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10/17/15

This week's Doug Casey "cack yourself laughing" alert

Sent in by A. Reader, here's a  screenshot of the Casey Research morning mailer this Saturday. Your author's red underlining:



Friedman, Piketty, Keynes, Krugman, Von Mises...and Doug Casey. Love it.

10/16/15

Love them Friday post-bell NRs

"...amendment to Second Preliminary Economic Assessment" could be the most Vancouver News Release headline of all time. What part of "promo pump" do you not understand? I mean, there's speculation and there's risk, but you have to be stark raving mad to put money into stories like this. 

From Tommy Humphreys to you. With love.

CENTENNIAL, COLORADO--(Marketwired - Oct. 16, 2015) - NioCorp Developments Ltd. ("NioCorp" or the "Company") (TSX:NB)(OTCQX:NIOBF)(FRANKFURT:BR3) announces that as a result of a review by the British Columbia Securities Commission, it has amended its second Preliminary Economic Assessment (PEA2 Amended) for its Elk Creek, Nebraska Niobium Project. PEA2 Amended retains the technical and economic results previously disclosed by NioCorp in its August 4, 2015 and September 4, 2015 news releases and includes additional guidance and cautionary language required by National Instrument 43-101 regarding uncertainty in realizing the results of PEA2. PEA2 Amended provides additional descriptions of the scandium demand and pricing assumptions included in PEA2, including that a significant portion of the Project revenue, and achieving that revenue projected in PEA2, is subject to market growth in scandium, which is a developing market with a risk of oversupply and/or undersupply disrupting pricing.

The Friday OT: Jacques Brel; Ces gens-là

From a 1966 live concert, the amazing Brel. There's never been a performer like him, before or since.



Il ne faut pas jouer les riches quand on n'a pas le sou.


x

Abel: "Why I believe Scioli will win in the first round"

"El Blog De Abel", run by its eponymous author, is one of the smartest places I know for independent and reasoned thoughts on Argentine politics and today Abel has posted "Why I believe Scioli will win the the first round". It's in Spanish, but there's always Google Translate to help you if you're not versed in the tongue of Cervantes (and fwiw here's the link to the English language auto-translate version of his post). 

A highly recommended read that cuts through the increasing and biased noise on either side and states the case directly. For the record (as subbers know) I agree with his take that on October 25th, Daniel Scioli will win enough votes to be declared the winner and the next President of Argentina.

Go read it all.

A week without word from Minera IRL (MIRl.L)...

...about the dissident proxy. Are they trying to pretend the clock isn't running? The "la la la i can't hear you" business strategy? The level of comtempt that these people have for their shareholders is astounding.

By the way, Daryl Hodges and Jaime Pinto were in London this week, spreading their bullshit lies and failing miserably to convince people to back them. It's laughable.

Chart of the day is...

...gold, hourlies:



A good week.

10/15/15

Checking in on the Gold/Copper ratio

Back on August 28th on the blog, IKN's copperygoldy message was as follows:
It's important that copper moved up because the gold/copper ratio was getting to such an extreme point that it would crimp the upside potential of gold when the rally begins.  And the gold rally is about to begin. So get positioned.
And as the gold/copper ratio chart shows...



...the minor rally in copper has indeed allowed gold the space to improve inside the realms of logic.



Still, the trend remains clear; Gold's the one to be on.

Brent Cook's analysis of Rubicon Minerals (RMX.to) (RBY)

Brent Cook has kindly given your humble scribe permission to reproduce his analysis of Rubicon Minerals (RMX.to) (RBY), part of the latest October 11th edition of his newsletter "Exploration Insights". Basically it was so good that I asked him nicely and he said yes, so without further ado here's his note:

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Rubicon Minerals (RMX.T, RBY.NYSE) got hammered this week after, 1) announcing milling operations had been temporarily suspended by the Ministry of Environment and Climate due to elevated ammonia being discharged into the tailings pond; and, 2) its President and CEO, Michael Lalonde, bailed. The share price dropped from ~C$1.00, to close at C$0.68 on Friday (Fig. 3). Of note is that, 1) SRK (Feb 2014) recommended further test work and optimization to keep the ammonia effluent within guidelines; and, 2) RMX failed to disclose that it was issued a notice from the Ministry regarding ammonia discharge back on September 8.


(Fig. 3: Three-year chart of RMX. Not a pretty picture for one of Canada’s favorite mining stories)

Prior to this week’s news nine sell-side analysts and two newsletters recommended the stock, with target prices between C$1.20 and C$2.00. With the drop in share price we have received a number of queries from subscribers, and someone’s mom, wondering if the current RMX share price represents a buying opportunity.


In short, I ain’t touching it

In long, I have reviewed Rubicon’s Phoenix gold deposit in the Red Lake District, Ontario a few times but was never comfortable with the resource estimate or some of the assumptions of the preliminary economic analysis (PEA) authored by SRK. For today’s discussion I also owe some thanks to a few shall-remain-anonymous, but top, analysts and geologists and Tim Oliver who all opined on Rubicon’s issues over the week.
Although the Phoenix deposit occurs in the Red Lake District proper, the alteration and structural setting is considerably less developed than the very high grade Red Lake deposit owned by Goldcorp (current P&P 2mil oz @ 10g/t Au, M&I 2.3mil oz @ 17g/t Au, including a high grade core of over 60g/t Au). There is little comparison between the two with regards to the intensity of mineralization.

Phoenix is not a simple high-grade deposit. Pulling from the SRK 2014 PEA, “The current mining plan envisions a complex deposit that is relatively discontinuous, somewhat disseminated in nature, has weak visual indicators, and a strong nugget factor.” The direct implication of this on mining is that miners cannot visually differentiate between ore and waste (it’s all black and grey rock), and they cannot even follow a structure, as the mineralization comes and goes over very short distances. The PEA goes on to state that (Fig. 4):

(Fig. 4: Pg. 94, SRK PEA notes that until a year of test mining is complete and reconciled to the resource estimate, they have no reasonable clue what future production will be—not terribly reassuring.)

SRK also points out that to successfully mine the deposit will require a high level of geological effort to understand the mineralization trends over very short distances. “This complex deposit will challenge the mine engineers to develop and employ a comprehensive ‘tool box’ of mining solutions. This will require the employment of multiple mining methods and variations on those mining methods to deal with the situations where the mineralization is not continuous to the next level and has an irregular geometry.” Meaning, this is going to be a real bitch to mine. 

Resource
The company has produced three resource estimates since 2010. The first, by Peter George of Barkerville fame (see EI Feb. 20, 2011 and EI Aug. 19, 2012), estimated an inferred 4 million ounces grading 20 grams per tonne gold plus a “total geologic potential” of 13.3 to 16.1 million ounces grading 24.4 to 26.8 grams per tonne gold (we’ll call this the Tea Party estimation methodology). AMC produced a revised and improved estimate in 2011 of an indicated 0.5 million ounces grading 14.5 grams per tonne gold, plus an inferred 2.3 million ounces grading 17 grams per tonne gold. In 2013 SRK estimated an indicated 1.1 million ounces grading 8.5 grams per tonne gold, plus an inferred 2.2 million ounces grading 9.3 grams per tonne gold. The SRK estimate was really not much different from the AMC, but appears more conservative due to changes in the cutoff grade, etc. All the reports are severely lacking in critical information necessary to completely evaluate the estimates (e.g., coordinates, from-to intervals, sections, and surveys).

With that caveat out of the way and using the data at hand, it appears that the two most recent estimates have blown high-grade assays into low or zero grade blocks—meaning they put ore where there is none. The 1-meter composited histogram (Fig. 5 below) is very scary. Consider: the cutoff grade is 5 g/t and average grade ~10 g/t, yet ~40% of the composites are 0 grade, and less than 1% are greater than 10 g/t. The entire resource is being carried by a very few high-grade assays.

Additionally, drilling focused on higher-grade zones, so it is probably more extreme than shown below. For the geo-statisticians in the crowd, there are 56 ore domains modeled, and the coefficient of variation (CV) runs between 11.8 and 59—these are very high, unusual numbers-- which means the estimation methodology needs very tight geological control (which it doesn't seem to have).


(Fig. 5: 1-meter comp frequency distribution plot. Note very few assays above 10g/t)

Driving the point home, Fig. 6 below is a cross section through the ore-body, illustrating drill holes and individual assays. Note the small scale (50 m squares) and intensity of drilling:

(Fig. 6: Cross section showing drill holes and individual assays. Note scale.)

At a mine cutoff grade of 4 grams per tonne gold (they are using 5g/t now), the only ore intervals are colored orange, red, and pink. Even at this map scale, it is virtually impossible to connect the orange or better intersections, and my bet is that the final diluted grade delivered to the mill will be substantially lower than predicted. The company was running a trial stope mining program to reconcile results against the resource estimate. The trial stope mining has been delayed by two to four weeks because of the mill shutdown. It will probably be mid-2016 before we have any sense of how the mined deposit reconciles with the modeled deposit.

Costs and Valuation
The SRK 2014 PEA estimates underground mine costs will be C$89.60/tonne, process costs of C$28.12/tonne, and G&A of $32.22/tonne, for a total on-site operating cost per tonne milled of C$149.94. 

I don't buy it. 

Goldcorp reports mining costs of C$233.36/tonne and process costs of C$47.37/tonne from its nearby Red Lake deposit. Red Lake has been operating for over a decade, is a somewhat simpler deposit, and has a skilled workforce that knows the deposit well. Rubicon is starting from ground zero on a PEA-level study, and has not even determined what mining method will work best on this complex deposit. 
The 2014 PEA estimates a base case ($1,385 gold at a C$1/US$1.05 exchange rate) post-tax NPV5% of C$531 million and IRR of 27%. At a $1,108 gold price, the NPV drops to C$206 million. Rubicon states the PEA is conservative, as it employs a low diluted grade, low sustaining capex, and low recovery, plus a high C$ exchange rate; and therefore the project is deemed “low risk”. Rubicon has sunk in excess of C$600 million into the deposit, has a market cap of ~C$270 million, and ~C$59 million in debt. 


Summary
If the resource is wrong and the costs wrong, then the valuation presented in the PEA must be wrong. Cash flow problems, debt problems, and production problems on a deposit of dubious resources, questionable costs, plus a new guy in charge don't add up to a screaming buy. Someone’s mom is going to be very disappointed as this slow motion calamity unfolds—or maybe it all works out just fine. (-:

Argonaut Gold 3q15 production

NR here, chart here:


FUBAR

10/14/15

Allan Barry

I think we can put this one to bed after today. The guy's a complete moron.

There's always Tim Horton's so don't think of it as an end, Allan, think of it as a beginning.

A free offer from IKN

Okay, here's the thing, in four easily digested parts:

1) From time to time I get these mails asking about the difference between the stuff you see here on the blog (basically a mouthy dude mouthing off) and The IKN Weekly (where I try to shut the mouth down and do some work). 

2) After doing the necessary DD and things, I've identified a precious metals exploration stage junior miner working Latin America with a project that I like enough to buy.

3) This weekend's edition of The IKN Weekly, IKN336, will run the analysis on the company.

4) Anyone who'd like a copy of the fundies analysis I'm running on this company in IKN336 can send a mail at the normal address... 

otto.rock1 (AT) gmail (DOT) com

...with the title line "Free Analysis Yes Please" and I'll send it to them, free gratis for nothing and for no money. You'll get the report on Sunday evening at the same time as subscribers to The IKN Weekly. 

As easy as that, but there are a couple of details to mention:

a) I currently do NOT own this stock. I plan to buy, but I will NOT buy any until next week (it's the way things work round here, we keep it clean in good times or bad).

b) However I greatly value the people who send me money which is then transformed into goods and services that keep my children fed and clothed and with a roof over their heads, i.e. my current subscribers. Therefore I'm going to tell them the name of the stock in question on Friday morning.

c) The free offer is NOT for a full edition of The IKN Weekly, you'll only get the fundies analysis of the company in question. The Weekly has other sections and those are for the people that pay.

d) If you mail in for the offer I won't bug you with spam mail, offers, follow-ups or anything else of that sort. The dumbasses like Casey Research who run that type of promo drive me nuts, I'd never stoop to their level of marketing mediocrity. This is a one-time deal, pretty promise.

So that's the gig: 1) Send me your mail address with the right title line 2) get a fundies report on a decent looking trade prospect Sunday evening. Please be having nice day yes thank you.

UPDATE: Holy excrement, that many? Okay, word is word after all.










Here's another little thing mining companies do in their NRs

Let's say, for example, it's the end of the third quarter. And, just fer sayin's sake, that your Q3 wasn't the most stellar compared to recent numbers. So what are your choices, CEO-Talking-With-IR-Department?

1: Just run the quarterly number as per normal, play it straight, no hiding of a slightly disappointing quarter.
2: Lipstick that pig.

Exhibit A: The title of Lake Shore Gold's (LSG) (LSG.to) 3q15 production NR this morning:


Yup you got it, you hide the 40.6K oz number for the quarter by throwing in the two previous quarters of outsized production and make it all look sooooo smoooooth. Oh Tony, you're so soooo smoooooth. And the funny thing is, these 3q15 numbers are really pretty good because what we out here are worried about these days are profitable ounces, not ounces per se. But old habits die hard in spindoctor circles and the fools running IR departments just cannot resist reaching for the canister of Bullshit Spray.

Do us all a favour, mining IR people: Stop the stupid once and for all. It gets to the point where we think you're just insulting us.

I've been wondering why Teranga Gold (TGZ.to) (TGZ,ax) has been undeperforming this last two or three weeks...

...compared to peers. It looked like there was somebody sitting on the thing refused to budge etc etc. And yup...

TORONTO, ONTARIO--(Marketwired - Oct 14, 2015) - Teranga Gold Corporation ("Teranga" or the "Company") (TGZ.TO)(TGZ.TO), the owner and operator of the only commercial gold mine and mill in Senegal, West Africa, today announced the completion of a non-brokered CDN$22,736,000 private placement (the "Offering") with Mr. David Mimran, the CEO of Grands Moulins d'Abidjan and Grands Moulins de Dakar, one of the largest producers of flour and agri-food in West Africa. Under the banner of the Mimran Group, the Mimran family has a long history of operating successfully and responsibly in Africa. The family is also a major sugar producer in the region and the largest private sector employer in Senegal through Compagnie Sucrière Sénégalaise. As part of this transaction, Mr. David Mimran has also been appointed to Teranga's board of directors (the "Board").
Pursuant to the terms of the Offering, Tablo Corporation ("Tablo"), a Mimran family company, has been issued 39,200,000 common shares of Teranga (the "Common Shares") at a price of CDN$0.58 per Common Share.
"I am truly delighted to welcome David Mimran as a cornerstone investor of Teranga, and as a director, where he will combine his tremendous strategic and operating knowledge and experience in Senegal and West Africa with our own," stated Alan R. Hill, Chairman of Teranga. "The Mimran family's commitment to Senegal runs deep and they are highly respected in the country. David's strategic investment in Teranga supports the acceleration of our longer-term growth strategy beyond our current life-of-mine plan." 

...it was being sat upon. Which means now is the time to get some.

But here above is another example of why I try hard to stick to LatAm companies, because at least I have an inkling of a clue about the political/business background to a country and how it works, who pulls strings, the tricks and sleights of hand. All the above here is totally new to me. Africa, eh...

10/13/15

OT: Proud father alert

While you mugs were gawking at the esteemed visitors of IKN were concentrating their undoubted intelligence on the market, your humble scribe took his two daughters indoor rock climbing, their first ever go at the game. Here's the nine year old, who got to five metres up and seriously impressed the instructor for her age.


And here's the eleven year old, who (after half an hour of basic training and work on the practice walls) managed to climb to the very top of the 12 metre wall on her first ever attempt at the sport and ring the bell at the top.


A good dozen people had gathered round by this point and cheered and applauded when she did, the prof said she's a natural. I still have a stupid grin on my face. End of proud father alert, we now return you to your normal programming.

Fission and Denison: A radioactive deal

I had a good laugh when this dog of a deal was announced.




TORONTO, ONTARIO--(Marketwired - Oct 13, 2015) - Denison Mines Corp. (DML.TO)(NYSE MKT:DNN) ("Denison") and Fission Uranium Corp. (FCU.TO)(FCUUF)(2FU.F) ("Fission") have terminated the previously announced arrangement agreement pursuant to which Denison and Fission were to combine their respective businesses by way of a court-approved plan of arrangement (the "Arrangement"). At the deadline for submission of proxies on Friday, Denison's shareholders strongly supported the Arrangement. While a majority of the Fission shares voted were in favour of the Arrangement, the required two-thirds approval was not obtained.

An object lesson in how managerial greed and mediocrity strips value away from shareholders.

10/12/15

Keith Barron's blog has come back to life

My thanks to long-time reader and mailpal "Hammer" for the heads up.

Keith Barron's blog, "Straight Talk On Mining", has come back to life after a multi-year pause in posts and it looks as though he plans to publish regularly in the near future, too. If you follow the mining/junior mining/exploration scene and don't know who Keith Barron is you haven't been paying attention, he's tip top of the crop, so go right now to the link right here and sign right up to his e-mail service or put him on your RSS.

A little more on the Franco Nevada (FNV) silver deal with Antamina

I don't really follow the large cap mining names very closely and The IKN Weekly has always been about the juniors, but there is a minor part of the Weekly that keeps an eye on the bigger names so this weekend it got a few lines on Franco Nevada's (FNV) deal with Antamina for its silver. What I most like about the deal is the concept, not the numbers. For sure it's a bet on silver in the long-term and for sure it's an immediate revenue generator, in the end the math really isn't so very difficult. What struck me from the very moment I read the NR on the deal last week is that FNV is growing up fast.

You may have noticed that IKN doesn't like sucking up to mining's great'n'good, there are way more than enough sycophantic fanclubs to massage their collective egos already, plus many of them are just plain lucky rather than smart and time catches up with them. But I can't get round the fact that Pierre Lassonde deserves all the praise he gets. Here's the short section on FNV from IKN335, out last night.


Franco Nevada (FNV): My one line comment about the deal FNV has struck with the Antamina mine in Peru was the most visited single post of the week (10), an award it hardly deserved (because there was virtually no content in it) but it shows how this deal between two names has captured the limelight. I’ve read several brokerage published numbercrunches on the deal and they’re all of an ilk, calling the deal “fair” and “win-win”, but I think on a conceptual level it deserves far more praise than mere numbers can indicate. This is exactly the type of deal FNV should be doing, locking down a generational stream with a company that wants the cash and can afford to forward sell (de facto) one of its minor metal products from the mine without sweating.



FNV’s share price performance this week reflects its conservative exposure to metals swings compared to the traditional (and very beaten up) mining companies. We’re seeing it move from “good idea” to the type of long-term holding that will become a must-own part of any metals fund portfolio, the next BHP or Rio Tinto.


What the gold/silver ratio tells us

Silver sucks
Silver has sucked for over a year.
It's still sucking today.
There's no sign that it will stop sucking.



So own gold over silver.

Reader 'R' on IRL

My favourite bit of feedback from subbers on Minera IRL (IRL.to) (MIRL.L) from yesterday's edition of The IKN Weekly, IKN335. He hits the nail right on the head in this section of his mail. 
I just want to say that as I was reading the CV's and got to the one of Jorge Luis Ramos and read the words "He is the CEO of COFIDE", my immediate reaction was "What?! The CEO of the very bank that has already forwarded the company $70 million? Uh, YES PLEASE!". The rest of the nominees also have some fairly impressive backgrounds, so this is exciting. My wish would be that the current (expletive deleted) in charge would feel the pressure of what's coming and just decide to throw in the towel and resign, but those types of bottom feeding lowlifes will probably still fight to the end until they're shown the door, unfortunately.
 
Thanks R, always appreciated

10/11/15

The IKN Weekly, out now




IKN335 has just been sent to subscribers, amongst other things it's got chunky excerpts from the key passages in the Minera IRL proxy documents in one section. And I'm very tired. Goodnight.

Rubicon (RBY) (RMX.to): Brent Cook versus the likes of Allan Barry or Louis James

American Pharaoh versus an unraced two year old over a mile and a quarter.
Usain Bolt versus 40 year old dads at the school sports day.
The New Zealand All Blacks versus Namibia.
FC Barcelona versus Scunthorpe United. In the Nou Camp.
Stephen Hawking versus Kim Kardashian at astrophysics.*
Robert Frost versus you at poetry.
I could continue, but let's cut to the chase: Brent Cook's weekly letter is the best in the business and today's edition proves that in spades.

*Spellchecker wants me to change 'Kardashian' to 'Guardianship'. Discuss.

The top three most visited IKN posts this week are...

...in reverse order:

Third Place: "The undoubted genius of sellside anal ysts", because Oliver Gross linked to it at CEO.ca chat and it picked up a bunch of extra direct hits. It was only a silly little thing that got overweight attention. A bit like Tommy Humphreys' breakfast.

Second Place: "Timmins Gold (TGD) TMM.to): Reader 'RW' and your humble scribe are in complete agreement about..." in which reader RW and your humble scribe cracked on one of IKN's standard in-jokes. A bit like too many people are regulars round these parts these days.

First Place: "Franco Nevada's (FNV) deal with Antamina". which was a mere ten words long but got a bunch of hits coming in from Google because it somehow got ranked highly on their system. It didn't say much, either. A bit like me all week in fact.

And good to see that the IRL posts didn't make the top three this week. Yup, I'm getting a little weary of it all too.