There are two types of business decisions: Reversible and irreversible

POSTED ON January 06, 2016 BY Benjamin Cox
CATEGORY Stocks, Stories, TSXV,

There was a sheet ice storm in Portland, Oregon the other day and I did not make it to the office. There was one inch of sheet ice on both my car and the roads, and then it warmed up slightly, producing water on top of the ice.

With the ice storm, the decision to go to work had 60% odds of being time accretive and 40% odds of being a mess, and there were a significant number of non-reversible outcomes possible.

I am significantly more productive at my office, but the cost of getting there could have had serious outcomes, where cars get totalled, or worse - me or someone else ends up in the hospital or dead. All of those outcomes could take days to clean up.

Junior mining companies in 2016 are facing such an ice storm, but it's not the first morning of said storm, it is Year 4, and the critical thinking that supports rational decision-making in the early years is done. If I was stuck at home for 20 days with no end in sight, I might brave it just because I am bored, frustrated, or just don't have a choice.

Majors, loan to own funds, and most larger predators in our space know that most junior mining company management does not have rational decision-making ability left. They know that we have had so many bad years that we can't think about, let alone model out, the future.

2016 is going to be the year that good companies fail to deliver returns to investors. They will fail by selling at the bottom of the market, doing stupid financings, taking toehold stakes that turn into fire sales, and 101 other bad deals that just do not support long-term planning. The fact is, juniors at this point are going to do things they would not do if they were sober, in a better market, or in the first morning of the ice storm.

If you wipe out the winners in a bad market with stupid deals, a recovery will be hard to achieve on the back of the losers.

In any outcome, it is going to take years to clean up from this industry recession, but it will take even longer if you have a toxic loan or a bad deal on the books that ties up the project without creating value.

So when you are offered that deal, think about if it creates value or if you are just doing it because you want to do something. If it does not create value, why do it?

Benjamin Cox

Prior to founding Oreninc, Mr. Cox served as a senior analyst at the D.E. Shaw Group and as a consultant with the GLG Group, where he worked directly with 15 Wall Street teams in the mining deal space. Mr. Cox is the Chief Executive Officer and a Director of Aston Bay Holdings Ltd. (TSX-V:BAY), a copper and zinc company with properties in Nunavut, Canada. Mr. Cox has researched and developed business, financial, and shipping models for every major global iron ore project. He is also an expert on mining industry market dynamics and metals, with a focus on raw materials including base metals, iron ore, platinum group metals, and industrial materials such as potash and lithium. Mr. Cox holds a B.S. from Brandeis University and an M.B.A. in Finance from Portland State University. More →

bjc@oreninc.com

Benjamin Cox

bjc@oreninc.com

Disclaimer:

Readers are advised that the material contained herein is solely for information purposes. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice. Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase or sale of securities. The information contained herein is based on sources which the publisher believes to be reliable, but is not guaranteed to be accurate, and does not purport to be a complete statement or summary of the available data. Any opinions expressed are subject to change without notice. The owner, editor, writer and publisher and their associates are not responsible for errors or omissions. They may from time to time have a position in the securities of the companies mentioned herein, and may change their positions without notice. (Any significant positions will be disclosed explicitly. This article is not intended to meet your specific individual investment needs and it is not tailored to your personal financial situation. Nothing contained herein constitutes, is intended, or deemed to be — either implied or otherwise — investment advice. Thomas Humphreys, Pacific Website Company Inc., and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. We reserve the right to buy and sell such securities or commodities without notice to readers. While the information herein is believed to be accurate and reliable it is not guaranteed or implied to be so. The information herein may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. Neither Thomas Humphreys, nor anyone else, accepts any responsibility, or assumes any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information in these publications or web site.

Forward-Looking Statements: This article may include certain "forward-looking information" within the meaning of Canadian securities legislation. Forward-looking statements include predictions, projections and forecasts and are often, but not always, identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "forecast", "expect", "potential", "project", "target", "schedule", budget" and "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions and includes the negatives thereof. All statements other than statements of historical fact included in this release, including, without limitation, statements regarding the potential of the Company's properties are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are based on a number of material factors and assumptions. Important factors that could cause actual results to differ materially from Company's expectations include actual exploration results, changes in project parameters as plans continue to be refined, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, uninsured risks, regulatory changes, delays or inability to receive required approvals, and other exploration or other risks detailed herein and from time to time in the filings made by the Company with securities regulators. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ from those described in forward-looking statements, there may be other factors that cause such actions, events or results to differ materially from those anticipated. There can be no assurance that forward-looking statements will prove to be accurate and accordingly readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date of this article. The Company disclaims any intention or obligation, except to the extent required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Always do your own due diligence. We seek safe harbor.