Postcard from PDAC 2010, part four

Codename NRI sends in the last postcard from PDAC 2010 and seems to have been caught musing on previous portfolio errors (well, one specific error really) and that old saying 'what goes around comes around'. Before handing over, I'd just like to thank NRI for the postcards this year, a fine effort that gives insight to the PDAC bunfight (and will hopefully keep those IR depts on their toes the next time around, too).

Hi Otto,

This last day of PDAC, as I stood waiting for a departure shuttle from the Convention Centre, I noticed that the guy standing beside me was from Apollo Gold (APG.to). Having read last night the NR about the APG merger with Linear Gold (LRR.to) I exclaimed to him ‘Hey. You guys have been busy’. He was beaming; we sat together on the shuttle and gabbed about the deal until we reached our destination. I wished him well, expressed regret that I couldn’t share some celebratory champagne with him and conveyed the wish that we could meet up next PDAC for a belated clinking of glass.

My first question to the APG guy was ‘I don’t remember anything in the NR about Wade K. Dawe ( ceo/pres of LRR). What’s he gonna do?’ It was apparently agreed that Wade would be the Chairman of the Board, and the majority of the Board would be from APG. In the course of our commute, I did not hide from the congenial APG guy that I thought Wade was an excessively overcompensated, ineffectual executive. Ha! Notch another one up to the Peter Principle. Poor lad. How’s he gonna live on the pay cut? Or justify being paid at all when he’s under the scrutiny of competing interests? Coincidentally, I recalled viewing an APG presentation at PDAC last year and was not impressed with the metrics for this company transitioning into production. As I travelled today I’ve been thinking about what the APG guy told me and the challenges they faced. They were settling their development financing and everything blew up, then the forward-going financing deal they finally cut was quite oppressive. I know nothing more about APG. Maybe they warrant a look. I dunno.

LRR, on the other hand, is another in my portfolio which serves to remind me that my critical faculties and my bullshit detector need more work; since last fall I had been hoping for a share price recovery to the high 2’s and I would liquidate. I bought LRR in late 2007. I was influenced by the recommendation of Jean-Francois Tardif, an occasional BNN guest whom I respected. As I recall, LRR had cut a nice option deal with Kinross on a project in Chiapas, Mexico, had $100mill in cash and had a few other irons in the fire. I haven’t rechecked but at the time it might have been trading at a discount to cash.

Subsequently, LRR got badly outmanoeuvred by B2Gold on the Central Sun Mining takeout. Last summer I got thinking about the Kinross option, which LRR kept touting as prospective (a decision and a big balloon payment?); in the meantime I was already in kindergarten prep school for latam politics with my course material being IKN. So, I knew…yeah, right…never gonna happen. Then they picked up the Goldfields projects in Saskatchewan with one deposit in the final stages of mine engineering design and construction permit applications, with pre-production capex being about $63mill USD. In Jan09, they had a financing; in Mar09, they had a financing; in Nov09 they had yet another expletive provoking financing at a hurtful discount to market price.....with warrants. And you know, they still don’t have the mere $63mill and they were ditzing around with more drilling on this project which they had touted as good to go.

Lemme fill you in on my compensation beef:

I just rechecked the last Management Info Circular filed by LRR and in fiscal years 2007-09, our boy Wade took total compensation of $2.4million PLUS he is represented as being a Board member of publicly traded companies East Energy, Linear Metals (received $60,000 bonus), NWest Energy (received $17,500), Rhino Resources and UCore Uranium. Since that filing, he has added directorships with Immunovaccine Tech and Keeper Resources. This being a postcard and not a research project I have tired of pulling the filings to tote up his rewards.

Yup. Busy, busy Wade. Kinda hard to get a mine up and running and to get around to doing all the things you lead us to believe you’re gonna do. Wade K. Dawe should bone up on the implications of karma or, if that’s too hard, the golden rule.