I have been trading stocks since I was 11yo. My father was impacted by the huge gains to be made in the 1960s commodities boom. He didn’t know anything at the time. It was not until the late 1960s, that the ‘bonanza stock’ captured worldwide attention called Poseidon Ltd. Not to be confused with Poseidon Nickel (POS.ASX) listed today, in those days Poseidon rose from 40p to £240 in London on the rumour of a nickel discovery. That’s all I know about it, however it collapsed as quickly because it turned out to be nothing substantive. This ‘bubble’ influenced him to buy stock in another company called Cliffminex Ltd, whose share price never went anywhere.
Clearly however he was not perturbed. In 1978, after the oil shock, he bought me stock in an oil & gas explorer seeking hydrocarbons in the Perth Basin offshore from Western Australia. It was a minor holding, and I never made money with his money. My father was an offset printer. He had considerable amount of work, and I was fortunate enough to have work after school, on weekends and on holidays. Despite my ‘slave wages’, I was able to amass a great deal of savings, and that would inevitably go towards spec mining stocks. Clearly my father has instilled in me a love for making money, taking risks and speculating at an age, and it took hold with me, more than it did with my brothers. But we would all be impacted. My middle brother did as I did, by just buying low and selling high. My oldest brother was least thoughtful and simply listened to us and treated it like gambling. He was living the ‘dream’ but never really invested in it. My middle brother did make some money, but the enthusiasm died as his self-esteem declined thanks to the broader context of his life.
My interest in ‘spec’ mining stock investing was substantially increased by my holiday experiences and schooling. During a ski trip to the Snowy Mountains, I had the opportunity to do some panning for gold in the creek. In fact, I found a great deal of ‘fool’s gold’ (mineral mica) derived from the erosion of the local granites. It did however instil an interest in geology and mining.
In year 10 of school I would further my interest in science & geography by studying geology. I was very keen and would spend my holidays researching further about geology, both at my school library, as well as the Department of Minerals & Energy library in the city. Moreover, I would periodically go to the Australian Stock Exchange library in Sydney and research a litany of stocks in ‘all-day sittings’. It’s hard to believe my enthusiasm and desire for learning. I would pester my father into taking me on field trips to abandoned mine sites that bored him silly. Money not spent on stocks was spent on maps, laminating them, as well as mine data sheets describing the state’s old mines in preparation for our next visit. This preparation was of course the foundation for a compelling ‘imperative’, and of course a lot of pestering would eventually achieve the desired goal. Often my father was annoyed because to him it looked like wasting a lot of time and petrol, gathering mineral samples, which to him were akin to junk to discard. No doubt the frequent failure to find any trace of mine workings was yet another sigh that we were wasting time. These old mines were often financed from London because there was simply not the ‘risk capital’ in Australia that appreciated the potential.
Eventually I would finish my schooling. I was sufficiently intelligent that I was able to gain entry for economics, as well as my chosen field of geology. I in fact was considering studying a double degree of economics and science (geology & geophysics), but I didn’t like the idea of prolonging my studies, which were no longer free since tertiary education had just been placed on a ‘self-funding’ model with loan support. One of my lecturers was impressed by my intent to study both geology and finance. Most people were only looking at the ‘minimum’ degree, and seemed so compartmentalised in their thinking. They wanted an ‘off-the-shelf’ product, whereas I was looking to package a product to serve a sense of purpose that seemed lacking in other people. The truth is that this sense of purpose was greatly challenged by negative experiences in my life, but that is a distraction from the broader story.
During my first year of university I was introduced to philosophy through the manager at my part-time job at Pizza Hut. Philosophy had a big impact on me. Aside from challenging my presumption that philosophy was a waste of time, it exposed me to classical liberal ideas of economics, as well as philosophy. This ‘casual interest’ in philosophy was informally expanded to psychology, history, law and maths. These explorations really conveyed I belief in ‘classical education’ that departed from the ‘specialist’ or compartmentalised model of ‘learning’ that people were compelled to complete for credentials at university, but which otherwise seemed to undermine other’s sense of curiosity and purpose. I was always different and had few friends I could relate with as a result. It didn’t bother me too much. I continued my stock investing, ASX library researching, but during my university holidays I had taken every opportunity to seek industry employment in mines. By the time I’d finished my degree, I had worked in tin, copper, gold mines, underground and surface alluvial projects, as well as in exploration.
My next inspiration was to learn more about mining and mineral processing. I enrolled for a 1-year graduate diploma in mining engineering & mineral processing at UNSW. Aside from giving me a broader understanding of mining, attendance at some voluntary ‘short courses’ at the attached Key Centre for Mines. A question I asked at the Centre appeared to have prompted Ed Malone, the course director, to recommend me for a position as a mining analyst at Barlow Jonker, the international coal marketing consultants.
I frankly was more interested in ‘spec’ mining, and everything about coal has conveyed to me that it was ‘big company’ mining because of the large investments involved. In any respect, I endured because of the opportunities. Within 18 months I was travelling to remote countries like Colombia and Venezuela, and moreover doing research in Asia, as well as attending marketing conferences in enticing places like Goa and Bali. In any respect, I loved the research, the projects and travel. In one year I was given a bonus that was equal to my salary; but I’d already decided to leave. I actually decided to prepare my own technical publications, however the marketing proved too much of a challenge. It was however the 1990s, so I went off and lived in Japan. This was one of those countries that I loved the most travelling.
I had little savings at this time, and half of it was invested in a single stock, Aquarius Platinum. I bought into AQP.ASX when they were capitalised at just $5 million. After consolidation, my entry price was 70c. For 2 years they stayed at 35c before rising to $10.00. Before they did however, I was able to secure more options at just 25c, with 75c more to exercise in 3 years. I would eventually divest the shares at $2.40 and $3.20, however the options I would eventually exercise at $9.75 for a return of 3200% in 3 years. People simply don’t expect these types of returns, and yet:
This profit was made before the minerals boom
1. This stock would be ‘pitched’ as speculative or ‘risky’, but the reality is that the return on these types of investment propositions bear more to do with ‘knowledge’ rather than ‘ignorance’, or what we’d call risk.
2. Few people are looking for these investment opportunities, and yet they are there to research for anyone through company websites or the exchange.
This is not luck, as I will describe how an even better opportunity came my way. I learned my way into this opportunity. I created this opportunity by preparing my mind so that it could commit with comfort a large pool of my savings. So why aren’t more ‘professional investors’ doing this, as well as fund manager, and why are people satisfied with 1-20% returns, even losses, from their funds. The truth is that funds exist for the sake of fund managers, not savers. Some of you will think this is luck. But this was not even my best opportunity. It is however true that such opportunities don’t come along all the time. There are however far more less impressive investments offering 200-700% gains over shorter periods than 3 years. I describe how I find these opportunities in my eBook ‘Global Mining Investing’ (480 pages). The eBook can be found at www.miningstocks.sheldonthinks.com.
