Saturday, August 18, 2012

The Sten - a thing of beauty

Only an engineer could ever fall in love with the Sten sub-machine gun.

It looked as if it was made out of a shoe-horn, a metal pipe, and a coathanger. It was the simplest possible machine capable of firing repeating rounds.

the most basic model, the Mark III, could be produced from five man-hours work. Some of the cheapest versions were made from only 47 different parts. It was distinctive for its bare appearance (just a pipe with a metal loop for a stock), and its horizontal magazine.

The Sten was not designed by an accountant, manager, MBA or anyone on the leadership track at a large corporation. It was designed by two guys whose job it was to build stuff.

Now it wasn't an ideal weapon - it misfired, it jammed, it roasted eggs, it sometimes fired off an entire cartridge at once - but this was wartime, and Occupational Health and Safety wasn't a big thing back then. England had no machine guns and no stuff with which to make them.

So Shepherd & Turpin got asked "make us the cheapest simplest possible machine gun that will kill people. Or else we all die at the hands of the Nazis." They slapped something together based on that specific scope of work.

A fucking accountant or MBA wouldn't know where to start. They would have held fucking focus groups.

Remember this next time someone yaps about cost control in the miners: it's not the stuffed suits or the pencil-pushers who know how to get a job done cheap. If you want someone to strip down a project to its bare essentials, and quite possibly save yourself 20-80% in costs, you go to the engineering and construction staff.

The guy with the shovel knows how to dig a fucking hole.



PS in case you think I'm being an Anglophile, the whole Sten bit could just as easily have been written about Stalin's Katyusha rocket launchers - which were basically Studebaker pick-up trucks with rockets on them.

Clive Johnson from BTO on why other mining execs suck


Here's Friday's BNN interview with Clive Johnson, on why other mining execs suck™.

And here's my own pump-and-dump commentary:

Listen carefully to what he says about so many juniors not wanting to sign confidentiality agreements or get bought out, and how he says he always wants to do what's best for shareholders, and he wants to do win-win deals, and he's not out to be predatory, and then remember BTO bought just over 10% of CXB after getting very familiar with their geology, despite already having a 51-65% JV with them on one set of targets.

Disclosure, I've got so much tied up in CXB that my ass hurts (at 16 cents so I wasn't an idiot), and it is not a recommendation of any newsletter that I read.

Is Daniela Cambone married? YES, NOW GET LOST

Quit searching my blog every single day trying to find out if Daniela Cambone is married. 

Dropping the gloves with Gary Tanashian


Gary took issue with me taking issue with his latest post on the $CPCE. Since almost nobody in the land of the sane reads post comments, and since I dunno if this comment even got through (boy I hate those "prove you're not a robot" boxes!*), and because I'm certain that I'm a transcendent genius whose every word you must memorize as gospel, I'll repost here what I said there:

I'm not against all charts, just most charts. Price and volume seem to work, along with breadth, and sentiment too. But I'm really getting into this idea of Gary's about filtering out all noise: some indicators are derivative, others are coincidental, others (like the Harpex or Baltic Dry) are just a completely misleading fragment of the truth.

Now here's Gary's $CPCE vs $SPX chart:



Now here's a video of me and Gary dropping the gloves and sorting out our little disagreement:




If it is valid to assume $CPCE is an inverse sentiment indicator, and you've looked under the hood to make sure no weirdness is going on right now in puts and calls that would throw it off, like say the extreme weirdness and contango in $VIX that I just wrote about yesterday, then the problem still remains that sentiment has a lot of choices for direction right now. And they show up right in the $CPCE chart as the backtest failures that I pointed out in my comment.

Maybe $CPCE will go a lot lower if the S&P breaks the April high and goes into blue sky, like it's about to do any day now if the uptrend continues. Why shouldn't it? Sentiment could become very complacent then. But you don't know where the top in the market will be.

Maybe after the S&P goes into blue sky, the $CPCE will start trending back UP again like it did in Winter 2011 when people felt the market didn't deserve to be in blue sky. That's probably more dangerous, since when an upmove's validity gets doubted more and more, that's a hit right at the supply/demand characteristics that could maybe set the market up for a gigantic fall later - like what we subsequently saw in Summer 2011. Could that situation happen again too?

Or maybe once we hit blue sky the $CPCE will instead stay flat, like Winter 2012 when it seems everyone felt the market had a right to go higher. Or it could dive crazy low like Winter 2010 when everyone thought the worst was behind us and everything was going to be fine forever.

See? Different psychological expectations of market participants will cause different behaviour in the $CPCE.

Point of all that is, drawing a line at 0.6 is a way to ignore all the above.

Now, I'm not saying the market's going up forever, cos I'm not a dolt. It'll go down. A lot of chatter already exists on the internet about the newsflow we'll be getting in September - no QE, Troika, Spain debt rollover, Spain bailout?, Dutch election, blah blah blah.

And because the chatter is already out there, I can see the possibility that the coke-addled manic-depressive fucktards who trade the market, and the Paranoid Android HFTs that they've programmed with their own neuroses, could spend all September puking their fucking guts out all over the market, like Kate Moss after eating a spider.

But a $CPCE chart with a line drawn at 0.6 doesn't help me predict what's going to happen.



* - Why should I prove to you that I'm not a robot, anyway? How's about if you prove to me that you're not a robot! Hm? And even if I was a robot, would that make my opinion any less valid? You have something against robots? What are you going to demand next - I also have to prove I'm not a socialist, or a Muslim?

Friday, August 17, 2012

$VIX is too low? No it's not. It's not low at all. You're seeing things.


Before paying attention to anyone's blather about the $VIX, please read this article from ETF Trends:

Double Whammy for Volatility ETFs: Falling VIX and Contango

Investors looking for insurance against market pullbacks have pumped a lot of money into volatility ETFs in recent months.

The products have grown so large that they may be impacting spot VIX and futures prices.

One reason the August VIX futures are depressed compared to later months is because VXX is still rolling into the September contract form the August contract, said Jordan Beck of BTIG, in the CNBC report.

“That puts extra pressure on the August futures,” he said. The August contract expires Wednesday.

The spot VIX was trading at 14.17 on Friday, according to CBOE.com. The September VIX futures were trading hands at 18.75, or a premium of about 32%.

Also,

it’s impossible to trade the spot VIX that investors see quoted. Traders paying far in excess of spot VIX levels for VIX futures that expire in coming months is further evidence that the stock market rally has few believers, he added.

Which ETF Trends gets from this other article at Barron's.

Keep all that in mind next time you see someone yammering about how a 14 on $VIX is a bad thing and OMG teh market iz toppingses.

Frankly, it's plausibly hinted that it's the end of being able to predict market tops buy using spot $VIX.

BCM's seller seems to have gone away for now

Either they read my blog or it's all just a paranoid narcissistic fantasy coincidence. But the large Anon seller who was keeping his boot on the throat on BCM for the past few weeks has now either sold his entire position, or taken his ask away for a few days to let the price recover.

The ask seems now to be boring old A-list retail from CIBC and a bit of TD.

They could still only have gone away for a few days, and come back to fuck shit up some more next week. Seems the selling of a few weeks ago also abated on a Thursday afternoon.

Whatever. My only regret is I didn't buy more BCM. Not really though.

Sober Look blog on Spain and UI

Sober Look is a blog that I recently added to my RSS, and might soon delete.

Today the author has an article on Spain's decision to extend unemployment benefits to the mass of Spanish unemployed, and how he feels this will put a damper on Spanish bond support by the EBC/ESM/whoever. Because, I guess, he thinks the smart thing to do is for the Germans to bludgeon Spain into a whimpering pulp before showing them any superior Aryan generosity.*

This type of blogging, an attempt to "manufacture a crisis" by someone who I'm almost certainly is not personally connected to the inner circle of Eurozone plutocrats, and quite possibly has never even seen the inside of Europe, really fucking pisses me off.

General rule that I now scream at the monitor several times a day: If you don't have the inside scoop, then I don't want to know your opinion. Stick to showing me charts.

Speaking of which, upon the announcement? Y'know, the one that's so bad and terrible? What happened, eh?

Spanish bond yields continued to trend down. That's because, like I keep saying, the bond market rewards Spain for countercyclical programs that slow economic contraction, and punishes Spain for stupid shit like austerity or taxpayer-funded bank bailouts.

This is exactly what we've seen throughout all of bloody Europe through the entire fucking crisis.

Quit feeding me crap and give me real analysis instead of political pontificating.


* - Germans are also not known for their generosity.

WGC report out now

Almost forgot - the World Gold Council, derided and viewed with suspicion by goldbugs everywhere, has come out with their quarterly report on what the Bilderbergers want you to believe gold supply/demand trends.

Go get it here.

James Hodgins, Curvature Hedge Strategies - weird company name, interesting picks

Was poking around stockchase.com today, probably looking for... well, god knows what, really.

Stumbled across this guy James Hodgins, from Curvature Hedge Strategies, who seems generally to have some good miner picks - he likes Argo, SSL and BTO, for example, and dislikes the right companies too.

Anyway, have a look through his recent picks. Lots of non-miner stuff in there too. And also, a few miner picks I hadn't heard of, like Torex.

On deeper inspection, it's not that I like his picks - and some have tanked since, like Second Cup - but more that I like how he's in the past picked garbage, like SansGold, and now he's all bullish on BTO and AR.

The point being, if a lot of the remaining investors (i.e. who haven't permanently run away in disgust) are like him, they'll be buying the quality names only.

And thus Argo and BTO continue to move up, on above-average volume (for a Friday anyway), on a consolidation day like today.

Arrest me for attempted TA


After that really stupidly exuberant run-up we saw in some juniors yesterday, I'd half expect GDXJ to at least fall back down to $20.25, maybe $20. Maybe even give back the whole advance.

If it doesn't, then we know we've really got something awesome happening. Cos you know everyone else sees the same crap I see on their own charts, and expects at least as much/little as I expect from the market.

Then again, it's only a Friday.

Friday videos: Xiu Xiu doing "Clowne Towne"


One of the most depressing bands of all time.



You might remember them from the video that I posted ages ago, of them and Deerhoof coming together to do a ton of Joy Division covers, very damn well.

Thursday, August 16, 2012

Read Royce Funds' opinion on silver

In my quest to find out who the anon is who's dumping BCM, I've been poking around.

Royce Funds, one of the >1M shareholders as of recently, has a big writeup here on silver and small-caps.

Just in case you wanted to see their opinion about anything.

Bear Creek news


At 11:42 AM, there was a small (insignificant) flurry of buying activity in BCM. At this point, Anon pulled its $2.25 ask, and the stock went up to a new equilibrium at $2.35.

As it turns out, that's because there's news.

Blah de blah, not much to comment on in the NR, more like a "we're here and Corani is still awesome so quit selling us!", but obviously when Anon saw a flurry hit its asks, and then phoned its buddies to find out a news release was coming this afternoon, before us retail scum of course, they decided to pull their ask temporarily to gauge market reaction. No point puking the rest of your 4-million share position at $2.25 when you might be able to get $2.45 for it after the NR, eh, guys?

BTW nifty thing in the NR - BCM's built a bunch of schools for the local communities already. And so on. Heck, let's just listen to Andrew Swarthout:
"We are very pleased with the progress at Corani and the favorable conditions for proceeding with permitting.  The project design has been optimized to provide for a smaller footprint in order to further reduce the affected area and expedite the ESIA review and approval processSocial programs have been strengthened and the project's benefits have been successfully communicated to the sparse populations as far as 50 kilometers distant. Community support is very strong for the project. Importantly, water-related issues are minimal and are being mitigated so as to provide better and more consistent access to clean water for the local communities.  I am very proud of our engineering, social and environmental teams who have worked hard in establishing these favorable conditions."
Which translates into "we're not Yanacocha so quit selling us!"

Also note that the confiscation of Santa Ana violates the Canada-Peru FTA.

God... they even go into detail about their 3 exploration properties. Mr. Swarthout, the first part of the NR is great and all, and I'd personally see you go into more detail about how the people at Corani and Santa Ana don't hate BCM like they hate Yanacocha; but adding that stuff about La Yegua just makes you look desperate for attention.

Anyway... we'll see how Anon reacts to the NR. Silver going up strongly this morning can't hurt. Then again, when you desperately need to puke 4 million shares, you're going to have to choice but to utterly destroy the market in a fairly illiquid development property, eh? Cos after all, this Anon is so much more important than everyone else.

UPDATE: Yup, Anon's back selling, this time at $2.34. Because, again, their 4-million-share pukage is more important than the market.

S&P500 coming to a scary juncture


IF S&P goes all the way back to 1419 in this thrust, the opportunity will be there for the haters to be caught very, very flat-footed.

$BPSPX is moderate. We've only just begun rotation out of staples. Ten-year bond is riding the bollinger down. US dollar is moving slowly down. People only quit whining about the coming apocalypse a couple weeks ago.

And really you'd expect S&P to get all the way to 1560 (the pre-2008 high) before it rolls over and dies, wouldn't you?

newsbreak

In the news today:

- Paulson really loves his gold. Also Novagold and Allied Nevada.

- Sovereign default risk has dropped across the board. So quit your worrying already.

- China's domestic stock market is a joke. So start worrying about China already.

- Really? Germans are unfeeling fascist fucks who are now responsible for the deaths of thousands? Who would thunkit? I mean, up til now they've always been very nice to people, haven't they?

- Oh look. China's buying African Barrick. All of it. That explains the miners not sucking as much today!

Macquarie on BTO



Here's a link to Macquarie's writeup about why BTO are so awesome and what kind of an idiot do you have to be anyway to still own some shitty exploreco like EST that's down 80% when BTO is constantly expanding and glorifying its own gloriousness.

Morning market comment - oh my

Well, silver and GDXJ are both up vigourously - as if Paulson were mind-controlling the world or something. Both had backed off over the past couple days, and this upmove does have some headroom to it.

The good (P, BTO, DPM, SVL, SUE, FVI) miners have all pretty much moved up strongly, but not on overwhelming volume - as if maybe their upmoves are simply being driven by a big fish buying GDXJ without a thought given to the liquidity of the underlying.

But AR and RIO have done nothing, on the other hand. Strange. I bought some December AR warrants, in the hope that AR is simply lagging and will move back up, since the warrants give me more leverage.

Also bought back some NCU, since it hasn't been going back down with any volume. I still think the Yerington bill dying on the table would be a negative and bring about some selling, since it'd mean no land transfer til 2013; but then again they're moving strongly forward with their capex and are supposedly putting out a resource update or something?

To buy both I had to jettison SWD. Sorry, it's been acting like dead money, so fuck it. My little anti-AMM diatribe convinced me - if it's so great, why isn't it going up? LYD is a buyout property, and frankly its chart seems to have missed all the carnage of the past year - so that's what I should use as my model for a buyout property that's actually going to get bought out.

Wednesday, August 15, 2012

The false dischotomy of explorecos versus producers


Been thinking today about the "explorecos/producers" dichotomy. Frankly, I think it's an unproductive way to think. Here's why.

Look, explorecos are moose-pasture owners who are good at lying, and sell lottery tickets. And producers are companies that actually have a metal and are able to mine it more-or-less at a profit. But there are more than that in the world.

Buyout targets are not explorecos. They may still have some exploring left to do, but they already have a defined deposit, a good 43-101 with most resource in M&I, the metallurgy and process have been figured out, and there's at least a PEA giving a realistic value for the property.

Then, you also have near-producers. They have their own funny action on the market, with price shakedowns during commissioning, and strong accumulative upmoves as the project is de-risked and the mine comes closer to being a reality.

Then I guess there's a fifth type of mining company, the "prospect generator", which I refuse to even consider past this paragraph because I've yet to see one PG chart that didn't make me throw up. And yes, Brent & Mickey, that includes Almaden. The PG idea must therefore be wrong and I won't stoop to consider a wrong idea.

What are my opinions of each?

explorecos
- underlying value of $0.00, since you don't even know if any good intervals are mineable - and if you doubt me, look at the market today;
- can give you a ten-bagger win, or a 99% loss;
- every stupid piece of news, every drill hole, affects the price somehow and you never know in what direction or even on what day, though apparently the insiders and the drill crew often do;
- your share of what little they have is even guaranteed to dilute over time - so really, "the last fool" is the guy who buys in first (*cough*-Lupaka-*cough*);
- frankly, unless you're a P.Geo you have no edge in that field, and even the P.Geos seem to strike out a lot.

buyout targets
- you can calculate a definite underlying value which should support the share price, based on a NAV or based on ounces in the ground, but it will also vary depending on how the market perceives the buyout risk in that mining space;
- generate next to no news, so all you have to do is follow the political situation surrounding the property;
- then they sit there for years and do nothing, until you sell your entire $60K position and the next day Eike Batista buys them out at a 100% premium, the bastard.

near-producers
- you can calculate a definite & probably/hopefully much higher price target which should act like a magnet on the share price, based on the feasibility study and other economic facts;
- de-risking process should constantly add value;
- de-risking process generates a lot of news and leaves many opportunities for fuck-ups;
- problems in the de-risking/development process can give you a good entry point as the Tiny Dicks of Bay Street continually shake the tree to drive out retail (see RIO or SVL)
- should have a good long upward trend to share price, as de-risking takes it from the doldrums of a "buyout property" to a real company with (you'd think) profits and stuff.

producers
- bo-ring!
- but at least they have a strong underlying value, the opportunity to apply FCF to organic growth, and have no reason to drop below chart support (with metals prices remaining constant) unless they do something stupid like try to merge with Astur or RX Gold.
- dunno why anyone should not have a core position of producers, unless they're sadists.

And then, within that, I guess you could say there are also hybrids: for example, BTO has 2-3 mines, depending how you count it, but they're also going to bring Otjikoto to production, and they also have exploration properties that probably won't majorly affect their price (but at least BTO has the money on hand to develop them without dilution, unlike explorecos).

And then on top of that, you can divide these companies up by metals. That helps, since each metal price is going to move based on different things.

gold - depends on Indian, Vietnamese and Chinese economic growth, and the American delusion that it has anything to do with inflation or the US dollar; thus exposed to the vagaries on bot hthe economic and the psychological front.
silver - depends on technology growth; extremely exposed to liquidity crises.
copper - depends on EM fixed-asset growth; extremely exposed to economically contractive crises.
zinc, lead, iron and other boring base metals - China's flooding the market anyway so who cares.
soft rock - seriously, why is Mickey Fulp the only analyst who even mentions phosphates, coal and lithium? Goldbug newsletter writers don't know any geology anyway, so why does a phosphate mine frighten them? Frankly it exasperates me. They dig crap out of the ground and sell it: write about them.
specialty metals - REEs and graphite are bullshit fads. Ignore.


The metal action will have some effect on the company's price, unfortunately. So a good day to buy gold miners may not be a good day to buy silver miners.

And, y'know what? Looking at what I've written above, ignoring the prospect generators, the 5th type of company to invest in would be the good ol' GLD or SLV ETFs.

They don't mine gold, they just hold on to it. But really, looking at the past year's action, do you have any good explanation for why anyone should have owned a miner instead of GLD or SLV?

And I guess you can add the streamers like SLW or SSL to the list, as a sixth kind of company to invest in.

I've been writing this post for too long now, I'm off to lunch. Make of the above what you will.


Clive B2 article from Mineweb

Someone on the boards posted a good link to a good Clive Johnson article.

Acquisition frustration boils over at B2Gold

Excerpt:

...Like a host of other gold producers, B2Gold has a lot of gas in the tank (cash around $80 million) accumulated over the past couple years of especially healthy gold prices and concomitant high margins. And Johnson pointed out that B2Gold, relative to peers, had done relatively well in terms of share price. No wonder he said, "We're very keen on acquisitions."

But being stymied in its efforts. Johnson said it was surprising how many companies out there are unwilling to sign confidentiality agreements at all. And if they are willing, they come with caveats - shackles in the form of standstill agreements - that make it tough to do anything even if you can get into the data room. The self interest here is evident. B2Gold wants to leverage its position of relative strength. The beaten down, however, see no reason to put ink on paper at market lows. To do so is like starved lambs letting the fat wolves in, the thinking may go. If they do open the gate, well, they add a little poison to the ink.

Yet Johnson - sermonizing or no - will undoubtedly find some nodding heads before him in the audience when he says there isn't enough action out there in acquisitions. We have been hearing for about a year now how mergers and acquisitions would save the junior market. Light a spark. Fuel some unbridled buying on the TSX Venture. It hasn't happened.

Shareholders take note. If those who are doing the looking are to be believed, it is management on the receiving end of interest getting in the way. In that, some of those being targeted may be afraid of a bully's deal: your lunch money in return for not getting kicked in the groin. Hard to take that to shareholders. There are surely cases where there is reason to sit and wait longer; because you have the cash and a grand plan that does not include getting taken out at extreme shareprice lows. In other cases, however, myopia may be getting the better of management and egos getting in the way. If this drags on, there will be better reason for the kind of shareholder dissent we have started to increasingly witness. Or there should be.

US Silver price weirdness


Saw on the ticker tape today that USA went up by over 60 cents.

Checked the bullboards and saw someone say that this is only because the merger with RX Gold includes a 3:2 rollback. So it's not like anyone's made money. Certainly wasn't any particularly interesting volume this AM.

BMO has no news available (big fucking surprise there, they're usually a week behind Yahoo) and didn't see anything on Google Finance.

Don't really care anyway, not personally involved in a USA position.

Tuesday, August 14, 2012

Fun with valuing Barkerville Gold Mines' mythical 90Moz resource

OK, so first, here's a fun article on Barkerville from some website called "Canadian Securities Law". (Based on the website's name, I think it's a fiction website, fnarr fnarr.) For more background, here's Frik Els writing about them at Mining.com, even linking to a post by a Rogue Peruvian Blogger.

In any case, it's good to see they're still getting ink, no news is bad news, it's better to be talked about than not to be talked about, your majesty is like a stream of bat's piss*, etcetera.

Anyway, we all know that Barkerville doesn't actually have 90 million ounces of gold in the ground. But, that wizened old Professional Geologist Peter George from Geoex did sign off on the news release saying it just maybe perhaps could be so. And we should trust him because he's a P.Geo and that venerable profession always actively ensures the highest quality work from its membership.

So, let's have some fun a ciggypack calc and break out the ol' Office-97 Excel, shall we?

Warning: all figures below will be wrong. But thanks to the wonders of exponential functions it doesn't really matter to the final number, as far as "orders of magnitude" are concerned.

Other warning: I am a retail piker who, while entirely conversant in Excel 101 and how to discount cash flows, have learned most of the mining stuff from 2 years of skimming Otto's newsletter. (In other words, I've learned less than bloody nothing, net brain cell population negative year-over-year. But at least 2 years of reading IKN mean I can now sing the Internationale, chat at length about the finer points of Bolivaran political economy, and pick out the prettiest colours on IP/resistivity maps.)

Extra warning: seriously, this is only for fun, cos for some stupid reason the autism kicked in hard today and I decided I really want to do some math for 2 fucking hours.

Now. Are we sitting comfortably? Then we'll begin.

Let's assume that Barkerville has 90Moz.

Furthermore, they build something the size of Malartic, so as to mine it.

Malartic has 600koz/y production, say. And I found somewhere that capex at Malartic was $800M. Let's assume the exact same numbers as Malartic. Yes, BGM could build a Grasberg instead and pull 2Moz/y out of the ground, but I have to clue what that does to capex (Grasberg's the biggest evarrrr gold mine, Malartic's only in the top 20 or so) so we'll keep it simple for dumb ol' me.

(Maybe BGM doesn't have to move a town, but with recent cost inflation I'd assume a 600koz/y operation in Canada, even in greenfield, would end up costing the same capex anyway. Besides, the town was in fucking Nouveau-Quebec, so you're essentially paying for dynamite and 3000 servings of poutine-avec-Cinquante.)

Now let's assume the all-in costs for Barkerville will be a stunning $600/oz for life of mine. That cost includes all GA (there's only so much you could possibly spend on hookers and blow, unless of course you're hiring Russians) and sustaining capex.

Let's keep gold price steady. You'll see why, in the long run, it doesn't matter.

Let's assume the mine is entirely built, commissioned, and operational at full capacity by 1 Jan 2014, throwing off $600M/y in earnings.

At this point, if you're some dick who prefers setting a stock price target based on cash-flow multiple, stop reading. I'm doing an NPV calc here, because frankly cash flow targets are gay.

Now, first problem I see is that if you're up and running in 2014, mining 600koz/y, your mine life is holy shit 150 years. That's significant, because I'm going to use a discount factor of 6%.

I type all this into Excel, all the years from 2014 to 2163. We'll completely ignore shutdown and cleanup costs.

NPV(6%) of Barkerville's Cow Mountain adds up to only $9.4 billion. Yes. It does. At $600 constant all-in costs, $1600 constant gold price, and 150 years at 6%, each $1000-profit ounce is only worth on average $100/oz in current dollars. That's because, thanks to the compounding nature of discount factor, a $1000 ounce of gold is only worth $1 by 2131.

Now. BGM raises $800M by selling 655M shares at $1.22. Divide the NPV by the now 755M shares, and you get an awesome $12.39 net present value per share.

A ninety million ounce deposit and it's only worth $12.39/share.

That can't be right, you say?

Fine. Let's do cash flow. The revenue stream essentially lasts forever anyway, with a 150 year mine life, so perhaps the methodology is valid. OK, $600M/y, again they dilute to 755M shares to raise capex, so you get FCF of 80 cents per share, go 15x FCF and it's $12 again plus now you've made me feel dirty for doing cash flow multiple valuation.

That's unacceptable, you say?

Fine. Kinross buys them out. Kinross buys the entire 90Moz property by offering all the BGM shareholders a sweet deal. Kinross offers you a fair price of 80% of the NPV(6%). You get bought out, then, at $7.5 billion dollars, for only 100M shares cos nobody dilutes nothing, so you get $75 per share! Wow!

Among the problems with that are (a) Kinross has to somehow find $7.5 billion; (b) Kinross already can't mine fuck at a profit so they certainly aren't going to buy another multibillion-dollar writedown, (c) same for every other major. So, in reality, absolutely fucking nobody buys your 90Moz deposit cos they don't have the money and wouldn't know what to do with it if they had it anyway.

No, didn't think you'd like that either.

Fine. Let's say Barkerville magically builds a mine the size of Grasberg instead, and for a total capex of only $1.6 billion. That's 3.3 times the production, for only twice the cost. They can do that cos they're geniuses and it's easy anyway to build out what would be tied for the largest single gold mining operation the world has seen.

Now they're putting out 2 million ounces a year, again at $600/oz all-in cost. Hey! Mine life is now down to a reasonable 45 fucking years.

Discount that, and you get a NPV(6%) of $29 billion.

BGM raises the capex by emitting 1.3 billion shares at $1.22, and The Cow's NPV per share goes to... $20.58.

Hm. Diminishing returns much?

Frankly, it's like boobs. More than a C-cup is just a waste. In this case, when gold ounces are so far in the future that their current-dollars price drops below $100 at an entirely reasonable 6% discount rate (e.g. $1/oz in 2130), and when the capex is so huge that the existing shares are utterly diluted, anything beyond 10Moz is simply too big for anyone to know what to do with.

PS - I know the first comment to this post will scream "50/50 debt/equity you fucktard". But it requires more work to include the debt payments, I don't know how to do it anyway, and how is BGM ever going to find anyone willing to lend it $400M or more based on a promise that there's 90Moz on Cow Mountain? Fuck, even the name "Cow Mountain" will get them laughed out of the revolving door at the front of the lobby of the main floor of the bank.



* - for the "bat's piss" reference, please see this:



And yes, the subtitles are in Hungarian, and they have an almost Strom-like** quality about them, don't they?



** - for the "Strom" reference, please affix heavy-duty adult diapers and then listen to this:



Seriously, Fry & Laurie were hilarious together.

Fun Stock Gumshoe article on Greg McCoach


Randomly flipping thru the interweb, I came across this fun little article from Stock Gumshoe about a Greg McCoach pump email.

I'll link to it so you can read it, just in case you want to see how frickin' lame and pumpy these goldbug newsletter people can get. Stock Gumshoe also does a good basic analysis of the bullshit in a way that readers of idiot bullboards will find illuminating. And, just so you know ahead of time, SG deduces that McCoach's pump email is promoting Tinka Resources.

God, this does not reflect well on Greg McCoach.


SLW CEO Naughty Tinyboard interviewed on the Hudbay stream


SLW bought a silver stream from Hudbay recently to fund the Constancia mine; and I guess Hudbay doesn't even mind that, since to them they're just selling an afterthought byproduct.

Anyway, Silver Wheaton's CEO Naughty Randy Tinyboard Smallwood gave an interview to FP a few days ago. Among the takeaways:

1. He'd rather have silver ounces in the ground than money at bank right now;
2. He thinks Humala's actually done a pretty good job, and he's not scared of projects in Peru.

Also of interest: Hudbay asserts (in this other article here) that they've locked in a lot of construction work with fixed-price contracts to limit cost creep. Sounds like a good business plan! Hey, maybe Hudbay has good management?

Though I'd wonder whether a "locked-in price" really works out as such in Peru. They don't even work out that way in Canada. A Contractor (see, I capitalize it so those in the know will know immediately what business I work in) can, whenever he so wants, win 50-100% in cost over-runs. It's crazy simple to do. But maybe Peruvian contractors are naifs by comparison?

Chris Berry in the Gold Report

Chris Berry from House Music Partners gives a good interview in the Gold Report today, where basically as far as I can tell it's blah-de-blah REEs and blah-de-blah graphite.

Basically, it was informatie for me, inasmuch as it taught me that

1. REEs and graphite are foreign languages to me so I'll avoid;
2. REEs and graphite compete with China so I'll avoid;
3. REEs and graphite are seeing cost creep so I'll avoid.

Seriously, those are important things for me to learn.

Watch as newbie retail tries to figure out who's selling BCM

Ha! I just stumbled across a nice little feature at Morningstar that might give me some idea about the share structure at BCM.

That's good, see, cos I've seen that someone's selling Bear Creek like nuts. They're pro, since they're selling an iceberg as Anon; and they're large, since Anon was on the ask for maybe 400-500K of the shares that were traded yesterday alone. And it kinda seems they're one single seller, since the asks aren't trying to leapfrog each other and race to the bottom - the big position is sitting on the ask and not hitting the buy. I want to know who it is.

Well, this doesn't tell me that much:



Bear with me here. I haven't counted exactly, but by my very rough estimation, vaguely 600K-1M shares have been sold by Anon over the past couple weeks. And by probability theory and to give me a fudge factor, I'm going to assume what's been sold up to today most likely can't be more than 20-60% of their total position. (If they were, say, 80% sold as of today they'd have pulled their ask up, instead of sending it down further - so they must have a psychologically significant fraction of their original position remaining to sell.)

So I think we can ignore everyone below Royce in the table above.

So who is selling - SLW or Sprott? Meh - they seem to like silver, and Sprott's position is supposedly new.

Or is it ATIC? Apparently, if this other site has any usefulness, they've increased their holdings of BCM. (A few other interesting stock picks in there too.)

So is it Van Eck or Tocqueville, maybe? Van Eck, Tocqueville and Royce also own BCM within funds, so you'd have to wonder why they's assrape their own fund perormance. Unless they're simply de-listing BCM; do they have to, since the stock has fallen below $3? If so, looks like there's another ~19M shares or so left to sell, so that can't be good.

Interestingly, as of 7/31, BCM had been stuck below $3 for about 3 months, outside of a couple days. Then again, those days were precisely the first week of July. Did these guys buy it up to precisely $3 for start of 3Q, then begin dumping it?

If so, then I bet the fuckers are learning the hard way that you shouldn't take so large a position in a stock that you can't sell it without destroying the fucking market.

And I'd wonder why the seller doesn't just phone Sprott Inc. and ask to do a block trade to them. Hm? Sprott already likes BCM. Or is it that Sprott doesn't want to go over 10%? OK, then why not phone someone else who likes silver miners and has cash? Maybe Andrew Swarthout could give you a few names of people who want in?

Seriously, the way it stands now, dude, you're looking a lot like a big fat creepy guy splashing about in a Mr. Turtle pool full of the little toddlers of retail. You're not going to be able to hand off a multi-million dollar BCM position to these people without fucking the stock up for good.

Anyway. My entire chain of inferences might be wrong, but at least I'm right with the righteous anger, you've gotta admit.

UPDATE: And furthermore, guy, you're not even trying to dump your shares to retail, because you don't put up your ask until 10AM, and then you take your ask off the board from noon to 1PM. What the hell are you thinking? You want maybe retail to drive the price up for you so you can keep selling into thin bids?

I promise if I ever meet the trader who's executing this bullshit that I'll put my steel-toes thru his teeth.

Monday, August 13, 2012

Assuming I'm not the last person in the world to have seen this....

Here's a link to a 360-degree panorama of Mars.

Warning #1: on Mars, Google Maps works the other way around, so you have to pan left to turn left.

Warning #2: yeah... there's not much there after all.

Oh well.

Anyway, looks like another good win for science. I'm still awaiting the day that a bunch of mud-hut fundamentalist wackos manage to land a rover on Mars by praying to Jesus and pretending to read a bible.

News bits

1. Merrill Lynch has put out some copper "analysis" by an utter fucktard who read a few pages from Investopedia once. Seriously, pal - a head and shoulders in copper? Wow, that's the first time anyone has ever pointed that out to me! U iz teh smrt!

Okay, so did you confirm it with volume? No? Head and shoulders pattern by its traditional definition has to be confirmed with a specific volume pattern. Oh - and did you give us any macro reason whatsoever that could possibly drive copper down to $1.40? The sudden discovery that all Montana bedrock is actually 50% copper? Or maybe everyone in the developed world suddenly decides to become Amish? No? No macro reason at all? Then shut the fuck up because it's not a fucking head and shoulders pattern.

2. Guess what? The market is now experiencing rotation out of defensives into cyclicals. I.e., we're going up from here.

3. UBS wonders if the "fiascal cliff" is just another Y2K. Hey... I think a competitor finally showed up for my sarcasm-fest! Good on ya, guy!

4. Morgan Stanley thinks US bond yields are about to surge, based on some funny super-specialist indicator that's about as significant to me as when Lady Gaga last douched.

Of course, if I were having sex with Lady Gaga, the significance would be greater. And since you're asking, yes, damn right I'd tap that.*

5. Brian Belski from BMO says we're on the verge of the next bull market, based on something like a 10-year trailing returns chart or something.

Speaking of which - hey, mister dude from BMO who reads my blog. Why is it that I'm a BMO customer, and yet I've got to read about this on Business Insider? Really, for fuck's sake, why don't you guys provide proper fucking service to your Investorline clients?

Anyway.

Frankly, looking at the bullishness above, I wonder if I should sell? Really, given #4 and #5 above, it's starting to look as if people are really reaching to find reasons for bullishness.



* - Among the boxes ticked by Lady Gaga are such perennial favourites of mine as "young", "crazy", "Italian", "chubby", "easy access to drugs", and "wardrobe full of bondage gear".

market comment - Bear Creek

Anon has had its boot on the throat of BCM for about a week now, constantly driving the price down, leaving a big iceberg on the ask, forcing retail to dump into thin bids. Someone wants to unload a heck of a big position, wants not to be seen to be unloading it, and is happy to sell at utterly stupid prices. Really desperate.

Well, today, BCM volume's gone up strongly. A lot of big (for BCM, anyway) blocks are getting bought at $2.25. Strangely, even a lot of Anon is showing up in the buying.

Has someone figured out that you can buy all the BCM you want at $2.25? And do they really think it's a good deal at this price? How much has Anon left to sell - another million shares? Two million? God knows.

UPDATE: ha ha! The minute I post this, they stop buying. Thanks for making me feel so important, guys!

Sunday, August 12, 2012

Idiocracy

For absolutely no reason, here's a clip from the hilarious movie Idiocracy.

It was banned in the US for making fun of Americans.



My favourite is when Dr. Lexus says "Don't wanna sound like a dick or nothing, but it says here on your chart that you're 'fucked up'. Uh... you 'talk like a fag', and your 'shit's all retarded'."

Later: "There's that fag talk we talked about!"



Sunday news for you

I don't mind letting this blog devolve into a glorified news aggregator. If I'm doing that, it means the market isn't doing anything wrong, and that means it isn't going down, so I have nothing else to say.

And, after all, there's a lot of bullshit out there, and I'm only now starting to find it easier to drill through all the hype and dogma to find the real truth of what's going on. Might as well share it with my dozen remaining readers.

Hey, maybe those guys reading my blog every day at RBC, BMO, Northfield or Verdmont will offer me a job?




Anyway....

Here's the news.

1. USDA crop report was dismal, so corn prices ended the day... down. Really? Hm? What stunning genius could ever have expected this? And here's the funny thing - corn production in China is up 8.8%. Really? No shit, other countries grow corn too? Big countries? Wow....

2. Sober Look opines that another "Jackson Hole fix" isn't coming. And I agree. But maybe you should mark the date on your calendar, go 100% short, and then after the 1- or 2-day market collapse, go back to 100% long for when the market realizes that the US economy is actually doing vaguely okay right now (aside from external problems caused by the cunts in Germany) and doesn't need a monetary stimulus to kickstart things anymore.

3. JC Parets really lifts the veil with this post. I find it extremely necessary to quote him to you:

I get into a lot of discussions with people about the market and where I think it’s going. And for some reason they always come back with some sort of economic or political issue. Are we in running for office or we trying to profit from the marketplace? What the hell does Paul Ryan have to do with S&Ps this week? And this Fiscal Cliff nonsense – enough already.

The stock market doesn’t care about your economic issues and political beliefs, so leave it alone. The only thing that drives price is buyers and sellers. Period. End of story.
Brilliant! And, as he points out, S&P short interest in now rolling over, and when that happens, the charts say you get a 100-200 point pop. The chart is the chart, and the market is the market - so the babble from the news studio and the bloggers is all bullshit.

I'm loving JC Parets more and more.

4. Washington's Blog, often reposted on Ritholtz, is really just a hardcore Occupy-ist at heart, and frankly I feel that I don't need to read what he posts - it's the Americans who should be reading him, not me. And he has often propounded utterly stupid ideas, such as the one that the Occupy Movement should work with the Teabaggers - you know, that bunch of McCarthyite Moonie John-Bircher idiots. Not going to happen. Because? Because they hate you is why.

But, the nice thing about Washington's Blog is that he writes utterly encyclopedic catalogues of American plutocratic corruption. Here's this week's post on the crimes of the big banks. I dare you to read it and not reach for your revolver.

And with that, it's time for a musical interlude:



(Now GT can post a "omg that's Mission of Burma omg omg" comment....)

5. And we'll end with a neat article from Christian Science Monitor: 'Why Nations Fail': Can elites choke American prosperity?

And I'd say yeah, and in fact, I'd go further and say that quite many of the bear markets in modern history have been caused by plutocratic corruption siphoning off productive capital. Which means this bear market in the US ends only when all the bankers, politicians and corporate lobbyists get sent to what Karl Denninger calls "ass-rape prison".