Jayant Bhandari

China will continue to grow—II

(Also, Phoscan Chemicals and Niogold Mining)

Continuing discussion on China from my last musings, I want to point out two more issues that are often raised by those who say that China has economic problems. (Many thanks to Sunny Pannu of Minaurum Gold—MGG—for his input on this):

1) In recent months there has been much noise about China devaluing its currency. So, let’s look at how Canadian Dollar, Euro, Indian Rupee (INR), and RMB have performed over the last one-year and five-year periods.

In the last one year, compared to the US dollar, C$ has fallen by 12%, Euro by 5%, INR by 9%, and RMB by 5%.

In the last five years, compared to the US dollar, C$ has fallen by 32%, Euro by 24%, INR by 32%, and RMB by 0%.

As you can see in the above, news about devaluation of RMB is not really the truth. Moreover, given that you actually get a decent interest on your RMB deposits, it has overall performed better than the US$, making RMB the best major currency.

(I strongly suggest you open a bank account in China, one of my favorite countries.)

2) Let’s now talk about a claim some economists make that India is about to overtake China.

Chinese GDP is US$12.25 trillion. India’s is paltry US$2.18 trillion.

On a per capita basis, Chinese GDP is US$8,866 and India’s is US$1,688.

Now if China grows by a “mere” 6% and India by 7.5%, Chinese per capita GDP will grow by US$532 and India’s by US$127. So even at this seemingly low growth rate, China will grow at four times the absolute per capita growth rate of India.

Please look at the above numbers and let me know if you really think China and India are comparable. Let me know if you really think India can overtake China any time soon.

India is NOT the next China. Most importantly, I think India will start to falter soon and you will start hearing stories of chaos—and we can always blame all problems on ISIS or whatever. My big worry is that India is on the path of becoming the next Pakistan.

I will be speaking on the above at the next Mines & Money in Hong Kong, and also at Mining Investment Asia in Singapore.

Let’s move to investing…

→ Phoscan Chemical (FOS) is trading for $0.24. If you do the arbitrage calculation, you might come to a value of $0.34, offering you a 37% upside.

→ Niogold Mining (NOX) is trading for $0.36. It is being acquired by Oban Mining for 0.4167 share of OBM. At the current share price of OBM, NOX is worth $0.44, offering you a 21% upside.

In my several musings, I have written very highly about Oban Mining (OBM). As an investor I have learned a very hard way that I must change my views when facts change. And I now must confess that I made a mistake with Oban, for I kept on ignoring that they compulsively raise money from the market.

OBM has about $65 million on cash. But they are now raising $10 million and worse there is a warrant attached. The financing can be doubled if they can find more people to give them cash.

If you do participate in the financing of OBM, please—please—do give them a call and ask them why they need to raise another $20 million and do ask them what is the desperation that they must offer warrants with this financing.

I utterly dislike such financings, for they do no good to shareholders.

So, despite a seemingly good upside in OBM, I believe that my upside will always get diluted away for empire building. OBM has shown that they will keep raising cash whenever they can, whether they need it or not.

I no longer see myself as an investor in OBM, but as a trader. I would buy NOX for mere arbitrage, but would like to get out of OBM at $1.20.

Lessons: a) Change your opinion when facts change. b) Invest for hard facts, not greed, hope and change.

Finally, a friend is looking for a small amount of money for continual research on material for 3D printing. If you have an interest in such an investment, let me know.

Warm regards,

Jayant Bhandari

www.jayantbhandari.com

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