"Poll finds Americans angry about pretty much everything"
"The Caperon, For When You Need An Apron But Also Might Need A Cape"
Neneh Cherry....mmmmmmmmm....soooo fine.
The 2011 World Barrista Championships were held June 2-5 in Bogota, Colombia. The winner this year was Alejandro Mendez from El Salvador. With a polished presentation featuring coffees grown in El Salvador, he brewed and poured sophisticated coffee drinks for a panel of judges. CONTINUES HERE
..corn weeklies, inspired by Yukon Cornelius's post yesterday.
Exclusive: Strikers in Carabaya cause damage in the mining Warehouses of Solex and Pacific Sur
The population of the province of Carabaya, currently protesting against the construction of the Inambari Hydroelectric project, this afternoon caused damage to several installations of two mining companies in the area.
Locals went to the location called Uchuy Macusani, where the warehouse of mining company Solex is located, and once there burnt the the receptacles used to process aluminium. They also burned wooden structures and hose pipes and all the rooms of the buildings suffered damage.
Damaged was also caused to the warehouses of mining company Pacific Sur in the zone called Patapampa, where rooms were also burned and destroyed. At the moment tonight the city is calm, however there is worry about what tomorrow may bring.
Peru is a buy, but not tomorrow morning (published Sunday June 5th, 2011)
This one gets put here instead of in the ‘Regional Politics section just to make sure it gets read. So let’s start with a nice clear statement about Peru exposed stocks: Tomorrow they sell off.
But with the short-term reactions out the way, Peru exposure is still a good option for mining exposure even with its now almost certain new President Ollanta Humala. Yes, there will be hand-wringing and wailing over this near certain Ollanta victory but once it becomes clear that the mining industry and its investment isn’t about to come grinding to a halt in Peru, the sector will adapt to the new rules, likely higher (though not prohibitive) State burdens and get on with the job of mining in Peru. What follows now discusses the Ollanta Humala side of things because he’s now the near-certain President elect and we’ll assume that from now on even though results are not official. If by some freak of stats Keiko is eventually called the winner we’ll cross that bridge another day.
Humala isn’t “anti-mining” per se. In fact he’s pro-mining, but he uses that “pro responsible mining” cliché that sends shivers down the spines of foreign investors and gets him comparisons with Rafael Correa along with the dog’s breakfast of a “nascent mining industry” in Ecuador that has so far done little else but antagonize locals and halt any sort of progress towards the large-scale mining operations he says he wants in Ecuador (sorry Rafa, evidence very thin). Ollanta Humala has said out loud that he’s in favour of mining, that the industry is extremely important to the country, that mining will continue to happen, that there aren’t going to be nationalizations in the industry, that private property is not under any sort of threat, all that backed up by the more general policy statement that he’s not going to change the rules to allow a second term of office as was the case in Correa’s Ecuador, Morales’ Bolivia, Chávez’s Venezuela and (interestingly and always left out by the fearmongerers) Uribe’s Colombia. He’s said, pledged, signed papers and put his hand on the bible to the effect that he’d do his five years and then leave. But back to the main issue that we cover, mining, and the main line of thought behind his proposed changes to the mining industry is that the mining companies pay more to the State as part of his ‘social inclusion’ policies and the monies raised going to State programs such as better schooling, pensions, healthcare etc. As for details, put simply his policies are to raise royalties from the current 1%-2%-3% rates to a 2%-4%-6% (a change that will probably happen). He has also spoken of raising corporate taxes on mining companies from the nationwide level of 30% to 40%, a rate exclusively for mining companies (this may be tricky to implement). Finally, he has often spoken of raising a windfall tax on mining companies to take advantage of exception profit levels, with a main eye firmly placed on the mega-mining operations such as Antamina, Cerro Verde, Yanacocha, Toquepala/Cuajone etc. As we’ve seen before in other debates on WFT, the theory sounds good to the outsider but putting these fiscal regimes into operation has been very difficult, so even if the spirit of the new Humala administration is willing it may take years rather than months even to get to the stage where WFT charges are levied.
The bottom line to this is that the royalty rates are likely to rise in Peru first, but you’ll also hear a lot from a Humala government about how Peru currently charges much less to its mining companies than peers in Chile or the USA (which is true) to offset the new round of taxes. The corporate tax changes may happen, perhaps as a negotiation trade-off against a windfall tax which your author believes will be tough for Humala to put in place, realpolitik-speaking.
However much Humala’s Peru claims the new taxes on miners there is a fair policy, businesses won’t like the idea much and there’s clearly going to be a rough period for Peru-based mining companies because he will run a government that raises more money from mining companies via higher royalty charges and/or taxes. This means that stock prices will be under pressure on today’s news, but you’ll also have to note that stocks downing in price will also be accompanied by fearmongering and will add in all the “them commies gonna eat your babies” type stuff. It’s important at these moments to separate the wheat from the chaff, because the chances are that Peru’s market and the miners therein will bounce back much faster than Northern commentators imagine...and that means opportunity for nimble traders. We’ll expand on that thought in a moment.
The other effect of a Humala government on Peru’s mining industry comes at the social interactive level and would be to give more power of decision to local communities on whether they want a mine built near to them...or not. This, for example, would mean the end for the Santa Ana project, the end of Dorato Resources (DRI.v) hopes of minebuilding in the Cenepa region of North Peru, the curtailing of activities in the jungle regions where anti-mining opposition is strong. But this would also mean that mining projects don’t cause the type of crisis flashpoints we’ve seen in recent weeks in the Puno region, so it’s worth noting both sides of the equation. The knock-on effect would mean that companies may not be so keen on committing to the less explored areas of Peru and NGOs might start making more of a nuisance of themselves as well, but resulting problems would be extremely unlikely in places like Rio Alto’s (RIO.v) La Arena mine, or Focus Ventures’ (FCV.v) exploration in Santa Rosa, or Fortuna’s (FVI.to) Caylloma, or Vena (VEM.to) at Azulcocha, or literally thousands of other examples, because mining is welcomed in the areas in which they operate. Or put another way, the mining exploration business in Peru is likely to continue just fine in the areas known for mining acceptance, but lessen in the farther flung spots that have attracted attention in recent years.
Expanding on that second point a little further, let’s re-emphasize something that’s been mentioned on these pages (and on the blog) more than several times. Peru has been, is and will be a miner-friendly country in general but the time is long past to heed ignorant commentaries about ALL the country being miner-friendly. Peru is miner-friendly in the areas that are traditional spots for mining. It’s not miner-friendly in the jungle areas (that make up over 50% of its country by area) because mining activity there is 1) new and 2) damaging to sensitive ecological areas, no matter what the mining companies say otherwise. It’s also important to understand Peru on a micro-regional scale, because a single village in the middle of a centuries-old miner-friendly spot can be dead set against mining for its own sweet reasons and be surrounded by others that are perfectly relaxed and happy to co-exist with the biggest type of world-class open pit operation.
So yes, we’ll be in for a rough few days now that Ollanta has seemingly gotten the nod in this election, but to use that horrid and hackneyed newsletter writer’s neverwrong bullshit, “Great buying opportunity!!!” (three exclamation marks used to emphasize irony). Also, I’d expect the Peru market, and therefore its exposed miners, to snap back more quickly than most foreign observers imagine, because the big controllers of the Peru stock market, the “AFP” pension funds, will be keen to protect their asset book and have already clearly raised cash in order to buy back into this market. This is because Ollanta Humala isn’t the radical raving Commie lefty boogieman he’s made out to be in the northern (and local right wing) press and there’s a mountain of evidence that points to his moderation of policies, particularly his move to the centre in the last few weeks. Yes, he’s left wing but no he’s not a radical lefty. No, he’s not Hugo Chávez so put that one behind you. I know that during the election he’s tried to attach himself to the image of Lula da Silva, so if he turns out like that President did Peru will be just fine. Personally, I see him more along the lines of a mining-friendly Mauricio Funes (El Salvador), but pigeonholing Humala is always going to be difficult.
Humala has moved to the centre to win this election and he has no choice now but to run a coalition government, else be slaughtered down the line. He doesn't have the natural charisma of Evo Morales (or Hugo Chávez or Rafael Correa) which will be a problem for him. He will adopt what are regarded by observers as left-wing policies wherever he gets the chance but the opposition is going to be fierce, worse than anything Evo or Hugo or Rafa suffers because the opposition forces in Peru are solid, organized and long-standing. He'll also piss people off when they realize they'll have to wait at least a couple of years for the Plan65 pension and his traditional radical supporters will either have to be reined in or seriously affect his credibility with the majority of mainstream Peruvian who have voted Humala on sufferance because they’re more opposed to a new Fujimori-led government (Peru has a memory for the bad things that went on, something that pleases your author on a non-business level). Finally, as a person I actually think he's quite a decent guy. Family man, more mature than 5 years ago, naturally intelligent, not a bullshitter in the normal politicians' way.
To wrap up, Peru mining stocks are still a buy, but they’re a buy later or a hold today if you’re already bought. A Humala win will make for a rough few days but it’s also totally buyable (and so would be Rio Alto at under $2 or Focus Ventures or Vena Resources at (or even under) 25c). The question is when the AFPs will step up to buy and my best guess is that they’ll wait two or three days before the bargain buys begin...but that’s just a guess. When it comes to mining Peru isn’t going the path of Ecuador, it isn’t going the path of Bolivia or Venezuela, either. Peru is Peru, a mining country and it will stay that way, period.
Post Script: For those of you versed in Spanish that care enough, find out a lot more about Ollanta Humala via the book he wrote in 2006, which goes into his past history until that point and explains his trajectory and his political stance. A free online copy of the most important sections of the book is available at link (1) in the appendix below. It’s actually a pretty interesting read, too.
JUN 8, 2011 - 16:20 ETVANCOUVER, BRITISH COLUMBIA--(Marketwire - June 8, 2011) -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
Zincore Metals Inc. (TSX:ZNC)(BVLAC:ZNC) ("Zincore" or the "Company") reports that, due to adverse market conditions following the recent Presidential election in Peru, it is revising the terms of the brokered private placement of units originally announced on May 24, 2011. Under the revised terms, the Company will seek to raise gross proceeds of up to $6.4 million on a best efforts basis. Units will be priced at $0.28 per unit and will be comprised of one common share and one-half common share purchase warrant ("Warrants"). The Warrants will be non-transferable and each whole Warrant will entitle the holder to purchase one common share at a price of $0.40 for up to 36 months. Dundee Securities Ltd. is acting as the sole agent on this financing.
Zincore CEO and President, Jorge Benavides, commented "The result of the recent Presidential election in Peru has created significant short term volatility in the market. For this reason, it has become necessary for us to amend the terms of our proposed financing. The fact that we are still raising these funds to carry out our programs in Peru is a testament to our belief that Peru will remain a good place to do business."
The net proceeds of the offering will be used to fund the development of Zincore's mineral properties in Peru and for general corporate purposes.
The common shares issued with respect to this offering will be subject to a four month hold period in accordance with applicable Canadian securities laws.
The closing of this offering is expected to occur on or about June 15, 2011 and is subject to receipt of all necessary regulatory approvals including that of the Toronto Stock Exchange.
Any participation by insiders of the Company in the Offering, which participation will be subject to the approval of the independent directors of the Company, will be on the same terms as the arm's length investors and at or below their current pro-rata percentage ownership.
This press release is not an offer of securities for sale in the United States. The common shares being offered have not been and will not be registered under the United States Securities Act of 1933 and accordingly are not being offered for sale and may not be offered, sold or delivered, directly or indirectly within the United States, its possessions and other areas subject to its jurisdiction or to, or for the account or for the benefit of a U.S. person, except pursuant to an exemption from the registration requirements of that Act.
Zincore CEO and President, Jorge Benavides, commented "The result of the recent Presidential election in Peru has tanked our stock to kingdom come. For this reason, it has become necessary for us to cut the price of of our proposed financing otherwise nobody's gonna go near it, we'd be left with diddlysquat in the treasury and wouldn't be able to carry out our programs. The fact that we are still desperate to raise these funds to carry out our programs in Peru overrides the wishes of current shareholders so we've decided to dilute their asses even more than even they expected."
..the straightforward 5 year price chart for copper.
News and analysis of oil & gas exploration, wildcats, megaprojects, frontier plays, deepwater discovery and completion technology, supermajors, independents, geology, geophysics, 3D seismic interpretation, and valuation of oil & gas reserves by CWSX LLC.
Question 1: Who's buying Rio Alto Mining (RIO.v)?
...the gold/copper ratio, three year timespan:
"...they’re accusing BCM of looking to pollute Lake Titicaca, which is 50km away and uphill! Would need to invest millions in pumps to be able to do this"
Credit where it's due, Erasto Almeida of Eurasia stuck to his guns all the way through the second round of the Peru Presidential election, consistently called Ollanta Humala as the winner and got the result he predicted. Never mind the nitpicking, he deserves credit for a good call.
Now for his note sent out today about an hour and a half ago, which you can see below. Enjoy.
PERU: Risk of major policy shifts under Humala will be low at first, but could grow over time
6 June 2011 04:08 PM EDT
With nationalist candidate Ollanta Humala headed to become Peru's next president on 28 July, there is tremendous uncertainty amongst investors and businesses alike over what his agenda will be. Humala is likely to begin on a positive note. We expect him to signal continuity on fiscal and monetary policy and nominate reasonably well-respected economists to his economic team. Nevertheless, over time Humala will be challenged to manage the trade-offs between his goals of increasing spending and expanding the role of the state in the economy without threatening macroeconomic stability. As a result, we expect the direction of economic policy to deteriorate over the course of his mandate. The sector most immediately at risk is mining. Humala will seek to increase revenues substantially by increasing royalties and instituting a high windfall tax that will affect new and existing projects. Humala will probably try to negotiate changes with companies who have contracts guaranteed by Peru's constitution. The overall dynamics of how the increase is implemented will be a good litmus test of the overall direction of policy during his presidency.
In line with our expectations, official results and private estimates show nationalist-candidate Ollanta Humala appears to be headed to become Peru's next president (see Eurasia Group Note Peru: Humala is likely headed to a narrow victory 1 June 2011). The latest results from the National Office of Electoral processes (ONPE) show that with 94.3% of the vote counted Humala has 51.27% of the valid vote, while center-right candidate Keiko Fujimori has 48.7% of the vote. Quick counts (estimates based on a sample of voting stations), that in the past have proven to be fairly accurate, show Humala ahead with a comfortable margin. According to NGO Transparencia's latest quick count Humala defeated Fujimori 51.37% to 48.53%. A quick count by reputed polling agency Ipsos-Apoyo Humala had 51.4% and Fujimori 48.6%. While Fujimori has not yet conceded, the trends are unlikely to change. Moreover, the difference seems to have been wide enough to avoid any possible dispute or conflict over the results.
The main question now turns to what to expect from Humala after he takes office on 28 July. Our view remains that Humala will likely begin on a positive note, but that policy risks will likely materialize in the medium to long term (see Eurasia Group Outlook Peru: A low risk of radical change under Humala, but policy would likely take a negative turn for investors 5 May 2011). Humala has moderated his discourse throughout the campaign, and there are reasons to believe such a stance extends beyond a pure electoral strategy to help win the election. Humala and his advisors, for example, do seem to be earnestly concerned with containing the negative impact that his election could have on markets and they look to be placing a premium on maintaining economic stability in the short term. . We wouldn't be surprised if Humala announces part of his cabinet and economic team, including appointments to the central bank board of directors, relatively soon. Humala will likely nominate moderate individuals that would assuage market concerns. After the first round, many former President Alejandro Toledo economic advisors' joined the Humala campaign, so Humala has a pool of respected economists to choose from. The next administration will take office on 28 July, but Humala will probably announce appointments to key economic posts within a few weeks.
It's very hard to anticipate who Humala's next Minister of Finance will be, but Kurt Burneo probably has the highest chances of securing the post. He was one of Toledo's economic advisors, was an ex-Central Bank and Ministry of Finance official. He joined Humala's team in the second round, and the fact he has already been giving strong signals of policy continuity today could be seen as an indication of his growing standing vis-à-vis Humala. If he doesn't assume the Ministry of Finance, he could be a candidate to assume a position in the Central Bank (the government will appoint 3 directors plus the president within he first month of office).
The problem for Humala will be to strike a balance between his goals of increasing spending and expanding the role of the state in the economy without threatening macroeconomic stability or generating market uncertainty. Our view is that given the high demand for change among voters (this was a driver of Humala's victory) and Humala's desire to avoid seeing his approval ratings plummet, when faced with difficult trade-offs he would probably lean towards higher spending. It is unlikely that Humala would put broad stability at risk, but he will push the limits on fiscal and even monetary policy. As a result, the direction of economic policy could very well deteriorate over time.
Nevertheless, Peru's good overall macroeconomic fundamentals will give Humala some room to maneuver without significantly altering the policy framework. Moreover, and although we think this should not be overstated, Humala will face institutional constraints, including constitutional limits and a divided congress, that will limit how much he can do.
The sector that would be most immediately at risk would be mining. Humala wants to increase revenue to finance his policy agenda, and has clearly stated his intention of increasing revenue by 4% of GDP (Humala has stated a desire to raise revenue from 14% of GDP to 18%), and mining is the easiest source. As a result, he will most likely seek to increase revenues by increasing royalties and has mentioned his intention of instituting a high windfall tax. This will affect both new and existing projects. Humala will also seek to renegotiate current tax stabilization agreements to boost tax revenues (they represent around 25% of mining production). If he were to encounter difficulty doing this companies would probably face strong pressure to accept tighter terms, but risk of nationalization is low. In fact, how strongly Humala pressures companies and the overall dynamics of how the increase is implemented will be a good litmus test of the overall direction of policy during his presidency.
Erasto Almeida
Analyst, Latin America
According to the official vote count, with 86.6% of total votes already in, Mr. Humala (Nationalist party) got 51.18% of the valid votes while Mrs. Fujimori (Fuerza 2011) got 48.17%. Mrs. Fujimori is likely to concede the election within the next few hours. Mr. Humala already gave a victory speech in the early morning hours in which he stroked a moderate tone. He said he would lead a government of national unity and that he would preserve the economic growth and the good policies of the current administration. Moreover he pledged to improve redistribution policies and comply with his campaign promises of increasing social spending.
In our view, the fact that Mr. Humala has won the elections with the support from moderate votes and moreover, that his political coalition does not have a majority in Congress, suggests that he would find it very difficult to impose a radical reform agenda early on during his tenure. Last night, his main economic advisors said that investors should have no doubts about the direction of macroeconomic policies in Peru, because Mr. Humala is committed to maintain the independence of the central bank and a disciplined fiscal policy.
In terms of things to look forward to over the next few days, Mr. Humala is likely to begin nominating cabinet members. In particular, he is expected to appoint the Prime Minister and the Minister of Finance. In our view, it is likely that Mr. Humala will appoint independents to these posts in order to reduce uncertainties.
Eduardo Cavallo
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