Don’t let short-term fear and noise make decisions for you.
Some real thoughts put down tonight by Ponch73 about his (and my) investment in Oroco Resource OCO.v ORRCF
Ponch73 — Today at 7:05 PM
Just wanted to share some top-line thoughts. I’ve written them primarily to remind myself why I’m invested here. If others find them useful, then excellent. If not, no problem.
1. The thesis here is that ST is a unique deposit that will hold appeal to a major in a supply-constrained copper world. Nothing in that thesis has changed. We may have had unrealistic expectations about grade, but what really makes ST unique is that there is a clear line of site to becoming a functioning mine. There is local community support, manageable permitting, proximate infrastructure and manageable strip ratios.
2. Many of us (and I am most guilty of this) are taking cues from minute-to-minute, hour-to-hour moves in the stock market. That’s a recipe for disenchantment. We can’t expect management to react to short-term stock price movements. But what if the short-term price movements aren’t anything, but noise or short-term voting (as opposed to weighing)? There might be a case to be made that a second firm in the PP was shorting the stock up to 5/14. Canada doesn’t have an uptick rule, so it looks like we’re dying from a thousand paper cuts.
3. What has changed with Oroco since we got involved. They won the legal battle. They got registered. They secured permits to start mining. They secured more permits on a promising part of the deposit. I think they’ve drilled 24-25 holes already. We would all love the assay results to be reported more expeditiously, but in the greater scheme of thing, does it matter if we get a press release in 2 days or 2 weeks?
4. I think management is pretty astute to be pushing to a PEA as quickly as they are. I was very surprised by the pace of today’s timeline, and I’m surprised that we’re burying the lede. Oroco is moving f’n fast. And they’re able to do it with 4 drills. They don’t need a 5th or a 6th like some are speculating. They’re much further along in NZ than the market presumes (because of the backlog in reporting assays). When they finish NZ, they can then reallocate 3 other rigs to Brasiles and SZ (maybe 2 and 2?)
5. I am floored that copper has remained relatively flat this year while the stock market has fallen out of bed. That’s an interesting signal that we perhaps don’t spend enough time considering. Every day that copper is above $4 is another day that ST gets more valuable. Plain and simple.
6. I think a case can be made using a couple of different valuation methodologies (NPV, 3% of contained CuEQ value, etc.) that ST will be worth $1 bil+ to an acquirer. The list of alternate copper projects of size and line of sight are few and far between. We can cross Pebble off the list. Filo has awesome grade, but it’s going to be a cap ex monster (and it’s already priced for perfection). Solaris has community and permitting issues that may not be priced in. Casino has severe community resistance from First Nations authorities. Unlike many of its peers, I think ST can return a NPV to cap ex ratio above 1.
7. Put yourself in the position of management. They’re not perfect, but they’re now at the point where they can do no right in the eyes of some. They’re damned if they do, damned if they don’t. CEO makes a presentation today after getting crushed by COVID. He puts out an aggressive timeline, but perhaps isn’t quite as crisp or quick on his feet as he normally would be, and then gets lambasted for being low energy?
8. Instead of drilling down and reading the tea leaves, the knee-jerk response to the presentation is that I don’t trust management’s timeline. All because the septuagenarian former CEO is uncomfortable and unpracticed at saying I don’t know.
9. I think I, for one, need to take a step back and revisit why I’m an investor in Oroco. This is a long-term play. It’s not going to skyrocket overnight. It takes time at cultivating an asset like this. I got greedy and stupid after the run-up post-Covid through last summer. I confused brains for a bull market. I’ve done this before.
10. I might be absolutely wrong about Oroco and ST, but there’s not enough evidence of that yet. The stock market is not fundamental evidence. It wasn’t at $3.50 CAD and it isn’t now.
11. But, for the life of me, I can not fathom how a delayed press release pertaining to a zone that has had no historical drilling changes the value of a deposit with significant historical data. I don’t begrudge others for throwing up their hands and saying investing in this is too hard. But the potshots at management and the constant citing of the stock price is a bridge too far.
12. I think there’s lots of promising signs under the surface. The blog update from last week was great. Management’s willingness to put out an aggressive timeline is great. The decision to move quickly to a PEA and compliant resource for the NZ is great.
13. Management has secured sufficient water rights to make the 4th rig operational. That’s great. Their willingness to continue to take my calls even when I haven’t acquitted myself as well as I should have is great.
14. The possibility that NZ, Brasiles and SZ are one continuous structure seems like pretty good news.
15. Could management’s engagement with the broad investor community improve? Absolutely, but they’re taking steps in the right direction. I’m really looking forward to calls with Richard, with Adam’s next TH presentation and with weekly blog updates.
16. I know some of you are losing faith and doubting yourself and wondering if you’re dooming your children. I hope this stream of consciousness posting helps you to step away from the ledge and consider the bigger picture. You’ve done your homework. You know why you invested. Are you going to let CIBC and a couple of fucking offshore hedge funds change your mind? It’s ok to determine that this investment isn’t for you and that you expected higher grades or a faster pace of drilling or whatever. Just don’t let short-term fear and noise make the decision for you.
If you still want to hold this investment, I would highly recommend, in your darkest hours, stepping away from the keyboard and resisting the temptation to vent. Instead, read old reports, crunch numbers, read Malte’s work (@malte_humpert) on twitter
And, to conclude this, I’m going to take my own medicine. I’ll be updating my ST model tonight and will share the results when I’m done. News flash: my NPV calculation will likely be going up.
