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Which will be worth more at end 2015?

7/23/11

Mickey Fulp podcasts on Peru and its mining industry

Out just a few minutes ago, the Mercenary One gives us nearly 12 minutes of insight into Peru and its mining industry via podcast. You can download and listen yourself by clicking right here.

And she said no no no

KD's facts spoiling Eric Sprott's good story


Kid Dynamite has being doing sterling work (geddit?) by tracking the way in which Eric Sprott has been mindfarking his own flock and creaming the profits generated by them into his own back pocket, Eric's vehicle of choice being his silver fund PSLV. Today KD updates on the affair and notes that Eric has sold more stock at a premium to NAV.....and oh what a coincidence!....just after preaching the old "silver to the moon Alice" line in public speakpits and forums that give you rampant silverbugs them there sticky dreams.

Go see the latest in KD's excellent series right here and make a point of clicking thru his links provided in-post to see the previous stuff. When you do, you'll notice how patient KD has been with the more-cash-than-sense boorish and arrogant idiots who've left comments. Far more patient than your humble scribe could ever be, that's for sure.

Junior mining quote of the week...

...comes from Market Narrative in this post:

"...this is aided by the fact that most of the people who write about junior miners are fundamentalist Christians, racists, neo-Nazis, "paleo-conservatives", or at least far to the right of Strom Thurmond.

The good things about these people are:
  1. their thought patterns are terribly predictable.
  2. because of (1), you can easily fleece them out of all their cash.
  3. they're stupid enough to keep coming back for more.

Yes, yes and thrice yes. IWNATTOS then mentions this humble scribe. This humble scribe then leaves a comment. It then all kind of degenerates into a slanging match about English grammar. Go read it all if you dare.

7/22/11

The Friday OT: The Kirsty H double bill

Today's Friday OT is humbly dedicated to reader Kirsty H and it's two for the price of one.

First up, a bit of Lindisfarne:


And the second is Toni Basil's all-time classic.


Enjoy the haircuts, the make-up, the everything.

Update: And then there's this, definitely the best thing Billy Corgan did and stands up against anything in the music of the last 20 years. Tonight Tonight sounds even better now than it did then and makes my heart ache with pleasure and memories. Superlative track.

More letters. The Four Cs

From left to right, Correa (Rafa), Castro (Fidel), Chávez (Hugo), Castro (Raúl)

And of course Simon Bolivar on the wall. The four dudes met today, possibly trying to decide what to do with Rafa's $40m windfall.

K is for Kirchner, K is for Killer, and S is for...

...


Yes, the silly season of Argentine Presidential Elections is upon us and although we all know Cristina wins this thing, we have to have some fun along the way.

Here's a direct translation of this report at La Nacion Argentina about an advert running for Channel 13 of Argentina's new HDTV service. For those unaware, C13 is owned by Kirchner opposition Clarin Group. Under the report, you get to see the advert (and it's really quite good) yourself. No words in it either, pure action/adventure...and stuff.

K Polemic for a Channel 13 Advertisement
A Kirchner psychiatrist analyzed the spot where an attempted assassination of a president is seen. He denounces the large quantity of K letters, a message that suggests "mental manipulation" according to the expert.

Thursday, 21 July

Scandal has erupted due to an advert in which Channel 13 publicizes its High Definition TV (HD) service. In it, a young female killer is seen trying to assassinate a supposed president of a European country who is waving from a balcony. The assassin misses the target and shoots a TV with HD images which is benig watched by a pair of pensioners in an apartment close to the site. 

Up to now, all normal stuff, but the problems start with the inscriptions. Psychiatrist Marcelo Dignani, self-proclaimed "national and popular (i.e. Kirchner) militant, has made an analysis of the advert and found a large quantity of K letters that appear semi-hidden, as in the advert words in Spanish and a supposed East European language appear.

"My duty as a professional in the popular field is to warn (about this)", he said. There arer 120 K letters, between normal Ks, double Ks or reversed Ks", he revealed.

This video analysis was published under the title "Subliminal Anti K (Kirchner) Messages in Channel 13" by the Kirchnerite publicity agency Paco Urondo. They make referense to this advert as a proposal that incites "Magnicide".


La plata viene sola

The title of this post roughly means "the money arrives on its own", a now famous quote of García's as he tried to explain how he got wealthy to journalist/novelist Jaime Bayly. Anyway, that's a side point and here's a photograph that comes to you via IDL Reporteros and Mate Pastor, the blog of Peru politico Juan Sheput.

All the details of how Peru's drug squad tracked and nabbed Nader in that above link.

Chart of the day is...

...copper daily candles.

 At what point does the world stop the handwringing and admit that copper above four indefinitely is a pretty clear bet?

7/21/11

Reuters on the new Peru cabinet

Here's the link to a good, comprehensive note out of Reuters a few minutes ago about the new ministerial cabinet of Ollanta Humala. Smart insight as to what all the appointments mean including ramifications for the mining industry, but let's sum it up in just eleven letters: FDI FRIENDLY.

Here's how the note starts, click through for the rest.

(Reuters) - Leftist Peruvian President-elect Ollanta Humala picked more centrists for his Cabinet on Thursday as he tries to reassure investors he will govern as a moderate in one of the world's fastest-growing economies.
To burnish the pragmatic image Humala sought to project during the campaign, he has hired two conservative economists who worked under departing President Alan Garcia and are respected on Wall Street to run the central bank and finance ministry.
Continues here

Covering my short on ECU Silver (ECU.to) and taking profits

This ridiculous excuse for a silver miner may well go even lower, but a near 20% win in one month since uncovering the short position (as witnessed here) is good enough for me. Not getting greedy on this one and there'll always be another time to uncover the short and shear the flock again.



Thanks again for your money, idiot longs. Keep worshipping at the altar of arch scumbag paid pumper Mexico Mike for as long as possible, cos the rest of us really appreciate it.

UPDATE: Handy hint for those wishing to engage with your author via e-mail. Don't put "ecu.to" anywhere in the title line, as those mails tend to be deleted unread. Biondi shots served, the end.

Executive decision

As your author was up last night tending a sick kid (nothing serious I hasten to add, just a stomach thing that's now finished) and didn't get much sleep, now that a whole bunch of e-mail fielding and catchuppering has been done an executive decision has just been made Chez Otto: The markets can get along just fine without the presence of your humble scribe so this post says "hasta mañana" to you all.

However, I'll leave you with this paste-out of a letter to the editor over at Northern Miner (we have no qualms about pasting out NM stuff ever since one of their reporters ripped off a bunch of stuff from this blog and pretended it was his own work), as it was sent in by A. Person and is a very good read that concerns a rising and rather disturbing trend amongst juniors. The tail wagging the dog? 

So chau for now and make a point of digesting what's below. Good education.

Letter to the editor: How big can Côté Lake get? Depends how you stretch it!
TEXT SIZE bigger text smaller text
2011-07-12
In the cover story of The Northern Miner's June 27 - July 3, 2011 issue, staff writer Anthony Vaccaro describes Trelawney Mining and Exploration's activity on its newly discovered Côté Lake gold deposit in the southwestern Abitibi region of Ontario.
Trelawney has made remarkable progress in just one year, delineating a National Instrument 43-101 compliant inferred gold resource of 4.2 million oz. to a depth of 550 metres at a grade of 1.0 gram per tonne using a cut-off grade of 0.3 gram gold. Citing analysts' euphoric projections that this resource has now grown to 8 to 10 million oz., Mr. Vaccaro asks "How big can it get?"
Côté Lake is described as being unlike typical shear-hosted Abitibi gold deposits, instead being hosted by brecciated granitic rocks and sharing many features with porphyry deposits.
However, the deposit nicely fits current gold-exploration requirements where the preferred target is a wide, large-tonnage deposit amenable to open-pit mining. The tendency today is to stretch the width and depth of these deposits as much as possible to maximize the ounces that can be extracted while maintaining an acceptable profit margin.
The parameters and assumptions used to establish the 4.2-million-oz. gold resource at Côté Lake are well documented in a technical report prepared by independent consultants Roscoe Postle Associates (RPA) as an audit of an initial study by Trelawney's consultant. RPA's report is clearly written and thorough, and its assumptions are fairly standard for an open-pit mining operation in a readily accessible location in the level terrain of the Canadian Shield.
However, there are two features of the Côté Lake deposit which suggest that a more conservative approach may be needed to allow for possible unpleasant surprises. The first is that a significant portion of the deposit is not as close to surface as other gold deposits of a similar 1.0-gram-gold grade that are currently being mined or developed in a shield setting. The second is that the gold grade within the resource limits is highly variable, with many samples being barren and much of the 1-gram-per-tonne average gold content contributed by a small number of high-grade samples. With the mineralization being hosted mainly in the breccia matrix, these high-grade intercepts are unlikely to have significant continuity.
The 4.2-million-oz. inferred resource is based on the first 47 core holes drilled at Côté Lake. These holes tested a strike length of roughly 800 metres between grid lines 88+00E and 96+00E, with most holes in the eastern 400 metres.
Cross and longitudinal sections from RPA's report and a Trelawney presentation to investors dated May 2011, indicate that the western half of the deposit crops out whereas, in the eastern half, very little mineralization occurs within 100 metres of surface. It appears that only 10% to 20% of the gold resource lies above the 100-metre level, limiting the potential for early payback of capital costs if a mine is developed at Côté Lake.
A fundamental requirement for mineralization to qualify as a resource, even in the preliminary "inferred" category of Côté Lake and similar early-stage deposits, is that the mineralization must have "reasonable prospects for economic extraction."
In the Abitibi, does all or even a significant portion of a 4.2-million-oz. gold deposit with a grade of just 1.0 gram gold at a 0.3 g/t cut-off and with more than 80% of the deposit lying between depths of 100 and 550 metres actually have reasonable prospects for economic extraction?
One table in RPA's technical report (11-2) features 15 drill holes having mineralized intervals grading between 0.82 and 1.75 grams gold per tonne across widths of 16 to 196 metres, in some cases with two or three such intervals in the hole. The other 32 holes included in the resource study but not in the table generally had significantly shorter and/or lower-grade mineralized sections; all were included in Trelawney's news releases.  The typical sample interval was 1 metre.
The 47 holes considered in the resource study yielded 54 samples having unusually high-grade gold assays exceeding 25 grams gold per tonne and ranging up to 785 grams gold; these were capped at 25 grams per tonne to limit their influence on the average grade of the resource.
This strict capping is commendable but the gold grades of the 1-metre samples appear to be so variable throughout the deposit that an even more conservative approach may be needed.
RPA notes that the resource blocks include 8,807 samples. However, not all of these samples exceeded the 0.3-gram-gold resource cut-off grade. Rather, as is usual when estimating resources, the grade was obtained statistically by "compositing" (essentially averaging) the assays, in this case in 2-metre intervals across 10-metre sections, or ten consecutive 1-metre samples.
Thus a single assay of just 3 grams gold per tonne might qualify a 10-sample section for inclusion in the 4.2-million-oz. gold resource even if the other nine samples contained no gold whatsoever.
RPA further notes that the median grade of the 8,807 samples is just 0.34 gram gold per tonne, indicating that nearly half of the samples within the resource blocks were below the 0.3-gram cut-off grade.
Trelawney's cross sections show many 30- to 50-metre intervals within the resource field having grades only marginally above cut-off. Would a large mining operation at Côté Lake be able to withstand significant periods with very little gold coming out of the mill?
At the deposit scale, the major dependence of Côté Lake's average resource grade on the highest-grade samples is evidenced by the fact that the 4.2-million-oz. resource diminishes by only 300,000 oz., or 7%, if the cut-off grade is raised from 0.3 to 0.5 gram gold per tonne. This suggests that capping only those assays greater than 25 grams gold may not be sufficient; it may be necessary to cap somewhat lower values as well.
At the drill-hole scale, the degree of grade dependence on the highest assays is illustrated by hole 33 on Section 94+00E. This hole was featured in a Nov. 16, 2010, Trelawney news release. Using a 50-grams-gold cap rather than the more-conservative 25 grams subsequently adopted for the resource calculations, Trelawney reported a remarkably long, 520.3-metre intercept grading 0.92 gram gold per tonne. Within this interval, a 193.5-metre, sub-interval graded 1.42 grams gold. However, 62% of the gold was contributed by three short, 0.95- to 1.7-metre sections spaced 40 to 60 metres apart, with the other 190 metres grading just 0.54 gram gold, well below the 1.0 gram per tonne average resource grade.
In contrast, a recent news release by Atac Resources announcing a 114.9-metre drill intercept grading 3.15 grams gold per tonne from its Conrad discovery in the Yukon included a footnote clearly explaining that 32 of the 45 samples within this wide intercept yielded greater than 1 gram gold per tonne and only 4 samples yielded less than 0.25 gram gold, thereby assuring potential investors that the gold grade is relatively uniform and that the mineralized interval was not stretched to boost the size of the zone.
Côté Lake is not the only new gold deposit in the Canadian Shield for which the length of the mineralized drill intercepts and the depth of the proposed mine pit have been stretched to maximize the resource ounces. However, the Côté Lake resource is based on just 47 drill holes whereas the others were determined from hundreds of holes, providing a better understanding of the gold-grade distribution, and also have a higher percentage of their resources at shallower depths.
In today's euphoric markets, there is a lot of pressure from analysts, shareholders and the media for gold exploration companies to quickly deliver more ounces. In The Northern Miner interview Trelawney's president, Greg Gibson, is quoted as saying: "We've done this so quickly that we weren't able to prepare for everything, but the world has said we're on to the real deal so we have to keep on pushing."
Unfortunately, history has shown repeatedly that hurrying results to meet the expectations of those who may have little interest in oversight and due diligence is a perilous path.
Have we so quickly forgotten the many mines that were opened in 1987 with easy money obtained from poorly regulated flow-through financings only to fail within a year, the Bre-X Minerals debacle of 1997, the dot-com bubble of 2000 and the juiced-up derivatives and asset-backed commercial paper offerings that triggered the 2008 recession?
The market meltdown from each of these events devastated our mineral exploration industry, drying up our principal source of capital and disrupting the careers of many mining professionals, thereby creating a lingering shortfall of qualified personnel with no end in sight.
Recently we had another market warning from Sino-Forest.
Will we in the exploration industry, from geologists and analysts to the media and stock exchanges, heed these warnings and muddy the crystal-clear waters underpinning euphoric resource projections by asking penetrating questions about the quality of these resources? Or will we once again raise investor expectations to unattainable levels and kill the golden goose?
Stu Averill, P. Geo., president
Overburden Drilling Management Ltd.
Ottawa, Ont.

Chart of the day is...

...built to show that South American stocks are not having a vintage year so far.


So far at least. DYODD

Luis Castilla is confirmed as Peru's next FinMin

The markets will like the news out of Peru this evening, as Ollanta Humala has just confirmed the strong rumours that have been floating round since last week and has named Luis Miguel Castilla, a economically orthodox technocrat-type of play, as his Finance Minister. (and oh coolness, his party made the call via Twitter, check it out right here). Along with the weekend's decision to keep Julio Velarde at CenBank, now that Luis Castilla has the other main roles that matters to the rest of the world the stage is now clear for a Peru that's not going to spook you gringos out of FDI in the country.

7/20/11

21st century evidence that Magdalenes still practice the world's second oldest profession


noun /ˈmagdaˌlēn/  /-ˌlin/
magdalenes, plural
  1. St. Mary Magdalene

  2. A reformed prostitute

  3. A home for reformed prostitutes

A classic tactic of market scoundrels is to change the name of your company when it's all gone pear-shaped, presumably in the hope of suckering in a whole bunch of new sheep in the future...y'know, the ones who can't be bothered (or simply don't have the brainpower) to do basic of DD. Another symptom of failure is the share rollback, when a company will reverse split a rapidly falling PPS in order to make things look better and "attract institutional shareholders"....y'know, the ones with basic rules about not buying pennycrapper dogs (for obvious reasons).

So when you see a company run by rather iffy and most certainly self-serving individuals announce a name change and a rollback in a disaster of a junior O&G, it's time to unfurl those red flags at IKN and wave 'em in your face. Here's Reuters take late last week (when your author was on the road) on how Alange Energy (ALE.v) no longer exists and PetroMagdalena (PMD.v) is the new name for Serafino Iacono's unmitigated snafu.

UPDATE 1-Alange Energy sets reverse stock split, to change name


Fri Jul 15, 2011 5:20pm EDT
* Sets one-for-seven reverse split of common shares, warrants
* To change name to PetroMagdalena Energy Corp
* Consolidation, name to change effective July 19 (Follows Alerts)
July 15 (Reuters) - Canadian oil exploration company Alange Energy Corp said it will effect a one-for-seven reverse split of its common shares to reduce volatility and to make the stock more attractive to institutional investors.
Toronto-based Alange will also consolidate its listed warrants on a one-for-seven basis, it said in a statement.
The company said it will change its name to PetroMagdalena Energy Corp, and that the shares and warrants will start trading on a post-consolidation basis from Tuesday under the symbols "PMD" and "PMD.WT".
Shares of the company closed at 21 Canadian cents on Friday on the Toronto Venture Exchange. (Reporting by Mayuresh Tungare in Bangalore; Editing by Joyjeet Das)

A home for reformed prostitutes, eh? The only doubtful word in that definition is 'reformed'. Anyway, if you want to know more about the bullshit that Alange ran on an unsuspecting public, go check out Setty's coverage of the stock, because it's unbeatable. Start here, go here and here and then find even more at his site...all great stuff

Mojitos served, the end.

Stillwater (SWC) winning friends and influencing people. Not

Here's the chart of Stillwater (SWC) and Peregrine Metals (PGM.to) since the day two Mondays ago when SWC, a company that mines palladium and platinum in Montana USA, announced it was buying a explorer with copper in Argentina.


I get the feeling SWC shareholders haven't had the same optimistic view of this deal that the SWC management (holders of a whopping 0.8% of shares between them) have voiced and y'know what, there's even a chance that this deal falls through. We went into all this and why your author decided to sell his PGM.to at $2.60 in IKN15 last weekend and fwiw* here's how that piece ended:


"So to sum up, there’s a small chance that SWC comes under pressure to drop this deal, with evidence supplied by the drop in the share price and backed up by the weakness giving rivals a potential opportunity to buy SWC on the cheap. Because of this, there’s a chance that SWC under its current management will not be able to close its desired deal and therefore PGM drops from its current “under offer” type prices. This is why I decided to leave the position last week, take the money and run."

DYODD, dude.

*not much

Shockah! Gold down under $1600/oz on a US debt deal.....who could possibly have predicted such a thing?

Errr...me. On July 14th to be exact, in this post which said:


"Anyway, when all this stupidity about the US debt is behind us, expect gold to get jawboned down a bit. Might be over 1.6k by then, though"

That day gold closed at 1590. It then went to 1610 or so. Now it's 1587. DYODD

Catching up with the Portage Resources (POTG.pk) scam

It looks like the light shone upon the bullshit scam Portage Resources (POTG.pk) by scambusting website The Street Sweeper has had an effect. Before last week's Street Sweeper note linked here, POTG.pk was up in the stupid $1+ range. With Yesterday's close at $0.64 the correction to its true value, about 2c by my reckoning, has started.


Still a long way to go though, and oodles of downside left in the pipeline for anyone stupid enough to have bought this criminal pumpjob. DYODD, but help that DD by making Street Sweeper a part of your market reading material.

Monterrico Metals pays for its violent past

With thanks due to regular reader 'MH' for the headsup, this report from the Peru Support Group brings news on how Monterrico Metals, widely featured on this blog in earlier times for its violence and general nastiness in treating Peru locals, has reached an out of court settlement with the people it terrorized and has been hit where it hurts a capitalist the most. Here's a past-out of proceedings.

Legal Proceedings Against Monterrico Metals Settled

20 July 2011
Legal proceedings against UK-based Monterrico Metals PLC by 33 members of a peasant community in northern Peru were settled earlier today by compensation payments, without admission of liability. The claimants allege torture by the Peruvian police after protesting at Monterrico's Rio Blanco copper mine in Piura in August 2005 (for a video outlining the allegations and background to the case please click here). The settlement means a hearing at the UK High Court, scheduled for October this year, will no longer go ahead. One consequence of this is that the full details of the events of August 2005 are unlikely ever to be established or publicly disclosed. Nevertheless, the Peru Support Group welcomes the payment of compensation to those who allegedly suffered mistreatment.
The Rio Blanco mine has been a key focal point for our organisation since March 2006 when we sponsored a meeting in the Houses of Parliament in which the project was debated. During the meeting, local citizens’ organisations and representatives from Monterrico Metals expressed radically different analyses of both the events of August 2005 and of the wider effects of the firm’s operations on development in Piura. To establish the veracity of their claims, PSG President Lord Avebury suggested we send an independent delegation to the region to visit the sites in question and discuss the project with local organisations and experts. With Monterrico Metals’s assent, the delegation travelled to Piura in October 2006 and its conclusions were subsequently published in our report entitledMining and Development in Peru, With Special Reference to the Rio Blanco Project, Piura’ (March 2007). We have also supported the legal proceedings subsequent to the report by providing UK law firm Leigh Day, who represented the claimants, with political context to the case, facilitating contact with Peruvian organisations and helping to coordinate translations of witness statements.
Today’s settlement represents a significant achievement for the claimants and communities affected by the events of 2005. However, it has not resolved all the outstanding issues related to the Rio Blanco project. Domestic attempts to prosecute police and private security officers who allegedly committed the abuses are yet to make much headway. Many in Piura also express concern over the likely environmental impact of the Rio Blanco project (now owned by Chinese firm Zijn) when it begins production later this year. As such, further tensions between the local communities and the mine operator cannot be ruled out.
Consequently, the PSG will continue to closely monitor developments around the project in Piura for the foreseeable future. In the meantime, we encourage the mine’s new owner to engage in regular, participatory dialogue with the local communities in an effort to minimise the risk of renewed social conflict.

Chart of the day is...

...a close-up of very recent action in the Gold/Silver Ratio (GSR) as a follow-on from last week.


Now Gary over at BiiWii would call the downward shift of the GSR a liquidity event and good for ocverall prospects (I think, daring to put words in the chartmeister's mouth). Me, i say it's geting too low again and if it keeps up we're headin' for a bruisin'.

Eurasia on Peru and the run-up to the Presidential handover

The Julio Velarde news gets the Eurasia treatment in this note out today. Enjoy.

PERU: Humala sends strong signals of policy moderation, but medium term risks remain
19 July 2011 03:31 PM EDT

President-elect Ollanta Humala's decision to keep current President of the Central Bank and respected economist Julio Velarde in his post amidst concerns about slowing private investment and falling approval ratings represent the strongest signal to date over his commitment to maintain macroeconomic stability. The next most important decision for Humala now rests in who he will choose to head the Ministry of Finance, where there is growing speculation he will announce tomorrow Luis Miguel Castilla, another moderate economist, to the post. The fact that Humala is responding to early difficulties through a stronger turn toward the center reinforces our view that he will start his administration on a positive note and will prioritize stability. That said, we continue to expect economic policy to take a negative turn in the medium term as Humala gradually increases spending to meet his ambitious social and economic goals in a context where his expectations about new source of revenue are probably overly optimistic. Such a risk is particularly acute if Humala's approval ratings don't recover or drop further in his first year in government.

Humala's decision to keep Central Bank President Julio Velarde in his post, announced in an interview Sunday night (he added that Velarde accepted to stay) is the strongest indicator to date that his administration will pursue relatively moderate macroeconomic policies. Humala originally seemed to prefer a new, less conservative president for the board, so the decision to keep Velarde is a positive surprise. Of the central bank's seven board members, the executive will appoint another three (the other three are appointed by congress), but it looks unlikely that Velarde would have accepted to stay if he would not at least have a say on other executive appointments. Given that the constitution guarantees the autonomy of the central bank, and that the central bank sets inflation targets, the decision to maintain Velarde indicates that keeping inflation low will be a priority under Humala.

The next most important decision for Humala is who he will choose to head the Ministry of Finance. The strongest candidate for the post appeared to be Kurt Burneo, who was former President Alejandro Toledo's main economic advisor and joined the Humala campaign after the first round of the presidential election. Burneo has experience in office and is viewed as more moderate than Felix Jimenez, Humala's long-term economic advisor, but shares some of Humala's views about the need for a larger role for the state in the economy. Now there is growing speculation he will choose to the post Luis Miguel Castilla, a moderate US-trained economist with a more technocratic profile than Burneo. Speculation grew after Castilla resigned from his post as Vice-Minister of Finance last Friday. Humala has always been more open to appointing independent technocrats to the central bank than to head the Ministry of Finance, a post he views as highly strategic given its role on budget issues and fiscal policy. As a result, decision to appointing Castilla would represent another strong early signal of moderation.

While the decision to keep Velarde in his post and the potential nomination of Castilla to the Ministry of Finance are a bit of a surprise, we have long expected Humala to appoint respected economists to the central bank and place a premium on stability, so this doesn't change fundamentally our baseline view on his economic policies.

Humala's decision to veer more strongly to the center, however, is probably a function of concerns with slowing private investment, which would affect future economic growth and tax collection, but also with a sharp decline in support for Humala over this past month. According to an Ipsos/Apoyo poll released over the weekend support for him dropped from 70% to 41%. While part of the drop was probably driven by a high profile scandal involving his brother (who has been accused of trying to use his family ties to negotiate private deals in a recent trip to Russia), part of it may also be driven by more negative economic news associated with uncertainties surrounding the transition. The fact Humala is responding to such difficulties through a stronger turn toward moderation is certainly a positive sign, but it probably reinforced his view on the need for a "positive shock" on expectations early in his administration.

Despite the recent positive developments, we continue to expect economic policy to take a negative turn in comparison to the past administrations-particularly in year two and three of his administration. Humala is well aware that sending positive signals to investors early in his administration is critical to avoid an environment of uncertainty which could dampen investment, economic growth and tax collection. But he also wants to expand the role of the state in the economy through social programs, infrastructure investment and an active industrial policy, all of which will require more spending. He will increase spending gradually and seek to finance new expenditure with higher tax revenues on mining and measures to fight tax evasion and corruption. However, such measures look unlikely to generate additional revenue equivalent to 3% to 4% of GDP as the government expects. As a result, reconciling conservative macroeconomic policies with his more interventionist goals won't be easy. As we have been arguing, if Humala faces tough decisions later on his administration, he will probably lean towards a more heterodox economic policy mix.

The trajectory of Humala's approval ratings will be a key variable to follow. If his approval ratings don't recover or drop further in his first year in government, his incentives to pursue policies that are less-investor friendly will increase over time. While the recent decline in support for him probably contributed to a turn toward moderation, if that doesn't yield political or economic results Humala could be tempted later on in his mandate to adopt a more heterodox approach. The fact that Humala's approval ratings dropped so sharply and so early is worrisome. Past presidents started with about 60% of approval, but support for them declined over the course of their first year in office and recovered only partially towards the end of their terms. This suggests that presidential approval ratings in Peru are structurally low. It looks like Humala will start with a lower level of support, so if there is a repetition of past trends, he may struggle to recover support and his approval ratings could very well drop further. If that happens, Humala could feel that he needs to spend more to deliver on campaign promises and boost political support.

Even in this scenario Humala is unlikely to respond with a radical shift in economic policy, but the risk of a negative turn in policy would increase. He wouldn't put stability at risk, but would probably test the limits on fiscal policy, which could generate political tensions between the executive and the independent monetary authority if the central bank starts a tightening cycle that could dampen growth. There would be higher risks for the mining sector as well. While Humala looks poised to increase taxes on mining operations, which he views as a key source of new revenue, we expect him to show some restraint to avoid hurting a promising pipeline of investment (See Humala likely to show some restraint in approach to mining sector, from 1 July). However, greater fiscal pressures and a weaker political standing would increase the risk of a more cumbersome tax hike.
 
Erasto Almeida
Analyst, Latin America

7/19/11

Chart of the day....

...begs the question, "So did the market like the news about Julio Velarde staying on at the Peru CenBank?"

Answer: Errrr......yes.


And well it should. Nice to see the penny finally dropping amongst you gringos. Meanwhile, your author has one more day of roadtrip to do so normal service resumes mañana (well...what passes for normal round here, anyway). Toodle pip!

cuentos de jaimito

The bad news for Jaime: He sold too early

Rio Alto Mining Limited (RIO)

As of July 18th, 2011
Filing Date Transaction Date Insider Name Ownership Type Securities Nature of transaction # or value acquired or disposed of Unit Price
Jul 18/11 Jul 15/11 Soldi, Jaime Direct Ownership Common Shares 10 - Disposition in the public market -14,900 $2.240
Jul 18/11 Jul 15/11 Soldi, Jaime Direct Ownership Common Shares 10 - Disposition in the public market -5,100 $2.230
Jul 18/11 Jul 15/11 Soldi, Jaime Direct Ownership Common Shares 10 - Disposition in the public market -80,000 $2.150

The good news for Jaime: Here still has 927,288 shares left in his account (as well as a whole bunch of options at a buck fifty) so he's still benefitting from the decent rebound in RIO.v.

Glencore and Marcobre

I know I'm late to this story, but it's getting an airing here all the same. So Chariot Resources sells to a Hong Kong company that previously had precisely zero knowledge of mining, then a year an a bit later the Hong Kongers flip the property out to the mighty Glencore for a $200m cash profit. Beats working and shows that the current phase of deals in copper projects are valuing them ever higher. Here's AFP with its take on the story.

GENEVA — Swiss mining giant Glencore said Monday it would buy a majority stake in Peruvian mine owner Marcobre for $475 million in cash.
"Glencore International AG, a wholly-owned subsidiary of Glencore International plc, today announced that it conditionally agreed to acquire from CST Mining Group Limited a 70 percent interest in Marcobre S.A.C.," said the group in a statement.
Marcobre owns Marcona Copper Property and the property's exploration and development project Mina Justa, which contains resources of 413.3 million tonnes containing 0.79 percent copper.
"Mina Justa would ideally complement Glencore?s existing polymetallic mining operations in Peru, and add significant value to our worldwide group of copper mining assets," said Daniel Mate, Glencore co-director of zinc, copper and lead department.
The deal is expected to be closed in October.

7/18/11

Bear Creek Mining (BCM.v): Our kung fu is stronger than yours

Today's handy hint. If you are thinking of investment opportunities in Latin America, you'll find youself at a great advantage if you understand how Latin America works.

Not pretend to understand, mind you. Understand.

Chart of the day is...

...gold dailies, showing $1600.

 Happy to have lost that bet, BB :-)

Still on the road, posting still light. Have nice day yes thank you yes please do.

Ollanta Humala calls Julio Velarde as the CenBank Head

I was impressed. Tonight in a live TV interview, president-elect of Peru Ollanta Humala revealed to a wide and gullible world (your author included) that current (and very successful) Peru CenBank head, Julio Velarde, would continue as head of said Central Bank of Peru. If you, kind and gentle gringo, needed a reason to expect that Peru's macro policy would change it's tough to think of a better example of a person in power calling BS.

Peru is currently cheap and a buy. The end. Toldya nuff times already. The end.

7/17/11

Tristeza nao tem fin

Well done Paraguay, Uruguay.....but Peru for the cup, carajoooo.

The IKN Weekly, out now

IKN115 has just been sent to subscribers. Worth a big grin, dude.