It comes as no surprise that the Managing Director of A1 Minerals has resigned. This company is going backwards at the moment. It has broken its 15c support, and is now down to 12c support. There will be questions about why. I think it is the same reason as usual - the same problem which befalls many small gold stocks....nuggetty gold and the mining executives who trade these projects knowing full well their issues. Its amazing how a bad project can be turned into a 'diamond' with a bit of creative accounting. All this goes unregulated by ASIC because it has no skills. Mindless, rule-ridden bureaucrats who think they have an education because they went to university...and studied arts no less.
The problem of course is specifically with vein and shear-zone style gold deposits. Perhaps others as well, but I think you can have a lot of confidence in porphyry-copper/gold/Mo style gold deposits because the mineralisation is so pervasively spread throughout micro-veinlets in the rock.
This problem is huge in the mining industry. Of course is does not help that many mining executive have a dubious ethic, that the government does not regulate, that we are in a mining boom, and that people are regulated by so many silly rules, they might repute all rules as nonsense. Shareholders have a right to effective disclosure....they are not getting it, particularly at the small-end of the market, which is like the wild west.
For those who bought at 15c support, there is the prospect that AAM will go out of business. It is hard to believe that there is no gold, but the grade might be 1.5g/t rather than 4g/t. Who can say whether its a 'nuggetty' effect, or whether its manipulation of data with geostatistical modelling. Maybe it was just financial mismanagement. There are people in the industry who say nothing. It is all a 'game of friends' in WA.
I'm been to conferences where people will tell you that 'so and so' company's project has no credibility. The reason being they know people who have taken a look at it, and rebuffed it, whilst the opportunists 'mine the market' for money.
The industry is full of rationalisation and there is no critical insights coming to the market from people who know to stop this practice. As an analyst who can only go on reports (because I don't perform site visits or hang out in WA pubs), what can you do but draw attention to the issue. ASIC has to change the way it regulates. People will lose confidence in smaller stocks, which means there will be no new companies being formed in Australia, and investment will go offshore. Gillard's tax is just one issue.
I am recommending stocks which are undervalued...not because they are good...but because disclosure is so bad you cannot know the difference. I think there needs to be a role for analysts in managing the disclosure of these countries. I suggest the way to manage this issue is for the ASIC to pay a market analyst $5000 a year to prepare quarterly analytical reports on specific stocks. Based on critiquing of his work, responsibility might pass to another analyst. This approach would see some analysts dominate certain industries, it would force others to critique them to improve the reputation of their brokerage, and investors would have informed debate and analysis from brokers and the companies.
At the moment we have brokers collecting fees from shareholders/companies. The worse the company the higher the fee. I am reminded of Australian Magnesium Corp. I was working for a broker at the time. My analysis showed it was a dog, and the major brokers supported it because they wanted the 'very attractive' 7% commission offered by the company. It went broke.
Brokers are often corrupt too I think. There was suspicious activities at the broker I worked for. The MD of the company employed a hooker from the 'men's club' across the road as a secretary. I think it was because you can trust a hooker to keep secrets. Daily he would need to explain to her how to use excel and word, yet she was paid as much as me (an analyst). Go figure! Her boyfriend was also a broker.
Brokers are salesmen, they are not people with integrity. So long as this country, any country, is regulated by government agencies, you will get no justice, no accountability, which means people being rewarded for deceit. Compulsory super? Don't give up control of your money.
Sorry to those who lost money from my information. I'm in the same boat. Get angry. I think you are wasting your time complaining to your local MP. I would be inclined to vote for smaller government, i.e. LIbertarian based Liberal Democratic Party....not because they are people of integrity, but because there would some competition in the short term. I would also talk to your friends, and get them mad. Organise like business and unions have done before you. Make ideas count for something. There are too many self-serving dikks in the world.
The JORC code was supposed to restore credibility to the international mining industry. It has failed to do that with respect to gold reserves. It is probably adequate for other metals.
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Andrew Sheldon www.sheldonthinks.com
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