Mining cost overruns are common right now, so that was not surprising...The magnitude of the overrun certainly was though. That was a known risk in the investment thesis though and current $0.56 prices more than compensate for the current funding risk IMHO.
The resignations are worrisome but could be nothing. Baja is saying Grady resigned due to time issues and we *know* the other two simply resigned because Grady did (It was in their resignation letter). Plausible explanation? You judge for yourself.
If I was in Baja's audit committee, i'd resign too. Too much liability risk of coming out with this cost-overrun RIGHT after the proxy. If the audit committee did not know how big the overruns were BEFORE the proxy, they SHOULD have (If they were doing proper oversight)...So in either scenario they sucked.
The bottom line for me is that current evaluations are too low and the company has VERY tangible assets that will produce high cashflows. The cost of meeting that funding gap are unknown right now but even in a worst-case scenario (Which is much worse than a best case scenario) the stock is still very very cheap.
I got kind of lucky today. Was able to sell most of my position right at the open, got much better prices than I hoped for. I then rebought my share-count at $0.65 later in the morning and kept nibbling more as it fell to $0.56. My current position size is just slightly more than it was last night, at around 4% of my portfolio, but I own 50% more shares than before.
I hope the panic continues, would happily buy more if prices get better -- Even with the uncertainty out there.
-Fernando
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