start here

start here

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


OGC and BTO, analyst opinion wrap-up from a Bloomberg terminal piece

Thanks reader LH for punting this one on:


(BFW) OCEANAGOLD/B2GOLD STREET WRAP: Philippines Suspension Unlikely


OCEANAGOLD/B2GOLD STREET WRAP: Philippines Suspension Unlikely 2016-09-28 13:22:29.743 GMT

By Aoyon Ashraf
    (Bloomberg) -- B2Gold fell ~12%, OceanaGold 14% in Canadian trading yday, after Philippines govt. noted that audit of roughly three quarters of mines in the country could see operations suspended; most analysts expect issue to be resolved, and mine suspension unlikely for both cos., although stocks likely to be volatile in S-T until issues are resolved.

CIBC (Jeff Killeen)
  * OGC CN, BTO CN have sufficient balance sheet strength be able to develop mines in Philippines (based on $1,300/oz gold price) uninterrupted
  * Says during previous site visits, it was observed, that operations at Didipio and Masbate mines seemed to be employing industry best practices; would be surprised if ops ultimately halted
  * Didipio represents ~37% of NAV for OGC CN; Masbate ~29% of BTO CN’s NAV

BMO (Brian Quast)
  * Masbate comprises 22% of BMO’s NAV, 28% of 2017 production ests.
  * Didipio represents 31% of asset-level NPV, 30% of 2017 gold eq. production for OGC CN
  * Expect weakness for OGC CN until further clarity is provided

RAYMOND JAMES (Chris Thompson)
  * OGC CN’s social license, strong environmental track record from operating in New Zealand and Philippines for several years underscore its commitment to safe and responsible mining
  * Also OGC CN has strong local support, which will help OGC CN in resolving this matter
  * Didipio is 30% of NAV for OGC CN; Masbate represents 28% of NAV for BTO CN

HAYWOOD (Geordie Mark)
  * OGC CN will be able to resolve issues raised in audit, even though DENT announcement presents negative headline risk, heightened investment risk for Philippines
    * Didipio accounts for roughly 23% of project NAV
  * BTO CN’s Masbate mine represents 20% of project NAV; notes that mine received ISO 14001 accredition earlier this yr, which confirms environmental mgmt system is up to ISO standard required by country’s law

CANACCORD (Reg Spencer)
  * Says unlikely that OGC CN can’t satisfactorily address listed social issues; notes that suspension is based on “soft” social issues rather than any specific environmental breaches
  * Didipio represents 30% of NAV ests; OGC CN ultimately will be able to resolve these issues, uncertainty will be elevated until situation is resolved

CORMARK (Richard Gray)
  * Ascribing low probability for suspension of BTO CN’s Masbate mine
  * BTO CN now trades at 0.97x NAV, 8.2x CF, which is “attractive value” for investors looking to build or add to position in high quality, growth co. in gold sector
  * Finds it “hard to believe that a well-run operation such as
    Didipio would actually be suspended;” also sees OGC CN trading on attractive valuations


  * Doesn’t see any balance sheet risk for OGC CN, in case of potential suspension of Didipio (~22% of asset NPV)
  * Reiterating sector perform rating, PT of C$4.50 for BTO CN given potential for resolution of cited violations without production interruption or material impact to costs
    * Says Masbate represents 17% of mine/project NAV at C$0.54/shr

SCOTIABANK (Ovais Habib)
  * For OGC CN, under a worst-case outcome, oper. license at Didipio (39% of asset NAV ests.) would be suspended; although at this time its low-probability scenario
    * More likely that there will be requirement for more stringent operating conditions
  * For BTO CN remain optimistic that Masbate (23% of asset NAV) operating license can remain in good standing; final negotiations between co. and govt expected in coming weeks

Global Mining Observer brightens an otherwise quiet day... quoting Ian Ball of Abitibi Royalties quoting Justin Bieber in this interview. It's actually a pretty good piece.

Chart of the day is...

...the gold/silver ratio:

I really don't know what to make of the current action in the GSR, aside from the fact that the immediate drop in the ratio to 55X that the silverbugs promised us was just another crock of delusional excrement from that bunch of permawrongs.

The Barrick (ABX) Veladero mine's suspension is likely to be lifted on Friday

That's what the Argentine judge in charge of the paperwork and the decision said today, after conducting a visual inspection of the mine yesterday. He said that the repairs and preventative work demanded by government and judiciary had been done by ABX and the only thing stopping the mine from going back into production was a Mining Police report on the quality of the work done, which is due in the next 48 hours.

So now you know.

Frank Holmes Says

Killer clowns are bullish for gold. 

This is of course a developing story.


A Philippino pair trade

An idea for instos and funds with easier access to the short side.

1) the apparent difference in gravity between the company infractions (according to the Philippino govt anyway), as BTO's looks rather admin-related while OGC's looks potentially serious
2) the relative exposure of the two companies to the country in NAV terms (OGC has more percentage of its overall corporate neck on the line)
3) the roughly equal share price reaction so far today (I recently saw BTO down 12% and OGC down 13%)

...a decent pair trade looks like long BTO/short OGC from here.

I'm getting a lot of mails about B2Gold (BTG) ( this morning... to stem the tide, here's my position on the stock's issues at Masbate:

Pu simply I'm in "wait and see" mode. From what I've picked up, its problems at Masbate aren't as serious as other mines on the Philippino hit list. However, there whole loose cannon thing around this government makes things more difficult to read. There has been opposition to the Masbate mine on the island for many years, but that's mostly about accusations of land-grabbing. The mine is a big employer and job supplier (direct/indirect) to the local economy, it's not easy to cut that off...but it's not impossible either if you have a bigger political point to make.

Regarding valuation, Masbate is a large contributor to the BTO sales mix but it's not that much of the overall value. You're individual anal yst and brokerage house will argue the toss about the exact percentage, I have it at around 22% of NAV. As BTO is now 13% off in trading today, the market is signalling a binary up/down resolution in the near future and that's a reasonable stance.

I'm not a seller of BTO (as subbers know, I'm long and overweight the stock). I'm not a buyer/adder yet, either. I'll be very interested to get BTO's take on this, that's bound to come soon enough in an NR. In the NR I'll want as much information as possible, any nook and cranny, as what's left out of a NR such as the one coming from BTO matters as much as what's put in.

One final thing: My inner investor isn't really that worried or nervous about this, which surprises me a little. I'm taking that as a good sign, but it's a wholly personal thing.

UPDATE lunchtime: BTO announces this and the feeling above fits into the contents that 1) not as serious as other cases 2) the loose cannon effect still can't be ruled out. Bottom line is that before I was reasonably relaxed about holding through, now I'm even more relaxed, but I'm too whussy to add any more (plus I'm already overweight BTO, the eggs-in-one-basket rule says I shouldn't rush and and get more). Or as reader RL succinctly put it in the shortest mail I've received today, "Overblown...blow over".

The London Evening Standard, teaching the small brown people how to spell all proper like

It's 2016, fercryinoutloud.

Link here, but don't expect to learn anything from it.

The list of 20 Philippine mining firms in the firing line

Right here. And even though Masbate isn't one of them, B2 is off 9% at the bell. Go figure.
Update..oops, my mistake, the subsidiary Filminera is named. Makes more sense, I need to drink my coffee earlier in the day.

  • Libjo Mining Corporation
  • AAM-Phil Natural Resources Exploration and Development Corporation - Parcel 1 and Parcel 2B
  • Krominco Incorporated
  • Carrascal Nickel Corporation
  • Marcventures Mining ‬and Development Corporation‪
  • Filminera‬ Resources Corporation‪
  • Strongbuilt Mining Development Corporation
  • Sinosteel ‬Philippines HY Mining Corporation
  • Oriental Synergy Mining Corporation
  • Wellex ‬Mining Corporation
  • Century Peak ‬Corporation - Rapid City Nickel Project and Casiguran Nickel Project
  • Oriental Vision Mining Philippines Corporation
  • CTP Construction and Mining Corporation
  • Agata ‬Mining Ventures Incorporated
  • Hinatuan Mining‬ Corporation
  • Benguet Corporation
  • Lepanto ‬Consolidated Mining Company
  • OceanaGold ‬Phils, Incorporated
  • Adnama Mining Resources, Incorporated
  • SR ‬Metals, Incorporated

Mind you, the drop in OceanaGold ( ( this morning does have more fundies to back it up.


Yamana ( (AUY): Marrone, pwned

This is what it sounds like when the corporate profile of a $4Bn gold mining company has to play catch-up to a pissant blogger. 

On September 8th IKN revealed that Yamana Gold (AUY) ( was facing the "never going to happen" card and a likely $1.1Bn write down on its Agua Rica project in Argentina.

On September 22nd IKN revealed that far from being a done deal, the lawsuit against the company filed by Ricardo Auriemma was looking bad for YRI and the company faced paying out up to $110m.

And tonight, September 26th, YRI published this news release to "clarify" on both the above matters, the verb used by YRI in its title line that's a very, but VERY debatable choice because Marrone's Minions have spun the two issues hard and laid on as much sophistry as they possibly could.

Regarding the Auriemma issue, AUY try to make it sound like the maximum on the table is $54m and the most likely result is nothing, or perhaps $5m. Total bullshit. Read the files and it's clear that they could be on the hook for as much as $110m and their hoped-for derisory penalty is very unlikely to occur. There are no lies in their text but it's spun like a Waltzer at a fairground.

Regarding the ban imposed on the Agua Rica project by the town of Andalgalá in Catamarca, they pooh-pooh the locals, say the laws are applied by the province and not the nearest town and make out they're running an efficient and winning community relations campaign. Sorry guys, I know I promised not to swear any longer on the blog but that's just fucking delusional. It's like saying that the law states the locals around Conga couldn't stop that project, or the locals around Suyai couldn't stop that project, or the locals around Tia Maria couldn't stop that project, or the local around Caballo Blanco could stop that project, or the locals around Cañariaco coul.... get the picture? But what YRI didn't address is the write down they should take in order to be straight and true with shareholders. Agua Rica may be ostensibly under provincial law but to use the local vernacular, deja de joder che! There is no way, none, zero zip zilch nada no chance that Agua Rica happens. Ever. So...writing down this quarter, Marrone?

But the big one for me is that I still can't get over how a company like YRI can get pushed around by a drunken zero-DD blogger such as your humble scribe. The humanity Peter! Oh the humanity!

Some Monday music

Alabama 3, 'Monday Don't Mean Anything To Me'

Keep your shades on when you clean your teeth.

Frank Holmes Says

Shopping mall mass shootings are bullish for gold. 

This is of course a developing story.