Ritholtz on H1N1 (wonderful)

Found on the wonderful Big Picture blog.

If his blog isn't the most influential thing on US bizworld yet, it should be. The only reason I don't have it on my RSS is that if I did I'd spend all day reading Ritholtz and get nothing done myself. Still, it should be part of you financial interwebnetpipes life by now.

Weekend Freestuff

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The IKN Weekly: All Aboard!

The first edition of The IKN Weekly is now taking shape Chez Otto. As well as the content that will be covered every week, as it's the first issue I'll also be giving some background into what The IKN Weekly is setting out to achieve, the thinking process behind my stock selections and things like that. All things being equal it will go out on time and as planned tomorrow afternoon (Sunday May 3rd), so it's not too late to get on board (though the last thing I want is a scene like this).

So to find out more check out the previous post linked right here or yesterdays' follow-up on this link. The subscription buttons are over there on the right-hand side of the blog page. Payment comes via PayPal, but all major credit cards are accepted just fine.

Peru: Insight into why Sendero terrorists are gaining ground

• There's the lack of attention paid to the provincial regions by the Republic of Lima*, of course.

• There's also the drug money Sendero is using to win hearts and minds of VRAE (and other Amazon basin dwelling) locals.

• There might even be some political sympathy towards the group's ostensibly ultra-communist ideology (though that's debatable)

But there's one key element that hasn't been fully examined up to now, which is...

...Peru's Security Forces are Commanded by Total Dumbasses.

Here's an example: This week the chief of police in the VRAE region was stripped of his post by the new Interior Minister Mercedes Cabanillas. It so happened that the VRAE police force took delivery of a consignment of 120 AKM rifles to help beef up presence in the Sendero controlled region but the police honcho, General Percy Riveras Paiva, decided to get the arms from Lima to his area by putting them on an interprovincial bus like any other cargo load. On its journey into the terrorist-controlled region the bus wasn't escorted by any other army or police force vehicle, either. Now let me be clear I'm in no way a fan of Cabanillas, being a career politico in the corrupt and inept APRA party of President Twobreakfasts. However Cabanillas has done the right thing this time and should be applauded.

That the bus wasn't intercepted by Sendero and the guns lost to the enemy isn't the point. What's crystal clear from this episode is the lax attitude of Peru's security forces in the face of a growing threat to their country's social stability. Cabanillas has made a Voltaire-like "pour encourager les autres" move, but it remains to be seen whether Peru's police and army can pull themselves together. If not, one has to fear the worst.

*excellent phrase stolen from Cesar Hildebrandt, perhaps the most intelligent journalist in Peru

Good weekend reading from respected sistasites*

Saddi at L.A.B.E.P notes that Latin American countries spend (and I quote) "a higher share of fiscal resources (6% of budget) to social spending (education and health) than other regions of the developing world". The only thing I'd take issue with in her otherwise incisive article is that she's surprised at this. I mean, this is precisely the reason why LatAm has been voting in left-leaning officials and governments, isn't it?

Lillie at 'Memory...' does her usual vigilent job of covering Peru and reports on how Sendero terrorists opened fire on a Peruvian army helicopter last week that happened to be carrying the capo de tutti capi Peru general at the time. No injuries this time around, but a warning that Sendero still have firm control over their patch of the coca-growing VRAE region.

Bina at 'Restless' has been doing top work in following, covering (and even breaking before all others) news as it happens of the Michael Dwyer Bolivian terrorist cell. Check her latest posts on the story here and here, as they contain damning audio and video evidence.

Plan Colombia and Beyond asks "Have False Positives Stopped?". Read the (as always) great article to find the depressing answer.

*and bruddasites, por supuesto

The Friday OT: Santa Maradona by Mano Negra

Key instruction: PLAY LOUD

Two weeks ago I featured this song by Manu Chao and the e-mail response was wonderful, both from people that know Manu and his music going "yeaaaaaaaaaah!!" and people who don't saying "Hey..not bad, who is his guy?". So here's a second song from the dude, but this time we go back in time. Before Manu Chao made it big as a solo artist he was the founder, lead singer and central column of 'Mano Negra' (black hand), a group playing "patchanka" music (kind of fast ska, punky rhythms and other influences) that was born in Paris. The group split up in 1997 but still has a cult following in France, Spain and all Latin America.

As for this song, it's the definitive musical homage to the game of football and is nothing short of legendary amongst my group of friends in Buenos Aires, Argentina (esp. El Gordo Wulff). For those of you without an ear for French (Manu sings in Spanish, French, English and sometimes even Portuguese in his songs) the chorus line is "Santa Maradona pray for me".

This track totally rocks and the video complements it perfectly. Enjoy.

Brazil: Top quality new blog on Brazil economics to recommend

Headsup people, Vitoria Saddi has a blog!

The blog's name is "Latin America and Brazil On Economics and Politics" and is good news for people like me that don't know enough about her specialist subject and want to know more. As mentioned previously, one of the standard mail questions I get is "why not more about Brazil, Otto?", but now I can refer them over to a true expert. Vitoria is blogging in English with some Portuguese articles as well, but if you don't know who Saddi is as yet here's the biography (prepare to be impressed).

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Vitoria Saddi was senior Latin American economist at RGE monitor. Previously, she was chief economist at Queluz Asset Management and Latin American economist at Salomon Brothers in Sao Paulo. Ms. Saddi was a lecturer at the University of California at Long Beach and Ibmec Business School. She received the BNDES award for the best master dissertation in Economics in Brazil. At the University of Southern California she received the award for outstanding teaching assistant and at Ibmec the award for excellence in teaching. She holds a master in Economics from FGV-SP and a Ph.D. from the University of Southern California.

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And those, esteemed lector of IKN, are top credentials. I can also confirm that Saddi plays a seriously good game of chess.

So there's today's new blog recommendation and the savvier among you will do what I've just done and put it on your RS feed forthwith...or maybe even fifthwith. If not, you can always access her blog on the link you'll find from today over there on the right. Here's the link to her blog again, so you have no excuse.

Trading Post (Roundhouse kick edition)

Freeport (FCX) up 5.4% at $44.96 and getting a real kick out of the move in copper. Cu spot has zapped straight back from $1.90 to $2.10 (against my call, it has to be pointed out). Volumes a little under average at FCX, which is also true for the other copper sister PCU, up 2.5% today. Seems like I'm not the only one who has great trouble in buying this copper rally-ette.

Fronteer (FRG) up 7.5% at U$2.57 with the Canadian version now over three loonies. I'm really, really enjoying this rally in FRG, even though it's now off its intraday high. FRG is now a definite third in my trading port holdings and closing in on second because........

...DMM.to down 1.8% at $4.42 and getting no love again. Uff. I got a mail this morning in which reader 'BA' asked

"Just wondering if you know anything of Dynasty’s production progress. I would have thought that the closer to production they got, the higher the stock price would go. Is it possible production reality doesn’t measure up to projections?"

Well, I don't think so. From what I'm told, production is ramping nicely and on schedule. Mining isn't an exact science and there are always teething problems in newly commissioned mines, but overall it all seems very positive out of DMM.to. IMHO the soft share price is more due to the combo of a softening gold price that's taking the shine off the whole sector, plus the way DMM.to is still an under-the-radar company that doesn't play the big pipes'n'whistles promo game. I'm very, very comfortable about holding my posistion in DMM.to and expect the real fireworks to begin as production and revenues numbers come to light. I still see plenty of upside on the compeling fundamental numbers here...just can't tell you when the market will wake up.

Capstone Mining (CS.to) up 7.5% at $2.15 and bouncing straight back from the lull we saw when it announced its financing (just before the copper swoon). CS.to has really caught the attention of the market now as the up'n'coming copper player. Now who was it who said, "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" back in November 2008? Oh yeah...that was me. Too stupid to buy my own reco, though. DYODD, dude.

More about 'The IKN Weekly'

The response this morning to the new subscription service 'The IKN Weekly' has taken me by pleasant surprise. Thank you to the people that have already signed up (you know who you are) and also thank you to the people that have written in asking for more information. There have been plenty of different questions arising and I'll be answering the person-specific ones as soon as I've finished this post. However two questions have been repeated in several different places so by way of a pre-emptive strike I'll answer them here.

1) Will the blog change or finish?

• Answer: The blog continues, no worries. As for content, there is likely to be a slight change as I give first call to some of the pure mining issues to the subscription newsletter and perhaps feature them at a later date on the blog. But the general political, economic, Trading Posts, rants, opinions, and sillystuff etc etc will carry on as normal for sure.
  

2) Do I need a PayPal account to subscribe?

• Answer: No, you can go to the subscription page and pay by credit card if you prefer. One you click the "subscribe" button you're taken to the PayPal page. Under the 'e-mail & password' blok there's a link that says "Don't have a PayPal account? Use your credit card or bank account (where available)." Click that link and you're taken to the right place...it's pretty straightforward and totally secure.
  
  So with that I'll now toddle off and answer your mails. If you decide to give the service a try, the necessary buttons (monthly or annual discounted) are over there on the right of the page. And feel free to write in with your own queries, as I'll be happy to explain more. The main post explaining in more depth about The IKN Weekly and what it will contain/do for you can be found right here on this link. Thank you for your attention.
  
  

Chuck Norris Financial Facts

These are so good I am contractually obliged as a finance-esque blogger to share.

Please go over to Felix Salmon's blog to get the full post. He picked them up from Epicurean Dealmaker's Twitterfeed. Here are the first three on the list, get the others over Chez Salmon.

• Little-known Chuck Norris Fact: Chuck Norris does not mark to market. The market marks to Chuck.

• More: Chuck Norris does not go bankrupt. Chuck Norris ruptures banks.

• Source of hedge fund survivorship bias?: Funds that pay Chuck Norris 2 and 20 survive; others don’t.

LME warehouse copper

There's a lot of talk about this chart crossing my desk today:

For sure the 100,000MT lopped in copper stored at LME warehouses in just the last couple weeks is ostensibly bullish. No denying that, but boring old fundy-headed Otto is yet to be convinced there's any demand driver here, sorry.

One clear thing is that China is the driver of this copper take-up. There's little debate on that score. However we saw China restock iron ore over the new year period, now we see iron ore piled up on the docks of that nation and end user demand clearly wasn't the driving force. So why should copper be any different here? This copper move has all the hallmarks of Chinese restocking, as the move is fast and against the grain of world macroeconomics. Another rebuttal worth mentioning to the auto-copper bulls is that warehouse stocks that leave one warehouse (eg in Europe) and are transported to another (eg Shanghai) are subtracted from the warehouse lists while in transit. That might also be a factor in play here.

If the stocks are still dropping hard in, let's say, four weeks time I'll review my bearish outlook on copper, but there's no way I'm chasing a speculative sentiment fuelled by Hope™ in the middle of this bear market. Because that's where we are, like it or not. You won't get any fairydust sprinkled in your eyes at this blog, so if you want the Kool-Aid go watch CNBC.

DYODD

"Psst! Wanna buy a Venezuelan gold backed dollar bond, guv?"

In Venezuela, there is mucho talk from mucho places about how the goverment is setting itself up to raise cash by selling (or attempting to sell) a new swathe of bonds to a willing world. This article in Bloomberg outlines the bureaucratic nuts'n'bolts filings that have taken place recently. Most intriguing are the manifold rumours swirling around about gold-backed bonds being emitted by CVG. There is a lot of confusion and the story is by far from definitive yet, but this (as far as I can work out) is the general scenario:

1) CVG is a quasi-state run company that operates heavy industry in the South of the country

2) The idea is for CVG to raise up to U$6Bn on dollar denominated bonds that will be backed up by gold production in the years to come.

3) Much the same way as the previous years' PDVSA bonds emissions, the bonds will be offered to Venezuelans via the private banking system. Citizens can pay for the dollar bonds using Bolivares Fuertes (VEF), probably paying a significant premium to the official 2.15/U$1 rate.

If it happens this way, the bonds will be wildly and incredibly popular with the local citizens. Even if the government makes people pay 3.0 for every bond-dollar, it's a big difference to the 6.50/6.90 spread currently offered by the parallel market. Or put theoretically:

• You buy a $1,000 dollar bond using VEF3,000
• The next day you sell that bond back to the banks for, let's say a 10% hairut. The bank gives you U$900.
• You run down the street and buy VEF5,850 with your dollars.

Now for sure the scenario isn't as smooth as that, but the theory will hold true even if the bank takes a more probable 30% haircut on the bonds (i.e. gives you U$700) and even if the parallel rate drops to VEF6.0 = U$1 (you finish with VEF4,200, which is still a nice day's work).

The question will then be "What do the local banks do with all their CVG dollar bonds?". These will be rather....hmm, how can we say this diplomatially...rather dubious financial devices in the end. Backing a dollar bond with revenue from gold that is still underground and mixed up in its mineral rock is a bit of a stretch, especially when you consider the dog's dinner that CVG has made of its non-production around the KM88 region so far this....well, this century, basically. Then there's the inflation in Venezuela and the way the local currency is fading against the dollar. A large lump of dollar debt may become rather difficult for CVG to service in the medium term and the local banks know it. They won't want to hold a stack of CVG dolalr bond paper in their safes, whatever nominal asset value may be printed on them

So Venezuelan banks will be keen to punt plenty of this paper on to other people. AND THAT'S WHERE YOU COME IN, GRINGOS! If all the above does come to pass as has been suggested by the Veenezuelan financial jungledrums, the world financial community will certainly get the "wonderful opportunity" to invest in "gold-backed dollar bonds" from Venezuela "at a considerable and attractive discount to face value".

My advice is that you should avoid such paper like the plague, as the buck has to stop somewhere. If...

• Venezuela is happy with its shiny new U$6bn in funds, and...
• Locals are happy to have made some coin from a quick flip, and....
• Venezuelan banks are happy to have made coin by punting the bnods off to foreign concerns...

...there has to be someone who pays for the party. Look in the mirror, blue-eyed-whitey. If all this happens, Venezuelan banks will be keen to offer any sort of arbitrage over the haircut offered to locals, so if you get the "$1,000 worth of dollar bonds back up by GOLD! for just $710" pitch, please don't go there.

However there is another side to all this. The Venezuelan government needs the cash, so it'll be keen to make this happen. So it must appease the local banks and make the deal profitable one for them, because otherwise it's not going to happen and Hugo&Co won't get their hands on the funds they seem to need (and with more than a little urgency, I gather). Therefore if the bonds deal doen't go ahead, the flipside is that Venezuela ill have to do something quick to shore up its finances. This mean...yep you guessed it...the deval. Thus watching the parallel market in the days and weeks to come will give you a very good idea of whether the government bonds deals will happen and, more importantly, whether they will be successful. Here's what the exchange rate looks like right now.


DYODD.

Ecuador Bonds: Game on

It took over four months for the Ecuador defaulted bondholders to make a move, but yesterday they tipped their card everso slightly. Reuters reported yesterday afternoon (Soto, natch) that they had got their hands on (i.e. sent by bondholders on a courier bike) a letter sent by the holders of a minor slice of the bond pie (estimated at $130m or above by Eurasia's Patrick Esteruelas). The letter had been sent to the government of Ecuador and requested the government to make good on the full amount of the bond capital and interest due.

Interesting that they should have waited until after the Presidential elections to make this opening gambit. This story is at the top of the second, approximately. Watch this space.

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

....the Peruvian Nuevo Sol versus US Dollar, three month time period.

The Nuevo Sol (PEN) briefly went under three to the greenback yesterday before closing a touch above, the first time it has traded under 3 since October. The main reason for the surge in the Sol is that local banks are now unwinding dollar positions as they feel more confident about the worst of the recession being behind them. Well, good luck to them on that score is all I can say.

Also part of the equation are the still relatiely high interest rates on offer for foreign investors. Central bank chief Velarde cut an agressive point off the benchmark rate last metting around, but rates still lie at 5%, much higher than place like Chile, for example.

Going forward, exporters will start to moan and whine about lost competitivity if the trend continues and the last thing Peru needs is to be priced out of foreign markets. So we can expect rates to drop quickly from here.

Announcing the new site subscription service: The IKN Weekly

Ladies and Gentlemen, presenting......

THE IKN WEEKLY

The time has come to roll out the new site service, "The IKN Weekly", a subscription newsletter principally aimed at investors in the mining sector. The main objective of The IKN Weekly is simplicity itself: Empower investors with knowledge and views that give them a significant investment advantage. Or put simply: Make you money.

The content
To that end the following subjects will be covered:

• Fundamental analysis of mining stocks. The weekly will include at least two NOBS reports per month (perhaps more), a format that has proved very popular with site regulars. These reports are likely to cover mostly junior miners but may include other regions than LatAm or different industrial sectors if good opportunity arises. The NOBS reports will likely aim at highlighting buying opportunities, but may also cover updates or even hold/sell calls if a company catches my eye. The reports will also eventually cover the 'Stocks to Follow' portfolio.

• Stocks to follow. I plan on developing a short list (likely not more than ten stocks at any given moment) of companies that I believe will offer strong profit-making opportunities. Once again, Latin American exposed stocks will be favoured but other regions will not be excluded for simple geographical reasons. The performance will be tracked using a model portfolio. Additionally, as 'selling well' is equally as important as a successful buy call, the IKN Weekly will not hesitate in giving 'take profit' or 'stop loss' signals. Regular readers of the blog will know how I normally call my trades on site and the principle will be the same.
  

• Regional Politics, but not any old gossip. Regional political or economic developments that offer the investor a potentially profitable knowledge advantage are the matters that will interest us in The IKN Weekly. What Hugo said to Evo about Barack will not interest us. The type of political development in Ecuador that allowed this blog to call Dynasty (DMM.to) a buy just days before the beginning of its 300% upmove in December will most definitely interest The IKN Weekly.

• Market Watching, providing impressions, thoughts, opinions on whatever happens in the sector during the week and how you as an investor might benefit going forward. This would really be a catch-all category covering many aspects of the junior mining investment world, but a topical example would be as in yesterday morning's blog content mentioning International Royalty Corp. (IRC.to) (ROY). I wrote that IRC.to would be a good way to play the positive news from Barrick about Pascua Lama. It subsequently rose 13% from C$2.63 to C$2.97, with the final push made when IRC.to published its news release promoting the Pascua Lama link late Thursday.

The Service
The IKN Weekly will start this Sunday, May 3rd 2009 (so you have just three days to get on board if you want the first copy) and will be published and sent every weekend. Subscribers will also benefit from a flash alert service that will offer a headsup to any breaking news that your author believes offers an immediate investment advantage. It is impossible to say how many flash alerts will go out, but perhaps one or two per week is a possible.

The Price
As for the price, subscription to The IKN Weekly, including:

• Fundamental analysis via NOBS reports

• Our Stocks to Follow list, with regular commentary and analysis on the companies included

• Regional Politics and the issues that normally only make the English language media once the advantage has disappeared

• Market Watching, with tips, opinion, trends and nuggets that offer insight and advantage.

• Flash Alerts, as if it can't wait until Sunday you'll hear about it in good time.

...... is U$25 per month, payable by PayPal. By way of making it easy, the button on right hand side of the page is pre-set for a U$25 monthly recurring subscription. Please note that you can cancel your subscription at any time, with no quibbles or comebacks and my personal word of honour. I plan to offer a quality service for the money but unsubscription will always be an easy to achieve option, guaranteed.

By way of special offer, an annual subscription of U$250 is also available for those of you confident about the service offered and looking to save two month's worth of fees. To get the discounted annual cost, use second button marked "yearly discounted subscription" also over on the right of the screen.

The Conclusion

So here the pitch for the new service ends. I hope you come aboard and subscribe to The IKN Weekly. If you have any questions, queries or comments about the new subscription service I'd be more than happy to hear from you via mail, no matter if you eventually sign up or not. My mail is.....

otto.rock1 (AT) gmail.com

......exchanging the (AT) for the @ symbol. Thank you for your attention and I hope to see you on the mailing list soon.

UPDATE July: There's now a free sample copy available for your viewing pleasure. The link to get a free copy of IKN7 is right here.

UPDATE August: I get a lot of testimonials from subscribers that say nice things but I don't tend to publish them. However I did post one today because it allows you to track back and ask the person in question directly if you wish, so take a look here.

So what was that about Irish Mercenary Michael Dwyer being unarmed again?

So, Michael Dwyer was some poor innocent unarmed traveller doing a bit o' dis and a bit o' dat?

Want to continue with your BS denial, Ireland?


Was "hard", now dead.

This below is a photo of the montage put on by Bolivian police today, including weapons and 58 photos of the mercenary terrorist cell that was plotting to kill Evo Morales and other political heads as well as destabilizing the sovereign state and forcing a breakaway of Santa Cruz from the rest of the country.

Also today, one of the men arrested earlier this week admitted having sold leader Eduardo Rosza Flores (ERF) a gun for U$1,000. He also said that ERF was plotting to kill the Prefects (i.e. governors) of Santa Cruz and Beni because they had been ineffective in the struggle for a separate state of Santa Cruz

Finally, here are close-up shots of the photo montage. Click on them to make them big, because they get very big and you an see all the details of Dwyer, Flores, the others and their guns....all in hotel rooms. It only remains to be seen whether the bigoted mailers and anonymous commenters this blogger has had the displeasure of reading these last two weeks (mostly Irish, according to IP numbers) have the guts and common decency to write again and apologize. You people aren't quite as disgraceful as examples of Irish as Dwyer, but you certainly aren't any credit to your nation.

Click to enlarge (they get very big)

Trading Post (tee hee hee edition)

Seriously, you guys make me laugh. I just saw this group of headline links on the Yahoo!Finance front page:

• Stocks rise amid signs of economic hope- AP
• US economy could recover much sooner than expected- CNBC
• Dow 10,000 by year's end?- CNBC

Meanwhile........

Capella Resources (KPS.v) down 16% at $0.46. Oh dear. How sad.

Telecom Argentina (TEO) up 2.5% at $8.73. TEO has managed to ignore my short call last weekend (how dare they!) and rise on the week so far. The news about the Argentina windfall tax seems to have become a sleeper. Time will tell....

Rusoro (RML) up 5.7% at $0.56. Just sayin'.........

Fronteer (FRG) up 5.9% at $2.52. As the old saying goes, one man's "pumping it left and right" is another man's "I really want to highlight good quality companies, encourage you to do DD and invest in quality". Gawddarn high falutin' charties :-)

An in-depth report on South American humour

One of the things that separates cultures is humour. What makes one people laugh leaves another people cold and asking "And this is funny?" (believe me on this...I lived in France). When it comes to South America there is one humour trait that, even after all these years, leaves me scratching my head. Over the length and breadth of the continent, ask people what makes them laugh and the consistent top polling answer is:

PEOPLE FALLING OVER

It's always bothered me, this one. The best answer I've ever got was from my wife. Very early into our relationship I asked her why people falling over as so funny. I mean, my wife is a very smart lady, educated and intelligent etc etc, but she also cracks up laughing over this. It's not some socioeconomic phenomena here. So when I asked her why slips'n'falls were so funny she said "It all depends on the fall". Great answer, i thought.

So with that in mind, here's a video of a Playboy model who fell over on a catwalk just two days ago. With 22,000 views racked up already it's going viral down here and there are several other Youtube versions already made available. I'm glad to say that the model, named 'Josi', didn't hurt herself badly.

UPDATE: From the depths of depravity, reader "G" (who should know better at his advanced age) sends in this mail:

Man, I was hoping that she would fall a 2^nd time at the end of the cat-walk. Now that would have been funny.

Disclaimer: I, in no manner, wish any harm on the poor lass in saying this. In fact, I would be perfectly willing to nurse her back to health if, indeed, some injury was to befall her. I am a very caring individual and great attention would be paid to her recovery in such a circumstance.

Bolivia Mercenaries update

El Gaviero has two posts that neatly sum up in English the latest happenings in the investigation into the mercenary terrorist cell dismantled in Santa Cruz.

• This post sums up the latest arrests and the backbround to what the terrorists were planning.

• This post links the fascists to local Santa Cruz leaders and also to Human Rights Foundation, a very dubious NGO that has some nasty rightwingers behind it, including our old friend the bipolar Alek Boyd.

Two recommended reads to keep you fully up to date. Nice work from blogmeister MG and good to see El Gaviero back and regular, too.

Aquiline (AQI.to): The Canadian pissing contest continues

Here's a follow up to last week's post on Aquiline (AQI.to) as we shed a further tear and pity poor, hard done by Aquiline (AQI.to) being used as a football by competing Canadian houses.

Well, not really. Pity is a real exaggeration as AQI's management are fully responsible for the current low cash "somebody please buy us" situation. However what is clear is that there are two factions playing financial games with AQI's stock right now.

• In the red corner we have a whole buncha suits that want to drive AQI's stock price down because they know the comapny needs to raise capital soon and they want to get in cheap (put simply they'd like to see AQI raise $10m by selling 6.66m shares at $1.50)

• In the blue corner we have those already bought in that want to see their holding rise in value and don't want to see the company dilute too heavily on the next financing round (put simply they'd like to see AQI raise $10m by selling 4m shares at $2.50).

What these two bickering parties have in common, of course, is that they want AQI to go up in value AFTER the next round of financing. That's when this humble corner of cyberspace will be looking more closely at AQI as an investment, by the way, but until then it's fun to watch the boyz and their games (fun for a wonk like me, anyway).

The latest round comes from the blue corner today. Cormark published a report on AQI that I've had chance to read. I generally agree with their take on the company and consider it a good report. I don't know where the devil you, kind and gentle reader, can get a copy of this member's only analysis. Not a clue.

Oh, by the way my e-mail address is otto.rock1 (AT) gmail (DOT) com if you ever feel like dropping me a line...about anything at all.

Novagold: But Seriously Folks.......

Ok, no Nadagold or Rick! Van Alphabet jokes here for a second. It's time to seriously question this company and examine the short case for Novagold (NG) (NG.to). To do that we need to check out the circumstances of its three main projects, Rock Creek, Donlin Creek and Galore Creek.

Rock Creek: Supposedly opened last year but soon closed down and has remained shut. Violated environmental regulations and got into trouble with the authorities. Bad atmosphere and community relations with the people of Nome, Alaska. NG has no plans to re-open Rock Creek and has made noises about selling the asset. The Rock Creek debacle demonstrates that this company is inept and incapable of running a goldmine.

We should also remember the very shady and underhand insider selling that went on late last year. For sure Rick Van Nieuwenhuyse and Greg Johnson can claim they were forced to sell by margin calls once the financial woes were made public. However Johnson started systematically selling his stock way before any margin pressure could have been put on him. He started selling stock at the very same time as Rock Creek's "production" ran into serious problems...almost to the day, in fact. He also started selling his stock the very same day that Wellington West recommended NG as a buy with a 75% upside price target.

So thanks to its Rock Creek operation we have evidence at Novagold of managerial and mining incompetance, poor social and community relations and shady inside dealings.

Donlin Creek: The 43-101 compliant feasibility report announced two days ago was woeful. And this isn't just my view, as Ron Coll of Jennings called the numbers "atrocious". Novagold will push the absolute amount of gold at Donlin but it cannot and will never make up for the fact that the study calls for $4.5BN in capex, $803m in sustaining capital and then, after all that cash, can only promise a meagre 10% IRR if gold manages to get to and stay at $1,000/oz. That in layman's terms is a lot of buck for not much bang, trust me.

Then yesterday we heard JV partners Barrick (ABX) telling us that Donlin Creek was way down the list of its priorities. So let's put this as simply as possible: Unless gold goes to and stays at $1,500/oz, Donlin will never be a mine. Never. Not now not ever, it really is that simple.

Galore Creek: Finally we get to Galore Creek, a JV with Teck. As everyone in the mining business knows, Teck is going through a whole house of pain right now as it scrambles to make payment on the bridge loan it took out to pay for a whole heap of coal it wanted to buy (aka Fording). And as Teck is at heart an industrials mining company it's selling off all the non core PM asset that it can. There's very little chance that Teck will do more than the strict minimum at Galore to keep its share, something the market and NG has already acknowledged. Galore is another project along the lines of Donlin, and we already know that capex projection at Galore turned out to be shockingly high. Also, it has been examined and dropped and examined and dropped by several different mining company for decades on end and has never become a mine. This in itself is a wake-up call.


Company Struture: To cap this all off, the company reported having cash of $78m and working cap of $62m on February 28th and a burn rate of $100,000 per day once one-time charges are backed out. If that burn has kept on burning we'll be down to $56m in working capital by now.

However the market prices NG at a touch under $500m. So in the strange world that is Novagold, $56m + two unworkable projects + one for sale booked as a $110m asset= $500m. Even if we're as generous as can be, say NG has $80m cash right now and ignore any debt on board, we're assuming $300m for Donlin and Galore combined. To give you more colour here, Scotia this morning (Apr 30th) reduced the NPV of Donlin to zero. Also, Teck announced today it was continuing with its fire sale of assets by selling its Pogo project to Sumitomo. You seriously believe they're going to move forward a marginal project like Galore under present circumstances? Wanna buy a bridge?

Bottom line at NG: Inept management + bad assets + high burn rate+ rapidly declining cash pile = NG is a seriously overpriced stock. It's currently being held up where it is by a group of people in serious financial denial. That will change.

Recommendation: Short NG

DYODD.

UPDATE: Oh look who's selling his stock again...just days before that Donlin 43-101, too. Lordy, this mgmt stinks to high heaven.

Apr 29/09

Apr 22/09

Van Nieuwenhuyse, Rick

Direct Ownership

Common Shares

10 - Disposition in the public market

-10,000

$3.000

Doe Run Peru: Public Relations Fail of the Day

Yesterday I got the following comment from a reader named 'Dremco' added to the bottom of this post about Doe Run Peru.

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Dremco has left a new comment on your post "Doe Run Peru: The truth will out": I have visited La Oroya several times over the years, since 1984, in order to visit and work at the Metallurgical plants. In the early years, of Centromin ownership, there was never any apparent environmental work done in the entire area.

However, since Doe Run bought the company there has been a very extensive cleanup of the plants, and especially in the communities. La Oroya looks entirely different, and more attractive since the Doe Run purchase.

It is probably impossible for any company to do a good enough cleanup effort to satisfy the environmentalists, but from my perspective as a visitor to the area, Doe Run has done a remarkably good job.

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Now when somebody sticks up for one of the worst polluting companies on the planet in such a sycophantic way (not joking either; the Blackstone Institute put Doe Run Peru in its top ten most polluted places on the planet), my BS meter tends do that "Geiger Counter meets U308 yellowcake" thing. So on checking the where reader Dremco was sitting when writing the comment*, it turns out to be Chandler AZ, a town just South of Phoenix. Our mystery reader arrived directly on the page by searching "Doe Run Peru" in Google and then stuck around for over 30 minutes checking out other Rennert-related articles (some of the following has been XXXd out to respect privacy):

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VISITOR ANALYSIS
Referrer	http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4WZPA_en___US258&q=Doe Run Peru
Search Engine Phrase	Doe Run Peru
Search Engine Name	www.google.com
Search Engine Host	Google
Host Name	XXXXXXXXXXXXX
IP Address	67.XXX.XXX.XXX dremco
Country	United States
Region	Arizona
City	Chandler
ISP	Sun Lakes Cable
Returning Visits	0
Visit Length	31 mins 22 secs
VISITOR SYSTEM SPECS
Browser	IE 7.0
Operating System	WinXP
Resolution	Unknown
Javascript	Enabled

Navigation Path

Date	Time	Type	WebPage
29th April 2009	17:32:08	Page View	www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4WZPA_en___US258&q=Doe Run Peru www.incakolanews.blogspot.com/2009/03/doe-run-peru-truth-will-out.html
29th April 2009	17:36:39	Exit Link	https://www.blogger.com/comment.g?blogID=507788417054293017&postID=7735749254938621153&isPopup=true
29th April 2009	17:44:42	Page View	www.incakolanews.blogspot.com/2009/03/doe-run-peru-truth-will-out.html incakolanews.blogspot.com/search/label/ira%20rennert
29th April 2009	17:58:00	Page View	incakolanews.blogspot.com/search/label/ira%20rennert incakolanews.blogspot.com/2009/03/ira-rennert-doe-run-peru-leopards-and.html
29th April 2009	18:03:21	Page View	incakolanews.blogspot.com/search/label/ira%20rennert incakolanews.blogspot.com/2009/03/ira-rennert-doe-run-peru-leopards-and.html
29th April 2009	18:03:26	Page View	www.incakolanews.blogspot.com/2009/03/doe-run-peru-truth-will-out.html incakolanews.blogspot.com/search/label/ira%20rennert
29th April 2009	18:03:30	Page View	www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4WZPA_en___US258&q=Doe Run Peru www.incakolanews.blogspot.com/2009/03/doe-run-peru-truth-will-out.html

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Bizarrely enough, if you leave Chandler and travel South 30 miles or so on I-10 you arrive at the town of Casa Grande, home of a very large lead (Pb) products plant owned by.....yes you guessed it folks...The Doe Run Company.

So let's see now: Is it just a wild coincidence that somebody sitting 30 miles from one of the few Doe Run operations in the world suddenly decides to type "Doe Run Peru" into Google and leave glowing and demonstrably false comments about just how wonderful, clean and caring Doe Run is at La Oroya, Peru? Or maybe there's a connection somewhere. Waddya think?

Therefore commenter Dremco, you win this week's coveted award. Public relations dumbassery taken to a new level. All yours, dude:

*and don't worry, I rarely do it and unless you're at a company registered IP there's very little I can find out.

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

.....the gold/silver ratio.

If you put a gun to my head I'd say "it's going higher" (a higher GSR = more nerves), but a move downwards would be the world greatest surprise, either. What I do know is that things can't stay the way they are for muh longer.

Barrick on Donlin Creek: "An Interesting Strategic Value"

During the Barrick Conference Call today, the CIBC analyst dude asked ABX mgmt about its 50% owned Donlin Creek project.

The ABX dude had a really (that big enough?) hard time in finding something positive to say, but managed to squirm out with "there's a lot of gold there", that Donlin Creek "offers good option value" (a coded phrase in itself meaning "we can delay forever"). However he couldn't avoid saying that Donlin Creek comes way down the list on its project pipeline and ended up by calling Donlin Creek "interesting strategic value". LOL!

Or in other words, Rick Van Alphabet and all at Nadagold (NG):

I still find it incredible to think that Rick! told shareholders to reject a $16 offer and is still Nadagold's CEO.

By the way, Barrick's CC was pretty good. They were coy more than once about Pascua Lama and promise a full update some time in 2q09. Overall I'd certainly rather be holding ABX than NG going forward.

Trading Post (bit o' math edition)

Just thought I'd share a graph with you. Despite rumours to the contrary spread by the Wistar&Bob show, I do know a bit about mathematics.

Meanwhile in the crazyshow, I could pick up on about two dozen stock stories worth featuring today. So I won't. Here's just a couple.

Colossus (CSI.to) up 12.5% at $3.15. You can't beat a good pump, can you? Who needs fundamentals and risk analysis to make money in this market anyway? I reiterate my call on CSI.to: Don't buy, don't sell, just avoid.

Fortuna Silver (FVI.v) up 4.8% at $0.87 and seventeen days to go, but the way things are today methinks less than seventeen days left to get on under 90. I own. I like. I bang on table. DYODD.

Rusoro (RML.v) up 4% at $0.52 and doing good volume. This is another that I like for its upcoming earnings report. I have a small position recently taken at 50c...lord help me for buying Venezuela exposure again. It's like scratching a mosquito bite.

Capella Resources (KPS.v) down 6.7% at $0.56. Oh dear. How sad.


UPDATE: I have the worrysome habit of writing up the Trading Post at the precise time that FVI peaks on the day. Now $0.83...gotta laugh, eh?

Swine Flu: THE VIDEO GAME!

Uff...it had to happen I suppose. The graphics are pretty good to be honest (I passed level one to check it out).

Here's the link, go knock yourself out.

Lithium: Let's make this clear, yeah?

The following commentary does not apply to well-run companies such as SQM and FMC that are already producing and selling lithium as a minor part of their total revenues.

LITHIUM
INVESTMENT
IS
FOR
SUCKERS

So will you please cut it out with all the mails and comments about the sector? You don't know what you're talking about and this snake-oil is most definitely a case of a little knowledge being a dangerous thing for your back pocket. It's being promoted by dubious sources who are targetting suckers. Current supply easily covers demand and China is growing its internal industry far quicker than anything in the Americas. Finally and importantly, people who think lithium is the energy source of the future are barking up the wrong tree. You need to stop believing the hype and research the latest developments in battery technology. One you do you'll know what I know and you won't touch any of these BS scammy lithium juniors with a barge pole, either.

If you're considering an investment in a lithium junior you should also consider ingesting it on a daily basis to combat the mental imbalance that is manifesting itself. That clear enough?

Barrick and Pascua Lama: Munk and Borg's lobbying pays off

photo source

In the last couple of weeks, both Argentine and Chilean press reported that Peter Munk and Vince Borg of Barrick (ABX) met with the countries' respective presidents (Klishtina and Michelle) to try and get the company's massive but expensive and environmentally complicated Pascua Lama gold project moving.

The sticking point of the project that straddles both countries high up in the Andes has been the tax regime, but it seems that the three parties have come to a broadstroke agreement. Here's Reuters with the info:

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SANTIAGO, April 29 (Reuters) - Chilean tax authorities reached a deal late Tuesday with their counterparts in Argentina over tax issues related to Barrick Gold's (ABX.TO) Pascua Lama gold project, but said some minor issues remain to be resolved.

Pascua Lama, one of the world's last known mega-gold finds, is located about 5,500 meters (18,000 feet) above sea level and holds a treasure trove of some 18 million ounces of gold. It is also one of the world's largest silver deposits.

Chile's tax authority said the tax issues were agreed upon at a meeting in Buenos Aires on Tuesday.

"During the meeting, a deal was reached to resolve tax issues related to transborder services and some others that remained outstanding," Chile's tax authority said in a statement.

CONTINUES HERE

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So what to expect from here? Tough to say how it will pan out right now, to be honest. The whole thing certainly isn't cut'n'dried and done with and I'm anticipating a mix of the following

1) Enviro protesters ramping up their voices in opposition. To be honest they have a case, here. Details can be found all over the interwebnetpipes via that Google thingy, but I'd strongly suggest you read both sides of the argument and not swallow either sides' propaganda whole.

2) Argentina and Chile will likely get bogged down in the unspecified details, as this saga has been going on all decade and there's no reason to suspect that today's announcement declares a final definitive accord. LatAm is as LatAm does and you'd be wise to remember that.

3) Barrick will do the pipes and whistles on the news in the next few days.

That's just three personal ideas and there will be a lot more thrown into the mix, for sure. My personal bottom line on this is witout particular opinion, but I'm a keen observer of the issue and will be watching the developments going forward. However for those looking for an investemnt angle on this news, take a good look at International Royalty Corp (IRC.to) (ROY) as it has a chunk of the revenue stream of Pascua Lama and is trading at low levels right now. You'll probably get more bang-per-buck playing the latent behind-the-scenes royalty holder than ABX itself. But make sure you DYODD dude, as I own IRC.to in my long-term never-touch-it portfolio.

Troy Resources reports its quarter

On this link you can get your own copy of the quarter end March 2009 report that was released today. Overall its a pleasing report and the market rewarded the Aussie listed stock with a 9.4% increase to A$1.335 (CAD$1.15 approx). Not bad at all considering what happened to gold while Australia was asleep yesterday anjd as gold has managed to climb back above $900 on this side of the world today there's plenty of reason to expet a very decent pop in TRY.to this morning. Here are four points (from many others) that caught my eye in the report:

• The most important positive is the doubleplay that cash costs have dropped and its Australian Sandstone mine is producing competitively.

• Another positive is the reported A$64.8m in cash/bank/bullion deposits. This represents U$46.8m at current forex and means that the new Casposo mine and capex an be paid for out of treasury and there's little reason to expect any dilutive financing going forward.

• Another intriguing bonus is talk of a sale of its Iron Ore to one of two possible Brazilian purchasers. Although I personally am not holding my breath on this one (see today's Chart of the Day) if TRY can do a deal it would be a great cash bonus to the company.

• The major negative in the release is the delays experienced at Andorinhas in opening up the high grade underground extraction. By no means serious, but all the same the company is now behind schedule on that count. TRY now expects to start feeding significant amounts of high grade into the mix beginning June 2009. Let's see if they make that on time this time. TRY reports difficulties in procuring equipment and also power outages. The power problem sould now be a thing of the past as they've invested in back up diesel generators.

As said, those are just a few of the points I picked up and I strongly recommend that you read the full report (on that link above) for yourself. It's my idea of a great investment and I cannot be louder and clearer than that. Great prospects, growth baked in, under the radar and importantly run by honest management that truly put shareholders first and don't just pay lip-service to that angle. I'm long and have been since $0.84 and expect plenty more upside to come. My NOBS report on Troy Resources is still available if you are enough, find details here. However be clear that if you pay $10 all you'll get is plenty more detail and the same reco; "buy" as I'm not trying any hard sell here. I'll leave you with the Australian-listed stock and its performance from last night.