great discursive style of write up, i'll have to reach to yahoo or other to get the financials. Most impressively, i love the comments below, a very real & candid discussion with the author fully involved & appreciative enough to understand pros & cons. Bravo!
Detailed write up thanks, these commodity businesses have a lot of moving parts! I was curious what you use to value investments if you don't use excel!!
The beauty of value investments is that you don't need to open excel most of the times, that's mainly for growth companies! If you open excel to make a model you have to make around, say, 15 assumptions? If you can make a solid case using just words and a few assumptions you'll do better, tested!
It's interesting to hear a professional investor take that approach - but it's certainly mine. I do know how to do DCF's etc etc but tend to take more of a back of an envelope type approach, as I'm in it for the long term.
Strong article thank you. I enjoyed it - I have looked at Ecora previously and passed. I really look forward to future articles - your approach looks a breath of fresh air.
The problem here is management might just give away the remaining valuable parts for stupid non-financial reasons, like the Narrabi royalty. "Ecora" (hate that stupid 'rebrand' name) is off-limits for me. Capital goes where it's treateded best - so not to Ecora.
Thank you Graoully for your angle. Much appreciated. Let me please share mine in that regard:
That line about "capital goes where it's treated best" was referring to the commodity space in general. My initial point was that this sector tends to be overlooked.
Now, I completely agree that Ecora’s history of capital allocation hasn’t been great—Narrabri is one example, but the biggest one is Voisey's Bay. I did touch on this in the article. One possible counterpoint is that the rebranding forced them into some poorly timed buying and selling, but that doesn't mean they’ll keep making the same mistakes. You mentioned "non-financial reasons" for their past decisions, but I don’t see any such factors influencing their current portfolio. Yes, there’s always the risk of more bad deals (I flagged this in the group chat), but I see that probability as relatively low.
The core of my thesis isn’t about management suddenly becoming great—it’s about them doing nothing. If they just do nothing and let their partners run the mines efficiently, the value is already there compared to the price I pay. What I see right now is widespread pessimism over something that's already happened, known and priced. If you reflect on your own comment, you’ll see that you’re essentially mirroring the broader market sentiment—your dislike for the stock name itself is a perfect example of that.
There are definitely risks—management incompetence is one of them. If they make another bad deal, I’d be out. But when the market cap is just 144 million compared to the assets they hold, and all I need is for management to do nothing, this sets up as a clear asymmetric bet. I could lose a little, but the upside is at least a double.
Management teams generally don’t like to sit on their hands.. The recent copper deal doesn’t seem great capital allocation imo. The recent FY24 results also emphasise focus in growth, which doesn’t sound like doing nothing. New to the name, seems an interesting setup, but I don’t have great confidence in management based on what I have seen on the surface. Do you have any more color on what gives you comfort they will not further destroy shareholder value?
First, as anticipated, I believe the rebranding may have forced them into some poorly timed buying and selling, but that doesn’t mean they’ll keep making the same mistakes. Now, the portfolio is in place, so they should only take on deals that make sense. Third, I don’t see them having the financial means for a major destructive acquisition.
I believe these arguments are strong enough to say that the risk is there, but its magnitude is somewhat overstated by the market. The natural question then becomes: Okay, but now could they still make a series of moderately-sized bad acquisitions over time? Yep, but this applies to almost any company, and the thesis here doesn’t require management to be exceptional.
Now, let’s look at Mimbula, their most recent acquisition. Yes, it may not be the best deal ever, but it’s also not a bad one. So, it doesn’t support the market’s view that management will continue destroying shareholder value.
In conclusion, I find the magnitude of this risk smaller than the market suggests. When conducting my research, I ultimately answered myself it was a risk worth taking in exchange for getting my hands on these assets.
Very interesting. I see the CEO has been busy buying too. Take a look at Serabi Gold. My guess is it's on a forward PE ratio of 3 & should grow earnings quickly.
Thanks for the tip and the comment! I remember attending a web conference some time ago where Serabi’s IR guy presented the company. The story was nice, but I didn’t take a swing at it since they didn’t have a JORC-compliant report. I’m a bit reluctant to trust companies without one (or an equivalent one) but happy to see now that I definitely missed out on some profits :)
It does look like a diamond in the rough the swing back from tech to commodities is just a matter of time. Here in the US the cost of the foreign transaction fees would put a pretty good dent in the potential profits. I just might know a guy that could give me a lead of a commodities fund somewhere that would not do that. Or maybe I should get myself some Francs, Euros, or Pounds
This is a great write up, much more conversational in tone than most of investing substack and thus more readable.
I had never heard of this company but the case you make for it is very compelling. It’s definately at least going on the watchlist
Thanks for your comment, appreciated!
great discursive style of write up, i'll have to reach to yahoo or other to get the financials. Most impressively, i love the comments below, a very real & candid discussion with the author fully involved & appreciative enough to understand pros & cons. Bravo!
Thanks for the nice comment!
Detailed write up thanks, these commodity businesses have a lot of moving parts! I was curious what you use to value investments if you don't use excel!!
The beauty of value investments is that you don't need to open excel most of the times, that's mainly for growth companies! If you open excel to make a model you have to make around, say, 15 assumptions? If you can make a solid case using just words and a few assumptions you'll do better, tested!
It's interesting to hear a professional investor take that approach - but it's certainly mine. I do know how to do DCF's etc etc but tend to take more of a back of an envelope type approach, as I'm in it for the long term.
Strong article thank you. I enjoyed it - I have looked at Ecora previously and passed. I really look forward to future articles - your approach looks a breath of fresh air.
Thanks, appreciated!
The problem here is management might just give away the remaining valuable parts for stupid non-financial reasons, like the Narrabi royalty. "Ecora" (hate that stupid 'rebrand' name) is off-limits for me. Capital goes where it's treateded best - so not to Ecora.
Thank you Graoully for your angle. Much appreciated. Let me please share mine in that regard:
That line about "capital goes where it's treated best" was referring to the commodity space in general. My initial point was that this sector tends to be overlooked.
Now, I completely agree that Ecora’s history of capital allocation hasn’t been great—Narrabri is one example, but the biggest one is Voisey's Bay. I did touch on this in the article. One possible counterpoint is that the rebranding forced them into some poorly timed buying and selling, but that doesn't mean they’ll keep making the same mistakes. You mentioned "non-financial reasons" for their past decisions, but I don’t see any such factors influencing their current portfolio. Yes, there’s always the risk of more bad deals (I flagged this in the group chat), but I see that probability as relatively low.
The core of my thesis isn’t about management suddenly becoming great—it’s about them doing nothing. If they just do nothing and let their partners run the mines efficiently, the value is already there compared to the price I pay. What I see right now is widespread pessimism over something that's already happened, known and priced. If you reflect on your own comment, you’ll see that you’re essentially mirroring the broader market sentiment—your dislike for the stock name itself is a perfect example of that.
There are definitely risks—management incompetence is one of them. If they make another bad deal, I’d be out. But when the market cap is just 144 million compared to the assets they hold, and all I need is for management to do nothing, this sets up as a clear asymmetric bet. I could lose a little, but the upside is at least a double.
Management teams generally don’t like to sit on their hands.. The recent copper deal doesn’t seem great capital allocation imo. The recent FY24 results also emphasise focus in growth, which doesn’t sound like doing nothing. New to the name, seems an interesting setup, but I don’t have great confidence in management based on what I have seen on the surface. Do you have any more color on what gives you comfort they will not further destroy shareholder value?
Thank you, Mark, for adding to the conversation.
First, as anticipated, I believe the rebranding may have forced them into some poorly timed buying and selling, but that doesn’t mean they’ll keep making the same mistakes. Now, the portfolio is in place, so they should only take on deals that make sense. Third, I don’t see them having the financial means for a major destructive acquisition.
I believe these arguments are strong enough to say that the risk is there, but its magnitude is somewhat overstated by the market. The natural question then becomes: Okay, but now could they still make a series of moderately-sized bad acquisitions over time? Yep, but this applies to almost any company, and the thesis here doesn’t require management to be exceptional.
Now, let’s look at Mimbula, their most recent acquisition. Yes, it may not be the best deal ever, but it’s also not a bad one. So, it doesn’t support the market’s view that management will continue destroying shareholder value.
In conclusion, I find the magnitude of this risk smaller than the market suggests. When conducting my research, I ultimately answered myself it was a risk worth taking in exchange for getting my hands on these assets.
Very interesting. I see the CEO has been busy buying too. Take a look at Serabi Gold. My guess is it's on a forward PE ratio of 3 & should grow earnings quickly.
Thanks for the tip and the comment! I remember attending a web conference some time ago where Serabi’s IR guy presented the company. The story was nice, but I didn’t take a swing at it since they didn’t have a JORC-compliant report. I’m a bit reluctant to trust companies without one (or an equivalent one) but happy to see now that I definitely missed out on some profits :)
It does look like a diamond in the rough the swing back from tech to commodities is just a matter of time. Here in the US the cost of the foreign transaction fees would put a pretty good dent in the potential profits. I just might know a guy that could give me a lead of a commodities fund somewhere that would not do that. Or maybe I should get myself some Francs, Euros, or Pounds