I’ve just returned from holiday and I’ve seen a flurry of activity around URU Metals (LON:URU).
Over the past couple of weeks, URU’s share price has gone from a high of 1.07p less than a month ago to closing at a lowly 0.60p on Friday March 22nd. This means that in less than a month, URU has lost nearly 50% of it’s share price. In a recent article, I pointed out that there were multiple reasons why URU could be viewed as undervalued; I haven’t seen any news over the past month regarding URU Metals, which suggests that I need to change my view.
From URU’s recent RNSs, it appears that there are a couple of reasons why the share price has sunk the way it has:
- Executive Chairman left
- Zebediela’s recent drilling results
- Management Resource Solutions (LON:MRS)
Executive Chairman left
On March 12th, URU Metal announced that Mr Henry Kloepper would be stepping down from the board of the Company with immediate effect. Given that Mr. Kloepper was promoted to the executive chairman position in June 2017, this means that his tenure at this position was well short of a year. Mr. Henry Kloepper can be considered a heavy hitter director and continues to be a director of several other mineral companies such as Global Mineral Resource Corp and A25 Gold Producers Corp. The big question is – why would such a director leave his post if he had faith in the company? A director of such calibre who decides to leave a company, may leave because of several reasons – some of the negative reasons could be that the company may not be performing in line with expectations, or that the director may not be in agreement with wider management in the way the company should be run. With Mr Kloepper leaving, URU immediately appointed another director – Mr. Kyle Appleby. Mr Appleby is nowhere as seasoned as Mr. Henry Kloepper and is over 20 years his junior. Sounds bad right? Not so fast……
What’s interesting about this is that both Mr. Henry Kloepper and Mr. Kyle Appleby have connections with Captor Capital Corp (the largest shareholder in URU). Captor Capital Corp has maintained its shareholding, although Mr. Kloepper has left. In addition, from Captor Capital Corp’s website, Mr. Kyle Appleby is a director while Henry Kloepper is the CEO. The leadership team for Captor Capital Corp only has 6 team members. The likelihood is that Mr Kloepper directly recommended Mr. Appleby as a director on the board. All of this to say, that it is unlikely Mr. Kloepper left because of nefarious reasons; it could simply be that he believes that the company is so well positioned, that there is no longer any need for his oversight – Mr. Appleby’s presence alone is enough now.
Of course, some could say that I’m speculating – but I think I’m speculating much less than those who say that Mr. Henry Kloepper has left because the company is about to go belly up.
Zebediela’s Recent Drilling Results
The results of the recent drilling proved that platinum deposits were onsite at shallow levels – more mineral content can only be a good thing for the company when production does indeed start. However, the guidance stated that further drilling will be needed to determine the scope of the mineral resource. With this longer term guidance, short term investors hoping for a quick buck may have moved their money elsewhere, with the thought that Zebediela won’t actually be ready for production until some time in the distant future. Others who may have been hoping for a quick acquisition of Zebediela may have also been disappointed and could have sold out.
Management Resource Solutions (LON:MRS)
Over the past few weeks, MRS has gone from a market cap of £14.50m a month ago down to the market cap of about £9m (a share price of under 7). At £14.5m, URU’s stake would have been worth roughly £1.4 million, At a market cap of £9m, this stake has lost about £500K in value (well over 1/10th of URU’s current market capitalization). Why has LON:MRS gone down so considerably in such a short space of time though you may ask? I’ll probably need to do another article to answer that, but in the mean time, take comfort in the fact that recent options were granted to employees & directors to be exercised when the share price is at least 15p (note that the share price is currently at 6.76p)
General markets have gone sour
In addition to the above 3 points, stock/shares markets have generally taken a hit after Donald Trump’s recent comments & decision around the implementation of increased tariffs for steel. Some pundits consider his comments as a precursor to a trade war – and trade wars aren’t good for markets in general. Sentiment across the board has been largely hit as a result and has resulted in a decrease in the main indexes over the past month
Summary
Although the share price of URU has sunk considerably these past few weeks, I do not believe that this is cause for major concern. For investors who are willing to buy and hold, I believe that there will be significant rewards in the long term.
As always though, please do your own research before buying/selling this share; the opinions above are only my personal views.
