It is about Time for These Insiders to Buy

When things gets so crazy, insiders are stepping in to buy stock of Veris Gold.

More buys.

More Buys.

In total, Randy bought $87,442 worth of stock and Shaun bought $40,418 worth of stock. I don’t know about Randy’s net worth but Shaun is a young guy (38 years old) and he is not rich or anything. Plus, he already has invested a lot in this company. To put $40,000 into the company’s stock just in three days is something. I don’t expect more insider buying now because they are blocked from trading as of Friday.

21 Comments to It is about Time for These Insiders to Buy

  1. bob's Gravatar bob
    December 20, 2012 at 9:36 am | Permalink

    wow. hitting the 1.60 level. wondering if this is tax loss selling. i’m still holding. strange ride.

  2. aagold's Gravatar aagold
    December 20, 2012 at 11:48 am | Permalink

    Mariusz,

    Ok – please don’t yell at me because I’m *not* complaining or whining. But I’m just wondering – are you aware of any rumors or anything at all to explain why the stock is now trading at around $1.60 even though the recent secondary offering closed at $2.10? I’m just baffled here… I’m tempted to think “it’s just idiotic stock market investors doing what they do best”, but as I mentioned before, last time I thought that I realized later it was I who was the idiot and didn’t know what was going on.

    – aagold

  3. Josh's Gravatar Josh
    December 20, 2012 at 3:09 pm | Permalink

    The secondary also had warrant consideration. I bought a small tracking position but still don’t believe that the stock is a screaming buy. Now I definitely wouldn’t short, but I would rather stay on the sidelines until we see continued production increases and cash costs decrease.

    I went back and re-read all of the posts about the company on your blog. I may miss some of the earliest gains going forward but being patient also saved me from buying near $0.50 pre reverse split or close to $5.00.

  4. Roger's Gravatar Roger
    December 22, 2012 at 1:43 pm | Permalink

    I have never seen a stock that loses almost half its value just when things are looking at their best. For those who like track and field, I have been holding the stock for 2 years, and it now feels that it’s a 5,000 meter race, and after progressing several times around the track for a long time, investors are totally exhausted just as they got to the final curve and with the finish line in sight.
    In just a couple of years the Company took over from prior Management, put in the first mine into production, found out about the poor shape of the plant, raised a whole lot of money, rebuilt the plant (while dealing with a challenging computer problem, a faulty bucket elevator, an originally badly designed dryer…) , increased the life of the environmental facilities, corrected all but one item of the consent decree, put in a second mine into production, increased the permitting of the roaster to its full capacity (allowing them to lease the excess capacity to others), and substantially completed the work to put a third mine into production. Because all this took longer than anticipated, they need a few more million dollars to complete the work on the third and most profitable mine (highest gold content). The ensuing panic has created an unbelievable buying opportunity. I calculated that with Starvation Canyon, the company will be making almost $100 Million in free cash flow within 12 months, while at the same time reducing their Deutche Bank liability (not counting ANY tolling agreements they may get. Those could be worth up to $50 Million per year on their own!). The stock is now trading way below the value of the roaster on its own as if there is no gold in the ground, and there is no tolling agreements to be profitably made.
    For people like Josh, you are extremely fortunate. You saw a very good value proposition and you passed on it. If there was 100% fairness in this world, you should have missed on it completely. Instead, you are now seeing an unbelievably better value proposition. What’s holding you back is a combination of fear and greed. Sure the stock could drop temporarily some more. However, the stock can sneeze and go easily back over $2.00. Heck, there is so much pessimism surrounding it, all it would take is for the company to sign one tolling agreement for people to be shaken up from the worst case scenarios playing in their head. If I were a Josh, I would go in now with at least 25% of the position I would want to eventually have. If the stock rebounds quickly, I may never be able to get in with more, but at least I would make a killing on that 25% and still be happy that I didn’t totally miss the boat. If fund redemptions force more selling in the stock, I would be able to buy at lower prices and make even more money when any of the expected final positive events happen.
    Warren Buffet says that he gets most scared when his stocks go up (less value remaining, and a lot more room to the downside). He gets greedy when prices are at their lowest. What is happening in this company just shows how the rest of us are no Warren Buffett. We saw the potential of the company when the stock was trading much higher, and now that it is trading for a song, everybody is coming up with reasons why the stock is fairly valued at this level and could go lower! Wow! Such an amazing case study of the human psyche!
    Thank you Mariusz for being the steady influence on this blog. I’m sure you’re also losing a lot money on this company, and you somehow are able to not lose your head. You’re going to be a very successful value investor, sir!

  5. Roger's Gravatar Roger
    December 23, 2012 at 10:47 am | Permalink

    Manipulation anyone?
    I have been keeping track of who is buying and selling on the Toronto stock exchange (the TMX shows that using 3 digit codes. “001” is anonymous, and the rest of the codes represent clients of different brokers). On Friday there was heavy and consistent selling by “009”. I didn’t think much about it and just thought a major shareholder is getting redemptions and have to sell at whatever price is available (the explanation of most of the selling lately-lower prices make people want their money back from their money manager, which forces more selling and even lower prices, particularly in thinly traded stocks like VG). The TMX shows only the last 25 trades at one time. The last page of the day showed almost exclusively 009 sell trades. What was most interesting however, was that his most serious selling involving 70,000 shares (248,000 shares were sold for the entire day) happened in the last 10 minutes! That started smelling of manipulation as one would expect sellers to get the best price by selling in a more measured way. Well, who knows, maybe 009 just wanted to finish his position before the end of the day. However, huge alarm bells rang in my head when I noted that after hours (the thinnest possible market, with usually very few buyers and sellers) 40,000 shares were unloaded at significantly lower prices than what the stock closed at. It seems like someone wanted to sell at the lowest price possible instead of the highest price possible. Why would someone want to do that? The only reasonable explanation I could think of is to create panic among many current shareholders, so that it makes it easier for that party to later on accumulate a significant position in the stock, trying to take over the company. Of course, the crown jewel is the roaster. There are many players in that area sitting on ore bodies with no possibility of having the stuff processed except through VG’s roaster. Not many of them are able or willing to buy the company at the asking price. This is their last chance to get it on the cheap before the expected big increase in positive cash flows (due to starvation canyon and tolling agreements). Will current shareholders listen to their reason or their fear? In moments like this I am so glad the company closed the financing deal. No matter what happens to the stock price in the short run, the company now has the cash to put Starvation Canyon in production and within the next few months the stock will have to reflect the improved fundamentals.

  6. Roger's Gravatar Roger
    December 25, 2012 at 1:19 am | Permalink

    The manipulators lost an important battle today. This was the day when more than 48% of all VG shares that exchanged hands on the TMX, were sold in the last half hour of trading! Despite this, the stock closed higher! It seems like more VG investors are wising up to the manipulation and are no longer assuming that just because the stock may go down, that it’s a problem with the company. In fact, today’s price action indicates that many are buying it back before the stock goes back up and leaves them behind. I feel pretty good owning a significant amount of stock that would do great if the price goes up, but I wouldn’t mind buying more, if the price goes back down to an even more unreasonable level.

  7. Mariusz Skonieczny's Gravatar Mariusz Skonieczny
    December 25, 2012 at 1:31 am | Permalink

    I have been watching the action myself. You are right that about 50 percent of shares were dumped during the last 20 minutes or so. I don’t know if this is manipulations but it definitely looks weird. Someone told me that the exchange is looking into it.

    Whether the stock is manipulated or not will not matter in the end. But it sure is crazy to watch it.

  8. Roger's Gravatar Roger
    December 25, 2012 at 8:52 pm | Permalink

    Mariusz, I disagree with you on this point. I think the manipulation may matter in the end or it wouldn’t have been done. Let me give you a hypothetical (but maybe real) scenario: a company wants to take over VG at the lowest possible price. Using the pretext of the company needing the last few million dollars to put Starvation Canyon in production, this company has a shareholder(s) sell his shares at the lowest possible prices (huge quantities all at ounce, sell at the bid price, and at the most illiquid times of the day (at the end of the day, after hours, etc)). Seeing this, along with the perfect storm of softening gold prices, current shareholders and funds (due to increasing redemption calls) sell into the falling prices. This allows the manipulator to see even lower prices while replenishing the shares he dumped, allowing him to perform more price manipulation later on.
    The starting goal is to prevent the company from completing the financing so that Starvation Canyon is not put in production. While this fails as the financing is closed, the second best case scenario is achieved as the Company has to drop the price of the financing and raise less funds at a lower price. This should effectively de-risk the company and stem the selling. But, this is when the manipulator does another round of dumping of the stock. It reduces the price of the stock to a price way below the price of the financing! The good news is that he hasn’t found a significant number of investors to join in the selling, and was therefore not able to replenish his shares. However, it may not be over. The ultimate goal is for the company behind the manipulation to come in and offer to buy the entire VG at a price that would have seemed ridiculous only a few weeks ago (say, $3.00 per share). After the manipulation and resulting price drop, the offer price may seem very attractive to shareholders who would wipe out their recent significant losses thanks to the seemingly high premium being paid. If they say yes, the manipulating company would have effectively stolen the company from right underneath their nose, right before tremendous profitability in VG.
    What do you think of that scenario Mariusz and/or others? Do you think the company is seeking to prevent this scenario with the recently announced poison pill? It doesn’t seem much of poison pill to me as all it would do is allow the company’s Management more time to make their case to the shareholders if they receive an unfair takeover offer.

  9. Jordan's Gravatar Jordan
    December 26, 2012 at 4:50 am | Permalink

    1) The stock starting dropping when the company announced it needed to raise $25 million.
    2) The stock dropped further when the company announced it could only raise $15 million because there was not enough demand from investors for the full $25 million.
    3) The stock dropped even further when the company announced the $15 million would be issued at a lower price than previously stated.
    4) Finally, the stock has continued to drop as investors have realized the company is using the proceeds from the latest offering to develop Starvation and thus will need to raise MORE equity to pay off the “Nov. 2010 US$21.3M – 12,961 oz Au deliverable in Q4 2012″ that is stated in their latest corporate presentation on their website. Also, they will incur a penalty of 2.25% per month until it is paid off.

    • Mariusz Skonieczny's Gravatar Mariusz Skonieczny
      December 26, 2012 at 6:35 am | Permalink

      Jordan,

      What is your point? Are you trying to explain why the stock price is dropping or that there is no manipulation because the drop is totally justified and that it doesn’t matter that someone is dumping 50% of volume in the last 20 minutes of trading and that on Friday there were shenanigans after the hours? I am not saying that I disagree with you and I am not saying that there is 100% manipulation but it looks weird to me when 50% of volume gets dumped in a short period of time while they have the entire day to liquidate the position but they choose to do it almost all at once.

  10. Jordan's Gravatar Jordan
    December 26, 2012 at 2:07 pm | Permalink

    Roger and Mariusz, did you not see the shareholder rights plan aka “poison pill” the company put in place last week? I don’t know if the stock is being manipulated or not but anyone smart enough to manipulate the stock would know that at this point it doesn’t make sense to do so because of the poison pill in place. Therefore I think it’s just angry shareholder(s).

    My point is shareholders are pissed off that the company raised equity and diluted shareholders and the stock dropped 30% as a result. And the company will need to raise MORE equity and current selling shareholders are afraid the stock will an additional 30% when the company goes out to market. Having two equity raises within a year let alone within six months is just not a good thing

    • Mariusz Skonieczny's Gravatar Mariusz Skonieczny
      December 26, 2012 at 4:58 pm | Permalink

      Jordan,

      I see your point.

  11. Richard's Gravatar Richard
    December 28, 2012 at 9:01 am | Permalink

    There has been a lot of talk about what caused the take down of certain mining shares on Dec 21, 2012. It was a MOC sell order, just google TSX,MOC and it will give you the explanation. VG got hit, and so did others, all sold off by Credit Suisse

    This was posted on the AUN.V Stockhouse Bullboard

    twoggle0
    12/26/2012 12:33:30 AM | | 341 reads | Post #31953193

    I am not an expert, but It looks to me like the 2.5+ million share MOC sell was part of the automatic quarterly rebalancing of the GDXJ EFT (which matches the Market Vectors GDXJ index). The rebalancing happens on the 3rd Friday of the quarter-ending month. I noticed that the AUN shares in GDXJ were reduced by 2,744,246 to 32,556,108 shares. The rebalancing has nothing to do with whether AUN will go up or down in the future, but is based on a complex (to me) weighting and capping formula that is automated.

  12. Roger's Gravatar Roger
    December 29, 2012 at 6:36 pm | Permalink

    Jordan,
    Responding to your two points. As I said in my post, all the poison pill does is it buys Management more time (60 days from being notified, up from 35 days by Canadian law) the opportunity to explain why shareholders should not sell into a hostile takeover. As I said above, I don’t know just how effective that would be, if shareholders are offered almost 100% premium from the current price.

    About your second point, I am as disappointed as others that the company keeps needing more equity raises (because fixing the plant took more time than expected). However, a 2.25% per month penalty on the loan is not catastrophic (is it any worse than a credit card loan?). While VG would have loved to raise more money to give its balance sheet more operational safety, I am not convinced that the extra money was not just “nice to have”, and whether the company absolutely needs it after they put Starvation Canyon in production. And if tolling agreements start getting inked, there should be plenty of cash flow to pay off the loan.

    Frankly, my biggest concerns are two-fold: the price of gold, and if God forbid the company encounters any major operational problems with the plant. Thanks to the destruction of the company’s price by its own shareholders, the company was not able to gain the margin of safety it would have liked to have before finalizing its turnaround with Starvation Canyon.

  13. Josh's Gravatar Josh
    December 30, 2012 at 8:44 pm | Permalink

    Roger, Thank you for the healthy discussion on Veris. I have found an investing style that works for me and I could very well be wrong in my valuation. I think Veris Gold is cheap based on its potential future, however where I am different is that (I believe) the company is not cheap based on its current production and cash costs. I would much rather buy stocks that are cheap based on current metrics vs a projection of value in the future.

    Re: fairness and investors like me. We have all been in situations where the market went against us by a lot. The question I ask myself when this happens is am I missing something, was I too optimistic, etc? I have exited plenty of investments at losses because I was wrong. In most cases my projections were very wrong. I realized what works for me is only buying stocks that look cheap to me today and using pessimistic scenarios (for margin of safety).

    In your comment you said that you’ve owned Veris for two years. I am guessing that your original cost basis is $8-$9 post split. Hopefully you have traded around your position and are ahead or close to break even. I am curious, do you see Veris getting back to $8 or $9? (I can’t) Using really optimistic scenarios, I get to a valuation of $7. Using more conservative numbers, I get to $4. Using pessimistic numbers I get to $1.90, which is why I am not willing to buy a big slug (although getting there).

  14. Roger's Gravatar Roger
    December 31, 2012 at 1:32 am | Permalink

    Josh,
    I am sorry about your recent experience. As you surmised, I do have paper losses in Veris, though not as much as you surmise (I did trade around it quite a bit).
    Your strategy sounds low risk and terrific on paper. I would however recommend that you be careful about being TOO pessimistic by not including the realistic future in your value calculations. For example, in a turnaround situation a company appears to be most expensive just as it’s made its first small profit after losing money for a long time. Before it makes $, a company is not valued by P/E as the E is negative. Right at break-even, the P/E becomes positive for the first time, but the E starts out so small that the P/E looks ridiculously “expensive”, only to plummet after increased profitability is achieved. Taking all sentiments (disappointment, frustration, anger) out of the equation, I believe this is the situation Veris is in. After all, if you value Veris as fairly valued at current production, how did you value it this past March or May, when it wasn’t producing nearly as much as today? Also, because most of its costs are fixed, the cash costs per ounce were in the stratosphere. Those costs have steadily decreased as the fixed costs are being spread over more and more ounces. When Starvation Canyon is in production and/or the toll agreements are added in, the cash costs will plummet potentially to the $500’s range. The question is, do you think the stock price will be waiting for you when that happens?
    I would recommend understanding why your models have failed in the past, and what the true drivers are for your companies. For example, while I was right in expecting that the first 2 mines that are put in production would allow Yukon to break even and everything else would be profit my initial mistake was not realizing that the inherited plant was so old that it would require such a major overhaul. However, all of that was already included in the price of the stock at $3.00, and at the current laughable price there is no way I am selling (by the way, I bet your best case scenario does not include gold at higher prices, or what this company would be worth to a company like Newmont who is sitting on several years worth of unprocessed ore at 2.5 to 3.0 g/ton). That by itself is a shame as there are about 5 stocks from Mariusz’s newsletter that have more potential than any stock I’ve seen in my life, and I’m dying to invest in them once I can free up some capital.
    I wish you great health and investment success in the new year.

  15. Jordan's Gravatar Jordan
    December 31, 2012 at 3:51 am | Permalink

    Roger,

    For someone who appears so invested in Veris, I’m surprised by your comment. Did you not read the full press release on the poison pill? You should be reading everything in full if you are invested in the company. It’s on their website dated December 21, 2012. Basically every shareholder will have the right to purchase additional shares (equivalent to the number they own) at a 50% discount to the market price at the time. This essentially would double the amount of shares outstanding if a hostile bid took place. A poison pill is designed to make it much more difficult and expensive for a hostile takeover to occur, which is essentially what Veris has designed it to do. Here’s some text from the press release that you might have missed:

    The Rights are attached to the common shares and cannot be exercised until eight trading days after a triggering event has taken place. A triggering event is one of the following: (i) an Acquiring Person, as defined in the Plan, acquires 20% or more of the common shares of the Company; or (ii) an Acquiring Person announces his intention to make a take-over bid that would result in the person owning 20% or more of the outstanding common shares of the Company. Upon such a triggering event occurring, each Right would separate from the common share and thereafter entitle the holder to purchase common shares at a 50% discount to the market price, up to the amount of the $25 exercise price of the Right.

  16. Mariusz Skonieczny's Gravatar Mariusz Skonieczny
    December 31, 2012 at 10:53 am | Permalink

    Jordan,

    I am going to jump in here. I am a little puzzled. You told Roger to read the poison pill but if you read his comments it is obvious that he read it. So it is either you are saying that he doesn’t understand it or you didn’t read his comments.

    Are you saying that the company can’t ever be sold because there is a poison pill? What is your point about talk about this poison pill?

    Correct me if I am wrong but I am getting this message, “Jordan says that this poison pill is so toxic that no one should be investing in Veris Gold.” I could be wrong here but if this is what you are saying then why do you think insiders just purchased shares? Why do you think Sprott participated in the most recent equity offering at a higher price? Are they also not understanding the poison pill?

  17. Roger's Gravatar Roger
    December 31, 2012 at 11:52 am | Permalink

    Jordan,

    I read the poison pill several times and it does NOT stop the company from being sold. All those “poisonous” parts are NOT triggered if the acquirer gives 60 days to the company to deal with the bid (making it a “Permitted Bid”). Here’s the relevant part of the press release:

    “The Rights will not be separated from the shares if the Acquiring Person makes a Permitted Bid, defined in the Plan to mean a bid made pursuant to a take-over bid circular to all shareholders of the Company, which has a minimum deposit period of at least 60 days and pursuant to which not less than 50% of the common shares, other than those held by the Acquiring Person, are deposited and not withdrawn. The Permitted Bid concept is intended to provide protection to the Company and its shareholders while permitting shareholder democracy to operate by extending the time for deposit to ensure due consideration of the bid and allowing the bid to proceed if a majority of the shareholders tender their shares.”

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