The 10 year lease signed for the Oaxaca City office starting 1/1/2012 was attached to the 10-K for 2012.
The 3 year lease signed for the Denver office in November 2012 was attached as an Exhibit to the 10-K for 2012.
My question to you Chris:
Why do you suppose the lease, signed sometime in July 2014 or earlier, for the Colorado Springs condo did not show up as an Exhibit in the 10-K for 2014?
"--As this forum is not conducive to drawn out discussion such as this, if you want to talk more about my valuation analysis or such matters you can email me at chris.rutherglen at yahoo "
I disagree with your characterization of this forum, Chris. There are some folks who are getting very interested in the depth of this company's reports. Not ALL folks on this board. But it seems an increasing number. And I think your presence provides a huge benefit to everyone, for balance of opinion.
" Note 11 in the recent 10-K filing indicates that $74k was the 2015 lease expense for 6-7months of renting about 50% of the Colorado Springs headquarters PLUS 10 to 11 months of the rental costs for the Denver office space. This information should put to rest the hypothesis that the lease-back arrangement with a related party (e.g. Bill) was punitive for GORO shareholders. Based on the facts disclosed, it seems to be immaterial."
No I don't see anything "resting" over here from my vantage point, Chris.
I disagree with your finding. For a number of reasons.
I have been waiting to see the actual lease attached to a filing before I make specific comment on rental costs to the shareholder paid to Bill Reid for the square footage allocated. We do not know that 50% of the property is being leased. We only know that a "portion" of the property (25%? 50%? 75%?) is being leased from Bill Reid,
All I know is that the in the sale to Bill Reid the shareholders made nothing even though a gain was recorded due to the recapture of the annual depreciation on the real estate while it was in GORO hands.
I am not sure of your parsing 10-11 months on the Denver lease. It is a calendar year lease.And you make no mention of the Oaxaca City lease.
It seems that you may be trying to interpolate a lease expense for the Colorado Springs building out of year 2015 and 2016 in the schedule in Note 11 (146K-72K=74K????).
Take note that the Colorado Springs rent is NOT in that table at all.
From the Note, with my emphasis:
"The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining non-cancelable LEASE TERMS IN EXCESS OF ONE YEAR as of December 31, 2014"
The table represents the Oaxaca City office ($72K for this calendar year) and the Denver office ($56K+ for this calendar year). The dropdown to $72K in 2016 is due to the expiration of the Denver lease.Which brings up another question for you, in my next post
---Since David's amendment filing I have not spoken to management regarding the error in the 2014 Proxy statement nor do I intend to. They should be able to figure that out themselves.
--As this forum is not conducive to drawn out discussion such as this, if you want to talk more about my valuation analysis or such matters you can email me at chris.rutherglen at yahoo
I am not bothered by the two month period in filing the amendment because whether it was 1 day or 5 months, it would be immaterial to the share price by itself. Thus, why get worked up about it. The sin was committed when not filing the amendment in a timely matter in the first place. If the SEC wants to get worked up about it, they can as it is their job. If it was an honest mistake on Bill and David's part or a deliberate act of obfuscation, the enforcement action will likely be the same from the SEC.
--Regarding management of Gold Resource, consider it this way; in general if you want to invest in a company with a management team beyond reproach and great prospects then one would have to pay up for that as the market would assign it a healthy premium. The fact that GORO is trading at a discount to it peers despite having good cash flow suggest that the market has priced in problems such as a declining production profile. As an investor, I am not going to make money by agreeing with the market. I need to find opportunities where the market is over reacting.
-- Consider Yamana which trying to grow production via share financings at these low share prices. Or consider the companies selling gold royalties to finance mine development as unattractive levels. Or consider exploration company that consistently drilled straight down the long axes of the vein in order to show long intercepts and withheld info on the true width of its veins. There is crazy stuff out there and the management teams that deliberately perform actions that are materially detrimental to shareholder value is what I am on the look out for.
Thanks for the response. As you can see it has resulted in a lively discussion. For my part, "capable and shareholder friendly management" doesn't have to have their word discounted. I can think of a number of companies with management that doesn't require that sort of discount.
I was attracted to GORO in the first place because I didn't know much about the industry, but they took a much different path than other miners. I thought they were unconventional - dividend, cash flow, getting right to the mining thing without a lot of distractions. I thought they were straight shooting, get it done types with extremely clear and measurable expected outcomes.
I'm not seeing it now. "Capable" hardly describes what I see when I look at this company. They've missed every metric they ever set, have had numerous CFOs and mine superintendents, had concentrate stolen right out from under them, labor actions, community resistance, SEC filing issues, mining setbacks. If there's something else that could go wrong it's not clear. I've often wondered if capable management could make real money with this setup.
I'm OK with the reserve issue. As you point out, other miners have short lives but still seem to be around many years later with the same mine life.
"Shareholder friendly" means to me that I can take what I hear and trust it. I understand the need to verify, and I do, but it's hard enough to figure out what's going on at a distance. When you have to ask what you can hear and believe in, it becomes very hard. Ultimately, I couldn't do it and sold. I'm so glad I did.
Your point is that's all in the past, and to look to the future. If this management team was capable and shareholder friendly I might be able to do that. If they cleaned house of the entire current management I might be able to do that. Just my thoughts.
"- My opinion of management has decrease a few notches but they are still better then some of the other joker management teams out there in the mining space."
Looks like a lesser of all evils approach to investing, Chris.
--From your research in this sector,could you site an example or two of "joker management teams" and what makes them "jokers"?
--In an absolute sense (ie, not compared to jokers), do you still put management of GORO in the "capable and shareholder-friendly management" category"?
--The title of your article referenced GORO as a "Top Tier Miner" . I suspect there are over one thousand publicly traded mining stocks. Can you provide some elaboration of your categorization of "top tier"?
"However, based (on) David Reid's recently filed schedule 13D-amendment, there does seem to be an error in the 2014 Proxy statement by not including him as a 5% beneficial owner in Section 16(a)."
My question to you again on this topic is:" Did you ask them if they would be filing a DEFA-14A amended proxy for 2014?"
"-The fact that it took nearly two months to file after first being informed of the issue does not bother me too much."
I am guessing from looking at the depth of some of the stuff you have done on seeking alpha, that you are aware of the necessary work to prepare a 13-D amendment. I have a pretty good handle on stuff like that.
My personal opinion is that for a filing that is 18 months overdue (or for any 13-D/A filing for that matter) two WEEKS would be an outrageous length of time, much less two MONTHS!
Why are you not bothered by the delay in reporting given the magnitude of the import to last year's liquidation by Hochschild? Surely contemporaneous filings by the Reids (at least David) of their sales at that time would have been even more devastating to the stock then actually took place. My personal opinion is that this sin of omission was intentional.
Wrong! Goro is not still drilling at Margaritas or Alta Gracia. They pulled their solitary drill @ Alta Gracia many years ago and moved it to Margaritas. They then pulled that one as well. Agree with you that I asked simple questions yet, you still got the answers wrong. Lastly these are not typical mine development complications. They have MAJOR water and ventilation problems which, they have tried to cover up since these problems began. The correct closing statement, on your part, should be: Goro may not be an appropriate investment for those that cannot answer even these simple questions.
---- Most underground mines have a short life of mine relative to open pit mines: For example, the life of mine (PP reserves / annual production) of other comparable mines are...
- First Majestic Silver (consolidated) : 5.7yrs
- Endeavour Silver (consolidated) : 1.4yrs
- Fortuna Silver (consolidated) : 8.6yrs
- McEwen Mining's San Jose mine : 3.4yrs
- Gold Resource La Arista mine : 4yrs
--- I assign no value to Switchback, Margaritas, Alta Gracia
--- They are still drilling on Switchback, Margaritas, Alta Gracia and Nevada based on recent press-releases. No rigs have been pulled.
---production is declining because they are mining lower grade and they have yet to get ahead of the typically mine development complications.
--- GORO may not be an appropriate investment for those who need answers to such simple questions.
How many of the miners that you recommend have but a single mine? And of those, how many of them have but, a short term resource? What value do you place on Switchback, Margaritas or Alta Gracia? Why did Mgm't pull their SOLITARY drill rigs from both of the latter projects and then choose instead to invest in Nevada exploration? Lastly why is production continuing to decline? Doubt that you can properly answer these questions so, feel free to rationalize and spit back. But, whatever you do be sure to follow the Seeking Alpha rule: never admit that you were flat out wrong.
- I just presented the facts on Seeking Alpha.
- Back when GORO was trading at the +$20, it was clearly overvalued relative to its peers and a large speculative premium had built up largely due to 1) the initial success the company had, and 2) extrapolating those cash costs and growth into the future. In addition, Bill fanned the flames by over-promising what can be achieved and in the end, under-delivering. But that is not uncommon. Management teams, particularly in the mining space, have a strong tendency to over-promise and under-deliver. So you just take their forward looking growth statements with a grain of salt. Now the GORO share price is undershooting relative to its peer group so now it is the oppose of being overvalued. Bottom line is, don't trust any management team's forward looking statements at face value and do not pay excessively for promised growth. It is best to get the growth for free.
- The fact that it took nearly two months to file after first being informed of the issue does not bother me too much.
- Also, Hochschild Mining was already liquidation mode prior to David's share sales
- On an unrelated note, previous postings on this forum have brought up the issue of the sale and the partial lease-back of Colorado Springs headquarters. Note 11 in the recent 10-K filing indicates that $74k was the 2015 lease expense for 6-7months of renting about 50% of the Colorado Springs headquarters PLUS 10 to 11 months of the rental costs for the Denver office space. This information should put to rest the hypothesis that the lease-back arrangement with a related party (e.g. Bill) was punitive for GORO shareholders. Based on the facts disclosed, it seems to be immaterial.
- OK, strike the word "discussion" and substitute it with "brought to light" as it is true there was not fallout discussion from the finding posted due to the lack of sufficiently interested readers on seeking alpha. As for my comments on this issue, they were a presentation of facts without any added speculation.
- When this was brought up with management of Gold Resource on June 2, Greg was not aware of the need to file an amendment. He was of the understanding that only if they were 10% owners would they be required to file form 4 updates. It was not until I quoted the legal specifics that the issue was elevated to Jessica and it was confirmed to me that Bill and David were not in compliance. It was claimed to be an oversight on Bill & David's part.
- Gold Resource Corp stands by the information contained in the 2015 proxy statement and there will not be any amended filing for that as I have been informed. However, based David Reid's recently filed schedule 13D-amendment, there does seem to be an error in the 2014 Proxy statement by not including him as a 5% beneficial owner in Section 16(a).
-Yes, Bill is also now a less than 5% owner and as such, he is likely delinquent in his Sc 13D/A filing too.
- My opinion of management has decrease a few notches but they are still better then some of the other joker management teams out there in the mining space.
In your article itself, one of your reasons for owning this stock is "Capable and Shareholder-friendly Management".
To support that, you make the following comment:
"In total, current management, including the retired founders Bill and David, collectively own approximately 13.6% of the shares outstanding, giving them a strong incentive to be shareholder-friendly and avoid the common principal/agent problems that can come up. "
You corrected that part of your article by addressing the problematic ownership reporting in the proxy versus the lack of 13D/A filings by the Reids. PS: Bill Reid was next on my posting list to this board. I refer everyone here to your comments regarding Bill Reid and his necessary disclosure.
As I mentioned earlier, this issue brings up more questions than it answers.
After reading your June 9th comments I have a few more, questions:
--Who did you speak with when you stated the following: "When I brought this up with the Gold Resource Corp, they confirmed to me that both Bill and David Reid are currently not in compliance with their Schedule 13D reporting requirements"?
--since you posted this on June 9th, you obviously spoke with someone on that day or prior. Do you think that 7 weeks is an appropriate turnaround time for a simple filing of David Reid's (and most likely Bill Reid's still to come) 13D amendments?
--I assume that you informed the person that you spoke with that the ownership disclosure section of the 2014 proxy was in error? Did you ask them if they would be filing a DEFA-14A amended proxy for 2014?
--Did the person you spoke with stand by the validity of the 2015 proxy regarding Bill Reid being a less than 5% owner? Or will they be filing an amendment to that proxy as well?
--Has your opinion changed regarding your initial "capable and shareholder-friendly management" comment?
Again appreciate your post.
"This issue regarding failure to file a schedule 13D amendment for Bill and David Reid has already been discussed nearly two months ago in the comments section of a seeking alpha article from Mar 26 2015"
Thank you for your post Chris. Your "already been discussed"comments seems to refer to the article authored by you and to the correction by you on June 9th and the update by you on July 31st in the comments section of that article. I see no "discussion" there.
Your reference to a law firm's website about increased SEC enforcement in this area is very helpful and encouraging. Thanks for the link in your to that in the comments section.
For others here, we are referring to your bullish seekingalpha article entitled "Gold Resource Corp.: Top Tier Miner Trades At Attractive Discount To Peers".
I'm analyzing the Form 3 and 4 filings right now. I'm a beginner at combing through SEC filings so I have a ways to go before coming to any final conclusions. But what I have discovered coincides exactly with what engy has disclosed so far.
I found your comment on SA. Your comment above lead me to conclude you think your SA comment somehow resolves the issue. While it explains the facts as disclosed, don't you think it's worth comparing the disclosure with facts on the ground?
All of the Reids - all of them: Bill, David, Jason, Bill's wife, were huge sellers when the stock was 25-28. From a purely asset diversification perspective, it makes sense to sell to diversify when you have almost all your wealth in one stock. Sort of like Richard Kinder, who is the single largest shareholder of KMI, and who is constatnly selling his stock. Oh, sorry, got that wrong, He's BUYING KMI stock. So while you can legitimately argue that the Reids were properly diversifying, it doesn't look to me like a definitive move.
Kinder makes over $400M a year off the dividends, and is not a young man, yet he's buying. The Reids were selling their stock at exactly the same time they were proclaiming it undervalued, and worth $100 per share. If I thought something was undervalued, wouldn't I buy it, not sell it?
The Reids made a wise move in hindsight, because GORO stock is worth 90+% less than when they sold it. That includes Jason. They sold their stock at 28 to buyers who, if they are holding now, are holding it at 2, with a penny a share dividend.
There was a token purchase of $100k by Jason after he commented on a conference call that GORO stock was undervalued. That's about it from what I've seen so far.
The macro view as I see it is this - the Reids built a business from scratch, sold at the top while proclaiming it undervalued, and are now multimillionaires. The loyal shareholders have lost most of their investment and are underwater.
This issue regarding failure to file a schedule 13D amendment for Bill and David Reid has already been discussed nearly two months ago in the comments section of a seeking alpha article from Mar 26 2015. The recent filing from David Reid came about due to the company being informed of this failure to file on June 2.
Tremendous effort Engy. Just another example of Reids treating SORO as their personal ATM. Traditional rules don't apply when there is a family run board of directors.
Spectacular stuff. That took a lot of research, and I wanted to make sure you got some response for your hard work.
I have a lot of thoughts arising from your posts, which I hope to get to later today and in future days. Here's a couple:
Why can't you or anyone else contact the SEC and alert them to the noncompliance?
I wonder if this is the reason, or a contributing reason to why Rodriguez left the company but still got a bonus.
How much in total did all the Reids get from GORO?
Isn't the sale on the senior Reid's part very much akin to short selling? (I can hear the howls on that point) Where's the confidence in Jason to continue their "legacy"?
Have you contacted GORO with any of this to get their response?
I wonder how the Reid's actions compare to the Code of Ethics they have posted on their website.
Initial thoughts only. More later.
But, further, what about the timing of Reid’s sales juxtaposed with the timing of the liquidation by Hochschild last summer?
From the 13-D/A just filed two days ago, we can see that Reid had 3,189,188 shares on January 21, 2014 and 2,644, 488 on July 23, 2014.
That is, he sold 544,700 shares within that 6 month window.
But this amended filing only shows the 240,000 shs sold between June 12th and July 23rd.
What were the dates of the other 300K+ shares sold?
I believe this is an important topic because of the beginnings of Hochschild’s liquidation on May 13th. Often a large shareholder will inform the company of its intention to sell, thus allowing the company to be the purchaser or to help arrange for a purchaser to avoid a market disruption due to the dumping. The intent to sell by a 17% shareholder is considered inside information, in my opinion. Did Reid sell his 300K+ shares after being given a heads-up on Hochschild’s intent to liquidate?
And, curiously, our own HockeyCFO’s over-the-top comments about the bullishness of the Hochschild liquidation, were posted to this board on July 24th the day after David Reid breached the 5% required disclosure; and could sell at will without reporting. Hockey is supposedly close with Bill and David Reid. What a post he made that day, diametrically opposed to the reality on the ground! An inner circle guy?
My assumption is that, today, David Reid is an owner of an insignificant amount of shares of GORO, or more likely, not a shareholder of GORO at all.
All of the above likely asks more questions then it answers. But one thing this all does not change, and actually reinforces: the soundness of the thought process of the shortsellers on this dodgy company. Well, now I know..