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Small-minded Canadian idiot of the day

That you have a different view to Colossus Minerals is fine by me. You like it, I don't like it, so be it. However, the actions of shareholders in the stock just gives me further suspicion to doubt the wellbeing of the company. This afternoon a Toronto resident (I'll keep the exact name and IP number to myself for the moment) clicked through from a link left by A.N Other on Stockhouse and read this post that mapped out how insider Pat DiCapo recent sold a large lump of stock at a very nice price. The IKN visitor can't have liked reading some facts about Colossus that didn't tally with their version of reality because the visitor then proceeded to click 10 Adsense links found on that page in the space of three minutes and 25 seconds. For those of you who don't know, this is a tactic used by blackhat cybertrollers to get Google to ban Adsense from a website, as the person (or sometimes people) tries to make it look like the site is collecting illegal clicks.

I mean, how smallminded can you get? Just shows you the kind of trash that heavily hyped stocks like Colossus can attract, doesn't it?

Anyway, no harm done here. Unsurprisingly it's not the first time that IKN has attracted this kind of pondslime reaction from visitors. The remedy is quick and easy, and so far I've contacted Google to tell them to ignore the adsense clicks and I've also contacted Stockhouse and told them the exact time and place of the clickthru. I understand SH has a strict policy about these things and will ban the person if they turn out to be a member.

Petty blogger's rant completed. Thank you for bearing with me.

El Salvador's Presidential Election, March 15th 2009

Next weekend sees the presidential election showdown in El Salvador between the right-leaning Rodrigo Ávila of the ARENA party and the left-leaning Mauricio Funes of the FMLN party.

If the subject interests you, don't get your bias from that awful O'Grady woman and don't get it from the more respectable but still clearly biased UpsideDownWorld, either. As far as I'm concerned about the best place to watch proceedings is via an independent and experienced voice on El Salvador who follows the country's politics closely and has such a good reputation there that he's been an invited neutral observer on previous country elections.

So Tim's El Salvador Blog is the place for me. He's been blogging regularly already (the campaigns, the reactions, the collection of widely different opinion polls etc) and we're bound to get plenty more insight from Tim in the lead-up and the aftermath to March 15th. A highly recommended source of information. Here's the link to his blog again just to make sure.

The Saturday OT: Simon Barnes the magnificent

A story that has captured multiple headlines worldwide this week and sadly missed by those in the Americas is the terrorist attack in Pakistan on the bus carrying Sri Lanka's cricket team to the stadium in Lahore. This despicable attack is bound to get more coverage in cricket-playing nations of course, but all the same the thin reporting of the greater implications does this double continent no favours.

With this in mind, read the following. I have Simon Barnes linked down the blog (down there on the right) and call him quite simply "the world's best sports journalist". Read the following from the Chief Sports Correspondent of the London Times (recently voted sports reporter of the year by his peers) and find out why.


The terrorists waging a jihad against joy

Tell me, have you ever shared a gasp of wonder with more than half the population of the Earth? Have you ever, moments later, shared with the world a long, glorious, incredulous moment of joy? Of course you have. You are reading the sports pages. You know about joy and, more particularly, you know about a joy shared with a billion others.

Oh, I’ll never forget it, never, and it lasted only 9.69 seconds as Usain Bolt boogied his way to the gold medal in the 100 metres at the Olympic Games in Beijing last year.

I was there in the stadium, among the 91,000 who shared that gasp of disbelief — that long, head-wagging, blaspheming protest against the evidence of one’s own senses, then that realisation that the impossible dreams of humankind had been possibilised before our 182,000 eyes.

With the exultant beauty of the emotions in the stadium came the certainty that they would be duplicated across the time zones and the political boundaries, across the oceans and over the mountain ranges; that in a billion homes and bars and informal public places across the world, the same sporting miracle would have been celebrated in the same way. For a few brief seconds, the world was united in joy.

And this is what terrorists are waging war on. Theirs is a war against joy, a crusade against union, a jihad against humanity. After the terrorists — brave souls prepared to risk a battle against men with cricket bats while armed only with rifles and rocket launchers — made their attack on the Sri Lanka team, we have to wonder if big-time sport will become a worldwide target. If so, sport as we know it will be changed for ever. Big sporting events as we know them will no longer be feasible. What, then, will the world lose?

Terror has already robbed us of the rest of a Test series between Pakistan and Sri Lanka in which Thilan Samaraweera scored double hundreds in successive matches. Samaraweera was an off spinner who realised that he was never going to make the team ahead of Muttiah Muralitharan. So he concentrated on his batting, and did so gloriously. He was hit in the assault on the bus. (Bus? Soldiers should be attacking tanks, not buses). As the series was cancelled he was robbed of his finest achievement, and potentially the rest of his career as shrapnel was removed from his leg. That’s the sort of thing terrorists are opposed to: determination, versatility, talent.

What if these attacks had taken place 12 months earlier? What if, as a result of terrorist action across the full range of world sport, big-time professional competition was no longer feasible? Just for a start, cricket would have been deprived of Kevin Pietersen.

Last year Pietersen hit Scott Styris, the New Zealand all-rounder, for two sixes with his unprecedented tactic of switch-hitting, a technique in which he swivels and bats as a left-hander. The lawmakers wondered if so outrageous a manoeuvre was even legal. In the end, they decided that if anyone was mad enough or talented enough to try, then good luck to him.

That’s Pietersen for you: complex, brilliant, gaudy and capable of redefining the art of batsmanship. He remains the most watchable cricketer on Earth. And that’s the sort of thing terrorists are opposed to: genius, originality, extravagance.

Football’s central event last year was the European Championship. England, who had got caught in the rain, were unable to attend, but the rest of Europe made for a competition that went from intriguing to enthralling and ended up with the victory of Spain, the great underachievers of world football.

Spain at last showed that it could set aside provincial rivalries and jealousies and create a unified team of purpose and style and substance. This was a story of growth and realisation and achievement; and it is the sort of thing that terrorists are opposed to.

More or less simultaneously, Spain triumphed again, this time in the person of Rafael Nadal, who beat Roger Federer at Wimbledon in the most breathtaking exhibition of sustained and shared brilliance that tennis has seen. It was a final of painful beauty, of aching drama, of oscillating advantage, and it was played at a standard that rose and rose as the match went on, each man pushing the other to find the best of himself.

Federer, the old king, was broken, perhaps for ever, but never disgraced. Nadal showed the courage that you find only in the most exceptional champions. The occasion was elevated because both men consistently comport themselves with generosity and decency. Yes, that’s right: greatness, brilliance, courage, generosity, decency — the sort of things that terrorism is opposed to.

The Formula One season was anything but formulaic, talent battling impetuosity in the heart and the mind of Lewis Hamilton. It brought us its dramatic conclusion, in which the Briton lost the damn thing and won the damn thing in the space of a few bewildering seconds and emerged as the youngest world champion in the sport’s history.

It was one of those rare but glorious tales that Formula One specialises in, when the human element is dominant over the technology, when the personality overwhelms the machine. The season was a hymn to youth, to optimism, to talent, to belief; just a few more of the things that terrorism opposes.

But the year was dominated by the Olympic Games and if Bolt was the brightest star, there were endless constellations and galaxies and nebulae. Michael Phelps won eight gold medals in the swimming pool. No sportsman has made so much of his talents. There was also the Great Britain cycling team: a great, gang-handed, tumultuous striving for excellence, a fusion of planning, technology, corporate will and individual talent. Phelps and the Britain cyclists: an unsparing belief in human possibilities, the sort of thing to which terrorism is opposed.

And, of course, there was Yelena’s night, when Yelena Isinbayeva, the Russian pole vaulter, brought a bed into the stadium so she could lie down while her rivals squabbled among themselves for the minor placings. Then, majestically, she cast her covers aside, won the competition — and then set about the Yelena Show.

In the course of an hour, in which time she pouted and tried on a sarong, she set an Olympic record and then a world record at 5.05 metres. It was a night on which the world discovered that there are few things better than watching a beautiful woman leap the height of a house, higher than any woman has gone before. It was a triumph of ambition, athleticism, skill, determination and sheer beauty.

And all of these, especially the last, are things that terrorism is opposed to.

Sport isn’t the most important thing in the world. Its very point is that it doesn’t matter at all. But it can be the vector for things such as truth and beauty, youth and hope, unity and joy — and when the terrorists turned their rocket launchers on sport, they declared war on all these things.

Few of us really know what these people are for. But they have made it very clear what they are against.

More one-sided reporting on Bolivia: Antidote available here

Evo explains what bodypart is held most tightly
by capitalist economic policies

What we hear: Bloomberg reports that Bolivia exports for January were down 32.9% compared to January 2008. The total of $345.85m means there is a $170m or gap in the macroeconomic numbers compared to last year. For sure it's a big drop and part of it includes the exports lost to the US market due to the withdrawal of ATPDEA concessions, but the main chunk is the new, lower pricing for its gas exports to Brazil. This comes as no surprise to anyone with half a brain that has analysed the situation.

What we don't hear: Bolivia was adding to its international currency reserves to the tune of $250m a month at this time last year. So let's just assume that Bolivia doesn't move over the excess to its (already all time record) reserves this year; that would mean Bolivia has more than enough money coming in and doesn't have to feel the pinch on a day-to-day basis, this at a time when nearly every other LatAm country is taking money out of its reserves to fund programs.

Bottom line: Expect people with less than half a brain to "raise questions" (a lot of them get featured at the HACER hatemonger's website). Expect Bolivia not to worry. Also expect Bolivia to get through 2009 far better than those truly exposed to this world recession.

Saturday Mailbag (RIO and AUY)

Two mails this week that show your humble correspondent doesn't have all the answers.

Firstly, after calling short on Vale yesterday, reader LR points out I'm going against Marc Faber and sends along a link to prove it. So Faber holds RIO, that's interesting for sure. For me it's a call on overestimating the extent of the Chinese 2009 growth season. Let's see how it goes, but I'm still going short on it Monday if Mr Market gives me $13. I note he's also long Nadagold, so even if he's right by liking the junior gold sector his understanding of company fundamentals is obviously sketchy. What's the point in holding a junior that, unless gold goes to $3k/oz never be able to produce gold with its properties? And with gold at $3k the good companies rise first. Nadagold is a heavily promoted joke that's giftwrapped specially for people that don't understand gold mining. Nuff said.

Second mail. After noting the good results posted by Yamana (AUY) this week, I received the following from...well let's just call this person "market professional". I enjoy reading a mail that takes a contrary position to mine; I especially enjoy one that comes with solid reasoning and basicaly betters my call. So here's what market professional wrote, FYI (permission to reproduce this section was granted).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx light of your recent commentary on Yamana I wanted to add a bit of colour on their fourth quarter results.

As has been the case with most of the earnings season thus far, Yamana’s results were noisy. The headline number of $0.25 included numerous one-off and non-cash items. Obviously analysts have no way of predicting the size or nature of these items so when the results are reported we back these items out to get a “truer” earnings number (an “apples to apples” if you like). Boosting Yamana’s results this quarter were foreign exchange gains ($131mln), unrealized gains on derivatives ($139mln) and proceeds from the sale of the copper hedge ($47mln). Offsetting this was a write down at Sao Francisco ($58mln), other investment writeoffs ($14mln) and provisional pricing adjustments ($74mln). Obviously deciding what items to adjust for is a subjective process and thus analysts will always report different adjusted earnings numbers. The most controversial item this quarter for Yamana was the provisional pricing adjustments. My view is that provisional pricing is always going to influence the business and thus should not be backed out. Besides, companies rarely make mention of it when they benefit from rising prices yet when prices fall all of a sudden they claim the negative impact is a one-off item!

After backing out all the noise estimates on the street ranged from $0.03 to a loss of $0.08 so the quarter could be described as a miss. Of course this makes it difficult to explain the strong share price movement on the day other than if it traded off its headline number or simply benefited from a gold price up on the day and a recent bounce in the copper price.

Anyway, I just thought I’d provide a bit of colour on the quarter and hopefully put things in perspective. If you have any questions or want any further info please let me know.


Now that's what I call a good mail. Thanks MP


The Friday Financial Freebie

Here's a free offer to end the working week that all you financial professionals sitting in the USA or Canada should grab with both hands (and along the way help IKN generate a penny or two of commission for every report that gets sent out).

Going by the title "Why Professional Services Organizations Need Improved Financial and Resource Management" and published by Consulting Magazine in association with Microsoft Dynamics, this white paper addresses the financial and resource management pain points that Professional Services Organizations (PSOs) currently face.

It focuses on the benchmarks that PSOs can use to improve their management capabilities and how business applications can help PSOs achieve their goals, including streamlining their businesses, increasing operating margins, and meeting the challenges posed by today's fast-paced global marketplace.

So request your copy today by clicking on this link. Help yourself to this totally free report and help keep this humble corner of cyberspace on the air at the same time. For every copy sent they pay me a buck fifty approx, so it's free for you and good for me. Thanks in advance

Trend and Value Report: An impressive call

Back on November 8th 2008 the S&P stood at 930.99.

On that date Lucas at Trend and Value posted this long (for him anyway) but informative post in which he called the S&P at 666 in 2009. Here we are with the S&P at 668 and dropping into the bell. Big kudos Lucas, that was one helluva call.

I'm fussy about who I link to on this blog. Trend and Value has long since proven to me that it is a high quality resource for market intelligence. Make it part of your reading list, too.

UPDATE: The S&P pinged to 683 at the bell on late buying. Takes nothing away from Lucas's superlative forecast. In fact if 668 ends up as being the bottom of the bottom it just makes it even better.

Memory Loss in Latin America

AKA Scum

Lillie over at Memory in Latin America is doing her usual great job of following the trials of those who need to rot in jail. Today she reports on the way in which sudden and inexplicable memory loss has afflicted the two most emblematic cases in Argentina, those of torturers and murderers Alfredo Astiz (the friend of Silvio Berlusconi pictured above) and 'El Tigre' Acosta. Read on here.

By the way, here's a clip from the wiki page on Astiz from the time in The Falklands/Malvinas conflict. This is the kind of scum we're talking about:

Astiz is known to have committed several war crimes during this period, notably attempting to lure Royal Navy helicopters to land on a helipad he had previously mined, after he had surrendered to British forces. The pilots were suspicious, and landed elsewhere. Astiz also attempted to encourage Royal Marines across a minefield, after he had surrendered. The mines did not function correctly, as their trigger mechanisms had been frozen solid by the sub-zero weather conditions. Astiz was never tried for these crimes.

Vale (RIO): Very shortable here

I'm now looking for the right price to short RIO. Fundamentals suck (Inco in bad shape and more layoffs at an office admin level announced this week) and recent news out of China strongly suggests that the recent pickup in steel production is a forced governmental move that has no basis in true demand, thus causing ever greater stockpiling of finished product.

Sorry brazilguys, I know your RIO is big and meaty and I know you've already dropped a long way, but there's plenty of reason to see RIO as a major hedge play to balance longer stuff.

Here's Reuters with a short report to whack home the issue:


BEIJING (Reuters) - China's crude steel output was 1.42 million tonnes a day in February, equivalent to about 520 million tonnes a year and a "worrying oversupply", Deng Qilin, chairman of the China Iron & Steel Association, said on Friday.

According to a Reuters calculation, that means February output totalled 39.76 million tonnes, a 5.2 percent increase on the 37.79 million tonnes produced in December 2008, a longer month and the last month for which data is available.

Deng, who is also president of Wuhan Iron & Steel Group, said his company would cut output by 15-20 percent and aimed for sales of 120 billion yuan ($17.55 billion) this year. ($1=6.839 Yuan)


UPDATE: Not short yet, will look for $13 on Monday

Trading Post (nervy Friday edition)

Not much happening out there. Everyone looking at everyone else for an idea and a clue, and lots of the usual suspects treading water. Gold up but hardly euphoria amongst da bugz

Merval up 1.2% and Bovespa down 1.3%. Not many days when these two go in opposite directions like this. The Merval is benefitting from the 3.5% upmove in its top weighted stock, Tenaris (TS on the US markets)

Cosan (CZZ) down a penny at U$2.49. It traded as low as $2.40 this morning. I'm beginning to feel more confident about yesterday's $2.50 purchase even though volume has been low today. DYODD, dude. I have and I bot.

Southern Copper (PCU) down 0.5% at $14.30 even though copper has added 3c today to sit at $1.66/lb. PCU is clearly taking its cue from the broader market weakness. I still recall that large insider purchase at $13 and bits I reported last week. Starting to look like good timing.

Amerigo Resources ( up 12% at $0.37. I'm going to talk more about this stock in a separate post, either today (if I have time, which I kind of doubt) or over the weekend. Suffice to say there's good reason to revisit and look closely at the current price. DYODD. I don't own as yet.

Macro things

In Brazil, industrial output dropped in January by 17% YoY. As mentioned before, it's not wise to take the January figures as gospel because it's the main vacation season and this year the numbers were particularly boosted by the enforced holidays at car plants and suchlike. February numbers will give us a better idea just how much of a slowdown we're seeing. Your article-scanning Otto checked a few sources on Brazil industry between yesterday and this morning and the kinda anecdotal slowdown figure being bandied about is 10%. Let's see how it comes out, but 17% is way high on an annualized basis, methinks.

In Ecuador, inflation is not a problem anymore. You can tell that the central bankers aren't thinking twice about it as they dropped the bank reserve requirement to just 2% to add an estimated U$270 to U$290 of much-needed liquidity to the system. The problems of not having sovereign control over your currency are complicating everything, of course, and Correa's main response from a limited toolbox has been to put import controls and tariffs on goods shipped into Ecuador, which should help people move away from ever cheapening goods from Peru, Colombia etc and to locally made alternatives. Of course we've had the free-trade genuflectors calling it a draconian measure. These people would also be the first the criticize when Ecuadorian factories close down in the face of cheap imports and blame Correa for that, too.

In Peru, Velarde at the Central Bank dropped its baseline rate another quarter point to 6% last night. No surprises there, and even the dumbasses in suits got this no-brainer right. The Nuevo Sol is trading at S/3.28 to the greenback this morning. Depends on general dollar strength of course, but all signs point to the Sol weakening further as those quarter points get chopped off monthly. The other number to watch carefully is the international reserves, as the BCRP is using a selective intervention policy to make sure the Sol doesn't dive all in one go.

Talking of dives, the Argentine Peso is now trading at $3.62 to the dollar, having made a move from $3.50 in short order. Local analysts are predicting four-to-one by the end of the year. I have no real opinion but I did enjoy this article yesterday entitled "Strong Dollar + Cheap Steaks = More Douchebags in Argentina". I'm not against other gringos coming down here to live, but the ones that refuse to learn Spanish, don't even attempt to respect local cultures and attitudes or just spend their time moaning about how things just aren't the same here are they?.....those need a good bitchslapping and a return ticket.

US Homeland Security Immigrations Dep't says: "We can make a person disappear"

How to win friends and influence people.

If there's one phrase that Latin Americans do not want to hear from any sort of government authority, up to and including the people who patrol, apprehend and supposedly deport illegal immigrants into the USA, it's anything that includes the disappearance of people. After the hundreds of thousands of people disappeared from the face of the earth in LatAm's modern history you'd think that people might have got the message.

But no. We get US ICE spokespeople at official conferences proudly announcing that;

"We can make a person disappear."

Check out the full story via the evergreat Mex Files. I really feel like stringing an expletive-ridden sentence right now but let's just keep it to "Homeland Security, consider this an imperative to have auto-intercourse."

Charts of the day are....

...about zinc. Part of the feedback from the copper post of two days ago was some friendly mailer from Russia (of all places) asking "do the same for the other base metals, willya Ottodude?" Sure, and let's get the easy one out of the way. Here's the six month price chart that shows......

......why I'm not getting hot and panting about today's move to $0.55/lb. If it breaks 60c, wake me up and ask me agin, yeah? Here's LME warehouse stock for the same six month period....

....that's a nice pocket signal of the slack demand out there. However the five year chart....

...does give us room for optimism compared with that long-term copper warehoused chart from earlier in the week. It's a bigger subject to explain than can be done with the few lines I'm dedicating to this post, but let's just point out that zinc is a more flexible metal on the supply side and it's pretty quick and simple to put zinc mines into (and later out of) mothballs; ask the Australian mining industry if you don't believe me.

Bottom line: nice to see the base metals, inclusing zinc, upping today. However there's no reason to assume a continued rally right now. If the prices ad about 10% or so from here we'll be off to the races.


Maple Energy (MPLE.L): Rotten to the Core Values

Map of Peru with Pucallpa city marked

If you go over to the core values page at Maple Energy's (MPLE.L) website you read that.....

"We value employee and public safety and respect the environment" well as other things such as having high ethical standards and being committed to excellence. As is so often the case, this corporate babble isn't worth the pixels it's printed on. The following Youtube video came up on my radar today, thanks to the Red Ucayali blogsite that keeps a close watch on how companies in the jungle region of Peru operate.

It turns out that Maple Energy respects the environment a lot less than it claims in its corporate literature, because a local Pucallpa TV station recorded images of the Maple Energy emergency team mopping up oil pollution from a company pipeline leak. But that's just the start of things, because amongst other things in the report:
  • The pipeline is over 50 (yes, fifty) years old
  • It gets painted every so often by the company to make it look good, but it doesn't get infrastructure maintenance or any replacement.
  • The oil leak recorded by the cameras is the fifth so far this year! Yeah seriously, in the first 10 weeks of 2009 the thing has spilled oil no less than five times.
  • The pollution causes permanent environmental damage. As in permanent. Understand the word "permanent"? Good.
  • The local chief engineer working for Maple Energy was very defensive when asked a few questions and really refused to give away any information about the leak or the previous spillages.

One of the other things that Maple Energy boasts on its website is the good relationship it enjoys with Peru government and officials. Well that one might mean something positive in good old anglosaxon North, but anyone who knows Peru can decipher that code very easily. It's also worth noting that the rich and influential Peruvian Pension Funds jointly hold around 15% of all shares outstanding. So it comes as no surprise to hear in the report that neither Peru's oil watchdog OSINERG nor the Ministry of Energy and Mines has so much as mentioned in passing the problems Maple Energy is causing to the Amazon Basin far, at least.

So maybe after reading all this you're not as impressed with Maple Energy as you could be and you'd like to complain in your own way. Well as MPLE.L obviously doesn't give much of a damn about things a letter to its IR department representative Alphonso Morante might not be the best method. However, as the IFC (International Finance Corporation), which is the financing arm of the World Bank, is a 6.2% shareholder in Maple Energy you might like to drop them a line and ask them how long they will continue sponsoring a company that uses a 50 year old permanently leaky pipeline that does far more harm than good to its host nation.

Trading Post (happy birthday Otto's brother edition)

Nadagold (NG) up 8.5% at $2.80. For the record, I covered my short at $2.70 this morning making money on the $3.70 and $3.02 sales. I wanted to book profits and keep unfettered cash levels bouyant after the CZZ purchase. My view of the company hasn't changed one iota, just some practical port mgmt in the face of a possible short term rocket in the gold price.

Dynasty ( up 5.3% at $5.17. Dynasty has had a great few days since I last mentioned it 'in limbo'. Here's the five day chart......

...and note the big rebound started the moment CEO Washer appeared on BNN as part of the PDAC festivities. Here's a link to the interview and it's worth a couple of minutes of your time. Washer is not a TV natural but he does a good job all the same, especially the way he whacks viewers over the head with the compelling arguments of as an investment in the first few seconds. Remember I own plenty, so accuse me of drumbanging if you like. I don't care. It's a great stock.

Vena Resources ( up 8% at $0.195. Volumes have been tiny but since we noted it at $0.16 the other day it's up over 20%....and 20% is 20%. I'm still waiting for NRI's views of the Vegarra encounter but I know that our superspy was impressed. Otto likes for its long-term prospects, that's for sure.

Metanor Resources (MTO.v) down 17% at $0.465. The downside risk of investment in these small juniors captured by the action in Metanor today. As much as I might like the project and the "story", if management announces a heavy dilutive placement in the way MTO.v just did this morning (details here) the stock dumps and severely annoys shareholders. Juniors are high risk and high reward...we all know that. All in all a really pissy decision by mgmt that had recently been to market.

Troy Resources ( up 4% at $1.05. I'm tempted to add but again somewhat in limbo. I still want sub-loonie as an adding point, but on the other hand I own loads already. Still my 2009 top pick.

Jon Stewart's Daily Show last night

If you haven't done so already, drop everything and watch Jon Stewart pulling CNBC apart on his show last night.

Watch the full 21 minute version of the show linked at Alex Dalmady's blog here (well worth it).

Watch the 8 minute section on CNBC at Felix Salmon's blog here (to get to the point).

Our friend Cur Allen Stanford gets a mention, glad to say. Unmissable.

Bot Cosan (CZZ): Here's why

It's not just your humble correspondent that's been following this stock very closely these last couple of days. Yesterday I got this (extracted) from TL, a regular (and very patient) reader:

"....... you posted on CZZ recently but curious whether you like it here, despite your previous wariness of the "falling knife." Isn't it now below your cost from the last time around? Unless there is something company-specific that we're missing it has the feel of hedge fund liquidation or similar forced or semi-forced selling. Do you see significant survival risk for this company? Maybe someone who realizes the world economy is continuously deteriorating thinks CZZ is going to get XXXXXX in the process? .....if you were to post again on CZZ I would be a happy blog reader.

Well here's the word for TL and others: I've jumped off the fence and bought the thing today at U$2.50. Here's why. First let's look at the sugar futures chart.

Click to enlarge

The last time I posted on this I mentioned that I'd like to see $13.50 broken. Well true to form that happened, but then the sugar complex dumped. However the chart shows that there's no real panic going on and it only corrected inside the ascending channel. This, along with the general market negativity, whacked CZZ hard. The same three month period chart here shows the story.

Click to enlarge

Remember that CZZ is a high beta stock (2x) even in the best of times and these are surely not the best of times. So expect volatility at any given moment.

Fundamentals give reason to like CZZ right now. The ongoing sugar shortage in India has not gone away. CZZ has reacted to this by moving its ethanol-to-sugar production ratio down to its minimum of 40% ethanol to 60% sugar. And while we're at it, please remove that immediate kneejerk raction you might have to the word "ethanol", as CZZ supplies the profitable Brazilian market and is not in the same position as those flash-in-the-pans up North.

Financially, the dollar strength is clearly affecting both the commodity and the stock, but if you (like me) believe that there is a limit to this current short-term dollar strength and we're close to the top right now (USD index 89 and bits) there's another reason to like the short-term future. The other great issue at Cosan is its debt burden. Yes it's heavy and they went to the debt market at the wrong time, but it's not too onerous and looks serviceable enough under all logical outcomes to present circumstances.

The bottom line is that I believe CZZ is oversold now. So I bought it, looking in the short term at least for a return to that U$3.70 or so level it was revolving around. DYODD, dude.

Peru: Tide's Out!

What's that one that Buffett likes about naked swimmers at low tide? Yeah, you know it too. Well here's another example to show off the Omaha dudes set of smarts. First let's examine the accepted financial world wisdom of three South American countries:
  • Chile: Smart, conservative, wise, financially prudent, stable, investment grade, stable outlook
  • Peru: New star, biz-friendly, now stable, financially prudent, investment grade, stable outlook
  • Argentina: Irresponsible, anti-free trade, unstable, will default at any moment, crazy to invest there, junk bond graded, negative outlook.
But where the rubber hits the road, what do we see?

Red = Peru Sol vs USDollar, Blue = Arg Peso vs USDollar, Green = Chile Peso vs USDollar

Nuff said. The sooner the world wakes up the arriviste BS propagated about Peru, the better things will be. I still find it amazing that any investor trusts convential wisdom of the idiots in suits about anything economic after the evidence of the last few months.

Finetik and the latest on Itau/Banamex/Citi

Via the Finetik blog linked here, your info-hungry Otto finds out that Banco Itau (ITU) sent an official communication to the Brazilian regulators last night stating that Itau " not negotiating any stake in Banamex’s capital..".

Now that doesn't mean there's no interest, of course. The ITU honchos have already said they'd be interested purchasers if and when Banamex went up for sale. It does mean, however, that ITU isn't doing anything proactive right now. This fits with the official Citigroup (C) line that Banamex is not up for sale, of course. This won't quell the rumours, but it will put a dampener on short-term speculation for sure. However it should be clearly pointed out that none of this addresses the core issue here: As explained previously if the US gov't takes its 36% interest in Citigroup as planned, C will be breaking the Mexican law and cannot hold onto Banamex as things stand. That's as plain as day.

Finally, a word of kudos for the people at Finetik; I've only recently discovered the blog (which is part of a wider capital markets company that specializes in Latin America as well as Asia) and put it on my RSS, but I've been very impressed with the quality of information passed over there. I can thoroughly recommend it and say it would be a good addition to your own RSS feed (or regular bookmarked visit). Here's the link to the blog's main page.

Disclosure: I have no affiliation whatsoever with Finetik and have never even spoken to the people in my time. I just think it's a good blog that covers LatAm finance well.

Related Post
Itau, Banamex and Citigroup: Rumours in the village

Coeur D'Alene (CDE) and Bolivia: Spot the difference

San Bartolome, Bolivia: A model workforce according to CDE

Want to know why I'm always cynical about corporate press releases, statements and political viewpoints? Here's today's example. This below is from Coeur D'Alene's (CDE) fourth quarter conference call transcript, courtesy of Seeking Alpha (one of the bits worth reading over there and a good service). Pay particular attention to the bold type.

".......At San Bartolome, the world’s largest pure silver mine, we’re now in full operation, with a targeted average monthly production of approximately 750,000 ounces of silver and a total annual targeted production of 9 million ounces for 2009.

I do want to take a moment here to acknowledge the very fine effort put forth by our entire workforce at San Bartolome. They’ve done an outstanding job of getting the operations up and running and we want them to know that Coeur recognizes and appreciates their contribution.

Looking forward, cost reduction and containment is and will continue to be a major priority at San Bartolome. In fact, we’ve already reduced our operating cost per ounce nearly 50% since commencing operations in late last summer. While San Bartolome is close to meeting our expectations for both production and costs, we will continue working to further enhance its economic efficiency as the year progresses"

And now this one from BNAmericas this morning:

Employees of Bolivian miner Empresa Minera Manquiri, a subsidiary of US firm Coeur d'Alene Mines (NYSE: CDE, TSX: CDM) that operates the San Bartolomé silver mine, have halted operations to demand that the CEO and other executives step down.

"The union is demanding that several company managers leave. This is a pressure tactic," a former Manquiri executive told BNamericas.

The employees, who also blockaded the Potosí-Tarija highway, are protesting because they do not agree with the way the company is being managed, the former executive said without providing further details.

Coeur d'Alene representatives were not available for comment when BNamericas contacted the company Wednesday.

San Bartolomé churned out 2.1Moz of silver in the fourth quarter and is expected to produce 9Moz this year at cash costs of US$6.50/oz.

San Bartolomé has 153Moz of silver reserves and 34.2Moz of indicated resources, which are expected to allow for a 14-year mine life.

In another part of that transcript, CDE explains that they put in new top management in Bolivia last year. Strange, then, that things aren't quite are beautiful as CDE would like to make out in its statement to shareholders......

One for all you Don Coxe fans

I know there are plenty of you out there, too.

Don Coxe couldn't make PDAC this year for his own reasons even though he was booked to speak. However the keynote address he planned to give is now available on this link at Republic of Mining. Go over and have a read, good stuff.

Chart of the day is.......

.....the chart for Yamana Gold (AUY), because it didn't just beat the street last night, it kicked its butt bigtime. This simple 12 month chart surely gives it room to rise, too.

AUY is a funny fish to estimate and gives insto analysts real headaches. They never seem to "get" Yamana, due mainly to its fluctuating financials more than any pleasant or unpleasant surprises on actual production. Over the years it's also been a frustrating stock to own, which is why I've never held it except for short, trading periods (and never made much money on it, for the record...probably a net loser personally).

But yesterday's really came in well; cash cost was on target, there were no significant write-downs, at the 4q08 eps of $0.25 beat the average consensus of $0.04 into a cocked hat. The company also made clear in its presser that its plans to increase gold (eq) production to 2m oz per year in 2012 are on course. That compares to the 1m oz Au it produces right now and clearly indicates that AUY will be on the acquisition trail soon enough. I still say AUY will buy JAG (been saying it since December), but repeat to stop potential mailers that there's no inside knowledge happening around that...just my own, personal call that can be shot down in flames at a later date.

So the bottom line is: great quarter at Yamana. I've never been a great fan of the stock but credit where it's due. I enjoy those moments when facts prove me wrong.


Trading Post (miners only edition)

Western Goldfields (WGW) up 8% at U$1.60 on the back of a buyout (well, they call it "fusion") offer from New Gold (NGD). Here's the Bloomie version of the story. Just to toot a little, back in the October '08 when WGW stood at U$0.99 in a NOBS report I put a valuation of U$1.58 on the stock at U$900/oz gold. Oh well, that's another one I'll never get to sell again.......

Southern Copper up 8% at $14.74 and Freeport (FCX) up 13.5% at $32.55. PCU goes up and down and up and down and up. FCX goes up then down a bit then up a lot and has beaten out PCU these last three months quite easily. It's the gold in the mix that wot done it, but both loving copper today.

Minera Andes (MAI.t)o up 11% at $0.71. Yep, that McEwen puts on a good party all right.

Fortuna Silver (FVI.v) up 5.75% at $0.92. So far so good and the buy spotted yesterday is already 8.5% up. Not shabby, but no counting chickens yet. Anyone else buy yesterday? Hope so. Volume low.

Great Washbasin Gold (GBG) down 1% at U$0.99. No need to tell shareholders of this one that the debt market is tight. The offering of a cool 100m shares (as reported last week) was priced at an unsurprising C$1.30 this morning. Sad to see such a good prospect hammered by a combo of frozen credit and all-too-trusting mgmt.

Gold Reserve (GRZ) down 1% at U$0.53. Check out the chart (three month comparring GRZ and RML.v) and work it out for yourself.
That Belanger sure knows how to add shareholder value, eh? Worth your loyalty, eh? Any IKN hatemailers feeling plain stupid yet, eh? Volumes are not low; volumes are pathetically low.

Postcard from PDAC: An addition to yesterday

NRI must have had a good night's sleep, as our superspy just remembered something else that went on over at the Petaquilla stand and wanted to add to yesterday's missive. Looks like Goldex is looking to sell its El Pato property in Guatemala and is not being very subtle about it, either. Here's NRI:


Darn it, Otto, there's something important I meant to include in my report of my interrogation of Pet.rep, the CFO of Petaquilla Minerals...allow me:

Our discussion did not have a natural conclusion with our parting being preceded by a courteous adieu and a handshake. What happened was this guy in a suit with an exhibitor's name tag which said GOLDEX rushed up, butted in on my tete a tete with Pet.rep. and said to Pet.rep. : Want to buy a gold project in Guatemala? And Pet.rep. responded: Yes. We'll talk.

Otto, my point is not to draw attention to what a rude little prick the guy in a suit with a GOLDEX name tag was but to tell you how it shocked and amazed me that this Master of the Universe should be so indiscreet and careless about letting me in on his wheeling and dealing. I mean we are not talking about their dealing baseball cards or dope. Imagine if I were chatting with Yamana's Peter Marrone. What do you think the chances are that Tye Burt might rush up, interrupt, and say: Hey Peter. Wanna buy a gold project in Russia? Only a Kupolla million...

Isn't there some rule about a level playing field? Well, I intend to watch the share price action of and Goldex Resources - GDX.v - and if it develops that I could have made a profitable trade on this inside information to which I, but not all members of the public, was privy, I will send a postcard to the OSC as well.

Gotta go. No time here to tell you about my meeting Vena's Juan Vegarra the other night...just as heart's still pounding.



Canada's OSC: The toothless, lazy and impotent watchdogs strut their stuff

Hey there Canadian readers, remember back on January 27th when I posted this on the blatant insider trading at Alamos Gold ( and Plexmar Resources (PLE.v)? Well I'm not just mouthy here y'know, I actually sent the thing in to Canada's OSC. For those unaware, the OSC is the Canadian version of the SEC, i.e. the people that are supposed to regulate the securities industry up there. The OSC's track record is nothing short of abysmal, having (for example) managed to convict just two people in the last nine years. Not bad for one of the world's most corrupt and crony-ridden capital markets, yeah?

So anyway, I'd all but forgotten that I had put in a complaint to the OSC when suddenly, today, five weeks later (!) I get a reply. Here it is below, but you can sum up Allan Krystie's attitude in just one sentence:

"I don't care, I'm doing nothing, stop bugging me."


Dear XXXXX: Thank you for your inquiry to the Ontario Securities Commission (OSC) concerning Plexmar Resources Inc. and Alamos Gold. We have forwarded your complaint to the enforcement branch of the OSC for further review. This may or may not result in an investigation; however, Commission staff do not generally comment on the existence, status, or nature of an investigation. The purposes of this practice are to protect the integrity of investigations, to ensure the complaint process is not used to affect the market and to provide fairness towards those who are the subject of investigations, but against whom proceedings may never be taken. If additional information is required from you, staff will contact you; however, you may hear nothing further.

Allan Krystie
Senior Inquiries Officer
Ontario Securities Commission


Canada's OSC = A Disgrace To Its Nation.

What Desjardins thought of PDAC this year

Desjardins published its review of PDAC 2009 today. They diplomatically label it a "less wild party" (you saw the photos sent in yesterday by people that don't have to wear suits and speak prettily, yeah?) and bulletpoint the first page with:

• Industry sees a ‘difficult year ahead’ with a lack of available financing and no new major base metal discoveries
• Review of 4Q08 results released so far; most companies in ‘reasonable’ financial condition at the end of 2008, but metal prices have fallen further so far this year
• Rate of production cutbacks continues to outstrip rise in inventories

Finally, let me point out that I have no idea where you might be able to get a copy of this client-only report and read it yourself, but if you're lucky enough to find one it's a worthwhile good read.

Here's one you're unlikely to see on Fox News this week

Marcel Granier (for it is he)

Hey, remember all that fuss about RCTV in Venezuela? Yes you do!! That's the opposition-run private TV channel that was taken off the public airwaves in 2007 when its licence expired and Hugo refused to renew it (something about how RCTV illegally propagated the 2002 coup d'etat, but hey...insignificant details, no?).

So the world screamed human rights abuses and press gagging and all sorts of things. And of course the whole thing was taken to court by RCTV via Globovision, another opposition TV channel in Venezuela. Not the Venezuelan courts, obviously, because RCTV head honcho Marcel Granier knew he wouldn't get a fair trial there. So they all went straight to the top and wisely chose to make the case at The Inter-American Court of Human Rights. Thus Globovision and RCTV sued the Venezuelan government to the tune of U$1m.

So yesterday came the verdict. Yep, you guessed it already, THE WHOLE CASE WAS THROWN OUT. The ICHR ruled that the government of Hugo Chávez had not violated any freedoms of expression, property freedoms or broken the laws regarding equality of companies in the privately run media. No million dollars for the hard done by rich people, but the ICHR did order Venezuela to pay a full $10,000 as its part of the ICHR proceedings expenses.

Burning question: Will Andrés Oppenheimer address this issue in his next Miami Herald column? YOU BE THE JUDGE!

Lime Slime's Brazil: Corruption and slush money in the Lula government? Surely not!

I've actually had a couple of mails since the weekend saying "Hey dude, where's Lime Slime got to?" or words to that effect. Never fear, dudettes and dudes! Here we have a new dispatch from the whacked out world of the Caipirinha. All yours, Lime Slime:


Robert Mangabeira Unger (for it is he)

Serious journalism is alive and well in Brazil, especially at O Estado De S. Paulo, known as Estadao by its fans. I've long thought of it is the best paper in Latin America. Excellent writing, rigorous and independent. It's editorial page is too far right for me on social issues, with a conservative Catholic slant that sounds outdated in contemporary Brazil, but the rest of the paper is top notch. And today, they have one of those great articles explaining more or less how political parties finance themselves here.

Lula's party, the PT, controls 6 of the biggest 10 pension funds of the so-called estatais, the state-run companies. These are BIG, and historically have been one of the few sources of long-term financing in a country that, before the latest commodities boom, had a very low domestic savings rate. The funds include Previ, the fund of Banco do Brasil, Petros of Petrobras, you get the picture.

The execs at the funds are named by political parties, and most of them were put in place by Lula's former right-hand man, Jose Dirceu, who quit the cabinet during Lula's first term during a corruption scandal that almost cost Lula re-election. In that scandal, the PT was buying votes in Congress to get bills approved. The other guy who appointed PT allies to the funds was Luis Gushiken, an old union hack who formerly had a job as chief propagandist and whose office had an obscenely large budget, before the corruption scandal got him.

Why do they want to control the funds? Moolah. Parties have two basic ways of raising cash. They can either take kickbacks on concessions for things like bus routes, or they can dip their hands into the pension funds. Accounting at the funds has historically been opaque, even though some of them make smart investments and build important stuff. But it's time for Brazil to clean up these conflicts of interest.

Many of Lula's buddies from the union movement are now managing billions of dollars in cash. Why? What do they know about investments? One of the opposition parties is pushing for a Congressional investigation of the funds, which would damage Lula. Robert Mangabeira Unger, the Brazilian dude on leave from Harvard Law school who speaks Portuguese with a gringo accent, once called the pension funds the most sordid, nefarious area of Brazilian politics. But that was before Lula hired him as his "Secretary of Long-Term Planning", a ministerial level post where he runs his own one-man think tank. Why don't you tell us what your plans are, Mangabeira?

Read all five Lime Slime guestblogs right here

Charts of the day are.......

......all about copper (and supplied by those friendly dudes at kitco).

Here's the 60 day copper chart that includes this morning's action in London that sees it at U$1.61/lb. As we can see, this strong upmove is not the first this year but it does come (yet again) off the U$1.45/lb level that's become the baseline in 2009 so far.

The reason for the latest optimism is basically the Chinese government over the weekend and its forecast of 8% GDP growth in 2009. Otto sez "hmmmmmmmmmm". Regarding exports, they might grab all the headlines on this side of the Pacific but they haven't contributed much more than 3% to the Chinese GDP growth figure in the last few years (I checked). So thinking about the 10% to 12% recent yearly growth figures and sticking a finger in the air, if The People's Government really pulled out all the stops 8% GDP growth in 2009 is technically possible, I suppose. But it would be one helluva internal stimulus and kinda makes me wonder just how many empty apartment blocks they want in their cities. On balance it's difficult to see China coming in at 8%, no matter what they might do. Even 5% would be chunky enough for me, given present conditions.

Let's just point out in passing that copper is a good barometer for China growth. They need 4.5 times more copper imported than they produce themselves, biggest import/export ratio of any base metal shipped to China by quite some distance. So with that in mind, let's check the longer price chart again:

The above chart is the main reason why iIm not getting hot under the collar about copper yet. U$1.60/lb is a help for the producers for sure (go!), but there will be no repeat NO new project funding for the greenfields while the spot price begins with a "1".

Another thing that has perked up spot prices is the slight drawdown in warehoused copper. We can see the LME figures in this chart......

...and that's another small positive in the mix. The general market thinking is that China is stockpiling at these low levels. That may well be true, but let's again check the longer chart and get some context on the post Chinese New Year drawdown.

Yeah, context sucks, doesn't it? That, gentle lector, is a boatload of surplus in anybody's book.


Postcard from PDAC: Low lies and high fives

Superspy "Codename NRI" is back with a second missive, direct from the heaving bosom of PDAC. If you missed the first, here it is. So here we go with the second NRI view of things. Enjoy (because I fact it's a hoot).


NRI here, with a few tales to tell...

I thought I should act on the suggestions of Otto, the incisive analyst, and locate a few of his interesting miners. I spotted the Petaquilla Minerals booth; and got straight to the point:

NRI: Aren't you the guys that have an unpaid fine?
Pet. rep: No. We don't owe a fine.
NRI: What do you mean?
Pet.rep. (defensively): They don''t have the authority to impose a fine.
NRI: Who?
Pet.rep.: The environment group. Only the Ministry. Nothing is being enforced against us.
NRI: Are you saying that the Ministry hasn't imposed a fine?
Pet.rep. : Not that I'm aware of.
NRI: Who are you?
Pet.rep.: Bassam Moubarak, the CFO.
NRI: The, if a fine were imposed, you would know.
Pet.rep. : I'm not aware of any fine. A misconception in the media.
NRI: Which media?

Pet rep. responded but I didn't catch the reference. It sounded like a Panamanian newspaper.
This ended our exchange and I hurried off to a bench to sit and make a transcript of the questions and answers, while the exact words (as I recalled them) were fresh in my mind.
Now, Otto, if you find out that my interview might be of any help to Panamanian authorities I am responsive to providing evidence and would be delighted to have an expense paid trip to Panama for that purpose.

Digressing, I paid a visit to the booth of Eastmain Resources - - explorationists with some great projects in the James Bay area of Quebec, Canada, one of which is a JV with Goldcorp, which is developing the Roberto Mine on an adjacent property. ER is one of my favourites (I have shares) and I like their people a lot. I talked to one of the geologists, Cathy B, and she told me this PDAC has been very busy for them. I asked Cathy whether she and husband Don (ER's CEO) exhibited at the show in Phoenix last week. Cathy told me they had and, though they expected that it might be quiet, it was very very busy. Cathy told me that a coin dealer was set up right behind them; and he sold out his entire inventory - $173,000 in coins - in the first three hours of the show.

Returning to Otto's crib sheet, I really wanted to find Rob McEwen. Well my buddy, JG, informed me that the
McEwen companies - Rubicon Minerals, U.S.Gold, Lexam, Mineras Andes - were hosting a reception Tues eve at 1King St - a tony location in the power vortex of Toronto. Off I went - to this, my fourth reception so far, with the first three having been in suites in the Fairmont Royal York and the Intercontinental Hotel. Digressing again, the other night at the Royal York, a staff person told me that the PDAC is their biggest and busiest engagement of the year - and the one during which the most booze is served. Many many receptions are hosted simultaneously in each of several hotels. The McEwen reception was not in a suite - but in a ballroom! - and it was packed. I was given 2 bar tickets upon entry. Waitstaff circulated with platters of hors d'ouvres; rep's from each of the McEwen companies had stations to receive and respond to questions; and a photographer had a station to take one's photo as one held a 400oz. gold bar.

My buddy JG arrived and we connected. He told me that McEwen must be economizing, because last year, the bar was open - no 2 drink limitation - and there was a lot more food. I hadn't sighted Rob McEwen in the packed ballroom but JG had and pointed him out. I approached Mr. McEwen and waited for the couple who were chatting with him to finish; and then, responded to his greeting by thanking him for hosting this reception. I told him I had been following the Minera Andes story and was really glad that he had jammed Hochschild. Mr. McEwen responded that they deserved to be jammed. I asked whether he had heard about Inca Kola News; He had not. I told him this guy Otto had this blog and encouraged anyone spotting McEwen to highfive. Gawd love him, Mr McEwen immediately responded with the highfive. Anybody reading this: he is such an accessible guy. I have had an opportunity to speak with him before and my buddy JG told me that he once called one of the McEwen companies; and Rob McEwen answered the phone and was absolutely responsive to the questions which JG posited.

Wearing down here, I wanted to report on my meeting the charismatic and very impressive Juan Vegarra, the CEO of Vena Resources, and the question I didn't get to ask him; but I must sign off.

more later...

Related Post
Postcard from PDAC: Where have all the people (and freebies) gone?

Do what with tourism???????

This one isn't really LatAm, but it is Spanish language, it is politics and it's definitely stuff like that. Spanish PM Zapatero (he of the crummy suits) was speaking at a press conference today after meeting Russian President Medvedev. The issue in question was bilateral tourism and Zapatero said

"We have made an agreement to stimulate, to benefit, to f**k, to help this tourism."

Don't believe me? Ok, here's the Youtube.

The exact words are (in the last 10 seconds of this 27 second video):

"Hemos hecho un acuerdo para estimular, para favorecer, para follar para apoyar ese turismo."

For those who suffer under the Castilian challenge, the offending word is "follar" (pron: fo' yar). Sure it's a blooper, but it's a damn good one. Just a pity the new US Prez is such a good speaker. Will we begin to miss those dubyaisms after a while?

Thanks for the headsup, UL.