<excuse my attitude on this subject;…just so happens some of the great companies I own with fantastic managements, undervalued prospects, and high hopes tanked 5 & 6% today…>
Whining is Ok, I do it all the time. Again, should let you know, I generally consider mining to be a tough, even poor business to be in, especially mine development. I usually have to hold my nose to buy these stocks. Even so, at times the valuation spread between good producers and late stage companies is just too wide. That's really the case now. I keep saying the key to the later is a major munch that puts big profits into PM investors hands, and not just more like kind mergers of the large, like WHT/GG. These are just shuffles to please Wall Street.
I suppose I could write a chunk of my notes here on MRB, but I don't even own it yet, and am therefore not that motivated in generating possible competition for my potential bids, because I may be close. I am willing to exchange ideas with people on it, however. I think when you look at the chart though, it's pretty easy to see the entry point?
stockcharts.com[l,a]daclniay[pd20,2!b50][vc60][iUc20!Lf]&pref=G
Also when you listen to Rich Hall in the presentation here,
metal-res.com
you hear the tone of someone who is impatient, and rather aggressive. That's because he is a big stakeholder. That's the attitude I'm looking for from management.
I don't consider the continual delays and obstacles (*) these companies have to endure in these backwaters to be bad management though. It's pretty standard modus operandi, and is one of the reasons the world is running short on metals and energy. BTW MRB has made some progress at Cerro San Pedro since the presentation in Sept.
biz.yahoo.com
(*)
'17-JUN-04 05:00' GMT © Mineweb 1997-2004
RENO (Mineweb.com)--Last February, everything was on track at the Cerro San Pedro Gold/Silver project in the Cerro San Pedro District of Mexico.
Construction had began after several years of hard work involving Colorado-based Metallica Resources (a Canadian mineral and exploration company), the village of La Zapatilla, the Municipality of Cerro San Pedro (a historic mining community), and Mexican federal and state officials. Then a 22-year-old was elected President of the Municipality of Cerro San Pedro last February, and nothing's gone right since.
This coming Tuesday, the Cerro San Pedro project may shut down, despite the efforts of the community, Mexican federal officials, the Governor of the State of San Luis Potosi, and the Canadian and U.S. embassies to keep it moving forward. It seems heaven and earth, and members of his own family --who originally approved the Cerro San Pedro project--can't move His Honor Oscar Laredo Laredo. A single, inexperienced young leader of a tiny mining ghost town may undo all the goodwill of the Mexican Government to promote a stable and welcoming environment for foreign mining companies.
Ironically, Laredo's late father supported the Metallica Resources [MR] project when he was President of the Municipality. Laredo's aunt favored the project when she recently served as La Presidente. Since 1995, the municipality has supported the project and even relocated the entire La Zapatilla village to the newly constructed town Nueva La Zapatilla. Roman Catholic Church officials and the local priest consented to the project after historical buildings and monuments had been stabilized by a civic foundation established and funded by MSX, Metallica's Mexican subsidiary. The Cerro San Pedro Municipal Government is to receive 100 ounces of gold and 5,000 ounces of silver annually from the mine to fund municipal projects, according to Hall. The municipality is extremely poor and the 200 jobs provided by the project are desperately needed.
One of the first warnings that trouble was coming was a April 14, 2004, notice of an Agrarian Court, residing in the State of San Luis Potosi, which had found in favor of three women who had contested the 1997 Lease Agreement between MSX and the Ejido of Cerro San Pedro. Ejidos are a specific form of land tenure, which gives control to all members of a community to determine how the land they hold as a group is to be used. To convert Ejido land into private ownership, all members have to agree to allow a single individual to covert his or her land into private property. The three women, who did not live in the Ejido of Cerro San Pedro, were, nevertheless, allowed to contest the lease in court because of their historic ties to the community.
In an interview with Mineweb, Rich Hall, President and CEO of Metallica, is confident that the company will prevail and freeze the Agrarian Court decision, which did allow Metallica to proceed with construction of the Cerro San Pedro project. A Mexican federal court is expected to make a ruling on the appeal of the Agrarian Court decision this October. However, at the time the Agrarian Court ruling was made public, MR stock dropped 20% in a day, Hall noted.
However, young Laredo has sent Hall's frustration levels soaring. Using tools of obstruction not even anticipated, Laredo managed to bring mine construction to a halt. Even if construction is resumed, Metallica can't use blasting. The President refused to renew a construction/operating license reissued annually by the Municipality for the past four years for which MSX pays $124,000 annually, Hall said. Laredo believes that MSX is not in compliance with certain conditions in the mining permit and therefore the municipality will not renew the license. His decision was backed by one of the litigants who filed the Ejido lawsuit, who subsequently successfully sought a temporary injunction preventing the President from renewing the license and form consenting to the issuance of an explosives permit. The Mexican Army, through the Secretariat of the National Defense (SEDENA), had an application for an explosives permit which was signed by the Governor of the State of San Luis Potosi and the then Municipality President, Laredo's aunt. However, SEDENA requested that the current Municipality President Laredo support in writing the issuance of the explosives permit. Although 75% of the residents of the village of Cerro San Pedro signed a petition requesting that the blasting permit be issued, the young President hasn't budged. Laredo is unhappy that only 50 of the 200 mining jobs have been promised to residents of his municipality, Hall explained. Laredo's decisions not to renew the construction license and not to issue the explosives permit caused Metallica's stock to again drop 20%, Hall added.
So, what's the problem? No one is certain. Mineweb contacted Glamis Gold, who was a former partner on the Cerro San Pedro project. Glamis Senior Vice President Chuck Jeaness said the company decided to leave Cerro San Pedro in favor of the larger El Sauzal gold project in the State of Chihuahua. Jeaness recalled no political problems with Cerro San Pedro and added that Glamis has no problems with El Sauzal. Nevertheless, he added, the El Sauzal is located in a remote area, which really doesn't impact towns or villages. Other mining companies and associations familiar with Mexico were contacted by Mineweb. While some have encountered problems with Ejidos over the years, they usually managed to overcome the obstacles. The current theory is that Metallica may be a victim of pure politics. The Governor of San Luis Potosi is from one party, the young Municipality President belongs to the opposition. Partido Revolucionario Institucional (PRI) was the party in power for decades. Partido Accion Nacional (PAN) is PRI's oldest rival and has won governorships in several states Mexican President Vicente Fox, a PAN party member, is the first non-PRI Mexican President in years. Partido de la Revolucion Democratica (PRD) is considered the left-wing party and the chief opponent of PRI, ideologically and in practice. The PRD elected a mayor of Mexico City, which, basically, upset the political balance in Mexico.
Laredo and the Governor come from different political parties, which, in Hall's opinion has exacerbated Metallica's problems. Governor C. Marcelo De Los Santos Fraga is a member of PAN. It is assumed that Laredo is a member of PRD.
Meanwhile, Metallica has invested $40 million in the project, the village, and in local foundations. The company has paid the salary of the local doctor for the past six years. It pays for a silversmith shop which provides a place for local artisans to craft and sell their creations. The company had $47.7 million in cash and cash equivalents with no debt as of March 31.
Hall told Mineweb that the "Governor has been incredibly supportive" of the project, along with the Secretary of Commerce and other Mexican federal officials. Cerro San Pedro has received the approval of federal and state environmental agencies, and its own technical oversight committee comprised of members of the community, academic, regulators and other environmental expects.
Meanwhile, a resident of the city of San Luis Potosi, who obtained status as an Ejido member in 2001 allegedly has filed criminal charges for fraud against Hall, Metallica Senior Vice President and COO Fred Lightner, and other company employees. Metallica has yet to be notified of the charges, but learned through the news media that the resident claims the original lease between MSX and the Ejido of Cerro San Pedro, signed back in 1997, was obtained under fraudulent conditions. Ironically, Hall is not exactly a mining promoter kind of guy. He enjoys an excellent reputation for honesty and fairness among his peers within the mining industry, including former partner Glamis.
"We've worked so hard to do it so right," Hall declared, adding that means doing everything right environmentally, socially, and legally. He is mystified as to why Mexican officials haven't made the connection between the risks the Cerro San Pedro project has encountered and potential future risks to other Mexico mining projects. In turn, that could impair future investment by institutional investors and financial institutions.
If Hall decides to shut down the project this Tuesday, the fight is far from over. He feverently believes Laredo has no jurisdiction over the project. In Hall's opinion, no legal reason exists for the young Municipality President to deny renewal of the construction permit, or to refuse to endorse the explosives permit. Unfortunately, Laredo will serve a three-year term if his aunt and the soon-to-be unemployed residents of Cerro San Pedro don't bring his fledging political career to a swift conclusion.
Hall also believes that no external anti-mining NGO forces are at work here. Metallica has done its homework and checked into the possibility. The Cerro San Pedro project may simply be another casualty of the rough and tumultuous world of Mexico's economic and political transformation. |
