Baja Mining - Lies and Lawsuits?

In an earlier article on The Frost Report, I wrote about a great mining company - Baja Mining.

What makes it great?  Well, they have a huge, mostly finished mine with great expected cash flow in a known mining district with a low stock price!

Without taking sides, I wrote alot about one problem that was contributing to the low stock price: Mt. Kellett Capital Management, a hedge fund and major shareholder, said that Baja was not being governed properly, and so were attempting to place some new members on the board of directors.  Mt. Kellett lost this battle on April 3rd.

It now seems that Mt. Kellett was right all along- Baja's management is indeed incompetent, or at the very least hopelessly confused.

Baja stock sank 40% (!!!) today, after Baja issued a press release saying that, contrary to everything they have ever said before, the project is NOT funded through to completion, and will require substantial new funding ($246 million) - from somewhere.

The issue of funding is especially interesting to me, since in my interview with Baja representative Alex Macdougall in February, I specifically asked him if there was any chance whatsoever of Baja needing to raise capital.  Macdougall's answer was: "There is no chance of them [Baja] raising monies before they complete construction."  About two months later, Baja issued a subtle press release saying that they were feeling "inflationary pressure," but that they were implementing cost-cutting measures to help offset these.   Looking back, I feel like I was sucker-punched.

Today's latest press releases also included a short "by-the-way" statement, which was that three more directors quit because (their words), "In light of recent developments...we are no longer confident that we can ensure the level of good governance and oversight that the Shareholders of Baja have a right to expect from us."  Tellingly, this quote only made the follow-up press release.  The first release had no mention of this quote, despite the fact that the exiting directors had specifically asked that it be included.  Shady.

The big question is...is Baja still a good investment?  The answer is that at $0.57 per share, now more than ever, it is a fantastic investment - for someone.  Just maybe not for you, the shareholder.

Whoever provides the funding to completion will find Baja an excellent investment.  Mt. Kellett, I'm sure, is wetting their pants with excitement at taking over this flopping fish of a company and its incredible mining assets (either that, or today's drop was because they finally said "**ck it" and sold out!)

For the average shareholder, it is far too early to load up on shares of a company that has proven so opaque and -- as of today -- almost ungoverned.  I bought a few hundred more shares just to be crazy, fully recognizing that Baja has turned from an investment into what is essentially an asset-backed gamble.

Bad governance is almost as bad as "unexpected accounting irregularities."  When the rules keep changing, you can't play the game.

I have no high expectations.

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The Earlier Article (including interviews): Stocks I Like - Baja Mining

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Boy Broker: Investment Classic Returns

The Frost Report is proud to announce the re-release of the 1888 investment classic, The Boy Broker: Among the Kings of Wall Street.

Though The Boy Broker has been available as a re-print for some time, the quality of these earlier reproductions was very low.  One version, for instance, actually includes an apology for the poor quality of the printing.  Another version (obviously edited by non-English speakers) boasts that is was “restored by human beings.”

We felt compelled to do it right.

From the Amazon.com description:

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In 1888, one of the richest men in America published his masterpiece on becoming successful.  More than a century later, the wit and wisdom of Frank A. Munsey's "Boy Broker" still shines through.

This edition maintains all the integrity of the 1888 edition, while adding valuable new features including "Notes for the Modern Reader," which provide information and context to the 21st Century reader.

- Edited for Clarity
- Now includes Historical Biographies and Information
- Contains New Illustrations

From his own experience, Frank Munsey noted that when young people are given lectures or advice, it often proves valueless (they ignore it).  Instead, he reasoned, people are influenced by their friends and peers, and also their heros.  Munsey therefore wrote this book as a story with a hero, where the subconscious mind is the recipient of its advice.

The story follows the adventures of young Herbert Randolph, in his quest for independence and achievement in the great city of New York.

We hope that you will find this updated edition far more readable than the original, while enjoying all its 19th century wit and character.

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Thanks again to all the readers of The Frost Report!

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BlackBerry's Bold Move

Reuters news agency this week released an article with the hopelessly biased title, “RIM’s BlackBerry May Have New Hope in One Market.”  Within that article, however, Research in Motion outlines a great new sub-strategy to further increase sales in emerging market countries.

When I was in India just a few years ago, it was impossible not to notice how everyone – no matter how poor - has a mobile phone.

That bicycle-rickshaw driver may live in a hut made of dried cow dung and tin, yet he owns a mobile phone.  The street vendor who sells curried rice for $0.20, then washes the plates in a pothole filled with rainwater and cow piss…she has a mobile phone too.  The young call centre employee, who lives in his parents “condo” (three rooms and almost no furniture), owns both a mobile phone and a laptop: he is middle class.

RIM’s strategy is to capture the lucrative “trade up” market: the billions of people who currently own older mobile phones capable of talk and text but little else.  These people could never realistically afford an iPhone 4S, yet are willing to spend a few months’ salary to get a simple, reliable smartphone like RIM’s new BlackBerry Curve 9220.

The Curve 9220 is a sleeker version of the 8520, with improved Web browsing, Facebook and Twitter apps, FM radio, long battery life, and $48 US worth of free application downloads – including both business applications and games like "Ultimate Cricket." In other words, the features are simple, but are the most important ones for the customer base RIM is trying to capture.  Monthly plan fees start at as little as $5!

The Curve 9220 will sell for about $210 US (without contract), which compares nicely to the older iPhone 3GS which sells for $350 or more and has higher monthly plan fees.

Earlier this year, RIM made a great move by upgrading its Playbook tablet operating system, and slashing prices down to $199 to compare positively to the Kindle Fire.

RIM has been struggling of late, and no one yet knows if these and other strategies will give RIM its profitability back.

I’m not willing to make a huge investment in RIM – but I am willing to throw a few investment dollars their way.  I think RIM has been written off far too easily.

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"Asia is not going to be civilized after the methods of the West.  There is too much Asia and she is too old."

Rudyard Kipling

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Disclosure

Do not buy stocks, or take this or any other financial advice without doing your own analysis; including, but not limited to: reviewing business models, financial statements, management style and philosophy, recent developments, market macroeconomic analysis, and chart analysis. If you do not know how to do these things, you shouldn't be buying stocks in the first place. Seek the advice of professionals, as appropriate.
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