Aquiline (AQI.to) and PAAS

No further comment

Pan American Silver Corp. ("Pan American") (TSX:PAA - News)(NASDAQ:PAAS - News) and Aquiline Resources Inc. ("Aquiline") (TSX:AQI - News) are pleased to announce that they have signed a support agreement (the "Support Agreement") pursuant to which Pan American will make a formal take-over bid to acquire all of the issued and outstanding shares of Aquiline (the "Share Offer"). Contemporaneously with the Share Offer, Pan American also proposes to make formal take-over bids for each outstanding series of Aquiline warrants and the Aquiline convertible debenture (together, the "Convertible Security Offers"). The transaction value implied by all of the offers is approximately $626 million.

The Share Offer will be made on the basis of 0.2495 of a Pan American common share, plus 0.1 of a Pan American common share purchase warrant for each Aquiline common share. Each of these warrants will entitle the holder to acquire one Pan American common share at a price of $35.00 per Pan American common share for a period of five years after the date on which Pan American first pays for Aquiline common shares tendered to the Share Offer (the "Five Year Pan American Warrant"). The consideration offered pursuant to the Convertible Security Offers will consist of replacement Pan American securities, exercisable to acquire Pan American common shares, with similar terms to the respective Aquiline securities, subject to an adjustment based on a 0.2495 exchange ratio.

So what's going on over at Aquiline (AQI.to)?

The company has been tight lipped about things, but according to this Spanish language report from way down Chubut Argentina way and dated the morning of Thursday, 21st May, the Environmental Impact Study submitted by AQI.to to the provincial government of Chubut has been rejected and they have a maximum of 60 days to come up with a better idea.

In the news report, Chubut's Environment Minister Juan Garitano tells a local radio station that "the updated report of environmental impact (for Aquiline) mentioned in the reference is not in conditions to be approved for the environmental aspects it refers to, as it does not comply with the sufficient technical requirements for the stage in which it finds itself."

It never fails to amaze me that mining companies forget to mention these things to their shareholders. I mean, screwing up an EIA, getting a red light from the local bigwigs and putting the whole project at risk is probably something they'd like to know, dontcha think?

Thanks to reader M for the headsup on this.

Aquiline (AQI.to): The Canadian pissing contest continues

Here's a follow up to last week's post on Aquiline (AQI.to) as we shed a further tear and pity poor, hard done by Aquiline (AQI.to) being used as a football by competing Canadian houses.

Well, not really. Pity is a real exaggeration as AQI's management are fully responsible for the current low cash "somebody please buy us" situation. However what is clear is that there are two factions playing financial games with AQI's stock right now.

• In the red corner we have a whole buncha suits that want to drive AQI's stock price down because they know the comapny needs to raise capital soon and they want to get in cheap (put simply they'd like to see AQI raise $10m by selling 6.66m shares at $1.50)

• In the blue corner we have those already bought in that want to see their holding rise in value and don't want to see the company dilute too heavily on the next financing round (put simply they'd like to see AQI raise $10m by selling 4m shares at $2.50).

What these two bickering parties have in common, of course, is that they want AQI to go up in value AFTER the next round of financing. That's when this humble corner of cyberspace will be looking more closely at AQI as an investment, by the way, but until then it's fun to watch the boyz and their games (fun for a wonk like me, anyway).

The latest round comes from the blue corner today. Cormark published a report on AQI that I've had chance to read. I generally agree with their take on the company and consider it a good report. I don't know where the devil you, kind and gentle reader, can get a copy of this member's only analysis. Not a clue.

Oh, by the way my e-mail address is otto.rock1 (AT) gmail (DOT) com if you ever feel like dropping me a line...about anything at all.

Aquiline (AQI.to): No cash = No Control

This time last week, Aquiline (AQI.to) announced a 40% rise in its resource (M+I) at its Navidad Silver/Lead/Zinc project in Argentina. All very nice and prospective for sure, and one fine day this resource will surely become one of the biggest silver mines out there, especially as the jungledrums are positive about the local Argentine bigwigs relaxing their mining ban in the region shortly.

So why has the stock sold off so sharply since then?


Answer: Got no cash.

At YE2008, AQI reported total assets of C$140m, but only C$8.5m of that was in the current asset column. Or in other words they're short of readies and therefore at the mercy of the sharks-in-suits that populate the Toronto exchange. Those sharks know that AQI.to from here has two options....

1) Find a buyer
2) Raise more capital via placement

...and as everyone's most likely buyer of the project, Pan American Silver (PAAS) isn't flush with cash itself right now and having its own (not desperate but significant) version of cash flow issues, the buying option has faded into the distance. For the time being, at least.

So what we're witnessing right now is a bunch of sharks operating in cahoots. they want to push AQI.to stock down so that when the placement happens, it happens at a significant discount to the stock's "true worth" (whatever that may mean...it still confuses me after all these years). The sharks want to scoop up as many cheapo shares as they can, y'see. It's nothing more than attacking weakness..sharky is as sharky does.

Moral of the story: Junior miners are still suffering from the lack of credit available in the market, despite the bounce back from Oct/Nov'08 lows that we've seen. It's still impotant for you, the retail investor, to make sure that any potential investment isn't exposed to the whims of the Toronto crooks-in-suits. That means you want to buy companies with a decent cash position.

Aquiline Resources (AQI.to): Southern scuttlebutt

First the facts: Aquiline (AQI.to) came out with this PR today that sets the company up nicely for its new 43-101 resource due out next month (according to the PR at least). The drilling campaign has clearly been a good one and the company conveys the feeling that the resource is very close to full definition now. The Navidad project is undoubtedly very rich, very big and altogether tasty. It's also got important support from the governor of the Chubut region, Mario Das Neves. backing worth its own weight. Anyway, next month we get to see some hard 43-101 numbers.

Now the gossip, rumours and general "don't bet on this stuff" talk. Otto was talking yesterday with a long-time friend in Argentina. Word up from the bowels of BsAs tends to confirm the talk that swirled around a few weeks ago, namely that Aquiline is the target for a large silver player in the immediate future. I want to stress that this is an unconfirmed, anecdotal rumour and so take it as you will, but I'm passing this one on today (instead of leaving the rumour on my desk, as happens with the great majority) as it passes personal tests:

1) The source is one I consider very reliable.
2) It's unlikely to be duplicity from last month's scuttlebutt. Sorry and all that but can't really say why. Suffice to say that the person in question doesn't move in the same circles as the Canadian investment world.
3) It makes sense. The timing before the 43-101 resource is good, and as seen in recent days there are large players looking to buy up the beaten-down juniors in all sectors from copper to gold.
4) I do not own any Aquiline, nor does anyody I know directly. (There's one guy I mail with in Canada that owns heaps of the thing but we haven't spoke since I got back from the beach).

Here's the 12 month chart of Aquiline FYI:


Now listen very carefully: DO YOUR OWN DUE DILIGENCE, DUDE. What I'm passing here is a rumour, no more and no less. I have my opinion about the integrity of the person involved and this post wouldn't exist if I had the slightest doubt on that score. But it's still a rumour. Got it? And as for future positioning, I'm not planning to take a piece of AQI.to personally, either. I'm quite happy with my trading portfolio right now and don't want to move much further out of cash. I'd also feel cheesy after posting like this. Nuff said. Have a nice day.

Aquiline Resources (AQI.to) News

Elsztain (for it is he)

On the back of its recent and very good looking scoping study (link here) for its Navidad silver project in the Chubut region of Argentina that shows the site is good for a very chunky 15m oz of silver production per year, AQI.to has today announced a round of funding. The idea is to sell four million shares at $2.50 a pop, each with a whole warrant attached. This will bring the fully diluted number at AQI.to up to 79.1m (I think).

At least one person who reads this blog every day will be very interested to know that a single investor by the name of Ernesto Elsztain is picking up 2m of those shares, and along with the attached warrants is putting himself in line to own 5% of the company. For those who don't know the dude, Elsztain is the guy behind the perennially underperforming stocks Irsa (IRS) and Cresud (CRESY), two stocks so badly run that even George Soros noticed he was being diluted to merry hell after a while and broke off his business with them.

I wish AQI.to luck with its new minority partner; it's going to need it.

Argentina: Chubut looking good for miners

Mario Das Neves needs to buy a razor

A tiny little story caught my eye on Tuesday, and it obviously caught the eye of a reporter in Argentina's newspaper of record, La Nacion too. In the South Argentina province of Chubut, one of governor Mario Da Neves' closest supporters, Norberto Yahuar, resigned this week after reporting friction between himself and other factions of the regional government. Apparently Yahuar's big problem is with Governor Das Neves' son, who is trying to muscle in and take over the day-to-day running of the Province while his father expands and marks territory for his presumed 2011 presidential push (at least according to the cattiest critics).

It's a typical story of Argentine nepotism for sure, and personally I don't give two hoots who runs the shop as long as its run relatively well, but the thing I picked up from this is that local business concerns are likely happy enough with the nascent father-son double act. (or else Yahuar would still have a job....you gotta know provincial Argentina to know these things, dudes). Das Neves Senior represents the non-Kirchner part of the ruling Peronist (PJ) party grouping that looks for social and economic progress more inside the present system, and during his second term of office (and to the specific delight of foreign capital) Das Neves has turned Chubut from an anti-mining reactionary area to a pro-mining region.

Main beneficiary so far has been Aquiline Resources (AQI.to), owner of the large silver/lead "Navidad" project in midwestern Chubut. After getting the big dude to visit their project recently, AQI was rewarded by Mario Das Neves waxing lyrical to a crowd gathered in the Canadian Embassy in Argentina about the exemplary social and environmental responsibility of the AQI set-up. This may not be a surprise for those of us who know the difference between 21st century clean mining standards and the type of thing miners still try to get away with when people are not looking (ask FCX at Grasberg), but the fact that miners (if obliged to do so) can extract the goods leaving very little enviro footprint and actually look out for the people who live around the area is still new news for politicos like Das Neves. What it does mean is that Chubut is quickly becoming a miner-friendly corner of Argentina, and if Das Neves Jr is shaping up as the new power-that-be, companies like AQI will be pleased enough.

So keep your beady eye on AQI and any other miner with Chubut exposure. As a country, Argentina is a very regional political risk exposure, and having the local governor on your side is probably more important than having the national government running with you. Right now, I'd rather be a junior in Chubut than in Mendoza for sure, no matter what Exeter Resources (XRA) might tell you!

Local knowledge. Get some.

UPDATE: So much for my local knowledge. Thanks to the reader who just pointed out to me that AQI's project is "Navidad" and not "Natividad". That's what happens when you write copy late at night while watching the futbol. Thanks for the correction.