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11/1/08

The Government of Evo Morales and the Fight Against Cocaine

Today at Chimoré, Cochabamba, Evo inspected the troops that have
cleared 5000ha of coca plantations from Bolivian soil this year
and announced he was kicking out the DEA


The US government is trying to paint the Bolivia of Evo Morales as some sort of friend to the Cocaine business and enemy of....well everything, really. So riddle me this one:

Bolivia's Special Force to Fight Cocaine (FELCN) is the body in charge of fighting drug trafficking. Here's a list of its cocaine seizure tonnages for the first 10 months of the years 2005 to 2008:

2005: 11.3 metric tonnes (MT) of cocaine/coca paste seized by FELCN
2006: 14.0 metric tonnes (MT) of cocaine/coca paste seized by FELCN
2007: 14.8 metric tonnes (MT) of cocaine/coca paste seized by FELCN
2008: 25.5 metric tonnes (MT) of cocaine/coca paste seized by FELCN

This isn't some list of made-up numbers. We are talking documented seizures by a bunch of brave police officers that are up against very organized armed gangs.

Next productive acreage:
2000: 14,000 hectares
.
.
2004: 27,700 hectares
2005: 25,400 hectares
2006: 27,500 hectares
2007: 25,000 hectares
2008: 22,000 hectares

These are the official numbers, but it's widely assumed that in Bolivia there are around 5,000 extra hectares to add to each year's total. This means that, according to the International Crisis Group's 2008 report "Latin American Drugs I: Losing the Fight" (a copy available from Otto on request) there is around 100MT of potential cocaine production in Bolivia in 2008, if you subtract the 12,000 hectares of coca that is grown for traditional uses such as chewing, infusions and ceremonies.

This means that, roughly, Bolivia is producing around 100MT of cocaine and 25.5MT of it gets seized, which compares, for example, with Peru's potential production of 300MT, its probable production of 196MT (according to the UN) and its 25MT of cocaine seizures this year. Don't even get me started on the world's number one player Colombia, responsible for over 60% of the world's cocaine (maybe 750 to 800MT right now, of which only a tiny fraction gets seized).

Ready for the big finale? Evo Morales became President of Bolivia on January 22nd 2006. Yep, that's right; since Doctor Morales assumed the presidency cocaine production acreage has dropped by 20% and cocaine seizures have more than doubled. We do hear from the UN that absolute cocaine production rose 5% in Bolivia last year, even though hectares under cultivation dropped. This because the narcos are using more intensive farming techniques and hybrids that produce more alkaloids. However in the same period Colombia's cocaine production rose by no less than 27%! And remember, this is the country that the USA has donated U$6.7Bn to for its "Plan Colombia" war on drugs this decade (Colombia now has 50% more area under cultivation since 2000). But back to Bolivia, and if cocaine production goes up about 5MT in a year and cocaine seizures go up by 10.7MT in the same period, doesn't that mean Evo Morales is winning the war on drugs in his little patch?

No wonder Evo is kicking out the DEA; wherever they go drug production increases, and wherever they leave it goes down. For another example, check out the enormous drop in heroin production in the far eastern golden triangle in the brief period when the Taliban had control, and look at the production figures since the DEA got back into town.

I wonder why...........

People of Spain: Please buy Jose Luis Rodriguez Zapatero a new suit

HAHAHAHAAAAAAAAAAAAAAAAAAAAAAAAA!!!

(click to enlarge and get a better look at my stupid comments)

Otto "WannabePerezHilton" Rock has got his hands on a hi-res version of that silly photo world leaders always do on steps outside conference halls. This one was at the 18th Iberoamerican Summit in El Salvador earlier this week. Click on the photo to see the big version and a few of my silly comments (and note that Evo is the only brown face among them.....let's cut the crap and face facts; it's basically why the North is so scared of him), but the one to zoom in on is the guy on the right.

That picture of elegance is José Luis Rodriguez Zapatero, Prime Minister of Spain. But if we zoom in further........

......we can see that the political head of Spain is wearing a dog's dinner rather than a suit. Jeesh, that thing wouldn't look good on Enrique Iglesias, let alone stick-man Rodriguez. And by zooming in even further....

..... and then twiddling with brightness and contrast (Otto's been having fun with Microsoft Picture Manager this afternoon)......

.........we can see the stitching is coming undone and it's all frayed at the edges. No wonder Kingy banished him to the edge of the photo and refused to stand next to him; I'd choose Michelle Bachelet as a photo-neighbour every time, too.

PEOPLE OF SPAIN....FEEL SHAME!


YOUR GLORIOUS LEADER IS A SARTORIAL WASTELAND!

Are oil companies wealthy, or is South America poor? Or both? Or neither?

Between July 1st and September 30th, combined revenues at Exxon Mobil (XOM), ConocoPhillips (COP) and Chevron (CVX) were U$288Bn.

Between July 1st and September 30th, the estimated* combined GDPs of Argentina, Bolivia, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay and Venezuela were U$278.7Bn.

Three oil companies generate more wealth than all of Spanish speaking South America. (i.e. the bit without Brazil). To be honest I don't know whether it's good or bad or whatever, but it does give some context. Interesting factoid, no?

3q08 Estimated GDPs (U$Bn)
Argentina 70.2
Venezuela 63.8
Colombia 46.3
Chile 44.2
Peru 29.4
Ecuador 11.9
Uruguay 6.2
Bolivia 3.6
Paraguay 2.9
Total 278.7


3q08 Oil Co. Revs (U$Bn)
CVX 78.9
XOM 137.7
COP 71.4
Total 288.0


*Calculated by taking the IMF official GDP numbers for 2007 (exchange rate) and adding a blanket 8% for average regional growth. This blanket admittedly underestimates some countries (e.g. Peru, Argentina) but overestimates others (e.g. Chile, Ecuador)

Mercado Libre (MELI) is offline...probably not good for business, all things considered

Geddit?

Word reaches slow-off-the-mark Otto that Mercado Libre (MELI) has had an enormous glitch in its operational software for the last three days and the whole site is down. MELI has some kind of "we're doing maintenance work" BS notice up but according to unofficial mails sent out from inside the company the shitstorm is due to head office making a mess of incorporating clients from the recently bought deremate dot com.

From here MELI has two choices:

1) Get the problem sorted out quickly. Three days is far too long already.

2) Pay severe consequences.

As I said just yesterday, the stock is cheap right now but it's not the perfect company. Case in point. Thanks to reader FC for waking me up to this one. I should have known about this earlier, really.......

Good weekend reading from a respected sistasite

This weekend the recommendation is just one site. Memory In Latin America has been on top form all this week so there's not one single post to pick out; the best way to enjoy Lillie's blog is to start right at the top and scroll down. Here's the link to get there.

It really is a top blog, and if you want to do more than just surface-scratch Latin America put it on your list of required reading. Lillie does such a great job in collating and presenting information for the English-speaking world and even though some of the links handed out by her are by necessity in Spanish you will always get good context before you're sent there.

Go read Memory in Latin America this weekend. Bob Marley said it best.

"If you know your history, then you will know where you're coming from."

Otto's weekend freestuff


Here we are, back with the free weekend downloads and interesting stuff for nothing section. There's something for all (ok, most) tastes, so dig in dudettes and dudes.

Free E-Book; Reminiscences of a Stock Operator. I'm putting this link up again because if just one more person out there takes advantage, downloads and reads this it'll be well worth it. The best book on stock investment ever written.

Free White Paper Report; Engaging With The New E-Learning. Adobe (yep, the clever guys who do Acrobat) offers this white paper that gives 12 smart ideas on how to engage and retain learners online. As a secondary reason to get your copy, if you go for this one I get a small commission from the people out there. Help an Otto this weekend? (USA and Canada residents only on this one, I'm afraid).

Amnesty International's report on Colombia named "Leave Us In Peace". If you've ever wondered why people are continually up in arms about so-called human rights abuses in the land of Uribe, read this and you'll extract the "so-called" from that sentence.

Free report on the Commodities sector. Want to read the kind of stuff read by the industry? Here's a report dated 13th October from Macquarie that shows the state of play in the base metals sector, with plenty of data about supply, demand and all that wonky stuff people like me enjoy. At 13 pages it's not too heavy and it's full of useful charts, too.

Free NOBS report on Metanor. Yep, I'm still trying to drum up interest in my online analysis service, and here's the freebie access page again.

Ecuador news roundup

Rafa seen out with Bina last weekend

Let's all feign surprise: The US Central Intelligence Agency had "full knowledge" of the deadly Colombian raid March 1 on a FARC rebel camp inside Ecuador that led to a rupture in ties between Bogota and Quito.

Crisis what crisis? Ecuador's FinMin sez the country will grow 4% to 5% in 2009. Otto sez "believe that one when I see it".

The much delayed mining law is going to the lawmakers next week. Word is that Ecuador is now treating the matter as "a priority", but that word needs more than just a literal translation when transferring it from latino to anglosaxon mentality.

As for the oil sector, Studmuffin keeps on playing the hardball. The latest target is Repsol (REP) of Spain and he says that because REP and Ecuador can't come to an agreement on its local production it's end-of-contract-adios-amigos time.

But I've saved the best til last: Studmuffin got his dos centavos in about the world financial collapse and I agree with everything he said on this one.

"One of the few good things to come out of this crisis is that we don't have to put up with those yuppies of Lehman Brothers, Standard & Poors and JP Morgan. When I was minister, it was unbearable to have a line of those kids asking for an appointment so that I could do their job. They'd ask you for your analysis and then present it in a report as if were their own."

YAY....you still rock, Rafa.

10/31/08

Trading Post (spooky Friday edition)


PCU and FCX continue with buying strength on volume. Yes I know they're both flat-to-negative right now, but they've both managed to shake off the drop in copper in much the same style as yesterday.

Minera Andes (MAI.to) has impressed all week, climbing 40% from the very silly 50c values printed on Monday. Check previous posts for more talk on its San José silver/gold mine and Los Azules copper project...or better still visit the website.

Mercado Libre (MELI) up 3% today. This is starting to build momentum, and I can think of far worse ways to play the resilient retail market in Brazil. MELI is not the perfect company, but clearly undervalued here. I love the low running costs, I'm not fond of the previous hype it self-generated.

Baja Mining (BAJ.to) at $0.33 has fought back really well from its bad news earlier in the week. It's up a full 50% from the low point of just two days ago.

Two cheers for Dynasty Mining (DMM.to) as well, up from very very silly one buck prices at the beginning of the week. The present $1.37 is still incredibly cheap when you bear in mind what they have by way of completed infrastructure and production forecasts, but they have that stodgy Ecuador gov't bureaucracy to fight against. An excellent stock for those with patience.

Merval update

In this post on Tuesday morning I pointed out that Argentina's benchmark Merval index had been beaten to a pulp recently, but it may well be time to buy back in.

Without beating around the bush let's just point out that I nailed that sucka. The index is up 20% in the four days since that call, and this despite the ongoing drama and BS calls from S&P who lowered debt rating after-the-fact (they're good at being late on the scene, though).

It may come as bad news to some, but Argentina isn't going down the toilet just because the North tries some self-fulfilling prophecy techniques. And as Credit Suisse rightly pointed out yesterday, Argentine bonds are a smart buy at this point. At least there are some analysts up there who know what they're talking about.

Message to Jay Taylor: Enrol for 'Financials 101'

Yes girls, you KNOW he's cute

I found out yesterday that newsletter writer and sheep-herder Jay Taylor told his flock to sell Fortuna Silver (FVI.v) on October 16th. Well that's fair enough, I have no problem with that, we all make our own value decisions. But when I saw why he'd called sell on the stock I just burst out laughing. Here's the full alert sent to me yesterday by a kind reader:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Taylor says sell Fortuna Silver

Fortuna Silver Mines Inc (C:FVI)
Shares Issued 85,331,659
Last Close 10/29/2008 $0.48
Thursday October 30 2008 - In the News

Jay Taylor in the Oct. 16, 2008, edition of Gold, Energy & Tech Stocks tells readers to sell their Fortuna Silver Mines Inc., recently 61 cents. Mr. Taylor said buy three times between August, 2005, and August, 2006, at prices ranging from 61 cents to $1.35. He said sell half on April 16, 2007, at $3.25. Assuming a $1,000 investment for each of the three buys, selling half of the $3,000 investment at $3.25 would have yielded a profit of $3,620. Mr. Taylor upgraded Fortuna to a buy on June 12, 2008, at $1.96. Assuming a $1,000 investment at $1.96, and taking into accounting the remaining $1,500 investment after the April, 2007, sale, selling the total $2,500 investment at 61 cents would yield a loss of $1,229. Mr. Taylor says he is selling this stock because of a rapidly deteriorating global economic environment, and not because of a loss of interest in the company. The newsletter writer has decided to sell those companies in his portfolio which do not have a considerable amount of cash on their balance sheets. By doing so, he hopes to turn these negative markets to his favour or at least avoid further losses. He plans to keep an eye on Fortuna for a possible repurchase when there are signs that the current global decline has abated.

© 2008 Canjex Publishing Ltd.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

So, Mr. Taylor is selling FVI.v because it doesn't have a considerable amount of cash on its balance sheet. IS HE TOTALLY MAD? Right now FVI.v has around C$50m in cash, which is more than the company is worth according to market cap (about C$41m). I'm not talking about working capital either (that's much higher), I'm talking about cold, hard cash that FVI.v has tucked away in deposit accounts collecting a useful slice of interest. Not only that, but FVI.v is the owner of a mine that actually makes money...y'know..positive free cash flow. It's not some explorer with no income stream that will continue to fracture cash while it waits for the market to turn again.

If, as is truly the case, FVI.v has more cash than market cap this can only mean one of two things about Jay Taylor:

1) He doesn't have a clue about Fortuna Silver
2) He doesn't have a clue about how to read a balance sheet or financial reports.

And as Taylor did an extensive interview with FVI.v this year (you can see the video at the company website), it seems clear that the guy must know about the company. So therefore the only possible conclusion is that he's a zero when it comes to reading financial reports.

A little knowledge is a dangerous thing, and those that pay Taylor healthy monthly subscriptions for newsletters that contain badly researched and patently false information should muse on that old saw. Call sell on FVI.v if you want, Taylor, but don't write factually incorrect and misleading statements to back up your erroneous analysis. Jeesh, what a dumbass.........

Peru's latest bout of social unrest: what you need to know


By popular demand (bit of shadenfraude perhaps?) here's a quick rundown on the protests in Peru's southern Tacna region being reported by all the press this morning and why it has protests going on and stuff...like:

1) Southern Copper's two big Peru mines, Toquepala and Cuajone, are situated in the two regions of Tacna and Moquegua respectively.

2) Toquepala has been producing at full speed this year, but Cuajone has been undergoing strip work and stuff and revenues from that pit have consequentially dropped.

3) Therefore the Tacna region has been getting more money from the government royalty program than Moquegua.

4) Moquegua hasn't liked this for a long time, and last week put together its second big strike/protest/roadblock in the last couple of months. The reason was to pressure Peru's Congres into passing the new royalty law that spreads the cash around more evenly amongst regions.

5) The law got passed. Therefore Moquegua received a dose of happiness and Tacna got all pissed.

6) Result: one unblocked bridge in Moquegua and one burned gov't building in Tacna.

Bottom line: for the first time in ages I feel sympathy towards the Twobreakfasts administration and also say that the regions (esp Tacna) are acting like spoiled brats here. The alterations to the royalty law mean that mining money will get spread around more evenly, but the people in Tacna are doing a foot-stomping act. This isn't some sort of new Bolivia uprising, it's greedy people squabbling over money. That's all.

Last on lithium: a comment about my morning mailbag

A corner of my mailbox had this for me to read this morning, and it's worth sharing quickly so that I can clear up a difference. A reader wrote:

"I was looking at SQM as a possible trade when all of a sudden you cautioned about Lithium. SQM is being hyped on that, although they have other lines. Should I read that as a caution on SQM? A glance at their financials looks pretty good, but then so do a lot of things at first glance."

There's a big difference between the prospectors and the producers. I like SQM too, and along with other big regional FMC keep the world demand for Lithium satisfied. I have no problem with them, my problem is with the junior miners who stake off a puddle 15,000 feet up in the Andes and then pump their stock on dubious claims of being the answer to the world energy riddle. SQM is fine by me...plenty of phosphate exposure too, and the PE has come down strongly these last few weeks. Around here is a value level in which to enter.

Charts of the day are...........

.........the LME futures curves for Copper, Zinc, Lead and Nickel.

Oh these charts are so much fun.

........and are a big difference to the story of just just a few weeks ago...........

.....when the annualized discount was running at 6% to 8%.........

....because now you can get your lump of metal significantly cheaper at cash spot than for 2011 delivery.

Semi OT: There are lots of things I like about inflation, because if you understand how it works it can work for you and not against you. Perhaps the nicest thing about inflation is that due to its very chequered history in fighting the beast over the last four decades, Latin America understands it better than virtually any other place in the world. Compared to the knowledge pool I've been lucky enough to tap into on the subject, you guys up there are greenhorns.

I'm really beginning to look forward to 2009.

10/30/08

We now have a price on that lithium snake oil

Admiralty Resources (ADY.ax) is an Australia miner with an iron ore operation in Chile. However its real appeal up to now was its ownership of a heap of the finest untapped Lithium brine prospects in the world up in the Andean highlands where Argentina meets Chile

Tonight ADY.ax announced they'd sold their lithium plots to a certain "Charge Resources Pty Ltd" for A$36.281m (that's a touch over U$24m at today's rate). Here's the press release so have a good look at the details yourself.

Tonight's deal underscores what I said in this post way back when all things mining were still fab and unscrupulous junior mining companies (esp. from Canada, big surprise) were still jumping on this latest fashion bandwagon to try and sucker in another relay of innocent retail investors: LITHIUM PROSPECTS ARE SNAKE OIL.

Let's get this straight as a die; the ADY.ax prospects just sold are arguably the best and most prospective untapped reserves out there. Period. The production plan has their sites good for 17,000MT of lithium production per year, which at today's market price would bring in a cool $100m or so in gross revenues. The capex needed to build the production facility would come in at (an estimated) modest $110m. And don't worry about reserves, because we're talking 400 years of brine (yep, four hundred) at the planned extraction rate. The in-situ reserves are worth billions.

This is the best there is out there, with those potential numbers that would cover your whole outlay in three years max and allow to make tens of millions in net profits every year until man lands on the planet Zog..... and it goes for just U$24m? If you don't smell fishy smells by now, then I suggest you stay out of mining investment forever. Tonight, ADY.ax is up about 3% on the news, standing at 3c or so per share. That's all it's worth, frankly. In June it traded eight times its present value, firmly in the mid-20s. I didn't like it then and I don't like it now. And be clear, if ADY.ax had the best lithium sites on offer just imagine how bad the recently staked ones are......

Otto sez: Hear the word "lithium" from a junior miner's investment relations department and run like hell.



A BIG THANK YOU TO REGULAR READER "EB" FOR HANDING THE PRESS RELEASE ON TO ME TONIGHT. THAT WAS ABOVE AND BEYOND THE CALL OF DUTY, EB. MUCH APPRECIATED.

Thought for the day

(this even though there are 35 minutes left before the bell)

When copper drops 10%, gold dumps by U$20/oz and Freeport McMoRan (FCX) rises 5% on the day, you just know there's a new dynamic in the stock market.

Trading Post (digging Brazil edition)


Great to see the junior miners generally ignoring the drop in metals today, as value hunters continue to snap up bargains.

Canada's National Bank picked up one million shares of Gold Hawk (CGK.v) at 3c just after the bell this morning, with Can'o'corn the seller. CGK.v now at 3.5c

Malaga Inc (MLG.to) at $0.15 continues its nice run after we mentioned it at 10c yesterday. If you'd grabbed some then (and there were plenty available) you'd be 50% up by now.

Fortuna Silver (FVI.v) up two spots at 50c and showing plenty of life on continued strong volumes. Yes it's my favourite stock in the whole wide world, but it's my fave for very good reasons. Reason 1) it's way cheap (for reasons 2 to 547, please mail me).

Away from the diggers, Brazil and its banks had a great pop this morning but the novelty of having Ben Bernanke give them free money is already wearing off. Our benchmark bankstock Itau (ITU) was up 12.7% earlier. It's still up nicely, but the gain is down to 7% on the day. ITU volumes are good without being exceptional.

Mercado Libre (MELI) at $13.50 is another company with plenty of Brazil exposure that's coming back from the discount basement. According to my casio you can pick this up for 5X fwd PE right now. That's cheap for this kind of growth profile. Remember that MELI passes the key test of any stock right now, and that can be summed up in three words: CASH FLOW POSITIVE.

Finally, another to consider is SBS, the Sao Paolo water stock. A friend of mine who knows his stuff is very hot about this stock at this price. After running the slide rule over the numbers, I see what he means.

Vena Resources (VEM.to) gets its rebound

Here's the five day chart of Vena Resources (VEM.to)........

..........and the pop from those bargain basement $0.11 and $0.12 numbers has finally happened. Now let me just take a wild guess and speculate here;
  • I speculate that there has been plenty of insider buying at these levels in the last few days.
  • I also speculate that a certain fund that wanted out of VEM.to and was dumping for all it was worth has finally reached the bottom of its barrel.
  • Finally, I'll speculate that the company will soon come out with some positive news for the market.
Just speculating, y'know...... musing my own funny little muses out loud. DYODD, dudettes & dudes, and remind yourself that Vena is a site sponsor.



Related Post
Vena Resources (VEM.to) hunkers down

Amnesty International to Colombia: "Let Me Count The Ways I Love Thee"


An excellent report on the ongoing problems in Colombia was published by Amnesty International this week. It's called "Leave Us In Peace", and you can get your copy by clicking right here. There is a lot of information packed into the 100 or so pages, but here are a few stats to give you an idea of how Colombia is for the people who live there:
  • 70,000 murders in the last 20 years.
  • Between 15,000 and 30,000 people have 'disappeared' since the start of the conflict.
  • 1,400 civilians killed in 2007 and 1,300 in 2006
  • Of the 1,400 killed last year, 300 have been identified as the responsibility of the right-wing paramilitaries, security forces accounted for 330, guerilla groups 260 and the other approx 500 unattributable.
  • 80 cases of torture last year, 45 of which died from the torture inflicted. Colombia's security forces were responsible for the majority of cases.
  • Colombia has more land mines than any other country in the world, mostly laid by the FARC terrorists. The main report starts with a particularly harrowing report of how three children were killed by one of these mines.
  • In the first 8 months of this year (2008), 40 trade union members were killed or disappeared, up from the 39 victims reported in 2007.
Please read the full report for the necessary detail that my little stat background cannot give you. Just so you have no excuse, here's the link to the report again. Once again, maybe you should be thanking your lucky stars for the things you have in life and not cursing and shaking your fist about the things you do not have.

Good News: Lima's potential environmental disaster is getting airtime

This report from Reuters hit the wires last night and I'm happy to report the potential disaster due to government inertia is getting more airtime. The report included this from Environment Minister Antonio Brack-Egg:

" Brack said the mines and energy ministry is preparing another emergency measure to finance the clean-up of a potential slide in the area."

This is good for Peru, good for the Lima water supply and good for Gold Hawk Resources, too. I can also report that CGK.v has contracted a highly respected local forestry firm, "Foresta S.A.", to get expert advice on what else they can do to move the process along as quickly as possible.

I know it's very easy to lay the blame at the door of the mining company in cases such as these, but it has to be said that Gold Hawk has done everything in its power to alleviate a problem they inherited more than created. A good example from "a tiny metals company" (to quote Reuters) that would be great to see followed by miners many times their size. Kudos to CGK.v.

(special re-post): Don't forget your Doom Mask for tomorrow, people

Have yourself a real 12-point meltdown of a halloween with this year's Incakola special free gift giveaway........

THE NOURIEL ROUBINI HALLOWEEN FACEMASK

  • GUARANTEED TO SCARE THE HELL OUT OF YOUR MACMANSION NEIGHBORS
  • MORTAL ECONOMISTS WILL CRINGE WITH FEAR AS THEY REMEMBER THEIR WORDS AT DAVOS 2007
  • SURE TO BE IN HIGH DEMAND AT MASOCHISTIC BANKING PARTIES
  • IT NEVER SMILES
  • IT'S NEVER WRONG
  • IT STILL WON'T SMILE
Instructions: Click to enlarge your mask, print out and cut out with scissors. Then do what Larry Krudblow has wanted to do for a long time and poke his eyes out with a stick. You're now ready to be the spookiest academic on the block.

Chart of the day is............

.....is Brazilian Real over the last three months.


Now that the Fed is pumping U$30Bn in their direction things might (repeat might) settle down a little, but after the recent switchback ride in the Real I wouldn't bank on it.

The funniest reaction to the Fed bailout (ok ok "credit swaps lines") of Mexico, S. Korea, Singapore and Brazil has been in Argentina. The Argentines have been all "Why not us? Aren't we important enough? Hey, that's not fair!" over it all. Absolutely ridiculous, and kind of ironic that the $30Bn offered up to Brazil by the Fed almost exactly matched the $29Bn that Klishtina gets her hands on by decimating her country's pensions sector, isn't it? Argentina no es un pais serio..........

If you feel like it....

...you can donate a little something today.





If you don't there's no worries. Thanks in advance.

10/29/08

EXCLUSIVE: Venezuela joins the space race, and IKN has the photos

Big news! About three hours ago a Chinese rocket launched Venezuela into the bigtime bigboy big nation space race.

Chavez at the launch today; "Holy Crap! Look at that thing go!"

At the presser, Hugo tells all; "...and then it went up....really fast."

Here's Disassociated Press on the big event:

President Hugo Chavez has increasingly turned toward the East for help in technological development, and his latest endeavor — at a cost of some $406 million — will help him spread his revolutionary message across Latin America.

A rocket launched from China's western Sichuan province carried the 5.1-ton satellite into space and it is supposed to reach its final orbit 21,900 miles (36,500 kilometers) above the earth next week.

It will begin carrying radio, television and other data transmissions in early 2009 after three months of tests.

Chavez watched the launch by television with Bolivian President Evo Morales at an observation center just south of Venezuela's capital.

"This is a satellite for freedom," Chavez said in a nationally televised address following the launch.

However, IncaKolaNews has scooped 'em all and managed to get its grubby little hands on a photo of the new Venezuelan space monster, known as 'Chavenger'.

An enormous hat tip to the wonderful Chiguire Bipolar for the image.


UPDATE: Ok ok, that 'Chavenger' picture was my little joke, but IKN has just received exclusive first images of the Venezuela satellite in space, as seen from the NASA spy satellite in close orbit. It seems as though somebody has daubed some graffiti on the satellite, though it is difficult to make out all the message as the sun's reflection is blotting out some of the letters.

NASA scientists are working on understanding the message and we'll update on the decoding process as soon as we get any news from Houston HQ.

In Peru bureaucracy is annoying, but it can also be very dangerous

Justify FullWe've followed the trials and tribulations of Gold Hawk Resources (CGK.v) quite closely on this blog (see below for links to previous posts), but as a very quick re-cap:

1) In May this year, CGK found it had a problem with the containing wall of its main tailings dump

2) The company immediately closed down operations (voluntarily too...it's been a good corporate citizen throughout) and told the Peru government about the problem.

3) The gov't inspected the site and found that a farmer irrigating his land above the tailings dump was the main cause of the wall weakness. The big problem is that if the tailings wall eventually collapsed it would likely pollute the nearby Rimac river, one of the main sources of water for the capital Lima and its nine million or so inhabitants.

4) An emergency decree was declared by the government and since then CGK.v has been champing at the bit (and fracturing cash while waiting impatiently) to get the alternative tailings dump approved so it can get on with the job of transferring the tailings to a new, safe site.

So guess what? Yep, no permit to use the new dump yet. Peru's bureaucratic nightmare has stopped all emergency plans in their tracks and while those concerned just want to get on with a job of work, the file has been lost in the maze of corridors known as officialdom and has stopped anybody from actually doing anything about the problem.

Fortunately, at least one person in Peru's government is awake enough to realize that this bureaucratic inefficiency isn't just a pain in the butt this time; it's now reaching the point where it's getting downright dangerous. Antonio Brack Egg (great name) is the Environment Minister in Peru and today he said the following (translated):

"...the rains are coming and there may be filtrations of the hill that provoke a disaster that would affect the Central highway, the mining installation, a hydroelectric power station and if the tailings reach the River Rimac it would be a disaster of very high contamination."

Yes indeedy folks, there's such a thing as "the rainy season" in Peru. That time is fast approaching, and if the rains arrive before the emergency tailings transfer is started the chances of a full collapse of the tailing dump will shoot skyward. Brack Egg realizes this (thank the stars). Gold Hawk has done everything in its power to get the whole thing moving, did its necessary paperwork months ago and is impatient to get on with the essential transfer of highly toxic tailings. The people of Lima will probably prefer their waters to be free of heavy metals, arsenic and suchlike too, I'd bet. So all we're waiting on is some dickhead in a suit to sign a piece of paper.

Message to Peru's government. Please extract your thumbs from your anal passages just this once. The hasta mañana attitude of Latino life is famous worldwide, but this particular case just isn't funny any more. The government of Peru has gone past "slow", left behind "lax", said adios to "ridiculously tardy" and has now reached the level of "absolutely and criminally irresponsible" on this issue.

You can't stop mother nature, and those rains are on their way. Period. I'm quite sure Peru would prefer to do just one thing now rather than do 10,000 things tomorrow, and the size of the ecological disaster staring them in the face if that dam wall collapses is not even slightly funny. Undrinkable tapwater isn't going to win friends and influence people, Twobreakfasts.

Please. Just this once. Do something.


Related Posts
Gold Hawk Resources: Questions and Answers
Gold Hawk Resources in the News
Gold Hawk (CGK.v): Positive developments at Coricancha
Gold Hawk Resources (CGK.v) catches a break at last

Trading Post (strictly 10%+ miners edition)


The qualifying minimum for this post is a 10% rise in price this morning. I'm also shamelessly concentrating on personal favourite stocks because its been an age since I've seen this kind of relief in the markets and I may as well enjoy it for a day.

Fortuna Silver up 10% at $0.49 and good volumes being traded, too. The 3q08 results are due out on November 14th , by the way. Why do I get the feeling that the world will applaud the quarterly results...? Hmmmm....just a guess, perhaps? ;-)

Candente Resources (DNT.to) up 13% at $0.17. My oh my, this thing has been beaten into a pulp recently, but value sniffers are finally surfacing. Also true for Los Andes Copper (LA.v), which has moved up 30% in the last couple of days.

Inca Pacific (IPR.v) up 18% at $0.225. The same comment applies here, but add that large cash at bank to the equation as well. Still way way cheap.

Malaga Inc (MLG.to) up 10% at $0.11. Hey, you don't suppose my mentioning MLG today is anything to do with this pop? hmmmmmmm..................................

Minera Andes (MAI.to) up 13% at $0.62. This might well be the cheapest mining stock in the whole of South America, all things weighed and considered. Not only does it have 49% of the cash flow positive San José silver/gold operation, but it also has control over an 11+Bn Lb copper project at Los Azules. MAI partners with big boys like Hochschild (HOC.L up 20% today, too) and Xstrata, too. Minera Andes is another stock that would double and still be dirt cheap.

Kinross (KGC) (K.to) up 14% at U$9.68 and directly benefitting from the rise in gold to $760 or so this morning. When you think that K was at $22 when the Aurelian deal was first annoucned, it gives it a lot of perspective.

Gold Reserve (GRZ) up 11.6% at $0.48. Gold Reserve's sorry tale in Venezuela has been well-documented, but this is another company with plenty of cash at bank and trading well below its NAV. Management has always been careful with its money, too (not like its neighbours, who must remain nameless as this post is only for PPS winners today).

By the way, I have bought a few things this morning. Just a bit of value-hunting. Two stocks are mentioned here, but another two went into the ST port as well. It sure feels nice to dip my toe in again after all this time.

Baja Mining (BAJ.to): A victim of the credit crunch


This morning Baja Mining (BAJ.to) bit the bullet, faced reality and announced to the world its 'Boleo' copper/cobalt mine in Mexico would be indefinitely delayed. Mine construction started last year but will now be halted until further notice. Here's a quote from today's PR:

"While project economics remain robust even at low metal prices, the impact of the current financial crisis on short term metal prices and hedging prices, coupled with an effective shutdown of the global bank syndication and equity markets, require Baja to revise its construction schedule."

Allow me to translate: BAJ.to contradicts itself on the metals prices issue; on the one hand the mine would be profitable at low prices, but on the other hand low metals prices are halting the project. That doesn't make any sense and can be discarded. This leaves us with the real reason for the stoppage, namely there isn't a bank willing to fund BAJ.to right now. And that's full square the credit crunch and how it's affecting the industry.

The stock sold off 20% or so on the news and stands at $0.22. That's a long way from the $2+ figures it was printing last year when I took a serious look at Boleo and liked what I saw even though capex costs had almost doubled on the deal. The moral of the story is that metal in the ground ain't worth squat unless you can get it out the ground. Junior mine investors have to remember that one.

Argentina: The peso forex hits 3.43

There has been a pretty severe move in the Argentine Peso from its recent baseline level ArgP$3.12 or so versus the dollar to the P$3.43 being printed this morning.

Argentina Peso Versus US Dollar, 12 month chart
Reports from the presidential palace are that the Kirchners' are hopping mad about this move and are trying to pin the blame on anyone, from the AFJP (bugbear of the month) to Grupo Rocca (bugbear of the week) to the "business cartel" to a more generalizaed "speculators" fist-in-the-air. I'm not joking, either and here's Critica on the whole charade. Apparently the fools think that the strange thing called 'the market' shouldn't be used to bet against the state.

My four year old daughter has a better concept of finances than the leader of Argentina (and his wife). What would Occam and his razor say to 1) Argentina announces it is nationalizing its pensions system and then 2) its currency suddenly loses 10% against the greenback? If I'm ever required to explain what's going on with the Argentine economy to los Kirchner I'd better remember to extract all words above two syllables. No wonder Martin Redrado is at the end of his tether with these clowns; explaining financial realities to the Ks must be like herding cats.

Gotta love base metals this morning

Copper up 7% and back over $2. Nickel, zinc and lead all up at least 7%, too. Hopefully when I get round to writing a trading post later today there will be plenty of double-figure greens to choose from. Yesterday I wondered if the recent sub $1.80/lb prices for copper had marked the bottom. Well, it's looking more and more likely, is it not?

Meanwhile, precious metals are not being left behind in this, with gold up 2.2% at $760 and silver nearly 6% up. Love is all around. Looks like the stopped clocks that get published at kitco can bask in some glory for once........

As for me...hmm...might just pick up a few bargains myself today. Nothing wrong in joining in on a bit of euphoria (as long as the timing isn't too wayward). However, it's worth remembering that gold has a tradition of getting sold hard into and out of a Fed rates decision. Keep that one as a caveat on any ST trading plans.

What junior miner to buy?

A very nice and positive mail was waiting for me in the inbox this morning from reader 'NS', who asked me what junior he (NS is male) should pick up at these low, low prices. His basic viewpoint is that buying a junior or twelve for pennies right now is a good scattergun policy. He thinks it unlikely that he'd lose a lot of money, as even if any stock drops another 50% he wouldn't have to lay out a big amount of money to get a good sold chunk of stocks and any loss would be small in absolute terms.

Y'know, the more I think about that attitude the more I like it. It wouldn't take more than two or three real springers in a high risk portfolio like that to get the whole thing into the permanent profit column, and it would also be great fun to own. This as long as you're clear that buying into pennyshoots is high risk and it can mean wild swings in both directions (or in other words it's certainly not for everyone).

As for some stocks to consider, right now I'd be looking for two types of junior mining company:

1) With plenty of cash at bank and beaten down to a pulp. An example of that would be Inca Pacific (IPR.v), a company with more cash at bank than market cap. And even though that's a very strange and weird thing, there are plenty more examples out there of the same phenomenon.

2) Working mines with good cash flow that have also been beaten down to a pulp. My favourite here is Fortuna Silver (FVI.v), a company that could double and still be dirt cheap at a buck. But yet again there are plenty of others; one that's been catching my eye recently is Malaga (MLG.to) which at 10c a pop means for $1k you can get 10,000 shares of a working mine producing a specialty metal (tungsten) with good market prices and guaranteed demand. It's also in the process of smoothing its production process and cutting down on the key energy cost element.

FVI.v, IPR.v and MLG.to are solid examples, but the two categories are more important, I believe. So I suppose my best advice right now would be to look in those two criteria and then "buy your own favourite!". We all have our sweet stocks, and a few shekels invested at current low prices isn't sucha bad idea as long as you're willing to look to the long term. By the way, if you'd like more fundamental information on any company, with a pro-analyst's view of its operations, potential profitability, management and financials, you could always consider investing a small amount in a NOBS report. Details of how it works can be found right here.

DYODD, dude.

Chart of the day is............

..........the Venezuela parallel exchange rate, August 11th to date.

You see that spike late last week? You see this post I published at that very same time that said;

"Meanwhile, here's a message for (at least) seven readers I know that live in Venezuela and are fortunate enough to get their salaries in US dollars; tomorrow's the day, people....get yourself some of those cheap VEFs."

Toldya so. Another strange thing about the English media is that they'll relate with joy when the VEF sinks against the dollar, but to hear about a 10% strengthening you have to hit the blogs.

10/28/08

The biggest news from Argentina this year

Forget the strikes, the protests, the politics the economy. Diego Maradona is the new manager of the Argentina national team.



If you've ever been to Argentina, even for a long weekend, you'll know how big this news really is. He'll be backed by "technical secretary" (aka right hand man) Carlos Bilardo, the same team that brought Argentina its 1986 World Cup success.

That's a smart move by AFA and gives Diego plenty of technical experience to fall back on.

Right now, Argentina is around 6/1 fourth favourite to win the World Cup in 2010. That means Maradona is a 6/1 chance to become the most celebrated Argentine in history...and by a long, long way. Forget Evita Peron, Che Guevara, Borges, and all the others. If Diego brought the World Cup back to his country he'd move past demi-god status and have churches re-named in his honour. If you think I'm joking, you don't know much about Argentina.

Update:
On Clarin.com they're running a survey, the question is "Do you agree with the choice of Maradona as the next manager of Argentina?" These Clarin surveys usually get maybe 5,000 votes in the space of 12 hours. Here's how the vote stands after four hours:

Yes 26.2 % (17,605 votes)

No 73.8 % (49,468 votes)

To celebrate the visit of King Juan Carlos and Queen Consort Sofia of Spain to Peru this week.......

....here's a photo from a previous visit Juan Carlos made to South America.

Poor old Juan Carlos....all that politics stuff never seems to end, does it?

For educational purposes here's the link to the wiki page for Jorge Videla, just in case you don't know who he is or what he did in Argentina between 1976 and 1981 (and I don't just mean hand over the World Cup to the winning Argentina team in 1978, people). Here's how the wikipage starts:
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Jorge Rafael Videla Redondo (born August 21, 1925 in Mercedes, Buenos Aires) was the dictator and President of Argentina from 1976 to 1981. He came to power in a coup d'état that deposed Isabel Martínez de Perón. After the return to democracy, he was prosecuted for large-scale human rights abuses and crimes against humanity that took place under his rule, including kidnappings or forced disappearance, widespread torture and extrajudicial murder of activists, political opponents (either real, suspected or alleged), as well as their families, at secret concentration camps. The accusations also included the theft of many babies born during the captivity of their mothers at the illegal detention centres. He was under house arrest[1] until October 10, 2008 when he was sent to a military prison.

Trading Post (tudo bem edition)

Brazil is having a killer day, with better currency news, better commodities prices and a positive Wall St. combining into a 10.7% rise in the Bovespa benchmark index. Plenty of happy Brazil stocks to choose from today, with RIO (up 11%), PBR (up 8.4%), NETC (up 14.6%) catching my eye and Itau (up 8.4%) an example of the fun in Brazil's banking sector.

The rest of LatAm is taking its cue from Brazil today, but the continued rally in copper today has helped FCX (up 7%) and PCU (up 8.5%). Those two were actually negative early this morning, so a very solid rally to report (happy to say).

Junior mining world is a mixed bag of small relief rallies, small drops and small volume. Distressed selling can hit any of these stocks at any time, and ST trading bargains are there for the fleet of foot. No special one to point out as the field seems to change every 45 minutes.

UPDATE after the bell: Wowswers, that was nosebleed material. Dow ended up 10.90%, the featured Bovespa up 13.4% and all those stocks I mentioned into double-figure gains and left those numbers I quoted just an hour ago in the dust. And here's me still in cash, still watching, still sidelines. Boring, aren't I?

Revealed: China's politburo reads IncaKolaNews

In this post on October 22nd, I mused that the strong dollar policy is one being actively used by the USA to get through this financial crisis and maintain its position as the world's leader (at the general expense of other countries). As an excerpt here's the last paragraph of the original post:

Therefore, the USA is doing everything in its power to maintain a strong dollar, because it doesn't care so much about the whole world suffering as long as it remains the world's most important once the recession is finished. It will probably be encouraged in this effort by the other main industrialized countries that will also benefit from status quo. I repeat; the USA is and will continue to base its whole plan around one thing; "keep the dollar as strong as possible". It is the number one basic element of all its crisis planning.

I had quite literally dozens of mails hit my inbox because of that post, and for every positive comment there were seven that pulled my argument apart. However it looks like I'm not the only person thinking this way as the The People's Daily, mouthpiece of China's Communist Party, has just released an editorial on the ongoing financial crisis saying much the samething as I did. Here's the Reuters report on the issue which includes quotes from the article such as:

"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.

The Reuters article also puts in its own comment, saying:

(The People's Daily) pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.

Just remember where you read it first............

Human rights abuses in Colombia? Surely not!

Here's the link to a great post at the CAJA website (it's on the link list on the right f the page). CAJA founder Scott Nicholson reports from a Colombian prison and focuses in on the case of Flor Diaz. Flor was a rural health promoter for 14 years. She was first detained and then arrested by Colombia's secret police in 2006. Nearly a year later her case went to trial, none of the six witnesses used at the time she was arrested for "rebellion" were presented, the judge left the room and 15 minutes later the prosecutor found here guilty. She's now serving 6 1/2 years in jail.

For more details and the family background of Flor and others like her, go see Scott Nicholson's post. Well worth it. And if you are still wondering why there are a few minor blockages on the road to the Colombia/US Free Trade Agreement this next image is for you, as you probably don't even know how to spell the name of the country correctly.

Good news for Corriente (CTQ.to) out of Ecuador this morning

The gov't has approved the plans for the dedicated port facility. Here's the PR. So tell me, what was all that guff supposed in the North about Ecuador being unfriendly toward miners and FDI and development?

Now, if copper actually gets off its back and moves up a bit I'm a Corriente (CTQ.to) (ETQ) buyer. Here's the 30 day copper chart and you don't need me to point out the obvious on this one. But is that a glimmer of a bottom just seen? Time will tell.

Albatross update

I've been quiet on the subject because Noront (NOT.v) isn't anything LatAm, but the quote from ousted NOT.v headguy Richard Nemis just about sums up what I think of the new board at the company that includes Patrick Albatross Anderson, destroyer of shareholder value at Aurelian and Colossus Minerals.

Richard Nemis said in Canada's Globe & Mail that the ex-Aurelian managers "certainly would not have been my first choice," for board seats because Aurelian shareholders "got shafted" in the Kinross deal.

Well said, Richard. The world of retail investors is waking up to the fact that management is every bit as important as projects for a junior miner. Mediocre, self-centred and self-serving arrivistes such as Anderson need to be called out. He thinks he can just waft in and take over one of the most exciting mine projects in Canada after the stunt he pulled at Aurelian and not be the centre of well-deserved vitriol? You have to be joking, Albatross!

How Ari Sussman must be regretting his decision to add Albatross to the Colossus BoD. After the latest NOT.v mercenary act from Anderson, I wonder how long it will be before Sussman (a guy with a decent reputation) decides to issue the "we thank Patrick for the contribution he has made and wish him the best in........." press release?

CSI.to (Anderson joined early September)

A final word; the last time I mentioned the albatross was in this post. A few days later I got a mail from a person in the mining world that said (words to the effect) that it wasn't very fair of me to keep attacking Anderson, and that it wasn't a way for me to make new friends.

You see, dear reader, that's how the insider's club of junior miners keeps itself going. "You want to make money with us? Well stop the badmouthing, be a good little boy and then we might let you join." All I can say to that person is, "Expect more on Anderson and his type at this blog, because I really don't need any new friends, and I certainly don't need the soiled money." I wrote back to that person and said that if Anderson wants to spend the rest of his life as a geologist and bang rocks together, well that's fine by me. But he has decided to cross the line and become a business-oriented CEO/director and is now fully and clearly in the world of finances, money and shareholder responsibility.

So far Patrick Anderson has done nothing...absolutely nothing...to warrant the trust or praise of anyone outside the small, self-interested mining clique. He's in my world now, the world of looking after shareholders. And I'll be damned if I'm going to put up with people like him snatching money away from the people he should be caring about for the next twenty years.

Got it?


Related Post

Colossus Minerals (CSI.to) and "The Anderson Effect": An update