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Littlefish,
Thanks for offering your take on the FMG release. I'm not convinced that Alloy Steel's small size is the reason it wasn't mentioned, but I agree with your analysis otherwise.
Regarding the other stock you mentioned here, I asked you (twice) how you had heard of it. Why the reluctance to answer that question?
Littlefish,
Thanks for the link. No specific mention of Alloy Steel though. I wonder why Fortesque would mention some of its vendors in the release and not others.
How did you find out about MXC?
Littlefish,
Congratulations on the huge gain with MXC. How did you find out about that stock? What other stocks are you bullish on besides AYSI?
Would you mind posting a link? Thanks.
Facile comparisons between the housing bubble and the current secular bull market in commodities are no substitute for paying attention to economic fundamentals. Your realtor clearly wasn't paying attention to economic fundamentals if she claimed that real estate prices would continue to rise indefinitely because of supply and demand, without acknowledging the extent to which demand had been inflated by the credit bubble (during which "liar loans", no-money-down mortgages, etc. were common).
Commodity prices won't continue to go up indefinitely, and, as Jim Rogers has said, before the secular bull market ends, we will get to a bubble stage, but we're not there yet.
First, there isn't a commodities "bubble". There is a secular bull market in commodities, which is being driven by economic fundamentals (namely, demand growing after two decades of underinvestment in supply).
Second, no market goes straight up without corrections. There have been serious corrections already in some commodities (e.g., base metals), and there will be corrections in others going forward. You can have cyclical (less than five years) bull and bear trends within a secular (longer than five years) bull market. Happens all the time.
Third, the average secular bull market in commodities over the last 140 years has lasted 18 years. According to Jim Rogers, this one started in 1999. So, if history is any guide, we probably have several more years to go. During secular bull markets in commodities, different commodities peak at different times. Fortunately for Alloy Steel shareholders, Alloy Steels products can be used in the production of several different commodities, so the company's fortunes aren't linked to just one.
Jim Rogers has said that, historically, the shortest secular bull market in commodities was 15 years long, and the longest was 23 years long. He says the current one started in 1999, so, if history is any guide, this one could go on until 2014 or longer.
It depends on the field, Mike. In some fields, experienced sales people get a six-figure base plus a "guarantee" that can be even higher. It's not uncommon for a salesman in a small company like this to have a higher base salary than any other employee (that was the case when I was a business development director for a start-up -- I remember the CEO giving me crap about that before I brought in the company's first sales).
In any case, as I said, a good salesman will more than pay for himself soon enough. If I had the requisite background, I'd jump at this sort of opportunity. How hard would it be to sell this stuff to, say, the North American subsidiary of Rio Tinto, when the company is already using the stuff in Australia?
I'm sure I could get him a better price on PR than he'd find elsewhere. Maybe not free, but definitely fair.
I'd be happy to do the PR for him, if he wants to hire me. I have a friend who owns a PR firm, so she knows how to get releases placed in the media, and I know how to write them. I've been thinking of doing a joint venture with her to do PR for small companies with great prospects like Alloy Steel.
That said, I am comfortable with the status quo. As long as Alloy Steel stays on track, coverage will eventually follow. In the meantime, we can accumulate more shares at lower levels.
You're welcome. Regarding the impact of the gas explosion, it might be felt over the second half of the year, though how big an impact it will have, I don't know. It's a short-term factor in any case. Another short-term factor to consider that could impact the bottom line is the hiring of salesmen (e.g., the Vancouver-based one they are currently looking for). These sorts of high-end, big-ticket salesmen don't come cheap, but they should more than pay for themselves over the next year.
All the best.
I didn't ask whether the construction of the mill was on schedule, but I have no reason to believe it isn't.
Littlefish: Click on the link I provided and read the full post, along with the comment I made on it. I think that will clarify the 60% number for you.
Answers from Alloy Steel's CFO. I posted the whole thing on my site ( http://thehackensack.blogspot.com/2008/07/answers-from-alloy-steels-cfo.html ) yesterday, but here are some highlights:
- No plans to license the manufacturing process now.
- Confirmation about some of the current clients.
- New mill will offer capacity to produce new products as well as Arcoplate and Super Arcoplate.
- Current clients are using Alloy Steel wear plates on about 60% of their Australian-based equipment fleets.
That last point is the most positive one, IMO. First, it shows that the client companies have embraced the product and aren't just using it on a trial basis; second, it means that there ought to be sales opportunities in getting those clients' non-Australian fleets similarly equipped. I'm guessing that for these multinationals, procurement decisions are probably done on a country-by-country basis, but it can't hurt a salesman to be able to point toward the successful use of Arcoplate at a company's Australian subsidiary.
Thanks, Kutubu
Thanks LittleFish. I did acknowledge in my follow-up e-mail that I was sure they were busy, etc., and I didn't send the follow up e-mail until two days after the marketing coordinator said I should expect a response. If Winduss has to hand it off to Gene, then I wouldn't expect to hear back before next week sometime, since today is Gene's first day home after a few weeks of international travel.
Thanks for the feedback. Regarding Winduss, I didn't contact him directly. I sent an e-mail to the info at Alloy Steel address and the company's marketing coordinator (Mei Wo) wrote me back saying that Winduss would return my e-mail.
I wrote a long post on Alloy Steel on my blog if anyone wants to check it out: http://thehackensack.blogspot.com/2008/07/alloy-steel-international-aysiob.html
Also, I had a GTC limit order in at $2.29 that got filled today.
Knowing their customers is something any security analyst would be interested in if any analysts covered Alloy Steel. With that info, the analyst could try to follow up with contacts at the client company and ask some useful questions. For example: What percentage of your bulldozers (trucks, etc.) are currently using arcoplate wear plates? If the answer is only a small percentage of the client company's equipment, logical follow up questions would include:
- Why are you only using this on a small percentage of your equipment? Do you really want to use it on all your equipment but you think the price is too high? Are you OK with the price but Alloy Steel simply can't fill your orders now?
- Are you testing arcoplate out on a small scale before deciding whether to widely adopt it? If so, when do you think you'll make a decision?
And so on. Answers to those questions would do a lot to clarify Alloy Steel's prospects. I know it's a real company, but getting this sort of information can give us a clearer sense of its prospects and potential.
Thanks. I actually asked LittleFish on the Yahoo Message board, but so far haven't had a response from him there.
Any thoughts on the possibility of Alloy Steel licensing its process to other wear plate manufacturers as a business model?
Neither. It's zinc prices falling out of bed. Hudbay just diversified into nickel though with the purchase of the mine in Guatemala. And it also produces copper, gold and silver. And it has about a third of its market cap in cash. I am comfortable holding on to this one.
Vaalco still looks cheap based on forward earnings estimates. It currently trades at an enterprise value/estimated forward earnings multiple of about 11x. Of course, should this falls exploration program end up being successful, those earnings estimates may need to be revised upward.
I raised some questions on Alloy Steel on its Yahoo! message board today, but since I haven't gotten answers on those questions there yet, I'll ask them here:
Does anyone have a list of mining companies that are currently using Alloy Steel's wear payments, with links to supporting documentation? I have heard names like Fortesque mentioned, but I haven't seen documentation from Alloy Steel listing their clients. Who is buying these wear plates? Is Rio Tinto? Is CVRD? Are they using the wear plates on a trial basis or planning to equip all of their machines with it? Could Alloy Steel scale up to meet the demand if they are? Would it be willing (and able) to license its manufacturing process to other wear plate manufacturers instead?
Just trying to kick the tires here a little before I decide whether to expand my position.
Probably not much. How will another war in the Middle East lessen the demand for metals around the world? As for Alloy Steel's stock price, I wouldn't even expect much of a pullback from this, because the OTC BB trades so far under the radar.
What will happen though is that oil prices will spike in the short-term. So will the stocks of oil companies that have reserves in politically stable areas, domestic and Canadian oil royalty trusts, etc.
Another thing that may happen is that the prices of some Israeli stocks will drop in the short-term, on fears of Iranian retaliation. This could be a buying opportunity. There are plenty of these companies traded on the Nasdaq, so it wouldn't hurt to make a shopping list now. I already own a few shares of this one, ELOS.
OK, thanks for the heads-up, littlefish.
As a new AYSI shareholder (at $2.28), I wouldn't mind if the shorts gave me an opportunity to buy more in that range.
Separate question for the board: Anyone know if Alloy Steel has been selling wear plates to companies in the oil sands industry, or has plans to do so?
Thanks.