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Alright, enough of that. In this week’s column: American grift, hilarious mining incentives, and Barrick wants a name change.
Let’s get after it!
“Digging for Value, One Story At A Time.”
American Grifting 101
Say what you want about President Biden, but he never let you participate in his backdoor dealings and grifting activity.
That’s not very democratic of him. Sure, the “Big Guy” got his cut. But what about middle-class Americans? Where was their share of the political profits?
If Biden truly loved America, he would have created a SPAC called “Offshore Big Guy Acquisition Corp I” and let everyday Americans (like us) participate in his ventures.
Luckily, we have an administration that understands Biden’s mistakes and is committed to fixing them. In other words, grift is back.
Yesterday, Donald Trump Jr. took to X (Twitter) to announce, with the subtlety of a fireworks warehouse fire, that:
“Big things coming for @GrabAGun — One of the most exciting pro-2A companies out there. Stay tuned $CLBR. HUGE for American patriots who love the 2nd Amendment!!! $PEW”
GrabAGun is, as the name suggests, a retailer that caters to the “grab a gun” demographic. The ticker $CLBR refers to Colibri Group, which recently announced plans to acquire GrabAGun.
Nobody is being subtle here. The formula is simple: take a company that sells products to a passionate, politically engaged customer base, take it public (or reverse-merge it into a public shell), and then have Trump promote it on social media.
I mean, it’s genius?
Donald Trump, Jr. knows something about investing that many people don’t want to admit. Investing isn’t about buying partial ownership of a business because you think its future cash flows, discounted back to the present, will provide you with a satisfactory risk-adjusted return.
Nonsense!
Investing is about showing others how you identify politically, spiritually, emotionally, and societally. All that talk about dividends, buybacks, and earnings is just noise.
It’s obvious how this relates to natural resource investing.
Mining companies should follow the same playbook. Take a US-based project, wrap it up in the American flag, find a “patriot” to promote it, get everyone all hot and bothered, and then watch your stock moon? (Not advice!)
It’s not “just copper” but “American-produced copper.” Which sounds way more patriotic. And wouldn’t you instead invest in a patriotic American copper company? Wouldn’t that copper shine a little brighter in the hot, Arizona sun?
Remuneration Gone Wrong
Mining companies get a bad rap, and for good reason. 99% of projects are worthless; the executives who promote such projects pay themselves too much, and they dilute shareholders’ interests into oblivion while overseeing their projects from thousands of miles away.
Everyone knows the Mark Twain quote, “A mine is a hole in the ground with a liar on top.”
I’ve written a lot about the 1% of mining companies that are building actual businesses, such as Idaho Strategic (IDR) and Magna Mining (NICU) – both of which I own (not financial advice!).
But then I read this story about Koonenberry Gold (KNB) and couldn’t help but agree with Twain’s words. From Mining.com:
Australian explorer Koonenberry Gold (ASX: KNB) is facing a potential shareholder revolt amid concerns over its governance and remuneration.
On Monday, Melbourne-based boutique fund Datt Capital, which holds a major stake in Koonenberry, went public with its concerns over the composition of Koonenberry’s board and proposed incentives to be issued to directors.”
Emanuel Datt runs Datt Capital, a boutique Australian investment firm. At the time, the firm owned 10% of the company. So they approached the board and said, “Hey, we own 10% of the business, we love the future prospects, and we want to be helpful and get some voice on the board. What do you guys think?”
Datt told Mining.com that, “They were very much opposed to any sort of board change.”
But Datt kept buying. Now they own around 12% of the business. And instead of getting one seat, they want two.
“It made us think, well, we own over 10% of the company, we’re in a fairly strong position. We’d like a nominee on the board, but if we need to go through a formal shareholder, process, we’ll be going for two seats rather than just one.”
Essentially, Datt wants adults to run things. The firm intends to remove non-executive directors Darren Glover and George Rogers. Datt explains:
“Ultimately, the board in its present incarnation, it’s fine if it’s a micro-cap company, and when the operations are still fairly speculative … [However], this looks like it could be a very real major gold discovery, and effectively, that’s when you’ve got to start preparing for the company’s evolution.”
Now, if you’re KNB, you should probably issue a press release informing your shareholders that a) this fund that owns >10% of the company wants to fire two board members and b) the reason they want to do that is because they think they’re unqualified to lead a serious company.
But instead they chose to c) release a new remuneration package. And it’s hilarious.
“The incentives included the issue of performance rights to employees if the company reported single drill intercepts of at least 20 gram metres and 50 gram metres of gold and the company achieved a volume-weighted average share price (VWAP) of at least A3.75c for 10 consecutive days.
Managing director Dan Power is set to receive roughly 2 million performance rights for achieving at least one 20 gram metre gold hit and at least one 50 gram metre gold hit.
Datt estimates the package could result in a potential A$5.4 million dilution to shareholder value, assuming a A20c share price, and could dilute existing shareholders by almost 6%.”
I’m going to nerd out on drilling for a second, but bear with me. This will make the incentive structure even more absurd.
Gram meters are simply the length of the assay times the grade. To obtain a “20 gram meter” gold assay, you could hit 4 meters at 5g/t, 10 meters at 2g/t, or 20 meters at 1g/t. It’s the same calculus for the “50 gram meter” incentive.
You get the idea.
The important thing is that those targets aren’t really that impressive. 4 meters of 5g/t gold is nice, but it’s not extraordinary. Certainly not something worthy of bonus compensation.
Take IDR, for example. Last month, they issued drill results showing 150g/t over 1 meter and 50.86g/t over 4.5 meters. And yet their management team didn’t get a fancy bonus for that.
It’s just bad taste.
I understand the concept of incentivizing based on drill results. Exploration companies don’t really have any other KPI. However, why not a bonus on a blended average of the total drilled meters during a program? That sounds more shareholder-friendly than, “Well, all we have to do is hit one hole and we can pay ourselves at the expense of shareholders.”
It’s just too easy for management to defraud shareholders, sprinkle some edible dust in the ground, and say, “Look at that! We hit our target on the first drill hole!”
However, I’m glad I read it because I like the Datt Capital guys and think they have a chance of turning KNB around, getting adults in the room, and recognizing the deposit’s value. To the watchlist it goes.
“Drop the ‘Gold’ It’s Cleaner, Now.”
Gold is bouncing around all-time highs, oil is below $65 per barrel, and mining profit margins have never been higher.
If you’re a mining company executive, what would be the best use of your time? Optimizing production, finding areas to reduce costs, maybe buying back some of your deeply depressed stock? I don’t know, there are tons of options.
But one of those should not be “what if we changed our company name by dropping ‘gold’?
Not if you’re Barrick Gold – err wait – just Barrick now. According to the Canadian Mining Journal:
“Barrick Gold Corporation (NYSE: GOLD; TSX: ABX) announced it plans to change its name to Barrick Mining Corporation and from « Société aurifère Barrick » to « Société minière Barrick » in French. This change is still subject to shareholder approval at its upcoming annual and special meeting of shareholders on May 6, 2025.
In connection with its name change, the company also plans to change its ticker symbol for the Barrick common shares listed on the New York Stock Exchange from ‘GOLD’ to ‘B’, to become effective at the start of trading on May 9, 2025.”
Ahh, yes. Why would you want your ticker symbol to spell out the one commodity that’s making money for investors right now? Why make it easy for investors to find/invest in your company because they want exposure to your specific theme?
No, “B” is much cooler. It’s minimalist. It’s the initials of my first and last names. But most importantly, it’s ambiguous.
“Barrick president and chief executive Mark Bristow stated: “Barrick’s vision is to be the world’s most valued gold and copper exploration, development and mining company. Along with our world-class portfolio of six tier one gold mines, we are building a substantial copper business which will be a meaningful contributor to growing our production volumes in the coming years and beyond.”
Bristow added: “Barrick Mining Corporation and our new stock symbol, ‘B’, better reflect Barrick’s current business and our mission to achieve sustainable and profitable gold and copper growth. Gold remains core to our foundation, and we will continue to explore for and develop new gold mines, including the expansion of Pueblo Viejo, the exciting Fourmile gold project in Nevada and exemplified by the Reko Diq project with its world class mix of both copper and gold.””
Barrick should’ve pulled a Donald Trump, Jr. and named the company “Barrick USA Mining Pro America Guns Hell Yeah, Inc.” Imagine the inflows.
