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7/27/16

Char of the day is...

...gold the last three days, marking the pre-FOMC mini-pop:

Whether that holds after the lunchtime announcement is another question. Vamos a ver....

7/26/16

Capstone Mining (CS.to) and a cash costs explainer

Ever wondered why mining companies like to bombard you with different ways of calculating cash costs per unit of product? Here's why.

Capstone Mining (CS.to) reported its 2q16 financials this evening and if you check out the NR, one of the first things you'll see (in the very first paragraph in fact) is this:
"...C1 cash cost (1) of $1.51 per payable pound produced with copper sales for the quarter of 22,549 tonnes at a C1 cash cost (1) of $1.66 per payable pound sold."
But in the very same paragraph one of the NR CS.to announces that it's made a $13.4m net loss in the quarter and that's exactly the kind of thing that confuses people, so easy to go "Huh! These guys produce copper at U$1.51/lb....and copper's selling for plenty over U$2/lb these days...but they posted a 3c per share LOSS? Huh?". So your humble scribe believes that a little explanation is in order and to get a handle on things, we need to go to the regulatory filings for the Q2 period rather than the puffy NR. Suddenly you'll see there are eight ways (seriously) to cut and slice "cash cost per pound copper" and they are the following:
  • C1 for production
  • C1 for sales
  • AISC for production
  • AISC for sales
  • All-In for production
  • All-In for sales
  • Fully-Loaded All-In for production
  • Fully-Loaded All-In for sales
Sheesh, what a mess. Confused yet? Yeah me too once upon a time so to get to a place where it makes a little more sense, let's first look at what those cash cost terms mean.

a) "production versus sales". That's fairly straightforward, as the amount a company produces is never the same as the amount it sells. To get a handle on why the company recorded a loss or a profit in any given quarter what it sells is more important, therefore I'm going with those sales number. 

b) "C1 cash costs": These are the costs of production at the mine, plus the treatment and selling costs of its product minus any by-product metal credits. This is the baseline cost of production if you like and it's also the lowest, so naturally a mining company will tend to highlight this one even though there are A LOT of other costs it needs to cover in order to do business (as you're about to see).

c) "AISC": This stands for "All-In Sustaining Costs" and it sounds like a more comprehensive number just from the title, but in fact it would be better understood as "Half-In" rather than "All-In". To get AISC, you start with the C1 costs and then add a whole bunch of things including (deep breath) "NSR royalties, production phase capitalized stripping, capitalized brownfield exploration, sustaining capital, accretion of reclamation obligation, amortization of reclamation asset, corporate G&A, share-based compensation, greenfield exploration". Yup, all those were missing from the "cash costs" number that CS.to preferred to highlight in its NR. Funny dat, innit?

d) "All-In costs": But wait! There's more! AISC isn't the end of it all because to get to what they call "all-in costs" you then need to add the company's development costs at its assets. In the case of CS.to you add in the money spent at Pinto Valley and Santo Domingo.

e) "Fully-Loaded All-In Costs": But even the previous "all-in" is a misnomer, because it's not everything a company needs to pay in order to stay in business. In the specific case of CS.to it has a crapload of debt on board (one of the basic reasons it trades at 0.3X book, the other reason being its huge overvaluation of Santo Domingo) and it has to pay interest on that. And of course, it needs to pay income tax and sorry, if you don't include tax payments in your costs parameters you'll never get to a real world number. And that's "Fully-Loaded All-In Costs", it's "All-In" costs plus interest and tax.

Finally, by scraping through the quarterly filing small-print we find a number that's a realistic reflection of the costs CS.to incurs in order to be a copper miner. And when we stick those four cash cost calculations in a chart and compare them to the price of copper this evening...

 NB: Please note the cut-down Y-axis

 ...we get a better visual on why this company is a loss-making miner.

Geology is difficult

A. Reader who will remain nameless sends in this pearl of wisdom to IKN Nerve Centre, rescued from the depths of the Rye Patch (RPM.v) Florida Canyon PEA dated June 2016 (to be exact, from page 88). Your humble scribe adds in the bold type:

"The lithology in the Florida Canyon deposit consists of a complex deltaic sequence of the Grass Valley Formation. The rocks are a complex and gradational sequence of silty and sandy rocks within dominantly argillites. The original lithology probably controlled the plasticity of the rocks and determined the degree of fracturing, which is the dominant ore control. Grade, however, is the more reliable and quantifiable method of defining the ore zones.”

Who knew?

To clear up the IKN position on Continental Gold (CNL.to)

As today's news from CNL has woken the subject up again and mails from non-subscribers are beginning to come in (two so far, time to nip in the bud) I'd like to make it clear, once and for all, that I fully believe Continental Gold (CNL.to) will get its environmental impact permit (EIA) awarded in 4q16, or 1q17 at the latest. And as subscribers know, that's the reason I've been long the stock since May this year and with a cost average purchase of $2.68. 

However the above doesn't change my views on Mr. Ari Sussman, a person who should have been locked up in jail many years ago. It's just capitalism, it's nothing personal.

UPDATE: No more mails please, as the sense of entitlement now being displayed by the mouthbreather end of blog readers is deeply impressive. Oh noes! Otto told his paying subscribers about a winning trade without mentioning it here! Poor little blog reader missed out, oooh that nasty Otto person! Mailers on this subject are hereby referred to the reply given in the case of Arkell versus Pressdram.

McEwen Mining (MUX): Look into my eyes...you are tired...you are feeling sleepy...sleep...

I have come to the conclusion, after staring hard at its 2q16 production numbers, that the only logical explanation as to how McEwen Mining (MUX) can command a one billion dollar market cap is mass hypnosis. Just one set of numbers, those of its 100% owned El Gallo mine. Here's the average gold grade and even though it dropped significantly in 2q16, it's still way above the M+I resource grade of 1.54 g/t.


And as MUX has guided El Gallo for 55k oz Au in 2016, that means it's going to return a couple of 10k oz quarters in what remains of the year.


And that makes sense if you accept the fact that MUX high-graded its mine for a couple of years to get itself out of a tight spot, but really it's just a 40k oz per year asset. And, give or take, El Gallo is half the NAV of this company! I feel like I'm taking crazy pills.

Daniel Ameduri's paychecks (a re-post)

From last weekend and by popular demand, a re-post. The main reason I'm running this script again is to make the Canadian sellside boothboys green with envy. Sic transit gloria mundi muthafkkaz.

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Thanks to reader MB for the heads up on this, the disclosure section of the latest promotional pump bullshit from Daniel Ameduri and his pumphouse, Future Money Trends. You'll find it in tiny tiny lettering in light blue ink at the bottom, but when you take a good look at the contents it's pretty impressive stuff. 

To give you an idea, just the cash dollars add up to U$1.467m, that's aside from the warrants, options, shares and other derivatives. Here are some of the highlights on the cash he makes from promoting these worthless pieces of crap to idiot greenhorns:



Future Money Trends LLC has been compensated one hundred and seventy thousand dollars for a one week marketing program, paid for by K92 Mining.

We were previously compensated one hundred and seventy thousand for a two week program that has since expired. We have also been compensated one hundred and forty five thousand options by the company for a six month video advertisement campaign.

We are also actively marketing First Majestic Silver, and received twenty five thousand options and up to eighteen thousand dollars.

We are also actively marketing First Mining Finance, and have received six hundred thousand options, and and up to one hundred and seven thousand dollars.

We are also actively marketing Nevada Exploration, and have received one hundred thousand options, and and up to two hundred and thirty seven thousand dollars.

We are also actively marketing Golden Arrow Resources, and have been compensated one hundred and eighty one thousand dollars.

We have previously been compensated by Brazil Resources, Auryn Resources, and MX Gold Corp., including fifty thousand options from Brazil Resources and one hundred thousand options from MX Gold Corp.

We own shares on both the public market and via warrants received through private placements in First Mining Finance, First Majestic Silver, K92 Mining, Golden Arrow Resources, MX Gold Corp., and Brazil Resources.

Gold Standard Media (GSM) is currently marketing Brazil Resources, GSM is a media company with the same members as FMT. We have received up to one hundred thousand dollars for our current program paid for by the company.

GSM is currently marketing K92 Mining,  we have received two hundred thousand dollars for our current program paid for by the company.

GSM is currently marketing First Mining Finance  we have received one hundred and sixty thousand dollars for our current program paid for by the company.

Wealth Research Group (WRG) is currently marketing K92 Mining, FMT has a majority ownership in WRG. WRG has been compensated forty thousand dollars for a two day investor awareness campaign.

WRG has been compensated by First Mining Finance forty thousand dollars for a two day investor awareness campaign.

FMT and its management may benefit from any increase in the share price of the profiled companies and hold the right to sell the shares bought at any given time including shortly after the release of the companies profile. When it comes to buying or selling shares.  Please assume we are buying and/or selling before, during and/or after publication of the discussed Company.  FMT will not advise as to when it decides to buy or sell and does not and will not offer any opinion as to when others should sell; each investor must make that decision based on his or her judgment of the market.
But to give Ameduri credit, he saves the best line until right at the very end of his mailer.

 "Never base any decision off of our website or emails."

On that I can only agree.

UPDATE: Reader C sends in some visual commentary on the contents of this post:


Notice how words are superfluous sometimes? Nicely done, C.

The main question remaining around the Dynasty Metals & Mining (DMM.to) trainwreck

Will Ian Telfer buy Jerusalem from DMM, or will he buy it from Vertex? Because if he gets it from DMM he's going to want a rock bottom bargain price. Either way, think it through long enough and you'll see that the only remaining issue is when, and not if, shareholders get sexually intercoursed. 

Tahoe Resources (TAHO) (THO.to)

Interesting to hear that John Doody has called sell on TAHO. Even more interesting to read the reasoning behind the call, because he's 100% correct. That includes the non-responsive IR department.

A ticket I would vote for

Michelle Obama and Tim Kaine.

Seriously, is Hillary vs Donald really the best that the most powerful and influential country in the world can come up with? Asshole vs asshole? Sheesh.

7/25/16

Regarding the need to combat anti-mining propaganda bullshit (from IKN376)

Here's a small part of IKN376 out last night, one of the minor pieces in the 'Regional Politics' section but it's also the type of thing that I think needs more eyes on it and more attention devoted by the mining industry, in order to demonstrate to the ublic at large that the treehugger end of the debate are just as likely to use BS in order to influence public opinion. So here you go:

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Mexico: Anti-mining propaganda

This is the type of thing that drives me up the wall, not just because of its misinformation content but also because the mining industry never makes a concerted effort of rebuttal against the  NGOs and knee-jerk treehuggers peddling this crap. Last week in Mexico, during a presentation by a group of anti-mining NGOs for a (13) “Manual for the defence of communities against the impact of mining in Mexico” (in other words, an instruction book on how to stop mining companies in your community), one of the presenters, a lawyer from Greenpeace, said the following (translation of direct quote):



“At the end of 2014 a total of 25,267 mining concessions were registered (in Mexico) which, according to the Mexican Geological Service, cover a concessioned surface area of nearly 26 million hectares. This represents around 12.7% of the national territory”.



And how was this anti-mine coordination meeting reported by the press? Here are (translated) four examples of the headlines (and there were many more, play with Google and find out for yourself) (14) (15) (16) (17):



“NGOs: 12.7% Of Mexico’s Terrain Is Concessioned to Mining Companies”



“Mining Companies Consume Mexico: They Already Have 12% of the Territory”



“Mexican Mining Companies Already Have As Much Terrain (12%) As The Country’s Nature Reserves”



“Mining Companies Awarded 12.7% of the Nation’s Land”



Of those four only the first one is in any way accurate, the others use inflammatory language and are deliberately trying to create the false impression that mining companies “own” 12.7% of Mexico. As you and I know (or you damned well should by now) the reality is nothing of the sort and owning a mining concession is a million miles from “owning” the land. So why doesn’t the mining industry tackle this head on, because it’s both a way into teaching a wider audience about how it works and a way to show them the BS they’re being fed by the anti-mining industry? It would be simple stuff too:



1)      Explain what a concession is

2)      Explain how you get one and what you need to do to keep one

3)      Most importantly, explain why a mining company will own concessions that are much MUCH larger than the mine therein contained. This last point is the one that’s most played upon by the anti-mining screechers and it just by doing this, your average person would see the hypocrisy in the Greenpeace propaganda.



And of course it isn’t just a tactic used in Mexico, I come across this “Mining owns X% of my country! How dare they!” argument all the time, with variants such as “Mining Company XYZ owns a concession that includes a graveyard! They’re going to dig up my relatives!” and all sorts of others. The world of mining is hardly perfect and there are still some companies that give it a bad name, but it’s long past the time that the good guys need to be painted as some sort of gang of land-rapists and property usurpers.

7/24/16

The IKN Weekly, out now



IKN376 has just been sent to subscribers.Turn off your mind, relax and float down stream. It is not dying, it is not dying.

A download link for the Clinton Cash video (and an alternate Youtube, too)

The 'Clinton Cash' youtube and link we stuck on the blog last night has been scrubbed, I hear. Does Frank Giustra have shares in Google or something? He sure comes out looking grubby and shady in the documentary, that's for sure.

Anyway, you can still watch Clinton Cash by downloading it from this link. Worth your time, I know it's a hit piece that cherry-picks its data and hardly the most balanced piece of documentary making ever created, but it's done very well and when it comes to the Clintons, there are plenty of cherries to pick.

UPDATE: It's also on a Youtube here. Though you never know, this one may be scrubbed soon too.