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4/11/09

Cerro Casale capex and those dubious neighbour plays

Any professional analysts at the Can'o'corn feeling stupid about pumping the Exeter Caspiche story yet? Cerro Casale is just down the road from Yale's dog of a project, remember. Same rocks, same grades, same lack of water, same altitude...same same same. (Hint to Mr Z; Next time you go on a site visit make sure you leave the comfort of the deluxe hotels and spend more than four hours at the mine site.

Oh, then there's that dubious Volcan under Andina Minerals (ADM.v). Same place. Then those utter criminals at Capella (KPS.v). Same place. As mentioned many times before not all gold ounces are the same, so check out below what Kinross and Barrick have suddenly discovered! My, doesn't it remind you of that Noront Ring of Fire thing from a couple of years ago.......
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A key development project for mining giants Barrick Gold Corp. and Kinross Gold Corp. has run into massive capital cost escalation, raising more doubts from experts that it will get built any time soon.

The project in question is Cerro Casale, a huge, low-grade gold-copper deposit in northern Chile. Kinross filed a technical report this week that pegged the construction cost of the project at a whopping US$3.6-billion.

That is an increase of 86% over the last estimate of about US$2-billion, made in August, 2006.

"This number is obviously going to have pretty big implications," said Dundee Securities analyst Paul Burchell, who used to work at Cerro Casale.

"It suggests to me that a project difficult to justify five years ago is probably more [difficult] today."

Experts are also concerned with the aggressive pricing assumptions made in the Cerro Casale study. Kinross is using a gold price of US$725 an ounce and a copper price of US$2 a pound, which is actually higher than the current copper price.

"It's a tough project economically because of the capex and the prices required to make it work. In this market, it will probably be deferred," said David Whetham, a resource fund manager at Scotia Cassels.

Gold and gold miners: A chart study of correlations


Yesterday in the comments section of this post, reader Pedro Candela asked.......

"which gold companies' shares would you recommend to buy that have a very good correlation with gold bullion prices?"

....and as I hadn't looked at the relevant charts of gold versus the gold miners for a while this interesting question piqued my interest. What we're trying to gauge here is beta correlation to gold, but that's just a fancy name for the leverage a gold mining company has versus its major product.

The subject of this post is hardly new, of course. The "gold vs gold miners" debate has been going on since before I was born and will go on long after my time is up. But all the same, here follow a few thoughts that came from the charting inspired by Pedro's question and a few charts themselves. Firstly, we need to narrow down the wide range of miners on offer. Logic suggests that to get a fairly close correlation to gold, a gold miner must be:

1) Big, most probably a tier 1 miner, possibly a tier 2. This rules out a lot of the small producers (Troy, Metanor, etc ad infinitum) that get pushed around more by their own local circumstances.

2) Stable, so companies that have a short company history (i.e. recent start-ups like JAG) or a patchy record in the non-production part of company life (DROOY springs to mind) don't interest us.

3) Mostly gold. The company should make as much of its revenue as possible from gold and only gold. Silver revenues, as long as they aren't too big, don't skew things too much but a big reliance on other metals isn't the ideal. So a company such as Freeport (FCX) is left out as it makes most of its money from copper, even though it churns out plenty of gold ounces.

4) Unhedged (or mostly unhedged) on production so that market movements of gold are better reflected in the company itself. Nowadays this doesn't tend to be a big issue.

So here we go with the charts. Be warned that they may look "messy" at first sight, but believe me they could have been a lot worse! This is because I've narrowed the field down to just eight gold companies, namely...
  • Yamana Gold (AUY)
  • Buenaventura (BVN)
  • Newmont (NEM)
  • Gold Fields (GFI)
  • Goldcorp (GG)
  • Kinross (KGC)
  • Barrick (ABX)
  • Royal Gold (RGLD)
...as representatives of their sector. If I've missed out your fave gold play, sorry, but you can always run the same chart exercise with your own parameters.

All the above gold mining plays are then compared to GLD (the gold ETF) which acts as an excellent proxy to gold itself. Please note that all companies are quoted on their USA tickers so that exchange rate issues are discounted. Also please note the line for GLD is that black one made up of broken daily trading highs and lows (called the OHLC) while the other tickers are the unbroken, coloured lines. Finally, click on any of the charts to get a bigger view.

Firstly, a very interesting set of three charts that compare all nine tickers over three time periods. This chart for 2009 only (Jan 1st to date);

Next this chart below from November 1st 2008 to date;

Thirdly this chart from September 1st 2008 to date;

These three charts looked at in conjunction make it clear that the timescale involved is most important, this is because the gold miners are almost to a man levered to the price of gold, and some display heavily leverage (or beta).

If we focus in on the "Sept 1st to date" chart above, we see that the price of gold has done comparatively better than all but two of the miners. This is because the time period takes into account the September and October 2008 big swoon period when stocks of all types dumped heavily, but gold was supported by people moving into it as a safe haven option. However by looking at exactly the same companies but starting the ball rolling at November 1st, that bad period is behind us and the miners have bounced back well, with all of them outperforming the metal. And by way of exaggeration to prove a point, we can take a look at the Sept-Oct 2008 segment of time in isolation and see just how those gold stocks were slammed compared to gold:

Gold went down 10% in that period, while the miners dropped 40%, 50% even 60%. That's a nasty pill to swallow in just two months if you bought gold miners "for safety" and really is the crux of the whole matter; miners do typically display high beta correlation to gold. The mining companies will sometimes match the percentage moves in gold quite faithfully. Sometimes they will outperform gold by a lot. And sometimes they will underperform against gold. It all depends on the internal state of the company, the external state of the economy and a thousand other factors, not necessarily gold itself.

Here's the one year chart with the same comparisons........
........and we again note that gold the metal beats out all but one of our examples, a direct reflection of the 2008/2009 bear market.

And here's an altogether longer, four year view.....
.....and perhaps this four year timescale above gives the best understanding of which gold company is the "best match" to gold the metal. After studying it for a while you'll probably come to the same conclusion as I and choose Royal Gold (RGLD) as the best fit. Here's the same four year chart that isolates RGLD versus GLD:
In the end it's not that surprising that RGLD matches GLD's movements in the most faithful manner, because RGLD is a gold royalty company and not a true miner (check the company website to see what I mean if you're unsure). But even then, if we go back to the one year chart above we note that RGLD has displayed strong positive leverage to gold for the last 12 months.

The bottom line to all this is really two separate conclusions:

1) The timescale of the study is of the utmost importance. Gold companies act differently to their metal product depending on wider circumstances. So when, for example, a company representative boasts that their company has outperformed gold or the market or whatever by X percent in the last X weeks/months/years, unfurl that red flag!! Don't just swallow the IR guy's timescales whole but check his company against a whole range of times and perhaps against a range of peers, too. It will give you a better idea about the company's true performance.

2) Gold miners offer significant leverage to gold. Period. If you buy the miner it means you're getting extra bang-per-buck on the forward movements of gold itself. The miners are also affected by the foibles of the people that run them, errar humanum est and all that jazz. So don't fall into the trap of thinking that gold miners are as safe an alternative as an investment in physical gold. They're not. They are far more speculative. And in the end, this is why I hold a chunk of gold bullion in my long-term portfolio and not an equivalent bunch of shares in NEM, ABX, BVN or whatever.

As for a recommendation amongst that lot, Pedro: DYODD!

UPDATE:
Trend&Value picks up the baton. I agree with his final sentence.

Guess who's coming to Caracas?

On Monday April 13th 2009, President Hugo Chávez plays host to a visit from one of his country peers. Who could it be?

The Axis of Evo Morales? Nope.

Iranian dwarf Ahmadinejad? Nope.

Kim Two of Rocketland? Nope.

All wrong, folks. In fact, to confuse the blueeyedwhitey world that can't seem to handle anything more complex than "you're either for us or against us", it's this dude:

U: Where's the bathroom again?
C: End of the corridor on the right.

America's friend Uribe arrives for bilateral talks with Chávez that are aimed at the 'further reconstruction of the dynamic' (or somesuch translated phrase used by Hugo) between Venezuela and Colombia. Sounds fine by me. It also gives a chance to point out that opposites do indeed attract, because it's an open secret that these apparent polar opposites (ok..apart from the shared obsession with re-election) are friends that like, respect and get on well with each other.

4/10/09

Dalmady explains Stanford


My favourite type of blog, blogger or article comes when an expert in their corner of the world can explain tricky concepts in a way that most everybody can understand. It always reminds me of something that particle physicist Richard Feynman used to say about how it's perfectly possible to explain even the most difficult of concepts in his field to a class of freshmen. For the record, this is why I like and appreciate econobiz bloggers such as Brad Setser, Jurgen Schuldt, Felix Salmon, Yves Smith, Farid Matuk, Gary BiiWii, Paul Krugman and also why people like Tim do a great job on El Salvador, RG equally on Mexico, Plan Colombia & Beyond on its subject etc etc. All those people and many more gooduns are linked over there on the right.

Alex Dalmady (Quack!) shows today that, in my opinion and according to the same criteria, he's also a top blogger. Dalmady has written a post today that explains just how the internal structure of the Allen Stanford empire was set up, why the "tier 3" assets are so important and how much of a fraud Stanford really is. I really don't think this subject can be explained better than in Dalmady's post, as anyone with a modicum of financial knowledge and experience will 'get it' straight away. One of those things that, after you read it, makes you ask yourself "Why do people always make finance sound more complicated than it is?".

It's a wonderful piece of writing, edifying, entertaining and educational. Here's the link. Go read.

The Friday Freebie: Learn what business intelligence can do for you

This one is a very useful Friday freebie and well worth getting. Follow instructions and make yourself smarter and Otto happier:

1) Read the outline below

2) Request your copy on this link (or the link below) and remember that this is for USA and Canada residents only.

3) Get your hands on your free copy (not joking, these freebies are exactly that..free) and get wise.

4) Otto makes a small commission from the publisher and smiles a big smile.

So if you too want to contribute to this humble corner of cyberpace AND learn about a key business advantage, all at no cost to you, now you know how to do it. Here comes the blurb.

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The Borev Peeps Campaign: Time for that final push over the cliff


There are just two days to go before The Washington Post hits us with the finalists in their Peeps™ diorama competition and we need......nay we BEG you to get on board the Borev diorama promo campaign.

Here's the info-packed post with all the details, above is the magic work of art, and this is the link to the all-important petition campaign. Borev is aiming for 10,000 signatures, so when you go over take a look at just how close he is to making that magic number.....AND JOIN IN AND SIGN ON THE LINE, DUDETTES AND DUDES. It only takes a minute and the love you will spread will be karmically returned to you in the course of your life, of that you can be sure.

Make this an Easter to remember for Borev and everyone that sails with him. Thank you in advance.

Colombia's indigenous

This 11 minute video with good quality English subtitles features Aida Quilcue, an indigenous leader from Colombia, explaining how indigenous rights have been trampled on in her country and how as soon as her people raise their voices in protest about state and narco sponsored violence, forced removals from home territories, and the general ignorance and racism they suffer they are immediately classed as terrorists.



By the way, Quilcue is the same woman who lost her husband earlier this year when Colombian soldiers "mistook his car" for a FARC patrol and machine-gunned it.

I don't know how much you people up there care about the lot of the original, precolombian indigenous people of South America, but I do. Because I'm married to one. And it's my blog. However it would be nice if you took 10 minutes out of your Good Friday and considered the issue. I wish you all the happiest of Easters.

English language coverage of Venezuela and another stunning development


You should all know by now that it's Hugo Chávez himself, in person, that's forcing your children to smoke crack cocaine by selling it to them just round the corner from their own school gates. But what happens when, contrary to everything that has been said about Venezuela facilitating drugs smuggling, helping the traffickers, not cooperating with those fine upstanding fellas in the USA of A etc etc, a big story shows that the English language media coverage of Venezuela, cocaine and stuff is basically a crock?

Yep, you guessed it. The media ignores the story.

Here's the link to a report about a major drugs bust that arrested five Venezuelan nationals and confiscated 925kg (i.e. nearly a tonne) of cocaine this week. The boat involved was Venezuelan registered and sailed out of Isla Margarita, Venezuela, and was in international waters, but unbeknown to the narcos was being tracked by both US and Venezuelan authorities. When the US coastguards decided to move in they asked for and immediately received permission from Venezuela to board the boat, thus the bust happened.

In the words of Venezuela's Interior Minister, Tarek El Aissami, "It is another demonstration of the effective government policies against narcotrafficking. The coordination was done in an immediate way and gives lie to all the slanderous campaigns that try to make people believe that Venezuela does not collaborate."

Lastly, three things to note:
  • Firstly, the five people arrested were Venezuelan, so there's no special treatment going on for their own nationals.
  • Secondly, the English media have completely ignored this big drugs bust and the Venezuelan/US cooperation that went on. Ask yourself why.
  • Lastly, as the bust was made in international waters by the US Coastguard, Venezuela will get no "credit" for the tonnage confiscated. But that's not the point here, is it?

Is it?


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

......copper, spot chart, 30 day time period.

Bill the Quill had a way with words, so let's leave it to him this time:

I am even
The natural fool of fortune
King Lear, Act 4 scene 6

4/9/09

Free for you: Today's Trend & Value Report from Lucas


The Trend and Value Letter is the service run by Lucas of the same-named blog. It's an impressive daily service that gets sent straight to your mailbox five days a week. The price is also way too cheap for the frequency and quality of analysis on offer (remember, this is the guy who called the S&P bottom to within two points months before it happened). As well as the indices, Lucas is particularly strong on currencies and precious metals having previously been a precious metals broker before moving to independent analysis services.

Therefore it's with great pleasure (and prior permission) that IKN offers today's Trend&Value letter as a sample of Lucas's wares. Just click here to download your copy and find out how just how good the guy is at this analysis game. And while reading this free sample of today's report (really, it's today's dated April 9th and everything) reflect that the monthly fee for this letter is just U$28, which means the typical production of 20 letters per month will cost you just U$1.40 a copy (for more details on that, check Lucas's blog on this link and mail him).

So I hope you check out the free copy on the above link (and just to make sure it's on this link too). And by way of disclosure, I get no commission or anything of the sort if you decide that Lucas's letter is for you and sign on for a trial month. All I want to do is to make you aware of the excellent service that's on offer. Thank you for your attention.

Bolivia GDP grows 6.15% in 2008

Today the Bolivian INE stats office released its preliminary GDP statistics for country GDP in 2008. Bolivia's headline GDP grew by 6.15% in 2008 which must be a royally difficult pill for the Evohaters to swallow. Here's a chart that breaks down some of the key sectors:

Worth pointing out that I've left the biggest change off the chart as it would have skewed the scale too much, as mining revenues grew by a full 56.2% in 2008. Expect a roaring silence on these figures in all English language media. I mean, you can't expect to read any positive truths about Evo's Bolivia, can you?

Trading Post (cupriferous edition)


Freeport up 7.4% at $43.60 and Southern Copper (PCU) up 7.7% at $19.60. I covered my FCX short at the very first opportunity this morning, took the small loss and got the hell outta the way of this juggernaut. Copper breaking $2/lb in London this morning triggered a whole swathe of buys and there's no point in shaking your fist and spluttering "bu... bu.. bu... but it's not fair!" You take the loss. You say "I was wrong". Period.

Amerigo Resources (ARG.to) up 1.7% at $0.305. This seems to me to be a great way to add copper exposure to your portfolio, if that's what you want. This price is below that paid by Ross Beaty for his recent chunk, the company wrote down its share assets in LA.v and DNT.to in its year-end report (DNT.to significantly higher since then) and the cash injection from the Beaty-taken offering has given the company breathing room on its cash flows. With $2/lb copper it's probably making a profit right here and right now, and it will definitely be making a profit by the end of the year with Cu at $2+. DYODD and be clear that it's a high risk exposure of course, but it's a producer at a discount to peers...and that ain't a bad place. I don't own but it's on my shortlist right now.

Capella Resources (KPS.v) down 7.8% at $0.83 and volumes low. How sad.

Petaquilla Resources (PTQ.to) up 12.4% at $0.50 which looks sexy at first, but it's not breaking out of its range at all even on stronger than usual volume. Shorters are unlikely to be tempted yet. Avoid this PoS like the veritable plague.

Fronteer (FRG) up 1.9% at U$2.19 and showing signs of life. I'm happy to say that at least one reader has followed me in on this stock and it happens to be somebody I highly respect as a stockpicker (sorry, naming no names). Volumes are low.

A most impressive map of the Amazon rainforest

A couple of weeks ago IKN ran this post with a chart that shows just how much (read 'how little') of the Amazon rainforest is protected by its host countries. Well now the people behind the study RAISG, have released their truly fabulous interactive zoom-in detailed map of the whole region, it's protected areas, its indigenous territories etc etc

Click to enlarge (it gets very big)

The above map is a screenshot from the site, but you should really go to the link right here and have a play for yourself. It really is everything you've ever wanted to know about the Amazon rainforest but were too afraid to ask and you can zoom in and out, change parameters, look in close detail and all the rest. A highly recommended website and superb source material.

Argentina: Another round of "INDEC versus Reality"

Just for fun, today's wonderful front cover of Barcelona
(click to enlarge)


When the Argentine government's official stats office INDEC announced last week that industrial output had dropped just 1.1% in February compared to the same month last last, the laughter could be heard on the other side of the Rio de la Plata. Long gone are the days of anger, of protesting the INDEC, of indignant op-eds in newspapers, of marches and symbolic demostrations outside its offices. Nowadays Argentines just react with a shoulder shrug and a giggle and just wait for the more reliable independent economy bureaux to tell them how it really is.

Here below is something far closer to reality (and of course the gov't throws up its hands in disgust and denies it all). Argentina's industrial output dropped 12.1% in Feb '09 YoY. DJNW takes up the story.

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BUENOS AIRES (Dow Jones)--Industrial production in Argentina declined far more in February than the government previously reported through the national statistics institute, Indec, according to a new report published by a manufacturers group.

Indec reported last month that industrial output fell 1.1% in February versus the same month a year earlier.

But February's output actually fell by 12.2%, according to the Argentine Industrial Union, a group that represents the country's leading manufacturers.

Dow Jones Newswires obtained a copy of the report Wednesday.

The UIA's report is considered authoritative because it gets its production data from its own member companies, which in many cases are the same companies consulted by Indec. In theory, economists say, Indec's data shouldn't differ substantially from that compiled by the UIA itself.

In reality, the gap between Indec data and private-sector industrial estimates has widened in recent months.

Production Minister Debora Giorgi dismissed the report, however, saying it doesn't reflect reality.

"If the decline were of that magnitude, we would be seeing job losses that, thank God, we're not seeing," Giorgi said. "This isn't Argentina's reality. All you have to do is walk around and look at factories in the country."

Even so, virtually all private-sector economists now believe Indec data don't accurately reflect inflation, poverty, economic growth or industrial production.

The UIA's report indicates industrial production is down for the fourth consecutive month since November. Before that, production had risen uninterrupted for 72 months.

A UIA official familiar with Indec's report says the government institute gets its data directly from companies and not from the UIA itself. But the official didn't know how many of these companies Indec surveys.

Indec officials repeatedly decline to comment on differences between their reports and private estimates.

One example of diverging data comes from the estimate for food and drink output. Indec reported that February food and drink production rose 13.3% from a year earlier while the UIA said it declined 5.6%.

Chemical and petrochemical output rose 11.6% according to Indec, but declined 11% according to the UIA.

-By Taos Turner, Dow Jones Newswires; 5411-4590-2421; taos.turner@dowjones.com

Petaquilla Minerals (PTQ.to) and its total disregard for the law


On this link find today's press release from Petaquilla Mineral (PTQ.to) that tells us it has just poured its first gold (on April 7th). It has done this without having environmental approval and in total disregard to the government ANAM office that specifically ordered the company to stop all work until it met with and gained environmental approval for its operations.
  • It's the same company that faces a further round of sanctions, fines and prolonging of its suspension (the one being totally ignored) due to the recent investigations by ANAM and the failure of the company to comply with environmental law, as announced last week.

Against all this, these bastards calmly announce that they have poured gold to an unsuspecting audience. The image of Voltaire's firing squad "pour encourager les autres" once again springs to mind. If PTQ.to moves up today it will give a shorting opportunity of a lifetime to the people at Kingsford Capital (and other shortside traders). I strongly encourage them to take that chance, as this company is an embarrassment to the mining community and should be traded out of existence in the shortest possible time.

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

......really really impressive. It's the average interest rate that Citibank, Santander and HSBC charged its Brazilian branch clients compared to the rates charged in the banks' home countries in 2008. Data from this article in America Economia


Look, I know all about the SELIC rates and how Brazil is still a developing banking nation and all that..... BUT GIMME A FREAKIN' BREAK HERE!

This is what los conquistadores did to the New World via Potosí. Ever wondered why global banks are so keen to move into developing nations? Wonder no more.

4/8/09

Peru Central Bank cuts big

Peru's Central Bank tonight cut a full 1% off its baseline lending rate, taking it from 6% to 5%. Here's a Bloomie report on the cut, but what it basically means is "we don't care about inflation but we're in the crapper on the growth front." But hey, I could have told 'em that. In fact, I have....since December.

It also means that Peruvians should go and buy themselves a few US dollars instead of holding Nuevos Soles, as the S/3.135 = U$1 won't last very long. See you 3.3, bitches! Here's a three month chart that tracks the major locally traded currencies against the US Dollar. Peru's Nuevo Sol (PEN) is the blue line and will soon be joining the Argentine Peso at the "down 5% vs greenback" level.

Capella Resources update

I have to say that I'm pleased about the contents of the following five day chart and really don't care if it's a coincidence or connected that the big traded volumes in Capella Resources (KPS.v) suddenly stopped as soon as this post appeared on IKN Monday morning (and followed by this post later).

That's a 22% drop since publication ($1.10 to $0.86) but more importantly the thieves in suits selling at these higher prices to their unsuspecting marks have been stopped from unloading for big profits as the volume has dried to a trickle. Meanwhile, not a word from the OSC, "the houses" or the Canadian financial dailies about this most obvious of criminal frauds. Until you guys up there do something meaningful your sordid markets will suffer from the reflected reputation of scum like KPS.v.

Related Posts
Capella Resources (KPSv): A fraudulent scam for the ages
More on Capella Resources (KPS.v) and the scum behind the scam

The Summit of the Americas: A primer


"The only thing worse than being talked about is not being talked about."
Oscar Wilde

Thanks to The Economist, IKN no longer feels obliged to writing a long preview of next week's Summit of the Americas that happens in Trinidad and Tobago on April 17th to 19th. Here's the link to the Economist article, recommended as a nice'n'concise way to get the issues clear before the bunfest starts (top of agenda will be Cuba, Cuba, Cuba and sadassed Miami residents' rabid reaction to Cuba) and also gives a neat background to the fiasco (The Economist's word, not mine) of the last SotA in Argentina, 2005.

Finally, while checking out the script make sure you note something about the illustration that accompanies. As well as the attention to detail (Lula's missing finger) the Canadian dude is so unknown outside his borders that the cartoonist feels obliged to slap a red&white maple leaf on his tie. Sad, innit?

Not just bananas in that republic

Click to enlarge (gets big)

Up in the northern and northeastern parts of Colombia, the cocaine trade is run by both far left and far right groups. The best known of the bunch is of course the leftwing FARC insurgents, but equally as nasty (though kind of ignored by the national gov't...who knows why?) are far rightwingers such as the Aguilas Negras (Black Eagles).

However not all their revenues come from Colombian marching powder, as both sides in this particularly dirty war are adept at extorsion and racketeering, too. The big export brand of Chiquita Banana made headlines and got into trouble a while back for admitting that it had paid protection money to right wing paramilitary groups, but well worth a read is this new story from Colombia Reports that makes it clear just how pervasive the protection racket is in provincial Colombia. Here's an extract from the report:
  • So far, Chiquita Brands is the only multinational company that admitted paying the AUC. Other companies deny having paid the paramilitaries, despite the growing number of testimonies of paramilitary warlords who say the opposite.

But be advised here that it's not just the banana growers that suffer under this weight, so if you are invested any companies currently operating in the region, perhaps a quiet mail to their IR department on this matter would be in order. Just so you have your back covered on the issue. Yeah?

DYODD. I really mean it this time.

Trading idea of the day

Minera Andes (MAI.to)

Because in about 90 minutes' time, Rob McEwen is going to stand up in front of a whole bunch of rich people and their analysts at the Yale Yacht Club in New York and tell them to buy MAI.to. All these people will have cellphones in their pockets and decent red wine in their bloodstream.

Buy at 64c now, sell at 70c (or maybe even that 74c target I set myself a couple of days ago) in a couple of days; what could possibly go wrong?

DYODD

Peru GDP revision watch: Carranza gets in on the act

Luis Carranza is either an outright liar or he's feeling very, very stupid right now. Today El Comercio reports the latest downgrade in Peru's GDP expectations with Peru's FinMin having to eat a plateful of crow just weeks after insisting that Peru's GDP is set on course for 5% this year. Let's see how his 3% number fits in with all the other BS calls so far:


And it's still only April! Remember Otto's call of 2.25%, folks.

Dynasty Metals (DMM.to) starts its engines


It took one week longer than this humble corner of cyberspace expected, but hey...one week...no biggie.

The magic moment for any junior miner is when it moves from being just another exploration play to actually owning a working mine and Dynasty (DMM.to) makes that transition officially as of today at its 'Zaruma' operation in Ecuador. Congratulations, CEO Washer and the team over there. Enjoy a glass of champagne tonight because my stars you deserve one.

DMM.to is up at $5.00 at the bell and WILL go higher, be in no doubt. By the way, the NOBS report is still available on Dynasty, but as it was a recommend four months ago and about 300% away from today's price the investment dynamics have changed somewhat (which is a long-winded way of saying "nailed that trade, dude").

Here's the press release with the good news.

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VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 8, 2009) - Dynasty Metals & Mining Inc. (TSX:DMM - News; "Dynasty" or the "Company") is pleased to announce it has commenced the commissioning of its gold processing plant at Zaruma, in the El Oro Province of south-western Ecuador.

The plant will be commissioned in phases, starting with the crushing section which is currently being tested. The ball mills will be tested later this month and by the end of the month the Company expects to run and test the full circuit. Plant commissioning and mine development will continue for approximately three months, after which time the Company plans to process 800 tonnes of material per day, which is approximately 300,000 tonnes per annum. The installed capacity of the plant, except for the wet section, is approximately 800,000 tonnes per annum, allowing for considerable expansion without significant additional capital cost. It also provides the opportunity for the Company to process material with lower than planned resource grades to generate additional ounces in a rising gold market.

Mine development activities continue as scheduled. The Company has opened two declines, from which material is presently being mined. A third decline is under construction. The mining and delivery of material to the plant will be stepped up in time to meet the Company's planned production schedule.

Recently updated photographs of the Zaruma Gold Project are available on the Company's website at www.dynastymining.com.

Cam Hui on Ken Heebner

Over at 'Humble Student of the Markets' and linked right here (go visit), Cam Hui takes a good, hard look at the recent record of fund guru Ken Heebner and finds him wanting. Quite right, Cam. I have fond memories of Heebner at this time last year when I was shouting "short PBR" (that got me into the London FT I shouted so loud) and people would point out that I was taking a contrary position to the legendary Ken. And the rest, as they say, is history.


Now for a short Ottotrans™: This is what Cam Hui (obviously a gentleman) says:

"Ken Heebner has a bottom-up driven investment process but takes big macro bets as a result of his bottom-up analysis. This style can work well when the economy is showing a trend, but I believe that Heebner tried to call the turning point a little early and got hurt."

And this is how Otto (obviously less so) translates it:

"Any dickhead looks good in a bull market."

DYODD

Heebner's CGM Focus Fund track record
(click to enlarge)

The bit that SinkingAlpha does well

Stuck in amongst the re-hashed posts from good commentators (that you can just as easily get at their own sites..learn RSS, people) and the mediocre guff written by people that are nothing but a herd of contrary indicators, there is one thing that SinkingAlpha does well and for which it deserves applause.

Here's the link to go visit the SinkingAlpha transcript of Alcoa's (AA) Conference Call from last night and it is well worth your time to read every word from the brass at AA. It is always a mistake (repeat always a mistake) to read about conference calls from a media report, as getting the information filtered through another person's brain (and as we're talking about finance reporters I use the word 'brain' in its figurative sense) defeats the whole object of a CC.

Reading the AA transcript will take you 10 or 15 minutes, but it is well worth it. You will learn much more from taking time and hearing it from the horse's mouth than reading any words I or any other will throw at you. Go read it now, metalshead.

Chart of the day is.....

.....the voting intention for Ecuador's Presidential election on April 26th (less than three weeks away).

All three survey companies (SP Investigaciones, Market Asesores, Cedatos Gallup) are saying the same thing; Studmuffin wins in the first round of voting and wins by a country mile. And so it shall be.

Fronteer (FRG) (FRG.to): A new NOBS report available


I mentioned in passing yesterday that there's a new $10 report available and was pleasantly surprised at the reaction, with 12 of you taking me up on the offer. So consider this post as a second, more blatant and final offer so that others might step up to the plate, get a copy of the report and make a giant stride towards owning a winning investment.

Order your copy of this bespoke report and you'll get to see why I like the company and why it's trading at a real bargain price right now. You get a breakdown of its financials, its operative background, all relevant facts and plenty of 'no BS' opinion, too. You also get a solid price target with a timeline. All you need to do is send U$10 to my PayPal account, which is.....

otto.rock1 (AT) gmail (DOT) com

.....and I'll send you your copy back by return. As mentioned before, U$10 is less than the price you pay for commission on a trade. It's a small price to pay to get wise on a quality mining company and in my considered opinion there's plenty of profit to be made by investing in FRG for those who take the current pricing levels, as the current risk/reward equation is very favourable indeed. To make things easier, here's a pre-set button you can use to put your order in. Via PayPal you can use all the usual credit cards, too. It's a quick, simple and totally safe transaction.





Disclosure: I recently went long FRG at U$2.25 and added at U$2.10, though it's not a big position...yet. However, apart from the recently taken long position I have no affiliation with FRG or anyone connected with it. In other words, I'm doing my independent thing as always.

4/7/09

Trading Post (nervous Alu edition)


When Alcoa (AA) reports after the bell, forget the headline number. Forget the breakdown numbers, too. The thing that matters is the conference call as Alcoa management have never been afraid of telling it like it is. I'll be listening in.

Dynasty (DMM.to) up 3.2% at $4.83. She goes up, she goes down, she goes up, she goes down. However with the sparkling fundies behind this stock it's very easy to hold thru the beta ride.

Freeport (FCX) down 1.4% at $41.17. My now open short position was in the negative column all day until very recently. It's at least a nice way of hedging the long metals positions held and at best might still toss a short term winner over this way. DYODD.

Ventana Gold (VEN.to) down 4.7% at $1.41. I mentioned the other day that it looks like it has peaked and recent action has gone a way to confirm this view. Nice looking project and good management, but in the end everything has a price. Certainly one to watch going forward.

Cosan (CZZ) up 13.5% at $4.69. So I made a buck and sold the stock and left a buck 20 on the table. DOH! I'm still not worried as I made my money on the play. However I was very pleased to find out today that at least one reader of this humble corner of cyberspace followed me in at the $2.50 level and (not being a whuss like yours truly) has held all the way up so far. Kudos to you, reader AC.

Peru: I dream of GINI

Thanks to reader MR for the headsup, here's a chart that Peruvian economist Humberto Campodonico used to illustrate his great article that you can either find here in La Republica or here on Campodonico's own blog.

Basically, Campodonico demonstrates with solid numbers that which we all suspect; Peru's growth has not managed to reach the pockets of Peruvians but has been largely beneficial to big business. The metrics used are of salaries and industrial output, both as percentages of GDP. Here's an extract from Campodonico's article as translated by your truly:

"In monetary terms, the salary loss is immense: The (Peruvian) GDP in 2007 was 410.939 billion Nuevos Soles. With 30.1% of that (as in 1991) workers would have received 123.7 billion Nuevos Soles. However with the 21.9% of 2007 they only received 90 billion Nuevos Soles, that is to say 33.7 billion Nuevos Soles less.

But in 2007 businesses received 38.6 billion Nuevos Soles more than they would have in 2001 for the additional 3.4% of GDP (assigned to them)."

By the way, Twobreakfasts is still under the self-delusion of being on the left of centre.

So how's that 2009 Peru growth miracle story going?

Let's compare what The Twobreakfasts&Carranza Show wants you to believe (5% growth, unaffected by world recession, investment grade, serious country etc etc) to..... well...... errrrrr....to reality.


The reasons given by the SUNAT tax office for the fall in tax revenues were (and I quote), "A less dynamic economic activity and an unfavourable international context that continues to affect tax collection levels, principally via the mining sector and the taxes assocaietd with the importation of goods".

So, let's think about what we should really believe here. The region's most unpopular President and his poitically biased spoutings based on nothing but a wing and a prayer, or the facts? Tough one, no?

Fujimori found guilty

'El Chino' not enjoying his day in court today

Like I said, no surprises today.

Here's Reuters

Here's AP

Plenty more links at Google News if you want to read the same thing 100 times.

UPDATE: I'm actually getting some e-mail feedback about the Fujimori sentencing. For the two mails saying "tell more", you really are better checking the newswires. The link to Google News up there will keep auto-updating. For reader PF who asked ".... how long is Fujimori going to get in jail?", the answer is likely 35 years. There are 247 separate rulings and verdicts to get through (it could take all day), but one of the main verdicts was mentioned almost at once by the judges. Fujimori was found guilty of being the brains behind the 'La Colina' massacre. This is a crime against the state and the mandatory sentence for that crime alone is 35 years.

UPDATE 2: Reuters is running this useful little Factbox report that crunches the Fujimori years into an easily digestible timeline. A good place to learn the basics.

UPDATE 3: Rather strange, but no complaints either. The court has just handed Fujimori 25 years in prison (not 35 as the supposedly mandatory sentence indicated). Long enough for sure. On this link you can find the full 20 chapter court ruling. What better way to practice your Spanish?



Venezuela: The day Chavismo feared has arrived


It's the day Venezuelan opposition finally showed signs of political maturity.

Pre-Chávez, Venezuela was ruled by an oligarchic elite (and that's not an overdose of rhetoric) that never needed to explain themselves to their underlings as they never bothered to include the vast majority in the political franchise. Then along came Chávez and that has now changed forever. Since that time, the reaction from the upper and middle classes has basically been one of the petulant schoolboy stomping his feet in rage that someone dared to steal back that which he had stolen.

However, this post over at oppoblogger Quico's Caracas Chronicles site may just mark the moment when Chávez finally has something to fear from the opposition. A much-needed dose of maturity is shown by Quico as he makes it clear to his fellow oppos (much to the disgust of some of them..check the 100+ comments) that Chávez is not a dictator. In fact, he recognizes something that has been clear to non-rabid outside observers for some time; the rest of the world laughs at an oh-woe-is-me opposition that tries to lump a democratically elected, re-elected and re-re-elected President who has brought social justice to his country with the real dictators of our time (Stalin, Pinochet, Amin, Pol Pot etc etc).

So go read Quico's post, "The Dictatorship Canard", for yourself. It's linked right here. You may or may not agree with the whole thrust and political background of Quico, but that's beside the point. The overriding reason why it makes such a refreshing change from the usual drivel written by the anti-Chávez brigade can be summed up in three words: It is intelligent.

Snapshots from regional economies

Chile: February's YoY growth figure was a very nasty -3.9%, worse than even the downtrodden -3.3% the local economists* expected. Not only that, but consumer prices clicked up 0.4% in March. Stagflation, anyone?

Colombia: Exports are down 13.2% YoY for January 2009, with a trade deficit to boot. Ugh.

Argentina: Due to the liars and thieves at the official INDEC stats office it's very difficult to get an accurate inflation figure about Argentina, but certain times of the year help us out. As Easter is upon us, the traditional "Easter Basket" of goods is being measured compared to last year's prices as a 21% increase. That tallies quite well with other anecdotal information on Argentina inflation.

Peru: The Central Bank will cut interest rates this week, the only question being "by how much?". If the cut is 0.25% it means the Velarde and his Central Bank friends see inflation risk. A 0.5% cut is the most likely outcome. Anything above that wil mean "Oh crap, we need to boost things and yesterday" and will also knock the Nuevo Sol (PEN) down against the greenback. The trade surplus Peru registered will allow Velarde more room to be aggressive if he wants to be. Personally I predict a 0.5% cut and a slight lowering of the reserve requirements at Peruvian banks. That combo might make Credicorp (BAP) an interesting short-term trade, but DYODD.


*dumbasses in suits

More evidence of a top in copper


1) At the CRU conference in Chile, Reuters had to search hard to find a bullish shiller or two. The report ends up with Ivanhoe's Friedland (a man with a "history of promotion", let's say diplomatically) and some non-entity from Petaquilla which is simply the worst mining company in Latin America (and that, dudettes and dudes, really takes some doing). If these are the only people Reuters could come up with for saying "buy copper" it doesn't bode well for spot Cu.

2) John Kaiser (who gets general approval Chez Otto...I don't subscribe but he's not a bad newsletter writer and importantly has a top reputation for honesty and integrity) just said the following (mailed over by reader DL 30 minutes ago...I don't know exactly when Kaiser published it).
xxxxxxxxxxx
There is some suspicion that hedge funds have re-entered the "hard assets" arena, and quite a few market observers have issued sell recommendations for the copper sector on the premise that copper prices will soon develop a downtrend. Nickel prices have remained near the bottom of their recent range, and while zinc and lead have both crept higher, the gain is nowhere near as dramatic as in the case of copper.
xxxxxxxxxxx
I do think that's fair comment even as I try my hardest to avoid the "blame the hedgies" approach.

3) SinkingAlpha starts publishing nobodies and their "buy copper" calls. This one really is a great contrary indicator, stopped clocks notwithstanding.

DYODD, and accuse me of searching for reasons to justify my own position as a short-term copper bear if you like. I am LT bullish on the stuff, by the way, but do believe it needs to retest lows in the next couple of months before it really moves up properly.

Whatever makes you think........

......that Wendell Zerb and Canaccord are all nice and snuggly with Exeter Resources (XRA) (XRC.v)?

Click to enlarge

Nothing to see here...move along now, please.......

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

....a survey taken by Peru's Universidad Catolica (PUCP) about the verdict expected today in the Fujimori trial.

For me, the main thing to take away from this survey is that 24% of Peruvians truly are insane. The Fujimori sentencing circus starts at 9am Lima time. And winner of the "overkill of the week" award is Mercedes Cabanillas, the Peruvian Interior Minister. She's put 10,000 extra police on the streets of Lima to avoid problems when maybe 50 would have been about right. Don't expect surprises.

4/6/09

You should be reading 'Colombia Reports'

Colombia Reports is an English language online daily that popped up on my screen about a year ago. I've been drawn back to it more and more often, and nowadays it's part of my normal day-to-day reading.

For the wide coverage of Colombian affairs they cover, their team of what looks like 17 people (including editor, reporters, photographers, office and sales) is remarkably small. The best compliment I can offer them is to say I sometimes forget I'm not reading in Spanish over at the site, it's that good. These guys actually do real, genuine reporting, too. It's not just a whole page of newswire re-hashes that you can read in other places. It's the real deal, unafraid of reporting Colombia the way it is in English.

So now you know; there's a top quality news service out there on Colombia in the English language available to you for free (they survive on advertising and donations). Go see for yourself on this link and from today you'll find the link to Colombia Reports on the IKN right-hand linksbar.

Trading Post (bargain edition)


Fronteer (FRG) (FRG.to) down 5.3% at U$2.14. I put a stink bid in at $2.10 this morning and it filled. So what if Au and Ag go down further? This is cheap, cheap, cheap and I love the risk/reward equation here and now. SO HEAR THIS: I'm now selling a NOBS report on Fronteer for U$10 at the usual PayPal payment address, otto.rock1 (AT) gmail (dot) com. You send money and I send report back to you immediately. Fair deal?

Dia Bras (DIB.v) up a penny at $0.07. If you like your high risk and high reward pennycrappers, take a good look at DIB.v. Methin ks the rounds of financing are now over, judging at least by this PR today that smacks of "we're all in, let's start feeding 'em the good news". I repeat, the recent fund that has bought a third of DIB.v shares is run by smart cookies who really know their mining.

Minera Andes (MAI.to) down a penny at $0.65. MAI.to is keeping its head whil all around lose theirs. Very interesting and encouraging PPS action today. McEwen is in the big apple all week giving it the promo talkup. We like McEwen.

Cosan (CZZ) up 10% at $3.85. Some guy wrote this morning to point out I'd sold too early. I refer him to Baruch who said "I made my fortune by selling to early". I made my money and I'm happy if you're still long and making yours.

Dynasty (DMM.to) down 5.3% at $4.62. Ouch. The silver lining is that I was expecting it.

Exeter (XRA) (XRC.v) down 5.1% at U$2.59. Oh dear. How sad.

Freeport (FCX) down 3.4% at $41.32. FCX is very shortable from here. So shortable, in fact, that I've just put an order in to short it for a few. Short-term trade. Great great company, but putting my money where my bearish copper mouth is for a change. DYODD.

More on Capella Resources (KPS.v) and the scum behind the scam


This is an update to this morning's post which can be found below or on this link.

My oh my, what a company!
Check out this link at one of my fave mineblogs, I Think Mining. Capella has a real reputation in the trade, as does the puppeteer behind the show, Brian Gracey.

Also unmissable is David Baines report on the ultra-shady Gracey, linked right here. Here's how the Baines report starts:

Brian Gracey's business doesn't look like a cash cow, but it is.

His office is located on the fourth floor of the tired Credit Foncier building at 850 West Hastings. The sign at the entrance says "apella Resources," a wounded vestige of Capella Resources, one of many TSX Venture Exchange-listed companies that he has controlled or managed during his two decades on Howe Street.

His office is, well, shabby. Some old steel filing cabinets, a couple of desks, no receptionist, just somebody who answers the door if you knock loudly enough. But appearances can be deceiving. Gracey has made a good living on Howe Street, good enough to afford to live in a $2.2-million home in the British Properties.

CONTINUES HERE


Also worth a quick look is this post from a blog back in 2006 that shows Capella Resources has been pumped and dumped previously....not a surprise, though.

The more you look, the more incredible it seems that the Canadian OSC regulators have never lifted a finger to protect innocent retail shareholders from these criminals. Now you know why I keep on calling the Canadian market one of the most corrupt in the world.

Related Post
Capella Resoures (KPS.v): A fraudulent scam for the ages