Friday in Ecuador.....

...will be an interesting day for mining there, because according to today's reports that's the limit date for Ecuador's government to release details of its new mining contract with producers (the whole shebang we told subscribers about last Sunday and noted on the blog Monday evening). In other words, Ecuador's suited people have until Friday latest to tell us what kind of royalty, windfall tax and etc type things they propose for the sector.

The same report has the President of Ecuador's Chmber of Mining Commerce very happy about recent developments.

It's Dynasty time. At last.

Dynasty Metals (DMM.to)

I get these really boring anonymous hatemails (hey, on a blog like IKN they come with the territory) from this one guy and there always about Dynasty Metals (DMM.to). Another one came today, loaded with the usual selection of teethgnashing. But then I also get mails from normal people who ask me why I hold the stock, what with the Ecuador pol risk and the way it's flatlined for the longest time. The simple answer is that I bought the stock when it was at $1.35 and at current prices that's a 295% upside in around a year and a half. Hey, maybe not the kind of returns you could have got from Ventana Gold (VEN.to) in the same period, but really it's not that shabby. Sure makes holding a value play that much easier, I can tell you :-).

And not only did I buy the stock back then but I also advised other people to buy it. Here's the December 2008 NOBS report on DMM.to written by your author by way of proof. If you can't be bothered to download the file (and I wouldn't blame you; who needs to read a 18 month old report from a lunatic wonky blog ranter anyway?) here's the conclusion section pasted out for you. DYODD, dude.

Conclusion
Dynasty has been severely affected by the local political scene in 2008, as well as suffering some of the effects of the wider market woes. However, as project economics still look sound and profitable, the decision to invest in Dynasty is a call on Ecuador mining and its future in the country.

NOBS has no doubts that the current discount for political risk at DMM is far too large. Once the new mining law is on the books DMM will almost certainly revalue. We expect an initial target of around $3, with $4.00 to $4.50 once Zaruma is operational. Market doubts will remain, especially about the size and shape of the windfall tax to be applied, but as total state burden is likely to be designed around 50/50 parameters the combination of “classic taxes”, the royalty burden and the WFT will not take much more away than in other countries….perhaps the final difference will be 10% of proceeds.

Socially and environmentally, there is still delicate ground to clear. However DMM enjoys strong local support and that should win the day (although there is a clear risk of political or protest actions from other groups in Ecuador).

Once in steady operation at Zaruma further price revaluation is likely. The NOBS medium-term target of $5.60 is based on the P/E ratio parameters discussed in the report. Once Zaruma is running, DMM will be in a position to grow organically, and can decide whether to move ahead at Jerusalem and then Dynasty Goldfields.

DMM.to is a speculative buy, and could almost be described as a “strong speculative buy” due to its compelling economics and the political situation which is on the road to stabilizing, but may still hold unpleasant surprises. But the bottom line is that reward far outweighs risk. DMM is an obvious buy for investors with a higher risk profile to their portfolios.

Any further questions?

Mike Kozak of Cormark, numerical dumbass

One of the main qualifications of an equities analyst is being able know your ass from your elbow when it comes to numbers and stuff. Unfortunately Mike Kozak, analyst at Cormark, fails on this score in a rather epic manner.

Last Friday, Kozak published an analysis on Dynasty Metals (DMM.to) that was so full of elementary mistakes it was laughable. Here's a little chart that has just a few of them (not kidding, just a few of them):

Dynasty Metals & crap analyses, Cormark Edition
Mike Kozak vs Bleedin' Reality, November 13th 2009
	Kozak	Reality	Cormark result
52wk high	$11.18	$6.20	EpicFail
52wk low	$3.53	$1.09	EpicFail
Shares out	36.4m	37.64m	EpicFail
cash at bank	$18.8m	$10.75m*	EpicFail
mkt cap	$205.4m	$212.7m	EpicFail
source: Cormark report and bleedin' reality, mate

* approx, but way way closer than Kozak, I promise

Add to this things like assuming Ecuador's corp tax rate is 30% (it's 25%), overestimating insider holdings at DMM by what looks like a million shares, getting the gold resource number wrong by nearly half a million ounces....there's a whole bunch of other stuff. Maybe funniest of the lot was that, after getting so many asset parameters way way bad he decided to value DMM.to using a Net Asset Value calculation!

It's super-early to give out this week's coveted award, but surely nobody can beat this one. Therefore, Mike Kozak of Cormark, you win this week's coveted award. Your report on Dynasty Metals was the worst piece of rushed and sloppy analysis we've seen this year. Enjoy, dumbass:

Ecuador: Today's signing of the new mining law

Inquiring minds have been asking me about the signing of the new mining law in Ecuador that is supposed to happen today. Allow me to explain.

• It's confirmed that President Studmuffin will sign the law into effect today.

• It is happening at 3pm Ecuador time today.

• Not only that, Correa has chosen to do the signing ceremony in the town of Zaruma, Portovelo. This happens to be the exact same place that Dynasty Metals (DMM.to) operates.

So if you think that the 10% move in DMM these last two days has been kinda neat.....

.... just wait for the upside when the can of corn and cormark get their hype machines into action as from mañana. Above info taken from decent sources.

mojitos served. the end

PS: Dear agoracom EC.v dumbasses, please feel free to do what you always do and steal the post or the info and pretend you're the source of all wisdom on Ecuador without providing a link to source. And oh look! DMM is up 23c since this got posted...there's a thing. Ever thought about offering Spanish lessons to analysts at RBC, boys?

Photo of PDAC '09 (and a snippet of Ecuador news)

...sent in by a regular reader.

Thank you, regular reader.

Meanwhile, Ecuador's Vice Minister of Mining José Serrano (I think that's his title) put on the full trumpet display at PDAC yesterday afternoon and announced to a packed audience of 80 people that Ecuador was now officially a country free of legal bullshit for miners and that everybody could mine. Word is that Serrano has kept his job all this time because he's the only one in the mining ministry that can speak English

So here's Corriente's PR last night on the issue (CTQ was so excited it couldn't wait for this morning). Expect similar literature from the other Ecuador-exposed miners. By the way, they chose an 80-seat capacity room to make the announcement so as not to embarrass him.

UPDATE: Another regular reader sends in his PDAC '09 photo. Thank you, other regular reader.

Chart of the day is.......

......Dynasty Metals (DMM.to) and a trip into the wacky world of technical analysis.

Nearly all proponents of Technical Analysis that I know say that they "don't like gaps". There's something especially weird about this in my view, as if a hole in a chart's pricing can attract a future valuation in some kind of mystic magnetic way. IMHO it's bonus mumbojumbo layered upon the normal TA mumbojumbo, but even the cream of chartists that I know...the ones I actually respect such as Gary over at BiiWii or the mysterious dude known to the world as "Grin" adhere to this hatred of gaps.

So there's a big fat gap for you, charties. Waddya say?

Dynasty and the games redux

I'm not going to list all the trades at the end of day the same way as in the previous post, but if you look for yourself you'll see how can'o'corn (the famous 33) beat down the DMM.to price at the bell this afternoon. When it comes to this kind of crap, there's no better price artist than the jokers at 33 (they're always crawling over this blog for ideas too..... probably cos they just can't bring themselves to hire someone who can speak Spanish).

As a regular reader (who prefer to remain anonymous I'm sure, as he's probably long half the DMM float in his private a/c) wrote to me after the bell;

"I'm getting nervous. I'm selling everything tomorrow at the open! Ha, ha, ha..."

Did you take him literally? If so, that bridge of mine is still for sale. Here's that everso everso retail friendly action in chart form.

About DMM.to

I've been asked by a DMM.to long via mail whether I'm taking profits. That's an easy one to answer: NO.
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In the report I wrote that I was looking for a jump to $3, then $4 or so once the mine opened and a steady state target (using the conservative-biased parameters mentioned in the report) of $5.60. You think I'm going to bail just because the first target was blow away in just three weeks? No way! If it rushes directly to $4 then there's a place for thought and perhaps taking 1/2 profits. That's as whussy as I get, though.
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If you want a copy of the report I'll be happy to sell you one (sold two today). Here's the pitch post, but it boils down to sending U$10 via PayPal to this address......
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otto.rock1 (AT) gmail (DOT) com

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.....and I'll send you your copy. But the call is the same as on the free blog. It's still a great buy.
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Greetings from a crummy cybercafe as I wait for the computer doctor to give me the bad news.

Dynasty Metals (DMM.to): Do I have your attention yet?

I've been pounding on the table since December 1st about Dynasty Metals (DMM.to). It was $1.22 at the time. To be as fair as possible I called it a raging buy for you guys before I bought it myself.

Then I managed to sell a few of the NOBS report on the stock, too. (That's still available, by the way. Here's the link). So here's the ten day chart, with today's action...errr....pretty clear.

Right now we're trading at $2.37. Not bad for two weeks' work, no? Read the report available above and you'll find out why this is only the start of the upmove. I want to sell more of the NOBS report on DMM.to because I want you to be in on a very good investment.

Buy Dynasty Metals (DMM.to)

Reasons:

1) It's a gold miner that, if given the necessary permits, would be up and producing in just one quarter.

2) It's extremely cheap. Do the easiest of DD and note its share price at present ($1.21), shares out, targeted gold production and cash cost schedule (and add a little bit to that number to account for the changes in supply costs, but they're coming down, too). Find out for yourself how cheap it is. If you want me to run the numbers for you, drop me a line.

3) Note the good management team, and key people from Ecuador political circles on board, too. Also CEO Washer knows Ecuador backwards and has kept the faith all this time.

4) Note how Mining minister Palacios defended the new mining bill being debated by the Congresillo last week. Palacios used very strong arguments all round and left a good impression about how the new mining law goes hand in hand with the new constitution.

But finally, note this report of Correa's words yesterday. Speaking to thousands of students at a rally, he said:

"Mining in a country like Ecuador is a great opportunity to generate jobs and wealth that will allow us to get out of underdeveloped (status)."

DMM.to is now a total no-brainer. CTQ is also cheap, but DMM.to offers exposure to gold...and that's the metal to buy into right now. So no more playing coy about this stock. DMM.to is stupidly, amazingly cheap and has discounted a political risk that is disappearing fast. Buy it now. DYODD. Otto hath spoked. Otto will be buying, too. Screw it, it's time to make a stand on this stock...imho it's a double at the very least (and you can quote me on that or throw it back in my face in 6 months' time). I repeat, DYODD, dude.

P.S. Note that smart gold market watchers like Claude Cormier love this stock too. If it's good enough for Claude, it's good enough for me.

Related Post
Dynasty Metals (DMM.to): a NOBS bespoke report available

Trading Post (Stop it moving I wanna get off edition)

Profits taken on SLV and GLD. I wanted more for SLV (was aiming for a buck or so higher) but there's no reason to ignore a ST win these crazy days. Meanwhile..........

FCX up 2.6% and PCU down 5.3%. FCX is getting love from its gold revenue unit, and PCU is simply hurting. Copper at $2.45 is the reason, and it looks like there's more downside to come.

Breakwater (BWR.to) is now at $0.13. I feared the worst when Zn broke 75c to the downside, and it's coming to pass. Other heavily zinc and lead exposed producers in exactly the same boat, of course.

Vena Resources (VEM.to) at 20.5c. This is "baby with bathwater" stuff as Larry the Liquidator could buy this, split it into its various parts and make oodles in an asset garage sale. VEM has gold, silver, uranium, copper, coal. When the music stops, keep it on your list of possibles. It's just one of hundreds of small juniors in the same boat, but as I know the people at the company and know they're smart, honest and good at what they do, I can't help feeling for them. Happily they have cash to ride out the storm, which is more than can be said for many.

Dynasty (DMM.to) down 20% at $1.61. The news on Ecuador's Mining Chamber I posted yesterday has been a real downer for DMM. The hope/plan at the company is/was to begin production 90 days after the stop work order was lifted and the mining law published. Cesar Espinoza's words yesterday took a lot of wind out of sails at the worst possible macro moment. Remember this company has $0.73 in cash per share, and more than enough at bank to wait out the storm and then fund the final part of capex without needing a cent from any bank anywhere. And then they start mining gold. So if you have patience and let Ecuador get their apparently fair law on the books, this one is a stupidly cheap price right now.

As always, DYODD, dude.

Ecuador Mining: The law looks good, but it may be another year to wait

Big thank you to reader Ruben for catching this news report and sending it along.

Spiny Caesar

César Espinoza is the head of Ecuador's Chamber of Mining, and he was interviewed by local radio today about the contents of the new mining law (which he has obviously seen). He says he likes it, but it might be a full year before it comes into operation. Here are the two important direct quotes from the report as translated by me:

"We think that the general context of the law isn't bad; it has nearly 100 articles, the observations are profound, the Mining Chamber of Ecuador promotes the development of responsible mining and that the President of the Republic also promotes it."

(The law won't be applied in less than a year because) "it does not establish that the mining law is an organic (aka stand alone) law. It doesn't say it this way, and it will depend on many other connected laws that are not yet ready for approval."

In other words, it's a fair-looking law but there are yet more delays in the pipeline, folks. Welcome to my world. It cetainly explains why Corriente Resorces (CTQ.to) (ETQ) stock has done this today....

Corriente suddenly down 9%

....and why other Ecuador exposed miners have sold off sharply such as Dynasty (DMM.to) down 12% and Cornerstone (CGP.v) down 19%.

UPDATE: I'd like to share Q&A I've just had about this post with another reader.

MP wrote: "How long is a year in Ecuador? Are you aware of a web site where I can get
the conversion?"

Otto answered: "You see where i'm standing?.........Now, look over there........You see that tree I'm pointing to?........From here to the tree....that's how long."

Reaction to the Ecuador referendum result (and a word on Cornerstone)

Correa supporter celebrates getting to within one metre of Studmuffin

Correa calls for unity, peace, love, 'not the end but the beginning' and every other cliché you've come to expect from a politico that whips his opposition's ass in fine style. What he actually said was, "I call on all Ecuadoreans of good will and faith to put their shoulders and hearts together and build together the Ecuador that we have been fighting and hoping for and which starting today is approaching reality."

Jaime Nebot (the face of the opposition and Guayaquil's mayor) says he's willing to sit down with Correa. Well, after getting his ass whipped soooo badly what else could he say?

Simon Romero writes fruitfly level analysis copy on his laptop in a bar in Caracas (and don't deny it, Simon...you were spotted).

Meanwhile, Ecuador exposed stocks like Corriente (CTQ.to) (ETQ) and Dynasty Metals (DMM.to) jumped at the bell but then immediately sold off. The news is positive for them, no doubts about that, but the greater fear in world markets is outplaying the local political factor this morning. So be it.

Meawhile, here's an under-the-radar play on Ecuador that is worth a second look. Cornerstone Capital (CGP.v) has been added to the S&P factual stock stable this morning, and you can get your copy of the file right here. Totally free. My stars, I look after you guys.

Cornerstone isn't a bad play on Ecuador right now because:

1) It's cheap. Real cheap. Beaten down with the others, but not rebounded yet.
2) It has plenty of cash at bank to fund its planned operations ($4m or so as at 2q08 filings)
3) It has plenty of interesting/prospective concessions in Ecuador, and now that the new mining law almost certainly won't limit any company to just three it will benefit from the news of the final publication in October. Trust Otto on that one.
4) Perhaps most importantly, it's in JV in Ecuador with Newmont (NEM), and once mining exploration gets underway again NEM can decided whether the projects at CGP.v are worthy of it spending $4m as a 51% buy-in. IF CGP.v gets its free ride from NEM at the Ecuador projects, expect the share to pop back to the 40c pre-stoppage levels of March.

This one is a high risk play...be very clear about that. However it's a good looking microjunior that has a nice chunk of cash at bank (important) and plenty of possible blue sky, so the high risk is offset by the high possible reward. DYODD please. I disclose that I do not own (and in fact I've never owned it), but it's one of those stocks I've always had an eye for.