doc75

Yes... building up inventory while pulp prices are sky high and expected to fall is just plain fishy. And if the drop was mostly because of inventory build up, then why doesn't it say so in the MD&A? Please tell me if this is what one would expect from good & honest management: The MD&A says the drop is "mainly due to a strong recovery in 2009 and increase in world supply in 2010". But according to the CC, it was "mainly inventory build-up". This discrepancy isn't due to bad French-English translation. They just don't have their story straight on this very important issue. I don't mean to beat a dead horse here, but this is exactly the type of thing that will keep value suppressed. The drop in sales might as well have been highlighted in fluorescent paint --- it sticks out like a sore thumb. Volumes down 20K from 2009 and 16K from last quarter while prices are the highest in years? And yet the issue was officially addressed only by a terse & misleading sentence. This just opens the door to speculations like Al's (ie. they dropped a big customer), because frankly their explanation doesn't make sense. I was going to press them on it during the CC but didn't want to lie about being an analyst. (I also wanted to ask about the union contract. No mention of it from what I can tell.) The fact that FBK is undervalued on an asset basis is pretty clear. But management is far from impressive IMHO and Fibrek's valuation on an operational basis is more questionable than it should/could be. I wish Fairfax would emphasize more "fair" and less "friendly" in this case.

I only know that they were cut from "market perform" to "underperform". I got the Sept 23 $0.90 price target from the basic research on my brokerage account. No further details. I'd also be very curious to see an analyst report on Fibrek -- even an outdated one.

At first I thought that Fibrek was being really pissy with that guy -- asking him where he's from, and if he's an analyst etc. But then he asked his questions and I thought "what a moron". FYI: Raymond James downgraded Fibrek today. Their old target price (as of Sept 23) was .90 so I'm curious to know if they've gone even lower. I suppose this may explain some of the slide as well.

You had to know that the share price would tank after seeing the net income down to 3M from 10M in the previous quarter. That's all a speculator would look at before hitting the sell button. The conference call just finished. Very few questions. Decrease in sales was mostly due to inventory buildup, given the upcoming maintenance downtime (as conjectured on here). They claimed they were running with low inventory and had to build it up to make sure there was enough. I don't quite follow. The stated inventory level from end of Q2 seems like plenty to cover 10 days downtime with lots of spare, and prices were only going to go lower.

On a somewhat related note: Catalyst Paper just released Q3 numbers.. their best quarter in quite a while. The stock was down to 0.09 earlier in the year (39M market cap!) and recently had a lightning quick run up to over .20. Gobs of debt, but it's still dirt cheap if they manage to stabilize for a few quarters. I'm kicking myself. I've been holding shares bought at an average of .20. While it was really in the dumper, I worked some numbers and every calculation suggested that they'd be well into positive EBITDA territory for Q3 & Q4, provided the world didn't suddenly fall apart. Yet I still only took a tiny nibble when it was less than 10 cents. I really need to learn to trust myself more when I actually take the time to do some thorough work. In this case, there was lots of conflicting noise: Ongoing labour disputes and a high debt load lent credence to rumors that they may file for creditor protection to tear up their union contracts. I was scared of throwing good money after bad. I mention the above only as a public admission of a lesson learned: ignore the noise. It will be interesting to see market reaction to the Q3 numbers tomorrow. For what it's worth, Catalyst foresees weakening pulp prices going forward but feels some of their paper markets have stabilized. The CEO has been talking about the need for merger/partnership.

Agreed! When I said "mining friendly" I was referring to the various financial incentives that Strateco enjoys as a developer in Quebec. The environmental paradoxes (asbestos!) are simply bizarre. There is definitely opposition to Strateco's development. Lots of people without any scientific knowledge talking about radium pollution, in particular (a total non-issue). If there was a junior company this far along in development in Saskatchewan, my money would be there instead. And it may still be safer to invest in high quality assets in Sask and wait for a major to buy you out. We'll know more about Strateco in the near term. If they get a permit for underground exploration, it will be the first one issued in something like 25 years. The environmental assessment is elaborate and the first town hall meeting raised over 200 questions to which the company had to formally respond. The second meeting will be telling. Once underground exploration begins, it will be much more difficult to halt the project over bogus concerns (provided the various assessments required for permitting are airtight). The opposition knows this and are trying to stop development at an early stage. And... for the record... if Strateco actually is going to be an environmental monster, then I hope this is discovered sooner than later, even if I lose some cash.

Thanks for the info. HAT has some very attractive properties and has been on a tear lately. Your idea to get in by the backdoor is interesting. I've held a small position in Strateco Resources (RSC in Toronto) for a few years now. If you're interested in uranium, it's worth looking into. Their Matoush property is in the Otish mountains of Quebec and contains some of the highest quality uranium assets outside of the Athebasca basin. The percent grade is FAR less than the grade in the basin, but by world standards is very high and viable for mining. They're moving steadily towards production and all appearances are that they're dedicated to bringing a mine online by 2014. An updated scoping study was released in late summer. If I remember correctly they have over 20M lbs of inferred and indicated U3O8 at at average grade over 0.6%. They're currently in the final stages of getting a permit to carry on underground exploration, hoping to increase the resource to approximately double today's numbers. A first round of community meetings was held in the spring. A number of questions were raised, and Strateco responded in September. Another round of community meetings have recently been scheduled for mid-November. After this, the permitting decision will be made. Some of the economic assumptions in the scoping study seem aggressive to me, such as a low Canadian $ and a somewhat optimistic uranium price. But the company will be worth a lot more than it is today if they can access what's in the ground. I've held a few shares since their initial exploring successes. I've been uniformly impressed by their commitment to the project. Here are some things I like: - The CEO has been buying shares consistently over the years and hasn't sold at all, even during huge run-ups. He has a fine history of mining success. - Ned Goodman (of Dundee Securities) has taken a large personal position in the company. - They have delivered on their promises in a timely manner. They've been aggressively pursuing all the necessary permits and have a very organized plan in that regard, even as they work to prove up more resource. - They've been careful about heavy dilution and don't appear to be burning cash more than necessary. - Quebec is mining friendly. - Mining should be profitable at today's uranium prices. Things I don't like: - There's risk that one of the many necesssary permits won't be granted. People don't want uranium mines near to them. - It costs a lot to start up a mine, so there will be further dilution, and they're at the whim of the markets as to how much. - The CEO gets paid as a consultant through his personal company, and it's a pretty tidy sum of total compensation. I don't mind him taking home a good paycheck because it seems he's working hard. But I don't like the whole consulting business arrangement. I'm not sure if this is just a tax loophole thing, but it stinks a little. - They're in the midst of a large drilling program and there have been no updates as to progress in some time. - They still don't know exactly what's in the ground and the plan seems to hinge on outlining more resource. - I'm not convinced of the uranium bull market. I expect some serious volatility between now and a mine opening. Disclosure: I sold a lot of my position when it ran up to over $3 back in the crazy uranium days. I hold a small position now and am happy to see how far these folks get. Sorry if this should be moved to the investment ideas board.

I sold some TRXAQ today at .60. I tried to sell a few days ago at .30 and my order wasn't filled. Talk about luck. Lots of speculation here on the valuation. It seems there's a very strong case for shareholders to get something but once the OEC withdrew I was looking for a good exit. In hindsight, I suppose it was always going to come down to valuation fight at confirmation. I just didn't like the lack of communication regarding the withdrawal. Josh: Are you still following MMPIQ? Very interesting story there... Any thoughts on the vote? Any ideas as to the chances that the C/H plan is confirmed?

Look into the ASUS UL30vt-A1 and the newer UL30jt (maybe not released yet). I did a lot of searching back in the spring, and was going to buy the UL30vt but decided to wait until the UL30jt was available, as I wasn't in a hurry. (Once the JT comes out, I'll either buy it, or get the VT at a lower price than today's.) I want a small, light, laptop with gobs of battery life. I was originally looking at netbooks but felt I was really sucking up too many negatives for the small form factor: short screen and low power amongst the issues. The UL series notebooks are based on the the ultra-low volt chips and have fantastic battery life and very good performance. The ones I mention here are 13.3in and weigh 3.7lbs with battery. They're fully powered. Lots of RAM, gigabit ethernet, yada yada.

So all I have to do to get an 8% pop is do a little bitching on this board? Hmm... You know, I'm also not impressed with the stagnant FFH share price as of late. Worrisome. Management doesn't have any direction. Industry pricing is soft. Hate their website and its conspicuous lack of flash animation. Now excuse me while I check my portfolio. ;)

Is there anyone in the crowd that has played with the Kobo from Chapters/Borders? I see that they recently released a new version that's faster, includes Wi-Fi, has an upgraded screen, and a couple other features. I've thought about getting one myself because I love (1) ePub access and (2) its lighter weight, and all-else-equal I'm happy to support a Canadian underdog. But I've held off purchasing because my reading is mostly non-fiction and I think I'd really miss the ability to search. Besides storage, search/scan capability is the primary motivator for e-reading. The "simplicity by design" paradigm of Kobo really limits the device's expandability. I know the people at Kobo are more interested in selling e-books than devices, but if the whole world (including local libraries) goes Kindle then Kobo won't have books to sell. Kobo seems to have attracted a loyal cult following. It's just hard to imagine them taking much market share when their device is priced similarly to Kindle and offers a lot less. I think they'll have to drop the price substantially to compete -- to $99 or something. It will be interesting to see where the market goes. It seems there are plenty of Kindle users who want ePub readability (inc. Adobe DRM) but these same people don't seem to be rushing out to buy Kobos (or Nooks etc.).

Agreed. Whatever you call it, in retrospect it would've been the right way to play FBK after the great runup! On that point... here's a question: There are a great number of cases where there have been huge sudden run-ups in my "value" holdings, and I'm extremely tempted to sell and then re-enter. I have generally resisted the temptation, telling myself to wait until they approach my estimate of intrinsic value. But if I guesstimate based on personal experience, I'd say I would've experienced much greater returns had I consistently sold positions after very fast run-ups of 50% or more, particularly if they take place with huge volume spikes. Far more often than not it seems the stock falls back after the big buying is done. (Fibrek's not actually a great example of this, since the run-up took a while. I'm mostly talking about huge returns over one to three trading days.) I'm curious what others on the board do?

I think there *should* be great value here but I haven't been able to summon the courage to add at these prices. I haven't been impressed with management. The way the rights offering was handled didn't exactly inspire a lot of market confidence (more like a vicious cycle). I generally find the numbers stated in their MD&A's to be a little misleading. It's clear that they were not realizing the full effect of the pulp price increases, due to various discounts and long-term contracts. But instead of addressing this they simply state that higher pulp prices were offset by FX. In general, I'd like to see some acknowledgement that they are trailing their peers, and have some sense of what they play to do about it, rather than leave it to us to guess that they are being guided by the deft hands of FFH. The website issue really peeves me, mostly because I just can't imagine how they rationalize the delay. It seems incredibly unprofessional. I contacted IR about this but didn't hear back. I think a couple other people on here also asked what's up.... did anyone get a response? Sorry to rant. I'm a bit underwater but still hold my shares because there *should* be lots of value here. I just hope the Q3 report includes both the expected solid numbers and some evidence that management isn't just coasting.

Anyone have any idea when Fibrek will report? It fees like we've been bound in the .97-1.03 range for ages, with pretty average volume. It'll be interesting to see if the Q3 report induces any movement. I fear not, since I think everyone is expecting pretty solid numbers but has doubts they can keep up going forward. I had expected a trend upward as we approached November. I follow Catalyst, too... they're in much worse shape but rallied very hard with some other pulp/paper names over the past little bit.

Fan & Zarley, Sorry for the delayed response. My research on Polaris was primarily in the form of various online resources. My plan was to put together some links but it seems I've lost the bookmarks. My assessment of intrinsic value was based purely on a quick survey of the costs associated with permitting and bringing a quarry into operation. I'm sorry I don't have specific numbers anymore for you to compare with, but the gist is that permitting is generally contentions for environmental & "neighbourly" issues and quarry development costs are nontrivial. At current market price, Polaris' EV is roughly $70 million. That's pretty a pretty cheap price to pay for (1) a quarry that is permitted to produce over 6 million tonnes/year of high quality aggregate, (2) a loading system & tidewater port for Panamax vessels, and (3) a new receiving terminal in San Fran (Richmond). So here are the positives, as I see them: - As Zarley said, Polaris seems quite cheap on a pure asset basis. This was particularly so when it was trading at < 0.90. It's up over 20% since then, but is still cheap. - Even with relatively high fuel prices, Polaris can ship a vessel full of aggregate 1000 miles at about the same cost per tonne as trucking it 25 miles. The business plan is to have Polaris terminals supply large markets like San Fran, L.A, San Diego, where it is very costly to truck in aggregate from domestic (Californian) producers. If/when the US west coast construction market comes alive (in the year 2087??), well-documented aggregate supply constraints will return to the fore, and Polaris' business plan is very sensible. - Polaris has standing supply contracts with Cemex & Shamrock Minerals. Cemex is of course a huge player (with its own problems, admittedly), and is actually a JV partner with Polaris in their L.A. operations. Shamrock is a big player in the San Fran construction supply market. These supply arrangements allow for fuel surcharges to be passed on from Polaris to their customers on a month-by-month basis. - The aggregate that Polaris supplies is particularly suitable for high-quality ready-mix concrete... which makes it ideal for large-scale infrastructure construction in earthquake prone areas. So Polaris' fortunes are more closely tied to infrastructure/commercial construction as compared to residential. And the negatives: - They live & die by volumes. Management predicted volumes would rise back in 2007 and entered long-term shipping contracts with CSL. The problem is that they're on the hook for large deadfreight charges if they don't ship certain minimum tonnages... and those minima are pretty big compared to today's volumes. The minimum volumes increase each year over the life of the contract, all the way into 2020 (as I recall). So their success is highly dependent on Californian construction demand. Not an enviable position to be in at this time. - Management did renegotiate the shipping contracts earlier this year. They payed a substantial charge to do so (6mm). This is probably money well spent, but even under the new contract they're not going to meet the minimum shipments for this year. It seems that most observers were expecting stimulus money to crank up infrastructure spending, but between long lead times and California's budgetary woes, the stimulus money hasn't trickled down in the second half of 2010 the way people expected. - I believe Polaris is cash-even at around 2 million tonnes / year. They almost certainly won't hit this target this year, so they're bleeding cash. They are definitely in a liquidity squeeze. The sale of a Long Beach port will put some much needed cash in the treasury, but this is not expected to be completed until Q1/11. Another nasty equity financing (ie. dilution) may be in the cards. Addressing Zarley's comments: - Polaris has relatively little debt, so borrowing more against their assets may be possible. However, one can imagine that bankers aren't looking to hand out cheap debt to a company whose cash flows are questionable in the near term. - On the last Q conference call, an angry investor took CEO Herb Wilson to the woodshed over the last equity financing and over the company's continued expansion even while they were losing money. Wilson didn't address the financing, but he did say that they are pushing for expansion into L.A. because *volume* is the key. The sales price for aggregate has held up. Polaris just needs to ship more of it. They currently only serve the San Fran area and crave larger markets. But, realistically, they won't be shipping to LA before 2012. - I think they did a smart thing with the "change of port" in LA. The new property was not available when the first one was purchased... and the first one was purchased while economic fortunes in L.A. were much rosier. (That is, it probably seemed like a great idea at the time.) Anyway, the new property is already permitted as an aggregate depot (3 mm tonnes/year) so it is a natural choice and should cost much less in the end. It appears as though they won't be losing a lot of money on the initial port purchase. A sale is already negotiated from what I can tell. All said, at this point I agree that it's a speculation on asset value. I put very little faith in the West Coast market turning soon, so I agree that a takeover is the best case scenario at the moment. Disclosure: I took profits after the run-up from 0.85 to 1.15. I still hold a couple thousand shares as an asset play, but I fully expect some more bad news before good news.

I think we can safely assume it wasn't because of a positive weekly pulp market update: See www.foex.fi Not an end-of-the-world report by any means, but it looks like prices continue to soften with new supply, as expected.

Fibrek has yet to negotiate a contract with their workers. They have been without a contract since sometime in spring/summer 2009, if I recall. THe August 2010 MD&A suggests that they were no negotiations yet. Does anybody know what's going on here? There's a fair bit of pulp production coming on line, some of it coming from companies who are emerging from BK with lower labour costs. Apparently the CEP union (under which most, or all, pulp workers operate) has decided that Abitibi is their "pattern setter" for contracts in Eastern Canada. The Abitibi workers ended up taking a 10% wage cut in their first year of contract. They *may* also have taken a 10% cut in their second year, but it was unclear from the contract I read. After that, wage increases start up again. It's a 5 year contract, and one would expect Fibrek's agreement to be similar. (?) Does anybody know what percentage of cost/ton is attributable to labour? My fear is that if they don't reduce production costs then they'll have a lot of trouble making money with the high Can $ once pulp prices invariably soften. If the C$ were back at $0.85 we'd be making money hand over fist, but the great prognosticators suggest a level above par is more likely in the coming months.

I noticed today that an offer has been made for Baffinland Iron Mines (BIM.TO)... and it got me thinking about a small position I hold in Polaris Minerals. Does anyone here follow Polaris (PLS.TO)? It's a west coast aggregate supplier, started in 2006 with much giddyness. The game is to ship construction aggregate from coastal British Columbia down to markets in California. Polaris has developed a very high quality quarry and dock, fully permitted to ship over 6 million tonnes per year. The quarry has well over 120 million tonnes of resource. They also have interests in other, as-yet-undeveloped quarries with enormous resource. They have a solid shipping system for delivering these materials to coastal Californian markets. The business plan was greeted with enthusiasm back in 2006/7/8 and the stock commanded a hefty valuation in its growth phase. And we all know what then happened to the California market. Apparently aggregate sales are down 40% from 2007 levels. Management expected a turnaround in demand in 2010 because of infrastructure spending. But infrastructure money hasn't yet percolated from the design phase to the construction phase, and Polaris has found itself in a bit of a tight situation. The shares have traded down below $1. This appears to me to be WELL below the intrinsic value of the company, and it's hard to imagine it can stay at these levels for long without being scooped up. As usual, any thoughts from smarter people are appreciated! FYI: Irwin Michael and his ABC funds hold a significant position, bought at much higher levels. ------------ (Incidentally, BIM only reminded me of this because of the takeover offer. I had eyed BIM as a speculation when it reached very low levels but never pulled the trigger. Don't know if anyone here followed their story. They needed a huge amount of capital to move forward on a high quality iron mine in northern Canada. A number of major steel players were interested, which gave the story some credibility.)

It appears that today the creditors filed an objection to the entry of the equity ctee's original plan, and the equity ctee submitted a revised plan that leaves equity holders with somewhat less... I haven't dug into all the numbers, but the creditors objection is convincing and the equity revised plan doesn't really address the main issues. Josh/Myth/anyone: Have you done your own evaluation of this? The equity ctee's plan is predicated on certain arrangements/negotiations regarding environmental liabilities being in effect, whereas there is already testimony on record that indicates that the settlements of liabilities may not stand under the equity ctee's proposal. This is a tough one to add up. It's easy to believe the massive scale of environmental liabilities could wipe out any and all enterprise value... so the settlements are an integral part of it all. But the gov't wouldn't be happy seeing value transferred to shareholders while they were left holding the bag for cleanup, and if the creditors aren't made whole then the equity plan skirts the bankruptcy law by assigning value to junior capital holders. It's an interesting case to read about. Do you have any thoughts on these things? It looks like it could be a great investment before THursday if one could assign some reasonable probability to the equity committee's plan being allowed. My gut says it's a lot lower than 50-50, but as usual I know nothing about these things.

FYI: The reader who commented also refers to the current president as "Hussein". This is a warning flag for me.

And Al... Of all posters on here, I've learned possibly the most from you and Ericopoly!

I re-read my message and maybe it appears I was taking a "side", so to speak. My comment about "ugly bits" of human nature was a general observation, not finger pointing at anyone in particular... though in retrospect I suppose the "ugly bits" could have referred to the d*ck measuring contests that inevitably results when egos clash. Anyway, I think most would agree the board is at its best when there's debate without trash talk or pomposity. I mostly wanted to point out the disparity between dispassionate investing and dispassionate posting. I just ignore posts with a really pompous or condescending tone. But maybe my lack of financial ideas makes it difficult for me to know what it feels like for someone to insult them! And I still think it's best if people like rick_v, who clearly has interesting things to say, continue to post. ps: I agree about the black-and-white. A disagreement quickly gets ugly when one side refuses to concede anything to the other, even if that concession is simply "I see your point, but I disagree.". Some people see their path as absolute truth. I have a friend who's a financial idiot but believes he is a guru on the subject of women. He knows what's best for everybody, with certainty. 100%. Don't argue. It's bloody annoying at times, but once you get used to it, it provides fantastic entertainment. :)

Rick_V, if you're still reading: I'd like to echo Coc's comments and say I'm sad to see you've made the decision to stop posting. As a novice, I found your ideas to be very interesting and informative, particularly since they are different than many other posters'. I sometimes agree and sometimes disagree, but frankly that's like saying Paris Hilton agrees/disagrees with Stephen Hawking on the nature of black holes. I've looked into each company you mentioned simply to practice my analytical skills. Same goes for Harry Long and a number of other posters on here. I find this board to be amazingly informative and at the same time perplexing. For the life of me I can't understand how or why such intelligent and rational people could be so insulted (and be so insulting!) over someone disagreeing with their opinions. It's strange that people who are so talented at stripping emotion out of their investment decisions could be unable to strip emotion out of their *discussion* of investment decisions... particularly when the discussion arises on an anonymous electronic forum! THat's not a judgement, just an observation. Rick_V, Harry Long and Munger (to name three) have all recently shared insight based on their own rich analysis. Some of their posts have led to passionate debates that have brought up some very good points of finance and some pretty ugly bits of human nature. It seems the general source of friction is a simple conflict of egos: "preachy" posts on both sides of the argument. Being a novice, I find the extreme self-confidence more amusing than annoying, and I learn a lot from the debates. But it's pretty sad if it ends with people no longer posting. I'm being selfish here: I learn a lot from you folks! In any case, thanks to everyone for sharing their ideas! I hope it continues!

Yet another pulp increase: http://www.foex.fi/default.asp?navigate=pix_pulp_select.asp

Note that the Paperage site quotes the FOEX indexes that are initially posted ever Tues on the FOEX website: http://www.foex.fi/ I find the brief weekly market commentaries there to be an interesting read. PS: No rights in my BMO account yet, either.