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8/23/08

Good weekend reading from respected bruddasites*

Borev megasnarks (as usual) its way through the 329 non-com extrajudicial killings recorded in Colombia in 2007. The 329 killings represent a 47% increase on 2006. ¡Vaya proceso de paz!

Jurgen Schuldt points out the obvious thing that all the Peruvian politicians seem to miss about inflation; it's easy to pump having the lowest inflation in South America if you violin the numbers enough, but if wages don't rise the population is still screwed.

The Mex Files points out the obvious about the US border patrol; they are dickheads with zero compassion. Great story to prove it, though.

Memory in Latin America notes that the ESMA building once used as the main clandestine torture and murder in Argentina's Dirty War period has now been declared a national monument. Lest we forget....

Inside South America covers the ongoing clearing of Chile's border landmines, laid in the Pinochet period. Two notes and a good reminder that things really are getting better. Also gives a worthy salute to the brave but almost anonymous soldiers that do the tough clearance jobs.

*and sistasites, Lillie. Respect.

Anatomy of a Canadian Stock Promotion (part 4)

Now that we have 'marked' the object of our study as Dorato Resources (DRI.v), it's time to start looking at the details of this particular stock promotion.

Today we'll look at what the DRI.v project location has to offer the world, and we'll leave some of the drawbacks of the project to part five. In fact, now is a good time to point out that we'll be taking the whole story piece by piece over various posts. This is because there's plenty of time to set the scene on this stock as the high point of this promo isn't expected until early 2009. So today we'll concentrate on the ostensible advantages of DRI.v as a stock...it's 'selling points', if you like.

As mentioned in part 2 of this series, perhaps the most important part of a successful stock promotion campaign is that the company in question has believeable content. As written previously, Dorato Resources has taken control of a large geographical area that will almost certainly return excellent drill results when the time is right. It also has positives on its geological location, absolute size of concessions held and low relative political risk to peers.

Here in bullet point form are four of the strong points that the company will use to sell its project and location to the retail crowd in the months to come:
  • In the 'Cordillera del Condor' region, home to deposits such as Aurelian's Fruta Del Norte (FDN) project.
  • On the Peru side of the border, thus in a 'mining friendly' country.
  • Undeveloped mining territory of great promise
  • Large concession area, with five identified early-stage targets
There will be other promo points of course, but we'll cover things like the association with Franco Nevada, the region team of experts, the exploration covered by good cash at bank etc in future episodes. Today is just the project targets. So here we can see a few maps and charts all taken from DRI.v filings. This first one...........

(click to enlarge)

....outlines the geographical area involved. The DRI concessions lie right on the border between Peru and ecuador, but are all on the Peru side of the international boundary. We can also see how DRI is quick to point out the proximity to major gold and copper deposits/districts/projects etc on the Ecuador side of the border (marked with red and gold dots and stars).

The map also points out the so called "Anglogold Targets". This is because DRI.v might (or might not, we shall see) be keen on saying it's "discovering" the region, it won't be going in to the region totally blind. In 2003 and 2004, Anglogold explored the region and mapped out the five targets with asterisks on the map above. Incidentally, the findings of Anglogold largely agreed with an earlier exploration done by a company called Metalfin in 1993 and 1994.

Here is a second map that shows the five targets in closer detail.....

(click to enlarge)

...and for the moment, I'm going to concentrate on the same target that has been pushed to the front of the queue by Dorato itself, namely the "El Tambo" target (number 1 on the map). This is because in its press releases and exploration plans, DRI has said it will aim at "El Tambo" first. I think this is because El Tambo has been the best mapped of the five targets so far (by both Metalfin and Anglogold) and offers a close to guaranteed target. Something like 17 veins have been identified at the target, and previous rock samples have given gold returns that average 10 to 11 grammes per tonne, but also returns of up to 45g/t (about an ounce and a half). This is pretty important for a stock promotion, because the company will have a very, very good idea where to drill its first hole to return eyecatching assay numbers later.

This last chart...
(click to enlarge)

...is the simplified sketch of the El Tambo target. As well as other important details, it shows the main identified veins as pink lines and the position that Anglogold proposed for the first two drillcores. The point of this more geological sketch is not to blind the non-geologist with science but to show that people who know about these things have already been here and they know quite a lot about what's on offer already (as mentioned this week, although I have picked up quite a lot along the way, I'm not a geologist myself nor do I pretend to be).

So what we have here is a company that knows it's going to find gold when it sticks its drills into the ground. This is underlined by the fact that local artisan miners (often known as 'garimpeiros') are active in the zone. Be clear that garimpeiros might use primitive techniques, but they are by no means stupid. They wouldn't mine a zone where there is little gold available. Period.

So when DRI.v finishes its current "Phase One" exploration and moves to the drilling program of betwen 14 and 24 drill holes envisaged in "Phase Two", the sampling done by the company along with the previous explorations should get them "on target" with the drill, and in position to return some sexy-looking gold returns. By the way, it should be pointed out that phases one and two will cost the company (i.e. its shareholders) about U$4.5m, this hefty figure due to the fact that the region is rather inaccessible and the project needs plenty of helicopter support. More on that little detail later.

Thus ends the background to the Dorato Resources projects from a positive point of view. The next post will look at the drawbacks the same projects present, which is information less likely to be freely available from the company going forward.

Related posts
Anatomy of a Canadian Stock Promotion (part 1)
Anatomy of a Canadian Stock Promotion (part 2)
Anatomy of a Canadian Stock Promotion (part 3)

Disclosure: I would like to remind you that at no point will I make any sort of recommendation to buy or sell any DRI.v securities. I would also like to make it clear that to the best of my knowledge the promotion techniques used and to be used by Dorato are totally legal. Finally, I would like to make it clear that I am not passing any moral judgement on Dorato Resources, and will try to avoid any insinuation of judgement in future posts in this series. The aim is to educate readers about some of the ways promotion campaigns are used and the company structures behind them.

Reactions to the overturning of Peru's "Law of the Jungle"


Quotes from the people involved, with no comment from Otto necessary:

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Rosario Fernández, Minister of Justice:
If this issue arrives at Parliament with a pistol aimed at its neck and what Congress does is react by overturning the law, the message to citizens in my opinion is very bad, because it teaches them that things work like this." When asked whether the administration would recongize the overturning of the law, Fernández replied, "We're still thinking about it."

Jorge Del Castillo, Prime Minister and Cabinet Chief:
"I believe that today Perú has lost a great deal, today Perú has taken a step back in at least this part of Perú, and therefore what will happen when investment capital arrives is that it won't go there and will stay in the coastal regions. It will stay in the zones where the community doesn't represent a blockage to progress."

Bryce Pérez, indigenous leader and ex-council of the Amazon regional government:
"The native peoples have greeted the news with great happiness. For the first time in our history the indigenous have put on an indefinite national strike and have won a victory."

Alejandro Toledo, ex-President of Perú:
"It doesn't seem very prudent to me that in the name of badly interpreted modernization they want to govern by decree, trying to imitate the Fujimori government. For me, it is terrible that while in the world there are policies that protect the environment, here they try to sell land belonging to the Amazon communities."

Alberto Pizango, leader of the indigenous strike movement:
"Perú has taken a great step forward towards respecting a true democracy. The peoples of Perú, be they indigenous or not, have again demonstrated that it is possible to stand up for our rights, for dignity and for long-term sustainable development. This is a new dawn for the indigenous peoples of the country."

8/22/08

One in the eye for Twobreakfasts and the US Free Trade Agreement

Alan Garcia's attitude towards his fellow Peruvians, as explained by grancomboclub


It took a coordinated campaign by those who were affected by President Twobreakfasts push to sell Peru on the cheap and on the sly, but the indigenous populations who closed down strategic petroleum installations last week have today won a significant victory.

This afternoon Peru's Congress overturned two laws that would have allowed the easy sale of native lands in sensitive Peruvian jungle areas. Known as the Legislative Decrees 1015 and 1073 (and known colloquially as "The Laws of the Jungle"), they were part of the package agreed with the USA in the Free Trade Agreement passed this year.

It was a classic (and close to literal) case of "the squeaky wheel gets the oil". Despite ongoing protests, marches and suchlike by populations in the Amazon Basin, their cause was totally ignored by the Twobreakfasts & Co until they stepped it up took over strategic hydrocarbon installations and threatened to cut off supply to Lima and the coast. Suddenly these people were classed as near terrorists, and one indigenous leader was given a extremely racist and biased interview on National TV where the whiter-than-white (literally) interviewess/Limeña bitch basically asked him "why are you so brown and stupid?" in 17 different ways.

But people power has won the day, and the Lima idiots will have to STFU for once. Tonight the local populations are chanting "the people, united, shall never be divided" (in Spanish, of course), and have stuck a great big one in the eye of Garcia, who had previously said that overturning these decrees would be an "extremely grave historical error". Wrong, Twobreakfasts. The mistake is yours. Listen to your people for once and see your own grave errors.

Interestingly, the grounds for today's overturning by Congress was that the two decrees are unconstitutional. It just shows how far the García (and Toledo before him) gov't was prepared to bend over for the gringos in order to seal the free trade deal. And while countries such as Ecuador go to the people with a new constitution and allow them to decide democratically whether to adopt the new Magna Carta, countries such as Colombia and Peru simply try to ignore their own by Presidential decrees.

Feel free to ignore this post, cos you've been told who are the democratics and who are the dictators already. What could a guy who actually lives down here know that Fow News doesn't? And feel free to ignore the popualtion of Peru that gives Twobreakfasts 22% approval. I mean, what do they know anyway, All ignorant brown people, right?

So much for a Bolivia torn in two

El Duderino at Abiding in Bolivia got the map.

Bina at News of the Restless got the map.

Now Otto got the map, and even the less perceptive among us (e.g. US based political scientists, sycophants of US political scientists who enjoy sending hatemail to bloggers, English language journalists covering Latin America), should be able to grasp the meaning of this map.

This makes me think: What would be the definition of a Obama or McCain landslide victory? Would 67.41% of the vote qualify? Would this much landed area qualify? And importantly, would Barack show the restraint of Evo if Texas decided to block roads and stop cattle shipments just cos they didn't like how the election panned out? Same goes for McCain and Boston (or somewhere...not so many cows in MA, though).

related post
The Bolivia Recall Referendum: Final Numbers and Analysis

UPDATE SUNDAY MORNING: Here's an alternative version of the map, sent to me by a friend and found on the site okrimopina.blogspot.com. It shows the percentage strength of Evo votes per province. For example, it show the Evo "NO" vote beat 70% in just two provinces, while the Evo "YES" vote beat 70% in 61 provinces.

Chavez sez Bush wins gold medal for drunks

Wow, Hugo says something bitchy about Dubya...that's a new one.

This time, Chávez says that Bush deserves a "gold medal for drunkards". "Impressively pissed!" was another line as he showed these photos of Dubya on Venezuela State TV. The H man also said he thought it was some kind of Photoshop trick at first.

Expect the usual BS thrown from one side to the other in the next few days.

Trading Post (non-mining edition)

Grupo Clarin (GCLA, available on the London and Buenos Aires stock exchanges) is up sharply this morning, as it seems the powerful media group has kissed and made up with the Kirchners and is now in a good position to consolidate its lion's share of the Argentina cable TV market when the new "radiodiffusion" law goes through. The stock has sold off heavily in the last three months and is an interesting option to play the period of "Argentine calm" we're now entering.

Staying in the media sector, Brazilian Net Servicos (NETC) has been a thorn in my side. I've entered twice in the last couple of months and twice bailed at a 10% (or so) loss. Now that the larger houses (eg the Morgans) are sniffing around EM service sector stocks and calling them value, NETC might get the pickup I'm looking for. Solid fundamentals haven't changed.


Cosan (CZZ) the Brazilian sugar and ethanol play is back at the low $12 level after its recent pop. The chart suggests a trading range, and any strength in sugar will reflect well here. One to use as a trading vehicle rather than a long-term hold.

Credicorp (BAP) at $69 has been slammed recently. However this Peruvian bank is showing great reveneus growth (as is the whole Peru banking sector) and this quarter promises to get that growth to the bottom line now that currency losses have been washed through (the peruvian sol (PEN) has been relatively stable recently). Good value entry point here or hereabouts.


8/21/08

Peru evolves from Banana Republic to Flambeéd Banana Republic

In the neatest bit of Bistromatics* seen in Latin America so far this year, Peru's new finance minister, Luis Valdivieso, showed once and for all that the so-called fundamental structural changes so lauded by the international community are just so much bull. However much the country might grow, the people who run the shop will eventually drag it down to its historic banana republic status (though perhaps due to the application of Bistromatics we might be generous and serve the bananas as exotically flambéed these days).

In the course of his presentation today, Minister Valdivieso managed to say that:
  • Public spending is too high.
  • There are no plans to reduce public spending, as Peru needs to build its infrastructure.
  • The same public spending is inflationary.
  • Inflation, currently running at 5.7% in Lima+Metro (or 9.25% nationally) will finish the year at 5.8%.
  • In other words, although public spending is pushing inflation and although that spending will not be cut, there will be just 0.1% of aggregate inflation in the last five months of 2008.
  • Not only that, but according to this joker inflation will drop to 3.5% in 2009.
  • And to cap it all, because there is no inflation, there will be no pay rises in the public sector. Neither will there be a rise in the minimum wage (currently U$190 per month). Not needed, you see.
The funniest thing is that El Comercio and other supposedly 'serious' newspapers in Peru will tomorrow run their own "how clever we are to be sensible about things" story to cover this total balderdash. These guys make Dubya look good at sums, I'm telling you.

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*Bistromatics was created by Douglas Adams in the "Hitch Hikers Guide to the Galaxy" series. For those unacquainted with this important mathematical theory, here is the definition of the term:

The Bistromatics Drive is a wonderful new method of crossing vast interstellar distances without all that dangerous mucking about with Improbability Factors. Bistromatics Itself is simply a revolutionary new way of understanding the behaviour of numbers. Just as Einstein observed that time was not an absolute but depended on the observer’s movement in space, and that space was not an absolute but depended on the observer’s movement in time, so it is now realized that numbers are not absolute, but depend on the observer’s movement in restaurants.

The first nonabsolute number is the number of people for whom the table is reserved. This will vary during the course of the first three telephone calls to the restaurant, and then bear no apparent relation to the number of people who actually turn up, or to the number of people who subsequently join them after the show/match/party/gig, or to the number of people who leave when they see who else has turned up.

The second nonabsolute number is the given time of arrival, which is now known to be one of the most bizarre of mathematical concepts, a recipriversexcluson, a number whose existence can only be defined as being anything other than itself. In other words the given time of arrival is the one moment in time at which is impossible that any member of the party will arrive. Reciproverexclusons now play a vital part in many branches of maths, including statistics and accountancy and also form the basic equations used to engineer the Somebody Else’s Problem field.

The third and most mysterious piece of nonabsoluteness of all lies in the relationship between the number of items on the check, the cost of each item, the number of people at the table and what they are each prepared to pay for.

Numbers written on restaurant checks within the confines of restaurants do not follow the same mathematical laws as numbers written on any other pieces of paper in any other parts of the Universe….

Venezuela's getting catty

International reaction to the stunning discovery of sabre-toothed tiger remains in the Monagas region of Venezuela has been quick in arriving. According to AP,

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CARACAS, Venezuela - An ancient tar pit exposed when Venezuelan oil workers laid a pipeline has yielded a rich trove of fossils, including a type of saber-toothed cat that paleontologists had never found before in South America. Scientists say the find holds the promise of many discoveries to come. (Continues here)
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According to Fidel Castro, it is "...no surprise that these remains have been found in the foundation years of Venezuela's glorious Bolivarian revolution."

In a hastily convened press conference, President George W. Bush said, "The discovery of these remains proves that the lands of Venezuela were full of predatory creatures long before Chávez came to power."

US political scientists were quick to point out that we should not necessarily applaud nor condemn the extinct tigers for being trapped in the tar pit where they were found, but we should try to understand their mindset and general attitudes in order to promote peace and understanding amongt all mankind.

In Peru, on being surrounded by a press entourage President Twobreakfasts was quoted as saying "Whatever George said."

In Canada, shareholders of Crystallex took the annoucnement as a clear signal that the Environmental Impact Premit for the company's Las Cristinas project would be granted. KRY finished up 40% on the day.

In Paraguay, President Lugo's reaction was to stop smiling and ask whether the tar pit found to contain the animal remains was the one that Paraguay would be getting its free oil from, and would this cause a supply problem going forward. He then resumed smiling.

Meanwhile, commentators from the Miami Herald, New York Times, Fox News and International Business Daily were all unanimous in calling for the immediate invasion of Venezuela by US troops to solve the problem.

Friends in high places

Mario Uribe, with pre-jail bouffant hairstyle

Remember this face? That's Mario Uribe Escobar, the ex (?) Congressman of Colombia who was arrested four months ago for presumed connections with right-wing paramilitary death squads. Mario is also famous for being cousin and close advisor to President Alvaro "dubious past" Uribe, of course (and admit it, "Uribe" and "Escobar" is very cool combo of last names, no?).

We remember that four months ago on hearing about the warrant for his arrest, Mario behaved bravely and acted like a man convinced of his own innocence. He immediately ran to the Costa Rica Embassy in Bogota and begged for political asylum. Only when the Ticos kicked him out the building was he eventually canned up.

Here we are a few months down the line, and the Fiscals have decided that the evidence from famed paramilitary supergrass Jairo 'Pitirri' Castillo just isn't enough to keep Mario in jail. This is strange, cos Pitirri's evidence in exactly the same circumstances has been enough to put dozens of high ranking politicos, army guys and bizpeople behind bars so far.

What's Mario got that the others don't have? Oh yeah...nearly forgot.


Shock Horror News!!!!!: Peru mainstream politician tells truth about inflation

It comes to something when the rich Lima families care more
about the poor in Peru than a supposedly left wing
party like APRA. ¡Pachacuti!


Víctor Andrés García Belaunde is an estabished figure in Peruvian politics. As well as heading the "Frente de Centro" (centre front if you like) party in Congress, he comes from a long line of family members in Peru politics. Last names Belaunde and Diez-Canseco are common in the history of la politica Peruana and are all blood relations of Victor. Basically, more "Lima upper-middle estabishment family" is impossible to imagine.

So it's good that a dude like Victor has finally said what the smarter economists have been saying for a long time now, cos it's only when people like the Belaundes say these things that the rank'n'file take notice. Today, García Belaunde attended a Peru Central Bank (BCRP) presentation, and on being able to get his own dos centavos on the table said the following:

"(The Central Bank) has estabished something that goes unsaid; inflation in Peru is not 5.7%. This number is for Lima. Infaltion in Peru is not 5.7%, the national average is 9.25%. This is a lie that needs to be corrected and denounced. We are talking about double digit inflation in nearly 13 departments; this is very serious and the government says nothing about it."

YAY! Damn straight, Vic! García Belaunde continued by talking about the burden of food price inflation on the poorest sectors of Peruvians. "In June inflation was 0.77%, but food proce inflation was 0.48% (of that total). We can prove that the effect of food on inflation is 62% and those that suffer most are those that have the least." Correctamundo, Fonzie! He also said (quite correctly) that many basic foodstuffs have risen more than 100%, and this inflationary pressure had nothing to do with the price of improted goods such as wheat or oil.

He then got as close as one Peruvian criollo establishment figure will ever get to calling another establishment Peruvian criollo a barefaced lying sonofabitch when he said that the Julio Velarde (head of the BCRP) "has said things that are not exact" in his presentation. García Belaunde then finished his "j'accuse" session on a strong point, by stating that the Finance Ministry and the BCRP don't seem to be coordinating their efforts very well, which in the obvious stakes is on a par with "Alan is looking a little chubby these days."

What's so funny, lardarse?

Hopefully this will open the debate on inflation further than the present mediocre Twobreakfasts administration have allowed so far. Those pig sick of hearing the blatant lie about Peru having the lowest inflation in South America (include Otto in that list) have reason to cheer the establishment today. In fact, the only statistic worth its salt in Peru these days is the Presidential approval rating, and how up to 22% can still support Twobreakfasts is kinda suspicious in itself, frankly.

Advice on reading drill results press releases

I had a conversation yesterday with a friend who pointed me towards this press release from Alturas Minerals (ALT.v), an explorer-stage mining company with plenty of exposure to Peru. The PR was on drill results from its Huajoto property, and my friend asked me my opinion of the results (as although he's interested in the sector, he doesn't obsess on it like your wonky Otto). The conversation that ensued is the basis for what's below.

This is a checklist of things to think about when reading a drilling result/assay result/lab mineral report press release. I'm also going to (perhaps unfairly) pick on the Alturas Minerals PR of yesterday to illustrate the points.

1) Firstly, and the most important: I'm not a geologist. Where I'm coming from is a diferent angle altogether, and once the knowledge needed is of the scientific variety I'm the first person to throw up my hands, say "dunno dude" and seek professional opinions from people who know 1000 times more than I do about breccias, skarns and suchlike. If you're not a geo, do the same.

2) One of the first things to do is check the share price action, because if you don't know how to interpret drill results, you can bet your sweet bippy that there are several guys in Canada (for example) who make their living due to the fact that they can. In the case of ALT.v....

....neither the PPS action nor the volume make me sit up and take notice.

3) Next, try doing some calculations for yourself, however rough'n'ballpark they might be, to see what's being talked about here. In the ALT.v case, let's take the headline 2.24% zinc returns (over 48m) as our baseline (which is Utopia in itself for myriad reasons, but this is basic exampleworld). So with other metals being marginal at best, the rock that was drilled is very much dependent on whether there's enough contained Zn to make it interesting. Here we go;
  • 2.24% Zinc means for every metric tonne (MT) of rock there are 22.4kg of Zn. This works out as a touch under 49lbs.
  • When processing, let's assume recovery rates for the Zn at 85% (which is typical for the whole industry, but a lot (i mean a LOT) depends on a thousand geological or metallurgical factors. If the ballpark calculations pass muster, this is one of the moments I get in touch with a real geologist/metallurgist, and you should, too).
  • So we can say that for every MT milled, the company gets about 41.6lb Zn.
  • Now we look at the current price per Lb of Zn. Right now that's $0.83/lb. Therefore, that 41.6Lb Zn is "worth" $34.57.
  • Now the next ballpark is to guess cash costs per MT of rock. To keep myself on the conservative side I tend to use $55/$60 per MT right now, but it can be lower (example, FVI.v has a non GAAP cash cost per MT of $46 right now).
  • So with a potential ballpark revenues of $34.50 per MT, and my potential ballpark cash cost per MT of $60, I'm not salivating about this assay return. Not even with those potential rare earths returns. Sorry guys.
4) Away from the actual factual content of the press release, there are other things we can understand, too. The "way" in which a junior miner releases drill results speaks volumes about their attitude to the market. Back to the ALT.v case, the people are drilling 3,000m of holes in the current program, but are for some reason anxious to immediately release the first 300m worth separately. This gets my red flags unfurled, it must be said. It is impossible (repeat 1000 times 'impossible') to have any good idea about an orebody, project or whatever from a single drillcore. I therefore ask myself, "Why is a whole bunch of geologists who know better than I do so eager to tell me about a single hole?", and unfortunately 99 times out of 100 the answer is a close variant on "They're playing to the retail crowd."

5) Following on from point 4), if it's a "play to the retail crowd" you're up against, you NEVER know how such a junior will drip info to the market. Have a look at this link, which shows the whole target area of the project and the single drill hole reported so far. Now think on this little list:
  • It's easy even for a non-geologist to see that there are plenty of other areas that need to be drilled at Huajoto.
  • We humble investors, sitting in front of the computer screens, know about 1/1000th that the on-site geologists know about the area in question (OT: which is why I like doing site visits, by the way).
  • The company has a very good idea before they stick the diamond bit into the ground which areas are most promising, which are possibles and which are more likely to return dusters.
  • Upshot: That first hole might be the best there is on site. It might be the worst. It might be typical. WE DON'T KNOW. However they do. And maybe they want us to read about a mediocre result the first time round on this site so that market expectation is dampened. Maybe they're being totally straight with us. WE DON'T KNOW.
  • However at the risk of repeating, it's impossible (repeat 1000 times 'impossible') to have any good idea about an orebody, project or whatever from a single drillcore. I therefore ask myself, "Why is a whole bunch of geologists who know better than I do so eager to tell me about a single hole?".
6) The above five points are a beginning. Once you begin to read more drill results, other important factors start jumping out at you and you learn more (eg type of rock, what the word 'disseminated' means, why the angle and azimuth of the drill hole is important, what 'manto' is, why the depth of the assay return is so important etc etc etc). It's just a case of education, and as so many people have proven over the years, to be educated it's not necessary to be intelligent.

Bottom line: I do feel like I'm picking on Altura Minerals a little unfairly, because there are hundreds of other companies that would serve as equally valid examples. When it comes to junior miners, my job often feels like weeding out the 95% of ho-hum companies to find the 5% or so of companies with real promise and bright futures. And when it comes to reading PRs (and believe me, i read dozens of them every day), if the company doesn't "feel right" I just walk away. Over the years I might miss a few star buys by filtering this way, but I guarantee that it filters me towards the majority of "good ones" much more quickly and efficiently.

buy at the bell


Ka-chow!

Zinc is the most beautiful of all. You know all the Zn exposed stocks that I follow by now.

UPDATE 40 minutes after the bell: Lots of my friendly stocks doing very friendly things this AM. Too many to list properly, but BWR.to worth a special mention (i bot at 0.245). Also climbed back on board PCU at 25.2 at the very open. I'm kinda kicking myself i didn't hold yesterday, but it was the right decision. Note in passing that an ego-trader would have resisted buying PCU higher than a previous sale because s/he'd "wait for it to come down to where s/he'd sold it" . FWIW, noise from the LME is positive, with solid buyers stepping up, I'm told.

8/20/08

An object lesson in how to screw retail sheep

This is the five day chart of a Canadian junior mining stock with South American exposure, and shows the trading action via 15 minute candlesticks between last Thursday morning and the bell today.

click to enlarge

This was the "news release"
This is why it sold off the next day
This was the "last chance to sell"

Moral of this story: The small retail investor can either AVOID these crooked stocks, or give their money to people who will always be one step ahead. Your choice.

Trading Post (sniffing value edition)


Southern Copper (PCU) at $24.58 decided to keep going up after I sold my chunkette. I'll console myself with Bernard Baruch's, "I made all my money by selling too early."

Dynasty Metals (DMM.to) zooming today, up 17% at $2.65. Otto didn't put his money where his mouth was Monday (I quote myself; "Dynasty Metals (DMM.to) is really catching my eye at these low, low levels.") Otto didn't buy at $2.30 (or even less). Otto kicking himself. Otto stupid.

Mansfield Minerals (MDR.v) continues the fightback, with bid $1.05 and ask $1.10. Worth much more than either those prices imho.

Petrobras (PBR) up 4% at $52. These prices that swirl around the $100 pre-split look more reasonable to me, now. I'm still neutral on the stock, but I did enjoy Banco Itau's comment today that PBR "will need a miracle" to hit 2008 output forecasts. Over-promising is so typical of Brazil industry; now that the world markets are exposed to their ways serious people will suddenly start noticing. Tudo bem....

Telecom Argentina (TEO) flat at U$13.30. I have my eye on this one again, as the PE is tempting and Argentina looks like it's going to enjoy a politically quiet period , at least for a few months. The only thing not to like about TEO is the country in which it mainly operates.

Colossus Minerals (CSI.to) down a notch at $2.33. A bit lower and I'm a buyer. Today's PR seems like a headsup primer for the drill results to come.

nineteen point three zero seconds

He had his shoelaces tied up this time

Unashamedly nothing to do with Latin America stocks, economics, politics and stuff like that. The greatest sprinter to have ever walked the planet (and it looks like there's plenty more to come). I salute you, Usain Bolt.

I've been trying to understand Fortuna Silver's PPS action

When any company, not just FVI, issues several news releases that contain substantive and positive developments on several fronts, the prices for its products recover and the share price proceeds to dump by up to 20%...

.........there's something a bit odd going on. In this FVI case, the first thing that goes through my head is "darnit, i was wrong about this". The second thing is to try and figure out what my mistake was (for future reference, y'see). Just to recap, here are the recent significant developments at FVI:
  • Last Thursday (Aug 14th), FVI announces it is buying out Continuum Resources (CNU.v), the minority partner in its San José project.
  • Last Friday (Aug 15th), FVI releases 2q08 results showing a net profit, good cash flow, and on-track production growth at Caylloma. Guidance also positive.
  • Yesterday (Tuesday 19th August), FVI releases excellent drilling results at two of the untapped veins at Caylloma (but maybe the market doesn't really understand the significance, JG).
Also, if we use SLV (the silver ETF) as our proxy we see the metal's performance has no real influence on the FVI share price action in the last couple of days:

So what's going on, Marvin? Right now I'm at supposition stage, but I've bounced ideas off people with brains as well and there seems to be something going on with the arbitrage deal that CNU.v has to offer. With the all share deal of FVI putting up 7m shares to take over CNU's 124,052,503 (plus 285,000 options at pro-rata), the 0.0564-shares-for-one-FVI throws up the chance to make a difference on the arb while the acquisition is still going through.

With FVI at $1.05, CNU "fair value" is at 5.9c or so, which is a mile away from the 7.1c per share it stood at when the deal was first announced. So the idea may be to batter FVI down, scoop up as many cheap CNU as possible in the meantime and then let all boats rise once the deal is through.

Another, similar, idea was sent to me by a good brain today who said, "only thing i can think of is CNU shareholders are shorting fvi because FVI has greater liquidity than blowing out CNU", which is also a fair theory to bounce around. But whatever it is, it's not the free market at work here, of that you can be sure. I have nothing particularly against that as my FVI are tucked away in the long term basket with no sweats at all, and right now (due to the move to cash from a couple of weeks ago) there are none in the ST port. FVI's action right now is one of those market inefficiencies that we investors are constantly on the lookout for, so being wrong about the short-term PPS action is just fine as long as it's not a case of being too wrong for too long.

Disclosure (the same one as always): I own, they advertise here. They started long after I started.

This is what I've been trying to tell you about copper

But now somebody serious is saying it, you might start to believe. From Bloomberg today, some trader dude named Frank Zhou:

"There has reemerged a lot of appetite for London copper these days,'' Zhou said over the phone. "Demand from these inquiring buyers is quite inelastic as they are users, not speculators.''

As for the stocks to play, although I'm doing fine with the PCU trading block purchase yesterday, there's not much doubt that I picked the wrong horse and FCX was the better trade.

So be it. But a win is a win, and anytime you can squeeze out a profit in this market is a time to be content. FWIW I think there's more short-term upside in PCU and i'm not letting go yet. Spot copper holding (or not) is the ST momentum key.

Meanwhile check out the continued upside on Zn. If I've made you think zinc recently, think BWR.to, too. We sold well last time, and it's sunk way way down on renewed speculation that it'll have to mothball some operations. If zinc puts in a sustained rally, this level is a nailed on long trade.

UPDATE: When Copper sank to $3.48 I took the $24 ofered on PCU. A small trading profit, nothing serious. Cash remains king here, but the base metals complex (though fading today) does look much perkier than just a week ago.

Signs of loosening purse strings for junior miners

Two similar news releases hit within a couple of hours of each other yesterday, both kinda pointing an arrow at that "hey, this really is the bottom" idea that is now solidifying in my mind thanks to the cost fundamentals and the dollar shenanigans noted in previous posts (and this time I'm not linking any past articles...if you care enough you'll go look anyway and if you don't I don't mind).

Firstly, about an hour before the bell Atacama Minerals (AAM.v) reported that it had raised a cool $50m via a $1 placement of stock. Atacama is an established iodine producer and is now moving in the potash/nitrate sector, with its main project in Chile and a recent acquisition in Brazil. It's one of those comanies I've had my eye on for quite some time without diving in, but if (as I expect) the potash/nitrate market picks up in the medium term, there's a whole bunch of value waiting for investors here. Placing $50m worth of stock at $1 in current market conditions isn't so very easy, so there are obviously plenty more that think the same way about AAM.v.

Then minutes after the bell yesterday, Vena Resources (VEM.to) (one of my sweetheart long term stocks) announced it had put together a $3.5m placement at 50c (with a half warrant kicker at 60c attached). This might not be so sparkling in absolute cash terms, but when your stock has been bouncing around in the 40-50c range while trying to place at 50c, it shows there is still large money that wants to buy chunks of promising juniors like VEM without the hassle of wading through the licensed crooks in suits that run the Canadian wild west venture exchange. Also, there's the basic fact that VEM doesn't need to raise 50 large ones.

All very interesting, I thought. And what with the tepid jump in commods and the tepid drop in the dollar, I can see ducks starting to come into line. Buy 'em when nobody's talking about them, yeah?

Lula sez: "I've never been so disgusted"

What might this be? Some internal corruption scandal? Another horrific mass murder in the favelas? Some foreign president insulting his country?

No, it's soccer.

Aguero and Messi celebrate Kun's first goal

Argentina beat Brazil 3-0 in the Olympic semifinals yesterday, and President Lula was absolutely spitting mad with his team. I quote (translated), "I've never been so upset. I was left disgusted....It's embarrassing to lose like that against Argentina". Y'see, it's not just cos Brazil lost but it was the way they lost, with a 3-0 scoreline, no heart for the comeback and two red cards near the end.

Meanwhile, Argentina hardly cares if it wins or loses the final match against Nigeria. Beating Brazil so emphatically means so much more to them in the great scheme of things, and the mails from Argentine pals today were nothing less than euphoric.

The subject of this post might seem lightweight to you, dearest kindest reader. However I disagree. Before coming even close to any fair understanding of the Latin American way of life, you have to understand what futbol is and what it means. You might think Lula was exaggerating with his comments and other issues of state count as far more important. I don't. El Futbol isn't just a sideshow down here.

¡Vamos Argentina Carajooooooo!

8/19/08

Breaking News: Peru confirmed as "NOT INVESTMENT GRADE" by Moody's

Well, what actually happened today was that Moody's raised Peru one notch but left Peru one notch below the investment grade rating that Standard & Poor's gave them a few weeks back (and forget Fitch...they're a bunch of patsies). S&P must be totally regretting hiking Peru to investment grade, as it happened right at the very top of the metals price curve. Here's Reuters on the news.

Of course we do keep hearing about how Peru is 'structurally solid' these days, which coming from guys who gave IndyMac AAA is a bit of a giggle, right? Somehow the ratings agencies want to continue with this "Peru isn't reliant on metals exports" BS. Take a look at the Bolsa de Valores de Lima index chart and guess if the REAL money is buying the agency line (clue, 21st May 2008 IGBVL 17,772.97.....18st August 2008 IGBVL 11,829.64).

How's the Bolivian medialuna 24 hour strike going?

Here follows Otto's translation of this report in Argentine newspaper "El Patagonico" linked here. These are the people the handwringing political "experts" want to "understand". There's nothing to understand, you idiots; these people are genuine fascist thugs.

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La Paz, 19 August. The 24 hour strike in five Bolivian departments (provinces) with authorities that oppose the government of President Evo Morales is being partially adhered to today, and in Santa Cruz, the 'shock groups' of the Unión Juvenial Cruceñista (UJC) have forced citizens, including police, to adhere to the strike according to local press.

Youths armed with batons and shields similar to those used by the police intimidated the local populations and above all those who tried to circulate in vehicles, according to Radio Erbol via its website.

Civic leaders. such as the president of the Santa Cruz committee Branko Marinkovic, tried to minimize the UJC violent incidents by saying that in fact they were carried out by members of the Movimiento al Socialismo (MAS) ruling party.

But according to Radio Santa Cruz, part of the Erbol network, the aggressors "are civics and unionists very close to the president of the Santa Cruz committee" that punctured the tires of a police car, broke its windows and beat its three uniformed officers who were forced to flee. Another group threatened bars and restaurants that stayed open, where customers who were inside were beaten, the businesses sacked and then forced to closed their doors.

The strike in the Santa Cruz capital was enforced this afternoon only in the four most central parts of the city (the "first four rings"), but in others areas such as Villa 1 Mayo or the suburban neighbourhoods of Plan 3000, activiites were normal.

In the rural area of Santa Cruz, the municipalities od Cuatro Cañadas and San Julián did not join in the 24 hour strike. Similar situations also occur, according to the local media and the ABI news agency, in the capitals of the Beni, Pando, Chuquisaca and Tarija departments.

In Tarija the strike was partial in the morning and was adhered to only in the city centre, where there were some blockades of main streets to stop vehicle circulation. In general, bus drivers, rural organizations and the indigenous populations of the five departments and neighbouring zones were against the strike as they considered it "political".

The show of strength is to demand the reimbursement of funds generated by the Direct Hydrocarbon Tax (IDH) taken from the departments by the national government to pay the old age pension. In the Beni region of Rurrenabaque, a group connected to the mayor and prefect (governor) Ernesto Suarez forced State Radio 'Patria Nueva' to stop transmission. "A group of armed thugs belonging to the prefect threatened us for thinking differently and wanted to assault us", said one of the employees at the radio station.

It's looking promising for Correa's "YES" vote in Ecuador's Constitutional Referendum

Not Even Rodriguez Zapatero of Spain can resist
reaching for a touch of Studmuffin's buns

Check out Jurgen Schuldt's blog for the latest update on voter intentions in graphic form. Over there you'll see two charts that show how voter approval is growing for the new constitution, and also how the "YES" vote is closely correlated with President Studmuffin himself.

By the way, no knowledge of Spanish required to read the charts, so don't be afraid to click that link, dude.

Spot Copper according to Jim Morrison, and Fortuna Silver according to stupid people

come on baby light my fire.....come on baby light my fire

I know I said i was hanging on for Cu $3.50 spot, but this is a violent move to the upside so I've just bot PCU @ $23.46. ST trade play.

Meanwhile, the definition of stupid (apart from dumbass Doctors of Bolivian political science and all their sycophant hangers-on who try to "understand racists" and will hopefully leave me alone forever after today) is the person who sold Fortuna (FVI.v) at $1.18 this morning. Did you see this press release today, foolseller?
  • A new vein at a working mine with up to 62 ounces per tonne of silver, and you think this stock is a sell?
  • a market cap of just over $100m, and $46m in CASH at bank, and you think this stock is a sell?
  • profitable mining operation that has increased production tonnage 15% since the last earnings report, and you think this stock is a sell?
  • 45% of lead and zinc production hedged between $1.10 and $1.20/lb, and you think this stock is a sell?
I'm constantly amazed at how many stupid people form a queue in front of me to give me their money.

UPDATE, 30 minutes later: As Lightning McQueen says, "KA-CHOW!" Copper zaps thru 3.5 and the base metals complex is following nicely. Even my fave dogs-with-fleas zinc (I never gave up on you, Zn) is coming for the rise. Gold is staging a bit of a rally too, currently printing $813. Long way to go yet though, no no highfives for Jim Sainclair yet, yeah?

The foundation of this base metals rebound seems to be the whiff of weakness around the dollar (see previous posts on musings about this, example this one) as well as good old fashioned bargain hunting. As mentioned innumerable times here, end user demand for base metals is still strong, it has not faded, and anyone telling you otherwise is either ignorant of the real numbers or is a liar.

Are all AngloSaxon political scientists and hangers on such total idiots....?

...or is it just the ones who pretend to be the experts on Bolivia? It's a very, very simple equation folks, so listen carefully:

NOT BOLIVIAN = NO VALID OPINION.

I have never opened my mailbox and found the amount of pretentious rubbish sitting there in my entire working life. Jeez, what a bunch of total idiots. The more you apply your self-important meddling attitudes that serve absolutely no purpose to the matter, the more you are despised down here.

If you think what you're doing is important, go and debate amongst yourselves. Stop bothering people who live in the real world, yeah?

8/18/08

The Bolivia Recall Analysis in Spanish

Earlier this evening I got a mail from the guys over at the blog "Boliviasol". It turns out they liked my analysis on the Bolivian recall referendum so much that they've translated it into Spanish and wanted my permission to publish the translation on their blog. I feel quite honoured about all this, to be totally straight with you. I was also totally and fully impressed with the quality of the translation, and it must have taken the translator quite some time to get it that good.

So here's the link to the post in Spanish. Please go and visit, and maybe you can pass the link on to any Spanish-only speaking friends you may have. Thanks in advance. Otto

Venezuela's dictatorial one-party forced vote is on for November

Click to enlarge (worth it)

Jon Goicochea, breathe easy! Our favourite chubby right-wing insurgent dude in the house of Chávez was stomping his feet about the way national gov't had trampled on his human rights just the other day. This cos the Supreme Court had barred 270 people from running in November's local and regional elections (I mean, it was only a trifling thing called "corruption charges" that got 'em banned in the first place).

The 23 year old Jon (or is it 'Yon'?) who is usually passed off as a peace warrior in a newspaper near you, said he and his gang were ready to burn down Caracas (I kid you not, here's the link) if things weren't just the way he liked them. Even the fact that more than 50% of the 270 barred are Chávez supporters didn't seem to be to his taste. Oh, and by the way the WORLD'S BEST PICTURE OF JON GOICOCHEA (or is it Goicoechea?) CAN BE FOUND RIGHT HERE.

So perhaps he'll be more calm and dude-like when he finds out that November's elections aren't some kind of one-party shamfest, after all. Even though those 270 corruptos are not getting their names on the ballot papers, a full 17,308 people are.

"Wowsers! That's a lot of candidates Otto!" I hear you gasp. And you're right, beloved incakolareader. Here's a bit more breakdown for you:
  • Across the nation, 608 regional and local seats are up for grabs.
  • 59 national political parties are running in the elections.
  • 236 regional political parties or groups are running in the elections.
  • According to the CNE (Venezuela's Electoral Body), on average there will be eight candidates for every post.
And if you do the most basic of calculations, it works out at one candidate for every 1526 or so Venezuelans, man, woman and child. This will, of course, be interpreted as a lack of democracy.........somehow.

Trading Post (strictly juniors edition)

Dynasty Metals (DMM.to) is really catching my eye at these low, low levels. A few weeks ago I wrote on the stock and said "neutral". Since then it's sold off heavily and now looks a good risk/reward long play, especially taking into consideration Minister Chiriboga's words last week.

Fortuna Silver (FVI.v) up a heap on last week's newsflow (2q08 results, the Continuum news) and the press release comments today. Volume lowish

Minera Andes (MAI.to) down a heap on some block sales. These things happen. Dirt cheap and totally buyable here.

Mansfield Minerals (MDR.v) finally catching a break and up 17%. the market has treated this good junior very badly these last few weeks. A 'serious junior' that deserves much better.

Continuum (CNU.v) was trading at 5.5c earlier today, but the arbitrage between itself and FVI has now been taken and it's sitting at 6.5c. Looks healthy for the FVI deal, and good news all round.

Amerigo Recources (ARG.to) solid on nice volume. Gotta love this company; strong biz model, smart mgmt and as icing on the cake, dividend yield is at 8.5% right here.

NB: I remind people that although my long term portfolio remains unchanged, my ST port is mostly cash and just a few positions. I'm still staying away from ST trading as I'd like to see more bullish confirmation.

President Daniel Ortega of Nicaragua, rapist and incestuous child molestor

I'm amazed that I haven't seen this story in world media.

Zoilamérica Narváez

President Daniel Ortega of Nicaragua last week postponed his Paraguay trip to attend Fernando Lugo's inauguration at the last minute. The official reason given was "commitments in his country". The real reason is that his adoptive daughter has accused him of sexually abusing her for 20 years, and one of Lugo's ministers, Gladys Rubin the Minister of Women, has joined in the chorus.

Zoilamérica Narváez claims that Ortega is "a rapist, an abuser", and abused her from 1978 to February of 1998. In 1978, Narváez was just eleven years old. In her words;

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"I affirm that I was sexually abused by Daniel Ortega Saavedra from the age of 11 years. ...I have had to go down a painful and debilitating road to be able to interpret and understand myself, the consequences and the sequence of the systematic and savage practices that were committed against me from 1978 to February 1998.....Reporting this chain of events has not been easy for me, I have had to conquer fatalism and fear to answer questions that come from the deepest part of me, such as "Why did this have to happen to me?", "What did I do to deserve the life I've had?"

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There are plenty of Spanish language links to this story, for example here, here and here. Google the others if you like.

Otto sez: If Narváez's accusations are true, then Ortega is total scum. He should be stripped of the presidency immediately and also thrown in jail for life.

Why the London FT's coverage of LatAm frustrates

The Curate's Egg. What-ho, Blighty!

The Financial Times of London (FT) puts out a weekly digest on the region, called 'Latin America Agenda. Here's the link to the latest offering out today, and it just about sums up why the paper's coverage of the region is so frustrating. In the space of one page you get:
  • An excellent piece of insight on Petrobras, Brazil and the nation's attitude to oil. All PBR longs should read this and tremble at the sight of the word "Petrosal".
  • A ho-hum gossipy piece on Argentina's INDEC stats office which is like Otto without the snark. Hey, content may be thin here but at least I squeeze out a laugh sometimes.
  • A good general summary of the task facing Fernando Lugo in Paraguay.
  • A mediocre analysis of Bolivia's referendum results that shows the insight of a fruit fly.
All the same, it's worth reading this week's note, if only for the Petrobras article. Go see.

UPDATE: However, the FT beats Bloomberg hands down. Apparently Bloomie now wants us to believe that Sarah Jessica Parker is a leading indicator of the financial world, and also presumably wants us to take its coverage seriously. Absolute junk.

Crystallex (KRY): I'm not kidding you...just "avoid"

So far I've had three separate mails asking my views on this report from Bloomberg dated Sunday 17th August. It's a short piece, so here it is in full:

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Venezuela to Limit Gold Mining in Bolivar State, Nacional Says
By Daniel Cancel Aug. 17 (Bloomberg) -- Venezuela will limit gold mining in the mineral rich Bolivar state to a 4 million hectare (9.8 million acre) area along the Cuyuni river bed, El Nacional reported, citing Deputy Environment Minister Merly Garcia.

The government is trying to reduce the environmental impact that mining has in the Imataca Forest Reserve and will limit mining activities in the jungle region, the newspaper said.

Gold mining companies such as Crystallex International Corp. and Gold Reserve Inc. are waiting for the government to approve their concessions in the region, El Nacional reported.

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The question everyone wants answered is "Will Crystallex get the permit due to this?". Well I honestly don't know (and frankly i honestly don't care), but the evidence suggests that the answer is "NO". It's true that KRY's Las Cristinas project sits in the Cuyuní Basin (about 40km from the banks of the main river, but a small tributary that feeds the Cuyuní runs right past the mine site) and that's the basin that will get mining green lights from the VZ gov't enviro people. However, the mine also sits in the part of the basin that is also a part of the Imataca Forest. Venezuela has decided to protect this forest. No ifs, no buts.

Next: As well as being told flat out either this year that is wasn't getting its environmental permit (although the shady characters around KRY put out some deliberately vaguely worded BS spin last week about the VZ gov't "reconsidering") The 'El Nacional' article mentioned by Bloomie contains this paragraph:

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"Aun cuando una parte de la Reserva Forestal Imataca está en la cuenca del Cuyuní, la viceministra aseveró que para proteger el pulmón vegetal guayanés, en esa zona selvática no se permitirán actividades mineras."

This translates as, "Even though a part of the Imataca Forest Reserve is in the Cuyuní basin, the Vice-Minister stated that to protect the Guayanese vegetation lung, mining activity will not be permitted in this jungle zone."
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Ok, so let's have a look at the area, starting with the Google Earth wide angle. The yellow marker sits on top of Las Cristinas (close to the yellow-lined border between Venezuelal and Guayana), and the white line that comes from it ends at the banks of the Cuyuní river. Up in the far corner you can just see where Caracas lies as reference:

Click to enlarge

This next Google Earth shot shows the minimum distance between Las Cristinas (the marker) and the Cuyuní (40km give or take a meander or two). Plenty of green on the screen, no?

Click to enlarge

This one brings us closer, and gives you more idea of the greenery between Las Cristinas and the river.

Click to enlarge

And just for fun, this is Google Earth's idea of a close up on Las Cristinas itself, runway, light aircraft and the rest. The same white line shoots off to the river in the distance.

Click to enlarge

But this is a real photo of the region, taken right next door to the KRY site. Remember all that green splodge between the mine and the river? It looks like this.

Beautiful, isn't it? (click to enlarge)

Whatever else you might hear in the next couple of days, remember the following:
  • Las Cristinas is in the Imataca Forest region
  • The Venezuelan gov't has decided to protect the Imataca Forest. I don't know whether it's the right decision or not, but they've made the call.
  • KRY is a crooked stock run by crooks. Period.
Bottom line: Avoid KRY. Don't buy it, don't short it, and don't get sucked in by it. Just AVOID. As mentioned before, there are far too many excellent junior mining companies with solid prospects at extremely discounted prices right now, so why bother with crap like KRY?

And please, no more mails on this subject, yeah? Thank you in advance.