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3/7/20

Quarantine

History may not repeat, but it sure does rhyme. The English language word "quarantine" has its origins in Italian. In the 17th century, Venice in Lombardy was a key trading port and authorities there would oblige any ship arriving from a place where the plague (aka Black Death) was killing people, to stay moored off its coasts for "quarantina giorni", literally 'forty days'. In this way, the locals protected themselves from diseases, viruses and bugs. And now Lombardy, a region of twelve million people, is about to go into quarantine.

Great Panther (GPL) (GPR.to): When your CEO thinks he's a forex pair trade expert

And yes, him. It's always a he. Here's Great Panther (GPR.to) (GPL) on February 4th 2020:
On January 31, 2020, Great Panther's non-deliverable forward foreign exchange contracts for BRL against the USD totalled approximately BRL 506 million (US$120 million), with pre-determined exchange rates ranging from BRL 4.11 to BRL 4.32 against the USD through the remainder of 2020.  This compares to BRL 355 million at rates ranging from BRL 3.99 to BRL 4.18 as reported on September 30, 2019.  This represents the majority of the Company's BRL-denominated expenses for the balance of 2020.
The company also announced it had bought gold options that day:
Great Panther has purchased put options on 45,000 gold ounces that mature from March through to the end of June 2020 at an average cost of US$9.33 per ounce of gold.  The options ensure a minimum sale price of $1,500 per ounce of gold for the majority of the Tucano Mine's production during the noted timeframe, without limiting any upside from rising gold prices.
And GPL CEO Jeffrey Mason was feeling very pleased with himself:
"With the recent weakening of the Brazilian real, and gold prices reaching multi-year highs, we are taking the opportunity to increase certainty of cash flow in 2020," stated Jeffrey Mason, Interim President and CEO.

So let's see what's been happening to the Brazilian Real (BRL):


That 4.63 close against the USD on Friday means that on average, the GPL hedge is 42c Brazilian out on every dollar. Do the math and you see the company has flushed just under $11m down the toilet already and the way things are going, it's only going to get worse. And the gold put options? That's easy, they spent U$9.33 per ounce on something they do not need and another U$420k down the drain. These are not "non-cash items" either, these are direct financial losses that also involve the CFO writing large cheques to counterparties.



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

....in reverse order:

.
Third Place: "Jerry Huang in the house". A reputation once gained is hard to shed. Unlike a coat, of course.

Second Place: "The market is turning, allow it some time". An op-ed.

First Place: "Eric Sprott OBO, Collin Kettel and Foghorn Leghorn". Boy ah say boy. I laugh at my own jokes, it's pathetic.

3/6/20

The Friday OT: The Chats; Pub Feed

On the back of The Clap last month, this homage to good, honest pub food by the same Oz trio of early brilliance. The singer's sneer is the best ever.




Medium well. Dedicated to Son Of Teemoh. Youtube here.

The Aurubis Copper Mail, March 2020

The Aurubis Copper Mail edition 181 dated, March 6th 2020 has just been published, which even in normal times is a most useful monthly fundies notes on the metal. In other words, it's essential reading in our current Strange Days, so go read it yourself and while over there, sign up for the free monthly mailer.

Terry MacGibbon Resources (TMR.to) has bad news for you



Just thought we'd remind you who this multi-million dollar failure is named after, it was a vanity project from the start. Anyway, here's the news and there's plenty included to set off the IKN First Law of Mining NRs. Let's start by remembering that that current strategic review of the company, initiated on Jan 20th this year, was in response to its awful production efforts and increasingly poor financial position. The company said the review is, "...to explore, review and evaluate a broad range of potential alternatives focused on maximizing shareholder value, including a potential sale or merger of the Company, joint venture of the Hope Bay mine, introduction of a new significant strategic shareholder or various long-term financing alternatives"

So what do they do? They make emergency adjustments to near-term financials that cost them even more money:
"...the Company has entered into an amendment to its amended and restated credit agreement dated July 26, 2017 (the “Credit Agreement”) with Sprott Private Resource Lending (Collector), LP and associated lenders (the “Sprott Lenders”).
The principal and interest payment due April 1, 2020, equal to US$5.0 million, has been deferred and will be added to the July 1, 2020 scheduled principal and interest payment. The $10.0 million minimum cash balance covenant has been reduced to US$0.5 million until June 30, 2020. Other covenants were also deferred to June 30, 2020. The consideration for these amendments is a fee of 1% of the adjusted principal balance that will be paid on July 1, 2020 and an increase in the extension fee from 1% to 2% should TMAC elect to extend the maturity date from December 31, 2020 to June 30, 2021."

Because nothing makes you feel relaxed about a gold mining company's future than when it says "WE CANNOT EVEN PAY BACK FIVE MILLION DOLLARS". But at least production has been more reliable in 1q20, right guys?
"...however, we have experienced continued throughput challenges due to unplanned maintenance issues."

Oh.

3/5/20

Applying the Ottotrans™ to Eric Sprott OBO

Here's what Eric Sprott OBO* said this evening as he resigned from the board of Novo Resources (NVO.v):
“Novo has been and will continue to be a leading gold explorer, and I wholeheartedly support the Company’s goals to deliver significant value to its shareholders,” commented Mr. Sprott. “I recently turned 75 and I am focused on pursuing other priorities in life, but I plan to remain an engaged shareholder of the Company.”

And this is what it means:
“Dumping half."


*Our Benign Overlord


Gold has broken out today and is going higher

Be clear that by calling long on gold, it does not necessarily mean an auto-bull on any other metal or even the precious metals mining stocks, we need to consider those separately. All I'm saying is that the price of a troy ounce of gold has made a very significant move today and is now on course for U$1,800/oz by the end of this year:


Get used to the idea and adjust portfolios accordingly, if required. As for mining stocks, IKN forecasts that the next fashionable buzzphrase among analysts and dilettantes* is set to be "cost creep".



*Apologies for the redundancy

So much for the predictions of increased M&A in the mining sector

We come out the other side of BMO and PDAC with the highlight deal a 60c silver miner paying all paper for a 12c gold exploreco, way to go, guys.  

Told you the Kirkland Detour mess would chill it all. Paulson got his print and flipped the bird at the whole industry, so by way of revenge I suggest we all short International Tower Hill, not least to annoy Paulson's scumball mini-me, Marcelo Kim:




The US markets and gold are now neck and neck during POTUS45




Gold bullion (GLD proxy) versus the US broad markets (S&P500 proxy), January 20th 2017 to date.

PDAC 2020 attendance down

The number this year, 23,144:


3/4/20

The market is turning, allow it some time

I've been thinking a lot about B2Gold (BTG) (BTO.to) recently and this post concerns that stock in passing, but rather than try and prognosticate on the future of The Clive's Rhino it concerns the last time I bought BTO stock hand over fist, because I believe it offers a window on what's happening in the market today.

Students of the gold market know that January 2016 marked a clear turn point for gold, the point where it snapped out of a years-long bear market and popped quickly higher, starting a bull run in the precious metals mining sector. However, I remember buying BTO at its lows and plenty AFTER gold started its big run and was moving swiftly higher on gathering momentum. Here's that chart:


The third week in January, with gold having broken out and clicking higher, I was staggered to see BTG making new low after new low (turns out a large fund was puking, big mistake on their part). I went as close to zero cash in my accounts as possible (I do not use margin, period), bought all I could around 75c average (the bottom was U$0.60c intraday, remember it well) and then as the trade was a near-term set-up, sold them back a couple of months later for a nice win which would have been a lot nicer if I'd held on to them for another quarter. So there you go, anatomy of some pissant retail's winning trade, big deal. However, what it does allow me to recall is that when gold turns, don't expect the market to smoothly turn with it just because gold gets popular in crises, that's also when people are putting out fires in their portfolios, or on previous orders from upstairs to sell a position into the market when they shouldn't be doing that any more, or all sorts of fun. Note I added GDX and GDXJ to that above chart and from gold's decisive turn point, arguably January 20th 2016*, as well as it needing a week before BTG had bottomed the indices needed two weeks before they were back positive for the year. I invite you to look at a longer-dated chart of what happened to the market in 2q16 at you own leisure (one hint would be "whoosh").

With the advent of The US Federal Reserve cutting rates and certain to cut again soon, gold this week marked an obvious turn point because gold moves up in value when the USA deliberately weakens its own currency. However, the above chart shows why you the investor, now long to your armpits in precious metals stocks, shouldn't get frustrated in this brief period while the broad markets get used to the new normal (includes Covid-19). Once they do and the dust settles, the big players will also see the inherent logic in owning gold this year and it will go higher. Once that happens, the market will seek leverage so now that you are positioned nicely and the "be right" is covered, time to do the "sit tight" thing as the value of quality PM companies is discovered by others.

 Disclosure: No current position in B2Gold.


*Gold bottomed about a week before, then rebounded above U$1,100/oz in a sharp move on Jan 20th





Eric Sprott OBO, Collin Kettel and Foghorn Leghorn

Every time I think about the weird and wonderful goings on around New Found Gold recently, this scene comes to mind. Eric Sprott OBO* is our hero Foghorn, Collin Kettel is the hound:




"Boy ah say boy, don't you go stealin' from me again now boy, yhear?"



*Our Benign Overlord

Chesapeake Gold (CKG.v) and a little peach

After about a decade of nothing, CKG finally gets close to admitting the truth about Metates:

Vancouver, British Columbia--(Newsfile Corp. - March 3, 2020) - Chesapeake Gold Corp. (TSXV: CKG) (OTCQX: CHPGF) ("Chesapeake" or the "Company") is pleased to announce an option to acquire a 100% interest in the El Duraznito gold-silver project ("El Duraznito") located near the town of Tayoltita in Durango State, Mexico. Regional reconnaissance identified El Duraznito and follow up grassroots exploration generated impressive results. El Duraznito is located about 18 kilometers east of First Majestic Silver Corp.'s San Dimas Mine ("San Dimas").


And your Spanish lesson of the day: El Duraznito = The Little Peach. Something you cannot say about the performance of this company or its flagship asset project.


*Not an asset, it's a liability.

Copper is hanging in there

Didn't repeat the late January/early February low and now there's a nice W.


3/3/20

Jerry Huang in the house

Lock up your Canada Gooses:

Spotted at PDAC: B2Gold (BTG) (BTO.to)

Why be a mere bull about gold? About time you got down with The Clive and became a full-blown rhino.



Marin Katusa on Lucara Diamond Corp (LUC.to)

Quoting Marin Katusa on Lucara (LUC.to), 26th February 2018:

"I will be making this one of my largest bets ever and plan on making it one of my core holdings for many years to come."

And here's the price chart of LUC.to, with Katusa's point of entry for one of his largest bets ever, the one he made a core holding for many years to come:



Further questions?

Nice to see Steve Cope of Silver Viper (VIPR.v) is an IKN reader

The trouble with having a bullshit liar as a CEO is that they'll never stop bullshitting or lying to you, even when it's perfectly obvious they've been caught with their pants down doing the same scammy, self-serving crap to line their own pockets as quickly as possible. The IKN post of Friday evening pointed to...
  • The post-Friday close VIPR NR
  • That awarded the company insiders a boatload of options
  • That were priced exactly on strike after the heavy sell-off that day
  • And vest immediately
...all those being classic moves from bullshit juniors looking to quietly rip off their shareholders. However, Mister Cope didn't like being shown as the scamster he obviously is, so he got one of his paid lackeys to write this on CEO.ca (I thank reader P for the headsup). Along the way, you'll also note that Cope wanted to reply directly to IKN, but somehow doesn't know how e-mail works. Lies stacked upon lies, you'd have thought by now that a guy like Cope, constantly covering deceit, had learned that it's best to stop digging when in a hole. I'm not linking to that den of iniquity, instead here's what was written by his sycophant.

Silver Viper’s CEO Steve Cope has asked me to post something onm the CEO board on his behalf. It’s a response to something negative about the recent option grant that was written on IKN blogspot about VIPR and its CEO. He would have rather responded to IKN directly but doesn’t see an avenue to do so on their website. Below Steve Cope addresses the comments that were made on the IKN blogspot and then leave it to people to make their own judgements on the situation: 

1. We just hired a new Corporate Secretary and part of working for the group is getting options when you start. 

2. Insiders bought over 350k shares of the company in the open market at prices ranging from $0.275-0.385 on Feb 27th and 28th. If there had been an attempt to issue options cheaply there would have been no buying and we would have allowed the share price to stay down closer to the $0.265 low of the day. 

3. The decision to issue options was done over a week ago based on the fact that we hadn’t issued options in over 2 years and we knew our best release to date was going out earlier in the week. The plan was to allow time for the price to react accordingly to the news before issuing options. It is also important to note that everyone who works for the group is granted options all the way down to the receptionist. The options were going to be issued whether the share price was at $.25 or $.55 it didn’t matter. 

4. We weren’t able to push this off for days as we wanted to make sure they were issued before we had any assays for the next holes. If we issued next week we would already start to see gold numbers for holes 219 and beyond and would be acting on insider information. 

5. The only other option grant we did was done when the stock was trading in the teens and we issued at $0.25 in order to not undercut people that participated in the IPO at $0.25 months before. The share price moved down in the coming months and we were questioned on why we would issue options that way vs waiting and doing it at a lower price. 

6. I pushed back on doing an option grant in January when the rest of the Belcarra Group companies issued because I knew we had good results on the horizon and didn’t want to issue options in the .20’s when I firmly believed the price would be higher. 

 7. Insiders of this company have not sold a share and will continue to support the stock in the open market. 

I value peoples opinion and pride myself on trying to do what is in the best interests of shareholders and the people that work for the Belcarra Group. If anyone has any questions or would like to arrange a call please email me at steve.cope@belcarragroup.com. I always have time for shareholders and please don’t hesitate to reach out. Thank you for your continued support and I am excited to see how the La Virginia project continues to grow as it is really starting to get exciting based on these results. Thanks, Steve Cope

Mazumdar and Cook and BNN and Rule too

Here's the link to watch the replay of Brent Mazumdar and Joe Cook doing BNN's Market Call, accompanied by the dulcet tones of Andrew Bell.

And your extra ball, here's the link to Rick Rule's appearance on Market Call tonight, yesterday evening. Give me a shout if it's worth watching.

That surprise rate cut

This from the introduction section of IKN562, entitled "Fear is a Forward-Looking Statement" and published Sunday evening, as we dissected the negative week and predicted the response of this week

"The cash from equities went to money market or to bonds, the US Dollar rose sharply, then as the selling accelerated, the dollar dropped as the wider business world realized what would happen next because the central planning reaction to a sudden drop in economic activity is not difficult to call. Jerome Powell was the first to bring the subject up on Friday afternoon and once he’d finished his variation on “We’ll do what it takes” the Dow rallied 630 points in the last 15 minutes of play.

As for “what it takes”, look no further than the euphemistic “printing press” (these days no extra ink is spilled, the result is the same). Markets now price in a 100% chance of a rate cut by April FOMC, plus a 75% chance of an emergency rate before the April FOMC meeting (that I think should be also be priced at 100% because it will happen soon). The Fed is going to drop rates, get cheap credit moving and drown our sorrows in adult-level liquidity and it’s going to happen very soon, which is why the whole market rallied the way it did on Friday afternoon."

Then later on in the same intro section, this:
"What we have before us in 2020 is a type of “2008 Light”; the market is not in systemic risk nor is Covid-19 an existential threat to humanity, but the sudden collapse of economic activity due to fear spreading around the globe requires action from the financial powers and we are sure to get that. The Fed will drop rates and stimulate the economy because that is what it does. And gold will now go higher because that is what it does when the US Dollar is deliberately weakened."

Surprise rate cut, eh...

Bear Creek Mining (BCM.v): When the bullshit has to stop

It's around this time that mining companies realize you can't have your cake and eat it:

Vancouver, British Columbia--(Newsfile Corp. - March 3, 2020) - Bear Creek Mining Corporation (TSXV: BCM) (BVL: BCM) ("Bear Creek" or the "Company") announces that it has engaged BNP Paribas and Société Générale as Joint Lead Arrangers (together, the "JLAs") to arrange a US$ 400 million senior secured credit facility (the "Facility"). The Facility, if concluded, will be used to develop the Company's wholly owned and fully permitted, world-class Corani silver-lead-zinc project located in the Puno region of Peru. The JLAs will use commercially reasonable best efforts to arrange the Facility with a syndicate of banks and financial institutions.

In other words, while the world knows that silver is $17/oz, zinc $0.90/lb and the price financiers charge mining companies for capex cash rarely drops below 15% these days, Bear Creek Mining expects to raise U$400m on a project that uses U$18/oz silver and U$1.10/lb zinc for its economics (Ag and Zn are the big revenue generators) and also assumes the world will lend them the money at a 5% cost of capital.

Good luck with that.

3/2/20

Mining stocks and dead cats

There's some appetite for the biggest and most liquid names (see GDX components, plus a few others), but overall this relief rally is not attracting much volume. A lot of early opening markers are just hanging there, asks already under but no takers. If this is all PDAC day one can muster, we're in for a long week.

Spotted at PDAC: Quinton Hennigh




The PT Barnum of geology.

Novo Resources (NVO.v), seed capital fund

What a circle jerk.


VANCOUVER, British Columbia, March 02, 2020 (GLOBE NEWSWIRE) -- Novo Resources Corp. (“Novo” or the “Company”) (TSX-V: NVO; OTCQX: NSRPF) is pleased to announce that it has subscribed for 15,000,000 common shares of New Found Gold Corp. (“New Found”), a Canadian private exploration company with the largest mineral claim package in the Province of Newfoundland and Labrador. The subscription price will be paid by the issuance of 6,944,444 common shares of Novo (the “Acquisition”). The Acquisition is subject to TSX Venture Exchange approval.

The IKN Weekly, out now



IKN562 has just been sent to subscribers. I'm off to bed.

3/1/20

The IKN PDAC 2020 Bingo card is available at the Silver Range Resources (SNG.v) booth

When you get to the Silver Range Resources booth 3124 in the Investors Exchange, this is what you'll see:



And yes, that bottle of scotch is the prize. Good luck!

Six dollars for a hotdog in Toronto

Sounds expensive to me. That and protesters now setting up roadblocks to the PDAC show.


Joe Mazumdar and Brent Cook on BNN's PDAC Special Market Call, tomorrow Monday




Noon local time tomorrow Monday, Joe Mazumdar and Brent Cook of Exploration Insights appear on BNN's Market Call program, giving a full hour of views and opinions on mining stocks of all shapes and sizes. When the best in the business offer up free advice, you'd be wise to take it. If you want to get your question in to the men, this is the phone number 1-855-326-6266, this is the Twitter account @MarketCall and this mail address Marketcall@bnnbloomberg.ca.

EMX Royalty Corp at PDAC (and McEwen Mining now, too)

Or not at PDAC, as the case may be:



UPDATE: We hear McEwen Mining (MUX) has also cancelled. There are likely to be a lot more.