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11/8/08

So how did Repsol manage to hold on to its oil biz in Ecuador?

If these two rumble the Muffin will beat the Spaniard's tush again

The Muffin revealed all in his radio address today.

"Even the Spanish government intervened (i.e. lobbied on Repsol's behalf), and in consideration of that government we met with the Repsol executives (who) accepted every single one of our conditions."

Or in other words, KOW TOW! KOW TOW! KOW TOW!

Correa continued; "We are very happy that Repsol is staying in Ecuador. It is a very serious company, but we aren't going to let foreign companies impose the conditions (of the contracts)."

Gotta love this guy.

Good weekend reading from respected bruddasites*

World's best blog Borev did what I was too lazy to do and compiled South American reaction to the Obama election win. My fave quote was Lula's and I'm often amazed how you guys up there think Star Wars is the font of all wisdom. Talk about cart-before-horse........

Mexico is going through a bizarre serial outbreak of escaped wild animals. Mex Files tells all (and neatly quotes W.B. Yeats, too).

Bananama Republic does a great job in exposing extreme right wing KKK members in Panama who are getting rich by duping locals into MLM schemes. Seriously good investigative work by Bananama, as its exposé got the President of the MLM branch to resign once he found out the evil and criminal background of the dude he was sponsoring.

Jurgen Schuldt looks at the revival of Marx (no, not Groucho) and notes that it's not the first time this has happened....and it always seems to coincide with financial crises, too. Now why would that be......?

Biiwii has been getting into macroindicators recently. As this is the stuff I wonk out on this humble corner of cyberspace heartily approves. Here's a post on LIBOR which explains why CNBC isn't talking about it any more...not dramatic enough now, y'see.

Otto's weekend freestuff

This episode of weekend freestuff is not about Latin America, not about economics, not about politics and not about stuff like that.

It's much better.

"Zen and the Art of Motorcycle Maintenance" by Robert M Pirsig is the most important book I've ever read, and if you haven't read it here's your chance. Here's the link to the free, gratis for nothing e-book version. No forms to fill in or e-mail addresses to leave; you just click straight to the book.

This book really makes a difference. It's wonderful, marvellous, deep and intelligent. It's a true pleasure for me to be able to pass it on to others. I hope you read it.

The author

Interesting interview from Ecuador

This is the link to Daniel Denvir's interview (who's doing great journalistic work in Ecuador) with Monica Chuji, a local politician who knows the Correa government from the inside out. Here's the first paragraph of Denvir's note to get the context:

Monica Chuji is an indigenous Kichwa activist from the Ecuadorian Amazon. She served as an Assembly Member from President Rafael Correa’s Alianza País party in the National Constituent Assembly, drafting Ecuador’s new constitution. Prior to Chuji’s election to the Assembly, she was Correa’s Secretary of Communication and spokeswoman. In September, she broke with Correa and left Alianza País, the culmination of months of increasing conflict between the President and Ecuador’s social and indigenous movements.

An excellent interview then follows, giving us a different perspective of what is happening in Ecuador today. Here's the link again, so go read it.

11/7/08

Trading Post (wrap up the week edition)


Capstone Mining (CS.to) up 11.4% at $1.27 is a star performer today. The good 3q08 earnings report coupled with the news that soon-to-be merged partner Sherwood has raised $37.5m by selling its Minto mine's life of mine PM production to Silverstone is the winning combo. Excellent volumes, too.

Another rising on good earnings is Telecom Argentina (TEO), which beat estimates and guided nicely too. The ADR is up 14.6% today.

Amerigo Resources (ARG.to, or AAAARRGH!!.to if you prefer) is the other side of the earnings coin. It made $1m+ in operations, but did the right thing and wrote down assets to the tune of $12.2m. This is because ARG.to holds sizeable percentages in DNT.to and LA.v, and both of those companies have seen megadrops in their share prices. This looks like ARG.to getting all bad news out of the way in one swoop, and I think it's cheap here. Costs will be considerably lower in 4q08 and in general terms it's a very well-run company. Today the stock is down 14% at $0.43.

Mercado Libre (MELI) back under $12. This is the place to buy some. I'm back to 100% cash again after selling the SLV yesterday, and right now this one is my idea of a quick trade. DYODD, dude.

Copper sunk under $1.70/lb today. That's not good, people. Not good.

UPDATE: FWIW bot a few MELI at just under $12. Small play and ST timeframe. I won't fret about holding thru the weekend.

Two weeks later and nothing has changed

Know your Beckett

On October 22nd I wrote this post pasted underneath. I got dozens (quite literally) of mails from people who told me how the dollar was at a temporary peak due to the carry trade (or something like that they'd probably heard on CNBC) and how the dollar was going to plummet at any minute and how gold was going to fly at any minute and how I should stick to LatAm things and not get involved in real men's work and this and that and the other.

At the time the USD index stood at 84. It's now at 86. Gold is still fiddling around at $730/oz and silver is at $10. Feel free to tell me how wrong I am again people, but make your arguments more interesting this time, please.

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I just received another one of those "It's mystifying how gold and silver have sold off" mails this afternoon. So let's put some broadstroke ideas out on the blog (even though this isn't really LatAm material). It's really pretty simple. It's not about gold, silver or any other commodity, it's about the US Dollar. In simple bullet-point form:

1) Under normal circumstances, any country faced with recession needs its currency to devalue relative to others to make its country, products, goods, services etc competitive in the world market, therefore grow out of recession. It's the typical cycle....no brain surgery needed.

2) When its currency drops, it also puts up a de-facto imports restriction (i.e. locally produced goods and services become more attractive than more expensive items imported from overseas). As an example of the flip-side, Venezuela is the classic overvalued currency at the moment and its internal industry suffers as a consequence.

3) However the country in question this time is the USA. Firstly it is a net importer on a vast scale. Secondly its exports tends to be cutting edge sectors in tech, biotech, pharma and finance that hold their competitive edge at whatever dollar ticket price.

4) Therefore it is perhaps...repeat perhaps...unnecessary for the dollar to go through its weak phase to bring the country out of recession.

5) Meanwhile, the USA is the implicit "world leader" and does not want to lose that position. If its currency weakened sufficiently it would mean that:
  • net exporting countries would look for new markets more vigorously
  • commodities prices would revalue in dollar terms and bring more wealth to the net exporters and imply less wealth for the net importers (eg W Europe, Japan, USA)
Or put simply: If the current "leaders of the world" (for want of a better phrase) make a concerted effort to keep the dollar strong, they will not lose their place as the most important nation(s) on earth.

As a by-product, the economies of the traditional net exporting nations (for example Peru) and the commodities in which they deal (for example silver) are suppressed.

Conclusion: It seems to me that the USA has two ways of going through its recession. It can either take the logical/natural (in economics terms at least) road and pass through its recessive phase with a weakened currency. Or it can pass through recession with a strong currency. With a weak currency the rest of the world is less affected but the after effect is a less influential USA on the world stage. With a strong currency the USA drags the rest of the world into its recession, but the after effect is that it remains the top dog as people will continue to want to sell plastic dolls and things to its market and will be actively hoping that the USA improves as quickly as possible (so that its most profitable market is quickly restored).

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.


UPDATE: I'm writing an update on this post at 7:41am this next morning because I'm already fed up about having to multi-answer the same counter-argument via mail. Yes, there's all that carry-trade thing, isn't there? But if you think that explains things then you also say that once the carry trade phenomenon is done there will be an equal and opposite downside to the dollar. Ok, that may happen, but it ain't necessarily so, either. What I'm proposing here is the carry trade explanation puts the cart before the horse. It's not the cause, but the effect. It's how it's happening, but not why.

When the dollar returns to USD72, write me and tell me how wrong I was. Until then, don't you think that all experts saying exactly the same thing at exactly the same time is a little suspicious, especially given those same experts' recent track record in understanding world finances?

UPDATE 2: This is most definitely the final update on this issue. Instead of getting on with my job the e-mail exchanges have continued for the last two hours with several people. I can distill my position in those mail exchanges into the following:

I just don't buy all the "it's carry trade" chorus. It fits, yes. But it's also the new chorus coming from a bunch of people who have been scrambling behind the curve for weeks, months or even years; why should I or anyone else blindly accept they should suddenly be ahead of the curve with this explanation? The carry trade explanation is choosing yet another after-the-fact scenario that fits. What I'm proposing is an a priori scenario that also fits the evidence we see around us.

I repeat the basics here;

The USA will benefit from a strong dollar policy going fwd.

If the dollar drops to sub 78USD (or so) then I'm wrong, it was pure carry trade and there is nobody at the helm of this dollar move.

Whether by accident or design, the current dollar strength will keep the USA and the industrialized nations in the box seat and will suppress the net exporting nations' economies.

I'm now going to crawl back under my stone and stick to all things LatAm, as mentioning to N. American readers that they might be wrong about their own financial analyses (after all the recent evidence too!) seems to rile too much from an outsider. I never mind about being proved wrong on these kind of things, but I'm always surprised about how religious other people get in defending hastily put together theories and daren't even think about any other logical alternatives.

Originally posted October 22nd

Continuum (CNU.v) vs Fortuna (FVI.v) arbitrage opportunity

A gift for value hunters

Here's an interesting way to get hold of shares of Fortuna Silver at a discount to present PPS, and may appeal to those people looking at FVI.v as a long-term value play.

As this PR dated August 14th announced, FVI.v is buying out Continuum Resources (CNU.v), its minority partner at the San José silver project in Mexico. FVI.v is emitting 7m new shares to absorb the 124m or so CNU.v shares out. When you get the calculator out that works out at 0.05642772 shares of FVI.v for every CNU.v.

In this update PR published this week, FVI.v stated that the deal is going ahead as planned and is due concluded by the end of the year. All this offers up the chance of a decent arbitrage trade, as this table makes clear.

The CNU / FVI arbitrage
CNU.v Share price Equiv. FVI.v Price New FVI at 92.33m S/O
0.02 0.35 0.38
0.025 0.44 0.48
0.03 0.53 0.58
0.035 0.62 0.67
0.04 0.71 0.77
0.045 0.80 0.86
0.05 0.89 0.96
0.055 0.97 1.05
0.06 1.06 1.15

The first column is a range of prices for CNU.v (for example, right now it's trading at $0.035 and yesterday it traded at $0.03). The second column is the equivalent price of FVI.v today using the 0.05642772 multiplier. The third column is the one that gives us the longer term arbitrage, as it assumes the deal is done and Fortuna's shares outstanding (S/O) moves from the present 85.33m to the 92.33m it will have once the new 7m shares are put into the mix.

All this shows that there's plenty of chance to buy FVI.v at a discount by entering through CNU.v. Consider that right now FVI.v is trading at $0.70 and CNU.v is trading at $0.035. This means you can get a 70c stock for a 67c equivalent (and if you can snag a few CNU.v at 3c you're getting FVI.v for a real bargain arbitrage of 58c).

This kind of trade is most useful for people thinking of a longer term position in FVI.v, of course. DYODD, dudes.

Paraguay: The bloodletting begins

I'm really beginning to really like this dude. Really.

Paraguay's newspaper of reference, ABC Color, is running a story today about how the ex-gov't of Nicanor Duarte Frutos "anaesthetised the press" (what a lovely expression) by "investing" U$13m in bribes for journalists and media outlets (radio stations getting more than their fair share) in the final 20 months of its administration. Here's Argentina's Clarin on the story, too (nice resumé).

For sure, this isn't going to come as a surprise for anyone that knows Paraguay, as in a world of Banana Republics it's been El Platano Mas Grande for decades. The real news here is that corruption is finally being reported to the public in a close-to-official manner (ABC Color is run by people who are pragmatic, are not stupid and will toe the official line without batting an eyelid).

This is an interesting and positive step forward in President Lugo's assault on corruption in the country. I suspect there will be various sweaty palms and nervous grins around the Congress building in the next few days, and that's the possible source of backlash that Lugo has to protect himself against. Plenty of politicking in the pipeline, folks...

Nice quarter from Capstone (CS.to)


This is the small-but-growing copper company that is in the process of merging with Sherwood Copper. CS.to returned a 3q08 EPS of $0.2o which looks very smart against its current $1.14 share price (P/E of 1.4X on a producing miner anyone?) But watch out folks, because it sold copper at an average of U$2.91/lb and Zn at $0.78/lb in the period and now....well...you know the score. Here's the link to the summary results PR.

Zinc isn't the big problem going forward, as copper makes up 80% of sales (so watch that chart I posted just minutes ago). Another thing to note is how CS.to will benefit from the weaker loonie in its US dollar driven revenues. Production growth continues to impress. The other benefit is the nice cash pile the company is sitting on.

Going forward, the copper cash cost of $1.29/lb means that the company is in very good position to ride out the lean times. But make no mistake; this is the last of the sexy quarters and the lean times are about to come, even to the good plays such as CS.to. Just to put your mind in the ballpark, if the company makes 20c/share from a margin to cash cost of $1.62, what does it make at a margin of $0.52? Yeah, two thirds less...you got it. So the question to ask yourself is would you be happy owning CS.to with an annual EPS of $0.30 or so and a P/E of 4X? Extremely ballpark and DYODD, but those are the kind of numbers you need to assume to get the current situation.

All in all Capstone looks like a good defensive position for your mining money, and one that will get immediate bounce from any upturn in commodity prices.

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

......30 day spot copper.

It hit $1.72/lb, it bounced to $2.10, it dropped again to..........yep, $1.72/lb. Right now spot Cu has popped a little to $1.75 so the line is holding for now.

I'm not TA's biggest fan (that's putting it mildly), and I'm triple-leery about trying to read THE TRUTH into a chart with just a 30 day timescale. Today's chart is either witnessing the moment when copper turns definitively against this raging bear market, or it's Otto clutching at straws. I'm not basing my trading day around it, that's for sure. But it's there.....in the back of my mind....saying "pssst...still holding here".

11/6/08

This post is strictly for the Canadian Mining people who read this blog

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Written by Jennifer Nemis, daughter of Richard Nemis. If you have an interest in the Canadian mining community, you need to read this.

Is this the worst ever note on LatAm from The Economist?

The Economist has always been lacklustre in its regional coverage, but this note linked right here, full of half-truths and revisionist history (example " Mr Goldberg’s offence was merely to have met opposition governors.".........LOL!!!) on the state of play between Bolivia and the USA really takes the biscuit. Don't they know that Goldberg is in the caca in his own State Dep't due to the way he cocked it up in Bolivia? Even this humble blogger knows more than The Economist about the latest developments, it seems. The Economist may cover other parts of the world well, but in LatAm it has royally sucked for years and there's nothing to suggest the pattern is about to change, either.

The thing that annoys is that there are plenty of informed people all over the globe that trust The Economist implicitly; it never crosses their minds that their fave magazine would try to unduly spin and influence their opinion. Nah...these clowns actually think the tail wags the dog; they think they can read The Economist then form their own informed opinion a posteriori.

Delusion.

If you want to know what has really been happening in Bolivia and the dirty tricks being used by the US and its propaganda machine, just click the name "Philip Goldberg" on the tagline under here. Or better still, click here and go to Abiding In Bolivia because El Duderino knocks spots off the MSM when it comes to Bolivia coverage.

PS: corvad, otto.rock1 (AT) gmail (dot) com

Breaking news on GRZ

Bad news for KRY shareholders: they've already changed the name


I nailed that sucker. This from the wires.

VENEZUELA SAYS TO OFFER RUSSIAN RUSORO VENTURE AT LAS BRISAS, NOW OPERATED BY GOLD RESERVE


UPDATE: here's the Reuters version.

Venezuela to offer Russians Crystallex gold project
Thu Nov 6, 2008 12:56pm EST

CARACAS, Nov 6 (Reuters) - Venezuela said it will offer a joint venture to Russian-owned miner Rusoro (RML.V: Quote, Profile, Research, Stock Buzz) to operate the Las Cristinas and Brisas gold projects, currently under contract to two Canadian companies, Mining minister Rodolfo Sanz on Thursday.

He told a Russian delegation that a memorandum of understanding would soon be signed with Rusoro.

It appeared that Sanz intends to replace the Canadian companies who operate the projects that contain some of Latin America's largest gold deposits, with Rusoro, but he did not mention their names.

Las Cristinas is currently operated by Canada's Crystallex (KRY.TO: Quote, Profile, Research, Stock Buzz), which had waited for years for an environmental permit to start building a mine at the site. The minister on Wednesday said that the government was taking control of Las Cristinas and would start the mine next year.

Nearby Brisas is operated by Gold Reserve (GRZ.TO: Quote, Profile, Research, Stock Buzz) which had also been waiting for permits to start mining the gold and copper deposit. (Reporting by Brian Ellsworth; Writing by Frank Jack Daniel)



UPDATE 2:
Now you know this story is gonna get a lot of fun!!! LOL!!!

CARACAS (Dow Jones)--Venezuelan Mining Minister Rodolfo Sanz denied Thursday that the government was planning to offer the Las Cristinas gold mine, one of the largest in Latin America, to Rusoro Mining Ltd. (RML.V) after taking back the mine from Crystallex (KRY).


UPDATE 3: ALL ABOARD!! GRZ insider filings from today

Nov 06/08 Nov 05/08 Timm, Rockne Direct Ownership Common Shares Class A Common Shares 46 - Compensation for services 50,000 $0.550
Nov 06/08 Nov 05/08 Timm, Rockne Direct Ownership Rights Unvested Restricted Shares 57 - Exercise of rights -50,000
Nov 06/08 Nov 05/08 Geyer, James Direct Ownership Common Shares Class A Common Shares 46 - Compensation for services 30,000 $0.550
Nov 06/08 Nov 05/08 Geyer, James Direct Ownership Rights Unvested Restricted Shares 57 - Exercise of rights -30,000
Nov 06/08 Nov 05/08 Stewart, Douglas Direct Ownership Common Shares Class A Common Shares 46 - Compensation for services 20,000 $0.550
Nov 06/08 Nov 05/08 Stewart, Douglas Direct Ownership Rights Unvested Restricted Shares 57 - Exercise of rights -20,000
Nov 06/08 Nov 05/08 Smith, Mary Direct Ownership Common Shares Class A Common Shares 46 - Compensation for services 17,000 $0.550
Nov 06/08 Nov 05/08 Smith, Mary Direct Ownership Rights Unvested Restricted Shares 57 - Exercise of rights -17,000
Nov 06/08 Nov 05/08 Belanger, A. Douglas Direct Ownership Common Shares Class A Common Shares 46 - Compensation for services 45,000 $0.550
Nov 06/08 Nov 05/08 Belanger, A. Douglas Direct Ownership Rights Unvested Restricted Shares 57 - Exercise of rights -45,000

Stop the world! IKN makes Canada's Financial Post!


Now who is that insightful blogger they be talkin' bout, huh?

UPDATE: I've had two mails so far so let's nip this in the bud now. No, that photo is not me. I just plugged "shocked expression" into Google images and picked that one.

Trading Post (light volume edition)


Just sold the SLV. Bot for 9.7 and sold for 10.1 so a win's a win, but I can't help feeling a bit annoyed this time as I thought SLV would run straight to $11 this time and score me a homerun. It's good to examine these feelings of frustrated greed and see them for what they are, though. Everybody gets them and if you ignore them they'll eventually cost you money.

Volumes have been light in the junior world all morning, and that's not good. Not good at all. It means if you have positions the day for taking profits was yesterday. Examples:
  • DNT.to 500 shares (five hundred!)
  • FVI.v 61k shares (after trading a million Monday)
  • DMM.to 19k shares (after a great run, too)
  • CS.to 24k shares (Capstone has recovered a lot of ground)
  • MTO.v 18k shares (fits and starts in this stock..earnings report out next week)
  • GRZ 25k shares (though intriguingly up 12%..check the posts below)
  • FAN.to 65k shares (another that's coming off very low lows...watch Zn price on this)
Plenty more like those juniors. The problem is that if you want to sell you're forced to hit the bid, then the MM smells blood and .........well, you know the rest.

Amongst the bigger boys, copper sisters PCU and FCX both down 7% today. The beta displayed by those two stocks recently has been impressive, both to the upside and the downside. 10% days hardly raise an eyebrow any more. May you live in interesting times, eh....

Repsol Kow-Tows to Studmuffin and gets to keep its oil

"hmmmm...Muffins..."

As usual, Alonso Soto of Reuters has scooped the field on a big Ecuador biz story. That guy is good, and here's the Reuters story below.

Make no mistake, this one is a big, big win for President Studmuffin and he'll reap both kudos and extra money for his country over this. I just hope he's read John Perkins' "Confessions of an Economic Hit Man"........

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UPDATE 1-Ecuador reaches contract deal with Repsol-sources

By Alonso Soto

QUITO, Nov 6 (Reuters) - Ecuador will keep its contract with Spain's Repsol (REP.MC: Quote, Profile, Research, Stock Buzz) after reaching an agreement over new terms, oil ministry sources said Thursday.

"Yesterday we reached an agreement with Repsol, they have accepted our terms," one senior ministry official told Reuters, asking not to be named because he was not allowed to speak on the matter. Two other ministry sources confirmed the deal.

Ecuador had said last week it planned to terminate the company's extraction contract because it could not reach a deal on terms more favorable to the state. But Repsol had said it hoped for an accord.

Ecuadorean President Rafael Correa had only recently said it was too late for the company to save its contract, but the leftist is known for his arm-twisting tactics with foreign companies to secure more benefits for the state.

Since he took office in 2007, Correa has launched an aggressive drive to renegotiate foreign oil and mining deal to exert more control over those key sectors of the OPEC nation's economy. He has threatened to expel other companies in the past.

The former economy minister wants oil companies to switch to new service deals that would allow the state to keep all the oil they produce in exchange for a set fee.

Oil Minister Derlis Palacios is expected to publicly sign a temporary participation-sharing contract with Repsol later on Thursday in hopes of switching to service deals in a year.

Ecuador has already signed temporary deals with the largest oil companies in Ecuador, including Brazil's Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz) and China's Andes Petroleum.

The new deal would lower Repsol's overall tax burden in exchange for giving more of the oil it produces to the state, ministry officials said.

Repsol, one of the Andean country's largest investors, operates three oilfields in the Amazon jungle with a capacity to produce around 65,000 barrels per day. (Reporting by Alonso Soto in Quito; Editing by John Picinich)


Related Post
Is Studmuffin's hardball finally working? (3 November)

Where's Waldo? (Peru Edition): Update


Remember the Keystone Kops? The Peruvian government's ongoing search for Romulo Leon is much better. Developments:

The head of the criminal investigations dep't today says Romulo Leon will be captured "at any moment" and his men are conducting an "intense job of intelligence". It's taken them a month to work out he's missing, so the 'don't your your breath' rule is in operation here.

The gov't has opened up a cellular phoneline so that people can phone in with information on the whereabouts of Romulo Leon. I really feel like phoning and saying "HE'S BEHIND THAT TREE!!! LOOK!! NOOOO, NOT THAT TREE...THE OTHER ONE!!" but I bet they've already had a thousand calls like that so there's not much point.

A special multiparty parliamentary commission has been set up to investigate the PetroPeru corruption. Yesterday they noted that there seems to be more cases of corruption than have so far come to light. NO SHIT SHERLOCK.

Whatevs; this comedy of errors has a long run ahead of it. Watch this space, soap opera fans

Related Posts
Where's Waldo? (Peru Edition): The joke continues
Where's Waldo? (Peru Edition)
Today's news: Peru loses high-ranking minister in corruption scandal, rest of world yawns

Fertilizer issues, soya harvests and all that jazz

Here's a bloomie story on Brazil soya pasted as stands. Zero in on the highlighted para 2, people. This could become a big problem going forward. Watch Argentina come out with lower crop forecasts in the next couple of weeks, too.

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Brazil Cuts Soybean, Corn Forecast on Fertilizer Cost (Update1)

By Carlos Caminada

Nov. 6 (Bloomberg) -- Soybean output in Brazil, the world's second-biggest producer, will unexpectedly fall next year as farmers lack credit to buy more expensive fertilizer, the government said.

Soybean output will decline to between 58.4 million and 59.3 million metric tons, compared with 60 million tons this year, the Agriculture Ministry's crop-forecasting agency said today in an e-mailed report. The agency, known as Conab, last month forecast production to rise to between 60.1 million and 61.3 million tons.

The global credit crunch came as farmers in Brazil sought financing to finish buying fertilizers for planting this month. The lack of credit means some regions will cut planting, and the reduced use of fertilizers may trim yields, Conab said.

``Production costs are significantly higher during the planting season and there are difficulties to access credit,'' Conab said in the report.

Average soybean yields will drop 1.6 percent to 2.77 tons per hectare in next year's harvest, Conab said. A hectare is equal to 2.47 acres.

In the Center West, which accounts for half of Brazil's soybean output, farmers will reduce planting as much as 2.9 percent to 9.35 million hectares.

Corn production will fall to 54.3 million to 55.2 million tons, from 58.6 million tons, Conab said. That compares with the October estimate for a drop to 55 million to 56 million tons.

To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net

Last Updated: November 6, 2008 07:20 EST

A highly recommended post on China

Brad Setser (for it is he)

Brad Setser is my favourite number-crunch blogger and does a simply magnificent job at his "Follow The Money" site.

Today he's written an overview post about the Chinese economy and its growth prospects going forward. Unmissable post written in a not-too-wonky style that we can all understand easily. Setser is as good as it gets on the Chinese economy. Stop reading this site right now and go read Setser. Here's the link.

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

....a table that compares how much Crystallex (KRY) has spent on development of Las Cristinas and how much money the company has received in equity sales since March 2004.

(click to enlarge)

Question for Robert Fung: Where has all the money gone?

11/5/08

Why Gold Reserve (GRZ) may be about to sell out to Rusoro (RMLv)

Let's count up the coincidences, shall we?


1) The GRZ "Brisas" project stands right next door to (quite literally..they back onto each other) the KRY 'Las Cristinas' that's about to be taken away by the Venezuelan government.

2) On August 27th, GRZ confirmed it had been approached by Rusoro Mining (RML.v), the Russian gold miner in Venezuela that has been making unrefusable offers all round the place (the latest to sell out to them at a deep discount was Hecla (HL)). Details of the previously discussed deal and my views can be found on this earlier post.

3) On October 10th, GRZ announced it was selling mining equipment it had planned to use at Las Brisas.

Taking into account that Rusoro and the Venezuelan gov't have already set a couple of precendents on how they work (they JV and split everything down the middle 50/50), it would make a lot of common sense for Venezuela to get its hands on Las Cristinas, Rusoro to get its hands on the slightly smaller but fairly comparative Brisas and then put together one massive mine operation between them.

Strangely, MIBAM might have unwittingly let the cat of the bag, as in its e-mail reported by Bloomberg today it said Las Cristinas has 31m oz of gold. That's way too high a number, in fact, but if you add the two properties together (LC approx 20m oz Au, Brisas approx 11m oz Au) 31m ounces of gold is right in the ballpark.

But finally, there's this. Doug Belanger, President and main man at GRZ, for some reason converted 205,000 class B shares of GRZ to class A shares on October 28th 2008.

Nov 03/08 Oct 28/08 Belanger, A. Douglas Direct Ownership Common Shares Class A Common Shares 36 - Conversion or exchange 205,000
Nov 03/08 Oct 28/08 Belanger, A. Douglas Direct Ownership Common Shares Class B Shares 36 - Conversion or exchange -205,000

This seems to be related to a 1999 reorganization of the GRZ company structure. Here's (what I think) is the relevant GRZ SEC filings passage:

In February 1999, Gold Reserve Corporation (predecessor to the  Issuer)    
became a subsidiary of the Issuer. Generally, each shareholder of Gold
Reserve Corporation received one Common Share of the Issuer for one share of
Gold Reserve Corporation. Certain U.S. holders elected, for tax reasons, to
receive Equity Units in lieu of Common Shares. An "Equity Unit" is comprised
of one Class B common share of the Issuer and one Gold Reserve Corporation
Class B common share. An Equity Unit is substantially equivalent, including
voting rights, to a Common Share and is convertible into a Common Share at
any time at the election of the holder. Equity Units are not listed for
trading on any stock exchange, but subject to compliance with applicable
federal, provincial and state securities laws, may be transferred.

What this seems to mean (in a nutshell) is that if Belanger didn't convert those "equity units" to true common shares they wouldn't have been recognized or included in any buyout deal. It certainly rings a lot of bells that the President of the company waits nine full years to convert this remnant of stock into common stock (I say remnant because Belanger already owns plenty million GRZ shares) right at the time when all sorts of other wheels seem to be in motion.

I think the big deal between GRZ and Rusoro is about to go down, folks. It's not a trade for the faint of heart, but I think there's value to be had in GRZ stock right now. Don't bet the farm though, and you MUST do your own DD on this one.

Non-Existent Colombian Paramilitaries Update

The Aguilas Negras (Black Eagles) paramilitaries. Neatly equipped, aren't they?
Where the devil did they get the cash for that little lot...........?

Now remember what you've been told, folks: The problem in Colombia is the nasty far left-wing FARC terrorists. The nasty far right-wing Paramilitaries do not exist, they are not a problem and they don't have anything to do with cocaine trafficking or anything. We know this because the "alleged" groups are sponsored by the Colombian gov't which is in turn sponsored by the US gov't.

Here's a story from today. Yet another illegal incurson into Ecuador from Colombia. This time it was 20 heavily armed paramilikos trying to search and destroy a woman in a disco on the Ecuador side of the border. This is an big story in Ecuador (Google has 57 reports and counting...here are a few listed) , but strangely...bizarrely...amazingly...I could only find one report of the event in the English media.

I wonder why?

Crystallex loses Las Cristinas: Surprised?

Reuters is reporting this below. As usual when KRY is concerned take nothing at face value, but if this is true then it's all over for the scammers. There will be few tears shed and few politicians to lobby for KRY from Canada, that's for sure. Here's another take on the same story from the LatAm Herald.

Meanwhile I'll bet on the following scenario:

1) GRZ gets the offer it can't refuse from Rusoro (RML.v)...almost certainly an all-stock offer just for the Venezuela land assets

2) GRZ walks away with cash to spend somewhere else and a passive percentage in RML.v

3) The Vzla state and Rusoro develop the double site as one operation and split it all 50/50.

4) And we all live happily ever after. Except Robert Fung. Or anyone who ever believed him. Or his company.

Finally, this link has MIBAM dude Rodolfo Sanz saying that the gov't plans to take possession of Las Cristinas next year.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Wednesday, November 05, 2008

CARACAS
Venezuela says it will take over Crystallex International Ltd.'s Las Cristinas gold project, one of Latin America's largest, marking the latest move by President Hugo Chavez to bring key industries into the hands of the state.

Venezuela's mining ministry said Wednesday the government aimed to start up the mine next year.

"This mine will be recovered and will be operated under state administration," the ministry said in a statement.

Crystallex, which operates the project under a contract, has waited for years for permission to begin mining the Las Cristinas deposit, located in a huge forest reserve in southeastern Venezuela.

Socialist Chavez has nationalized large swaths of Venezuela's economy, including energy, telecoms and steel companies.



UPDATE: here's the Bloomberg take

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Venezuela to Take Control of Crystallex's Gold Mine (Update1)

(Adds ministry's comments in third paragraph.)

By Daniel Cancel
Nov. 5 (Bloomberg) -- Venezuela's government will take control of the Las Cristinas gold mine operated by Crystallex International Corp. to assure state control over mining operations.

Las Cristinas is estimated to have about 31 million ounces of gold ore, valued at about $35 billion, the Mining and Basic Industries Ministry said today in an e-mailed statement.

``This mine will be recovered and will be operated under state administration,'' the statement said.

Venezuela's socialist government has seized control of industries that President Hugo Chavez has deemed ``strategic.'' Mining Minister Rodolfo Sanz said in the statement that the government plans to seize other mining deposits to increase production of gold, diamonds, bauxite and uranium.

Toronto-based Crystallex was given a 20-year contract to operate the mine in 2002 and hasn't been informed of any changes, Richard Marshall, vice president of Crystallex, said in a telephone interview.

Crystallex fell 13 cents, or 25 percent, to 38 cents a share as of 3:16 p.m. in Toronto Stock Exchange trading. The shares sank 43 percent on April 30 after the company said the environment ministry didn't plan to issue permits for Las Cristinas.

A ministry spokeswoman didn't immediately return phone calls seeking comment from Bloomberg News.

Trading Post (and on the seventh day he rested edition)

Southern Copper (PCU) has rebounded in biblical style over the last six sessions...

..... and Freeport McMoRan (FCX) has done well, too. Both are down today (PCU down 8%, FCX down 6%) and we can blame it on the spot copper dump for sure, but the recent climbs of both stocks have been good to see.

Malaga (MLG.to) up 0.5c at $0.11. This small Peruvian tungsten producer is still definitely on my list of microcaps to follow, and although it dropped away from the recent 15c level the stock seems to be waking up at long last. Tungsten demand and pricing has been strong through the crisis for other metals.

Brazil is having a rest day, too. The Bovespa (down 3.6% today at 38k) had jumped from 30k to 40k on the recent (and very welcome) rebound. Stocks taking a breather include NETC (down 3.3%), PBR (down 6%) , CZZ (down 3.4%) and ITU (down a more concerning 12%).

Another cheer for Dynasty Metals (DMM.to), up another 5% at $1.62 this morning. If this stock doubled it would still be cheap. And if Ecuador just said "ok guys, go do some mining" it would likely double again.

Oh yeah..nearly forgot...FVI.v up another 10% today :-)

Juan Camilo Mouriño, QEPD


Je sais, depuis déjà
Que l'on meurt de hasard
En allongeant le pas

La ville s'endormait, 1977, Jacques Brel
I was going to write a note on the horrific plane accident in downtown Mexico City yesterday that claimed the lives of a reported 15 people both in the plane and on the ground, including that of Mexico's Interior Minister. However The Mex Files has done a much better job than I ever could and here's the link to that note. Go read.

Fortuna Silver provides an update

At Caylloma, underground extraction caught on camera

Here's the link to the full PR. Go read it for yourself.

But I'm sure you'll like:
  • improved production tonnage
  • more silver from the mine
  • even more coming in 2009 (1.4m ounces will be 70% more than this year)
  • recovery rates for all metals are improving (now over 80% recovery for silver)
  • new copper circuit that adds easy money by-product cashflow
  • strong cash position Mr Taylor
  • etc etc
This company is the real deal, people. Read that PR for yourself, but I'd like to point out just one small thing here. FVI announced it had started developing the Soledad vein (the bonanza-grade vein mentioned in the PR) on September 23rd and just six weeks later the ore is being processed and those big silver grades are being turned into saleable ounces. This is the difference between an explorer company and a junior actually in production and is something many junior investors don't appreciate. Far too often a PR announcing high grades hits the airwaves as part of an ongoing drill campaign but nothing ever comes of it, or if something does we have to wait months or even years for a solid result. Not true when you can throw the ore into the processor in a matter of days.

All junior miners are not the same. DYODD. Here's a link to the Fortuna website to help you.

Where's Waldo? (Peru Edition): The joke continues


Hey, remember all that thing about the big Petroperu corruption scandal and the politico dude Romulo Leon who decided to run away instead of answer to authorities about the backhanders he was caught on tape admitting? Well amazingly enough after a full month he's still on the run.

So today the Peru gov't have slapped a one hundred thousand Nuevo Sol bounty on Romulo's tush (that's about U$33k and a lot of money for a non-politico in Peru). Or in other words, the gov't and Police are either too corrupt or too stupid to find him for themselves (probably both). To give you an idea, dearest reader, there was a classic line from the absolute toppy top head chief honcho of police last week. When asked "Where's Waldo" he replied


That's a direct quote. You cannot make this shit up. Oh my how I love Latin America... wouldn't live anywhere else if you paid me.

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

.....the Palladium 30 day price chart.

There's a good reason for this. About four weeks ago I was asked for thoughts on Palladium. I wrote this post at the time saying I knew very little about the metal, but also put up a couple of charts with simple technical analysis comments. The LT charts suggested that Palladium would either hold $182/oz or slump to $100/oz.

As we can see from the chart here, that (self-confessed very tentative) call was so much crap. Moral of the story:

1) Don't read too much into a chart. The main problem with charts is that they'll fool you into seeing what you want to see. Most of the random walk problems stem from that.

2) Don't ask me about palladium. There's a very simple reason as to why I know more about the copper market than the palladium market. There's no palladium in Latin America* but there's a whole mountain range full of copper. For PGM, go ask a Russian.

3) Beware of people who proclaim to have the answer to all things market. I know a little bit about a little corner of the world and can read company reports because I was taught how to do it and have done it for lawd-knows how many years. Understanding balance sheets correctly allows you to note the financial wellbeing of a company, but it doesn't suddenly make anyone an expert on what that company does. In the same way you cringe when a pop-star starts explaining how to save the world, you should also see red flags when a banking analyst starts pontificating about a resources company and what its CEO is doing wrong. Horses for courses. That's all.

*ok...there's a little bit. But we're not talking ring of fire here

11/4/08

My own fantasy

In 40 years time, if my grandchildren don't understand why it was such a big deal that a black guy became President of the USA in 2008 I will be a very, very happy old man.

This is a truly historic day. A great day.

Don't let us down, Barack. Go out there and do what we know you can do.

Dewey Defeats Truman

Not trying to second-guess or pre-empt anything here. I just found a high resolution version of the Tribune front page and I thought I'd pass it on. Just a little trivia for you. I mean, you think anyone cares much about any news from LatAm tonight?

Click to enlarge (and it gets really big)

Today a man was elected..........

........who has the hopes and dreams of an entire nation riding on his shoulders. Here's CNN with the details.

(CNN) -- Football legend Diego Maradona has been officially confirmed as the new coach of the Argentina national side. Julio Grondona, the president of the Argentinian Football Association, made the much-anticipated announcement in Buenos Aires on Tuesday.

"Today is a special day for Argentinian football," said Grondona.

Maradona, 48, will be assisted by former Argentina coach Carlos Bilardo, who will act as general manager. Maradona's first match in charge wil be a friendly against Scotland in Glasgow on November 19. He then faces a tougher task in making sure Argentina qualify for the 2010 World Cup finals from the South American group.

"It's an honor," Maradona said. "It's a dream come true. I'm going to give it my all to make sure yada yada continues here

Why doesn't this surprise me?

Mexico's Telmex (part of the Carlos Slim empire) made the news in Peru today and not for the right reasons, either. Here's the Ottotrans(TM) of the first part of the link above
.
Lima, 4 November
The Peruvian branch of Telmex today announced it had cancelled U$60m in investment programmed for this year due to problems in obtaining municipal licences for infrastructure works.
.
The Mexican consortium was to have invested U$300m in Peru in the period 2005.2008, of which U$160m was earmarked for this year. The director of Telmex Peru, Mauricio Escobedo, told journalists that they had encountered a series of obstacles trying to instal the necessary networks and antennae for telecommunications services.
.
He detailed that they had problems to get licences and municipal-level permission concerning the expansion of Telmex's 3play project, an integral service of fixed line telephone, broadband internet and digital TV
.
Surprised? If you are you don't know what Peru is like.

Trading Post (very green edition)


Well..gotta say it....this is fun. I might not be getting the big gains from trading the smallstock springers, but the SLV trade (up more than GLD today, that's cool) is working out just fine so far. Taking nothing for granted though. There is an embarrassment of riches in the 'ten percent gainers' today, and that's great to see. Here are a few:

PCU and FCX upping over 10% each. The world suddenly likes copper. So be it.
.
Fortuna Silver (FVI.v) up 12% at $0.54, and volumes (and the bid/ask) suggest there's more to come. Word reaches me that some retail newsletter dude called McCoach reco'd FVI.v to his flock. Sounds fine by me.

Crude oil up 4% on the Saudi news (timed on election day....hooda thunkit) and PBR upping nicely to $29. Yes, it was me who said it was expensive at $40+, and yes it was me who said the recent $20 to $22 prices were value. Don't say I never do anything for yaz.

Kinross (KGC) (K.to) continues to fly and printing good volumes too. Up 50% from the recent lows now, and a very smart 17% today.

Cosan (CZZ) up 12% and has finally broken away from the $2 numbers. It wasn't so long ago that this thing was printing $12 to $15 prices, so there's plenty of reason to buy if you like the sugar/ethanol sectors going forward. There's a simple difference between ethanol in Brazil and ethanol in the USA; in Brazil it's profitable.
.
Update: Yeah, go Fortuna go