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Paul van Eeden, metals prices, China and the New York Fed

Regarding the metals prices, a friend of mine wrote to me yesterday and told me that Paul van Eeden (he of Cranberry Capital and non-stop talkinghead appearances) is shorting US treasuries and asked me what I thought of the trade. So I put together an answer for him that along the way helped me synthesize a few thoughts. The following gives reasons that point to a metals rebound Sept/October. (FWIW, i think PVE is very good on gold but not very good on other things).

I'd appreciate any thoughts/criticisms/feedback on what follows via comments or mail as you prefer. I'm not trying to claim victory here, but if you can punch a hole in this it would help us both, I'd think. TIA.


If PVE is shorting the US treasuries, I suppose he thinks this will happen:

1) The coupon drops
2) Therefore the yield rises
3) Therefore I presume he thinks this current deflationary move in the dollar, reflected by oil and commods, is a headfake. He's presumably betting on a weaker dollar and a non stagflation scenario.

He's betting on the logic that the market is currently ignoring. I'd say it's a 50/50 shot that he loses all his money.

Have a read of this.

(Or click on this link to go to the same place)

Brad Setser is the blogger who most understands capital flows between the world and the USA (I think). He's also very smart on China. He's been saying over the last few weeks that "one of the Central Banks" (presuming China) has been adding net funds to the US treasury without anybody noticing. This is the kind of thing that can continue until it doesn't. It's an artificial way of deflating the US (and therefore world) economy. This is the reaction we're seeing from the market, with Kellogg's up 4% and PCU down 4%. Margins are being tightened at the primary end and loosened at the service end, thus food manufacturers, Nike sneakers, WalMart, Citibank etc etc rise and Petrobras, BHP, and the spot price of copper fall.

If it is (as I suppose) China who has stocked the New York Fed with $29Bn just last week, there is an obvious end to this. It goes like this

1) USA in serious financial trouble

2) Commodity prices rising

3) China doesn't want rising commods (adds to inflation and stops its own expansion).

4) China reaches agreement with US. Instead of buying bonds as international reserves, it adds to foreign holdings inside USA via NY Fed reserve, and note that the inflows go directly to US treasuries according to Setser's data (he provides a link in his post).

5) The US therefore reflates the dollar, and thus deflating other things (oil, bonds yields, internal inflation etc). This is what we've seen these last two weeks, no? USD from 72 to 75, oil from 140 to 115 etc etc.

Point 5 is where we are right now. This is how i THINK it continues:

6) China wants commods to drop so that it can continue its growth program with less inflationary pressure.

7) USA gets itself out of a tight spot (temporarily, or permanently...i don't know. Probably temporary).

8) Once commods are lower (which is basically now), China goes back to growth policies.

9) Important: This has already been decided upon by the Chinese politburo and reported by such companies as Merrill Lynch, Morgan Stanley, UBS. (Here's a link to the story run by The Economist). The Chinese policy is to return to full growth pattern once the Olympics is over.

10) Therefore there must be an end to the presumed large scale capital inflows from China. This flow to the US via the Fed will end either now, after the Olympics or maybe a few more weeks.

11) The data that Brad Setser follows (and we should follow it too, now) will give the clearest indication possible to when commodity prices will recover. Once foreign capital inflows return to normal (e.g. neutral) levels, it means the FED will not have the ammunition. The dollar drops, US bond yields rise, PVE makes his money and Zinc (for example) goes above $1 again.

12) However, WHEN is the key question, because by the time the inflows stop, PVE may already be bankrupt (once again we remember JM Keynes; "The market can remain irrational longer than you can remain solvent" or words similar).

13) Therefore we keep our powder dry and stay away from a dangerous market that is being pulled around by very large non-supply/demand forces.

14) Any questions?

Argentina's Interior Minister is a liar

"Look...nothing up my, for my next trick......"

This weekend's 'pants on fire' award goes to Florencio Randazzo, Minister of the Interior. In a radio interview this morning, Minister Randazzo said that talk of investor mistrust in Argentina is pure speculation, and added (and I quote), "...there is no economic data that points to this."

Let's compare Randazzo's statements to those of Moody's. In this report, Moody's says that the government's under reporting of inflation, "....raises serious questions about their willingness to pay. The big negative is mainly politics and concerns about policy implementation. With inflation, it is not so much the level. It's that the government is not recognizing it because the number they publish the market doesn't believe in.''

But let's give the last word to the money. Here's Argentina's year-to-date EMBI+ rating (normally known as "country risk"), compared to the LatAm average spread.

Nuff said. Randazzo's a liar.

Snippety stuff (interesting weekend stuff in Spanish edition)

I remind viewers who don't have the best Spanish in the world that Google Translator "does" Spanish-to-English pretty well. Not grammatically perfect, and chews up the odd word occasionally, but all in all makes the stories acceptably understandable. Available here.

On checking out the inversion Peru site I found this very interesting post. Juan Vegarra, the CEO of Vena Resources (, has written a long post in Spanish for readers (aimed at those who invest in his company via the Lima stock exchange, it seems). It contains lots of interesting info about where the company is headed.

Argentina has always known that ex-President Carlos Menem stuffed his pockets while in the top job. Now, it seems, there might be some documentary evidence. Der Spiegel is reporting that Siemens paid him a U$16m bribe (along with other multimillion dollars gifts to key memebers of his government). Here's Critica Digital with the lowdown.

Despite the image President Twobreakfasts tries to project to the outside world (and the inflation figures that are massaged to a level nearly Argentine) Peru is obsessed by its rising inflation. This Schuldt post offers you 100 links (not joking) to inflation articles written by field experts in its national press so far this year.

Don Coxe Basic Points

Those of you who enjoy Don Coxe's "Basic Points" monthly newsletter (and I'm most definitely in that group) may find it useful to click on this link right here.

As well as the best global analysis available to mortals, his sense of humour shows through this August. Example:

Happy Days Are Here Again!
(Sorry, that song came out in 1929.)


NovaGold: Nice people don't necessarily make good miners

Unmissable pair of posts by mining columnist Jack A Caldwell on the NovaGold affair. Although the story is not in the LatAm region, it's well worth drawing your attention to the words of the extremely experienced Caldwell on this subject.

Here's the link to his blog post, and I strongly recommend you go and read the story there. But as a taster, here's a section from his post:

"Nice people with not much technical experience hired a famous consulting company to design the mine and estimate its costs. The engineers sort of knew things were cockied. A peer reviewer or two told them they were neglecting things that would blow their cost estimate sky high. So the company emperor fired the reviewer and ultimately the consultant. But even naked emperors have to ultimately admit that they have no clothes, and so in spite of parading around in all glory through the financial markets and successfully fooling the adults who wanted to believe that the emperor’s new clothes were indeed grand, a small child (reality) intruded and it all collapsed. And the lawyers ran in to fight over the emperor’s naked body, while the young child grew up to be a blogger."

Also well worth a visit is another Caldwell article today. Go read that one, too. More background that expands to an interesting generality.

Trading Post (depressing edition)

It's a jungle out there. Spot silver off nearly 6% is the gruesome headline to beat all gruesome headlines, but there's plenty of horror stories out there to choose from.

Jaguar Mining (JAG) at $7.12. I puked the trade I tried at $8.00 for a 10% loss. Back to the drawing board there. I jumped in too early, that's clear. Now waiting for the bottom to truly show itself.

Capstone Mining ( at $3.00. The company reports record profits, growth and good forward guidance. It's rewarded by a 20% PPS slump. Gimme a break...this is a profit making animal! 2q08 EPS was 0.15c. That's a 5X PE just on direct projection and doesn't take into account production growth. And they're selling this like it's going Chap11.....Utter madness and sheeple stock trading. My four year old daughter has more financial sense, frankly.

Minera Andes ( at $1.03. This week's good news on a solid company has been discarded like yesterday's newspaper. But apparently the 26,500 Californian home foreclosures worth $12.5Bn in July, and the 2q08 $2.3Bn loss at Fannie Mae is GOOD news, cos the Dow is up 2.6%.

There are plenty more of the above, and the war zone that is my trading screen is boringly red. But let's just note three happier stories, yeah?

Vena Resources ( at $0.50. The light of optimism today. Up 4% again, and I note the chunky 147,000 shares traded in Frankfurt today. Any green on my sign stands out on a day like this, so let's mention it here, yeah? Because contrary to market expectation, Otto can gently but firmly assure you that the world is not coming to an end. Whatever, but in this case it looks like the good news on Vena is not far away now.....

Gold Hawk Resources (CGK.v) up 10%. I got two mails from CGK's IR dept yesterday (can't fault them for sharp eyes). The company wants to make something clear about the options deal and how it's mainly aimed at maintaining key personnel on board, as well as rewarding the loyalty of employees in Peru.

So here we go:


- As should be expected of companies that are not CF+, CGK has never paid cash bonuses

- Approximately 1/3 of the options can be attributed to our new CFO who had signed a contract and joined CGK at the beginning of May (yeah that’s right, nine days before we stopped production).

- Neither the Chairman nor President/CEO received options

- The focus of the Company since May 9 has been on the necessary steps to return to production; getting the Emergency Decree on July 18 was critical as it shows public, formal recognition that there was a problem, that Gold Hawk discovered it and proved it, and that the cause was a third-party. It involved a lot of effort on behalf of many, particularly our team in Peru .

- Our team in Lima (not just the couple of expats but the people who do the day-to-day work, assistants, legal, environmental control, HR, accounting, etc.) received more options than ever before, and deservedly so.

One other thing that any shareholder should be concerned about with options is timing. Under normal circumstances, and in this case, issuing options is something that would have been done in May soon after our new (and fantastic) CFO joined us. However, with a national emergency at hand, issuing options got moved down the list of priorities. I think rightly so. While the hard work and progress made to finance and get a restart timeline together has yet to be reflected in our share price, the Company is now making positive steps after three months of tough sledding.


Which is all fair and good Gold Hawk, thank you. I'm very happy to be able to diffuse these details, but might I suggest that you explain this in your official press release next time, and not wait for the market to turn its back on your stock and then get the word out via a humble little blog like this one? Thanks in advance.

UPDATE: As for Fannie, Freddie, Californian foreclosures and the Dow, an e-mail pal just sent me this. He's right, of course:

A spike in foreclosures is bullish as it indicates capitulation, the last stage of the process.

Flat foreclosures is bullish, as it shows the situation has stabilized, the penultimate stage (before recovery).

Falling foreclosures is uber-bullish.

That's logic!

A quick snippet of info on Kinross for the agoraguys

Hi agoradudes/dudettes,

Just thought you'd like to know that according to sitemeter dot com, Kinross has been a regular visitor to this humble corner of cyberspace this week. And if they're visiting me and my little backwater, you can bet your tush they're all over your bullboard. They seem to be very interested in you retail guys all of a sudden, no? I wonder why.............

Time of Visit
Aug 8 2008 8:25:40 am

Domain Name ? (Commercial)
Continent : North America
Country : Canada (Facts)
State/Region : Ontario
City : Toronto

From a porteño viewpoint (part two)

In this previous post, I invited my Argentine ('Porteño' precisely; i.e. from Buenos Aires) friend DB to comment on Argentine politics. Afterwards, some dude named TL left this comment:

Yes, why does he see:" very dangerous to me now that the majority of the urban middle class support the agro cause." as Dangerous?
Also,Yes, I'd like to know more about the money link between Argentina and Venezuela,(in yesterday's La Nacion, 06 August.) In particular, what Argentines think about this relationship.
TL August 7, 2008 10:15 AM

So for the general amusement, edification and education of TL and you all, here's DB's answers to those questions. By the way....keep the questions coming if you're interested in his viewpoint. This could turn into a series, and all I have to do is translate. Enjoy.


It's dangerous because the urban middle class are the one that have 'media power'. They are the ones who participate in surveys, call the radio stations, send mails to the newspapers, etc. The bottom line is that they are the 'public opinion'. When 'the people' (explanation; when I use 'the people' it means Buenos Aires middle and upper-middle class) make their voice felt they achieve many things. For example, Blumberg (Ottonote: Ing. Blumberg is a businessman whose son was kidnapped and murdered a couple of years back. His public protests and campaigns turned him into a media star and then a political figure). The people supported the 'engineer'* in his protests and between them they changed the whole penal system! I believe the pain of a citizen such as Blumberg cannot change something as important as the penal code. There are specialists for these things. Today, everybody realizes that the changes were a mistake, but at the time the government gave way under social and media pressure.

The rural society supported by 'the people' can achieve dangerous things, too. Although I think that the support for agro is from certain powerful sectors but is not massive/popular yet. I still haven't seen anybody banging pot and pans (cacerolazos) in Avellaneda or La Matanza (ottonote: two traditional working class neighbourhoods in Buenos Aires).

As for the second question, I think that the financial relationship with Venezuela is the only credit option we have today. No other banking entity is going to give Argentina credit today. The interest rate is very high, yes. The general perception is that the IMF/other world banks previously lent money but imposed unacceptable conditions. We had a very bad experience with the IMF 'recipes'. Venezuela does not impose internal conditions. If there have been back room deals, well find out about them in five years' time (as always).

*Blumberg used the title 'engineer' for years, until it was discovered he was not properly qualified to do so.

Related post
Klishtina from a porteño viewpoint

Copper breaks $3.50

All bets are off.

Zinc also diving, and at 76c/lb. I was reading a long report from UBS yesterday, and the authors are very into this new "demand destruction" buzzword. I have to say that I do not agree, and there are too many basic supply/demand factors in today's world that point to things such as Zn with little downside, and things such as copper with sustained upward pricing pressure.

But those are long term fundamentals, and as a friend of mine continually whacks me on the head with, "the market doesn't care about your stupid long term trends" (Just a modern version of JM Keynes's 'irrational/solvent' thing, I suppose).

So it's time to batten down the hatches and lighten the trade port of losers. At the risk of being boring, the Long Term port is unaffected, but in the ST port, cash is king.

One more thing: Don't try telling me it's sheer coincidence that Copper hits a year low on the very same day the Olympics opens in Beijing. It's the LME's idea of a joke, I reckon.


More reason for the USA to be proud of its military (a non-LatAm tribute post)

Judge at the first Gitmo trial, Navy Captain Keith Allred today:

"I hope the day comes that you return to your wife and daughters and your country, and you're able to be a provider, a father and a husband in the best sense of all those terms," Allred told Hamdan at the close of the hearing.

I tip my hat to the judge and the six military personnel that gave Salim Hamdan a fair trial. A much finer calibre of human beings than the people who order them around from desks in Washington.

Did you see the battering GOL took today?

If you didn't, check this Bloomberg report (bloomie Brazil gets one right for a change, it seems).

The chart speaks for itself today, and cut short the rally your eagle-eyed Otto called in this post last week. Gol was $10 and bits, and it's back at $10 and bits after visiting $12+ this week. Ho hum. However, some of the talk around GOL today does seem a bit overexaggerated. After all, the company is doing the right thing bizwise by cutting back on capacities to keep cash flow in the black. In fact, it's exercising the option I mentioned it had way back on July 7th in this post:

"...But the main problem facing GOL right now is that of liquidity; in the last qtr, the cash at bank dropping by 30% or so to R$1Bn. This might make GOL think twice about those new jets it has ordered and therefore curtail its fleet requirements for the time being in order to keep the cash flowing correctly. Wall St. doesn't like curtailed growth...not one little bit.

But is it such a big problem after all? I don't think so. This is because it can always totally batten down the hatches, cancel those new jets, mothball the new Varig international routes (which is has been doing) and concentrate its efforts on carrying domestic passengers."

Come on..tell me I nailed the fundies call. I know you want to.........

Evo sez, "You and who's army?"

The man wearing the hat has lots of tough friends, and one of them is Evo

One of the things that was missed by most observers in Bolivia today was something that didn't happen. Quite a few things did happen, of course.
  • Evo paraded with the Head Honcho of the Bolivian Armed Forces, Luis Trigo, who pledged his loyalty to the President and to democracy.
  • Three half moon governors have gone on hunger strike, with another five pledging to join them tomorrow (after a decent breakfast, of course). How will they ever reach Sunday without eating? The poor lambs...48 whole hours!
  • Evo made his final campaign speech in front of tens of thousands at the city of El Alto. Evo not silly, cos with a 90% approval rating there he was bound to draw a crowd, no?
  • In the speech he denounced his opposition as "civil dictators" and said that his 59% majority projected by the polls for this Sunday's vote will be beaten "by 15 or 20 points".
There was plenty more things of the same ilk on both sides, and you can check 'em out on Reuters, AFP and the other wires if you like. But the interesting thing that didn't happen was something that is normally straightforward. At the time of any vote, regional governors (prefects) have to sign documents that state they take responsibility for the civil obedience of their populations on the day before and the day of an election. However, four governors refused to sign this normally open-and-shut piece of governmental legalese (and yeah, before you ask, Santa Cruz was one of them......duh).

Is there something afoot that will finally show the autonomists in their true colours? A part of me hopes not and just wishes the weekend passes peacefully. The other part wants me to see the autonomists tip their hand once and for all and try something outrageous. Then if I were Evo, I'd take General Luis Trigo to one side and whisper, "Go get 'em, soldier."

Snippety stuff (red, gold and green edition)

Loving would be easy if your colours were like my dreams
Red gold and green, red gold and green

Culture Club, 'Karma Chameleon', 1983

In the green corner:

Credicorp (BAP): The ADR of the Peruvian bank that jumped a tasty 6% on the back of a good earnings result. If we back out the "one time currency loss" (translation: 'we tried to play the forex market and failed') earnings growth from just the last quarter was 23.7%, and YoY growth stands at 57.8%. All very sexy, and the bank has guided strongly. You guys up North remember the concept of banks making net profits?

Minera Andes ( On a down day for the miners (again), Minera stood out with a 3.6% gain. The Rob McEwen news obviously went down well. As it darn well should, frankly.

Vena Resources ( Recovered 6.7% of recent losses, but the eyecatcher was the 111,000 shares traded. Nice to see at least a little more volume flowing through the stock.


In the red corner:

FCX and RIO: Both finished in the red. See previous posts for the necessary mockery and dirtydeed exposure.

Aurelian ( Down 1%, ARU is being pulled by the sagging Kinross (down 3%) and its crappy all share deal. At closing prices, ARU is offering a 15% premium to arbitrage now (and don't talk to me about that stupid 1/7th warrant at $32, ok?). The market is now assuming a sweetener of that size from Kinross, which explains why certain funds suspected as being sympathetic to Kinross's argument are buying in now. The fund bags the difference when the sweetener comes in exchange for saying, "Oooohhh yessss...great deal for everyone. We vote pro-deal". Simple scam, isn't it? It's still a scam though. The power of leverage...............

Gold Hawk Resources (CGK.v): Down 23%. Ouch. The mine issue looks solvable now, but the recent round of options handed out to mgmt an employees smacks of opportunism and other holders are now voting with their feet. I'd be interested to find out exactly what percentage of the 3m or so options were awarded to the lower employee ranks. Whatever it was, this options deal was not the kind of signal CGK should be sending out.

Was Bloomberg's Kinch "asked" by head office to paper over her pump job?

You saw it here first folks!

A cast iron pump

After the blatant pump job that Bloomberg Brazil pulled on the market Tuesday (see here for full details), one of the two by-lined reporters has been charged with doing the correcting.

Today, Diana Kinch posted this report that directly contradicted her previous supremely biased report. Suddenly, it seems, Kinch has to recognize that Vale (RIO) isn't about to buy Freeport McMoran (FCX). This because she is forced to quote Vale's CEO this time:

"...Cia. Vale do Rio Doce, the world's biggest iron-ore producer, said its ``main strategy'' is to grow by expanding and building its own projects rather than through acquisitions."

"Acquisitions are possible but not probable,'' Chief Executive Officer Roger Agnelli said today on a conference call. ``We want to speed up our organic growth. That is our main strategy now.''

A fine example of egg-on-face, but how would you feel if on Kinch's original report you were silly enough to have bought FCX at its $90.10 top yesterday? So if anyone has a copy of "a certain hypothetical" internal Bloomberg mail sent from New York to Bloomberg's Rio office, please forward it to otto.rock1 (AT) gmail (DOT) com. You know it makes sense.

Meanwhile, Kinch continues to show her mediocrity with last night headline "Vale Shares May Rally as Iron-Ore Price Fuels Record Profit", filled yet again with vacuous speculation and friendly analysts shouting 'buy!". With Vale (RIO) trading flat-to-negative today, I suppose we should be thankful that her editor made her put the word "may" into that headline.

The mouse that roared

Ever read the book (turned into a great movie starring Peter Sellers)? Well the guys and girls over at agoracom's Aurelian board have been kicking up such a fuss about the awful deal foisted upon them by the ARU management that they're now getting into the MSM. Canada's National Post is today running a story on their ongoing protest, and even get Aurelian's CEO, Patrick "it's-suddenly-risky" Anderson to comment. Anderson is trying to use the brush-off tactic, saying that the protest mail sent by retail to all points Canadian was "a pretty skewed document."

Remember this old line from Mahatma Gandhi, agoraguys*. Right now you're on stage two:

"First they ignore you, then they ridicule you, then they fight you, then you win."

Meanwhile, to the cozy Bay St. club I say, "Welcome to the 21st century, boyz. You can't rip 'em off like you've done for the last XXXX years. Little retail is fighting back, and good on them too!

*Hey, think on it too, yeah?

Related Posts
Obsession with a question
Aurelian: Mutiny, Mr. Christian
Ecuador Mining: Time to play "Spot the Difference"
(others too)

UPDATE: Now at the Calgary Herald, too

If this doesn't interest you in Minera Andes (

.....nothing will. Rob McEwen seems to have given up on his Cortez thingy and is going for the big gold, silver and copper in Argentina. Here's the link. Buy Minera. Don't ask me, ask the Coffins. Ask Red Back Mining. Ask the guy who built Goldcorp. Ask the CEO who just announced positive cash flow.




(yes I own. Waddya think I am, stupid?)


Human freedom and arson

"You call me violent and I'll smack you"

Quote of the day comes from Jon Goicochea, Venezuelan opposition movement student leader and winner of this year's Cato Institute 'Milton Friedman Prize', awarded biannually. According to the Cato Institute, "The prize is awarded to an individual who has made a significant contribution to advancing human freedom."

Could this be the same person who today reacted to a Venezuelan Supreme Court decision by saying,

"The national government is looking for violence....if they do not let us freely express ourselves and manifest our discontent with the government via the voting box, they are looking for us to burn the city down."

This young pup better watch his mouth. As well as openly inciting violence, he's saying that the Supreme Court judgement is a purely political. He forgets to mention that:
  • The appeal to the Supreme Court on this issue (which was turned down) was made by a Chávez supporter who has been banned from running for office.
  • Of the 270 people barred from running, more than 50% are Chávez supporters. Looks like Jon, the mob and the fawning English speaking press "forgot" to mention that.
  • The Supreme Court ruling was made by the same judge who refused to call the 2002 coup d'etat anything but a "power vacuum"* so it beats me how Bloomberg are running stories about the judgement having come from Chávez's pocket....these Bloomie dudes need to do more DD.
I cast my mind back to words spoken by Edward Crane the chairman of the Cato Institute just three months ago.Jon Goicochea is making an extraordinary contribution to liberty. We hope the Friedman Prize will help further his non-violent advocacy for basic freedoms in an increasingly militaristic and anti-democratic Venezuela.”

Non-violent? The guy's a thug! So will the Cato Institute consider withdrawing its prize (and the cheque for U$500k that goes with it?). Hmmmm, doubt it...all things considered. Especially when you remember how the judging committee is staffed by people such as Pinochet's ex finance minister.

*i.e. the major dissenter

UPDATE: I've been reliably informed that in Spain tonight, the whole referendum barring issue was treated in a balanced way by mainstream media (I have no link, just a honest voice via mail). From what I've seen so far in the English press, the US army will be called upon to invade Venezuela at any given moment. English speaking press coverage on Venezuela ranges from mediocre to shameful, once again.

Eric and David Coffin on Canaccord today

A nice, chunky post for all you mining fans.

As those at Canaccord haven't been averse to lifting ideas from here, by way of light revenge here's an interview dated July 31st and published today by Canaccord's popular "David Pescod's Late Edition" publication.

I'm not really trying to upset Canaccord, and wholesale copypasting for content really isn't my bag. However today's an exception as I'm more interested that as many people as possible get to read the Coffin Brothers in this interview. These dudes are two of the very few 'newsletter gurus' that I wholly admire, as the Coffins really work hard and dig deep for their inside edge, as well as being smart at gauging the market sentiment.

So here goes with the interview. Enjoy, and look out for the reco on one of my faves, Minera Andes ( You'll also note a big red flag hoisted next to the word 'Venezuela'. When it comes to mining, total agreement for that, too.


(As of July 31, 2008)

The mining markets have been a mess – it’s been a wasteland over the last while, but the Coffin Brothers – David and Eric have still been able to pick out a couple of winners such as Goldsource Mines in last while. But there are couple of questions that are obvious for the industry veterans…

David Pescod: This is a terrible mining market, when do you see it turning and what could lead us out of it?

David Coffin:
The when is more difficult I think. It’s a matter of either perceptions about the role of the U.S. economy leading the global economy changing, or simply an assumption that the U.S. economy has turned a corner and is healing again, would do it. The other possibility is even without seeing perceptions about the US role changing you do eventually reach a point where people start stepping up to the sector for its own sake. We are starting to see takeovers happen, certainly in the gold sector and I think the same thing is coming with base metals. As that happens the undervaluation of a lot of assets-rich juniors will be taken into account and people will start buying them again.

David Pescod:

Eric Coffin: My thoughts are much the same as Dave’s. I thought some of the news out of Wall Street this week was positive. It was nice to see Merrill actually managed to do a deal although it was admittedly a really crappy deal. But I was pleasantly surprised to see a sovereign wealth fund was willing to put any money into Wall St. Since I don’t know anybody else that has those kinds of cash pools around, it’s probably going to have to be sovereign funds that refinance those guys. The simple fact is, the US financial industry is going to have to come up with another couple of hundred billion dollars and that’s going to take a bit of time.

Until people feel more comfortable with the major markets having bottomed, it’s obviously not going to be easy to talk people into buying stuff at the spec end of the market.
I’d like to say I can give you a date too, but obviously it is going to take a while longer because it has to wash through the market. The comments we’ve always made is that the U.S. hasn’t been the world’s growth engine for a while. We need the market to come around to the idea that the world hasn’t necessarily come to an end even if things are lousy in the U.S. for another few quarters.

David Pescod:
One of the ironies about this whole wasteland problem right now is that commodity prices other than zinc and lead are actually quite good. We have gold prices and silver prices doing quite well, some of the others aren’t bad and oil prices are near record highs too. What are your thoughts?

Dave Coffin:
Zinc is a good case in point. Zinc producers are not making money at current prices of $0.85 a pound range. Zinc production, on average, is becoming a losing proposition again. That will resolve itself since, eventually, low prices will start to dry up supply and its price will pick up.

As for the others, yes, we are definitely at record prices for copper, and for most precious metals. But, while we still have punters in the junior space they have refocused away from traditional juniors’ spaces and onto coal, onto fertilizers, onto iron ore, which areas that traditionally don’t have many, if any, junior players. The refocusing is for the simple reason that right now these are the spaces where you can make money.

Eric Coffin:
It’s something that we’ve noticed several times in the past year, that there is more than a little irony to the fact. I’ve seen headlines left, right and centre over the last three or four months about the commodity “bubble” bursting and how the speculative money is out of this stuff and that shows you that those run-ups were just speculation. But, the parts of the sector that don’t actually have openly traded markets where you basically have contracts between buyers and sellers, i.e.: potash, coal, iron ore – those things are all at record prices.

There is a big disconnect here - the market doesn’t seem to recognize the fact that part of the commodity market that’s the least affected and has the highest prices is the commodities with little or no price input by speculators.

David Pescod: In your crystal ball, what kind of prices do you have in mind for commodity prices down the road?

Eric Coffin: I think it’s going to depend on how much the rest of the world can keep growing. As far as the U.S. goes, the housing markets have pretty much gone into the basement. It might go a little bit lower, but probably not a lot but the turnaround won’t happen quickly. Asia has managed to hold up reasonably well.

Exports will be the one bright spot for the U.S. so obviously there will be people buying stuff somewhere. We haven’t seen big supply expansions inventory levels aren’t climbing that quickly for most metals. It looks like most of the base metals will stay at about the levels we see now. We might see a little more weakness in copper going forward because it’s the one that held out the longest...
Zinc, nickel, lead are all back to levels where Dave pointed out miners aren’t making much money. I think this cycle is different from previous ones.

I think one of the ways it is different is that I don’t think large mining companies will accepts years of loss making production.
There is not going to be a lot of base metal production coming on stream at current price levels. With coal and iron ore, a lot of the pricing behind that stuff comes back to infrastructure build out. I’d like to think there will be more infrastructure expansion in the developed countries in the next few years – certainly most of them need it desperately and historically, infrastructure is one of the best public investments there is.

You can actually make the argument that part of the reason for China’s success is the fact that they recognized that and have thrown tons of money at infrastructure for the last few years and intend to keep doing it. If that continues, we will see pretty good prices for iron ore and coal. Coal might see a bit of a pullback in the next coal year. There were some weather effects in terms of this year’s pricing in terms of terrible storms in Australia. But even so, they are close to capacity in terms of shipping.
Potash is the same story. For all intents and purposes the potash sector is an oligopoly.

The few companies that produce over half the world’s potash have made no bones about the fact that they are not planning to build more mines unless current high prices are sustained.
As for precious metals the story is the US dollar and gold production has actually been falling for the last three or four years. As far as the dollar goes, it’s had some bumps lately on better economic news and so have oil prices. And we might see a little more of that, but still, given the fact that the Feds just announced they are going to extend their lending window into January, I find it hard to believe you are going to see that on the one hand and interest rate increases on the other hand.

I don’t see a lot more upside on the dollar in the short term and I think we are likely to have prices more or less where they are right now for a while and there may actually be a bump up in precious metals prices if there is more nasty news out of the U.S. economy.

David Pescod:
It’s time to get to some of your success stories. Goldsource was an amazing discovery that you guys have featured over the last few months in the Hard Rock Analyst. With their accidental discovery of coal in Saskatchewan, it’s had a huge run; you’ve had your subscribers take profits, what next?

David Coffin:
I think we continue to watch the progress. It’s still very early. The specifics for the region in terms of what the basins in which the coal formed look like are still being determined. The quality of the coal has had a first pass which indicates it is “reasonable to good” if you will, similar to Wyoming which ships about 300 million tons a year. So our basic take is how much of a Wyoming-like commodity might be available for development, and then is there any higher quality coking level coal that could be sold on an international basis?

In short, right now it’s a matter of how big will it get? Understanding the geometry of the subbasins will come together with Goldsource’s work and, eventually, other people’s work. As this proceeds we will get a better handle on the overall potential of Goldsource, and also what the potential of other players might be.

David Pescod:
How would you rate it right now? A buy or a hold?

David Coffin:
Right now it’s a tricky situation. It’s literally a hole by hole equation. We know they are testing a third point on a triangle, which is a start for some proper sense of how large the potential could be and what the geometry looks like, but you are still going to need to do more work to really understand the scale. The stock has had a very rapid run, but that’s the nature of new discoveries.

You tend to get a series of ups and downs in the discovery company until the market gets a firmer sense of what the project should be worth, and then it will settle in a bit. We are not telling people to rush in at this point. We have taken profits, and then for our traders told them to come back in last week. Right now the message is we have to wait and see what the next few holes look like to get a firmer sense of where we are at before we could say much else.

David Pescod: Another story you guys have been quite fond of and has done well for you is Hathor Exploration, ironically one of the few uranium players left that’s having any fun.

Eric Coffin:
Hathor is one we like a lot and continue to like a lot. It’s another one of these great discoveries and its impressive both in terms of the holes they’ve pulled, but it’s also impressive in terms of the way it developed. They applied some new technology in terms on 3-D seismic on top of all the other surveys they did. They are drilling right now. There was a lot of consternation about summer drilling because of apparently it’s not an easy place to do it, but we talked to them and they say the drillers don’t seem to have any complaints or big problems in terms of getting recovery or getting holes done. The last hole was a great step-out.

We remind people as we do in the publications that these sorts of deposits in Athabasca are quite small in terms of footprint, so when you get a 20+-metre step out with radiation counts they put out a couple of days ago, that’s a very impressive hole. We have to wait for chemistry just like they do, but counts like that, it’s pretty apparent that’s going to be a very good hole.
They are still drilling and moving towards the northeast.

Essentially, they are moving along a fairly large registivity gravity anomaly and just getting to the guts of it now, so I would say hole 30 and 32, the two long intersections, those are very encouraging. If they can pull a few more
holes anything like that, they are rapidly going to build some pounds there. I think it’s a really good story. One other thing I would add to the Goldsource thing is that that just isn’t enough coal analysis yet, but I think they’ve done the first two holes and it’s probably grading better than Wyoming, but I’d also point out (as we have in the publications) that you are dealing with a pretty big area here and it’s going to be quite interesting to see what happens when the other players get into their drill programs. It doesn’t seem to be an area that has seen a lot of exploration even in oil and gas. It’s really an open book, and hence the reason for the interest in it.

David Coffin:
The two discoveries are a nice contrast in how exploration gets paced in mining and how the juniors operate within it. Goldsource is a company that was very light on stock, and had a major discovery, as you said, accidentally during a diamond exploration program.

Fortunately, it also had the right people in the executive office who had a coal background and who quickly did the research to figure out if there was potential with this. They decided there was, and carried on and were able to finance at a high price because there was very little stock out – the valuation did grow quickly, but that is because the corporate structure positioned the company for an extraordinary price gain on a discovery revaluation.
They are now in a very broad-brush pattern of testing a new district. The stock is in a very volatile, up and down pattern because nobody knows what the ultimate valuation is going to look like.

On the other hand, Hathor is working in one of the most established uranium camps in the world, and the world’s most important high-grade uranium mining district. They have put a lot of money up front to establish targets by, to some degree, rethinking the exploration process, and they have had to put stock out to do that. They made their discovery and are now moving away from the original discovery area, step by step, to determine the overall size and quality of the deposit that they’ve discovered. They have a ready-market for the deposit – it’s a matter of saying how large it is, what the quality is, and with that determining its bottom line value and therefore share pricing.

The company does huge volumes every day, so I think the other thing about Hathor is, with uranium prices seeming to have bottomed (again the opposite of coal pricing), that Hathor is going to start to move up simply because it’s one of the few juniors that the market will go to for gains in conjunction with a rise in uranium prices. The market knows the Hathor asset exists and it is more just a matter of finding out what Hathor’s ultimate value should be as the discovery is fully evaluated.

David Pescod:
You two are an amazing combination…the Coffin Brothers, because Eric stays home in Vancouver, watches all the paperwork and stock trading, while David is out on the road visiting country after country and taking first-hand looks at the mining projects around the world. So Dave, we are curious, which countries would you consider a safe investment these days because I suspect there would be a couple on your “avoid” list?

David Coffin:
Most of the Western hemisphere is comfortable at different levels. There are a few countries in Central America that I avoid because of potential versus hassle value.

David Pescod:
Which country would you avoid?

David Coffin: Venezuela. I’m cautious about though not totally avoiding Columbia, but the markets just aren’t ready to be there yet. I avoid Russia. I avoid places like Romania Bulgaria and a number of African countries, for now, in part because they are still pulling legal frameworks together.

But with all of that said, with a place like the DRC, the Congo, which is extremely mineral rich and therefore offers up a good longer term potential, their issue of just coming out of civil war and are still forming the law might be viewed as an advantage.
Being there now in a small way while the risk is high means you get an opportunity for a very large gain once things are functioning well. You do have to look at both sides of that coin. While there are avoids, there is also a legitimate, high risk, investment perspective that you go to places that are in the dumps, just as you want to be going and buying commodities when they are cheap. Countries can be viewed the same way, as long as you are willing in their case to take the risk that things never do improve.

David Pescod:
Now comes the best part of any interview such as this…what would be the two stock picks both of you would have that would be at the top of your list at this time?

Eric Coffin:
Two each? You usually just ask for one?

David Pescod:
We just want to see which brother is the better stock picker…

Eric Coffin:
I guess it depends on timelines. Dave and I will probably agree on some of them. One of them certainly has to be Hathor Exploration(HAT). Even with the current $3.00 price, I think it’s probably one of the safer bets out there. We are very comfortable with the way the exploration is advancing. It’s a great looking project. More drill holes to come and I think it will get to the point where it will just get lifted to a higher level.

Another one that we talked about
recently that I like but it is a longer term one because it’s going to have deliver some more results and the market is probably going to have to care a little more about gold explorers which it doesn’t seem to at the moment, but for that reason it’s cheap and that’s Riverstone Resources (RVS), which is one we started following a while back. It’s still trading at about the same level. They have a good deal with Teck on one of their projects that’s funded them. They don’t have any money issues in the short-term and they should see another transfer of money from Teck in the next couple of weeks from that same deal. They are drilling on one project; they just finished drilling on another. They have started a 43-101 calculation and we are expecting a million ounces plus in one of their projects. I think that if the market comes around a little bit, exploration stocks like these guys, could start generating results and new flow and I don’t think you are going to get hurt buying it at this level.

David Coffin:
You know that I hate this question! But I will do it anyways. One, getting back to the Goldsource discovery area, is a company called Bitterroot Resources (BTT). Bitterroot has picked up some of the right geology for that coal play, on the Manitoba side of the border. Manitoba is a little different than Saskatchewan in terms of acquiring the coal tenure in that Manitoba has a much larger seriousness bond that goes up front with the application, so staking there has been somewhat more limited. But as important as the regional coal potential is that Bitterroot is drilling at a very high-grade gold situation on Vancouver Island and doing a bulk sample at the same location to look at near-term cash flow potential from a small portion of the deposit. Bitterroot has two or three other projects that will get drilled this year, both for gold and on a uranium project in Michigan that Cameco is funding at a grass roots level.

In terms of another pick, I would actually suggest a general look at the juniors that are undervalued and begin thinking in terms of averaging down as a strategy. Focus initially on new producers that are showing you good cash flow numbers but have had share price deflation due simply to the market’s risk aversion. That, on our list, would be stocks like Sherwood Copper (SWC) and Minera Andes (MAI) which is a gold/silver play in Argentina. They have both pulled back with the other juniors despite having generated their first few initial quarters of good cash flow. I would say let’s call these two a pair – a base metal/precious metals pair – since you’ve got two companies that are showing the cash flow they had anticipated but have share prices pulled back much below the bottom line expectations for them as each pays off its development capital costs over the next six to 12 months.

David Pescod:
Okay, the Hard Rock Analyst is having a little get together we understand in about a week or so in Vancouver.

Eric Coffin:
We are doing a subscriber-only afternoon with ourselves and Lawrence Roulston who has been a good friend of ours for many years and David Morgan. It’s taking place at the Metropolitan hotel in Vancouver on the afternoon of August 8th. Basically we are just going to give individual presentations on where we think things are at in the market right now. It will be a question and answer and some panel stuff and take questions from subscribers.

It is just a little get together and a thank you for our subscribers.
We realize its local to Vancouver and short notice so I am hoping to organize having it audio taped so we can post audio from it on and pass it on to Lawrence and David so our and their other subscribers can listen in. Subscribers of ours, David’s or Lawrence’s who want to register or need more information should contact Sabrina at who is organizing things for the event.

David Pescod: Thank you very much Eric and David. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Liar liar, Uribe's pants on fire

If a Red Cross worker is killed by FARC rebels, the blood will also be on the hands of Alvaro Uribe. This isn't some lefty handwringing moan'n'groan here, dudes. This is contrary to the Geneva Convention and puts the lives of those who help the rest of us at risk.

Totally unfunny.


06 Aug 2008 16:29:47 GMT
Source: Reuters

BOGOTA, Aug 6 (Reuters) - Colombia must clarify an apparently "deliberate misuse" of the Red Cross symbol in a hostage rescue after a video revealed new details of the mission, the International Committee of the Red Cross said on Wednesday.

Intelligence officers disguised as aid workers tricked Marxist FARC rebels into handing over hostages including French-Colombian Ingrid Betancourt and three Americans in July.

President Alvaro Uribe last month apologized, saying one of the officers involved slipped on a Red Cross vest when he got nervous during the mission after seeing so many rebels on the ground waiting for his helicopter to land.

But video of the July 2 operation, leaked this week to Colombia's RCN television, drew criticism after images showed one soldier appearing to wear a vest with the Red Cross symbol at the start of the rescue operation.

(continues here)

UPDATE: Tyler Bridges at Inside South America is also blogging this story.

UPDATE 2: For a more detailed and snarkier version check out the magnificent BOREV and its coverage.

A note to RSS feed and e-mail subscribers

As a response to a regular reader request, the RSS feed and daily emails will now contain the full posts as written, not just the first part of any post. I know RSS feed viewers find this the most convenient, but if the mail readers think their daily digests are suddenly far too long don't hesitate in contacting me at the usual address, otto.rock1 (AT) gmail (DOT) com.

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Photo of the day

From Venezuela today, proof that truck drivers tend to overestimate their intelligence all over the world, not just on the road you've just driven to get to your computer screen.

I think we can safely say this rig now conforms to the "Max. 3.6m" rule for this stretch of asphalt.

Telecom Argentina

Under normal circumstances I'd be shouting from the rooftops about Telecom Argentina (TEO) and its quarterly results announced last night. On the numbers it's the craziest of bargains.

Half Year EPS of U$1.15

Growth at 20%

Stock price $13.19

Mix those three up in a bowl and you get a projected PE of 5.5X for TEO. A telco in full bottom lie growth mode, rising numbers and lots of play to come in broadband internet. Cheap cheap cheap.

The problem, of course, is the country in which it operates and not the company itself. You gotta make your own call on this one dudes, but I'd call risk reward as in the longs favour from this current price. Argentina has a politically calm-looking period coming, it seems. Relatively speaking, of course.

UPDATE: TEO flat on the day. Very sad to see such strong fundamentals go to waste on this pisspoor gov't.


This call made March 2008 is still good:

" a nutshell it'll bounce around the U$3.50 to U$4 range, breaking U$4 some time this year. It'll consolidate at or above U$4 in 2009 and then we may or may not see U$5 depending on what the dollar decides to do. No point trying to go too crystalball at this stage."

And spot is now rising "on bargain hunting", though stocks are capping the rise, sez Thompson Financial. In other words, FCX don't need no shameless pump from Bloomberg, cos it'll do just fine from the sound fundamentals.

Personally, I like where is right now. Now $1.43 after peaking at $1.65 last week, there will be plenty of short term holders underwater and doing the "sheep-hold" (aka "I'm not selling until I get back to zero, then i'm out and never coming back to this POS").

Do the samba pump!

The last time I posted on very strong rumours flying around that Vale (RIO) was going to use the U$12Bn or so it raised to launch a bid for Freeport McMoRan (FCX), a reader commented:
Anonymous said...

And just coincidently*, I take it, this rumor happens to come out on options expiration date?

I replied that I was just calling the rumour and had no position (totally true), but on reflection s/he did have a fair point. Fast forward and here we are, no RIO bid and one large sell-off later. FCX has dropped from $100 to $79 (it was under $76 at one point yesterday). And.......well, lookee here!! Bloomberg is running a story that can easily be classed as "PUMP JOB".

It starts with the headline............

Vale Profit Slowdown Prompts Mining Takeovers as Nickel Drops

..........which is intriguing in itself, but the intro paragraph hits you straight with a....

Aug. 6 (Bloomberg) -- Cia. Vale do Rio Doce, the world's biggest iron-ore exporter, is looking for copper and coal acquisitions as profit growth slows following the steepest drop in nickel prices in two decades.

.....and before you can say 'self-fulfilling prophecy' Freeport's name is neatly inserted into the text. "Wowsers", thought Otto, "Bloomie has cracked a revealing interview with CEO Agnelli or some major name inside RIO."

Except Bloomberg hasn't. It takes a while to realize due to the set of the report, but after you read through, check back and read again you get to realize that Vale is not quoted as "looking for copper and coal acquisitions" but in fact the analysts with their own vested interests that hover around these stocks are calling for RIO to move into those sectors.

It turns out that Brazil Bloomie staff Diana Kinch and Jessica Brice have cobbled together a story from information already known to the market, phoned a few analysts for some opinion, whacked a totally misleading headline and top paragraph on the note and sent it out as something fresh'n'new to draw attention to either RIO or (most probably) FCX in the midst of heavy sector selling.

What the hell kind of stunt is Bloomberg Brazil trying to pull here? There's enough bullshit info in this market without supposedly reliable newswires pulling the wool over investors' eyes like this. Whether or not Vale finally decides to bid for FCX, or Anglo, or Antofagasta, Xstrata, or a copper asset, or coal, or another iron ore asset is beside the point here. This kind of note is at best on the very edges of acceptability and at worst a crockashit. All this and the timing as well.....all these analysts coming out and calling bull things and dropping all FCX buyout hints at the same time, to the same pair of reporters, right at the moment FCX stock is taking a right royal tanking. As anonymous mentioned last time, the timing has to make you wonder.

Bottom line:
Question: What kind of journalistic licence allows you to leap from the quote from the Goldman dude saying "A coal or copper acquisition would help Vale reduce volatility in its results,'' buried in paragraph eleven to "(RIO) is looking for copper and coal acquisitions" on paragraph one?

Answer: A licence with an expiry date in the very near future.


Addendum: Here's the full bloomie story (just in case they start editing it)

Vale Profit Slowdown Prompts Mining Takeovers as Nickel Drops

By Diana Kinch and Jessica Brice

Aug. 6 (Bloomberg) -- Cia. Vale do Rio Doce, the world's biggest iron-ore exporter, is looking for copper and coal acquisitions as profit growth slows following the steepest drop in nickel prices in two decades.

Vale raised $12.06 billion last month in a stock sale that Chief Executive Officer Roger Agnelli said will be used for takeovers and expansion. JPMorgan Chase & Co. said in June that Vale's ``most likely'' target is Freeport-McMoran Copper & Gold Inc., a U.S. mining company valued at $30 billion.

Agnelli needs new assets because profit growth slowed to 14 percent in the second quarter, down from a 69 percent average during the past four years, based on estimates of three analysts in a Bloomberg survey. Nickel makes up 27 percent of Vale's sales since it purchased Inco Inc. last year.

``For Vale to gain a comparable level of diversification to mining rivals, including Rio Tinto Group, it must add a third leg of major commodities exposure to its existing legs of iron ore and nickel,'' Nomura Securities analyst Paul Cliff said in a telephone interview from London on July 31.

Any new deal would be in addition to the $59 billion that Rio de Janeiro-based Vale is spending over five years to boost output of iron ore, nickel and other commodities to overtake BHP Billiton Ltd. as the world's biggest mining company. In May, Agnelli told business leaders in Rio de Janeiro that ``if Vale doesn't grow, it will be swallowed.''

Freeport spokesman Bill Collier declined to comment yesterday when asked whether Vale has made any approach about a takeover of the Phoenix-based company. Vale said July 18 that it wasn't in talks with Freeport and hasn't made an offer.

Seeking Takeovers

The share sale in July was the biggest ever by a Brazilian company, fueling speculation Vale is preparing a takeover offer after it walked away from talks to acquire Xstrata Plc in March. Agnelli said in May the company was ``very well positioned'' to grow in coal and copper.

Vale said July 1 that it was studying a bid for copper smelter Caraiba Metais SA and phosphate-fertilizer maker Cia. Brasileira de Fertilizantes, subsidiaries of Brazil's Paranapanema SA.

``Vale can achieve growth to the adequate size in copper only by acquisitions,'' said Bernardo Lobao, a steel and mining analyst at ARX Capital Management in Rio.

Second-quarter profit probably climbed to a record $4.67 billion from $4.1 billion a year earlier, according to the average estimate of three analysts in a Bloomberg survey. Excluding some items, analysts expected per-share profit of 91 cents, up from about 85 cents. Vale is scheduled to report results after the close of trading today.

Nickel Eroded Growth

``Nickel may have restricted Vale's profit and revenue growth,'' Marcelo Aguiar, a Goldman Sachs Group Inc. analyst, said by telephone from Sao Paulo. A coal or copper acquisition ``would help Vale reduce volatility in its results,'' he said.

Aguiar forecast profit of $5.2 billion, or $1 a share. Sales probably climbed 36 percent to $11.8 billion, the average of four estimates in a Bloomberg survey.

Profit growth was fueled by iron ore, which accounted for about 46 percent of Vale's sales in the year through March 31. In February, the company won a contract price increase of at least 65 percent for its iron ore, an ingredient in steel.

In the first quarter, nickel led to an 8.8 percent profit decline, the first drop since the final three months of 2003. Vale acquired Canada's Inco in January 2007 for $16.7 billion to become the world's second-biggest nickel-mining company. Nickel prices fell 26 percent in the quarter, the most since 1988.

Nickel Outlook

A rising surplus of nickel may hurt Vale's earnings in coming years. Production will outpace consumption by 15,000 metric tons next year and widen to 74,000 tons by 2013, Goldman Sachs said in a report on July 17, citing a forecast by metals consultant Brook Hunt & Associates Ltd. Copper supplies will fall short of demand by 1.35 million tons by 2013.

Vale will open a copper mine next year in Chile, the world's biggest producer of the metal. The company aims to more than double output to 592,000 tons a year by 2012 from last year's 284,000 tons. Copper equals about 6.4 percent of total revenue.

Nickel for delivery in three months averaged $25,919.69 a metric ton on the London Metal Exchange during the quarter, down 43 percent from a year earlier. The metal closed at $17,600 yesterday. Copper averaged $8,324.52 a ton on the LME in the quarter, up 9.8 percent from a year earlier, after touching a record $8,940 on July 2. The metal closed yesterday at $7,625.

Vale rose 34 centavos, or 1 percent, to 36.04 reais yesterday in Sao Paulo trading. Before today, the stock declined 5.2 percent in the past year, compared with a 6.9 percent gain for Brazil's benchmark Bovespa index.

To contact the reporters on this story: Diana Kinch in Rio de Janeiro; Jessica Brice in Sao Paulo at

Last Updated: August 5, 2008 23:04 EDT

* sic