Subscribe via email, get all daily posts sent to you next day (and without all the annoying ads)

6/28/08

Unmissable abiding post

Go see Abiding in Bolivia's latest post explaining just how stupid the fascist racist scum (the ones who think they have a God-given right to lord it over little brown people) are feeling right now. More than beautiful.

The only recourse they seem to have left is a full scale Coup D'Etat, but it'd be just too much fun to watch them try to launch an attack on La Paz with El Alto just up the hill and ready to protect their Evodude. I mean, this was the scene today as the littlest leader launched his recall election campaign in La Paz.....
..... and if we zoom in on those posters the locals are already comparing Evo with Tupac Katari, a seriously hardass dude who led a siege of La Paz back in 1781 until the colonials caught him and quartered him alive.
Katari is an indigenous hero of the first order; a veritable 18th century Che Guevara in Bolivian circles. So I'm happy to say the coup has zero chance, cos believe me you do NOT mess with an angry Aymara*. Anyway...go read the Abiding post; that dude is all you need to know on Bolivia. Here's the link again...no excuse not to go visit now.

*I know, cos I married one.

Julio Cobos deathwatch

Once upon a time there was a Vice President of Argentina who came from a different political background to that of his president. He took the job in order to demonstrate a united coalition and the view that a consensus gov't was the way forward. Just one year into his job, he resigned after suffering an insulting public loss of face from his president and his party.

Remember Chacho Alvarez? Well I do. Veep of Argentina 1999 to 2000. Post Chacho, the admin he left lasted another year and finished with the mighty bang of December 2001.

Fast forward to 2007, and Julio Cobos....

..... who cut and ran from his UCR (Radical Party) background to join the Kirchner's "FPV" (Front for Victory) quasi-Peronist movement, now finds himself in nigh on the same situation as Chacho less than a decade ago. Cobos took the Veep's job to put on a united front. Cristina promised a consensus gov't. But as soon as she got her hands on the job it became clear that this was K2. Suddenly no room for consensus, and even the mention of the word from Cobos this week has brought vitriolic backlashes from Kirchner lapdogs such as the dumbass Interior Minister, on orders from his goggleyed master, of course.

So we now have our second candidate for removal from the house that K built. Lousteau tried to hack it and failed. Now the suddenly popular Cobos will be next...a simple question of time, it seems. As for Argentina, it's that old one about histories and repetitions, no?

Plus ça change, plus c'est la même chose......

An overview of how Venezuela's imports affect the economy

This article caught my eye today, as it pointed out that trade between Colombia and Venezuela in the period January to April 2008 has increased 30.1% compared to the same period in 2007. Not only that, but the bias is very much tipped in Colombia's favour, with Venezuela exporting 9% less to Colombia, and Colombia exporting 45% more to Venezuela. Those are pretty strong trade numbers for Colombia under any circumstances, but if you consider the non-stop complaints coming from importers about Venezuelan bureaucracy slowing the trade process down (normally via the official CADIVI exchange rate offices) and then the recent FARC-led spat between the two countries, it's pretty remarkable...well, at least I thought so

So as one thing leads to another, I decided to check to see how Venezuela's general import situation stands. And suddenly I found myself writing a long article about just one aspect of Venezuela's economy. I should point out that what follows is pretty simplistic if you're a qualified economist, but for those people who don't know the ins and out of the profession it might shed a little light on one corner of the issues faced by Venezuela today, and help explain how they can keep their strange economic balancing act going.

Firstly, this chart shows total Venezuelan imports, and also shows how important the private sector imports are to the trade balance.
So the next chart takes a closer look at how the imports break down.

Clearly private sector imports dominate the scene, and also the end of year Christmas etc rush affects business in Venezuela, but it's also pretty clear that there has been a sharp slowdown in imports in the first quarter of 2008. So if we look at this third chart...

....we see exactly what kind of imports are slowing down, and the picture it paints is not a good one. Consumer and intermediate imports have stayed relatively high, which certainly ties in to what we heard from that newspaper report. Colombia's main trade with Venezuela is foodstuffs (particularly beef, chicken and eggs) and these haven't stopped, but the big drop has been in imports to service the primary sector.

So with this next chart, we see exactly what kind of growth we've seen in the backbone industries in Venezuela, and apart from electricity and cement (both more tied to growth in end consumer demand), the primary industries in Venezuela have been close to stagnant these last few years.
There is no doubt that GDP growth has been strong, but evidently this has not come from any type of industrial base. The growth is very much consumer-led, as this last chart shows.

So what we have is a weird situation. GDP is growing fast, imports are growing fast, consumer activity is growing fast, but Venezuela's industrial base is basially stagnant. This is because the Venezuelan currency, the Bolivar Fuerte (VEF), is kept at an artificially high level by gov't controls, meaning that locally produced goods (and sevices) cannot compete with the imports at low VEF ticket prices.

The whole caboodle runs on oil, of course. The rise in oil revenues is clearly making its way down through the system and into the pockets of Venezuelan, whether it be via higher salaries in the public sector, or cashing in on the licences-to-print-money known as the gov't dollar bonds emissions, or being part of the oil industry itself. Venezuela as a country is obviously benefiting from the higher oil prices.

The $64,000 question is, of course, will Venezuela be able to keep it up? It's as clear as a bell that the whole economic edifice is totally dependent on the continued high prices for oil. Venezuela's policy of a fixed exchange rate along with the recent damping down of the VEF parallel rate (done by emitting gov't debt and not adding the petrodollars to reserves) will work as long as there is a similar amount entering gov't coffers from oil sales. But if the price of oil suddenly drops, a vicious circle may ensue that slams the value of bonds held by banks and private citizens. This would in turn make any further bonds emission practically impossible. The gov't is then unable to mop up the extra liquidity caused by the growth in VEFs circulating in the local economy. Thus the currency devalues rapidly and inflation spirals.

But will Venezuela suffer the fate outlined above? I believe, to the chagrin of the rabid right who are itching for Chávez to stumble, that it won't, and for two main reasons. Firstly, oil prices do not look like they are going to drop by any significant amount (meaning under $100/bbl) in the indefinite future. Secondly, after all the jawboning and talk of production increases at PdVSA, it seems that this year they are finally going to do something about it. The turbulent 2007 period of taking 60% control of all oil production, making new JVs with companies and kicking out the companies that didn't want to play ball is over. New JVs have now been signed with other foreign countries such as China, Russia, Japan, Iran, Norway, Brazil, Argentina, Portugal, Italy and many others. The construction and infrastructure operations are now underway, and long delayed offshore drilling programs have also started. All this means that even if oil prices drop significantly, absolute revenues from oil are still likely to increase substantially in the next 1 to 4 years.

The bottom line in this very rapid and hole-ridden overview of Venezuela is pretty simple. Although economists wail and complain and warn that Venezuela is heading for financial disaster under its present economic policies, unless there is a drastic change in the direction of oil prices the country will be just fine. It doesn't need foreign investment (outside of the new oil deals). It doesn't need a vibrant mining industry (sorry KRY), it doesn't need to promote a big tourist influx, or ask the world to come build its factories there and take advantage of cheap labour, or anything of the sort. It may be pure luck, but the reality is that its oil industry is more than enough to keep the country running. And I know this post is by far from a definitive explanation to what's going on in the country, and I should explain this or that issue a bit more and provide links and footnotes to back up some of the things mentioned, but I've had enough of writing for one day. And this is a blog, not an academic paper. I just hope I've explained at least one part of the conundrum, and maybe piqued your interest to find out more from better sources.

What's known so far about the contents of the new mining law

Know your Beckett?

The new mining law was supposed to be published yesterday, according to the announced timetable Minister of Energy and Petroleum, Galo Chiriboga. So the fact that it hasn't been published yet seems to have got a lot of investors up North a bit antsy (judging by my inbox anyway). Best advice is "relax dudes", cos this is South America we're talking, ok?

In the meantime, your diligent Otto has scoured and grilled his finest sources and come up with the following list of ten things that are part of the new mining law story. Most of these are 100% confirmed, and a few bits are "most probables". I have heard other bits and pieces, but I'm not putting suppostions into this list (and they tend to be the minor-ish details, anyway). So here we go:

1) The law is ready. Correa has inspected it. It will be published "any day now" (sorry, can't get better than that).

2) The "three concession maximum" rule has been scrapped. In its place there is a mechanism that will allow a larger concession area in the exploration phase, but when the company begins focussing on particular areas of its concession, the unused areas will lapse. By the time the miner is actually producing, its total concession area will be reduced to 5000 hectares approx. This sounds like a good idea to me...it allows the explorers to do their job correctly, and then it allows the gov't to take back what isn't wanted by the company at a later stage.

3) The concessions that have been taken back by the gov't in the last few months will be submitted to tender again. The companies that lost the concessions can bid for them again, but on equal terms with other bidders. This is different from previous information I received, that said the ex-holders would get first refusal.

4) The concessions will have a 25 to 30 year time limit. They will also be subject to a 10 year "use it or lose it" clause.

5) There will be no forced joint venture with the state. That is 100% confirmed, I'm happy to say.

6) The law will be ratified and enter into active operation in September 2008, almost certainly before Ecuador votes on its separate draft constitution. The mining law will be passed into law by the interim "Congresillo". In real terms, this means miners can get back to work in two months' time. Not the best situation, but by no means the worst either.

7) The environmental controls will be strict by world standards. This will be a main promotion point of the national gov't to its people. The gov't will be making very strong noises about the severity of environmental controls that miners will have to abide by, and the penalties/immediate closures they would suffer by breaking these laws. However for responsible modern, medium and large scale mining, these regulations will not be too difficult to comply with successfully.

8) The state mining company will be set up from scratch before the mining law becomes active. It will concentrate on non-metallic mining only (e.g. cement, clay, brickworks etc).

9) Royalties will be due on gross product. The limit on royalties is either 5% or 6% (I cannot confirm that, but 6% is the most probable). There is no windfall tax in the new law.

10) There will be mandatory minimum investments to be made on all concessions. If those minimums are not met, the concession is lost.

So the bottom line here is: VERY GOOD. This framework is better than my "worst case" scenario postulated last week, and if we remember that even under the worst case miners such as my favourite Aurelian (ARU.to) would still make it as going concerns, this means the new law will be greeted with relatively open arms by a sector in serious need of reassurance. Things are looking good, dudes.

But before you start high-fiving your dog and shouting "to da moon Alice", let's be clear that the law has to get through the legislative process first. No fat ladies singing yet. But there's little doubt that the publication of the new law will be viewed as a positive for the industry and for those companies with Exposure to Ecuador. The usual caveats apply to all the above, yeah? We're all big girls and boys.

And while we're at it, how are my Ecuador bonds calls doing?


Chapter one: On March 19th I called Ecuador sovereign debt a buy; at the time, Ecuador's EMBI+ (country risk) rating was at 773 basis points spread.

Chapter two: On June 17th, the same day as all the New York analyst sheep were purring about its country risk rating of 543 basis points spread, I called "take profits" on Ecuador's sovereign bonds. The title of the post was "Ecuador bonds: Time to take profits (and here's why)"; much doubt about the subject matter?

Chapter three: Yesterday, Ecuador's country risk spread closed at 610 basis points, some 67 clicks back from where I (hopefully we) rang the register.

Talk about nailing the trade..........
(click to enlarge)


And you get to read this blog for free........

Colombian dry fish shot at point blank range


So the trade was the Colombian Peso, right? We set the trade up early June, then waited for the Central Bank to act. When it did on Monday 23rd the Peso has seen a low of 1,650 to the dollar.

Then in this report, Bloomberg broke the news we were waiting for:

Colombian Peso Drops Most in 10 Months on Dollar Purchase Plan

By Andrea Jaramillo June 23 (Bloomberg) -- Colombia's peso plunged the most in 10 months after the central bank said that it will buy $20 million a day to ease the currency's rally.

Banco de la Republica said on June 20 that it will buy the U.S. dollar through auctions to accumulate foreign reserves.

etc etc. That evening I posted this note, which basically said "do it now". The next day (Tuesday) there was all the 1,730/U$1 you could handle in the morning session, and it closed 1,770/U$1.

Cut to Friday, and this is what Bloomberg had to say about the currency:

Colombia's peso plunged after President Alvaro Uribe told Congress late yesterday to call for new presidential elections after a court challenged the law that allowed him to seek another term in 2006.

The peso dropped 1.7 percent to 1,905 per dollar, from 1,873.4 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX.

Colombia's currency has slumped 12.1 percent this week after the government implemented measures to slow its rally.

So what was the outcome? If I'd timed the trade to perfection by selling the Peso Monday morning (at 1,650 before the Central Bank announcement) and bought back Friday morning (at 1,980 at the height of today's Uribe charged semi-panic), I could have made a cool 20%. Bloomberg marked he weekly change at 12.1%. But my sell at 1,730 and re-buy at 1,905 made me 10.1%. The difference is that there was no risk involved with my 10% gain. Once the bank had made its policy clear, some people thought that the gain had escaped them. On the contrary, it was the easiest play possible to "bet with the house" and watch the Peso fall further.

Thus the moral of this story is: Don't worry about what other people are making; you make your own and enjoy. And be patient. And make money.

6/27/08

Rattling the cup, June edition

It's Otto's cringeworthy end-of-month post again, folks.


Yes, it's the pathetic attempt at begging. Over there...up in the right hand corner of the page....

....there's a chance to donate via that paypal button.

If the blog has done you a service this month it's a chance to throw over a small tip. No coin too small, and as always it'd be very appreciated. But once again it's important to understand that this is totally voluntary. Donate or not, the door is permanently wide open for one and all. If you enjoy reading the blog and maybe have learned something along the way and generally have warm and fuzzy and cuddly thoughts about this tiny corner of cyberspace, that's more than enough for me.

"Pour encourager les autres" (Voltaire)


Trading Post


I missed the sharp downspike prices on Mercado Libre (MELI), but got some at a touch under U$35....that's fine. As the plan goes, we double down if U$32.50 gets printed...if not we (hopefully) ride it up to U$45 or so. What could possibly go wrong?!?!?!?

Gold U$927 and silver U$17.50. Gotta love that........

Colossus Mineral (CSI.to) is really moving now, up 15% at $3.50. I'm now nicely in the profit zone, and with no rush to sell. News coming that's been leaked, perchance?

Fortuna Silver (FVI.v) above $2 and doing nicely, too. I like this stock more than any other. It's an obvious ST trade winner, but I'd prefer to hold this one through.

Aurelian (ARU.to) is also flying, now up 10%.....a happy day chez Otto. Strange to some is how Corriente (CTQ.to) (ETQ) is not responding. Perhaps CTQ should worry less about putting their adverts on the Copa Libertadores final TV coverage every 10 minutes and more about the local community surrounding them........

Jaguar Mining (JAG) is upping nicely, but I'm kicking myself cos I forgot to put an order in. Could have snaffled up some at U$9.40. Errare humanum est.

To cap off a nice day at the races (bar the amateur's mistake with JAG, that is), those nice people that run the market for Minera Andes (MAI.to) gave me all the $1.30 I wanted. I'll be selling this ST block in the $1.50s very soon.


Uribe shits on his country's constitution (again)

"Just one more...honest like...won't happen again...pretty promise."

As forecast here last week, Alvaro "dubious past" Uribe has now tipped his hand and proclaimed his right to re-re-election as President of Colombia. And before we go any further, it's worth remembering that before Uribe came on the scene Colombia did not allow any president to serve more than one term of office. Now Uribe's in town he's waltzing through his second term and going for a third. Jeez..let's just give him a coronation ceremony and be done with it, yeah?

Because Uribe knows he's crapping all over his country's laws yet again, he's decided to ask for a referendum and ask his adoring public whether they want him to be prez again. And as he runs 70% approval ratings (look...it's Colombia....they're like that....what do I know anyway) he's a sure fire winner in any public poll.

I really don't think I need go into many comparisons with Chávez at this point...you guys tend to be smarter than the average bears and don't need these things force-fed to you. But don't expect John McCain to dig deeply into this issue when he visits "America's friend", yeah? And don't expect too many howls of "dictator" aimed at Uribe from the English speaking press, right?

The Peru mining strike starts Monday 30th June

A lot of Peru's metal exports cross the Pacific to Asian customers.
Obviously these ships must pass by Hawaii. Therefore this picture of
"Miss Peru Hawaiian Tropic" is relevant to this post, no? (pathetic, aren't I?)

(By the way, click to enlarge)

Peru's miners are going on indefinite strike as from Monday, 30th June (like next week, dude). That's the message today from the syndicate leaders, and the whole thing is about better pay, conditions etc etc.

The threat of this strike has been rumbling for quite a few weeks, and up until the recent Moquegua protests I was a little cynical about the whole deal. For one thing miners (in general) in Peru get paid very well for their labours compared to the national average salary, with much of that pay is locked up in the profit sharing laws (which hand out 8% of gross profits to employees, with some ceilings to the program). Basically, they make this anything more than a gesture strike and they get hit hard in the back pocket.

But since Moquegua (this is the way the gov't treated protestors before the little guys won through) the feeling has changed in Peru. There is now real force behind the move to share the impressive profits coming from the mining industry amongst the people, and that will certainly start with the mineworkers themselves. (As a side thought, paying extra to the miners will be a great way of stimulating the trickledown economics favoured by this mediocre government, so it's hard to see what a nominally socialist party such as APRA has against sharing wealth this way....unless of course they've gone all neolib on their founder and prefer to suck up to the remittance companies).

But back to the strike, and we may see real resolve unfold as of Monday. Peru is heavily dependent on metals in its export mix. With imports growing fast (see the charts I put together on this post recently), the trade surplus could easily go negative with any prolonged industrial action, thus putting pressure on the whole gov't economic model. But post Moquegua, this may turn out to be a more general protest about gov't macroeconomic policy and not just about the mining. The feeling of ill-will towards the Garcia gov't is growing. His approval ratings are dropping once again. The general population of Peru, and especially the two thirds that live outside Lima, have not felt the benefit of the last six years of national GDP growth and are fed up with promises of a brighter future just around the corner that never happen. Post Moquegua, these same people see that by standing up to this gov't they get results.

A lot depends on how the individual miners and their union bosses react to the prospect of a prolonged strike. As much of their salary is made up of performance bonuses, they'll really feel the difference if they stay out for more than a few days. So the scene is set not only for a battle of miners versus companies, but perhaps for the wider battle of gov't policy versus people power, and it'll be worth keeping a very close eye on how things develop.

PS: Forgot to mention that Alan's favourite attack dog, Jorge del Castillo, is meeting with national union bosses today to try and avert the national general strike slated for 9th July (Spanish link). Y'see, it's not just the miners that are at their wits end with this gov't....

As for the Ecuador mining law....

I've received several mails asking for more info (and I appreciate all correspondence, thank you), but until the law is actually published there's not much to say. So this post is a general reply to those who sent mails.

Supposedly, there will be a press conference run by Chiriboga at the mining and energy ministry, and then the law will be handed down to us mere mortals. So here's the deal; as soon as I get my hands on a copy (feel free to send one along if you get there before I do), I'll take a good hard look at it and report on what there is, isn't etc etc once I've read it.

The time for speculation is over; we need the facts, right?

More good news for Minera Andes (MAI.to)

This map was published before Los Azules went from big to "oh my stars"

The problem with this company seems to be that whenever it releases good news the freakin' stock price goes down. No matter; the PR this morning (right here) says that the Los Azules copper project is indeed open to the North (as most assumed), but the doozy is that they've let slip a bit of their geologist work and said out loud that the 2.5Km length of Los Azules is likely to be extended by up to 3km....that's 5.5km of copper....oooooooooooohhhhh (rubs hands with glee).

Holy moly, dudes...let's do some back of envelope calculations to see what that means. Let's assume the current width and depth (600m wide, and 200m deep) stays uniform across the whole orebody. In fact, it looks like Los Azules is also open at depth, but this is just ballpark numbers, ok? Let's also assume the final copper average is 1% (it's 1.6% typically right now, but it's also two different types of copper minerals that are typical in porphyry deposits).

Ok, enough blabbing; here's the ballpark mathematics:

600m X 200m X 5500m = 660,000,000m3

If each m3 = 2.5 metric tonnes (kinda typical, can be more, can be less), that means the total mass of the Los Azules deposit comes in at 1,650MMT

Now if 1% of all that stuff is copper, that means there is 16.5 MMT copper there. In old money,
that would be 36.37 billion pounds of copper. That's just copper...by products come in later episodes of ballpark numbers.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Do I have your attention yet?
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Also, that size of deposit, if mined at 100,000 tonnes per day (tpd) would give a mine that lasts 45 years, which is up there with the big boy mines in Chile, Peru, Mexico etc. So all in all, saying Los Azules is promising is a bit like saying Everest must be a tough climb. Add the fact that MAI.to has a strong JV partner there in Xstrata, and the recent drop in share price to $1.27 looks pretty silly.

Otto sez: Put some Minera Andes in your long-term portfolio right now, and forget about them. Then look at what they're worth in 3 years' time. You know it makes sense.

6/26/08

Two buys for tomorrow

Both pretty simple, straightforward gold bull plays. And what with the nerves around the big boards, gold and its preservation of capital role might even get through the numbskulls that are still using margin to buy out da munney calls on tech stocks.

MDR.v: Mansfield has dropped back from the $3+ level where I sold last time. Maybe this $2.60 is the right place, or maybe it'll revisit the $2.40 of a couple weeks ago. The main thing about Mansfield is to remember it's a very good, solid and well run junior. These fundies will get it rising again.

JAG: I've just noticed Jaguar Mining there on the screen at U$9.44. Gold rising and this beauty under U$10? Sold to the guy with the word "Otto" on his lapel badge.

Remember, these are ST trading plays only, and please remember all the caveats I've mentioned previously. DYODD and all that jazz, dudes........

PS: I've just spotted MAI.to in the corner of my screen at $1.27. ONE TWENTY-SEVEN??? Oh my oh my, there really is no justice, is there? If the great wide world offers me anything under $1.30 tomorrow I'll spend some of my pocket money on adding some Minera.

So where shall we start?

How about the Colombian Peso at 1820, dropping 2.7% today? Toldyas!

Or perhaps we can report that Ecuador's new draft mining law is ready, and DJNW reports that it's going to be wonderfully wonderful for all miners concerned? Nah....we knew that one already...boring story. If you're not bot in by now, you need your head examining.

Or howzabout we point out that MELI dropped to Otto's buy zone price of U$35 today? Weddy for wabbit huntin'? I'm a-snufflin' round MELI mañana, dudes. Let there be no doubt about it.

Or we could just stick to gold at U$914/oz, (up oodles in one day) or make some clichéd remark about how weak the Dow is and how we're all gonna die an' stuff....but you've been whacked over the head about that one several times today already, yeah?

Then there's the false hope thrown at desperate Crystallex longs this week. C'mon, dudes...get real...you honestly think it's gonna happen?

Or perhaps CSI.to handing me a 10% winner...so far. So to the people who said I'd bot in too early, "yaaa booo" (sticks tongue out)

But maybe pointing out that the world's cheapest and politically safest big copper project is going to run a 3rd party scoping study tops the whole list off. Why? Cos it's real news, and not just regurgitated stuff you've read before. Gotta like LA.v! 48 cents?? Jeesh...cheap or what?


Metals rally on dollar weakness (surprised?)


With the Fed's decision bringing a little reality to this so-called dollar rally, gold is now starting to go to where it should go. Sorry to bang on about the gold:oil ratio, but it really is a very large canary in a well-lit coalmine. Keep it front'n'centre on your screen, and it'll remind you about the games played in the short term and how logic tends to kick in over the long run.

Let's see just how far the barbarous relic (is dat wot he sed?) can run today. With silver upping nicely (over $17 again), a nice 3.5% rally in zinc, and copper over $3.90, the whole metals sector is a nice place to be today. The zinc/silver/lead rally is going to favour FVI.v. Have a good look at the company people.

6/25/08

two posts from respected bruddasites

Check out "China South America", where yer man Bennett uncovers the story of how China will be JVing with PdVSA of Venezuela to build 8 oil rigs A YEAR. Wowsers....isn't it amazing how the English press missed that one............

And on a different, altogether seedier level, Abiding in Bolivia has the full SP on how the racist scum are trying to overthrow Evo illegally. Wowsers....isn't it amazing how the English press missed that one too..........

happytime (in house post)

I've just checked on viewing figures, and I'm HAPPEEEEE to say we've just signed on our 100th e-mail subscriber (it's free, by the way....come on join the club...the link's over there on the right). Also we're getting 700 unique visitors to the site, and another near 200 people on RSS and e-mail feed. Pages viewed now top 2000 per day quite easily. So to one and all, thanks for reading.

Basically, this silly little blog that started as a semi-joke just over three months ago is taking over my life (in the nicest way possible of course). I never thought I'd be at a point where people start saying "2000 pageviews? Crap that's nothing! This guy thinks 2000 pageviews is something special? Jeesh what a jerk!"

By the way, I'm still on the road. Don't expect anything decent and cutting and deep and stuff til Thursday.

Well Inca Pacific (IPR.v) has been sprightly

Nice to see. A big thank you to KR for his sacrifice to the market gods...thanx dude. Something tells me that Inca Pacific will be delivering good news more frequently....

Also good news from my fave rave silver miners at Fortuna (FVI.v). The company has got the green light from the Lima stock market (BVL) to trade there, and as this tactic has worked for several foreign mining companies working in Peru (Peru Copper and Minera IRL being two examples of success stories in the Lima bourse) this can only help FVI.v, methinks.

it looks like neshtor's taking my advice....

...because there's no doubt that he reads inca kola, dudes.

Otto calls the Argy peso at $2.80 to the dollar....and here we go, folks! The only problem is that it took 'em 3 months to take my sage advice. It took the resignation of a real economist from the ministry, and it took Neshtor using a stonger Peso as a form of revenge against the campo.

But here we are, and with the import figures rising thru the roof, it's just in time (well, it's too late in fact, but better late than never.

so, to mark your card...we have the Peso going to $2.80 to the greenback, and poor little rich boyz from the auto sector about to cry me a river.

6/23/08

Colombia: dry barrel fish shooting season has just opened


This is the no brain trade of the year, and here's Bloomberg with the details. Look at how Chile stopped currency appreciation this year, now look at this plan, and make you own estimate on how far back the Colombian Peso will go in the next few weeks.

And don't say I didn't warn you......and warn you again.

snippety stuff: true crimes edition

A highly respected Ecuador journalist was assassinated this morning. Police suspect local crime gangs for the hit-style killing. QEPD, señor.

Pele (the second greatest soccer player of all time), was mugged by a gang of druggies South of Sao Paolo. They got his bling and his snazzy watch.

Racist scum once again portrayed as hard done by innocents by pathetic English language media carrying an agenda the size of Cerro Rico. Hypercool Abiding blows them apart.

A whistleblower at JP Morgan points the finger at several Argentina millionaire families for tax evasion. The Kirchner tax office is rubbing hands with glee. This story has serious legs, cos big losers might be the family behind Kirchner bugbear Grupo Clarin.

At the Chile whale summit, Japanese continue to be assholes and insist on killing the big guys "because it's cultural".

Venezuela decides to save its Imataca forest. Crystallex is toast. Roy Carson craps out on his stock options. I like a happy ending!

On the road

If you don't know, you're missing out

I'm travelling for the next three days (obligations get in the way of life once again), and for quite a lot of that time internet connections aren't on the menu (wi-fi hasn't taken over LatAm yet, ya knowz). I'll be checking mails Wednesday, but don't expect many posts here between now and Thursday evening. Hope you have a great week. By the time I get back I want gold over U$950 and ARU in the $10s, please...see to it that it happens.

So what happens now in Ecuador?

All day this whole Acosta resignation issue has been gnawing at me. There's something strange about it all, and the Occam's Razor explanation of Acosta falling out with Correa and throwing a final hissyfit doesn't quite add up, imho. So here we go with some thoughts and a couple of hypotheticals.

In basic terms, what we're being told is that Correa and Acosta have fallen out because Correa insists on the 26th July deadline for the draft constitution, and Acosta insists on the process needing more time. Now this isn't any small-time law they're putting together here...this is a constitution....that's big stuff. So let's back up a second and see how we've got to this stage.
  • Mid 2006: Correa, Acosta and a couple of others form the inner circle of people to mastermind Correa's presidential bid.
  • November 2006: Correa wins the election, with one of his main promises being to change the constitution for one that is fair for everyone.
  • Early 2007: Correa, now President, effectively dissolves congress and calls a referendum to ask the country whether they should re-write the constitution. He wins easily. Correa's right hand man, Alberto Acosta, resigns his post as Energy and MiningMinister to run for and presumably head up the new constitutional team
  • Mid 2007: Elections are held to decide the members of the Constitutional Assembly (CA). Correa's Alianza Pais coalition party wins an absolute majority of seats.
  • Late 2007: The CA begins its work, with Alberto Acosta elected as president of the body.
  • Mid 2008: With the Assembly running behind its timetable to complete the draft constitution and Correa insisting that the 26th July is the definitive deadline, Acosta quits his post and throws the whole process into disarray.
So there are the bones of the timetable so far, and one thing I clearly remember about all the above stages is how Correa was given no chance, or little chance, or was taking a mighty gamble here or there or whenever with each step.
  • They said Correa&Co couldn't defeat Noboa in the presidential run-off..he did.
  • They said Correa&Co wouldn't be able to overcome his enemies in congress.....he totally outflanked them and left them hanging out to dry.
  • They said the referendum would be a close call...Alianza Pais won it 70% to 30%
  • They said Alianza Pais wouldn't get a majority in the CA. They won 81 seats of 130.
So, they're now trying to tell me that after all this process, after coming so far and fighting against what seemed like heavy odds against success, Acosta and Correa, close friends and battle-hardened colleagues, the two main figures of the inner circle of Alianza Pais, have decided to throw it all away on some procedural whim?

It doesn't add up.

So let's go back and imagine a different scenario, and it starts with a suggestion that Correa and Acosta have not suddenly become bitter rivals and enemies, but are still the close friends and confidantes that they've always been. Bear with me on this hypothesis, because I know it goes against what all media channels are now saying but that also reminds me of how much Correa despises his local media and tends to play them at their own games (though that's outside the scope of this post).

So let's imagine for a second that all this is not some drastic development that has ripped asunder the very fabric of Correa's grand vision, but it's what has been planned all along. That might sound a bit wack, perhaps, but think about this:

Correa has had to play a mighty fine balancing act to lead his centre-left to radical left coalition this far. Promising a re-haul of the constitution has been a popular theme of his campaign all the way through, and is probably the single issue that tipped the balance in his favour in November 2006, and it's certainly the issue that neutered the opposition congress when he took power back in early 2007.

But! As one person pointed out today in a comment on site, how did they ever expect to bring home a brand new constitution for a whole country in just six months? That's an incredibly short period of time to debate something so complex, in my opinion. But Correa maintained his popularity and the dynamics of his change by insisting on that tight schedule....put simply, it was a vote-winner. Is it possible that the inner circle knew all along that a tight six month timescale would never be practical? Is it possible that Correa and Acosta have cooked up this plan to prolong the CA procedure and delay the final vote until, let's say, next year? For one thing, I doubt Acosta will mind too much about losing the job of chair as he's on record in many places as saying he has no designs on higher office and would prefer to return to his preferred academic backwaters once the assembly is dissolved.

So the next few days will show whether my idea holds any water. We'll either see a clamouring for the return of Acosta, which will only happen if Correa "gives way to Acosta" and the CA is allowed more time to operate. Otherwise we'll be left with a CA led by current VP Fernando Cordero, a straight-and-true Alianza Pais guy who has already made himself unpopular at Montecristi by leaving aside Acosta's consensual approach and forcing through all resolutions as quickly as possible in order to meet the deadline. With Cordero, Correa is going to get the constitution he wants, and will then be taking an enormous gamble.

In the "Cordero leads and deadline is kept" scenario, the crunch comes on September 23rd when this rushed draft constitution goes to the national vote for approval. If approved, then Correa wins the pot, but if it is rejected the country (presumably) goes back to the suspended 1998 constitution, Congress regains all its powers and Correa's initiatives are all but stopped in their tracks. In basic terms, he'd become a lame duck president who fought and lost against the Ecuadorian establishment.

Right now, I have serious doubts on whether Correa will get "his" constitution past the people of his country. Even before Acosta resigned today, the polls suggested the vote would be tight. Correa is bound to have lost support from the radical left of his party today, who look upon Acosta as their standard-bearer. The indigenous groups are also very pro-Acosta, and have significant polling power come national elections. Dissent over the contents of a draft constitution from them will further water down the broad-based support Correa will need for his cause.

So this brings me back to whether this really is some extra deep plan. For one thing, with extra time on his hands before the big vote Correa's government will have time to seal the deal on the key oil deals, telephone contracts and the new mining law. Then if the constitutional changes come after that, Correa will (let's suppose) be able to point to the economic growth his policies have brought, especially in the sector of state oil revenues. The Acosta-backed constitution then sails through the vote, and we all live happily ever after.

All this boils down to the next few days. If Acosta gets his way, gets more time to run the CA the way he likes and takes back his resignation, it might look like a Correa climbdown, but it'd be one that serves him better than the status quo of just a few days ago. But if Alianza Pais ploughs on with the CA the way Correa wants, this really will be an enormous gamble on his part and also clearly show that there is indeed a rift between him and Acosta.

So there are two possible scenarios to all this, and I'd certainly agree that they're not the only ones possible. Also, there are myriad variation possible on just the two scenarios outlined above. I'm not trying to lay down "the right answer" here, it's more a case of looking beyond and trying to see further than the two-dimensional analyses we''ve been offer up so far. But one thing's for sure: Whatever happens from now, it's going to be fascinating. And I'd also venture to say that in both of my scenarios, foreign investors come out smiling. Why? Work it out for yourself, Eric!

More on the Acosta resignation

rough-hand sketch of Canadian brokers at work this morning

Oh, man...I haven't had this much fun on a Monday since that time the in-laws took all responsibilities to the zoo for the day and the wife said "come here, sexy".

So this Reuters note (in Spanish) has Alberto Acosta saying he resigned because of the lack of support from the Correa government, and specifically that Correa/his party wouldn't extend the deadline for the draft constitution. It also has a quote from Acosta that contains a jewel in its own right;

"..(my resignation) is irrevocable for the moment."

LOLOLOLOLOLOLOLOLOLOLOLOLOLOL!!!!!!!!! YOU CANNOT MAKE THIS SHIT UP, I'M TELLING YOU.

Maybe just as funny is the reaction from the Ecuador exposed stocks traded up in Canada. As you know, I follow Aurelian more than any other, and the low volume trading pattern just smacks of crooked market makers knowing their plan for the next few weeks is now out the window, but not sure whether this resignation is good for the stocks or bad.

Let's see: Mining law goes through that is friendly to the sector, but constitution draft is either a) scrapped, or b) delayed til next year or c) hurried through and voted down by the population....hmmmmm......tough call boyz!!! Now surely Correa and Acosta haven't come up with a plan to stop the treehugger blocks to economic development for a while? Nah perish the thought...let's just take the Reuters story at face value and not even consider that there's something else afoot.............

This afternoon the pantomime continues, when Acosta enters stage right at Montecristi. I bet you wish you spoke Spanish, right?

Alberto Acosta resigns as Assembly chief in Ecuador

Acosta resigns his job, and announces his intention
to become a helicopter pilot


Ok, this one is just plain funny. Remember that post I put up over the weekend that worked out that Ecuador's Constitutional Assembly had about four minutes left to do seventy-five thousand things before the whole shitstorm blew up in their faces? Well, it seems Acosta has done the same sums as Otto, too.

Alberto Acosta has just announced his resignation as head of the Constitutional Assembly (though he's staying on as a assembly member), and his reason is that he opposes any "hurredly written constitution". LOL!!! This dude has been arsing around as top man for over six months, and now...suddenly...he's seen a bit of reality. And rather than face up to the fact that he's responsible for this mess as top man, he bails!!! Oh, man...this one is priceless! Now, let's remember that just two days ago, this same body said that the draft constitution was "nearly ready". The only "nearly ready" we can expect from this is a "nearly ready for the Guayaquil mob to take charge again."

But more seriously, there is obviously a lot more going on behind the scenes in Ecuador right now. Some lightweight has pointed the blame at Correa for insisting last week that the constitution draft be handed in on July 26th, but he's surely missing the point here. Deeper things are happening. Watch this space for updates.

Inca Pacific's (IPR.v) news today is very good

The Magistral site. The copper comes from
the head of the valley


Weird timing. I revisit Inca Pacific (IPR.v) (IPRFF.pk) yesterday, and today the company announces another very positive piece of news. Kinda reminds me of what happened to GLQ.to when I posted on it*....nah....let's not dream down that lane today.

Looking down from the valley head

Anyway let's get down to business; the IPR.v news is very good, and here's the link to the company's press release. In a nutshell, IPR has been given a thorough financial and operational examination by the bunch of dudes at Pincock, Allen and Holt (PAH)....

These are serious, serious mining
dudes, and they like IPR


....and the result is a veritable thumbs up. What this kind of third party consultancy does is to take a magnifying glass, a telescope, a fine tooth-comb, a Geiger counter, a carbon 14 dating machine and whatever else they can find** to all the details of a project and try and find what they call "fatal flaws". In this case, although there are a couple of things that IPR needs to attend to (totally normal for a mining project), there are no such fatal flaws in the feasibility study, and these PAH guys know... cos they're good....and we know they're good. That's cos PAH work on all the world's major projects and have the topmost of top reputations in mining. Don't believe me? Well click on this and have a look. They're also the consultancy dudes that go to the banker dudes and say "hey, this project rocks" or "watch out dudes, that project sucks", and so with the positive approval shown by PAH in this report IPR is in a very strong position to move forward and secure project financing at the correct moment.

A moment I hope will never come, cos IPR.v still has "buyout" written all over it, and with luck that buyout will happen before IPR starts talking financing with some bank. On this point, the PAH report had another dose of very good news for shareholders (I've had a quick squint at the executive summary, as some fool mistook me for an executive). According to PAH, once the adjusted market values for copper and moly are taken into consideration the new NPV (net project value...aka what the joint is worth right here right now) is U$206m. Now that totally rocks, dudes, because with IPR currently having a fully diluted share total of 62.074m shares, this would mean that each share, right now, is worth U$3.32. If you compare that to the C$1.58 closing price on Friday, you can begin to understand why I like this company so much.

There's more to it than all that, of course. But in any buyout talks, IPR has an extremely strong case to say, "Look, Mr. Minebuyer...PAH totally rocks and is the best in this biz...and they say we're worth U$3.32 a share. So put up or shut up." And somewhat coincidentally (??), I'm pretty sure that U$3.32/share is just the kind of ticket price that block shareholder Eric Sprott will agree to.

So it beats me why you're still reading this post, frankly. Go buy some IPR. If you do, there won't be a single miner worth his salt that says you haven't bought a bargain.

*it was bought the very next day
**only joking

Message to three Ecuador-exposed shareholders

Thank you for the hate mail. Very constructive of you. I didn't realize you don't want to know about words spoken by the head of the constitutional assembly because the message contained isn't one that pleases you very much. I now realize you prefer to ignore anything that might affect "your" stocks (funny that one, isn't it?). I also realize you don't even want to consider a worst case scenario, even if that worst case happens to be acceptable from an analytical point of view. My, the brokers that have you as clients must love you! (The guys that sell you cars too, for that matter....and houses...and insurance...)

Anyway, just wanted to tell you to go screw yourselves. So go screw yourselves. You honestly think this blog can move markets? Gimme a break! You don't have the first clue about what you're up against in the world of stocks, do you? If you have another bile-filled response, then tell it to the guy you sit next to when you're drinking your beer. Write to me again and I'll publish your e-mail addresses and let the spambots do the rest.

6/22/08

Alan Garcia sucks as President: Official

If you're tuning in, Evo: A young, thin
and anti-imperialist Alan.

Reuters ran a note on the new Peru (dis)approval ratings today (here it is, in Spanish), and it makes for interesting reading. The headline number of 30% approval for Alan means he's lost 5% since last month. If we look at how his approval has developed in the last 18 months.......

....it's clearly more likely that last May's bump was the exception to a pretty dire rule.

The reasons mentioned in the Reuters note for Peru's crappy view of its president are numero uno cos prices are rising, and numero dos cos Alan's a liar, his pants are on fire and he hasn't kept his electoral promises. There was once a two-time president famous for cheating on his wife who had a smart catchphrase, "it's the economy, stupid." In Alan's case, only the word "stupid" does not apply. We'd have to change it to "arrogant lying dick".

Lastly, the Reuters reporters noted something very interesting in this month's survey; 69% of Peruvians approved of the insurrection (Alan's word) in Moquegua last week that at one point had between 60 and 100 police officers as hostages and finished with the gov't conceding heap loads to the protesters. Shows you where Peru is going under Alan, no? In this final link right here Reuters Lima correspondent Terry Wade looks in more detail at the problems facing Alan and Peru, and it's a good resumé of the current situation, imho. Go have a look for yourself. The bottom line is that if fatty doesn't start making a real difference to the lives of the people left behind by the nominal GDP growth of the last 6 years, you can kiss the rule of law goodbye.

Eric Sprott and Inca Pacific (IPR.v)

Say cheese, Eric

I like Eric Sprott. A straight shooter, a darned good stockpicker, a successful investor. You know where you are with the Eric dude. So the fact he owns a tad under 50% of Inca Pacific (IPR.v) can only be a good thing, right? He originally took a 50+% position there, but at no point asked for a seat on the board or tried to put one of his dudes there to dictate matters. He basically said, "I like the deal, I'm buying in, now go make me money." And since then he's doubled down on IPR by buying large chunks of the subsequent placements. No doubt he still likes the company.

Thus knowing that Eric sees Inca Pacific and its large copper/moly project at Magistral in Peru the same way as me keeps me warm at night, but there is a downside. Sprott isn't the kind of dude who will sell his stock back to an eventual buyer for a 10% gain or similar; in my opinion he won't part with his large chunk of IPR for under $3, and even then I'm probably lowballing the deal. So with the stock fiddling around the $1.50 to $2 range, a potential buyer will not be interested in paying such a high premium to current market value, methinks.

It's a bit of a catch 22, no? The low volumes and low profile of IPR mean it doesn't get the hype machine revved up behind it. But on the other hand, the largest (by far) of the shareholders knows IPR.v is worth a lot more than the current PPS and has the zen-like patience to wait until the rest of the world works it out.

But fortunately, the story of this junior won't be one that drags on for years, as there are a couple of natural deadlines coming. The next one will be when the environmental study is (presumably) approved and the project goes for funding (it's had some positive comments from guys in suits), and the final limit is the 2011 date the gov't of Peru has put on the project; basically use it by then or lose it....and nobody's going to lose that much copper and molybdenum to a piece of legal paper. But by then, IPR.v is bound to have sold out, and that is bound to be at a price that Eric Sprott likes. Even now, there are several miners that have made it pretty clear to the local jungle drums that they're interested in IPR. I don't know how far down the line any takeover offer is right now, but I know I can wait until it (or even they) come along.

So as mentioned before, keep IPR.v on your radar. And while I have your interest in the stock, go have a look at its website, linked right here.