The market took a big hit this past week. Despite that, our most recent picks NeutriSci International Inc. (NRXCF) (NU.V) and New Age Farm Inc. (NWGFF) (NF.CN), remain slightly in the green even as they have been victims of the weak market. These two companies continue to release a steady stream of news and are on the peripheral of a lightning hot cannabis market that we think is in a bubble. The bubble aspect of the cannabis market is exactly why we are going down the line to find cheap undiscovered gems like these rather than the market leaders like Tilray (TLRY) or market pretenders like New Age Beverages Corporation (NBEV) or India Globalization Capital, Inc. (IGC) which have insanely high valuations compared to their near-term revenue prospects. If the cannabis sector continues to climb, it will take companies like NU and NF with it as investors will look further down the line like we have to find cheap plays. Much like how in a housing bubble, condos and houses in less desirable areas in the city rise in price as well. But if the cannabis sector falls, these companies won't fall as much or might remain steady as they both have reasonably near-term revenue prospects that set a floor on their value. Both NU and NF sit closer to their 52-week lows than 52-week highs, so it is hard for them to fall in a bubble pop when their bubble, along with other CBD/hemp players like Isodiol occurred several months ago.
In chasing the hot cannabis sector, we have strayed a little bit from our "Value Trades" theme on this blog. With our next pick, we can't think of a stock that fits this moniker better right now. Rusoro Mining Ltd. (RMLFF) (RML.V) entered into a settlement with the Venezuelan government to the tune of $1.28 billion U.S. RMLFF closed Friday with a $97 million market cap. Even after subtracting the nearly $100 million in liabilities on the company's balance sheet and the potential of 30-40% of the settlement going to the litigation funding agreement with Calunius and contingent success fees, this settlement implies a minimum of a 7 times upside and as much as a 12 times upside return upon its receipt. We are up to 705 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have over 3,000 followers on Twitter as well.
The first reaction one would have is that "if it is too good to be true, it usually is". RML has reacted positively to this news, moving from $0.12 to $0.22 on the TSX Venture on over 13 million volume over the past two days since this news was released. However, if this settlement is to be believed, RML should have immediately moved to $1.00 or more on 10's of millions of volume. There are a few simple reasons why we think this hasn't happened, and why we think it would be wise for readers to carefully consider this opportunity while it is so cheap:
#1 provides investors with a great opportunity. While many stocks suffered a loss this week, our experience has been that stocks that have good news with limited movement due to a weak market have the better short term upside potential during a market recovery compared to stocks recovering from a pullback. If the market does well this week, people will chase a good news story with momentum on FOMO.
#2 is the fear of the unknown. Rusoro has funded operating and litigation expenses and delayed debt repayments under the expectation that there will be a substantial settlement from Venezuela (the company has essentially no assets without it, so debt holders really had no choice). There is no chance that the company is going bankrupt now, but everyone involved with the company up until this point will get paid. Per financial reports, Rusoro's management estimated that the aggregate potential exposure related to contingent success fees will not exceed 15% of the Award. The deal with Calunius Litigation Risk Fund LP is more of a wild card because its terms are not clearly disclosed in the financials. Based on our research and knowledge of these types of contingency deals, there are two ways this deal could have been structured. It could be a straight percentage, likely not exceeding 30%, or a certain multiple, such as 5x, of the costs incurred by Calunius during this time. So Calunius could end up taking in excess of $100 million and maybe up to $400 million of this deal. But that still leaves a lot left over for Rusoro, well over $1.00 per share worth with 585 million fully diluted shares in the worst case scenario and likely around $2.00 for the Canadian listing RML or $1.50 for RMLFF for a more realistic scenario.
#3 Rusoro was trading at pennies on the dollar even after having been awarded a billion dollar settlement in 2016 by the International Centre for Settlement of Investment Disputes. The stock hit $0.35 in August 2016 shortly after the news but drifted downward after it became apparent that Venezuela was not willing nor able to play ball. This is where one must carefully read the latest news release to really understand what is going on here:
"Rusoro Mining has Received a Settlement Proposal from the Bolivarian Republic of Venezuela
VANCOUVER, Oct. 11, 2018 /CNW/ - Rusoro Mining Ltd. (the "Company" or "Rusoro") announces that it has agreed on the terms of a settlement proposal ("Settlement Proposal") with the Bolivarian Republic of Venezuela ("Venezuela") by which Venezuela agrees to pay Rusoro over US$1.28 billion to acquire the Company's mining data and for full release of the arbitral award (the "Award") issued in favor of the Company in August 2016 by a tribunal constituted pursuant to the Additional Facility of the International Centre for Settlement of Investment Disputes. In addition, it is contemplated that the parties will constitute a Mixed Commission to assess the current status of Rusoro's Choco 10 and San Rafael - El Placer former projects and on the basis of such assessments may by the end of January 2019 partner to exploit those projects. Rusoro expects to sign the formal settlement agreement (the "Settlement Agreement") shortly after completion of the schedules to the Settlement Agreement.
"We are very pleased that we have agreed on terms of a settlement with Venezuela," commented Vladimir Agapov, Chairman of Rusoro. "We look forward to the execution of the Settlement Agreement and towards our continued relationship with Venezuela in assessing two of Rusoro's former gold projects regarding a potential partnership to restart production of the Choco 10 and San Rafael – El Placer mines."
Note that Rusoro received a settlement proposal from Venezuela and has agreed to it. This means that Venezuela is not reluctantly resigned to the deal like it has been with other billion dollar awards mandated by arbitration; it has actively put forth a proposal which has been accepted by Rusoro. This proposal presumably has a payment timetable which is acceptable to the company. If Venezuela wants to remain in good faith with the deal that the country itself has put forth, it will do whatever it can to abide by it. Likely in lieu of other settlement deals where it was not the aggressor in settlement like it was here, but passive acceptance of its fate.
Some investors are comparing this deal to the one accepted by Gold Reserve Inc. (GDRZF) (GRZ.V) and how this company is still trading at a fraction of the market cap of its settlement, despite already getting cash. This deal is not comparable, but also shows that Venezuela does have the ability and willingness to pay. Reading the news release that announced this deal, Venezuela merely agreed to pay the arbitral award. That's the equivalent of reluctantly agreeing to pay a massive parking ticket after trying to go to court to dispute it and failing. There are several news released produced by Gold Reserve which update the market on the progress of the settlement, with Venezuela eventually paying in installments but clearly dragging its feet.
The Rusoro deal is the Venezuelan equivalent of a consumer proposal to get out of debt with their creditors, wanting to maintain a good relationship and keep whatever credibility the country has left. Rusoro is led and significantly owned by father and son duo Vladimir and Andre Agapov, Russian businessmen with influence. Rusoro once produced two-thirds of all gold mined in Venezuela. The post-Chavez regime likely values these people and Russian associates in general more than any other company Chavez screwed over during the nationalization process.
Gold Reserve is also paying income tax on each round of the settlement it receives, a major contributor to the discount it is trading to its settlement. Rusoro has recorded an accumulated deficit of $882 million U.S. according to its latest financial statements. As a result, the company should have substantial tax loss carryforwards which it can apply now to avoid taxes on any settlement payments net of contingency fees.
All things considered, Rusoro is trading at a substantial discount to where it should be after the settlement. RML hit $0.35 on the news of the award in 2016. Now that Venezuela is finally willing to pay for the award, $0.35 should be the minimum starting point and should see greater than $1.00 in reasonably short order upon further clarification of the collection process in our opinion.
In chasing the hot cannabis sector, we have strayed a little bit from our "Value Trades" theme on this blog. With our next pick, we can't think of a stock that fits this moniker better right now. Rusoro Mining Ltd. (RMLFF) (RML.V) entered into a settlement with the Venezuelan government to the tune of $1.28 billion U.S. RMLFF closed Friday with a $97 million market cap. Even after subtracting the nearly $100 million in liabilities on the company's balance sheet and the potential of 30-40% of the settlement going to the litigation funding agreement with Calunius and contingent success fees, this settlement implies a minimum of a 7 times upside and as much as a 12 times upside return upon its receipt. We are up to 705 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have over 3,000 followers on Twitter as well.
The first reaction one would have is that "if it is too good to be true, it usually is". RML has reacted positively to this news, moving from $0.12 to $0.22 on the TSX Venture on over 13 million volume over the past two days since this news was released. However, if this settlement is to be believed, RML should have immediately moved to $1.00 or more on 10's of millions of volume. There are a few simple reasons why we think this hasn't happened, and why we think it would be wise for readers to carefully consider this opportunity while it is so cheap:
- The market has been extremely weak during the release of this news. Long term investors and day traders have been suffering on the long side, which makes it easier for a stock to sell off on profit taking on anything that makes a bit of money. This includes a stock like RML which has had news which sends it into another stratosphere in terms of fundamental value.
- The balance sheet looks awful. This could cause some people to avoid the stock, thinking that any prolonged delay in payment will result in the company's insolvency or perhaps selling that settlement to a third party for a fraction of its value in order to get out of today's debt. Past deals to help fund the legal costs on a contingency basis could also turn some people off the stock as that is an unknown.
- They just don't believe a Venezuelan settlement based on the poor financial state of the company and look to recent examples as evidence.
#1 provides investors with a great opportunity. While many stocks suffered a loss this week, our experience has been that stocks that have good news with limited movement due to a weak market have the better short term upside potential during a market recovery compared to stocks recovering from a pullback. If the market does well this week, people will chase a good news story with momentum on FOMO.
#2 is the fear of the unknown. Rusoro has funded operating and litigation expenses and delayed debt repayments under the expectation that there will be a substantial settlement from Venezuela (the company has essentially no assets without it, so debt holders really had no choice). There is no chance that the company is going bankrupt now, but everyone involved with the company up until this point will get paid. Per financial reports, Rusoro's management estimated that the aggregate potential exposure related to contingent success fees will not exceed 15% of the Award. The deal with Calunius Litigation Risk Fund LP is more of a wild card because its terms are not clearly disclosed in the financials. Based on our research and knowledge of these types of contingency deals, there are two ways this deal could have been structured. It could be a straight percentage, likely not exceeding 30%, or a certain multiple, such as 5x, of the costs incurred by Calunius during this time. So Calunius could end up taking in excess of $100 million and maybe up to $400 million of this deal. But that still leaves a lot left over for Rusoro, well over $1.00 per share worth with 585 million fully diluted shares in the worst case scenario and likely around $2.00 for the Canadian listing RML or $1.50 for RMLFF for a more realistic scenario.
#3 Rusoro was trading at pennies on the dollar even after having been awarded a billion dollar settlement in 2016 by the International Centre for Settlement of Investment Disputes. The stock hit $0.35 in August 2016 shortly after the news but drifted downward after it became apparent that Venezuela was not willing nor able to play ball. This is where one must carefully read the latest news release to really understand what is going on here:
"Rusoro Mining has Received a Settlement Proposal from the Bolivarian Republic of Venezuela
VANCOUVER, Oct. 11, 2018 /CNW/ - Rusoro Mining Ltd. (the "Company" or "Rusoro") announces that it has agreed on the terms of a settlement proposal ("Settlement Proposal") with the Bolivarian Republic of Venezuela ("Venezuela") by which Venezuela agrees to pay Rusoro over US$1.28 billion to acquire the Company's mining data and for full release of the arbitral award (the "Award") issued in favor of the Company in August 2016 by a tribunal constituted pursuant to the Additional Facility of the International Centre for Settlement of Investment Disputes. In addition, it is contemplated that the parties will constitute a Mixed Commission to assess the current status of Rusoro's Choco 10 and San Rafael - El Placer former projects and on the basis of such assessments may by the end of January 2019 partner to exploit those projects. Rusoro expects to sign the formal settlement agreement (the "Settlement Agreement") shortly after completion of the schedules to the Settlement Agreement.
"We are very pleased that we have agreed on terms of a settlement with Venezuela," commented Vladimir Agapov, Chairman of Rusoro. "We look forward to the execution of the Settlement Agreement and towards our continued relationship with Venezuela in assessing two of Rusoro's former gold projects regarding a potential partnership to restart production of the Choco 10 and San Rafael – El Placer mines."
Note that Rusoro received a settlement proposal from Venezuela and has agreed to it. This means that Venezuela is not reluctantly resigned to the deal like it has been with other billion dollar awards mandated by arbitration; it has actively put forth a proposal which has been accepted by Rusoro. This proposal presumably has a payment timetable which is acceptable to the company. If Venezuela wants to remain in good faith with the deal that the country itself has put forth, it will do whatever it can to abide by it. Likely in lieu of other settlement deals where it was not the aggressor in settlement like it was here, but passive acceptance of its fate.
Some investors are comparing this deal to the one accepted by Gold Reserve Inc. (GDRZF) (GRZ.V) and how this company is still trading at a fraction of the market cap of its settlement, despite already getting cash. This deal is not comparable, but also shows that Venezuela does have the ability and willingness to pay. Reading the news release that announced this deal, Venezuela merely agreed to pay the arbitral award. That's the equivalent of reluctantly agreeing to pay a massive parking ticket after trying to go to court to dispute it and failing. There are several news released produced by Gold Reserve which update the market on the progress of the settlement, with Venezuela eventually paying in installments but clearly dragging its feet.
The Rusoro deal is the Venezuelan equivalent of a consumer proposal to get out of debt with their creditors, wanting to maintain a good relationship and keep whatever credibility the country has left. Rusoro is led and significantly owned by father and son duo Vladimir and Andre Agapov, Russian businessmen with influence. Rusoro once produced two-thirds of all gold mined in Venezuela. The post-Chavez regime likely values these people and Russian associates in general more than any other company Chavez screwed over during the nationalization process.
Gold Reserve is also paying income tax on each round of the settlement it receives, a major contributor to the discount it is trading to its settlement. Rusoro has recorded an accumulated deficit of $882 million U.S. according to its latest financial statements. As a result, the company should have substantial tax loss carryforwards which it can apply now to avoid taxes on any settlement payments net of contingency fees.
All things considered, Rusoro is trading at a substantial discount to where it should be after the settlement. RML hit $0.35 on the news of the award in 2016. Now that Venezuela is finally willing to pay for the award, $0.35 should be the minimum starting point and should see greater than $1.00 in reasonably short order upon further clarification of the collection process in our opinion.
Disclosure: We are long Rusoro Mining
Bitcoin has gone from a concept worth pennies a few years ago to worth thousands of dollars. It may appear to some who are late to the game that the opportunity to get rich is gone. However, there are still plenty of ways to make some money trading in bitcoin and other cryptocurrency. Here are some links to valuable reports and strategies:
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
Microcap Millionaires Free Video: Cheap Gold Miner Set to Soar in Fall 2017
The dividend stock report from dividendstocksonline.com
Bitcoin has gone from a concept worth pennies a few years ago to worth thousands of dollars. It may appear to some who are late to the game that the opportunity to get rich is gone. However, there are still plenty of ways to make some money trading in bitcoin and other cryptocurrency. Here are some links to valuable reports and strategies:
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
Microcap Millionaires Free Video: Cheap Gold Miner Set to Soar in Fall 2017
The dividend stock report from dividendstocksonline.com
The dividend stock report from Dividend Stocks Rock
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
No comments:
Post a Comment