No. of Recommendations: 2
Nautilus Minerals (NUSMF) is a small, pioneering Canadian company seeking to mine the ocean floor. They focus on SMS, Seafloor Massive Sulphites, which are highly concentrated deposits of copper, gold, silver, lead and zinc left on the seafloor by underwater volcanoes. They hold licenses to vast areas of seabed and their potential is enormous, if they can pull it off. Their initial project is off the coast of Papua New Guinea in southeast Asia.
After years of exploration and meticulous preparation, involving all aspects of the project from designing remotely controlled 250-ton 'tools' to mine the sea floor and the ship that will control the operation and hold the ore to environmental considerations they were within a couple of years of beginning actual mining. They agreed to give the PNG government one-third of the proceeds in return for their paying one-third of the development costs, which was a great way for a small mining company to slow their rate of cash burn. In the Spring of 2012, everything was rosey until they got hit with a double whammy: PNG reneged on paying their share of expenses and the company that was building the mother ship announced that it was unable to hold up their end of the contract because of the European credit crunch.
Since then Nautilus has been scrambling to raise money by issuing options and shares and deferring expenses, including by delaying work on vital equipment under construction. The CEO left 'to spend time with his family.'
Share prices have plummeted. I felt lucky to get in at $2 (US) about a year ago. I bought more as the stock fell, bringing my net price to a little over $1 per share. Unfortunately, a share of Nautilus is now selling for around $0.40, leaving me about 60% underwater (ironic choice of words intended) on a relatively large portion of a relatively small portfolio.
So this was my dumbest investment in part because it was much too speculative from the start and because I continued 'catching the falling knife', buying more as the price fell. But the greatest reason that it is my dumbest investment is that I'm going to buy more.
Perhaps there is an element of emotion in this decision. Perhaps it is the lure of sunken treasure. Perhaps there's an element of pride in being unwilling to admit that I was wrong. Perhaps it is an unreasonable belief in a small company of people who have shown incredible commitment over years of preparation and continue to show their integrity and fortitude in a time of great adversity. No doubt there is an element of greed in the prospect of seeing a share of stock that I bought at $0.40 worth more than Apple or Google.
Just maybe my dumbest investment will turn out to be my most profitable. But just because something I did works out well in the end doesn't mean that it wasn't dumb. It may just mean that I was lucky.
D (Sometimes it's better to be lucky than smart)
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