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3/26/15

Tonight's Kitco screenshot

Including your author's reply to its intrusive pop-up survey:


All the sexual abuse of South American children by U.S. military personnel that's fit to print

Greg Weeks asks a good question over at his blog today:


Yup that's a very, very good question. Click though and read more, including the F.A.I.R. report on the total lack of coverage of this subject by US media.

IKN adds an observation: Since the story was broken in English by Colombia Reports on Monday (kudos to Adriaan Alsema) and your humble scribe pointed your eyes its way via this post, there have been dozens of hits from many different US Defense Department sites, including Washington DC head offices and forts scattered all over the USA. They've been constant all week and it's the first time ever that the US military have cared so much about this backwater site.

Something to hide, officer? Something you don't want the world to read there, soldier?

PS: To repeat and underscore: This important story of U.S military raping at least 54 Colombians between the years 2003 and 2007 including underage girls (which is getting plenty of coverage down this end of the Americas landmass) was broken by Colombia Reports in this note on Monday. The site and its editor, Adriaan Alsema deserves recognition and respect for the job well done.

UPDATE: And as if by magic...



...here they come again. And again...



...

Is your gold mining stock pick special? A handy guide

And it's not a difficult question to answer:


  • Gold goes up and your mining stock goes up: IT'S NOT SPECIAL
  • Gold goes down and your mining stock goes down: IT'S NOT SPECIAL
  • Gold goes down and your mining stock goes up: IT'S SPECIAL
  • Gold goes up and your mining stock goes down: IT'S SPECIAL (but sadly, not in a good way)

Any further questions?

A Flash update...

...has been sent to subscribers, pre-bell Thursday morning. Selling something.

Lake Shore Gold (LSG.to) 4q14 results

Apart from a financial charge taken that turned a projected small profit into an actual small loss for 4q14, this was your box standard in-line quarter. You can sum up 2015 guidance as "Hey, you see what we did in 2014? We're doing the same in 2015", so if you're looking for price catalysts it's either that new fangled 144 zone or the gold price. The value purchase isn't at this current price level (and I don't own personally) it's more around the 90c area, but if you like your gold miners small and solid there are worse out there. A well-run miner that got its act together nicely in 2014. NR here

Chart of the day is...

...gold, dailies:



Well, here we are again.

3/25/15

Gold Resource Corp (GORO): Got gold missing?

We start here, with a basic earnings overview chart for GORO that shows the quarterly evolution for revenues, costs and the resulting gross profit for the last two years:



See that big drop in revenues in 3q14? Back when it announced its 3q14 numbers, here's how GORO explained the revenues shortfall in its news release (IKN highlighting in red):
“The Company delivered weaker than expected quarterly operating results with production levels approximately 24% lower in the quarter compared to the quarterly average of the first half of 2014,” stated Gold Resource Corporation’s CEO and President, Mr. Jason Reid. “The Company has implemented new mine management in 2 response to these unsatisfactory results and believes that fourth quarter production can rebound, which puts the lower range of the Company’s 2014 Outlook within reach. We stockpiled much of our high-grade gold and silver concentrates produced during the quarter in preparation for pouring Doré bars in our new Doré facility, which we began commissioning at the end of the quarter and which increased our unsold inventories. We recorded a $(0.03) per share loss which was contributed by unsold concentrate inventory as a result of stockpiling the high-grade concentrates for the Doré facility process. These inventoried ounces are planned to be processed and sold during the fourth quarter as Doré bars
And indeed, if we check out the evolution of the inventories of concentrates as reported per quarter by GORO, we see a pattern that matches the statement. For five previous quarters to 2q14 concentrates held in inventory were at or under $1m. Then in 3q14 the number jumped to $3.4m. We can then see that GORO was apparently true to its word about processing the extra in 4q14 because the number dropped back most (though not all) of the way, with 4q14 filing $1.481m in inventory of concentrates.


If we then look to the production and sales of silver, the pattern also matches.



Above you see how production tends to be higher than sales, which is normal enough. We also see how in 3q14, production and sales of silver dropped sharply. Then finally in 4q14 production rebounded but in this quarter, sales actually managed to outstrip production. That's just what you'd expect from a company that was working through its unsold inventory during the quarter.

However, when we get to gold something strange happens:


Again we see how gold production is typically higher than gold sales (to cut a long story short, GORO has middlemen to pay so that's understandable). We also see how in 3q14 production dropped sharply and sales even more so. That matches its explanation in the 3q14 filings about the plans to run it via the new doré circuit and also matches the inventory spike.

BUT! Come 4q14 we see two things that don't fit at all. Firstly, production fails to recover to previous levels. Secondly (and most importantly) sales are still lagging way behind, even more than in a typical quarter in fact, when by all rights we should have seen the extra unsold gold from 3q14 make up the gap and even outstrip the production total, in the same way as we saw in the silver table above. If you asked me for a best guess, I'd say there were at least 3,000 Au ounces of negative reconciliation in the numbers published by GORO, maybe even 4k oz Au.

Somewhere else you see the gap in the numbers is when considering the revenues numbers filed by GORO per quarter. This chart shows the filed revenues in the darker green bars. It also shows "calculated revenues" and that's something that needs a line or three of explanation


In its quarterly filings and thanks to the US markets' system getting more disclosure out of companies than the Toronto guys, GORO gives us the amount of each metal sold as well as the realized price for each metal. From those data it's easy enough to calculate a raw revenue total for each metal, then add 'em up. That little sum gives you the "calculated revenues" light green bar you see in that above chart.

If you stare at the chart a bit you see that the "real revs" number is typically slightly lower than the "calc revs" number, and again that's okay by me as long as it's a typical trend. But again you see in 3q14 a big difference between the two numbers in 3q14 (in fact a 21.4% difference, when the average for the previous ten quarters was 9.6%). And again where you might expect a better than normal revenues number reported for 4q14 as GORO reports its catch-up sales, there's nothing to show.

And by the way of a slight sidebar, one of the weirdest things about this company these days is how it gets more of its revenue from the zinc, lead and copper base metals credits than it does from silver or gold. This chart (based on the "calculated revs" numbers) shows how Gold Resource Corp has only ever been "gold" in name, as silver's always been its greatest revenue generator. But even the cash from Ag was surpassed in 4q14 by the Zn/Pb/Cu base metals combo. Gold the metal was a mere 22% of its revenue source in Q4.



There are other charts I could show you but at some point it gets to offering up too much information. The suspiciously low realized price for gold in 4q14. The costs pop in 4q14. Etc etc. The bottom line story here is the one that counts, that of the apparently missing revenues for gold at GORO in 4q14.
  • Inventories went up in 3q14, then down again in 4q14.
  • Silver sales dropped in 3q14, then made up for the quarter with extra sales in 4q14.
  • But gold sales didn't. For reasons known only GORO insiders, the amount of gold sold is much less than it should have been, even accounting for the poor Au production in the six month period.


Hey dudes, mislaid some gold?

The Red Eagle (RD.v) news today

In IKN306 this weekend (well, Monday evening this time) I made mention of Red Eagle Mining (RD.v) and its Colombia gold project for what (I think) was the first time, mainly due to the permits it had received from the Colombian government. The very last line of that brief-ish note was...

"If the capex arrives and it's equity-friendly 
it may become a trade, but not before that."

...so today's news is more than interesting, because it's a massive step to getting the gig fully funded. In ballpark terms and what we'll be left with, assuming the side-by-side $15m placement happens correctly, is a company with around 140m shares out and all the cash it needs (approx $80m, which was my own best guess in IKN306) to build a mine. We've always got to be wary of the details in financing deals (there be devils a-lurkin') but this summary from today's NR is what we know so far:

The Credit Facility includes the following key terms:

  • Draw down of the Credit Facility is subject to Red Eagle Mining completing an additional equity financing of at least US $15,000,000 ("Equity Financing");
  • The Credit Facility will have a five year term with a principal holiday and capitalized interest for up to 18 months from the first advance;
  • Advances under the Credit Facility will bear interest at LIBOR +7.5%;
  • A Production Payment of US $30 per ounce produced is payable on the first 405,000 ounces of gold produced;
  • Granting of 5,000,000 warrants to purchase Shares to Orion exercisable for a five year term at a strike price determined in the context of the Equity Financing; and
  • Amounts outstanding under the Credit Facility will be secured against all of Red Eagle Mining's property and assets.

Interest on secured debt plus "production payment" plus juicy warrants, clearly the money people at Orion (the ex-Red Kite people) aren't giving their cash away here, as that's a financier-friendly deal if ever I saw one. What we the grunts at the bottom of the food chain need to decide is whether there's enough love left once the big money has been paid off to buy the stock at 30c and on that one I simply don't know yet, there's numberwork to do. But you can't fault RD.v for moving forward, something that hundreds of juniors have abjectly failed to do in the last few years.