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Revolution is in the airBob Moriarty I visited Spain a week ago. It was the first time I had been there since going to Pamplona thirty years ago. Back then the newest building was 300 years old. On my latest visit, the oldest building was 30 years old. Changing of the guard politically and globalization has brought up the standard of living to that of Europe as a whole. Actually I thought the price of condos and houses was a little expensive. Revolution is in the air. It will start with one group of tax eaters attacking another group of tax eaters. It’s already started in Greece and is on the cusp in Spain. I took a ton of photos of 'business closed down' shopfront signs and have posted samples, below.
Like Greece, Spain cooked the books using derivatives to enter the EU in exactly the same way every bank in the world is pretending to be solvent today when they are clearly not. With $615 trillion in derivatives, you can hide a lot of fraud. Spain subsidizes coal mining, mostly in the northern part of the country. The EU has dictated that all members halt government subsidies of mining by 2014. Not that it makes any difference to Spain; the country is broke and hasn’t paid the miners for three months anyway.
The unpaid and unhappy miners now occupy one mine and have blockaded roads from the north of the country to Madrid several times before being broken up by submachine gun wielding police. One day soon some armed tax eater in Spain will shoot a bunch of unarmed tax eaters and the revolution will start. It will spread. It’s interesting to me that the most alarmed and potentially violent groups in our societies and indeed, all societies, are the tax eaters, who believe they are somehow superior to the rest of society and look down on tax payers. They seem to feel entitled and so what if the economy can’t afford them, they work for the government and are owed benefits far beyond the reach of mere taxpayers.
Astur Gold The CEO of Astur Gold (AST-V) has been through it before. Cary Pinkowski founded Entrée Gold which now has a JV with Ivanhoe on a giant copper-gold mine in Mongolia. Cary picked up all the ground surrounding Ivanhoe and waited patiently as Friedland’s drills moved closer and closer to the property boundary. Two thousand years ago, the Romans mined what was one of the biggest gold mines in the world at Salave right on the northern coast of Spain. The riches of Rome came from this mine. The Romans mined the high-grade oxide portion of the mine and stopped when they reached the unmineable, for them, sulfide rocks. The mine sat for almost 2000 years until 1964 when Cominco began doing ground survey work. The project went through a variety of owners before landing in Rio Narcea in the Lundin Group in 2004. There has been over 65,000 meters of drilling outlining a little over 2 million ounces of gold at slightly less than 3 grams per ton. It’s one of the richest gold mines in Western Europe. The property has just about everything it needs to get into production. AST’s five mineral concessions cover 433 hectares next to the Spanish National highway. A high voltage power line crosses the property and a rail line is nearby as is a shipping port. Due to coal mining in the area there is a surplus of both infrastructure and experienced and motivated miners. In 2005 Rio Narcea applied for a mining permit for an open pit mine after spending over 40 million Euros with the encouragement of the provincial government. But the government had changed and a new Socialist government refused the application on the grounds that Rio Narcea intended to mine within 500 meters of the coast. Under the “not in my back yard” theory of wealth creation, Rio was forbidden an open pit permit. Rio Narcea commenced legal options to local courts in an attempt to overturn the decision. If the decision stands, Rio could recover damages, if the decision was overturned, Rio would mine. Rio got tired of the aggravation and sold the Salave deposit to Astur last year. Part of the agreement to sell calls for any damages recovered from a lawsuit to be split between Rio and AST. The unemployment rate in Spain is above 20%. Half of the savings and loan banks are insolvent. (Actually all banks in the world are insolvent and that will get real obvious soon.) And according to EU regulations, all subsidized mining has to stop by 2014. When the provincial government of Asturias thinks about it, I believe they will wake up to the fact that hundreds of high paying mining jobs may not be that bad an alternative. I think the government will end up bending over backwards to encourage AST to get into production. In the meanwhile, AST is a pure bet on gold. They have 2 million ounces and with a market cap of about $30 million, you are paying right at $15 an ounce for defined gold. You are getting $52 million dollars worth of development work and drilling. With $1280 gold, gold in the ground ready to mine should be more like $50 to $300 an ounce. There are other issues but minor. Power is expensive in Spain, about $.13 a kilowatt-hour. I was just in Manitoba and they are paying $.03. Power is expensive anywhere in Europe. The mineralization is refractory. Metallurgy will be complicated but that can be solved. Right now 99% of the problem is a local government that lives in a never never land world where wealth can be printed and every pot deserves two chickens a condo in Aspen and 150% retirement at age 25. It’s not going to happen and the world needs to get back to real world economics where people work and produce things. Salave is in a grove; you can’t even see anything from either the road or the shore. It’s actually a perfect place for an open pit mine and I suspect that soon the same government will be begging AST to mine. Astur is an advertiser and as such we are biased. I like management. The President, Emilio Hormaeche is the most experienced mine developer in Spain and maybe Western Europe. I think AST will have both a mine and a lot higher market cap soon. The company is approachable. If you have any questions, you should contact them. As always, you are responsible for your own due diligence.
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