Mkt Cap $180M Gold Held $290M Value, page-10

I've been thinking about it and it's actually quite genius from a long term capital management perspective, and from the perspective of someone wanting to increase their percentage of the company over time. Firstly, by holding any surplus gold mined as inventory, they don't pay tax on their profits, or it is minimal. Over time this makes a huge difference, the net assets of the company compound at a much faster rate. Secondly, by keeping the company relatively illiquid, they decrease the market valuation. There is a large body of evidence suggesting that low liquidity decreases efficiency of markets. In my observations this is true. So by decreasing liquidity to extremely low levels, at times the market severely undervalues the company, which allows the company to deploy funds buying back stock at bargain prices, further increasing the value of the remaining shares quite dramatically over time.

The downsides. Any shareholder wanting to exit their shareholding does not get full value for their shares. Warren Buffet for example prefers his Berkshire stock to trade closely to its intrinsic value, allowing shareholders to enter and exit at a fair price. Also, shareholders have no way of getting value other than selling their shares due to the lack of a dividend stream. However, this is probably more than offset by holding gold as inventory and not paying tax on gain on sale, allowing the net assets to compound at a faster rate.

Overall, for shareholders with patience (lots of patience), this stock should deliver very good long term returns. However, those considering entering need to be aware that the only way to realise that value is by selling your shares, and the market for that is very illiquid. Unless of course a takeover offer were to come into play, which is entirely possible at some point.

I've decided to wait this out long term, either selling if there is a gold price boom, or a takeover offer comes into play. I may even add further to the position over time, despite it being a patience tester with no dividends. I do wish though that they would follow through with their share buyback, and actually buy back some shares, they must be waiting for even better prices.