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5/7/16

Yes indeed, Donald Trump can win this election

Not saying he will, just saying that it's perfectly feasible. Evidence below, link here.



Professor: flight was delayed because my equations raised terror fears
American Airlines says woman expressed suspicion about University of Pennsylvania economics professor, who was solving a differential equation
"...Menzio recounted the “unbelievable” experience in the present tense. “The passenger sitting next to me calls the stewardess, passes her a note.”
The plane, ready to take off, then returned to the gate and the passenger left. Menzio was then asked to disembark the plane and “met by some FBI looking man-in-black”.
“They ask me about my neighbor,” he wrote. “I tell them I noticed nothing strange. They tell me she thought I was a terrorist because I was writing strange things on a pad of paper. I laugh. I bring them back to the plane. I showed them my math.”
Menzio told the Washington Post that he was “treated respectfully throughout” the process but remains perturbed by a system that “relies on the input of people who may be completely clueless”."

UPDATE: Reader 'PW' mails in this apt Mencken quote:
"As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart's desire at last and the White House will be adorned by a downright moron."
— H. L. Mencken

TAG: "Lies, damn lies and metallurgical recoveries"

Catching up with reading material after a few days away, this post by The Angry Geologist (TAG) needs putting in front of IKN's esteemed audience. Entitled "Lies, damn lies and metallurgical recoveries", it's a nice little window on a couple of the tricks used by junior explorecos to make their deposit look more attractive than it is. It was published Thursday and today's Saturday so it's possible you've already seen it but if not, go look.

5/6/16

The Friday OT: Radiohead; Burn the witch

The week in which the four corners of the globe learned about Trumpton and Camberwick Green.



And rediscovered a very decent early 70s British movie. As for the song, a decent starter course for the upcoming album. IKN is a Radiohead fan, period.

In this weekend's edition of The IKN Weekly...

...the main event will be a good, hard look at the Sandstorm (SAND) (SSL.to) 1q16 numbers. For non-secret reasons.

Today's funniest mining equity research...

...comes from BMO and its note on Dalradian (DNA.to) entitled "Mineral Resource Update Debunks Cooked Up Continuity Concerns", coming on the back of the company resource update that poured more heat than light on the sector's valid concerns about Curraghinalt.

"Cooked up"...geddit?

Anyway, Andrew Breichmanas of BMO is either stupid or a bullshitter, because that's the only possible explanation for his publication managing to confuse the concept of dilution with that of continuity.

Bless the sellside and the way they think you're dumber than they are.

5/5/16

Sandstorm (SAND) 1q16 numbers

Good quarter.

Which is good, as I own a few of these.

PS: IKN back to normal tomorrow Friday afternoon. Posting remains light until then. For secret reasons.

The Friday OT on a Thursday: 2CELLOS; Whole Lotta Love vs Beethoven's 5th

This is fun:



From the same people who brought you the cello version of AC/DC's Thunderstruck, 2Cellos does Ludwig and Page. Unsurprisingly they stick to the famous melody from the first movement, too much to cram in otherwise, but I like the way they didn't shrink away from the psychedelic middle section of the Led Zep tune. The crowd in the AC/DC vid is better, though.

5/4/16

Posting will be light for a couple of days...

...for secret reasons.

IKN Recommends: The Arubis copper mail

Arubis sends out a monthly mailer on copper, start of each month, totally free, just needs your email address, it's always a good read and provides sane and measured commentary on the metal. Here's the May edition on this link, go over check it out and get your free sub in too (box on the right).

Dilma's impeachment process: The need-to-know (from IKN364)

Another small segment from last weekend's letter, featured here because the mention in the final paragraph about the possibility that Dilma dissolve government and calls snap elections has been gaining traction in the last couple of days after O Globo reported on Monday that Dilma was seriously considering the option. 

Anyway, that's today's gossip. Here's how we ran things last Sunday in IKN364
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Brazil and the Dilma impeachment process: What happens now

Although not directly related to mining and in my considered opinion not a major factor in country risk for our sector of focus (see the latest Regional Risk Review in IKN360 dated April 3rd for more) I’ve been getting a smattering of mails asking what’s happening in the media-grabbing Dilma Rousseff impeachment process, what with things suddenly quiet. So here’s the need-to-know:



1)      Brazil’s lower house of parliament voted for the impeachment process last month, it’s now up to the upper house Senate to approve the process.

2)      That debate and vote is set for May 11th.

3)      There are 81 senators, the vote to move forward on the process needs a simple majority and as political watchers in Brazil concur that there are at least 50 senate members who will vote for the impeachment process, things look bad for Dilma.

4)      Assuming the vote goes against her, Dilma will be immediately suspended from her duties and her Vice-President Michel Temer takes interim office.

5)      The Dilma suspension will be for 180 days. During that time the Senate must vote again after the investigation is complete on whether Dilma is guilty as charged. That vote needs a 2/3rds majority to carry (not a simple majority).

6)      If that vote goes against her Dilma loses her job and Temer becomes the official President of Brazil until the end of the current government’s mandate, December 2018.



So now you know. There are some variations possible on that basic scenario, such as the potential of a dissolving of government and snap elections being called, but what you see above is now generally regarded as the most likely process and the path of least resistance. No word on who gets to make the opening speeches at the Rio Olympics and sit in the VVIP box at the track and field events, the official Prez or the interim one.

5/3/16

Gold and TIPS

This is a 12 month chart of gold versus the 10 year TIPS yield, inverted to show the correlation more clearly. TIPS in this case is basically a proxy to US inflation.


In the words of the person who's been tracking this relationship closely, Mike Churchill of Churchill Research, "These series have a long history of moving together, a fact which lends credence to the idea that the gold move to the $1,300 range is sustainable".

Or in IKN's words, the whole freakin' ball game right there.

CUM stains its quarter

Copper Mountain (CUM.to) is having a dirty sticky time in 2016, as shown by its 1q16 numbers out yesterday. Here's the baseline operating financials and as you can see, costs swallow CUM of its revenues almost entirely, leaving just a puny trickle of gross profits.


Here's copper production per quarter, which underscores how 19m lbs Cu isn't going to win friends.The problem is grade, by the way.


And over at the balance sheet things are even worse, with CUM running a negative working cap of $13.9m as at end March. CUM liquidity is in a sorry state, it would seem CUM shot itself out of treasury to the point where it had to borrow $5m just to get by (monthly payroll, one presumes). With $5.9m to pay back from loans in 1q16 and another $5.3m in 3q16, it would seem somebody in finance will have to take CUM where they don't want it.

First Mining Finance (FF.v) math

From today's deal NR with Chalice:
"...First Mining has agreed to acquire Cameron Gold Operations Ltd., a wholly-owned subsidiary of Chalice (the "Transaction") which owns the Cameron Gold project located in Ontario in exchange for 32,260,836 common shares of First Mining..."
And:
"The deemed value of the Transaction is approximately $13,000,000..."
Therefore we can state that according to both Chalice and First Mining, shares of FF.v are worth 40.3c each.

And according to the everso everso sophisticated investors that are buying up FF.v shares at the behest of Ameduri and his paid pump, FF.v is worth 81c per share as per yesterday's close.

Is it just me, or do you think this is all going to end in tears too?




Argonaut Gold (AR.to) 1q16: A three charts and a few words

The numbers are out, I'll leave all the El Castillo 2017 fun and games to the Very Serious Suited People and the ConfCall, AR.to is giving it the rah-rah about the thinnish looking 3c EPS, we at IKN are fuddyduddies and prefer balance sheet items to get the real idea of what's going on.

Assets look like this and even with the impairment in 4q15, this company still hasn't bowed to the bleedin' reality and written down the carry of Magino (who they think they're fooling is beyond me).

Liabilities show little change. The tax break from the write-down is the big change in 4q15, not a massively material thing, the other side of the assets value loss coin.

Working cap breaks down like this. 

As $54m of the non-cash current assets are inventories (if you don't have them you don't have a going concern), the real number here is the change in cash. AR.to getting all trumpety about its rise to $46.6m in the NR (in fact it's $46,583...details...details), IKN considers the longer-term decadence and wonders just why, if it has that cash cushion, the company decided to take out a $30m loan last week. 

Bottom line: Another quarter of mediocrity, it's still difficult to take a company that can't be straight about Magino's true value seriously, plus with the 2017 production shortfall now a shadow, there's no reason to own this stock at such an expensive level. Ha dicho, adios

5/2/16

Leicester City

Oh my stars. Amazing.

IKN welcomes new investors to the junior mining sector

For unimportant reasons, your author was this morning reminded of this post from March 2015 that includes the Calvin & Hobbes cartoon seen below. Reader CM at the time called it, "...the perfect description of the junior resource market when having conversations with company promoters":


100% agreement.

A warm welcome is offered to newcomers to the mining sector.

The Minera IRL April 18th 2016 board meeting minutes

Would you like to read them too?

First click on this link. It gets you to the right page of the Lima Stock Exchange website.

Then you see this:



Follow the bouncing ball, get your copy of the PDF, scroll down from the first page and there, under the cover letter, are the English language minutes of the April 18th board meeting at Minera IRL which sets out its plans for re-listing its shares in both Lima and Toronto. 

 Enjoy.




The Desjardins sell call on Argonaut Gold (AR.to)

Today's most interesting research report is the piece written by Michael Parkin of Desjardins on Argonaut Gold (AR.to). Here's how it kicks off:

The Desjardins Takeaway
Through channel checks, we came across a new LOM plan for El Castillo published recently by Argonaut which calls for production to fall by ~50% in 2017. Based on our revised estimates, we believe the company can produce nearly 95koz next year on a total basis, down ~30% yoy (consensus is currently at 125koz for 2017). We view the San Agustin update from April 29 as positive, but believe the nearer-term negative outlook will overshadow the update. We are downgrading Argonaut to Sell from Buy.

The report then continues, but the reason it's interesting is that management at AR.to know all about this unexpected (for most people) tailing off of production at El Castillo from 2017 onward and they knew they had to disclose it (being a material matter), but instead of making it a widely known fact decided to bury the plan deep in the AIF. So far, only the eagle-eyed Parkin has spotted it. 

Bottom line: Parkin has got this call spot-on dead right, the rest of the sector covering AR is wrong.

The other interesting thing: AR.to reports tomorrow and then there's a Conference Call. I'd strongly suggest to all your sellside suits covering this stock that you do your reading and then ask management on the call about El Castillo, else run the risk of looking pretty stupid in front of your clientele.

Zinc: Demand to outstrip supply in 2016 (from IKN364)

Think Zinc, baby. Think zinc.

A small section of IKN364, out last night. One small edit made, the name of the company we're buying to take advantage of the bright future in zinc.

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Zinc: Demand to outstrip supply in 2016
Yes, shameful but it’s true, your author is going all zinc-pumpy on you after sneering at the “it’s gonna happen anytime now folks!” perma-pumping of the sellside in zinc for years. This “Get On Zinc Before It Flies!!!” is a narrative (with obligatory three exclamation marks) that’s been sold to us for years, but this time it really seems to have some fundamentals to back up the wishful thinking and that was underscored last week by the International Lead and Zinc Study Group (ILZSG) saying this in its latest update, dated April 28th 2016 (29):

“Information recently collected from ILZSG member countries indicates that global demand for refined zinc metal will exceed supply by 352kt in 2016. This deficit is higher than that indicated by the Group during its meetings last October with the difference due primarily to additional cutbacks in mine production announced over the past six months.”

The combination of higher expected demand in China (+4.5%) as well as in other consumer countries, plus the closure of another raft of mines, has altered the supply/demand balance significantly and here is a chart of how the current 2016 forecasts compare to previous years.



The result is record demand, only slight increase in supply, and the only recent year with a comparable deficit of total production (mine production is most but not all of the Zn supply to market) is 2011 (the last year that zinc both went above and stayed above U$1.00/lb for longer than just a quick spike). But that’s not all, because when you comb through the details of the ILZSG report we also read that further supply crimps are in the cards. To quote the bulletin, “...taking into account the predicted decrease in zinc mine supply, zinc metal production expectations in some countries may be subject to downward revisions later in the year”.

Overall, a bullish price scenario right at a time when commodity prices across the board are rallying. The type of oversupply in the copper market is not happening here. That’s another reason to like (name removed) in the weeks to come.


5/1/16

The IKN Weekly, out now


IKN364 has just been sent to subscribers. Includes a new stock purchase and additions to existing longs. And other stuff. The IKN Weekly used to be much more muchier. It's lost its muchness.


And don't forget to check out how little the person running HudBay (HBM) knows about the company he runs, weekend posts get lost by the Monday morning mailer readers. Wouldn't want you to miss out on the guffaws.

The Angry Geologist does Calibre Mining (CXB.v)

Right here.

Interesting analysis and conclusions. go see.

Rule and Friedland

So here's the rule, as it were: I decided that I'd stick a link "Rick Rule Interview with Robert Friedland – Part I of II" if and when ten people mailed into IKN with the interview stuck in their missives. Yes Claudio, you were number ten this morning so here you are, the anti-promo IKN promoting two people that don't need a single extra moment of promoting. Such is the way of the master salesperson.


Yes, it's a good interview (iIve done it twice now). And as it's only the first of two we get to enjoy more in the week to come.