at $7.50 for a 196% gain. During this time frame I defended this company vigorously in these pages when I felt that the Vancouver Sun unfairly attacked its reputation. I continue to believe that Naxos has been unfairly criticized by the press and I continue to believe the Alberta Stock Exchange was not entirely fair with the company either. There is no doubt that my own reputation has been hurt by defending this most unorthodox junior which most mainstream mining investors view with suspicion at best and most believe is a scam. But despite the potential cost to my business, I spoke in favor of Naxos then, because I believed in the company and in their project and also felt passionately about telling their side of the story. Moreover, I am duty bound to tell you what I believe, even if at times my beliefs are not popular with all my subscribers. What else can I do? If I were to prostitute myself by telling others what they want to hear, even if I disagreed, what good would I be to my subscribers over the longer term? I think you would agree that I must call them as I see them. Right?
I do not believe Naxos is a fraud. However, nearly seven years of experience with this company and a greater understanding of the inadequacies and peculiarities of management, has caused me to change my views with respect to the long term prospects of this company. That is not to say that I no longer believe in the potential of the Franklin Lake property to contain large amounts of precious metals. I continue to believe it has potential. But as I have been saying rather frequently of late, I no longer believe the current management team is capable of advancing the property toward production in any serious manner. What caused me to change my mind? To begin with, this is a company that does not begin to compare with the professionalism nor integrity of IPM or Maxam for that matter. Most disturbing to me has been the anarchistic style of management which lead various professionals in whom I had faith, leave the company over the years. Your editor had a first hand view of the inadequacies of this management when the President's son arrogantly suggested that he knew the answer to a question I asked him, but he was not going to tell me. I thought that was quite strange, since I knew I could have called his father and had my question answered. Now, this behavior is very stupid because as a newsletter writer, I literally have hundreds of companies requesting coverage in this newsletter. Why would you alienate someone like myself who could give a helping hand and at free of charge at that?
The "straw that broker the camel's back" so far as your editor was concerned was the provision in a recent agreement with Johnson-Lett & Company in which the President of Naxos will be granted irrevocable proxy to vote upward to 10 million shares of stock to be issued to Johnson-Lett as part of the agreement. President John's ability to vote this block of shares virtually ensures he will retain control of this company for the foreseeable future. With the current managerial structure remaining in place, it is hard to see how past behavior will change. Had Naxos welcomed into its senior management experienced mining personnel, your editor would most likely have "stayed the course" with Naxos. But the consolidation of power within this company ensures that experienced mining people will not be called into its inner sanctum for the foreseeable future. That's unfortunate because after all, mines are made, not found. In my opinion, the current management team does not have a clue nor the inclination to hire those that do have a clue about building a mine.
A couple of subscribers have expressed a great deal of anger with my recommendation on November 17 to sell Naxos and apply the proceeds to the purchase of IPM's shares. Indeed at this juncture, as Naxos leaks unsubstantiated rumors of enormous values coming from Ledoux Labs, the price of Naxos has risen while IPM has fallen toward the $1.00 area. Now if this newsletter were geared toward trading, I would feel crushed by this move. However, since the focus of this publication is on a long term approach in which share values are based on intrinsic value, not rumors of "gobs and gobs of gold," I feel fully confident my November 17th recommendation will, over the next 12 months, prove to have been the right move. I could still change my mind on Naxos if it had a wholesale management change but Mr. John's agreement with Johnson-Lett ensures that is highly unlikely to take place. |
