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5/3/08

Microsoft walking away from the Yahoo deal, and how it affects Latin America

It doesn't matter in the slightest. But watch out for the madness of watching a junior copper play in Peru sell off on Monday because one dude said $33 and another dude said $35 about a US internet stock.

Tomorrow's vote in Santa Cruz, Bolivia

When those that tentatively support the separatist movement in Santa Cruz, Bolivia make their case, they tend to use words like "totalitarian", "anti-american" and (of course) "Chavez" in their articles. What they don't mention is the racism so apparent to anyone who has spent more than 48 hours in the region (e.g. Otto). The basic fact is that these people are screaming racists, and are trying to tear the country apart because they do not like the colour of President Morales' skin. Have a few beers in a Santa Cruz pub with the good ol' boys, and before long the conversation is peppered with words to describe the indigenous population and President Morales that are not going to appear in this blog ever.

Santa Cruz wants to be ruled by white racists because they are also white racists. A plain, brutal fact. And every single argument they use is built on this racism. They do not want to share the wealth of the region with their nation because of this. They refuse to acknowledge the Presidential mandate because of this. They rally the people in the streets under a white supremacist flag, etc etc etc.

Tomorrow's vote in Bolivia may be a difficult moment for the country, and it may also be difficult for the region. The white leaders of Santa Cruz are using phrases like "freedom from the llama-herder turned president" and union leaders in Morales supporting zones are threatening to destroy ballot boxes rather than let the vote they consider "an illegal survey" take place. The indigenous populations are turning to the tactic of abstention to take credence away from the referendum. The national government has apparently withdrawn army security from the voting sites. Opinion polls suggest the white racist voters will win 70% to 75% of the vote.

Bottom line: I hope I'm wrong, and I hope tomorrow goes more smoothly than I imagine no matter what the outcome. In the longer-run, the shrill cries for autonomy are likely to fade as a little realism comes into play. Richard Lapper of the London FT is not my favourite journalist, but he wrote a good note last week that shows how the game is likely to unfold once things have calmed down.

UPDATE: I've just checked over at my favourite snark site borev.net, and not only did they beat me to the story and tell it better than than me, they also found this link that gives you the real feel for Santa Cruz. Highly recommended for those who thought apartheid finished with the Mandela presidency.

sneakydeaky quiztime (VIII)

It time for.....................

(click to enlarge)

SNEAKYDEAKY QUIZTIME VIII

Mai oui, mesdames et messieurs, time to stretch the brain cells and win big. Today's edition is all about presidential popularity. The first list is a whole buncha LatAm prezzes (in alphabetical order), and the second list is percentage approvals of those presidents (in ascending order), as recording by a reputable polling company very recently. Your job is simple; which person gets which approval rating?

This week's prize makes it all worthwhile, too. Get top score and you'll be walking away with A WEEK FOR TWO IN THE COLOMBIAN JUNGLE, which may turn into longer than a week depending on who you meet while you're in there. So on with the show!!

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Bachelet (Chile)
Calderon (Mexico)
Chavez (Venezuela)
Correa (Ecuador)
Fernandez de Kirchner (Argentina)
Garcia (Peru)
Lula (Brazil)
Morales (Bolivia)
Tabare (Uruguay)
Uribe (Colombia)

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34% (now 28%, according to latest poll)
45%
46%
47% (now 45% according to latest poll)
51%
55%
56%
61%
62%
84%

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So match the name to the approval rating, and send in your guesses to

otto.rock1 (AT) gmail (DOT) com

And then watch out for the answers, published as always on Wednesday. So until then...

Toodle Pip!

5/2/08

Gold Reserve (GRZ) gets the support of locals in Venezuela

I think this will be my last post on Gold Reserve (GRZ) for the moment. In the local Venezuelan newspaper "El Diario del Cuyuni" today, there was an interesting news story about GRZ, which gives me plenty of reason to repeat my recommendation of "spec buy" on this stock right now. Here's the link to the story which is also pasted underneath, and here goes with my translation of it.

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The representatives of the Creole and Indigenous communities of the parish of San Isidro in the municipality of Sifontes, Alcides Herrera, Daniel Gomez, Eligio Velasquez, Idalys Jimenez and Edwin Casiano, have requested the Minister of Popular Power of the Environment (MARN) Yubiri Ortega and President Hugo Chavez to complete the initiation act for the mining company Brisas del Cuyuni.*


According to Herrera they have been waiting for a reply since October 30th last year. They emphasized that by starting-up the company they will be able to have the true environmental and economic development that is needed in the region.
They also emphasized that the illegal small mining will continue to cause severe environmental damage if Brisas de Cuyuni is not allowed to start.

The community delegates stated that the National Government has always proposed the modernization of mining and its dependent industries, and it must also understand that the company (Brisas del Cuyuni) has shown that the project is feasible and it can operate to the benefit of the country's wildlife and all its inhabitants.


The support for Brisas de Cuyuni by the representatives comes because it is the only company that has all the necessary requisites to reach and comply with environmental preservation targets, and that the company gives priority to this aspect, the delegates stated.


Also, the project already has its technical, financial and environmental feasibility study correctly approved by the Ministry of Mines and was also granted its Environmental and Sociocultural Impact Permit by MARN authorities and by the Ministry of Basic Industries and Mines (MIBAM).


By granting the long-awaited initiation of the project, 7,000 direct jobs and 19,000 indirect jobs could be generated, as well as contributing to the general development of the zone.

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Which is pretty interesting to see, methinks. The locals are out there supporting the GRZ project and want to see it start as soon as possible. Yet again, it's the locals who know what's good for them, and in passing they also make it clear that rather than harm it, the GRZ project would benefit the local environment, this because the polluting small miners would have another way of making ends meet. Also, it's interesting how the locals mention that they ONLY support the GRZ project, separating it somewhat from Las Cristinas and Crystallex, it seems.

All in all, I think my $2.13 purchase yesterday is a pretty good bet with the speculative part of the portfolio. It's already in the positive column, there seems to be little downside (see previous posts on residual asset values) and there may be a big upside if the Venezuelan environment authorities see a bit of sense and allow GRZ to go ahead at Brisas.

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Los representantes de las Comunidades Indígenas y Criollos, de la parroquia San Isidro, municipio Sifontes, Alcides Herrera, Daniel Gómez, Eligio Velásquez, Idalys Jiménez y Edwin Casiano, solicitaron a la ministra Para el Poder Popular del Ambiente (MARN), Yubirí Ortega y al presidente Chávez, concretar el acta de inicio de la compañía minera Brisas del Cuyuní.

De acuerdo a Herrera, desde el 30 de octubre del pasado año, hasta los momentos no han recibido respuesta, aún cuando, reconocieron, que será a través del arranque de la compañía cuando se podrá tener el verdadero desarrollo ambiental y económico que necesita la zona.

Hicieron hincapié en que la pequeña minería ilegal seguirá ocasionando daños severos al medio ambiente de no darse inicio a Brisas del Cuyuní.

Los delegados de la comunidad señalaron que si bien el Gobierno Nacional planteaba siempre la reconversión minera y de enlaces, debía entender también que con la compañía se demostrará que es factible este proyecto y que puede ponerse en práctica para el beneficio de la naturaleza, del país y de todos sus habitantes.

El apoyo a Brisas del Cuyuní por parte de los representantes surge por ser la única compañía que cuenta con todos los requisitos necesarios para alcanzar y cumplir las metas de preservación del medio ambiente, ya que la empresa le da prioridad a este aspecto, mencionaron.

Y es que el proyecto cuenta con su Estudio de Factibilidad Técnico, Financiero y Ambiental, debidamente aprobado por el Ministerio de Minas, y le fue consignado ante las autoridades del MARN y del Ministerio de Industrias Básicas y Minería (Mibam), el Estudio de Impacto Ambiental y Sociocultural.

De darse el tan esperado arranque del proyecto, podrían generarse alrededor de siete mil empleos directos y 19 mil indirectos, además de contribuir con el desarrollo general de la zona


*the local GRZ subsidiary

Ecuador's national constitutional assembly is falling into the old trap of socialist dogma and failing its people

Y'know, I was fairly optimistic when it all started. There's not much doubt that Ecuador's rulers up to now have been a bunch of corrupt oligarchs that were bleeding the country dry. So when the country voted last year to write a new constitution and then voted on the 130 people to represent them in the process, it all looked like a model of democracy. Naive, trusting little Otto thought Ecuadorians would finally get a decent chance to make something in their own country instead of having to emigrate to get a life.

Unsurprisingly, as the corrupts spring-cleaning was lead by Rafael Correa his party gained the majority in the Constitutional Assembly. But since then his Alianza Pais party (which itself is a necessary amalgam of centre-left to very left groups) has fallen into the classic trap of dogmatic socialists who suddenly find themselves with real power.

Instead of actually thinking about what the country needs in a pragmatic style, the AP ruled Assembly has descended into a bunch of navel-gazing busybodies who somehow think they can put the world to rights just by publishing a mandate here and a declaration there. One classic was the Mining Mandate passed some 4 weeks ago. The moderate voices were drowned out by the reactionary hard left who finally had a chance to "get some revenge" (as one of the assembly members so candidly stated) on the ruling classes and those horrible, horrible foreigners. The fact that the very people the Assembly thinks it is helping now want the Mandate revoked because it is ruining their livelihoods goes way over the principle-filled idiots who think they rule the country. These people are no better than the corrupt bourgeois that has raped the poor of Ecuador in the previous decades.

Yesterday showed up another fine example of the Assembly's nature. With a tight deadline in place to decide upon the contents of the draft constitution, the Assembly ignored its own rules about non-interference in foreign countries and debated on then passed a resolution supporting Evo Morales and condemning the (so-called) Santa Cruz independence vote due this weekend. As it happens, I think the people of Santa Cruz in Bolivia are about to make a very big mistake and a united Bolivia is the only way they can move forward, but that's not the point here. Ecuador's Assembly is so bothered about putting their Socialist world to rights that they've forgotten what they were elected to do.....help Ecuador. And by the way, yesterday ruling came at the same time they were supposed to be debating the triviality of the new national tax laws.

It's pathetic, hand-wringing left-wing politicking of the worst sort. These people have been given the privilege (yes...the privilege) of making things right, and all they want to do is complain about what's wrong. A three-toed sloth has more leadership ability.

What started as a real hope for positive change in Ecuador is destined to cause more conflict than ever before. The hated oligarchy must be laughing its head off at them all, and sat there in Guayaquil counting off the days before they get their grubby hands back to power.

Brazil: Let the feeding frenzy begin.....


.........but be smart and take the short term profits.

There will be plenty of time to position yourself for the long term once the S&P investment grade upgrade starts to make a real impact on the Brazilian economy. However the chances of hot money sloshing in today are pretty high, with articles such as this one linked here predicting 25% index gains for 2008 fuelling the sheep money fire (remember the ADRs traded in New York yesterday but the Brazilian markets were closed for May Day).

So where are the trades? Let's assume you don't have access to the Brazilian market directly and want to play the ADR stocks; here are a few to consider, with their simple 1 year price charts to give you a bit more context (click to enlarge):

ERJ: the Embraer ADR. This one has lagged the market somewhat this year, despite being a great Brazilian success story and an order book stacked up in the billions of dollars.
Expansions in workforce have started getting the planes out to customers more quickly recently. It's something of a national jewel, this Embraer thing.

VIV: Mobile phone play Vivo jumped 6.2% yesterday, but there's plenty more where that came from.
Sector consolidation in Brazil is making the competition less cut-throat, and VIV should begin to perform well on its bottom line. As the North loves a growth stock in a growth sector, I expect Vivo to be a hot money target.

CIG: Cemig is a Brazilian cement play that popped 2% yesterday, but it still under its 52 wk highs. At $21 now, if this breaks $23 it'll be off to the races. Cement stocks become much less boring when they make you a heap of profit.

SBS: Sao Paolo water company SBS is sitting here at a great, great price. Dividend yield is attractive, and I have its forward PE pegged at 8X presently.
That could easily expand to 12X now that investment grade is here. SBS is probably my top Brazil pick from here, but at the same time may not get the first wave of hot money washing over it.

ITU: Banco Itau got a big pop on strong volume yesterday on the investment grade news, and will be one of the first in line to receive hot money when Sao Paolo opens tomorrow.
It may be close to fully priced on fundamentals right now, but there may well be a lack of logic in Brazilian trading over the next couple of sessions. Trade it on a momentum basis.

GGB: Gerdau Steel has resisted all downgrades on its climb to its current all time high. With a PE of 11.5X right now, there's more in the tank now that Brazil is "officially a serious country"*.

Again, don't be afraid to take a short term profit on GGB, but be thinking about a longer term position afterwards.

So there are six ways to play the investment grade party. You'll notice that PBR and RIO aren't on the list. This because they're already 'world class' investment risks and won't be first in line to get "the pop" from this news. Another way to play Brazil is the useful ETF play, EWZ.
Finally, the Brazilian bonds may have tightened considerably these last 48 hours, but with the high interest now on offer to more institutional money, they will still have plenty of buyers on Friday. Another good option to consider.

I hope this little overview helps in its own small way. However I'm sure you'll need to do more DD on any or all of these before making a good investment decision.

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UPDATE: It's been pointed out to me that CIG (Cemig) is not a cement play, in fact it's a Brazil energy play. Quite right too, and thank you "chinstrap" for point that out. A mistake on my part, and I'll blame writing late at night for it. Any way around, a basic error. Sorry dudes...will try harder next time. And as a little autoflagellation I won't correct the original text (which was corrected on seeking alpha, by the way).

*Charles de Gaulle will be turning in his grave

5/1/08

Ecuador: The people that really matter want mining in the country

On 22nd April, the President of the Shuar Federation of Zamora-Chinchipe wrote a letter to Alberto Acosta, President of the Nation Assembly that decreed all mining should stop for the next 180 days while the new mining law is drafted.

Yours truly has obtained a copy of that letter, and here it is translated into English below. The copy i was given is a PDF scan of a photocopy so I can't peg it up here. However I'd be glad to send you the original via mail if you want a look*.

Very interesting to see how the people that really matter, the Shuar indigenous population living in the mining regions, SUPPORT the responsible miners who are working the area. Anyway...no more blab from me, let's hear what the people that matter say:

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Quito, 22 April 2008

Dear Economist Alberto Acosta,

As leader of the Zamora Chinchipe Shuar Federation and representing around 6000 Shuar, I am deeply worried about the recent approval of the Mining Mandate of the National Constitutional Assembly. This Mandate that you supported and voted in favour of has caused a serious impact in the well-being of the Shuar people and their families in the province of Zamora Chinchipe.

It is possible that you are not aware that our people have worked for nearly seven years with responsible mining companies, who through their investments have created over a thousand direct and indirect jobs in our region. These jobs have been put at risk by the National Assembly through the Mining Mandate, which has unilaterally suspended all medium and large scale mining projects in Ecuador, without taking into account the social, cultural and economic impact to the Shuar people.

It is incredible for our people that over two billion dollars in investments, nearly ten thousand well paid jobs and important cultural, environmental and social projects have been suspended by the Elected Assembly. It is terrible that the National Assembly attacks our jobs and takes them away from us without considering the suffering of our people caused by the price rises in bread, milk, flour, rice and other basic goods in our region.

Our people believes that the National Assembly, by approving the Mining Mandate, has ignored our indigenous rights as direct beneficiaries of these mining projects and above all our right to work, to maintain our families united and a better standard of living as an indigenous people.

Mr. Acosta, please take into account that the Shuar Federation of Zamora Chinchipe fully supports the government of our President Rafael Correa and his vision of responsible mining as a tool for the development and prosperity of the Ecuadorian people. We would also like to inform you that the Shuar people of our region fully support responsible mining and the employment that this mining investment brings to our region.

Finally, we ask for the immediate retraction of the Mining Mandate, and also that the Constitutional Assembly quickly brings to justice those small groups that wish to stop responsible development and to those who continue taking advantage of the crime that is indigenous poverty.

Yours sincerely,

(SIGNATURE)

Rubén Naichap

President

Shuar Federation of Zamora Chinchipe

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* otto.rock1 (AT) gmail (DOT) com

The Economist on Argentina today: I feel old all of a sudden


The Economist has just published what can only be described as a no-holds barred attack piece on Argentina under Klishtina. Here's the link, and I thoroughly recommend it to get a grasp of what's going on over there.

As it happens, I totally agree with The Economist's line here (bar perhaps the 6% margin for farmers they mention...too simplistic and much depends on the individual farm business.. see the charts in this post for a bit of background on that), and that's about the first time I've ever said that about its LatAm coverage.

I'm feeling a little weird, dudes. First I agree with the IMF and now The Economist...all in the space of a week. Sign of ageing, perhaps?

GRZ is a buy here

GRZ is currently sitting at U$2.13, down 20+%. The news last night that the Environment Ministry were planning to take away the company's Environmental permit has really shaken the share price.

Well it should....I've been trying to thinking of a case where a Environmental Impact Permit is granted and then taken away for no apparent reason less than a year later, and I cannot think of one. The main problem with this is the total lack of trust that can be placed in Venezuelan authorities now. I mean, even if the final decision goes with GRZ, how much trust can you place in the future of this project when there's a construction cost of $731m that needs to be funded by someone unafraid of the property being snatched away at any given moment (for the latest example see SIDOR, though to be fair all nationalizations in Venezuela have been compensated by the state).

So why is GRZ a buy? Well, if you look at the latest SEC filings, you'll see they have $100m in cash and other assets of around $30m. The company's burn rate has always been low, so there's little worry about that cash figure dropping significantly while the project is on hold.

With 55.06m shares outstanding, this immediately gives GRZ a residual value of U$2.36.

Add to this the $300m that GRZ has spent in developing the Brisas project. In the event of the property being taken away, GRZ would have a very strong case for either an agreed or arbitrated compensation package for at least part of that cash. So let's throw in $100m as a final settlement figure (as a totally wild guess, I must say...could be more, could be less), which would add another $1.82 to the share price.

So whatever happens here, GRZ at $2.13 is a buy. Those selling haven't done their sums yet. This is the place worth buying that I mentioned yesterday, but if you pick some up be nimble, be prepared to take profits and above all don't bet the farm.

UPDATE: I've been asked in a mail if the same trading plan applies to KRY. The answer is "no". KRY has cash at bank after its last placement, and some assets, esp in the form mothballed mining equipment. But it has a heap of debt , too, and you'd have to line up behind a whole queue of creditors before you got yours. Maybe worth $0.35 of so. So the answer is: GRZ is the play, here. At this price GRZ downside risk is negligable...can't say the same for KRY, even at $0.70.

UPDATE2: GRZ now $2.02...this is going well :-) If it touches this morning's low of $1.90 I'll average down there to put me at a penny over $2.

Trying to logically gauge a situation where people are panicking is always a toughie. But I repeat that the asset value held by GRZ gives it a clear floor price that is ABOVE the present share price.

Today in Brazil, and a good lesson as to why you don't put all your investment eggs in one basket

Gotta be philosophical about it

So there I was watching PBR fight with U$116 and feeling all pleased with myself about the short at $124. I'd pencilled in a $10 drop at the time, and at one point there was less than a buck to go for my target cover price.

Nice quiet day, I thought.

So I went to make some coffee and do other things. I couldn't have been away from the screen for more than 10 minutes. PBR had shot to U$121. "WHAAAAAAAAAAAAAA????"

It turns out that while i was away, super duper stockpicker Ken Heebner had been on CNBC and gave PBR the full bull treatment. And that guy is good...gotta be said. And people listen to him (which is a little silly after the fact, as Heebner owns 2m PBR at $88 and $95, but sheep is as sheep does, Forrest). Whoosh! Up she went, touched $122 and dropped back. "Good", I thought, "the hot money has now rushed in...we'll drop back to $118 or so by the end of the day."

click to enlarge

Then came part two. Ken wrapped up his segment, and out of the blue S&P ratings announced they were raising Brazil's credit rating into the investment grade category. You can see the second spike on the PBR chart, but have a look at this BOVESPA index chart and take a wild guess as to the exact timing of the news:

click to enlarge

Yep, the whole index went up 6.33% on today's news. Which is great stuff for Brazil, and you can catch what happened to the Brazil ADRs on this link (very green), but it didn't do my Petrobras short any good at all.

So PBE closed at $121 today, and i saw most of the profit wiped out in a flash. And y'know what, that's ok! I'm happy for Brazil, that's for sure...this investment grade should have been granted a while ago, I think. But with the massive jump on the news, and hype going round with title lines such as "..heralds new age of investment...", methinks the bovespa will have to cool its jets a little in the shorter-term. Looking at what happened to the Peru stock market in the days that followed its recent upgrade should give a ballpark idea of what's about to happen to the Bovespa (but with a heap more money flowing around, of course).

It's also nice to be reminded there are a million ways of losing in this game, just as there are a million ways of winning. And just when you think you got all the bases covered is just around the time the unknown variable tends to kick in....for example a country-wide ratings upgrade right on the back of a top guru recommending a stock. Hey...no harm done...the trade is still in profit, and there's no way I'll be letting it run into loss. But just imagine if you had 51% of your portfolio in that PBR short instead of less than 1% like me......a quiet reminder to keep eggs out of one basket, especially in the volatile world of LatAm stocks.

Chavez and May Day in Venezuela

Not trying to make a political statement
here...toldya before...I'm a sucker for Soviet
art. Check out the new link over on the right.


May 1st is the worker's holiday all over the world (except the USA*, which does its labor day thing in September). In socialist states it's always a big thing, and it's also a respected holiday in Latin America. So unsurprisingly this cocktail means it's been part of the Venezuela speechifying calendar for the last few Chavez years.

Tonight's edition was always going to be a speech packed with newsworthy stuff, but hotlips Hugo really went to town this time. In no particular order:

1. The nationalization of the SIDOR steel plant. This doesn't mean expropriation, by the way. Talks are ongoing with present (or should that be previous?) owners Ternium, part of the Techint group. But Chavez signed a piece of paper tonight to say the steelworks is now State property.

2. Raising the minimum wage by 30% (yep 30) to VEF799. He timed the wage rise announcement to May 1st last year, too, so the only suprise was the size of the hike. 30% outstrips inflation by a handy amount.

3. He had a real dig at the USA, who said today that they were "watching Venezuela carefully" for signs it was aiding terrorism. Chavez said that the USA would soon accuse Iran and Venezuela of producing atomic powered bicycles.

In other news out of Chavezlandia today there was the permit denial for Crystallex (already covered), and also the bank dudes raised interest rates to fight inflation. That along with last week's U$3Bn bonds sale which turned into a $4Bn sale cos it was 3X oversubscribed and Venezuela threw another billion on the pile for fun. Then there was French Foreign Minister Kouchner in town, meeting with Chavez and asking him to help get Betancourt out of the FARC's hands.

So plenty on both sides of the political spectrum to cheer and jeer in that lot, and yet again it makes me reflect on how boring it must be for you dudes living up North.

*Also true for Canada, I was reminded in a mail this morning. Thank you LC

4/30/08

Message to Doug Belanger: SUE CRYSTALLEX

So Crystallex surprised nobody today when it announced that the environmental permit for its Las Cristinas gold project had been denied. Y'see, it's not really about the environment around Las Cristinas, it's more about the environment around Crystallex.

But in its announcement, KRY slipped this little line in......

".....and the communication appears to be in opposition to all mineral mining in the Imataca Region...."

........which immediately caused its neighbour, Gold Reserve (GRZ) to plunge, too.

Fact is that this is sheer speculation on the part of KRY. Another fact...like FACT..is GRZ already has its environmental impact permit approved and granted. Doug Belanger, the head honcho at GRZ, should get on the phone to his lawyers a.s.a.p. KRY still has about $100m at bank, and that'll be enough to settle any damages claim off all this.

Otto sez: Keep your eye on GRZ, and find a place to buy it. Others sell on panic, we buy on knowledge.

PS: Nearly forgot; did anyone else notice how KRY director Oppenheimer dumped 313,000 shares two weeks ago at $1.77? That on the back of VP IR Richard Marshall's sales earlier this year around the $2 point. Crystallex...now there's a company that cares for its shareholders.

UPDATE: In this press release, Belanger says that he has had informal notice that the GRZ environmental permit is to be rescinded. Holy moly...this is a big move by Venezuela, and could be a whole street of pain for everyone involved.

Belanger points out that GRZ holds around U$130m at bank (as well as $30m in assets and a $104m wodge of convertible noted), so there is a logical floor level on this stock of around $2.40. But hey......logic, what logic? This story has a ton of chapters to run, and methinks a lot of them will be messy.

Good Copper Investments and Frogs

So in this post, a dude named oscarbullfrog left a good comment.....well, more of a question than a comment, really. Here's the meat of froggy's question:


".....i guess my question would be about your top three choices for copper mining companies and/or stocks (they can be different); would you choose the highest tonnage producer(s) or the company with the greatest percentage of production (company-wide) in copper with other minerals as a 'hedge'/'diversification'?....."

Now this is a big ol' subject, froggy, but let's see if we can sort out a bit of wood from the trees. The question identifies two types of base metals/copper mining investments, but there are other categories. Here's my little rundown of things, and on the way through I've plugged in some 1 year charts that you can click to enlarge if you feel so inclined.

1. Pure copper producers.
These really are few and far between, as all the major copper producers also come with by-products. I'd be interested in getting ideas from people out there about good names for this category.

2. Copper producers with by-products
This is a large group that includes some seriously big players, including the world's biggest copper miner, Chile's state run Codelco. Companies like Southern Copper (PCU) also get thrown into this category, cos although the main chunk of money comes from copper byproducts such as moly, zinc, silver, gold, even cobalt are common.


Away from my favourite PCU for a second, another example here is Antofagasta (ANTO.L, on the London Stock exchange),
which pulled in about 20% of gross revenues from moly last year. Its new "Esperanza" copper project will have gold as its by-product.

Those are big boys, but there are smaller plays that fit this category, too. There are many to choose from in this sector, but just one topical example is Capstone (CS.to), that released its 1q08 results just yesterday.
It's mining copper at $0.98/lb net of its zinc, lead and silver by-products and made $0.19 per share in the quarter....which points to a forward PE of just 4X for FY08 cos the stock is a dead giveaway $3.30 right now. Here's the PR that came out yesterday...have a look for yourself. Very cheap.

3. Truly mixed metals producers
There are plenty of good examples in this category. Freeport McMoRan, (FCX, and ugh I hate the way they capitalize their name like that) has been very heavily copper since taking over Phelps Dodge, but its main mega Grasberg pit is big gold as well as copper.
It's also making sure it is more diversified in the future, with one example being the new moly circuit at its majority owned Cerro Verde mine in Peru and another being the restart of its Climax moly mine in the USA (very high grade moly ore over there).

BHP Billiton (BHP) is quite simply the biggest miner in the world,

and although it has its fingers in all the pies, it's also the third biggest copper producer in the world (running the world's biggest pit at La Escondida in Chile goes a long way to help that). Brazil's Vale (RIO), known mainly for its iron ore production, also has its own 130KT copper mine now producing in its own country.

Those are big boys, but there are smaller polymetallic plays, too. Here's one that right at the other end of the scale, but is also very interesting at today's prices. Although it's not extracting its copper on the recovery circuit yet, Gold Hawk Resources (CGK.v) is a good small miner operating in Peru and is very cheap right now.

Its main products are gold, silver zinc and lead from the rich "Coricancha" mine East of Lima, and it plans to recover the copper grades in the future. After ramping up just last year it is now turning cash flow positive, and the teething problems look like they're just about ironed out now. It's sitting there at $0.345, which is ridiculously cheap. That stock with be over a buck by year's end...Otto's honour.

4. Junior/Exploration companies
These come in all shapes and sizes. Here are a few examples of copper juniors in LatAm right now that i personally like (some have been mentioned here before, some not)

a) Los Andes Copper (LA.v) with its copper/moly project at Las Vizcachitas. Here's my previous post on LA.v.


b) Candente Resourcs (DNT.to), which holds a lot of greenfield sites but its flagship is the pure copper Cañariaco project in North Peru. Here's my previous post on DNT.to.



c) Inca Pacific Resources (IPR.v), which has a great looking copper/moly project in Northern Peru called Magistral.
This project already has a 43-101 compliant final feasibility study published, and is a clear buyout play. Interestingly, the Sprott Moly Fund (MLY.to) owns just under 50% of the company, so when the final sale comes you can be sure Eric Sprott will get a good deal for shareholders before handing over his wodge.

d) Mansfield Minerals (MDR.v), which has good copper and gold/copper projects proving up in Argentina, and is also a minority holder in some good looking projects in Peru.

MDR is an example of what i call a "serious junior", that's to say a junior that doesn't pepper the market with press releases and flimflam, and just gets on with the task of drilling, proving up resources and doing all the good groundwork in a responsible manner. At the current share price of $2.40 or so, it's at a big discount to last year's valuations and also further down the development road. This is the kind of copper junior that could easily go it alone on one or more of its projects and turn into a very profitable mid-sized producer in the medium term future.

Again, there are many more to choose from.

So to wrap this up and answer froggy's question, I like all the above stocks. But looking back at what I've written here my favourites right now would be:

PCU in the producer sector.
CS.to in the small producer sector
FCX in the fully diversified sector
CGK.v in the small diversified sector (although it doesn't have copper production as yet)
IPR.v in the junior sector (but really all those four are good deals and it's tough to choose just one)

All comments, suggestions for other stocks and queries very welcome.

rattling the cup

Over there...up in the right hand corner of the page....

...there's a chance to donate to your poor, suffering Otto via that paypal button.

Look, I'm crap at begging, but if you've got anything worth having from the blog this month and you'd like to throw over a small donation in this direction, it'd be appreciated.

BUT IT'S TOTALLY VOLUNTARY. Nobody will starve at this end, and you're all so very very wonderfully welcome to come back and play any time you like, coin or no coin. I'm enjoying it this end, and if you get a kick out of the blog, then all is well. Spreading some lurve & happiness is what it's all about.

While I'm at it, it might be a good time to say that next week my mother and sister are coming over to visit us in our sleepy, happy, third-world backwater. Therefore if the posts don't flow as normal between the 5th May and the 19th you'll know why.

sneakydeaky quiztime (VII): the answers

It's time:

click to enlarge (worth it)

Is it Wednesday already? Wowsers, this week is zooming past, innit dudes? This can only mean:

SNEAKYDEAKY QUIZTIME: THE ANSWERS

No nattering today....brass tacks time. Here we go go go with the answers to this week's sneakydeaky quiz. If you remember, I asked you to put the right nickname to the right Latino political bigwig. So no more Mr. Nice Guy............. answers!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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Alan Garcia (Prez Peru): Nickname "More Cake"

I mean, just look at the guy. Now Alan was never the slimmy-trimmy build anyway, but in these last 6 months he's just ballooned.

Garcia presents the new employees
at the Presidential Palace
.

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Alvaro Uribe (Prez Col): Nickname "Leviathan"

This refers to Thomas Hobbes' literary work of the same name, and specifically where Hobbes writes "nasty, brutish and short".

Hmmm, that's an unfortunate photo
to choose. Let's try again


Oops, I did it again Britney. One last
try to get Uribe in a normal pose, eh?



DOH!

"Err..security? Please visit Otto's house..."

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Cristina Fernandez de Kirchner (Prez Arg): Nickname Morticia

C'mon everybody, get ready to snap those fingers:

♫♫♫♫Duh duh duh duh (click click)♫♫♫♫

♫♫♫♫Duh duh duh duh (click click)♫♫♫♫

Spooky, innit?

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Edualdo Duhalde (Ex Prez Arg): Nickname "Fernet Branca"

Wake me up when you need
another usurper, yeah?


I'm afraid I can only explain why in Spanish, English simply doesn't catch the meaning here:

"Es negro, amargo, y se hace rico con la coca"

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Evo Morales (Prez Bolivia): Nickname "Maradona"

Diego joins the Axis of Evo

That's cos Evo fancies himself as a bit of a footballer, and has even recently lined up in a charity match with the greatest player ever*. In fact, Evo has just turned out for a semi-pro 2nd division team, which isn't bad for any 47 year old, let alone a head of state.

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Fernando Lugo (prez in waiting, Paraguay): Nickname Rasputin

Lugo prepares for his first
meeting with Klishtina


The guy starts in the priesthood and works his way up via political deals and alliances to become the country's most powerful figure. Can someone please send Lugo a copy of the Boney M song to warn him on what to avoid?

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Hugo Chavez (Prez Ven): Nickname Hot Lips

You calling my pint a puff?

Pucker up, baby. Hugo may not be in the same aesthetic league as Studmuffin Correa, but he has a pair of lips on him that give Mick Jagger a run for his money. Not afraid of opening them to let a constant stream of words flow out, either. And the beret looks GAY, Hugo

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Lula da Silva (Prez Braz): Nickname Teddybear

Shiver me timberzzzzzzz, and get that
mike out of my eye, shipmate


He's small, hairy, cuddly. And try as you might, it's tough to get mad at him. Thus teddybear.

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Nestor Kirchner (Ex Prez Arg): Nickname Marty Feldman



The fine British comic taken from us way too early. Two pictures, no comments necessary. Case closed, m'lud.

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Rafael Correa (Prez Ecu): Nickname Studmuffin

And you better believe it, visually-challenged mortal reader. The Adonis of 21st century socialism is in your face again.

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They think it's all over........it is now!

So who's da boss? Who is the smartest smartypants? Who's wrapped up this week's star prize? Well that be the stunningly intelligent, smart and superduper Mike B with a rocking 7/10 scored. Well done to you Mike....and nice to see a new face as a winnah

Which wraps up another quiz. Join us Saturday for the next instalment of sneakydeaky quiz, but until then:
Toodle Pip!

*No arguments. Pele? Gimme a break.....

4/29/08

bailed on ST gold

It went against me, a small loss, so there's not much point hanging in there. Please don't confuse ST plays with LT positions, by the way. If I have to say it a thousand times I will; hold gold in your core portfolio, and preserve your capital.

Back to the trading world, and things might be getting ready for a bounce soon enough. The smart chart dude known as Gary from Biiwii sez the bottom of the HUI isn't that far away (and he's better at this TA game than I'll ever be). Here's the page he updated today, so go have a look.

FWIW, I have my eye on Jaguar (JAG) to play the bounce when it comes....and it'll come.

The strange thing about the Ecuador mining 180 day "stop work" order....

...is the way that it doesn't seem to exist.

If you remember, back a couple of Fridays ago when the Constitutional Assembly passed its mandate, one of the articles was "everyone downs tools for the next 180 days". Assembly head Alberto Acosta even mentioned some of the Canadian miners by name after the vote, saying that they'd have to stop right now. So far, at least three companies have made it abundantly clear that their work is continuing as normal.

1) Corriente Resources (CTQ.to) that has consistently said "business as usual" as they prove up their large copper project at Mirador.

2) Aurelian Resources (ARU.to), my favourite Ecuador stock has sent mails to shareholders that say it is still drilling and working at Fruta del Norte.

3) Dynasty Metals (DMM.to) played host to Studmuffin Correa over the weekend, and was clearly working away in front of the President's own eyes.

Somebody mailed me on this subject today, and so your humble Otto made a couple of discreet inquiries on the matter. And the upshot of it seems to be that to put the decree into action, Ecuador's Ministry of Mines and Petroleum has to sign a so-called "execution order" which is then sent to the relevant mining company telling it to stop what it's doing. Until this order is signed and delivered, the mining company is in its rights to continue working. The thing is that apparently those execution orders have not been signed and delivered by mining minister Galo Chiriboga.

Why that is so is another story, and frankly I don't have the reason nor do I have any sourced scuttlebutt on it. But after seeing Correa get the guided tour of the DMM project, there's little doubt that the Prez knows full well that the miners are working. Is there some sort of collusion between Correa and Chiriboga to ignore (for as long as they can) the assembly mandate article? That'd certainly be my best guess....what do you think?





UPDATE (9 am): Well, I dunno whether to laugh or cry....either way my timing sucks

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Aurelian Suspends Drilling as Required by the Ecuador Mining Mandate
Tuesday April 29, 8:47 am ET

TORONTO, ONTARIO--(Marketwire - April 29, 2008) - Aurelian Resources Inc. (TSX:ARU - News) today announced that the Company is obliged by order of the Mining Mandate to reduce its operations and workforce. The previously announced Mining Mandate, effective April 18, 2008, ordered a halt to mining activities on concessions, including drilling, exploration and development.

Yada yada yada................(rest of the PR here)




What? You mean Otto was right about the Petrobras "find"?

It has finally dawned on the sheep up North that the 33 billion barrels of oil Petrobras has supposedly found in its new deepwater survey isn't the manna from heaven that foolish analysts made it out to be. Way way back on April 17th, your humble correspondent totally nailed the story with this post. Click on that link to get the full rundown, but basically I said that:

a) Nobody knows how much oil is down there, so pulling numbers like 33Bn barrels out of a hat is just plain stupid, and especially stupid for big New York analysts to recommend buying PBR on such flimsy evidence.

b) Even if
it is a large find, it aint gonna be easy to get the stuff out and it will be darned expensive whatever happens.

So Bloomberg dropped this bomb on the long sheep today. Well pointed out the bloody obvious, really, but it needs to come from a reliable source before anyone cares:

a) The oil field lies twice as deep underwater than the present depth record for production

b)
Then there is about a mile of rock hard salt laden seabed to drill through

c)
Then the oil is cooking at 500ºF at very high pressure, a combo which is good enough to melt any equipment currently in use.

d) The very incomplete seismic survey will have to be upgraded, cos you gotta get the drill points spot on when you're drilling under these circumstances else pay serious money for a dry hole. This isn't like drilling a hole Texas, getting slightly miffed if nothing happens then moving on and drilling another. These holes come in at around $60m a pop.

So the bottom line is even if there is oil and even if they can get the oil out of the ground, it's gonna be a real expensive project and it'll take ages to get it going. Just like I said back on the 17th when I called the stock a short.

Since then the stock went from $124 to $130 or so, but in the last few days has come back and now it's at $122 and my call is in the green. The WTI oil price moving from $113 or so to $120 didn't help my short cause at all, and although I was tempted to short more at $129 or so I didn't. Frankly I was chicken, cos the frenzy fed on shaky information and hype could have taken the stock higher.

But now that reality is beginning to bite and the news on exactly what this oil find is really about (and is that oil price dropping a touch at last?) the short play is looking good. I said before that it was an easy $10 trade....with $8 to go I'm sticking to that call, dude.