I would like to offer some perspective to the disheartened shareholders here.
We all knowingly put our money in a volatile penny stock in the highest risk sector in the world and it should not be the least bit surprising that it is capable of large percentage swings both up and down. When you consider the sentiments towards metals and markets in general and how many times junior markets have had 90% corrections in recent history then there is nothing alarming about our current circumstances. Due to the calibre of the Mexus projects and their realistic potential for huge production we are in far better shape than most juniors. Remember that many things are cyclical or driven by events far from our control or view.
Consider one of my favourite Mark Twain quotes:
“I was seldom able to see an opportunity until it had ceased to be one.”
Hindsight makes the winners obvious, but if opportunities were easy to see they would cease to be.
You can look at the share price and become emotional or you can evaluate things calmly from the perspective of a disciplined speculator.
Last year, with higher metals prices and a generally more optimistic market, Mexus ran up over 300% (11.5-46.5) in a month and a half on essentially nothing. All that happened was that Mexus finished their mill and it looked like underground mining was commencing imminently and a relatively small number of shareholders chased the stock to a high $0.62. As the rally accelerated this is where numerous JV rumours, pictures, trips, the Plomo deal and ultimately Trinidad and the all speculation and back of napkining(™) that went along with it.
To get to .62 it took about 7-8 million dollars of total buying and selling over 14 weeks. I estimate it took approximately $250k per week of sustained buying pressure.
Fourteen weeks is not a long time, the number of shares and dollar value is modest, this stuff can and will change just that quickly.
At 62 cents Mexus was valued at 130 million dollars and was just not worth it without cash flow. If you go back and the read the messages during this time period everyone was ridiculously bullish and had blinders on. This is a telltale sell signal. At this point they had the mill, a hole in the ground, and a JV going concern with huge potential but that definitely needed a few bucks and some TLC. The JV employed about 125 workers and was quite bloated and inefficient and we had little information about grade and operations. Gold is a dream somewhere in the future. Most of us, myself included, ignored many of the permits necessary to run the Mexus 100% projects and I think that in general an average investor hugely underestimates the difficulties and amount of time permitting and construction actually take in this business.
Fast forward to today. Mexus trades at 7.5 cents and is worth about 18 million dollars fully dilluted. They still have no real earnings. While that remains the same though, the projects on the other hand have all advanced significantly. The mill sits as before and the placer, marginally expanded, is idle. There has been a lot of equipment added to the Julio site, a headframe and bucket system has been installed and the underground mine resembles an underground mine instead of a rattle snake cave. The environmental and permitting is ongoing but I would say it is more a matter of money than time at this point. The geo reports indicate (to me) that there is ludicrous exploration potential at the Julio and the surrounding areas. Something about multi-kilogram surface outcrops that makes a man wonder what is a little bit deeper.
The JV now with new, much more conducive partners, is a lot leaner and more efficient, the property better understood and explored and huge tracts of land have mysteriously been acquired, probably through Atzek. The geological report demonstrates that the exploration potential is also very exciting, showing 1.5-20x the grades of neighbouring profitable mines, processed with little or no crushing (rare) and we have cost estimates that as far as I remember put us in the top quartile of mining companies on Earth. I know Paul has been working and tinkering, replacing pumps and whatnot. I am confident in saying the JV is in much better working order than last year.
Gold is still a dream somewhere in the future but this time metal is flowing and is so close I can taste it. (It tastes like a four leaf-clover, or perhaps that’s the cyanide?)
Overall the value of the company has increased significantly while the price has decreased considerably. What’s that sound? Opportunity knocking.
On another related note I wanted to ramble a bit about gold and the political standoff in the US. There have been 17 US shutdowns since 1976. There were more and more shutdowns as the US economic situation progressively worsened in the 1970s and early 80s. I would expect a few more of these in the coming decades if history is any guide.
I was listening on the radio and a financial commentator I respect was talking about how it made no sense whatsoever that when the US government shutdown the stock markets were rallying. Data was coming in showing the negative ramifications of such brinkmanship diplomacy and as these effects ripple throughout the economy things are bound to get worse, hence negative for stocks. He was genuinely puzzled, as were his guests and callers.
This probably sounds crazy but he is correct from a common sense point of view and that is why he will be wrong a lot of the time. We do not live in a world of common sense and free markets where its participants rationally price things. Prices used to be largely determined by economic fundamentals, by supply and demand, and were set by the summation of the desires and wills of millions of people. Nowadays we look to a single man with a beard and hang on his every word. Our markets are dominated by their respective central banks and the gigantic fascist tumour that is the political and corporate landscape of North America.
So the government shuts down, tanking the economy, thus creating the next financial crisis and giving the impetuous for a massive amount of money printing and government stimulus. Of course the people that created the crisis will be put in charge to fix it, and encouraged to do whatever it takes to save the country. The longer this business persists the more likely another credit downgrade is and the more significant the effects of removing the third leg (gov’t spending) from a three legged stool, and the more justification they have for not only maintaining their profligate spending but increasing it as well. The stock markets, in the bizzaro world we live in, are anticipating a fat increase in the debt limit, and the maintaining of free money interest rates (to the banks, not the people) and that those freshly printed eighty five billion smackers per month keep being churned out for a long long time to come. Everything is easily blamed on republicans for the crisis, and Obama gets to “save” the world 2008 style.
Gold is heavily correlated with the debt ceiling moves of the past 15 years or so. They don’t want to have to deal with this debate again in six months or a year so they will likely pick an absurdly large number like 20 or 25 trillion dollars as the new limit. Such a limit allows for the irresponsible status quo to continue, and I believe that gold acts as an anti-debt instrument, it is the opposite of the debt, actual payment and not a promise to repay. This ensures a gold price over $2500 and that a lot of “crackpot gold bugs” will be proven correct.
All in my opinion,
Take care.
-TM
