IKN #176Premium

The IKN Weekly
Week 176, September 16th 2012
Contents
This Week: New stock buy, Notes From The Rabbit Hole, Sinocism, Congratulations to the
Dow Jones Industrial Average and the S&P500 indices.
Fundamental Analysis: NOBS update report on OceanaGold (OGC.to) (OGC.ax).
Stocks to Follow: Overview, Fortuna (FVI.to), Gold Resource (GORO), Bear Creek (BCM.v),
Yellowhead (YMI.to), Strait (SRD.v), Vena (VEM.to), Minera IRL (IRL.to), Rio Alto (RIO.to),
Focus (FCV.v), Sunward (SWD.to), Lupaka (LPK.to), Plata Latina (PLA.v).
Copper Basket: Overview, Nevada (NCU.to), Strait (SRD.v), AQM Copper (AQM.v).
Regional Politics: Mexico: Armed attack and hostages taken at Chihuahua mine, Peru: Conga
suddenly out of national headlines, Colombia: Thumbs up from AngloGold Ashanti, Venezuela:
The latest Datanálisis poll puts Chávez comfortably ahead, Mexico: Baja California Sur turns
anti-mining (Argonaut (AR.to) longs beware).
Market Watching: Game on, Goldgroup Mining (GGA.to) update, Sunward Resources:
Discussion of recent share price weakness.
I remind subscribers that no part of this newsletter can be copied, reproduced or given to any
third party without the express permission of the author.
This Week
New stock buy
So that’s it’s nice and clear, here’s a line at the top of the shop to state that your author is
going to buy OceanaGold (OGC.to) (OGC.ax) next week. The reasons for the decision not to
wait any longer on the outside of OGC after watching it carefully for a month are given in the
NOBS update report below.
Notes From The Rabbit Hole
As mentiond previously on these pages, I normally read Gary Tanashian’s weekly missive,
‘Notes From The Rabbit Hole’ (1) after sending out The IKN Weekly on Sunday because I’m
usually too wrapped up in my own thoughts to allow others in. However on occasion I’ll read
his letter when it arrives on a Sunday (it hits my mailbox mid-morning to midday, no matter
whether I open it or not) and today was one of the days I took time out to read his words
before sending the Weekly, because frankly I’ve been as curious as hell about what Gary’s take
on last week might be. I think this week’s NFTRH newsletter has nailed the situation 100%
correctly and if you’re not a subscriber already, I encourage you to sign up to his service and
see what he has to say, this week and every week. But take particular time out to read today’s
edition #204 because I don’t think I could agree more with another person’s opinion of last
week’s events. If you have to choose between them, I think you should be subscribed to Gary’s
letter and not this one. Please note that I’m not on any sort of commission or set to gain in any
way from recommending NFTRH to you, except the reflected glory of helping you gain top
quality insight into what’s happening out there.
Sinocism
I’ve recently been directed to a site that runs a daily letter about China. Called Sinocism (2) and
run by one Bill Bishop, a U.S citizen and highly experienced market watcher living and working
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in the business field in China (check his site biog (3) for more on that). So far I’ve been
impressed with the level of insight, particularly political and “what makes China tick” insight,
offered into China by the daily mailer, a place I know very little about and feel I need to know
more due to its importance to metals and commodities (take for example Michael Pettis’s call
that commodities prices will collapse by 2015 due to China crisis (4)), and I don’t seem to be
bombarded by spam stuff after signing on to his letter, either. Also note that the service
provided by Bishop is 100% free, which is a nice price to pay for such deep insight. I also
recommend this service and again please note I have no affiliation or connection with Bill
Bishop or his business whatsoever and won’t gain from this reco.
Congratulations to the Dow Jones Industrial Average and the S&P500 indices
Both back to levels last seen at the beginning of 2008:
It took four years almost to the day for the broad markets to climb back from the Lehman D-
Day. And as for gold in that period...
...let’s remind ourselves, again and again, of the number of times we’ve been told that gold is a
stupid bet from those professionals who would invest our money for us...in the broad markets.
As for thoughts on last week’s Fedfun, see ‘Market Watching’ below.
Fundamental Analysis of Mining Stocks
This week we update on OceanaGold (OGC.to) (OGC.ax) and make a trading decision on the
stock
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NOBS bespoke report dated September 16th 2012
OceanaGold Corporation (OGC.to) (OGC.ax)
Company Overview
OceanaGold Corporation (Canada: OGC.to, Australia OGC.ax, New Zealand OGC.nz, Frankfurt
RQQ.f) is junior mining company operating in New Zealand and The Philippines. It has two
producing mining operations in New Zealand in Macraes/Fraser and Reefton, as well as the
Didipio project in The Philippines now under late-stage construction and due to be
commissioned at the end of 2012. The share structure is as follows:
Shares out: 262.9m
Options: 7.1m
Warrants: Zero
Fully diluted shares: 270.0m
Current share price: $3.04
Market Cap: $799.22m
Approx cash per S/O: $0.28 (end 2q12)
We use the OGC reporting currency, United States dollars, unless stated. Forex U$1=CAD$1
NB: Buying OceanaGold (OGC.to) (OGC.ax): The reason for today’s NOBS update is to
change our position on OGC. It’s time to call buy on this stock even though we deferred and
demurred back in IKN172 and in subsequent weeks and the reason for the change of heart is
the new situation in which we find ourselves. The rest of this shorter than usual NOBS report
explains the reasons for the change in heart.
“When my information changes, I alter my conclusions. What do you do, sir?”
(Attributed to JM Keynes, 1940)
What has changed?
In IKN172 (available on request if you don’t have it to hand) we ran a NOBS report on OGC and
the conclusion was that the company looked pretty good for its then share price of $2.4. We
liked the look of the New Zealand operations and we were impressed in the way its future
flagship Didipio had moved into the final stages of construction since last examining the stock
carefully nearly two years previously. However, even a mere four weeks ago the nervous
market and fragile look of the rebound had your author concerned about adding too much
exposure to junior miners too quickly and in the end the decision was to leave OGC on the
short-list as a very definite buy option, but to wait and see how things developed before pulling
the trigger. This paragraph, part of the conclusion, spelled out my way of thinking on OGC at the
time:
As for the investment recommendation, I like the way this company looks and for those
wanting leveraged upside to the price of gold and willing to take on board the risk
factors, OGC is a good option. It’s in production, its share structure hasn’t been blown
out and offers upside to asset growth, it has apparently overcome the opposition to its
Didipio project and is in the last stages of building what will be its flagship operation
and although it has overrun on costs and to some extent timeline, this is the type of
window, just before start-up, that can offer good shorter-term gains. Today I’m not a
buyer of OGC because I want to see how that finalized financing deal slots into place,
the stock has just seen a bit of a run up (not chasing prices in this market atmosphere)
and a few weeks less between now and the proposed start of Didipio will give me a
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better risk/reward bias, I think. Finally, let’s see what the gold price does between now
and perhaps October, because the costs/debt profile at OGC make it sensitive to gold
price movements and there may be a better place for entry. So even though I’m not a
buyer now, at this very moment, it is the type of stock I’m looking for in the larger-sized,
better traded volume (driven by Australia) speculative production sector. The potential
is clear for investment gains in OceanaGold and as long as you’re aware of the risks I
wouldn’t stop anyone from buying this stock tomorrow morning and starting a position.
IKN176 back and now to consider what has changed, compared to that little list of factors
mentioned above (and in rough order of mention, too):
• The relatively high cash cost profile of the NZ operations (Macraes/Fraser and Reefton)
are now benefitting from the higher prices for gold at market. On August 19th spot gold
stood at $1,615/oz and today we’re at $1,776/oz, a difference of almost exactly 10%.
• Its share structure remains the same; tight, in good shape with a very low
option/warrant count.
• We now know more about the deal to finance the final stages of Didipio and bring the
mine into operation and from what we see, the deal seems pretty miner and
shareholder friendly. In the week after the NOBS report OGC announced its financing
package in this August 21st NR (5) and we commented on the deal in IKN173
• Didipio remains on course (no news = good news principle). Added to the financing deal
news it suggests the risk part of the risk/reward bias has moved in our favour.
• Market atmosphere has changed radically, perhaps the single most important factor.
Previously the nerves and doubt saw me backing away from chasing a price but now
see little reason to hold back and look to nickel/dime a slightly lower entry point. It’s time
to be long this market and deploy cash, concerns about nickels, dimes and even
quarters are set aside now prizes can be counted in dollars.
• We’ve watched the gold price between then and now (not quite October) and the action
has been wholly positive, another reason to place more confidence in profitable
producing miners.
Those of you who did start a position on reading IKN172 (and I know from feedback there were
at least several) have generally done well, getting in around the $2.50 to $2.60 range and are
already sitting on ~20% gains. If I’d been braver I’d have that start logged up too, but the fact is
that I preferred to sit it out and remained hesitant to my own chagrin. That changes today.
How the changes affect our valuation model
I urge you to check out IKN172 and check out the valuation model that day, because in this brief
update today we’re not going over all the point. Rather, we concentrate on changes and how
they affect our financial forecasts and target share price for OGC. Boiled down, there are two
real changes to the model today:
1) The increased confidence that OGC offers as an investment comes from a combination
of a) much improved market sentiment b) the announcement of a decent deal to finance
Didipio that will not apparently cramp profit margins at the company, thus allowing us to
model on next years financials rather than 2014 and c) the gold price. This allows us to
raise the PE multiple from the rather subdued 8X used in IKN172 to 10X today.
2) The gold price itself, which is up a full 10% from IKN172 and makes a significant
difference to the cash flow projections of a relatively high cash cost mining company
such as OGC. In IKN172 we used an across-the-board $1,600/oz gold price but thanks
to Ben, I see no reason why we can’t use $1,750/oz going forward (and time may show
that assumption as rather conservative, let’s see where we stand come Christmas).
3) The copper by-product price, which we move up to $3.50/lb. We won’t get the full
effects of this until Didipio really starts to ramp up in mid 2013 onwards, but it’s
reasonable to suppose that we can base at least 2013 and 2014 on a higher copper
rack price now that the market has jumped to the upside.
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Once we adjust the gold price parameter, our earnings model changes from this..
AS SEEN IN IKN172, NOW OUT OF DATE
.... to this, our new abridged income statement items table:
OGC: Concise Income statement items (Cu by-product)
$1.75k/ozAu FY 2013 FY 2014 FY 2015 FY 2016
Sales (C$m) 602.9 674.0 697.7 697.7
Cash COGS 240 264 272 272
Depreciation 110 110 100 100
SGA 23.0 23.0 23.0 23.0
Op income 211 256 281 281
Op Inc/share 0.80 0.97 1.07 1.07
Interest 24.0 24.0 24.0 6.0
Tax 46.8 58.0 64.3 68.8
Net income 140.4 174.1 192.8 206.3
Shares out 263 263 263 263
EPS 0.53 0.66 0.73 0.78
Capex -12 -10 -10 -10
FCF 0.91 1.04 1.08 1.13
Sources: OGC data, IKN estimates
Those EPS forecasts really benefit from this gold rise, as the high cash cost nature of the OGC
New Zealand ops see a high percentage upmove in profitability for every $100 added. And once
the new higher expected earnings benefit from the higher P/E multiple that I now feel fully
justified in using, thanks to the company-specific improvements and the generally bullish
atmosphere for mining stock we now enjoy, our target price table changes to this:
Sales and earnings Target price & valuation data at $1750/oz gold
2013e 2014e 2015e 2016e consolidated
Sales (C$m) 603 674 698 698 12-month target $5.34 (based on 10x '13 EPS)
Sales growth 12% 4% 0% Upside to target 76%
EPS 0.53 0.66 0.73 0.78 Mkt cap (C$m) $800 EV ($Bn) $1.097
Cash flow 0.95 1.08 1.11 1.16 P/sales (2013e) 1.19 EV/sales (2013e) 1.63
P/E (2013e) 5.7 EV/EBITDA (2013e) 3.4
P/E (2014e) 4.6 EV/EBITDA (2014e) 3.0
P/E (2015e) 4.1 EV/EBITDA (2015e) 2.9
In IKN176 I invited readers to “dream of a 10X multiple” if they preferred, but nowadays the
atmosphere has changed for the better and assumptions of higher multiples are firmly based in
reality. We therefore get a $5.34 target price base don 2013 results that imply a 76% upside to
Friday’s close of $3.04, representing a 76% upside potential. It’s worth noting that in IKN172,
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the OGC share price at the time may have been 63c lower but the target set gave a 60%
upside, so that leavens the shame of having missed a better entry point...to a certain extent at
least.
Conclusion
This is one of the shortest (if not the shortest) NOBS reports I’ve ever published, mainly
because most of the legwork and heavy lifting was already put in place just four editions ago. As
we’re now in a distinctly changed atmosphere for junior mining stocks, thanks to the macro
impulses of the last couple of weeks in general and last Thursday in particular, after revising the
work done recently on OGC and factoring in the changes in circumstances the decision is to
buy. There’s a lot to like about OGC and although risk is still apparent (eg I’ll be happier once
Didipio is fully up and running to something approaching design) there’s enough reward in a
market that’s now looking to add risk to justify a decent sized position. Along with the
advantages discussed today, it’s also worth mentioning that OGC in both its Australian (ax) and
Canadian (to) listings is doing decent and liquid daily volumes these days that allow for smooth
and trouble-free entries and exits if necessary.
The main risks to our buy call today are 1) OGC fails to operate up to expectations and
guidance, which is something we need to keep in the front of our minds rather than the back,
because as a company it does have a tendency for OPUD. However, these days its guidance
and forecast timeline parameters set aren’t particularly aggressive and there’s reason to
suppose that they’ve learned a lesson from trying to promise too much. To suppose, but not to
fully trust them, not yet anyhow. Then the 2) risk is that of the price of gold, as the high-end
cash cost profile at OGC (that will improve as Didipio comes on line but still isn’t going to be
even close to the low-end of the market) means it has high leverage to spot market prices, so
what we need is for gold to maintain $1,750/oz or at a pinch, not drop below $1,700/oz for too
long before coming back at us. In fact I’m now pretty darned bullish on the prospects for the
price of gold and if the market gets a hold of it in the way I think possible, $2,000/oz in a
medium term (6 months) wouldn’t see me surprised at all (whereas seeing $1,500/oz again
really would get me scratching my head in disbelief). However, considering the potential reward
of the newly evolving OGC coming at a sweet spot moment for gold prices those risks are the
type that speculators, even the nervy ones such as myself, can take in stride.
The IKN Weekly recommends OceanaGold (OGC.to) (OGC.ax) as a buy and sets a 12
month price target of $5.34 on the stock, representing a 76% upside to Friday’s close.
Your author will be a buyer of this stock next week and come IKN177 next Sunday, Ogc will find
its palce in the full “recommends” section of the ‘Stocks to Follow’ table. OGC is what we’re
looking for in a junior gold mining company, with decent profitability already demonstrated and
strong growth upside in the near future that will see great benefit from the current (and any
future) rise in the price of gold. We buy.
End of Report
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Stocks to Follow
In this section this time last week I wrote, “It was a good week all told, let it be the first of
many (please Ben).” Ben delivered. Thanks Ben (though on writing those words that Chinese
saying “be careful what you wish for...” immediately floated through my head). Anyway, we
saw nine of our open positions last week make gains and three lose ground. Of the winners the
best was seen in Plata Latina (PLA.v up 72.4%) and followed by Minera IRL (IRL.to) up 20.8%,
Focus Ventures (FCV.v up 17.5%) and Lupaka Gold (LPK.to up 13.6%), while the worst by quite
some way was the 14.5% drop in Sunward Resources (SWD.to).
With the addition of our short position in Gold Resource Corp (GORO) we now have 13 open
positions on our list, two less than our self-imposed maximum. Five are in the green and eight
in the red.
Company Ticker this week Init Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.04 07-apr-11 C$5.25 157.4% $6.29 tgt
Recommends
Vena Resources VEM.to hold C$0.35 31-may-09 C$0.17 -51.4% target lowered to 21c
Sunward Res SWD.to hold C$1.47 13-mar-11 C$1.18 -19.7% considering sale
Lupaka Gold LPK.to hold C$1.12 23-oct-11 C$0.67 -40.2% considering sale
Bear Creek Min. BCM.v buy C$3.27 07-nov-11 C$3.20 -2.1% added more last Fri
Yellowhead Min. YMI.to buy C$1.00 01-apr-12 C$0.75 -25.0% value under $1, added Fri
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.42 23.5% solid biz model, LT hold
Plata Latina PLA.v hold C$0.79 10-apr-12 C$0.50 -36.7% considering sale
Minera IRL IRL.to buy C$0.65 22-jul-12 C$0.87 33.8% $1.56 tgt
Gold Res Corp GORO short U$21.47 09-sep-12 U$21.81 -1.6% SHORT Position tgt $14
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.15 -51.6% considering sale
Strait Minerals SRD.v hold C$0.125 09-dec-11 C$0.13 4.0% tgt 25c drill play
Focus Ventures FCV.v buy C$0.175 01-jul-12 C$0.235 34.3% revised tgt 25c
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
2009, 2010 and 2011 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Fortuna Silver (FVI.to): Position fully closed. As announced in the Friday Flash update
(appendix 1) FVI is now all gone and the final average selling price has been adjusted to reflect
that fact, too. All that remains is to watch FVI storm off into the 6s then 7s and prove me
utterly wrong in selling on this bounce.
Gold Resource Corp (GORO): Short position opened and we got a nice average price to
open this short as well, thanks to Ben’s announcement Thursday. The plan here is a simple one
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as we expect GORO to underperform peers due to its own issues. There’s no discounting the
potential that GORO is one of the boats that float with the rest of the tide before we get 3q12
production results (likely first or second week October) then financial results (mid-November)
from the company, but all the same this one has enough company-centric problems to warrant
at least hedging the rest of my newly bullish sentiment towards the juniors. The position is now
set and we’re not going to fiddle much with it, next stop early October and those production
numbers. Meanwhile, we note that in the same S&P/TSX review that promoted RIO to the big
board (6) (see below) GORO has been made a part of the less important Gold Index. That
might see GORO stock getting a bounce during next week, but do you think I’m worried? ☺
Bear Creek (BCM.v): Added. Last week we put up a 6 month comparative chart between
BCM and the silver ETF (SLV) as a
proxy for the metal to show the lag in
the stock. This week the two tickers
again but over just the last ten days to
show something else:
The volatility (beta) that BCM
demonstrates to its underlying metal
is consistently impressive and last
week was no exception. When silver is
calm, so is BCM but once we get a jag
up or down in silver, the move gets
magnified in our featured stock. The
potentially good news about this is
that at the right hand side of the
chart, as Friday’s selling does seem overcooked so given a level playing field, we should see
gains again next week. As for the personal position in BCM, that was strengthened by a further
purchase Friday that even allows me to drop the cost average price by 2 spots to $3.27. I have
enough BCM now and won’t add more on weakness, as my cash pile is being aimed towards
producers from now on. Will trim if it flies however, as a trade is a trade.
Yellowhead Mining (TMI.to): Added. More interesting than BCM was the action seen in YMI
on Friday, because there’s clearly a seller out there who’s happy to bang into any 75c bid and
did so all day. In much the same way as BCM, last week’s addition to YMI puts me at my “full,
no more please” level in this stock because again I’m after producers from here for The IKN
Weekly, not exploration stagers (mostly).
So why the selling? As I was casting around the following turned up unsolicited from respected
and knowledgeable Canadian mining correspondent ‘KJ’
BC politics might be keeping Yellowhead down. The province is headed for a change
of govt which will likely be the NDP who run on a platform of no new mines. Vancouver
mining guys say that nothing new will be permitted in the province. I've heard the
same from many business leaders. YMI has a great project, I've met the team and was
impressed, but politics are keeping me out.
This is the type of thing that reminds me just why I stick with LatAm (usually, because even in
what seems (to the outside world at least) like a safe political risk jurisdiction for mining, BC.
CA, politics can creep up behind you and scupper the best laid plans. I’ll be absolutely honest
with you all here and say I didn’t know about these political machinations before KJ mailed in,
though if it turns out to be as radical as he suggests it’s probably going to do damage to my
plans for near-term upside in YMI. As it happens, I know that there are several people who are
very knowledgeable about the coming and goings of Vancouver and/or its city and state politics,
so if any of you out there feel like adding a couple of cents worth of thoughts on this score, I’ll
be happy to read them and also re-print any thoughts next week.
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Anyway, I find myself with a now expanded position in YMI that’s not enjoying the same kind of
lift as other copper juniors such as NCU and I’m wondering whether I’m barking up the wrong
tree here. The numbers on YMI at Harper Creek work very well, but if the locals start a
permitting freeze, it may be better to cut soon and find a better place to park cash.
Strait Minerals (SRD.v): Added. In the end I did manage to bag a few (just a few) SRD on
Friday as per the Flash update that morning, so the small position here just got a little less
small (and at the same basic entry price, so not making any minor adjustments there. Be clear
that this is a risk position and a lot depends on how the drill results come back from Alicia
(when they start flowing, shouldn’t be too long now as long as the labs aren’t a cause of delay)
but from the background rumblings picked up recently there’s room for a little optimism and a
roll of the dice here, I think. News will drive this stock though, no more and no less.
For more on SRD and also AQM, see ‘Copper Basket’ below.
Vena Resources (VEM.to): That small addition last week is in the green, the larger
aggregate position isn’t, but with no news meaning good news this one might turn out better
than currently expected. Still watching the wires for news of a deal and in no rush to dispose at
any old price...hey, with things as they are, that 21c target price might turn out to be a
minimum selling price...one can but dream.
Minera IRL (IRL.to): A good week for the stock, especially in the volume action we saw in
MIRL.L, the mainstay listing of IRL that runs in London. As noted in Friday’s Flash update, the
temptation to add existed and although the stock flew the Canadian bourse action was on fairly
light volume and we should still take our dues from London so don’t read too much into that big
jump on Friday.
Also as noted Friday, the thing we’re really waiting for here is news on Don Nicolas permitting,
which is due at some point in the fourth quarter if all goes to plan. This key moment would
start what your author believe to be a virtuous circle of events at IRL, with the permits allowing
for a company-friendly financing deal that would run to a Don Nicolas opening on time which
would greatly boost the probabilities of
seeing Ollachea financed in good time
and operating on schedule. Market
timing aside, the awarding of permits
by the governments of Argentina
(national/local) is the fundamental key
to this company’s success so until then
this company will carry part of my
speculative money rather than true,
longer-term investment money. It’s
good to see the price go in the right
direction having bought twice, but with
the right newsflow I intend to make
IRL a much bigger position and will
therefore wait it out until the goods
arrive. Because I’m a whuss like that.
Rio Alto (RIO.to): The action last week was nothing to rave about compared to other names,
but that’s the kind of thing you get when the beaten down dogs start bouncing and the names
that have kept up the good work don’t get the same sort of beta in the very-near-term. But by
far a better judge of RIO than a single week in the market was the news Friday (6) that Rio Alto
Mining has been selected to be one of the 249 components of the S&P/TSX Composite Index,
i.e. the main bigboard TSX index. RIO is included as of September 24th so all those index
tracking funds have next week to position themselves in RIO before the stock goes live on
Canada main index. Expect buying pressure ☺. Top Pick? You bet it is!
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Focus Ventures (FCV.v): FCV moved up nicely percentage-wise, but volume remained thin
and we shouldn’t read too much into the move. However, we can expect news out of the
company’s flagship Santa Cruz/Reventón development in Mexico in the near future and again
let’s point out that thanks to the small share count (and its tightly held nature) along with a lot
of those shares already covered by treasury cash, a good NR from FCV could see the company
move up in leaps and bounds. News-driven moves are the ones that matter here, too.
Sunward Resources (SWD.to): The short piece I began writing on SWD here turned into
something longer, so rather than clog up the crib note section of ‘Stocks to Follow’ too much, I
transferred it down to ‘Market Watching’ below. It was a poor week in the price action of SWD
and that’s the subject under scrutiny, because when things go well in the market (as last week)
it pays to pay careful attention to the weak areas, rather than bask in ephemeral glory.
Lupaka Gold (LPK.to): From last week:
“LPK has seen itself beaten down far too much and should be good for a
rebound in the near-term. The real acid test will come on the day it reveals
numbers for Chaska, though. That’s the place your naively hopeful author
looks to for his salvation.”
No change in that, but happily a bit of change in
the price and the trading volume in LPK as the
stock managed to react positively along with the
sector. The other thing last week was news (7)
that the merger with AAG is almost certain to
happen come September 21st (i.e. next Friday),
so all I hope for is a bit of good drilling news on
the back of the corporate formalities at the
time.
Plata Latina (PLA.v): A violent and impressive reversal and rebound that’s very welcome
viewing, but we shouldn’t read too much into the 72% move in PLA last week until decent
volumes start flowing through the stock and as just 37,000 shares changed hands all last week,
we’re still a long way from that. Still, it’s nice to see the previous weeks’ sell-at-any-old-price
people getting their hind quarters handed to them on a platter. PLA is still one that’s under
consideration for the chop from our ‘stocks to Follow’ list in order to make room for a producer,
but as we have until the end of the year to get ‘majority producers’ on the list, there’s plenty of
time on our side still.
The Copper Basket
After thirty-seven weeks of 2012 The Copper Basket is showing a 35.14% loss to level stakes.
1

company ticker price 1/1/12 Shares out Market Cap current pps gain/loss%
1 Copper Fox CUU.v 1.15 387.97 481.08 1.24 7.8%
2 Augusta Res AZC.to 3.17 144.1 430.86 2.99 -5.7%
3 Lumina Copper LCC.v 13.19 40.7 378.51 9.30 -29.5%
4 Nevada Copper NCU.to 5.18 72.8 242.42 3.33 -35.7%
5 Western Copper WRN.to 1.58 93.28 83.95 0.90 -43.0%
6 Candente Copper DNT.to 0.97 121.67 75.44 0.62 -36.1%
7 Regulus Res REG.v 1.24 99.88 69.92 0.70 -43.5%
8 Baja Mining BAJ.to 0.80 338.5 45.70 0.135 -83.1%
9 Yellowhead Min. YMI.to 0.80 52.82 39.62 0.75 -6.3%
10 Duran Ventures DRV.v 0.18 184.72 22.17 0.120 -33.3%
11 Excelsior Min MIN.v 0.63 56.12 16.27 0.29 -54.0%
12 AQM Copper AQM.v 0.39 105.6 15.84 0.15 -61.5%
13 Catalyst Copper CCY.v 0.08 274.48 15.10 0.055 -31.3%
14 Crazy Horse CZH.v 0.35 62 8.99 0.145 -58.6%
15 Strait Minerals SRD.v 0.150 56.86 7.39 0.13 -13.3%
Portfolio avg -35.14%
Repeat Note: I DO NOT OWN ALL THE STOCKS IN THE COPPER BASKET. I DO NOT RECOMMEND THEM AS BUYS.
THEY ARE CHOSEN AS A REPRESENTATIVE BUNCH OF THE COPPER JUNIOR EXPLORATION SECTOR, NO MORE NOR
LESS. In fact I currently own three of the stocks on the list, namely Yellowhead Mining, AQM Copper and Strait Gold.
From the outset, back in 2010 when the first version of The Copper Basket made its debut, the idea has been to select
a range of names in the junior copper exploration sector that offer a fair representation of what’s out there, the big,
medium and tiny, the well-run, acceptable and nasty, the world class deposit potentials and the small, scratchy assets,
ones that might get taken out by majors, others that might get moved to production by the same company. The Copper
Basket is nothing less than an index, a measuring the
pulse of the sector if you like.
20% Copper Basket 2012 average, weekly
A seventh straight week of average gains 15%
10%
is racked up, though it wasn’t all hearts 5%
0%
and roses for The Copper Basket despite
-5%
the QE3 lovefest. Over the week we saw -10%
-15%
nine make gains () , one remain
-20%
unchanged (WRN.to) and five lose ground -25%
-30%
(LCC.v, AQM.v, CZH.v, CCY.v, SRD.v). The -35%
best moves were put in by Regulus -40%
-45%
Resources (REG.v up 40.0%), Duran -50%
Ventures (DRV.v up 33.3%), Nevada
Copper (NCU.to up 17.3%), Augusta
Resources (AZC.to up 14.6%) and
Excelsior Mining (MIN.v up 11.5%). The
worst drop by quite some way was taken at Crazy Horse
(CZH.v down 23.7%).
The story of last week was the sector reacting to the sharp
upmove in the price of copper, which finds itself in the
$3.80s per pound this weekend for the first time in a long
time (since the earliest days of May in fact, as the first part
of 2012 featured a copper price that bounced merrily
between $3.80 and $4). The reason behind the move is
the FOMC decision and its fallout (no surprise) so the call
on whether this policy-fueled move will have significant
legs is dependent on what happens in the real world in the
weeks to come. This implies that fundamentals of demand
(and supply to a lesser extent, but those tend to fluctuate
less) are going to become more important than before, so
let’s check out our normal coverage parameters.
1
ht8naj ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht4ram ht11 ht81 ht52 ts1rpa ht8 ht51 dn22 ht92 ht6yam ht31 ht02 ht72 dr3nuj ht01 ht71 ht42 ts1luj ht8 ht51 dn22 ht92 ht5gua ht21 ht91 ht62 dn2pes ht9 ht61
source: IKN Weekly calcs, TSX
2102/1/1
morf
egnahc
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The big story was the immediate upmove in the market price for copper so it remains to be
seen how the deeper trends react, so we
shouldn’t read too much into the 1.5% increase Cancelled Warrants at LME, IKN157 to date
in world copper stocks (418,956mt), with a 35% 31.91%
30%
weighting on those to Shanghai (once again) 19.81%
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13.76% 13.78%
LME cancelled warrants tracker (which is more 15% 11.07% 11.5911%.721%0.81%
8.71%
10% 6.87%
likely to see quicker changes to events than
5%
overall warehouse stocks) that registered
0%
18.18% of total stocks as under cancelled
warrants and due delivered to end users. If you
remember back to last week, we pointed to the
deterioration of the cancelled warrant
percentage as a potential bear signal for the
price of copper, so the 4.4% rebound as seen in the tracking chart is good news for those who
like their prices when they go up.
Now for updates on some basket companies this week:
Nevada Copper (NCU.to): We pointed out the good momentum being picked up by Nevada
Copper (NCU.to) last week but then tried to temper that with the potential political stumbling
block that an earmark or two might entail to the permitting picture at Pumpkin Hollow.
However, last week the stock took no negatives of prisoners as it zoomed forward and broke
into the $3+ handle zone. The way things are now at NCU we should fully expect buyout talk to
start swirling around the stock once again and as there’s still plenty of room between it and the
$5+ share price numbers registered earlier this year.
This is one of those situations where, personally at least, I feel as though I’ve managed to
snatch defeat from the jaws of victory. Selecting Yellowhead (YMI.to) over a position in NCU
was part of personal error, but so was recognizing that NCU looked good at its low $2 prices
recently and not doing anything about it. Again personally, I need to reflect on my
shortcomings as exposed by my attitude towards NCU recently.
Your biased author makes cases for going long Strait Minerals (SRD.v) and AQM
Copper (AQM.v) for high-risk, high return trades: What do you want from a potential
snap-back play in the copper sphere? As far as I can see, a combo of the following wouldn’t be
a bad mix:
• A once-loved but now unloved and ignored stock trading low volumes
• A very cheap price compared to previous levels
• Potential upside uninhibited by severe political or social risk
• A news catalyst expected in the near future
Now I’m not saying that a trade in AQM.v or SRD.v at this level would be a guaranteed success,
far from it, and I’m not saying that the futures of Zafranal or Alicia are without doubt to
become copper mines because before we can say something like that we need to see the
economic parameters of the PEA (AQM.v) or the results of the first serious drilling program
made at the location (SRD.v). What I am saying however, is the two under consideration fit the
bill in the categories I’d want to see for a potential market rebound springer.
First AQM and if it offers up a good PEA it will be able to hit all the bells.
• It has location on its side, because Zafranal is in a miner-friendly region of Peru and the
immediate locals welcome the company’s presence, as does the regional government.
On that score it beats any number of projects facing local opposition (eg AZC) as well
as the national political risk drawbacks of other places (eg LCC).
1
751NKI 851NKI 951NKI 061NKI 161NKI 261NKI 361NKI 461NKI 561NKI 661NKI 761NKI 861NKI 961NKI 071NKI 171NKI 271NKI 371NKI 471NKI 571NKI 671NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne

• Once upon a time it traded at prices many times higher than today and at much better
volumes, as seen in this chart (incidentally, those were the days when we told all and
sundry to avoid AQM and consider it well overvalued). Nowadays it’s a broken stock in
an unvisited backwater of the market.
• And when it comes to potential near-term catalysts, the PEA due soon (expected 3q12)
is as good as one could ask for by way of an event in a junior copper exploreco.
Now SRD and the results from the current drilling program at Alicia are its calling card
• Again, local acceptance at Alicia is now a given and its regional location is one that suits
mining (we’re not in any sort of hot anti-mining zone of Peru)
• SRD’s share price has never traded in multiples higher, but that’s because it’s never had
much of a following or hype machine to pump it up. On the other hand, it does have
periods of much higher volume activity which indicates its present, somewhat forgotten
status.
• As for the catalyst, we again cannot make any guarantees on this but if the current
drilling program run by bigboy partner Teck goes well, we’ll have all the good news a
little stock and share price could possibly handle. Teck isn’t in JV with SRD to try and
find a small or medium sized copper deposit, it’s after a big one and if the risk (and
there’s plenty of that, don’t try and fool yourself otherwise) pays off the upside comes
in multiples
This is perhaps one that I personally shouldn’t call, because I’m long and holding a bag on my
my AQM position already and also when it comes to my high-risk cash, I’m going to plump for
Strait Minerals SRD.v over AQM for the time being. But having reviewed the list of The Copper
Basket this weekend looking for a suitable vehicle to play a tidal change in sentiment in copper
juniors (if that indeed occurs), AQM and SRD fit the bill better than any other and I wouldn’t
stop anyone from taking a chunk of AQM over SRD:
• Copper Fox (CUU.v) may be good as a speculation at lower prices, but today is kept
artificially overpriced by its majority owner and is plain silly at today’s prices.
• Lumina (LCC.v), Augusta (AZC.to), Candente (DNT.to), Regulus (REG.v), Excelsior
(MIN.v) and potentially Yellowhead (YMI.to) all have local, regional or national political
risk factors weighing them down
• Baja (BAJ.to) and Catalyst (CCY.v) are broken stock, killed by bad management
• Duran (DRV.v) and Crazy Horse (CZH.v) offer projects that are easily discounted due to
poor or marginal economic parameters.
So from our Basket that leaves us with four names to consider:
1

• Nevada Copper (NCU.to), which I like but isn’t cheap and has less room for the type of
explosive gains that I’d look for from my real edgy risk money.
• Western Copper (WRN.to) which i personally don’t like because I can’t see its
economics, but other can and on a like-for-like basis at least it makes better sense than
CUU.v at current prices.
• Then AQM Copper (AQM.v) and Strait Minerals (SRD.v).
If you like them beaten down to a pulp and then with the potential to spring hard if things go
their way, SRD and AQM (even though I own them both) do seem like fair candidates. As for
my own positions, I again spell out that i have a 25c target on SRD (basically a double from
here) and before that turns up I’m not a seller (in fact I’m trying to add a few). As for AQM, the
personal plan is still to hold and see what happens once the PEA is released so really I’m in the
same boat as any new holder that might turn up. Overall, as long as you have your financial
house in order, eyes wide open and can stick a few shekels on a very high risk possibility, I
think either or both of these provide fair vehicles for this kind of trade
Regional politics
Next week I plan to run our quarterly regional risk review with the tracking table, score per
country and all the usual. Until then, a few relevant stories for your information.
Mexico: Armed attack and hostages taken at Chihuahua mine
On Friday reports emerged (9) of an attack on a mining operation near the town of El Sauzal, in
Chihuahua State near the border with Sinaloa State, Mexico. A group of heavily armed men (a
description which fits the Mexican narcoterrorist gangs perfectly, as does this “hot” location in
Mexico) blocked roads to prevent access to and from the mine and took hostage two employees
from the mine. There is no word as yet on whether anything of value was stolen from the mine.
The name of the mine attacked was not released, but we know that it is located in the
municipality of Urique which is the same location as Goldcorp’s (GG) El Sauzal mine (10). There
are other mining mining operations in the area so we can’t jump to conclusions, but there’s a
fair chance that the Goldcorp mine is the victim. But whoever owns the attacked mine, locals
were reported to be living in terror due to the constant attacks of armed groups in the area.
We note that in February 2011, Dia Bras (DIB.v) had one of its security guards murdered by
thugs as they tried to steal machinery at its La Piedras mine that lies near to this area.
Peru: Conga suddenly out of national headlines
In a country such as Peru, it’s what’s not being delivered to your TV screens in the form of
news that can be as interesting as what is and in the last two weeks, the amount of polemic
(false or otherwise) and headlines made by the Conga project and its protests has dropped very
significantly. This sudden drop in newsworthiness seems to be part of the plan of the
government to try and reduce the importance of the issue in the public eye and coincides
(though it’s hardly a coincidence) with utterances of the new cabinet chief Juan Jiménez when
he took the job that Conga shouldn’t be an obsession. It may be a case of media bosses and
editors getting an informal phone call, it may be that there’s less actually happening around the
Conga project, but it is significant that your author had to search for the latest news stories of
the massed protests in the town of Bambamarca (11) with 100% adherence to the protests and
marches, schools and shops closed etc, then vows of local ‘Ronderos’ (rural activist groups) to
maintain a permanent 24/7 vigilante party (12) made up of 1,000 people at the threatened
lakes for signs of construction activity. What we have heard instead from the media are the
news stories of development and growth in the mining industry in other places, such as Cerro
Verde (Arequipa) Toromocho (Lima/Junin), Quellaveco (Moquegua) and others, all quite the
charm offensive in fact and all indicative of a government that has decided to set the agenda
instead of reacting to somebody else’s, which is a positive change. As for what might come,
1

regional president Gregorio Santos will be keen to get his face back on front pages when he
visits Lima next week (13) to meet with the Energy and Mining commission set up to try and
find a solution to the Conga impasse and to that end, not only has he already formally accepted
the invitation to meet with the commission but he’s also asked for an audience with prime
minister Jiménez (who hasn’t decided whether to meet him yet as we go to press).
Colombia: Thumbs up from AngloGold Ashanti
For sure it can be put down to the company talking its book, but there was clear bullishness on
Colombia as an emerging mining jurisdiction in the AngloGold Ashanti (NYSE: AU) presentation
to the Denver Gold Show last week
(14). This slide from the presentation
gives an idea of the high regard in
which the country is held, as AU calls it
“...the world’s most prospective new
gold district” (though it helps to have
30m of those prospective gold ounces
in your company asset book of course).
The most interesting part of the AU
view on Colombia though is the way
that the Gramalote JV split 51%
AngloGold and 49% B2Gold (BTO.to)
has apparently jumped the queue in
the big company’s opinion and is now
slated to be AU’s first operating mine
in Colombia, with 2016 expected if all
goes well. Not only that, but Gramalote
would be the ever open pit gold mine
in Colombia and a bona fide pathfinder
for the nation. The idea from here is that AU/BTO present a pre-feasibility study in 4q12 (i.e.
before the end of this year), move the project to a full feas and get a construction decision
made by 1q14, then construction and commissioning by 1q16. With a current 4.1m oz Au under
43-101 rules and an AngloGold that expects that number to grow more, plus a current plan of
producing an average of 300,000 oz Au in the first seven years, this is a fairly interesting
project for the whole of AU, let alone the smaller B2Gold.
Un fact, it’s the minority partner BTO’s role at Gramalote that really piqued your author’s
attention on considering AngloGold’s opinion of Colombia, as the 49% of a nominal 300k Au
Gramalote production would basically double BTO’s current gold output from its two Nicaragua
mines. This is clearly a big project for BTO and with a strong and large partner such as
AngloGold on its side, comes with a measure of security enjoyed by few junior gold producers.
Venezuela: The latest Datanálisis poll puts Chávez comfortably ahead
Wednesday saw the dissemination (15) of the latest (and likely final) poll from the best of a bad
bunch Venezuela polling company
Datanálisis and the news is that there has Venezuela Election: Datanálisis poll, Sept 12
50% 43.1%
been little change in the support for the two
45%
candidates for President, challenger Capriles 40%
and incumbent Chávez, which means that 35% 30.0%
26.9%
30%
Hugo Chávez should now be considered
25%
favourite for the October 7th election. The 20%
poll, conducted between September 3rd and 15%
8th on 1,200 people from all socio-economic 10%
5%
walks of life in Venezuela and with a
0%
reported margin of error of 2.82%, put
Chávez Capriles don't know/
Chávez on 43.1% support for the vote and
won't vote
Capriles on 30%. source: datanálisis, sep 3 thru 8 poll
1
%28.2
-/+
eom

That headline number is good for Chávez and there’s little comfort for Henrique Capriles in the
other details either. Of the Chávez 43.1%, no less than 99.4% consider themselves “hard
votes” for the current President who will not change their mind under any circumstances. As for
the undecided, Datanálisis reported that of the 26.9% who responded that they didn’t know
who they’d vote for or wouldn’t vote on the day (via spoiling ballot, not going to vote, etc)
10.7% were inclining towards Chávez and 6.4% were inclining towards Capriles, which if
translated into votes on the day would see Chávez winning 53.8% of the popular vote and be
called clear winner.
Finally, another interesting datapoint in this opinion poll was that 41.7% of those questioned
said they considered themselves “Chavistas” (i.e. Chávez supporters, or pro-current
government), just 16.1% considered themselves “anti-Chavistas”, 38.6% said they were neither
one nor the other while 3.6% did not respond. This strikes your author as a very different
make-up to the type of coverage we get about Venezuela from both the national and
international media.
Mexico: Baja California Sur turns anti-mining (Argonaut (AR.to) longs beware)
This is one of those stories that finds me wondering whether to file it in ‘Regional Politics’ or
‘Market Watching’, because it straddles both categories. That’s because we have a political
move to report that may affect several junior mining companies, not least of which the high-
flying Argonaut Gold (AR.to) which is depending on its San Antonio project in the region for a
large part of its future growth plans. According to reports dated September 13th (16) from the
region, the State government’s official position is (and we quote precisely), “... to protect
natural and human resources and at no time compromise the economic and social future of the
state with investment projects that threaten the patrimony and that of future generations.”
That was part of the press conference on the first report of the new State governor, Marcos
Covarrubias Villaseñor and was from the lips of his Secretary of Promotion and Economic
Development, Joel Ávila Aguilar. And with that formal statement in place Ávila went on to
express specifically the regional government’s disapproval of open pit mining projects in the
region on several occasions during the presser, particularly those that threaten natural
resources. He then made a special case of the San Antonio/Los Planes project and announced
the government’s position on it as “an emphatic no”.
With this we’re in roughly the same position as that in the Veracruz project of Caballo Blanco in
Veracruz. Although it’s always going to be comparing apples to oranges at some point, what we
have are two open pit mining projects opposed by the regional governments but with the final
environmental decisions left to the national Semarnat environmental body. In the specific case
of San Antonio, the fight is likely to be centred around water supply and whether any mine
there will potentially pollute supply. The AR.to position is that the mine lies on the other side to
the watershed and will not affect quantity or quality supplied to local populations, however we
should note that the Vista Gold (VGZ) Paredes Amarillas project that lies just next door to San
Antonio has been successfully blocked by local anti-mining campaigns and sets a precedent on
what might happen.
Overall, what we have in San Antonio, particularly after the regional government press
conference of last week, is a situation that’s 1) bad for AR.to and 2) not yet priced into the
stock. AR.to saw some weakness a few weeks ago when a semi-minor permitting decision on
San Antonio went against the company. However, it was interesting to watch the reaction of
the Canada houses covering AR.to at the time, because to a man the line spun was “a
temporary setback, give it six months and things will go through” or words to that effect. It
smacked of a bunch of anal ysts who were taking their information directly from the hand that
feeds them, i.e. AR.to management, and not doing much independent research for themselves.
With its new PEA just released on San Antonio (17) that outlines a project that would produce
an average of nearly 70,000 oz Au over a 15 year mine life at a low ($553/oz) cash cost and
high (post-tax IRR 66%) profit margin, AR.to is clearly investing a lot of its growth upside in
this project, which means that somebody somewhere is going to be rather disappointed if it
goes on something akin to an indefinite delay.
1

On a like-for-like basis I’ve always preferred Rio Alto (RIO.to) as an investment to AR.to; RIO
produces more gold at the moment, but they’re both open pitters, they share a roughly
equivalent market cap, they’re both looking for growth and expansion quite aggressively and
they’re both LatAm located, but AR depends more on things such as San Antonio for its future
upside while RIO plans are for expansion into sulphide copper/gold operations at the same
location as its present production. As the market expects them both to grow at (or around)
their planned rates, the type of upset and longer-term delay at San Antonio that is now looking
pretty darned possible would affect AR.to’s current share price pretty significantly.
Market Watching
Game on
The events of last Thursday at the FOMC are not to be underestimated, ladies and gentlemen
readers. As set out in the Flash update of Friday morning (appendix 1) I believe the
consequences of the start of QE3, or the Bernanke Put, or QEtoInfinity or whatever else you
prefer to call it (all those and more available in the financial press) are very significant and very
bullish for gold (first and foremost) as well as other metals and commodities. That goes for the
junior mining sector as well, which has already seen and I believe will continue to see sharp
spikes up in share prices for sector participants that have been severely beaten up during 2012.
On Friday the message was that for the near-term at least this is a market that we want to
trade, get long, take positions, dust of sideline cash and to increase exposure. It’s for that
reason alone you received a Flash update Friday, because I simply didn’t want to wait (after
sleeping on it) to announce my full-steam-ahead bullish intentions in light of our the new
scenario and I wanted to make feeling plain before the bell Friday, not Monday, as every day
counts in a near-term trading scenario (even for a normally dull investor like me, usually
equipped with the turnaround capabilities of a Japanese supertanker). That call was borne out
by what we saw in the market on Friday and it also suited those who are smart at trading
stocks. What I expect in the week ahead is more of the same, but I’m also expected some
choppy intraweek/intraday activity as traders who aren’t convinced that things have
fundamentally changed for metals and the mining/commod stocks take profits, liquidate
chronically suffering positions etc and move on. It’s not going to be plain sailing and nobody
can expect vertical arrows all the way to the moon (Alice), so keep it real.
As for the medium term (let’s say from here to 12 months) I’m far more confident about the
bullish scenario than I was even on Friday morning when writing up that Flash update (and
then buying a bunch of stocks). There’s a profoundly different message to the QE3 than even
QE1 and QE2, one that’s tempts the phrase ‘extremely dovish’, which was outlined in the Flash
update too. This is a fed that will not only do something tantamount to pumping zero interest
money into its financial system, but will do so for what amounts to an indefinite period. I
expected QE3 (post Jackson Hole at least) but not something as obviously, unequivocally bullish
for equities and commodities as that. Therefore, I’ve spent the weekend trying to frighten
myself out of buying the this market like merry hell. And I’ve failed, because what you read are
the words of someone who’s used to considering the nuanced and codified subtleties that
always come with their pros and cons, then making a considered opinion on whether the new
data introduced to the market are positive or negative as regards his own exposure. No this
time, because I can’t get round the simple, basic, bottom-line bullish effects of the Fed’s actions
that have very little if no potential downside, at least in the near-term or medium term,
compared to their clearly bullish influences to stocks and in particular the junior mining stocks
we follow here at The IKN Weekly.
We must consider the potential for problems and hiccups to our newly confident bullish stance
towards the junior mining market, post-Bernanke Thursday. There are somewhat minor issues
such as the expectation that the Canadian Loonie will strengthen against the U.S Dollar
1

(sidebar; the Loonie has a very close correlation to the price of copper) so this would temper
gains in Canadian listed stocks that do their business in US currency.
But there are two potential issues worthy of real consideration. The first is that gains in gold
may be tempered by a faster than expected rise in the U.S bonds rates. According to theory (at
least) T-bonds should see their rates rise as economic activity picks up and as the yield
improves, this would eventually pull money that’s been parked in gold back to interest-
delivering devices. The dollar would then (in theory at least) gain strength against other
currencies, which includes gold. We would then be in a scenario of rising inflation and lowering
market prices for mining company’s products and that’s the mix for lower equities prices par
excellence. Although I wouldn’t expect a rising bond rate to happen in the near or nearer-term
(and quite frankly right now I can’t see much further than six months ahead and don’t want to,
either) the is the possibility that the rise in bonds happens earlier than expected and crimps
equities gains. But aside a surprise of that order, gold in dollars looks a great bet for at
least the time being and probably well into 2013 as well (Mayans permitting) and a rising gold
price tied with a looser and more accessible financial and credit market for juniors is a recipe for
good near-term gains in our covered sector of the market.
The second problem on the near-term horizon is more esoteric in nature, the possibility that
there are so many people saying the same thing and leaning the same way vis-a-vis today’s
market (dollar under pressure//gold up//looser money means more financial credit available//all
fingers point to junior higher) that the contrary trade and the potential for a black swan event
would make for one mother of a whipsaw to all the newly minted commodity longs. As
mentioned before, my contrarian nature means it’s second nature to run away from the herd
and the groupthink and there’s a basic truth about fearing the no-brainer call, because if
someone with no brain can make an equally good decision as you can, there’s something out of
kilter. However, it’s also important to note that...
1) ...every now and again, even the herd makes good calls.
2) ...“Don’t fight the Fed” is a tried and trusted concept so don’t start now, especially when the
Fed is on your side (for a damned change).
3) ...the size of the pot is key, as most people au fait with PMs/metals/commods/etc are
whetting their lips at the gains that Mr. Bernanke seems to have dropped into their collective
laps and those are the circles and people with which we jr mining trader masochists usually
connect with, but there’s a whole wider world out there who are only going to feel the effects
of last Thursday’s Fed decision when the price of their gas/rice/imported plastic toys goes
higher. In other words...
4) ...it’s easy to be contrarian, the hard part is knowing what to be contrarian about.
The upshot to all this can be summarized in one simple phrase. I am bullish. I don’t know how
long the bull run will go on for and I know that it’s not likely to be plain straight up sailing, not
even in the very near term of next week. But I know that this is the type of set-up that I have
to participate in and I have to increase my exposure to this market. That’s already happened
via the addition-type purchases on Friday (though one of those was adding to a short, of
course) and will continue next week with the opening of the OGC.to position. However, thanks
to the recent disposal of FVI I find myself flush with cash and unafraid to use it, so expect more
positions taken in the days and weeks ahead.
Finally, I’m aware that the most likely place to find massive, triple digit springback gains will be
in the worst of the trodden-to-bits junior exploreco companies that have been pummelled by
this unforgiving 2012 down to mere pennies. There’s a lot of potential rewards down in the
dogs (and we highlight the case presented by AQM Copper (AQM.v) in The Copper Basket today
as a fair example) but all the same, my best instincts tell me to stick with quality names, rather
than delving into the end of the junior pool where the shady scam artists dwell. Don’t buy any
old crap, because there are still plenty out there desperate for cash that will use the first sign of
an upturn to run self-serving equity financings to add even more paper to their diluted books
and pay their own back salaries. Buy quality names first, then if you fancy a flutter look for the
type of ultra-cheap, beaten down name that has the potential to spring back if things go its
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way. But first buy quality (there you go, that’s three repetitions to make the point clear),
because even though the organic upside might not be as dramatic as the beaten down name
that re-springs, the preferred exit strategy for any junior will always be the buyout offer from a
larger company and the big boys don’t care whether your ounces are “worth” $5 or $50 or $500
in situ, they’re always going to go for the quality stock, the quality operation, the quality
deposit.
Goldgroup Mining (GGA.to) update
We continue to keep a close eye on things here and note share price weakness on rising
volumes last week. As the Semarnat decision on
Caballos Blanco is due in this month of
September, we might be getting a signal from
the market that all is not well. We continue to
recommend avoiding GGA until the decision is
known and if it turns out to be positive for GGA,
there’s every chance of grabbing hold of some
stock early as it rises on the news to score a
quick momentum trade win. However, holding
through the decision timeline seems overly risky
to your author, considering the record of the
company and the strong local opposition to the
mining project.
Sunward Resources: Discussion of recent share price weakness
The share price action in Sunward in the last couple of weeks has been disconcerting, with a
true cherry-on-top being the drop in the share price that accelerated along with volume in the
last two days of the week while all around the sector saw rebounds, profits and great joy. Quite
frankly it’s not the type of market action that inspires confidence and seeing new lows in a
favoured stock that has a longer-term target of over $3 and is plenty undervalued at $1.50, let
alone $1.20, at a time like this wasn’t easy viewing.
So rather than bask in the glory of upsurging winners of the last few days, I’ve found myself
wondering and worrying about SWD more than any other stock and to that end these musings.
I’ve also been in contact (by phone) with Colin Andrew, CEO of SWD to discuss the company’s
present situation and future plan timelines. Let’s get down to it and to state things nice and
clearly at the top of the piece, there are two
main mitigating factors which will keep me in
the stock, for the immediate-term at least
(though let’s be clear and say that on the other
hand the “considering sale” sign as I re-align
The IKN Weekly service isn’t going away,
either):
1) Even though volumes accelerated into the
drop, it’s a small portion of total shares out
and the big holder of SWD seem strong hands.
If there were selling from the larger holders of
SWD, say Electrum, Paulson & Co or Toqueville
then I’d be more worried by the selling, but as
things stand the volumes traded in the last few days are relatively higher than the drip-drip
stuff of before but still small compared to the really big-hitters on board here.
2) There’s nothing reportedly in bad shape at the project. I talked with CEO Colin Andrew last
week and as well as talking about the current project status and timeline, the overall from
Titiribi is that development continues as per the current timeline. There are four rigs turning on
site and the emphasis is now on turning the exploration and resource information into a PEA
(scoping study). On that CEO Andrew didn’t want to get very specific on timing (which is fair
enough I suppose, this is a big project) but did at least commit to “the first half of 2013”. This
1

is because the current thinking behind the PEA is 1) to make it one of the more complete,
higher standard PEAs that can stand up to scrutiny and 2) offer up several different economic
scenarios for development and mine construction at the project, from the start-small-build-up
type of plan to the high-capex-go-big type.
Those are the two main reasons that keep me comfortable enough about SWD to be able to
hold while others dump and wait for a better price to exit, but apart from those there are
others, e.g. the good community relations continues with issues addressed and two-way
conversations among local stakeholders (rather than the mining company ignoring anything it
doesn’t want to hear). To that end there will also be a lot of study and investigation into water
supply for any eventual mine in the PEA to come because local people aren’t stupid, can read
and have seen what the issues are with other big, open pit mining operations or projects. SWD
is confident there’s more than enough water in the region to supply both population and mining
operation, but as now is the best time to be proactive about potential local concerns before
they get out of hand, the company is going to make the effort now and get those concerns,
addressed, allayed and nipped in the bud.
Next, from what I gathered from CEO Andrew and by reading through the lines during our
phone exchange, the preferred in-house plan for Titiribi is clearly one that takes advantage of
the higher grading part of the most understood deposit inside the larger resource, that of Cerro
Vetas. The overall Cerro Vetas resource contains nearly 6m oz Au (M+I+I) as well as a copper
byproduct credit of nigh on 1Bn lbs, but inside that overall for Cerro Vetas are 32.5m tonnes of
rock that grades 1.14 g/t Au (at a 0.8 g/t cut off, not including the Cu byproduct) for a resource
(M+I+I) of nearly 1.2m oz gold (or 1.5m oz AuEq if you count in the copper by-product at a
suitable ratio). That’s the type of higher grading rock that’s suitable for a lower tonnage, higher
profit, cash flow generator that can fund mill growth without asking for a major capex bill. In
fact, I pressed CEO Andrew on this subject and floated across him that I’ve always considered a
$1Bn capex bill as reasonable for Titiribi, especially when we consider the infrastructure
advantages the project has over similar low grading open pit projects in Chile’s Maricunga or
the Canada/Alaska frozen Norths that have seen their capex estimates balloon wildly out of
control ($6Bn for Cerro Casale!). So I floated my $1Bn rough figure at CEO Andrew and his
reply was a pretty clear “No, it’d be much less than that” in the context of a Titiribi project that
started by mining the higher grade material at Cerro Vetas and then expanded. This makes
sense and looking around, there’s no reason why a smaller operation couldn’t be built for
$500m (or even less) if the plan were to expand later. Let’s do a bit of simple ciggypack math:
• A starter pit that runs the 1.14g/t material at 20,000tpd would process 7.3mt/annum
• That’s good to feed that aforementioned higher cut-off higher grading rock for nearly
five years and would produce an average of around 230,000 oz per year in that time
(85% recovery on 1.14g/t Au, but so far SWD has seen better than 85% recoveries in
its met testing so we shoot to the downside.
• At a operating cash cost of $700/oz we’d be clearing a gross margin of $1,000/oz today
(thanks to Ben Bernanke last week)
• However, the good news at Cerro Vetas is the decent copper by-product kicker we
could expect $200/oz by-product credits and bring this starter operation down to
$500/oz pretty easily (at 0.15% Cu average, we’re theoretically at $300 worth of
copper for every ounce of gold produced if the copper gets 100% recoveries and a
market price of $3/lb, so 66% recoveries would give each gold ounce a $200 credit
approx)
• So 230,000 oz at $1,200/oz gross profit gives $276m in cash flow per year. Even after
paying G&A, dues to government coffers etc, the cash generated from that type of
smaller beginning is very decent, would pay down the relatively low initial costs quickly
and leave large lumps for the next growth stage, where throughput would go up in
order to compensate for lower average grades.
Yes, I know it’s all a bit rough’n’ready mathematics at this point. And yes, we need to see what
direction SWD is going to take in the PEA and then its preference beyond that (and let’s face it,
2

the most likely exit strategy is still a sale to a major). But what the quickmath does show,
limitations aside, is that Titiribi is doable and thanks to its higher grading pods (along with the
well-documented excellent infrastructure already in place, power, water, roads and labour all
checking in) and won’t need the type of massive upfront cash that the Livengoods and
Caspiches of this world demand.
But back to the issues at SWD and its current share price slump, which is an undeniable blot on
last week’s copybook (in my portfolio at least). If we look at the state of play in SWD over the
last two years (having first bought the stock in November 2010 I’m still up on the overall deal,
apologies if that fact annoys you) compared to other low-grade-big-tonnage-open-pitters
Andina (ADM.v) Exeter (XRC.to), NovaGold (NG.to) and International Tower Hill (ITH.to) it’s
now feeling the same type of drag, but on the other had it has clearly outperformed its peers.
On the other hand, cut down the timescale to just 2012 and SWD is at (or close to) the bottom
of the same pile of peers, so its weakness is clearly a recent phenomenon
I’ve personally done the numbers on Titiribi seventeen whichways forwards and backwards and
convinced myself that although this project runs a low grade, it sets itself apart from the other
of its ilk once the numbers are run because its economic parameters are that much stronger.
But I also know that a directive or blanket “low graders are out” type of statement from on high
can see them all tumbling, so the requirements of market fashion may be in play here (repeat
mantra “grade is king” until any newbie fund manager who doesn’t agree is sacked). As local
social issues are well-managed and maintained by SWD, political risk from violence in that
2

specific region is very low and Colombian national politics, although imperfect, is conducive to
mining and moving in the right direction, the other logical possibility for the weakness that
crosses my mind is that we’re a long way from the next significant catalyst for SWD and
minority holders who don’t have the patience of the big players on board are leaving in order to
find some faster action. If that’s the case it is understandable, but then again it also means this
current price sag will be wholly temporary in nature and we can look forward to a snap-back
once the sellers are done liquidating their positions.
Conclusion
IKN176 is done, we close with bullet points:
• No more pussyfooting around, we buy OceanaGold (OGC.to) (OGC.ax), as what we
heard on Thursday is virtually tailor-made macro news for a company such as OGC.
• We’re also buying a decent quality company in the shape of OGC, something I urge you
to do rather than stick a whole bunch of cash on the crummy end of the market. Then
again, I’m not against a high risk play on the really beaten-to-a-pulp names as the
commentary on AQM and SRD point out. The dosage of cash applied to each type of
trade is vital.
• Argonaut Gold (AR.to) has a significant permitting problem in Baja California Sur, site of
its San Antonio project.
• I like, really like the overall look of this market all of a sudden. It won’t go on forever
and it will have its rocky moments at any given stage, maybe even sooner rather than
later, but the macro setting now in place means that being an exposed participant to
events is a much smarter option than staying on the sidelines.
• I’m looking to my recently swollen position in Bear Creek (BCM.v) to provide a boost in
the near-term and I won’t hesitate in cream off a bit of profit if it does. Same too for
the other adds, including Strait (SRD) Yellowhead (YMI) and its potentially stifling
permitting issues (though I don’t dare say much more than “potentially” at this
moment). This is a market fit for trading and therefore trade I will.
The top long-term pick is Rio Alto Mining (RIO.to). I thank you in advance for any feedback
sent in. Flash updates will be sent promptly if required by events.
I wish you good trading fortune, ladies and gentlemen.
Otto
2

Footnotes, Appendices, references, disclaimer
(1) http://biiwii.com/wordpress/
(2)http://sinocism.com/
(3) http://sinocism.com/?page_id=2349
(4) http://www.mpettis.com/2012/09/16/by-2015-hard-commodity-prices-will-have-collapsed/
(5) http://finance.yahoo.com/news/oceanagold-announces-signing-corporate-refinancing-075300360.html
(6) http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-
Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3D20120914-canada-
composite.pdf&blobheadername2=Content-
Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-
type&blobwhere=1244165983001&blobheadervalue3=UTF-8
(7) http://www.lupakagold.com/i/pdf/nr/2102-09-13_NR.pdf
(8) http://www.avn.info.ve/node/131881
(9) http://www.proceso.com.mx/?p=319867
(10) http://www.goldcorp.com/Unrivalled-Assets/Mines-and-Projects/Mexico/Operations/El_Sauzal/Location-and-
Geology/default.aspx
(11) http://www.rpp.com.pe/2012-09-13-cajamarca-paralizacion-total-en-la-ciudad-de-bambamarca-por-conga-
noticia_521317.html
(12) http://www.generaccion.com/noticia/166888/mil-ronderos-vigilaran-lagunas-conga-permanentemente
(13) http://www.larepublica.pe/14-09-2012/gregorio-santos-se-reunira-con-la-comision-de-energia-y-minas
(14) http://www.anglogold.co.za/NR/rdonlyres/3668CC11-BFFC-4F2D-A068-
EDDD3102AA74/0/MarkCutifaniatthe2012DenverGoldForum.pdf
(15) http://www.entornointeligente.com/articulo/1312157/Datanalisis-Chavez-ganaria-con-431-si-elecciones-fueran-este-
domingo-12092012
(16) http://www.oem.com.mx/elsudcaliforniano/notas/n2693479.htm
(17) http://finance.yahoo.com/news/argonaut-gold-announces-updated-pea-120300101.html
Appendix 1: Flash update dated Friday Sept 14th
Good morning, I decided to sleep on the FOMC move and market reaction before making any pro-active decision,
something I did quite literally and slept very well (thanks for asking). Here are the results of the musing:
1) I was initially surprised by the amount of positivity that greeted the announcement of QE3, because from where I
was looking it semed like a fairly obvious call that Bernanke had already telegraphed to the world (Jackson Hole etc).
My thinking up to yesterday was that most of the kick from QE3 being announced was already baked in. Now, especially
when considering the aggressive, open-ended nature of its policy move, it looks as though yesterday's Fed decision will
have a greater repercussion in the near-term market than I expected. Felix Salmon in this post yesterday...
http://blogs.reuters.com/felix-salmon/2012/09/13/qe3-arrives/
...put the effect of the 'open endedness' of the QE3 move very well when writing:
What this means is that QE3, unlike QE1 and QE2, has no set expiry date. The Fed’s not trying to kick-start the
economy any more: instead, it’s promising a steady extra flow of monetary fuel for the foreseeable future — or at least
until the labor market improves “substantially”. Which is likely to be a pretty long time.
That would be a big enough deal on its own, but the Fed went even further in the following paragraph, where they all but
promised zero interest rates until mid-2015:
The Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a
considerable time after the economic recovery strengthens.
The job of monetary policy, in the famous words of Fed chairman William McChesney Martin, is “to take away the punch
bowl just as the party gets going”. The Fed, here, is essentially disowning Martin, and saying that they’ll keep refilling
that punch bowl with high-grade hooch even after the party is getting going.
2) There is clearly a new bullish feeling around the metals and also those stocks that depend on them, which
includes of course the tiny sliver of the market we cover in The IKN Weekly known as junior mining companies. What
2

we're likely to see is a market that will virtually oblige managers of funds, brokered accounts, institutional portfolios (etc)
to re-take positions in the miners else see their professional prowess (ie jobs) under scrutiny. In other words, I don't
know how long this highly bullish feeling around juniors will last but that's where we are today (and probably next week
at the very least) so while it remains bullish it's silly not to take advantage of it.
3) On a personal note I will deploy cash today, looking for bargains of a near-term trading nature. I am aware
that The IKN Weekly is moving away from the exploreco end of the junior sector and that is not changing as a policy.
However, that's where the most violent upmoves are most likely simply because they've been so heavily beaten down
during this awful 2012 so I will look to add to positions in Bear Creek Mining (BCM.v) and Yellowhead Mining
(YMI.to) today, as well as trying to get an addition to my position in Strait Minerals (SRD.v) which would be a
smaller position and also still risky (as we don't know the results from the first stages of Alicia drilling yet). Buying more
SRD is tougher too, due to the tiny volume nature of the ticker. However, BCM.v and YMI.to, they're definitely on the
menu for additions here because at current numbers and with new eyes looking for cheap fundamentals these two (YMI,
BCM) scream cheap, they don't just shout it.
4) An addition to Minera IRL (IRL.to) (MIRL.L) here is tempting, because although it's been strong recently (up
~20%) it's still very cheap compared to its target. However, for the moment I'm probably going to hold off on an addition
as news from the Don Nicolas permitting track is the key to this stock. However, I repeat that if the Argentines come up
with the necessary permits on schedule (i.e. before end 2012) this company is clear Top Pick material in the making.
5) On the other hand I will make my final exit of Fortuna Silver (FVI.to) today, thus raising cash for future purchases.
Our selling price has finally arrived and I'm going to stick to the plan here. It's taken far longer than I imagined to get a
decent exit price on FVI, but here we are.
6) I will also boost my new short position in Gold Resource Corp (GORO) today. I took a small short to mark price
at $20.70 earlier in the week but then thought the entry point I really wanted, $21 or so, had slipped away from me.
However GORO reacted very well to the Bernanke news yesterday and saw $21+ for a while before closing at $20.84.
By the looks of things GORO will open up above $21, which is the right spot for me to move in and take the short
position I wanted to take. We remind reader of the fairly-short-term nature of this trade, with a exit strategy of mid-
November in the cards.
7) Away from The IKN Weekly 'Stocks to Follow' portfolio, we're in the type of atmosphere in which all boats rise so
I'd encourage readers to add to their own preferred positions and raise general exposure to the juniors market at this
point, whatever your favourite poison might be (I am not you, you are not me, etc etc). I thank readers once again for the
mails that have been coming in with suggestions for new potential trades and more are welcome so keep them coming.
Amongst recent ideas Nevada Copper (NCU.to) has been voiced several times. NCU is a company that we've followed
on the Weekly quite closely without pulling the trigger and is likeable in present circumstances (copper very strong this
morning). Silver Wheaton (SLW) clearly has plenty of fans amongst you (rightly so, super-strong company, as does
Silvercrest (SVL.v) which looks expensive from my point of view, but then again I said exactly the same thing when it
was at $2, so wtfdik? Finally, I'm still interested in OceanaGold (OGC.to) and Primero (P.to), but not at any price.
However, I'm going to do some work today on new price decks for gold (etc) and see if the current preffered entry points
can be reasonably raised. Thought on that on Sunday in IKN176.
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'1 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
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Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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