Friday File: Buying ID and Overpaying for cash, Checking up on some insurers

Updates from the Real Money Portfolio and watchlist, including thoughts on CTEQF, BOMN, SQ, JD, AXS and OKTA

By Travis Johnson, Stock Gumshoe, March 2, 2018

So… what’s happening this week? I have a few updates on Real Money Portfolio investments, including some updates following earnings releases this week and some notes about my hedge position, as well as some thoughts on a few insurance companies that are catching my eye and making their way onto the watchlist… and I also have two buys to note for this week, one add-on and one that’s brand new to the portfolio. Enjoy!

We’ll start with cobalt… Clean TeQ shared a new presentation recently — and investors were briefly scared off a little bit, probably because Clean TeQ is extending its internal deadline for the definitive feasibility study (DFS) by a quarter, with their target date now “by the end of June” for that information. Investors hate waiting. The update last week indicated that the delay will give them time to assess a new proposal for the construction of the Sunrise project… and, in further news that scares investors, they noted that the capital costs of the project are likely to be higher than was expected last Fall, mostly because of their “optimisation program” that is intended to increase efficiency and flexibility of the plant.

The delay of a few months is not a huge concern for me, mostly because the company seems fully committed to the project and already has arrangements in place to raise most of the required capital (assuming the initial capital estimate is just going up by a bit, not dramatically), and should still be on track for construction to be well underway this year… and I think the larger investment for a better expected cash flow is likely to be worthwhile. But it is a reminder that this is a new kind of processing plant, and nothing is really final or proven yet — there are risks that go beyond regular cost overruns or the unpredictable nature of cobalt or nickel prices, and we should keep in mind that there might be surprises in the definitive feasibility study, or significant hiccups along the way as they build and commission (and finance) the processing plant. I still think the reward is well worth the risk, considering the rising demand (and price) for cobalt, but that doesn’t mean the risk has gone away.


Also in commodity land, gold miner Pretium (PVG) has gotten clobbered because their performance has been worse than expected… ...

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