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8/10/12

The Friday OT: Gustav Holst; Mars, the bringer of war (Planets Suite, 1st movement)

Boston Symphony version, vintage 1970, conducted by William Steinberg (good sound quality, too):







So I get this mail from Tommy Humphreys...

...of CEO.ca and Cambridge House, unashamedly pumping his interview with IAMGOLD's (IMG.to) (IAG) head honcho Letwin. Here's the whole e-mail:

Title: maybe you would blog this?????????
Body: 
http://ceo.ca/iamgold-ceo-letwin-gold-mining-confidence-game/ 
Satire welcomed.
Enjoy your day,
--
CEO.CA  |  CambridgeHouse.com  |  @TommyHump  |  +1.604.607.4835Disclaimer: This e-mail and any attachments may contain confidential and privileged information. If you are not the intended recipient, please notify the sender immediately by return e-mail, delete this e-mail and destroy any copies. Any dissemination or use of this information by a person other than the intended recipient is unauthorized and may be illegal.

OK Tommy, as it's you and even though you suck up nastily to the Casey Research crew and screw your "dissemination may be illegal", ok?

Here's the link to the interview in which yet another CEO talks bird's-eye-view bullshit (you telling me this guy "will allow mistakes" without firing asses? And he's a CEO? Yeah right...). And did you ask him about the Ecuador Quimsacocha clustafark and why the locals hate IMG so much? Oh, ok. And what about the way in which IMG disposed of La Arena, what with RIO.to now worth $750m mkt cap on the back of that deposit alone? No? Nothing? Oh well. Serioiusly, I'd love to see just one of you kow-towing suck-up hacks ask just one difficult question of these mighty industry paragons of loveliness just once instead of just throwing them constant puffballs. Grow some balls, willyaz?

Enough satire yet? Want a bit more?

UPDATE: Second mail received from Humphreys, reproduced in full here:

"haha you are such a turd."

No argument with that.


Don Coxe

The dude writes on the commods market like a dream and has a better sense of financial history than just about any commentator out there, but...


Just sayin'

Oh by the way, here linked is the latest Basic Points dated August 2012. Thanks due to those who forwarded the PDf to your humble scribe during the breaktime and to DC for this hyperlink.

Changes

The recent days away from the office and doing non-work things also gave your humble scribe time to reflect on the state of his current junior mining company portfolio, refected in the 'Stocks to Follow' list in The IKN Weekly. And the fact is that things aren't the way I'd like them to be in that portfolio so as of this weekend there are going to be some changes, first in strategic direction and then, bit by bit, companies held and covered.

The other thing I found myself reflecting upon a lot while soaking bones in large pools of hot mineralized waters, to an extent that it surprised me, is the relationship of two currencies as seen in this chart:


In the medium-term, I'm forced to concede that Loonie vs Greenback will become an important factor in stock selection. It's a balance sheet thing, y'see...

If you want "bullion brawn", don't buy gold miners

I'm sent this link by reader Dave (ty man), an interesting report in Canada's Globe & Mail written by one Michael Bowman. Entitled Gold miners with bullion brawn, it's all about how much gold bullion production you get for your buck when buying into gold mining companies and producers. Twenty-two producers are covered, including all the tier 1 names you'd expect and also smaller, newer kids on the block such as B2Gold, San Gold, etc (read the thing for the full list).

The payoff comes when Bowman offers up a table that shows how much gold production you get for every $10,000 you invest in company shares right now and to get you in the picture, here's an extract from the report:

What did we find? 
For a $10,000 investment in Centerra Gold Inc., an investor would be picking up 3.77 ounces of bullion production, and a 2.28 per cent dividend. A $10,000 investment in Canada’s largest gold company, Barrick Gold Corp., would buy 2.33 ounces of production, and a 2.45 per cent dividend yield. With Goldcorp Inc., you are receiving less than an ounce of production. continues here.

As soon as I saw the list, I couldn't help noticing how poorly all these companies, including top-placed Centerra, come off against just buying gold or perhaps GLD, the gold bullion ETF. Right now, if you put $10k into those, you get 6.2 ounces of gold. This means that these mining companies have to justify their current share price (not to mention their growth potential in something other than their gold asset value, else they're going to lose even more ground against the thing they produce (in simple terms, gold will continue to beat the gold miners, the clear trend of the past year). And the way they do that is to make net profits, give dividends, get bigger etc. 

Rule One™ = Producing Miners Make A Profit. And by the looks of the above, the days of accepting a thin profit are also behind us.

Chart of the day is...

...the amount of money this humble corner of cyberspace makes from Google Adsense adverts, per month:

Offered up by request (and last seen Nov'11). I know it's not a mountain of cash, but it's pretty regular , needs no work at all on my part and $150 to $200 per month is a useful small chunk that pays the standard bills round the house every month. So now you know why this blog is ugly.

8/9/12

Gold Resource Corp's (GORO) 2q12 financials are a interesting read

Well, interesting if you're a boring numbers nerd like your humble scribe, at least.

All sorts of things stand out of the 2q12 financial results (linked right here for your own viewing pleasure), starting with the net EPS of 7c/share. In fact that's not the comprehensive income number, because Gold Resource Corp (GORO) also took a $1.64m forex charge which brings the earnings down to just 3.6c/share. Now that might seem like splitting hairs to you, but it's not for me because GORO has no problem about adding nearly $1.3m to its non-adjusted net (via "other income") for forex adjustments, but prefers not to subtract the counter-transaction for its headline profits number. It's the type of accountancy tomfoolery we see all too often from this type of sophist-run enterprise, so next time forget the number GORO prefer to offer you and home in on the comprehansive net income, the bottom line of the bottom line, because if you work in Mexico, you pay Mexico related charges, period. 

Anyway, the quarter was clearly going to be poor after the production numbers and guidance that sent the stock tumbling back in July, but the way in which that net was arrived at, for example...
...the big fat $5m jump in operating costs 
...the $10m drop in sales revenues, from around $40m in 1q12 to around $30m in 2q12 
...the way in which the financial result was "luckily" saved by selling more gold than it produced (777 oz) and more silver than it produced (116,373 oz), with those two taps into the previous quarter inventory (presumably) accounting for $4.41m in gross sales (assuming average fetched prices for Au and Ag in the period, as per the 10-Q. 
...and how many other companies this size charge $3.4m in one quarter for G&A, anyway? They bathing in Dom Perignon at HQ or something?

...it all (well, all and other vignettes that are in the figures) adds up to a company trying its hard to paper over some pretty big cracks. As for the sales breakdown, we already know that calling GORO a "gold" mining company is a misnomer, because only a fraction of its total sales come from said metal. Here's the sales breakdown by metal from 1q12 (a chart that was featured in The IKN Weekly a couple of issues ago):


And here's the same breakdown type for tonight's figures, from 2q12:

You can see for yourself that the 'fortunate' use of inventory sales kept the gold revenues up to around the same $10m or so in the comparative of the quarters, but the big hit was taken by silver sales that dropped $10m, because even though GORO added 116 oz Ag to sales from inventory, it couldn't get close to matching the 828k oz Ag sold in 1q12.

By the way, it looks like charges (tc/rc etc) jumped from around 11% in 1q12 to around 12.5% in 2q12, but that's another story. The story of this quarter is GORO the crack-paperer, so if it wants to keep paying those 6c/share monthly dividends (that's $9.5m per quarter, which from now on will be U.S. taxable according to the 10-Q, oopsy) the 3q12 doesn't just have to be a bit better, it has to be a LOT better. Which brings us on to guidance and outlook for the rest of the year as contained in this 10-Q...there isn't any.

Hey, maybe all this is why David C. Reid decided to sell 183,960 of his shares on August 6th (mere days ago)? I hope we get to find out all that at the Conference Call, where people can actually grill the GORO meisters instead of being filtered through its IR system....what?...No ConfCall scheduled? Cue owly!


Avoid this dog like the plague, folks. When that divi is pulled, the 2nd shoe drops.

UPDATE: Oh wait, apparently there is a ConfCall after all, 11am Friday EDT

Free lunch

Here's a screenshot from about the 4th mail on this subject that Robbie Mac has sent your humble scribe. Anyone want to go instead?


After all, he seems keen to fill seats...

Regarding cash costs per ounce

Once again, the subject of cash cost per ounce of silver came up at the Fortuna Silver (FVI.to) (FSM) conference call (just finished) and once again, it's clear that when companies such as FVI have significant revenue coming from metals that aren't in their corporate titles, it's a tough thing to nail down. The problem with using cash costs per ounce with by-product deductions isn't in the specific quarter in question, but rather the difficulty in using the metric as a decent and reliable baseline for quarter-on-quarter comparatives. The nature of silver mining is that few companies out there are "pure silver" plays, for the simple reason that other metals are found in the rocks that contain silver (Zn and Pb most typical, Cu and Au as well).

You can get yourself tied up in knots if you want to gauge costs using cash cost per ounce (which is partly why it's never going to be GAAP acceptable). So yet again, your author proposes you cut the crap about cash cost per ounce with by-product deductions for mining companies such as FVI with polymetallic revenue streams (FVI gets moolah from four metals and previously from five) and simplify your life no end by doing this:
1) Look at Net Smelter Return per tonne
2) Look at Cash Cost per tonne
3) Subtract one from the other
4) The end
A much better way of handling these companies. After all, it's margin that's king in a profitable mining operation, not anything else. 

Great note on gold from Biiwii Gary

Check this one out, a quality look at the state of play in gold from Gary Biiwii. If you are fed up of searching through the usual crankpot nutbar tinfoil stuff you get on the interwebnetpipes and just want a piece of writing on the metal that takes in many arguments then provides, intelligent, measured thoughts instead of ranting and screaming, his article today is right up your street.

Nice job Garydude. Read it here

Shock horror! Bolivia doesn't need U.S. investment cash

A nice note on what's happening in the Bolivia investment scene by Marcelo Ballvé a World Politics Review, which is normally a pay-for service but you can access his note right here for free.

Ballvé ends his analysis "Despite Nationalizations, Bolivia's Resource Sector Attracts Asian Investors" with these words:
"Morales may indeed be ramping up nationalizations. But his strategic calculation that commodity-hungry foreign capital will nonetheless continue to bet on Bolivia might just be proved correct"
That sounds right and reminds your humble scribe of the "Oooooh noooooo, it'll never work!" screams when Morales Nationalized the oil company YPFB in the early stages of his Presidency. Since then the revenues generated from foreign gas sales have fuelled the decently sustained GDP growth, the rapid rise in Bolivia International Currency Reserves (right now at all-time highs) and all the social programs (free school breakfasts, the new pension plans plenty of etcs) that don't directly contribute to GDP but do add to life quality for millions of Bolivians. Just the kind of thing Ben Bernanke was on about last week, in fact. More relevant to this post though is how the world's oil companies came back and were happy to invest in Bolivia after the nationalization took place, defying the capitalist calls of imminent disaster. This is why they don't talk about the Bolivian O&G sector much these days, of course (the greedy pigs just hate being wrong).

Anyway, go read Ballvé's note, it's a good overview of the FDI scene in Bolivia today and indicative of how Morales' shunning of U.S. imposed policies hasn't hurt his country one jot. Sorry 'bout that up there, guys...


Lake Shore Gold (LSG.to) fails Rule One™, plays "this thing isn't like that thing"


Guys, do yourself a favour and stop drawing attention to your stock using BS prose. A bit of basic 
humility would serve you far better than ladling it on sans pareil. I mean, look at that chart....

A rich, thick and deep flow of 2q12 results this last 48 hours, with Lake Shore Gold (LSG.to) and its NR out just a few minutes ago just the latest in the line. However, when the company headlines with...

"Lake Shore Gold Reports Strong Second Quarter Results"



....and then later down the NR notes that...

"Net loss for the second quarter 2012 was $2.0 million"

...you get the feeling that the company IR department needs to update its thesaurus. Either that or just...


Rule One™ = Producing miner makes a profit. Period.

Chart of the day is...

...gold in August:
Easing back into the saddle gently here, catching up with the baseline stuff and by the looks of things, gold has behaved pretty well so far in doldrums month. By way of juxtaposition, blowing a real gale outside this office right now. Just thought you's like to know.


Fortuna Silver's (FVI.to) (FSM) 2q12 numbers are out

The company left it til late at night to file, but file Fortuna (FVI.to) (FSM) did with the NR here and the full deal numbers on SEDAR  and EDGAR tomorrow. As for the look of things, it's come in largely as expected though a bit thin on absolute bottom line profits at $3.854m. That's forgiveable in a growing company as long as production and mine site revenues/costs hit the mark and as these show, things are very much in line with expectations at FVI. Here's how we forecast Revenues, Costs and Mine Operating Income for 2q12 over at The IKN Weekly a few issues ago:

Here's how that chart updates with tonight's accurate and filed figures:

  • We were close to spot-on for the revenues (sadly, as i was hoping to be pleasantly surprised by lower smelter deductions)
  • Slightly higher than expected costs (will be looking for clues from tomorrow's ConfCall on that)
  • Therefore slightly lower (but acceptable) Mine Operating Income


But overall, I think we're pretty close on this quarter. Whether or not that's a good or a bad thing is an entirely different question. As for the rest, that'll be in IKN171, out Sunday.

8/8/12

Sunrise on Mars

I promise not to do this again*, because there will be a squillion corners of cyberspace reproducing these Curiosity photos for the next two years (at least).

But just for today...wow, wow, wow.
(click on image to disensmallify)

Seriously, wow.

*unless of course...

And on the subject of Kinross (K.to) (KGC)...

...the 2q12 numbers (linked here) aren't as bad as many feared, but there are devils in the details. We do have a slight miss on the bottom line mainly due to higher costs (though higher deprec/deplet/amort of $235/oz from a guided $200/oz  is in there too), but guidance is kept for FY12 (bar the lost Crixas production cos they sold their 50% of that asset) and things like Fort Knox did ok. However (trembling roll on drums):
1) Lobo Marte has been delayed again. Wow what a shockah*. That White Heffalump is still going nowhere fast, plug ugly thing,
2) Tasiast is getting a PFS run on a smaller 30k tpd operation, instead of the planned 60k tpd due to capex hikes. Which is a neat and politically acceptable way of deferring development in 2012, if nothing else.  
3) But the thing at Tasiast is that K is now flagging another write-down in the pipeline, mebbe for year's end, which again points the finger directly at the most obvious reason as to why Mr. Burt became Mr. Boot; he paid way but waaay too much for Red Back. Har har hardy har, Tye.

But y'know, look at the balance sheet and it's really not that bad at K. Working cap's still at (just a smidge under) $1.5Bn so as long as that Tasiast writedown isn't too heavy the current book value ($11.19/share) makes the stock look reasonably cheap (and although Lobo El Marte is a dog worth residual value in your author's horribly biased opinion, it's not a mega slice of that balance). Kinross is a company that i'd like to pick big bones against and this set of numbers is by no means sparkly, but in this nervously anticipated quarter there really isn't that much to worry about. 

*not

To market to market to buy a fat pig...

...home again home again jiggety jig.



Hello, how are you all doing out there? Nice break had, family fun and all the frills. This is mentioned just in case you thought I'd travelled up North to be interviewed for the CEO job at Kinross. First thing to note is that my spec buy on U.S. Silver (USA.to) seems to have turned out to be a loser with Hecla (HL) running away at the first opportunity, rats and bother. So what else has IKN missed? I'll prob find out plenty in the mailbox this evening.

It was nice to get away. It's nice to be back. Everything's nice.