As usual, theexcellent Tim's El Salvador Blog brings us a headsup to good content about his subject of choice. Here's a great interview with President Mauricio Funes by Al Jazeera (the news media we've extolled at IKN for years due to its strong regional coverage).
Take 24 minutes out and watch this one. Well worth it.
UPDATE: WHOOPS, WRONG LINK! and I didn't even notice until reader 'Chomik' kindly mailed in. Ahem....errr...sorry. Here's the correct embed below, which is also found on this link.
...but they do break down in tears during TV interviews.
Lula goes into tearduct overdrive from the 2:00 point onwards in this interview aired last night on Brazil TV. It's not the first time he's cried in public like this, either. His excuse? "I think I'm getting old". Damn, if only more politicos felt for their country in the same way.
Here's the link to the article in Harper's, here's an extract of the text....
".....with former Argentine president Néstor Kirchner, Oliver Stone learned that Bush claimed that waging war was a formula for economic growth. Here’s the key exchange:
kirchner: I said that a solution for the problems right now, I told Bush, is a Marshall Plan. And he got angry. He said the Marshall Plan is a crazy idea of the Democrats. He said the best way to revitalize the economy is war. And that the United States has grown stronger with war.
stone: War, he said that?
kirchner: He said that. Those were his exact words.
stone: Is he suggesting that South America go to war?
kirchner: Well, he was talking about the United States: “The Democrats had been wrong. All of the economic growth of the United States has been encouraged by wars.” He said it very clearly."
Further to yesterday's poston the BP Deepwater Horizon post and the cover-up in process, a link was sent to me by somebody with close ties to the effects of the Exxon Valdez oil spill. The place to go is the link that's covered by the following blurb:
Reliving the tragedy of the Exxon Valdez For those living on Kodiak Island, Alaska, watching the news these days brings back nightmares of 21 years ago, when the massive Exxon Valdez oil tanker hit rock, spilling millions of gallons of crude oil into the sea. Fisherman Dave Kubiak joins us from Kodiak Island to talk about how the Exxon Valdez spill affected his life and his community.
You then click through and listen to 9 minutes and thirty seconds of real experience in these things. It's genuine, simple and moving to listen to an honest man who went through the experience of the oil and the subsequent company-led excuses and lies....another example of plus ça change. Mustlisten material and thanks due to A. Reader for sending it in. Here's the link again, to make sure you go listen.
Here's an excerpt from the "Regional Politics" section of yesterday's IKN Weekly, issue 52. The subject is Colombian presidential frontrunner Antanas Mockus as he talked about the effects of mining in Colombia on the country's economy in an interview last week. Enjoy.
Colombia: Antana Mockus talks mining In a reported interview between Colombian presidential candidate (and now favourite for the post) Antanas Mockus and head of Colombia’s export body ANALDEX published Friday 30th , (10) the subject of mining was broached. Here in translation is the section that covered the issue. It should be pointed out here that the word “mineria” (translated here as “mining”) in Colombia is usually used to refer to all non-renewable extraction and therefore the Q&A also applies to the larger and more developed hydrocarbons industry as well. Here’s my translation, more comment afterwards:
Javier Díaz: How should we take advantage of the resources that mining is generating (for the State)?
Antanas Mockus: The mining boom is now years old and if we don’t take advantage of it to construct a more sophisticated production base (more added value manufacturers with incorporated know-how) we’re doomed.
JD: The mining boom will affect the foreign exchange rate. That’s where Dutch Disease (ottonote: put roughly this means too much country dependency on one product, but it is more complicated than that) appears.....
AM: That is a risk, but we are currently moving in the right direction. With high-level training programs for Colombians we will avoid wasting the extra resources internally. If this can be done not just with human resources, then even better. Using these extra revenues is good if the spending has a positive effect on the country.
JD: How will you explain to the country that exploring for and knowing how to produce mineral resources is not a sin?
AM: Sergio Fajardo (ottonote: Mockus’s running mate on the ticket) will be one of the people in charge of Science and Technology issues and the adjustment of the educational system towards productive vocations in every region. Some people say the (mining and hydrocarbon) royalties must go towards infrastructure and others say that educational progress should be the main target, because once the mining bonanza has gone we must have much better qualified citizens and the roads can be financed via concessions.
There are countries that use protectionism policies in the fields of research, technology and human resources. Therefore they don’t subsidize exports but make themselves super-competitive for those that need these sectors. In the same way, we must look at which sectors we are going to invest in and the non-approval of the Free Trade Agreement (with the USA) has helped the productive sectors to become more competitive. What’s more, I believe in (country) interdependency, as only the very rich and powerful countries have the luxury of auto-supply. Interdependency also means that any country that breaks off commercial relations with another puts pressure on its neighbours.”
IKN back. This excerpt shows pretty clearly that, whether you agree with his policies or not, Mockus is pragmatic, obviously pro-business and has a well-educated view of economic issues. There are also things such as opposing the current Venezuela trade embargo with Colombia and wanting to use “the mining bonanza” to greater effect on a national level. But there is an implicit message that a Mockus Presidency, as explained in the last two IKN Weeklies, will not be an automatic “anti-mining” agenda even though he is running on a Green Party ticket. He seems to view mining not as an end but rather as a mean to an end, using it to collect revenues in order to further country development from a central treasury. This may eventually lead to higher taxation and royalties but by definition mining will not be banned in the country all of a sudden.
Our bottom line analysis re. a possible Mockus presidency and mining has not changed: There is reason for investors to be cautious about events unfolding in Colombian presidential election because a Green Party candidate is leading the way, and that automatically brings baggage. However there’s no need to panic if you like the sector and you’re long Colombia. Finally, as mentioned previously this author avoids the country for junior mining investments at this time (for reasons previously explained) so any conclusion stays in the world of theory personally.
On this link. Click the little man icon to the left of Sprott's photo to download the 39 minute interview (Sprott starts talking at 2:25, so skip the intro and get to the paydirt). Here's the promo blurb to whet your appetite:
Eric Sprott has over 35 years of experience in the investment industry and manages roughly $5 billion. Eric has been stunningly accurate in his writings for quite some time and is one of the highly respected industry professionals who foresaw the current crisis and chronicled the dangers of excessive leverage as well as the bubbles the Fed was creating while correctly forecasting the tragic collapse we are all enduring. In this interview Eric discusses the stock market, bond market, inflation, deflation, gold, silver, gold stocks, consolidation in the gold sector, the economy, the US Dollar, paper currencies globally, tax revenues going down, layoffs in US government jobs in states, oil and much more.
....here's the youtube of the Macquarie analyst who was interviewed on live TV in Australia at the exact time that his colleague sitting behind him thought it'd be a great idea to check out photos of nekkid chicks on his computer screen.
The first 18 to 20 minutes or so are generalized stuff, which although good may be of less interest to mineheads. People who want to know about how mining in Ecuador is seen as developing by the guy that actually runs the shop should move to 18 minutes onwards....and then listen to the guy blow your lefty-anti-biz prejudices out of the water. Essential listening matter for anyone with the vaguest interest in Ecuador mining world.
For what it's worth, I sent the link to the radio interview to subscibers before the bell this morning as one part of a Flash update. Here's some feedback from subscriber DL:
Thanks for the Correa BBC interview. He's no dummy. I have always liked the guy's smart like a fox ways and what he is trying to do. Guys like him are an important step to establishing lasting change that should take root this time as it's happening at a time when the U.S. is preoccupied to say the least. However If there's one thing SA is good for it's change. Two steps forward one step back. I really think this century will in many ways belong to SA and not just Asia.
Well said, DL. Here's the link again, just in case. Go listen, and hear in English what we've been listening to in Spanish for neverending months...perhaps you guys up there will start believing now?
This interview is timed to a new PR this morning that you can find on this link. GUY.to has purchased a new property in the same area and is already putting it to the drill. The stock has done well in the last couple of weeks, too.
We'll be talking more about GUY.to in IKN26, but for now go see the interview...good stuff. Here's the link again, just in case. Nicely done, Mr. Taylor.
Emir Sader is a well-known Brazilian (born in SP) sociologist and left-wing political scientist. On this link he gives a very interesting interview that covers plenty of bases in the modern LatAm. Here below is the intro blurb from the interview, but click through for the Q&A session. Recommended reading for those who want to know what's going on in LatAm from the point of view of its inhabitants, not from Rupert Murdoch.
With the rise of center-left governments, the South American region has—almost universally—appeared to leave behind the pillars of the Washington Consensus and the neoliberal model. Fiscal adjustment has been replaced with an agenda marked by a social emphasis, and the projects related to a free trade area with the United States are veering toward a renewed emphasis on horizontal regional integration.
However, recently some of the elements of the current Latin American context have begun transforming. In addition to the international financial crisis—which has had less of an impact on Latin America than in other regions, but has had an effect on external trade in several countries—the region has seen many new political changes. The persistent coup d'etat in Honduras; the major losses incurred by the Kirchners during the latest elections in Argentina, and the weakening of the government's position in relation to agribusinesses and the media that followed; the endorsement of the Union of South American Nations (UNASUR) for Alvaro Uribe to authorize the presence of U.S. troops at seven bases in Colombia, after President Rafael Correa decided not to renew Ecuador's contract with the United States for its base in Manta, and despite the fact that the bases violate the agreements of the South American Defense Council, to mention just a few. In an interview with CIP Americas Program, Emir Sader, professor, sociologist, and executive secretary of the Latin American Council of Social Sciences (CLACSO), explains the roots, repercussions, and possible challenges that these changes present.
Your humble correspondent recently caught up with the the COO of Amarillo Gold (AGC.v), COO Rick Brown. Along with Buddy Doyle, Brown is very much the driving force of AGC.v, especially in its exploration and development activites at its Brazilian assets. This interview was first published in IKN20 last sunday and Rick has kindly given permission for it to be repeated here on the public access blog. No more blahblah from me, on with the action.
Otto Rock: Hi Rick, and thanks for agreeing to do this interview
Rick Brown: Happy to answer your questions Otto and hope to catch up with you next time I’m over your way.
OR: So down to business. What is it like running an exploration junior in Brazil? You have plenty of experience of other countries, so how does Brazil compare as an environment to do business?
RB: Modern mining and exploration, even by foreign companies, has political and social/ community support throughout the country and except for parts of the Amazon basin generally excellent infrastructure and very tolerable working conditions. The only other country on the continent that can boast those conditions is Chile and that’s a lot more mature as far as exploration opportunities goes. The one notable negative in Brazil is the pervasive bureaucracy which is one of the worst in Lat Am, but once you’ve scaled the learning curve its manageable.
OR: And what about it as a place to live, as it’s your home base if memory serves?
RB: That’s right and a very easy place to live (except when that dreaded bureaucracy gets in the way). First world convenience and comforts if you got a professional income and all over the country people are welcoming and friendly.
OR: As for the company, Amarillo Gold, we understand that it has two main projects moving forward at the moment. Would you give us a general overview of both, starting with the Posse project.
RB: Posse is a million ounce resource in all categories about 60/40 indicated/inferred. Location couldn’t be better, 11km from main N-S federal highway and within a few hours drive of five other major mining projects. The deposit was previously mined on a small scale by WMC in the early 1990’s with about 80,000ozs extracted. The mine represented a major source of employment in the small town of Mara Rosa and the people were able to observe that environmental impact can be managed without any long term effects. So we have the happy situation where the locals are eager for a new mining operation to commence and start employing people again, and from the authorities point of view there has already been a mining operation and subsequent environmental rehabilitation all with the requisite approvals.
OR: The other main area is Lavras do Sul. What can you tell us about that?
RB: Lavras do Sul is the best known gold project in the South of Brazil. The prospective area covers a 100km2 intrusion, plus some of the surrounding volcanic, of which Amarillo has optioned about 95% from three different titleholders. Mining commenced in the 1700s, and about 20 old workings dot the area. Over 20,000 metres has been drilled to date in 5 prospect areas, 16,000 by Amarillo. Four of the prospects have returned significant gold intersections of which the most promising are Butia and Cerrito. The best intersections are 232 metres @ 1.92 g/t, 227 metres @ 1.80 g/t and 120m @ 3.23 g/t, both at Butia. The next phase of drilling planned for October this year will aim to delineate an initial 43-101 resource for Butia and Cerrito. Drilling will continue on the other prospects in 2010.
OR: As long as I’ve understood correctly, Posse is the more advanced of the two projects. Last week (Sept 2nd) Amarillo announced it was running a third party metallurgical testing on Posse mineral. Can you tell us, layman’s terms if possible so that even I can understand, what you’re looking to achieve with this testing and the importance of it in the mine development track?
RB: The objective is of the tests is to maximise gold recoveries from any future mining on a cost/benefit basis. This will involve testing for example various grind sizes and applying different process flow parameters. During the previous mining at Posse, gold recoveries varied between 80% and 90%. In our 2008 scoping study we assumed the lower end of this range due to the fact that we had no historic data for the sub 2g/t material included in the expanded Posse resource. Since then we carried out some preliminary tests at a state run laboratory which indicate that we can hope to repeat these recoveries even in the lower grades and that finer grinding may be the key to higher recoveries throughout the grade spectrum.
However it must be stressed that these tests were a long way from even pre-feasibility criteria and didn’t include economic parameters such as cyanide concentration and energy consumption. For this reason we’re running this new series of tests which will be way more comprehensive and will give a much better idea of what kind of recoveries we can expect from a 21st century mining operation.
OR: Moving to the financial side of the company, you’ve recently raised working capital successfully via an equity offering. After going through the institutional process, what’s your feeling of the market right now or junior exploration-stage miners?
RB: You’d think with gold over $1,000 the gold juniors would be in fat city but the market is still very selective and this is reflected in the fact that the TSX venture index is still at August 2003 levels. One thing that’s noticeable this year is that good drill results will really move stocks – we’re hoping for same from our upcoming Lavras drill program - but apart from that the best thing you can do is get your story out.
OR: How long is the capital you raised in this last round expected to last the company? Will it see you through 2010, for example?
RB: For sure we could see through 2010 but that would mean a higher proportion of relatively fixed costs such as G&A, management, promotion and BCSC compliance and less actually going in the ground proving up more ounces and thereby adding real shareholder value. We’d prefer to aim for an 80/20 ratio which means more news flow, more chances of exploration success and more shareholder value.
OR: One problem that is seemingly raising its head in Brazil is that of the appreciation of the currency, the Brazilian Real (BRL) against the dollar. Is the strong Real affecting your company finances very much?
RB: While we’d obviously pefer a weaker Real bear in mind that the Company is financed in Canadian dollars which has lost just 12% against the Real this year and is actually at the same level – approx 1.7 – as it was 12 months ago.
OR: There are a number of shareholders of Amarillo reading this interview. Also, there are plenty of other potential shareholders. I took some straw poll opinion from AGC shareholders and, although they are in general relaxed about holding the stock on a longer term basis, the main complaint they have is the lack of promotion given to the stock by you the management team. Can you address this issue?
RB: We have been saying the same thing internally and for the first time we are developing a promotion strategy and budget starting with a Munich investment conference and presentation later this month.
OR: And as for the future, what can we expect from AGC by way of catalysts in the months to come? I for one am rooting for the company, but I’d like some solid newsflow to cheer me on the way and hopefully move the stock price forward.
RB: Newsflow catalysts up till end of year will likely be drilling at Lavras do Sul, interim results from Posse met (metallurgical) tests, further plans for advancing Posse pre-feas and exploration on other Mara Rosa targets, plus surface geochem and drill targeting at Lavras and Santo Antonio projects.
OR: Rick, thank you for the interview today. We can wrap it up here, but I’d like to give you the chance to say any last words.
RB: It’s worth mentioning that we never stop looking for new acquisition opportunities that will add significant shareholder value to our current portfolio..
In November last year, this humble corner of cyberspace ran an interview with Juan Vegarra, CEO of Vena Resources (VEM.to) (find it on this link here). At the time the stock price was down at 19c but Vegarra was keen to point out tht VEM.to wasn't about to turn its back on plans and go into hibernation.
So last week I had the chance to catch up with Vegarra and get the lowdown on developments at VEM.to. This interview was first seen by subscribers to The IKN Weekly last Sunday and it's now availble on the internetwebpipes for all to see. Enjoy.
IKN: Hello Juan thanks for taking the time to talk again.
Juan Vegarra: Interesting times for sure. Looks like we survived the global financial meltdown, but I am still a little worried about the US dollar and the credit markets – should be promising for the metals, especially gold. I know you may not agree, but we can have the finance debate on a different occasion or platform.
IKN: So what has been happening since we last spoke, apart from the quiet doubling of your share price (which is good)?
JV: There is no way you are going to get me to gloat on the current stock price. Remember we were at $1.91 not too long ago (although it feels like forever ago). I know our value is closely tied to zinc and uranium as those are the metals the market recognizes us for, but for the last 12 months we have been enhancing our precious metals portfolio as part of our mandate to maintain a diversified portfolio. We have two exciting projects – Pucara and Esquilache which are both gold/silver plays as well as the investment in the coal business that has kept a much smaller and focused team very busy lately.
IKN: Let's take things piece by piece, as Vena has a lot of irons in the fire. Of course you have to find a balance between what you can say in public and what you can't, but we'd like to know as much as possible about the current state of play in the following:
1: The uranium projects and the JV with Cameco
JV: Cameco, like everyone else in this industry, also has to manage the bottom line, so we went back to investing $2.5 million this year as originally agreed when we created Minergia, our joint exploration company in Peru. They have abandoned some JVs around the world but have kept the Vena deal going. That alone is a clear signal without me having to continue to emphasize we have a strong relationship which is getting stronger every year. After drilling over 12,000 meters last year at Macusani we have been doing a lot of “what if and what’s next” in Macusani. We knew we needed a strong manager and well experienced uranium geologist that can “live” in Puno and not in Lima. We hired an outstanding professional in David Bent. He ran a JV with Cameco in Canada before and we think David can do very well for us in Macusani. While we prepare the next drilling phase for Macusani we wanted to drill test Lagunillas. We knew the surface info was not as exciting as Macusani, but regardless it was worth doing 2,000 to 2,500 meters to test those targets. So what should you expect? A targeted drill campaign for Macusani for the next 18 to 24 months so we can get a better picture of possible resources with the goal of meeting Cameco’s uranium pound threshold.
2: Azulcocha, and plans now that zinc has rebounded a bit(along with the latest gold discovery there)
JV: If you base Azulcocha solely on zinc, as long as Zinc stays below 75c/lb I am not too keen to invest the dollars that are needed to build the mill and begin operations. The risk/reward is just not there when there are better opportunities in other parts of the business. BUT, if you fully understand the latest press release regarding finding gold on the sandstones then the picture changes dramatically for us. We are going to do some metallurgical tests to see if the gold in the sandstones is recoverable. If we get positive metallurgical results then we have a great future ahead for Azulcocha. I will tell you what we will do but remember it is all speculation right now. The first step will be to drill from surface to expand the lateral extends of the mineralization. So far we know dissemination exists near surface for more than 250 meters along strike. The second step will be to drill from the working level -40. This operating level already extends one kilometer underground, so we can fan up and down to test mineralization at depth. The third step will be to test other nearby targets where we have seen sandstones. “El Mono” is a hill right across the Azulcocha mine that we now know reported several gold anomalies in sandstones in previous exploration programs years ago. And finally, we will review core from the Azulcocha West program and see if we see similar occurrences. In summary, if the metallurgical tests are positive then spending money to delineate a 43-101 gold resource as part of the operating mine would be a no brainer. So expect us to discuss metallurgical tests before discussing the sandstone potential again.
3. The coal business you're putting together. How will it work, on the supply side and the demand side?
JV: There are two sides to this business; bituminous coal from Oyón in the Andes of Lima and anthracite coal in northern Peru. The anthracite business is the most interesting to me. We have completed a review of several coal projects in the Alto Chicama area in northern Peru and now have a solid understanding of the market inefficiencies so we can maximize our earnings. We have a clear idea of market dynamics (supply/demand, key Peruvian and international buyers, key properties, competition, market inefficiencies especially on the logistics end). The next step is for us to set up a coal classification facility in northern Peru which should generate significant cash flow for Vena in the short term. Coal classification can lead to washing coal which will increase our margin even more. We will not be releasing more numbers especially of a financial nature until we begin operations. You know this is standard venture capital work managing a start-up business. It would be nice to have some barriers to entry so we avoid people cloning our strategy as they did when we announced the uranium finds several years ago. So you need to be patient for a few more months with me on this subject.
4. What’s the latest on the Pucara gold project? Does the JV have a timeline to production there as yet?
JV: We received a very detailed report from Consorcio Minero Horizonte. It suggested we should drill further down to increase tonnage. We have reviewed the entire report and there is a good working relationship with CMH but no final deal has been signed as we are still working on several other fronts that may lead to a stronger (or no) relationship.
5. And finally, what about my personal favourite asset of Vena's, Esquilache? It seems to have been put on the back burner so any reason for that?
JV: Esquilache is also my favorite exploration project in our portfolio. It is very strategic to the future of Vena so there is more being done on this project that there is space in this interview. This project requires 5,000 to 10,000 meters of drilling NOW which is estimated to cost between US$1.5m and US$2m to start with, so I am “monetizing” other assets to raise enough funds to drill Esquilache without dilution at these low share price levels.
IKN: Final question: In last week's IKN Weekly I mentioned VEM as an example of a company that might benefit from the loosening in credit markets and the subsequent hunt by larger miners for cheap assets. Has VEM seen any evidence to suggest that is true recently? Is being asset rich (and relatively cash poor) becoming a positive as I imagine?
JV: I can only state what we are seeing as I’m not sure what is happening to other explorers in Peru. The answer is Yes, you are correct. We are seeing strong interest in reviewing our assets. Vena is asset rich and cash poor in comparison to previous years. We have signed several confidentiality agreements with third parties that may lead to something or nothing. The advantage we have is that we have accumulated plenty of assets over the last seven years in Peru that could be classified as non-core for now, like recoverable VAT or equipment that we can sell today without affecting short term deliverables, plus funds from our partners, so I am not going to a negotiating table with weak hands.
IKN: Thanks for your time, Juan. Any last words?
JV: I find the time to read IKN every day. I know you are very supportive of the company and I thank you for it. Peru is booming in comparison to the rest of the world. I know your comments regarding the Peruvian economy, but in comparison to the US where I live Peru’s economy looks strong. I think it is the first time the country is facing a global economic crisis with sufficient financial resources that should provide a cushion for Peru that it never had before. I see the performance of the Lima Stock Exchange as very beneficial to Vena. We (and other BVL juniors) are trading at five to six times more volume than we do in Toronto. The political climate is changing as elections are nearing, so the next 12 months should be even more interesting for all of us doing business in Peru.
A truly frightening display of idiocy was on show for viewers of Peru's TV program "El Cuarto Poder" last night. Finance Minister Luis Carranza was interviewed on show and managed to pack in haughty arrogance, arch stupidity and a full-on attempt at mass-hypnosis in the space of just ten minutes. Here's an Ottotrans™ of some direct quotes:
"The most important is that they (the Peruvian people) are relaxed and continue making their consumption, savings and investment decision with a long-term view and not on account of bad news that might appear one day in a newspaper or from a pessimistic analyst.
He then went on to ask people not to be carried away by negativity because the government has the clear objectives to maintain growth and reduce poverty. And then...
"The important thing is to be relaxed and be safe in the knowledge that in the government we are doing everything we can and we have the strength to maintain GDP and employment growth according to our needs."
"The Government Will Look After You." "I'm From The Government And I'm Here To Help You." "Every Day In Every Way I'm Getting Better And Better." "Fitter, Stronger, More Productive."
So as you can imagine, Otto is sure his words went down well with the 10,000 Peruvian miners laid off in the first two months of 2009. Certain that the 45% drop in real estate sales registered in Lima in the final three months of 2008 will immediately bounce back thanks to Carranza's soothing words. And how can there be any doubt that the ZERO PERCENT CURRENT GROWTH registered by local experts (when they don't swallow the gov'ts massaged numbers whole) will immediately pick up again thanks to Luis's performance last night?
To round off his pep-talk last night, Carranza reminded the world yet again that the IMF had predicted 5% growth for Peru in 2009. Hey wow..the IMF...they're serious people and never get it wrong in South America. Or perhaps not.
While in Cuba, President Rafael Correa of Ecuador gave an interview to Cuba's officialist daily Granma. Granma has a small potted translation of the interview in English here, but it doesn't do justice to the much longer full talk that's published in Spanish here. Very interesting stuff.
China & Copper Well this news went down well, didn't it?
Jan. 12 (Bloomberg) -- China, the world’s largest metal consumer, discarded a plan to buy copper to support domestic smelters because producers are still profitable and inventories aren’t high, government and company officials said. The government also deemed it risky to buy yada yada continues here
There I was last week saying that there's no reason to get all hot'n'sweaty about copper yet and saying the rebound had little to do with true supply/demand issues. Ho hum. Here's today's copper chart. Venezuelan finances for dummies I supposethis kind of article has its uses for people who don't follow Venezuelan affairs much. On the other hand, here we are with another politically biased Bloomberg note about Venezuela finances that manages to quote only anti-gov't talking heads and even makes the gov't comments sound snide. Look....it's Bloomberg...why should you expect balance anyway?
An Interview with George Salamis, President of Rusoro Mining (RML.v)
Mickey Fulp is a very connected guy. Thanks to The Mercenary Geologist (check out his website here) your humble correspondent recently got in touch with Mickey's friend George Salamis, the President of Rusoro Mining (RML.v). After some banter about how I didn't seem to like RML.v so much, I asked Mr. Salamis (I called him Mr. Salamis...kept it all formal y'know) if he'd be good to answer a few questions.
"Sure!", he said "ask me anything you like!".
"What, on the record?", I asked.
"Yep...anything you like. On the record, no problem."
Well an offer like that doesn't come around every day, so I did just that and here below is the resulting long interview. I hope you enjoy. Otto.
PS, if you want to know what "salami" means in Spanish slang, drop me a line.
Otto:Hello, Mr. Salamis and thanks for agreeing to do this interview.
George Salamis: Hi Otto, thanks for inviting me to a chat on Inca Kola News. I have been reading it with interest for a few months now.
Otto:So on with the show. Can you tell us a bit about your background as a miner and how you became President of Rusoro?
GS: Well to use an over-used cliché, I guess mining is in my blood. My Father is an accomplished mining engineer and prospector who worked extensively overseas in mine development, often dragging us with him to live in some fairly exotic and remote places. Central America, Africa, Northern Quebec, you name it. Rock and mineral “pop-quizzes” were part of everyday life in our household.
Much to my Mother’s alarm I chose a life in mining as well, graduating as a Geologist in 1989 and going on to work overseas for the likes of Placer Dome, Cameco and others. In 1999, feeling a desire to unleash that pent-up inner entrepreneur, I made the leap from major mining companies to junior mining and have never looked back. Its been great fun and I’ve had the chance to be part of some great mineral discoveries, been part of advancing some great deposits into production and have been involved in some successful M&A transactions – some friendly, others not so friendly.
How did I get involved with Rusoro as President? Well, in mid 2007 a friend of mine rang me up mentioning that he knew of a newly listed company (Rusoro) that appeared to have a strategic edge on developing big gold assets in Venezuela. Rusoro was in need of a President. He mentioned this knowing full-well that I had spent a fair bit of time working for Placer Dome, the previous owners of the gargantuan and infamous Las Cristinas gold project. I walked away from Placer in the mid 1990’s saying to myself, “this place (Venezuela) has probably the best gold potential of anywhere in the world, however working down here is a bureaucratic nightmare. I shall NOT return unless the circumstances have changed”.
Roll the clock forward to 2007; when asked to consider the Rusoro posting I did a lot of due diligence on the Company, the Agapovs and their track record in Venezuela, Rusoro’s in-country management ability, etc. and quickly concluded that if any outfit had a remote chance of working through the bureaucracy, it was Rusoro. They had a track-record of success and if anyone had a valid shot at gold mining in Venezuela, and working cooperatively with the Venezuelan government, it was (and still is) the Agapov’s.
And Otto, “yes”, as you have rightly pointed out on your Blog in the past, the family name "Salamis” does attract the odd snicker down in South America. I tell you, it’s a great ice-breaker when meeting a Venezuelan government person for the first time!
Otto:Ok, so now can you tell us something about the background of your boss, André Agapov? I’m asking you this because on the gossip mill circuit you hear all sorts of things about the Agapovs, both father and son. Can you tell us more about their background and how they’ve become gold miners in Venezuela, maybe laying to rest a few of the rumors along the way?
GS: Here's what I know about them after becoming close friends and working colleagues with both father and son and have confirmed from them personally, corroborated by those who know and have worked for them in the past, etc. Vladimir Agapov, our Chairman, is an aeronautical engineer by training and used to run Aeroflot's North American operations in the bad old days of the Cold War (1980's and early 90's). Based in Montreal, he fought hard to keep Aeroflot’s transatlantic flight routes open in the face of some fairly serious sanctions that were on the go at the time against Mother Russia. This was not exactly a cushy job. Montreal: nice place, however think Siberia in winter, with OK baguettes, good beer and great hockey. In spite of the obstacles Vladimir kept the flight routes open and his planes fueled, even when they didn’t want to sell him fuel for his fleet of Ilyushin’s. A true story of perseverance in my view.
Son André was sent from Montreal to Moscow to school in aeronautical engineering, following in his. Dad's footsteps. Fresh out of school, Andre started a computer business for a brief time then moved to New York and into stock brokerage, owning the first licensed Russian owned/managed brokerage firm with a trading ticket on the NYSE in the 1990's. André sold the business off, did well doing so, and then he and Vladimir headed off to Venezuela to look at resource investment opportunities. He was one of the first Russian business people through the door in 2002-2003 which, by the way, is well before the Kremlin started to show up on the doorsteps of Hugo Chavez’s digs at Miraflores. they invested in a small, private Venezuelan gold mining operation in Bolivar State and actually delivered on promises made to the government regarding mine development, jobs and community support. All of this coming at a time when lawsuits were flying thick and fast with Vannessa Ventures and others on Km88. North American mining companies were fighting things out in international courts to no avail, rather than building mines down there. Along the way the family acquired other interests in other resources (Kaolinite, for example) in Venezuela.
On one of our first encounters, André shared a story with me about how he had spent days and sweated off many kilos of weight in the jungle looking for the original late 1800’s, British constructed mine shaft accesses in El Callao (next door to our Choco 10 Mine). Decades earlier, as a field geologist, I had spent some time looking around for those same old gold workings and shafts. I knew what he was talking about and said to myself “how many CEO’s do you know of who actually spend time in a jungle doing this sort of thing?”. At that moment, I was sold.
I’d like to dispel another popular misconception regarding the Agapovs. They were not given the “silver spoon treatment” in Russia like many of the oligarchs in Russia when the iron curtain fell. They are, in fact, not oligarchs at all. They are simply hard working and serious businessmen with a desire to build mines in Venezuela. Their success has come as a result of hard work and perseverance, a common theme in everything they have done. Ok Otto? So you can put away the John Le Carre novels and toss aside that copy of “Eastern Promises” that you got for Christmas! Does not apply here.
Otto:Wow, that’s a lot of background. So what’s the bottom line here with the Agapovs?
Seriously, if I have to sum up the situation with the Agapovs and the Venezuelan government I’d have to say that they have solidly won the trust of the government, at all levels, because of their history of delivering on promises. Do they benefit from the recently accelerated cooperation between the Russian and Venezuelan governments? Absolutely. However their reputation was solid before the Kremlin ever started sending their sailors to La Guaira for a bit of shore-leave. Do the Agapovs often dialogue with the government? Yes, Rusoro is a JV partner with the government and they have come to us frequently in the past when they have had problems to be resolved in Bolivar State in and around the various mining communities. For example, regarding labor and community unrest at the Choco 10 and Isidora mines under different ownership, we worked hard to overcome these issues under Rusoro ownership and have been successful doing so.
Otto:So let’s talk a little about the company, Rusoro (RML.v). What has happened to RML.v in 2008 and where does it stand as a producing miner today?
GS: 2008 was a hugely important year for Rusoro. It marked a major turning point for the Company and its investors, in terms our transformation from explorer and developer to gold producer. We’ve successfully turned around not just one struggling mining operation after we bought it, but two separate mines in less than 12 months. None of this was easy and we did hit a few speed-bumps along the way in terms of production cost blow-outs which are now behind us. Our last few months of production numbers have hit record levels, November alone was 13,475 ounces, and our per ounce cash costs have gone from the mid $700s in the summer of 2008 to under $400 per ounce. A lot of the turn-around strategies that we implemented in mid-2008 are just now kicking in. Otto, we think these production levels and low costs are sustainable.The new mine fleet is delivering more tonnes to the mill than ever before, the mill is behaving better than ever before, the union bosses are happy, the workers are happy, there is relative peace in the towns around our mines in Venezuela.
Alongside all of this work of successfully turning around a few failing or problem plagued mines, we’ve also been very busy building two new mining operations, San Raphael-El Placer and Increible 6. Both are expected to come on-line in 2009 giving us a further significant bump in our production.
Otto:On the subject of social and work relations, there were news reports about a land invasion by locals on to your Choco IV property just before Christmas that was affecting production. Can you bring us up to date on the situation there?
GS: I wouldn’t necessarily call a few dozen or so small miners moving into an area of Choco 4 to earn a bit of pre-Christmas pocket money a “land invasion”. This sort of thing happens all the time down in Bolivar. Not a material event, not newsworthy especially when compared to the thousands of small miners that have overrun the Km88 area in the past.
The best way to ensure that land invasions of any sort don’t occur is to give these small miners permanent employment and job skills which is something that we do at our mines in the El Callao and El Dorado areas, employing over 1000 people. However, this is something that has been sorely lacking in Km88 and deserves to be fixed. The locals are tired of waiting for something to happen, perhaps even more so than the Gold Reserve investors. This is a situation that we think we can resolve quickly to everyone’s benefit.
Otto: Rusoro of today is all very well, but in the last month the company has been making headlines with its move to buy out Gold Reserve (GRZ). So the question here is more about the Rusoro of tomorrow. What’s your vision for RML.v going forward, Mr. Salamis and how do the GRZ assets fit in?
GS: Shareholders in the gold sector have been ill-served by excessive turf battles for as long as you and I can likely remember.The starkest testament to this folly, especially for those who worked in the mining sector through the 1980’s and 90’s in Canada,is the three shafts sunk into the Hemlo orebody; three companies couldn't find a way to work together and shareholders paid the price.Some strange mix of ego and greed.You don't see this nearly as much in the oil patch, in passing.
It makes eminent sense to put these two companies together.The potential for operational rationalization is obvious. I also believe we could make a contribution towards moving Brisas forward.The project is world class and an excellent compliment to our existing assets in Venezuela. It deserves to move forward.We think we can help here.
I want to say at this juncture that we made determined efforts to do this in a friendly way. Several times during my tenure and, from what I understand, a few occasions before my time.The last thing we wanted was a bun fight. Unfortunately, the management at GRZ did not see things the same way. Now it us up to us to earn the trust of GRZ shareholders. They, the GRZ shareholders, have sunk a lot of money and time and effort into the venture. We firmly believe it makes a lot of sense to combine forces and just get it done. We just as firmly believe we can help and we hope and expect the shareholders will come to view things likewise. There is a huge opportunity to build something here. That's the 30 second soapbox appeal.
Otto: Many Venezuelan mining market watchers have noted the way Rusoro seems to get the permits it needs to operate from the Venezuelan government fairly easily while at the same time companies such as Gold Reserve and Crystallex have languished for quite literally years while waiting for the paperwork to go their way. Why do you think that is so, Mr. Salamis?
GS: Well, I can't speak to the particular situations of GRZ and/or Crystallex; I haven't been privy to the correspondence. But I acknowledge it's been a dreadful trip for most investors in Venezuela’s gold sector.For an exploration destination so endowed as Venezuela, surely there's a way for investors to see a return. A strategy that’s neat and tidy, one that “de-risks” the place in the eyes of the investors. Now there’s an idea!
As for ourselves, speaking very generally, I think cultural affinities have something to do with the way we're seen and accepted. People have a natural tendency to do business with people they feel comfortable with. And so far we feel there is a fairly high degree of mutual comfort between ourselves and the various permitting authorities, the government, etc.
I should also add that we are not unique in this respect. Before us, Gold Fields was also welcomed in-country. Why would that be? Recent South African history helps shed light here. The Company (GFI) had demonstrated its willingness to work with constituencies traditionally left out of the decision making process and was, more generally, alert to sensitivities in-country. This sort of thing makes a difference.
So Rusoro is not unique and there is nothing magical about our success at getting projects moving down there. When in Rome, as the saying goes, do as the Romans would do. And that's what we try to do. So far, so good.
Another question that has come up frequently in conversations over the last few weeks is how we are going to finance Brisas. We shall cross that bridge when we get to it. What is clear from this vantage point, however, is that is will be a lot easier to finance a land position under management with a proven track record in working successfully with relevant permitting authorities than it will be to finance a land position under management with a proven track record of working quite unsuccessfully with relevant permitting authorities. That's what we know right now.
And done correctly, it's an attractive proposition. If we can marry big ounces with a viable framework, that is a framework that gives comfort and confidence that the ounces will in fact get developed, and we think we can, well, that's a nice meal for investors and solves the environmental woes caused by the small miners and rampant unemployment that’s plagued that area for decades. How many gold ore bodies with seven digits of metal are left out there, besides those in Km88 and the ones Rusoro already owns to the northwest in El Callao and El Dorado?
Besides, it not as though there's no bad news in our share price already, yes? The markets could triple and the shares would still trade as though we killed our grandmothers. So some constructive developments on the ground against a backdrop of shares that are already priced for nuclear winter make us think we won't have a problem raising money, debt or equity, and on favorable terms at that. With the government on-side and a partner with some skin in the game, plus our track record of production, one would think that raising debt would be feasible.
Otto: One of the things investors and potential investors always want to know about Venezuela is what it’s really like working there. Is the bureaucracy as difficult as people make it our to be? Is the country so socialist in nature that it’s difficult to make a capitalist-style profit? How do you see political risk going forward? What insights can you give us about doing business in the country?
GS: I wish that I could paint a tremendously rosy picture about operating in Venezuela, this isn’t so. Building and operating mines in Venezuela is not for the faint of heart nor the impatient. Importing equipment and spare parts into the country is doable but slow, as we witnessed during the summer of 2008 causing us a bit of a cost blow-out. That’s when the new haulage fleet that we ordered didn’t exactly show up on time and equipment availabilities were fairly dismal over those months. The bureaucracy is problematic at times and the time factor involved in dealing with this bureaucracy must be built into everything we do when we make plans down there. However, we manage and have succeeded in working within the framework of Venezuela’s socialist development agenda and bureaucracy. And in the last few months we have done so very profitably. In reality these types of issues are not unique to Venezuela in Latin America or other mining regions in less developed countries around the world.
The perception of political risk, for us, resides only in the market and is obviously impacting our share price and that of Crystallex and Gold Reserve, equally. Resolving the Km88 situation in a positive way, having the projects move forward with the Government’s involvement and blessing, would go a long way to lifting the black cloud that has plagued the market’s perception of an incredible gold deposit in what is geologically a world class environment for gold.
Otto: One issue that concerns me about miners in Venezuela can be summed up in the quick phrase “dollars in dollars out.” By dollars in I mean the difficulty many companies have in accessing the official VEF2.15-to-USD1 exchange rate via the government CADIVI body. The result is they have to buy their currency on the more expensive parallel market. The dollars out part refers to the possible hitches you as a gold miner might have in obtaining the full market price for your metal on the world market. Does Rusoro suffer from either “dollar in” or “dollar out” problem, and if so how much of a problem is it for you?
GS: The system in Venezuela is actually beneficial for companies who are able to exchange currency through official channels thereby effectively covering those costs associated with the milling and mining operations paid in local currency.
All gold is sold based on the daily world spot price for gold. We are subject to all applicable taxes and sales charges as in any other country and some of those are recoverable. As for the movement of currency out of the country, mechanisms exist and are in place to allow the transfer of funds out of the country.Like us, many significant foreign companies in many industries use these mechanisms on a regular basis.
You mentioned CADIVI; however sluggish this system might be CADIVI is a huge benefit to us in terms of using in-country exchange rates to benefit the low-cost purchase and importation of goods that cannot be manufactured or bought in Venezuela. Do we suffer at all from “dollar in and “dollar out” problems? No.
Otto:I’ve mentioned my doubts about Rusoro as an investment several times on this blog. In fact, one of the things you and I talked about before you kindly agreed to do this interview was how you’d like to convince me that I’m wrong about my “avoid” call on Rusoro. So here’s your chance, Mr. Salamis! I’m a doubter, make me a believer. Why is Rusoro a good investment today?
GS: Yes Otto, well I’m still debating whether I include you on my Christmas card list or not for being such a pessimist. Essentially you have a company with an exceptional production growth profile, having grown from no production to producing at an annualized rate 150,000/yr in two years. Upon the completion of the current studies for production expansion at the Choco 10 mine and mill, Rusoro foresees this number more than tripling in the future. In the last 12 months the Company has acquired two mines that were struggling in terms of labor issues and in the case of the Choco Mill efficiency issues and turned them around to the point where not only are labor and the Unions happy, but the mill will operate in positive cash flow for the first full quarter in Q4 of 2008 with cash costs well under $400/oz Au. All good.
Add to this that the company will bring two additional mines on stream in late 2009 or early 2010 which will likely add approximately 100,000oz/yr Au in the near term and you get a feel for the production growth profile near and mid term. Longer term Rusoro will continue its exploration and asset consolidation efforts in this enormously gold rich region, hopefully with Brisas as the next addition.
Without the political risk that has plagued us in the market, where should the company trade?You can decide this based on you own comparative analysis, but the answer is certainly higher. We feel we are making headway on the extent of the perceived political risk by embracing the JV model preferred by the Venezuelan Government.Resolving the Brisas situation goes a long way down the track of “de-risking” Venezuela in the eyes of the investment community. We now have several JVs with the Government, the most significant being at the Isidora Mine. In our minds the best way to significantly lessen the perceived risk moving forward is to lift the black cloud that is Km88 and in the last month we have become proactive on that front, rather than sitting back to watch the situation worsen.
Certainly the quality of Rusoro’s assets are not fully realized in the market. If you are an investor who likes to rely on underlying fundamentals and growth potential you have a company whose fundamentals are improving on a monthly basis and that has a production growth profile and resource portfolio which leads its peer group. We are certainly not a one-asset Company. For speculators who wonder “what if” concerning the Km88 region you have a company, Rusoro, that is committed to consolidating a world class gold region and that has had success so far in doing just that.
You are essentially asking me how you can eliminate the political risk for you and the truth is you can’t completely eliminate it in any developing region in the world.We do believe however, that we are on the road to significantly lowering it and I can best sum up where the Company is at as follows; Rusoro is a company with exceptional production and growth prospects, with improving fundamentals and significant blue sky in partnership with the ultimate decision maker in the region.Can I take my Bay St. Howe St. beret off now, Otto?
Otto: You sure can. Thanks again for agreeing to do this interview with IncaKolaNews, Mr. Salamis. Are there any final words you like to say to our audience?
GS: Enough said for now, Otto. Many thanks for letting me bend your ear!
