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7/20/17

The Friday OT on a Thursday: Linkin Park; Numb

For obvious reasons. For sad reasons. From sad blogger.




A damned good piece of music, too. Youtube here.

Tahoe Resources (TAHO) (THO.to): News on the Xinca people who, according to Kevin MacArthur, do not exist

This link has the story from yesterday outside Guatemala's Constitutional Court. This one has this photo:




In short, hundreds of the Xinca people that Tahoe Resources (TAHO) (THO.to) insist do not exist turned up at the Guatemala Constitutional Court yesterday, proved by their mere presence that TAHO is plain wrong (a fact that has also been firmly established by the Guatemala Supreme Court, like it or not Ferrari Kev) and demanded that the mine be closed immediately and permanently.

Asanko Gold (AKG): Canaccord's worldbeating brass neck

Perhaps because I've been watching the scumbaggery that goes on inside the Canadian sell side world for too long, there's really not much those thieves in suits can do to leave me gape-mouthed these days. But the nefarious stunt Canaccord pulled on its own clientele this morning is an exception that proves my cynicism rule. Seriously, this one is so two-faced and deceitful I almost stood up and applauded the computer screen on finding it out. Consider the following:

Yesterday July 19th, Asanko Gold (AKG) announced its 2q17 production results and on receipt of the news, Canaccord's Rahul Paul sent a note to clients reiterating his C$5.00 target price and "Buy" rating. Here's the top box of his note:


Today, just one day later, Canaccord cut its target price price on AKG from C$5.00 to C$2.75. But Canaccord didn't do this in a specific note, it sneaked it in via a macro sector update report. In this report covering a multitude of companies, the only segment on AKG was this one (circled in red):


This is brass neck of the highest level. And when you consider the three "reasons" Canaccord gives for this massive downgrade it gets even better because numbers (2) and (3) were already known to both Canaccord and the whole world beforehand, there was no reason whatsoever to ignore them in the July 19th update (just one day before). And of the third reason, the (1) change of house gold price deck, if we check the new ratings and target changes on the whole deck of Canaccord price targets for smallcap/midcap miners there is only one that stands out:


And sticks out like the proverbial sore thumb. While all other stocks are adjusted between 0% and 17%, Asanko gets a whopping 45% drop to its target price (and wonderfully, it's still a "buy"!).

To cap it all, there are some of you who are bound to remember back in February 2017, when AKG finally came clean with its manifold problems, starting with the Nkran reserve downgrade. At that time Rahul Paul called the issue "A speed-bump, not a roadblock" and UPGRADED (!!!) AKG to buy with a $5.00 price target.



At that time AKG was a $3.90 stock. Today Nahul Paul has decided that AKG is worth $2.75. Nahul Paul will of course keep his job, because he's being a good little boy and doing exactly what corner office is telling him to do. You can expect his "downgrade to hold" on AKG about a day after it goes into bankruptcy protection.


thinking zinc

A quiet, under the radar run on the back of its deal closure.


7/19/17

Dear Mister Becker Boris, I am from Bhartistan...

...and I would be humbled for you to consider a most excellent investment opportunity in the beautiful country of Nigeria and its oil industry, of which I am a great expert. I am happy to await your reply at my import & export business Forbes & Manhattan, but time is limited on this special opportunity only for you.

With love in most happiness, Stan.




You think I'm joking? Think again. This link starts by telling us...

Boris Becker 'invested in Nigerian oil firms that 
plunged in value', before losing £100m fortune

...and later tells us this:
The magazine claims it has seen details of a single investment of “more than $10m” in Nigerian oil prepared for Mr Becker by Forbes & Manhattan, a Canadian investment bank and a former associate of the tennis player. Forbes & Manhattan did not reply to a request for comment.


Boris learns the hard way about the political risk of Bhartistan. My thanks to reader S for the heads up.

Discount rate feedback

Several decent mails by way of feedback on this post yesterday, 5% discount rate stupidity and all that. All mailers kept anonymous and some are just excerpts, to protect IDs of both innocent and guilty:

Some people just grouched along with me:

"Well said - there is no capital available to junior mining for 5% or 10%. My biggest issue is that the purchase price of the project is not included in the financial analysis in the 43-101. It's just a sunk cost, prior to the feasibility study, and so can be neglected in the NPV and  AISC calcs. Its no wonder that the cash flow is marginal compared to what you would expect with an AISC of $700."

Some people still don't get how 43-101s are being used for ulterior motives...

"Hey Otto - I couldn't agree more that if you take the company's stated 5% discount rate or whatever they choose as the correct one, you shouldn't be investing in the mining space at all.

With that being said, I have always had a viewpoint that there was a purpose to the 5% discount rate for golds or let's say 8% for base metal projects. Is it really the 43-101's job to assess the level of geopolitical risk? From an operating / construction / processing etc. side, sure, but that's where I would stop. I would say that the 5% is simply a rule of thumb that let's anyone reading the 43-101 report generally speaking compare the relative quality of one project versus another, without considering geopolitical and other risks. Obviously there are limitations as the price decks are not uniform, which I think is something the industry should be pushing for to change, but it is a starting point.

Everyone's perception or tolerance for risk is different and an investor is solely responsible for applying a discount rate he/she believes addresses risks external to the project. I guess in my mind the 43-101 on the npv side is aimed at providing you with a relative data point rather than a factual one - once you have gotten past that point then other risks can be factored in, which in my mind are more external than internal to a project's quality."

Some people do and defend the system (a bit), but still miss the promo BS angle:
"There is another way at looking at discount rates – granted that a junior in an exploration phase pays say 12% interest, however when they find an economic deposit that promises to make a very good return, interest rates for the junior will go down and approach that paid by producing companies. Accordingly it does not really make sense to use a very high discount rate in an EPA, or Feas. as this could cause a company to discard what otherwise could be a money maker once producing. Therefore using a discount rate equal to a junior’s explorers’ cost of capital while in the exploration stage would be a huge mistake."

Other people really get it, like this one:
"The 5% rate serves only one very important purpose: it allows the entire junior market industry to function (raise and pay $$). If actual cost of capital rates were used (only) 10% of projects would be economic..."
And this one:
"My dearest Mr. Otto,... I once questioned an analyst on whether a 5% discount properly reflected risk for a sketchy project in a difficult mining jurisdiction and his answer was, if everyone uses a 5% discount, it is easy to compare project to project.  I guess I just never spent enough time to understand  the incredible similarities of the risk profiles of a project in BC to a project in the DRC.  Silly me."

But I'll leave the final word to a geologist:
"FWIW I don't quietly masturbate over 43-101 reports. I try to make it as loud as possible (and) put on 'Ace of Spades' for tempo."

Nuff said.

Gran Colombia Gold (GCM.to) workers on strike as from July 21st

That's what the report says.

Asanko (AKG) 2q17 production

Due to Muddy Waters and K2 this stock is now BigShort material and to be honest, I wouldn't have bothered with a post on its 2q17 production numbers this morning if it weren't for the blatant corporate BS stuck as the last bullet point. What you need to know about its Q2 is...


...AKG needs to move an awful lot of dirt around to produce an ounce of gold these days, that's exactly what K2 predicted a year ago, too. But the thing that got me riled was this bullet point in the NR:

  • Strong balance sheet with unaudited cash and immediately convertible working capital balances of approximately US$59.2 million (June 30, 2017)

Strong balance sheet? STRONG BALANCE SHEEEEEEEET? From which alternate universe did this message arrive? I mean...




...that U$155m pile of fun in the red circle starts moving over to the current liabilities at the speed of around U$16/qtr as from next month. As from July 2018 AKG needs to pay it all back in 10 equal chunks per quarter, from 2q18 through the end of 2020. That's not going to be easy when you consider the mine makes no money. 

For some unknown reason, AKG rallied this morning by a point or two on the back of its news. More proof (if you needed it) that gringos will buy anything.

7/18/17

Regarding discount rates and junior promo bullshit


IKN Nerve Centre received a mail today from A. Reader, who prefers to remain anonymous but can fairly be called an experienced financial professional. He was in grouch mode and his lament was on the "State of The 43-101", a subject we've covered previously at this humble corner of cyberspace but there's nothing wrong with a revisit either. Here's an extract or two:
Lundin Gold, from IKN 370's commentary, had a discount rate of 5% for NPV. Somewhat ludicruous given extremely high political risks over the centuries in Ecuador as you mentioned.  Recently I saw an iron ore mine FS that had a discount rate of 8% for NPV for northern Canada.  Seriously.  Higher than Ecuador!   Now obviously there's no "standard" for assessing discount rates and other FS variables across the global risk spectrum and never will be.  But this is getting ridiculous, as these FS's and NI 43-101's  just seem to lead to more questions for investors rather than answers. 
Feasibility studies and NI 43-101 summaries feel more like marketing power point pitches than bare bones factual guts.  
Lastly, I don't have the time or energy, but it would be interesting to hire an intern or analyst to take say the top 100 mining companies of all time and compare the feasibiity study estimates to actual mining output and profits in a spreadsheet. Don't even bother with the sub 100, you know what those results would be.

Good points made and let's consider that whole 5% NPV discount rate issue a little further because yes, that one is a fetid turd on a stick. If you care enough (and if you do it will immediately place you in the top 1% of retail investors because most people who trade junior miners are freakin' morons) check out the latest few financing deals for juniors raising or servicing capital for their projects. To give you a start, here are two that come to your humble scribe's mind quickly (because I've analyzed and traded both in the last 12 months):
  • Continental Gold (CNL.to) cost of capital for capex raise; approx 14%
  • Red Eagle (R.to) current interest rate on loan; LIBOR +11%
Those just two off the top of my head, thing is that they're pretty typical and I'm quite sure you have half a dozen more to offer me of the same ilk. The point is, what the merry jinkums and blinking flip do those numbers have in common with a discount rate assumption of 5%? Or even 8% for that matter, a figure that used to be a type of benchmark standard for financial anal ysis in previous years? Answer; Nothing, not a sausage and bugger all. But that's not going to stop the purveyors of high quality bullshit (you know them as junior miners, their consultants, their paid whore promoters and their under-strict-instruction paid lackeys in sellside houses) from using them to throw sequins in your eyes. And if you, dear and kind reader, think there isn't much difference between a 5%, 8% or 10% discount rate when running a financial anal ysis you live in the same world of dumbass mathematics as Allan Barry.

When floating such comments about 43-101s on the blog, it's round about now that the geologists (normally) or engineers (sometimes) pipe up and say "AHA! But my dearest Mister Otto, a 43-101 isn't meant for the public world, it's by nature a technical document designed for an audience who understands the funny graphics, quietly masturbates over mill plan flowcharts late in the evening or knew the difference between a greywacke and a schist before you were out of short trousers; dearest Mister Otto". Which just goes to prove how stupid geologists and engineers are. Their insistence on this point, when it's crystal clear that Company XYZ has put a 5% discount line into its PEA and then trumpeted it in the accompanying NR and then got all the hangers-on and parasite lackeys to repeat the spin verbatim on their radio show, youtube channel, coldcall phone spiel, anal ysis report, chatroom wankery, blog, weekly subscriber report or wherever else is too much of an insult to be taken seriously (note to geologists and engineers; please check out definition of 'common sense' in your preferred dictionary).

So what's the answer to this mess, reader A. Reader and others? Pretty simple really, know more than your peers. Yeah yeah, I know I know but once you do you're allowed to put in place a BS filter that quickly separates the mining wheat from the chaff. In this specific case you can boil it all down to something like:

"Immediately ignore any company, promoter or market voice who tries to get me into a stock using an analysis based on a 5% discount rate."

You see them trying to do it, immediately blackball the assholes. It's how a free market works, after all.


The price of copper...

...has this thing about the U$2.70/lb line:



In fact it's more likely the U$6,000/tonne line, as that's U$2.72 (and bits) per Lb.

Atico Mining (ATY.v) 2q17 production

NR out today here, chart here:


A pretty reasonable quarter. You're getting a lot of value for the CAD$64m market cap here. The day this company starts paying a penny per quarter dividend is the day its current share price is left in the dust. Shouldn't be long now, either.

Novo Resources (NVO.v): Speculators having fun

Here's the ten day price chart of Novo Resources (NVO.v), one that priced the company at around $150m last weekend and a bit more today.


Volatile? You bet. The discovery it announced last week is perfect stuff for a speculative end of the market, but (and to make clear to the sartorially challenged jackass Jordan Roy-Byrne) your humble scribe is not joining in on this one because even though it could be anything, it could also be overbought already. I wish those people playing the stock the best of fortune but it's not a trade for me and here, in the piece from IKN426 published Sunday, is why:

Novo Resources (NVO.v): Difficult to value
I think most of us saw the video, results, photos and news release out of Novo Resources (NVO.v) last week, the wonderful nuggets of gold dug up after the metals detector went crazy in its first trench at its Purdy’s Reward project in Western Australia (if not, start here (19)). The stock shot higher on the news of course and closed up nearly 50% on the week with outsized volume, but the action late Friday was interesting too because there were clearly sellers.

Here’s the problem with NVO and its Purdy’s Reward discovery. Yes it’s exciting, anytime you discover rocks with large lumps of visible gold it’s always going to grab the attention of the market and rightly so. It’s also the type of result you’d want from this type of paleoplacer deposit at this early stage, as it’s long odds-on that if your first bucket of rock gives you impressive gold returns you’re going to find the same stuff in other places, again and again. But it’s going to be tough to value:

How big is the deposit? No idea, and there are only two ways of finding that out with any type of security: You either SwissCheese it with a very expensive drill program or you start mining it out now and see how long it lasts.

How much can you produce a year? This is Nugget Effect mineralization to the Nth degree, so what kind of throughput will it support? And what amount of production will that give you? And how long until the rock runs out? Without a good handle on size and grade, these questions become best guesses and you may end up spending way too much on your capex for the eventual mine.

NVO is already a $150m Market cap company and that’s expensive for a junior, exciting discovery or not. I’m not saying there’s not speculative potential in the stock, I am saying it’s hardly a riskless trade by any means. It’s way too early to make any firm statements or start assuming things, but from the scant evidence to date I can imagine Purdy’s Reward becoming a nice and very profitable source for a small mine in private hands that can run for years. Is it big mine material? I don’t know and to answer that one, NVO will have to spend a LOT of money and time on the deposit, Is it worth $150m? Frankly, it could be worth half that or it could be worth ten times that. What I do know is that if you’re going to speculate on its future I wish you the best of fortune (as I do Quinton Hennigh and his team) but I won’t be joining them until we know more.


PS: Today's price isn't even the 52 week high yet. Just saying.

7/17/17

Big fire at Tenke Fugurume

Large-scale damage, explosions and at least two of the workers dead, we hear. Expect reports.

The Alset (ION.v) scam: Nine and a half weeks...




...since this scam run by a blowhard charlatan sent its samples off to the labs and they STILL won't release the results. At what point does this move from stupidity into the actively criminal?

Cordoba Minerals (CDB.v) will release hole 063...

...assay results, along with a bunch of other holes, before the company AGM. So says the CEO. As the AGM is set for July 27th, that means either this week or next. Now you know what I do.

Global Mining Observer does Alex Black

In the nicest possible way, of course. Link here to the Alex Black meets GMO extravaganza and don't miss the GMO Glencore piece either, that's here.

The IKN Weekly, out now




IKN426 has just been sent to subscribers. As tasty as an Old England Toffee.

7/16/17

Gran Colombia Gold (GCM.to) loves its workforce

Tomorrow Monday the workers employed* by Serafino Iacono's joke of a mining company Gran Colombia Gold (GCM.to) will vote for what seems like the 50th time to go on strike. This time it's because GCM hasn't kept its promise to improve pay and conditions as it said it would by June 22nd, a date it confirmed and ratified with both workers and government. Because that's how this company works, it lies and cheats and gets your money, then flushes it down its own worst practices toilet. Lather, rinse, repeat.

Don't expect Fino to be at the meeting or the negotiations, he's too busy living it up at his new boutique hotel in Italy.



*in fact GCM isn't much more than a very large toll milling operation and the combo of thousands of informals and a company that doesn't give a rat's ass gives you one of the worst environmental polluters you can imagine.

Hey Jordan Roy-Byrne

I may be a jackass, but as anyone who has met me will testify (a list that does not include you) I admit that readily. On the other hand humility has never darkened your doorstep, you are widely considered as an asshole of the highest order, pompous, arrogant and just plain fucking stupid. So the next time you decide to slag off somebody in your subscriber-only material, I suggest you avoid writing about the personal character of people you've never set eyes upon or even spoken with, make it about yourself and learn a life lesson, you fucktard.

Lots of love, Otto.

PS: And buy some clothes that fit.