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New Globe and Mail Article on Belo Sun
March 8, 2014
Canadian miner's quest for gold meets politics in the Amazon jungle
By STEPHANIE NOLEN
Belo Sun Mining's Mark Eaton is battling feuding governments, environmentalists and wary locals to construct the Volta Grande gold project in Brazil that is estimated to contain more than 4.8 million ounces
Brazil, Mark Eaton likes to say, will be the place where he builds something – where he has an impact, where he leaves a legacy. Standing on the grassy riverbank in the Amazon basin where he hopes to build Brazil's largest gold mine, he foresees a brilliant future.
The Brazilian present, however, is somewhat less appealing.
Mr. Eaton is red-faced and sweating in the damp midday heat. He struggles to make himself heard over the pounding music at his staff Christmas party, then frowns dubiously at the heavily salted grilled meat heaped on a plate in front of him. He cannot follow the Portuguese conversation bubbling around him. When a huge rain-forest wasp stings his hand, his jovial façade crumbles for a moment. He emits half an expletive before managing to restore the tight smile to his face.
A few days before the Christmas party, Mr. Eaton's company, Belo Sun Mining Corp., obtained an environmental licence to work here, two hours by boat down the Xingu River from the city of Altamira. Obtaining that licence, after a bureaucratic process that dragged on over three years, gave Mr. Eaton and his colleagues something to celebrate.
But there is a legal challenge to that licence, filed by a federal prosecutor who appears deeply mistrustful of the project, and two more licences must be obtained before any earth can be dug. And there are several different regulatory agencies responsible for the environment and the welfare of indigenous people, who are demanding a say in what Belo Sun does here.
"There have been so many days this past year when I wished I'd sold it a year ago," Mr. Eaton said, incinerating half a cigarette in a single inhalation as he surveyed the Christmas party. "No major [mining company] would want to go through this."
At stake is the Volta Grande gold project, which Belo Sun estimates contains more than 4.8 million ounces of measured and indicated gold. For Belo Sun it would be a company maker. Construction would cost about $330-million (U.S.), and the mine would produce an average of 167,000 ounces over 21 years. At current gold prices, that represents an annual revenue stream well above $200-million.
Volta Grande is a high-stakes project for Brazil, too. This country has the world's sixth-largest economy, but its glow has faded in the past few years, as once-rapid growth slowed abruptly. Brazil has raised interest rates sharply to battle inflation; in need of investment and jobs, the country must now decide how quickly it will encourage new developments, and at what cost.
Belo Sun's adventure on the Xingu is a microcosm of the many competing interests at play in development in the Amazon, where Brazil's most ambitious and potentially lucrative projects are located. It's an area whose economic potential is matched only by the extreme vulnerability and staggering diversity of its ecology.
Some of Belo Sun's problems have nothing to do with Brazil. Having bought in at the height of the commodities boom, Mr. Eaton saw the price of gold sink even as the Brazilian project required ever more cash to take it forward. There wasn't a solitary piece of infrastructure on the land (and even today there are only a bare-bones office, accommodation and some rough sheds to store drilled core). He wooed investors, led by gold funds, but conservation organizations did their best to sabotage the financing rounds, warning that the project would never happen. Today, the company trades on the Toronto Stock Exchange at 44 cents, with a market capitalization of $117-million (Canadian).
But many of the company's problems have everything to do with Brazil – and this particular swath of land for which it has bought mineral exploration rights.
The gold is housed in volcanic greenstone rock, an intrusion that dissects the Volta Grande, or "big bend," in the Xingu, a 2,000-kilometre southern tributary of the Amazon River.
This has been known as gold territory for years: Garimpeiros, or "artisanal miners," have worked the land for more than half a century. This deposit was initially explored by the fallen Brazilian tycoon Eike Batista, in his first foray into mining. Verena Minerals bought it in 1996, and Mr. Eaton, a board member, was named chief executive officer in 2010. Shortly thereafter, the firm changed its name.
The Belo Monte dam
Pale with light blue eyes and blond hair with a boyish flop to it, Mr. Eaton has an English accent undiluted by his years in North America, and a formal, awkward manner that sets him apart as much from the laconic Canadians on his team as from the casually warm Brazilian ones. After a career as a mid-level equities broker, mostly in precious metals, Mr. Eaton jumped to the other side of the game at the height of gold prices. "As a former stockbroker, I get such a good feeling coming here," he enthused on a recent visit, surveying the cleared land where the boats from Altamira dock.
Mr. Eaton has no metallurgy or geology background, and defers on most technical and operations questions to Ian Pritchard, Belo Sun's chief operating officer. As reserved as his CEO is voluble, the operations chief is also English but a 23-year veteran of mines from rural Botswana to the Northwest Territories.
Mr. Eaton and his team raised the cash to buy this land, but they would seem to have been largely unaware of another project just 17 kilometres down the river that would come to be their biggest problem – although that project is remarkably hard to miss.
Between Altamira and the Belo Sun concession lies the Belo Monte dam: Now under construction, it will be the third-largest hydroelectric project in the world. It is the largest infrastructure project in Latin America by far, and the most controversial. It dams the Xingu and will flood an area of 516 square kilometres, producing 4.6 megawatts of power when it comes online in 2015. The dam has been in discussion since the 1970s; only in 2011 did the Brazilian government finally move ahead with building it, in the face of huge protests from environmentalists, indigenous peoples and the complaints of international celebrities such as Sting. The dam is still the focus of bitter protest, even as a giant concrete wall goes up in the middle of the river – and the mine next door that shares its name inevitably sits in its shadow.
"I tell the representatives of Belo Sun, 'Go get approval for a project like this in Canada,' " Jose Colares, the Environment Secretary (equivalent to a Canadian minister) for the state of Para, said in an interview in his office in the capital, Belem. "It's not easy. You're in an area of conflict, next to a huge dam with serious problems of social inequality with every actor involved. You picked the worst possible place."
Mr. Eaton appears to have belatedly come to that realization. "I might have chosen a different name if I'd known how controversial the dam was going to be, because I think people sometimes think we're affiliated," Mr. Eaton reflected.
The dam builders, at least, are at pains to convey that there is no such affiliation.
The Belo Monte dam is emblematic of the attitude of the current Brazilian government – that development takes precedence over any question of conservation in the Amazon region. The precise impact of the dam won't be obvious until years after it dries up part of the Volta Grande, and floods another – and for both environmental advocates and some in the Brazilian government, the idea of allowing the gold mine to proceed in that climate of uncertainty seems rash.
"We feel that any additional environmentally stressful activity in this region before that monitoring even happens is very dangerous," said Eliane Morera, a public prosecutor for the state of Para who sits on the environmental licensing board. She was the sole vote against when the board decided to license the mine in December.
For Ms. Morera and other critics of the dam – including Thais Santi, the federal prosecutor who filed the outstanding lawsuit – the most critical question is what the open-pit mine will mean for the indigenous inhabitants of this region. Brazilian law says that any project that is undertaken within 10 km of designated indigenous land (like a Canadian reserve) must include an impact study on how it will affect that community.
Belo Sun, arguing that its mine site is 12 km or more from the land of the Juruna and Arara peoples, didn't do those studies initially – something Ms. Santi calls illegal and unacceptable. Once indigenous people are involved, licensing becomes a subject of federal as well as state jurisdiction, because all indigenous issues are handled through the National Indian Foundation, known by its Portuguese acronym FUNAI, a body much like Canada's Department of Indian Affairs.
The question of whether Belo Sun is within or outside that critical 10-km zone remains disputed. The prosecutor says the mine is 9.6 km away; Belo Sun says the mine is closer than when it first applied for its licence because it has acquired new territory, but is still at least 10.7 km away.
But that kilometre-or-less issue is to some degree irrelevant. There are indisputably indigenous people living extremely close to the mine site, close enough that they will feel and hear blasting, and could be affected by any accident at the site. Their traditional hunting and fishing patterns will likely be disturbed – although any damage done by the mine pales compared to what is about to be caused by the dam. The name Juruna means "owners of the river," but the dam is going to reduce the flow of the Xingu by 85 per cent in this region.
"Belo Sun is just down there, so we're in the eye of the tornado," said Marino Juruna, the head of a community of about 100 people called Paquisamba – about 13 km downriver from Belo Sun. "It's clear that there's going to be an impact and it won't be small. Already the noise from the machines at the dam drove the animals away. We can't fish [at night], because the night looks like day, now, with all the lights they use."
Mr. Juruna worries about his people, his children and his tribe, but he worries too about people he doesn't even know. There is one, or two or three depending whom one asks, uncontacted groups of indigenous people living in the forests around the mine. They deliberately eschew interaction with other people, living an entirely traditional life, and no one is sure whether they are Juruna, Arara or something else entirely. Mr. Juruna (many in the community use the tribal name as their surname) said his people see their hunting trails in the forest some times, have left them gifts of smoked fish that have been accepted, have traded flute tunes through the trees – but that's it.
In the past couple of months, he said, they have disappeared – he has heard a rumour that they are now in the forest several days journey down the river – driven away most likely by the bright lights and the blasting and the silt churned up by the dam construction.
Mr. Pritchard said Belo Sun will proceed with a study on the mine's impact on indigenous people, as requested. He acknowledged that no one with Belo Sun knows what the area around the mine will look like in a year or two, when the river has been diverted. "But time isn't going to stop here while everyone sits and watches the river."
The garimpeiros
Meanwhile, Belo Sun has a second community demanding its attention: the garimpeiros, the small-scale miners who live on and still work the gold deposits on the Belo Sun concession. There are four communities of them scattered around the site; two are situated on top of what would be the pits when the mine begins work. Many of those miners were born on this land, and Brazilian law recognizes extractive rights of what it calls "traditional communities."
Until May, several thousand were still mining in hand-blasted shafts – wildly dangerous and deeply unpleasant work that involved being lowered up to 400 metres below ground in a cobbled-together tire swing. When it finalized title to the land, Belo Sun closed over the shafts and sealed off the pits. Many of the miners and their families moved out. Some stayed, sifting the old tailings for gold.
The mine would create 2,000 jobs in its installation phase, Mr. Eaton says, and about 500 when operational, and some will go to people from the garimpeiro villages. But many of the jobs will require a level of education or skill that people in the community don't have.
"Belo Sun came here with great proposals, that they'd never stop anyone working, that they'd give everyone jobs," said Jose Lopes da Costa, who has mined here for 26 years. "Those promises were a ploy – as soon as they got their first licence, they came in and stopped the mining." Some people in the towns did get jobs – mostly make-work projects, such as putting up fences, for which they are paid about $450 (U.S.) a month. That compares to the $750 a month they made in a typical month of mining, Mr. Lopes said – and that was work done on their own schedule, when they felt like working. He acknowledged that the work was dangerous and often unpleasant (the miners use mercury heated over open flames, often in small enclosed spaces, to form the gold into small chunks they can sell).
"The government could come here, give us training – but no, they want to bring in a foreign company and throw us out," said Ideglan Cunha, another garimpeiro who said his parents were born on the land where he now has a three-room wooden house. "The wealth could be kept here within this country – and instead it will go out. What the company will spend here, it's crumbs. They will get rich on the backs of our poverty."
Mr. Pritchard said the company has done a census of who lived in the four small towns as of last year, and will buy the homes and businesses of those people, as well as moving them to a new community 22 km away. Royalties (currently set at 1 per cent of gross value of extracted gold, these are projected to be $15-million a year paid to a municipality of about 12,000 people) will pay for schools, health care and roads.
But Mr. Cunha said his community is frustrated because none of that is visibly under way. "They've stopped us from mining, but there's no resettlement project. They play with time – they're millionaires, they have investors. They just plan to put pressure on this place [for years], so the people all give up and leave."
There is perhaps more truth in this statement than Mr. Cunha knows: Mr. Eaton admits that with gold prices down, Belo Sun was perfectly happy to have a quiet year in 2013, in which bureaucracy kept them from being able to push forward at the original planned speed with developing the mine.
But the bureaucratic woes may be abating, because it is clear that the government in Para state – which has primary responsibility for approving the mind – wants this mine to get built. A few months ago a police force sent by the Environment Ministry came to bust up the technically illegal mining on the company land, the first time anyone can remember the police enforcing the law against unlicensed artisanal mining.
Seventy per cent of the land Belo Sun wants to use had small farmers on it. Mr. Eaton says the company was ultra-careful with land title, taking the step of first formally registering it in the name of the farmers who owned it before buying it from them.
But that's not as straightforward an assertion as it might seem, said Ms. Morera, the state prosecutor: those farmers were resettled under a federal program to give landless people farm land, in an effort to reduce both violent conflict over land and illegal agriculture that is seeing the forest cleared at a furious pace. How, she asked, does the company know that the owners they registered actually had a valid title claim, given that land transactions in this area frequently involve invasions, faked claims and extortion? "These people who negotiated with Belo Sun might be grileiros [professional land thieves who operate across the rainforest]. This question worries me very much."
The federal land authorities told The Globe and Mail that the agency is investigating "possible irregularities" in Belo Sun's purchase of the land and that the company had been informed that their work area overlapped with land already used to resettle people. The authorities would not say how long that investigation might go on or what its outcomes might be.
The rain forest
The other actor in all this is one largely without a voice – the forest itself. This ecosystem is home to 10 per cent of the world's species. Mr. Pritchard says that although the open pits will be just 100 metres from the river, the company's impact on those species will be minimal: It will draw no water from the depleted river, he said, instead relying on rainfall collection. It will store tailings away from the riverbank, in ponds that he said will not leach into the surrounding land or river, that will keep cyanide out of the ecosystem. It's not virgin rain forest, he pointed out, but land that has already been cleared extensively for agriculture and that has been heavily degraded by the artisanal mining, damage the company will have to clean up.
The state Environment Secretary, Mr. Colares, is persuaded by this argument. "If this project doesn't happen, people are going to continue to live in misery and environmental degradation will continue," he said.
Ms. Morera called that assertion specious. "Yes, the land there is totally degraded and nobody takes any care about improving it – but there are other alternatives for sustainable development that they have totally ignored," she said. "You absolutely can't say that [commercial mining] is the only way to rehabilitate it."
For Ms. Morera and other critics, the mine itself is a problem, and so is what it represents – Altamira, once a sleepy little town, has in the past couple of years boomed to 100,000 people (but still dumps all its sewage directly into the river.) By green-lighting the mine, the government is sending the message that this region is open for development.
International non-governmental organizations such as Amazon Watch are highly critical of the proposed mine; 44 different organizations are part of a public campaign called Belo Sun No! Mr. Colares doesn't appreciate their involvement. Foreign countries, he said, particularly those in the developed world, like to talk about the Amazon as global heritage. That it is, he said, but it also happens to be on sovereign Brazilian territory, and Canadians who don't like the idea of mining here should remember that no one was trying to shut them down when they went hammer and tongs after their own minerals a century ago.
Belo Sun's licensing process has taken as long as it has in part because the company has been caught in a dispute between the state and federal levels. This state, Para, is Brazil's largest mineral producer and, under a decentralization initiative from the centre, is entitled to engage and license a project like Belo Sun itself. Yet a number of federal agencies, including the indigenous peoples' and one called the Brazilian Institute of the Environmental and Natural Renewable Resources, in charge of conservation, are entitled to a say, and the federal prosecutor's agency has taken a self-appointed activist role for both the Belo Monte dam and this case – becoming in the process the bane of Mr. Eaton's days. He described Ms. Santi as an ambitious lawyer unhappy at being posted to the backwater of Altamira: "She's trying to make a name for herself – and we're a pretty easy target."
The oversight of federal agencies makes for a good system, in theory, he said – "making sure someone doesn't just come in here and trample over the indigenous people," he said. "But in practice it's been a little harder. I'd rather spend money on geologists than lawyers."
Perhaps fortunately for Belo Sun, the company happened into a situation where the Environment Secretary who must sign off on their permits is palpably irritated with environmentalists and others who oppose the dam, whom he views as professional opponents of progress, and fed up with federal interference in his state. Mr. Colares is having none of the public prosecutors' objections, or of the suggestion that because of the mine's proximity to the dam, the changed river flow and the indigenous lands, that federal regulatory agencies should also be involved.
He opens a discussion about Belo Sun with a long list of grievances. "The effects of mining on the local economy are minimal," he said. "In the installation phase they employ thousands of people but when they operate, the number of employees falls dramatically because these are very technical, innovative projects, not reliant on human labour. The federal government exempts them from taxes so that Brazil will be internationally competitive."
He says he has no idea how much money the project will mean for the state. (Mr. Pritchard says the mine will generate about $226-million in federal, state and local taxes over 12 years.) But Mr. Colares would seem very determined that the federal agencies are not going to take away his power to make these decisions, and if they oppose Belo Sun, he is determined to see it happen.
"We don't need to consult with [the federal agencies] ... They're just making confusion," he says. "It doesn't matter if the mine is 9, 10 or 11 km from [the indigenous people] – it doesn't impact them – even their border," he said.
Many in the environmentalist community here speculate that Belo Sun intends to sell the mine now that it has an environmental licence; Mr. Eaton insists they will build.
"We've spent $35-million on engineering studies to build it," he said. He gestured toward the rough wooden core sheds that house the 175,000 metres of rock the company has drilled, at the stacks and stacks of trays that hold the proof this land is seamed with high-grade ore. "It's a great project. It's a good enough project that I believe we will end up building."
Read more at http://www.stockhouse.com/companies/bullboard/v.bsx/belo-sun-mining-corp#OIugcT3DWKbjkVsR.99
Thanks for the Belo tip Progafa.
Petaquilla Minerals Ltd.
Current Recommendation
Prior Recommendation Date of Last Change
Current Price (01/03/14)
Six- Month Target Price
SUMMARY DATA
(T.PTQ TSE)
OUTLOOKT.PTQ: Rating lowered to Neutral on loss of Lomero-Poyatos mining concessions
Late last week, the Regional Ministry of Economy, Innovation, Science and Employment announced that the mining permits for the Lomero-Poyatos concessions had been revoked due to inactivity which prompted us to lower our rating to Neutral. In addition, gold production continues to be less than expectations due to disruptions in mining operations from the reassignment of mining equipment towards deliveries of aggregate to the Cobre Panamá copper project. During the most recent quarter, revenues from aggregate operations increased to $7.98 million, which represented 38.7% of total revenue
KEY POINTS
Petaquilla Minerals is a junior gold production and exploration company with a producing mine in Panamá and numerous mineral exploration properties in Panamá and Portugal. The Molejón gold project in north-central Panamá achieved commercial production in January 2010 and has poured 254,857 ounces of gold. Approximately 473,315 ounces have yet to be monetized from the proven and probable reserve delineated in the most recent 43-101 compliant mineral reserve report at Molejón. Within 20 kilometers, the company controls the Palmilla gold deposit (M&I resource of 509,000 ounces Au) and the Botija Abajo deposit (proven and probable resource of 106,739 ounces Au).
Petaquilla Minerals holds the mineral exploration and development rights to 842 square kilometers of concession lands that contain gold, copper and molybdenum deposits in Panamá. Oro del Norte and Brazo, continue to be advanced with exploration programs. NI 43-101 compliant estimates for the Botija Abajo and Palmilla deposits were released in the early 2013 adding $34.5 million (or $0.12 per diluted share) to the NPV to our valuation model.
An updated NI 43-101 compliant estimate on the Palmilla gold deposit was announced on October 9, 2013. The report expanded and upgraded the resources from an estimated inferred resource of 502,800 gold equivalent ounces (using a cutoff grade of 0.30 g/t Au Eq.) to an estimated measured & indicated resource of 841,000 gold equivalent ounces and an inferred resource of 269,000 gold equivalent ounces (using a cutoff grade of 0.35 g/t Au Eq. Without even considering the significant upgrade of the resource, it can be stated that the estimate increased 120%. The updated estimate contributes $53.2 million (or $0.21 per diluted share) to the NPV to our valuation model.
Petaquilla successfully asserted its rights over claims in the area of the Cobre Panamá copper project being advanced by First Quantum Minerals. In consideration for land access, Petaquilla received (through PDI) a $75 million contract for aggregate procurement (which was subsequently increased to $100 million), $13 million for 10 years of land lease, $13.3 million waiver of royalties, etc., all of which total approximately $150 million.
On/off leach pads have been constructed at Molejón. During fiscal 2012, the on/off leach operation produced approximately 300 ounces. The start-up and construction of the operation continues, though no additional production was reported during fiscal 2013. Management expects this incremental leach operation to be commissioned during calendar 2014.
On January 2, 2014, the Regional Ministry of Economy, Innovation, Science and Employment announced that the mining permits for the Lomero-Poyatos concessions were revoked due to inactivity. Petaquilla Minerals had owned a 100% interest in Lomero-Poyatos through the acquisition of Iberian Resources.
During the fourth fiscal quarter, the status of the Forward Gold Purchase Agreement with Deutsche Bank required the declassification of PDI as held-for-distribution despite management s continued plans for a spin-out. Therefore, the company is pursuing a course to refinance and close the gold and silver contracts. Also, both events had impacts on the balance sheet and income statement. Management s focus during fiscal 2014 lies in boosting gold production at Molejón gold project, though initial expectations of producing approximately 100,000 ounces appear out of reach. In addition, management is actively pursuing financing alternatives to fund developmental plans (including exploration at Brazo and Oro del Norte in Panamá and Jales-Gralheira in Portugal), re- finance short-term liabilities and terminate the Deutsche Bank forward gold and silver purchase agreements and convertible loan. Management may also pursue a judicial remedy to the loss of the mining rights to the Lomero-Poyatos concessions. We reduce our rating on Petaquilla Minerals to Neutral and adjust our target to $0.73 due to several factors, including the loss of mining rights to Lomero-Poyatos, an increasing working capital deficiency and lower prices of gold and silver.
Results for first fiscal quarter
On November 22, 2013, Petaquilla Minerals filed first fiscal quarter results for the period ending September 30, 2013. Gold equivalent production declined 22.5% sequentially from 12,191 ounces to 9,452 ounces despite an easy comparison. Mining operations continued to be disrupted from the reassignment of some mining and crushing equipment towards the efforts to make timely deliveries of aggregate to the Cobre Panamá copper project. The requirement for increased capacity is necessary since lower ore grades are being processed now. Additional equipment has been procured, and management expects the mining and process operations to be re-balanced during the course of the second fiscal quarter. In addition, the average realized gold equivalent price declined 10.9% sequentially to $1,312 per ounce. The company again drew upon inventoried bullion and sold 10,191 gold equivalent ounces; nevertheless, sequentially revenues from the sale of gold equivalent ounces declined 28.2%. Revenue from the aggregate business was $7.98 million and increased to comprise 38.7% of total revenues for the quarter. The company reported a loss of $2,105,435 ($0.01 per diluted share).
Lomero-Poyatos
On January 2, 2014, the Regional Ministry of Economy, Innovation, Science and Employment for the province of Huelva announced that the mining permits for the Lomero-Poyatos concessions were revoked due to inactivity. A delegate of governmental body, Eduardo Manuel Muñoz García, explained that the decision to revoke the mining rights was due to repeated failures to meet the conditions of the Unified Environmental Authorization (Autorización Ambiental Unificada or AAU) issued in October 2012, along with other developmental requirements. He cited that Petaquilla s subsidiary, Iberian Resources, failed to present a complete project plan and the associated restoration plan. In addition, Iberian Resources has not provided the additional information requested by the Geological Mining Institute of Spain (Instituto Geológico y Minero de España or IGME), has only completed 10 of the 170 proposed exploratory surveys, has not constructed settling tanks and has not made the required deposit guarantee. The Ministry estimates that in recent months, Iberian Resources has not made any exploratory or construction progress since May when a rudimentary access ramp was constructed in the form of earthworks creating a channel, which the Ministry estimated to represent at most ten working days.
The Ministry of Economy mentioned that Iberian Resources had requested to delay the work requirements citing lack of sufficient funds. The Ministry denied the request and is moving forward to make the mining rights available again to interested companies. Apparently, the Ministry warned the Petaquilla that the mining rights would be forfeited if certain requirements were not executed by the end of the 2013.
Petaquilla Minerals had owned a 100% interest in Lomero-Poyatos through the acquisition of Iberian Resources. The most recent financial report books the value of the company s Iberian assets as $35,830,876, which predominately reflected Lomero-Poyatos. Petaquilla may appeal the decision in court.
Labor Protests
On December 31, 2013, Panamanian newspapers reported that workers at the Molejón gold project were protesting in the streets of Penonomé and along the road to the Cobre Panamá copper project. The workers are demanding the payment of wages due December 15th and the 13th month payment required according to their Collective Agreement.
Deutsche Bank Liabilities
Though management is committed to physically delivering the required ounces of gold and silver to Deutsche Bank pursuant to Forward Gold Purchase Agreement and Forward Silver Purchase Agreement, Petaquilla Minerals has recently failed to meet the physical delivery requirements and has settled its obligations in cash. In October 2013, Petaquilla paid $1.7 million to Deutsche Bank to settle the September delivery requirements. As of September 30, 2013, the company was in negotiations with Deutsche Bank to reschedule the October delivery requirements.
Financing
On November 21, 2013, Petaquilla Minerals announced the closing of a private placement of 14,285,714 Units at C$0.35 per Unit, each of which consists of one common share and one common share warrant exercisable at C$0.45 per share. Gross proceeds were $5,000,000 from which a $200,000 finders' fee was paid. Management is actively pursuing financing alternatives to fund developmental plans, re-finance short-term liabilities and terminate the Deutsche Bank forward gold and silver purchase agreements and convertible loan.
During the first fiscal quarter, the company's working capital deficiency expanded 13.7% to $97,368,564. Since the decline in gold production is contributing to the company missing gold delivery requirements to Deutsche Bank that are required under its Forward Gold and Silver Purchase Agreements, an IAS requirement stipulates that the Forward Gold Purchase Agreement and Forward Silver Purchase Agreement with Deutsche Bank (both totaling $25,860,000) be classified as a current liability. Despite Petaquilla Minerals having belatedly satisfied the delivery requirements with cash payments, the company continues to be in arrears as of the end of the first fiscal quarter.
There are concerns that the company may possibly be under pressure from a shortage of working capital. In early September 2013, Petaquilla Minerals entered into a gold prepayment facility with Auramet for $2,500,000 (under which the company was obligated to deliver 2,128 ounces of gold on the following timetable: 152 ounces per week for 14 weeks between September 20th and December 20th).
Share Repurchase
During fiscal 2013, the company repurchased $257,652 worth of treasury shares. No shares have been repurchased thus far during fiscal 2014.
Miscellaneous
On August 19, 2013, Petaquilla announced that the company has changed its fiscal year from May 31 to June 30. As a result, the company had a transitional 13-month financial year ending June 30, 2013 including a transitional 4-month fourth fiscal quarter.
It was disclosed in the 2013 fiscal year-end report that the spin-out of Panamanian Development of Infrastructures, S.A. can only be executed upon the repayment of all the outstanding Deutsche Bank debt.
germynator, please comment on the following as to if you believe it is true:
"Wednesday, January 01, 2014 11:23 AM ET
Report: Petaquilla workers block mine access in Panama over wage dispute
By Fawad Mir
Operations at Petaquilla Minerals Ltd.'s Molejon gold mine in Panama's Donoso district came to a halt after workers blocked roads in protest over not receiving wages, Business News Americas reported Dec. 31, 2013, citing daily La Estrella. The company later pledged to make the payments owed to workers.
A mining union official reportedly said there had been 108 instances in 2013 where 1,300 operational and administrative workers did not receive salaries on time.
First Quantum Minerals Ltd. unit Minera Panamá SA, owner of the Cobre Panama copper-gold project that borders the Molejon mine, said the road block was illegal as 600 of their workers were trapped at the mine site due to the strike without food or supplies, the news source added."
Progafa, can you enlighten us on status of sale to FQ or white knight.
Thank you
RW -PRESS : Petaquilla Minerals : Petaquilla Minerals ( A0DKMR ) Petaquilla Minerals exercises reinforced pressure on First Quantum Minerals !
DJ IRW -PRESS : Petaquilla Minerals : Petaquilla Minerals ( A0DKMR ) Petaquilla Minerals exercises reinforced pressure on First Quantum Minerals !
Petaquilla Minerals ( A0DKMR ) Petaquilla Minerals exercises reinforced pressure on First Quantum Minerals !
Dear buyers of millions Invests !
In the current negotiations regarding the sale of the Panama assets between Petaquilla Minerals and First Quantum Minerals uses Petaquilla Minerals now seize the moment and blocks the only access road to the Cobre Panama project completely , so that First Quantum Minerals currently be 6.2 billion USD project can not develop any further.
After consultation with the company The reason for this is an outstanding payment of USD 2 million for units already delivered to First Quantum Minerals , which has not yet arrived. Because of infringement Petaquilla Minerals has now blocked the access road to the Cobre Panama project for all vehicles from First Quantum Minerals .
It must be realized that there is only one access road is for the Molejon Gold project of Petaquilla Minerals , as well as for the Cobre Panama project (both mines are in the midst of the jungle of Panama ). This access road was built by Petaquilla Minerals , before putting the Molejon gold mine and is privately owned by Petaquilla Minerals .
Thus, there is one and only good will of Petaquilla Minerals , whether First Quantum Minerals may use this road or not . Plays First Quantum Minerals not according to the rules of Petaquilla Minerals , there is no legal right to use that road. With this action, Petaquilla Minerals strengthens its negotiating position again and makes First Quantum Minerals absolutely clear that without Petaquilla Minerals in Panama goes nothing.
Already Inmet Mining which was taken in spring 2013 by First Quantum Minerals had already twice (!) Appealed against Petaquilla Minerals because of land rights and thus failed miserably . The competent courts have always ruled in favor of here Petaquilla Minerals , which are the rightful landowners .
Therefore, really very much to suggest that the current takeover negotiations between Petaquilla Minerals and First Quantum Minerals will already find soon to a positive end , because by blocking the only access road to the Cobre Panama project can be First Quantum Minerals 6.2 billion USD project not develop further .
It must now therefore in the interests of First Quantum Minerals be to create this dispute from the world as quickly as possible by offering a fair purchase price to the shareholders of Petaquilla Minerals ( this is according to Chair man Richard Fifer 0.70 to 0.90 CAD per share ) and thus Petaquilla Minerals grants from the road . Anything else would only lead to the development of the Cobre Panama project time- shifted backward and it is ultimately much more expensive than Petaquilla Minerals quickly as possible to clear out of the way now . From previous information of Inmet Mining , we know here that each month delay not less than $ 100 million cost when commissioning the Cobre Panama project ( through lost profits and interest payments on the bonds).
First Quantum Minerals is so can not afford to postpone a takeover of Petaquilla Minerals much longer.
Hold on to your shares continue firmly or buy at current rates continue , because even a takeover price of only 0.70 CAD per share would have over the current exchange rate of 0.28 CAD a surcharge of 150% result !
I expect a sale of the Panama assets in the first quarter of 2014 and this fits the message of First Quantum Minerals that the new mine plan of the Cobre Panama project will be released in the first quarter of 2014.
Source:
http://www.prensa-latina.cu/index.php?option=com_content&task=view&idioma=1&id=2223661&Itemid=1
Notice pursuant to § 34b WpHG and disclosure of a potential conflict of interest :
Michael Türk holds shares of Petaquilla Minerals .
Contact:
Türk Finance Communication UG ( limited liability)
Huelva, Jan 2 ( Reuters) - . 's Ministry of Economy, Innovation, Science and Job revoked the transfer of mining rights granted in November 2012 to Iberia Resources Corporation , a subsidiary of Petaquilla Minerals ( PTQ ) for 391 acres of the site Lomero - Poyatos ( Huelva).
The territorial delegate bouquet, Eduardo Muñoz , explained , through a statement that this decision has been taken due to "the repeated failure of the requirements for the company 's concession ."
He has also said that the Ministry is already working to launch a new tender to put the exploitation of these rights again available to interested companies.
Muñoz has detailed , among other things, have not met the conditions required relating to the Unified Environmental Authorisation has not submitted a complete project work or restart a restoration plan associated with it and has not provided information additional requested by the Institute of Geological and Mining Spain .
In the past year more than one have been made ??only 10 of the 170 surveys given without further have slop tanks built and planned control have not been deposited guarantees required restoration and the 10,000 euros that the company raised contribute as social collateral are clearly insufficient.
Also, it has been estimated that , in recent months , they have not conducted research , construction or civil works , as the technicians of the Ministry paid a visit in September during which noted that there was no such activity or equipment for execution , working only a small group of workers in the office environment and a security guard .
The construction of the access ramp to the site that began in May have been limited to the top earthworks to form a wing , tasks which is estimated at a maximum of ten days of actual work , so in the rest of the time has been no progress .
not quite today on TSX but almost! Will they keep negotiating after the holidays or is it over for now?
Merry Christmas to everyone.
Doesn't the recent 14 percent dilution for just $5 million hurt the large stockholders as well as the small? I don't understand why the large stockholders would be happy with management about that.
Do you have friends at belo too?
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Thu, Nov 21, 2013, 3:28 PM EST - U.S. Markets close in 32 mins.
Petaquilla Minerals Ltd. Closes Private Placement Financing
Petaquilla Minerals Ltd.
7 minutes ago
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov 21, 2013) - Petaquilla Minerals Ltd. (the "Company") (PTQ.TO)(PTQMF)(P7Z.F) announces that it has negotiated and closed a non-brokered private placement of 14,285,714 Units at a price of $0.35 per Unit, raising gross proceeds of $5,000,000. The proceeds from the private placement will be used for general working capital purposes.
Each Unit consists of one common share and one common share purchase warrant, whereby each warrant entitles the holder to purchase one additional common share of the Company for a period of five years from closing at an exercise price of $0.45 per share. The securities distributed under the private placement are subject to a four-month plus one day hold period.
In connection with the closing of the private placement, the Company has paid finders' fees in the amount of $200,000 cash.
All dollar amounts referred to herein are expressed in Canadian dollars.
The securities sold have not, nor will they be registered under the United States Securities Act of 1933, as amended or applicable state securities laws, and may not be offered or sold within the United States or to, or for the account or benefit of a U.S. person, as such term is defined in Regulation S under the U.S. Securities Act, other than through registration or an applicable exemption from U.S. federal and state registration requirements. This news release does not constitute an offer for sale of securities in the United States.
About Petaquilla Minerals Ltd.
Petaquilla is a growing, diversified gold producer committed to maximizing shareholder value through a strategy of efficient production, targeted exploration and select acquisitions. The Company operates a surface gold processing plant at its Molejon Gold Project, located in the south central area of Panama. In addition, the Company has exploration operations at its wholly-owned Lomero-Poyatos Project located in the northeast part of the Spanish/Portuguese (Iberian) Pyrite Belt and several other exploration licenses in Iberia.
On behalf of the Board of Directors of Petaquilla Minerals Ltd.
Joao C. Manuel, Chief Executive Officer
Complete NI 43-101 for Pamilla just posted on SEDAR.
Thank you MJK
Would't we come out with a PR saying that Gold Dragon's claim was false like we did with Cambridge Resources when they claimed LP was theirs? MJK says this is the second time Gold Dragon has made this claim in a PR.
According to Zacks Dec 2011 Analysis, Gold Dragon is still in the picture:
You can read the entire report at www.ralstonfinancial.com/ptq_initiation report.pdf
Petaquilla Minerals Ltd.
Current Recommendation Outperform
Prior Recommendation N/A Date of Last Change 12/20/11
(T.PTQ TSE
T.PTQ: Zacks Co. Report OUTPERFORM
Zacks initiates coverage of Petaquilla Minerals with an Outperform rating and a NPV-derived target of $1.70.
Current Price (12/21/11) $0.54
Six- Month Target Price $1.70
SUMMARY DATA
Zacks Investment Research Page 6
Petaquilla Minerals Ltd. (through its Petaquilla Minerals, S.A. subsidiary) owns 68.88% interest in Zone 2 and 47.46% of Zone 1 of the Rio Belencillo Concession (the two larger green concessions in the map above). Gold Dragon Capital Management Ltd. can earn a 100% interest in the concession through $500,000 on mutually agreed upon property expenditures over two years.
Good Find Lowjack. This is from the 2008 financial:
Rio Belencillo Concession – Panama
The Company holds various interests in other land concession areas adjacent to the Ley Petaquilla Property in Panama, including the Rio Belencillo and Rio Petaquilla concessions.
By an Agreement dated May 7, 2005 and amended on June 10, 2005, Gold Dragon Capital Management Ltd. (“Gold Dragon”), has an option to purchase all of the Company’s interest in the Rio Belencillo and Rio Petaquilla concessions by the expenditure of $100,000 in approved exploration costs by May 7, 2007, an additional $400,000 in approved exploration costs by February 7, 2008 and by then paying the Company $1,152,400. This sum is payable in shares of Gold Dragon.
6
The payment of $100,000 on account of exploration expenditures has not been made in accordance with the terms and conditions of the May 7, 2005 agreement. The Company is in the process of amending the agreement with Gold Dragon.
The Company’s proportionate share of exploration costs totalling $48,872 has been capitalized on the Company’s balance sheet.
GOLD DRAGON CAPITAL MANAGEMENT LTD. EXERCISES ITS RIGHT TO PURCHASE THE REMAINING 31.12% OF THE INTEREST IN THE BELENCILLO PROPERTY CONCESSION
Gold Dragon Capital Managment Ltd. has exercised its rights per its contract with Petaquilla Minerals Ltd., increasing its ownership to 100 per cent of the Palmilla deposit. Recently PTQ, through its subsidiary Petaquilla Gold SA, sponsored and announced the completion of a National Instrument 43-101 technical report on the Palmilla deposit estimating its inferred resources at 502,800 gold-equivalent ounces. As per the contract of May 7, 2005, between PTQ and Gold Dragon, PTQ will own 17 per cent to 20 per cent of Gold Dragon stock once formal transfer of the Rio Belencillo (including the Palmilla deposit) and Rio Petaquilla concessions to Gold Dragon is completed. Rodrigo Esquivel, president of PTQ, stated, in a letter to Gold Dragon dated Nov. 23, 2012, regarding the option contract signed between PTQ and Gold Dragon, that PTQ will honour the terms of the contract (see news releases for PTQ of May, 2005; annual reports and Form 20F from 2006 to present; the management's discussion and analysis release of Sept. 13, 2006; and PTQ's latest corporate presentation).
Petaquilla Minerals Ltd.
TSX : PTQ
OTC Bulletin Board : PTQMF
May 18, 2005 16:41 ET
Gold Dragon Options Rio Belencillo from Petaquilla
VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 18, 2005) - Petaquilla Minerals Ltd. ("PTQ" or the "Company") (TSX:PTQ)(OTCBB:PTQMF) announces that the Company has granted Gold Dragon Capital Management Ltd. ("Gold Dragon") an option (the "Option) to purchase its interests in the Rio Belencillo and Rio Petaquilla(i) concessions in Panama for $1,152,400, payable in capital stock of Gold Dragon.
(i) Note: The Rio Petaquilla concession is separate from the much larger Minera Petaquilla S.A. project, which is a joint venture between the Company, Inmet Mining and Teck Cominco.
Petaquilla Minerals Ltd. owns 68.88% of Zone 1 and 100% of Zone 2 of the Rio Belencillo Property Concession. Madison Enterprises Corp. owns the remaining 31.12% of Zone 1 and has the right to equal or better Gold Dragon's offer on the Rio Belencillo for a period of 60 days. The Company owns 100% of the Rio Petaquilla Property Concession.
Gold Dragon Capital Management Ltd. is a privately held company holding primarily cash and equities of major exchange listed companies. The number of shares of Gold Dragon to be issued to the Company if the Option is exercised will be calculated based on the value of Gold Dragon's cash and equities plus exploration expenses under the agreement, less liabilities. The Company will become a significant shareholder of Gold Dragon if the Option is exercised.
In order to activate the Option, Gold Dragon must evidence ownership of a minimum of 1,025,000 shares of Petaquilla Minerals Ltd. within 120 days of the execution of the Option Agreement. Upon activation of the Option, Gold Dragon has the irrevocable right and option to purchase the concessions until May 7, 2006. Petaquilla will grant a nine-month extension provided Gold Dragon has spent a minimum of $100,000 CDN on developing the concessions prior to May 7, 2006. Gold Dragon must evidence ownership of a minimum of at least 2% of the issued and outstanding shares of Petaquilla Minerals Ltd. at the time Gold Dragon elects to exercise the Option.
The Company has also agreed to process the ore from the concessions for a fee through the facilities of its Molejon gold project, provided that the Molejon is operational.
Initial exploration on the Rio Belencillo by Madison Enterprises Corp. included 3756 meters of diamond drilling. The Rio Petaquilla is a 45 square kilometer exploration stage property located adjacent to Zone 1 of the Rio Belencillo.
On behalf of the Board of Directors of
PETAQUILLA MINERALS LTD.
Kenneth W. Morgan, CFO and Director
The sentence before that mentions sale so Gold Dragon is covering all the bases.
Unbelievable, over 330,000 shares sold at 47 cents. It's happening now.
Do you believe it will get to the point of a share holder vote to sell or continue on?
carlosc, are they're any other roads being built for the exploration of our concessions? If yes, where are the roads being built to/from. I know that FQM is building a road to the port. Will we be able to use that road and develop our own roads branching off of it?
Whittle Optimisation & Strategic Planning
Whittle Optimisation and Strategic Planning is needed to optimise resource models for open pit mining projects through the use of software as a strategic mine planning tool. Whittle 4X software is used in strategic mine planning from early scoping studies to short term operational planning as well as the ability to setup and run basic optimisation studies using the software and the ability to interpret and comprehend the meaning of results from Whittle. Whittle bring together all the information from all the mining disciplines including: Geology, Geotechnical, Mining Processing and Financial Analysis to select the size and shape of open pit including Whittle nested pits. The software shows how to select the cut over from open pit to underground, optimise cut-off grade, assess risk involved in following a particular strategy e.g. selecting a long mine life vs. mining a sub-optimal pit to high grade the orebody.
The Whittle process structure options are: Block model – single element, multi-element, rock types, calculating tonnes and metal, setting up processing methods, coding the model with mining cost and processing cost. Topography Re-blocking – to speed up processing or “smooth” the pit shell, to extend the model limits. Slopes – rectangular slope regions, using rock type slope regions, slope error, number of benches.
The Whittle software will Generating pit shells using metal price and revenue factor, Whittle generates a range of pit shells, metal price and units, selling cost and royalties, processing cost – which costs are allocated to ore and why (time based costs vs. volume costs). The software projects: metallurgical recoveries, smelter recovery, mining dilution and mining recovery, mining costs, capital costs Limits – mining limits, processing limits, discount rate. The software also provides an analysis of the range of generated pit shells using the selected metal price, selecting ramp location, determing Mine life, Cut-off grade and High grading stockpiles
Rod101, Is this what you're referring to, trouble separating out PDI financial statements from PTQ statements?
PETAQUILLA MINERALS LTD.
August 19, 2013
(a) Notice is hereby given, in accordance with Section 4.8 of National Instrument 51-102, that Petaquilla Minerals Ltd. (the Company”) intends to change its year end from May 31 to June 30;
(b) The change of the financial year end from May 31 to June 30 in preparation for the spinout, which the Company intends to make during its 2014 fiscal year, of the Company's infrastructure subsidiary, Panama Desarrollo de Infraestructuras, S.A. ("PDI") as the Company requires more time to ensure accuracy of its financial plan information, allocations between the Company and PDI as well as for audit processes and plan of arrangement preparation;
Per: “Ezequiel Sirotinsky”
Ezequiel Sirotinsky,
Chief Financial Officer
Rodriguez101 I'm not disputing you and the financial statement are certainly late, but I don't know where you got the information on the date of publishing. Filing requirements are covered by Canadian National Instrument 51-102, section 4.2. There appears to be no provision for extending the 90 day rule regarding year-end audited financial statements. Subsequent events (events occurring after June 30, 2013) should be disclosed but cannot delay the issuance of the financial statements. The BCSC might be holding the issuance up for some reason but if the auditors have signed off, it's hard to see what the BCSC could object to. In other words, the BCSC would have to have information that the auditors did not have. If auditor's won't give clean opinion, and management disagrees, the auditor's certification discusses the reasons a clean opinion can't be given and the material effect on the financial statements but the 90 day deadline to issue the statements must be met. I suppose the auditors could just be late with wrapping up the audit but since the deadline was extended by 30 days by the change in year-end, its hard to imagine they didn't have enough time. Perhaps you could share with us where you got your info about filing on Friday?
Good to know MJ. Future is bright. Solid plan for increasing production at low cost. We are very profitable at today's gold price and the gold price will not stay down at these levels long. Only need one domino to fall to set off doubling in gold price.
Rules for taking company private (issuer bid) are found at:
http://www.bcsc.bc.ca/uploadedFiles/securitieslaw/policyBCN/BCReg_21_2008.PDF
We hear about Panama being a third world country, but Panama seems much better off than Spain and Portugal. Spain and Portugal appear to have stable societies but with youth unemployment over 50 percent in Spain and 30 percent in Portugal, can stability continue for the long-term? I worry that our investments in Spain and Portugal could turn sour if communists or other forms of anti-private business government take over. Would Spain and Portugal nationalize our mines? Probably not, but there's less chance of that in Panama IMO. Not sure I'm happy with the company investing heavily in Europe but I suppose it's too late now. Hope we get the gold and silver mined before there's a revolution. The following article points out the problems in Spain and Portugal
Triple shocks threaten Europe's sickly and deformed recovery
Europe has not recovered. It has begun to stabilise, but only just, amid mass unemployment, with debt trajectories still spiralling out of control in Italy, Portugal, Spain and once again in Greece.
By Ambrose Evans-Pritchard7:27PM BST 04 Sep 2013
The complacency of those dictating Euroland's policies - though not its victims - is breathtaking.
"Europe, it seems, has become anaesthetised to bad news," says Simon Tilford from the Centre for European Reform. Tentative signs of life after six quarters of contraction are deemed a vindication of shock therapy, even as the underlying crisis gets worse in almost every key respect.
"The reality is that the Spanish and Italian economies will shrink by a further 2pc in 2013. Greece is on course to contract by an additional 5pc to 7pc and Portugal by 3pc to 4pc. Far from being on the mend, the economic crisis across the South is deepening. Real interest rates are increasing from already high levels," he said. An end to the slump - hardly assured - is not enough to reverse a compound interest trap across Club Med as debt loads rise faster than nominal GDP, or enough to render Italy and Spain viable within EMU. Such is the "denominator effect". Mr Tilford says the elephant in the room is the rise in the debts of Portugal and Spain by 15 percentage points (pp) of GDP over the past year, by 18pp in Ireland and by 24pp in Greece. Italy's ratio rose 7pp to 130pc of GDP, already at or near the point of no return.
This is the fruit of "naked" austerity, conducted without offsetting monetary stimulus. Debt ratios are rising even faster. The hairshirt strategy has been self-defeating, even on its own terms.
The debt spiral cannot be checked until Euroland embarks on full-blown reflation, yet EMU creditors shun such a course. The Club Med states in turn have yet to throw up a leader of stature, willing to forge a debtors' cartel, and bargain from strength. They let themselves be picked off one by one. Much was made of a slight fall in Spain's registered unemployed in August. The more relevant detail is that a net 99,000 people left the workforce in a single month. Some are coming to Britain. We now know that 45,530 Spaniards signed up for UK National Insurance last year.
The EMU refugees are still arriving daily at Victoria Station, where the Telegraph is based. They make a bee-line for a currency shop nearby known for low fees. Three Andalucians in their 20s were in the queue ahead of me the other day, chatting about their prospects. Each changed a thick wad of euros into pounds, starting new lives in London. Bienvenidos. They are Britain's gain; and Spain's loss. They no longer pay Spanish taxes or contribute to Spain's Social Security system, sliding towards bankruptcy as the reserve fund is depleted at an exponential pace. The ratio of workers to those receiving benefits has already fallen to 1:7 in Aragon.
Not that the exodus from Southern Europe has made a dent in youth unemployment rates: 62.9pc in Greece, 56.1pc in Spain, 39.5pc in Italy, 37.9pc in Cyprus and 37.4pc in Portugal. It is surely the greatest policy failure of modern times.
Whether you think Europe's recovery is reaching "escape velocity" depends on what you look at. Optimists cite PMI manufacturing indices, punching back above the boom-bust line of 50, though these are the same PMI surveys that gave no forwarning of EMU disasters of 2012.
Money data are a different story. Growth of "broad" M3 money has stalled, slowing to a 1.5pc rate (annualised) over the past three months, a harbinger of economic stagnation over the winter. Credit to business fell at an accelerating rate of 1.9pc in July as banks continue to retrench too fast, compelled by overzealous pro-cyclical regulators. If that is the launch-pad for a new cycle of growth, I will eat my monetarist hat.
Euroland has been hit by three shocks, none life-threatening but serious when combined, which are likely to bite with a delay. The euro has risen 30pc against the Japanese yen over the past year, 25pc against the Indian rupee and 20pc against the Brazilian real. It is has even risen against the resurgent US dollar, an odd state of affairs for the world's slowest growing economic bloc.
To make matters worse, borrowing costs have jumped by 70 basis points across Europe since the US Federal Reserve began to talk tough in May, the difference between life and death for small firms in Spain, Italy and Portugal clinging on by their fingertips.
The ECB has not done much about this, beyond waffle on about "forward guidance". It has allowed imported tightening to run its course, while plans for direct lending to small businesses in the South have withered on the vine. The ECB's Mario Draghi pledged last year to do "whatever it takes" to save monetary union. He is not in fact doing so. His masterplan to backstop Italy and Spain has averted an immediate chain of sovereign defaults, and kudos to him for that, but has not averted the slow slide towards insolvency. If the ECB targeted 5pc growth of M3, or even better 5pc growth of nominal GDP, this would lift Club Med off the reefs. It could do this easily. It chooses not to do so.
Europe will now have a third shock to contend with, and perhaps a fourth if the emerging market rout continues. Brent crude has jumped by $15 a barrel since June, nearing the economic inflexion point around $120 even before Tomahawk missiles rain on Damascus. This will tighten the deflationary vice yet further by draining spending power from the economy, like a tax.
It was a Princeton professor called Ben Bernanke who wrote the last word on this in "Systematic Monetary Policy and the Effects of oil Price Shocks". Central banks themselves cause most damage from oil shocks because they panic, over-reacting to short-term inflationary noise. Yet the mystics at Bundesbank still seem to think that oil spikes are inflationary. They have largely succeeded in imposing their 1970s views on the ECB's Governing Council. They raised rates to counter the pre-Lehman oil shock in July 2008, even though half of Europe was already in recession, the worst monetary policy blunder since the Second World War. They repeated the mistake in 2011, causing Europe's double-dip. Third time lucky, perhaps?
Even if eurozone growth does indeed gather speed, this will bring forward the day when Germany demands rate rises to head off overheating in its own misaligned economy. This will change the contours of the crisis, not solve it. The 20pc gap in labour competitiveness between North and South - the fundamental cancer of the EMU Project - will remain. And no, the North-South current account chasm has not closed in any meaningful sense. It has been masked by crushing internal demand and investment in the Latin bloc. Germany's surplus actually grew to 7pc of GDP last year. The misalignment is so extreme that even a full depression in the South cannot bring intra-EMU trade into balance. Should they be even trying to hold the currency together given sheer scale of the task, you might ask. How this gap in incompetitiveness was allowed to evolve over the first 15 years of the EMU experiment is by now ancient history. It no longer matters whether it was caused by Germany's beggar-thy-neighbour wage squeeze, or by Italy's "scala mobile" wage escalator, or by a flood of cheap foreign capital into Spain. The damage from this joint venture is now done. All EMU states are in it together.
Forcing all the burden of adjustment on the debtors repeats the cardinal sin of the Gold Standard. It cannot succeed since deflation poisons debt dynamics, and mass joblessness poisons democracy. There comes a point when leaders have a moral obligation to default.
Yet to stoke EMU-wide inflation deliberately to lift the South off the reefs would destroy political consent for monetary union in Germany. It would require statesmanship of the first order in Berlin to marshall civic support for such an imperative. No such statemanship is on offer. We have an impasse.
I'd be surprised if FQ tried to buy us out. However, FQ has been reviewing Inmet's operating plan for about 5 months now and maybe they've come up with new ways to do things such as build a copper refining plant near our operations site and extract the gold and silver at out plant. Could be a JV of some type to build infrastructure or we could have hit a big copper deposit in ODN and we'll hook up to FQ's slurry line. Could be anything. Not much volume so I'm not getting to excited over the rumor but it is interesting. Haven't heard from Peta-bull in a while and his input would be nice.
The 32 million warrants were issued in a private placement transaction in late 2011 and early 2012. We used the money to pay off high interest rate bonds. I can't see the company extending the time frame or reducing the exercise price without some additional financing being provided by the private placement people. Is that what this about -obtaining additional financing?
I don't see the need to push the SP up at this time. Lots of warrants expire in less than 6 months. Might not get good news until after 1/31/14. Should be lots of good news after that.
Gold seems to be holding in the $1,280 to $1,320 range even with more and more indications that the Fed will slow its mortgage and bond purchases. This is right in the range of the cut-off from the forward gold agreement ($1,290). This fiscal year is highest amount of gold we will have to provide Detuche Bank (approximately 1/3 of our production) and we will not be paying a hugh premium like we were for the last 15 months. Don't know if we can accelerate quarterly payments within a fiscal year but you can bet we send the bank gold when the spot price is $1,290 or less. It was not good that the price of gold dropped but better now than a year from now. If gold holds this price range for a year of more, we will not be providing about $30 million in extra profits to the bank. We don't really gain but the agreement with the bank looks better and better. Also, less than 180 days until most of the warrants lapse. We should be in great position by the start of next fiscal year.
Lot of people in U.S are on vacation. Gold is approaching $1,300 an ounce but forecasters are warning it could drop below $1,000 before the summer's over. That stops people from buying. No reports due until end of August, why buy now? I have $20,000 in my brokers account and I'm kicking myself that I didn't buy when it was in the 20s a couple of weeks ago. Should buy now but still wondering weather gold will take another tumble. The post on the Portugal mine at 543 grams per ton makes me itch to pull the trigger. Patience grasshopper.
Someone explain to me why gold will keep falling. The following is from the British Press;
The wheels are coming off the whole of southern Europe
Europe’s debt-crisis strategy is near collapse. The long-awaited recovery has failed to take wing. Debt ratios across southern Europe are rising at an accelerating pace. Political consent for extreme austerity is breaking down in almost every EMU crisis state. And now the US Federal Reserve has inflicted a full-blown credit shock for good measure.
A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin
By Ambrose Evans-Pritchard8:50PM BST 10 Jul 2013
None of Euroland’s key actors seems willing to admit that the current strategy is untenable. They hope to paper over the cracks until the German elections in September, as if that is going to make any difference.
A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc. The Greek stabilisation is a mirage.
Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency. Standard & Poor’s did not say this outright when it downgraded the country to near-junk BBB on Tuesday. But if you read between the lines, it is close to saying the game is up for Italy.
Its point is that if “nominal GDP” remains near zero, Rome will have to run a primary surplus of 5pc of GDP each year to stabilise the debt ratio. “Risks to achieving such an outturn appear to be increasing,” it said. Indeed. The International Monetary Fund has just slashed its growth forecast for Italy this year to -1.8pc. The accumulated fall in Italian output since 2007 will reach 10pc. This is a depression. Yet how is the country supposed to get out of this trap with its currency overvalued by 20pc to 30pc within EMU?
Spain’s crisis has a new twist. The ruling Partido Popular is caught in a slush-fund scandal of such gravity that it cannot plausibly brazen out the allegations any longer, let alone rally the nation behind another year of scorched-earth cuts. El Mundo says a “pre-revolutionary” mood is taking hold. A magistrate has obtained the original “smoking gun” alleging that Premier Mariano Rajoy accepted illegal payments as a minister. The Left is calling for his head but so are members of the Consejo General del Poder Judicial, the justice watchdog. “Citizens cannot tolerate a situation where the prime minister has received undeclared payments,” said José Manuel Gómez, a Consejo member. Much of the ruling party appears tainted by a network of covert funding. If proved, said Mr Gomez, it poses a “very grave” threat to Spanish democracy.
Portugal is slipping away. Professor João Ferreira do Amaral’s book - Why We Should Leave The Euro – has been a bestseller for months. He accuses Brussels of serving as an enforcer for Germany and the creditor powers. Like Greece before it, Portugal is chasing its tail in a downward spiral. Economic contraction of 3pc a year is eroding the tax base, causing Lisbon to miss deficit targets. A new working paper by the Bank of Portugal explains why it has gone wrong. The fiscal multiplier is “twice as large as normal”, or 2.0, in small open economies during crisis times. What is new is that Vitor Gaspar, the high priest of Portugal’s shock therapy, has thrown in the towel. He blames the fainthearted for refusing to slash with greater vigour. Needless to say, he still refuses to accept that a strategy of wage cuts and deflation in a country with total debt of 370pc of GDP was always likely to fail.
If Portugal does pull off an “internal devaluation” within EMU it will shrink the economic base. Yet the debt burden remains. This is the dreaded denominator effect. Public debt has jumped from 93pc to 123pc since 2010 alone. The Gaspar exit has closed a chapter. The junior coalition partners are demanding a change of course. I write before knowing whether President Anibal Cavaco Silva will call a snap election, opening the way for a Left-leaning anti-austerity government.
The Portuguese press is already reporting that the European Commission is working secretly on a second bail-out, an admission that the wheels are coming off the original €78bn EU-IMF troika rescue.
This is a political minefield. Any fresh rescue would require a vote in the German Bundestag, certain to demand ferocious conditions if this occurs before the elections. Europe’s leaders have given a solemn pledge that they will never repeat the error made in Greece of forcing an EMU state into default, with haircuts for banks and pension funds. If Portugal needs debt relief, these leaders will face an ugly choice. Do they violate this pledge, and shatter market confidence? Or do they admit for the first time that taxpayers will have to foot the bill for holding EMU together? All rescue packages have been loans so far. German, Dutch, Finnish and other creditor parliaments have never yet had to crystallize a single euro in losses.
All this is happening just as tapering talk by the Fed sends shockwaves through credit markets, pushing up borrowing costs by 70 basis points across Europe. Spanish 10-year yields are back to 4.8pc. These are higher than they look, since Spain is already in deflation once tax distortions are stripped out. Real interest rates are soaring. By doing nothing to offset this, the ECB is allowing “passive tightening” to occur. Mario Draghi’s attempt to talk down yields with his new policy of forward guidance is spitting in the wind. The ECB needs to turn on the monetary spigot full blast – like the Bank of Japan – to head off a slide into deflation trap and enveloping disaster by next year.
This is not going to happen. Der Spiegel reports that the German-led bloc fought vehemently against a rate cut at the last ECB meeting, even though Germany itself has slowed to a crawl as China and the BRICS come off the rails. Markets have reacted insouciantly so far to these gestating crises across Club Med. They remain entranced by the “Draghi Put”, the ECB’s slowly fraying pledge to backstop Italian and Spanish debt, forgetting that the ECB can only act under strict conditions, triggered first by a vote in the Bundestag. These conditions can no longer be fulfilled. The politics have curdled everywhere. Sooner or later, this immense bluff must surely be called.
Thanks DigiTech, It does help. From your post, I take it that Morocco or Ghana would be where gold or silver opportunities exist. Your posts are great. Thanks for the info.
I agree that Africa is very risky. Didn't Portugal have links to some of the old African Territories? Angola comes to mind. Maybe Portugal still has some influence in certain Countries and our management is using that link to negotiate for mining rights.
Your comment on expanding to Africa is very interesting. I would guess they are looking in Ghana or Burkina Faso. I believe Burkina Faso has more opportunities as it hasn't been explored to the extent of Ghana. Burkina Faso has been stable politically for over 25 years, has good roads to the interior, and passed laws favorable to outside mining companies around 15 years ago. I don't know how they get the cap-ex money with the gold price falling but getting property through equity is always an option. One thing for certain, this management team is willing to take big risks to expand.
I guess we lose some money from Deutsche Bank (DB) below $1,290 an ounce but the cost of buying out the contract is also reduced. The only way DB gets hurt is if gold holds above $1,000 through the end of this year and then drops below $875 an ounce. I can't see that happening.
The contract reads as follows:
Should the gold price be in excess of $875 per ounce, the Company will receive from Deutsche Bank an additional gold payment amount equal to the product of the monthly quantity of gold delivered in that month and the amount by which the gold price exceeds $875 per ounce, limited to $415 per ounce.
If on any business day on or after September 1, 2010 and on or prior to December 31, 2013, the gold price is less than $1,000 per ounce, then Deutsche Bank may, by notice to the Company, require that the Company enter into, on commercially reasonable terms, a fixed-for-floating swap or any combination of gold derivative instruments that would have the net effect of reducing the Company’s exposure to movements in the gold price. The mandatory hedging which the Deutsche Bank may require pursuant to this shall be restrictive to the period commencing on the Notice Date and ending on December 31, 2013.
Thank you so much. As an aside, here is historical cost to build rail lines. Not saying that this would be cost but if $10 million per Klick then $900 million to build rail line.
Published Railway Costs
Here are some sample new railway project costs as published in the railway trade press. The prices published by operators usually include all civil and equipment costs, project and financing costs.
Complete Rail Projects
Railway> Date Type of System Cost per km Distance
Madrid - Albacete 2010 High Speed line €9.57 million 304 kms
Seoul-Gimpo, Korea 2010 Airport line $98.1 million 20.4 kms
Yichang-Wanzhou, China 2011 Main line $9.1 million 377 kms
Haikou-Sanya, China 2010 High Speed line $10 million 308 kms
Copenhagen 2011-18 New Metro line $247.5million 16 kms
If there is no rail line to haul the ore to port for shipment to Panama, then I assume it will be shipped by truck in shipping containers? Was the cost estimate of $750 ounce for processing LP ore in Panama based on shipping by rail or truck?