Sunday, March 6, 2011

A friend is at PDAC (part two)....

...and wrote me this second mail. I get to run this one virtually verbatim, too. Enjoy.

Saw some of the speakers at PDAC today, visited some booths.
I caught the last couple minutes of Ian McAvity while waiting for John Kaiser to show up. Suffice to say, McAvity is a bull on silver to $45, a bull on oil, and thinks the S&P run is "overextended and so vulnerable". Seems a bit like one of those newsletter writers who envision a Mad Max/Terminator future of societal collapse and piles of human skulls. I might have gotten the wrong opinion.

John Kaiser's topic was "are we at a cross-roads in the resource sector?" He noted the resource supply rebuild that would have strangled a resource bull got interrupted by the 2008 crash, interesting point. And while volume on the TSX-V is higher than 2000, we still aren't seeing prices anything like the 2000 blow-off top. (Wonder if he's comparing like to like, here.) Only something like $300B out of $600T in the global economy is the global production value of mining ex-oil. (Any mistakes in figures will be mine, not his.)
But he also noted the "PDAC Curse", where 9 out of the past 10 years everyone bailed out of the resource stocks in March so they'd be out before May.

He noted that the US people's net worth curve pretty much mirrors the Case-Shiller home index. Scary.

He had another interesting point, that low s/t interest rates are destroying the baby-boomers' savings, and suggests even more evocatively that the younger generation will rise up against the boomers out of distaste at having to re-fund the boomers' retirements (through pension support, as if there was any such thing in the US - I find the suggestion of intergenerationalist revolution compelling, since we're economically back to the 70s, but the details seem to weaken the thesis). He notes pessimism drives unrest in youth, and inflation causes supply shocks which cause rioting. Well, maybe in the developing world... but the propaganda state is firmly entrenched over here and I haven't seen any signs of revolution in Canada yet.

He seems to suggest that, while China has been equating their REE supply with demand, choking out any new ex-China REE investment, they may soon be throttling it to clean up the sector - bringing a Moly-style price spike, but followed a few years after by a Moly price crash after the clean-up.

There was a large exodus from the room after Kaiser finished. He seems popular. Definitely a good speaker and someone whose "ideas intrigue me enough to subscribe to his internet newsletter", to paraphrase Homer Simpson.

I swung by the DMM booth after Kaiser. They suggested that the Ecuadoran gov't wants to get a few contracts done BEFORE June, and DMM is 1 of 3 companies in line right now. I know they pissed you off with doublespeak, but at a dumb price like $3.40, and supposed progress toward closure in this matter, wouldn't you be a buyer right now?

You respond "yeah, *supposed*." OK fine I get it.

Mickey Fulp's talk was "Resources and reserves: a primer for the lay investor". You know all that already, I knew a lot of it already. Did make a few good points. Shorter in person than I'd expect him to be. He even quoted Rick Rule, which is funny... Cookie took a question pleasantly from Rick Rule later, so I guess Rule is one of those "friend of everyone" writers? Would have liked to stick around for him, but he was on later in the afternoon and I'm still sick from the cold.

Visited your buddies Juan Vegarra and Enrique Winkelried at VEM. We chatted mostly about Macusani, which I'm interested in. He gave me the short form on the difficulty at Macusani re: the surface zone obscuring what's at depth. He's as stunned as anyone else about YEL's recent price puke - and noted the exact same thing happened when VEM went for their financing, and they went through the same financiers. Should we blame Raymond James for price-diddling?

I've been watching YEL's L2 constantly (out of fear, maybe, since I've got such a huge position without any DD), and am seeing replaceable asks pinning the price down - much like RIO during its short attack, except the guy driving YEL's price down has a lot more capital at his disposal and I can't fight him off like I did the RIO short. Considering YEL is about 50% insider & industry owned, it just looks funny. Oh well.

Anyway, VEM expect they should get some results out this week.

Funny thing - I told Juan my newsletter writer had him as a reccy - he said "who, Otto?" I said yeah, he said "That guy's hard core!" Anyway, he wants to remind you he's picking you up soon for a weekend of wild boozing.

Caught the last couple minutes of James West. I was confused by the apparent reccies of Japan and T-bills. There must have been a technical malfunction. Or maybe I was hallucinating. Or maybe he's given up on miners, since they seem to use him as tissue paper to drive a pere-financing pump.

Brent Cook repeated much of his "danger signs for the lay investor" and "price cycle of an exploreco" content. Actually, the investment fundamentals class on Saturday had much of the same content as Fulp and Cook - just with less stress on their favourite areas. He's also shorter than I expected him to be.

Funny nuff, Cookie tangentially referenced the recent Seafield pump that turned West into a used tissue. He used Batero and Bayfield (not SFF, probably since he's such a polite guy) to warn newbie investors of two tricks: smearing gold over longer intervals (yup, he brought out the interval calculator), and re-drilling historical holes. Sure, it is always good to look at a drill map when you get a new assay news release.. Unfortunately, West had already left the room.

His picks are LYD - he's expecting a 2M oz @ 1g/t resource estimate update this month - and Almaden, I guess for their JV model.

He notes one important thing - never sell when your expectations are being met. Instead, ladder in even more. That's Jesse Livermore, from 100 years ago. Copyright is lapsed, so that's fine.

Cookie's on BNN Market Call Monday night at 7PM, and asks us all to phone in with questions about GNH to try to make him crack a smile on TV.

Rick Rule was sitting up front, and asked Cook to give his own opinion of the "$/oz in the ground" metric. Cook says "quite frankly, I think it's bullshit." Cook feels the real determinant of value is margin per ounce. I personally find that a bit incoherent, given who the speaker is. How does he calculate margin for an early-stage exploreco, anyway?

Of Doody, I can't say much. The first 7 minutes of his presentation were exclusively, I mean exclusively, a pump for his newsletter. Neener neener, he beat the GDXJ? Well, *I* beat *HIM* last year (95% vs 71%), and I don't charge $1000/yr for my thoughts! I scream them out randomly at passers-by as I sit on a street corner in urine-stained combat pants with a piece of string hanging out of my mouth!

You can let Gary know that one of Doody's top picks is Yamana. 1.1M oz/yr at $200 cash costs, 1.7M oz next year, undervalued by the market. If he wants to know more, he can pay $1000 for the service.

Other than that, I swung by CPN and ARR for some propaganda. ARR basically confirmed they're not doing anything at all, so I should go tell all the speculators on Stockhouse. CPN were proudly displaying their Haywood propaganda with a target of $1, and the Cormark propaganda suggesting Rovina NAVPS at present spot Cu & Au of over $3.

Finally, my cold was too much and I had to go home. So I left Moria, and stopped off at a little bar in Ruins of Undermountain (bet you don't get that reference) for a few double vodka & lemons to give me the strength to get home.

Now I'll spend a day or two trying to fight off the virus obviously given to me by unclean mining people, and nursing my poor dying cat