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Which will be worth more at end 2015?

11/14/09

Your friendly LatAm tool announces....


...that The Mex Files has a good post regarding the advantages (and some of the challenges) of locating your business in Mexico. Good stuff. Here's the link, go have a read.

ECU silver (ECU.to) third quarter results

Yes indeedy that fun time has come around again, as ECU Silver (ECU.to) quietly publishes its 3q09 results. Once you look at them you understand why management never announces it has published results like any normal, respectful entity; it doesn't want to attract attention to this ongoing trainwreck of a financial situation. But never fear, IKN is here! Here are the charts that tell the story.

Let's start with the fact that, despite all the fanfare about higher production and doré bars and grades and stuff, it still managed to make a loss in the quarter

Assets are still held up by its ridiculously inflated fixed asset position that cannot be justified by any normal sentinent being. The company has little in the way of current assets.

In the quarter, ECU.to decided to sweep its debt problems under the carpet by booting a large portion of what it owes into the deeper future. The debt is still there folks, the only difference now is that it will be paying more interest on what it owes for a longer period of time.

But the funny thing is, even though silver shot up in price and even though ECU.to booted a large chunk of its debt load into the longer term future, the company is still running a negative working cap!

Meanwhile, its self-entitled management team decided that they were still worthy of stock options. That's now over $6m in stock based compensation in the space of two years.

And of course, who pays for all this incompetence? Yeah you guessed it.....more share dilution registered in the quarter.
ECU.to now has a deficit of over $100m. Assets-debt = $56m, it can't make a quarterly profit to save its life, it's heavy in debt, has negative working cap but somehow it has inflated itself to a current market cap of $254m.

Disclosure: now you know why I'm short ECU.to as of this week. DYODD.

11/13/09

The Friday OT: Rage Against the Machine; Bulls On Parade

The track that sums up the state of The Americas, late 2009. The USA's attitude towards Honduras is a blast out of the 1970's. Barack Obama, you make me want to puke.



Play it loud.

reasons to love the interwebnetpipes

H/T to Salmon for finding this wonderful visual learning tool. Called 'Cell Size and Scale' and put together by The University of Utah, it shows you the relative size of small things, starting with a coffee bean and finishing with a carbon atom (with many stops along the way) in the most elegant way I've ever seen.....just slide that bar underneath the picture and see for yourself. Gotta check this one out, so do it here.

Trading Post (tip your hand edition)


All the following stocks will get a greater or lesser mention in IKN29, out Sunday.

B2Gold (BTO.to) down 1.1% at $0.88

Dia Bras (DIB.v) UNCH at 22c

Fortuna Silver (FVI.v) up 2.4% at $1.74

TVI Pacific (TVI.to) up 28.6% at 9c

New Gold (NGD) up 6.9% at $4.07

Dynasty (DMM.to) up 0.9% at $5.70

Amerix (APM.v) UNCH at 7.5c

Plenty more stocktalk on other companies, too.

IBM (IBM): Big Blue, Big Bribe


It's taken 15 years, but finally executives of IBM have admitted to paying bribes to the government of Argentina in exchange for an oversized contract to supply its machines in the country.

The scandal started back in 1994, when Argentine journalist Santiago Pinetta reported that IBM had paid U$37m to government officials in bribes. In return, IBM was given the contract to supply 525 offices of state bank "Banco de la Nacion" under a contract that came to U$249m and is understood to have inflated prices by around 100% on the whole deal.

The legal inquiries have trundled on for what seems like forever since that time, but hot off the presses today the seven IBM executives under accusation copped a plea bargain, admitted guilt and will pay hefty fines in lieu of going to jail.

Another episode of The USA knows best in LatAm comes to an end.

UPDATE: A mail received from reader 'MP' follows. He's right bar one thing; should have written "South America" instead of "Argentina".

So that's how it works in Argentina. You bribe the officials to get the contract, and when you get caught, you bribe the officials so as not to go to jail!

Nice to know...

Yanacocha: A nice catch by Reuters

Reuters is on the ball regarding Yanacocha and yesterday immediately noted a discrepancy between production estimates at South America's biggest gold mine for 2010. In the left corner we have Newmont (NEM) with upbeat estimates and in the right corner its JV partner at the mine, Buenaventura (BVN), with a negative outlook for production next year. Here's the excerpt from the note:

"This year, we're going to have something similar to 2008 production ... and for the next few years, we're going to maintain levels of around 1.8, 1.9 million ounces," Carlos Santa Cruz, Newmont's vice president of South American operations, told reporters.

His statement conflicts with one made last month by Roque Benavides, Buenaventura's chief executive, who said he expected to see production at Yanacocha falling roughly 25 percent to 1.5 million ounces in 2010, as lower ore grades are explored."


But hey...what's four hundred and forty two million dollars of gold between friends anyway, right?

Dead Animals


Last week we ran this story on the sealions found dead on the Colán beach in northern Peru. This morning El Comercio reports the press conference held by Minister of Production (oh the irony) Mercedes Araoz who confirmed the obvious; the 263 dead animals had been poisoned. The method was to feed them fish laced with rat poison and the culprits were undoubtedly small fishermen that work out of the local harbour.

Sit this story alongside the recent one about the Mining Minister who refuses to control the sale of mercury inside Peru while condemning the artisanal mining in Madre de Dios that is wreaking environmental havoc. Spot any pattern yet?

TheNewCrystallex (EC.v) doing its thing

You gotta hand it to these Ecometals (EC.v) guys, they do know how to press all the right greed buttons amongst the sheep:


But it's still untouchable by anyone with the slightest knowledge about its company history and current standing in both Ecuador and Brazil.

But hey.......capitalism never fails....

News roundup (Otto quotes people that actually know what the hell they're talking about instead of spouting garbage himself...then spouts garbage)


From Tim's El Salvador Blog:
The tragedy of this week's floods and landslides is not just a natural disaster. It's a man-made disaster as poverty and marginalization lead people to build homes in at-risk areas and the government has failed for years to invest in risk mitigation projects. CONTINUES HERE

Otto sez: I think Tim deserves awards for what he does. My vote for the best English language LatAm blog. He doesn't get mixed up in partisanship, he doesn't scream and shout, he just produces articvle after article that captures his subject and educates his readers. If your interest is LatAm and you don't have Tim's El Salvador Blog on your radar, you're missing out.


From The Mex Files:
While Lou Dobbs’ use of neo-nazi source material in one broadcast was shocking, it was no more a manifestation of American Exceptionalism than was John Arivosis´contention in “Americablog” that the Honduran coup was justified to prevent “another Chavez”. As opposed, to say, another Pinochet? Or, rather, another Alvaro Uribe? CONTINUES HERE

Otto sez: Mex Files nails this subject once and for all.


From Bloomie:
Nov. 13 (Bloomberg) -- Venezuelans’ BlackBerrys buzz with urgent news on Twitter: an accident in La Trinidad industrial zone, a tie-up at the old toll booth on the mountain, a mudslide onto the Prados del Este highway.

Tweets flag potholes, warn of flooded roads and divulge police checkpoints on weekend nights. Politics laps into the Twitter alerts that Caracas drivers use to navigate traffic- choked streets, as posters rage at the government and stalled infrastructure projects.

Caracas motorists, burning the world’s cheapest gasoline and driving twice as many cars as roads can handle, may be global leaders in using Twitter Inc.’s social networking Web site to outflank traffic. CONTINUES HERE

Otto sez: Shome mishtake shurely ossifer!! Don't they get immediately arrested by the local Stazi for saying bad things about Glorious Leaders??? And how can a communist country have blackberries and interwebnetpipes?? Aren't they too busy queuing for black bread and rushing around on rumours of a supply of fresh apples?


From Commodity Online
When it comes to global manufacturing, Mexico is quickly emerging as the “new” China. According to corporate consultant AlixPartners, Mexico has leapfrogged China to be ranked as the cheapest country in the world for companies looking to manufacture products for the U.S. market. India is now No. 2, followed by China and then Brazil. In fact, Mexico’s cost advantages and has become so cheap that even Chinese companies are moving there to capitalize on the trade advantages that come from geographic proximity. CONTINUES HERE

Otto sez: This is what happens when you sign free trade agreements, Twobreakfasts.

Chart of the day is...

...crude oil, December futures contract, daily candle.

That looks like a rollover to my uneducated charty eye. Care to tell me where I'm going wrong?

11/12/09

Trading Post (wake me up when it's all over edition)


Nadagold (NG) down 4.8% at U$5.11. You have to feel sorry for the US investor in junior exploration golds, deprived ofthe chance to move on the hundreds of possibles and forced into considering crud like this simply because they have access to the US market.

Fortuna Silver (FVI.v) up 4.7% at $1.78 and bucking the trand of its peers today (though volumes not stunning). FVI.v is supposed to report today. The CC is definitely Monday 11am EST, though. DYODD.

Colossus Mineral (CSI.to) down 0.7% at $5.40. It's been funny to watch the market scratch its head over today news, trying to work out whether it's good or bad (handy hint: not good). Ask the house analysts about geology, rocks, grades, metallurgy or any of that malarkey and you'll get all these bullish sounds from them, but as soon as political risk rears its ugly head the silence is roaring. I wonder why........

B2Gold (BTO.to) down 4.4% at $0.88. BTO tried and failed to bust out over its resistance yesterday. No matter charties, it'll happen. According to sources the Limon strike is now over and they're all back working happily, but we're looking for news on Orosi at the end of this month to make the real difference.

Oro Silver (OSR.v) down 5% at $0.19 and I'm down on the small roll-da-bones position taken at 23c. So be it. I thought about selling and taking the loss today but volume dried to nothing, so better to wait and see. Hardly likely to turn out as my best ever trade, whatever happens.

more thoughts on remembering

I received generous feedback from people over yesterday's rememberance day post. It's truly an honour to have contacted so many fine people via this blog during its time as a humble corner of cyberspace. I'd like to share with you one mail in particular from reader 'RB', received yesterday. I've been given permission to reprint here by the author, so here goes with no further comment from me.

Here's my regiment where I served for two years (reserve)

My father was a Major in the Highlanders, formerly a Lt. with the British Navy on HMS Constance, served in Korea. My mother was WRNS, which is how she met my dad. Grandfathers on both sides served in WWI & II.

There's a lot of remembering to do on Remembrance Day, so rather than spread myself thin, I focus on these guys who never came back:

I spent a day there back in 1992 on a family visit to Thailand. What struck me was how young most of them were - the average age was about 20. Everything they had and could have had was taken from them.

I'm not a religious man, but I'm not foolish enough to think that I know it all. Is there a divine force, do we have an eternal soul, are we judged at the end of our time? I have no idea, but I try to live as if it were true. You lose nothing from the effort, and in fact gain from it in this world, if not the next. For the sake of those young men, I hope that it is true. If anyone deserves eternal life it's them. That's my prayer for Remembrance Day.

Colossus (CSI.to): COOMIGASP mathematics


So, Colossus (CSI.to) has to amend its original agreement with COOMIGASP to keep the locals from revolting. The main hush money is a U$206,000 monthly payment to its JV partner that get repaid as from year two of production... so let's see how that math works:

  • Monthly payment to COOMIGASP: U$206,000
  • Estimated membership of COOMIGASP (according to Brazil gov't): 45,000
  • Monthly amount paid to COOMIGASP per member: U$4.58

Thus CSI "gets to utilize the majority of its $90m treasury" while it hands out enough to make one feijoada a month to the thousands of locals around them. Oh yes.....that will keep everybody happy there for sure. Whatever makes you think there will be more amendments to the deal in the pipeline, Otto....?

Said it before and will say it again: Don't buy it, don't sell it, just avoid CSI.to.

Peru: Madre de Dios gold mining, as seen by Hambone

The Amazon jungle, as seen by Peruvian gold mining
companies and ignored by its government

I've been given permission by the author to paste up part of chapter 17 of the great book 'Peruvian Plunge' by Sam 'Hambone' Mitchell (another excerpt is here, along with a link to get your own copy...only $5 and well worth your time) that covers the ecological disaster area known as the Madre De Dios gold mining zone (that we covered in this post earlier in the week).

We join our hero as he goes through a difficult waters moment while travelling on a boat up the Madre De Dios river. Read on.....


"....my bladder stretched to the bursting point by two cups of coffee, I begged the captain to pull over for a pit stop. “I know just the spot coming up,” Pablo – who spoke perfect English – assured me. Two minutes later, we drew near to what first appeared to be a rocky beach on the left shore. As we pulled up to it, however, I noticed that the “beach” had been stripped bare of all vegetation as if it had been grazed by a Brontasaurus (who knows, maybe it had); just a few yards back from the waterline, three boxcar-sized pyramids of loose gravel and slag had been heaped there by some unseen giant hand. No bird stirred and no grasshopper whirred in the eerily still, almost sterile air of the place. What the Hell?

“Your first Madre de Dios gold mine, but certainly not your last,” announced Pablo when the motor had died. He indicated the riverside wasteland with a dismissive wave of his hand and weary ironic smile. “This one was just abandoned; I wish I could say the same for the others.”


Thinking that the ruined crescent of beach was “all” there was to the abandoned mine, I scrambled out of the boat and up one of the thirty-foot high slag heaps to find a private place to pee, as no tree or bush remained standing on the waterline. Cresting the top of the pile of loose stones, my eyes were speared by a shocking sight: stretching several hundred feet back into the jungle behind the slag heaps was two to three acres of sun-blasted, scorched-earth wasteland. In the middle of this ruined barren moonscape, covering perhaps a quarter-acre, was a slimy pool of toxic sludge that looked more like anti-freeze than water. Scattered about were stray bits of rusted-out machine parts and plastic jetsam. I added my own stream of human waste to the decoupage of destruction, and retreated back to the boat rocking gently in the waters of the Mother of God.


“This was just a small-time operation, what they call a ‘pirate mine’ because it had no permits to operate by the Peruvian government,” Pablo explained as we waited for the other passengers to finish their business. I asked him if the government had shut this mine down; Pablo laughed a “yeah, right” snort. “The government has neither the money nor the will to shut these mines down. The miners move in wherever they want to, dig until they think they can do better somewhere else, then move further into the jungle. These guys are set up somewhere else by now.”


As I had read but never paid much attention to, the other problem with these mines, legal or illegal – besides the total destruction of the fragile riparian corridor – is the fact that the miners leach the sand and pebbles through mercury, which binds to the gold dust, allowing them to harvest the tiny yellow flecks that have been luring fortune-seekers to Peru for centuries. Once the gold is collected, the mercury is washed on down the river to poison the fish – and anyone who eats the fish, be it bird, otter or human – downstream. Out of sight, out of mind, like so much else in the jungle. With the Peruvian government’s full knowledge and cooperation, hundreds of gallons of the toxic metal are simply washed away down the river for someone else to deal with.


As Pablo knew from experience all too close to home, it wasn’t just the folks downstream from the mines who suffered. “My brother went to work in one of these mines. When he got there, there was no fresh water for the workers to drink. His boss told him, ‘Drink from the creeks and river like everybody else.’ Pretty soon he was sick, then in the hospital for six weeks. He’s better now, but he says he will never work in the mines again.”


Everyone back in the boat, we headed off again. We hadn’t gone a mile before the real nightmarish visions began. They started out small enough, with the one- or two-man small-potato operations. While one guy would shovel wheelbarrows full of sand and gravel to fill the gravel-washing sluices (themselves supplied by a gas-powered water pumps from Hell), his buddy would wash the material through the mercury, ever alert for the tiny flakes that were the ultimate goal of all this carnage. Working together in teams, these small-time Planet Nibblers might be able to destroy a few acres of riverside in a year.


As we chugged on downstream, we came to the next level of Planet Eating – huge dredges set on barges in mid-stream that sucked the river bottom off its bed like a giant vacuum cleaner sucking up dust from a dirty floor, coughing the sand and rock up onto huge conveyor belts that were combed through by several workers. The tons of mercury-stained silt were dumped directly back into the heart of the river.


But the true, undisputed winner of the Planet-eating blue ribbon prize for inflicting, hands down, the most harm against the Mother of God weren’t the small-potato pirates or the Idaho-baker barges, but the legal “official” gold mines operated with the full encouragement and permits of the Peruvian government. These full-scale assaults against Mother Earth – clearly paid for and operated by some mega-buck multi-national mining corporation – didn’t screw around with piss-ant little wheelbarrows and water pumps. To truly lay waste to a planet, you need bulldozers, front-end loaders, and dump trucks the size of houses to move that rock around. You could almost smell the mercury hanging in the air.


Staring dumbfounded at this unbelievable in-your-face carnage stretching for miles along both banks of the Mother of God River (and this was just the little bit visible from the boat), I asked myself over and over again: what is humanity getting out of this rotten deal? Except for the few guys at the head of the pack – who have probably never even been to Peru – who is the “winner” in this lose-lose situation? The ladies back in the U.S. with their gold jewelry? Are those little flecks of yellow worth this destruction, this needless swathe of death? Could humanity survive without the “precious metal” being ripped from our precious planet? How much insult could one Mother of God take?


Of course, all these miners and their poverty-stricken families needed somewhere to call home. The small-time “pirates” tended to call home tiny little shacks that were really nothing more than overgrown tents made out of bright blue tarpaulins, clinging to the muddy riverbanks in little clearings hacked out between the waterline and the jungle. As we passed these forlorn little bivouacs, packs of curious children would stare out at us; I would stare back at them, wondering what kind of life these kids had to look forward to (clearly not a life in school, as it’s hard to run a school bus up and down a river). I asked Pablo his opinion, and he said, dismissively and unconvincingly: “These people have a lot more money than you think. They don’t have to live this way; they want to live this way.” Whatever you say, amigo…


The really high-rollers in the Peruvian gold-mining game got to move to the downright posh community of Rio Colorado, where they could upgrade from tarp-covered tent to rough plank and tin-roofed hovel. A six-block unbroken line of these depressing miners’ shacks stretched along the right riverbank; perched atop every other one of them like so many invading flying saucers were shiny new satellite dishes, so the miners could come home from a hard day of poisoning themselves with mercury to watch the governor of California blow up terrorists.


Pablo explained that the Colorado River, a major tributary of the Madre de Dios, was being invaded by the miners at an alarming rate. They were pushing deeper and deeper into the pristine million-acre wilderness of the Amarakaeri Communal Reserve, dumping their silt and their mercury into the river, to wind up in the village. When I asked him why the natives the reserve was supposed to “protect” put up with this, he explained that most of the miners in the reserve were the natives! Whatever “noble savage” myth I was still suffering from at that point floated on down the Mother of God with the gallons of mercury dumped there by the Indians who for thousands of years have depended on the river for their food and water. I mean, be real: who would be crazy enough to live in some hut in the forest when you could live in a house in town with a satellite dish on the roof?


The biggest irony in all of this is that the gold miners are opposed to Hunt Oil’s petroleum explorations because they think, for some reason I can’t fathom, that the oil company will shut down their illegal gold mines. Of course, if that does happen, the gold miners can always go to work for Hunt Oil until the oil is gone, at which time they can go back to gold mining: money is money and Planet Eating is Planet Eating, what difference could it make?



Get your copy of Peruvian Plunge here

A big thank you to Doug Casey (this week's coveted award)

Thank you for the laugh. I'm still chuckling full 12 hours after reading it.

A. Person sent me this thing called "Conversations With Casey" last night, which is an e-mail that has Doug Casey chewing the cud with some dude called Louis James. So yesterday's version (on line here) had the guy that is getting ripped off by his cattle ranch managers in Argentina (but he doesn't know that) talking about science fiction ('SF' or 'speculative fiction' if you like, Duggie) that includes this exchange:

Doug: Yes. I have little use for English professors. Their standard complaint is that SF isn't "great literature" – which is nothing more than a foolish and unsubstantiated opinion. The relevant fact of this matter is that a variation of Pareto's law applies: 80% of everything is crap. And of the 20% that's left, 80% of that is just mediocre. So, of course 80% of SF is crap – but so is 80% of everything else. And the best speculative fiction, the top 4%, is world-class literature. And it has much greater ideational content – by an order of magnitude – than any other genre of literature. That more than makes up for the lack of poetry in some of the prose.

L: What matters more; a book that challenges your mind to think in new directions, or onomatopoeia?

Doug: Exactly. No question. Anyone who wants to claim to be a well-read person has to read speculative fiction. In fact, my two favorite areas for reading have long been ancient literature and speculative fiction – bracketing the two ends of the spectrum of time, if you will.

L: Perhaps so, chronologically. But I suspect the ancients would have been looking around at a world that was new to them and full of mysteries and unexplained frontiers – just the sort of things SF authors tend to write about.

Doug: Yes, it's very interesting. Paradoxical, in some ways. The Greek and Nordic myths are actually a form of SF.


How anyone who claims to have read the classics can come out with a statement as crass as "the Greek and Nordic myths are actually a form of SF" is pretty impressive in itself, but to actually allow it to be published with his name at the side is another level altogether.

Anyone who has even scratched the surface of the subject will have heard of the mythos/logos issue. In fact, calling them "The Greek And Nordic Myths" as Casey does is a direct entry point to the mythos, as that's what the myths were based upon. The "mythos", the "myths" as manifested by the Greeks (and their Nordic counterparts) were not written or enacted by ancients trying to fathom the world as they see it. Myths weren't created to be 'reasonable'; that was left to the logos, which was the part of the Greek philosophy that has influenced western society to this day. The ancient myths were "mythos-to-logos" whereas a modern SF tale is "logos-to-mythos", when a writer (SF writers typically have strong scientific background) create their fantasy to explain where they see the future of their logical, scientific discoveries. Misunderstanding the mythos a freshman level error of judgement that has been refuted more times than can be imagined by those that really what the hell they're talking about.

Really there are reams that could be written on this one, but to cut a long story short taking a logos-based literature (SF) that has grown from modern society and saying that the mythos-based literature laid down all those years ago is the same thing would get you an immediate and unequivocal "fail" score in any classroom worth its salt. Any idiot can read the classics and go "oh, neat story dude". This is not about the validity or otherwise of Asimov (an extremely good read, fwiw) his peers or a literature such as SF; it's about a man called Casey that's spouting crap and trying to sound way smarter about a subject than he clearly and really is.

I always suspected there was intellectual mediocrity behind that facade of arrogance. Now the evidence is clear. Doug Casey, you don't have the slightest clue as to what you're talking about and therefore win this week's coveted award; enjoy, dumbass:


What you need to know about Dorato Resources


  • 1) It's getting pumped by the brassnecks at the can of corn. Twice this week the dog known as DRI.v has appeared in breathless notes in the 'Morning Coffee' publication, today's pearl using that wonderful "the next Aurelian?" line. Laughable.
  • 2) It was the subject of this series of posts last year on how a gold mining stock with serious red flags is pumped to sheep. There's plenty on the subject of the Cenepa region in the series, including how Anglo picked over the concessions and handed them back. And the tens of thousands of landmines, too. But don't worry about your geologists getting blown up in the middle of the Peruvian jungle...doesn't happen often.
  • 3) Right now, according to the Peru ombudsman "Defensor del Pueblo", Dorato is in social conflict with the locals around the project. And we're not talking about that lil village just down the road, either, we're talking about 55 separate communities of the Awajun-Wampum people that live there. Also, there is no dialogue currently going on between the two sides. You think they're going to get drill permits? Try thinking again.

The latest pump job might have something to do with the recent appointment of Gordon Neal to the board of DRI. Neal is also the VP Corp Development at MAG Silver, a company that has managed to screw up one of the better silver asset discoveries of this decade with inept corporate politics. He must have 'the Zeds'' phone numbers on his rolodex....

State of Play in Honduras


I haven't been posting much on the trainwreck that is Honduras, mainly because 1) it was never my specialist subject in the first place and 2) other blogs know one squillion time more about the scene and have been pounding out quality information non-stop these last four months.

For a decent perspective of the current situation, go the TheMexFiles (hero bloggers) and check out this entry, The Diplomacy of Deceit, that neatly sums it all up.

Charts of the day are....

...those boring copper elephant-in-room fundy thingies again. LME inventories are at a six month high and show no signs of stopping.

Here's the context
And here's the price chart

The only way that copper can perform the way it's been performing is as a hedge against the dollar. And copper isn't an asset class, folks! Never has been, never will be (unless this time is different, of course) and so the equal/opposite type reaction you see from copper can only be temporary. Put simply copper isn't gold, so anyone that puts the word "copper" next to the phrase "safe haven" in the same sentence should immediately be dropped from your list of advisors. Cos sooner or later that person is heading for a fall...happens every time.

UPDATE: Thursday's LME inventory number is just out, up 4,800MT to 402,125MT. But don't worry, it's just fundies. Party on Garth.

11/11/09

Lest We Forget

Today is Remembrance Day, also known as Veteran's Day or Armistice Day or even Poppy Day. The day that looks back to the moment the armistice that ended WW1 was signed, on the 11th hour of the 11th day of the 11th month of 1918. When that hour comes round again today, in a little over 2 1/2 hours from now, spare a thought.

The little symbolic poppy also comes from the First World War. It's said that the Flanders Poppy was the first flower to show itself after the initial battles had spilled blood there and the red colour was seen by those present as the blood of fallen comrades returning to the light. As they say where I grew up, "Wear Your Poppy With Pride."


No further posts today.

In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

Lt.-Col. John McCrae (1872 - 1918)

El Salvador after the storms

El Salvador this week

Unmissable post by Tim at his excellent blog. Two videos that show you what the thousands upon thousands of people that have lost their homes are going through. Whole villages not just destroyed, but wiped clean off the map by the 108 separate mudslides brought on by the torrential rains. There's plenty more data and evidence of the devastation, too.

There but for the grace of God go I. Remember your good fortune, dudettes and dudes.

The Year-To-Date Small Silver Sweepstakes: Update

Here's the second installment, first was on October 23rd here.

click to enlarge

After we ran it last time, I was asked by a reader to add Bear Creek Mining (BCM.v) to the list cos said reader had done well on the stock this year. Yup can do, and BCM grabs 2nd place right off the bat. If there are any other suggestions for the next time we run this chart, just drop me a mail...happy to oblige (as long as the miner fits the category).

Leader for the prize is now Endeavour Silver (EDR.to) which has had a fine November so far. You go girl. GPR.to and FVI.v are up there battling hard. Coming up the rear (if you'll pardon the expression) is MAG Silver (MAG.to) and, of course, the dog of them all ECU Silver (ECU.to), though even that scam stock has managed to get into a YTD net positive situation thanks to the recent hysteria. It won't last.

Chart of the day is....

.....Latin American Index of Budget Transparency, 2009.

Yesterday the 2009 edition annual survey done by the Mexican 'Fundar' organization, called the "Latin American Index of Budget Transparency" was published. The title is a bit of a mouthful, but what this survey does is check on the region's national governments to see how open they are at the time of budgeting and deploying state funds.

In other words, it's a way of telling the chances that the corrupt scum that milk their governments for their own back pockets have for ripping off the people. According the Fundar, any score below 60 is a fail.

In the words of José María Marín, head honcho of Fundar, this year's results were "very disheartening". Apart from Costa Rica, every single country surveyed failed the test. Well, count Otto as unsurprised, as you can argue the merits of "my country is run by scum, but less scum than your country" if you like (Venezuela bottom, natch) but the whole culture of graft and budget secrecy isn't one that is isolated to this-or-that-spot. In fact, thinking about it, it's pretty impressive that Costa Rica has managed to lift itself out of the trough.

11/10/09

Peru: Gold miners in Madre de Dios

The front page, above fold, of El Comercio today
(click to enlarge)

An excellent piece of journalism in Peru's El Comercio today (a reminder of the newspaper that it used to be) bylined Nelly Luna, showing the ecological disaster area created in the Amazon jungle of Peru by informal gold mining. The Madre de Dios Region is home to an estimated 30,000 miners, nearly all of whom produce gold illegally and with no regard whatsoever to environmental regulations.
Main feature page of the El Comercio page today,
complete with photos of the disaster zone
(click to enlarge)

Here follows my translation of the full report, entitled "Brutal Deforestation of Madre De Dios", and watch out right at the end for a revealing interview with the Mining Ministry Flunkey, who knows what is happening, knows it's illegal and knows that around 50 metric tonnes of mercury legally imported into Peru ends up being illegally sold in the disaster area but doesn't want to do a thing to stop it. His arguments are laughable and clearly just wants to protect the status quo, not giving a damn about the enormous damage that current policies are causing. Viva investment grade.


Who will halt this criminal attack against nature?


Forests are converted into deserts due to the advance of informal mining that illegally extracts gold. Regular buying and selling of mercury is demanded by locals, who use it for the extraction of the precious metal.

An overflight of the jungle between Madre de Dios and Puno offers a panoramic portrait of the devastation; thousands of tonnes of earth removed and forests disappeared or buried beneath the tailings left by years of intense and illegal exploitation of gold in the Amazon. It is possible to make out improvised mining camps, heavy machinery turning over the red soil, flows of rivers cut off and enormous pools of water that hold an un-noticed poison that keeps on accumulating: mercury.

This element is as necessary in the exploitation of gold as kerosene is in the production of cocaine. Because of this, mining engineers and environmentalists argue that if the sale of mercury is regulated, in the same way as chemical supplies are to combat narcotrafficking, a large part of the problem of illegal mining and the destruction of the forests. But this doesn't happen; mercury is sold without any sort of control among the population that is found around the mining zones of Puno and Madre de Dios.

Supply and Demand
According to Customs information, in just the last four years the importation of mercury has nearly doubled, from 75,000kg imported in 2006 to 132,000kg last year. And so far this year, only up to September, there have been legal imports of 131,876kg of mercury. The Ministry of Energy and Mines (MEM) says that all these imports are basically used in artisanal mining, where levels of informality (no mining or land titles held or environmental impact studies approved) reach 90%.

For every gram of gold produced, two or three times as much mercury is needed. A recent study by Cáritas estimated that more than 50 tonnes of mercury is used in the Madre de Dios region per year- Despite the large scale of the mining exploitation, tax evasion due to the informality of the industry is enormous; this region receives only S/15,000 (U$5,200) in mining royalties from the state.

Up to March 2009, the Institute of Geology, Mining and Metallurgy (Ingemmet) and the MEM had authorized 1,592 mining concessions in Madre de Dios and only 19 have approved environmental impact studies, with another 1,089 in process. There are also 87 mining concessions that overlap the Peru State Nature Reserve of Tambopata. According the the MEM, the control of current illegal mining is the responsibility of the regional governments.

"The mining concessions have been authorized without taking into account other existing rights such as agricultural properties, forestry concessions, conservation concessions and protected areas" according to the diagnosis of the Ministry of the Environment. With this disorder of concessions and a lack of controls, mercury is feeding into waters, lands and even in fishes. In improvised stores located around the mining zones such as Huepetuhe or Inambari, where the taxman never appears, one kilo of mercury sells for between S/150 and S/180 (U$52 to U$63) in jars with the ticket names American Mercury or El Español.

No Clear Rules
National rules establish that all companies that use mercury must have mechanisms that allow for the recapture and re-use of mercury, but nothing more. There is no rule that regulates the adequate final disposal or the metal. Experts say that the ideal situation would be to take it to safe depositories overseas (Peru does not have any). Without clear rules, each year more and more tonnages of this dangerous element arrives to stay (or evaporate) in some part of the country.

It is worth mentioning that 83% of mercury imported by Peruvian companies comes from the United States or Spain. Mercantil SA, Triveño Mercury Corporation, JH Minerals, Aldo Orlando Torres Rojas and M&M Trading S.R.L. are the main importers. The quantities that arrive are mainly destined for the mining industry, with lesser percentages for the production of chlorine and dental curation work.

But mercury is not the only element used in illegal mining in the Puno and Madre de Dios regions. Every day, front load diggers arrive that cost half a million dollars apiece along with lorries, trucks, excavators and drags. The economic investment is very large, nothing to do with small mining. The Ministry of the Environment estimates that 50 truckloads of fuel arrives to the zone every day, 175,000 gallons of diesel and gas is used and approximately 1,500 litres of oil is spilled by the machinery and boats. Who will put a stop to this situation?

Interview with Víctor Vargas Vargas, Director General of Mining, MEM
"Prohibiting sales could generate contraband"

"If the commercialization of mercury is regulated, wouldn't it reduce illegal mining?

Mercury is freely traded. There are formal companies that import and sell it in a legal manner. If it were prohibited, it may generate contraband in this material.

Imports have nearly doubled in the last four years.

This is connected with the rise in price of gold, which causes a greater demand for mercury in the marketplace. What's more, 98% of informal mining activity in the country is dedicated to gold mining and the basic ingredient is mercury. What we would like is that the technical requirements of the recovery of this element are complied with.

Therefore, mercury that arrives legally to the country finishes as being sold to illegal mining.

Indeed. Anybody can buy mercury, just like they can buy gold. There are no restrictions. What is needed is to formalize these people and teach them to correctly handle this resource. Large mining companies do not use mercury, but cyanide. Mercury is only used in artisanal mining. However, there are mines that during the exploitation process obtain mercury as a byproduct, for example in Yanacocha, that is then exported.

Is there a regulation, as there is for cyanide, that locates the final destination that the mercury must have?

There is no rule about its control, but there is perhaps thought of creating one, without aggravating the already existing problems. Blocking its comemrcialization would stimulate a black market and a rise in the price of this material.


Peru economy: But of course, this time it's different.....

...cos Twobreakfasts says it's different. And he never lies.

This excellent chart is taken from the post "Never Forget The Past" by tippy top Peru stats guy, Farid Matuk. Check out the argument and more stats on the same theme at the original right here. And to get things right up to date, today the Peru gov't announced October imports down 28.3% YoY. Gotta love that "we're armour plated against the crisis" bullshit from Twobreakfasts last year.

The good news for Matuk is that he'll get his job back when Toledo is Prez.

Trading Post (driller killer edition)


Fronteer (FRG) down 1.75 at U$4.11 and pretty typical of all junior action out there today, with the stock starting higher and trending lower on lowish volumes. I can see a dozen other charts with the same design on my radar today. Some days are better than others...that's all.

Imperial Metals (III.to) up 40.6% at $8.54 after its NR after the bell last night that announced a monster drill return at its BC project

--------------------------------------------------------------------------
Total Interval Interval Interval
Drill                Length     from       To   Length  Copper Gold Silver
Hole # Zone (m) (m) (m) (m) % g/t g/t

RC09-349 East 1150.6 390.0 927.5 537.5 0.86 0.99 1.14
866.6 919.9 53.3 1.83 2.62 2.60
RC09-350 East in progress 390.0 715.0 325.0 2.24 4.52 5.28
540.0 692.5 152.5 4.12 8.83 10.45
--------------------------------------------------------------------------

152.5m of 4.1% copper and 8.8g/t gold? Yeah, that works.

Oro Silver (OSR.v) up 23.5% at $0.215 but was as high as $0.285 early this morning. For the record I bought a small chunk at 23c as a pure roll-da-bones punt. Not much $ in play and I'll let it ride a few days to see what happens.


Let's do the small silver producers: Fortuna (FVI.v) down 2.3% at $1.74, Endeavour (EDR.to) down 4.8% at $3.37, First Majestic (FR.to) down 3.9% at $3.48, Great Panther (GPR.to) down 2.6% at $0.75, Impact (IPT.v) down 3.6% at $0.80, US Silver (USA.v) down 2.8% at $0.175. And adding one to the list from here on Excellon (EXN.to) down 6.3% at $0.60. EXN.to might be off today but it has put a decent run on in the last two months and its latest quarter production numbers were pretty sparkly. Of all that lot, I only own FVI. DYODD

Oro Silver (OSR.v): hot hole

Subscribers to The IKN Weekly received a Flash Update regarding this press release at 08:40am, some 50 minutes before the bell, that included some basic company background on financials and people and a view on the press release.

The Flash Updates come as part of the service and are sent as and when an interesting market occurance happens during the week, but only as and when required. Here's what the COO over at OSR.v had to say about this drillcore:
Tom Bagan, Chief Operating Officer of Oro Silver remarked, "We were expecting better than average grades from hole 09COM043 but what we got was truly spectacular. This is by far the best hole ever drilled at El Compas, and it will undoubtedly have a positive impact on our ongoing scoping study demonstrating the robust economics of our gold-silver mine."
CONTINUES HERE

DYODD, dude

Spam scam mail of the day


Received today. Apparently, this nice mister Benny Tao wants to sell me 22.4 Karat gold at U$19,000/kg. That's U$590.90 an ounce, so subtracting the 6.66% difference of this stuff to normal spot gold quality, at today's spot price of U$1,100 that nice mister Benny Tao is offering us all a discount of U$436/oz on an ounce of gold.

What could possibly go wrong?

Hello
We are contacting you to know if you would be interested in buying our precious metals.We are licensed marketer , exporter & miner of Precious Metals : Gold AU Dust & Rough Diamonds in Republic of Guinea & Republic of Cote d'ivoire of West Africa. We are end-seller for the below commodity .
COMMODITY DESCRIPTION AND SPECIFICATIONS:-

a) Commodity : Aurum Utalium (AU)
b) Form : Gold Bar/Dust, 22.4 karat

c) Purity : 99.9% plus - after refinery

d) Quantity : 350 kilos (Monthly Delivery) / 10 - 50 kg for trial shippment.

e) Delivery : CIF Buyer destination.

f) Assay : Final assay to be made by the buyer refinery
and this assay value will be accepted by both buyer and Seller
.
g) Origin : Guinea Conakry & Abidjan Cote d'ivoire

h) Price : 19.000 dollars/ Kg

If you are interested in our offer, kindly let us know.
Regards,
Mr Banny Tao

Sandspring Resources (SSP.v): Time to mark your cards

A nice, chunky post for a change.

Sandspring Resources (SSP-H.v)
is a shell junior that's about to come out of hibernation and start trading as a DOT V (SSP.v). It's also being massively pumped by that 21st century Barnum, Thom Calandra via his Stockhouse outlets and according to ShillForHire will start trading as early as next week. By the way, if you don't know how Calandra operates the excerpt from this note (or many other like it) will give you an idea of what he was doing just five years ago:
The latest stock jock to retake the field is Thom Calandra, the founding editor of MarketWatch, a financial-news site now owned by News Corp. He has launched a new investment newsletter, Ticker Trax, on Stockhouse.com. A gutsy move, considering that's exactly the vehicle which crashed his career at MarketWatch; an SEC investigation found that Calandra was buying shares of stocks he recommended before he wrote them up in a MarketWatch newsletter, and then selling them after publication. He surrendered $416,109.58 in illegal profits, and paid a $125,000 fine.

So what follows is part of The IKN Weekly issue 14 dated August 2009. In IKN14 we took a good look at this SSP company at the time it was raising capital for its seed financing (cos at the time several subscribers were being invited to join in the cheapo share deal).

For the record, the private placement mentioned in the future tense in the text that follows closed on August 28th, and therefore the escrowed shares also mentioned are unleashed upon the world on December 29th.

DYODD, dude.


Sandspring (SSP.P.V): A new company, a bought deal, DD and ‘cui bono’

Here follows a little walk-thru on a company about to go public named Sandspring Resources. The idea is to show you what to look for when considering a new entrant and how you can decide whether the play can benefit you. On Tuesday 28th, Sandspring published a PR (8) that piqued my interest. Here’s the first paragraph of the presser:

TORONTO, ONTARIO--(Marketwire - July 28, 2009) - Sandspring Resources Ltd. (TSX VENTURE:SSP.P) (the "Corporation" or "Sandspring") today announced that it has entered into an agreement with a syndicate of underwriters led by Research Capital Corporation (the "Underwriter"), whereby the Underwriter will purchase, on a bought deal basis, 14,285,800 subscription receipts of the Corporation (each a "Subscription Receipt") at a price of $0.35 per Subscription Receipt, for aggregate gross proceeds to the Corporation of $5,000,030 (the "Offering")..........."

It then continues (please check link). So why did this offering grab my attention and why is it a good case-study in DD? The answer is a combination of several factors that should always interest the investor when looking for an investment in the sector, including, company structure, management, resource size, resource quality etc. First a little about the company.

Share structure. The first place I went was, of course, the regulatory filings. According to the last quarterly, SSP is a shell company with has 5.7 million shares out, 600,000 options at $0.10 and no warrants. So my quick math added the offering and then presumed full takeup of the overallotment (Research Capital can place another 2,857,200 units) and got the share structure as

Shares out: 22,843,000
Options: 600,000 (at 10c)
Warrants: 10m approx (at 50c
)

This looked perfectly acceptable at face value for a start-up. So it was now time to find out what the company has by way of assets.


Company asset and valuation metrics. The SSP main asset is the 'Toroparu' gold project in Guyana. It is envisaged as an open pit mining operation. In the 43-101 compliant report that was signed off in January 2009 (I can send you a copy, but it's 11 mega), the Toroparu resource was given an indicated and inferred estimate of around 2.3m oz Au, breaking down as follows:

Indicated: 1,369,400oz Au (at 0.93g/t)
Inferred: 973,400oz Au (at 0.82g/t)

It also has copper in the mineral. In fact the resource (low grade gold, copper credit, open pit possible) strongly resembles the Gold Reserve (GRZ) 'Brisas' property in neighbouring southern Venezuela. Contained copper is estimated at 265.5 M Lbs, breaking down as follows

Indicated: 45.574MMT at 0.16% Cu = 160m Lbs Cu
Inferred: 36.8MMT at 0.13% Cu = 105.5M Lbs Cu

From these numbers, the company claims a gold equivalent resource of over 3.3m oz Au, which is debatable. Personally I would use gold at $900/oz, copper at $2/lb to give a 1:450 ratio. This would put Au Eq at 2.89m oz Au..but that's just me. Most of this mineral is in fresh rock, with a little in saprolite rock. As fresh rock is more expensive to process the 43-101 report estimates that mining and processing costs total U$10 per metric tonne. If we assume U$900/oz gold, 0.88g/t gold in the mineral and a 90% recovery rate, this mean the contained gold per tonne of rock is worth $22.92. If we assume $2 for copper and 80% recovery that adds $2.55 to the rock worth. Therefore theoretically (and at the low end of current prices) the mine has a good operating margin.

So after about five minutes of checking out the apparent share structure and the asset I’m interested. This is because if we assume 2.3m oz gold and 23m S/O, it's approx 10 shares per ounce of gold. So from there the approximate in situ gold calculation is easy:

PPS $0.35 = gold is valued at $3.50/oz
PPS $0.50 = gold is valued at $5/oz
PPS $0.70 = gold is valued at $7/oz
PPS $1.00 = gold is valued at $10/oz


And of course these metrics become even more interesting if we add the possible copper credit and calculate using the 2.89m oz Au Eq number (or even 3.2m oz Au Eq). I am assuming CAD$1 = U$1 for convenience in these simple in situ valuations.

These are interesting numbers, especially when you consider that the current $0.35 placement offer comes with a half warrant priced at 50c. In baseball parlance, this company has got to first base in my DD and I’m thinking about just how cheap it seems to be. At this point on Tuesday I even made contact with somebody I sometimes bounce ideas off and said “hey, have a look at this”. However, as you’re about to see, you should never rush into these things on half-baked due diligence.

Share structure revisited. So now that my greed glands had been opened and I was thinking about all that cheap gold about to plop into my lap, it was time to do the careful checking. The first thing was to check all press releases and filings, not just the ones that suited my initial DD pattern. And sure enough the Utopia-like scenario I’d imagined of $3.50/oz in situ gold soon faded away. In a May 20th press release (9) the terms of the acquisition of the Toroparu property are laid out. Feel free to read the whole thing, but in effect the owner of the property gets 38,156,288 shares of SSP for handing over his gold project. The debt of the middleman company arranging the transfer of Toroparu from the current private owner to SSP (that’s also run by one of the directors of SSP) is also paid off by issuing 3,282,740 shares and 1,804,747 units (presumably share+1/2 warrant) of SSP in lieu of debt accrued. Then $850,000 of the initial placement capital raised by selling shares of SSP also goes to the vendor of the Toroparu property to pay off the capital he placed in the middleman company.

Or in other words, assuming the bought deal placement run by Research Capital goes to plan and the full overallotment is also taken up, the company will have...

Shares out: 66,086,775
Options: 600,000 (at 10c)
Warrants: 15m approx (at 50c and 75c)

...and the owner of the private property will have 57% of the new company and gets all the money back that he put up to get the deal running. All this, of course, makes a big difference to the in situ valuations of the Toroparu gold made earlier. Again assuming 2.3m oz Au here are the revised figures:

PPS $0.35 = gold is valued at $10/oz
PPS $0.50 = gold is valued at $14.36/oz
PPS $0.70 = gold is valued at $20/oz
PPS $1.00 = gold is valued at $28.72/oz

These numbers aren’t half as attractive any longer (for example, market hotpot Keegan is valued at $21/oz right now). However they still look possibly cheap and worth further investigation, so at this point the DD turns to asset quality and to the management team behind the deal.

Management. Firstly the management and there are three directors at the moment. The CEO is Mark Maier, whose main job is working for The Aurum Group. This sounded to me like a mining-related company, but it turns out to be a dental supply company. Maier has a background in finances, holds a CFA qualification and used to work for Merrill Lynch in London. He also plans to step down as CEO and hand the baton to a certain Richard Munson, who is the abovementioned director of the company selling Toroparu to SSP, so if this transaction is claimed to be arms’ length we’re talking about very short arms indeed. The two other named directors at present are the above mentioned Richard Munson and Charles Gryba, an experienced mining executive who knows his job but (and trying to avoid character assassination after getting some off-record opinions from contacts) doesn’t seem to be the greatest of team players.

The role of Maier perplexed me the most, however. Why should a CEO who is also experienced and knowledgeable in finances step down at the precise moment the company goes public? Then on swapping mails with A.N. Other, a possible answer to that mystery came to light. As mentioned Maier works for the Aurum Group, a dentistry/dental supplies company. Here's what my correspondent said on this angle

"The Dental-connection is very interesting. I've seen a number of what I call Dental-deals over the years and they tend to be unmitigated disasters. A very close childhood friend is a dentist in (removed from blog post) and was several years ago President of the dental Assoc of (removed from blog post); He says dentists are the dumbest investors on the planet (he admits he is but at least recognizes it and refrains from all investments...has kids to consume his $). My dream company would be one with a lot of Dentist and Hockey players as major investors!"


So I hope there are no dentists or hockey players in my audience that are now about to unsubscribe from the Weekly :-). But the reason for Maier’s presence may be explained by this; his job may be to sell the seed capital placement to an established circle of investors he knows through his sector. This may also explain the confidence Research Capital has in making the placement offering a bought deal. You may have noted in the first PR excerpt that the offering is a bought deal, i.e. is being underwritten by the brokerage itself and any units left unsold are taken up by Research Capital. A bought deal scenario usually means that the brokerage is extremely confident of a full take-up in the offering, as it doesn’t want to be left holding any excess baggage; it just wants its commission (which in this case is a juicy 8% cash and one warrant for every 10 units placed).


Downsides to the property
The main problem with the SSP asset is that it’s located in the middle of nowhere in the jungle area of Guyana. Water supply is easy enough. It's one day by road in the dry season and unpassable in the wet seasons. River transport is possible. There is an airstrip for light craft with a one hour flight time to the capital, Georgetown. During the main wet season from November to February it rains like you cannot possibly imagine unless you've witnessed it previously (it's not called the rain forest for nothing) and holes in the ground, such as the open pit mine envisaged here, quickly become lakes unless continually and efficiently pumped. There is a second minor rainy season from May to June. Finally there is no power supply anywhere near the place (which shouldn't be a surprise after the previous descriptions).

The other main downside is the relatively small deposit size and low grade. Brisas (the GRZ project) is over 10m oz Au and this is not, but 2m oz or 10m oz still needs a lot of capex spent at the site. Combined with the remote location, this may well turn out to be a project killer. Even in the best of circumstances, a 0.8g/t property needs a lot of work to turn it into a viable proposition for a mine, even if benefitting from viable roads, energy supplies, on-hand labour, clement weather conditions, etc. The $4m or so that SSP will have in the bank once the placement is closed is enough, according to the 43-101, to fund exploration operations in year one. After that there will surely be more financing rounds to come and the mine will still be a long way off.

The bottom line to all this has a practical trading suggestion. I think you’d be stone mad to go for this offer and lock up money in this placement, however there may well be a trading opportunity on the horizon. If you can get shares at the 35c level on the open market when the stock comes out of shell status and starts trading as a ‘dot V’ there is every chance that the promotional aspect will send the share higher while the placement cash is still under escrow. The short-term trade envisaged is to buy early and then sell during the initial promotional push while initial interest is high (that will surely involve mention of 3.3m oz gold controlled by a company with a tiny $25m (or so) market cap). However anyone considering this tactic must make sure s/he is sold and long gone before the dentists’ (and more importantly the owners’) shares move out of lock-up.