is...probably trying to buy a stock
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Trevali (TV-TO, TREVF)
On Tuesday, I purchased a ~4% position in Trevali at C$1.10-C$1.11 (US$0.83). Trevali is really the only pure play zinc miner in the world.
Zinc Industry
The zinc industry has rebounded over the last year or so when zinc prices fell to ~$1,500/mt (~$.70/lb). The zinc market has seen many large mine closures over the last few years as Brunswick (Glencore), Perseverence (Glencore), Century (MMG), and Lisheen (Vedanta) have depleted. I'm pretty sure that these 4 mines were all among the top 10 zinc mines in the world.
Zinc prices have been relatively weak since 2007 when prices spiked to $2/lb. These weak prices have resulted in a lack of investment in new zinc mines for the industry. Therefore, the industry hasn't been able to replace the large mines that have depleted. You also saw several mines close/cut production as a result of low prices in 2015-2016. Now we are a seeing a situation where demand is oustripping supply and inventories are declining. Inventories have been in steady decline YTD and are now currently at only 16 days of supply. This is a pretty low level and the last time inventories fell to this level was 2007 (when prices spiked to $2/lb.
Trevali
As I mentioned, Trevali is the only pure play on zinc. Their mines are not the largest or super low cost, but they are a pretty good operator with what they have (one mine in Canada and one in Peru). I've met the CEO a couple of times and he's definitely a straight shooter, which I like.
Trevali recently announced they are buying two mines from Glencore. The mines expand their reach into Africa. These mines are a little larger than their current mines, and costs are fairly in line with their current operations. This will vault them into a top 10 zinc producer in the world at ~410 MM lbs of zinc (from 140 MM lbs). The mines have an average cash cost of ~$.80/lb. They are financing the deal through issuing $190 MM in debt and issuing equity for the rest (Glencore who is already a large shareholder will be a 25% after the equity offering). At spot zinc prices (which are down a lot from $1.34 over the last month or so), they are paying 3.73x EBITDA. I think this is a very good price for the acquisition.
Outlook
I believe the next move for zinc prices will be $1.50, and not $1.00/lb. If this happens as I expect, Trevali has big leverage to improving prices and should be able to pay off the acquisition debt very quickly. One year of $1.50 zinc and Trevali would have enough to pay off the debt and have a lot of cash left over.
I've owned a decent sized position in Trevali for a while now (Sept 2015 with cost of US$0.38), but I believe now is a great time to add to the position on this pullback to the 200 day MA.
If you have any questions, let me know.
Trevali (TV-TO, TREVF)
On Tuesday, I purchased a ~4% position in Trevali at C$1.10-C$1.11 (US$0.83). Trevali is really the only pure play zinc miner in the world.
Zinc Industry
The zinc industry has rebounded over the last year or so when zinc prices fell to ~$1,500/mt (~$.70/lb). The zinc market has seen many large mine closures over the last few years as Brunswick (Glencore), Perseverence (Glencore), Century (MMG), and Lisheen (Vedanta) have depleted. I'm pretty sure that these 4 mines were all among the top 10 zinc mines in the world.
Zinc prices have been relatively weak since 2007 when prices spiked to $2/lb. These weak prices have resulted in a lack of investment in new zinc mines for the industry. Therefore, the industry hasn't been able to replace the large mines that have depleted. You also saw several mines close/cut production as a result of low prices in 2015-2016. Now we are a seeing a situation where demand is oustripping supply and inventories are declining. Inventories have been in steady decline YTD and are now currently at only 16 days of supply. This is a pretty low level and the last time inventories fell to this level was 2007 (when prices spiked to $2/lb.
Trevali
As I mentioned, Trevali is the only pure play on zinc. Their mines are not the largest or super low cost, but they are a pretty good operator with what they have (one mine in Canada and one in Peru). I've met the CEO a couple of times and he's definitely a straight shooter, which I like.
Trevali recently announced they are buying two mines from Glencore. The mines expand their reach into Africa. These mines are a little larger than their current mines, and costs are fairly in line with their current operations. This will vault them into a top 10 zinc producer in the world at ~410 MM lbs of zinc (from 140 MM lbs). The mines have an average cash cost of ~$.80/lb. They are financing the deal through issuing $190 MM in debt and issuing equity for the rest (Glencore who is already a large shareholder will be a 25% after the equity offering). At spot zinc prices (which are down a lot from $1.34 over the last month or so), they are paying 3.73x EBITDA. I think this is a very good price for the acquisition.
Outlook
I believe the next move for zinc prices will be $1.50, and not $1.00/lb. If this happens as I expect, Trevali has big leverage to improving prices and should be able to pay off the acquisition debt very quickly. One year of $1.50 zinc and Trevali would have enough to pay off the debt and have a lot of cash left over.
I've owned a decent sized position in Trevali for a while now (Sept 2015 with cost of US$0.38), but I believe now is a great time to add to the position on this pullback to the 200 day MA.
If you have any questions, let me know.
As I've said before, DSX and SBLK are the only two dry bulk companies that I like.
Yes, I'm thinking about it. It is just that it was so overbought before that it's not even oversold yet. That has me concerned. It has bounced off the 50 day MA pretty well in the past though.
How does a stock get on this list? Is it it like SSK's fictional portfolio that mimics his real account?
Their first quarter post bankruptcy was 4Q. They posted $1.31 in the quarter. Annualize that and ARCH is trading at 14x.
I know the company very well. That isn't a real PE. Wait until it reports a few quarters to see what the real earnings are after coming out of bankruptcy.
I'm normally a pretty bad trader when doing exits but wow, that DSX sell couldn't have worked out better! I sold it within a nickel of the top and it's down a ton since then!
I just wish I would have sold more. I have another buy that I did yesterday that I will post about later when I get a chance.
What makes the Trevali deal so awful?
I own NGD as well. Going to be a cash flow machine when they finish their project. Thy will need to prove to investors that it was worth it to raise cape on the project two times. It's a show me story for sure.
I like Trevali as well but I'm waiting on a lower price.
DSX made it a big week for me! I probably should have frozen it!
Anyone think I will have a problem if I grout the tile after 16 hours of laying the tile? I want the floor to be ready for Monday morning when the kids are running around like little crazy people!
I sent the family to the in laws for the weekend so I could get the floor done. They will get back late tomorrow night but I can keep them off the floor for 10 minutes when they get home before the munchkins go to bed.
Forget the subfloor...I just put a ton of screws around where the backer board cracked and called it a day. The used nails attach the backer board. I can't see how that would be a good idea!
I didn't see any movement when my wife was walking around on it yesterday, but now that I'm ripping up the tile I do see that the cracks are above the seam in the subfloor (I accidentally got all the way through the backboard in one corner under the cabinets). Any thoughts what I should do to address the cracking problem?
Just checked and there is no movement in the subfloor.
I'm really doing this to get it ready to sell. Subfloor (from the basement below) looks good to me. What do I do if the backer board is cracked? Do you guys ever tape backer board? I never have for floors but someone told me last night I should tape the joints for a floor like I would when I did my two bathtub jobs.
Any thoughts on how to prevent from happening?
A couple of questions for the board. I'm by no means a tile expert, but I have done it from scratch a few times. However, I've never replaced broken tiles.
We have tile in our kitch that appears to have cracked. They are not loose at all, but there is hairline crack in a fairly straight line for the length of 6-7 tiles. Could it be from something to do with the hardibacker?
My main question is really just to make sure that I'm going to rip out the old tile correctly. My plan is to:
1) Use my grout blade (which I still need to confirm that I have) for my oscillating tool to rip out the grout.
2) Bang the tile with a hammer to break it up.
3) Use a chisel to pry up the tile from the floor.
4) Use a chisel (or something else, if people have suggestions) to get the thin set up trying to make sure that I'm down far enough so that the new tile will eventually be flush with the other (old) tile.
I will then just go through the process of laying the tile (new thin set, lay the tile, wait 24 hours then grout it).
Anything I'm missing or that I should be thinking about?
Thanks r59. I'm not sure what I'm going to do yet so it'll probably sit on the sidelines for a while. As you know mining and shipping are my two biggest specialties. I own a big position in CCJ (as well as several other mining companies), but I can't find any other big opportunities like that one right now.
In at 2.58 cost and out (for these shares) at 6.17. It's only 140% but I will take it. ;)
DSX is a prefect example of my investment style. Know the industry extremely well, take positions in the best companies in the cyclical business and hold for doubles (at minimum). I don't post a lot but hopefully I can add value when I do.
Sold 35%-40% of my DSX today on the big day (plus 16% today). I'm up about 150% so it was time to sell some. I still think it can reach double digits but I'm riding freebies from here.
Dryships is the shadiest company in the shadiest industry in the world IMO. Those guys are scam artists. I prefer to stay in safer, we'll managed companies like DSX and SBLK.
Dry bulk stocks doing very well today and appear to be breaking out. DSX and SBLK, my two favorites, are up 6%-7%.
That's why I always recommend waiting for the DEF to come out before doing those. Until then, there's too much risk (even for $80, haha).
Wade...they're probably blowing you off. I can tell you from experience that their minimum fee is $100k. Unless you pay them they won't talk to you.
All of this political talk over the weekend is going to get us on the top boards and then bring on the spam!
That's the most important post related to the stock all day!
Overall, I think things were pretty positive. I really enjoyed the Private Equity & Mining panel discussion. The panelists agreed that the "fat pitch" to buy mining stocks at extremely cheap levels is behind us, but there is still upside from current levels. I also learned a lot about the seasonality of gold stocks, but that's probably not new to you guys that focus more on that area (I'm mostly focused on base and bulks).
In other news, I may have found a job at PDAC!
ValueAct is a good firm and have had good success when we have crossed paths on common holdings. I have no interest in VRX but I would take it as a definite positive.
I'm not a huge Rick Rule fan but this has some good stuff in how to think about uranium markets. I like the uranium area like I liked met coal at this last year. Hopefully the results are the same.
http://www.mining.com/web/rick-rule-on-uranium-early-means-wrong-unless/?utm_source=digest-en-mining-170316&utm_medium=email&utm_campaign=digest
The move in the BDI will probably not be 30%-50%, but it will likely be 300%-500% and the stocks will see big reactions (i.e. you forgot a 0). Dry bulk is probably the most cyclical sector in the world, and from my past experience you have to be nimble to take advantage of very big moves. I'm in for a long term holding (Maybe a year or two).
If you want to listen to the management teams that has the best (and probably most accurate) view on the market, you need to pay attention to what Diana Shipping and Pacific Basin say. They are the best and have the msot realistic view on the dry bulk market.
For a microcap, I like GLBS in addition to DSX (which I own) and SBLK (which I never bought). I was just looking at GLBS the other day thinking about how I had a really nice trade on it a few years ago...I should have just bought it! It's been a good week for dry bulk.
I agree with the way you're thinking. I hope it works out.
Nelson, IPI
I had some time tonight, so I took a look again at IPI. For these commodity industries, I always focus on the industry first. The potash market has been getting crushed. Ever since the Russian cartel broke, this market has been in trouble. I made a decent call that potash stocks would bounce soon after the cartel broke, but I didn't sell the bounce (that was smaller than I thought) and ended up selling at a loss. Corn prices are still weak, so that's not going to help potash prices. There is still some more potash capacity that is slated to come online in 2017-2018 as well. I personally think that MOS has been doing the phosphate acquisitions over the last few years because the outlook for potash is so bad. It looks like potash prices have flattened out over the last year though, so maybe there is a little hope.
IPI is burning cash with every ton they pull out of the ground (and have been since at least 4Q15). I think that IPI is most likely to 1) totally close production (which I don't think is the most likely) or 2) file for bankruptcy. I'm not saying for sure that it is going to happen, but IPI is probably the most likely company to go bankrupt in the industry. They only have $4.5 MM in cash and burned $6 MM in 4Q16. I've been burned one too many times (I got absolutely crushed on BTU) trying make a bet that a company won't file for bankruptcy. It's not a risk that I'm willing to take. I would avoid, but like you said, I think you're aware of how risky this thing is.
Nelson
Great question. I'm out of town and have been able to do anything over the last week when it comes to looking at stocks. If you don't hear from me by Tuesday or Wednesday send me another message.
I would agree. Typically the sell side wouldn't write two reports in a week but it does sometimes happen around a firm's own conference because they basically have the obligation to pimp the companies at their conference a little bit.
Which conference are you referring to?
I have a feeling it's only a temporary fix but we will see how it goes.
The tank was full to the fill line but I decided to raise the level a little (3/4 inch) and it seemed to have worked. As far as I know it's flushed every time over the last few days.
I agree. No sense in wasting the time SSK!