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12/8/12

Do not save the planet

On reading this report today about Pope Benedict's comments regarding the future of planet earth that included...
"Pope Benedict XVI said this morning that the salvation of the planet is not something for man or science, but for God."
....I immediately thought of this segment from the late George Carlin.



George nailed it: "The planet isn't going anywhere. We are."

I did an interview...

...and it's here on this link.

Five days of metals and miners; December 8th

Our regular Saturday slot of the last five days' worth of action in the gold bullion ETF (GLD), the silver bullion  ETF (SLV), the miner ETF (GDX), the junior miner ETF (GDXJ) and the copper ETF (COPX).


So Monday and Tuesday and first thing Wednesdaym the miners kept on dropping. But what gets my eye is that afterwards they basically flatlined. It's almost as if they're finally fed up with dropping off a tax loss selling cliff (cliff!! Gedditt??) and might be putting in a bottom. Or is that just me dreaming?

12/7/12

Reasons to like Google

Somebody sitting at a desk in Mountain View with a silly sense of humour:



The Friday OT: Chocquibtown: Hasta el techo

Get down with the cool sound of Colombia's Chocquibtown, now maturing like fine wine.



South America rules.


A Brent Cook thing

It's good, so it gets linked here in order to attract your attention and get you to read it too.

Guatemala's Siglo21 newspaper editorial today

Here's the link, here's your humble scribe's translation:

A Canadian Visit Between Good and Bad
The official visit of the Governor General of Canada, David Johnston, has taken place with the backdrop of the positive disposition of this country to support the Guatemala government in the strengthening of justice and security, but also during expressions of community protest against mining that well known Canadian compaies are promoting.

Governor Johnston, who is also the representative of Queen Elizabeth II of England, showed a clear willingness to strengthen bonds of co-operation with Guatemala,to the point that in the future the potential of talks regarding a Free Trade Agreement (FTA) were not discarded, which to this day have been postponed on the agenda of both countries.

Throughout history the relationship between Canada and Guatemala has not been relevant, in both directions, though in the last decade investments in the mining sector have risen considerably and this appears to be the natural influence as to why both countries seek to improve relations.

Obvously, the mere mention of the possibility of a FTA after yesterday's meeting between Governor Johnston and President Otto Pérez Molina is cause for concern for the sectors of communities that oppose open pit mining and who will surely demand, in the case of this negotiation occurring, that mandatory public consultancy before the granting of any mining exploration or production concession is included.

The mining issue was not discussed officially but we can be sure that it was part of the private agenda, which is why the groups of communities opposed to mining were present to express their grievances via protests in front of the Canadian embassy, reminding us that a few weeks ago a delegation from Canada came to apparently push for a mining law that's favourable to foreign investment.

There has always been notable social conflict in Guatemala, but in the last few years it has reached levels that are even dangerous and this requires the government to be to be extremely cautious with the most sensitive issues, amongst which is included mining activity.

It is true that the publically debated issues are those of co-operation in security and justice, as well as the possibility of a FTA and support for social programs, we have to suppose that the basic reason for this visit is the support of the government of Canada for the large-scale mining companies that operate in Canada.

We must remember that the main problems of mining production centre around environmental damage, much of which directly affecting the population, as well as the low level of royalties that stay in the country. To these must be added, of course, that the opinion of local communities must be tken ito account.

Summing up, the support of Canada for the different problems in the life of the country is perfectly valid and welcomed, as long as it is not accompanied by conditions that favour and make facilitate investment in the mining sector.



Chart of the day is...

...the effect of Hugo Chávez's cancer on the price of gold, as seen in this 12 month chart of the gold ETF (GLD):


And the good news is that last night Chávez returned to Venezuela, so we can expect a decent rally in gold. You heard it here first, folks.

12/6/12

The can of corn pumps Tahoe Resources again (THO.to) (TAHO)

The way that Canaccord has been at the pumps regarding Tahoe (THO.to) (TAHO) recently you'd think they were in trouble with their position, wouldn't you? :-) Anyway, here's the Can of Corn's note, here's the paste-out of the bullet points:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

We visited Tahoe's Escobal asset on Wednesday, December 5, and came away with a positive view of the development progress both underground and at surface. Highlights of the development at site:

  • The company has completed approximately 4,000 m of underground development including a ramp and footwall access drives. The ore zone has been accessed in overcuts in three stopes on the upper level of the Central Zone.
  • Surface installations are progressing well with the ball mill and crushers in place, the warehouse and truck shops have been completed, and foundations and structural steel work have also completed on the flotation circuit which is now fully prepped for the installation of the flotation cells.
Community Support Commenting on recent social unrest in Guatemala with respect to mining, the company reiterated the strong community support in the local town of San Rafael. Support is not as strong in the neighbouring province of Jalapa including the town of Mataquescuintla, where the local mayor is anti-development and against the installation of the 5 km power line tie-in (Escobal's power source). The mayor of Mataquescuintla is losing support for his cause as nearly 300 people (employees and contractors at Escobal) have left the town to move to San Rafael. In the event that the power line installation is delayed, the company has the option to use diesel power generation.

Management continues to expect the exploitation permit to be issued by the end of the year. There have been several events of social unrest in the country in recent months and it may be that the President waits for the best opportunity to grant the license. In the meantime, development work at site can continue. Timing of the exploitation permit will only be an issue on the start-up of the mill to produce concentrate in H2/13.

Valuation
Tahoe is fully financed and on track for production of 20 Moz/year commencing 2014. We believe shares provide excellent value in the $17 range. Our target price of US$34.50 represents approximately 1.0x our 7.5%/$40 peak Ag NAVPS of US$34.67.

Tahoe Resources is our top Focus List pick among the explorers/developers based on the re-rating potential from further de-risking of Escobal in addition to the upside resource potential on the main Escobal vein and further regional blue-sky potential associated with 12 other satellite targets.



It's ok, it's only a temporary roadblock

Sixteen hours after IKN brought the news to the English-speaking world and 14 hours after the stock was halted (oh, must be mere coincidence) Candente Copper (DNT.to) tells us that there's a "Temporary Road Blockage in Canaris" (sidebar: interesting that they can't be bothered to spell the name of the town correctly, using an n instead of an ñ...little things that hint at what they really think of locals). 

And did you notice that the roadblock is temporary? That's good, isn't it? After all, we wouldn't want it to be permanent like West/East Berlin or the US/Mexico border or Gaza or something now, would we? So here's a photo from Cañaris of that temporariness:



Just so you know a little more than the company would like you to know. Photo from this report.



Ten days of Astur Gold (AST.v)

The basic problem with Astur Gold's (AST.v) news out on November 28th, entitled "Astur Gold Announces Approval of Environmental Impact Assessment for Mine Development at Salave", was this bit of the NR:
"Additional information regarding water quality discharge limits and handling was requested before approving the mill and tailings facilities."

Which means that AST has most of its environmental plan for mining at Salave approved, not all of it. Which means that it can't mine diddlysquat until further EIA approval is granted. Which makes you wonder just what the company is trying to achieve when it writes NRs with titles like that. As for the market, this ten day chart has the picture with the proverbial thousand words:


Put succinctly, sold to you suckah. So now that the market has been thoroughly pissed off by the half-truths of this company's IR department, we wait to see whether the boy who cries wolf principle will apply if it ever manages to supply the world with unqualified and undiluted good news.


Chart of the day is...

...the gold/copper ratio, 2012 year to date:


Presented with no further comment.

12/5/12

RIP


Corruption in LatAm, 2012

Transparency International, an organization that's had it in for Venezuela for about a decade, came out with its world corruption 2012 raking this week (176 countries included) and here's how the LatAm states make out. The ranking is over 100 and the higher you score, the less corrupt your country is supposed to be.


So Chile and Uruguay win the cup (and score an overall world rank of 20th), then Costa Rica and Cuba do ok, then a whole bunch of usual suspects score crappily, then Venezuela comes bottom because Transparency International hates Venezuela, like I said. Data from here

Candente Copper (DNT.to), This Thing Isn't Like That Thing edition

Consider "Candente only waiting for water permit to advance with Cañariaco project" dated December 4th 2012, which reports on the presentation that CEO Joanne Freeze gave to assembled financial suits in Lima at the Expobolsa conference. It includes
"In our community (i.e. Cañaris, locality of the Cañariaco copper project) we're working calmly, but yes there are people that don't want mining and don't want us there, but there's much more noise than truth."

Now consider "Ronderos* hold three geologists in Andean region of Cañaris" dated December 5th 2012 (today).
A police contingency left from the city of Jaen to go to the region of Upeyzata, in the Andean district of Cañaris, where 500 community members have blocked a road that goes to the Cañariaco mining camp and are holding three geologists hostage."
That enough noise for you, Jo?

*Peru rural community protection organization


Today could be the day that explorecos turn

Above all, Freeport's (FCX) twenty billion dollar, slightly incestuous, decision to return MMR and PXP to the fold today  is testament to the current state of the credit market. Not only do the big players have oodles of cash on their balance sheets, but they can tap near-historic lows for credit (it's nigh-on free money) to buy up beaten down assets. FCX's move is logical, so is the temporary sell-off in the mothership stock and the pops in the acquisitions. But it might turn out to mark the moment when the disconnect between the haves (positive free cash flow mining companies) and the have-nots (explorecos being sold down starved of cash) begins to repair itself.

This FCX thing is a big transaction, but scale it down to junior mining sizes and the logic holds true. What I'll be looking out for are juniors doing deals to finance M&A and/or construction using debt, rather than equity financing. The smarter CEOs will look to do their deals via a banker than via dilutive share offerings and those are the companies to put on your shortlists.

Goldman Sachs on gold in 2013

The Vampire Squid's call on gold for 2013 is out this morning, you can read the PDF report by clicking this link, here's the paydirt paragraph:

Consequently, we lower our 3-, 6- and 12-mo COMEX gold price forecasts to $1,825/toz, $1,805/toz and $1,800/toz, from $1,840/toz, $1,940/toz and $1,940/toz previously. We expect gold prices to average $1,810/toz in 2013 and introduce a $1,750/toz 2014 average gold price forecast. Importantly, even under a weaker US recovery than our economists forecast, our modeling still points to only modest upside with gold prices reaching $1,900/toz late in 2013. Net, while we see potential for higher gold prices in early 2013, especially should a resolution of the fiscal cliff remain elusive, we see growing downside risks. As a result, we find that the risk-reward of holding a long gold position is diminishing. We instead recommend rolling our long Dec-12 COMEX gold position into a long Apr-13 COMEX gold position and selling a $1,850/toz call to fully finance a $1,575/toz put to protect from a decline in gold prices. Since 2009, such a strategy has achieved a better Sharpe ratio than an outright long gold position.

Continues here. And remember, take GS research at face value at your own peril. These are the dudes that fade their own clients.

Breaking: Boat sinks on Lake Titicaca Bolivia, three dead and ten missing

News coming in that a motor launch, probably possibly of the tourist variety, has sunk early this morning on Lake Titicaca, with three confirmed deaths, ten people missing and nine people already picked up alive. We'll update this post when more is known.

UPDATE: This is sad. 26 people crammed on board a small launch that left one of the small islands in the South, Bolivian end of the lake. Eleven of them died, including three children. Another five are still missing.

What the world needs is more macro overview coverage of Paraguay, and...

Tereré: Once tried, never forgotten

...Nomura is the house to give us just that. Here you go, the overview paper on Paraguay's economy and prospects dated December 5th, right here. My thanks to site pal and top voice on Brazil stuff, Drunkeynesian


Chart of the day is...

...Dynasty Metals & Mining (DMM.to), year to date:


Plenty of buyers' regret on display around that mid-October spike, plenty of relieved sufferers that took the opportunity to pass bags to new hands, too. As your humble scribe wrote to the DMM IR dude at the time...
A company has every right to play its cards close to its chest, but when said company has a track record of obfuscation and disclosing minimum amounts of information without giving a clear picture of its situation, thereby disappointing backers and shareholders at a later date, it's hard to take any positive looking news at face value. Just my personal opinion of course, but I'd also confidently opine that the same opinion is held by many in the marketplace. 
dyodd

12/4/12

Jon Auerbach

Via Biiwii, sad news indeed. One of the best has gone.

Jonathan L. Auerbach, who explored new frontiers for investors as co-founder of Auerbach Grayson & Co., a brokerage that specializes in international trading, has died. He was 70. Continues here

No more posts today

Colombia's oil industry and community relations: The Economist Intelligence Unit reports

This links to a report from The Economist Intelligence Unit regarding the growing social, community and political problems that Colombia's oil industry is facing. Here's how the note begins:

Last year, Colombia failed to reach its target of producing 1m barrels/day (b/d) of oil. No matter; it simply shifted the target to this year. But by October 2012, output was still just shy of the magic 1m-barrels mark. This protracted struggle raises an awkward question: is this merely a short-term hiccup, or does it hint at more lasting impediments? 

Most commentators identify a recent resurgence of guerrilla attacks on pipelines as the problem. Peace talks between the government and the main rebel group, Fuerzas Armadas Revolucionarias de Colombia (FARC)—which on November 19th announced a temporary ceasefire—are undoubtedly good news for the country as a whole but and the oil industry in particular. Company reports, however, spread the blame for output woes among delays in obtaining environmental permits, bottlenecks in pipeline and highway transportation, and “community conflicts”. Moreover, community conflicts—a catchall term bundling together everything from environmental to labour disputes—show no sign of disappearing.


It continues here and there's a lot more to read as well. Regular readers may know by now that your humble scribe has a love/hate thing going on with The Economist on South America because all too often its coverage is trite, prejudiced and smacks of White Man's Burden, but every so often The Economist comes out with an excellent, insightful analysis on affairs that makes trudging through the dross worthwhile. That's the case with today's featured article, so do yourself a favour and read it. 

Chart of the day is...

...the Shanghai Futures Exchange copper inventory levels over the last five years:

The chart is chosen to get you to read Reuters' Andy Home's excellent piece on the subject, which you can do by clicking right here. Also, the SEC paper he refers to in the note can be accessed by clicking here. Bottom line is that Home calls the situation better than the SEC team who supposedly did an empirical invetsigation, but missed the mark because they ignored the big fat 10 ton elephant in the room. 

12/3/12

OceanaGold (OGC.to) (OGC.ax) runs a big bought deal financing

While hundreds of tinycap explorers scratch around in the dust trying to find a few bucks to keep going, the profitable gold miner gets a fat bot deal. Moral of this story: You got cash flow, you got financing. Here's how the NR kicks off:

OceanaGold Corporation (OGC.TO)(OGC.AX)(OGC.NZ) (the "Company") is pleased to announce that it has entered into an agreement with a syndicate of underwriters, led by Macquarie Capital Markets Canada Ltd. and Citigroup Global Markets Canada Inc. (the "Lead Underwriters"), and including Cormark Securities Inc., GMP Securities L.P., and BMO Capital Markets (collectively, with the Lead Underwriters, the "Underwriters"), pursuant to which the Underwriters have agreed to purchase a total of 30,000,000 common shares of the Company (including common shares represented by ASX-listed CHESS Depository Interests ("CDIs") (together, the "Securities") on a bought deal basis at a price of CDN$3.11 per Security (the "Common Share Offering Price") for aggregate gross proceeds of CDN$93,300,000 (the "Offering").  Continues here

FWIW I'm long OGC, can see this as a share price headwind in the very-near term, but overall it looks like a smart move to me.

It's a slow news day, so by way of light relief...

..step forward Jarrod Byrne, who shows us how Australian mining people complain to their suppliers.


They do it well, no?

Chubut delays its mining reform

The Chubut province of Argentina has apparently kicked the can down the road and won't push through any sort of decision on its new mining regulations this year or next. Too sensitive a subject, they say. Election period to get through first, they say. Shocking surprise not, we say. So those of you who actually thought that projects like Navidad or Suyai had a chance of moving forward are again sadly mistaken (so quit it with the bullshit hype Scotia, willyaz?).

For the rest of us, here's how the news affects the famed IKN meter:

Yup

Tax loss selling; a visual guide

It looks like this:


Lupaka Gold (LPK.to) hammered further into the ground

The Chile/Peru border dispute: What you need to know

1. This is the area disputed, a 37,900km2 triangle of maritime territory that starts at the border between the two countries.

2. Peru says "that should be the border" and Chile says "no no, that should be the border".

3. The case has been in pre-trial for years, but is up before the beak at The Hague as of today. Both sides get to say their piece of the next few days then the judges will go off, cogitate and at some point in 2013 will deliver a final and unappealable ruling.

4. The hype machine around the dispute has just hit overdrive in both countries. It's a difficult time to be fluent in the Spanish language, jingoism is rife and insufferable people are being insufferable.

5. Err, that's it.

UPDATE: Longtime reader JP writes in:
"It'll never happen, but it would be a great gesture for the Hague to slap them both around, Chile and Peru, and give the territory back to Bolivia."
Yep, that'd learn 'em both.

12/2/12

The IKN Weekly, out now


IKN187 has just been sent to subscribers. Another batch of overopinionated and totally useless tosh that tries to pass itself off as intelligent commentary and analysis.

Elliott vs Argentina, the Lego version

You know it's true! Felix Salmon has it down, right here (I'm not stealing the Youtube embed on this one because he utterly deserves your click on his page). The weekend's must-visit for any financial wonk into South American geopolitics and mere mention of what you're about to witness is guaranteed to break the ice at your office Christmas party. Go! Go now! Go!

Notes from the rabbit hole

I've just read Gary Biiwii's weekly missive, Notes From the Rabbit Hole NFTRH issue 215, and want to say out loud and in public that pages four through seven in this week's issue contain some of the smartest and most eloquently put macro commentary I've read for a long time. You should really sign up and see what he can do for you and you can do so by visiting his site right here.

Full disclosure: I get no sort of commission or financial incentive at all from promoting Gary's work. I receive NFTRH for free as a swap deal (he gets The IKN Weekly for free, I get his work for free, fair dinkum and I think I get the better part of the deal) but apart from that, nothing coming my way. The only real benefit from me promoting his work is the reflective glory of getting IKN readers to enjoy better reading material on the markets than the 99% of crud and nonsense out there. Hopefully you'll remember me as the guy that sent you to read Gary, one of the best brains available on the market.