start here

start here

The Daily IKN email digest, get all daily posts sent to you next day (& no ads)

11/7/15

The IKN Weekly on silver

For a different reason this evening I opened the back copy of IKN320, dated June 28th 2015, but once there something I wrote about silver that weekend caught my eye and I read it through again.

Remember that time early this summer when Keith Neumeyer of First Majestic (FR.to) (AG) wrote that stuffy letter to the CTFC people? When Jim Sinclair was up in his golden arms about the manipulation of the silver market (again)? When it was only a matter of time before silver exploded to the upside? Well, this below was written at that time and on reading it through again it looks just as relevant today as it did back then.

This weekend silver stands at U$14.74/oz, for reference purposes.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

A half-year review of IKN's position as regards silver

No specific mining stock again this week, instead a shorter note as I coast lazily through the summ...sorry, as I carefully consider options for investments during this quiet market period (see 'Market Watching' below for a little more on those). You know IKN likes gold miners more than any other right now (check the main places in which we're invested right now if that's not clear), you know I'm leery of industrial metals exposure (first up copper, but zinc, lead, alu, nickel moly etc all count too) but what about the one that causes the headaches, the Jekyll and Hyde metal, silver?



I've spent at least a chunk of time in the past seven days checking over my thesis on silver and why I prefer gold exposure in my mining stocks to that of silver, stress-testing if you like. The upshot is that I'm happy with my preference for gold over silver. Let's start by opening myself up to accusations of cherrypicking with a January 21st 2015 Bloomberg report, "Silver Poised for Bull Market as Economic Woes Boost Demand" (4). Yes it suits my argument against silver to pick an example of what's gone wrong in the pro-silver camp but believe me folks, after spending a while wading through the hype-laden silverbug material and what passes for analysis (total guff) that's out there I could have chosen something that looks plain stupid instead of just wrong. Anyway, to the example and here's a quote:



“Silver will benefit from all the stimulus measures and rate cuts being announced aggressively by the central banks,” Caroline Bain, a commodity economist at Capital Economics Ltd. in London, said in a telephone interview. “The stimulus measures will at some point boost usage of the metal.” Bain said she expects the price to rise to $20 by the end of the year.



On January 21st, the date of that report, silver closed at $18.22/oz on the London Fix. This weekend we're at $15.83, a drop of $2.39 or 13.1%. And before you say anything that same day had gold at $1,199/oz, which is a tad higher than today's close but still under U$1,200/oz and in the at-or-abouts range with which your author is trying to model investments in the gold space. So okay, long story short some analyst at a desk made a bad call, not the first time and not the last but I'll bet you a large amount of my money to a small amount of your money that calling badly to the upside only gets remembered by irritating little guys such as myself who snuffle around the web and dig up forgotten news reports. Dare to call silver lower (dare to call anything shiny lower) in public, get the call wrong in your timeframe and you never hear the end of it. I can promise on that one, I have the scars and the mails to prove it.



Next up, I also spent some of my Friday reading Jim Sinclair's views on silver. Yes seriously, that Jim Sinclair the "Dear Comrades In Golden Arms" Sinclair, via this post on his website (5) dated Friday June 26th and entitled "Don’t Push A Bad Position" which seems to be either co-authored or authored with Sinclair's tacit approval by one Bill Holter (I'm not sure of the protocols in silverbugland and can't be bothered to find out). Anyway, there was a lot of the usual "it's a fix!" and "it's not fair!" stuff so go read it if you like, but along the way a point made in this paragraph caught my eye and I've highlighted the bit that matters:



To finish this section, there is NO market anywhere on the planet where the amounts of futures dwarf the physical product so overwhelmingly than in silver. Why is silver so important? Why has it been bludgeoned so badly and even priced below the cost of production? You must understand how small the silver market is. Total global production is less than $15 billion per year …"but", silver cannot be left alone because high silver prices do not jibe with low gold prices. …And gold MUST be kept down and out of the limelight because high gold prices do not fit with low interest rates …which are an absolute must in an effort of reflation. You see, in no way can interest rates be allowed to rise with the amount of global debt outstanding. Higher interest rates will crush the debt outstanding, the silver market is at the VERY BEGINNING of the "food chain" that keeps the lid on interest rates. I believe the Chinese hold this market in their back pocket paid for with "pocket change", they will use is it at their own discretion!



And in that bold-typed and underlined section there are three points with which I agree:



1) Total global production is less than U$15Bn per year. In fact, if we take 2014's production number and a U$16/oz price for 2015 and it would be under U$14Bn.



2) Yes, it makes sense to use silver as a "handle" to keep a cap on gold. We all know about the gold/silver ratio and how it's moved up to towards 75/1 recently. We also know about the 15/1 legends and the 50/1 averages since the US dropped the gold standard, there's any number of numbers with which one can feed.



3) It helps the "mainstream financial world" (an ugly phrase, but it'll do in a pinch and you at least know what i'm talking about) to keep gold out the limelight or under control.



However, this very paragraph also points to how and why this horrible naughty unfair stomp-your-feet silver manipulation isn't going away anytime soon. Something Mr. Sinclair ignores.



·     Yes, silver's a "handle" on gold but by no means completely effective, else the gold/silver ratio would not have drifted to where it is today, North of 70X for for over half a year.



·     Yes, silver's a small market in absolute terms and that makes it easy enough to control, as all the articles pointing to the large JP Morgan position in silver will attest.



·     But why is there this assumption, or at the very least implication, that just by pointing to out the manipulation it's going to go away?



We've witnessed metals market manipulation on a far greater scale recently in the copper market and that only saw action taken against it because end-users we're complaining that the price they were paying was artificially high (and as a result threatened the LME which in turn changed its rules on warehousing, bringing all the fun to an end). So tell, me, what end user (rather than end-hoarder, big difference) is going to kick up a fuss and complain about artificially low silver prices? The masochist end of the silver market, perhaps? Silver is nominally "precious" but it's still an industrial metal and more than half of annual production goes to industrial uses. It's not gold, never has been, never will be.



The fact is, this silver manipulation by the big bad nasty JPM and its friends shows no signs of going away soon, none at all. We've even seen the bank successfully defend its position in courts, which annoys the manip-callers no end but that's the way it is. Call it legit market device, call it immoral, call it illegal, your opinion counts as much as mine (i.e. zero) but if we assume 1) the runners of this silver market are making their profit and 2) there are no rules being broken and 3) it's small money in comparative terms and 4) it at least helps the bigger game of gold control, I see no reason why it should suddenly stop just because Keith Neumeyer sends a mail to the CTFC. "Not fair" you say? Well f__k fair, since when has 'fair' been a part of capital markets?

"Lost at sea: the man who vanished for 14 months". Salvador Alvarenga, this weekend's longread must-read

A great piece in The Graun today, here's the subhead blurb.

In November 2012, Salvador Alvarenga went fishing off the coast of Mexico. Two days later, a storm hit and he made a desperate SOS. It was the last anyone heard from him – for 438 days. This is his story.

Go read it all here, wonderful stuff.

11/6/15

The Friday OT: Elvis Costello and the Attractions: Pump It Up

From 1978, a killer tune that (to many people's surprise) was never released as a single. It's aged well:



And to know where it came from, here's Bob Dylan (and possibly the greatest music video of all time, certainly one of the oldest). Compare and contrast.


There's a reason nobody was considering that, Eric. A really good reason

This from an interview with Eric Sprott dated October 20th 2014, a little over one year ago:

The Gold Report: How will an explosion in the number of Ebola cases impact the global economy?

Eric Sprott: Fear of travel and business disruption is definitely going to have an impact on a fragile economy already weakened by recessions in Europe and Japan. An event like this could have serious negative repercussions because it changes people's behaviors. If people worried about the security of bank deposits start pulling their money out, they would logically want to shift to gold and silver. All of a sudden, investors would come back into these markets and push the price up. No one is considering that. The natural Armageddon of disease could cause a financial Armageddon and precious metals are the natural comfort play.
A chart of the prices of gold and silver, October 20th 2014 to date, along with the SP500. The S&P500 index is the (oh the irony) gold coloured line and is up 10%. The others aren't.



Never mind, there's always the next Armageddon.

SP Angel on Minera IRL today

Here's the screenshot of the commentary from SP Angel on Minera IRL (IRL.to) (MIRL.L) after the Team Hodges silliness NR today.



Expect fun next week, folks.

The Fed December hike now baked in

As noted in The IKN Weekly last Sunday, consensus for the US jerbs headline numbers was +190k and 5.0%. So the 5.0% was on, but the 271k jerbs means we're now baking in the December Fed rates hike. Gold dumped to previous resistance as a result and today may turn out to be a good day to buy a few things (that is if you're not a Casey Research subscriber and have spare cash rather than being totally bought in on all their constant buy recos).

I digress. At the Weekly we've often said that it's not  question of "if" on Fed rate hikes, it's "when". That question seems all-but settled now, Fed being data-monsters and that.

For smarter commentary on the jerbs numbers and their fall-out, check Calculated Risk today. No better place for this type of US thing.

Brazil: The BHP dam failure

According to latest reports, at least 15 people are dead due to a dam failure at the BHP/Vale JV Germano iron ore mine in Brazil. Today's big news from this neck of the woods is not good news.

PS: Holy crap. Imagine that wave hitting your town.



UPDATE: Here's footage of the disaster zone (shot from a drone and then a helicopter, it seems). This is highly unfunny for the locals, for the companies and for the mining industry as a whole.


Minera IRL (IRL.to) (MIRL.L): The lawyers try again

A great big looong news release from Team Hodges this morning, which you can read on this link. The usurpers cover many angles and aspects, but as usual from these people it's a classic of lawyer-speak, so what they don't say about each subject and the way they carefully craft their sentences is important.

Take for example this, in which Team Hodges shows their...errr...respect?...for this humble corner of cyberspace:

Eric Olson, Chief Operating Officer

Minera would like to confirm that Eric Olson, Chief Operating Officer, has not had permission to enter Peru
revoked by the Peruvian immigration authorities as speculated, nor has he broken any immigration rules. In
common with most expatriates who work in the global mining industry, Mr. Olson works on a rotation system which
includes 6 weeks in Peru, and 2 weeks outside Peru.

What they don't mention are:

1) The two official appointments with the immigration authorities that he failed to attend
2) The way he left the country rather than face the music.
3) That Olson cannot have his permits revoked until he sets foot on Peruvian soil again. Right now here today what they say may be technically true, but it's pure lawyer-speak and my stars, it's going to be fun to see how he gets on at the airport when he decides to show his face in Lima again.

Then there's this, what they write about Daryl Hodges' payments from IRL, direct quotes

The Company and Mr. Hodges have agreed to the following payments in
settlement of all obligations due to him: $15,000 a month from November 2015 to April 2017 followed by a
payment of $10,000 in May 2017. 

The Company would like to reiterate that subsequent to the August 27, 2015 AGM, Mr. Hodges has not provided any
services to Minera IRL Limited, and is not involved in any matters related to the Company's current situation.

Does anyone else see the glaringly obvious in those two statements? One about getting paid, the other about not doing a scrap of work? You'll also note that not a word is said about the $500,000 golden parachute payment aside from "it was triggered" and "change of control" because, as noted above, what these fork-tongue merchants don't say is every bit as interesting as what they do say. So is there still a bonus in place, Daryl?


Anyway, go have a look at the spindoctoring yourself. There's going to be so much more to get from this work of art.

PS: And one thing that's really really interesting is the way they haven't mentioned the name Brad Boland, not in this NR and not in the previous one, either. Oh what fun to come.

UPDATE: Here's what London-based Shore Capital and its analyst, Yuen Low, had to say about the linked NR today. Interesting how he's noted the Hodges pay stuff too.


MINERA IRL^ (MIRL, NR, CNP) – Minera soap opera: ex-Executive Chairman Daryl Hodges will get US$280k payoff, rather than US$680k. We continue to put aside our Dallas analogy while we consider the matter of former Executive Chairman Daryl Hodges financial arrangements with Minera. Earlier this month, we called on the company to fully disclose the details and the company today obliged.

· It emerges that Mr Hodges was indeed paid US$15k/month over March to September 2015 (US$105k total), which we view as fine on the basis that his basic salary was US$180k/year.

· However, it also turns out that there really was a gobsmacking US$0.5m ‘change of control’ clause (i.e. ‘golden parachute’) which was deemed “triggered” (along with a full year’s pay as a lump sum) as a result of his being voted of Minera’s board.

· Minera is attempting to justify this by comparison with Mr Chamberlain’s terms, which included a similar provision – but we see this as inappropriate given that Mr Chamberlain built up the company over many years, whereas Mr Hodges only joined in 2014.


Minera’s and Mr Hodges’ legal counsels have since concluded discussions on the termination of his contract.

· Mr Hodges is now to be paid US$280k, comprising US$15k/month from November 2015 to April 2017 and US$10k in May 2017.

· We are encouraged that this is significantly less than the aforementioned US$680k, although we still view US$280k as excessive under the circumstances.


Minera also reiterated that Mr Hodges “has not provided any services” to it nor been involved “in any matters related to [Minera’s] current situation” since being voted of the board.


Meanwhile, Minera is still “in the process” of dismissing former interim CEO Diego Benavides from his positions in the company’s operating subsidiaries, which could take several months. Minera reiterated that the principal cause for dismissal was Mr Benavides failure to co-operate with Mr Hodges as Executive Chairman, and his “resistance to changes” that Mr Hodges and Minera’s board wanted to implement. In a press interview, one of Minera’s directors also claimed that Mr Chamberlain “never saw fit” to propose Mr Benavides for a board position, and that it was Mr Hodges who elevated him to position of interim CEO “to try him out”.


We understand that Mr Benavides has a very different story, and we call on Minera to release the minutes of its meetings to put this issue to bed. We understand also that Minera has to be registered in Peru in order to be able to properly call for a shareholder meeting of its subsidiaries, and that this apparently isn’t the case. We therefore also call on the company to clarify this issue.


11/5/15

Global Mining Observer does Minera IRL (IRL.to) (MIRL.L)

You have to see the report that Alex Williams has put together on Minera IRL (MIRL.L) (IRL.to) in which he interviews both Diego Benavides and Robin Fryer. It's available to subscribers right now (it's a 100% free and zero cost subscription, link here to subscribe).

And here's a special IKN message to Robin Fryer. In my considered opinion you've just criminally defamed Diego Benavides under UK libel laws, because that's what happens when you tell direct and provable lies against another person. I hope you have a good lawyer, because the UK is not the place you want to lose a case like this. As for the "rights issue" thing, that just shows exactly what Team Hodges plans to do if it wins the proxy battle, i.e. dilute current shareholders to kingdom come. As they say down this way, "pez por la boca muere".

UPDATE: Here's the direct link to the Global Mining Observer piece on Minera IRL.

UPDATE 2: I've double re-read it and my stars, GMO's piece is just wonderful and the best thing I've read on the whole IRL saga to date. Not only is it packed with information, but the prose is a pleasure to read too. Make it your must-read of the day.

UPDATED (and read the updates, folks) The Minera IRL (IRL.to) MIRL.L) proxy forms: The need to know

Many readers and subscribers have reported that their proxy forms have arrived on their doorstep (virtual or otherwise) this week. A couple of you have asked for some basic guidelines so here come the four things you REALLY need to know:

1) If you vote AGAINST the agenda items, that means you're voting in favour of the current board. In other words, "AGAINST" is a vote for Team Hodges.You'll also note that the proxy form advises you to vote that way (because the incumbent trash don't want to lose their jobs).

2) If you vote FOR the agenda items, that means you're voting in favour of the current board being kicked out and the new board coming in. In other words, "FOR" is a vote for Team Benavides. 

3) BE CAREFUL, because if you leave any of the agenda item votes blank, the  votes automatically go to Team Hodges (i.e. the current management). Being the sneaky underhanded weasels that they most certainly are, hey've skewed the terms of the vote to their advantage that way.

4) If you have any doubts at all, don't hesitate to contact me at...

otto.rock1 (AT) gmail (DOT) com

...and I will forward you mail to somebody inside Team Benavides. They can and will give you all the exact information you'd ever require to get your form filled in correctly. That applies to people with shares held via the market in Canada, London UK and Peru.

As of this week, you the shareholder can get active and help throw out this scummy board who are trying to strip shareholder value away from you (and give it to somebody else while lining their own pockets). So the bottom line is VOTE FOR EVERY ITEM ON THE PROXY. And make sure all your details are filled in correctly, because Team Hodges will use every trick possible to annul valid votes.

UPDATE: Reader 'RK' writes in with this, for which we thank him:

 IRL Voting -much easier to do online...just saying

 just ask the broker for the control # and go to this website and voila:

https://east.proxyvote.com/pv/web
UPDATE 2: An excellent mail from reader "R", which anyone about to vote using the phone option should read carefully. Here are the necessary extracts:

The...important reason for writing you this message  is that there could easily be a potential situation in which voters who are in support of Team Benavides, mistakenly vote against them. The reason I say this is because when I called in to vote, the very first thing I was prompted to answer was the question regarding whether I wanted to vote for the recommendations. The thing is, I can't recall the exact wording they used and that's what worries me. Because if for example the words were "Do you want to vote along with managements recommendations? If yes, press 1", does pressing 1 mean that you're voting for Benavides, or are you actually recording a vote according to management's (team arsehole) recommendation, which actually means you're siding with them and voting against Benavides? ... when the first question asked 'Do you want to vote along with the resolutions set out in the circular?', I can't help but wonder if going along with that means you might actually be voting in accordance with what team Hodges wants us to do, which is all votes AGAINST the 10 resolutions.
 
Myself, I didn't trust that I might mistakenly be giving my votes to the wrong team, so I went instead to the second option of "To vote for each resolution seperately, press 2", and that way there was no doubt that I was voting "FOR" each of the 10 resolutions. Also, after voting for all 10 individually, the prompter confirms the votes by telling you what you voted and asks you to confirm. I can tell you that in my 22 years of speculating on junior mining stocks and always voting on every and any resolutions that came up, THIS TIME was the first and only time I've ever truly relished punching all those buttons and recording each and every one of my (number redacted) shares. 
 

Gary, goons and gold

IKN is quick to bring this post to your attention, "So Who Exactly Are the Goons That Gathered Against Silver and Gold in the CoT Alignment?" written by the famous and wonderful Gary Biiwii. 

That's because aside from the main chart argument at hand, he comes out with zingers such as...
" gold and silver miners are some of the dumbest money on the planet with respect to their hedging history"
...and...
"Gold miners are not traditionally the brightest lights in the constellation of corporate entities"

100% agreed, great stuff Gary. Add the way the people who run gold mines think they're special and top echelon (and swan around accordingly) and you have the laughshow that IKN gets to enjoy every day. 

The whole Gary T article is worth your eyetime this morning, metalypersons. Read it here.

11/4/15

Rubicon (RMX.to) (RBY) talk on BNN tomorrow Thursday

Tomorrow Thursday at 11:30am Eastern Time, Tim Oliver of 'Mining's Black Box' will be on Canada's biznews channel BNN to explain more about the snafu that is Rubicon Minerals (RMX.to) (RBY). If you want to learn about the situation from a seasoned and highly experienced mining engineer instead of listening to unqualified nonsense from blowhards in chatrooms, you'd be well advised to tune in.

Having your cake and eating it

Here's a question received from reader 'DB' this morning:

I'm really not sure why it's such a big deal that companies are not including depreciation in their cost reporting.

If I'm comparing a potential investment into two companies and wish to compare the cost base of those two companies, does it matter if the mine cost US$1bn to build or US$100m to build (and that capital is depreciated accordingly)? Surely what matters is what it is doing today.

Good question, and one connected to the recent posts on the increasingly useless metric we know as All In Sustaining Cost (AISC) (see the past couple of days on Detour Gold and Primero Mining).

Okay DB, in conceptual terms think of it this way. When a company constructs or acquires a project it will make its case for investment in said new mine by explaining the NPV of the project, i.e. what cash profit it can reasonably be expected to generate over its mine life. That's (nearly always) done on a 100% equity basis and if they manage to convince the world the capex gets raised. But if instead the company take out a big chunk of debt to pay for at least part of the capex, or it does a streaming deal, or something similar that doesn't show up in the "above the line" operational results of the company once the mine goes into production. With 100% equity is that the dilution is understood and built into the share price automatically. But if a debt (or other) financing deal is done, it won't affect the day-to-day operations but it will affect the corporate bottom line, i.e. what shareholders (equity) get for their return. In practical terms, what you get is a company that boasts wonderful made-up operational metrics (things like "operational profits adjusted for non-cash charges" and other such non-GAAP bunkum), but we then scratch our heads and wonder why that operational profit isn't being turned into net profit. The reason is that the "profits" (which they aren't) is being used to pay off something that got between the company and its shareholders. And this is why we can't ignore depreciation of a project, it's the indicator that shows when the project is expected to "get to zero" and it's therefore completely necessary to discount its effect every quarter.

Or if you like, think of it backwards. You can't mine a lump of rock and then assume it's still an asset. It's not like making Barbie dolls, or growing wheat, non-renewable is exactly that. You need to show the world that you as a business can make a profit on what's there in the ground before it's mined and then all gone.

IAMGOLD 3q15 results

The most incredible thing is that even after all this...


...Steve Letwin is still taken seriously because he goes on BNN and makes pretty promises about turning the company around. What a clown joke of a CEO.

Louis James' "biggest personal position": Let's see how this one is getting on

Our pretend geologist, Louis Lobito Little Wolf James of Casey Research, put more of his own cash in Bank's Island Gold (BOZ.v) than any other stock (by his own words, see below) but more importantly for us out here, it's the one he pumped without stopping for years on end. When it didn't go according to plan in early 2014 he published the following piece for his poor long-suffering suckers' readers' consideration and got them buying in even more.

As for how BOZ.v turned out, he waited until the stock had dropped to 5c and then decided to sell. And now he never mentions it any more, preferring to reminisce about buying SLW in early 2009.


It's now a three cent stock, down 93% on that chart. His "largest position" is probably not that any longer, not in cash terms at least.

Here's what Lobito sent to his top-level "investment alert" premium service clients on March 27th 2014, once again (and similarly to his stupidities on Rubicon (RMX.yo) (RBY) this year) AFTER he'd visited the project site. He seems to think that taking photos at a mine is a hallmark of expertise. My thanks to A. Reader for sending it in yesterday (a person who was a subscriber in Casey Research before seeing the light, sadly having lost a whole crapload of money first):

CIA #540: BOZ—Pictures Worth $1,000 Words
03-27-2014
Dear Speculators,
It was the right way to play the odds at the time, but given subsequent price action, it's a pity we got stopped out of our latest GLD "gold insurance" recommendation. I won't dwell on this too much, other than to remind readers that such volatility is normal in our sector, and it's providing some excellent buying opportunities on picks we missed earlier, such as our most recent pick, Roxgold. More on this next week.
Meanwhile, I've been out kicking rocks again, and I'm writing to you from British Columbia, where I just had a follow-up visit with the subject of many questions lately: the Yellow Giant gold mine recently built by Banks Island Gold (BOZ.V, C$0.44, 42.9M SO, 55.9M FD, C$18.9M MCap, www.banksislandgold.com).
I'll have more details in the forthcoming issue of the International Speculator, but want to go ahead and share the gist of it with Casey Investment Alert subscribers now: I'm convinced Banks Island Gold (affectionately known to its 60 or so employees as BIG) is a cash cow in the making and is deeply undervalued.
First, however, I want to remind readers that both Doug Casey and I own shares in Banks. Personally, it remains my largest position. If you believe this may bias me, or my perceptions of the project, please feel free to discount what I'm about to say or, indeed, to stop reading now. I will not be offended. (But I'll also remind readers that as per Casey policy, I'm not allowed to sell any of my shares until giving readers a chance to do so first.)
Now, if a picture is worth a thousand words, let me save us all a few thousand and show you why I'm so optimistic about Banks.
http://www.caseyresearch.com/images/CIA_Mar_27_2014_Photo1.jpg
The aerial shot above shows the main mine site, where there was nothing but moose moss last time I was on Banks Island. The whole camp was a cargo pair of containers—now, there are roads, buildings, and a floating residential facility to house the 30-odd people working where not so long ago, there was naught but wolves and wind.
http://www.caseyresearch.com/images/CIA_Mar_27_2014_Photo2.jpg
Above is the nondescript villain of the day: the barren garnet "contamination" that just happens to weigh the same as Yellow Giant's gold-bearing pyrite. This little surprise resulted in a large amount of garnet being included in the initial batches of gold concentrate from Yellow Giant, reducing their grade—and causing all the other problems we've reported on.
Next, the solution:
http://www.caseyresearch.com/images/CIA_Mar_27_2014_Photo3.jpg
This shot of Yellow Giant's dense media separation (DMS) plant, the heart of the operation, shows a red and yellow spiral separator on the upper-left deck. What was not clear to me before my visit, but is now, is that this new component to the circuit already addresses the garnet problem, even though we're still a few weeks away from the installation of the flotation cells that will improve recoveries and concentrate grades even more.
You see, Banks' contract requires it to produce a concentrate roughly grading two ounces per tonne (2.0 opt), but the garnets were diluting the concentrate down to a bit over 1.0 opt. The spiral circuit recovers fine material that would have been lost as waste, and it grades about 3.0 opt. This is critical, because lab tests had predicted that about 15% of the gold-bearing sulfides would be crushed to this fine size, but the reality is closer to 50%. So, if you add the concentrate from the spiral to the DMS concentrate contaminated with garnet, you end up with an average above the 2.0 opt required—even without the flotation circuit. Voilà.
Note the second set of spirals to the lower-left. Banks plans to run its previous tailings through that set to recover the gold from fine material produced before the garnet problem was identified. In other words, gold already "lost" to waste will be recovered.
http://www.caseyresearch.com/images/CIA_Mar_27_2014_Photo4.jpg
This long-hole drill rig is used to blast large amounts of ore at once, greatly reducing the mining cost per tonne. This is one of the keys to profitability at Yellow Giant; not only does the Bob zone currently being mined grade over an ounce per tonne, it does so in areas over 10 meters thick in places. Currently, this can result in rock with $1 million worth of gold being broken in a single round at Bob. And while in many vein deposits, you can only use long-hole stoping here and there, at Yellow Giant, it's the primary method of mining.
Another key advantage that may not be immediately evident from the photos above is that all the plant equipment is modular, brought in on trucks, and simply parked or planted on the ground. This required minimal surface disturbance, minimal civil engineering, no actual plant building to be constructed, and gives the company the flexibility to add to the circuits, and even move them around, as needed.
This is why the whole thing cost only about $10 million to build.
Note that we do not have cash cost figures yet; the company's accountants are working on those, and with Banks' fiscal year ended on February 28 (conveniently after the start-up teething pains), this first full quarter of production only started this month. That said, the math is not too difficult to sketch out; the mine cost $10 million, the Bob zone can produce $1 million of ore with a single blast… and that two-tonne fine material concentrate bag in the third picture above was mounted as I arrived on-site, and was half full by the time I toured the plant. When Banks starts reporting financial results from regular commercial production, I think the market will be greatly surprised by just how much money a little mine can crank out.
http://www.caseyresearch.com/images/CIA_Mar_27_2014_Photo5.jpg
As for making this little rich mine into a BIG cash cow (sorry, pun intended), consider that the single boulder under my elbow in this picture has about $20,000 worth of gold in it at today's spot price. There were several of these being hauled out of Bob while I was there, and much more in smaller broken rock. More to the point: material like this has been discovered by the company's exploration drilling below the current 43-101-compliant resources at the Bob and Tell zones. The Kim zone has also been significantly expanded, and new zones will be tested this year. With Banks' new, larger mining permit in hand, a little more exploration success could easily scale Yellow Giant up to a level that could attract the interest of a larger mining company.
http://www.caseyresearch.com/images/CIA_Mar_27_2014_Photo6.jpg
Banks is not, however, looking for a takeover; management wants to generate millions in net earnings, keep expanding Yellow Giant, and go shopping for more high-margin projects. I believe Banks will succeed. Consider this last photo, showing about $250,000 worth of gold in concentrates ready for shipment—not bad for a few days' work.
I did not have access to nonpublic data, so I can't give you any financial figures I'd care to defend. Based on what I saw, however, I can say that Yellow Giant is already bigger and better than anticipated, and it was built at an extremely low cost and is operating at what has to be one of the lowest costs per ounce I've seen. While other companies are reporting losses and write-downs, I now expect Banks to report net income in its first quarter of commercial production and growth soon thereafter.
Yellow Giant's profitability may not become fully apparent (or may not be believed) until the company's audited financials come out, but I expect the reality to become increasingly apparent with each press release throughout this year—perhaps starting with the next one.
I can't guarantee what gold will be doing in the nearest term, but Banks Island shares are selling cheaper than they have been since right after IPO, and back then, the company had only an idea, while now it has cash flow. This undervaluation won't last, and I see very near-term Push in this story.
So I'm reiterating my renewed Buy recommendation. Whatever happens in the near term, these shares are a great buy, whether for a first tranche or a second.
I intend to buy more myself—after giving you a chance to do so first.
More soon,
http://www.caseyresearch.com/images/LouisJamesLR.jpg
Louis James
Senior Metals Investment Strategist
Casey Research


Chart of the day is...

...Rubicon Minerals (RBY) (RMX.to) versus the Precious Metals Juniors ETF (GDXJ), 2015 year-to-date:


Note how RMX was tracking the broader, benchmark-type index for much of the year. Then suddenly it wasn't.


11/3/15

Oh lordy I'm fed up to the back teeth of mining company news release wordsmith and spin bullshit, Argonaut Gold (AR.to) edition

Look, instead of wading through the über-spin you get all through the Argonaut Gold (AR.to) news release on its 3q15 trainwreck quarter let's just stick with the title line and debunk the two things it features as quarter "highlights". That title is...

Argonaut Gold Announces Third Quarter 2015 Revenue of $32M; Quarter End Cash Balance Remains Consistent at $44M...

...which combines one balance sheet item and one P+L item.

1) "Revenue of $32m". In fact it's $32.106m, but who gives a fig how much you bring in if it costs you more to produce the goods than you get?



I mean forget operating or net loss, this company couldn't even make a gross profit. Again. And I'm very sorry people but you cannot ignore amortizations etc. Part of life, reality, cruelty etc.

2) "Cash balance $44m". Fine, but what about the one that really matters, working capital?



Notice anything there? Yeah, me too.

And those are just from the title line, fercryinoutloud! I'm now waiting for the mining company NR that starts "We Think You Are Stupid So This Is What We Want You To Understand And Please Do Not Bother To Look At Our Numbers". Shouldn't be long in coming at this rate.


Strange Days

It's a little strange, but...


...for me the message is finally getting through to funds looking for market alpha. Profitable PM mining stocks are cheap, even on a gold sell-off day.

TD Sec on Rubicon

On August 21st 2015, Daniel Earle of TD Sec dropped his target on Rubicon Minerals (RMX.to) (RBY) from C$1.95 to C$1.75.

On October 5th, Daniel Earle of TD Sec dropped his price target on Rubicon Minerals (RMX.to) (RBY) from C$1.75 to C$1.35.

On November 2nd, Daniel Earle of TD Sec dropped his price target on Rubicon Minerals (RMX.to) (RBY) from C$1.35 to C$0.85.

Today November 3rd he's dropped it from C$0.85 to C$0.35.

On the bright side, he's obviously paying attention :-)

To repeat: Brent Cook on Rubicon Minerals (RBY) (RMX.to)

I'm getting a lot of hits on the recent IKN post "Brent Cook's analysis of Rubicon Minerals (RMX.to) (RBY)", which isn't a surprise considering how the Brent dude nailed this story cold. Excerpt:

Costs and Valuation
The SRK 2014 PEA estimates underground mine costs will be C$89.60/tonne, process costs of C$28.12/tonne, and G&A of $32.22/tonne, for a total on-site operating cost per tonne milled of C$149.94. 

I don't buy it. 

Goldcorp reports mining costs of C$233.36/tonne and process costs of C$47.37/tonne from its nearby Red Lake deposit. Red Lake has been operating for over a decade, is a somewhat simpler deposit, and has a skilled workforce that knows the deposit well. Rubicon is starting from ground zero on a PEA-level study, and has not even determined what mining method will work best on this complex deposit. 
The 2014 PEA estimates a base case ($1,385 gold at a C$1/US$1.05 exchange rate) post-tax NPV5% of C$531 million and IRR of 27%. At a $1,108 gold price, the NPV drops to C$206 million. Rubicon states the PEA is conservative, as it employs a low diluted grade, low sustaining capex, and low recovery, plus a high C$ exchange rate; and therefore the project is deemed “low risk”. Rubicon has sunk in excess of C$600 million into the deposit, has a market cap of ~C$270 million, and ~C$59 million in debt. 

Summary
If the resource is wrong and the costs wrong, then the valuation presented in the PEA must be wrong. Cash flow problems, debt problems, and production problems on a deposit of dubious resources, questionable costs, plus a new guy in charge don't add up to a screaming buy.

Go read it all (again). Worth your time to see the difference between his work and that of clowns like Allan Barry or Louis Lobito Little Wolf James.

The inconvenient truth about Eric Olson, COO of Minera IRL (MIRL.L) (IRL.to)

He's supposed to be the Chief Operating Officer of Minera IRL (IRL.to) (MIRL.L), which only has two operations, both in Peru. But the sad fact is that Eric Olson isn't even in Peru, having left a few weeks ago to go back to live in The Dominican Republic. And that's because his migratory status has been revoked by the Peruvian immigration authorities and he's now not even allowed to go back and set foot in the country, not even as a tourist. And that's because he was working in Peru illegally and when he was found out, refused to attend the formal meetings set up by the immigration people in order to interview him. He just ran away.

And that's the calibre of people in Team Hodges.

UPDATE: My fave readers, back again. Hi Chuck!


More "All In Sustaining Costs" baloney, Primero Mining (P.to) (PPP) edition

The Primero Mining (P.to) (PPP) 3q15 news release this morning is a work of art. That's because its numbers have very little to do with science (and much about lipsticking pigs) with a number of things to love, such as the way we're supposed to look at its cash position and ignore the deterioration in working capital, but the one for this humble corner of cyberspace this morning riffs on the point made about Detour Gold's (DGC.to) guff and nonsense about All In Sustaining Costs (AISC) last week. In much the same vein, here's a few lines on what Primero would like us to believe about the AISC of the San Dimas mine, compared to the cruel bleedin' reality:
  • Gold equivalent (AuEq) sold: 53,475 oz
  • Average realized price per Oz AuEq: U$1,115
  • All In Sustaining Cost per Oz AuEq: U$454
  • Difference between two: U$661/oz
  • Total supposed revenue difference: + U$35.35m
  •  and....
  • Earnings from mine operations: US$18.18m
And be clear, that's just the San Dimas mine (forget about the loss-making Black Fox moneypit) and that's without all the Primero corporate expenses to be ladled on top. Or tax. If that's anything even close to "All In", then I'm Chinese*.

The point here isn't about PPP, though. The point is that once again we see that AISC is a worthless metric, it tells us nothing about the reality of a mining business. Seriously, how the merry devil can a company tell us that Thing XYZ is in the least bit "all in" when it misses the true difference in its real costs by nearly half? They certainly cannot boast about it in the "highlights" section of its NR, the way Primero did this morning. It's BS, direct and sweet-smelling BS. Stop the stupid, Conway.

Or as written in that DGC post the other day, d'ya think that All In Sustaining Cost might not mean what you thought it meant? Perhaps?



PS: Once again it's worth visiting the comments and feedback from reader 'BW' that he sent in after the DGC post. You can read that here and do so, it's very insightful and much of it applies directly to the Primero situation today.

*I'm not Chinese

Louis James Rubiconned you all (RMX.to) (RBY)

When Louis James made Rubicon Minerals (RMX.to) (RBY) his "must own" stock for 2015, he did so after visiting the mine and seeing what they were doing there. He even used his photos at the mine as pump-material to entice in new subscribers, trying to get them to part with money in exchange for the name "Rubicon" as the next big winner in the world of mining.

However, that's not why you should never take mining investment advice from somebody who isn't a geologist.

It is why you should never take mining investment advice from somebody who isn't a geologist but pretends to be one. Step forward Louis James, the "rock kicker and stock picker", Porter Stansberry's mining "expert" Lobito Little Wolf James of Casey Research has cost thousands of his subscribers many many thousands of dollars because of his delusions of grandeur. He went there, he looked at the mine, its plans, for sure at all the geological diagrams and charts and he didn't understand a thing of what he saw. And he peddled you all a very expensive dose of BS as a result of his fakery.

Here's today's news from RMX.to and before you say that nobody could have seen this coming, think again. I've been in conversations with real geols and real mining engineers who've been doing just that since 2014.

TORONTO, ONTARIO--(Marketwired - Nov 3, 2015) - Rubicon Minerals Corporation (RMX.TO)(NYSE MKT:RBY) ("Rubicon" or the "Company") today announced it is moving to suspend underground activities at the Phoenix Gold Project (the "Project") while it enhances its geological model of the F2 Gold Deposit and develops a project implementation plan.

"We believe in the potential of the Phoenix Gold Project," said Michael Winship, interim President and Chief Executive Officer of Rubicon. "We have high-grade gold mineralization with extensive infrastructure, in one of the top producing gold camps in the world. Similar to other high-grade, narrow-vein, underground gold deposits, the geology can be quite challenging and requires additional analysis to be fully understood. During the trial stoping period, we have discovered that the F2 Gold Deposit is much more geologically complex compared to our understanding of it from historical drilling." continues here

Timmins Gold (TMM.to) (TGD) does a rare thing for a loss-making mining company

The rare thing: It gets real.

Here's the NR of the 3q15 financials and while the large impairment was already flagged, the Ana Paula things assumed and the small operating loss no surprise, the big news comes further down the line:
Assuming the gold price remains in its current range over the next year, open pit operations will continue up to mid-2016, at which point the Mine would be placed on care and maintenance. Heap leach operations would continue through to early-2017. Production guidance for fiscal 2016 is between 65,000 and 70,000 gold ounces with a cash cost of approximately $700 to $750 per gold ounce. In the event of a sustained increase in the gold price, the Company could continue operations as outlined in the most recently published NI-43 101 technical report (dated December 6, 2013), which would see production continuing up to 2022 (based on reserves at a $1,250/oz gold price).

You have to wonder about the integrity of that Bruce B guy who came before this interim CEO, but that aside what we have today is a breath of fresh air, even if it does for the stock price in the near-term. In effect, what TMM has just said to us is, "Hey, you're right, we're not profitable, so we're going to mine the few profitable ounces we have at the mine and then not dig the rest out".

This is something that many, many other precious metals mining companies  should be doing at the moment, but they're not because they're run by people too chikkinshit afraid of losing their jobs by admitting they've been living a lie.


11/2/15

Two brokerage notes on Minera IRL (MIRL.L) (IRL.to) this morning

Today Monday this was published by Shore Capital of London UK. Screenshot of the morning mailer:



And this was published by SP Angel, also London UK:


Any further questions?

PS: If you can't read the screenshots in the daily digest e-mail, come to the IKN blog site.

PPS: Here by request are paste-outs:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
 
MINERA IRL^ (MIRL, NR, CNP) – Minera soap opera: we call on the board to detail ex-Executive Chairman Daryl Hodges’ financial arrangements. The Ontario Securities Commission has handed down a ‘cease trade order’ due to Minera’s having failed to file its interim financials.
Putting aside our Dallas analogy for a moment, we note certain allegations about controversial financial arrangements regarding former Executive Chairman and now purportedly consultant and puppet master Daryl Hodges at a certain blog (http://incakolanews.blogspot.co.uk; we are aware of the blogger’s identity, and believe him to be credible). The gist of the allegations are that Mr Hodges amended his already generous financial arrangements with the company to effectively award himself a very lucrative ‘get rich quick come what may’ scheme, and that this scheme was rubberstamped by Minera’s board - all at the expense of Minera’s long-suffering shareholders.
If untrue, we urge the board to fully disclose the full details of Mr Hodges’ financial arrangements (what they were originally, what they were changed to when, who approved the changes, and what the current board are doing about the matter) to debunk these allegations. Silence on the matter would represent a deafening self-indictment, in our view.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx


Minera IRL (MIRL LN) SUSPENDED – Statement from the Board of Minera IRL Limited
  • Minera IRL Limited has issued a further press release this morning relating to a ‘cease trade’ order in Canada.
  • The ‘cease trade’ order has been made as the board of Mineral IRL Limited did not file its interim accounts by 16 October.
  • The company also states “Minera IRL expects that the Order will be lifted after the Company files the Financial Materials.”
  • The statement also refers to the temporary compromise of the company’s Peruvian subsidiary.
  • It is our view that given the EGM vote to replace the current board that is probably better from a shareholder perspective for the shares to be suspended in both markets.
  • Shareholders need to decide which party should run this company going forward.
  • Should it be Diego Benevides, joint founder and director of the Peruvian subsidiaries or the existing board which seem unable to work with Mr Benevides?
  • We have been made aware of statements from persons supporting Mr Benevides. We will not reveal where these statements have come from but we will say that they provide damming accounts of the behaviour and actions of the board of Minera IRL Limited.
  • We believe that the board of Minera IRL are disingenuous in their statements.
  • In our opinion the board of Mineral IRL Limited are not acting in the best interest of shareholders.
  • That shareholders should support Diego Benevides in voting for the election of a new board.
  • Investors in the UK stock should send their votes to “Computershare Investor Services (Jersey) Limited, c/o Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, United Kingdom, by not later than 3:00 pm on 24 November 2015.
* SP Angel analysts are expressing their own views and opinions in this analysis. SP Angel has no corporate connection with Minera IRL or its subsidiaries. SP Angel holds no shares in Minera IRL and does not have any current financial arrangements with the company.

McEwen Mining (MUX) news for our Chinese readers

At this moment, McEwen Mining (MUX) is trading at exactly U$0.888


Feeling lucky?

PS: For the rest of you wondering why, this link with its quick explanation will help.

UPDATE: It's like magic. zhù nǐ háoyùn.


Continental Gold (CNL.to) and the boy who cried wolf

By the negative reaction to Continental Gold's (CNL.to) NR this morning, i.e. a new multi-year low at the open, it would seem that even the hardcore sycophants (you may know them by their alternative title: "independent non-editorialized sellside brokerage analysts who always tell the truth and never hide anything from their clients") are having trouble taking Ari Sussman at his word these days.

As for the core message in the NR, that CNL will get its environmental permit approved by the end of the first half of 2016, IKN is now taking bets on that one. Obvious reasons.