start here

start here

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


Jerome does an FOMC (from IKN461)

The short intro piece in this week's edition of The IKN Weekly, IKN461*:

Jerome does an FOMC
“I don’t care what the newspapers say about
me as long as they spell my name right.”
Phineas Taylor Barnum

There are things we know and things yet to discover about the FOMC meeting this week:

  • We know Jerome Powell sits at the top of the table for the first time.
  • We know that a rate hike is going to happen. Put another way, if rates aren’t hiked a notch the market will be very surprised and the market doesn’t like surprises at the best of times, let alone from a Fed with a brand new chair.
  • We are yet to discover how Fed Head Powell handles the presser post-FOMC, but considering his polished performance in front of Congress a couple of weeks ago, a few pesky journalists are unlikely to ruffle his feathers.
  • But most important of all next week, we are yet to discover the tone and content of the FOMC communiqué, that publication of always close focus will be pored over, examined and debated more intensely than ever as the market tries to interpret the direction Powell will (or at least want to) take.

Anyway, Wednesday’s your day. We’ll see how “King Dollar” looks afterwards (thank you Kudlow) and by definition, gold.

Talking of which, I’m hoping that President Trump’s new (latest?) economic advisor Larry Kudlow continues the gold trash talk and more of his “I would buy King Dollar and I would sell gold” comments are highly welcomed by these pages. Less because Kudlow is a time-tested contrary indicator and more because the average financial professional and market participant, beyond casual mockery of we tinfoil hat wearers, simply doesn’t think much about gold very much. Therefore, if the guy whispering in the ear of Trump is talking gold it doesn’t even matter that his comments are negative, it’s going to get more people to at least consider gold’s position in the investment firmament. We are in the political era that PT Barnum could only dream about, after all.

*Yes, that does mean I've spent the last 461 weekends writing the thing.

In order to understand just how bad Hecla Mining (HL) financials are, the necessary blog post on IKN

It's not just me, either. When A. Reader pointed out this bit of today's NR that announces the acquisition of Klondex (KDX), we both had a giggle. IKN highlights:
 “We structured the deal to use our excess cash balance so our shareholders can benefit from the approximately 162,000 gold equivalent ounces a year of production while minimizing dilution.”
Excess cash balance! Yup, like saltwater in a tidal pool HL has cash washing and lapping around. But once we'd stopped chortling and yokking at the words of HL President and CEO Phillips S. Baker Jr, it occurred to my lazy brain that it would be good to check out exactly how bad this company is at numbers and money and stuff so it was off to the RegFs and my stars, it's even worse than I thought. Two exhibits for you today, the first its latest balance sheet:

As at year end 2017 HL had $186m in cash so yes, it does have the "liquidity" to shell out $157m to KDX shareholders. However, look a bit further down and....oh, what's that? $502m in debt? Hmmm, and here's the payback schedule on that Senior Secured (aka at the front of the queue) obligation:

2018: $34.8m
2019: $34.8m
2020: $34.8m
2021: 518.107m

In other words, if HL can conjure up six hundred and twenty million dollars in the next three years, all will be well. That thought brings us to Exhibit B of this post, the net profits at HL over the last ten years:

Do the math (and notice how generous your humble scribe is by going for the ten year period and not just the last five years) and you'll see that HL has generated the sum total of $168.118m in the last ten years. TEN YEARS! What's more, $151m of that came in just one year. So folks, what do you think the chances are that Hecla makes enough to pay down that debt organically by 2021? Yeah, me too.

Thank you for the Monday merriment, Phillips S. Baker.

Just so you're clear about Alset Minerals (ION.v)

The people willing to invest money in the company would only do so under the condition that Allan Barry were fired as CEO. Barry was given time to find an alternative source of funds, unsurprisingly failed, and as a result "was resigned" by the board in order to get the people with the new cash in.

So it goes.

Hecla remains true to its corporate culture... once again overpaying for shit assets.

Have to admire their consistency.


The IKN Weekly, out now

The peanut stood on the railway line,
His heart was all aflutter,
The 461 came down the track,
Toot Toot! Peanut butter.

IKN461 has just been sent to subscribers. A better edition than last week's mess, the main gig is B2 but there's plenty more. All aboard!


First Majestic (AG) ( decides not to tell us about its cyanide spillage... its newly acquired San Dimas mine in Mexico (ex-Primero), so it falls to this pissant blog. According to the Mexican environment people, on March 11th (six freakin' days ago) First Majestic was trucking cyanide solution out of the mine when the truck ran out of fuel (weird in itself). The truck stopped on a hill and it turns out that one of the taps was either faulty (service dept?) or had been badly closed by the company. The result was the loss of 245l of cyanide solution, which then ran down 245 metres to the local river and proceeded to kill no end of fish when it entered the river.

Another Canadian mining company, winning friends and influencing people in Mexico.


Christopher Hitchens on Vladimir Putin

A nine minute segment of a speech and Q&A given by a Hitchens at the height of his powers, in Canada in 2005. The first six minutes give necessary background (including the Berlin Wall and Serbia), the last three minutes are impressively perceptive on the "KGB Weasel" Putin. Hitchens called it first and well.

The Friday OT: Smashing Pumpkins; Zero

Because zero:

Youtube here.

Fun Asanko (AKG) things

On checking out the 4q17 financials and MD&A out of Asanko Gold (AKG) today, I couldn't help but wonder how it managed to mine just 802kt of ore but mill 1087kt. The norm at the company, as you can see below, is that the company mines more than it mills.

The difference goes on the low grade stockpile and gets added to assets at the company. So you'd expect that stockpile to drop in value and sure enough...

...carried stockpile inventory dropped by U$4.5m during Q4. You can expect that stockpile number to drop further in the next two quarters too, what with AKG telling us how its' going to have to concentrate on cutting back the pit walls. That means the low 1.5g/t grade average will continue. As will the losses. 

There was also that weird thing about how AKG claimed mill throughput of 1087kt, 1.5 g/t and 94% recoveries. If you do the math on that they should have produced 49,282 oz but somehow managed to claim 51,550 produced ounces. That's 2,268oz magically created out of nothing. Clever trick, especially when there was another 2,047oz of gold magically created in the same way during first three quarters of last year.


IKN Welcomes Brent Gilchrist, president of JDS Resources

Hi Brent,

Thanks for signing up to the mailing list today March 15th, so good of you to take an interest in this humble corner of cyberspace. Now you're here, perhaps you could enlighten on just why your company managed to underestimate capex at VIT.v's Eagle project to the tune of around 47%? And all that stuff you guys are trying to do at Curraghinalt, too. Just drop me a line, it'd be great to hear from you. Anyway, thanks again for signing up and here's a link you may be interested in reading.

Kisses, Otto.

Mo' B2

It's not exactly setting the street on fire, but...

...if you sit B2Gold (BTG) next to the Gold and Silver Index (XAU) on the one minute intervals and the last two day to show how the earnings numbers were received last night, that's not bad. As noted to one mailer this morning, I've seen worse reporting days.

Peter Arendas snowflake alert (Victoria Gold Part Deux)

After this humble corner of cyberspace did some 'splainin' to Peter Arendas, self-appointed expert on mining numbers and stuff over at Sinking Alpha, somebody pointed out the post and he decided to act...and comment:

Peter Arendas, Contributor
Comments (963) |+ Follow |Send Message |
Author’s reply »
Yes, I made a mistake and only mechanically decreased the NPV by 5%. Although I reflected the impact of the royalty sale on the attributable gold production and AISC, I neglected the total impact of the royalty sale on the NPV. After I used the gold price of $1,300 and the new 5% NSR in Victoria's NPV model presented in their feasibility study, the resulting after-tax NPV(5%) should be around $370 million (I'm not familiar with the Canadian tax system enough to determine the exact impact of the royalty sale and the 2017 tax changes on Victoria's tax obligations which means that the actual number may differ slightly). I submitted a correction of the related numbers, it should be visible soon.I apologize for the mistake, however, I must say that I absolutely don't like the blog author's arrogant writing style. If someone makes a mistake, you can notice him also without personal attacks, in a more cultivated way.

Oh the poor dear, has no trouble about spouting BS, pumping stocks in public forums using false information and potentially leading thousands of naive sheep up the proverbial garden path, but doesn't like his thin skin being pierced. Well Peter, it's true I'm an arrogant piece of crap but it's also true that I'm not nasty and horrible to just anyone. I save that for people who deserve it, such as you because you may think you've fixed your BS anal ysis now but it still wildly overestimates the NPV of Victoria Gold (VIT.v). This is one reason I asked you whether you actually know what NPV stands for.

You are seriously telling us that the Eagle project will be built for CAD$370m? They've just raised CAD$505m, didn't you see that? Well in fact you did and somebody else pointed it out to you in the comments section, but lo and behold that fact didn't fit your prejudices so you were moronic enough to defend your position with "Well they might not spend all that cash on the capex"! Dude, have you ever met a mining company CEO in your life?

A few facts for you, Peter:

1) VIT raised C$505m to build Eagle because they need C$505m to build Eagle. Period.
2) That C$370m (U$288m) number you seem to be fond of is a work of fiction, made up by JDS and published in cahoots with VIT. It's fraudulent. One of these days JDS is going to get slapped with a lawsuit and go bankrupt after losing the case, because they do this shifty move all the time and you're simply a fool if you haven't noticed it yet
3) As they've already spent C$38.4m on Capex at Eagle in 2017, you're staring down the barrel of a C$543m capex project here. And even that may turn out to be generous, because I'm not including the $20m contingency bridge loan they've set up or their treasury position.
4) And here's how I framed that fact to subscribers of The IKN Weekly last Sunday evening in IKN460: "That’s an overrun of C$173m, or a whopping 46.75%. And as according to JDS every 5% extra spent on capex means C$27m less on the NPV, the subtraction is C$252.45m".
5) Got that, Peter? Y'see, the problem is that you cannot simply ignore a capex overrun. You can try of course, you can even publish about it (either due to dumbass ignorance or nefarious reasons, I'm going to assume the best of you and say you're the former) but don't start whining when your gross errors and miscalculations are brought in front of your eyes. 
6) So let me help you with the next correction you need to make to your utter work of fiction. You're claiming a U$370m NPV for VIT.v at U$1.3k/oz gold. You're going to need to subtract around U$197m from that now. And that means your NPV per share is down to 22c. And you're looking really stupid now.

Have a nice day, Peter.