The top three most visited IKN posts this week are...

...in reverse order:

Third Place: "PDAC 2018: The most effective and impressive company presentation today". The GDX rose by 0.4% last week, the GDXJ lost a penny but this company rose by 8.3% during a tough PDAC week, no mean feat.

Second Place: ""Otto Rock? More like Otto Wrong! Our lawyers are taking care of it, don't worry about him."". We note that the video has had 6,283 views as at this weekend. Not bad, but instead of Otto Rock references they should have used cute cats or puppy dogs doing endearing things, 100k guaranteed.
 

First Place: "On payday loans, Tinka Resources (TK.v) and Matt Badiali (from IKN459)". And when TK.v returned to that 57c trigger point the next day, we dinged the trade here.

The Friday OT: BT; 1.618

One for the math fans, a musical and visual delight.



From BT's album, This Binary Universe. Youtube here.

The tightening lead (Pb) market (from IKN459)

This was part of last weekend's edition of The IKN Weekly. Just one small edit, the name of a company at the end.

More on Lead (Pb)

It was hectic and a bit of a squeeze to get the edition out on time last week, since then I’ve had time to fill in some blank spaces and none more so than the intriguing situation in the lead market. What I’ve found by checking the data is that there’s every reason to suppose an acceleration in the demand for lead that justifies the current voracious appetite of smelters for product.

The place to go for reliable supply demand data is the International Lead and Zinc Study Group (ILZSG), based out of Portugal and comprised of a selection of industry experts from all corners of the sector. We’ve made use of their database (22) on these pages previously for the zinc exercise which showed in 2016 the rise in demand (that’s worked out very nicely thank you) and it’s now time for its ugly sister, known in Latin as plumbum and the reason we call out the plumber who’ll often bring his plumb line. This chart derived from the data shows the supply make-up of Pb and the first thing to note is the high percentage of end user supply that comes from the re-cycling business. There are well-established firms that do this and as much as 97% of the lead used in car batteries is scavenged and sent back to battery makers to use again. However, mined supply is also on the rise and with 11 months of data for 2017 already published, our estimated as seen in the charts is likely to be within a tight margin of error and shows supply expanding again after a couple of stagnant years.

When it comes to demand, there are a few extra uses for the metal out there such as electrical cable wrap (around 6% of supply) and ammunition (shot takes around 3% of the supply) and there’s even lead still put in some fuels and paints around the world (long past time to stop that, people) but the main use for the metal by a long way is for lead/acid batteries, taking around 80% of all the metal out there. Therefore when we talk lead demand we’re talking about cars, trucks, all types of moving vehicles and look no further for the demand driver (and therefore the reason for price changes. On this score, let’s take the aggregate supply as seen in the above chart and place it next to the demand columns for the same years (plus the ILXSG forecast for 2018 added in for reference) but please note the cut down Y-axis, which I’ve done to show surplus/deficit differences more clearly and not to try and fool your eye.

As you can see, supply and demand were reasonably lockstep for the five years to 2016, but 2017 saw it move into a deficit and with the ILZSG predicting further demand growth for this year, we should expect more pressure to deliver. What’s more, if we scratch around at some of the underlying data we see details of the demand hike. 

This chart right shows the quarterly net imports of lead into China (the world’s leading user of Pb, which is another way of saying that it makes the most car batteries). Inside the numbers included in that China chart are other intriguing datapoints too, such as the way in which up to 2016 China exports more pure refined Pb than imported (around 11,000 tonnes), but last year the numbers flipped and they imported a net of 77,000 tonnes).

My final exhibit today is a chart from a report compiled by Grandview Research (23) from 2016 which shows the lead/acid battery market for the USA only, which is set to grow substantially in the years to come with two of the forecasts added in for your consideration. It may be counter-intuitive what with the rise and rise of lithium batteries, but traditional lead/acid units aren’t about to go out of style whether they be SLI (starting, lighting and ignition, what we consider a “normal car battery”), motive (e,g, the large banks of batteries used by fork lift trucks and the like) or stationary (which are seeing growth due to the need to store alternative power, such as solar).

The bottom line: The lead market has quietly grown to the point where it’s tighter than the headline-grabbing zinc market and the likelihood is that Pb’s run is far from over. All the more reason to like (company name), in my view.

The best bit of the Pretium Resources (PVG) 4q17 results is...

...without a shadow of a doubt, this line from the NR:

"The Company has working capital of $40.6 million excluding the current portion of long-term debt as at December 31, 2017."

Because...

1) ...you can't exclude current debt from working capital. Well you can, but not while keeping a straight face.

2) ...when you include that debt, working capital becomes negative three hundred and thirty-four point four zero nine million. Y'know...details.

Reader CM explains zinc inventories

Nicely done, CM:

Victoria Gold (VIT.v) announces its capex blowout early

So, if I have this straight:

• In 2016, Victoria Gold (VIT.v) tells us in its Feasibility Study that it needs CAD$369m to build its Eagle Gold mine in the Yukon.
• In 2017 it arranges a U$220m credit facility and starts the ball rolling by spending CAD$40m on phase one capex.
• Today it announces a funding package that comes to CAD$505m, including an equity raise that adds a little under 50% to an already blown out share count (we go from around 515m S/O to 765m S/O) and giving a 5% NSR to Roosen. To be clear, this new C$505m package includes those previously announced facilities, but it's still way over what VIT told us it would need.

Which begs the obvious question, why so much money? Why, when according to the company's own literature the company did indeed spend C$38.4m on capex at Eagle in 2017, doesn't it put together a funding package for around CAD$330m to complete construction? Either they're planning to keep a contingency fund of epic proportions or VIT.v has just told the market that its project is built on the back of an unreliable Feasibility Study, which of course means in turn that all the NPV and IRR figures it's used to sell Eagle are complete balderdash.

Tahoe Resources (TAHO): Guatemala's Constitutional Court asks for more

Yesterday, Guatemala's Constitutional Court (CC) made noises on the Tahoe Resources Escobal mine case but, rather than give the type of resolution the company tried to hint at during BMO last week, told the lawyers in the case it wanted more studies and evidence before handing down a judgement in the case. The CC wants a study of the population around the mine (again to see if there are indigenous there) as well as more information on the way the licences were originally granted by the Ministries at the time.

The separate bodies have 10 to 15 days to submit the evidences. From that moment the CC says it will take the time it considers prudent before making a decision.

Info here.

International Women's Day according to Latin American politicians, version 2018

Not the first time we've run this subject. However, still true.


For women:

For men:

PDAC 2018 attendance is 25,606

The annual chart, updated:

You want me to be impressed. I'm not. Press release here.

Meanwhile, what I have learned from PDAC this year is that there are 500 operating mining companies all making a profit and 1500 junior exploration companies with highly prospective, robust flagship properties that will all become extremely profitable and anyone who is first in the queue and invests in them will make an awful lot of money.

Peru President PPK goes under a new impeachment process today

As from today, things hot up for PPK as the Peru congress is about to officially start a new impeachment (precisely called "vacancia" or "vacancy") process against the dude. The accusation is moral incompetence, it's again connected to the way in which he benefited from Odebrecht cash over a decade ago, this time they're linking it in with the way he's been bending the truth and using his presidential position in order to get out of the direct line of fire.

The process will need the month of March to unfold, but even now it's clear that this is a serious threat to PPK and the vote, which needs 87 of the 130 Congress members to pass and force him out, by my reckoning is going to fall somewhere between 80 and 98 and by the reckoning of a couple of the more vociferous Peru political watchers is already a done deal. And waiting in the wings is 1st Veep Martín Vizcarra, who has been given the nod by the main opposition party 'Fuerza Popular' as someone they'd support taking over the job until 2021 and according to plenty of sources has already been in negotiations with the opposition to form a cabinet of ministers which suits the approval of all. 

The LatAm-wide Odebrecht scandal may be about to claim its first true head state.

Joe Mazumdar and the slacker with the beard do Market Call

And here's the linko. Enjoy.

Tinka Resources (TK.v): I rest my case

You could have bought this as 50c yesterday at the open. More than one person who read this on Sunday evening did so (I have the mails):

Further questions?

PDAC 2018: The most effective and impressive company presentation today

This humble corner of cyberspace makes a safe call that today's best corporate presentation and the one that most impressed its audience was...

...Alexco Resource Corp (AXU) (AXR.to).

Inca One (IO.v) reminds us of the need to read to the end of NRs

This today, with the key info right at the end:

"We anticipate steady improvement in our throughput and production in the coming months as we deploy additional working capital towards mineral purchases, keeping Inca One on pace towards company-wide profitability."

In other words, it's still not making at a profit.

Tonight (Tuesday) on BNN Market Call

Joe Mazumdar and his hanger-on sidekick, Brent Cook.

Worthy TV.

"Otto Rock? More like Otto Wrong! Our lawyers are taking care of it, don't worry about him."

Ok, this is funny. Watch the whole thing because it's great stuff, but snippet at 1:07 resulted in my screen getting coffee-spattered:

Headsup via the EI people, thanks guys. Youtube here.

Rick Rule on Pretium (PVG) put through the Ottotrans™

Rick Rule did BNN's Market Call today and the whole thing is up on the website's video shelf now. I'm going to offer up this segment on Pretium (PVG) as the most interesting (for my taste, anyway). Here's the transcript and below that, the Ottotrans™:

Rule: "I have been a recent buyer of Pretium Resources. I have a very very high degree of confidence in the CEO Bob Quartermain, who I backed in his first venture which was Silver Standard I remember it going from 72c to $45 which of course engendered a certain fondness in me. Pretium as you may know started up a mine in Northern British Columbia and the first quarter they had was extraordinarily good which set market expectations very high. The second quarter was fairly bad. I think what you have to do in a deposit like this is you have to let them break the mine in. I remember saying to my clients six or seven months ago, "It's going to take four quarters before we see what we see here". I'm not saying that Pretium is out of the woods, what I'm saying is it is way oversold, risk relative to reward. I personally object to some market participants' criticism of Bob Quartermain, who has become over 30 years, in addition to somebody who has made me look smart, a close personal friend and any criticism of Quartermain is insane.

Interviewer: "And that aside, what would you say is the biggest misconception about this stock?"

Rule: "I just think it's too early to know how it's going to work out. They had a spectacular first quarter which is tough to do when you're breaking a mine in, obviously with regards to grade they got lucky. In the second quarter they had a lousy quarter. We have known for some period of time, given the erratic and very high grade nature of that gold, you're going to have good quarters and you're going to have bad quarters, you're going to have to look over the course of a year to get a feeling of how that thing is going to produce over time.

Ottotrans™: "I am underwater on Pretium and have averaged down."

On payday loans, Tinka Resources (TK.v) and Matt Badiali (from IKN459)

Part of the intro to yesterday's weekly. It's less about the abject stupidity of Badiali and more the case study of another way greenhorns are separated from their money. And I know most of the readers of this humble corner of cyberspace have the necessary market experience to understand this scenario without the need for an explainer, but I also know that people new to these shark-infested venture exchange waters read IKN as well. 

How would you like to learn, the easy way or the hard way?

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Dumb money

On seeing the TV adverts, the full-page dead wood news ads, the sponsorship deals with football teams etc I’ve often wondered just who takes out a payday loan. And last month I found out that my best guess of 20-something low paid manual labour workers who just wanted a few banknotes to get them through the last party weekend of the month wasn’t even half the story. In totally separate instances two people I know (one an age-old sparring partner from the UK, the other a solid friend in Peru) have come to me, desperate about the situation in which they’ve put themselves. Both are male, married, blue collar and though perhaps not the most intellectual or academic of people they are witty, know how to make a living, honest, hard-working types. As a personal bonus they’re nice people and good to be around. But for totally separate reasons in different places, they’ve both fallen into the payday loan trap.

Now you’re probably like me and know what it means when somebody says “the interest rate is 20% per month” but my friends have learned the hard way. Although a minor detail for this script, for what it’s worth I’ve sat down with both and got to the bottom of their financial woes and along with the creditors (another of their mistakes was not to talk with the people they owe) worked ways out of their separate messes, so as long as they stick to the plans now in place. What matters here is the reflection: I was taken aback by their lack of financial wherewithal, but being naïve about the sharks waiting round the corner isn’t a criminal offence, either. My friends weren’t in their area of expertise (they can do things I have no chance of copying) and hard or easy way, they get a lesson and unless really stupid, won’t repeat. However, anyone who employs an expert (qualified, self-styled or whatever) to advise them in investment should expect far more financial nous than that showed by Matt Badiali in the episode surrounding Tinka Resources (TK.v) on Friday. I was dumbfounded and to highlight the abject stupidity on show:

1)     If you have a large subscriber base of “non-sophisticated investors” (1)

2)     Who buy into a company like TK.v

3)     And you have a strict policy of calling sell if a 20% trailing stop is triggered

4)     Do you think the sharks of Vancouver might find out? And when they do, maybe drag down stock prices of vulnerable issues to your trigger?

5)     At which point you execute on your “strict rule” and your non-sophisticated followers all do the same thing at the same time, sending (in the case of TK) around half a million shares of at-market sale orders into a bid that doesn’t have a chance of handling that type of sudden influx.

6)     And the Vancouverites who have spotted this dumbest of dumb money up for grabs suck up the shares, flip short positions into longs which then rise back on the inevitable relief rally rebound.

The result? Badiali claims a minor loss, thousands of retail sheep wonder where their money has gone, a handful of people on Howe St have the answer (but will never tell them). Applying discipline to investing is fine, announcing to the world that a whole bunch of dumb money is being directed by a strict rule that is easily taken advantage of by a voracious and notoriously dog-eat-dog market is a one-way ticket to permanent losses. Since I heard about this sell call and exactly why I’ve been dumbfounded by the financial naïveté on show, as either Badiali is running his list under a more nefarious double agenda or he’s a supposed experienced financial professional making the type of mistake a rookie would only make once at most (likely never). The stupidity on show here is on the same level as my payday loan friends, but considering its source is unforgivable. For the rest of us, it’s an invitation to free money.

The best movie of the year wins its Oscar

No matter that it wasn't nominated for Best Film.

Coco wins. 

The IKN weekly, out now

IKN459 has just been sent to subscribers. No photos, plenty of script this time.

Mining booths and the Ottotrans™

As a variation to our normal Ottotrans™ service on mining NRs, today we consider how the mining sector delivers its message via the booths at PDAC. The example is from the Rye Patch Gold (RPM.v) display:

Value driven = Unprofitable at current cash costs.