DME and fustration with companies in general (rant alret)

I hold a small position in DME/DMEHF (Desert Mountain Energy)

I’ve posted before that I use chart analysis a lot but I also try to research company fundamentals. In the case of DME I did do a reasonable amount of research which was all positive and essentially indicated a fairly low risk small company with significant upside potential. Hence I invested. Yesterday the share price collapsed but my over recent weeks my confidence in the fundamentals has blinded me to not paying attention to the chart and ignoring the declines in share price (if anything considering them opportunities to top up based on the fundamentals).

The problem is that the company omitted to tell the market a major issue. I’m therefore left wondering what recourse simple investors have when a company essentially misleads the market and I’m assuming that the answer in reality is very litlte/nothing.

The drop in DME’s share price has seriously annoyed me because I feel like I did reasonably diligent research and essentially small investors are just considered inconsequential.

So what happened to DME. DME has an area of Arizona that they have successfully drilled for helium. I researched all of the company news releases and the broker reports which all gave a clear timetable for full production which appeared low risk - successful test drills, processing plant installed, solar farm installed (to power the processing plant), initial production started, customers signed up… The broker note and fund raising earlier this year made significant mention of the benefit of first mover benefit and also highlighted that Arizona had a long track record of helium mining/production and major customers nearby. Essentially the major risks were minor slips in the timescales (eg a couple of weeks to ramp up production), the spot price of gas changing, if Russia starts producing again…) but all of the fundamentals were clearly confirmed in reports, news releases, etc - ie known reserves, successful drills, processing plant commissioned, initial production started.

I got a little suspicious a couple of weeks ago when they announced they had bought an old gas field in New Mexico - why do this when you are just about to start full production in Arizona? Then a week ago a director left with immediate effect but the share price stayed steady.

So why a massive drop in the share price. News yesterday was that they have totally shut down the Arizona sit because they had become frustrated by delays getting permits. What you didn’t have permits!!! How can you put out investment prospectus and news releases, raise additional funding… and not mention that you don’t have the necessary permits and then days away from production shut the whole thing down (and plan to move the processing plant to the newly acquired site in New Mexico - now explaining that purchase). What happened to all the “Arizona has a long track record of helium production and we have the best management in the industry who know what they’re doing…”.

For me this says you can’t trust what any company is saying and can’t really rely on fundamentals. I should have paid more attention to the charts but charts have to be read with the fundamentals in mind…

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If they never said they had a permit, then logically they didn’t have a permit and that’s a red flag in resource investing. You learnt the hard way.

If a resource company has permit they publicise it, heck generally they publicise when they apply for a permit.

Not sure I agree. If a company has done test drilling, started initial production, built a processing facility… and raised money on the basis of imminent full production and not stated any risk factors in the way of that full production (initial production already having started) then I think its reasonable to assume they have the permits and failure to disclose lack of permits is a material disclosure failure.

Its a bit like a car manufacturer building a production site, commissioning it, starting initial production and then shutting it down because they didn’t have planning permission.

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If the risk disclosure of their funding prospectus was not mentioning permits, it is ground for a shareholders lawsuit.

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I imagine it would have been mentioned in the notes on risks in their annual report, sometimes towards the end and in smaller print… have you checked @WakeMeUp ?
Maybe search the pdf using CTRL + F and see if it comes up.

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There is a standard disclaimer on news releases which includes a general comment that the company has “risks obtaining necessary licenses and permits” but in the company releases they say that they obtain permits prior to drilling. Those are the only references to permits that I’ve found.

My original post was, however, more general and was trying to make two points (aside from the specific rant about DME): 1) to trust and don’t ignore charts even when you think you’ve done the research of fundamentals and 2) its almost impossible for a private investor to fully research companies and even when we do try to do the research unexpected things can often derail investments.

In terms of DME specifically - they had done the drilling, announced test results, announced initial production… and developed, installed and commissioned a processing plant (and solar farm to power it). In March 2023 they issued news that said:

“Our team understands that our shareholders have waited a long time for the completion of the McCauley Helium Processing Facility,” said Robert Rohlfing , CEO of DME. “Initiating helium sales as a vertically integrated primary producer of helium has been our long-term goal and we are proud to have accomplished it.”

They then announced timeline to full production and processing without mentioning the need for additional permits. So the only mention to permits is in the context of drilling (aside from a generalised disclaimer) and they announced they had fully commissioned the processing plant, and accomplished sales of processed production. In those circumstances I don’t think its unreasonable for a private investor to assume they have the necessary permits to go into full production