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7/20/18

The Friday OT: Lou Reed; Satellite of love

There are songs that last the test of time. Satellite of Love belongs in the top tier of that group.



Deceptively simple melody, poetry as lyrics, Reed's laid back delivery. Wonderful. Youtube here.

Barrick (ABX) $ABX is the third party looking at Detour Gold (DGC.to)

Which means there won't be a sale. No way in the world does ABX pay up for a high cash cost miner.

Bloomberg wires with the news on this, I'll link as soon as Bloomie puts it on its public pages.

UPDATE: Okay, here's that linko. It starts this way:

Barrick Gold Corp. is the undisclosed gold miner who was asked to sign a confidentiality agreement alongside activist investor John Paulson to discuss potentially buying Detour Gold Corp., according to people familiar with the matter.

Continues.

7/19/18

HIVE Blockchain Technologies (HIVE.v): Why ROI matters

I received just one mail on this about HIVE.v today, but in this case one is enough and I'd like to explain just a little more about ROI and why I mentioned it in yesterday's post. We're talking about "Return On Investment" of course and in this case, we need to consider three things:
  • How much has been invested
  • What return there has been so far
  • What return we can expect in the future
As noted last night, we know the answers to the first two. As at March 31st 2018 HIVE had raised $152m in cash and had around $14m left, so investments are $138m (as long as you agree that over $0.6m in travel expenses for HIVE executives in just six months is an "investment"). We also know the return, about $9.5m in coins. 

The future is the thing, there. Yesterday I also added a word on my guesstimate on the third element until the end of this year (when HIVE's money is likely to run out unless they get their sales tax cheques returned pronto). So it was interesting to tune into the HIVE.v conference call this morning, because at least one of my initial guesstimates was confirmed as pretty darned close. During the call, we were told that as at today HIVE.v holds U$17.7m worth of coins, a big jump from the year end number we were given yesterday. Even though they didn't give us exact coin numbers held (strangely coy, I wonder why) that's solid info and from that we can extrapolate a bit. Here's a table, notes below:


  • The first thing to say is that by the nature of the beast, it's going to be rough and ballpark. I'm using a value of $500 for Ethereum coins and $18 for Ethereum Classic in order to be generous in the rounding, as explained and used yesterday. 
  • I'm adjusting a little for the period ended June 30th based on what I heard today (mid-July). Also, I'm most interested in the ETH coins, as Ethereum Classic is a minor part of revenue.
  • We can expect hash rates to go up in the current quarter to end September, that's why we can expect lower production compared to the June quarter.
  • Finally, I'm taking another guess on the December quarter raising as that's when the Bitcoin (BTC) mining is supposed to begin at HIVE.v. So consider that larger number a "ETH Equivalent" that includes ETH and some BTC.
  • Yesterday my guesstimate (using those prices for the coins) was U$42m by the end of the year. Today I've adjusted it upwards a touch, to U$43m. That's a minor thing and I'm aware I could be out by a lot more on either side, this is ballparking folks and a lot will depend on price changes in the future, for one thing.

So, for $152m invested (because by the end of 2018 its cash is all gone) HIVE.v would have produced around $43m in goods. That, ladies and gentlemen is not a good ROI. Putting it mildly. Very mildly. Even if we assume they manage to produce the same amount in 2019 and 2020 without any extra investment (which won't happen hash rates are going up and up all the time), they still won't get back the original investment unless ETH prices move up considerably.

Or if you like, consider it another way: Back when this started and HIVE raised U$152m, ETH coins were trading at between $250 and $300 apiece. Even if we take the top end of that range, it means HIVE.v could have turned its back on all that mining and mucking around, bought over 500,000 Ethereum coins on the open market and become a passive investment vehicle with a FAR better business model. Instead, it's blown the cash on machinery, professional fees ($1.306m), marketing fees ($1.309m), travel expenses ($0.606m), share based payments ($4.817m....WTF???), operating and maintenance costs ($2.916m) and quietly paid cash bonuses to management ($0.545m) which you have to read in the small print details of the Reg Fs in order to know about. Those are just a sample of the costs involved with this company too, there are a whole bunch of other ones and while they like to tell you about the approx $2m/qtr running costs of the equipment and the cheap electricity, what they don't mention is the approx $7m/qtr cash burn the whole corporate entity swallows.

All that for a projected production of around 84,000 ETH Eq coins to the end of 2018. Instead of holding 500,000 or so and having a company with something to show for its U$200m+ market cap.

So confound us all with the new tech and crypto and all that malarkey, the boffins can throw all the sequins into my eyes that they want. This is a company, it lives or dies on its financial well-being and the financials at HIVE.v are plain awful. One of the basic rules of successful capitalism is that when you invest $150m into something, you get more than $150m out of it afterwards. The only people making money in HIVE are those on the inside, carving themselves fat salary cheques, bonuses for no reason whatsoever, juicy expense benefits etc. The investors have negative ROI and even if its kit remains valid for years (which it won't, and don't get me started on how they have the brass neck to depreciate $113m of fixed assets by just $3.2m in the last quarter, that's borderline criminal) there is no ROI. And that matters. End of rant.



HIVE Blockchain Technologies (HIVE.v) files its annuals

Ahh wonderful, kid in a sweet shop time. So many things to choose from, so much fun I've had tonight and the charts that I have generated...oh so pretty! But instead of visuals, allow me to pick a few things to explain succinctly what HIVE.v has done in the 2017 period, as ended March 31st 2018:
  • It raised U$152.852m in cash
  • It finished the period with U$14.729m in cash
  • Therefore it spent U$138.123m
Now for what it achieved:
  • It mined approximately 17,000 Ethereum coins. It's slightly less, but let's be reasonable and say today's price is U$500 per ETH. That's U$8.5m worth of coins
  • It mined approximately 54,000 Ethereum Classic coins. Again we can argue the toss but a reasonable price for that coin is U$18 each.  That's U$0.972m
So, U$9.472m in top line revenues for the year. I think it fair to say that ROI is lagging a little at this company, even if U$5.5m or so of that came from the latest quarter. FWIW, it looks as though HIVE has enough ready cash to get through two more quarters (longer if they get their sales tax back soon) and if they continue the acceleration of coin mining they may get to around U$42m worth of coins at today's prices before their money runs out. But hey, that's me just guessing. So maybe if you like the idea of investing in Ethereum you do something radical like buying Ethereum coins and getting more than 30c on the dollar for your initial entry. But again...hey...that's just me.

However for those of you still long, strong and HODL in this company, we recommend that you stick to reading the news release that came out with tonight's numbers and refrain from casting your eyes over the risk factors in the RegFs, because they aren't quite as bullish as in the literature HIVE is allowed to spin at you. For example:
An additional risk to the Company arises as a result of the potential shift from the use of a proof of work validation model by the Ethereum network to a proof of stake model. The current proposal for Ethereum’s shift to proof of stake has a number of unknown variables, including uncertainty over timing, execution and ultimate adoption; and there is not yet a definitive plan that is established and approved. As a result of these uncertainties, the Company cannot estimate the impact of a potential change to proof of stake on operations, but may see its competitive advantages decrease over time; this may have a material adverse effect on the Company. 

Specific to the Company, the Company may not be able to complete its planned expansion of SHA-256 ASIC miners with Genesis on the terms and timeline currently anticipated, or at all, and as such the Company may not realize on any additional electrical consumption or digital currency from the SHA-256 ASIC miners. Additionally, the Company may be required to sell its digital currency inventory in order to pay for its ongoing expenses (and in particular, expenses to maintain the Company’s facilities), and such sales may not be available at economic values.

I really like that one.

Tonight, HIVE.v has a market cap of C$291.45m, which is approximately U$221.5m. Nice big number.


7/18/18

Plateau Energy (PLU.v): Real journalism 1, Business journalism 0

Funny how it takes a real journalism media, such as Spain's newspaper of record El Pais, to seek and find the truth about a mining project. Because if you leave it with the fawning bizmedia they'll just swallow the company line wholesale and help the promoters pump the stock. Here's the link and here's the extract (translated) about the problem Plateau Energy (PLU.v) doesn't want you to know about:
Macusani Yellowcake, Peruvian subsidiary to the Canadian mining company Plateau Energy Metals, announced on Monday the discovery of 2.5m tonnes of lithium at high grade and 124m lbs of uranium at its Falchani concession, in the Puno region in South Peru. Howver, in 2008 local authorities and the World Monuments Fund stopped the mining projects of radioactive material because the concession lies over more than 100 sites of rock paintings and petroglyphs that are over 5,000 years old."
 "In 2005, the National Institute of Culture (Peru INC), today a ministry, declared the rock paintings of Corani and Macusani in the Carabaya province of Puno 'Cultural Patrimony of the Nation' after the initiative of Rainer Hostnig, an independent investigator who studied the art work between 2001 and 2008. Hostnig did so because the Peruvian State had awarded the Canadian mining company "Pacific" a concession of 30,000 heactares for the exploitation of uranium.

""The area under concession totally coincides with a zone that hosts the largest concentration of rock art in South-Eastern Peru, with the majority beloning to the era of hunter-gatherers", said Hostnig, quoting the regulation that was emitted by the rector of the institute. In 2011 the Ministry of Culture recognized the pre-hispanic archeological monument as Cultural Patrimony in the category "Archeological Cultural Land". The area covers more than 36,000 hectares at 4,500mabove sea level."


Full report here. Oops, did PLU forget to tell you they won't be able to build the mine? How thoughtless of them...

Detour Gold (DGC.to): Confirmation that John Paulson is a dickhead (updated)

But not as big a dickhead as the combined board of Detour Gold.

Two wrongs do not make a right(s issue).

PS, Ah you want the background? Okay so here's Paulson's stupidity and here's the Detour reply. Above all, consider that Paulson got the stock to shoot up on the back of his announcement early this morning. Utter madness and showing a complete lack of understanding about how this works, his mini-me Marcelo Kim deserves to be fired for advising the boss to go this direction.


UPDATE: Yup, Paulson is a dickhead:


As usual, Rick Rule is 100% correct (updated)

It's true that if I were presenting there the front half of the room would be empty, too. I'd point out how much they'd all lost on mining stocks since the last conference, ask those present why they spent U$800 on the ticket this year, then burst out into sustained laughter until they all left.

It'd take about a minute.

Prickly.

UPDATE: The man himself, Arthur Richards Rule IV, send in shots of today's hall to show it's now SRO. Ta muchly, Rick.



And here's why: Robert Friedland the Floor Filler. Bless his heart.




New Gold (NGD)

Good to see how Raymond Threlkeld, CEO of New Gold (NGD) since May 9th, has managed to get the company on an even keel.


At the time, I did find it somewhat ironic that they handed the reins of NGD over to the guy that sold them Rainy River. It's like asking Oliver North to head a panel on gun control.

7/17/18

Wesdome Gold (WDO.to): A drill map

From its NR today:


The Sprott Natural Resource Symposium

Hey, any overweight white balding males in the half-filled hall?


Two weeks of First Majestic $FR.to $AG and Porter Scamsberry

First Majestic $AG $FR.to is currently being pumped by Stansberry Research. When it comes to that den of thieves, pump is ALWAYS followed by dump. You have been warned.
Two weeks later and...


...15% down from that very day.

The scumbag M.O. of Porter Stansberry and his bucketshops is well understood. But when you combine him with a Keith Neumeyer stock, you can almost set your watch to the trading pattern.



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Feedback on mailbag

As is often the case, another good time was had by your humble scribe on opening his mailbox this morning, This time I'm not going to quote the mail in question verbatim (three swear words and the grammar wasn't wonderful), instead paraphrase and sum it up:
Dear Otto,

You think you're really clever. You wrote X in your blog but I know what you really meant was X+1, therefore I have perfect reply to your X+1 argument.

Two things to say about that:

1) This blog is not an instruction book on anything. It is not one of those "Follow me folks into the crazy world of stocks and shares! Listen to what I say and become rich!" websites run by charlatans and snake oil salespeople who spoonfeed you THE information you NEED. Sorry folks, it doesn't work like that. The truth is that this blog is nothing more or less than one guy spouting off on the internet, but if you really feel the need to find a deeper meaning to IKN consider it a list of hints and ideas that you can take away, think about, use as hints and ideas in order to make yourself a better investor of (mostly Canadian listed junior mining) stocks. At heart I do care about improving the quality of information on the subject and making smarter investors but it's Darwinism, not life rafts. This is capitalism in a free society and you have three choices; a) learn the easy way b) learn the hard way c) don't learn at all. I'm not here to save you.

2) No, I don't think I'm clever. In fact it's a constant source of amazement this end as to how few people have worked out how stupid I am about all this.