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Military Spending in Latin America, 2009

Peer-acknowledged world experts on military spending, the Stockholm International Peace Research Institute (SIPRI) think tank, this week released its survey of 2009 military spending around the world. When the focus is Latin America it makes for very interesting reading, especially when you consider the differences between verifiable facts and figures presented by SIPRI and the hyped out BS written in the English language about what goes on down this neck of the woods. The SIPRI figures that follow are taken from this EFE wire report.

Let's start with overall spending in dollar terms per country:

Brazil was, far and away, the biggest spending country in 2009 with over $27Bn as the total budget. Next was Colombia spending over U$10Bn on all things warrior. Then comes Chile and Mexico and then down in 5th place comes the country painted as the big regional military spender by Hillary&Co, Venezuela.

But size of country matters too, so in this next chart we see the biggest spending countries in terms of total bill as a percentage of GDP.
So from this we see that Colombia spends the most on its military compared to the size of its economy. Then close behind comes Chile (its military is directly funded by state copper company Codelco) and then Ecuador (that has to look after its border with Colombia due to the FARC). Fourth place is Brazil (which suddenly looks pretty reasonable, but it'd be better if it were off the chart low as Mexico is) and then in fifth place again comes Venezuela, edging out that other obvious destabilizing threat to the world, the nasty belligerent bunch from.....errrr....Uruguay.

Then there's this chart, which is really quite bizarre. This shows the Year-over-Year (YoY) change in military spending, with the 2009 spending as a percentage to 2008 spending.
Uruguay boosted its spending on the military the most in 2009 compared to the previous year, but as the sector is quite small in absolute terms we're not that worried. Then comes Ecuador, Brazil, Colombia (up another 11%...natch) Mexico and then Peru, which is a special case in itself as it was Peru in 2009 that went around asking the other Latam countries to reduce spending on arms during the Unasur wow, who in the world would have thought Twobreakfasts was capable of hypocrisy, eh? But then we have three countries that actually did do something about defence expenditures and cut their spending in 2009, namely Chile, Argentina and ....wait...what's this? Venezuela dropped military spending by how much??? Wow, you'd never guess that Chávezlandia spent 25% less in 2009 from the biased shit you've been reading, would you?

Finally, some context. It's always good to have some context.

So here's a message to Hillary. When it comes to the subject of Venezuelan defence spending, do us all a favour and....

UPDATE: Lots of extra crunchy LatAm military spending goodness available via this cool post over at Maladjusted.

A room with a view (part 6)

This week's view comes from reader 'RG' in the city Mazatlán, coastal Mexico.

The Gold/Silver Ratio


click to enlarge

Today your humble scribe yet again pretends he knows/understands/believes in technical analysis. Just goes to prove that the great thing about charting is that anyone can do it. We're all experts these days, aren't we?


The Friday OT: Led Zeppelin; Immigrant Song

How good is this?

Page shreds a solo, John Bonham shows how good he really was, the song's great wrap up rules. But it's that instantly recognizable riff that's the most awesome part of awesome. Play it awfully, terribly loud.

On The Road

Gotta run now for a quick trip to parts unknown. But no worries about The IKN Weekly, which will not be affected and will be out at its usual time Sunday afternoon. Also, the Friday OT will appear later today. Pip pip!

Chart of the day is....

...this, a part of a full breakdown on the Colombia first round results that was lifted by hat-tipped Maladjusted and originally found in this great, über-complete post over at 538.

Make sure you click through to 538 and see the whole thing, as it'll encourage this top election-tracking site to love LatAm the next election round, too. Go here.


Welcome to South America, Xstrata Copper

Under the title "Xstrata Halts Spending on A$6.6Bn of Projects", the copper company via Bloomie makes it clear that it's not going to hang in Oz if that gov't insists on this weirdo 40% windfall tax on profits. Later we hear from a stuffed suit in London....
“Capital, rather than being spent in Australia, can be spent in the company’s operations in other countries,” Charles Kernot, an analyst at Evolution Securities Ltd. in London, said by phone today. “If it can accelerate development of other projects, that may help offset these delays.”

.....and for once your humble scribe agrees with a brokerage-bound anal yeast, because it doesn't take a rocket surgeon (or brain scientist for that matter) to work out that if Xstrata bails on spending down under next stop is the altogether finer region known as South America....just check out the company's roster of projects if you don't believe this humble corner of cyberspace. So for those who need further clues here's a tune dedicated to them crazy Swiss miners, to their followers and to....errr....owners of neighbour plays. DYODD, dude.

PS: whatever happened to Lou Diamond Phillips, anyway?

Photoquiz redux

A shameless repeat post (first published Jan'09), because somebody reminded me of the issue this morning. Which of the two people featured in this photograph has gone through the most surgery in the last ten years?

Send your answers to otto.rock1 (at) gmail (dot) com. Please mark title line with, "Ooooh, don't be such a bitch, Otto".

Fortuna Silver's ( got meaty downloads for you

Fortuna ( has a new presentation out which is worth your time, metalhead. Download your copy by clicking right here (and it's 8.87Mb so it'll take a couple of seconds...patience etc ommm).

Meanwhile, for the hardcore numberfreaks out there (count me in), the FVI Annual Report is also out. Get your copy here and read with fascination how the FVI team tries to keep inside 43-101 guidelines but at the same time strains at the leash to try and say what they really, really, REALLY want to say about San José (IKN adds to bold type to help out):

Approximately 400,000 tonnes of mineralized material containing an estimated 5 million silver equivalent ounces are located in the upper 100 meters of the deposit where historic mining has taken place. Due to uncertainty in the exact location and volume of existing workings above the 1450m elevation, these materials have not been included in the reported resource and reserve inventories for the deposit. As the mine is developed, it is management’s expectation that a significant portion of these mineralized materials will be converted to mineable reserves.

Based on the opportunities presented through incorporation of the inferred resources and other mineralized materials into the mine plan, the Company believes that the design capacity of 1,500 tpd can be achieved within a shorter time period than considered in the PFS. Inclusion of these materials into the mine plan will result in a significant extension to the life of the mine and will directly reduce the rate of capital investment required for underground development on an annualized basis.

The PFS for the San Jose Project indicates an after-tax internal rate of return of 18% and an NPV of US$36 million at a discount rate of 8%. The Company believes that there is substantial opportunity for improvement of the project economic metrics that will be realized as the project is developed and enters into production

Plenty more strained prose like that to enjoy in the whole thing. Surely they should stop being such tarts, be like all the rest of the industry and forget those outdated things like 'ethics', shouldn't they? After all, that's what the dumbass sheep expect from junior miner plays so c'mon Ganoza, give the customers what they want and screw the OSC......everyone else does these days.

News roundup (we inhale deeply and blow it out our nose when done)

Piñera finished the lunch feeling worse for wear

Robert Funk gives us the lowdown on prez Piñera's lunch date with Chile's academic glitterati yesterday. We find out that Seb is an occasional smoker (it's big deal) and that Funk is still wondering what it was all about.

Bloomie got the scary copper quote for yaz. "The copper market will be “volatile” for as much as another year after China took measures to cool its property market, Codelco Chief Executive Officer Diego Hernandez said yesterday in an interview at Bloomberg headquarters in New York. The Asian nation is a “risk to the world’s market place in the near term,” Freeport CEO Richard Adkerson said in an interview.". plenty more spookiness over at the link.

Structurally Maladjusted got the ECLAC, links to the brand new 290 page (!) report from LatAm's trusted source for numbers'n'stuff entitled "Time For Equality" and then, for those of us too lazy to read the UN sponsored thing, explains a bit about what's inside. This is, in fact, required reading for LatAm wonks of all flavours. SM is a part of my webpipes life and should be on your RSS by now, too.

Grit and Grace has a great post on the real, homicidal dangers of sexism in LatAm. Here's the same extract that Tim used in his headsup post on this really good article.

These attitudes have a source. Whether spit from the mouths of fearful neighbors or from the pulpit in a twisted religious interpretation, these attitudes are called machismo, and one of El Salvador's big struggles (like most countries in the world) is how to finally shed sex discrimination. This discrimination can be propogated by societal structures, authorities, teachers, parents, etc, and it finds its extreme expression in violence against or the assasination of women, called feminicide. In El Salvador, sexism is so ingrained that the band of men found it completely acceptable to rape multiple women and girls in their own community, in the middle of the day, and not fear retribution. Their male and female family members felt that the Las Melidas team was in the wrong, and that their grandfathers, husbands and sons had done nothing unusual. In short: in this case in the Lower Lempa, Salvadoran "masculinity" was valued over the innocence of childhood. Clearly, it will take a concerted and well-coordinated effort to change this reality.
Sobering, informative and a jolt to the senses. Go read the whole thing.

UPDATE: We also love Chigüire.

Chart of the day is.....

...lead (Pb), five year chart.

Is demand slack for base metals? Yes, it is. It's especially slack for the metals that China doesn't need to import in large quantities.


The Evo/Costas meeting: How was it for you, Ruben?

"Sorry about the 'monkey' cracks, dude."
"No worries dude."

The meeting we outlined earlier this morning between Evo Morales and Ruben Costas has just finished. It lasted around 75 minutes and, sadly for the Evohaters out there, it went well according to the main guest at least. Here's a translation of a quote from Costas found in this report:
"The meeting happened in a very good atmosphere, with a very good predisposition shown by the President. The main objective was the search to construct a clear and sincere dialogue, the possibility that we as public servants, head of the country and head of Santa Cruz, work for what we want for Bolivians and for citizens of Santa Cruz, work for the wellbeing of our people and in a coordinated way."

Those with memory will notice that Costas now openly recognizes Morales as President of all Bolivia, a quantum leap in itself from a man who refused to recognize his mandate for many years. The other words from his lips were also highly conciliatory. Hey, we still don't like the dude much and there's every reason to want actions and not words before he's worthy of any sort of trust, but today was a good day for Bolivia. Peace beats war every single time.

COHA on Peru

With Twobreakfasts meeting the Hawaiian in DC yesterday, no surprises that the Peruvian "economic miracle" is a talking point today. Amongst the fawning dross written about a place most of the monolingual hacks couldn't find on a map, one link sent to me my Mexfiler RG (thanks dude) stands out as well-written, balanced and reasoned. The surprising thing is that it comes from righty think tank COHA.

Hey, most of you guys know that your humble scribe is no conservative, but we over here at IKN applaud any argument that offers up balance. There are a few nitpicking things about the COHA article that can be taken to task but it'd be unfair on the whole, because the author Elizabeth Sahner does a good job of potting the recent political and economic history of the country. This kind of piece is a throwback to when the US GOP would be able to string together a reasonable point of view that could be taken seriously by one and all.....gone are the days.

Anyway, here's the wrap-up paragraph of Sahner's note as a taster, but the whole thing should be read as you'll gain more insight into Peru in the English language by reading this than you will in four dozen other articles. Good job Elizabeth.

Even though Peru’s business sector is enjoying renewed foreign investment and the worldwide profile of a relatively small but rising power, García has not done enough to mend longstanding societal divisions in Peru. Far from reaching out to his country’s large indigenous community, President García has stood alongside business interests and only belatedly recognized the need to involve all parties in the decision-making process about the use of indigenous terrain. The president seems most concerned with reinforcing the benefits of the free market and globalization in Peru in order to rescue his own legacy, which has been tainted by corruption. Yesterday in Washington, President García asserted that Peru “chose correctly” by opening its economy and defying last year’s global economic stagnation. Economic indicators are indeed positive, but until the administration eradicates corruption and includes more segments of Peruvian society as part of the national financial and political conversation, Peru’s prosperity will remain a weak shell surrounding an imbalanced country.
Read it all right here.

The minor details that Dorato Resources (DRI.v) forgets to tell the market

Detail one: Dorato Resources (DRI.v) has the United Nations on its back now. CERD is a committee of the UN and the acronym stands for "Committee on the Elimination of Racial Discrimination". Its job is to combat state-level racism, so it's only natural that eventually they'd be alerted to the defence the Awajun-Wampi peoples of the Amazon basin have been putting up against the Twobreakfasts government and the parasites that would "develop" the region (word used as loosely as possible) for the benefit of the almighty janquidolar.

Detail two: DRI likes to pretend it has shiny happy relations with locals in the Cenepa region, but sadly for the liars at Dorato, the local know how to use the interwebnetpipes too. Here's the latest post on the blog run by the local people themselves. This way you get their true voice, unfiltered and unspun:

"Despite the injustified triumphalist announcements made by Dorato Resources and Mining Company Afrodita about their mining activities within indigenous territory, CERD express its deep concerns about the authorization of numerous mining concessions without the prior consent and informed consent of indigenous people and about the fact that the conflict between indigenous communities and the Government has escalated at an alarming rate. CERD also requests information about several indigenous Awajun claims."

But hey...why believe the people that actually live there? Why not believe a bunch of junior gold mining executives instead? When has a gold miner ever been caught lying?

Bolivia: Peace breaking out

Over at Bolivia's state news service ABI, the main story this week is that main opposition leader in Santa Cruz, Ruben Costas, has accepted an invitation from Evo Morales to sit down and talk. This might not sound like much to those unversed in BoliviaPolitik, but just the fact the two are willing to get together for constructive talks is a major step forward. This is, after all, the same provincial politician who refused to recognize Morales as his President, used racist language at every turn in his insults and was one of the main players in the attempted secession plans of 2008.

But let's not dwell on the past too much, as if Costas goes to the table with the right attitude Bolivia can turn out as the winner here. Good EngLang service Bolivia Weekly has more on the subject right here.

The Cerro Casale 43-101 technical report

Cerro Casale is the big gold project 75% owned by Barrick (ABX) and 25% owned by Kinross ( (KGC). Yesterday Kinross published its 43-101 compliant technical report on the project. After a brief scan, here are a few line items:

  • Capex is put at a cool $4.184Bn
  • Base case ($800 gold and $2/lb copper) IRR comes in at a horrid 5.5%
  • IRR using U$960/oz gold and U$2.40/lb copper is still at meagre 9.9%
  • If you want to go with current spot prices as your base (a very dangerous hobby), then $1,200/oz gold and $2.80/lb copper gives you a 14.7% IRR...feeling lucky, punk?
  • The project is very opex-sensitive. Annual operating costs are slated at an impressively large $778m with the 43-101 model indicating a 10% rise in opex taking a third away from net cash flow.

People, don't hold your breath on a build decision for this thing. It might give Exeter ( holders food for thought, too.

US Gov't Sponsored Bolivian Coup

This is fun. In an exclusive report, digital emunction digs out evidence to prove that the US gunded the Banzer coup in 1971. Here's how the note starts:
exclusive: the u.s. paid money to support hugo banzer's 1971 coup in bolivia

For nearly four decades, there’s been an open ques­tion about the 1971 coup that brought dic­ta­tor Hugo Banzer Suárez to power in Bolivia: was the U.S. gov­ern­ment involved? Thanks to newly declas­si­fied doc­u­ments, we now have an answer.

Here's a quick second excerpt

....the State Depart­ment denied it imme­di­ately, assert­ing unequiv­o­cally that the U.S. played no part in the over­throw of Torres.

A col­lec­tion of declas­si­fied doc­u­ments recently released* by the same State Depart­ment proves that this denial was not only incor­rect, but a lie: the Nixon Admin­is­tra­tion, acting with the full knowl­edge of the State Depart­ment, autho­rized nearly half a mil­lion dollars—”coup money,” accord­ing to the ambas­sador in La Paz—for the politi­cians and mil­i­tary offi­cers plot­ting against Torres. The CIA handed at least some of this money over to the coup’s lead­ers in the days lead­ing up to Banzer’s seizure of power.

Now go read it all for yourself. A good job of reporting. My thanks to reader AT for the headsup.

After a deserved handslap and prompt, I've just noticed that Structurally Maladjusted ran with this story in its weekend update days ago. Moral of the story; if you want to be current with LatAm affairs, read SM first and IKN 2nd.

Have a Bad Night?

Mala Noche (Spanish for 'bad night') Resources (MLA.v) is doing a Blues Brothers and putting the band together. The company NR today has this 25c exploration play buying a working gold/silver mine from Goldcorp (GG) for $500m, arranging part of that cash to come from a deal with Silver Wheaton (SLW), another part from a share deal punted straight back to GG (who'll own 30% of the gig when done) and adding the ex-chief of IAMGold as the new head honcho. Not bad for a morning's dealmaking and it made Reuters, too.

Here's the paste of the NR:


Mala Noche Resources Corp. ("Mala Noche" or the "Company") (TSX VENTURE:MLA) (to be re-named Primero Mining Corp.) announced today that it has entered into a binding letter agreement with subsidiaries of Goldcorp Inc. ("Goldcorp") to acquire the San Dimas gold-silver mine (the "Acquisition") for US$500 million. Mala Noche is also pleased to announce that Joseph F. Conway has been appointed President and Chief Executive Officer.

San Dimas consists of three underground gold-silver mines located in Mexico's San Dimas district, on the border of Durango and Sinaloa states. San Dimas produced 113,000 ounces of gold and 5.1 million ounces of silver in 2009. As part of the Acquisition, Mala Noche will be assuming an amended silver purchase agreement with Silver Wheaton Corp. ("Silver Wheaton") for the sale of silver based on production from San Dimas. Closing is expected to be on or about July 30, 2010, subject to customary closing conditions.

Wade Nesmith, former CEO and now Executive Chairman of Mala Noche stated, "This is a very exciting day for Mala Noche's shareholders. We have secured a well known producing mine and have engaged a widely respected CEO to join our team. Joe was President and CEO of IAMGOLD from 2003 through to his departure in January 2010. During this period, he led IAMGOLD through its transformation from a joint venture player to a leading mid-tier gold producer with a number of development projects, a solid financial position and a strong management team. We are confident that Joe's operations and capital markets experience will enable us to expand over the next few years and significantly increase shareholder value."

Mr. Conway stated, "I am delighted to be joining Mala Noche as it enters this new phase in its corporate development. I see a unique opportunity to create an industry leading, low cost, low geo-political risk precious metals growth vehicle. I also look forward to working with the Mala Noche team to integrate the San Dimas acquisition, focus on increased production and productivity and leading Mala Noche to become an intermediate gold producer within the next 3 to 4 years."

"Mala Noche has been focused on acquiring producing, or near producing, precious metals operations. The proposed San Dimas acquisition achieves this goal," added Mr. Nesmith. "Our management team has direct experience with San Dimas as Eduardo Luna was the President of the Goldcorp subsidiary that operated the mine. Eduardo had direct responsibility for the operation from 1991 to 2007, when they achieved their best production results in their over 250 year history."

Management believes that the Acquisition will provide the following benefits to Mala Noche:

--  Immediate transformation of Mala Noche from an exploration company (as

    its current property is on care and maintenance) to an established

    junior gold and silver producer; 

--  Positive cash flow from the date of the closing of the transaction, with

    average annual production over the next five years expected to be

    107,000 gold ounces (157,000 gold equivalent ounces) with an average

    cash cost of US$60 per ounce on a by-product basis (US$337 per ounce on

    a gold equivalent basis); 

--  Proven and probable reserves of 860,000 gold ounces and an additional

    1.6 million gold ounces of inferred resources (as at December 31, 2009),

    with further significant exploration and development potential; 

--  Long life assets with a proven record of reserve replacement, resource

    conversion and exploration success; 

--  The ability to internally fund capital and exploration projects with

    cash flow from the mine; and 

--  Provision of a strong producing asset base on which to expand its

    precious metals activities throughout the Americas.

Eduardo Luna, former President and COO and now Executive Vice-President and President (Mexico) stated, "I am extremely pleased to be returning to San Dimas to take charge of the operations and target organic growth to achieve the full potential I believe is there. I enjoyed my years there, first with Luismin and then with Goldcorp, and I think that the focus our Company can bring to the mine will benefit everyone involved."

Conference Call

A conference call will be held on Wednesday, June 2, 2010 at 11:00 a.m. (Eastern Time) to discuss the proposed transaction. A webcast of the conference call will be available through the Company's website at

Conference call details are:

North America Toll-Free: 1-866-946-0484 or 1-646-216-4773; Passcode: 6451104#

A replay of this conference call will be available from Wednesday, June 2 to September 2, 2010. Access this replay by dialing: North America Toll-free: 1-866-551-7583; Passcode: 263967#.

The Transaction

Mala Noche will be purchasing the San Dimas mine and related assets for US$500 million and will assume all liabilities and obligations associated with the San Dimas mine. The purchase price is made up of US$275 million in cash, US$175 million in common shares of Mala Noche and US$50 million by way of a promissory note. Mala Noche plans to undertake an equity offering to finance the Acquisition and provide working capital. The price of the purchase consideration shares will be equal to the price at which shares are offered under the equity financing.

Completion of the Acquisition is subject to a number of conditions, including completion of a financing, receipt of all government and regulatory approvals, the approval of the TSX Venture Exchange, the consent of Silver Wheaton and the approval of the shareholders of Mala Noche (as to the issue of shares to Goldcorp). In connection with the sale of San Dimas, Silver Wheaton has agreed to amend the existing silver purchase agreement, to be assumed by Mala Noche. Under the amended agreement, during the first four years following closing of the transaction, Mala Noche will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess. Beginning in the fifth year after closing, Mala Noche will deliver to Silver Wheaton a per annum amount equal to the first six million ounces of payable silver produced at San Dimas and 50% of any excess. Silver Wheaton will pay Mala Noche approximately US$4.00 for each silver ounce delivered under the agreement (subject to an inflationary adjustment). In addition, the term of the silver purchase agreement, which currently terminates in 2029, will be increased to life of mine.

Upon completion of the Acquisition, Goldcorp will be entitled to maintain its percentage ownership of the issued and outstanding common shares of Mala Noche as well as proportional representation on Mala Noche's board of directors based on Goldcorp's ownership percentage of Mala Noche. These entitlements will remain in place as long as Goldcorp's share ownership remains at or above 10% of the issued and outstanding common shares of Mala Noche. Goldcorp has agreed to hold for three years the shares of Mala Noche that it receives as partial payment of the purchase price.

About Mala Noche

Mala Noche Resources Corp. is a mineral resource company focused on precious metals, particularly gold and silver. Management's strategy is to transform Mala Noche into a revenue-generating precious metals producer by acquiring producing or near-term producing mineral properties.

On completion of the Acquisition, it is proposed that Mala Noche's name will be changed to Primero Mining Corp. to better reflect the Company's production status and corporate strategy.

About San Dimas

The San Dimas gold-silver deposit is one of the most significant precious metal deposits in Mexico. The deposit was first mined in 1757 with historical production from the San Dimas district estimated at 11 million ounces of gold and 582 million ounces of silver, affirming it as a world class epithermal mining district.

San Dimas is located approximately 125 km northeast from Mazatlan, Sinaloa and approximately 150 km west of the city of Durango in the state of Durango.

The San Dimas mines are all underground operations using mechanized cut-and-fill mining methods. After milling, cyanidation, precipitation and smelting, dore bars are poured and then transported to refineries. Production from San Dimas in 2009 was 113,000 ounces of gold and 5.1 million ounces of silver. The long history of continuous mining at San Dimas and the known occurrence of the mineral veins and the historical record of conversion of inferred resources to reserves are all positive indicators of the long-term life of the mine.

The San Dimas district has one milling facility at Tayoltita. The Tayoltita Mill has a conventional process flowsheet that employs cyanidation and zinc precipitation for recovery of the gold and silver. The mill currently has a capacity of 2,100 tpd. In 2009, the mill averaged 1,934 tpd.

As of December 31, 2009:

--  Estimated total proven and probable reserves for San Dimas was 5.6

    million tonnes at a grade of 4.80 g Au/t and 339 g Ag/t for 860,000

    ounces of gold and 61 million ounces of silver; 

--  Estimated total inferred mineral resources for San Dimas, and not

    included in the mineral reserves stated above, were approximately 15.2

    million tonnes at an approximate grade of 3.31 g Au/t and 317 g Ag/t for

    1.6 million ounces of gold and 155 million ounces of silver; and 

--  The total workforce at the San Dimas operations, a combination of union

    and contracted workforce, was 1,071.

Detailed information regarding San Dimas is available in a report entitled "Technical Report on the Tayoltita, Santa Rita and San Antonio Mines, Durango, Mexico, For Goldcorp Inc. and Mala Noche Resources Corp." which will be filed on SEDAR concurrently with this news release. The mineral reserves and mineral resources described in this news release have been verified by Mr. Velasquez Spring, P. Eng, of Watts, Griffis McQuat and are confirmed in the technical report.

Mr. Velasquez Spring, P.Eng., Senior Geologist, and Mr. Gordon Watts, P.Eng., Senior Mineral Economist, of Watts, Griffis McQuat, who are Mala Noche`s Qualified Persons as defined by National Instrument 43-101 and who are independent of Mala Noche have also reviewed and approved the technical contents of this news release.

Mala Noche's legal counsel is Lang Michener LLP. A fairness opinion was received from Canaccord Genuity.

Chart of the day is.....

Will she or won't she?


Free giveaway: The IKN Weekly issue 56

It's been suggested by several subscribers along the way that I do this and today's the day the bullet gets bitten (with one exception). Click this link for a free copy of the latest edition of The IKN Weekly (IKN56) out last Sunday. In it you'll find:

  • the normal preamble, 'This Week'
  • a fundamental analysis report on a small but interesting exploration miner operating in Chile
  • ongoing coverage of our 'Copper Basket'
  • the regular 'Regional Politics' section that handles events and news from LatAm as concerns metals and mining (this week the main article covers the mining royalties scene in seven countries)
  • the 'Market Watching' section, which is its usual pot pourri of items

The only thing that is NOT included is the regular 'Stocks to Follow' section, the part of the Weekly that tracks our current (also previous and possibly future) recommendations and keeps people up to date as to what's going on with them, as paying subscribers' rights come first. Also, a tiny bit of editing has been done here and there to take out names of reco'd stocks when referenced. But apart from that, this free giveaway is pretty typical of what goes on in the Weekly, so go get your copy now. It'll cost you nothing and you might just learn something. Here's the link again to the download just in case. Enjoy.

Goodbye, Mr. Chips

Cute education story of the week comes from Clarín, reporting on an incident in a school in the city of Rosario Argentina. Here's an excerpt (translated):

"The unusual episode occurred yesterday, at the 'Luis Laporte 468 Middle School', Rosario. During the 8pm break, a group of students at the school, located at 1059 1er de Mayo Street, decided to stay in the classroom and listen to music.

At the end of the break, the metalwork teacher came back into the classroom to continue with the metal turning class. It was then that was told that a 20 year old student still had his earphones in (listening to music).

According to the police spokesperson, the annoyed teacher asked him to stop listening to music but the student refused. It was at that point when the teacher reacted badly by taking a gun out from under his clothing and threatening the student with it."

The report goes on to tell us the gun was loaded with seven live rounds at the time. The teacher has been suspended, apparently. Gotta love Argentina.

On betting jockeys

Because it's not in the geographical area of IKN's usual fare, I'd hardly heard anything about Edgewater Exploration (EDW.v) before today and certainly never chased it up. However it's caught my attention this morning because the company has managed to land itself a strong President and CEO in site friend, George Salamis.

For those that recall, Salamis while President of Rusoro (RML.v) ramped up operations very successfully at its Venezuelan mines, bringing production up while hauling cash costs down to very low levels in the first two years of operations. Now out of Venezuela (probably a good thing, all considered) the dudes at this EDW gig have been smart enough to snap up Salamis and get him to run their projects in Ghana and (most probably very soon) in Spain.

IKN wishes Salamis the best of fortune at his new job and will be DDing the stock immediately and passing on thoughts to subbers in IKN57 next Sunday, because if it's good enough for the new guy there it must have something worth looking at. Here's today's NR:

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 1, 2010) - Edgewater Exploration Ltd. ("Edgewater" or the "Company") (TSX VENTURE:EDW - News) is pleased to announce the appointment of Mr. George Salamis as President and Chief Executive Officer of the Company effective immediately. Mr. Salamis has over 20 years of experience in mineral exploration, mine development and mine operations and was formerly President of Rusoro Mining Limited, a TSX Venture-listed junior gold producer, and CEO of Caledon Resources plc, a metallurgical coal producer in Australia. Mr. Salamis has previously held senior management positions with a number of major mining companies including Placer Dome Inc. and Cameco Corporation.

Edward Farrauto, CFO and Director stated: "We are very pleased to have Mr. Salamis join Edgewater's management team as President and CEO. George has a proven track record in advancing development-stage resource assets, managing major resource production and identifying and acquiring undervalued mining assets worldwide. He brings to Edgewater a wealth of knowledge and experience in international project development and connections to the capital markets that will greatly assist the Company."

Mr. Salamis stated: "I am very pleased to be joining Edgewater Exploration as President and CEO. Edgewater's agreement with Red Back Mining Inc. on the Enchi Gold Project in Ghana gives the Company the opportunity to rapidly advance a strategic land position in one of the most prolific gold regions of the world. We intend to build upon Red Back's successes on the Enchi Project as well as acquire additional advanced stage gold projects that are accretive to shareholder value. In addition, I look forward to successfully completing due diligence and closing on the acquisition of Lundin Mining Corporation's Malpica-Tuy Gold Project in Spain, which includes the advanced-stage Corcoesto Gold Deposit. I believe there is great potential to build on the current in-situ gold resources in this region of Spain." CONTINUES HERE


We're going to claim this as LatAm related, thanks to the word "Mexico" in the "Gulf of...." place that's suffering. I've been exchanging mails with an old friend of mine (we go waaaaaaaaay back) this morning who happens to be an environmental activist and (if memory serves) a member of Greenpeace. His question to me was;

"Do you think BP's CEO (Tony Haywood) will resign?"

My answer was;
"Yep, bet the house on it."

He then asked;

I said;
"Check the share price."

Because in the way of the capitalist, things like the worst oil spill of all time, the enviro disaster, the brickbats thrown by treehuggers, the accusations of media cover-ups....all those things can be ignored and successfully ridden by a multinational company CEO. But a sharp fall in the PPS and you're toast.

It's not good. It's not bad. It's the way it is. Chau, Tony.

Chart of the day is...

....this, that shows what percentage of the total gold produced in Peru comes from Yanacocha (NEM and BVN) plus the two big Barrick (ABX) operations (Lagunas Norte and Pierina).

Even if you don't find this as interesting as me, it does at least give you an idea of what sad mining numbers wonks get up to when let loose on a dataset and XLS. But just as a quick word, it shows that the recent slump in Peruvian gold production is very largely due to these three big mines. DYODD, dude.


Peru's gold production slump (from IKN56)

Here's one small snippet from IKN56, out yesterday, that covers the gold production slump seen in Peru right now. This comes from the 'Regional Politics' section of the Weekly that's not company specific, but keeps readers up to date with macro developments in regional mining.

Peru’s gold mining production slump

Here’s one for the Peak Gold proponents amongst you. The chart below shows monthly production of gold in Peru 2005 to date, measured in kilograms of fine gold. We see that, apart from a peak in late 2005 and a plateau aound 17,500kg/month that lasted through most of 2006, the average monthly output of all the mines in Peru (that include Yanacocha, Lagunas Norte, Pierina, other large scale mines with gold as by-product, medium and smaller-scale dedicated precious metals miners, informal gold mining etc etc) has fluctuated quite closely around the 15,000kg/month level...until very recently, that is.

The monthly results in 2010 have been as follows, according to the Ministry of Energy and Mines (MEM) official numbers:

  • January 2010: 15,803kg gold (a normal month)
  • February 2010: 14,809kg gold (slightly low)
  • March 2010: 13,637kg gold (low)
  • April 2010: 12,534kg gold (very low)

Just how low was that April month? It’s the third lowest since the end of 2002, with only March 2003 (12,163kg) and June 2007 showing lower numbers (and the 11,577kg in June 2007 was due to strike action in the June/July period of that year). The biggest culprit for the loss of production is Yanacocha, which has produced 21.29% less in the Jan-April 2010 period compared to the same four months of 2009 and its April production alone down by 37.29% YoY. Yanacocha is a big part of the Peru production deal, as of the 59,101kg of gold produced by Peru so far this year 21,364kg have come from that single mine (36.1% of the total).

However, we get to hear little about the overall drop in production out of Peru because the rise in gold prices has successfully masked the weakness in production (thus allowing its government to crow loudly about good things and ignore bad things). This chart below shows the gross monthly value of gold production in the same period, calculated by taking the Kg production figures for each month in question and multiplying by the average London PM fix for each month, data supplied by Kitco dot com.

The story is very different. The value ebbs and flows intra-annually but the overall rise in gold production by value is crystal clear, as in just five years values of gold produced have more than doubled. We also remind readers that nearly all Peru’s gold is exported, with the major destinations Switzerland and Canada, so what you see above has made an enormous difference to the export tallies for Peru (and also to tax revenues). However, even the current U$1,200/oz+ prices fetched at market cannot hide the sharp drop in Peru production for 2010, with gross metal values now down to under early 2009 levels.

Signs of creeping Dutch Disease in Peru? Possibly, as the production base declines and exports, fiscal revenues, growth etc becoming ever more reliant on the prices fetched on the world commodities market. The ongoing evolution in Peru’s two majors exports, gold and copper, should be watched carefully, as they underpin the growing market acceptance of the so-called Peru economic miracle.

we lead others follow

Let's see if you can spot the similarities too, dear reader.

Here's IKN on Friday May 28th:

How many Ventana Gold ( shares does Eike Batista Own?

Answer: 19,306,000.

This number went up this week, as Eike's 63X Master Fund vehicle added 1.1m shares to its pile on Wednesday (and filed them as quickly as yesterday).

Ventana Gold Corp. (VEN)

As of May 27th, 2010
Filing Date Transaction Date Insider Name Ownership Type Securities Nature of transaction # or value acquired or disposed of Unit Price
May 27/10 May 26/10 63X Master Fund Direct Ownership Common Shares 10 - Acquisition in the public market 1,100,000 $10.620

Strangely and weirdly, this puts the 63X Master Fund's total holding at 19.82% of shares outstanding, assuming that the May 13th total of 97,409,131 shares out is still the exact correct one. As many out there will know, special things start happening to Canadian stocks if one single holder goes above 20% so it's not really surprising to see Eike's crew stop just under that magic number.

Now that the land deal is done with Los Gelvez, the question now is "when" Eike makes his move and buys out, not "if". My best guess would be after the Presidential elections, but WTFDIK? Anyway, to round off here's the current state of full dilution at the company (the warrants and options are all in the money). I wonder if mgmt will have time to squeeze in a final round of bonus options?

shares out: 97,409,131
warrants: 3,644,000
options: 6,327,000

And now here's the Ventana Gold ( news release on Monday May 31st:

VANCOUVER, BRITISH COLUMBIA--(Marketwire - 05/31/10) - Ventana Gold Corp. (TSX:VEN - News) ("Ventana" or "the Company") is pleased to announce that 63X Master Fund ("63X"), its largest shareholder, has acquired ownership and control of an additional 1.1 million common shares of Ventana through the facilities of the Toronto Stock Exchange, bringing its aggregate ownership in Ventana to 19,306,000 common shares. 63X paid cash consideration of $10.62 per share, for aggregate consideration of $11,682,000.

Ventana Chairman Richard Warke said: "We are pleased to see 63X increase its position in our company. This demonstrates their confidence in the value of our assets and the strength of our business plan. As our largest shareholder, they have shown tremendous support to our Board and management team."

Chart of the day is.....

...the gold/silver ratio.

the Gaza aid ships

Greystar ( gets its appeal

take a wild guess as to when the trouble started

Now here's a thing. Greystar Resources' ( appeal to keep its December 2009 environmental impact assessment (EIA) as filed and not have to resubmit an EIA as asked to last month has been successful. Here's the NR:

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 31, 2010) - Greystar Resources Ltd. (the "Company") (TSX:GSL - News; AIM:GSL) is pleased to announce that further to its news releases dated April 29 and May 21, 2010 the Company has received a positive decision in regard to the Company's appeal with the Ministry of the Environment, Housing and Territorial Development (MAVDT) to reinstate its December 22, 2009 Environmental Impact Assessment (EIA).

On May 28, 2010, the Company received a decision from MAVDT that reverses its April 20 letter and reinstates the December 22, 2009 EIA as filed. MAVDT will move forward with a review of the EIA.

Steve Kesler, President & CEO commented, "We are very pleased with the Ministry's decision to reinstate our EIA as filed. We are committed to the highest standards of environmental stewardship in the development of the Angostura project. We believe that Angostura can be developed in a sustainable fashion that respects the integrity of the environment while delivering economic benefits to all stakeholders. We will continue to work closely with the Colombian Government and MAVDT to resolve all concerns related to the development of Angostura."

Greystar is in the midst of completing a Definitive Feasibility Study (DFS) on the Angostura project that is expected to be published in the second half of 2010. In addition, the Company has begun the process of securing US$650 million in project finance from international sources. The Company continues to carry out exploration at the project with a total of six drill rigs focused on three targets; Angostura high grade, Mongora and La Plata.

It seems the main thrust of the appeal, that the law enacted in Feb 2010 couldn't be applied retroactively, was a winning argument. All this and a Santos likely win makes for a good day for the GSL guys. The stock will jump on this news for sure, but it still leaves the question of whether the EIA as submitted will actually get approval. Thorny one, that.


Colombia Election early results

The polls closed just under one hour ago and we already have 31.9% of the votes counted that show:
Juan Manuel Santos has 46.8% of votes
Antanas Mockus has 21.43% of votes
We're told that by 8pm local time (9pm New York time) around 90% of votes are expected to have been counted. We'll update this post as the evening progresses.

: The scores are now 46.64% Santos, 21.61% Mockus, 10.35% Vargas, 9.47% Petro, 5.75% Sanín with 72% tallied in what's called the "precount" (i.e. official quick count and supposedly very accurate forecast). If you're interested in helping crash the official website, the link is here.

Now 79.86% of the precount done, with 46.54% Santos, 21.68% Mockus, 10.33% Vargas, 9.38% Petro, 5.86% Sanín. It has to be said that these numbers are very different from all opinion polls carried out pre-election that had Santos and Mockus in a technicial dead heat for the last two weeks of campaigning (here's the link to charts showing the last set of main polls from last Sunday). Let's just leave it at that for the time being.

UPDATE 3: 91.8% of the precount is now done and I think we've got the picture by now: 46.57% Santos, 21.55% Mockus, 10.24% Vargas, 9.22% Petro, 6.05% Sanín. There are going to be a lot of questions asked about this vote, not least from the observers that have already made observations of irregularities.

UPDATE 4: We'll make this the last update, as with 95.34% the result is now all-but set in stone. 46.58% Santos, 21.50% Mockus, 10.19% Vargas, 9.18% Petro, 6.11% Sanín.

The IKN Weekly, out now

IKN56 has just been sent to subscribers. Woof.