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4/30/16

This Thing Isn't Like That Thing, HudBay (HBM) and Alan Hair edition

My thanks to reader and IKN Weekly subscriber 'DG' for the heads-up on this.

Here's an interesting segment of BNN TV dated April 29th 2016. It features at minute 29:00 Alan Hair, the CEO of HudBay who says on Canadian national TV that there have been no trucking problems, accident or incidents at the HudBay Constancia mine this year. 

Now compare his statements to the cruel reality. This is from IKN363 last weekend, April 24th 2016:
"On April 16th (and confirmed (3) by Peru’s OEFA enviro people on April 20th) yet another 30 tonne truckload of concentrate out of Constancia was spilled in an accident outside the mine. The area affected was around 200m2 (and to its credit, the company went about remediation and recovery of the affected area quickly this time) and thanks to the lack of strong winds, environmental damage was minor. Plenty of different Peru media channels carried the news (here’s a sample (4) (5) (6) but unsurprisingly, you up North didn’t get to hear a whisper. By my reckoning this is the seventh (crazy but true) truck spill accident out of Constancia since the mine started up last year and notably, the last time one happened it caused the protest by locals that blockaded the mine. HBM’s logistics problems in Constancia have been previously documented and the series of accidents, using overloaded trucks under time and performance pressure, is a direct result of this. Another mine-blocking protest may or may not happen this time but, it wouldn’t take much more for HBM to hit a real Black Swan event."

Amazing how Alan Hair can't remember a truck accident that was serious enough to get the Peru OEFA environment control people out and make a full report on the incident. Incredible how he didn't manage to read about it in the press. Innit guv?

So Alan, it's either that you're a bare-faced liar or you as CEO are ignorant and unaware of what's going on at your flagship operation Constancia. Dishonesty or stupidity, Alan, what's the greater crime for a CEO?

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

...in reverse order:

Third Place: "Oceanagold (OGC.to) needs a Haile Mary pass". OGC can deny it ll they like but reliable word from the Haile project is that the OGC "improvements" as planned in its February NR haven't worked out. 
Second Place: "Richmont Mines (RIC.to) (RIC) and Tahoe: "Criss de calisse de tabernak d'osti de sacrament!"". IKN mentions the name of Greg Chamandy for the first time ever on its pages, then M. Chamandy "is resigned" from the company 24 hours later. Which is just a coincidence, of course. By the way, if the mail feedback is anything to go by, this post got popular just for its juicy use of Quebecois slang. RIC clearing the decks? You be the judge.

First Place: "Nevsun (NSU.to) and Reservoir Minerals (RMC.v) to combine???". This post went up Sunday mid-afternoon and the screenshot it contains bore witness to the large SNAFU that somebody at Nevsun created. Please be clear that IKN didn't break this news, we just managed to get a screenshot that confirmed the weirdness. By the time the post went live, Nevsun (under orders from its lawyers Stikeman) hadn't just pulled the web page but decided to take the whole of its website offline! We no know that at 9pm or so that evening the merger of RMC and NSY was formally announced (they were hurried into the news that was planned for Monday morning). Anyway, in the six hours or so between the post and the announcement this story went viral and got hit by the world and his wife, a rare thing for a weekend post. Once the news became official, hits backed off. Thus ends another chapter in backroom hit stuff and nonsense.

Brent Cook on optionality

You may have seen this before (published April 20th) but reader 'UT' sent it over this morning and it's a good reminder of the gaping hole of danger and value destruction waiting for those who think "optionality plays" are a sound way of investing. They're not, they're roulette gambling, so if you're comfortable in casinos go ahead, don't let me stop you.


The Cookie Monster also prefers gold over silver. Agreed on that too.

4/29/16

The Friday OT: Kula Shaker; Grateful when you're dead

This band was so talented they could write killer tribute songs. They should have been a lot bigger than they were.



Part Two of our Kula Shaker appreciation series (there may not be a part three), when I stuck the first one up the other day I got this mail from fellow fan MZ:
I never thought I'd encounter another soul in such a random fashion, who likes Kula Shaker. Funny world we live in. I own a couple CDs. They're far from my favorite music, but they're fun occasionally. To my ears, they're some kind of mix of Pink Floyd, Beatles, The Who, The Doors. Until your post, I had no idea they re-formed.
And here was my mail back:
I listen to absolutely everything. And the thing is, even moderate composers/musicians/singers/bands are allowed to hit one out the park on from time to time (e.g. Oasis). Kula Shaker had the shot at being very good, they decided to be occasionally good instead. So be it. But I liked Tattva from the first 15 seconds of the first listen and have a soft spot for them.

And Hush simply rocks.

Just sharing for the fun of it, I like the mails that come from the Friday OT series. Youtube linko to today's vid here.

Gold market action: VERY strange

Reader 'AK' sends in these two charts of the gold price this morning and this cover note:

"Dont know what just broke - but something did. I'm an avid chart watcher (read - addict). I've never seen anything like this before."

And I agree, this is strange as strange can be. This chart is gold trading the US Dollars today:



This chart is gold in Euros today:



Explanations, anyone?

Choose your battles (from IKN361)

This is how the intro section of IKN361, three weeks ago, wrapped up. As the days click by and the bullish set-up in the miners gains momentum it's getting more relevant, not less:

"In this bullish phase, money will be made by many people and stocks of companies of all stripes and forms get to climb high. Not all of them of course (Do Not Feed The Animals) but a decent proportion will, that’s for sure. Some of those people and companies may or may not be deserving of their rewards according to your own criteria, but they’re going to win all the same. It won’t matter a jot whether you applaud or begrudge their success, whether you are in or out of the same stocks. Unlike Bono from U2, mining companies and their sponsors can indeed live without or without you and as noted on Saturday (1) it’s really nothing personal, it’s just capitalism baby. To that end, a small suggestion: Don’t try and participate in every hot trade idea, don’t feel envy for the success of others, don’t get downhearted when that trade you passed on nails big wins for somebody else. There’s going to be money to be made, but pick your own battles and win your own money. Jealousy doesn’t become anyone."

GLD bullion holdings

Interestingly the holdings of bullion in the biggest gold ETF, SPDR Gold Shares (GLD), are some 20 tonnes lower than this time last month despite the recent pop in gold.

NB: Please note cut down Y-axis

And 20 tonnes of gold is about U$820m worth at current prices, that's not loose change. Data from here.

Chart of the day is...

...the US Dollar:


BE CAREFUL OUT THERE, FOLKS. You're getting fed headlines such as "Gold heads for 15-month high as dollar gets crushed" and while gold's certainly doing just fine, the dollar isn't "crushed"...not yet anyway.

I'd agree that if it clicks down another point from here those headlines will be justified, but note that we saw this very same level three times in 2015, only for the greenback to rebound again. So crushed?...not yet...close yes but not yet. 

If you like to bet on hunches, buy the "weak dollar" story today and if you're right you'll make more money than me on the trade. Because I'm going to wait out on the trade until the odds are stacked more highly in my favour. If that happens it's going to be soon, if it doesn't I save myself pain and a loss.

4/28/16

HudBay (HBM) (HBM.to) 1q16 numbers

IKN Nerve Centre has had a freakin' fascinating evening checking out the HBM 1q16 financials (more a reflection of my sad-ass life than anything else but hey, I'll live). Anyway, about a thousand things worth commenting about in the report and most of them will be on Sunday in IKN364, but here's just one little taster:
  • HBM 2q15 liquidity position, to quote that quarter's MD&A: "At June 30, 2015, we had total pro-forma available and committed liquidity of approximately $436.6 million..."
  • HBM 3q15 liquidity position, to quote that quarter's MD&A: "As at September 30, 2015, we had total liquidity of approximately $300 million..."
  • HBM 4q15 liquidity position, to quote that quarter's MD&A: "As at December 31, 2015, we had total liquidity of approximately $288 million..."
  • HBM 1q16 liquidity position, to quote that quarter's MD&A:"As at March 31, 2016, we had total liquidity of approximately $190.1 million..."

Can't see any problem there. Oh...Wait...

Buriticá Colombia: News on how the eviction operation against illegal gold miners is going

And for that we tune into the words spoken by General Humberto Guatibonza Carreño, comamander of Region Six of Colombia's National Police Force, at a press conference today. Colombia's Caracol Radio does the reporting (translated):
"The operation is going very well. We have intervened in 119 localities, 700 people have been evicted, 19 people have been arrested, nine whorehouses have been closed down. The task continues, it's a long-term objective and it has only recently begun. What I can say is that miners are no longer entering the illegal mines."
For context, the operation has an objective of evicting 6,000 people from the settlements that have sprung up around the illegal mines, which means that a little over 10% have gone in the four days of the operation so far. It's also worth noting here (because I've been asked in mails too) that the illegals and the mines they're working are NOT in the same place as the Continental Gold (CNL.to) project, that's a little further up the valley.

IKN recommends: The Angry Geologist

The Angry Geologist is a new blog set up by somebody known to your humble scribe, which makes it much easier to recommend to you even in its early days because I know the author has a serious geol brain. As for the objective of his blog, here's a part of the first post that lays it out:

"I want to use this blog as a forum to help pull away the layers of BS that junior exploration companies use to massage the data they put in press releases from their projects to 'maximize' the impact of this information on drawing in retail investors into buying their shares.
"I will be presenting a series if opinions on exploration stage project, using all available data on them to try and present them in a way that can be easily understood by people that don't have degrees in geology and mining engineering."

Go over and check out The Angry Geologist blog yourself for more. There's already a geologist's look at the Orex Minerals (REX.v) Sandra Escobar project and hot new discovery to get your teeth into, among other things.

IKN proposes a new industry standard: "Centerra's First Law of Mining"

The concept would be simple enough:

"If you can't spell the name of the place, don't invest there".
See CG.to and its series of NRs over the years for further details, including the jewel out just today of course. Or Lydian. And this law would also apply to bullboard "experts" when they confidently expound on "Equador" and "Columbia". The stupid isn't just confined to pol risk decisions made by mining companies.

A Flash update...

...has been sent to subscribers, this fine and upstanding Thursday morning. Adding to a trade today, but may close the whole position tomorrow. Depends on how things go. We'll see.

Chart of the day is...

...copper, dailies, with two lines drawn on the chart:



The black one shows where 2016 begins. The red one is at U$2.15/lb, the level which Chile's copper oversight body Cochilco yesterday reiterated as its forecast average for this year, 2016 anno domini.

Oh, they're going with U$2.20/lb for 2017 as well. 

Mediocre 1q16 numbers from GG, NGD, BTG, FCX but...

...who gives a crap? Gold's up twenty bucks. Buy 'em anyway.

(Yup my sellside anal yst friend, that's how important your numbercrunching and deadline-beating work was. Have a nice day).

B2Gold (BTO.to) (BTG) 1q16 production numbers in one word

Sucked.

Seriously, what else do you want to say about 127,844 oz produced, plus misses at three of its four operations? Want me to lie? Want IKN to BS you like everywhere else? Plain fact is that it's a crappy Q1 from my biggest position. Another plain fact is that The Clive will get away with it if gold pops U$20 mañana.

The gold price hike trumps all.

4/27/16

Bacrim and gold mining in Colombia

A very interesting report in Colombia's Portafolio website today entitled "Criminal Groups Declare War on Legal Mining", subtitled "Geologists and engineers who go to mines have to have bodyguards. Miners who become formalized suffer intimidation, eviction and murder". Continental (CNL.to) and Gran Colombia (GCM.to) heavily featured in the type of risk scenarios that strangely never seem to make the pages of the companies' glossy corporate presentations.

Seriously Ari, you think you're going to get funding?


PS: "Bacrim", the Colombia word for these criminal groups.

Scribbling in the margins...

...while we wait for The Janet Show to roll out. This chart...



...tells it all. Gold has done things since February, but only for people like me who are daft enough to watch it on a daily basis. The metal is basically UNCH, confounding bears and bulls alike. The new normal is boredom.

Declaration

The fact that the name of Greg Chamandy is mentioned for the very first time on IKN and then he resigns 24 hours later as a director of RIC is sheer coincidence.

4/26/16

Oceanagold (OGC.to) needs a Haile Mary pass

In July 2015 in what can be described as a "brave move", OceanaGold (OGC.TO) (OGC.ax) bought Romarco for CAD$856m in order to get its hands on the Haile gold project, framed as a 540,000 oz Au per year operation that would be able to produce at U$600/oz cash cost.

What could possibly go wrong? Apparently quite a lot.

Un-named observers of matters Haile have learned that the changes, framed as "design enhancements" by OGC in its February 2016 NR, are anything but that. Those that really know about these things believe Haile has turned into a migraine-level headache for OGC, with overruns in capex and timeline to production (first ore through the mill was supposed to happen 4q16...kiss that goodbye).

As usual, IKN vouches for its sources. Don't say you weren't warned.

Beware: Copper experts at work

Your author, on reading reports of the upbeat forecasts being bandied about by the metals consulting group CRU this week at Expomin Chile, decided to go and check on the recent track record of CRU and their forecasts. A typical example is the chart below, from the CRU presentation "Copper Market Outlook" prepared for the Scotiabank Commodities Outlook Conference on 13th January 2015 by Matthew Wonnacott, Senior Consultant – Copper Markets and Demand (and with that little lot you too can Google and find the PDF on the interwebnetpipes):




CRU expected 2015 copper at around U$6,300 per tonne in 2015, with the low end of the price band at around U$5,500/tonne. As for 2016, things get better and we go kinda U$6,500/tonne. Sadly, reality didn't match CRU's expectations. In fact the scale of that chart above doesn't even include the sub-U$4,500/tonne minimum we hit. As for 2016, U$6,500/tonne is the same as U$2.94/lb....how's that looking?

Just sayin'.

Richmont Mines (RIC.to) (RIC) and Tahoe: "Criss de calisse de tabernak d'osti de sacrament!"

Word from Richmont is that Greg Chamandy is now bouncing off the walls and convinced Kevin MacArthur is playing dirty tricks with the RIC share price, leaning in on the stock and forcing it lower. Personally speaking je m'en calisse because I own no stock in either company, but I thought you might like to know.

Dalradian (DNA.to): A word of thanks...

...to readers who yesterday kindly sent in reports of local opposition to the Curraghinalt project. For what it's worth, the subscriber-only IKN Weekly ran reports of the opposition in IKN355, dated February 28th. We considered the likely timeline and how the protests and opposition would probably evolve and made a call on their importance, too. Have a nice day.

Mariana Resources (MARL.L) placement; Sandstorm (SAND) and Sprott US the big takers

This morning Mariana Resources (MARL.l) announced a $5m placement and according to the proactive investors report it was with, "An as yet unidentified ‘North American royalty company’".

IKN can reveal that according to well-placed sources the major taker was Sandstorm (SAND) (SSL.to), with a minor take from affiliates of Sprott Inc (i.e. the US end of the Sprott empire). Not surprising really, SAND has a NSR on Hot Maden and the Sprotties have already been vocal supporters of this deposit and its potential.

So now you know.

Chart of the day is...

...copper, hourlies:


As I'm currently short a copper producer, this particular squiggly line is on my mind a lot. I'm not trying to will the metal down or shill a message to you either, I am saying that last week copper failed at U$2.30/lb once again, the same way it did in March (hopeful rally, reality kicks in) as we move into the FOMC penumbra.

Barrick (ABX) identifies its audience, and...

...it ain't you guys up there no more, Toronto.

Reading through the ABX 1q16 financials NR out this morning I was struck by its superior message, both to the ABX of the Munk era and to any of its Tier 1 rivals today. The decision to put a GS man in charge is paying off, ABX is now fluent in the language of Wall St and the fact it happens to be a gold miner with a product that's been largely alien to the "Very serious Financial People" for so long is now secondary. The tone, the style, the delivery is the same as you get in quarterly reports from the people who bring you Barbie dolls, canned tuna, smartphones or household paper products. The 2016 ABX is a money-making business first, second and third. It just happens to be a gold mining company as well.

If I were a New York fund manager who has been toying with the idea of adding gold exposure to their portfolio, on reading this 1q16 NR I'd be on the phone asking my underlings just why we didn't own ABX already. Today's NR won't go down so well in Toronto because they're going to feel a little out of joint with the message, the traditional gold mining investment world isn't the target of this news release. They're becoming irrelevant.

4/25/16

Continental Gold (CNL.to): Police trying to evict 600 informal miners in Buriticá today

Here's the link to the report in Colombia's Caracol Radio this Monday morning on how approximately 500 police officers have been drafted into the town of Buriticá today in order to evict around 600 illegal/informal/artisan (pick your preferred words) miners from the town and let Continental Gold live in peace and harmony afterwards. Apparently this is the first stage of an operation to rid the town of a total of 3,500 informals.

It's fair to say that the atmosphere in Buriticá right now is the way Caracol describes it: Tense. What could possibly go wrong?

UPDATE: This latest report ups the ante considerably and says it's now 1,500 police and army personnel trying to evict 6,000 (six thousand) miners today. Woah!

UPDATE 2: The above was laid down mid-morning, now post-close CNL.to decides to inform the world via a NR. I love the way they try to give the impression the eviction operation has come as a big surprise to them. How cute.

Know your country, Argentina mining edition

A small segment of IKN363, out last night. The example is Chubut but the lesson works for all the country, worth keeping in mind when the brain-dead end of the sector starts pumping whatever stock or story at you later this year.

Argentina: Chubut is as FUBAR as ever for mining
Another Macri government pitch on mining last week, with the national government including Macri himself making noises about Chubut and how mining development there would provide important and needed economic benefits for the region. It came on the back of a visit to Macri by executives of Pan American Silver (PAA.to) (PAAS) who are keen to get the company’s Navidad silver/zinc/lead project (well, in fact if we’re being brutally honest it’d be a base metals mine with a decent silver by-product kicker) move forward as well as working on the latest strike over pay and conditions at its Manantial Espejo silver mine, also in Argentina.

The pro-business/pro-mining noises were picked up by national and international wire media alike and went down well, right up until the moment somebody bothered to ask politicians in Chubut what they thought about the declarations. Chubut Governor Mario Das Neves said that his region “Has other priorities” at the moment (19), which was basically saying that he understands Chubut has to change its provincial laws or even the constitution before Navidad will be able to get green lighted. His underlings and other province politicos fell into line, pointing out that the central “meseta” region of Chubut would indeed benefit economically from Navidad opening but they agreed with the governor that they had more pressing matters first, that the debate on the mine’s viability may have to go to a referendum on changes to the laws (20), that the environment and use of non-toxic reagents at any mine was a priority and other matters which make the whole permitting track of Navidad sound like what it is; an exercise in cat-herding.

For those of you just tuning in, this is yet another example of how regional politics and agenda toward mining are far more important than anything the national government might have to say. Argentina mining investment = Choose your location very carefully. When PAAS bought Aquiline they didn’t do that and have been regretting the deal ever since.


Chart of the day is...

...witness to Joepower:



Hail the power of Joe.

4/24/16

Nevsun and Reservoir: Thar she blows Cap'n

Just out, 21:40 Sunday evening after the monumental fat finger snafu on the Nevsun site this afternoon. Official NR here.

PS I wondered why I was getting so many hits on that earlier post from Stikeman. From tonight's NR: "...Stikeman Elliott LLP is acting as legal advisor to Nevsun...". Heads will roll at NSU.

The IKN Weekly, out now


You've heard of scrambled eggs right? Here's scrambled Bacon.


IKN363 has just been sent to subscribers, 16,374 words and most of them....wait for it...are....ready....spelled correctly!

TA DAH! 

Try the veal

I'm here all week.

Waddya say, site parrot mascot friend?

Nevsun (NSU.to) and Reservoir Minerals (RMC.v) to combine???

Here's an interesting thing for a Sunday afternoon. About 15 minutes ago, 3pm local time this Sunday 24th April, reader TO sent me over this link to the Nevsun website which announced a business combination between NSU and Reservoir Minerals (RMC.v) due to RMC's Timok project. 

It had a presentation on the page too, but when I opened that it didn't say a thing about RMC or Timok. Then on moving to the NSU front page, not a word about this company-changing deal. Then over to the Reservoir page and...nothing. And over to SEDAR and...nothing. So I took a screenshot of the page just in case and, sure enough, the link doesn't work any longer. Here's that screenshot.



Seems to me that somebody in Nevsun screwed up bigtime.

UPDATE: I'm now told that handle "Pamplonatrader" broke the story over at CEO.ca. So good for her/him, kudos due.

Gary Tanashian is a great chartist

And this, from his weekly subscriber-only missive this morning, is one of the reasons why:

"...I only value charts as a tool toward understanding probabilities. I believe that markets can turn on a dime, with no chart having foreseen it. Chartists will quickly adjust and resume extrapolating again after the event, but all too often they do not see the event. That is why some people, including myself in some cases, dislike chartists."

Technical analyst Gary Tanashian and I have hung out in a virtual cyber way together for something like eight years and counting now. We disagree on things, we agree on many others, but one thing he's taught me above all else is to have respect for good chart work. These days I see the difference between the rote, low entry barrier shtick churned out by the majority and the smart stuff, where brain is applied to squiggly lines. Gary's up there with the very best.


His free-access blog (which is full of good stuff on its own)  is right here. I don't get commission or money or anything from recommending his work to you, I don't even pre-warn him (e.g. above was reproduced without permission...bite me Gary. The only arrangement he and I have is that we share each other's paid subscription weekly report on a quid-pro-quo basis and in that way, I get to read NFTRH for free every weekend. But I reco his stuff because I want more people to get smart about the market, no more no less.

But what is the answer

Regarding this chunk of script from yesterday...
"The promotion of mining companies in Canada is a tired, shady and parasitical model, it's time to change things for the better and people such as these are part of the problem, not part of the solution."
 ...reader 'MC' writes in to IKN Nerve Centre this fine and pleasant Sunday morning with a short, simple but highly relevant question:

"but what is the answer?"

MC, I honestly don't know but I'm pretty sure it has something to do with market dynamics, with the application of pure capitalism and with the phrase I've been using around these parts this year, "Do Not Feed The Animals". 

You the investor should stop feeding this whole sordid set-up, refuse to buy into obvious paid pump-jobs, demand FULL disclosure from those that would advise you on the sector (not just carefully worded disclosures that hide noxious realities) and perhaps tell people who put money directly into the pockets of this parasitical layer of the business world, i.e. mining company CEOs, directors and IR officers, that you refuse to buy shares of a company that pays for coverage and if they're that sort of company they're never going to be taken seriously by the non-mouthbreather end of the investment community. Because you the investor are the baseline, the money that makes this whole world go round and when money talks, bullshit walks.