Bayfield Ventures (BYV.v) gets top billing in this week's Northern Miner

As the reporter who wrote the note clearly lifted a ton of information from IKN without bothering to give any credit*, here's a full paste-out of the front page story in this week's Northern Miner (July 11 to 17) all about those scamsters at Bayfield Ventures (BYV.v). Glad to say those in-cahoots scumballs at Casey Research get theirs, too.

By the way, that dumbass lying scumbag Louis 'Little Wolf' James pumped BYV.v again today in his ridiculous monthly rag, calling the drill results that have been torn asunder by the BCSC "spectacular" and calling BYV.v as "even more likely" to be taken over...what a total pumphouse asshole that guy is.

Bayfield insiders sell as Rainy River area play overheats

BY MATTHEW ALLAN
Vancouver — A 400- by 800- metre claim block east of Rainy River Resources’ (rr-t) flagship gold project in northwestern Ontario is causing a big commotion at the project’s operator, Bayfield Ventures (byv-v).

Bayfield has drilled into a bonanza-grade mineralized zone at least twice since optioning the small sliver of land called the Burns Block in late 2007. This year, it plans to complete 100,000 metres of drilling in an attempt to prove that economic mineralization from Rainy River’s main OMD/17 zone extends onto its property.

To that end, Bayfield reported an eye-catching intersection last month grading 8.66 grams gold per tonne and 57.67 grams silver at 80 metres, starting from a downhole depth of just 16 metres, including a smaller bonanza-grade zone about halfway through. The results shot the company’s shares up 51%, from 59¢ to 89¢, on a record-high trading volume of 10.4 million shares on June 27, the day results were released.

The problem, at least according to the British Columbia Securities Commission (BCSC), is in the way Bayfield has reported its assays. On June 30, BCSC forced Bayfield to restate its latest drill results, as well as selected results dating back to September 2010, in order to “clarify certain details of its technical disclosure of drill results,” with Bayfield admitting, “The drill results are potentially confusing, as certain larger intervals were reported by diluting high-grade intercepts over longer intervals of lower-grade gold and silver mineralization.” The BCSC says the 80-metre intersection grading 8.66 grams gold and 57.67 grams silver is more accurately reported as a 26-metre intersection grading 26.7 grams gold and 170.69 grams silver, with most of that in turn coming from an 11-metre section grading 60.05 grams and 362.96 grams silver, starting from a depth of 48 metres.

The rest of the interval, says Exploration Insights newsletter writer and geologist, Brent Cook, is essentially “waste rock.” (Bayfield calls it a “broad halo of anomalous to multigram-level gold and silver mineralization.”) Indeed, when the 11-metre section is removed using a tool designed by Cook called the Drill Hole Interval Calculator, the remaining 68 metres of the drill hole have a residual grade of just 0.23 gram gold and 7.6 grams silver.

In a June 28 telephone interview with The Northern Miner from his office in Vancouver, Bayfield’s president Don Huston defended his company’s way of reporting the assays, arguing it is a regular practice to calculate an average of high- and low-grade sections, and that it was compliant with National Instrument 43-101. “I’m not trying to smoke anybody,” Huston said. “I’m showing that we have tonnage and grade equal to the $9 stock (Rainy River). And that’s a fact. . . should I report every metre, and show a chart twelve metres long?”

Huston acknowledged that the vast majority of the hole outside the high-grade zone graded below 0.4 gram gold, which is under Bayfield’s cut-off grade, and therefore not significant. He declined to comment on Cook’s methodology, but said he is familiar with it.

Huston maintains there is “good reason to believe” the mineralized zone found near surface in the latest hole RR11-71 is the same zone, or is connected to a high-grade zone found at the other side of the property in September 2010. That hole, RR10-18, returned an impressive 81 metres grading 5.08 grams gold, although most of that can be attributed to a 10-metre section grading 35.93 grams gold starting from a depth of 497 metres.

The holes are 350 metres away from each other on surface, but because of the variance in depth, the actual distance between the holes — and the potential length of the high-grade mineralized shoot — is approximately 600 metres.

According to Cook, who spoke to The Northern Miner about Bayfield’s latest results via telephone from just north of San Diego, “When you get these high-grade veins . . . usually they are nuggety, and Bayfield has showed pictures of coarse gold in the core, so you know it’s nuggety. So, the issue becomes one of continuity. How far can you project a high-grade intercept along strike or plunge? Usually not far.

“My sense of what they’ve got is maybe there is a rather small shoot that plunges from north to south that goes across what they’re drilling. Certainly, from the data we’ve seen, this is not a very disseminated deposit.”

Bob Marvin, Bayfield’s exploration manager and senior project geologist for Burns Block, acknowledges it has been “very difficult” to establish continuity of the high-grade shoot over a significant length. Speaking from Bayfield’s field camp near the Burns property, Marvin told The Northern Miner, “There’s absolutely no intention on our part, or certainly my part, to say that we see a lot of continuity, because clearly we have not. Now, whether that’s because we’ve missed or because there’s a true lack of continuity, I really think you’d have to go underground to establish.”

Marvin noted the high-grade shoot is contained within a well-established east–west trending zone of strong foliation, sericite alteration, locally intense deformation and highly variable pyrite mineralization. He pointed out drill hole RR10-15 may have picked up the shoot at a depth of 190 metres, with assays returning 9 metres of 12.88 grams gold, including a 3-metre section grading 31.71 grams gold. Many other holes have failed to demonstrate much continuity within high-grade zone, including hole RR10-9, which was drilled 25 metres along strike of the original high-grade discovery, hole RR10-18, and returned 20 metres of 1.2 grams gold, with the best interval within that intercept grading 9.93 grams gold over 2 metres.

According to Marvin, Bayfield has yet to prove much economically significant gold mineralization exists outside of the broader envelope that includes the high-grade shoot. “There is (some) evidence, but at this point, ninety-eight percent of every ounce if we were to do a resource would be within the zone.” Rainy River previously optioned a majority interest in the property from Bayfield in 2007, but dropped the option amid the financial crisis in November 2008 after drilling seven holes.

Rainy River’s namesake project boasts 4.1 million oz. gold in the measured and indicated category, in a conceptual open pit containing 115.5 million tonnes grading 1.11 grams gold, as well as 1.8 million oz. gold inferred. Besides hosting significant silver values, the deposit also has a underground resource estimated at 1.8 million tonnes measured and indicated, grading 4.82 grams gold for 290,800 oz. gold.

Having raised over $10 million in the past year, Bayfield should be well equipped in 2011 to drill out much of the Burns Block, and explore its nearby properties in the Rainy River area, including its C Block half a dozen kilometres to the west, and its B Block a few kilometres to the north.

Helping raise nearly half of Bayfield’s money was the Casey Research Group, which has been touting the stock as a potential takeover target since September 2010. The Casey Group’s monthly International Speculator newsletter has recommended its readers buy the stock no less than seven times in the subsequent nine months. Some of them must have listened, as three Casey employees (Marin Katusa, Marc Bustin and Joe Hung) found themselves the recipients of a $249,999 cash finder’s fee in October 2010, after helping Bayfield sell $5-million worth of stock in a flow-through private placement at $1.40 a share. The trio also received 178,572 finder’s warrants for their efforts.

Insider trading reports of Bayfield’s management show that no fewer than six insiders sold a combined total of approximately 589,000 shares shortly after the company released the first set of drill results that found the high-grade mineralized zone in late September 2010. The stock fell almost 65% in the following nine months, reaching a low of 50¢ in mid-June.

The latest round of drill results has proved little different, with four Bayfield insiders selling stock on the day the company released the assays. Huston sold 80,000 shares at 83¢ each; chairman Jim Pettit sold 90,000 shares at prices ranging from 87¢ to 94¢; exploration manager Marvin sold 64,000 shares around 83¢ apiece; and Burns Block project geologist Shane Hu sold all 25,500 of his shares at an average of 91¢ each. Huston and Pettit exercised options a week later to buy 50,000 shares and 200,000 shares, respectively, at 39¢ a share.

After their big leap on June 27 from 59¢ to an intraday high of $1.02, shares of the company have retreated back to a low of 66¢ on July 4. At presstime on July 5, they were trading up 5¢ to 71¢ on 327,000 shares traded. Bayfield has 62 million shares outstanding, 72 million if fully diluted.

*I mean, what do you think this is, some place that so-called professional reporters can get free DD that in tacit terms they claim as their own? seriously, go fuck yourself Matthew Allen and stick your fucking copyright up your unethical ass, motherfucker. That clear enough?

Peru's bleak economic outlook

It's a sorry day for Peru's economy and markets, with gloom and disaster awaiting this newly forming quasi-communist enclave......errr...hold on...wait a minute....let's just check today's PeruBiz headlines:

Peruvian Nuevo Sol closes at its highest level in three years
(El Comercio) The Peruvian currency closed today's session in 2.744 to the US Dollar, its best level since April 2008

Peru's Main Stock Indexes End Higher; Sol Strengthens
LIMA (Dow Jones)--Peru's main stock market indexes ended sharply stronger on Thursday, on gains in a number of blue chip mining companies that were boosted by rising mineral prices.
The broad General Index closed 1.91% higher, at 19,831.08.
The blue-chip Selective Index ended 2.02% stronger, at 27,607.49.


Peruvian Bonds Rise to 3-Month High on Bets Economy To Rebound
(Bloomberg) Peruvian bonds rose to a three-month high as investors bet the South American nation’s economy will keep growing after President-elect Ollanta Humala takes office.

And finally....

(IKN) Owl's Comment On Peru Makes More Sense Than 99% of The Tosh Written About Country

In the matter of Lawson vs Baines

Today's must-read comes from Stockwatch and one of its two main characters is white collar scambuster, our very own David Baines. The other is the dude that recently sued him for libel. But perhaps the most interesting part is the judgment itself and the reasons given by the judge for the call. Also noteworthy is how the story ended up on Stockwatch instead of its original destination, whihc is explained in the top paragraph. An excellent piece of writing that you'll find on this link.

Peregrine Metals (PGM.to), a value copper explorer

So I get this mail about copper juniors this morning and rather than answer via mail, here's the thought in blogerated form for mailer TG. The question was about copper (yep, I like the sector, have been generally bullish Cu for moons and it must be very frustrating to be a Cu bear right now...he says giggling at the idiots with their spideysenses) and where to look for a value exploration play and my best answer is one I've followed for a while now. What I like about Peregrine Metals (PGM.to) is:

• Its size. We're already in the multibillion Lb Cu category here and its main Altar deposit shows every sign of getting bigger. If 10Bn lb Cu + is considered the world-class size of deposit, that's what you're looking at here, no sweats.
• The close-by satellite targets are looking very promising, with more than intriguing gold intercepts already reported. 
• The location is remote but pretty good infrastructure wise, with lots of room to build a mill, water unlikely to be a problem, electricity lines due to be strung a few Kms away soon, roads in good shape, environmental footprint of a plant will also be lower than in many other areas.
• Management is of the no-nonsense, no pushyhype, professional get-on-and-explore variety, the kind of people to look for to create longer-term value instead of shorter-term BS.

The potential drawbacks are:

• In Argentina, because it would already be triple its current price if the borderline between Chile and Argentina were set just a few clicks further East.
• Most of the resource is inferred, which is normal for this type of early stage exploration but does mean there's decent money left to be spent on drilling.
• The enargite found may become an issue in the event that you actually mine Altar and produce a concentrate. I don't consider this a big fat red flag right now, but it's one thing to keep an eye on as the project is moved forward.

So that'll do for a start, go DYODD if you think this one has legs. Disclosure: I'm long PGM.to at roughly current prices, have held through the recent up-then-down and I'm in for the medium to long haul. It's also been reco'd to IKN Weekly subscribers.

Chart of the day is....

...three years of the Gold/Silver ratio (GSR):

x

News roundup (more fun than smoking herrings)

Kid Dynamite's coverage of Sino Forest (TRE.to) has been good, today's edition is great. Your humble scribe adds comment and we also applaud KD's trading ability in the stock...he's feeling the cloth well, that dude.

Felix Salmon checks out the progress of Sinking Alpha's plan to pay peanuts to monkeys...and finds they're paying peanuts to monkeys. Well what a surprise, SinkingAlpha's plans for TotalWorldDomination™ are hurtling into the abyss of the lowest common denominator instead. One stop shopping for financial mediocrity, thy name is Alpha (update: check out the self-centred pretentious twaddle of Rocco Pendola in the comments section, a case in point if ever there was one).

Gold Resource Corp (GORO) refuses to tell people just how many ounces of gold it did (or more to the point didn't) produce in 2q11, just saying the number was "record". That's saying very little, cos up to now each quarter's production has been pisspoor and so record is beginning to look like "slightly less than pisspoor" instead of anything that can prop up its current $1Bn+ market cap. As mentioned yesterday re. GORO, money talks and bullshit walks, so as GORO doesn't want to talk money, what's the only option left? By the way, i had a decent question mailed in by a regular reader about GORO yesterday and if I can shake off the ennui I might just get round to answering it here on the blert.

Bolivia's inflation hits 4.27% for the first six months of 2011 and to be honest that's not a bad result for the Evo government. The bottom line in Bolivia is that the country has to import large quantities of  foodstuffs (wheat, etc) and the low GDP/capita level means that foodstuffs make up an important percentage of the monthly basket that measures inflation (unlike the think-they're-developed nations that spend more on Playstations and stuff nobody needs). Both monetary and fiscal policy in Bolivia has been very sound and well-run in the Evo years...you can tell that because nobody criticizes him for those.

China hikes interest rates. Another wild surprise.

And now, the other side of the bullshit written about gold

Your humble scribe is sent this link to WeAllGonnaDie Central, aka Zerohedge, which features a new report from Ronald Stoeferle of Erste Group, which is a bank in Europe somewhere. Apparently and according to both Zerohedge and your humble scribe's missive counterpart*, the key point of the report is the following line contained:

"The possession of gold is tantamount to pure ownership without liabilities"

We can therefore 100% cast-iron, no-doubts guarantee that Ronald Stoeferle is not married.

Sheesh, a serious load of old wank gets written about gold, doesn't it?

UPDATE: Reader 'DM' writes in with the following to back up the point being made:

"Re today's post, my ex wife was accumulating gold the year previous to our divorce.  Being South Asian this was not so alarming but the timing makes me think insider trading."

*trans: the dude who mailed me

How the end of QE2 has affected gold (in one easy graphic)

Keep things simple, dudettes and dudes.

Chart of the day is....

...the "small silvers" year to date chart, because last night it suddenly dawned on me that I haven't updated on this one for a long time.

Which was lapse of me, but an honest mistake.....like....guv.

Anyway, in the lead we have First Majestic (FR.to) so take a bow, guys. Followed by more living proof that gringos will buy anything, Great Panther Silver (GPR.to) and then a tad behind Endeavour Silver (EDR.to). Your author notes at this point that the top three are all recent listings on the NYSE (with tickers (AG) (GPL) (EXK) as evidence). Methinks hardly a coincidence, Mister Ganoza.

Then after those three come the silver ETF (SLV) as our benchmark with a near identical score (though both fratcions behind) from Fortuna Silver (FVI.to) and IMPACT Silver (IPT.v and I hate the way they capitalize these names...MAG....IMPACT...ECU....what's the freakin' point, dudes? Feel the need to shout or something, go to a ball game).

So to the fails, which start off with MAG Silver (MAG.to) and U.S. Silver (USA.v), are followed by the permafail ECU Silver (ECU.to) and propping up the whole lot is Bear Creek Mining (BCM.v), which has had its well documented problems in Peru. And thus we remedy our lack of coverage on the small silvers and pretty promise we'll do this one the end of each month as per normal going forward.

that for here or take out, madam?

Yep, this is the photo from the story. And it's not The Onion

Oh my stars, I adore Latin America. We're going to go with the EFE newswire version of this story, via Argentina's La Nacion, because it sums it up nicely and concisely. Translation, your author:

Woman Tries To Break Her Husband Out Of Jail In A Suitcase

Arjona Rivera, 19 years old and pregnant, visited a prisoner in a Mexican prison condemned to 20 years behind bars and at the end of her visit helped him hide in her luggage. On discovering him, the prison guards laughed.

Tuesday July 5th 2011

Cancun (EFE). - A man sentenced to over 20 years in prison for several crimes tried to escape from the Chetumal prison, in the Mexican State of Quintana Roo, doubled up like a contortionist in a fetal position inside a suicase that his wife tried to take out of the prison.

According to local police information today, the jailbreak attempt of Juan Ramirez Tijerina happened last Friday, when at the end of the conjugal visit of his wife, Maria del Mar Arjona Rivera, (he) tried to leave the jail carried inside a heavy and bulky suitcase.

The jail authorities said that after checking the suitcase and discovering the prisoner, the newlywed wife named Arjona Rivera, 19, who is currently pregnant, was detained while two other prisoners were put under investigation for apparently knowing about the escape plan.

The young woman had to be taken to a hospital emercency ward in Chetumal due to complications in the pregnancy generated by the tension of the days since her detention, but now her condition is stable, according to sources at the Chemabal prison. As soon as her medical condition allows, she will be taken again to the jail to be judged for the crime of false liberation of prisoners, they added.

Arjona Rivera was helped by other prisoners to take the suitcase out of the conjugal area, but on arriving at the custodial exit area it was seen that she had great difficulty in managing the luggage that supposedly only held dirty laundry, what's more the suitcase's wheels also broke.

Nerves got the better of the woman, who with resignation watched as guards opened the suitcase to find her husband, dressed only in underwear and socks.

The police that opened the suitcase went from amazement to uncontrollable laughter on seeing the man doubled up and holding his breath. The escape of prisoners is a minor offence and, according to local laws, the woman may be set free on payment of bail.

Sam Antar: Inside a white collar criminal's mind

Sam Antar is a site friend round here, as he runs the excellent scambusting website White Collar Fraud that is out there pointing the finger at dubious accounting practices and SEC filings in U.S. listed companies. And Antar should know, as he himself is a convicted felon for accounting fraud (check out his highly entertaining posts and disclaimers that tell you straight who he is right here).

So National Public Radio has, as part of its Planet Money series, interviewed Sam Antar and the result is out today right here in podcast form. If you want to know how the white collar criminal's mind works and just why people feel compelled to rip others off via dubious enterprises (and my stars, there's plenty to go around in our chosen field of junior miners), the Antar interview is well worth listening to. Here's the link again so no excuses, leave this humble corner of cyberspace immediately and do something worthwhile with your online time. Here's the blurb from NPR to get you in the mood:

In the seventies and eighties, the Antar family ran Crazy Eddie, a popular electronics chain known for its frenetic commercials.
The business was crooked from the start, but the fraud got more serious when the family took the company public in the 1984. In 1987, the Securities and Exchange Commission investigated the family and discovered years of inflated profits and overstated income.
On today's show, one of the masterminds of the fraud, Eddie's cousin Sam Antar, explains how they did it and why it worked for so long.

Why so few posts recently?

This is why.

Could be coming down with a cold, so I'll try another good nap and see if it recharges the batteries a little. Anyway, market's looking pretty perky and optimistic all of a sudden. Even the crap stocks are getting a bounce. Enjoy your day.

Bayfield Ventures (BYV.v) from IKN113

I'm getting queries and questions about the post on Bayfield Ventures (BYV.v) yesterday, so rather than actually think on this fine Tuesday morning, here pasted out is the piece on BYV.v from IKN113, out last Sunday. 

Bayfield Ventures (BYV.v), an exercise in red flags

I’d like you to go to the footnotes list and make a point of linking through to link (13) and then take a good read of its contents because it is a salutory reminder of what you, the retail investor, need to avoid in this sector. However here’s the top of the NR published by Bayfield Ventures (BYV.v) last Thursday to make sure you at least get the gist of what’s going on:

Press Release Source: Bayfield Ventures Corp. On Thursday June 30, 2011, 7:50 pm EDT

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 30, 2011) - Bayfield Ventures Corp. (TSX VENTURE:BYV - News; FRANKFURT:B4N - News; the "Company") is issuing this news release as a result of a review by the British Columbia Securities Commission in order to clarify certain details of its technical disclosure of drill results on its Burns Block property and of its disclosure of resource estimates at Rainy River Resources' gold project adjacent to Bayfield's Burns Block.

Rainy River gold properties claims map: http://www.bayfieldventures.com/i/pdf/BYVRRArea.pdf

The Company restates certain drill intervals (listed below) reported in news releases dated September 8, 2010, December 14, 2010, February 16, 2011, and June 27, 2011. The original averaged gold and silver grades over these intervals are all correct and the total amount of gold and silver mineralization is the same; however the drill results are potentially confusing as certain larger intervals were reported by diluting high-grade intercepts over longer intervals of lower grade gold and silver mineralization.

The higher grade gold and silver intervals reported in the effected news releases identified above, and re-reported here, are enclosed within the much wider envelopes of anomalous level gold mineralization (and accompanying variable silver values). We therefore revise the portions of the previously reported intervals for which questions of potential economic viability cannot currently be assessed by Bayfield. Such an assessment would require identifying likely mining methods and establishing many other parameters that are well beyond the scope of our exploration project at this point in time.

The following is a list of the holes that report longer drill intercepts which are being restated:

- Previously reported larger intervals in hole RR10-18 (September 8, 2010 news release)

- Previously reported larger intervals in hole RR10-52 (December 14, 2010 news release)

- Previously reported larger intervals in hole RR11-1 (February 16, 2011 news release)

- Previously reported larger intervals in hole RR11-70 (June 27, 2011 news release)

- Previously reported larger intervals in hole RR11-71 (June 27, 2011 news release)

Bayfield Ventures (BYV.v) is a company I’ve mentioned on more than one occasion on the blog because it checks off so many of the boxes that shady junior mining companies check off. There’s the promotional aspect, the suspicious relationship it has with market moving commentators who have little or no idea about geology (and yes I know that’s true for me too but at least there’s no false pretences) and the cutely timed insider sales and rounds of financing that seem to benefit everybody bar the end user. The NR put out last week caps off a whole round of doubtful promotion that stretches back nine months, as BYV.v was forced by the BCSC to retract previous news releases it has made regarding its drill results. Please go and read the whole thing to get a fuller picture, but in a nutshell BYV.v has been slapped on the wrist for “smearing”. This is when a small, high grade intercept is used to make a larger width of the same drill core look like it’s all potentially mineable rock when in fact only a small part of what’s on offer could ever be construed as economically mineable. It’s a subject we looked at in IKN94, that piece also found its way onto the blog (14) and by sheer coincidence, the example used was that of BYV.v. I’ll leave you to check out that note at your own leisure (and if you have further questions I’m only too pleased to hear from you) but rather than do the same info twice over, I’d like to point out a couple of things about the latest BYV.v NR that has announced the forced retraction and adaptation of drill results. What follows is directly related to the dates of the news releases as they appear in the paste-out above.

• The September 8^th NR was the high point of a very aggressive promotional campaign for BYV.v that got many new investors into the stock. That day the company traded over 9m shares, which is many multiples more than its normal traded volume and without looking too far back into the company records is most likely a record. The share price peaked at $1.38 that day and to give an idea on the type of move it put in, the previous day it was trading at 83c.

• On the back of that Sept 8^th NR and market reaction, BYV.v just a couple of days later announced a $5m non-brokered private placement of flow-through shares priced at $1.40 (15).

• At the exact same time, company Chairman and CEO Jim Pettit decided it was a great time to do some insider selling and make over $100,000 on the sales he made in the next few days. Other insiders also cashed in at that time (15).

• Meanwhile, much the same pattern was repeated on December 14^th when the NR that day which has also been retracted due to ‘smearing’ of results saw BYV.v stock jump over 10% the next morning.

• The February 16^th NR also saw the stock jump over 10% by way of reaction, all on twice normal volumes. This was the very NR we covered in our IKN94 note about smearing (14).

• The share price reaction from the most recent June 27^th NR was even more dramatic, with the stock climbing over 50% and 6.9m shares changing hands. Just four days after an intraday peak of $1.02 that morning, BYV.v is now at 76c and fading fast.

But as well as this highly coincidental NR-plus-PPS-plus-Volume-plus-Promotion action, we should also note the way in which Bayfield has announced its correction last week. It has done so on the evening of June 30^th, at 7:50pm, when most all of the market is not paying attention and is unlikely to do so through Canada Day (July 1^st Friday) and perhaps even US Independence Day (July 4^th Monday), even though Canada’s markets are open for business tomorrow. That stinks, frankly. If it were an isolated case of convenient timing from a junior with a better track record of transparency that type of detail wouldn’t matter so much. But when it comes to a company like BYV.v, it matters a great deal.

It’s at times like these when your author reminds himself of the odds of a junior exploration company actually ever getting an asset into production (either via in house efforts or via selling it to a third party) and because those odds are so very small indeed, any small sign that a junior is out to mine the market (Mickey Fulp’s preferred expression) instead of the rock will always go down as a red flag. But when the signs come think and fast from a company and are backed up by dubious promotional techniques from dubious “research” houses, it’s difficult to imagine seeing the phrase CAVEAT EMPTOR writ any larger.

DYODD. I'm looking forward to Lobito...c'mon dude, pump it again, don't let us down. And oh yeah, full disclosure: No position in BYV.v (IKN highlights these scummy stocks for love, not money).

UPDATE: And the BYV.v insiders sell in droves just before the BCSC news hits! YOU HAVE TO BE SHITTIN' ME HERE, DUDES! Well, at least they're consistently scumbags, not just on every other day.

News roundup (we successfully flip playing cards into the waste paper baskets on the other sides of offices more frequently than the average news source)

Alexei, Sarah can see you from there too

I was going to mention Rob McEwen's appearance on BNN TV yesterday and send you over to the BNN link to go watch it yourself, but as Market Narrative has already done it (and far witter than wot i cud), I'm sending you there instead.

Setty is back after a travel hiatus and blogging good stuff. My fave of the last two days is this one on Colombian mining, because Setty takes no crap from any side of an argument.

This is great! John Helmer over at Dances With Bears shows how Russian mining moguls can get to have relaxed and trouble-free AGMs, as Alexei Mordashov of High River Gold (HRG.to) had his in the Yukon town of Whitehorse even though the company has no offices there or any sort of activity nearby. Sure beats actually having to talk to the proles, eh...

Gold Resource Corp (GORO) responds to the Barron's piece and the lady doth protest too much, methinks. In the end, the only thing I want to know is the 2q11 production numbers, cos money talks and bullshit walks.

Chart of the day is....

...a revisit and eye-keep on what's happening at the Lima Stock Exchange IGBVL "General" index this year:

Looks like this 19,000-or-bit-less level is the default ohMYgodWE'REallGONNAdie floor, as we've visited it three times since the electoral process pointed its finger at Ollanta Humala. Y'know....if I were a contrarian...

Guatemala's Elections: Clean Polls, Dirty Politics

Thanks to a kind reader who remains nameless, IKN passes on this link to the International Crisis Group's June 16th report on the upcoming Guatemalan Presidential elections. Entitled "Guatemala's Elections: Clean Polls, Dirty Politics" it's an excellent job of work by the ICG and great background reading  material for anyone interested in how the vote is shaping up and what we can expect by way of results.

Meanwhile, since that report was released it's become uncertain whether second-in-running Sandra Torres will even make it to the ballot paper, as there's currently a court case, now at the country's highest court of law, that may stop her from running because of her deliberate divorce from her husband, Alvaro Colom, the country's current President, whilst opposition leader and ex-general Otto Pérez Molina has stretched his lead in the polls to 42.5%. Confused? You won't be... after this week's episode of... BananaSoap.

Bayfield Ventures (BYV.v): It's so bad it's almost funny

This NR has to be contender for 2011 Junior Mining News Release of the Year.

And why this stock is still in the high 60s is beyond me. An utter scam, with Casey's nodding donkey Louis James pumper in chief. I can't wait to see what the bullshit liar Lobito has to say about BYV.v this  month, as he's obviously part of the problem, not part of the solution. Laughable.

Why are ECU Silver (ECU.to) fans such freakin' idiots? (Answered in just four easy to follow steps)

Step One: Post dated June 21st 2011 and entitled "I uncovered my short on ECU Silver (ECU.to) yesterday".

Step Two: Inevitable hatemail received from the ECU.to supporter's club (nah, not going to share them, they'll just make the place look ugly)

Step Three: Share price action since June 20th 2011:

Step Four: An Owl

Thanks for giving me your money, guys. Again. You people really should look up Einstein's definition of madness one of these days.

Chart of the day is....

...the 15 year zinc price chart:

It's moved off the $1 level these last few days and currently trading at $1.065. By the looks of things, $1.20/lb would be an interesting place to see what happens next. It's certainly a different market than it was 10 years ago though, and staring at this chart for a while reminds me just how often the loony goldbug brigade prefer to forget about the costs input side of mining...but that's just me.

The IKN Weekly, out now

IKN113 has just been sent to subscribers. Just sayin'.

Beautiful photos of an abandoned mine

Regular reader and site friend 'JG' kindly sends in this link to a whole bunch of photos (quick count is two dozen) of an old abandoned mine somewhere in Italy. Here's just one shot to give you a start, but the images from inside the mine are far prettier.

They're all here. Thanks JG.

Quote du jour...

...comes from David Merkel, author of the sector-famed and high traffic Aleph Blog.

A blogger with no enemies is a lousy blogger, particularly in finance.

Your humble scribe says YAY to that.

Itamar Franco, June 28, 1930 – July 2, 2011

Ex-President of Brazil Itamar Franco died today, aged 81.

Franco is memorable for many reasons, but perhaps his legacy is that he took over the helm of Brazil at a tough time in 1992 and within two years had got the runaway four digit Brazilian inflation rate the time under control. He did it by bringing institutional stability to a then-fraught country and his key move of appointing Cardoso as his FinMin who did the heavy financial lifting, brought the economy back into the bound of reality and subsequently won himself enough political capital to succeed Franco in 1995. 

One datapoint about Franco, however, is that he left office with a 90% approval rate and not even Lula could beat that. Today President Dilma Rousseff has declared seven days of official mourning in Brazil, which also gives you an idea of the importance of the man in his society.

Itamar Augusto Cautiero Franco, 1930-2011.  D.E.P.

UPDATE: Felix Salmon points your humble scribe to the Bloomie report of Itamar's passing

IKN recommends: LatIntelligence

Here's the link to LatIntelligence, a "serious" blog on LatAm political and economic affairs* that's existed in a very quiet manner for a couple of years, but in the last three or four months has picked up the pace of posts and is becoming a very decent read. Run by a certain Shannon O'Neill (biog link here that includes photo with nice smile...we like nice smiles), it doesn't have a strong political line to sell and its apparent neutrality is one of its best points. Also strong is the picking of individual cases that give a window to larger political and cultural issues, along with sober analysis of subject matter that shows O'Neill knows more about her subject that most.

IKN recos LatIntelligence to those who want to know more about how the region ticks. Here's the link again and as from today you'll also find it in the blogroll thingy over there on the right. Do like me and put it on your RSS.

*unlike your current port of call, but you should have realized that years ago

Gold Resource Corp (GORO): Barron's goes the Muddy Waters route

Here's the link to an article published today at Barron's on Gold Resource Corp (GORO). What you need to know:

• It's a hatchet job

• Its target, Gold Resource Corp (GORO), has plenty of reason to be the target of such a hatchet job. 

• However it doesn't have every reason to be a target, so the article's biased nature and highlighting of all the negative aspects is clear to see.

So what we have is a Muddy Waters type of negative article to read, which might be enough to put this company under a long-overdue spotlight. After all, Muddy Waters didn't have to be right on everything to blow Sino Forest (TRE.to) out of the water, Carson Block & Friends just had to be right on enough things to make their point. As for GORO, not everything is wrong at the company, but there's certainly enough heterodox stuff at GORO to make it deserving of more scrutiny, the type of scrutiny that a U$1.3Bn market cap company deserves. It's probably healthy all round to see this Barron's story, because if there really is enough meat on the GORO company it will survive and thrive on the refuting of criticisms such as in this report.

So go read the piece written by Michael Santoli for Barron's yourself (here's the link again to make sure you do). By way of a primer, here's a chunk of the script:

"...across the street from the Broadmoor Hotel is a $1.7 million, 3,600-square-foot town house zoned for residential use that serves as the corporate headquarters of Gold Resource (ticker: GORO), a 13-year-old junior mining company working some properties in the southern Mexican state of Oaxaca that has soared to a $1.3 billion stock-market value, thanks to the public zeal for gold investments and management's promises of having "some of the highest-grade deposits in the world." When Gold Resource acquired the town house last summer as a workplace for its five corporate employees, it paid the equivalent of almost 700 months' worth of the rent on its prior office space.

"If this real-estate indulgence were the only worrisome element in the Gold Resource story, perhaps investors would be safe in overlooking it. But it is only one red flag among many that haven't been heeded as the company's shares have run from 4 to 24 in the past two years, bestowing enough heft in market capitalization to win Gold Resource entry into the Russell 2000 index.


"In reality, the company is run by a small group of family members who have steadily sold shares on the way up, consistently promised more production than has been delivered and not conducted formal independent drilling studies to verify their claims that they will soon be mining 200,000 ounces of gold equivalent a year at zero cash cost."

DYODD, dudettes and dudes. Thanks for the headsup on the article sent out to reader A.

UPDATE Sunday AM: The Barron's note has now gone behind a paywall thingy, so......

The Glittering Prize 

Feature | SATURDAY, JULY 2, 2011 

By MICHAEL SANTOLI 

Gold Resources has a luxe new headquarters and a highly compensated management. Now all it needs is gold. 

The Broadmoor resort in Colorado Springs has served for 93 years as an enclave of leisure and luxury in the shadow of the Rocky Mountains, centered on a five-star hotel and featuring a pro-caliber golf course. This week, it will serve as host to the U.S. Women's Open tournament. 

Somewhat more improbably, across the street from the Broadmoor Hotel is a $1.7 million, 3,600-square-foot town house zoned for residential use that serves as the corporate headquarters of Gold Resource (ticker: GORO), a 13-year-old junior mining company working some properties in the southern Mexican state of Oaxaca that has soared to a $1.3 billion stock-market value, thanks to the public zeal for gold investments and management's promises of having "some of the highest-grade deposits in the world." When Gold Resource acquired the town house last summer as a workplace for its five corporate employees, it paid the equivalent of almost 700 months' worth of the rent on its prior office space. 


Some neighborhood: Gold Resource has set itself up in a town house across the street from Colorado's Springs' swanky Broadmoor Hotel, above. 


.If this real-estate indulgence were the only worrisome element in the Gold Resource story, perhaps investors would be safe in overlooking it. But it is only one red flag among many that haven't been heeded as the company's shares have run from 4 to 24 in the past two years, bestowing enough heft in market capitalization to win Gold Resource entry into the Russell 2000 index. 

In reality, the company is run by a small group of family members who have steadily sold shares on the way up, consistently promised more production than has been delivered and not conducted formal independent drilling studies to verify their claims that they will soon be mining 200,000 ounces of gold equivalent a year at zero cash cost. 

GOLD RESOURCE WAS CO-FOUNDED IN 1998 by William Reid, whose career in mining included a stint as head of U.S. Gold from 1977 to 2005, when he sold control of that company to Canadian gold entrepreneur Rob McEwen at a valuation of around $12 million. 

Bill Reid's brother, David, is Gold Resource's vice president of exploration and oversees drilling at the company's main El Aguila property in Mexico. Bill's son, Jason, was named president last year. Rounding out the executive ranks is Greg Patterson, head of corporate development. 

The company did a self-underwritten initial stock offering in 2006 with the help of Bill Conrad, co-founder of a firm called MCM Capital Management, in Denver. Conrad has been a backer and/or a director of several public micro-cap companies since the 1990s, some of which were delisted or merged into other companies as shells. Gold Resource's former part-time chief financial officer, Frank "Monty" Jennings, left earlier this year to serve as full-time CFO of Synergy Resources, an oil-and-gas driller for which Conrad also serves as director. 

Bill Reid served as interim CFO until last month, when the company signed on another part-time CFO, Paul Oberman, who works for a temporary-CFO firm and will be paid by the hour. The company's auditor, Stark Schenkein, is a local Denver firm with only a handful of small public-company clients. 

View Full Image 
.Conrad, who owns some 400,000 shares, is on the Gold Resource board as lead director, chairing both the audit and compensation committees. In the latter capacity, he approved his own cash compensation of $260,000 last year for his service as a director in a year when the company lost $23 million on $14.8 million in revenue. 

Bill Reid makes the rounds of gold investment conferences, extolling the rich vein of precious metals discovered at El Aguila, where the company built an open-pit mine and a mill and began production about a year ago. Reid claims that the company's mine, and an underground mine that was begun later, will yield enough lead and zinc byproducts to pay all of the cash costs of producing the gold and silver, leading to "zero cost" precious metals to sell, versus an industry average cost of $500 an ounce. 

As far back as 2007, company news releases were promising that production would begin the next year. But the start kept being pushed out because of permitting problems and construction delays. A representative explanation came in an April news release headlined, "Anomalous Storm Impacts Gold Resource Corporation's Aguila Project." The open pit, which was targeted to yield 70,000 ounces, produced only 20,000, leading to the expensive and complicated plan to do more underground blasting. 

In aggregate, over its dozen years of existence, the company has spent $95 million raised from equity investors to produce a total of $26 million in revenue, with $11.3 million of that coming in the quarter ended March 31 from the sale of "metals concentrates" to a single buyer, the closely held commodity dealer Trafigura Group, which did not respond to a request for comment. Neither Bill Reid nor Conrad responded to e-mailed questions. 

INVESTORS NEED TO TAKE the Reids' word on the mineral content of its deposits and how much it will cost to get them out of the ground, because the company has not sought an engineering study that could lead to estimates of "proven and probable reserves" under Securities and Exchange Commission standards. Bill Reid has been vocal about the wisdom of this approach, saying it would have taken years to complete such a study, and it was preferable simply to get into production as quickly as possible. Apex Silver Mines, now called Golden Minerals, explored the site in the early 2000s but walked away. Canyon Resource and Heemskirk were partners in the project but passed on their rights to acquire a larger stake in the company. 


Jason Reid, the president, in a series of e-mail exchanges, points to the endorsements of the company's two largest outside investors as indications of the value of the mining assets. Hochschild Mining (HOC.UK), a small Peruvian producer, took a 27% stake in the company as part of its strategy of acquiring a basket of young mining companies. 

Yet Hochschild acquired the stock at an average price of less than $5 a share and chose not to participate in the private placement last year, at 16, that raised $56 million via Jefferies & Co. While Hochschild geologists have re-assayed and reviewed some of Gold Resource's drilling core, no independent party has performed its own drilling, sampling and analysis. Hochschild's Isac Burstein, who is on the Gold Resource board, declined to comment. 

.The other large investor is Tocqueville Asset Management, whose top-performing Tocqueville Gold Fund (ticker: TGLDX) is managed by John Hathaway (subject of a favorable 2010 Barron's profile). Tocqueville owns more than 5% of the company. Like other bulls on the stock who discussed it with Barron's—a group that includes Michael Dudas of Jefferies, the only brokerage analyst who covers it, and John Doody of Gold Stock Analyst newsletter—Hathaway concedes that the Reids have taken an unconventional approach, but now that they are in production, the mine should bear out the promised value of the asset. 

Gold Resource has hired a firm to complete what's known as a 43-101 study, a Canadian standard for estimating "indicated" and "measured" mineral resources that is far less rigorous than the SEC's "probable and proven" standard. The effort is mainly aimed at getting the stock listed in Toronto. 

Hathaway says his analyst, Doug Groh, a geologist, has visited the site twice and found the samples consistent with a potential deposit of two to three million ounces of gold equivalent. Taken at face value and assuming $1,500 gold forever, that represents $3 billion to $4.5 billion in gross revenue over more than 10 years' time, before deducting for maintenance, administrative expenses or any future town-house purchases, for a company already valued at $1.3 billion. 

Hathaway points out that his Gold Resource position has gotten so large "mostly by appreciation" in the stock. So, the Reids' vast promises notwithstanding, the largest holders, who have known the company the longest, have not been buying the stock at anywhere near the current price. Meanwhile, the Reids and Conrad have been consistent sellers of the stock. In the past year alone, the foursome has sold $13.7 million worth, according to InsiderScore.com. 

Jason Reid says that the insider sales amount to only a small portion of management's holdings and reflect diversification of personal assets. He asked that any article wait until the second-quarter results are out, which he promised will show record production and earnings. He didn't wait for the numbers to come out to sell $700,000 in stock on May 19, a day after Barron's first e-mailed him some questions. He responds: "I may have sold more shares (representing a very small percentage of my holding) had you not contacted me, but I stopped selling as soon as I realized ALL your questions were/are slanted and I believe your article will be negative potentially driving down our stock." 

It's news to nobody that small mining companies can be promotional and hyperbolic about the underground riches they have found. Yet Gold Resource goes the extra step of promoting its stock with an unusual policy, begun in July 2010, of declaring special monthly cash dividends–lately four cents a share, for an annual run rate of $25 million. This despite the fact that the company's only profitable quarter, the first quarter of this year, required a few massages in its accounting, such as capitalizing mining equipment and supplies and a collapse in exploration spending. 

The Bottom Line 
Gold Resource's shares have almost doubled over the past year on a seemingly too-good-to-be-true promise of a "zero-cost" mine that could yield billions. Don't bet on it. 

.The company even has a tagline, "Earnings are opinion, cash is fact." They further propagate the gimmicky gold-bug idea of some day making its own gold coins to offer "dividends in kind." 

WHILE GOLD RESOURCE BOASTS that it is paying the dividend out of operating cash flow, the company has never, in a single quarter, produced positive operating cash flow. In the first quarter, when in its opinion it produced positive earnings, the cash balance fell by $9.7 million. The Reids use a measure called "mine gross profit" that ignores all construction and overhead costs. 

The dividends, which are categorized as "return of capital" for tax purposes, are funneling close to $4 million (in U.S. dollars mind you, not gold) a year to the Reids and Conrad in a tax-efficient way. And therein lies an interesting wrinkle. The dividends aren't taxed as income—unless the shares have been lent out to short-sellers. So there is a real incentive for investors to request that their shares not be lent out. 

That hasn't stopped the short interest from doubling in the past two months to 3.4 million shares. Clearly, some investors aren't taking the Reids' word on how much gold they have, or what it will cost to get at it, or when they might do so. That's probably wise.

The Friday OT: Red Hot Chili Peppers, Desecration Smile

The video is no great shakes but the song...oh the song. Such a good music band