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The World Cup build-up and the relative strength of South American teams

Hey, we know it's only the very first stages of the build-up to the WCF in Russia in June/July, we know they're friendly matches, we know the tackles aren't at 100% and the managers will use all their subs to try out different formations and strategies. All the same:
  • Brazil beat Russia without breaking sweat.
  • Argentina beat Italy, same way and no Messi required.
  • Colombia beat France in a cracker, coming from two goals down.
  • Uruguay beat Czech Republic using their typical 'garra'.
  • Peru beat Croatia in Miami with strong defence and dangerous, skillful counter-attacks.
This may even explain why Chile, not qualified for the finals, beat Sweden who are. Something for the euro-centric watchers to think about, this continent is far from the old "Brazil/Argentina, forget the rest" cliché nowadays.

Facebook (FB): Business is business


The Friday OT: John Lennon; Watching the wheels

A Lennon song? Ask me to choose and it'd be this one. Just a simple melody with some snapshot autobiography lyrics on top, but done with genius.

Me too, just sitting here doing time. Youtube here.

Good news about gold from Rob McEwen

The good news is that this week Rob McEwen is predicting gold to hit U$1,800 in 2018.

The bad news:

We could continue. STFU Rob.

LADB on the Peru political crisis (UPDATED)

Jordana Timerman at Latin America Daily Briefing does a great job of updating on what's happening in the Peru political scene, the PPK resignation (which hes threatening to withdraw this morning if Congress doesn't stop poking him with pointed sticks), the likely timeline of succession for Martín Vizcarra and lots more besides. Right here and all you need to know in one English language stop.

And by the way, in Strong Kung Fu news you may remember that this humble corner of cyberspace called PPK's resignation for February 2018 in this post dated January 16th. So I was out by three weeks. Bite me.

UPDATE: PPK's resignation has now been officially accepted by Congress and Martín Vizcarra will be sworn in as President, today Friday midday local time.

Chart of the day is..., dailies.

After a decent lie-in and good coffee, getting back in the saddle and up to speed at IKN Nerve Centre after a worthwhile site visit. So on enjoying the TradeWar pop in gold overnight and this morning and dialing up the chart... has to be said that this won't convince until 1350 or even 1360 is beaten solidly. If not, we're in for another re-trace and that's almost certainly the reason why the PM stocks aren't flying high today. On the other hand, if gold does break free we're in for a face-ripping catch-up.  Faites vos jeux, mesdames et messieurs.


A Flash update has been sent to subscribers...

...late Wednesday evening. A heads-up.


Peru, impeachment, PPK, Vizcarra and mining (from IKN461)

I'm getting mails asking WTF is going on in the Peru political zooshow. Even though the following, written on Sunday, is somewhat out of date due to the big video upheaval of yesterday, it's useful for Thursday and is also a need-to-know on Martin Vizcarra. Here ya go, from IKN461 last weekend:

Peru: PPK’s day of reckoning this Thursday
Two developments in the slow death of the presidency of Pedro Pablo Kuczynski (PPK) this week. First we had the official approval of the “vacancy” impeachment debate in Congress, which for local protocol reasons needed a debate to approve the debate. That happened and Congress has now decided the date of the session, this Thursday March 22nd. A couple of weeks ago I mentioned that the magic number of 2/3rds of Congress is 87 and as things stood, the vote to vacate PPK would be between 80 and 98. Since then we’ve heard more positions and it’s looking even shakier for PPK, we can put the vote to kick out the President at between 86 and 93 votes. Only one of those seven numbers works for PPK.

Meanwhile, PPK faced the “Lava Jato” Commission looking into the effect of Odebrecht corruption in Peru on Friday, the grilling took place at the Presidential Palace and lasted seven hours. Although we have no official word yet, reports such as this one (18) are doing the rounds about the meeting. Along with factoids such as the case that brought PPK to the brink back in December turns out to be just one of eleven transactions performed by companies controlled by PPK, plus the way in which PPK denies any control of the companies used by Odebrecht to pay “consultancy fees” (First Capital Investments and Westfield Capital) but strangely, 49.96% of the fees received by those companies are then transferred to PPK’s bank accounts, we can quote the impressions of commission members who for the moment have to keep their name out of the papers. Here are two quotes from separate commission members:

“With the Financial Corruption Unit (UIF) report in hand, we asked him about the relationships of First Capital Investments and Westfield Capital, but he could not explain clearly why those payments from Odebrecht went through the companies. He repeated his discourse about the “Chinese Wall” (note, the supposed wall between him and his business dealing while he was a member of the government) and could not remember much about the sums involved. It was disappointing.”

“Neither was he convincing as to why a payment from Odebrecht to First Capital, a company he denies owning at the time, was transferred to a personal bank account in the BCP bank and then transferred to a Westfield Capital account in The USA. Didn’t he keep repeating that he had no relation with First Capital?”

Back in early January, I posted on the blog that PPK wouldn’t survive February due to this mess (19). That turned out to be wrong, but it’s looking like it was only wrong by a month because his fate lies with around seven “undecided” members of congress and many of them have said that they’d only decide on how to vote after getting the Lava Jato report. With the weak showing in front of that committee now a fact, I’d make a best guess we have an 80% chance of PPK being thrown out as President and his Veep, Martín Vizcarra, taking over. The debate happens Thursday and is likely to take all day and night, we may not get the vote and decision until the wee small hours of Friday, local time.

Regarding Vizcarra, he’s been playing his cards very close to his chest, ostensibly supporting his President without sticking his neck out. He’s also made it clear that he won’t resign if PPK is impeached, which is a de facto way of telling the world that he would accept the Presidency. This fits with the strongly sourced rumours already reported on these pages as to how people in his team have been in negotiations with the Fujimorista “Fuerza Popular” party on how to form the next cabinet of ministers. He’s also been getting messages of support from Keiko Fujimori, leader of the party at both personal and party political levels that speak volumes about the “pre-agreement” that’s been going on in the background.

And really, the presence of Vizcarra in this whole mess is the main reason none of us on the outside looking in should be worried about Peru or any mining investment exposure we have in the country. Two things:

1)     He’s a canny operator, experienced in the style and substance of Peru politics and a consensus seeker. He’ll bring much-needed stability to the upper executive (at least for a while) and is known as an honest politico (a rarity in Peru).
2)     Not only is he an experienced politician, but he’s well versed in matters mining and before becoming Veep he was governor of the Moquegua region of South Peru. He knows the industry and its pros and cons and was, for one example, the main figure in the negotiations between Anglo and locals around Quellaveco that reached key agreements for the EIA permit. I can offer up other examples but we can summarize with “Vizcarra is good for mining” and be done.


This blog will be quiet for the next three days...

...for non-secret reasons, I'm off visiting Chakana Copper (PERU.v) and its Soledad project. Back at the office Thursday afternoon. Now yo have fun, too.


Jerome does an FOMC (from IKN461)

The short intro piece in this week's edition of The IKN Weekly, IKN461*:

Jerome does an FOMC

“I don’t care what the newspapers say about

me as long as they spell my name right.”

Phineas Taylor Barnum

There are things we know and things yet to discover about the FOMC meeting this week:

  • We know Jerome Powell sits at the top of the table for the first time.
  • We know that a rate hike is going to happen. Put another way, if rates aren’t hiked a notch the market will be very surprised and the market doesn’t like surprises at the best of times, let alone from a Fed with a brand new chair.
  • We are yet to discover how Fed Head Powell handles the presser post-FOMC, but considering his polished performance in front of Congress a couple of weeks ago, a few pesky journalists are unlikely to ruffle his feathers.
  • But most important of all next week, we are yet to discover the tone and content of the FOMC communiqué, that publication of always close focus will be pored over, examined and debated more intensely than ever as the market tries to interpret the direction Powell will (or at least want to) take.

Anyway, Wednesday’s your day. We’ll see how “King Dollar” looks afterwards (thank you Kudlow) and by definition, gold.

Talking of which, I’m hoping that President Trump’s new (latest?) economic advisor Larry Kudlow continues the gold trash talk and more of his “I would buy King Dollar and I would sell gold” comments are highly welcomed by these pages. Less because Kudlow is a time-tested contrary indicator and more because the average financial professional and market participant, beyond casual mockery of we tinfoil hat wearers, simply doesn’t think about gold very much. Therefore, if the guy whispering in the ear of Trump is talking gold it doesn’t even matter that his comments are negative, it’s going to get more people to at least consider gold’s position in the investment firmament. We are in the political era that PT Barnum could only dream about, after all.

*Yes, that does mean I've spent the last 461 weekends writing the thing.

In order to understand just how bad Hecla Mining (HL) financials are, the necessary blog post on IKN

It's not just me, either. When A. Reader pointed out this bit of today's NR that announces the acquisition of Klondex (KDX), we both had a giggle. IKN highlights:
 “We structured the deal to use our excess cash balance so our shareholders can benefit from the approximately 162,000 gold equivalent ounces a year of production while minimizing dilution.”
Excess cash balance! Yup, like saltwater in a tidal pool HL has cash washing and lapping around. But once we'd stopped chortling and yokking at the words of HL President and CEO Phillips S. Baker Jr, it occurred to my lazy brain that it would be good to check out exactly how bad this company is at numbers and money and stuff so it was off to the RegFs and my stars, it's even worse than I thought. Two exhibits for you today, the first its latest balance sheet:

As at year end 2017 HL had $186m in cash so yes, it does have the "liquidity" to shell out $157m to KDX shareholders. However, look a bit further down and....oh, what's that? $502m in debt? Hmmm, and here's the payback schedule on that Senior Secured (aka at the front of the queue) obligation:

2018: $34.8m
2019: $34.8m
2020: $34.8m
2021: 518.107m

In other words, if HL can conjure up six hundred and twenty million dollars in the next three years, all will be well. That thought brings us to Exhibit B of this post, the net profits at HL over the last ten years:

Do the math (and notice how generous your humble scribe is by going for the ten year period and not just the last five years) and you'll see that HL has generated the sum total of $168.118m in the last ten years. TEN YEARS! What's more, $151m of that came in just one year. So folks, what do you think the chances are that Hecla makes enough to pay down that debt organically by 2021? Yeah, me too.

Thank you for the Monday merriment, Phillips S. Baker.

Just so you're clear about Alset Minerals (ION.v)

The people willing to invest money in the company would only do so under the condition that Allan Barry were fired as CEO. Barry was given time to find an alternative source of funds, unsurprisingly failed, and as a result "was resigned" by the board in order to get the people with the new cash in.

So it goes.

Hecla remains true to its corporate culture... once again overpaying for shit assets.

Have to admire their consistency.


The IKN Weekly, out now

The peanut stood on the railway line,
His heart was all aflutter,
The 461 came down the track,
Toot Toot! Peanut butter.

IKN461 has just been sent to subscribers. A better edition than last week's mess, the main gig is B2 but there's plenty more. All aboard!