Charles Oliver, HBSc CFA Stornoway Diamond SWY-T COMMENT Aug 05, 2014

Had owned this years ago, but had his head handed to him on a platter. This was perceived to be a gem of a company with a great, great future, but unfortunately they didn’t have revenues. They have a lot of financial backing with the Québec government behind them. They would have to be further along in their process for him to be interested. At some point this could be a good play, but the question is, when is a good time to get in. He is not interested.

These stocks can do well all the way through to February and then they tail off. This one has been dreadful. Seasonally, you don’t want to be invested in material stocks during the summer.

Good momentum characteristics. He exited late last year. They are one of the few diamond mines. It is a quality cyclical stock. They have chunky cash flow because of the way they sell diamonds at auctions.

He used to own it and did poorly. He does not like to buy into companies without revenues. It has taken years and years and years to get it up and running.

Had owned this 7-8 years ago and it was a major lesson. They had talked about coming into production a few years ago, and didn’t quite make it. Then they went through massive dilutions, and he lost a lot of money. He now doesn’t buy into any company that doesn’t have revenues. Doesn’t follow this closely anymore.

Stocks start to trade up close to production, but no mine will work flawlessly immediately. He likes it, but thinks it will not come in at operational capacity right away.

It is the usual issue with any new mine. Let’s see how the ramp-up goes. There are always issues. He always likes to discount things at least 25%. It is going to take longer and cost you more and take longer to finally get to economic production, and he assumes this will be no different. Thinks the stock is sort of pricing in that expectation.

He thinks the diamond market will come back. Over time there was dilution. Stock consolidations often kills the stock price for a year. He usually sells before a consolidation. He will not buy a company with zero revenues unless they are coming in the next year.

They just put a mine into production. The good news is they have produced more karats than expected, but the bad news is what has happened in India. He hopes it stabilizes and goes away.