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Win us with honest trifles

When your trade in a junior producer goes wrong, Argonaut (AR.to) and Fortuna (FSM) (FVI.to) edition

With two trading days and an FOMC behind us, this humble corner of cyberspace is still feeling rotten, miffed, sheepish and somewhat poorer due to the SNAFU announced by Argonaut Gold (AR.to) on Tuesday morning that threw its share price off a cliff and caused the exit of erstwhile President and CEO, Pete Dougherty. It’s no fun to see an investment in (what you thought was) a cheap stock blow up in your face, even worse when the error gets passed on to subscribers and people who take your opinion into account when making their own trade decisions. It’s my bad call all right and due to the preconception AR was fundamentally sound, with a project it could fund organically and management that knew what they were doing. As it turns out, the opposite was the case and there are 190 million reasons to prove it. Ugh.

So if you think I feel bad about buying this stock at C$2.95 at the end of June this year and taking a 25.4% bath for the pleasure, just imagine how Dave Kranzler feels about his trade and reco in Fortuna Silver Mines (FSM) (FVI.to):

After all, Kranzler has been extolling Fortuna Silver’s (FVI.to) (FSM) virtues all year, even when it was an U$8 and U$9 stock. He was bullish about the takeover of Roxgold, believing the market didn’t understand the value FSM was picking up. Then he had no problem when Lindero, already subject of a massive capex blowout, started badly and has continued to under-perform. Finally, his stubbornly bullish credentials on FSM were fully stamped when belittling the San José permit snafu in November and insisting it was an excellent buying opportunity (after which, his loyal followers found out the true meaning of the market colloquialism “bagholder”).

So yes indeed, I feel bad about Argonaut and can only presume the “straight shooting” Dave Kranzler feels the same about his FSM call, but at least Argonaut’s board of directors stepped up to the plate and did the right thing when the crazy scale of AR.to’s capex blowout was made apparent. I don’t mind stating in public today that’s the clear silver lining and will hold AR in good stead when it comes to securing a quality replacement at CEO, as well as the financial package it needs to bolt onto the corporate financials to complete the Magino build. However, in the case of Fortuna Silver Mines and despite the litany of recent failures, along with attempts to cover up the shortcomings, Jorge Ganoza continues to sail serenely on as its President and CEO. We can only presume the FSM board of directors cannot think of a better person to head up the company and are happy with his work. Talking of which…

…I wonder which of the directors Dave Kranzler would like to interview next? Betcha he goes for Jorge Ganoza! However, if I had the choice and, on checking out the rogthe gallery available I wouldn’t go for Ganoza, or even bother asking Szotlender (life is too short). I may not even choose Independent Chair David Laing either, a busy man doing other things who cannot possibly be blamed for any failure of oversight at FSM (amirite?…amirite???). Instead, if I were Dave Kranzler I’d be more interested in the opinions of Independent Director Kate Harcourt…

Kate Harcourt is a sustainability professional with over 30 years of experience, principally in the mining industry. Kate has worked with a number of mining companies and as a consultant for International Finance Corp. Kate received a BSc Hons, Environmental Science, from Sheffield University and a MSc Environmental Technology, from Imperial College, London, and is a Chartered Environmentalist (CEnv) and a Member of the Institution of Environmental Scientists.   

…who sits on the Sustainability Committee, as well as Independent Director Alfredo Sillau…

Alfredo Sillau joined the Fortuna Silver Mines Inc. Board in 2016. Alfredo is Managing Partner, CEO and Director of Faro Capital, an investment management firm that manages mutual, private equity and real estate funds. Previously, he headed the business development in Peru for Compass Group, a regional investment management firm, until late 2011. As CEO of Compass, Alfredo actively took part in the structuring, promoting and management of investment funds valued at approximately US$500 million. He is a graduate of the Harvard Business School.

…who is on the Audit, Compensation, and Corporate Governance and Nominating Committees and not, as some might suppose, a mix of an Italian spaghetti sauce and a Chinese stir-fry condiment. So waddya say, Dave Kranzler? Which Fortuna person would you be most interested in getting on the record about the company’s 2021? A frank and honest Q&A along with appraisal of this company in light of what we now know would be a great feather in your cap as a “straight shooter”, after all.

16 Comments

    hi Mark,
    r u still holding $ar.to shares? would appreciate ur thoughts.
    I decided to hold

    Reply

      Yes, I am. The thinking is that yesterday sucked, today was always going to suck from the brokerage downgrade hangover (and FOMC timing), but we should get a feel for sentiment Thurs and Fri. I’m going to make a decision this weekend, hold or sell.

      Reply

        That will be of use for the subbers – maybe also will be a great barometer for the M&A climate – surely the wounded AR.to looks a juicy morsel for the canadian properties held.

        Reply
    Dan Bridgehampton 16/12/21 10:44 am

    It’s been clear Pete was a crap CEO for a long time. The directors shouldn’t be complimented for doing the right thing, they should be condemned for being complicit for so long. They should all go too.

    Reply

      I’d mitigate with “better late than never” but you have a point. Conceded, sir. As noted above, I own my call and it was wrong.

      Reply

    I have known Kate H for more than 20 years. She only came into Fortuna as part of the Roxgold deal, so less than six months ago and was invited in mainly to prop up their ESG credentials.

    Reply

      Which would make her point of view even more interesting. Or is she only there for the show?

      Reply

          Though clearly well connected, Martin, this desk can’t help but suspect you’re failing to capture one of two things. Either a) you’re missing the significance of the second conditional in dialectic hypotheses, or b) you think I’m Dave Kranzler. Wishing you a Merry Christmas, sir.

          Reply
    Moe Great White North 16/12/21 12:59 pm

    I too wondered why Kranzler continued to promote Fortuna. As for Argonaut, its travails illustrate what a minefield gold miner investment is.

    But in a (gold) bull market all ships will rise…

    Reply

      Sadly, many ships in the armada will be sunken treasure on the sea floor waiting for someone else to buy after they’ve run out of money. I expect some of them will have decent to good potential and even actual assets. But we’ll see how it plays out.

      Reply

    Not sure how any of the cost overruns can be laid at the CEO’s feet. All the estimates and reports were done by outside experts and engineers. All Dougherty did was build this company from 80,090 oz producer to 1/4 million one … and counting. More likely Dougherty tweaked a couple of noses on the board and they loaded him and the bad news into a rowboat and cut it loose.

    Reply

      Are you aware of what CEO stands for? Who would you prefer as the responsible party, the cleaning lady?

      Reply

        That would more sense actually. Dougherty is the only reason AR has the Magino deposit in the first place. Throwing him to the wolves for costs that outside his control to develop it, is the classic cutting your nose off to spite your face.

        Reply

    Dave Kanzler is a paid for slug.

    Reply

    […] dropped its bad news about Magino on the world and as witnessed in this post on the day, plus this more detailed post to follow-up a couple of days later, your humble scribe was long the stock when the excrement hit the […]

    Reply

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