Congratulations, Serafino Iacono...

...on your marriage today to María Paola Mejía Suárez.

The Friday OT: Daft Punk; Random Access Memories (Vanderway Edit)

A remix from heaven

Barrick's (ABX) halt connected to $16m fine imposed by Chile for Pascua Lama environment snafus

But we'll find out more soon, for sure.

UPDATE: As reported in plenty of places in Chile today (Googly newsfeed here), Chile's Environmental Superindentency agency has paralyzed the already halted Pascua Lama project and imposed an approx $16.4m  fine on the company's wholly owned Nevada SPA company for envirommental rulebreakings. If this is the reaosn for the halt today (and it looks very likely), the news is already largely baked in while the fine, though large, is a drop in the bucket of an $8.5Bn (with a B) initiative. Kinda looks as though ABX is playing the news a bit with this halt.

UPDATE 2: The Silver Wheaton (SLW) wrinkle, as noted by kind reader M and relayed from the SLW website:

Barrick has provided Silver Wheaton with a completion guarantee, requiring them to complete Pascua-Lama to at least 75% of design capacity by December 31, 2015. During 2014 and 2015, Silver Wheaton will be entitled to the silver production from the currently producing mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies the completion guarantee. If Barrick fails to satisfy the requirements of the completion guarantee, the agreement may be terminated by Silver Wheaton. In such an event, Silver Wheaton would be entitled to the return of the upfront cash consideration of US$625 million less a credit for silver delivered up to the date of that event. 

Certainly worth considering, what with the delays to date and all that. 

Agnico Eagle (AEM) (AEM.to) continues its 2013 spending spree in juniors

Yesterday saw the latest in a line of strategic investments made by Agnico Eagle (AEM) (AEM.to) in TSX listed junior mining companies, as AEM has decided to pay $11.25m to buy 7.5m units of Probe Mines (PRB.v) at $1.50 a shot (1 unit = 1 share + 3/4 warrant at $2.10 with a 2 year shelf life). As PRB.v closed at $1.41 yesterday we can expect a rally on this news, but more interesting is that this is the fourth such deal AEM has made with a junior in the last few weeks, so let's see how the other three have been getting on:

The first was on March 19th, when AEM paid $12.96m for 9.6m units of ATAC Resources (ATC.v) at $1.35 a shot (unit = 1 share + 1/2 warrant at $2.10, 18 month shelf life). Here's a chart:

Hmmm, not so good. ATC has suffered through the gold drop and is now at 99c. It's expensive exploring in The Yukon, they tell me.

The next was April 9th, when AEM paid $24m for 29.97m units of Sulliden Gold (SUE.to) at 89c apiece (unit = 1 share + 0.7 warrants at $1.31, two years to play). Here's how SUE.to has done in 2013 so far, with the date of the deal marked.

Well, not so bad considering just how bad the market's been during the gold sinkages of mid-April and then mid-May (as long as you consider that Shahuindo is never going to happen of course....but hey, details, since when have you needed to build a project in order to be a successful junior player, right Stan?). However, we do note that AEM's price was 89c rather than that day's market price and SUE.to is still a tad under that number. 

And to complete the set, April 23rd saw AEM's move into Kootenay Silver (KTN.v) via a 6.25m unit deal at 76c a shot that cost a total of $4.75m (unit = 1 share + 1/2 warrant at $1.08, two years playtime). The last chart here:

Again AEM paid over market price at 76c and will immediately start on about its long-term planning if you ask them. But we note the rally that managed to avoid the May sagging and repeat that there are a lot worse looking one month charts in the juniors today (and I should know, I own a few of them). 

The bottom line is that we're looking at a company strategy here, with AEM buying into beaten down juniors that offer up (in the company opinion) interesting projects at macro-induced discounts. We also note that AEM's been buying into tiny fractions under the 10% barrier in each of the names, too. The pattern is clear enough. Whatever you might think of the companies that AEM has bought (personally I think the're making a big mistake with SUE for political risk reasons), the rest are deals about which I can shrug my shoulders and say "well, at least the timing isn't bad".

Chart of the day is...

...tha gold/copper ratio again:

Your humble scribe's obsession with the the monetary versus industrial metals ratio continues and today it's all about the right hand side of the chart and what seems to be the beginning of a reversal. The pleasant thing about chartwatching is that you can see whatever you want to see in the squiggly lines (to the point where they've spawned a whole sub-industry).

Daft Punk: Random Access Memories

The best new music I've heard in years.



Listen to this music, it's superlative.

Despite having a chart that looks like this...

...Exeter Resources (XRC.to) (XRA) is still overvalued by nineteen cents per share. Here's the mathematics for your consideration:

Share price today: 72c

Working cap per share: 53c 

Value of fixed assets: Fuck all.

Result: Overvalued by nineteen cents per share (y'see, toldyaz)

It's the power of Canaccord (well, ex-Canaccord)

The potential for a class action suit against Aurcana Corp (AUN.v)

Below is the piece that first appeared in The IKN Weekly issue 206, dated April 14th 2013. By way of context, back in Novermber 2012 I bought Aurcana Corp (AUN.v) at $1.07 and for a little little while the trade showed green, but the stock then started its downhill run and via a Flash update just before IKN206 came out I sold the position at 55c for a big percentage loss. 

So I made a trade and lost. Shit happens, all that etc, however the post today isn't about a dose of them there sour grapes (it's only money, after all) and more about how I'm sick and tired of having to listen to, read and pay attention to liars and scumballs in the mining industry such as Lenic Rodriguez, Pres/CEO of Aurcana. What we have in this case isn't a subjective opinion that he's a liar either, as the company's own words make it abundantly clear that AUN.v told outright falsehoods to the market in December 2012. As such, and considering the hefty share price drop between then and now, AUN.v looks ripe for a potential class action suit (a legal recourse that's finally gaining some traction in Canada, glad to say).

Oh by, the way, that thing liar Rodriguez said about not needing cash during the YE company conference call? Well, as of this week RBC seems to agree with your humble scribe that AUN.v will in fact need to raise more cash, as it was one of the reasons cited by RBC during its downgrade of AUN.v to "underperform" on May 21st. Anyway, have a read of the piece in IKN206 here and decide for yourself if there's a civil case to answer. Personally, I think there's an abundance of evidence.

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Aurcana Corp (AUN.v): Position sold

To call myself disappointed with the Aurcana (AUN.v) 2012 YE financials is an understatement, as the Flash update of Friday morning (see appendix 1) should have pointed out clearly. The position sold as per Friday and the loss is taken so there won’t be a massive post-mortem here today. However, a few notes on just why, above and beyond the outright lies that AUN.v has used on the market, we don’t like the look of where AUN.v sits financially today follow.

Here bulleted are some of the items included in the company news release of December 14^th 2012 (3) and between the bullets are updates, dating from last week, on how the information released on April 11^th(4) compares to the original news:

• The assets at the Shafter Mine are ready for their intended use and the plant is now operating on a continuous basis at an average rate of 600tpd.

According to last week’s results, commercial production has not been achieved at Shafter.

• Processing of lower grade open pit ore, initially mined during the plant commissioning and testing phase, has been discontinued. The plant is currently processing higher grade underground ore exclusively.

The company reported in its NR that ore at 5 oz /t Ag was currently being mined, lower than the ~8oz/t average for the underground material. It also stated in the ConfCall that until the CCD circuit is installed (supposedly happening “gradually through 2013”) recoveries are running at 50%.

• The Shafter Mine currently employs 152 personnel allowing for a continuous operation. Additional underground miners have been recruited and will join the Shafter mine in January 2013, as the Shafter mine ramps up.

During the conference call, CEO Rodriguez admitted that the company was still short of staff, talking about 15 extra heads needed to bring Shafter up to 600tpd and that one problem had been high staff turnover. To combat this problem the company is now building living accommodation for employees.

• Aurcana has implemented a production ramp up plan to gradually increase production towards the phase I planned capacity of 1,500tpd, as mining operations proceed.

On December 14^th the mine was apparently running at 600tpd. Last week, some 118 days after the wholly false announcement of commercial production, it was running at 560tpd.

• As part of the ramp up plan, the installation of additional thickener tanks, increasing the processing capacity of the plant, will be commissioned early Q1, 2013. In addition, upgraded filters will be installed in Q2 2013.

Those installations have been delayed. Also, additional filter presses are needed but won’t arrive until 2q13 or become operational before 3q13.

As well as those points, it was also clear that AUN has dropped its grand plans for M&A type expansion. Back in 3q12 the company said it was in talks with another Mexico producer for a merger (we guessed at Scorpio at the time), but the message last week was that AUN would be concentrating on its organic growth. It’s unsurprising given the share price weakness between then and now of course, because its lack of cash and serious paper closes the door.

Aside from the untruths told and now admitted, there are financial ramifications to the delayed timeline for Shafter. This chart shows our forecasts for overall working capital at AUN during FY13 which assumes steady state production and post credit at La Negra, Shafter that runs at 600tpd in 2q13 and moves up to 1,000tpd by year end (using 5oz/t silver and average 70% recoveries) and an average $29/oz realized price for silver. On the ConfCall, CEO Rodriguez (after some prompting) admitted that the 2013 capex budget for AUN would be around $20m, which according to our model means that AUN is likely to go working cap negative for a while before recovering at the end of the year. It does have a credit line in position that will be more than enough to cover cash flow needs for a near-term period, but the problem here is if silver doesn’t maintain a $28/oz average, AUN does more than just go through a couple of quarters without profit; it runs out of cash.

On the ConfCall, CEO Rodriguez said that the company wasn’t planning any further equity raises but quite frankly, with a track record like his there’s no reason to believe him. As AUN is now about to enact its reverse stock split which will cut the shares out total eightfold (putting it at 58.4m s/o) and the share price to over $4, a rollback of this sort smacks of a company preparing to raise more cash via equity. Given the thin state of cash holdings forecast for this year and the slipping in timelines for expansion, I’d say a dilutive round of raising in 2013 is far more likely than the two-faced Rodriguez would like us all to believe.

Anyway, it’s all rather too much like sour grapes from me on this trade today. I’m now out and not going back until things have substantially changed at AUN. That would include a complete change in top management as I’ve been fooled once by these people, so shame on them. Next time would be fool on me. But there is one more thing I’d like to share here, which is the price chart for AUN since December 14^th, date of the apparent “commercial production” that turned out to be a tissue of lies. It was due to this announcement that its promised timeline was being kept that AUN remained in the IKN portfolio. Since that time the stock has sunk, from a December 14^th close of $1.04 to the current 56c. That’s $224.3m in market cap wiped from the stock and in my personal view, that leaves plenty of room for compensatory actions from those who have lost money on this deal due to the lies and deception of company officers. I for one know that I wouldn’t have held on this long if AUN hadn’t announced its “achievement” of commercial production on December 14^th.