Every why hath a wherefore

Argentina: macro check-up and mining scene (from IKN249)

The article below was one small part of IKN249, out yesterday Sunday. I liked the way it came out, so I’m sticking it up here too. Just for just’s sake.

Argentina: macro check-up and mining scene
Venezuela’s latest snafu will get no coverage here because it’s simply the worst place on the continent to go speculating with miners (and that’s saying something) but my views on the Venezuela macro political scene were made on the blog (9) last week. Perhaps foreign media attention was drawn away from Argentina by the Venezuelan flare-up, but the disinterest must also be related to the way in which the country of the gaucho is now getting its house in order. Main macro indicators are going the way of stability, with the official exchange rate closing Friday at ArgP$7.79 to the dollar (7.87 this time last week, 8.03 the week before that) and the unofficial ‘Dolar Blue’ also gaining well to finish at ArgP$11.70. Most interestingly, the Argentina Central Bank International Currency reserves saw additions in the last three days of the week (so much for the predictions of direct and non-stop capital drainage) and stand at U$27.823Bn (10) this weekend, still lower than the U$28Bn point on the devaluation day but moving back up. For what it’s worth the Argentina Central Bank (BCRA) forecasts a return to U$28Bn by the end of the month, then a period of stability, then extra inflows of dollars in the April-June period when the soybean grain revenues flow into the country (and this year is a record harvest).

The other big Argybiz news last week (11) was the January 2014 inflation numbers announced by new FinMin Kicillof. At 3.7% it’s the highest number for over a decade, but it was received warmly by the financial community as it’s interpreted that the country is finally coming clean about the real rate of inflation, instead of trying to BS the world. More importantly, it reinforced the idea that there’s real fundamental change going on at macro policy level. Or if you like, the world is catching on to the sentiment your author voiced four weeks ago in IKN246:
“This is clearly a new strategic decision by Kicillof and his team that looks to clean up the country’s macro-financial situation; it may not be the last one and it also invites a near-term of rough going for the country (markets not liking uncertainties and all that), but we should wholly welcome this positive move. It’s a clear sign that CFK & Co recognize that its current model is unsustainable.”
Yeah, toot toot aren’t I wonderful?
Moving to Argentina mining matters and some positive noises from Goldcorp (GG) in its 4q13 results conference call about the atmosphere at its Cerro Negro gold project last week (12). The company now expects first pour in the middle of this year and there’s been good development at the project over the last quarter according to company moneyguy, Russell Ball. Equally, he viewed the recent devaluation as a positive, but only in terms of cutting the price of direct costs once Cerro Negro is in operation and even then, he didn’t want to venture a guess to the size of that positive effect (smart guy, because inflation may eat away a lot of the gains between now and then). It was also notable that he had his diplo-speak on when saying that “it could be a little easier in the future” to work and operate in Argentina. Overall the tone was positive and Cerro Negro looks set to be a fanfare story for both country and company later on this year, though what you heard was also clearly company happyspin.
Maybe due in part to the GG noises, I heard from both IKN Weekly subscribers and people out there in the junior world who are getting hotter on the idea of moving in on the country and picking up some cheap junior stocks. For those seeking my opinion, I once again offer your author’s “Life Cycle of Juniors in Argentina” chart, first published on the blog in June 2012 (13)

Yes, there are a lot of cheap exploreco stocks out there (for what it’s worth, Argentex looks really cheap to me if you absolutely insist on getting a high risk/high reward name out of me, DQ J) but they’re not for me right now. This time may be different and I like what’s happening, so far at least, up at the executive level. However, there’s a lot of space between “good start on the macro” and “buy the juniors, they’re safe in Argentina now” and anyone telling you otherwise and trying to ram you into the juniors there is rolling the dice and using your money to do so. Listen up folks, I speak fluent Spanish, lived in the Argentina for five years, follow their political and economic scenes closely, have a good idea about the culture and what makes the people tick and I don’t have any agenda about what’s ideologically right or wrong for the country…and I don’t have a freakin’ clue about the juniors there, not yet anyway. So if you feel like going in because a monolingual analyst sitting 5,000 miles from Buenos Aires who went there once for tango lessons tells you it’s a sure thing right now, then be my guest.

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