What has happened with MHM Metals?

Firstly it is clear that my timing when purchasing of shares in MHM Metals was extremely poor. I purchased at $1.195 and today they closed at $0.69 (down 8 cents for the day). Now the poor performance is not entirely down to the company, its management team or the wider market but is a combination of the three. I can however learn from this and use it when making future investment decisions.

Originally an update in relation to the signing of a salt slag agreement was expected around July/August this year, we also saw delays at the Victorian plant as the ponds ran into trouble with the local council. Now I am not going to close my eyes and pretend that none of the above happened, but what is important during times like these is to re-assess the investment and fundamental position of the company.

So what has happened over the last couple of months:

1.   We received confirmation that all the components at the Geelong Salt Slag plant were operating to specification. I.e. the technology works and we can proceed with our international expansion plans.

2.   The company hired Mr John Pugh, who had previously spent 21 years with Smelter Services Corporation. His appointment provides us with significant industry experience and networking ability within the North American market.

3.   The company announced that it is looking at the potential to process “black dross” which could lead to a larger plant and increased revenue from the North American operations in my opinion.

4.   The latest update alludes to the potential of two plants within North America in the near term.

Reviewing all this information confirms in my mind that the fundamental position of the company has not been altered, indeed it has improved. Confirmation of this will come in the upcoming quarterly reports which will give us a firmer understanding on the profitability of the Australian operations and the signing of a North American agreement which must be getting closer by the day.

Once both of these are confirmed I do expect the down trend to reverse, however given my buy price is nearly double the current share price, it is unlikely that I will see any capital gains this side of Christmas. It does however provide me with an opportunity to purchase more shares at a discounted price if I am happy with any forthcoming announcement. As I have previously mentioned on my blog I do like to scale in and out of my investments. This ensures that I never pay the highest, nor sell at the lowest price and given I am a long term investor short term fluctuations do not have as much significance as the big picture.

So in summary the performance has been disappointing, but the fundamentals remain the same. The only medium term challenge I can see to the share price is any capital raising that may be required to fund US expansion. I will keep a close eye on this over the coming weeks and months.