OSC survey finds 40% of Canadian NI 43-101 reports ‘unacceptable’

A sampling of NI 43-101 Technical Reports filed with Ontario Securities Commission reveals mining investors should not necessarily rely on the documents to be reliable sources of information.
Author: Dorothy Kosich, Posted: Friday , 28 Jun 2013, RENO (MINEWEB) -
A survey by the Ontario Securities Commission staff has found only 20% of National Instrument 43-101 reports filed by mining and exploration companies with the OSC are actually in compliance, while 40% are unacceptable. Designed and implemented to protect mining investors, NI 43-101 reports govern all disclosures of any mining-related scientific or technical information—especially mineral resources and reserves—and requires mining and exploration companies to file a technical reported prepared or approved by a “qualified person.” To be considered a qualified person under NI 43-101, mining engineers or geoscientists must have at least five years of experiences in mineral exploration, mine development or operation or mineral project assessment; and be a member in good standing of a professional engineering or geoscience association.
Commission staff said there were 460 technical reports by 238 Ontario mining issuers filed in SEDAR between June 30, 2011, and June 29, 2012. The scope of the OSC review was limited to a sample of 50 technical reports chosen according to certain characteristics including the main exchange listing of the issuer, the location of the mineral property, type of mineral deposit and the stage of development of the property. The sample included 27 technical reports listed on the TSX and 16 listed on the TSX-V. Half of the issuers had a market cap of over $25 million with 25% of these having a market cap of greater than $100 million. The majority of the issuers (59%) were at the mineral resource stage. Most of the properties were located in North America (44%) while the largest percentages of the others were located in South Africa (22%) and Africa (20%). The three primary commodities discussed in the NI 43-101 reports were gold (46%0, copper (12%) or iron ore (10%).
Approximately 40% of the Technical Reports had at least one major non-compliance issue, which the OSC considered “unacceptable”. “We are particularly concerned with the major non-compliance issues noted in the Technical Reports reviewed as these deficiencies may have a significant impact on investors,” said the OSC. “Technical Reports are a key disclosure document for mining issuers and investors and their advisors may place significant reliance and make investment decisions based on the disclosure in Technical Reports.”
The “significant deficient” discovered by the OSC included mineral resource estimates; environmental studies, permitting and social or community impact; capital and operating costs; economic analysis; and interpretation and conclusions.
Other sections of the Technical Report with frequent disclosure deficiencies include: summary; history; and certificate of the qualified person. Mining and exploration companies most frequently had deficiencies in their interpretation and conclusions (38%), histories (28%) and mineral resource estimates (25%). Of the 19 Technical Reports related to advanced properties, the OSC noted that 37% were not in compliance with their economic analysis, while 32% did not adequately disclose information related to environmental permits or the social or community impacts of developing the mineral project.
The OSC discovered many Technical Reports did not clearly disclose how reasonable prospects for economic extraction were achieved, or what grade was used to estimate the mineral resource. Capital and operating cost disclosure requirements were also deficient in 26% of the Technical Reports on advanced properties. “In some cases, the main components of the capital cost estimate were not provided,” the commission observed. “In other cases, the Technical Report did not provide justification for how the operating cost estimate was determined or why certain costs were assumed.”
The OSC review also found that 36% of the Technical Report reviewed “did not disclose project specific risks and uncertainties such as the availability of water rights, use of a novel mineral processing technology or the potential impact of a civil war in the region.”

To read a copy of OSC Staff Notice 43-705 Report on Staff’s Review of Technical Reports by Ontario Mining Issuers, go to http://www.osc.gov.on.ca/documents/en/Securities-Category1/sn_20130627_43-705_rpt-tech-rpt-miningissuers.pdf

China gold production seen rising 10% to record levels

The China Mining Association expects gold output to rise almost 10% this year to a record even as bullion prices slump.

Author: Bloomberg News
Posted: Tuesday , 25 Jun 2013

Gold output in China, the world’s largest producer, is poised to rise almost 10 percent this year to a record even as bullion prices slump, the nation’s mining association said. Output may rise to as much as 440 metric tons, said Wang Jiahua, executive vice chairman at the China Mining
Association. The country, which overtook South Africa as the largest producer in 2007, had output of 403 tons in 2012, according to data from the Beijing-based group, an affiliate of the Ministry of Land and Resources.
Bullion extended its drop this year to 23 percent and hedge funds cut bets on a rally by the most since February after the Federal Reserve said it may slow a bond-buying program that’s been pumping stimulus into global markets. That hasn’t deterred buyers in the second largest economy, which may pass India as the largest gold consumer as early as this year as regulators in Beijing make investing in the precious metal easier. “Gold’s role as a tool for wealth protection is still widely recognized in China,” Wang said in interview in Zhaoyuan, Shandong province, on June 21. “The global economy isn’t out of the woods yet -- the European sovereign debt crisis hasn’t been solved and many still wonder if Abenomics in Japan will work, so gold’s downside should be limited.” Production gained 12 percent in the first four months from a year earlier to 122.89 tons, according to the producer funded China Gold Association, which publishes estimates monthly.

“We haven’t heard of any Chinese miners opting to lower production because of the gold rout,” said Le Yukun, head of metals and mining research at BOC International China Ltd. in Shanghai. “All we can see now is that the slump in gold prices will curb investor interest in gold-mining assets.” Every 10 percent drop in gold prices is likely to reduce profits at Chinese gold miners by at least 20 percent, according to Le. Gold rose 0.3 percent to $1,285.65 an ounce at 7:07 a.m. Beijing time. The precious metal fell 6.8 percent last week. Goldman Sachs Group Inc. cut its forecasts for gold through 2014 after selling quickened as investors priced in expectations of reduced asset purchases by the Fed. In a report dated June 23, the bank cut its target for the end of this year to $1,300 an ounce from $1,435 and lowered its prediction to $1,050 from $1,270 for the end of 2014,
Investors sold 533.3 tons from bullion-backed exchange- traded products this year, wiping out more than $54 billion from the value of the funds.

Cashless juniors! Off with their heads!

Watch out for the coming junior zombieland - for both danger and opportunity as cash-poor juniors are culled, say Kaiser, Coffin and Roulston.

VANCOUVER, BC (MINEWEB) - Author: Kip Keen
Posted: Monday , 21 Jan 2013

It’s not a new call, a new argument, a new macabre hope for the end of what some consider a worthless class of underperforming, cashless and asset-poor juniors.
But calls for the culling of a fair chunk of juniors on the TSX Venture Exchange are undoubtedly growing and were especially evident in Vancouver on Sunday in the presentations of newsletter writers to the Cambridge House investment conference. 

One of the closest to the subject is John Kaiser, of Kaiser Research, who, since about mid last year, has been putting hard numbers to the otherwise obvious reality that faces or will face juniors that have not been able to replenish their cash piles for some time over the past year or so.

Since climbing Mount Exuberance in 2010 - having fallen off it in 2008 after an equal peaking - investors have refused to fund the exploration plans of many juniors. That of course is a serious problem for an endeavour that is predicated on the pursuit of the big payoff but does not, by and large, generate revenue to get it there.
It does not help that many juniors, having received loads of cash in the past five years, have not, despite their best efforts, made a plethora of major discoveries the likes of which inspire even the slow ink of backwater community newspapers. More importantly, the kind of discoveries that, the argument goes, can inspire risk taking.

Among junior watchers Kaiser has put the greatest effort into chronicling the imminent doom over which many others also fret. Kaiser recently expanded on the issue in blog postings pointing out that, of some 1,400-odd juniors on the TSX-Venture nearly half - 632 - have less than $200,000 in the bank.

Of course, running a serious exploration company, with grand exploration plans, multiple staff, including geologists that no longer come cheap, in any number of jurisdictions while paying lawyers and listing fees with that much money at hand, is sort of like trying to build a coliseum with proceeds from a six year old’s lemonade stand.

Kaiser’s argument, expanded at some length in the link above, comes down to the probability these most of these cash-poor juniors will vanish and, in turn, that this will be good for coming exploration investment.

“The departure of 500 resource juniors would be a healthy development for the sector because when the retail investor does return to this sector, we want the field of choices not to be diluted with worthless distractions,” Kaiser recently wrote.

Eric Coffin, of Hard Rock Analyst, noted in a presentation Sunday that we “need to see 500 [juniors] or so go away”.

Lawrence Roulston, of Resource Opportunities, also speaking Sunday, put it in terms of the market bottom that we may not yet have reached on the Venture.
Roulston said there were many juniors whose “Fundamental value is zero.” Thus the cent or two in value the shares of these juniors enjoy rather distorts the Venture upward, he argues. By extension, with more junior extinction, there is, according to Roulston, still some ways to fall on the Venture, assuming few make notable gains on the whole.
 Kaiser rendered his opinion on the majority of the 632 juniors with less than $200,000 as this: “Most of them are useless companies that pretend to be in the exploration game.”

These newsletter writers take their arguments and thoughts on the opportunities and outcome of the impending junior liquidation to different places.

Kaiser, in his public talks and online missives, is particularly concerned about exchange-related factors that may compromise the immune system of the already hurting Venture patient. He excoriates the Canadian exchange owners for allowing algorithmic trading without transaction fees on a risk-obsessed exchange where it is difficult for fundamental values to be easily assigned to companies.
More rational, financial based analysis that might help combat the distortion that comes with programmed trading (here imagine one bot in battle with the other and rushing to liquidity and affecting shareprices) on the Venture is impossible, he said. 

Remember that juniors, which by and large don’t make money, trade on ideas of what money they might make, if their exploration plans, which must be judged or bet on by the investor, pan out in lucrative discoveries.

Kaiser reckons some simple fees on algorithmic trading might help level the playing field. In the extreme - perhaps an exaggeration inspired by a desire to effect change - Kaiser predicts the Australian and Chinese resource investing class will leave Canadians in the dust if we don’t make fixes to the way we trade. 

Coffin, like Kaiser, also spent some time criticizing the powers that be in Toronto. He noted one worry is that the exchanges refuse to pull the plug on companies in a vegetative state. Letting the Venture ventilators pump, of course, ensures listing fees keep on coming. 

But, before we get too negative, all three believe that there are opportunities within this 'junior zombieland', as Kaiser calls it.

Roulston and Coffin paid particular attention to merger and acquisition activity. They expect to see more of that in 2013. This might sound a little bit like the crumbs many analysts and newsletter writers dropped last year and the year before - ones that didn’t seem to lead anywhere. But, rather than a false trail, it may just have been a slow path. Takeovers did have a flurry in late 2012, as Coffin and Roulston noted, though they may have come at prices in comparison to recent shareprice highs that are somewhat disappointing.
Kaiser sees potential in both early and advanced stage juniors, but emphasizes the former. “The group to watch during 2013 will be the 428 juniors with advanced projects undergoing feasibility demonstration,” he wrote in December. “These may benefit from a slingshot effect if the market decides the macroeconomic glass is half full rather than half empty, rapidly boosting prices 100 percent to 200 percent as M&A fever kicks in.

He then continues on to his key point: “But the really interesting companies to investigate will be the 506 juniors that have more than $200,000 working capital and have projects that could deliver a major discovery that provides 10, 20, 30-fold price gains from their current depressed levels.” 

A major discovery. Now that would be something. If these could be made, juniors may then revenge the coming guillotine. Kaiser’s zombies turned hydra. But where? And how? Probably questions for another day.

Five percent of gold juniors deliver 90% of the performance - Cook and Rule

Success seldom comes true in the risky junior exploration sector but investors may have driven some junior gold stock prices up into multiples of their true value. Gold Report interview.

KENWOOD, CA - Author: Karen Roche
Posted: Thursday , 16 Jun 2011 

The Gold Report: The performance gap between equities and their underlying commodities has been especially noteworthy with gold. Brent, you wrote recently that the gold price has outperformed mid-tier gold mining stocks since 2005, with the price of gold up 190% versus 70%-90% for gold equities. Is this because investors can buy gold more easily now, or are some systemic reasons behind the equities' underperformance?

Brent Cook: Several dynamics are involved. Certainly one is that you can now buy gold through exchange traded funds (ETFs). That is a very simple bet on the gold price that does not carry all the baggage that comes with mining the stuff. That baggage includes the almost universal underestimation of development and mining costs published by mining companies, engineering firms and equity analysts. Capital costs are rising sharply due to the basic increase in cement, steel, fuel and everything else that goes into building a mine. Production costs are going up for many of the same reasons, plus rising labor costs. Qualified and experienced people are hard to come by and overworked. The result is lower-quality engineering studies and misses on cost estimates. 

Additionally, with the higher gold price, companies are mining lower-grade ore, which cuts down on margin per ounce produced. Then, we have the almost continual issuance of stock whenever a brokerage firm sees a chance to make a commission. From my dealings with value-oriented funds, this continual dilution from mining companies has been very frustrating and perplexing. Given everything I mentioned, it's not hard to see why the leverage we expected in gold equities at a $1,500 price hasn't materialized. 

TGR: So, will we ever see the leverage?

BC: Now is probably a good time to look at mid- to large-tier companies that have good production profiles at the lower end of the production cash costs and high cash flow per share.

TGR: What's your opinion on that, Rick?

Rick Rule: With regard to the juniors, everybody looks to the 1970s as the analogue, when we had that huge parabolic rise. That won't happen again. We won't see the circumstances we had in the mid- and late-1970s, when there was a shortage of stock. The industry now has the infrastructure to print paper-stock certificates-faster than demand can ever develop.

Brent nailed the reasons for the underperformance. People don't have to invest in gold stocks; they can invest in a gold proxy in the stock market. The underperformance has been disgusting, frankly, and investors are punishing the industry deservedly. The basic product going from $250-$1,500 an ounce without margins going parabolic is truly sick.

TGR: Given that, why should anyone invest in a junior at this time?

RR: Performance in the junior sector takes place in a very small subset; 5% of them deliver 90% of the performance. The performance delivered by that 5% is so spectacular that it adds credibility to a sector that, otherwise, would have none. People who have access to information, who subscribe to services such as The Gold Report or Brent's Exploration Insights, can do very well because performance is simply a factor of segregating-not buying the sector, but buying the best companies.

TGR: You've both talked about being more selective with juniors. And Brent, you've indicated that many investors go in without even really knowing what the geologists are saying. But geology is science; how can a lay investor really understand the difference between a real ore body and moose pasture?

BC: To get an edge, you have to go to someone who understands what a drill hole means, what an ore deposit is and isn't and, most importantly, when it is and isn't an ore body. It's really important to have advice from your broker, a newsletter writer or someone in the industry that has the experience to judge a property and the people running a company.

TGR: Wouldn't the geologist associated with the company be that expert?

BC: Not really. You need someone who's truly independent. In my newsletter, I write about what I'm doing with my money and that's it. I don't get paid by companies for recommending or promoting them. When I make a mistake, it's obvious and costs me money. That's my approach. Geologists working for a company, right or wrong, are also drinking their own Kool-Aid.

TGR: Rick, other than Brent, who do you rely on for the geology component?

RR: In order to compete, it's important for investors to educate themselves better than their peers, which isn't hard because most of those peers are completely uneducated, so they understand the nature of the information that someone like Brent gives them. They have to know a bit about geology to be able to give a relevant assignment to the professional they hire.

We employ geologists, so some of it's internal. We also offer an educational service called Mining Investment College that we put together in conjunction with the Colorado School in 1996. In terms of technical newsletters, Brent's is probably the best in the business.

TGR: If considering the geology is one component in being selective, what other factors might make a junior investment outstanding?

BC: Clearly, management. These companies tend to be very small. We're talking sub-$50-million market capitalizations and often sub-$10M market caps. The people running the company must be competent. If it's an exploration company, it needs exploration expertise. Management also should be committed, in terms of owning stock purchased in financings and not just the first seed round. Share structure is certainly key; what good is a 1,000% rise in a company's market capitalization if it's accompanied by a 1,000% increase in shares issued? Company management has to know what it's looking for. 

That simple concept is very, very important and you would be surprised at how many companies really don't have a clue about what the deposit they are looking for looks like-and even worse, no idea of what its value might be when all the exploration, development and mining costs are thrown in. Management also has to bail out of a property as soon as it doesn't look like what the company's after; 95% or more of the time, a project finally fails. That's just the way it is in exploration. So, it is critical that a company cut its losses as soon as possible and move on. You can't do so if you don't even know what the thing you are looking for looks like or how to value it.

TGR: In terms of management, is it the luck of the draw when you put the drill hole in?

BC: No. Some people consistently perform better, find deposits or at least get into good districts, while others continually stumble.

RR: Again, Brent nailed it. It gets down to people, people, people. Four reasons why good people matter:

  1. Prospectors who find an unusually good anomaly tend to take it to A-level promoters first, so the people with track records will see better stuff.
  2. Good people have a history of being able to separate the wheat from the chaff.
  3. In a bad market, good people can keep a good project without going broke.
  4. Because of their track record, their cost of capital is lower and they have a better chance of being successful.
TGR: What other factors should investors consider?

RR: After people, scale is incredibly important. You take extraordinary risks in this business, so you have to search for extraordinary reward. The idea that somebody will make a bunch of money on a 200,000 ounce (200 Koz.) gold deposit and use cash flow from that to avoid dilution-you know, the business-building thing doesn't work. If you're taking big, big risks you have to look for big, big rewards.

TGR: But if you're looking for big, big risks and only 5% of the deposits pay off, have you reduced that 5% to something less?

RR: Oh, it's much worse than that. Only 5% of the management teams are any good. When Brent and I went to school, admittedly a long time ago, we were taught that the odds against a deposit becoming a mine were somewhere between 3,000:1 and 5,000:1. So, it isn't 5%. It's an infinitesimally smaller number.

TGR: When a company has an unusually good project, does it typically bring that to another who can finance or manage it?

RR: Yes. Finance it and manage it.

TGR: Rick, for quite some time now, you've been hounding investors about how to handle volatility. In a nutshell, do they have to become more active traders, or just more emotionally prepared to ride it out?

RR: The latter. Trading isn't a strategy, and it isn't a defense. You have to trade right. You have to be prepared and disciplined in order to trade right. Investors respond to volatility in predictable, but strange, ways. When the market goes up 30% for no reason other than volatility, investors tend to become aggressive and want to buy more. By contrast, they panic and sell when the market goes down 30%. Most investors respond to volatility by selling low and buying high, panicking the wrong way in both directions.

TGR: But to capitalize on volatility, wouldn't an investor take some profits when the stock goes up and wait for it to go down before starting to buy back in? Wouldn't that make me a more active investor?

RR: What you said was the right thing-buy in panics and sell in manias. Most speculators, however, buy in manias and sell in panics. They get the timing pretty good, they just make the wrong decision twice.

BC: I think that's because they don't really know what they own. Retail investors tend to end up with portfolios of anywhere from 20-100 stocks and don't really remember why they bought them, who recommended them, what they're worth or even what their symbols are. When something bad happens, they sell everything-the good with the bad-because they don't have a sense of the underlying value. If they did, they'd know which stock to buy when it drops and which to sell when it goes up, at least in a perfect world.

TGR: Brent, in The Gold Report last month, you said that given the two-year bull run, junior valuations are quite high and don't reflect the inherent risks in exploration and mining. You advised caution as reality sets in. And Rick, at a recent Casey Conference, you said that the market is seriously overvalued but the rally will continue. So, are you two in agreement or do we have a difference of opinion here?

RR: I suspect that Brent and I aren't even a degree apart on a 360-degree sphere, in the context of relative valuations and the risk-adjusted net present value (NPV) in exploration.

BC: Yeah. I think Rick and I see these things from the same vantage point, albeit his is a bit more luxurious than mine. Most of these companies really aren't worth much if you put a monetary value on their properties. For the most part, junior exploration companies have properties with geochemical anomalies scattered around the world. These aren't really assets, but rather liabilities that will take a lot of money to turn into an asset if that anomaly is the rare exception that proves to be economic. Until that happens, it's shareholder money going into the hole in the ground that has to be replaced.

RR: I could probably quadruple my income as a broker by being more generous with the valuations I assign companies in private placements. Brent could easily double or triple his subscriber base if he could allow himself to be more aggressive. But in a universe of 4,000 stocks, he probably has 8 or 9 on the buy list. Particularly in a bull market, subscribers don't like those constraints. They want to be allowed to dream. But I think that our own mutual perceptions of the value in the market are strong enough that we constrain our own income by constraining the sphere of things that we're willing to waste other people's money on.

TGR: But if it's a bull market and it's going to rally, you're making-not wasting-money.

RR: Yes. But only those who have the good sense to sell, an extraordinary minority, will make money. That skill-understanding the value of a story in a market-differs from psychoanalysis. That's not something I do. If that's the sort of trade you want to make, go to somebody like Jim Dines of The Dines Letter.He's a market psychologist and a journalist. Don't go to a geologist like Brent or a pawnbroker like me.

TGR: Why do you call yourself a "pawnbroker?"

RR: I try and figure out what something is worth and buy it at a discount to that value. I don't care about the value of a story in a market. I never buy a stock with a view that I'm going to sell it to some other investor at a higher price. I always buy stock representing fractional ownership in a business that I think I'm going to sell after value that I recognize as inherent is recognized by a knowledgeable trade buyer.

TGR: At the Casey Conference, you also said that you expect another downturn because the market pre-conditions to 2008 still exist and that panic markets offer the best opportunities (i.e., value investing), which you were just talking about. Putting all of that together, are you suggesting that investors cash out now and wait for the panic to buy?

RR: For some speculators, the answer is yes. My partnerships, which represent the best work I do, are about 35% in cash at present. That isn't a consequence of a market call as much as the fact that, in most investment decisions, my fear overwhelms my greed.

For those who don't have the discipline not to panic, this would be a wonderful market to exit-despite the fact that the Venture Exchange is probably down 20%-25%. People don't understand that the magnitudes of declines experienced in this market have been around for a long time. I suspect that the real top-to-bottom downturn in this market-and it will come-will be a waterfall decline. Certainly the 1998-2002 market saw a 95% decline, and I suspect the 1988-1993 market represented another 95% decline. The 1982-1985 market represented a 95% decline. I don't know that we'll have a decline like that in this market, but it wouldn't surprise me at all to see it decline by 50% if we have another confidence-in-liquidity crisis, such as that in 2008. Is that a prediction? No. But, is that set of circumstances unlikely? No.

People have to be psychologically and financially prepared to endure incredible volatility in this sector. A secular decline of 50% in a cyclical bull market doesn't feel like something that might be short term to the person who's experiencing it.

TGR: Brent, you've said that we've entered a period when the metals supply as a factor of time can no longer keep up with demand as a factor of time. Would you elaborate on that a bit?

BC: Whether it slows down or speeds up, the demand for metal is something we can't keep up with physically. We can't physically build all the deposits we'll need to replace what's being depleted and to accommodate future demand. It's a function of the current environment to find, delineate, develop and exploit an ore deposit. The permitting, environmental and social realities slow the process down but the interesting point of that statement is that we flat out don't have the people to actualize the mines that are in the planning stage. We just don't have the people. There aren't enough engineering firms to design and build the mines.

Something like 230 projects with capital costs exceeding $400M are scheduled to be put into production over the next six to seven years. We can physically build only 20-30 of them a year at best, so there's a real bottleneck. This situation will keep the current metals bull market going. So, long term, this is a good place to be; but as Rick pointed out, we've had a really good run. High-risk mining and exploration plays are overvalued, particularly in the junior sector, where success is not guaranteed-yet success is being priced into these companies at multiples. Outfits with drill holes in the middle of nowhere are selling for $700M. That's assuming an awful lot of success.

RR: Those development-stage projects Brent referred to aren't a problem right now because debt capital is currently available. The capital markets shut down to the mining business from late-2007 through 2009. Another crisis in confidence that delays those projects by three or four years, because miners couldn't raise the money to build them, would present a whole range of interesting situations for the speculator.

TGR: Brent, you said earlier that with the juniors being so overvalued, this might be a good time to look at mid-cap and large-cap plays.

BC: I still recommend smaller-sized companies, but with tangible assets, in terms of resources in the ground that I believe will be economic.

I expect, but certainly don't know, pure exploration plays to get a lot cheaper. If this summer and fall go as badly as it looks like they will to me now, we'll be able to pick up discoveries for less than their current prices because people won't be buying drill holes. I am hoping most of the market players won't recognize a good drill hole or property from a bad one.

TGR: What will drive prices down?

BC: The market's been going really well for two full years. Most people in this industry recognize their chances of success really aren't that good. The smart money has been pulling out; and if the bigger markets fall off the way, and it looks like they will, it's going to really hit the riskier side of the sector- junior miners. But if Rick and I are right about the longer-term outlook for metals getting into potential economic discoveries on the cheap, it sounds quite good.

TGR: Yes, but wouldn't a high-quality group be able to weather a downturn or not experience as much of a downturn?

RR: Yes. But how many speculators have the guts to ride something down and ride it back? Numerous times in my life, fortunately or unfortunately, I've made that roundtrip. In the face of a 50%-60% decline, people who believe themselves to be truly in the business must be able to check their premise and either double down or say, "I made a mistake and I'm going to lose half." It's a very difficult discipline in either context. Many people who paid $1 for a stock say they can't sell at $0.50 because they'll lose 50%. That's wrong. They've already lost 50%; the question is: What are they going to do with the remaining 50%? If they were right to buy it at $1 and it's selling it at $0.50, they have to buy more at $0.50.

I've been relatively successful in the investment business because I think I understand the full panoply of risks and when I go into a stock, I do so in very sober fashion. If you speculate in exploration, you have to expect failure.

TGR: Expect to fail?

RR: You have to know you'll make 10 or 11 mistakes out of 20 decisions. But if you can limit your losses to 20% or 30%-in other words, once you recognize that your thesis is incorrect, you sell a stock irrespective of loss-on the odd company, you're going to make 10:1 or 20:1. That's the beautiful thing about exploration. A twentybagger amortizes so many mistakes that, over time, you can do as well as I have from a portfolio point of view.

TGR: Performances like that certainly are worth celebrating.

RR: They are, but you have to be extremely disciplined, both with your expectations and with your reactions to reality, and go into the stock in a very sober fashion.

Renowned exploration analyst, geologist and author of the weekly Exploration Insights-a mining and exploration investment newsletter focused on early discovery, high-reward opportunities primarily among select junior mining and exploration companies-Brent Cook has devoted 30+ years to providing economic and geologic evaluations to major mining companies, resource funds and investors. A 1978 graduate of Utah State University (BS in geology), he's worked in more than 60 countries on virtually every mineral deposit type and on projects from the conceptual stage through to detailed technical and financial modeling related to mine development and production. His hallmarks include applying rigorous factual analysis to the projects and companies he examines and augmenting his analysis with onsite field evaluations. Brent was principal mining and exploration analyst to Global Resource Investments from 1997 until 2002 and since then has served as an outside analyst and advisor to several investment funds and high net-worth individuals. 

Founder of Global Resource Investments Ltd.Rick Rule is a well-recognized expert whose company has built a stellar reputation for providing investment advice and brokerage services to high net-worth individuals, institutional investors and corporate entities worldwide and for taking advantage of global opportunities in the mining, oil and gas, alternative energy, agriculture, forest products and water industries. Rick has been principally involved in natural resource-security investments from the start of his career in the securities business in 1974. Since establishing Global in 1994, he's also been particularly active in private placement markets, having originated and participated in hundreds of debt and equity transactions with public, pre-public and private companies. Earlier this year, Rick closed a landmark deal with Eric Sprott, another famous powerhouse in the natural resources arena. With GRI now a wholly owned subsidiary, Sprott, Inc. manages a portfolio of small-cap resource investments worth more than CAD$8 billion and boasts a workforce of more than 130 professionals in Canada and the U.S.

Article published courtesy of The Gold Report - www.theaureport.com

Resource companies ripping off Africa – AfDB chief
By: Reuters
Published: 17th June 2013

Developed world mining and energy companies operating in Africa should pay more taxes to help the world's poorest continent climb out of poverty, the president of the African
Development Bank said on Sunday. "The reality is, Africa is being ripped off big time," African
Development Bank (AfDB) president Donald Kaberuka told Reuters, a day after attending a meeting in London with other African representatives ahead of the G8 summit of
rich countries on the "triple-T" agenda of trade, transparency and tax. "Africa wants to grow itself out of poverty through trade and investment - part of doing so is to ensure there is
transparency and sound governance in the natural resources sector."
Britain hosts this year's G8 summit, which takes place in Northern Ireland on Monday and Tuesday. Britain has turned up the pressure on the other countries to clamp down on secretive money flows by pressing its overseas tax havens into a transparency deal and announcing new disclosure rules for British firms.
Kaberuka attended a lunch on Saturday to discuss the issues with British Deputy Prime Minister Nick Clegg, the presidents of Ghana, Guinea, Senegal, Somalia and Tanzania and the finance minister of Nigeria, all of which have energy or mining resources.
"It's seen as a collective agenda, not just a G8 agenda, that we make sure everybody pays what is due," Kaberuka said. The Democratic Republic of Congo, for example, lost at least $1.36 billion in potential revenues between 2010 and 2012 due to cut-price sales of mining assets to offshore companies, according to a report from the Africa Progress Panel, led by former U.N. Secretary-General Kofi Annan. Africa, and in particular sub-Saharan Africa, has been growing strongly in the past few years, a trend which Kaberuka said had been helped by the cancellation of debt to the poorest African countries at the 2005 G8 summit in Gleneagles, Scotland. The AfDB forecasts growth in Africa at 4.8 percent this year, with sub-Saharan Africa - excluding South Africa - the fastest-growing region at 6.6 percent.
But aid to Africa from the developed world had been cut for the first time in 10 years and the continent needs to look for ways to make that money go further. "It's important we begin to use aid smartly," Kaberuka said. He pointed to projects such as the AfDB's
planned infrastructure fund, designed to use donor funding along with African savings as a base for debt issuance to finance regional infrastructure projects.
The AfDB is looking for up to $50 billion to be issued using the financing vehicle, which Kaberuka hoped would gain a single-A credit rating. Kaberuka also welcomed plans by the BRICS countries - Brazil, Russia, India, China and South Africa - to set up a BRICS development bank. "It could be a good partner for us in terms of building infrastructure," he said.

Africa: Popularizing New Neo-Colonial Governance Processes for African Minerals?

There seems to be an unspoken foreign goal to prevent control of mining policy throughout Africa from falling into the hands of nationalist, pro-community political forces who will promote a vigorous resource nationalism agenda
On May 9-10, 2013 Canada's North-South Institute hosted a conference in Ottawa called 'Governing Africa's Natural Resources'. Held in the elegance of the Fairmont Chateau Laurier, Ottawa's premier hotel, the event's line-up of panellists featured representatives of the Canadian government and of selected African governments (Nigeria, [1] Liberia, Ghana); multilateral agencies (notably OECD/DAC and UNECA); selected civil society groups (for example Transparency International and Revenue Watch); academics; and the mining sector. The event was sponsored by two Canadian mining companies, Teck and Kinross; two federal government agencies, CIDA and EDC (Export Development Corporation); and one civil society organization. Notably absent from the conference were well-known academics with long experience and expertise on African mining, and representatives of leading civil society organizations such as Third World Network-Africa, Miningwatch Canada, etc. Moreover, there was no formal representation from any communities in African countries where Canadian mining or exploration is occurring. In fact, only 18 of the 187 attendees at the conference were from African countries. Any possibility of a wide-ranging debate over the terms of the African mineral resource sector was thus largely precluded by the composition of panellists and participants.
For those who have been following the neo-liberalized burgeoning of foreign-investment-led mining in African countries since the late 1980s, there was nothing particularly new or startling about the content of this conference (apart, perhaps, from the fact that it was being run by the North-South Institute). In our view, the conference presents a good example of the continuing institutionalization of a set of managerial mechanisms and discourses aimed at maintaining control of African mining by and for largely private, foreign interests. It offered a few insights into some of the latest strategies, or strategy refinements, of Western (particularly Canadian) mining interests.
First, there is no question that private foreign interests - particularly Canadian companies, who currently operate some 700 mining projects in 35 African countries, want access to African minerals, and that there is competition among foreign nationals for such access. It is now a cliché to identify the African continent as the last great untapped mineral frontier - a treasure trove of resources. This situation should, and to a limited degree does, give African governments more bargaining power vis-à-vis a range of foreign investors. For Canadians and other non-African investors in African mining, these circumstances require careful positioning and a shrewd game-plan. In our view, the unspoken goal is to prevent control of mining policy throughout the continent from falling into the hands of nationalist, pro-African, pro-community political forces who will promote a vigorous 'resource nationalism' agenda. Significantly, there was a deafening silence throughout the conference with regard to South Africa's mining regime (with its Mining Charter, 'Black Economic Empowerment' quotas, veto powers of communities vis-à-vis new mine developments, etc) in comparison with Tanzania, which was touted throughout the conference as the darling of Western advisors on African mining policy. (No mention of course of the aggressive role played by Canadian mining companies, Canadian lawyers and Canadian diplomats to establish the pro-foreign-investor content of Tanzanian mining codes since the mid-1990s.)
If the unspoken goal is to maintain control of the terms of African mining policies, a key problem facing foreign interests is to avoid the charge of neo-colonialism. Thus a classic strategy - used extensively during the formal colonial period - is to put an African face on African mineral policy. In this regard, it is significant that the term 'African agency' was used by various speakers throughout the conference. At first glance, the term seems to suggest an important shift toward greater control of mineral policy and development by citizens, communities and governments of African countries. But, used by a group of neoliberal bureaucrats and technocrats, the term functions as a sophisticated rhetorical and institutional strategy: it circumscribes what it purports to support. As used throughout this conference, 'African agency' is something that can be exercised only by African government bureaucrats, consultants and academics who have internalized and accepted the logic of neoliberal policy prescriptions for African mining sectors - prescriptions that keep foreign investment (and foreign investors' terms) the central feature.
Throughout the conference, frequent references were made to international institutional processes that appear to put an African face on the continent's mining policies and appear to transform the African mining sector in ways that will now enable African economies to harness mining to economic or 'developmental' growth. The African Mining Vision, formally a joint product of the African Union and the United Nations Economic Commission for Africa, was referenced frequently in the conference as one guiding articulation of how mining could be conducted in the continent in ways that would benefit African communities and economies in tangible ways - that would, in short, be compatible with and foster sustainable development. However, we want to raise a few red flags about the AMV.
The AMV has emerged as one of the latest of a succession of international/multi-lateral policy initiatives - starting, in recent decades, with the World Bank's seminal 1992 Strategy for African Mining - to develop African mining in a manner that will protect foreign and private access to the continent's resources. Like most other continental plans and visions for the development of Africa's mineral wealth, it was initiated by a small group of technical experts within the UN system (that is, UNECA and the AfDB). Some among these may well have had developmental objectives in mind, yet such objectives were still subject to a neoliberal policy framework - an agenda that is fundamentally serving the interests of capital. With its array of policy measures to harness mineral wealth to African development processes, the AMV appears to represent the 'best offer' to date that the international community has been willing to accommodate with regard to the distribution of benefits from mining. (Indeed, the African Economic Outlook 2013 report, 'Structural Transformation and Natural Resources' - referenced at the conference by Lahra Liberti of the OECD - identifies the new approach to African mining as 'improving resource-rich countries' ability to receive an enhanced share of revenues and use them to best promote broad-based development.' This appears to assume that African countries are not in the driver's seat when it comes to their mineral resources and can only, at best, hope for an improved 'share'.)
In our view, the AMV will only bring developmental benefits to African communities and countries to the extent that is reflects input from community voices and 'ownership' by African governments backed by communities. Moreover, it would need to set common continental terms for the entry of foreign capital - recapturing what we would call the 'African development vision' of the early 1960s articulated by Kwame Nkrumah. Lastly, it would also need to be supported in its entirety by the international community and not in a selective or piecemeal fashion. However, although the AMV was 'workshopped' in 2009-2010 with African civil society and faith-based organizations, it does not reflect any significant contributions from such groups. As was indicated at the conference by Antonio Pedro, Director of East Africa sub-regional office of UNECA in his conference presentation, individual African countries are left to implement this ostensibly continental vision at the national level. This leaves the continent as a whole vulnerable to intra-African competition for foreign capital which has demonstrated its willingness to coerce policy content at the national level in many countries (for instance, through bilateral trade agreements). Overall it remains unclear as to whether the AMV will be adequately resourced, and whether it will operate on terms set by African citizens and governments as opposed to terms set, whether directly or indirectly, by outside interests. Thus one could conclude that the AMV lacks clout and potentially functions as a useful decoy, allowing foreign mining interests to pay lip service to the African Mining Vision as a way of legitimizing their presence in the continent.
At the same time, a number of competing mineral resource management blueprints are circulating. Some influential private interests have developed their own prescriptions for mineral development in the global South, including the African continent. Notable among these is the Natural Resources Charter, conceived by Paul Collier and now widely endorsed by the corporate sector and some governments. The NRC is a classic manifestation of emergent modes of pseudo-democracy that characterize private neoliberal governance. Its 'participatory' processes have no formal political accountability and effectively eliminate African state structures. Moreover, as Timothy Shaw noted in his presentation to the conference, there are a host of other 'transnational and private' initiatives to govern and manage the African mining sector. In relation to African citizens, who should be entitled, through formal democratic political processes, to exercise a voice over the governance of national resources, these transnational and private foreign initiatives are non-democratic and non-accountable in nature. The majority of African ciizens are effectively excluded from mineral resource governance processes.

This brings us back to our main contention with the thrust of this conference. The focus on 'governance' sounds to our ears like new language for an old form of external control that used to be called colonialism. One of the indicators that we are still in the institutional and ideological realm of neo-colonialism is the emphasis placed throughout the conference on what Africa 'lacks'. Even while the continent is receiving a new spin as a place of 'hope' - that is, a continent 'newly ready for investment' - it is still simultaneously deemed to be a place dreadfully short of what is required to really bring it into developmental modernity. Thus 'lack of capacity' was one of the most persistent themes that ran through many of the conference presentations. African countries were purported to lack capital, technology, skills of all sorts (that is, 'human capital') and inadequate political will and competence on the part of African 'host' governments to negotiate with foreign capital from a position of strength. Moreover, corruption topped the discussion as to why African countries had to date not benefitted adequately from their minerals. In fact, Andre Bourassa, in his presentation, stated that he had travelled throughout the continent (admitting publicly that he couldn't remember if there were 54 or 55 African countries) and had never found any 'resource curse'; rather, he had found a 'governance curse'. In other words, 'African incompetence' - a vintage racist-colonial charge - explained why African populations had not to date benefitted from their countries' resource wealth. Such aspersions seem primarily designed to justify continued foreign control and domination of the mining sector: in short, 'Africans' don't have what it takes to develop their own minerals, so foreigners must take charge and do it for them. Ostensibly to counter this problem, plans are well in hand for the establishment of a regional mineral training centre where African citizens could acquire the geo-scientific and technical skills to service the continent's foreign-dominated mining sector.
The assertions of 'lack of African capacity' that were heard throughout the conference indicated frustration on the part of foreign actors who would like to get on with mining and do it efficiently - in a manner that could be, or could at least be seen to be, a 'win-win' situation. But this 'win-win' requires African host states with the capacity to manage and regulate an industrial, foreign-investment-dominated mining industry according to the interests and prescriptions of foreign capital, and a citizenry able to work in the sector. In the alleged absence of such states and capacities, foreign actors need to continuously intervene to aid the production of the relevant capacities. As indicated above, the motivation for such interventions is to protect the foreign 'win' side of the 'win-win' fiction: in other words, to maintain foreign access to African minerals, even while the impetus is made out to be developmental achievements for African host states and their societies. The rhetoric of 'African incapacity' thus operates simultaneously to render invisible the active suppression of mining vision capacity oriented toward the prioritization of community interests (for example notions of resource nationalism and resource sovereignty), and the existing political capacity for African self-determination. The latter remain the primary threat to foreign (Canadian) interests in the continent.
To conclude, our assessment of this conference is that it may have been designed principally to impress and garner buy-in from the Canadian corporate mining sector with a view to disseminating a progressive image for the mining sector. The concept of creating a forum to bring people together to share views on African mineral resources and development was promising. But, if this was the intention, the composition of participants and panellists was problematic. As noted above, there were glaring absences from African and Canadian civil society actors involved in natural resources issues. There were no critical voices from African governments. Panellists seemed to have been very carefully selected to reinforce the emerging dominant policy prescriptions for African mining. Indeed, the registration cost alone ($225 without the gala dinner) prevented participation from many others who would have been interested to attend, even including some African embassy staff in Canada. Those Africans who came as invitees of NSI did not present a critique of the dominant paradigm but rather seemed selected to endorse it. In short, the messaging of the conference seemed highly controlled, in subtle and not so subtle ways. Thus the 'governance' of African resources, as discussed at this conference, does not acknowledge the central right to self-determination vis-à-vis mineral resource wealth due to African peoples and economies.

* Paula Butler is a scholar and educator whose work encompasses anti-racism, anti-colonialism and critical analysis of globalizing neoliberal power. For close to two decades she worked in global social justice movements with a focus on North-South relations, including solidarity work with organizations in East, Central and Southern Africa. Currently, she makes her living as a university professor, teaching in Gender and Women's Studies (Trent University) and continuing to build on doctoral research on Canadian mining in African countries.
Evans Rubara is a social justice campaigner with expertise in policy engagement on social, political and environmental justice issues in Eastern and Southern Africa and internationally. He is a member of the larger group in Africa engaged in creating discursive platforms to address malpractices in the extractive sector related to foreign direct investment and international relations. Evans is currently a graduate candidate in environmental studies at York University - Canada, specialising in Critical Development Studies and Policy.
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