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12/16/16

Shocked! Shocked ah wuz! Argonaut (AR.to) San Antonio permit denied

OK people, IKN has been going on about this one for years. Literally. Therefore the news out this morning that the environmental permit for Argonaut Gold's (AR.to) San Antonio project has been denied by Mexico comes with no side dish of surprise or "disappointment" (pace CEO) round these parts.

And by way of just a single example here's what was written at this humble corner of cyberspace way back in April 2014, a post prompted by GMP's buy call on the stock that included a NAV weighting of $1.30 for this single project. 

All the meta-twaddle and nonsense you read above was prompted by reading GMP's call on Argonaut Gold (AR.to) this morning. They like the thing, want you to buy it and even resort to the puerile "it's a smart money buying opportunity right now" argument to get your ego stirring and you on the phone to the trading and compliance desks. Thing is, GMP and IKN could argue the toss about its valuation call on the AR.to numbers (1.15X of NAV8% is rich as hell for this thing, guys) but when it comes to its pol risk call on what's happening in Mexico, they're just being plug dumb stupid. The subject is again San Antonio in Baja California Sur State, and the line GMP uses is...

"We continue to take a conservative approach, estimating production beginning in Q4/15."

Woah! Stop! That is not a "conservative approach". The true conservative approach is estimating production that will never begin and removing the $1.30/share NAV estimate for that "asset" (word used loosely, because in fact it's the exact opposite, a liability) from the calculation. Expecting San Antonio to ramp up in 2015 and calling that a "conservative" estimate shows a complete and utter lack of understanding about the political risk factors around the project, even if you decide to disagree with IKN's own "never gonna happen" call. It's the hallmark of a nodding dog analyst who cannot speak Spanish, hasn't bothered to read up on the local situation, has no clue about the type, strength or depth of the opposition to the project and has limited their DD to a phone call to the IR department to find out the company's own viewpoint and repeated it verbatim to brokerage clients.

The day of the GMP buy reco AR.to closed a $4.03 stock. This morning it's $2.01 and in all likelihood it's about to go lower. More IKN kung fu strength.