Subscribe via email, get all daily posts sent to you next day (and without all the annoying ads)

2/6/10

Lithium Juniors = Snake Oil, part 922

Thanks to reader 'NK' for the headsup on this one.


This report in the Ottawa Citizen is ostensibly about the bullshit lithium exploration in its own region, but there are a couple of cut-out-and-keep quotes from the article that should be nailed to the forehead of anyone even thinking about Li junior explorers as a valid investment. The first one comes from a certain Patrick Stratton, minerals market consultant for Roskill Infromation Services, who points out that juniors drill properties to boost share prices even when they don't expect to find anything by saying,
"Saying you are digging around for lithium or rare earth elements is one thing, but actually turning the search into a mine is completely different."
For sure there are plenty of people who read IKN that will treat that as just another No-Shit-Sherlock moment, but all the same it's true. However the second quote from the report is a classic. It comes from Michel Lemay, president of a bullshit Li junior known as Stelmine (STH.v) who says,
"It is impossible to increase share prices by drilling because the stock market decides what prices will be."
WTF? That's the most ridiculous statement so far this year from a junior miner, folks (and there's a lot of competition for that prize, believe me). Allow me to translate Lemay's thoughts into plain English: "We mining people think that the general public are morons and so we'll tell them any old shit to keep our scams going." I mean, you wouldn't buy a used car from shady operators, so why do you insist on buying worthless stock of worthless companies from the same level of businessperson?

Your Tax Bolivares Fuertes at Work

Thanks due to reader 'S' for the link-o to this report out of Correo de Caroní today.


Police in the Bolivar State region of Venezuela were yesterday proudly showing off their latest acquisitions, namely five Toyota Hi-Lux patrol cars (list price without the policial add-ons of 158,251 Bolivares Fuertes (VEF) each) by parading them in caravan style along the local highway for everyone to see. They get to just outside the local ironworks and the lead car suddenly notices a speed control bump (aka sleeping policeman) in the road and slams on the brakes. The result of the sharp braking was that all five vehicles managed to do a good impression of an accordion, causing "considerable damage" to all five.

Adding insult to injury and in true Police Academy style, the regional police bigwig, General César Fuentes Manzulli, was present to watch the parade and was standing at attention at the very spot were the multiple pile-up happened. According to the report (and I'm going to translate this bit directly cos it's so cool) the General "showed signs of great annoyance on seeing the magnitude of the accident and the results of the same".

Something Special 18 Year Old Single Malts served, the end.

2/5/10

The Friday OT: MC Hammer, U Can't Touch This

I don't care what you say, this is a great song.




Back story: About two hours ago I was in a café and taking a 15 minute break from errands when this came on the radio in the background. I hadn't heard it for years and damn it sounded good! So it makes it on to The Friday OT this week.

Fave line: AH TAWDYA HOMEBOYZ

Catching up with 'the small silvers' comparative

Last year we ran a series of posts that compared nine small silver miners and the benchmark silver ETF (SLV) to see how they did on a peer basis. As the final chart showed, Endeavour Silver (EDR.to) took the prize as the year's best performer.

So with a-month-and-a-bit gone, let's see how those same companies are faring in 2010. Here's the chart.......
click to enlarge

....and it's sorry sight at the moment, with none of them allowed to be 'best' and the most we can say is really 'least worst'. First place at the moment goes to Fortuna Silver, having dropped by about 4% so far this year. Second spot is taken by Bear Creek (BCM.v) and third goes to US Silver (USA.v). These are the only three above our benchmark of silver the metal as tracked by SLV.

Bottom? ECU Silver (ECU.to) as usual. The worst dog-of-dogs in 2009 is maintaining is mediocrity into 2010. Still holding, GATAfoolz?

UPDATE: I put this chart up around lunchtime and then left the office. Back after the bell and I see the whole silver sector has rallied into the bell. This is a good thing, but does make the far right of the chart above somewhat redundant. Such is life and i'll take the rally over an accurate chart anytime.

Coming up in IKN40

The IKN Weekly, issue 40, is out this Sunday. Here some of the content that subscribers will be reading about:

  • A NOBS fundamental report on Far West Mining (FWM.to) as we check out whether the recent copper downdraft (anticipated by the Weekly, for what it's worth) has offered up a bargain in this company.
  • Analysis of the latest news out of Fortuna Silver (FVI.to). Plenty to catch up on there, including thoughts on the quarter just completed, the recent financing and the very interesting news release on Animas and silver this week.
  • Checking out the quarterly numbers released by Dia Bras (DIB.v).
  • Opinion on the continuation of this week's metals downdraft.
  • The current and future political stability (or perhaps lack of) in Ecuador.

All that and the usual features, too. Promotion for Weekly complete. Mojitos served. The end.

OT: ¡Bienvenido Lucas!

A major pal of IKN's humble scribe has just seen the birth of his second child, so as it's relax-out Friday (and as a distraction of the market disaster zone due to kick off in 43 minutes time) here's baby Lucas, his beautiful mother, ugly father and Lucas's big brother, Pancho.


¡Felicitaciones che!

The roll call of shame: Peru's most dangerous mining companies

News this week from Peru's mining industry wasn't very good, with eight miners dead in an accident in an informal coal mine in the Oyon region of the country. The Minister in charge promised to levy severe sanctions against the unlicensed company in question and its owner (quite right too), but it has thrown a bit of a spotlight on the dangerous life that miners face in the country.

So eight dead and sanctions to come. Fair enough, but what about the other mining companies in the region that are also tried and tested deathtraps for its workforce. Here is a table showing the top 20 offenders in this category (that account for 57% of all mining deaths in Peru in the period) and to my surprise, it features not just little, national based companies but some of the large multinationals that quote in the northern exchanges.


Top of the list is the very large zinc/lead/silver miner Volcan (Lima stock exchange, ticker VOLCABC1) which doesn't have a bad safety record, but an abysmal one. In the last four years (including one death at the end of last month), it has watched as no less than 31 of its employees die on the job. Run by the ......errr.....eccentric Letts family, it's infamous for its poor working practices. Look above and see why, cos that's 12% of ALL mining deaths in the country from this single company and they don't get so much as a slapped wrist. Oh, how great it is to have friends in power, eh.........

Next on the roll call of shame comes Pan American Silver (PAAS), which should bring shame upon those up North. This large North American silver company is quoted on both the US and Canadian exchanges, but strangely doesn't make much mention of the thirteen Peruvian deaths at its operations since 2006. This company is a stain on those who talk the good talk about responsible mining practices but can't walk the walk.

Then comes Buenaventura (BVN), a Peruvian company quoted in the USA. Again, how can these publicly quoted companies get away with this? As we go down the list, there are plenty of Lima stock exchange-quoted companies, but ones that will catch the eye of those not so au fait with the local companies are Doe Run Peru (natch) and Barrick at its Misquichilca gold mine.

Not all foreigners are bad ones, though. Companies such as Southern Copper or Xstrata at Tintaya would have preferred zero deaths in the entended period shown, but as it is both companies have one death to their names. Nobody is claiming that mining isn't anything but dangerous and death, sad as it may be, will happen. But when companies such as VOLCABC1 and PAAS have an ongoing and regular pattern of above-average fatalities at their operations, there's something not right at all. Here's the monthly Peruvian death toll chart (2000 to date) that puts it all into its macabre context:

Zero Currency 11


Feb 4th

Chart of the day is...

....LME copper inventories.

It's gone up, up and up some more, but in the last couple of weeks there have been plenty of down days chopping in with the up days. That's the first time for a long time and for me is marking the top in Cu warehouse levels (on a there-or-thereabouts level).

Desjardins wrote an interesting report on copper dated Jan 26th. Here's an extract from it:

The increase of exchange inventories over the past 6–7 months at a time when metal prices have trended higher has been a source of concern for many market watchers. This is especially true for copper (still perceived as the market leader). We should point out that copper inventories are still at historical lows, both in terms of weeks of consumption (current reported inventories represent 2.9 weeks of consumption compared with ‘normal’ levels of 6 weeks) and tonnage.

Furthermore, we are entering a period when inventories fall seasonally, ie exchange inventories tend to be drawn down during the 1H of the year—

There appears to be two reasons why inventories and prices have risen in tandem. Firstly, producers have stored metal in Asia in anticipation of a ‘pick-up’ in regional demand in 2010. We note that the copper inventory held at the LME warehouse in

Busan (South Korea) has increased from 1.0 KMT in mid-July 2009 to 99 KMT at present. Provided Asian demand picks up, particularly after the New Year holidays in mid-February, inventories in the region should start to fall. However, North America also holds a ‘key’ to the puzzle. Since mid-2009, worldwide LME and Comex exchange copper inventories have risen by 306 KMT or 96% to 626 KMT. Roughly 150 KMT (approximately half) of this increase has been metal entering North American warehouses. Of the 626 KMT currently held by the exchanges, 391 KMT is held in North America.

We understand that several market players believe the vast majority of metal entering the exchange warehouses in North America comes from producers—and particularly consumers—destocking their own inventory. This would make sense, given the collapse of copper demand in the US. We estimate US copper demand fell 24% last year to 1.57 MMT, the lowest level in decades. Furthermore, prices remained at historically high levels, placing further pressure on consumers/producers to run down their own inventory. Apparently, some market players are speculating that once it is clear that the US economy has stabilized and is on the road to improvement, consumers/producers will have to replenish their own inventory—driving down LME/Comex stocks and pushing prices higher. Consequently, in our view, for sustained high metal prices, there must be stabilization in the North American economy (at the very least) in addition to steady economic growth in China.


Worth thinking about with signals of a direction change in those inventories. Desjardins is bullish on copper and therefore frames its argument along a "when inventories come down, copper prices will be pushed even higher" argument. However, there is another possible here. What might happen is that prices drop first, and all those people hoarding copper (be they producers stocking to warehouses or Chinese pig farmers) will dump their inventories onto a demand-slack market. The result would be a serious downdip in the price of copper until the inventory had been moved, but probably only down on a shorter-term spike. Here we are, just one week after that Desjardins report was published and there's suddenly plenty of evidence around for that scenario.

Can you handle the rollercoaster? If you panic easily, maybe it's best to grab an ice-cream and watch from behind the safety barrier.

2/4/10

Haiti: Relief And Reconstruction Watch

A new blog in town is worth putting on your radar. Called "Haiti: Relief And Reconstruction Watch" and run by the CEPR dudettes and dudes, the idea is to keep tabs on the national and international effort to put that broken country back together again. Here's the link to the new site, go check it out.

Frank Holmes, winner of this week's coveted award


A schematic diagram that may be of use to Mr. Holmes
the next time he opines on Latin America

I was recommended to read an interview over at The Gold Report with Frank Holmes, published yesterday. So obedient little Otto clicked the link supplied and went over. I got as far as the very first answer given by Holmes and it was all over. Frankie sez:
Look at Hugo Chavez in Venezuela as opposed to Álvaro Uribe in Colombia. Chavez destroyed Venezuela's economy and judicial system to maintain his power. Bolivia is heading in the same direction, but Colombia and Panama are booming. Policies in those two countries are completely different from Venezuela's.
Question: Which Latin American country had the fastest growth rate of all in 2009?

Answer: Bolivia.

So Panama and Colombia are 'booming', but the country with the best boom of all is used as a counterpoint to his examples. Dumbass.

Frank Holmes, you win this week's coveted award. Only the ignorant would bother to read the rest of your inanities if you can't get the basic facts correct. So if you prefer to spout prejudiced crap instead of the truth it would be better for all of us if you just....

Trading Post (searching for green edition)


You don't need to be reminded just how beaten up your port is this afternoon, so let's all stand and applaud the two stocks on your author's radar that are actually printing green numbers today (so far, at least) and then leave it at that.

Chariot Resources (CHD.to) up 1.3% at $0.40....but that's cos it got its own personal dumperooney out of the way yesterday.

Los Andes Copper (LA.v) up 5.9% at $0.09 on one trade of 10k shares. YAY!

And that wraps up today's Trading Post.....except....errrr....

Dammit! I can't resist!: Ecometals (EC.v) down 16.5% at $0.66. All you need to know right here.

Fortuna Silver (FVI.to): This morning's Flash update

As part of The IKN Weekly subscription service, Flash updates are sent out from time to time over punctual issues during the trading week. This week has seen two Flashes sent out, with the one this morning concerning the news released by Fortuna Silver (FVI.to) after the bell yesterday. By way of showing you what Subbers get, here below is the paste of today's Flash sent out a little under two hours ago at 11:16 and 11:18am.

Good morning, 11:16am, a little under two hours after the opening bell.

The FVI.to bought deal
Last night after the close, Fortuna Silver (FVI.to) announced it was raising $30m via a bought deal, with CIBC and Canaccord as the lead houses. Here's the news release. There is also a 15% over-option that would bring the total proceeds to $35m and shares sold to a touch over 15m if fully taken. Here are some thoughts:

1) I did expect a financing like this to happen, but I did not know what the timing would be. I refer readers to the section of the IKN37 NOBS report pasted at the bottom of this mail.

2) All things considered, it's a good enough deal. Particularly interesting is the low commission on the deal being charged by the brokerages, which I understand is 5%. A deal such as this would normally carry an 8% commission or even higher (if memory serves, EDR.to paid 11% commish on its last round). This is indicative of the strong institutional demand for FVI shares previously mooted.

3) Unless the bottom truly falls out of the market (and by that I mean mid-2008 style, not the blip we're experiencing today) we can fully expect the over-allotment to be taken up. This would take proceeds to a touch over $34.5m (after the 5% rake, around $32.8m) and would take shares outstanding to 110m when all done and dusted. In the IKN37 NOBS report I assumed S/O at 105m, so my guesstimate missed by 5m share. Bite me.

4) Note that it's a bought deal with no type of warrant attached. This means that dilution is kept to a minimum and that even in an extremis situation where the bottom does fall out the market, FVI gets the $30m.

Assuming full take-up of the over-allotment (I repeat, this is a near certainty) this would leave FVI with the following cash resources:

Approx $31m treasury
$32.8m from this financing
The previously arranged $20m revolving credit facility

The quick math gives us $83.8m, which is more than enough to pay for the $70m (NOBS contingency $75m) to construct San José and bring it into production. Note that this $70m/$75m budget estimate covers all expenses, including necessary drill work at San José to firm up the resource, etc etc. The whole shebang.

We can also add a conservative $5/qtr in free cash flow from Caylloma (minus any new drilling programs at the mine that did not go into the original 2010 budget)

5) The numbers work and as long as Caylloma behaves itself and silver remains profitable, it will be without the need for a 'top up' financing later (though that depends on whether they acquire something in the meantime, as mentioned in IKN37).

6) Next, CEO Ganoza is a conservative player and I understand where he's coming from by locking in the $$ for the gig now. We might be able to argue the toss over whether the financing should have been pitched at (let's say) $2.50, but in the end the difference would be 1m to the shares out column. Not a gamebreaker either way. We could also argue about whether it would have been tactically better to wait a while and try for a $3-handle on the financing, but knowing CEO Ganoza as a conservative, bird-in-the-hand type of person the deal struck yesterday makes sense.

7) Finally, the share price action today sees the PPS at a few pennies under the bought deal price. This makes sense when the downspike in silver (and all metals) is taken into consideration. For the duration of the bought deal raise, I'd expect FVI stock to tread water somewhat, either below, at, or a little above the bought deal price. Worth noting that if the stock stays where it is the mkt is saying "yes, they pitched $2.30 correctly". I have no issue with the deal at all. Good for the company and good for the long-term investment policy we have as regards FVI.

We reiterate our buy call on FVI.to. I now leave you with the paste of that section from the IKN37 NOBS report.

Best, O

A possible equity placement

The ballpark numbers run through above regarding the capex needed for the San José expansion show that FVI does not need to run an extra equity financing to get to production day one. However, at this juncture I would not be at all surprised if FVI goes to market and places shares. For one thing, it would likely get the pick of terms and from several sources, as institutional interest in the stock has grown considerably in the last six to twelve months and there would likely be plenty of buyers for a large chunk of shares. This would mean there would be little need to sweeten any pots via an attached half warrant, for example. But more importantly, a well-timed placement would give FVI a cash cushion that would a) bolster the books b) provide contingency to any glitches in the San José construction stage and c) provide a small warchest that would allow the company to go out and buy its next project.

At this point in time, I have allowed for a modest share dilution of 10m shares in the earnings model that adds $25m to the company cash position by end 2010. However this is more of a personal guesstimate than anything else and it remains to be seen what tactical path FVI takes on its financing.

Peter Capusotto: Hasta Cuando

I'm happy to say we get thousands of visitors per day to this humble corner of cyberspace, but this time the content is aimed at a small, select few. To get full value out of the linked youtube you need to:

  • Have a decent level of Spanish (for people without the ear for it, Argy Spanish can be tough and the below is spoken at a fast clip)
  • Know Argentina well (sorry, the two week package tour or that business trip doesn't count)
  • Know who Peter Capusotto is and his trajectory (e.g. Cha Cha Cha, Todo X2$, Y Sus Videos)

So if I'm lucky there will be a couple of dozen people who fill the criteria, but no matter. This is genius and it's worth it if even one of you gets the same kick out of it.



Capusotto now does a radio program, and one of the segments is 'Hasta Cuando'. I've been laughing so much at the several episodes available on Youtube this morning that there's been no time to post anything here. If you really want to understand Argentina, listen to this example episode (and the others available by clicking through). Magical stuff.

Thirty-four news releases and counting


There are now 34 news releases from junior mining companies stacked up in your humble correspondent's mailbox, all from this morning. You can tell that PDAC is just round the corner, can't you? Here are just three selected:

Creston Moly (CMS.v) decides that the best thing to do with its patently uneconomic 'Creston' project in Mexico, that has been picked over for 40 years and never taken to production, is to make like they're busy people and add a few more holes to the 116 that have already been drilled there.......y'know...just in case they find something different. The most important word to take away from that previous sentence is 'never'.

Rio Cristal (RCZ.v) issues a 43-101 report on its zinc asset that has nice grades and stuff. Unfortunately it's slap bang in the middle of the Peruvian Amazon jungle so has about as much chance of becoming a mine as Tiger Woods has of scoring with Naomi Klein.

Victoria Gold (VIT.v) tells us all about its great idea for a fast start-up gold mine with 87k oz annual gold production. Never mind that at $1,100/oz Au the pre-tax NPV for the thing is $146m and the current mkt cap is nearly $220m. And never mind that the resource is only inferred at present and it'll need a whole bunch of dollars thrown at it before the plan moves ahead. And never mind the clear front-running the market saw yesterday.....these people have YOUR interests at heart.

This post could take up a lot more room, but those give us the general lie of the land. Whatever gives you the impression I'm slightly cynical of junior mining management teams, anyway?

A great resource on resource(s...and reserves)

Click this link to find a video recording of Mickey Fulp giving his recent talk on what you need to know about mineral resources, mineral reserves and all things connected. It's great mining101 material, but even the more sophisticated investors amongst us will get value and learn things from checking out the presentation.

Nice job, Fulp. Here's the link again, just in case.

Chart of the day is....

...the percentage breakdown of Peruvian exports, October 2009 (the latest monthly set of figures).

Of the U$2.502Bn of goods exported by Peru, only 26% weren't metals or oil/gas. Can we stop all this Peru miracle economy nonsense and see it for what it is one time? Over half of everything exported by a whole country is either copper or gold (and nearly all the gold goes straight to Switzerland to be locked in the bankers' vaults there, too).

Ecometals (EC.v): Scumball at work

I find it incredible that people put their hard-earned money in the hands of total scam-runners like the people in charge of Ecometals (EC.v). Take for example the Non-Executive Chairman, Keith Robert Hulley. An ounce of DD will tell you his previous track record:
1) Non-exec chairman of Apex Silver. Result? Bankrupt.
2) Director Gabriel Resources . Result? Enviro trainwreck.
But they still believe his spiel and still get dollar signs in their eyes when his Ecometals starts wagging on about being 'the next Aurelian'...and how things are different now and yadayada. But when push comes to shove the scumball leopard will never get rid of those blotches on his coat. Let's check the latest filings from this charlatan:

Insider name: Hulley, Keith Robert
10 - Acquisition or disposition in the public market -116,000
10 - Acquisition or disposition in the public market -3,500
10 - Acquisition or disposition in the public market -500
10 - Acquisition or disposition in the public market -4,000
10 - Acquisition or disposition in the public market -46,000
10 - Acquisition or disposition in the public market -10,000
10 - Acquisition or disposition in the public market -30,000
10 - Acquisition or disposition in the public market -9,300
10 - Acquisition or disposition in the public market -8,000
10 - Acquisition or disposition in the public market -23,700
10 - Acquisition or disposition in the public market -20,000
10 - Acquisition or disposition in the public market -9,000
10 - Acquisition or disposition in the public market -10,000
10 - Acquisition or disposition in the public market -5,400
10 - Acquisition or disposition in the public market -15,000
10 - Acquisition or disposition in the public market -4,500
10 - Acquisition or disposition in the public market -9,800
10 - Acquisition or disposition in the public market -100
10 - Acquisition or disposition in the public market -200
10 - Acquisition or disposition in the public market -10,000
10 - Acquisition or disposition in the public market -20,000
10 - Acquisition or disposition in the public market -13,400


Yep that right: Between December 23rd and December 30th when the rest of you were gleefully buying EC.v and whacking it up to over a buck on the BS being vomited about Zarza, the man that knows more about this company than anybody else was selling. And selling to the tune of 252,400 shares for gross proceeds of $374,881...and seven cents. It's bad enough that the stock he sold is now worth $175k less than he did when he sold it, but to add insult to injury he sells it in the last week of 2009 and doesn't even bother about telling anyone, saving the late filing for a full two months after the fact (Feb 3rd) and thumbing his pig-greedy nose at the OSC into the bargain.

But the funniest thing of the lot is that this won't shake the religious belief that utter saps have about the future of Ecometals as their ticket to fortune. The same sector of the investment community that get to the end of their trading lives and wonder why they didn't make it big like that Buffett guy did. So let me tell you why you'll fail at trading, EC longs: You are assholes. And a scumball like Hulley will rip off assholes like you every single time.

DYODD

2/3/10

Trading Post (Return edition)


I gave 'Trading Post' a bit of a break cos it was getting samey, but today we get the guff'n'nonsense back in yer face.


Colossus Minerals (CSI.to) up 4.3% at $4.65 on the publication (for us proles anyway) of the new 43-101 technical report (get your copy here). Particularly interesting is the mineralization section (part 11, starts page 29) with some good schematics. Looks like they're going to attempt to run a tunnel to the mineral this year....acid test time. So CSI rises to within $1.10 of the bought deal price that the can of corn fobbed the market with last year. Gotta laugh.

Fortuna Silver (FVI.to) down 3.1% at $2.52 on low volumes (but yesterday's vols were particularly strong). I'm pretty sure that the FVI news out yesterday has not been understood well by the market, so we'll be going into mucho detail on this issue in IKN40, out next Sunday.

Constitution Mining (CMIN.ob) down 6.0% at $0.78. Seventy-nine bottles of beer on the wall, seventy-nine bottles of beer, take one down and pass it around.....there's seventy-eight bottles of beeeeeeer oooon the waaaaaaaaaaaaaaaaaall.

Ecometals (EC.v) down 1.3% at $0.78. Cue year-to-date chart:
A 39% loss in this scam so far this year? Cue owly:

Newsflash! Miners can be human beings too!

The strong news from Dynasty Metals (DMM.to) this week that concerned progress made by its Zaruma production facility was featured in this IKN post yesterday. The result was that the stock has dropped (go figure) but underneath yesterday's post site friend, regular commenter and raving lefty locojhon (but in the nicest possible way, dude:-) ) added the following comment and it's worth a look and a comment. Here's locojhon, commenting on one detail of the DMM presser:
This part intrigued me. It is very vague, but seems to indicate reduced environmental water-borne pollution going offsite when it states "The grey water treatment facility constructed by the Company supplies all the water used at the plant. Water that is required is diverted before entering the local river untreated, purified and used in the operation of the plant." Have they actually reduced or better yet eliminated pollution or are they playing smoke and mirror games that not only damage the environment, but later require massive governmental funds to clean up later.

Are there proprietary ways of mining without polluting they employ that others can't? Brainiacs or rockheads???

TIA,,,locoto
The idea of using 'grey water' at a mining production facility is an environmentally sound one. The technical details run into 150 page reports, but we can sum it up in the following way:

1) Water from the local sewage system or water previously used by other artisanal miners is piped to the plant. It's dirty and needs treatment before it can be used.

2) The mining company cleans up the water and then uses it for its own purposes

3) The water is then filtered again by the company before leaving the facility and put back into the local water system.

So to answer your question, loco, it's not some kind of smoke'n'mirrors thing going on. The valley where Dynasty Zaruma operates is chock full of artisanal mining operations (been that way for generations) that use the local water supply and don't give a fig about how much pollution they add to it before it runs into the local rivers. So what DMM.to is doing is diverting this water before it gets to the river, cleaning it up, using it, then cleaning it again before letting it go. It's an environmentally sound policy and is certainly helping to clean up an environment that's been contaminated by old workings for as long as anybody can remember.

By the way, this is the exact same water supply method that Fortuna Silver (FVI.to) will use at its new mine at San José Oaxaca, Mexico. These people aren't making the localities dirtier and they aren't leaving things the way they were; they're actually making things a lot cleaner.

Not all mining companies are the same and IKN will continue with its policy of championing good, responsible mining companies while at the same time highlighting those that bring shame to the sector.

Peru's tourism industry facing crisis

I picked a hi-resolution photo, so if you were planning to go this year you
can now click on the above, download and tell your
friends how great is was without leaving the beach.


After the rains comes the perfect storm. The flooding and chewing-to-bits of the rail connection to Machu Picchu has isolated Peru's jewel in the tourist track crown and according to latest reports the citadel will be inaccessible for the next seven to eight weeks. However, the new accesses that will open are footpath only, because they're now talking about five months to get the rail line back up and running.

This is not just a problem for Cusco. The two days (or so) that tourists spend at Machu Picchu form part of a whole circuit that runs typically for two weeks and shuffles coachloads of gringos from Lima-to-Paracas-to-Arequipa-to-Lake-Titicaca-to-Cusco and then flies them back to Lima. So with the main event now cancelled, tourists are turning their back on the whole deal because going all the way to Peru without getting to see the star attraction just doesn't appeal the same way. The result? In the last few days, foreign tour operators have cancelled no less than 50% of all their tour packages, leaving hotels all along the circuit facing empty rooms and tour guides with nobody to tour.

A quick ciggypack calc done yesterday by your humble scribe and a couple of pals who do numbers better than himself put the loss at about 0.5% of projected country GDP. This isn't a disaster in itself, but that money isn't part of the big purse run by the government; it's cash that goes directly to the populations of some of the poorest parts of the country and supports a whole range of service and ancilliary industries (the families that rely on market stalls selling trinkets to people wearing backpacks are in for the tough time, for example). All this on top of flooding that has cost the subsistence farmers of the high plains to the tune of eight million soles and wiped out crops for around 20,000 farmers, according to the Agro ministry.

Moral of this story: Don't build your railtrack next to a river in the high Andes.

Chart of the day is....

...the gold/silver ratio:

Back last June I scribbled up a quick explanation about this ratio chart. It still holds true today (and will do in 10 years time, for that matter) so by way of a reminder and easy content for this lazy blogger, here's an excerpt from it again:

"Watching the GSR is a good way of noting fear versus greed...to a certain extent that is. Basically, the more nervous people get, the more they'll prefer to hold gold over silver. This is because gold is money, gold is the long-standing store of wealth, gold is the safe haven metal etc etc.

And silver is......well, it's silver. The pretend precious metal. The one that claims brotherhood with gold but is mostly produced as a by-product of base metals (zinc and lead, usually). Neither fish nor fowl, silver maintains a positive beta relationship to gold.

When times are good, silver will appreciate faster than gold as people buy into the precious metals side of the metal. When times are nervy, silver exasperates its fan club (the dreaded silverbugs; people that make goldbugs look normal) and sells off at a faster rate than gold (supposedly due to Goldman Sachs using massive put positions on Comex and despite being the metal about to be used in the new Mexican currency, or the Amero, or whatever other tinfoilhat theory is fashionable).

All this can be summed up in one simple phrase: People trust gold more than silver.

2/2/10

Constitution Mining (CMIN.ob) had a bad January....

...and so far February isnt helping much, either.

48% down this year? Ouch, a hard lesson for those that believe the bullshit pump jobs out of Switzerland, innit. So the succinct comment is here.....
...and the more detailed comment and the reasons why this empty vessel is dropping so hard here.

Real cojones

Salvador spots a Canadian equities analyst in the crowd

Salvador Cabañas, the Paraguayan national striker who was shot in the head in Mexico (and featured on IKN) is awake, responding and getting better after coming out of various emergency operations and a coma.

According to this report, the first words he had to say were "I'm fine" to his dad, and he went on to tell him not to worry, because "I'm going to play in the World Cup". Damn, that guy has balls. The dude featured in the post underneath could learn a thing or two from him. Get well soon.


Ventana Gold (VEN.to): TD Securities needs to grow a pair


Some analyst dude over at TD Securities named Daniel Earle needs to get a better grip on life. In his latest analysis on Ventana Gold (VEN.to) published yesterday, Earle sticks the title of "We're Not Worried, But Uncertain Timeline Warrants Discount" and then makes his claims.

Now, due to very large and bold-type legal stuff on the report (and I have no idea who you could e-mail to get a PDF copy of this report, oh no no no no) I'm not going to paste any direct words up from the report, but suffice to say that he thinks the risk of Ventana being stripped of its right to acquire Bodega from "bad boy" Gelvez&Co is very low. But until the legal wrangling is done he expects the company to trade at a large discount. Also, he's optimistic that the problem is resolved in 3-6 months. But then later the timeline isn't certain (!) so he's reducing his target to $12 from $15 but maintains his speculative buy recommendation.

Otto says: WHAT THE ****?

Seriously, this is the call of somebody who is crapping himself. As those in the trade would have instantly recognized when checking out the title of Earle's note, when an analyst says 'he's not worried but..." he's leaving a trail of bricks behind as he walks down the street.

We can argue over this-and-that part of the call here, but the basic, bottom line is that IF Ventana gets the land, according to Earle's previous call the company is worth $15. but IF VEN doesn't get the land, the company is worth zero, zip, nada. And therefore, maintaining your argument that the stock is a buy but dropping your target on what is no longer a nuanced situation but a straight binary call is the opinion of a sin-cojones analyst doing a disservice to his company and his clients.

Dynasty Metals (DMM.to) with strong news this morning


A very likeable chunk of news from IKN Weekly favoured stock Dynasty Metals (DMM.to) this monring. Check out the whole release right here (and there's plenty detail to absorb), but here's how it starts:

VANCOUVER, BRITISH COLUMBIA, Feb 02, 2010 Dynasty Metals & Mining Inc. (TSX: DMM) ("Dynasty" or the "Company") provides the following update to shareholders regarding the development of its Zaruma Gold plant and mining operations in southern Ecuador.


At present, the Company has approximately 33 kilograms of gold and 190 kilograms of silver contained in dory bars and circuitry at the Zaruma Gold plant. For the past month the processing plant has been, and continues to be, operating twenty four hours a day processing material extracted during the construction of three declines (see below).


Robert Washer, the Company's President and Chief Executive Officer, commented: "We have faced, and substantially overcome, many adversities over the last two years since the introduction of the Mining Mandate in Ecuador. We have built a world class production facility at a significantly lower cost than similar plants recently constructed elsewhere, created a school of mining and trained a local work force to operate modern mining machinery, developed a self sufficient enterprise in a country that has no mining infrastructure or support and successfully safeguarded our assets in a dynamic legislative environment. Despite these many adversities and the resulting delays we continue to work hard each day towards our primary objective of delivering shareholder value and are close to reaching our first mining target. I wish to thank each of our shareholders for their continued support."


Zaruma Gold Production and Plant Operations
Throughout the fourth quarter of 2009, the Company made a number of significant and minor refinements to the Zaruma gold plant, ran a series of stress tests to optimize future operations, implemented appropriate maintenance scheduling and trained a local workforce. The refinements include
(
continues here)

Charts of the day are......

...gold futures the 60min candle and the daily candle varieties. This one says......



......Idiot Sinclair 1, idiot Prechter 0. But this one below says a battle has been won, not the war.

2/1/10

A long day...

...and subscribers know why. My only comment before hitting the sack is....

.....I hope you own some.

On The Road


Just for a day this time though. Not out of interwebnetpipes radar zones either, so posting will be light but not invisible.

1/31/10

The IKN Weekly, out now


IKN39 has just gone out to the subs list. Lots of good stuff, no bad stuff. Usual stuff.

personal shopper dot com branches out


I was going to write a line or two about the 10 US citizens nabbed at the border in Haiti who were trying to illegally smuggle 33 post-earthquake orphans out of the country, but there's not much point any more. Machetera has nailed it already in a far better post than I could ever manage. Here's an excerpt, read the rest here:

One of the most interesting things about the few news articles that have trickled out so far about the US Americans from Idaho who are currently under arrest in Port au Prince for trying to kidnap 33 Haitian children is that none of them mention the terrible irony in the occupation of the leader of the bunch, Laura Silsby. Silsby, according to her own website, is the “founder and CEO of [Boise, Idaho based] PersonalShopper.com, a leader in the evolution of personalizing the e-commerce experience for women.”
continues here