Thursday, October 7, 2010

How mining analysts back down

Chart first shown here on Oct 4th

Canadian brokerage mining analysts have a hard time and suffer....from the size of their egos because it must be physically painful for them to squeeze through doorframes due to the enormous diameters involved. Rule One amongst the dumbasses in suits  is never, but NEVER admit you're wrong or you made a mistake about anything because it's just not the done thing to be honest, is it? 

However, if you do watch the sector carefully you get to see when the analyst has decided they've put their foot royally into it and pumped the wrong dog. Take for example Indi Gopinathan, analyst at Scotia that follows and has liked Minefinders (MFN) ( for quite some time. Up to now Indi has kept bullish on MFN despite being such a pisspoor performer and has forgiven its trespasses. For example on August 5th, just after a bad set of numbers from MFN here's a report of her opinion:
"This was a miss on consensus and Indi (the analyst) believes any pullback on MFL today should be bought........ The Q2/10 quarter likely won’t change investor’s minds but that is backward looking and Indi believes the inflection point is right now."
Then on September 29th, when it turned out that 2q10 wasn't that "inflection point" after all (surprise surprise) and we're going to have to wait til 2011 (at least) for MFN to get its jive together, Indi was still stubbornly bullish, saying that "..any negative reaction to yesterday’s news (w)as a buying opportunity." Well, she sure got plenty of chances to buy!

However, today's Scotia daily report has Indi rather more subdued. As we mentioned in paragraph one of this post, the admissions of guilt and/or error are never explicit (that would never do) but now she's actually gone to see the Dolores trainwreck the talk from Indi about buying ops and such has disappeared. We now get this:
MFN: Minefinders Tour Takeaways (1-SO, US$14/sh target, Indi Gopinathan): Earlier this week, Minefinders hosted Scotia clients on a tour of the Dolores gold and silver mine in Chihuahua , Mexico .  In the short term, it appears the liner tear issue will negatively impact both Q3 and Q4 production as all of the Phase 1 leach pad was taken off leach in August.  Indi currently models Q3 production that is 40% below guidance with Q4 figures 8% lower than company expectations.  Longer term, block model reconciliation could lead to a 10% grade improvement over the average reserve grade.  While short term issues continue to plague the company, Indi reiterates her 1-Sector Outperform rating and US$14/sh target with the view that Dolores is a good asset and a potential M&A target. 

The change is subtle, but when you're attuned to these things the message is clear enough and now IKN confidently predicts that Indi will "lower her guidance" on MFN the next time it misses anything from its current guidance slate. Going by this pathetic excuse for the mining company's track record, that will most probably happen very soon. DYODD, dude.