Mud puddles at your feet
December 14, 2011
"Hi,
Too bad that things didn't work out the way we all hoped for at SA. I hope that the remaining holes will prove up some good grades, so that the share price can recover and I can exit, possibly with a nice profit.
Signed (I've changed his name here) X"
This was an email from a grahamanalytics reader, waiting for me when I got up this morning.
While reaching for my neck brace with one hand (to prevent injury from excessive shaking of the head), and my keyboard with the other, I caught myself short and bit my tongue. Took a deep breath, enjoyed breakfast with my family, sent our little one off to school, savoured a second cup of coffee with my lovely wife, and wandered back to the office to pen a response. In the meantime, I'd received multiple other messages, wondering if I didn't have more to say about Southern Arc… and one questioning directly whether I'd given up on that investment. Should have seen that coming, I guess. A friend had already predicted it when he saw my piece on New Zealand Energy (NZ.V), posted yesterday. For the past four years, people have been tossing names of companies at me, encouraging me to focus more on investments other than Southern Arc. My answer has always been, 'I'll only write what I know.' Now that I have chosen to 'know' something about another investment opportunity, and after a prolonged period of silence on my part, a sense of abandonment has been voiced by a number of people. Can't win either way, I guess.
Part of my hesitation in response is in knowing the part of the world from which the message had been sent. Perhaps something was lost in the translation, I thought. Perhaps. I'll give the benefit of the doubt on one hand, but will answer the message here as if it were intended literally as written. In light of the numerous recent messages I've received on the subject, the following should be taken as a general response, rather than simply a reply to one person.
Dear X:
It's far too premature to suggest that 'things didn't work out the way we all hoped for at SA.' To speak of this investment in the past tense is to be caught up in the moment. Getting caught up in the moment is a risky prospect in just about any part of life, with few exceptions. Think about that for a minute. How many times were you caught up in momentary agony, or momentary ecstasy, only to be pulled back to reality by the 'whole' picture.
'Things' are working out very nicely at Southern Arc, in my view. Nothing in the fundamentals of the investment have changed, other than for the good. I should preface these comments with the caveat that my view offers nothing to short-term traders or those who need the invested funds to pay for next week's groceries. To them, I have nothing of value to say. To those invested in the Company in hopes of a big payout, I say again, things are working out very nicely. Remember back in December, 2007, when John Proust was vilified for raising funds at $1.20? A year later, people were calling that move nothing short of brilliant. I regularly hear moaning and groaning from people who sunk hundreds of thousands of dollars into this stock at $1.60, $1.70, and higher… and 'for what?' Well, here's the silver lining for those who bought as an 'investment.' Your sacrifice is not without benefit, albeit one you may not (yet) feel. Be assured that, if you had not been buying this stock at those levels, John Proust would not have been able to raise $46 million at $1.60 and $1.70 earlier this year. Bluntly put, he would have been issuing twice the number of shares at half the price. History will again judge favourably on this account, I think. So…while it hurts to have paid higher prices, it was not without an upside. This Company is cashed up for drilling West Lombok for the next two years. The general market may run a roller coaster ride to its heart's content. I care not. From an operational standpoint, Southern Arc is impervious… read that again… impervious to the market fluctuations. When the market is through with its gyrations, those companies with cash, with highly prospective properties, with strong management, and with key relationships in place will bounce quickly to new highs.
Engagement is Everything
For a number of years, someone very close to me would answer each new challenge with, "I can't do it!" Perhaps my greatest gift to him (I hope he would agree) is the addition of the word "yet" at the end of that declaration. He is infinitely more wealthy having accepted this gift. Life is a journey and should be engaged as such. Over breakfast this morning, X's message in hand, I took the opportunity to raise this subject with my 12 year old daughter. Asking her to finish the line, I posed, "Life isn't just what happens to you…" Her answer, with very minor edits, "… life is what you do about what happens to you." Who says there's no hope in our youth? My indoctrination of her is intact. From September through March, she spends some 15 hours each week training at a dance studio. All of this for a flurry of five competitions in the Spring. She's just 12, remember. As you enter the door of the studio each day, the sign reads, "Life is not about finding yourself. Life is about creating yourself." George Bernard Shaw. "The best way to predict the future is to invent it." Alan Kay.
I've got a million of these. Don't tempt me.
So… what's all this got to do with Southern Arc. Here's the thing. Four years ago, we created a community. This community was a small group of investors eager to learn more about this Company so as to become engaged in the journey. Engagement is everything. This engagement has spawned a partnership of sorts with Company management. I've heard John Proust speak in these terms on more than one occasion, describing this relationship with lay investors in Southern Arc as unlike anything he's experienced or seen … ever. By engagement, I mean study. I mean conversation. I mean thinking past short-term share price fluctuations. I mean stepping back to see the horizon, rather than zooming in on the mud puddle at your feet.
There are those who would dislodge you from such engagement. One would be the raccoon whom I described in the September 30th piece, Choosing the best tool. Adopting umpteen different aliases, this rather stubborn fellow has completely hijacked the online discussion forum for Southern Arc, doing everything he can to discourage intelligent conversation and (I suspect) with hopes to encourage lower share price for accumulation. His high-frequency posts are an attempt to frustrate and fatigue people into selling. Whether he actually wants to buy cheap shares or just wants to punish John Proust for money lost elsewhere, I honestly don't know. His behaviour seems downright sociopathic to me.
The Southern Arc community lives on, just not on the Stockhouse forum. The opportunity to invent the future resides in a will to engage. Step up. Initiate. Engage. Whether or not you become materially wealthy beyond your wildest dreams is irrelevant. The journey is the thing.
When you speak of "the remaining holes," X, I fear you're referring to the 16 holes to be released in January. Such short-term perspective, if I read you correctly, is folly. There may be something to celebrate in these holes… I expect nothing. If it works out better than I expect, I'll be pleasantly surprised. The Waterfall drilling program was a political selection, rather than geologic. While there is mineralization there (9 holes reported mineralization so far, if I recall correctly), this site was chosen to make a statement to the itinerant miners. This was the centre of their activity. The objective here was to be 'in their face… in their own back yard. We're here and we’re not leaving and there's nothing you can do about it.' Never a guarantee, but the message has been delivered. Bising and Tibu Serai are much more exciting sites, in my view. This is where surface work yielded grades topping 200 g/t. Bring it on, I say. With a 10 rig program and 6,000 metres per month through the first half of 2012, this is a junior explorer to be watched very closely. Most juniors will do a financing, poke a few holes in the ground, leak a few millions of dollars out to consulting companies with questionable connection to management, then do another financing. Not this one. With 30 km of strike, the game is just now getting under way. Far too early to be thinking about a share price recovery for a speedy exit. Far too early. See my piece from August 20th, Multiple tens of dollars for a refresher on my unabated enthusiasm for this investment. See the 18 minute July 8th video for my take on the scale of the upside potential for West Lombok.
Do not take my recent silence as indicative of indifference or disinterest or abandonment. Far from it. In my view, for what it's worth, this is the 'real deal' as the saying goes. Nothing has changed in the fundamentals of this investment. Two things have recently presented themselves as what I call bumps in the road. First, the security issues in May and August took everyone, including the Company, by surprise. Okay, now deal with it and move on. Second, the general market anxiety, still upon us. I term this as a 'bump in the road' also, though the doomsayers would say more. Cash in the bank says Southern Arc will survive and thrive, and my investment along with it.
There's been nothing to speak about in the absence of news. With sustained, uninterrupted, drilling activity, the news flow come January, should be strong and steady.
We all have hopes, and this one's fair game for our investment in Southern Arc. At the same time, hope is not a strategy. It must be coupled with hard work… and by that, I mean due diligence. I've done mine, and have no worries for this investment. None. Whatsoever. Period.
In time, X, I hope you can say the same.
Sincerely,
Kevin Graham
P.S.: I encourage readers to continue to connect with me on Southern Arc, and am happy to engage. Before you do, however, asking if I've given up on SA, please first click on the last two embedded links above. There, you'll find my current take on this investment.