ShareProphets

The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares


Join ShareProphets at less than 2p per article

> All the big AIM fraud exposés

> 300 articles and podcasts a month

> Hot share tips

> Original investigations by our experienced team

> No ads, no click-bait, no auto-play videos

Find out more

Bluejay Mining - The lessons

By Tom Winnifrith | Friday 17 August 2018


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


I had not realised that shamed tipster Mike Walters of Minmet, Polly Peck, 3DM (and the rest) infamy was promoting Bluejay (JAY) but the kiss of death from Old Mother Walters is just another massive red flag. With disgraced Nomad SP Angel of MySquar infamy still refusing to say whether it dumped millions of shares while urging clients to buy, this stock is uninvestable. In that light I bring you a piece out yesterday from Richard Jennings which adds to the growing bear case. Over to the boss of Align Research... 

I have watched the Blue Jay Mining promote with interest over the last near 3 years, eyes agog at the ever increasing valuation which, for a junior operating in one of the hardest mining environments on the planet, to me defied belief as it, incredibly, reached near £250m. Hats off to Rod Mcillree – it has been without a shadow of a doubt one of the biggest and cleverest stock promotes in recent years and made some people (the smart ones that sold) very wealthy along the way. Those that held on in the mid 20’s and, error of errors, added, broke the cardinal rule of successful investing which is to diversify material gains into other undervalued situations and never, ever put all your eggs in one basket.

The primary lesson to me is that a promote that involves a distant jurisdiction with a commodity “du jour” can detach from any basis of commercial & valuation reality particularly where a tight free float and “nudge, nudge, whisper, whisper” information is involved in the insider riven market that is the City. The placings that were carried out at 7,12 and 22p were master strokes and bolstered the balance sheet temporarily whilst the additional funding increasded the City advisor roster on the payroll allowing the “story” to be pushed further.

The main “tell” however to me was the exiting of the supposed “cornerstone investor” Western Areas in late 2016 at 7p in part and then the remainder of their holding at 12p in mid 2017. That was the real smoke signal to me as, if the numbers being thrown around by the bulls (of which Michael Walters and SP Angel were the principal cheerleaders, the former indeed denigrating our business here and me personally for raising questions over valuation) were correct, then quite why this early stage investor would sell defied belief. This question was never answered satisfactorily by the company. Ditto the question as to the company’s broker (SP Angel’s) current holding in the company also remains unanswered and which could still be cleared up very quickly – namely do they actually hold any stock given that they are still advocating a Buy?

As the stock rose the bulls became ever more emboldened and near 25 years in the markets taught me that this is precisely the point of maximum danger. An “off take” agreement had been dangled as a carrot in front of many for quite some time (indeed since the start of this year) and as time has progressed and the realisation that in order to actually sell any product the company needs to come through the EIA & SIA in order to obtain the all important Exploitation licence, this it seems sparked the sell trigger for some. Coupled with the heavy leveraged position in the stock the chart tells the rest of the story. Our article HERE relays just how difficult it is to actually get operations going on the ground in Greenland with only one company we are aware of in production and the EIA approvals process taking upto 30 years in one case. Lesson? When valuations detach from reality, no matter what the seeming underlying fundamentals of the story, always, always take your profit.

My discussions with the mining specialist operating in Greenland this afternoon (indeed he relayed that he was offered JAY’s licence for £500k before they acquired it and turned it down) is that it is a very, very difficult environment on many counts (aside from the harsh climate) and that many companies just give up the ghost given the complexities involved. To be clear, I am not saying that I believe JAY will do this but I am sure that even Mr Mcillree will relay how difficult it is there given his experiences at Greenlands Minerals & Energy (see HERE) in getting to a point of actually commercially selling the product let alone mined. This particular company has in fact been trying to progress their rare earths interests there for over 10 years and are still not in production. The chart below shows how this played out for investors as delay followed delay.

To conclude, for those reasoning that because the stock has halved it must now be cheap (know as mental “anchoring” in the parlance) we repeat the questions posed to management HERE which we suggest they answer pront in order to shore up confidence in the stock, namely (indeed we have posed them direct this afternoon and will post their reply in full should it be forthcoming):

  1. Why is the Social Impact Assessment taking so long?
  2. Why is the Environmental Impact Assesment similarly taking so long?
  3. How many shares do SP Angel still hold given that they are advocating a Buy stance and mooting takeover talk which is, we believe, very much misplaced given that you still do not have the Exploitation licence?
  4. You had said to numerous parties in early spring that an offtake deal was imminent – why has this not transpired given the supposed grade of the ilmenite?
  5. The Exploitation licence is over a year late from when first flagged re timescales in early 2016, what confidence can investors have that it will be forthcoming this year?
  6. How much of the £15m is now left on the balance sheet and what prospects of a further raise in the next 6-12 months?
  7. Given that the field season is coming to a close in Greenland in the next 8 weeks would you agree any potential cash flows for the company are getting pushed ever further out?
  8. How do you square the valuation of essentially the same product at ALBA with an adjacent licence area relative to your market cap?

Absent a reply to these questions, the stark realities highlighted on this site re operating in Greenland and the experience of almost every company there married against a current cash balance of less than 2p per share leads us to believe the stock could continue to fall as investors realise just how far away the company likely is from saleable production and future financing requirements. Accordingly, we reiterate our SELL call on JAY.


Filed under:


Never miss a story.




This area of the ShareProphets.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ShareProphets.com. ShareProphets.com does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ShareProphets.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ShareProphets.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.


More on JAY


Comments

Comments are turned off for this article.


Site by Everywhen