Dust flux, Vostok ice core

Dust flux, Vostok ice core
Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

Monday, December 31, 2012

End of 2012

It's already the New Year in Singapore.

Rather than show you fireworks, I've put in here a picture of the rare talipot palm, currently in bloom at the Orchard Gardens here. This tree is about 80 years old. It blooms once in its life (now), then dies.

Unfortunately for me, this has been a gruelling year, both from a professional standpoint and most definitely from an investing standpoint. However, here's hoping the coming year will be better. Given the storms building on the horizon, for those of us working and investing in the precious metals field, it will either be a lot better or a lot worse.

The most-viewed article on this blog (in pageviews, according to Google Analytics) was the big winner last year about Atlantis.

The most-viewed article written this year was the one on scale invariance in avalanches, forest fires and default cascades, which no doubt got a boost by appearing on Zerohedge (where it has far more pageviews than it does here).

Happy New Year all! I have no predictions but intend to still be here.

Monday, December 24, 2012

Merry Christmas all

Merry Christmas to all. Back to business soon.

Not exactly what I'm accustomed to. But warm.

Moneylending is tough in Singapore

According to a story in one of the local papers here in Singapore, people can be jailed indefinitely without trial for "illegal moneylending", whatever that is. Asking for clarification from the locals wasn't reassuring--their understanding is that it meant lending money without formal permission. I guess the banks don't like competition.

Update: Jan. 3 - I forgot to clarify that the article actually says "jailed indefinitely pending trial". So there will be a trial--someday.

Wednesday, December 19, 2012

Why junior miners suck

It's no secret that junior miners are continuing to do poorly. The reasons include:

1) they are running out of money;
2) nobody cares about their @#%$ drill results;
3) they are caught in a death spiral positive feedback loop brought about by the expectation of low prices, making it hard to raise money, forcing the company to finance at excessively dilutive prices, which helps keep share prices low;
4) company finances are so weak that majors can postpone deals for decent projects until the junior either folds or vends the project for a pittance;
(but you already know all these)
5) and the Aristotlean first cause--NI 43-101 has rendered the business model of junior mining companies obsolete.

Let us review how that business model used to work.

A new company would list and raise a small amount of money at a low price to drill a few holes. With luck, one or more holes would have some promising results--the share price would rise and the company could finance some more work at a higher price. The additional work would hopefully bring about improved results implying an expansion in the area of mineralization. There would be another increase in the share price, and the company would finance again to finance further work. After a few iterations, the company would be able to raise enough money at a reasonable price to finance a program which would define a resource to a high level of confidence, or complete a feasibility study.

Alternatively, the first program would fail to find anything, and the company would be wound up. Thus, either failure (probable) or success would happen quickly. Salaries were minimal, as the principals in the company would have a considerable number of shares or options, so that the early rises in the share price would reward them for their successes.

The business model no longer functions. There is very little movement in share prices from drill results, unless they lead to a favourable resource calculation. This means that enough money has to be raised to define a resource at a very low share price, creating tremendous dilution. It also means that it will take a long time before the project either succeeds or fails. As a consequence, the principals now require salaries (in addition to their shares/options), which greatly adds to share dilution, as these, too, are financed at low share prices. Instead of either succeeding or failing quickly, the process is drawn out over a long time, requiring a lot of money raised at a low price.

What is the effect? In the short to medium term, it means producers will have their pick of excellent prospects from distressed companies which may be acquired at distressed prices. In the longer term it may be the end of discovery of new deposits.

NI 43-101 benefits major companies at the expense of junior miners, as it lowers the cost of picking up projects to replace the ore they mine.

As I have discussed before, NI 43-101 also favours institutional investors over retail investors and large consulting companies are favoured over individual practitioners (it really helps to have a lawyer and an accountant on staff when writing NI 43-101 reports).

Like most legislation, its true intent is the opposite of what has been stated.

Friday, December 7, 2012

Election day

One of my last days here, so I'll make a few observations.

People here are still enthusiastic about elections. They are passionate about their parties. Earlier this week on our way to the Minerals Commission we were held up by traffic going to political rallies. They still hope that government will make their lives better--at the same time, until now, the government's ability to interfere with their lives is still limited as the institutions of total control are undeveloped. But the signs are that they are coming.

People began lining up last night so they could vote today. Accusations of electoral fraud and warnings of ballot box snatchers are the talk of today's news.

One item really caught my eye as it went across the bottom of the TV. "Religious leaders warn politicians not to be too desperate for power as it will incite violence." I wish we saw such warnings at home.

Tuesday, December 4, 2012

Electricity and the election in Ghana

Once again the national electrical authority has promised that the load-shedding practice (which you might call rolling blackouts or power-sharing) will be suspended before the election--although the starting date has been rolled back to Wednesday.

The election is Friday.

Tonight there was breathless reporting on a major conspiracy to plunge all of Ghana into darkness during the election and vote-counting, so that unnamed nefarious powers could gain some unspecified advantage. Our staff have advised us that this sort of thing is announced before every election.

If they can avoid power-sharing for a few days, why can't they do it all the time?

According to interviews on Joy News, the required additional supply is coming from three sources. An extra 100 MW has been purchased from Cote d'Ivoire, 30 MW is coming from (or rather not being exported) to Togo and Benin, and interestingly, 30 MW is coming from an 80 MW power station built by a consortium of four mining companies. It was not clear whether they meant that the mining companies were generating this power and selling it to the network, or whether it represented power normally supplied by the grid that would be diverted elsewhere.

In case you are wondering why your mining stocks in Ghanaian jurisdictions have been performing poorly lately, there is this.