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7/31/10

The sky at night, southern hemisphere edition

This video is a thing of beauty and got here thanks to sez_me_man's twitter and reader 'HA''s sharp eyes.



Once upon a seven or eight years ago, I found myself living for an extended period in an unlit spot high up in the Andean region. There was no street lighting or light pollution of any type in fact, the air was dry and the skies nearly always without cloud cover, so what you can see in this video was seen by these eyes on many occasions. Now back in what's supposed to pass for civilization, your humble scribe thanks HA and sez for bringing back some great memories.

The video above is....well, see for yourself.

A room with a view (part 15) summer vacs edition

"Over such trivialities as these many a valuable hour may slip away, and the
traveller who has gone to Italy to study the tactile values of Giotto, or the
corruption of the Papacy, may return remembering nothing but the
blue sky and the men and women who live under it."

A Room With A View, E.M. Forster (1908)


Coroico, Bolivia. Sent in by the LatAm-trotting reader and vacationer, SS.

7/30/10

The Friday OT: Les VRP; Ramon Perez

The all-time number one French band of all time.

Quote of the day

From Andrew Sullivan

Quote For The Day

30 Jul 2010 11:10 am

"[M]y children don’t look Hispanic," - Nevada gubernatorial candidate Brian Sandoval, explaining why he doesn't fear his kids would get harassed by Arizona's immigration bill, which he supports.

Why is East Asia Minerals (EAS.v) hiding key facts from its shareholders?


The rise of East Asia Minerals (EAS.v) on the back of what can only be described as spectacular drilling results at its Miwah project has been so well documented that even your myopic LatAm anal yeast has heard of the story on numerous occasions (just look at that 12 month chart above for further details). But maybe there's trouble brewing in paradise, as this Northern Miner report dated yesterday below points out. What strikes me as strange here is that the company itself, busy exploring and drilling away over there, claims to have no idea about the laws that will stop the project from developing and the enormously trappy permitting processes it would have to go through even for a sub-optimal underground works.

Northern Miner is a subscription service and they get pretty anal about people pasting their stuff, so here's just the first portion of the report (about as far as I'll push this window, folks). You'll have to click through and sign on to get the rest.

Why would it take several years for a Canadian company with a history of strong drill results in Indonesia to disclose to its shareholders that a large portion of its tenements in the Southeast Asian nation are on land designated as protected forest where open-pit mining is banned?

It's a question The Northern Miner has asked junior explorer East Asia Minerals(EAS-V) repeatedly since June and has yet to receive a fathomable explanation.

Hong Kong-based chief executive Michael Hawkins -- who is "in the bush" in Indonesia -- according to the company's head of corporate communications Nick Kohlmann, has not responded to a stream of queries. And as for the Toronto-based Kohlmann, he says he "has no details" and isn't "privy to the various ongoing intricacies of the operations, legal agreements, permits, etc," which he explains in an email after six weeks of badgering, "is the responsibility of the senior technical and Indonesia-based staff and Michael Hawkins."

So what gives?

In February Indonesia issued a new regulation (No. 24) that allows mining, power plants and other projects deemed strategically important (such as toll roads, telecommunication network and broadcasting facilities) to take place within protected forest areas, according to Joel Hogarth, a lawyer with O'Melveny & Myers in Singapore. But the regulation, now law, only permits underground mining activities in protected forest, not open-pit mining, which is more commonly used in Indonesia.

Even then it's not guaranteed that an underground mine will ever wind up in production. "While the regulation opens up the possibility of mining in protected forest areas it remains to be seen how easy this will be in practice," Hogarth says. "To my knowledge no such approvals have been granted yet for mining, although there is at least one geothermal project applying for approval under the new regulation."

Hogarth explains that while ‘in principle' licenses (ijin prinsip) can be granted by the Ministry of Forestry for an initial period of up to two years, the full forestry ‘lend-use' licence (ijin pinjam pakai) requires the approval of the House of Representatives (DPR). And such approvals from the DPR "have been difficult to obtain and subject to political considerations."

"It strikes me as a pretty tough procedure," he says in a telephone interview from his home in Singapore. "That's like going to Parliament to get something approved." CONTINUES HERE



Disclosure: no position in EAS.v

Troy Resources (TRY.to) (TRY.ax)

Troy Resources (TRY.to) (TRY.ax), the Australia small gold miner we've followed pretty closely here at IKN over the moons, reported its fourth quarter production numbers today (its financial year ends June 30th). This morning your humble scribe has been happily updating the spreadsheets on TRY and fiddling with the model, but for the time being here's how gold production stacks up against the other quarters:

And this one shows how cash costs for those ounces have evolved, in AUS$ and U$ terms:


We'll be going into the more interesting details and making a stab at forecasting earnings in The IKN Weekly issue 65, out this Sunday.

Baja Mining (BAJ.to): As day follows night

Shocked! Ah wuz shocked ah sez! Here's Baja Mining's (BAJ.to) news release from this morning:
Baja Mining Corp. (Baja) (TSX:BAJ)(OTCQX:BAJFF)(PINK SHEETS:BAJFF) today announced it has executed an agreement with a syndicate of underwriters led by Cormark Securities Inc., and including CIBC World Markets and Canaccord Genuity Corp. and Rodman and Renshaw LLC, participating with respect to sales in the United States on an exempt basis, (collectively, the "Underwriters") under which the Underwriters have agreed to purchase, on a bought deal basis, 21,875,000 common shares (Shares) of Baja at a price of $0.80 per Share for gross proceeds of $17,500,000 (the "Offering"). The Shares will be offered in yada yada continues here

Well I've never seen this pattern of pump-then-finance in a junior miner with a poor track record of delivery before. Not. And heywow! here below is what was written on BAJ in last week's IKN Weekly...funny how these things happen, innit?

Baja Mining (BAJ.to):, BAJ filed its June quarter results on Friday so let’s run a quick snapshot of some basic financials at BAJ:

  • Shares out: 143.98m
  • Warrants: 24.99m (16.2m at exercise price $1.25 , 8.1m at exercise price $2.49)
  • Options: 12.625m (all in money at 40c or 59c)
  • Fully Diluted: 181.6m
  • Cash at Bank: $11.9m
  • Working Capital: $8.2m
  • Total Assets: $183.67 (incl $167.8m in booked mineral properties, i.e. Boleo)
  • Total Debt: $56.82m (incl $42.3m in long term loans from Korean JV partner)

As BAJ has a typical cash burn of around $1.8m to $2m per quarter, it currently has the cash to run for around another four quarters, maybe five (working cap was $18.55m as at Dec 31 2009). There is some work being done at Boleo but due to the lack of a final deal on the financing of the project BAJ clearly isn’t working at full tilt. The feeling is that money is a little tight right now as no explorer (especially not one with an advanced-stage project) likes to see its cash position close to zero before running a round of financing. Therefore it would come as no surprise to this author to see another equity placement from BAJ at some point in 2010 if the company can’t nail down its definitive financing for Boleo.

Another thing: Your author notes the diminishing cash position, then notes the recent (we’ve mentoned it the last couple of weeks) rumourmill on BAJ “nearly there” etc etc, and then notices the recent upmove in the share price, too. Are they connected? Am I being too cynical? Maybe, but I’ve noted over time that being cynical means holding less regrets about juniors in the future.

This quarterly held no real surprises, however. The bottom line is that BAJ as a company will succeed or fail on eventual financing, construction and operation of the Boleo project in Mexico. In the words of the company’s MDA:

The recoverability of the Company’s investment in its mineral property remains dependent upon the Company’s ability to complete debt and, equity financings, and to successfully construct and develop the Boleo Project.

There’s no arguing with that.




Disclosure: No position in Baja mining.

Chart of the day is.....

...crude oil, weekly candles.

While all around fret and frown, crude has been pretty orderly recently. Why that be?

7/29/10

Trading Post (transparent disclosure only applies some of the time edition)


Fronteer Gold (FRG) up 0.84% at U$6.00. Your humble scribe had a fascinating e-mail exchange with Glen Edwards, director of communications at FRG, this morning. With luck one day I'll be able to tell you all about it. Just waiting for a bit of clarification.

Baja Mining (BAJ.to) up 17.8% at $0.88 and the kind of reception that was expected, really. Caveat emptor, baby (see post below).

Ventana Gold (VEN.to) up 14.2% at $7.88. I'll never understand capital markets. Ever.

Western Copper (WRN.to) down 3.5% at $1.11. After dropping for weeks on end WRN suddenly made a massive 40% upmove on Monday to $1.20 or so. Since then it's just drifted. So what is this, some sort of newsletter pump with no legs, or is there decent news coming out regarding the previously denied Carmacks water permitting? Inquiring minds etc........

Arizona

Thanks, reader 'RB'.


No further comment necessary.

File this one under "Embarrassing for Evo"


Clarín has the report, Otto does a translation.


Favourite Aymara Elder of Evo Morales Arrested and Charged with Cocaine Manufacturing
29/07/10, 12:46pm

Valentín Mejillones Acarapi, who was in charge of the Bolivian President's investiture ceremony in 2006, was arrested at his home in El Alto "while working on the washing or purification of cocaine", according to the local anti-drugs commanding officer.

The "amauta" (Aymara elder/wise man) who invested President Evo Morales in 2006 as indigenous spiritual leader in an Andean religious ceremony was detained by Bolivian anti-drug police and accused of manufacturing liquid cocaine, a police chief today said.

Valentín Mejillones Acarapi, 55, was captured Tuesday in the Andean city of El Alto next to La Paz, when the existence of a cocaine factory was discovered in his house. His son and two Colombian nationals were also detained who had in their possession 350kg of liquid drug, according to police reports.

"In the operation we found four people, a Colombian husband and wife and the other two people, father and son, owners of the house, working on the washing or purification of cocaine", said Colonel Félix Molina, commander of the anti-drugs police.

Mejillones was today identified as the principal Aymara priest who on January 22nd 2006 invested Morales as leader of the indigenous peoples in a religious ceremony at the pre-Inca temple of Tiwanaku, one day before taking office as the President of Bolivia.

A government spokeperson, Iván Canelas, denied any relationship between the Morales government and the detainee, saying that, "according to the investigation he should be sanctioned if found to have committed a crime."

Mining PRs and the Ottotrans™, Part 21


Today we check in on Baja Mining (BAJ.to) and its news release this morning that saw the stock pop 12%.

This is what they wrote:

VANCOUVER, BRITISH COLUMBIA--(Marketwire - 07/29/10) - Baja Mining Corp. (TSX:BAJNews)(Pinksheets:BAJFF - News)(PINK SHEETS:BAJFF - News) ("Baja") today announced that its 70% owned project company, Minera y Metalurgica del Boleo S.A. de C.V. ("MMB"), has received all necessary credit approvals from the Export-Import Bank of the United States ("Exim Bank") and Korea Development Bank ("KDB") to provide US$573 million in senior and subordinated project financing for the construction of the Boleo Project in Mexico. -

Baja continues to work on obtaining credit approvals from Export Development Canada ("EDC") (also serving as technical agent for the facilities) and a group of commercial banks for, respectively, the remaining US$150 million and US$100 million of loans, consisting of senior project and cost overrun debt facilities. When combined with the Exim Bank and KDB elements of the facilities, this total of US$823 million will be the entire amount of required debt financing for Boleo. Further details concerning approvals for the commercial bank tranche of the financing are anticipated in the near term.


--------------------------------
PROJECT FINANCING (US$ m)
--------------------------------
EXIM Bank 419
--------------------------------
EDC 150
--------------------------------
KDB 90
--------------------------------
Commercial Banks 100
--------------------------------
Total 759
--------------------------------
SUBORDINATED DEBT (US$ m)
--------------------------------
KDB 64
--------------------------------
TOTAL 823
--------------------------------

"The credit approval of these two key elements of the project debt facilities is truly an historic event in the development of the Boleo Project," says John Greenslade, President and CEO of Baja. "It is a testament to the confidence of those financial institutions in the Company, its management team and the Boleo Project, as well as in Mexico. This key milestone facilitates the development of the Boleo Project. We are pleased to have such a supportive and committed lending group."

Drawdown of the project financing will be subject to the receipt of EDC and commercial bank credit approvals, as well as a number of standard conditions precedent, including completion of satisfactory legal documentation, implementation of a hedging program and expenditure by Baja and its Korean partners of their required equity contributions. Under the facility documents, MMB will be required to enter into offtake agreements for at least 70% of copper and cobalt production for the first 10 years of production and to hedge 50% of copper production for the initial 3 years of production.

MMB is being advised by Endeavour Financial International Corporation, and is progressing documentation with the lending group with the aim of closing the transactions and recommencing construction at Boleo as soon as possible.


And this is what it means:
Well, we seem to have nailed down the largest part of the debt financing deal, but we don't have the money yet because they won't give it over until the other guys agree to fund their parts of the deal. So we don't have the financing yet but it's close, pretty promise. Just like it was 'close' in 2008, in fact.

Oh, we're not going to tell you just how much we've committed to the debt lenders either, because the deal might turn out to be really shitty for you retail guys and leave nothing on the table for equity holders. There's a few bits about "offtake" and "hedge" but no details or numbers or prices, so don't worry about that. We don't want to put you off buying right now, do we?

US Gold (UXG): A free fundamentals report


In the July 11th edition of The IKN Weekly (IKN62) we ran a 'NOBS' fundamental analysis report on US Gold (UXG), the junior run by Rob McEwen with the 'El Gallo' silver project in Mexico and several gold assets in Nevada USA, including its most advanced 'Gold Bar' property. We looked at those two main projects but we also took a good look at the company financials, structure etc to determine if UXG offered value as an investment right now.

So today IKN and its humble scribe is offering the July 11th report on UXG as a free download for any non-subscribers interested in this stock. Click here and download your copy. Have a nice day.

Ventana Gold (VEN.to): A window (geddit?) on a niche market


So this morning Ventana Gold (VEN.to) released this news which told the world that the land purchase deal was done and dusted. The reaction to that can be seen in the above five day chart....yeah, the market liked it.

But what gets me is that anyone with an inkling knew that there wouldn't be any last minute hitches on this deal and it was a lock to go through as intended. So on seeing this reaction today, my thoughts turn to the general nervousness of the markets and how it likes to see solid, done deals at a time like this instead of verbal agreements. But it also turns to the continuing outright ignorance that the money community has of the LatAm culture and mindset, because as soon as the Gelvez clan had come to agreed terms with VEN.to there was no way they'd renege on the deal...no way at all....ask any latino.

There must be a way to make a profit from this lack of LatAm nous that's patently displayed time and again by people with more money than LatAm sense. Now if only there were a blog out there that concentrated on LatAm junior mining and its way of life........

Chart of the day is...

...LME copper warehouse inventories, five year chart.

click to enlarge

A long time since we featured this chart, as it got to be a bit of an obsession I decided to back off. But today it reappears, with an embedded quote from this Reuters report.

Water

Sponsored by Bolivia, too. Score one point for humanity.

The UN General Assembly has declared access to clean water and sanitation a "human right" in a resolution that more than 40 countries including the United States did not support.

The resolution adopted by the 192-member world body expresses deep concern that an estimated 884 million people lack access to safe drinking water and more than 2.6 billion people do not have access to basic sanitation.

UN anti-poverty goals call for the proportion of people without access to safe drinking water and basic sanitation to be cut in half by 2015.

The non-binding resolution, sponsored by Bolivia, was approved by a vote of 122-0 with 41 abstentions including the United States and many Western nations though Belgium, Italy, Germany, Spain and Norway supported it.

Bolivia's representative said many rights have been recognised including the rights to health, life, and education. He said the Bolivian government introduced a resolution on the right to adequate water and sanitation because contaminated water causes more than 3.5 million deaths every year - more than any war continues here


Some 40 countries (with plenty of big and rich names like the UK, Australia, the USA, Canada etc) abstained. There was some fudging-type diplo remarks from their reps on this, but AFP nailed a far better quote from someone who knows the UN and the water issue (the added red bold type will help if you can't be bothered to read the whole thing):

"This is a historic day for the world, a big step in the right direction" toward the distant goal of a water treaty, Canada's leading water activist Maude Barlow told AFP.

"It is going to mean a huge amount to our movement around the world, to local community groups fighting for water rights, water justice against governments, corporations which are not respecting their rights."

Barlow, a former senior adviser to the UN General Assembly on the water issue, said some wealthy countries abstained out of fear "that they are going to be asked to pay the price tag" or that the resolution would give "tools to their own people to use against them."

She welcomed the fact that major countries such as China, Russia, Germany, France, Spain and Brazil backed the resolution.

Of her country's abstention, she said: "We are terribly disappointed."

She said Canada's conservative government wants the right to sell water.

"They know that if they say it is a human right it will be a contradiction to want to turn it into a commodity," she added. continues here


So there you go. Surprised? Nah, didn't think so....

7/28/10

The Mex Files with good news

Oh, so apparently a state's racial profiling junk isn't going to be left unchallenged by people who really understand the law. MexFiles has the news on how key aspects of the Arizona law have just been blocked at a Federal level.

Regarding porcine make-up sessions

My thanks to reader 'DM' for the headsup.


Yesterday morning we noted the drilling results and wondered out loud just how Peter 'Holier-Than-Thou' Grandich would lipstick this pig of a NR to his flock of devotees. Well we didn't have to wait long, it seems. Here's the charlatan's call on EVG's news:

"...management has a better understanding of what they may be dealing with at both projects. I also would pay attention to the notation made about Rattlesnake that said:

“…Coupled with the distribution and intensity of potassic alteration and the nearby mineralized porphyry dikes in RSC-027, the mineralization at the bottom of RSC-006 is interpreted as potentially peripheral to a mineralized porphyry…”

Yeah, that feeder system just waiting to be drilled out Petey....

Of course, this rosy picture of a company with 140m shares out (which has exploded from 81m as at March 2009), around 18c to 20c of cash to back that up, a eyepopping burn rate and properties that ain't worth the cactus on top of them is not at all affected by Grandich's 1.1m shares held in EVG that he disclosed this spring, bought around the buck mark. Oh no, not at all.

Trading Post (Wisteria edition)


Century Mining (CMM.v) up 3.2% at $0.49 as shareholders breathe a sigh of relief thanks to this morning's news. It's still untouchable cos she still has a whole bunch of shares'n'options, as do her remaining cronies.

Uranium Participation Corp. (U.to) up 2.1% at $6.46. Yep, we're definitely going to run the sliderule over this one at the weekend.

B2Gold (BTO.to) up 3.9% at $1.61 though volumes are low. Seems as if the markets are taking a more mature view on the gold drop as well.

ECU Silver (ECU.to) down 3.6% at $0.54. The encouraging news is that Wistar Holt is suffering as the arrogant, foul-mouthed bullying dumbass should. The negative here is that the market still values this worthless hulk at over $150m mkt cap, which shows how silliness can stay in the system.

Radius Gold (RDU.v) UNCH at 30c. Ridgway is buying at this price....shouldn't you?

Reuters celebrates Peru's independence day by noting its repressive govt's downhill slide

Peru celebrates independence today (and tomorrow...why do one day when you can have two?) and Reuters pays tribute by reporting on the clampdown in dissent from this most rotten of governments led up by Twobreakfasts. Here's how this great note starts, click for the rest:

LIMA--Peruvian President Alan Garcia has been cracking down on left-wing movements, part of his broader push to shape the next presidential race in favor of a centrist or conservative candidate.

Garcia, who cannot run for a second consecutive term, starts his last year in office on Wednesday, Peruvian Independence Day. His first term from 1985-1990 was marred by economic turmoil and the rise of leftist insurgencies.

The 61-year-old Garcia has transformed himself into a fervent promoter of free trade and foreign investment and wants a successor elected who will maintain the mainstream economic policy mix that has generated a decade of surging growth. His administration has branded critics as "anti-system" radicals who threaten growth, often conjuring up memories of the leftist Shining Path and Tupac Amaru insurgencies that tried to topple the state in the 1980s and 1990s.

"The issue of terrorism is still very sensitive to voters and it is being used as a propaganda tool," said Fernando Tuesta, a political scientist at Lima's Catholic University. "Terrorists have been conflated with all the government's opponents or enemies, whoever they may be."

Ollanta Humala, a left-leaning ultra-nationalist who nearly won the 2006 presidential race but is trailing in polls for next year's vote, has complained of being unfairly depicted as a radical. The government also has taken aim at environmentalists and indigenous groups who say dozens of new mining and oil projects that have lured billions of dollars in foreign investment will cause pollution on ancestral lands.

"What most worries us is that there has been an escalation in repressive measures that hinder the right to assemble and right to free speech," said Francisco Soberon continues here

Named for the job


Ram Gold & Exploration Inc (RMGX.pk) is a small and utterly failed junior explorer. It wouldn't even get a mention on these pages under normal circumstances, but this week's NR has a small wrinkly detail worth noting. In its NR, Ram told of some regulatory change of status...again, zero interest...but then when reading the thing (reading such minutae = wonk) the contact details of the company caught this humble scribe's eye:
Contacts:
Ram Gold & Exploration, Inc.
Michael Di Pumpo
Public Relations
514 586-3799
ramgold at shaw.ca
Di Pumpo! Is that real? Man, now there's a person who could have become a taxi driver or a banking executive or an ice-cream salesman or whatever else, but should have stayed well clear of investment relations in junior mining companies. What a giveaway!

Chart of the day is...

...gold, daily candles.

If you want something to worry about, read more about Afghanistan or global warming or Iran with nukes or something......I mean....jeesh....

7/27/10

That freebie again

This has turned out to be a winning deal, apparently. Your author has just noted that 21 of you wonderful IKN readers have taken up this free gratis no-strings-attached deal for a subscription to Global Finance Magazine via these pages, so by way of celebration here it is again to give more of you the chance. Click through, sign on, get it delivered every month. Nothing could be easier.

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More Uranium

So the spot price rose even further yesterday as the bandwagon starts rolling. Here's that Scotia Daily thing with the breathless pumpo:

- UxC Uranium Spot Price climbs most in 14 months: +$4.25/lb to $46/lb U3O8! Following Friday’s $2/lb move higher for Tradetech’s spot price indicator, last night UxC announced that its spot price increased by $4.25 to $46/lb U3O8 as demand picked up considerably over the past week while sellers backed away. Last night’s move is the largest single week increase since a $5/lb move higher in May 2009. However, UxC notes that over the last three years, no price increase has lasted longer than six weeks as the sharp moves higher scare off potential buyers. The big question: “is it different this time?”. Scotia Mining Sales thinks so, given the increased demand from China (as noted by the recent off take agreement with Cameco) and supply issues (ERA’s Ranger and ConverDyn’s Metropolis conversion facility). See our Chart of the Day below for uranium spot price vs. the uranium miners share price performance over the past couple years. While DML and UUU offer better torque to higher prices, don’t forget Cameco is the “go to” name for uranium.


Meanwhile, by way of tipping the hat to the technical analysts that are never wrong and never crow about it either, this weekend The IKN Weekly will be taking a good hard look at Uranium Participation Corp (U.to), the Canadian vehicle to play the straight metal in the straightest way possible, and laying out the investment case from a fundamentals angle. After all, we boring supply'n'demanders are allowed to get all frothy and to-da-moon-alice, too, no?

The Colonial Guard

Francisco Franco is alive and well and holding the keys to entry

File this one under "things you don't normally get to hear about in EngLang media", as it's not just the new US immigration laws that carry the spirit of Arizoname!, sad to say.

One of the ongoing spats here in LatAm which flares up every so often is the Gestapo-esque attitudes of Spain's customs and immigration officials who love to lord it over the former colonies. Stories of ill-treatment float across the airwaves from media channels in nearly all South American countries that hit the same kind of wavelength; you get some minor infraction of a Latino trying to enter Spain, you get heavy-handed officialdom, you get physical ill-treatment, you get a big fat zero in justification or excuses from the Spanish authorities.

Spain might be enlightened when it comes to football these days, but stick a whole bunch of them in a government uniform and the dumbasses immediately knee-jerk themselves back to the day of Franco. Here's an example of the bad karma from Argentina's Clarín this morning (translated):


Another Old Woman Ill-Treated While Trying to Enter Spain

27 July 2010

She has a weak heart and the authorities confiscated her medicines. She was locked up for 24 hours and then sent home.

By Victoria De Masi

Luisa Ormeño, 72, is devastated and under medical treatment in her home in Cordoba Argentina, taking tranquilizers due to the nightmare she lived through a few days ago. She was another victim of what her family is calling clear ill-treatment when she was not allowed to enter Madrid, Spain, to visit one of her daughters, her son-in-law and her three grandchildred. Luisa prefers not to talk publicly about the ordeal but one of her daughters has decided to make the story known.

Her ordeal started one week ago when she readied her baggage and set off for Spain in an Aerolineas Argentinas flight. She was accompanied by Carlos, a 20 tear old family member. The idea was to spend three months there. According to her daughter she had complied with all documental requirements. What's more, to be on the safe side she went to the Spanish Consulate in Cordoba to allay any doubts about paperwork. But when she arrived at Barajas airport in Madrid, she was refused entry. The reason given at Immigration was that the Entry Invitation (in Spanish 'Carta de Invitación') presented was not the original but a faxed copy.

24 hours incommunicado and without medication

They said that she complied with all requirements but the letter done the by son in law "did not comply because it was a fax", said Miriam, daughter of Luisa, to Clarín. She then went through an ordeal. According to her daughter they put her in with other "rejected people" in a locked room with no food and without her required medicines for her heart problem despite the fact that she had her medical certificate with her.

"We found out about this from out son in law, who had little information to offer because they wouldn't let him see her" said Miriam. Meanwhile, her family waited in vain in the arrivals hall with no word passed to them.

continues

Eyes on copper

The Doctor breaks thru here and he's really off to the races.

Results that only a geologist could love

The EVG five day chart...oh look, it sold off yesterday! You mean
the news might have been leaked? Oh shockah!


Here's a link to the latest drill numbers from Evolving Gold (EVG.v), the junior that uses paid shiller Holier-Than-Thou Grandich to throw sequins in the eyes of the retail sheep. But fair is fair, so let's give the company chance to comment first:
Quinton Hennigh, President and Chief Geologist comments, "The consistent presence of gold in our drill holes at Carlin is extremely encouraging. We interpret the widespread and thick zones of gold, regardless of the grade of the intersections, as demonstrating the presence of a large scale gold system. The high grades associated with the altered igneous dike are particularly encouraging, as they suggest the potential for a major deep-seated structure, a possible feeder zone."

Yeah, right. First up, if I had a dollar for every time I'd been romanced with "possible feeder system" by a junior explorer I wouldn't leave the beach. Second up the gold they found was indeed thick, covering a 171.8m zone, but the average grade comes in at 0.31g/t. That kind of grade would be marginal for an open pit heapleacher but we're talking about rock that was intersected at 1135m on the drillcore, i.e. it's over a kilometre under the ground! What about the strip rate on that suckah? :-)

These guys have had a decent shot at drilling for a high grade gold resource on the Carlin trend, but they've come up short, end of story. And these 1300 metre drillholes don't come cheap you know. How you gonna lipstick this pig, Peter?

Chart of the day is...


...the Big Mac Index, from the July 2010 edition of The Economist.

click to enlarge

The Economist's Big Mac Index has been running for 20 years, so I'm told, with this latest edition stacking up some main players as seen. To zoom in on LatAm currencies a bit more, here's a little list:

Brazil Real: 31% overvalued
Colombia Peso: 18% overvalued
Costa Rica Colon: 3% overvalued
Peru Nuevo Sol: 5% undervalued
Chile Peso: 10% undervalued
Mexico Peso: 33% undervalued
Argentina Peso: 52% undervalued

So the cheapest regional BigMac in dollar terms right now is in Argentina, which implies the Argentine Peso is the cheapest currency out there in PPP terms at the moment (according to the Big Mac Index Theory, at least). This may explain the boom in gringo ex-pats in Buenos Aires (though I'm reliably told that they're largely behaving themselves).

7/26/10

NPVs, discounted cash flows, things like that

Wonk out! Here's an excerpt from IKN64 out yesterday that sampled the fun and laughter world of mine project economics. Posted up here on the blog by request from a subscriber (who'd like to show his non-subbing friend the piece). No probs 'GS', enjoy.

Talking discounted post-tax cash flows

In ‘Market Watching’ below, as well as in the two reports prepared by other analysts attached with today’s issue, we take a look at the new PEA published by Antares Minerals (ANM.v) last week (1). But before getting there I’d like to focus on one element of the PEA news release as it gives us some insight into the way junior miners often present their case as an investment vehicle in the rosiest manner possible; in fact it’s one that I believe to be irresponsible to the point of plain deception. We’re going to use ANM’s news release to highlight this because (and be very clear on this), ANM is one of the good guys, it’s doing the right thing by the market and investors and not trying to deceive anyone. This is probably due to a combination of the good, honest, straight-shooting people that run the company coupled with the fact that the Haquira deposit is so darned good it doesn’t need any extra dressing to prove itself to numbers people. It points back to the basic reasons why we recommend the stock as a ‘Top Pick’, too.


Here below are two tables pasted from the NR that show the Cash Flow models for Haquira. Before diving in we need to keep in mind that a PEA is not a definitive study and any of the current metrics being used by ANM might change by the time production day one comes around, but for the purposes of modelling we have to start somewhere so the things used by ANM (20 year mine life, 100k tpd flotation throughput, 30ktpd SX-EW throughput, 2:1 strip, 89c cash costs over first ten year etc etc etc on a hundred other variables) are taken as our fair baseline.


I’ve highlighted a couple of the numbers and titles in red to help with the explanation which you can refer to at your leisure (I won’t be discussing them all here). But the main one to bear in mind is the $1,069m cash flow number in the first table. This is the one presented by ANM in its news release headline that gives us the 16.4% Internal Rate of Return (IRR), the one that assumes a base case for the metal ($2.25/lb Cu) and also an 8% discount to the Net Project Value (NPV) of Haquira.


----------------------------------------------------------------------------
Copper Price US$/lb Cu
-----------------------------------------------------
3 yr
Post-Tax historical
Cash Flow Base trailing
(US$ millions) Case avg
----------------------------------------------------------------------------
$1.75 $2.00 $2.25 $2.50 $2.75 $2.95 $3.00
----------------------------------------------------------------------------
NPV 0% $1,424 $2,667 $3,911 $5,154 $6,398 $7,393 $7,641
---------------------------------------------------------------------------
NPV 5% $337 $1,069 $1,800 $2,531 $3,263 $3,848 $3,994
----------------------------------------------------------------------------
NPV 8% ($38) $516 $1,069 $1,623 $2,177 $2,620 $2,730
----------------------------------------------------------------------------
NPV 10% ($219) $248 $714 $1,180 $1,647 $2,020 $2,113
----------------------------------------------------------------------------
NPV 12% ($361) $37 $434 $831 $1,228 $1,545 $1,625
----------------------------------------------------------------------------
IRR% 7.6% 12.4% 16.4% 20.0% 23.2% 25.7% 26.3%
----------------------------------------------------------------------------
Payback (yrs) 7.4 yrs 5.7 yrs 4.8 yrs 4.2 yrs 3.8 yrs 3.6 yrs 3.5 yrs
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Copper Price US$/lb Cu
-----------------------------------------------------
3 yr
Pre-Tax historical
Cash Flow Base trailing
(US$ millions) Case avg(i)
----------------------------------------------------------------------------
$1.75 $2.00 $2.25 $2.50 $2.75 $2.95 $3.00
----------------------------------------------------------------------------
NPV 0% $2,217 $4,148 $6,079 $8,010 $9,941 $11,486 $11,872
----------------------------------------------------------------------------
NPV 5% $846 $1,981 $3,117 $4,253 $5,389 $6,297 $6,524
----------------------------------------------------------------------------
NPV 8% $359 $1,218 $2,078 $2,938 $3,797 $4,485 $4,657
----------------------------------------------------------------------------
NPV 10% $119 $844 $1,568 $2,292 $3,016 $3,596 $3,741
----------------------------------------------------------------------------
NPV 12% (70.3) $546 $1,163 $1,779 $2,396 $2,889 $3,012
----------------------------------------------------------------------------
IRR% 11.2% 17.5% 22.7% 27.4% 31.6% 34.9% 35.6%
----------------------------------------------------------------------------
Base Case = Industry analysts long term consensus price of US$2.25/lb Cu

(i) Three year historical trailing average for LME price of copper = US$2.95/lb Cu

Before continuing, let’s talk about why the “discount to NPV” (those lines like “NPV 8%, for example) exists. A way of presenting this is to imagine Person X investing a sum, let’s say one million dollars, in an investment that promises him or her $1.5m in a few year’s time (let’s say five years). Now that might look at first sight as if X will make a 50% profit, but if s/he hadn’t sunk $1m into the project it could have been used for something less risky but still lucrative. The typical counter-example is to imagine that $1m being put into government bonds or a time deposit that pays (again let’s say) a safe and steady 4% annual interest compounded. At the end of those five years, the $1m would become $1.217m once interest had been added and compounded. So the $500,000 nominal profit is really $283,000, which is a lot less.


The difference in those two results is a “risk premium”. If person X wants to put $1m into a relatively safe place, then $217,000 profit is the result. But choose a riskier invetsment and the return is higher ($500,000). It’s then up to the person to decide whether the extra reward is worth the extra risk (the same way as we equities investors make risk/reward decisions, often on a more intuitive level).


There is a second idea related to the NPV discount, which is related to the first but needs a note. The so-called “time value of money” theory notes that people prefer to have cash in hand than locked up over a period in time in any investment (be they safe ones like bonds or risker ones like mining). Therefore the potential investor needs to be compensated for their waiting by a monetary profit. There’s no need to go into the mathematics (it’s a bit technical but nothing on Einstein levels), just to understand that the theory takes into account that future profits aren’t just desirable, but actively demanded by the investor. It’s capitalism, folks.


So once those two concepts are taken into account, it makes much more sense for a company such as Antares to present its project economics using a discounted NPV. In mining circles, there’s a convention to use an 8% NPV which most players most of the time consider a fair benchmark (again, let’s speak very very roughly and say “5% for the time deposit interest, 3% as simple reward for waiting” to get a handle on things).


Now to the point I wanted to make about the ANM news release and project economics: ANM could have chosen a sexier copper price to present its economics. It could have chosen a lower discount rate. Also, it could have used a typical trick used by other miners and presented its economics on a pre-tax basis (just check the differences in those charts, especially when the NPV discount is higher). But it didn’t. It chose to pitch its headline using a low copper price, a industry-understood 8% discount and all on a post-tax, post-royalty, post-worker profit sharing participation (that’s 8% in Peru) basis. Also, on talking to CEO John Black yesterday I was told that the PEA added a 20% contingency price to every single line item, which is somewhat unusual in mining circles as a typical (and accepted) approach would be to add 20% contingency to some things but nail specific prices on other things that the company believes can be priced pretty accurately, even at this early stage.


All these conservative parameters and the IRR still comes out at 16.4%, the project shows robust economics and Haquira clearly “works” as a mine. So thanks to this modest, conservative approach used by ANM we can take this PEA as a solid and true baseline and assume that anything that affects project economics will affect it to the upside...it’s all blue sky from here, folks.


Now we have that out there, check how this news release (2) published by South American Silver (SAC.to) presented the PEA for its ‘Mallku Khota’ silver/indium project to the world in 2009. Here’s the first paragraph:


February 25, 2009

South American Silver Corp. (“SASC” or the “Company”) announces the results of a NI 43-101 compliant Preliminary Economic Assessment Study (“PEA”) on its 100% owned Malku Khota silver – indium - gold project located in central Bolivia. The study includes a Base Case with a pre-tax undiscounted NPV of US$1,233 Million (0% discount rate) and IRR 50.7%.


It also goes with using the “three year trailing prices” for silver and indium, its key project byproduct. Hopefully you can see the problem here but if not, reflect that if ANM.v had used to same cherrypicked criteria as SAC.to in its news release, it could have run with a project cash flow of $11.486Bn in its headline instead of the $1.069Bn it preferred. TEN TIMES HIGHER!


Yes SAC.to is one of my bugbear stocks on the blog, but it’s not chosen as an object of derision just because I don’t like the company logo. Aside from all the issues it has with its main country of operation (Bolivia) it tries to present project economics in a way that’s so misleading it should be outright banned by the financial authorities. SAC isn’t the only company out there that does this kind of financial manipulation...not by a long chalk. But it’s a good example and one that you can use as your counterpoint when checking out PEAs PFSs and FFS in the future. When it comes to mine economics, the devil is in the details.

Trading Post (leaked from the front edition)


Focus Ventures (FCV.v) up 12.1% at $0.37 on low volumes. FCV has news out today, updating on progress at its early stage Chúcara deposit in Peru. You want a geological wonkfest of a NR? FCV provides and in spades. Yum!

Minera Andes (MAI.to) UNCH at $0.76. This one is a funny old fish that only seems to move when the Can of Corn Zeds do their their magic pumpo on it. We checked the production figures for the 49% owned San José mine out last week and they weren't great, but not bad.

B2Gold (BTO.to) down 2c at $1.56. The downer is the PPS drop today, the good news is the continued strong volumes traded. BTO longs will be looking for good numbers from its Nica operations this quarter to set the scene for a wonderful lovely future.

Carpathian (CPN.to) up a penny at $0.31 which is kinda dull considering the strong news today. Its RDM Brazil project going from 1m oz to 3m oz resource (M+I+I) and that's a big hike, but we's also like to know how the financing to build the mine is going to happen.

For what it's worth, subscribers got a Flash update about one of the above stocks this morning.

The Washington Post, winner of this week's coveted award

Today the WaPo runs this story about how China is taking over the world blah blah etc etc nothing much new, but the make-shit-up factor is strong, like garlic and mouldy French cheese kinda strong. Here's the point where this humble scribe learned something new:
"China's investments are also booming elsewhere -- from Peru, where one-third of the minerals sector is in Chinese hands, to Japan, where Chinese mergers and acquisitions quadrupled from 2008 to 2009."
Cue Owly:


ONE THIRD!!! Are they mad? I mean really, spend about four minutes on the interwebnetpipes and do some fact checking, please...the word is Google, be not afraid. When it comes to exported product alone the number is less than 15%, but saying that the whole minerals sector is 33% Chinese is a joke worth telling to Xstrata, Grupo Mexico, BHP, Anglo, Barrick, Freeport, Gold Fields, Buenaventura, Volcan the thousands of small mining companies and my stars I could continue all morning on this one.

And so John Pomfret, staff writer at the Washington Post and utter dumbass on LatAm trying to make himself sound wise, you win this week's coveted award that you can share with your equally dumbassed sub-ed if you like. Basic law of journalism: Don't write crap cos nobody will ever believe a word you say on anything. Here you go dude, enjoy:

Radioactive juice

Here's a paste of a section from this morning's Scotia Mining daily letter thingy. Take it as you will:

Tradetech Uranium Spot Price +$2!!! Late on Friday, Tradetech reported that the spot price jumped by $2/lb to $43.50/lb, or nearly 5% which is the single largest increase since October 2009. This is quite an amazing move for the uranium market during the normally slow summer months. Tradetech noted that utilities, intermediaries and producers were all active in the market, looking to buy small amounts of inventory to offset any supply interruption owing to issues being experienced at ConverDyn’s conversion facility in Metropolis, Illinois (employees locked out since late June, equipment failures: ConverDyn is the only conversion facility in the U.S. (converts uranium in the form of yellowcake into UF6) and has a capacity of 15mm kg UF6 per year, or ~20% of global supply. A squeeze at the conversion stage can lead to higher uranium prices (i.e. a 3-month shut down at ConverDyn in late 2003 contributed to the 2004-2007 price spike, along with mine production issues at Olympic Dam and flooding at Cigar Lake ). Six month price performance of the uranium stocks has been pretty dismal, with the three companies in Scotia ’s coverage universe down 16-18% (see table below). Cameco (2-SP, C$31/sh target, Lawrence Smith) remains the go-to name for uranium “exposure” and is attractive at 1.14x NAV but Larry notes that Uranium One (UUU-CN, 2-SP, C$3.85/sh target) and Denison Mines (DML-CN, 2-SP, C$1.55/sh target) offer better torque to higher uranium prices with 16.3% and 14.1% sensitivity to a 10% move in uranium prices, vs. 6.7% for Cameco (see table below for valuation multiples and share price performance).


Meanwhile, here's a link to a decent interview piece from Mickey Fulp (one of the rare breed that actually knows what he's talking about re U) giving more bullish case for the metal and a few ideas on decent juniors that are worth trading in the U sector.

h/t biiwii

Peru run by corrupt politicos? Nah surely not!

César and Yary: cheats do prosper

IKN has a memory and that memory stretches back to April of 2009 this morning to remind people of this post. In it, we get to hear how a Lima woman managed to buy a large swathe of prime real estate in the trendiest beach resort in Peru for the price of two US cents per square metre. The woman, Yary Valencia, paid $10,000 or so for land that's, quite literally, worth millions.

So why drag this one back today? Well, that's because her husband César Zumaeta is on all accounts about to be installed as the new head of Peru's Congress! A guy knee-deep in illegal land deals doesn't get kicked out of power in Peru, he gets rewarded. You can't make this shit up, ah promizzez yaz.

Chart of the day is...

...the gold/silver ratio:
Two weeks since the last peek at the GSR and TheNewNormal still firmly in place.

UPDATE: Reader 'JL' in Japan writes in:

"...what is the significance of the gold-silver ratio? What does it mean (economically speaking) when the ratio is high and going higher (such as 66:1) or going lower? Is this something to do with inflation/deflation or the general markets, etc. ...... if you've written about it somewhere please let me know."

Yeah, we had some rough scribbles on the meaning (for want of a better word) of the GSR in this post last year. Click away, esteemed lector :-)

7/25/10

The IKN Weekly, out now


IKN 64 is now with subscribers. Have a good Sunday evening.

BP: A repeat post

This was first posted on June 1st. It's getting re-posted due to reports that Haywood is about to go. Surprised? Read on.......


June 1st: We're going to claim this as LatAm related, thanks to the word "Mexico" in the "Gulf of...." place that's suffering. I've been exchanging mails with an old friend of mine (we go waaaaaaaaay back) this morning who happens to be an environmental activist and (if memory serves) a member of Greenpeace. His question to me was;

"Do you think BP's CEO (Tony Haywood) will resign?"

My answer was;
"Yep, bet the house on it."

He then asked;
"Why?"

I said;
"Check the share price."

Because in the way of the capitalist, things like the worst oil spill of all time, the enviro disaster, the brickbats thrown by treehuggers, the accusations of media cover-ups....all those things can be ignored and successfully ridden by a multinational company CEO. But a sharp fall in the PPS and you're toast.

It's not good. It's not bad. It's the way it is. Chau, Tony.

A room with a view (part 14) summer vacs edition

This feature is getting popular so it's time to run these on Saturday and Sunday, too. Here's the photo sent in this morning by BC having breakfast in Kalkan, Turkey. Looks far too good.


Send in your summer vacation snaps and make this humble scribe (shivering in the southern hemisphere) yearn even more. The address is over there on the right.