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3/20/15

On the road

Your humble scribe is out and about pointing at rocks and stuff, which explains the lack of action here on the blerg today. Back in the saddle on Monday.


3/19/15

KWG Resources (KWG.v): Delisting its shares and diluting shareholders to kingdom come. For the benefit of its shareholders

KWG Resources (KWG.v) is one of those classic moose-pasture peddler parasite companies you get on the Venture exchange. As at its last quarterly it had 777m shares out (no typo there), of which just 1.5% were held by insiders. And of those, nearly all by one man, the Pres/CEO Frank Smeenk, who won't be crying too much about the current 2c share price because he gets paid $300k in cash every year anyway.

Here's what KWG.v came out with by way of a news release on Tuesday (and yeah I'm slightly late to this, thank you reader J for the headsup this morning):
As described in KWG's Press Release of March 13, 2015, the delisting is necessary in order for KWG to be in a position to satisfy its obligations under the option agreement with Bold Ventures Inc. ("Bold") (TSX VENTURE:BOL) in respect of the Black Horse claims. KWG's management and Board determined that it was in the best interest of its shareholders to continue to earn an 80% interest in Bold's interest in the chromite resources comprising the Black Horse claims and a 20% interest in their non-chromite resources and to husband its cash resources by issuing 35,000,000 shares of KWG rather than making a cash payment of $700,000, especially in light of the difficulty in raising equity in the current markets. Given that the value of the shares being issued is $0.02 per share (reflecting current market prices) and that the TSXV does not permit listed issuers to issue shares at less than $0.05 each in respect of this type of transaction and that the TSXV would not grant KWG a waiver from such requirement, management and the Board concluded that it was necessary to delist its shares from the TSXV in order to continue to maintain its right to earn such interest in the Black Horse claims. 
KWG's common shares have been inter-listed for trading on the Canadian Securities Exchange ("CSE") and TSXV for a number of years. Recently the CSE market facilities were made available to all of Canada's discount brokerage trading services. It is anticipated that following the delisting of KWG's shares from the TSXV, shareholders, investors and brokers will experience no disruption in their ability to trade such shares through the facilities of the CSE and that trading liquidity will not be adversely affected. In addition, such change in trading markets is not expected to affect KWG's ability to raise capital. Additionally, KWG Shares will continue to be traded on the facilities of the Frankfurt Stock Exchange and on the OTC Market in the USA.

In other words, the TSXV won't let us dilute shareholders to the tune of 35m shares at 2c each in order to buy our next piece of moose pasture....so we're going to delist from them and their stupid "rules". And we're going to add that new layer of eyepopping dilution and make sure this stock never moves again because...it's in the best interests of shareholders. Innit.

Bottom line: Do Not Feed The Animals. These zombie juniors must die.

The question "Is a Strong Dollar Good for the U.S. Economy?" is a waste of time

A correct affirmative statement is "A strong U.S. economy is good for the dollar". Get that in place and you can circumvent the new waste of time debate coming to you from the business entertainment media channels today. Because my stars, there's a whole queue of people wearing suits who want to waste your time with their vacuous opinions this morning.

Here's an example of the waste of space blathering, a three minutes talking head segment on Bloomie (and Ritholtz also guilty for promoting it via his site), that runs the title "Is a Strong Dollar Good for the U.S. Economy?" and hits every cliche the business viewer requires to get their head nodding. This is not a chicken-and-egg situation, ladies and gentlemen readers of this backwater blog. Economies do not get stronger due to currencies. Ever. Economies do not get weaker due to currencies, either. One is a real thing that exists, the other is a medium of exchange and its flow from point A to point B allows us to gauge the relative strength or weakness of the two things at either end (and just to make sure, the word 'relative' is bold-typed and underlined for a very good reason, it's the one word to meditate upon). There's this big mental image we're sold by the ignorant media show, one that the finance world conjures up of a scales-of-justice type weighing machine: You're presented with a country's economy on one side and the country's unit of currency on the other and told "this up this down". It's complete bullshit, because only one of those things is real and tangible, the other is a ghost. For sure the most persistent ghost of modern society, but it's still a ghost.

What we can say is that the Fed now finds itself managing a strengthening US economy and is therefore in the position to make strategic decisions on its dual mandate, with one of them on whether it should foster any further strengthening in the US Dollar. But that's very different from the dumbass debate, because it gets things in the right order. 1) Horse. 2) Cart.

And on that dual mandate subject, the other angle we're getting this morning is on how the Fed's thinking about giving itself leeway on rates so that it can cut when the time comes. The general line goes "Well, Janet's going to take us to 1% because then she has that to play with when the S&P collapses in 201_ (pick your year)". This is stock market masturbation of the highest order. It's strange how even after 100 years of its existence, people don't understand the Fed's dual mandate, which isn't a triple mandate and isn't a "yeah well that's what they say but really it's different" mandate. The Fed does 1) jerbs and 2) interest rates (exact wording being "stable prices" and "maximum employment"). Fed doesn't do Dow, the Dow does things because of the Fed's decisions regarding the economy.

PS: And this is what the Dow does as it continues to do its job of reflecting the state of the US economy:



It's not always up, but I think you can probably spot the trend.

UPDATE: Over at Market Narrative, Iwnattos tries hard to pick a fight with the above but can only find minor quibbles and whinges of the non-core type, which is of course a major achievement on my part. I rule.



Chart of the day is...

...gold:

3/18/15

Did you have a pleasant evening, Mr. Milner?

Barcelona 1, Manchester City 0. Joe Hart in goal for Man City played a blinder and saved his team time after time, if it weren't for him they would have been hammered, not merely defeated 1-0.

Leo in the second half played very well, but in the first half he was mesmerizingly good. And James Milner enjoyed this less than Pep in the crowd:


We live in the Era of Messi. Watch all the games you can when he's playing, your right to bore your grandchildren to death depends on it.

PS: And Mr. Fernandinho, pleasant evening's sport?

Somebody needs to tell the goldbugs...

...so it may as well be me. 

Gold post-FOMC isn't the important chart, you bunch of fools. This is the important chart, you band of slavering idiots.




And I've been told that apparently I shouldn't be as aggressive and shouldn't call people names on this blog. So apologies for that, fucktards.

A Wednesday musical interlude dedicated to Janet Yellen

Daft Punk: Harder Better Faster Stronger (the amazing live version):




Because our leaders must set the example.

PS: Just for the record, some pieces or music sound the same whether played at a high or low volume. This is not one of those pieces of music. Don't be shy about sharing this one with your neighbours. Or the next block, for that matter. They'll thank you for it. Probably.


I get the best e-mails

Good to know I'm on Bobby Genovese's BFF-list:



All the scamming scumballs of the Canadian mining world have IKN on speed-dial, y'know

Pacific Rubiales (PRE.to) reports its 4q14

Three charts from balance sheet items:

Assets:


 Liabilities:


Working capital:


It's that last one which shows why people are worried about the near-term future of this company. The working cap position of an O&G is different to that of a miner (for example) because a business like this is all about cash flow and velocity of money; You take out debt, drill the well, haul out the oil and sell it for cash, there's no mucking around and you expand by increasing your lines of credit. Which is fine, right up to the moment when the price of oil dumps by 50% on you and you can't pay your near-term liabilities. Working cap takes a hike South and you're suddenly scrambling to try and boot your liabilities further into the future. 

Forget the quarterly profit and loss, it's the balance sheet items that show how an O&G company that was big and strutting just a few quarters ago can go belly-up extremely quickly. If PRE.to can renegotiate its financial debt pile it has a decent shot of a long-term future. If it can't, its only future will be as a case-study for business MBA courses. Sophomore level.


Chart of the day is...

...copper, last week and a half:



Copper went under $2.60/lb this morning, first time it's done that since late February. That's a line in the sand breached, we now watch to see if it becomes important.

Though of course important is relative. It's probably not going to become as important as the Bible and its effect on modern humanity, for example. Or the diplomatic and political repercussions of the USA's decision to drop two atomic bombs on mainland Japan in 1945. Or Mahatma Ghandi's influence on the 20th century in India and  beyond. We're talking the market price of a metal, after all. So, context.

3/17/15

How the Vancouver system works, Southern Silver (SSV.v) edition

Before this starts, let's make it clear that I don't really have an issue with Southern Silver (SSV.v) the company, it's hardly the worst thing out there and what you see below isn't some sort of exceptional situation. It's the way that the Venture exchange system works, that's all. If you read the words below you may get an idea of how stacked against the retail player the whole thing is.

As we know from recent NRs, the previously very-strapped-for-cash Southern Silver (SSV.v), a company in the "Manex" group of companies under the auspices of Lawrence Page (or as he always prefers, Lawrence Page QC) ran an equity financing between late January and March. The deal was 20m units at 8c a pop, with one unit giving the buyer a share and a whole warrant priced at 8c The  main taker was the Electrum Group, the big NY based investment house run by Thomas Kaplan and into several junior companies (first and foremost NovaGold (NG)). But we can also find out at least some of the other takers of the placement by checking out this regulatory filing over at the BCSC.


So you see Electrum there as the big taker and that's fair enough. Chances are they're making a bet and knowing their normal style, they'll be in for the long term. Electrum's the type of player that takes the risk on small priced issues in order to go for the high risk big reward.

But now let's check on the others there.

We have Robert Swenarchuk and Scott Hean. Both those people are insiders of the Manex Group and they're stock promoters, too. Then we have Cambridge House "buying" their share. We know them as the promotion company, media group and organizer of many a sector event. Also, there's Dig Media which has decided to "take money from their own pockets and buy a few of these  shares". Dig Media has several promo aspects to it such as this, The Investor News Network, which manages to be sponsored by a range of TSX and TSXV companies but also claim to offer independent, unbiased news coverage of the markets. Well ain't that good for them.

As the SSV placement closure NR from early March points out, "Securities issued pursuant to the private placement carry a legend restricting trading of the securities until July 5, 2015 as to 2,305,407 Units and July 6, 2015 as to 15,884,593 Units." IKN is prepared to wager several of its dollars to one of your donuts that come some point between the end of June and the middle of July, SSV.v will suddenly get favourable write-ups in the mining press via several channels and gets talked up by quite a few of the established newsletter writers that only ever have the best interests of their paying subscribers at heart, y'know. Then come the end of the escrow, a whole bunch of warrants get clipped, volume shoots up for a while and those on the inside track get to hold SSV.v shares for as long as they want afterwards at no charge to their personal finances. 

And if you want to know who they have planned as their bagholder, take a look in the nearest mirror.



Zorb Soccer

Rare indeed are the times you'll see a brand-sponsored item on these pages, Today we make an exception for this, a game with GOTTA PLAY THAT written all over it:


Youtube link here. My thanks to reader B for brightening the day with the linko.

The laughing stock that is the BCSC

It's absolutely beyond me why there are so many stock market crooks and mining scamsters in Vancouver. It's a complete mystery.

Meanwhile and completely unrelated to that thought, check out the story out yesterday about Gary Thompson. He, via his company Lowprofile Ventures (oh what a great name, oh what irony) was found guilty of securities violations by the BCSC and once you filter out the noise, the penalty suffered was him getting fined $5,000 for making illegal proceeds of $485,000 over the course of five years.

Got that?

1) Repeatedly break the law
2) Over five years
3) Make $485,000
4) Finally get caught
5) Pay a $5,000 fine

But anyway, back to my thinking out loud on a completely separate subject and it's still absolutely beyond me why there are so many stock market crooks and mining scamsters in Vancouver, total mystery....


Guess which LatAm country's stock market is the best performer in US Dollar terms

Here below is the 2015 year to date chart of the US Dollar denominated ETFs for the main traded countries of Latin America. You have the following index-tracking ETFs that all trade on the NYSE and are priced in USD
  • EWZ: Brazil 
  • EWW: Mexico
  • EPU: Peru
  • ARGT: Argentina
  • ECH: Chile
  • GXG: Colombia

And to repeat so superclear, we're talking US Dollars, so any local currency deval from this-or-that country, or local outbreak of inflation is factored out of this particular bunch of squiggly lines. With that stated, here's how they're getting on in 2015 year to date:



And wow, it would seem that Argentina (ARGT) is doing best of all. In fact, it's the only ETF of the bunch that's showing a profit. 

But what if we step back and take in the 12 month chart?



Oh wow, it would seem that over the past year Argentina (ARGT) is doing best of all. In fact, it's the only ETF of the bunch that's showing a profit. 

But hey, let's play it safe and check back over the performance of the last two years, not just one:



Oh wow, it would seem that Argentina (ARGT) is doing best of all over two years as well. In fact, it's the only ETF of the bunch that's showing a profit. 

Been fed much bullshit about Latin America recently, whiteboy? Play that tango music.

3/16/15

B2Gold (BTO.to) (BTG): Count IKN as a defender of Clive Johnson and his team (from IKN305)

Stop the stupid, people. 
STOP
THE
STUPID

There's way too much ignorance floating around about B2Gold (BTO.to) (BTG) and its decision to take a big fat impairment/write-down/write-off/call-it-whatever-you-want-you-freakin'-hack on its Masbate mine last week, 360° all round bullshit coming from the keystrokes of dumbasses who obviously Do. Not. Understand. what they're looking at in a set of financials. Repeat; obviously.

Your humble scribe did this long piece about BTO for yesterday's edition of the weekly, on the back of its 4q14 numbers and those asset impairments now getting all the dumbass headlines. There were good things in the BTO numbers, there were indifferent things and for sure there were negative things too, we chewed them all over but when it came to the part that's getting all the attention in the financial moron-o-sphere today, here's what was written (screenshot, grammar mistake and everything):



Some good news for Pacific Rubiales (PRE.to)

We're pleased to report that the $2.69 printed on Pacific Rubiales (PRE.to) this morning isn't an all-time low for the stock; that came back at the height of the Lehman etc financial crisis, late 08/early 09:



Which should cheer Fino up no end. Mind you, there's still a lot of 2015 to get through.

More Argonaut (AR.to): The unintentional comedy gold that is its 4q14 MD&A

The more I look at Argonaut Gold (AR.to) 4q14 numbers the worse they get, to the point where I'm laughing out loud at some of the stupidities they've written in the 2014 year-end MD&A (get your copy from SEDAR, free download, guaranteed chortles and yoks for one and all). Here are two examples for your viewing pleasure.

First up, I can't for the life of me understand how they got costs to $33.065m for 4q14. That's not just high, that's crazy high:


That 4q14 cost figure is 40% higher than the 3q14. Forty percent. Forty. I mean, we all know they produced and sold more gold in 4q14 than in previous quarters...


...but that was all about high-grading their mines and stuffing their best rock through the machines, because they didn't move any more rock to do it:


So what happened here, they spend $8m on extra reagents or something? But the funnies on this part come when you try to get an explanation from the company because on 4q14 costs, this is what they wrote (your humble scribe highlights):
Production costs for the fourth quarter of 2014 were $33.1 million, an increase from $18.6 million in the fourth quarter of 2013. Cash cost per gold ounce sold (see Non-IFRS Measures section) increased to $801 in the fourth quarter of 2014 from $654 in the same period of 2013, principally due to an increase in mine operating costs.

And that's all she wrote! Nothing else on that wild costs number which means AR.to is telling us "Production costs increased due to an increase in mine operating costs". Buddha-like enlightenment, guys. 

Second up, down on pages 16 and 17 of the MD&A you get nearly a full page on why AR.to decided not to write down any of the asset values of its non-current assets (e.g. the asset value on their mines and projects).  I urge you to go read this marvel of comedy prose yourself, but if you can't shake the image of a CFO wearing a red nose and with one of those squirty plastic flowers in his lapel buttonhole once you're done, we're in the same boat. 

There is so much to love about this section, but consider just this as your lead-in example:
  • AR.to carries Magino at U$267m
  • AR.to currently has a market cap of CAD$207m (i.e. around U$166m).

Therefore what AR.to is trying to tell us with a straight face is that the project it bought in 4q12 (when gold was up at trading around U$1,700/oz) is still worth U$100m more than the whole of the company. Even with gold at U$1,150/oz, even after delivering an economic study on the project that shows it to be marginal at very very best (a polite way of saying that it'll never fly at sub $1,300/oz gold), even even the way it has scaled back development of the project to what's nothing more than care&maintenance. Seriously, this is not an IKN joke, we're not making this up, "Magino's worth U$267m" truly is what AR.to is telling us via its year-end documents. 

There are only three possible conclusions to be drawn from the above

1) Argonaut Gold thinks we're stupid
2) We think Argonaut Gold is stupid.
3) Both.

As AR.to is still trading above CAD$1.30 this morning, I plump for option three.

4q14 G&A per gold ounce of a selection of junior and senior producers

Here's a chart:


EDR did a good job of keeping its office costs down this quarter. The 'new normal' seems to be between $60/oz and $80/oz and there's no reason why any comapny should be spending more than that, I'd vouch. Meanwhile if you want to use gold taps in your office bathroom, go work for a silver mining company (though FVI and GPR are bound to tell you that layoffs and severance cheques are part of that gig, as in 3q14 both those were around $100/oz).

Here's the table that made that chart, for reference purposes:

Ticker 4q14 G&A ($m) Oz Au or AuEq prod $ G&A/oz
EDR 1.572 44286 35.50
RIO 2.835 57908 48.96
EDV 7.5 119729 62.64
ABX 102 1527000 66.80
FR 4.21 60679 69.38
KGC 51.2 672051 76.18
RIC 1.945 23854 81.54
BTO 9.957 118953 83.71
AR 3.733 44312 84.24
TGD 2.53 25007 101.17
GPR 1.868 13015 143.53
FVI 5.209 32156 161.99
in case of silver mines, conversion to AuEq done at 70/1


x

Dead Goldcorp (GG) miners in Guerrero, Mexico

Reuters has your story:


Three Goldcorp miners found dead in troubled Mexico state 
9:42 PM Eastern Daylight Time Mar 15, 2015
    IGUALA, March 15 (Reuters) - Three employees of Canadian miner Goldcorp Inc were found dead, family members said, after they were believed to have been abducted in restive southwestern Mexico.
    The corpses were found on Friday in a mass grave in Guerrero state and showed signs of torture, the relatives said. It was the same state where 43 trainee teachers were abducted late last year and apparently massacred, in an incident that sparked President Enrique Pena Nieto's deepest political crisis.
    State authorities declined to comment when asked about the discovery.
    The state prosecutor's office said on March 6 that four employees of Goldcorp, the world's biggest gold producer by market value, had possibly been kidnapped. Prior to their disappearance, they were believed to be headed home after finishing their shifts at the Los Filos mine.
    The fourth employee has since been freed, according to family members.
    "The information available to us about this incident is limited, however the disappearance of the employees was unrelated to their role with Goldcorp," Goldcorp spokeswoman Christine Marks wrote in an e-mail on Sunday. "The employees were not at the mine conducting Goldcorp business or in Goldcorp-supplied transportation at the time of the incident," she added.

Argonaut Gold 4q14 results

Interesting to compare the RIO charts below to these:



Well, I think it's interesting at least. It's a nerd thing. Here's the company NR, which is far more upbeat than that operations chart. Unsurprising.

Rio Alto (RIO.to) (RIOM) 4q14 results

Rio Alto Mining (RIO.to) (RIOM) just churns out another quarter. What grabs the attention is the absolute regularity of its financial results. Hits the revenues, costs stay in line, gross earnings similar, operating earnings same story:



The mine that runs on rails. Boring is good. Here's the company NR

Chart of the day is...

...five years of the gold/silver ratio:




You do remember the heady days of early 2011? Yeah, me too. That wondrous epoch when we thought Eric Sprott might be right. When Jason Hommel told us about the price of silver and its connection to The Rapture. When people thought Huldra Silver had a smart business plan.  When Bill Murphy pumped ECU Silver over at GATA for all he was worth*.

Long, long ago.


*Which was considerably more then than it is now, by the way

3/15/15

Pacific Rubiales (PRE.to) and Ecopetrol (EC) news

The news release rule of "short is not sweet" most definitely applies in this case. Seven lines, that's your lot
BOGOTA, ColombiaMarch 15, 2015 /CNW/ -- Ecopetrol (NYSE: EC; BVC: ECOPETROL; TSX: ECP) and Pacific Rubiales Energy announce that they have agreed not to extend the Rubiales risk participation and Piriri joint venture contracts that expire in 2016.
Ecopetrol will be examining different options for the operation of the Rubiales field. For its part, Pacific Rubiales Energy will explore the possibility of presenting a proposal to operate this asset.
Both Ecopetrol and Pacific Rubiales Energy have expressed interest in continuing to develop business opportunities for the benefit of both parties and that of the country.

And by way of a small reminder, on January 29th IKN wrote:
"...the word inside Colombia's financial zone is that Ecopetrol is indeed going to take back its Rubiales field next year instead of continuing the JV with PRE.to, as is ECO's right under the deal. And that means PRE loses its cheapest and most important production field. And that means in 2016, its costs per barrel shoot higher than anything it sketches in its current 2015 guidance...." 

And then there's this, a Spanish language documentary all about how wonderfully PRE.to treats the people round its operations. Not.

The IKN Weekly, out now



IKN305 has just been sent to subscribers. It mostly talks about metals and mining stocks, in fact.

The trading oil flowchart

This is very good indeed. From Setty