Stornoway Diamond (SWY-T)

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.

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.

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.

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.

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.

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.

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.

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.

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.

It is more expensive to mine this one. You have to go underground. It appears to be quite rich.

The only diamond stock he owns. Has a great asset. You’ll have to wait 2 or 3 years before they are into production, 2017-2018. They are going to have a huge amount of cash flow. Very nice looking project. As they de-risk the project, you will see it rise. Have a government that seems to be clearly on side with the project moving forward.

In the phase of constructing as well as raising money to construct a diamond operation in Canada. Raising money is going to take time. He is favourable on diamonds in the back half of the year. Somewhat of a China trade. Because this company is in the building phase, you are going to have to be patient.

Had lost patience with this. This is a company that had no revenues and they kept on diluting the stock, which is always a major danger. Doesn’t know if they have any revenues at this time.

It is hard to finance junior diamond miners. But once they line up all the partners, thinks this could be a potential mine, but high risk.