(AGQ) Arian Silver

Nat81, could you not ramp that share, as I'm a holder.
Your doing the share no favours imo
I don't like the P&D brigade messing around with shares I hold.

if thats happen to AGQ, will be good news, but the problem being, we still will need silver price to go up a bit to bring back sentiment.

another to be watching is BHR (beacon hill) - excellent AGM last week with resource upgrade within the next 2 weeks and financing agreement similar to CAZA is about to be announced soon, could come before resource upgrade

http://www.silverseek.com/commentary/busting-perfect-crime-11916

Since the mid-April capitulation in the miners we appear to be in the trough, or bumping along the bottom. The HUI gently slid from 450 to 340 between December 31st and April 9th before the artificially created capitulation event that took it from 340 to 260 in a matter of days. It's now barely above that, closing at 255 six weeks later:

http://finance.yahoo.com/echarts?s=^HUI+Interactive#symbol=^hui;range=ytd;compareindicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

Interestingly, at 255, the index is only 85 points above the record low of October 2008, the epicentre of the credit crisis.

With record gold shorts in place all the traders 'are at one end of the boat'. It will not take much to spook those same traders into a dramatic round of short-covering.

In a world of increasing money-printing I find it very hard not to see this as extremely bullish. We may well find in a year's time that this will in retrospect be a '2008 moment', a time to buy and hold, just wait.

Arian will ride this wave, just like in 2010. One morning you will switch on screens and volumes will have sparked into life across the sector. It may be a global geopolitical event, a speech from Ben, or another equity crash in Japan, the UK or the US. Maybe the faltering selling in the bond markets will be recognised as gaining traction. Or perhaps it will be simply a case of sector rotation. At the moment speculators still seem to be liquidating gold and silver albeit on a smaller scale, but that will change.

We seem to be range-bound in gold at $1350 - $1400 and in silver at $22 - $24, obvious uncertainty as to direction. With average total gold costs of production around the $1300 - $1350 mark and silver around the $21 - $22, which is the most likely direction? I think both markets know this which is why the dips are being bought.

Another interesting summer ahead.

I wonder what October will look like?

ddd

Forget Prayer, It's Lamb Slaughter Time: A Rational Man's Response To All Time High Gold Shorts

Two days ago we suggested that "they better pray there is no short squeeze." Today, following the just released latest CFTC Commitment of Traders data which showed that the Comex gold short position grew once again to a new all time high of 79,416 shorts, all prayers are now off. If we may be so bold as to we suggest, the time has come to upgrade to the sacrificial slaughtering of at least a lamb on the altar of Saint Ben, because even the tiniest hint of a forced cover will now result in the biggest rip your face off levered short squeeze seen in the history of the yellow metal. Maybe throw in an ink cartridge or two for good measure...

http://www.zerohedge.com/news/2013-05-24/forget-prayer-its-lamb-slaughter-time-rational-mans-response-all-time-high-gold-shor

ddd

That figures, PreciousM and I got out of there too. Another company promising riches tomorrow for punters while their boardroom keeps lapping up. RRL could make up a trio and there are plenty more on AIM just now!

In a Bloomberg interview, Blankfein just made a Freudian slip and very nearly said that Goldman is ... bankrupt!

Asked if Goldman is 'back' ... re responded 'Well you tell me if Goldman is bank ... er ... back'.

The economic analysis assumes Arian continue trial production at a rate of 500 tonnes per
day under the current toll milling arrangement until the custom-built plant commences
processing.

It assumes that once the custom built plant has been fully commissioned it will be rated at
750 tonnes per day, increasing to 1,000 tonnes per day, reaching full capacity of 1,500
tonnes per day in 2015.

Scheduled annual production at full capacity of is expected to reach 547,500 tonnes.
Expected annual production is expected to reach 2.1 million silver equivalent ounces at a
cash cost of $7.60 per ounce of silver on a by-product basis.

Kudos to Kyle Bass at Hayman Advisers for warning that the Bank of Japan would lose control of its ¥70 trillion bond buying blitz. The spike in the 10-year yield to 1pc on Thursday was certainly shocking to behold.

His point is that the BoJ faces a “rational investor paradox”. The authorities are trying to drive up the inflation to 2pc and therefore to devalue Japanese government bonds (JGBs), so why on earth would you want to own them?

“If JGB investors begin to believe that Abenomics will be successful, they will ‘rationally’ sell JGBs to buy foreign bonds or equities,” he told Bloomberg
He says the scramble to sell has “overwhelmed” buying by the BoJ. Governor Kuroda will now have double down with a huge increase in the scale of QE.
The argument is similar to warnings by Nomura’s Richard Koo, Japan’s most famous economist and an arch-Keynesian. The two men reach the same conclusion coming from diametrically opposed theoretical starting points.

As I reported last night, Mr Koo thinks the Abenomics plan of monetary reflation is madness. “Once inflation concerns start to emerge the BoJ will be unable to restrain a rise in yields no matter how many bonds it buys.” This could lead a “loss of faith in the Japanese government” and the “beginning of the end” for Japan’s economy.

Mr Koo said the BoJ faces a “time inconsistency problem”, a variant of Mr Bass’s paradox. Markets react more quickly to events than the economy. “The Japanese authorities are trying to generate inflation first and then hope for recovery, which means debt service costs will increase before tax revenues do.”

This will worsen the debt trajectory, set to reach 245pc of GDP this year (IMF), roughly where Britain ended the Napoleonic Wars. But then Britain produced half the world’s manufactured goods in the early 19th century, so it may be tougher for Japan.
Mr Koo says “long-term rates may rise before the real economy”. If so lenders will respond to these signals more quickly that borrowers, choking credit.
He says Kuroda has “altered the market structure of the last two decades” and undermined a fragile equilibrium, inviting a speculative attack on the JGB market by foreign hedge funds.
So that then is the critique. I don’t agree that it is game over for Abenomics. My view is that the Keynesian doctrines of endless fiscal stimulus without monetary support advocated by Mr Koo over the years is the cause of Japan’s desperate crisis (though he says the economy could have achieved escape velocity long ago if they had done more of it, which is not as absurd as it sounds).

Au contraire. Monetary policy should take the strain, pursuing a nominal GDP target of 3pc and later 4pc to turn the vicious circle of the “denominator effect” (ie a rising debt load on a shrinking nominal base) into a virtuous circle.

This is what Takahashi Korekiyo achieved with such brilliance in the early 1930s, setting off a boom and falling debt ratios. Though he also forced the BoJ to finance fiscal spending too to kickstart recovery. I am not against that either if it works. In fact in it is a rather good idea (for Japan, not the UK obviously).
Mr Koo’s argument that balance sheet recessions require radical action by governments is correct, but I refute his claims that QE was tried and failed in Japan. It was never tried.
The BoJ meddled on the margins with pinprick purchases of short-term debt, buying from the banking system, and merely pushing up the monetary base. Of course it failed. Who cares about the monetary base. It is irrelevant.

What they should have done is to conduct old-fashioned open-market operations, à la Friedman, Fisher, Hawtrey, Cassel, or Keynes himself, buying long bonds from non-banks to force up the M3 money supply. That works, as Ben Bernanke discovered when he finally alighted upon the policy by accident late in the Fed’s QE efforts.

True, the ructions in Japan over the last few days have been extraordinary. Governor Kuroda was for

What TARP Boss Neil Barofsky Told Me Yesterday Should Shock You
Today’s Sprott's Thoughts features a guest essay from a longtime friend, colleague, and client, Bill Bonner.

Bill is known to many of our readers as the founder of Agora Inc., a very large financial publisher, and a thought leader in investing.

We are reprinting this piece with permission from his daily blog, “Diary of a Rogue Economist.” I found this piece so unusual and useful that I felt the need to pass it on to our readers. It is worth noting that this daily blog is free -- my favorite price -- and I recommend that you subscribe, by following this link.

Sincerely,
Rick Rule
Chairman, Sprott USA

Thursday, 16 May 2013

The financial news is getting boring. The Dow goes only one way – up. But gold fell below $1,400 per ounce yesterday.

Rather than trying to figure it out, yesterday evening we drove down to Zombietown. A friend in Washington had promised to introduce us to Neil Barofsky, inspector general of the TARP program.

You remember TARP? It was the feds' $700 billion program to rescue the US economy from a correction. Neil Barofsky was in charge of it. So we decided to go down and ask him how it turned out...

Meanwhile, in yesterday's International Herald Tribune was a small note: "Economists agree that spending cuts and tax increases have slowed the US recovery."

Readers will recognize this as the usual claptrap.

Government spending does not bring a genuine "recovery."

C'mon... how many times do we have to explain? You take $5 worth of resources and give them to an armed 19-year-old in Afghanistan. He shoots a round or two into a mountainside... poof... the $5 is gone. Or you have an ATF official. He's idling his motor as he stakes out a house believed to be used by a cigarette smuggler. In a few minutes, or even seconds, the $5 has vanished. Or give the money to a welfare recipient; he buys a MoonPie and a Coke. Economists may record the spending as part of GDP... But how are you better off?

You're $5 poorer, not $5 richer.

But GDP growth is something economists feel they can control. Nothing good comes of their interventions. But at least they get results.

And here comes Paul Krugman with more garroting wire! The New York Times Magazine:

Keynesian economics rests fundamentally on the proposition that macroeconomics isn't a morality play – that depressions are essentially a technical malfunction. As the Great Depression deepened, Keynes famously declared that "we have magneto trouble" – i.e., the economy's troubles were like those of a car with a small but critical problem in its electrical system, and the job of the economist is to figure out how to repair that technical problem.

Back to Neil Barofsky...

Rewarding Mistakes

So... where did the $700 billion go? Did that fix the magneto trouble?

"I wondered the same thing," he said (from memory). "It was amazing to me that no one knew. We gave it to the banks. But no one knew what they did with it. I proposed to Tim Geithner that we find out. He was outraged. He cursed me out, using the F-word. He said it would bring the whole banking system down, if I asked.

"I went ahead and sent out a letter. I didn't really have the authority or the staff to insist. But all of the big banks wrote back. And most of them gave me dodgy responses or gave me the brush-off.

"What did they do with the money? They were supposed to increase lending to help bring about a recovery. None of them did that. Instead, they used it to repay each other's loans. In other words, they used it to reduce the amount of credit available... not increase it. And they bought US agency bonds... just as you'd expect. And they paid out their bonuses.

"In other words, they looked out for themselves... just as you'd expect. I didn't know this information was going to bring down the banking system...

"The whole thing was so perverse, I can barely believe it. In a normal financia

Thought this little bit of information may interest the Shareholders of Arian - Taken from HER's BB.........................

31 December 2012 Total Packages for Directors...

Graeme Sloan - £188,646
Michael Bohm - £185,609

Non-Executive

The Hon. John Moore AO - £25,000
Michael Bohm - £11,397
John Russell - £22,880
Greg McMillan - zero

Graeme Sloan was appointed Managing Director on 1 July 2012 and his fees/basic salary amount of £148,118 represents base salary together with annual leave entitlement (no bonus was paid during the year). Michael Bohm’s executive fees/basic salary amount of £117,875 represents the period 1 January 2012 to 1 July 2012 following his step down from Managing Director to Non-Executive Director. Both Graeme Sloan and Michael Bohm's salary are paid in Australian dollars and converted to GBP£'s for the purposes of these accounts. The share based payments are non-cash payment, it is a 'calculated' fair value for share options granted during the year (refer note 21 to the financial statements).


So... GS isn't getting as much as MB was and the NEDs salaries have been reduced... so the Total has been reduced by £156,298 from 2011 to 2012.

Hey all

See that Caza Oil got $50m financing package agreed today with a future potential further $50m. The market seems to like it with a 30% increase in share price. I just wondered if this is what we're looking for in the next few weeks from the Arian management? If it happens then the sub 6p share price looks incredibly cheap IMO...

Frankers

http://www.ariansilver.com/i/pdf/Arian-Silver-Technical-Report_v4_180513.pdf

From table 29:

Price of silver / payback period
$37 / 3 years
$27 / 4
$17 / 6

JRz...oops, I ticked you up by mistake

Agreed about POG. But, costs are projected to go in the downward direction (maybe!). And they hedged at 1600/oz + these last few quarters, which turned out to be a smart enough move.

Hopefully we'll break out up over 1400 and onto resistance at 1500+, but we could easily see-saw between 1320 and 1400 for a while or break down towards 1260-1285, so only time will tell if the hedge is worth it.


My top up in Arian last Fri will probably be the last, as I've reached my target quantity of shares that I feel comfortable with, but I think FRES and POG are worth a go over the next 4-6 months at these levels if I can free up some cash. In POG's case, it has pretty much been as badly battered as Arian and I think the debt overhang has been overplayed. In the case of FRES, they are a solid company who have dropped circa 50% over the last 6 months and are worth a buy assuming silver has bottomed and is liable to move up sharper than silver itself.

Given the physical shortages in gold and silver that now seem to being reported on a daily basis, perhaps we should be moving from a 'Spot -' basis for pricing to a 'Spot +' basis. It's only when miners start to make these sort of moves will the meaningless paper market be finally consigned to the dustbin. POG have chosen the rather dumb 'hedging' vehicle at $1400 gold, an act they will undoubtedly regret. With a total cost of $1300, it won't take many cost increases to blow this particular work of genius out of the water. No wonder the SP is on the floor.

ddd

Agreed.

Output levels were queried a couple of months ago. While Arian stated at the time they were not operating at capacity (which I take to mean 500tpd), I know that they had tested at least 400tpd. The low average output suggests to me that they are deliberately managing output on a week by week basis.

ddd

Call me crazy but bought some more ! GLA

"A total of 1,823 tonnes have been processed during the first seven weeks of Q2, 2013. This is more conservative than initial estimates, and reflects the
on-going adjustments to refine the operations and processes, as well as the volatility of the silver price and management's future expectations".

Says to me that rather than bust a gut to maximise mill throughput at a time when the pos is low, they're using the time to optimise recovery, ready to sell into an expected stronger future market.

Another way of saying that we are for sale i.e. takeover

Toll mill actually averaged 6 tpd since production resumed in Q1 believe it or not. A far cry from 500 tpd isn't it.

And another thing, JW points out later in the Q1 results that funding is not guaranteed & you would have to fear for the company if it is not acquired.
On top of that, if it is acquired, JW also states it may involve considerable dilution to existing shares.

Basically it seems as if he is publicly stating we are bent over looking for the soap in the gym whilst having left our glasses in the locker room.

Lead and zinc are plus factors but are probably lost in the rounding as far as the numbers we have discussed are concerned.

When you look at the them, they do seem to broadly align with what JW has said at AGM's and in responses to questions.

However you look at it Arian is a play on the silver price, the one point Berty got right. If it drops further Arian has a serious problem like everyone else. On the other hand when we start to see $30, $40 or $50/oz or more the price will explode.

Back to watching POG/POS....

ddd

I'll summarise the thinking on price.

Cost of sales cost per unit circa $23
Add another circa $3 per unit (at 75,000oz/mth) for SGA to get to a total cost per unit of circa $26
Cash cost per unit circa $19
Cash contribution of circa $1 - $2

Generating up to circa $100,000/mth cash but very tight at $22.50 POS. A couple of dollars lower and we are in negative territory, based on the 'Average spot - X' formula used to price output - I reckon 'X' will be 10% or thereabouts.

ddd

Just a further thought - I don't know how the lead/zinc recoveries factor into these figures.

Are they already included (as a reduction to) in the milling costs/tonne?

Looks like we got there.

Maybe $1- $2/oz cash contribution per oz x the no of units of output. I suppose we could be generating up to about $100,000/mth cash.

If paper silver drops much below $21 we are probably in negative cash territory.

We really need POS to get back up to circa $30 before we start seriously talking about exploration again. It looks pretty hand to mouth at the moment.

Nonetheless, we are probably in a far better space than 95% of similar explorer\developers. At least we have some cash coming and a back stop with SEDA, hated though it may be.

It's good to get back to value based discussion again, and away from the daily obsession with price.

This ship will turn around before long.

ddd

Ah, you know what, I think you have to factor the recovery rate (c60%) in there also.

So with grades of 170g/t we'd be producing 6oz x 60% = 3.6oz = $19.4oz cash cost! This is perhaps more like the real figure..

Hence an extra few $ per oz for the admin + a little for depreciation etc bringing the total unit cost to something like the $25 being quoted?

That makes more sense? So we are still cash positive, but not by a great margin

KS,

So, extending your calculation...

If Arian are producing 6oz/t and 500tpd over, say, 25 days a month (allow downtime), then we are producing about 75,000 oz/mth.

Our 'fixed' admin costs are $250,000mth or thereabouts, which spread over 75,000 units/mth gives us additional unit cost of circa $3.33/unit. Let's say $3.

Cash costs would be about $15/oz then.

Let's say average spot is $22.50 at the moment. Knock 10% off for the deal they (probably) have which gives us about $20.

In theory we should be generating about $5/oz cash at the moment. At 75,000/mth oz this is $375,000/mth, which should keep SEDA at bay. We may be making an accounting loss (depreciation/historical sunk costs etc. reflected in COS would be about $11/oz ($23-$12)) per unit but on a cash basis we are still on the right side. We may not have enough for a full exploration programme but it looks like even at a low POS we can still accumulate cash.

It's the output level that we have to think about.

ddd

DDD,

Info from prior RNSs state:

"During November 2012 Arian agreed terms for toll milling of a minimum of 90,000 tonnes of run of mine ("ROM") ore at a cost of US$38 per tonne with a newly refurbished 500 tpd plant in Zacatecas"

and....

"Looking forward to the planned resumption of mining at 500 tpd, mining costs are expected to be $32/tonne including transport between the mine and mill."

Thus, you have a combined mill/mining cost of $70 per tonne.

Arians grades are c170 grammes per tonne, so Arian produce 6 oz silver (concentrate?) per tonne mined.

The 'cash cost' is therefore (estimated) to be $12 per oz.

I don't see how we can be only be just breaking even on the milling if the quoted numbers are accurate?

Yes, I had originally thought about $7 - 8m, now I think it is more likely to be $10m. The capacity disconnect between the mill and mine is now a fact and we have to face it. Also, if silver stays at these levels we are going to need additional working capital. We really need to dump SEDA given the drag on the SP.

The total unit cost looks like $23/oz based on COS but I'm still not clear what the cash costs are (the toll mill piece). On top of the $23/oz we have about $250k's worth of admin costs ($3m/yr), which needs spreading across whatever total units are produced per month/year. I think the guy who calculated the FRES total cost of $21 included all costs. Our total costs on a comparable basis are probably somewhere between $25 and $28/oz, depending on your production volume assumption (it will change based on volumes).

The question I have is whether the difference between the gross unit cost and the actual cash unit costs are enough to cover the admin expenses. In other words, we are losing money on a total cost basis but just about breaking-even on a cash basis?

ddd

Long-Term Silver Prices Coming Back Up: Great Panther CEO

http://www.youtube.com/watch?v=-lEdu_0UkpU&feature=player_embedded

DDD have you seen any of my posts?

I said it would be a $10million job after I attended the AGM, and some on here were saying that would be far to much.

There are many more costs involved than what you suggest.

I'm hoping for around October 2014, but that would depend on nailing down the funding in the next couple of months.

Speaking of which, I guess we are looking for funding for:

- Acquisition of new mill
- Establishment of new mill on-site
- Upgrade of mine capacity to 1,500 tpd to match milling output
- Working capital to point of production

The mill may be second hand and cheap but it looks like it could be a $10m ask, to me (pure guesstimate).

ddd

Just repeating what the man said.
I agree its more likely to be Q2, or later knowing this bunch.
The mill has to be refurbished on location first, then moved to AGQ site.

See Silvercorp having a good day so far on the back of Dividend news. In these days of hunting for yield other miners should take note. Those that have profits that is!!

By the way if anyone looking for yield in a profitable goldmining junior could do worse to look at Goldplat. (GDP). They gave 6% dividend this year, trying to draw attention no doubt, but the sp is notoriously illiquid so don;t spent all your millions getting in as getting out can be problematic! Note it has had institutional interest recently too and it is generally an agreeably boring share to own.

There is zero chance of the new mill being ready in Q1 2014, let's not have unrealistic expectations, that said at some point in H2 2014 one would expect it to be ready.

Q1 2014

According to the MD&A results it was $24 back in Q2 2012. It looks like it's marginally down to $23.00 in Q1 (206,000/8937). I hope that this is down to start-up distortions or we won't have a happy year ahead at $22.50 paper silver.

ddd

What are the timescales to introduce the new mill? I understand 120 days due diligence process has already been started. Thank you.

nostrafuckindamus

FTSE has nothing to do with AGQ price.
Its all done to POS and cash costs per OZ.


A) FTSE will not go that low.

B) POS will have a final fall to around $18 long term support.

C) Will be able to buy back into AGQ around 2-3p