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8/30/14

Road deaths in Bolivia

In the six years of 2008 to 2013, according to official Bolivian government figures there were 8,730 deaths in road accidents in the country. That's an average of 1,455 per year and a bad record indeed for a country with a population of just over 10.6m people. It's even worse on a per capita basis than the infamously bad regional countries such as Peru (2,430 deaths in 2013, population 30.1m) or Argentina (5,094 deaths in 2013, pop. ~43m).

Of course you remember all those accidents in Bolivia being reported not, but now I'm afraid it's serious because today some whiteys on vacay in the country died. Here's AP, immediately picked up by WaPo, with the breaking news.
LA PAZ, Bolivia — Bolivian police say eight foreign tourists are among the 10 people killed when a bus returning to La Paz from the Salar de Uyuni salt flats ran off the highway and crashed. 
Police Capt. Gonzalo Carrasco said that another 24 people, most of them foreigners, were injured and being treated in hospitals in Oruro, the closest big city. 
Carrasco said the continues here

8/29/14

The Friday OT: X-Press 2 Featuring David Byrne; Lazy

From 2002:



The tech looks a bit generational, but the vid is fun and they picked the right voice for the words. And the song's been in my head all week for some reason.

Argonaut Gold (AR.to) trading today

Fat finger, or something up?


Argonaut won itself an IIROC trading halt under the circuit breaker rule thanks to this. Back trading now.

You Can't Make Up Your Own Metrics

This links to a smart little article (only a short read, don't be afraid) by Tim Hanson of The Motley Fool, that tells you to be leery of companies that make up their own metrics. Quite right too, here's an extract to prove it:
Just a few weeks ago, Latin American McDonald's franchisee ( Arcos Dorados told investors that "organic adjusted EBITDA" was only 4.4% lower in the first quarter of 2014 and that, excluding Venezuela, adjusted EBITDA was up 18.5%! 
What does that all mean? I've read the footnotes, and I'm not really sure. All I was able to discern is that performance was a lot worse if one looked at less adjusted metrics.

After all, your author had just finished reading the Aurcana (AUN.v) quarterly fubar that had this to say about its earnings in the NR:
Earnings 
The Company had earnings (losses) from mining operations at La Negra for the quarter ended June 30, 2014 in the amount of ($1.4) million (2013: $2.6 million), and $2.0 million for the first six months of 2014 (2013: $7.3 million). The decrease in earnings from mining operations at La Negra for the current period against the same period of the previous year was mainly related to the decrease in metal prices, lower silver grade at the La Negra mine and lower mill through-put as a result of mill downtime due to mechanical problems. 
You see how they did that? Start your sentence with "The company" and then slip quietly into "mining operations at La Negra" as seamlessly as possible? That was the whole lot, and you know they're BSsing you backwards by selecting one part of the P+L, rather than telling you about corporate earnings. The 'La Negra' losses are one thing, the Aurcana (AUN.v) loss happened to be $7,439,537, or 11c per share. The $1.4m they lost just by running their mine, tip of the proverbial iceberg stuff.

Galt's Gulch Chile news

While reading in a fascinated and enrapt manner on how Jeff Berwick and the people who 'invested' (term used loosely) in the Libertarian paradise in the making, Galt's Gulch Chile, have been taken to the cleaners by a U.S real estate wideboy and scamster, it occurred to your humble scribe that ripping off Libertarians is in fact the perfect scam. After all these are the people who want no rules, no laws and no government to run and whine to if things go wrong...it's all fair in the frictionless world of market forces, right guys? So if you're both a true Libertarian and stupid enough to be ripped off like this (which I'd also guess is a combo you find quite regularly) you just blame yourself and move on, leaving your hard-earned cash in somebody else's pocket. This must be why Doug Casey loves them so.

Anyway, go read the story of how Galt's Gulch turned into a Randian dystopian nightmare of moneyloss and tears right here.

UPDATE: IKN Nerve Centre™ is enjoying your Twitter comments already:

8/28/14

The Friday OT on a Thursday: Pizzaman; Sex On The Streets

Oh wow, found it.



Once upon a time, post Housemartins and pre-Fatboy Slim, Norman Cook was Pizzaman, he did this, it was good, I danced a lot to the music.

And happy to say it's held up pretty well to the test of time (19 years !!), especially considering the genre. So enjoy a slice of oldskool with your Thursday evening, you deserve it.

The middle class in Latin America

Greg Weeks over at his blog Two Weeks Notice today features the CEPAL/United Nations data that's been published on the economic strata of Latin America, featuring two of the main charts as well. As is often the case people focus in on the poverty figures and that's normal, but today I got to thinking about the numbers CEPAL has supplied on the middle class in LatAm. For sure we concentrate on the poor, but what about the middle class numbers, just for a change? They have their own story to tell as well.

In order to understand context, here's how CEPAL and many others categorize the economic levels:

1) Poor. Says what it means, standard definitions apply.
2) Vulnerable. This is the sector of the population that has either a) risen out of poverty but is at risk of falling back in if things don't go well or b) dropped away from the secure middle class category and runs the risk of becoming poor. For what it's worth, in LatAm this is usually the a) group.
3) Middle class. Says what it means, standard definitions apply. People just like your author who are fortunate enough to have disposible income and the trappings thereof.
4) Residual. I like that word, much cooler than the rich or the one percent. For example people who live in Peru, run the country's media and tell you how wonderful Peru is. For another example people who live in Venezuela, run the country's media and tell you how crappy Venezuela is.

So with those out the way, the charts that follow zoom in on the middle class sector, those people established in the comfort zone of each country. They're not sweating over the next paycheck, but neither are they wondering which colour their next Ferrari should be. If you want more on the other sectors, including the percentage figures, check out the Greg Weeks post, it's on this link.

This first chart shows the percentage of each country's population that's safely ensconsed in that gossamer cocoon of ennui and neuroses we know as "middle class life". As you can see, we have the figures from the year 2000 lurking in the background and then the latest ones for 2012 as main feature. That's because CEPAL provides both sets of figures, too.


Uruguay is top of the bunch because it's always had a large section in the middle class (being a small population country helps in these things, as does its long-standing reputation as a tax haven in the region). Then many of you out there may be surprised to see Argentina in a clear second place, but that's only because you've been reading too many stupid and unbalanced articles on the country, rather than ever visiting the place. Chile's good for this metric, as are Costa Rica and Panama. Down at the bottom, four Central American countries with a reputation for poverty and instability.

This second chart is perhaps more interesting for the context it shines on chart one. Here we see the difference in percentage scores between the two sets of figures for 2000 and 2012, which gives us a good idea of how many people have managed to make the move up to middle class status in the first part of this century:


Peru is up and thrusting and has added the most in percentage terms to its middle class, so well done indeed. Then come two supposedly pariah states (if you believe the MSM bullshit on LatAm) in Argentina (scoring well again) and Bolivia. Then come a bunch that have added the rough average of 11% or 12% to their scores, all good and laudable (and hey, including Venezuela). Also rans include Uruguay (at or close to a saturation point, so no worries there) and then four countries that have the shame of seeing their percentage of middle class drop.

So, tell me how Argentina is this economic disaster area again?

Tommy Humphreys and Lawrence Roulston, playing nicely together

Here's what's being sent over to my mailbox this morning, from a couple of you. Well, I might have adjusted the text slightly. Here and there. Y'know, just for fun.

(PS: Yes, I'm at a loose end this morning. How did you know?)

Good morning members of our free list,
This is Tommy Humphreys for Lawrence Roulston (Some of you may know me from my appearances in the daytime series, Nurses In Love).
Lawrence brought me on board a couple of months ago to help revive his rapidly fading newsletter, Resource Opportunities, established in 1998. We are both very excited by the chance to pretend there's an improving outlook for junior mining equities, as well as what's in store for our newsletter.
We just published a report on an R&D stage company that I believe has the potential to change my life, and possibly yours, but this one isn't Lowell Copper so don't worry I'm not going to make the mistake of toadying out of my league this time.
Yes, some luck will be involved, but you have to make your own luck in this world and if I sell enough of these subscriptions, my back will be covered and I'll be running no risk at all. That part's up to you, suckers.
The company our report covers has arguably the best possible management team and financial backers for what they have set out to do and if you get to the end of this sentence and still read on then you're exactly the type of person I'm looking for. The team has created billions in wealth for shareholders and themselves in this particular commodity over the past twenty years.
The roughly $20 million enterprise value company is not at all followed by the investment community, the same way my grammar fails to follow the basic rules of English language.
Under normal circumstances, I would be willing to pay the current enterprise value for an empty shell with a management team of this calibre because I'm a complete twat, but this company is not a shell. It has several potentially significant projects, and success at any one of them could add zeroes to the company's valuation. You still reading? Oh, you're the one, just go the bottom, hit the subscription button and sign on now.
I thought I would have to wait a long time to have the stars align on a story like this one, and there are very exciting things happening at this company over the next six months. Very exciting, as adjectives and modifiers make all the difference to a no-brainer winning trade.
To learn more about our idea please sign up at the Resource Opportunities site, which we are in the process of re-designing and we need more money to pay the web designer so don't delay.
The report is the culmination of over two months of research on the company, and its yours with a $299 annual subscription. You see, PT Barnum was right.
And if you change your mind you may cancel within 30 days of signing up for a full refund.
We look forward to having you aboard!
Tommy Humphreys for Lawrence Roulston
Toll Free: 1-XXX-773-XXX
www.resourceopportunities.com 

Amerigo Resources (ARG.to) insider trades: UPDATED WITH FE ERRATUM

Not that many interesting insider buys or sells recently, but this one catches the eye:



Herr Zeitler suddenly likes his own (and fave) company again. He now owns over 22m of these papers.

But hey, maybe it's because I recently bought a few ARG.to (a.k.a. Aaaaargh!!! to) myself that this one caught my eye. Yup, that was your full disclosure.

UPDATE: Unfortunately I made a mistake with some of the information in this post. Please see the correction here dated Sunday August 31st which is reprinted below:

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I've waited until Sunday evening to run  this correction because weekend traffic for the financial-mining things is always light. In this way it gets to been seen at the top of the page Monday morning, and in the Monday email digests.
On Thursday 28th August in this post I stated that Geologic Resource Partners was owned by Klaus Zeitler, CEO of Amerigo Resources (ARG.to) and as such, the implication was that he owned 22m shares of his company ARG.to via that holding company.
That was incorrect information. In fact Zeitler has no connection to Geologic Resource Partners and is not the person who has been buying the stock recently, either directly or indirectly. Although the post was written in good faith I got my wires crossed and apologize for the error.

8/27/14

And Marin Katusa called PRD Energy (PRD.v) "The next Bakken"

Must have been some sort of oilman's joke or something. A bit like Casey Research, in fact.

 The 2q14 NR here, which doesn't tell you that PRD.v got $537k of revenue from sales of its crude in 2q14 and made a net loss of $1.23m. And it has to be said, that's slightly under the megasquillions and profits Katusa was predicting from his close pal's company by now (yup how time flies, he's been pumping this thing for over a year now). 

As Katusa put it on November 23rd 2013 while waxing lyrical over a previous set of crappy returns from PRD.v, "...we expect the initial production numbers to be somewhere between 500 and 750 barrels of oil a day". In fact, during 2q14 the well that was going to make you Casey Sheep all rich and stuff only operated for 68 days and produced 8,923 barrels of oil. Which is 131 and bits for every working day (or less than 100bbl/d if you spread that production across the whole quarter). So they've now closed that well down for optimization work, which is cute. But don't worry! They're going to take all that cash they raised from you and drill some more holes, which are bound to be paydirt and much better than the first one, right Marin?

And John Mauldin, how's your trade treating you on this thing? Your readers happy about the way you got them in at $1.20? Ah, good...


The Rio Blanco copper lobbying in Peru

Here's a good one. The Chinese company behind Rio Blanco is trying to get the project moving forward again, with the usual hilarious corporate strategies and predictable results. They've hired this Chinese woman who got the job because she's guaranteed the company that she'll get the mine into operation in four years, even though she doesn't speak a scrap of Spanish. She's going about it by lobbying (translation: bribing) the rich and powerful in Lima's mining community and media channels, which means we've already seen supremely stupid and biased new reports on the national TV channels and efforts by the mining minstry to prime public opinion for the big PR push to come. 

Thing is, Rio Blanco is also trying to keep things very secret from the people who really matter, the locals around the Rio Blanco/Majaz project who've been vehemently opposed to the development of the mine for many years. This is stupid, because they've just found out Rio Blanco has been taking secret surveys of local opinion behind their backs and are now even more pissed than they were before (and that was very, but very pissed indeed, as IKN's previous coverage on the way the company kidnappped locals, shot at least one dead, got thrown off the property and ended up being successfully sued for its bullying shows).

So to sum up: A Chinese mining company being run by an new, arrogant and zero-idea-of-anything boss that's trying to push through one of the most hated mining projects in South America by pitting locals against a national press and government lobby through payoffs and slush funding. This one's going to end well, no'

Children's fashion, Spanish style

Zara is the big clothing chain from Spain, now a worldwide brand and the base of fortune for Amancio Ortega, one of the richest people in the world. Here's a new item for children in their latest collection:



Guess what? It's just been withdrawn, under full apologies, even though you can (supposedly, difficult though) read "Sherriff" on that badge and it's not meant to suggest anything about the second world war. Can't help but wonder if Mugatu is chief designer for this year's autumn collection. Zara should also apologize for being absolute idiots, but let's take it one step at a time.

PS: Zara has 22 shops in Israel.

Chart of the day is...

...the gold/silver ratio, 12 months:


Wnat my guess? Sure you want my guess, it's worth no less (or more) than anyone else's: The GSR is rolling over again, silver's about to rally. Right on time for Labor Day, too.

8/26/14

Today's mailbag: Me and Bobby G

This post done with screenshots.

Your humble scribe happened to check the IKN back office today and came across this mail address as the newest member of the illustrious IKN Daily Digest e-mail service:


Which was fairly interesting, considering the recent coverage on Bobby Genovese and his currently hatching scam Jemi Fibre (JFI.v). However I only gave it perhaps a 50/50 chance of being legit and from the man himself so there was only one thing for it: Send a mail the address in question.



A short while later, this came back:




And that caused guffaws and chortles at IKN Nerve Centre™, of that you can be sure. So rather than phone (or miss an opportunity), I sent this back:



To which no reply yet, but the night is young the moon is out and we remain in lusty hope. Though maybe Bobby noticed my grammar mistake and decided I was unworthy of further attention, which would only be fair I suppose. By the way Bobby, just in case you haven't worked it out already, this post does indeed mean that we're not going to be able to "find a way to work together" you scumbag fuckwit.

Filtering a news release (from IKN276)

This was the main fundies part of IKN276 this weekend. The feedback received from subscribers was pretty positive, so just for a change and a one-off let's stick it here on the open blog. You get thoughts on how to read and filter through mining company news releases, plus an example of the process, via the NR that came from Atacama Pacific (ATM.v) last week. Also, as an extra bonus the opportunity to show how little DD Canaccord does before offering you a trade idea is given (couldn't possibly miss that chance now, could I?). So without further ado...

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Fundamental Analysis of Mining Stocks
Leisure
What is this life if, full of care,
We have no time to stand and stare.
No time to stand beneath the boughs
And stare as long as sheep or cows.
No time to see, when woods we pass,
Where squirrels hide their nuts in grass.
No time to see, in broad daylight,
Streams full of stars, like skies at night.
No time to turn at Beauty's glance,
And watch her feet, how they can dance.
No time to wait till her mouth can
Enrich that smile her eyes began.
A poor life this is if, full of care,
We have no time to stand and stare.
WH Davies, 1911
Filtering a News Release
I’ve had the idea to run a piece like this one for a while, off and on. As market news and activity generally was low this week, plus the upcoming weeks look like being busy ones for both myself and The Weekly, plus an interesting and fairly typical example of the type of NR that needs to to filtered falling into my lap and nudging me into action, the opportunity is taken this weekend. So you’ve had an intro from the poem Leisure by William Henry Davies and now for a primer on what to look for in a NR.

The subject is simple in essence: With the amount of news and data available some sort of filtering system is needed to do the job of analyzing any given market or sector, else be bogged down by an overdose of information. We need to read like a critic and look for holes, because the faster we can get behind the inevitable and understandable company spin to decide whether a project, company, story etc is worth our time following and investigating more deeply, the better. To cut this intro as short as possible (yes, that means I’ve just edited out several hundred words of waffle in my Sunday afternoon edit) what we’re looking for is the fatal flaw, the piece or pieces of information that are enough to put us off looking more deeply, spending more time on a potential investment and maybe even eventually stumping up some cash and buying shares. The fatal flaw might be exaggerated numbers, or overstretching facts to suit the company’s pitch, or maybe it comes from a company pitching dead straight and offering conservative type numbers that don’t impress. On the odd occasion it may even be a straight fat lie. But our job is to find the flaw and if not, the project or company is probably worth more DD time. And be clear that you don’t need a dozen fatal flaws to draw a line under a project, a feas, pre-feas, PEA or company as one is more than enough, thank you very much. In short, find the flaw and save time, don’t find the flaw and the project or news release you’re currently looking at may be the one in twenty, or one in a hundred that catches your eye, gets you interested and make you want to read more.

Today’s example is about a pre-feas study and the news that came out last week, so it has more substance than most. But it’s a good example because one thing rings true about all junior exploration stage companies, and it’s the touchstone on which your investigations and DD should rest. These companies sell stories, no more and no less. The entire valuation of an exploration stage mining company, by which I mean absolutely every single dollar of value it is given by the capital markets (yes, underlined and blod typed), is based on 1) the value the market gives to the interest and trustworthiness of the story in question. No good project, no value. No trust in what they’re saying, no value. To keep it simple, here are four scenarios:

  • You have the management of a 100% straight and honest mining company telling you about a mediocre or uneconomic project.
  • You have the management of a 100% straight and honest mining company telling you about an exciting and potentially economic project.
  • You have the management of a dishonest mining company telling you about a mediocre or uneconomic project.
  • You have the management of a dishonest mining company telling you about an exciting and potentially economic project.
In only one of those four situations would you be put off at face value by the words spoken by the company. Yes for sure there are grey areas between those four corners of the argument, for example there are plenty of company directors who’ll swear blind they’re honest upstanding corporate citizens but it’s obviously their job to promote and make the best case for their property or exploration project.

The picture should be clear enough by now, it’s our job to separate the wheat from the chaff in the most efficient way possible. That’s what the process below will try to demonstrate.

Atacama Pacific (ATM.v) pre-feas news release
So to the example today, this NR (1) that was offered by Atacama Pacific (ATM.v) on Wednesday August 20th. Entitled “Atacama Pacific Delivers Pre-Feasibility Study for the Cerro Maricunga Oxide Gold Project”, it announces the completion of the PFS at that project and as that’s a pretty important step for any junior exploreco, it’s a fairly long and detailed NR that gives us an overview of the full pre-feas document (that’s not yet in the public domain). The narrative that follows below tries to capture in as close a manner as possible the thought process that I went through while reading the NR and as always, the main point of studying such a NR is to find the fatal flaw if it exists.

The first thing is a bit of background; this NR on the pre-feasibility study for ATM.v’s that the study is late. It’s not an immediate red flag of course, there have been examples where a late pre-feas has turned out to be a sparkling document, but the weight of history is against companies that drag their feet at these stages so with the already deferred study supposed to have arrived in July (ATC.v said so in June), the delay to late August is a factor.

But arrive it has (well, the NR with the overview details at least, we have to wait for the PFS itself and the company has the requisite 45 days in which to file it on SEDAR), so when opening up such a document the thing I do is scan the contents and the tables to see if it passes a smell test for the economics, because that’s what NRs that announce Scoping Studies, pre-feas studies, feasibility studies, etc are designed to do. In such an NR there are a bunch of numbers I want to see first. They are:

  • The post-tax IRR. Not the pre-tax (the one they’ll often throw sequins in your eyes with), because I don’t want to read the numbers of a company that assumes it won’t have to pay tax, I want to see the numbers of a company that lives in the real world and pays taxes on its earnings, it’s as simple as that. As for the number, the higher the better but usually I don’t want anything less than 20%.
  • Its base case metal price assumptions, which have (as in HAVE, must, got to, no exceptions) to be lower than the current spot price for the metal or metals in question.
  • The discount rate. I’m happiest when seeing an 8% discount rate offered in the literature, I’ll take 5% at a pinch if the project in question has a particularly good risk outlook.
With those three in mind, let’s go to the ATM.v NR and see how those “find them first” figures stand up. Here’s the paste of the Table 1 from the NR, which has all three available:



1)      The post-tax IRR of 25.0% is fair enough.
2)      Using a 5% discount on the NPV isn’t great, but I wouldn’t throw out a PFS NR on that alone.
3)      As for the metal price assumption for the base case, the first real red flag shows up (and that’s too early for anyone’s liking). As ATM’s project is a gold project, seeing the assumption at $1,350/oz with gold doing what it’s doing today is simply no good.

So at the first pass ATM already has a doubt cast on its PFS by that gold price. It’s the first thing I’d want to investigate further if I remain interested in this stock, so without either a) the full PFS or b) the will to run calculations of my own at this point (we’re filtering a news release and its the company’s job to impress me, not the other way around) I’m left with a quick scan of the NR for any further clues. And in this case ATM has given us calcs on an alternative, lower gold price further down the NR, which is U$1,250/oz (far more reasonable as an assumption) and ends up bringing the after-tax IRR down to 17.0%. Now that’s lower than I’d like but it’s not a disaster for a low-ish price assumption either; I haven’t discarded yet, I’m still interested enough to look around, but there’s enough to doubt here already.

The next thing I care about is the other side of the profit equation. This is a pre-feas NR, it’s all about the economics of the potential mine, we know about revenues, so what about costs? On this there are two aspects, the cash cost and the capex. In this case the first dataset I come across in the NR (reading from top to bottom) is about cash cost and here’s an excerpt:

Projected total gold production over the 13-year LOM is 2.96 million ounces at an average operating cash cost of $683/oz Au. All-in sustaining cost of $941/oz Au, including total cash costs of $864/oz Au, have been projected.

Now that sounds ok at first pass. Lots of gold, under $700/oz op costs, under a thousand for AISC, in theory at least that leaves plenty of free cash flow. I like the optics. So I keep reading and...

Gold will be produced from heap leaching 294.4 million tonnes ("Mt") of ore with an average grade of 0.40 grams per tonne gold ("g/t Au"). Ore will be mined at a rate of 80,000 tonne per day and an average LOM strip ratio of 1.76 to 1 (517.4 Mt waste to 294.4 Mt ore) has been calculated.

Wait a moment, where did you say this project was located? Suddenly a small alarm bell is going off in my head on reading this. There are never any apples to apples comparatives to make, but when it comes to this type of heap or dump leach operation there are enough similar type of operations out there and one I know well (to the point of memorizing the numbers) is Rio Alto at La Arena. What Atacama Pacific is proposing to me here is that its mine will be every bit as cheap to run on a cash cost per ounce level as Rio Alto, even though:

a)      It’s in Chile, not Peru, and that’s a more expensive country in which to operate on many levels (wages, fuel, water, etc). What’s more, it’s in the Maricunga where it’s going to have to pipe in water supply, truck in diesel, pay extra to employees etc.
b)      The 0.40 g/t gold grade is lower than the 0.5% that Rio Alto runs. Add to that the recovery rate, which isn’t shown in that snippet but is planned at just over 79% while Rio Alto gets 85% typically.
c)       The strip rate, which at 1.76/1 means a lot of waste stripping compared to RIO.to’s levels nowadays.

Now I’m not saying those financial parameters are impossible, but I’m now more than a little leery about taking them at face value because they don’t look particularly conservative at first pass. What I want from a serious PFS is just that, a sense of the company not trying to wow the market with its numbers but in the process of trying to convince itself, internally, that the project in question is one that should move forward. Or a company trying to convince real operating mining companies with buildings full of geologists and engineers and accountants who’ve been through the project selection process many times and have the decision-making call on multi-million dollar investments.

And that above means I’m now actively looking for a fatal flaw in these cost assumptions. So rather than spend time on the preliminary capex data (under $400m to build the machine, which isn’t cheap but is bearable for a 200k+ oz annum operation) I now want to dig deeper on what I suspect to be “optimized” op-ex numbers that won’t stand up to scrutiny. It’s chasing the fatal flaw  and remember, you only need to find one of those and you can close the NR and go open another. As this isn’t the PFS document yet and only a NR things can be difficult to check but in this case we do have at least some financial parameters given, here in this table further down the document. Therein lies the fuel to reject this PFS:



  
So far it’s been a scanning process to pick holes in the offered project. On another day one part such as the operating cost economics may pass muster and I start wondering more critically about the capex criteria. But in this case my eyes have been drawn to the cash cost credentials and here at the bottom of the NR comes the table that crystallizes the growing suspicions.

First the forex assumption and, dear people at ATM.v, you can assume a USD/CLP forex of 1:600 if you want. Hell, you can assume 700 to one or whatever other number you care to imagine, feel free and be my guest, but when it comes to a pre-feas study you need to put in serious numbers and not ‘optimize’ (i.e. bullshit) them to suit your own ends. Right now we have a CLP that’s weakening against the US dollar, having moved from ~500 in mid to late 2013 and is up to 583 to the greenback as at Friday’s close. But that’s still a way from the 600 assumption and as this ten year chart makes patently clear, a 600/1 forex between this pair is very much the exception in recent times, by no means is it the rule.


Which brings us to the fuel price assumption, the second one in the list and basically as far as I got with this news release. As it happens I was already getting mightily suspicious about ATM.v and its way of presenting the best possible case for its project and I was pretty sure just on memory that fuel doesn’t come as cheap as that in the Maricunga. So a quick check (2) at the right site (official government data, you’ll note) and indeed diesel is currently selling at CLP703 per litre in that zone, i.e. U$1.20. As fuel is one of the biggest cost inputs of a heap leacher, making an assumption that’s 25% lower than the current going rate is going to “optimize” the merry hell out of your cash cost figures. You might also recognize that the two cost inputs I circled in red above are interconnected because if you play about with the forex you start bending other price assumptions in USD as well; the cheaper the CLP is per dollar, the better things are going to look in USD terms. In this case I got as far as the second number for fuel and that’s all I need to read, the NR is now closed and ATM.v with its Cerro Maricunga Oxide Gold project have been filed under “one less to worry about”, or “avoid”, or “somebody’s going to have to give me a darned good reason to care about these jokers again before I do”. However, I’d wager good money that the 1:600 forex ratio chosen for this Pre Feas skews out the price assumptions for energy, lime, cyanide etc in dollar terms and all in the favour of project economics.

Bottom line: A junior exploreco is selling you a story, no more no less. If you can’t trust their story they have nothing to offer, so the job is to try to pick holes in their promo and see whether their pitch stands up to a little critical thinking. In this case I’ve already seen enough (more than enough, in fact) and don’t have the slightest inclination to check out capex assumptions, check whether they’ve taken into account the changes in the tax code under the new Bachelet government, any number of other line items. I only need to be BSsed once in order to walk away and the way in which this company has stretched parameters away from the conservative, through the potentially acceptable and out to a world of perfect for their purposes is all I need to know. If they’re doing it to me with things as obvious as a “base case” for gold that sits $50/oz higher than current spot, or with a CLP/USD forex rate that has no connection at all with reasonable assumptions for the future, then I simply don’t want to know.
One final word: Thanks to reader M, on Saturday I received Canaccord’s regular publication “Mineral Exploration Review” (aka Metaland) for the week, in which I read in the covering mail blurb the following (author’s highlights)


Based on the improving "risk-on" environment, we have decided it is time to build a diverse, gold-focused basket for exposure to the small cap, pre-cash flow mining sector. For a good start, we have turned to the three mining constituents of the Canaccord Genuity Canadian Small Cap Focus List: Dalradian Resources (DNA-T | Speculative Buy | $1.65 TP) with its flagship Curraghinalt high grade U/G gold deposit in Northern Ireland, Premier Gold (PG-T | Speculative Buy | $4.10 TP) with its flagship Hardrock open pit gold project near Geraldton, Ontario, and Roxgold (ROG-V | Speculative Buy | $1.20 TP) with its flagship Yaramoko high grade U/G gold deposit in Burkina Faso. To these, we have added one conviction name under coverage in Canada, Atacama Pacific (ATM-V | Speculative Buy | $2.10 TP) with its Cerro Maricunga oxide gold project in Chile, and two from our Australian Metals & Mining team: Gryphon Minerals (GRY-ASX | Speculative Buy | A$0.34) focused on its 3.6 Moz Banfora gold project in Burkina Faso, andOrbis Gold (OBS-ASX | Speculative Buy | A$0.57) advancing its gold projects in Burkina Faso.


That got me interested enough to open the PDF and see what the house had to say about ATM.v. Here’s the relveant snippet from the Canaccord document:


Atacama Pacific (ATM-V | Speculative Buy | $2.10 TP) has delivered a positive prefeasibility study on the Cerro Maricunga oxide gold project in Chile. The study shows significant improvement through reduced capex and a solid production profile of 228,000oz/a at $683/oz cash cost over a 13-year life.


I’d agree that on paper ATM has indeed delivered “significant improvement”, but sadly mines are built of other things than paper. I wonder how long the people at Canaccord took to make a buy decision on reading that NR Wednesday evening, and even if they’d bothered to think about some of the cost inputs, do they really care? However, I must say that I agree with their call on Dalradian (DNA.to) and wish them every success with their investment in that one.

Junior Gold Miner Seeker on Nolan Watson of Sandstorm $SAND

The blog Junior Gold Miner Seeker makes a good point about Nolan Watson of Sandstorm, as well as linking to his recent interview puff piece. Yes, Watson is happy to talk about the streaming business. No, don't expect anything from him about his Brazilian FUBARs via Luna Gold and Colossus, where he has managed to take the money earned by the streaming model and flush it straight down the toilet instead of allowing his shareholders to benefit. That's not my idea of a good CEO.

Chart of the day is...

...the gold/copper ratio.

8/25/14

GOLD UNABLE TO RE-TAKE $1300 AN OUNCE! We check the reaction



Thought as much.

B2Gold $BTG (BTO.to): Scales fall from eyes

They thought The Clive was special.
They thought The Clive was different.
They thought The Clive could lead them to a new promised land of growth and profit for all.

Until the day they realized he was running just another self-serving gold mining outfit that doesn't give a flying toss about anybody outside the board room.


Yup, BTG now underperforming the GDX.

The Jemi Fibre (JFI.v) pump and dump scam: What Bobby Genovese can do for your investment portfolio

Do you know what my favourite bit of this 2014 class action suit brought against Bobby Genovese and his bunch of scoundrel friends is? It is hard to choose, but on balance it's probably this bit:
Genovese is a penny stock promoter and is notorious for operating on the fringes of the financial markets, making tens of millions of dollars by touting and manipulating penny stocks. He uses television programs, newsletters, false and misleading press releases, and emails to pump up stocks, urging the public to invest in these stocks at artificially inflated prices, driving the stock prices higher; Genovese then dumps large blocks of the stock, which he has acquired at extremely low prices, at the artificially inflated prices created by the schemes, profiting millions of dollars in the process. When Genovese dumps his large blocks of stock, the stock price plummets leaving the general investing public with huge losses.
That whole document is a great read, by the way. And before leaving, a quick mention as to how you'd be amazed how many hits this blog's been getting from Haywood Securities ever since we started shining light on Bobby G and his nefarious ways at Jemi Fibre (JFI.v) last week. Wonder why that might be?

8/24/14

The IKN Weekly, out now



IKN276 has just been sent to subscribers. Stickily.

Meanwhile, enjoy this pearl of a gem from this evening.