The Multi Billion Dollar Question

Posted by: Fearless on August 21, 2008 12:03PM

Safe said,

/Keith Barron resigned from the BOD so that his 14 million shares would not be locked up in the management lock down/

Once again, Safe and I are starting to read from the same page, reminds me of old times hahahahahahaha.

What better place for the Chinese to invest in than a undeveloped resource rich country. Especially if that countries currency is the US dollar and thus the billions they spend there will not immediately be sold on the FX markets in favour of local currency thus driving down the US dollar. This in turn would hurt the value of the huge US dollar holdings the Chinese have.

It appears to me that most people are coming to the conclusion this deal with K will not go through. The multi billion dollar question is why it was entered into in the first place. Many excellent questions have been raised concerning it and the only real question left to be answered is why this deal now.

Long time holders of ARU will remember that I praised our managements business style and ethics on many occassions in the past. The fact that they were grinders who wisely spent the investors money and released factual information when they had it, never hyping up results or releasing fluff information. The fact that ARU management was also heavily invested in this company with there own money was what convinced me to remain a long and continue to accumilate shares on the dips.

Well, like when a poster on these forums sudenly falls out of character, the same goes for the management of any company I invest in, I become very suspicious of motivation.

Personally, I had lost faith in our managements new style of operating at the beginning of this year. I did not take it as a bad sign though, I took it as a sign that a deal was nearing and unfortunately I jumped the gun by buying more ARU a couple of weeks too early. That for the moment has cost me a pretty penny.

The two most motivating factors in peoples lives in my opinion are fear and gread. This is especially true in the markets.

While most people may consider the board granting stock options to themselves earlier in the year a big windfall under the present deal and that it represents a lot of money. For some of the board, if the share price goes substantially above what they sold there shares for earlier in the year then they will end up having missed out on substantial profits.

I do not see greed as being a motivation for this sudden shift in management style.

ARU was very well funded with aprox 50 million in the coffers. With this amount of money they could even have started up some developement. They had brought onto the board a developement specialist and have consultants working on the mine design and could easily go it alone by hiring contract miners if they had to. No company could gain any leverage over them in any of these respects and thus they had nothing to fear and no reason to do a deal.

There is only one entity that could be of concern and has leverage over ARU.

I was operating under the assumption that ARU was in negotiations with another company and were being accommodating in order to reach a deal.

I was correct in that, unfortunately I did not take into account another player being involved. The reason for the events that have occured over the last 20 months all fell into place for me with the arrival of the K offer and the wording of the agrreement.

Perhaps I should have come to this conclusion earlier. That is what happens when you start concentrating too much on the details instead of looking at the big picture as I usually do.

In order to give you a hint of where I am going with this, then just ask yourself if it is just too coincidental the number of times that Ecuadors bonds have been manipulated up and down. First government officials jawbone them down by annoucing possible non payment and then send them up by making the scheduled payments hahahahaha. It would be almost too easy for a small governement working through an annonymous brokerage to make money.

It would hardly be unethical, if that debt was considered to be illegitimate by present Ecuadorian government because it was taken on and given knowingly to corrupt officials with there hands in the peoples treasury hahahahahahahahahaha.

No new government in the world, would let what amounts to basically a multi billion dollar realestate deal go through, in there country, with a constitutional reforrendum and election coming up, without somehow getting a piece of the action. This is especially true if the present government, campaigned on anti-corruption and making it more equitable for Equadorians in order for foreign companies to do business in the country.

The above explains all the many very strange coincidences over the last 20 months. This is also why in my opinion we will not see another bid for ARU before the new attractive mining laws are released. It would be counter productive to the Ecuadorian Governments short term motives at the moment hahahahahaha.

Managemnt still plans to maximize shareholder value, you will have to still be a shareholder at the end in order to get it though. In business, sometimes in the interest of the majority, compromises must be made.

Like I said before, I know of no saints that were ever named after a business man.

I promised a story if enough posters requested my return and I will keep my promise.

Regards,

F.F.