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12/21/18

Merry Christmas to one and all

Because even the people featured on these pages in 2018 who should by all rights be behind bars deserve a happy and peaceful Christmas time.

The Friday OT; MUTEMATH; Voice in the silence

This is Paul Meany and people, you have to see this one. Seriously, take four minutes out and improve your Friday measurably.




Thanks you reader JB for the heads-up. Amazingly good and brand new, out just last week. Youtube here.

12/20/18

A quick Ottotrans on Prize Mining (PRZ.v) today

Here's the segment of today's NR:

As part of the Company's ongoing evaluation of priorities and direction and our internal processes where we follow up with all of our contracts and consultants on a regular basis to evaluate their work and deliverables, the Company has decided to shift its focus on the remaining work programs associated with certain additional Agreements.  These Agreements had an initial value of $3,710,000 at inception.  The Company has determined to cancel the remaining work associated with these Agreements and is in discussions with the service providers involved to facilitate that decision

Here's the translation:

Our scam pump bullshit failed.

Bolivia political risk thoughts (from IKN499)

Here's one that nobody up there is talking about. Yet. From IKN499, last Sunday.


Keeping an eye on Bolivia redux

As widely expected, last week President Evo Morales of Bolivia got judicial approval for the change of his country’s constitution that will allow him to run once again for re-election in the 2019 Presidentials, scheduled for the back end of 2019. As noted a few weeks ago, this election might not turn out in quite the same way as any other in the last decade, because Evo’s presidency is showing signs of supporter fatigue, there’s dissent among what are understood to be his base supporters and now we have far right wing Jair Bolsonaro about to become President of its neighbour, the vastly larger and richer Brazil, who has previously pledged allegiance to the far right wing politicos in the Bolivia’s largest city in the East, Santa Cruz.



It is therefore interesting (as in the Chinese curse) to see Andres Oppenheimer, the hard right wing political commentator in both Spanish and English language Americas, running an op-ed piece last week entitled, “Bolivian President Evo Morales is carrying out a slow-motion coup. Why isn’t the region talking about it?”  (11) and comparing Bolivia’s economy to that of Venezuela and warning of dire consequences etc etcif Evo is left unchecked (yes you can compare the hard left political stances of Bolivia and Venezuela, but Bolivia’s economic stability has been remarkably good for the last ten years and shows no sign of weakening).


I continue with my sneaking feeling that Bolivia may be the surprise political flashpoint of the region next year. If so, the “buy when blood in streets” maxim goes into effect, which also means of course that you shouldn’t get too interested too early. Watching brief.

12/19/18

Brent Cook does Daniela Cambone in just six minutes

I think that's how one phrases it correctly. Here's the link, here's the blurb:

A mix of geopolitical and economic uncertainties will likely create the perfect storm for precious metals and miners next year, said Brent Cook of Exploration Insights.
“Volatility and chaos will be the theme [next year]. We’ve got BREXIT, Italy, German politics, Saudi Arabia, U.S.-China tariffs, they’re arresting people in Canada, we’ve got an unstable narcissist in the White House that’s being backed into a corner capable of doing anything, bear market beginning, and I think the interest rates are going to be slowing,” Cook told Kitco News.
Cook said that all these risks should bode well for gold and gold miners next year, with miners outperforming the bullion.

Go see the video:

Angry Geologist does more GT Gold (GTT.v)

Right here. Agreed on 109.

Trey Reik of Sprott predicts on the FOMC today

With an eye on what Jerome Powell and his friends might do and how it could affect the precious metals market. A strong argument for gold ownership, no tinfoil hats necessary. Go here.

12/17/18

Newmont (NEM) and Continental Gold (CNL.to): Intel (from IKN499)

This was read by subscribers to The IKN Weekly on Sunday. Now it's your turn.



Newmont (NEM) and Continental Gold (CNL.to): Intel
I semi-promised I wouldn’t come back to this whole CNL Buriticá thing for a while just a couple of editions ago, but I’m going to have to break that semi-promise. This weekend, a reputable source passed on intel that by its nature must remain unconfirmed (so please keep that in mind, I have no second lead on this) but due to the respect I have for the seriousness of my source it’s going to get an airing.

This: According to my source, the board of Newmont (NEM) is meeting this week coming to decide, in an up/down yes/no manner, whether to buy out the remaining 80% of Continental Gold (CNL.to) that they do not already own. Also, my source stated that NEM is not at all happy with the current situation there and says that if NEM stays, they want full control and ownership of the project. End.

Okay, the beans spilled let me first reiterate that though my source is a good one, a serious mining professional and has proven to me over the years to be a trustworthy individual, the rumour is unconfirmed and I have no second line on the information. With that said and after consideration, as long as we assume the intel is solid here’s a thought or two (after conferring with a few trusted peers, who helped crystallize ideas and added a couple of angles), done in bullet point form.

  • Critically, NEM is in a standstill agreement with CNL. Therefore there can only be a friendly takeover. This means NEM would have to table enough money to interest CNL, its board and its shareholders.

  • Considering the current price range (let’s say “between $2.00 and $2.30” for argument’s sake) and from where CNL has dropped recently (I’m going to rough-say $4.00, before its recent security issues came up, feel free to argue that number), it would need a very big premium to current market to interest CNL.

  • The NEM board will know this as they make their decision. And in the event they decide to make an offer, it would almost certainly be of the one-time, “take it or leave it” type.

  • This would mean that, in effect, NEM would have to ignore the current market price for CNL and make an offer that’s more akin to what CNL think their company is worth. However and also critically, the current stock price isn't just a number picked out the air or floating in its own dimension, this current range is a reflection of CNL's well-documented troubles and issues. NEM is fully aware of all of them and there are a whole list that start with the deaths of its two employees at Buriticá town and then the three geologists at its Berlín project. Other matters are certainly of concern to them as well, such as exposing more of its own company employees more directly (instead of being there on an occasional and consulting/advisory role), the judicial uncertainty in the country (see Regional Politics today for the latest example), the continued presence of illegal/informal miners and far-right wing paramilitary groups. Also, I am quite sure NEM is considering the potential liability of legal actions brought against the company by the families of the dead employees, especially the geologists. The recent resignation of CNL country president Restrepo was a necessary move, but it’s also a recognition of responsibility for the internal mistakes that led to the fatal incident.

  • At this point, we should also note that NEM has not ignored the current situation, to the point where the NEM CEO made prepared comments on the problems during the company’s 3q18 Conference Call.

  • Another subject is the NEM corporate culture, which has always been notably (even notoriously) conservative. This is not a company of risk-takers and that’s particularly true on the issue of political risk and social security. It’s worth recalling the way NEM entered into Buriticá, via a minority purchase which brought them de facto control of the project. For around U$105m they got 19.9% of the company, but they also got directors on the board and their technical team leading the build-out. It was in effect a call option on 10m oz of high grade gold and for the price, it was a smart bet on a potential risk/reward basis, they would be inside the company and the project and would know whether to pull the trigger. I know that U$105m is real money, but it’s the type of sum NEM can risk without it affecting the company (too much). Also, we should note that if NEM decides to exit, they’re going to get a decent wedge of that outlay back.

Therefore, the application Occam's Razor gets me to the call that NEM will likely bail. I have no idea how they’d do that and there are a whole range of options, from keeping the current share position for a while, not taking up their pro-rata rights on any new financing, selling in a block or piecemeal way, entertaining offers for their minority share position etc. Also, it may not effect the project in the longer-term because I’ve also picked up talk that streaming companies are interested in financing the missing capex. If true, CNL may end up getting there on its own and becoming a success, but if NEM does back out CNL is going to take a near-term share price hit, that’s a certainty.

The bottom line is this:

1)     I have unconfirmed intel from a reliable source. The rest of today’s piece is built on the assumption that the intel is correct.
2)     I think the most likely NEM decision at this point will be to back out of CNL and Buriticá. They may do this by tabling a “take or leave it” offer to CNL that is too low. They may simply decide not to go any further. If NEM leaves then the CNL share price will take a hit, at least in the near-term and perhaps for the longer-term as well.
3)     However, be clear that I may be wrong. NEM and CNL could reach an agreement, NEM buys CNL at a very high premium to this weekend’s share price, those betting on the junior today would make a handsome return in a short period of time. There’s a binary trade on offer here.

And finally, for what it’s worth I will not be trading this development personally and will remain neutral CNL. I could make up a rationale for this decision that would sound perfectly reasonable, but the real reason is that I have a moral repugnance to the way CNL goes about its business and even shorting it to make money would be too vindictive on my part to be healthy. I pass this intel and analysis on an as-is basis, do with it what you will.

UPDATE: Rather than re-edit I’m going to add this new information on here, as the above shows the thought process and now this helps solidify things a little more. After casting the net in a couple of specific places and reaching out to people that may know, I received a reply from a 100% solid, zero BS, ultra reliable source. This person told me that they’d been asked by a powerful private equity group in the mining sector about Buriticá this week. The PE group wanted to know their thoughts on the project and asset, their thoughts on the management (specifically CEO Sussman) and said there was an opportunity for them to get control. This goes some way to corroborating my original intel (it’s not an exact match, but if you believe this to be a coincidence then I have a bridge to sell you). It also suggests that Newmont is already shopping its 19.9% portion around.


This blog will be quiet for a day

For secret Grinch reasons.


Mining Ramblings does cost curves

A solid overview of how cost curves work and why they're important, posted up by Doug Beattie at his bog 'Mining Ramblings' this weekend. Go check it out here and learn something useful about the industry. Nice job of work, sir.

12/16/18

The IKN Weekly, out now




IKN499 has just been sent to subscribers. Ooooh it's disgusting, that Otto is such a tease.

A tailing spill reported at the Gold Fields (GFI) Cerro Corona mine in Peru

Right here, on the official Peru government environmental people (OEFA) website.

No word on the size or scale of the spill as yet.

IKN recommends: 'High Grade', a new blog on mining

Follow the link here to a very welcome addition to the internet mining world, the brand new blog "High Grade" run by the Luis, better known as @EconomicAlpha on Twitter. Ever since I started back on Twitter early this year I've been hugely impressed and often educated by Luis and his extremely sharp eye for mining financials, it can only be a good thing that he's decided to take the plunge and go longer form on us as well.

We also have a first real post from him today, a look at the news out of Wesdome Gold (WDO.to) last week. For the record, he's called WDO early and well for a long time and those people who have taken his advice on the stock have been handsomely rewarded. That goes for his calls on Kirkland Lake (KL) in the past couple of years as well, they've been outstanding. His WDO post is on this link right here, go take a look. Welcome to blogging, Luis.