August 16, 2018 | Posted by

By Richard Jennings

UPDATE 17 AUG 2018 – We have had the following brought to our attention by a fellow sceptic on the JAY story. Below are the 2 key paras from a piece written by biased commentator Michael Walters (highlights ours) NEARLY A YEAR AGO:

“On October 13 we had details of the top-class team of expert companies involved in the feasibility study, and a change of name for the project from Pituffik to Dundas. The final feasibility study report was due for completion during the first quarter of 2018, and will form the final part of the exploitation license application which is expected to be approved during the first half of 2018. When that comes, Bluejay can get digging and selling in bulk. But we might get some news on that earlier, and meanwhile we should have the social impact assessment report and environmental impact assessment report approval. 

The proof-of-concept bulk sampling programme has exceeded expectations, and there is an agreement with an experienced mineral sands processor to refine the ilmenite into a two high specification products which will sell at a premium price, and can be used to seed the market to assist obtaining off take agreements. There is the prospect of such agreements – and more than one significant major player is interested – before the end of the year. McIllree has been travelling across the world to talk to interested parties, with at least one of them very keen.”

You can see why many people can now be forgiven for losing patience ref delivery of the feasability study, offtakes, EIA & SIA… and this is why the stock continues to deflate. See HERE for full link.

I have watched the Blue Jay Mining promote with interest over the last near 3 years, eyes agog at the ever increasing valuation which, for a junior operating in one of the hardest mining environments on the planet, to me defied belief as it, incredibly, reached near £250m. Hats off to Rod Mcillree – it has been without a shadow of a doubt one of the biggest and cleverest stock promotes in recent years and made some people (the smart ones that sold) very wealthy along the way. Those that held on in the mid 20’s and, error of errors, added, broke the cardinal rule of successful investing which is to diversify material gains into other undervalued situations and never, ever put all your eggs in one basket.

The primary lesson to me is that a promote that involves a distant jurisdiction with a commodity “du jour” can detach from any basis of commercial & valuation reality particularly where a tight free float and “nudge, nudge, whisper, whisper” information is involved in the insider riven market that is the City. The placings that were carried out at 7,12 and 22p were master strokes and bolstered the balance sheet temporarily whilst the additional funding increased the City advisor roster on the payroll allowing the “story” to be pushed further.

The main “tell” however to me was the exiting of the supposed “cornerstone investor” Western Areas in late 2016 at 7p in part and then the remainder of their holding at 12p in mid 2017. That was the real smoke signal as, if the numbers being thrown around by the bulls (of which Michael Walters and SP Angel were the principal cheerleaders, the former indeed denigrating our business here and me personally for raising questions over valuation) were correct, then quite why this early stage investor would sell at that stage defied belief. This question was never answered satisfactorily by the company. Ditto the question as to the company’s broker (SP Angel’s) current holding in the stock also remains unanswered and which could still be cleared up very quickly – namely do they actually hold any stock given that they are still advocating a Buy?

As the stock rose the bulls became ever more emboldened and near 25 years in the markets taught me that this is precisely the point of maximum danger. An “off take” agreement had been dangled as a carrot in front of many for quite some time (indeed since late last year as highlighted above) and as time has progressed and the realisation that in order to actually sell any product the company needs to come through the EIA & SIA in order to obtain the all important Exploitation licence, this it seems sparked the sell trigger for some. Coupled also with the heavy leveraged position in the stock the chart, sadly for the bulls, tells the rest of the story. Our article HERE relays just how difficult it is to actually get operations going on the ground in Greenland with only one company we are aware of actually in production and the EIA approvals process taking up to 30 years in one case. Lesson? When valuations detach from reality, no matter what the seeming underlying fundamentals of the story, always, always take your profit.

My discussions with the mining specialist operating in Greenland this afternoon (indeed he relayed that he was offered JAY’s licence for £500k before they acquired it and turned it down given his on the ground knowledge of the licence area and his assessment of the likely end commerciality) is that it is a very, very difficult environment on many counts (aside from the harsh climate) and that many companies just give up the ghost given the complexities involved. To be clear, I am not saying that I believe JAY will do this but I am sure that even Mr Mcillree will relay how difficult it is there given his experiences at Greenlands Minerals & Energy (see HERE) in getting to a point of actually commercially selling the product let alone mined. This particular company has in fact been trying to progress their rare earths interests there for over 10 years and are still not in production. The chart below shows how this played out for investors as delay followed delay.

To conclude, for those reasoning that because the stock has halved it must now be cheap (know as mental “anchoring” in the parlance) we repeat the questions posed to management HERE which we suggest they answer pront in order to shore up confidence in the stock. Indeed we have posed them direct this afternoon and will post their reply in full should it be forthcoming. Here they are again:

  1. Why is the Social Impact Assessment taking so long?
  2. Why is the Environmental Impact Assesment similarly taking so long?
  3. How many shares do SP Angel still hold given that they are advocating a Buy stance and mooting takeover talk which is, we believe, very much misplaced given that you still do not have the Exploitation licence?
  4. You had said to numerous parties in early spring that an offtake deal was imminent – why has this not transpired given the supposed grade of the ilmenite?
  5. The Exploitation licence is over a year late from when first flagged re timescales in early 2016, what confidence can investors have that it will be forthcoming this year?
  6. How much of the £15m is now left on the balance sheet and what prospects of a further raise in the next 6-12 months?
  7. Given that the field season is coming to a close in Greenland in the next 8 weeks would you agree any potential cash flows for the company are getting pushed ever further out?
  8. How do you square the valuation of essentially the same product at ALBA with an adjacent licence area relative to your market cap?

Absent a reply to these questions, the stark realities highlighted on this site re operating in Greenland and the experience of almost every company there married against a current cash balance of less than 2p per share leads us to believe the stock could continue to fall as investors realise just how far away the company likely is from saleable production and also very real future financing requirements. Accordingly, we reiterate our SELL call on JAY.