IKN #177Premium

The IKN Weekly
Week 177, September 23rd 2012
Contents
This Week: We consolidate.
Fundamental Analysis: Deferred.
Stocks to Follow: Overview, OceanaGold (OGC.to), Bear Creek (BCM.v), Gold Resource
(GORO), Yellowhead (YMI.to), Rio Alto (RIO.to), Vena (VEM.to), Sunward (SWD.to), Lupaka
(LPK.to), Minera IRL (IRL.to).
Copper Basket: Overview,Lumina (LCC.v), Catalyst (CCY.v), Western (WRN.to).
Regional Politics: Regional Risk update twelve.
Market Watching: Primero Mining (P.to) (PPP): Goldcorp runs a secondary, Tahoe Resources
(TAHO) (THO.to) in Guatemala, Goldgroup Mining (GGA.to) withdraws its environmental permit
application, Argonaut Gold (AR.to) and San Antonio risk, Peru Cajamarca: Gregorio Santos now
a marked man, Yellowhead Mining (YMI.to), Atico Mining (ATY.v).
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
We consolidate
Last week at the markets turned into a good one and once it was done and dusted Friday
evening I came away feeling happy about being long gold. And that, ladies and gentlemen, is
really all the intro I have left in me today and basically for the same reason mentioned in the
“Fundamentals...” section just below.
Fundamental Analysis of Mining Stocks
In Friday’s Flash update I wrote that I’d been working on a potential new purchase of a gold
producing company and that although the model was looking pretty good, “...although the
potential purchase appeals I still have some work to do to convince myself.”
The fact is that I need more time to get this one right and so, with sincere apologies, I’m going
to defer its publication until next week. I’m also sorry to be all mysterious about this one, but
until I’m comfortable with both the model and the story I don’t feel good about telling anyone
which company it is, either. The only piece of good news I can throw at you today is that, gold
price fluctuations aside, this isn’t a company that we need to buy now and there’s no real time
pressure on taking a new position (as far as I can see) so waiting until next week isn’t going to
harm its prospects.
I know that I could have swapped and changed things around in this week’s edition to make for
an entry in ‘Fundamentals...”, or perhaps done some work on some other company we follow,
but frankly I’ve been obsessing over this new company and its model for days and been too
focussed on it to do much else. When it got to Sunday afternoon (i.e. today) and I kind of knew
that time was beating me, rushing out something else just to fill in space didn’t make much
sense. So with a final apology for being such a flake, until this time next week.
1

Stocks to Follow
Since last week six of our open positions have made gains (SWD.to, LPK.to, BCM.v, OGC.to,
AQM.v, FCV.v), one has remained unchanged (VEM.to) and seven have lost ground (RIO.to,
YMI.to, LRA.v, PLA.v, IRL.to, GORO, SRD.v). The top performances in the week past came from
Lupaka Gold (LPK.to up 19.4%), Sunward Resources (SWD.to up 11.0%) and Bear Creek
Mining (BCM.v up 8.8%), whilst the worst of the losses came from Strait Minerals (SRD.v down
15.4%), Plata Latina (PLA.v down 13.0%) and Lara Exploration (LRA.v down 9.9%). At first
glance it was a ho-hum even-stevens week for the list but I was very encouraged by what was
seen overall. Some of the losers had their own reasons to drop (e.g. RIO.to and its inside sale,
LRA.v and its placement), some are the tinycaps that fluctuate big on little trading (e.g. PLA.v
and SRD.v and we’re used to staccato action from those two) but mostly there was a goodly
amount of healthy looking consolidation going on after the big rush up of the week before.
Also, where stocks hadn’t previously moved up we got some decent catch-up action going on,
with Sunward (SWD.to) a good example (BCM and LPK too, I suppose). The bottom line is that
I liked what I saw from last week in the juniors, both the ones on our list and the general
atmosphere of the sector. And my stars, it’s a pleasant change to be truly positive in this annus
horribilis 2012.
With the addition of OceanaGold (OGC.to) we now have 14 open positions on our list, one 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$5.19 154.4% $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$1.31 -10.9% considering sale
Lupaka Gold LPK.to hold C$1.12 23-oct-11 C$0.80 -28.6% considering sale
Bear Creek Min. BCM.v buy C$3.38 07-nov-11 C$3.48 3.0% added 3rd time Fri 21st
Yellowhead Min. YMI.to buy C$1.00 01-apr-12 C$0.74 -26.0% value under $1, added Fri
Lara Expl. LRA.v buy C$1.15 08-apr-12 C$1.28 11.3% solid biz model, LT hold
Plata Latina PLA.v hold C$0.79 10-apr-12 C$0.435 -44.9% considering sale
Minera IRL IRL.to buy C$0.65 22-jul-12 C$0.85 30.8% $1.56 tgt added more
OceanaGold OGC.to buy C$3.03 16-sep-12 C$3.08 1.7% new position $5.34 tgt
Gold Res Corp GORO short U$21.47 09-sep-12 U$23.67 -8.7% SHORT Position tgt $14
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.155 -50.0% considering sale
Strait Minerals SRD.v buy C$0.125 09-dec-11 C$0.11 -12.0% tgt 25c drill play
Focus Ventures FCV.v buy C$0.175 01-jul-12 C$0.24 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
failed ST trade close pre
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% 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
2

Now for some notes on a selection of the above stocks.
OceanaGold (OGC.to): Position opened and not only that, but I added a decent chunk on
Friday as per the Flash update of that morning (see appendix 2). The stock performed just fine,
fluttering around the $3 mark all week
before flexing a little more in that Friday
morning gold+stock early surge. Gold’s
move to start threatening $1,800/oz didn’t
last long Friday and things generally
moved back, but OGC hung around the
$3.10 range all day bar those last couple
of trades and on very good (1.5m+) one
day volume, to boot. That’s 5X its three
month average and all the liquidity you’d
ever need, traders.
So the new IKN PM producer position has
started positively, good to report. This one
is all about relative value to the metal,
relative value to peers and the growth upside from its Didipio project that should provide a
decent kick when up and running, assuming it gets up and running that is (but fear not, things
look good there). This new long position isn’t trying to re-invent the wheel, it’s a plain and
simple find-a-good-way-to-play-the-gold-bull so while gold remains bullish, we’ll stay long OGC.
Bear Creek (BCM.v): Added. Note that the average buy price for BCM is now a few notches
higher at $3.38, as your author bought as planned Friday (see appendix 2). This is turning into
a pretty chunky position in my portfolio now and it’s getting to the point where I have to at
least consider giving the stock a Top Pick rating, on sheer portfolio weight alone.
Gold Resource Corp (GORO): Here’s the five day chart for GORO showing how the stock
traded at-or-around $22 all week and
failed to break $22.50 at the best of
times, which makes the U$23.67 finish it
registered last thing Friday looks rather
the outlier, doesn’t it? We’ll likely see it
drop back Monday from the tape-paint
Friday close but whatever happens, this
short is all about its production numbers
come early October, not intraday
malarkey late September.
Yellowhead Mining (YMI.to): See ‘Market Watching’ for more on YMI, suffice to say here
that I’m now a much more relaxed and happier holder after finding out more about the BC
political scene.
Rio Alto Mining (RIO.to): The news we passed on Thursday in the Flash update (see
appendix 1) may have weighed on the stock Friday, as we went from a new all-time high
intraday $5.37 in the morning to as low as $5.08 before really large volume turned up (it was
TSX big board balancing day, as the near 4m shares moved after hours indicated) and saw RIO
finish $5.19. All part of the fun of the market, I suppose. As for that Alex Black sales news we
sent in Thursday’s Flash, it was confirmed later the same day by the man himself who sent this
to the RIO shareholder mailing list (start/finish pleasantries omitted):
3

“Today, Auscan Assets Limited, a company I have a beneficial interest in, sold 1,690,000 RIO
shares. Post sale, the company is intending to exercise 690,000 RIO options. As a result of these
shares being sold and once the options are exercised, Auscan Assets Limited will still hold a total
of 5,069,651 RIO shares. Auscan Assets Limited made the decision to sell these shares to enable
it to diversify its investment portfolio. The timing of the share sale was made to coincide with the
entry of the company into the S&P/TSX Composite Index entry whilst demand for the shares is
high. Prior to selling the shares, I personally contacted Sentry Capital and Investors Group, our
two largest shareholders, to gauge their opinion and both supported the sale. Auscan has no
intentions to sell any more RIO shares in the short to medium term.”
So the information gleaned by your author was basically correct, bu we now have the exact
numbers of shares sold, options exercised and post-trade holding of the RIO Pres/CEO. It’s also
good to note that the largest RIO shareholders were contacted before the trade went through,
so all main insto bases were covered. Finally, also good to see that similar trades are not
planned by CEO Black in the “short to medium term”.
Vena Resources (VEM.to): We understand that next week a definitive decision will be
forthcoming on the sale of VEM’s portion of Azulcochamining S.A. in order to clean up its
balance sheet and let it move forward (as reported in more detail in IKN175). Meanwhile the
market has shown all signs of considering the 15c prices of a couple of weeks ago (where your
author picked up a few trading shares to leaven the heavy load) as too cheap, with 17c or
abouts the going rate now. With good news of a cleaned-up VEM, I expect we’ll see the 20c+
numbers I’m looking for as the target.
Sunward Resources (SWD.to): A better week. Last week’s longish piece on SWD where I
had my kvetch on SWD’s poor recent price performance but then came out on the side of
holding through this soft price period got some payback, though I hasten to add that I’m 100%
sure my prose had nothing to do with the improvement. Instead, two factors seem to have
been in play
A NR from the company Thursday (1) that announced decent drill results from two of the
lesser-explored zones of Titiribi, namely Junta and Porvenir. The Junta drill intersects in
particular caught the eye, as hole JTO12 returned a 54.6m section of 0.823 g/t gold between
34.5m and 89.1m down hole, then 41.0m of 0.561 g/t with decent copper credit (0.128%)
further down between 125m and 166m. That’s a pretty good hole for the low grading system
that is Titiribi. In the same NR, company CEO Colin Andrew was again keen to point us to the
lower capex threshold, staged development type of plan that SWD seems to aiming for these
days, with the general story that of these outlying areas of Titiribi such as Junta and Porvenir
are going to be great feeder/complimentary/life expanding place to dig and use to expand
production once the first stage based on the higher grading areas of Cerro Vetas is up and
running.
The second thing to favour SWD last week is that it looks as though the company, or somebody
close to it with skin in the game, or a friend of the company, or a market promoter, or
somebody who knows how to do these
things (yeah, I’m being deliberately
vague, did you notice?) has got around
to defending the company stock price at
last. Exhibit A: Note the share price
ramp Thursday, on lowish volume and
one day before SWD released news to
the market. Exhibit B: Note that the
persistent seller of the last few days and
weeks (the one we noted in last week’s
piece) seems to have disappeared,
either on their own accord (because
they’ve sold all they own) or perhaps
because something has been said to
them about the advantages of holding
on a while. Exhibit C: As seen on this
4

five day price chart, come Thursday and Friday there was suddenly a whole buzz of small 500
share and 1,000 share lots changing hands again and again in the stock, the type of action you
see when a stock is either being attacked or as in this case, its price is being protected.
Add the elements of change in last week’s market action together and it’s fairly clear that SWD
(or somebody close to etc etc etc see above) has finally got more proactive about the state of
the company’s share price and market cap. And a good thing too, because I for one was getting
pretty fed up with the drip drip selling, particularly considering the size and market clout of the
main institutional holders of this stock (Electrum etc).
Lupaka Gold (LPK.to): Friday saw confirmation of the merger between LPK and AAG, which
is due to go active on October 1st according to the NR that afternoon (2). It also saw the
market decide that this totally telegraphed news was suddenly actionable and the stock(s) shot
up to 87c before LPK closed on 80c, driven by a small flurry of 1,000 share pieces bought by
somebody and then immediately greeted by larger 20k and 10k pieces that brought the quick
pop back a little. However, it was good to see LPK get a bit of love on this news. Grinch alert: If
LPK hadn’t done this merger I’d have a LPK position in the money by now. End of Grinch alert.
We now wait on news from the Chaska zone early stage drilling. It’s always a bit of a crap
shoot to rely on drills, especially the first ones put into a new target, but there’s enough in LPK
to justify its current share price so anything from Chaska can only be bonus. The truth machine
will decide, while we may be about to get more liquidity in LPK share trading once the AAG
shares are folded into the structure October. That’s the other silver lining here.
Minera IRL (IRL.to): I didn’t get any extra IRL on Friday (appendix 2) sticking with just OGC
and BCM as additions in the end. IRL isn’t an easy one to buy quietly and what’s more, its
Argentine permit thing is foremost in my mind so in the end I got a bit whussy about an
addition (plus getting a rush of blood to the head after buying two whole other stocks, which
constitutes a big day at the market for your author). A bigger holding of IRL can wait, either for
the right news or for a decently lower entry point.
DQ is a longtime IKN reader and mailpal and he and I have swapped more mails than probably
either of us would care to remember, but he has this knack of crystallizing my own thoughts by
asking smart questions. That happened for the umpteenth time yesterday Saturday when he
asked my opinion of the IRL projected timeline for permitting at Don Nicolas Argentina and
what I thought the chances of it happening as per the company really were. Here’s what I
wrote back to him (slightly redacted to save blushes of both guilty and innocent):
1) IRL says that it's on track for Don Nicolas permitting by end 2012
2) If it happens, signed sealed delivered, it's a very bullish signal and I'll be buying more, no doubts.
3) If not, a delay will see PPS upward momentum drag. The situation may eventually turn into one of those
really annoying Waiting for Godot scenarios where no word drips out for weeks, months and we start
pulling out our collective hair (company, shareholders, everyone) because there seems to be no real reason
for any delay.
4) Worst case is that Argentina totally blows up on the company and it switches to make Ollachea the next
mine in operation, thus using capex cash for Peru rather than Argentina. It will knock back timeline for the
next mine by one year and the PPS will suffer, but i don't see massive downside even in a worst case.
And my opinion of the chances that IRL delivers on its permit in the 2012 timeline? I honestly don't know. I
know IRL people are sincere, honest, trustworthy. I also know what Argentina and dealing with its politicos
is like. Nothing, repeat nothing surprises me about Argentina so even though the spirit and will to get things
done at IRL is high, we're in the hands of a bunch of people that think via a different plane in the space/time
continuum.
This is why I believe the current segment of time to be a key one at IRL. When the company
has control, when it has what it needs in its hands it’s shown itself to be a fine operator and
one on whose word we can rely. But at the moment we and IRL are at the mercy (oh, I tried to
avoid using that phrase but it’s slipped out now, so I’m leaving it for want of a more accurate
sentiment) of Argentine politicians for this permitting , construction and commissioning track for
IRL that’s pretty sharp if they want to pour first gold there by the end of 2013.
5

Plata Latina (PLA.v): It was down big in percentage terms, but we’re still looking at a thinly
traded vehicle here so it’s the type of choppy move we can (half) expect at the moment. The
problem for me personally is that it’s one of the exploreco on the list with “considering sale”
written next to its name, one of the ones I’m considering dropping from our ‘Stocks to Follow’
list in order to make room for a producer. With thin and irregular price/volume at the moment,
it’s hardly one that I can trade nimbly. Some news would come in handy.
Lara Exploration (LRA.v): One of our bigger losers of the week saw nearly 10% chopped
from this time last week because LRA has decided to go to the well and get financing. The
September 17th NR (3) announced that
LRA was raising $3m via a 2.4m unit
placement priced at $1.25 (unit = 1
share + full warrant at $1.85 with a 2
years shelf life). The deal tops up the
LRA treasury and it came as no surprise
whatsoever to mail over to LRA
management right after the NR hit and
be told that the placement book was
already filled before the announcement
went out. So if we take into account that
little snippet and also the way in whic
LRA sunk towards he equity placement
price in pretty classic style but low trade
volume, chances are that LRA will bounce
back from whence it came soon enough.
Overall, it’s a bit of a pain to see LRA jump at the first chance it has to go to market and feed
its coffers, but it’s also understandable and knowing the conservative, no risk nature of its
model it would have been tough indeed for this team to have refused money at this point if
offered it. And it was offered.
The Copper Basket
After thirty-eight weeks of 2012 The Copper Basket is showing a 35.27% loss to level stakes.
company ticker price 1/1/12 Shares out Market Cap current pps gain/loss%
1 Copper Fox CUU.v 1.15 395.5 474.60 1.20 4.3%
2 Lumina Copper LCC.v 13.19 40.7 452.18 11.11 -15.8%
3 Augusta Res AZC.to 3.17 144.1 389.07 2.70 -14.8%
4 Nevada Copper NCU.to 5.18 72.8 245.34 3.37 -34.9%
5 Candente Copper DNT.to 0.97 121.67 69.35 0.57 -41.2%
6 Regulus Res REG.v 1.24 99.88 68.92 0.69 -44.4%
7 Western Copper WRN.to 1.58 93.28 64.36 0.69 -56.3%
8 Baja Mining BAJ.to 0.80 338.5 44.01 0.13 -83.8%
9 Yellowhead Min. YMI.to 0.80 52.82 39.09 0.74 -7.5%
10 Duran Ventures DRV.v 0.18 184.72 24.01 0.130 -27.8%
11 Catalyst Copper CCY.v 0.08 274.48 20.59 0.075 -6.3%
12 Excelsior Min MIN.v 0.63 56.12 16.84 0.30 -52.4%
13 AQM Copper AQM.v 0.39 105.6 16.37 0.155 -60.3%
14 Crazy Horse CZH.v 0.35 62 8.37 0.135 -61.4%
15 Strait Minerals SRD.v 0.150 56.86 6.25 0.11 -26.7%
Portfolio avg -35.27%
6

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.
It wasn’t by much, but the seven week winning streak for our Copper Basket was broken last
week as the overall basket lost zero point
one three percent. Six of our names made 20% Copper Basket 2012 average, weekly
gains on the week (LCC.v, NCU.to, AQM.v, 15%
10%
MIN.v, DRV.v, CCY.v) and the other nine
5%
dropped some (CUU.v, AZC.to, BAJ.to, 0%
-5%
WRN.to, DNT.to, REG.v, YMI.to, CZH.v, -10%
SRD.v). Of the winners, the best -15%
-20%
percentage moves were put in by Catalyst -25%
-30%
Copper (CCY.v up 36.4%) and Lumina
-35%
Copper (LCC.v up 19.5%) while the worst -40%
-45%
of the losers were Western Copper & Gold -50%
(WRN.to down 23.3%), Strait Minerals
(SRD.v down 15.4%) and Augusta
Resources (AZC.to down 9.7%). Overall a
slightly negative week for the exploreco
coppers, a sentiment that was mirrored in the
larger copper sector as seen by the 4% drop in
COPX, the copper producers’ ETF, last week
(4). One reason for this may be the failure of
copper the metal to follow through on the
previous week’s quick gains, as spot lost 6c/lb
to close at $3.77/lb after finding strong
resistance at $3.80.
In other fundies news, world inventories
climbed by 12,855mt to 431,811mt, a rise of
3.1%. Nearly all of that rise was centred on
Shanghai Futures Exchange warehouses, that
saw inventories of 166,829mt at the end of the
week, up 10,428mt or 6.7% which means yet
again that the signal from China is that of weak
demand. Another bearish signal for copper
comes from those LME warehouse cancelled
warrants, a dataset we follow closely because
it’s been fairly successful in leading copper
prices in 2012. They dropped 2.29% to
15.89% last week, as seen in the chart here.
There’s still no real bull/bear decision that
can be made from that little lot, but it
balance again swung back towards sector
weakness in the last seven days and on
balance, it’s a pretty easy call to favour gold
exposure over anything in the industrials or
base metals sectors. Copper is sending a “it’s
not very strong round here” message that
goes beyond near-term price fluctuations and
its reach is enough to affect the hybrid industrial/investment nature of silver as well. In last
7
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 dr32
source: IKN Weekly calcs, TSX
2102/1/1
morf
egnahc
%
Cancelled Warrants at LME, IKN157 to date
35%31.91%
30%
19.81%
2
2
0
5
%
% 21.9
1
1
6
%
.21%
20.89%20.67%
19.10 16 % .0106%.4 1 0 8 % .3 1 9 6 % .06% 18.18 15 % .89%
13.76% 13.78% 15% 11.07% 11.5911%.721%0.81%
8.71% 10% 6.87%
5%
0%
751NKI 851NKI 951NKI 061NKI 161NKI 261NKI 361NKI 461NKI 561NKI 661NKI 761NKI 861NKI 961NKI 071NKI 171NKI 271NKI 371NKI 471NKI 571NKI 671NKI 771NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne

Friday Flash update I said I preferred to stick my neck out on gold rather than silver. With the
market currently influenced more by big monetary and financial issues rather than baseline
economics, that’s a call I’m sticking with.
Now for updates on some basket companies this week:
Lumina Copper (LCC.v): LCC had a decent week and it shot above $11 on Friday, all on no
news. At a wild guess, new money trying its luck in Argentina. I wish them good luck, they’ll
need it (5).
Catalyst (CCY.v): CCY moved up the most of any of our Copper Basket stock last week, which
goes to show that you gringos really will buy anything.
Western Copper & Gold (WRN.to): Interesting action in WRN last week because the story
was one-way, down, on no news (the last we had out the company is its Sept’12 Colorado
Precious Metals Summit presentation (6) that didn’t really have anything new to say) and on
consistent above average volumes too. It all points to some larger holder wanting out of the
stock (and using TD Securities to do so) which goes rather against the grain of this new
optimism in the junior markets, particularly taking into account the persistent nature of the
liquidation.
WRN has never been a favourite here at The IKN Weekly, even when its big Casino project was
being pumped by the Canadian houses and rising from $2+ to $3+, way back when. It has the
type of low grade + high initial capex
footprint that’s now out of favour in the
market and it matters not how safe a
jurisdiction Canadian moose country may
be for your new mine when you’re obliged
to throw a few billion at the project just to
get it started. However, as mentioned
before if the market insists that Copper
Fox (CUU.v) is worth nearly half a billion,
this similar project looks undervalued in a
comparative way so there’s a line of
reasoning to get speculative on this stock,
if that’s the type of risk you’re into (what’s
that they say about catching falling
knives, again?). However, before even
thinking about considering this one for a rebound play, you’d want to make sure that the seller
who showed up last week has done with their selling, therefore until volumes drop it’s one to
watch carefully, rather than play.
Regional politics
Regional Risk update twelve
It’s time for our regular quarterly check-up of regional risk for mining in the LatAm region. For
reference purposes, this table was first featured in IKN32 Dec’09. It then appeared in IKN42
Feb’10, IKN58 June’10, IKN70 Sep’10, IKN83 on Dec 5th 2010, IKN97 March 13th 2011, IKN112
June 26th 2011, IKN123 Sept 11th 2011, IKN137 Dec 18th 2011, IKN152 April 1st 2012 and most
recently in IKN163 dated June 17th 2012.
We remind readers of the scoring system: Each country gets a four-category score and then
underneath come notes to explain any changes in scores or circumstances as well as some
commentary on the current state of play in each country as regards mining (recall our subject
8

here is the mining industry, it doesn’t consider factors wholly unrelated to mining). Here’s the
make-it-easy-to-read colour coding:
Green: Good
Peach: Possible but tread carefully
Orange: Warning warning
Red: Danger Danger
Sep'12 updated Latin American Country Risk For Foreign Mining Companies
Country Miner Friendly FDI Friendly Mining Culture Political Stability Total
Chile 7 9 10 9 35
Mexico 7 8 9 8 32
Peru 8 7 9 7 31
Colombia 6 10 7 8 31
Brazil 7 9 7 8 31
Nicaragua 8 7 7 7 29
Uruguay 7 7 4 9 27
Panama 5 9 5 7 26
Guyana 7 7 4 7 25
Dom Rep 6 7 6 5 24
Honduras 5 6 5 5 21
Argentina 6 3 5 7 21
Ecuador 6 5 4 5 20
Bolivia 2 2 10 5 19
Paraguay 5 7 3 4 19
Guatemala 4 5 3 6 18
Haiti 6 6 1 4 17
El Salvador 2 7 2 5 16
Costa Rica 1 6 1 7 15
Venezuela 2 3 1 5 11
source: The IKN Weekly house estimates
General comment. In the last quarter, risk in general improved in the region, as we see
seven points added to the aggregate total of 468, compared to 461 in IKN163 back in June.
Perhaps because of the downdraft in metals prices that suddenly has the local states trying to
become more attractive, perhaps some maturity showing through towards the mining industry
and what it is in its modern form, perhaps other reasons.
There are still just five countries that get the overall “green for go” shading, but it has to be
said that Nicaragua continues to make strong progress. GDP forecasts for the country now have
it growing at 4.1% (was 3.7%), the mining industry has been given a clear welcome by
President Daniel Ortega who sees it as one of the key growth areas of the economy as long as
modern environmental standards are maintained there’s no reason why Nica’s reputation as a
mining destination of choice shouldn’t grow further.
However, there are now seven countries that are now classed in the red zone on our list of 18
countries, those in which I’d need superstrong reasons in order to place a bet (note use of
verbal phrase, as I deliberately avoid using “make an investment”). Back in the first seven
editions of this regional risk overview (up to and including IKN112, June 2011) there were just
five in the red for danger section of our chart. Not only that, but there are true fringe countries
such as Ecuador, Argentina and Honduras just above the red zone that should give anyone the
cold shudders when considering an investment in junior mining (Argentina being a particularly
difficult fish personally as 1) it looks modern and sophisticated on the outside, but underneath
9

it’s crazier than a box of monkeys 2) I adore the place 3) I have some exposure to its whims via
IRL.to, which although seemingly minor and controlled gives me more political worry than the
rest of my junior portfolio combined. I digress. The reason to mention “the red zone” is to note
that over a longer period, more and more countries seem to have made themselves unfriendly
towards the mining industry, either via overt antipathy or as a secondary result of having an
unstable or unreadable internal political situation. Real live dyed-in-the-wool miner-friendliness
is becoming an exception rather than a rule, so pro-mining efforts of countries that aren’t
traditionally mining destinations such as Colombia shouldn’t be dismissed lightly, even if the
nascent industry there has its bouts of growing pains.
To round off the warm-up today, here’s a line included in today’s Mexico section below is
repeated for your consideration:
As in all LatAm (barring perhaps Chile) we remind readers that you
cannot assume one flat, unmoving political risk for all parts of the
country.
That’s repeated for a reason, ladies and gentlemen. This risk review tries its very hardest to
give a balanced view of each country in question and a score that reflects their positions and
attitudes, but it’s always vitally important to understand the local area risks and attitudes before
wading in on your mining explorer or producer play. Peru is miner friendly but the far North
jungle regions of the same country are not. Mexico is miner friendly but the Chiapas region is
not. Beware the FARC-EP or Far Right Wing terrorist hotspots of Colombia. Argentina brings a
hat ful of risk but Santa Cruz/San Juan/Catamarca/Jujuy/Salta provinces have redeeming
factors (as long as you can overcome the hurdles set by the national government
Chile: Miner friendly down one point, political stability up one point. In the last few
updates we’ve kind of skipped past Chile, simply and somewhat blindly giving it the plaudits it
deserves as Latin America’s best country jurisdiction for mining. That’s still true but today we
catch up with what’s been going on there recently.
The main single matter to directly affect mining in Chile these days is the court ruling regarding
the Castilla power station project, that has been halted due to the lack of public consultancy
and approval from locals and had the ruling upheld by the Supreme Court of the land. The story
made it to the blog on August 31st when Eike Batista Brazilian billionaire and money behind the
Castilla power plant project, commented that Chile was becoming a tough place to do business
due to its laws and courts (7). Then just in the last few days, Diego Hernández, ex-head of
Codelco and brand new CEO of Antofagasta Minerals (ANTO.L) commented during a breakfast
meeting in Chile attended by the visiting President –elect of Mexico, Enrique Peña Nieto (8) that
the energy problems in the North of Chile that are now built into the delayed development
pipeline due to the Castilla permitting denials will cause big delays to mine developments in the
region. He said that current Chilean government projections of reaching 9 million metric tonnes
(mmt) of copper production per year by the year 2020 (today it’s around 6mmt) are not
realistic and that due to Castilla as well as other bureaucratic layers introduced in recent times,
projects that used to take six years to permit and bring online will now take twelve.
That’s the bad news in Chile. The good news is that the President is unpopular but nobody
seems to care much, so due to that we’re adding a point back to Chile via its Political Stability
sub-sector. What we’ve seen in the last quarter is a country that has come to terms with its
unpopular President, knows he’ll stay unpopular but isn’t getting the same type of political and
social unrest problems as it saw in 2011 and the early months of 2012. There’s a certain level
of resignation as regards Sebastian Piñera and these days, Chile finds itself looking forward to
the next Presidential election (9) due to be held in November 2013 (yup, just a year and a bit
from now). As a result, Piñera’s ongoing unpopularity isn’t any sort of threat to institutional
Chile and business is getting on with its job as usual. In many ways, it reminds your author of
the last years of the García government in Peru.
1

So Chile has its problems yes, and the Castilla ruling will need to be addressed by the country in
the near future if it doesn’t want to lag behind other regional countries in the hunt for FDI. But
forest-for-trees please, Chile for its minor faults is still the best overall country to be a miner in
LatAm.
Mexico: Unchanged. The only potential change would have been in Political Stability, because
the Presidential elections are now fully behind us (even AMLO has given up trying to fight the
result) and Mexico will see a smooth handover of power between Calderón and Peña Nieto in
the first week of December. However, i decided to keep scores as they were because now that
everything is done and dusted, the result didn’t cause any surprises and when it comes to the
mining industry, it will be business as usual under basically the same rulebook as before. The
only change we’re likely to see is a raising of royalties on mining activities, which should happen
in the first year of this PRI-led government but won’t be anything out of the ordinary on local
regional or world terms.
As in all LatAm (barring perhaps Chile) we remind readers that you cannot assume one flat,
unmoving political risk for all parts of the country. Mexico is generally miner friendly but there
are areas where mining exploration/production is less welcomed, with one example the recent
political declarations against open pit mining in the Baja California Sur region of northern
Mexico that we mentioned last week and also this week (see ‘Market Watching’ below). Another
area seeing a new round of mining push back is the State of Chiapas (10) that’s a longer
standing “anti mining” region politically. It’s the stronghold of the insurgent (or perhaps these
these kind-of-insurgent-if-you-really-wanted-to-push-the-point EZLN Zapatista armed
movement, led by Subcommandante Marcos. The left wing movement has been generally quiet
on the national/international scene for the last few years, but it’s still ruling the roost in Chiapas
so the call we saw last week from Chiapas elected and provincial leaders to ask ‘ejidatarios’
(roughly, the local landowners in committee) not to hand over land to mining companies was
one that will take a brave landowner to ignore. There’s more on how ejidatarios interact with
their regional political leaders in ‘Market Watching’ below, where the subject is Argonaut Gold
(AR.to) again.
Peru: Miner friendly up one point. The reasons for the slight improvement in Peru’s score:
• Conga is now fading somewhat as the front-and-centre issue in Peru
• Investment announcements such as HudBay moving forward on Constancia and Anglo
at Quellaveco.
• A new effort at a government level to promote the good side of Peru’s mining industry,
both at a national level where the campaign is to make the ordinary Joe more aware of
the benefits that a modern mining industry brings, and at an international level
promoting Peru as an FDI destination. The relative lack of scandals in the first year of
the Humala government. Yes, there have been issues and headline-makers, none more
so than Conga. However, on the whole it’s been a better than average passage for
Humala and the approval ratings we now see are stacked towards the higher
socioeconomic groupings (11), a sure sign of approval from the business community.
1

We covered Peru very closely all through this Conga thing as it needs close attention on a
weekly basis, so no big thing about Peru here today except to point out the bottom line that
things do seem to be getting back to something reasonable for mining companies. Watch out
for the casual headline trolls on the Shougang Iron mine strike tomorrow, though ☺.
Colombia: Miner friendly down one point. The problem faced by Colombia today is mainly
one of perception, but at least some of that can be blamed on government inertia. The
dragging on of the reformation of the country’s mining law, now set back to early 2013
according to latest government word (and if it gets delayed further there won’t be many gasps
of shocked surprise from the audience) is the single big blockage in the country’s mining
development today and comes from a government that has made all the noises about mining
being one of the key “locomotives” of economic growth in the country during the Santos
government. Well folks, we’re now two years into his four year mandate, there’s still no go from
the lawmakers and until there is, those stack of exploration-stage projects are not going to be
easy to move through permitting, financing and into production.
The other issue in Colombia today isn’t so easily quantified, it’s more of a underlying tidal move.
We seem to be seeing more anti-mining NGO activity in the country, with organizations set
against the development of mining making inroads and making people aware of the pollution
dangers from mining. As long as all sides play fair, locals knowing the other side of the coin of
any mining project is a positive thing in the long-term, but NGOs these days tend to run dirty,
overly negative campaigns. The onus is on the mining industry to make its case and get
properly organized on a PR level, and as soon as possible.
Brazil: Political stability up one point. Brazil gets an extra point in its political rankings
because the Dilma government is largely carrying on from where Lula left off, is popular and
has so far steered a moderate course through an economic ebb for the country. Yes, I know
there are some out there that disagree with certain elements of the Dilma admin’s
macroeconomic strategy, but there really hasn’t been anything to throw the country far off
course and the acid test, that of home popularity, shows Brazil’s government in a good light.
One element of Brazil’s economic policy that favours miners today is that the Brazilian Real
(BRL) has consolidated its new position at-or-around R$2 to the dollar. This level is some 10%
to 20% weaker than in previous years and means that in dollar terms, operating a mine or
exploring a property is now that much cheaper in Brazil.
Nicaragua: Unchanged. We’re getting to the point where Nicaragua can almost be classed in
the top tier of mining destinations in LatAm, along with the traditionals Chile, Mexico, Peru and
Brazil and the up and coming Colombia. In fact, in some respects Nica holds advantage over
Colombia what with its laws in place that allow mines to start up and a clearly pro-mining
government that doesn’t send conflicting signals. However it is still a poor country, it’s
institutionally precarious and President Ortega is capable of throwing a surprise spanner in the
works so although it’s becoming a close run thing, we’re going to keep Nicaragua out of division
one for at least a while longer.
But be in no doubt, this is a good place to have your mining exposure and it’s certainly the best
in Central America. Personally speaking, I see an exploreco’s story mention that it’s in
Nicaragua and don’t just consider it neutral; this is an advantage because along with the good
State backing you also get very prospective rocks that can be explored at a cheap operational
cost compared to most anywhere you care to name. The now well-known story of B2Gold has
led much of the way and it’s been a good leader, moving the Libertad mine back into
production and largely addressing the chronic labour problems of the Limon mine so that it’s
now a neat and profitable little operation instead of a sporadic producer, but you shouldn’t stop
the count at BTO because there are plenty of explorecos in the country now. In fact, it’s about
time I featured more of them on these pages, at least in the Market Watching section.
Panama: Mining culture up two points. Still a pain in the ass on the bureaucracy side, but
the impression of GDP high flying Panama is that the country is getting used to the idea of
1

large-scale formal mining decamping inside its borders and although there’s push back, public
opinion is starting to veer towards the acceptance of the industry as long as it behaves itself
(best practices etc). Panama gets a two point boost for this, but its reputation as a red tape
nightmare for mining companies is still intact
Guyana: Mining friendly down one point. Disappointing is the word here. Guyana has been
featured as the next big new destination in South America on many an occasion, but there’s
been little apparent progress in its mining and exploration industry in the time we’ve been
following it. Guyana Goldfields (GUY.to) hasn’t managed to find itself the major tier buyer that
Aurora needs in order to become a mine, the second tier things working there have largely
faded away and it all seems to stem from a government that can’t set up the type of miner-
friendly playing field or enact laws that would give the larger money the firm footing it needs to
commit to a more exotic and politically difficult location. For a while back there I was tempted
to take positions in mining companies operating in Guyana but didn’t, and looking back all
20/20 it was a fortunate decision. Until something changes, be it a sale of GUY.to to a large
mining concern that then brings Aurora into construction, or the government passes robust,
mining friendly / FDI friendly laws. I see Guyana with the mantle that Brazil carried for decades,
“The country of the future...and always will be”.
Argentina: Miner friendly up one point. Yes folks, Argentina sees its score rise by one
point, but as you might imagine there’s more to this basket case of a country than mere
numbers can describe and an explanation or two is necessary.
First, and before we go any further, I want to point out that despite what might look like some
significant street level protests against the Cristina government in Buenos Aires recently,
despite opposition factions making more noise, despite economic growth stagnating, despite
Central Bank reserves dropping, despite the continued 20%+ real inflation figures (forget the
official government numbers as the nonsense that they are), despite the government banging
heads with its normally friendly union leaders and despite Cristina herself suddenly seeing
approval ratings drop back in the 30s, we’re not changing the political stability ratings of
Argentina this quarter. That’s because Cristina won her election less than a year ago and
anything that happens, barring an out-and-out economic crash that barring an anti-miracle will
not happen (despite fervent wishes of orthodox economists around the globe) is just noise and
on a national political scale, it’s noise that can go on for two years non-stop and it won’t affect
the governability of Argentina one iota. Politically, the Cristina government is about as unstable
as the one they have in Switzerland and it doesn’t matter how much noise is created.
Now to mining business and we’re raising the Miner Friendly rating by a point because in the
last couple of months, there has at least been lip-service from the country, both at national
level in general and at regional level particularly in the ‘OFEMI’ provinces (Organización Federal
de Estados Mineros) that now group themselves together as the “mining friendly ones (let’s
name them: Santa Cruz, San Juan, Catamarca, La Rioja, Salta, Jujuy, Río Negro, Chubut,
Neuquén, Mendoza) even though some of those such as Chubut, Mendoza and Neuquén are
still very tough nuts for the mining industry to crack. But the “pro-mining” camp has made
progress in the PR war that’s run against mining in Argentina and there has been much more
heard about the benefits that the modern industry can bring to a country’s growth and
development. It’s also been proactive in combatting some of the worst myths and falsehoods
put forward by the anti-mining brigade on subjects such as the use of cyanide.
So with the PR campaign getting a foothold in public opinion, Argentina on an overall basis gets
a point added to its score. However, it’s still a basket case of a country and extreme caution are
still the watchwords here and although I find myself today with at least a little exposure via my
like of Minera IRL and its Don Nicolas project in (one of the best places to possibly be in
Argentina as a miner) Santa Cruz, it’s not a place easy to feel comfortable.
The main problem these days isn’t at provincial level (especially not in the better provinces for
mining, such as Santa Cruz, San Juan, Salta/Jujuy, Catamarca) but at national level. For a start,
populism is now the gathering point for the Cristina government and the power base is
1

nowadays firmly back in the hands of the lumpen end of Peronism, the “descamisados”
(shirtless ones) that were the driving force of the original Peronist movement back in the 40s
and 50s, the heady days of Evita. When a government takes the all-out populist route and
rallies its faithful round a flag, political uncertainty and shifting values always follow. Issues
such as the Falklands/Malvinas are back on the menu and one that really rocked political risk
numbers was the expropriation/nationalization of YPF, taken from Repsol without any form of
compensation. I’d be the first to agree that the specific circumstances of the YPF seizure mean
that it’s very unlikely that a general precedent was being set but I repeat, in a populist-driven
government there can suddenly be a whole new set of special circumstances for a separate
company or entity.
Next up are the capital controls that are being enacted with alarming regularity these days. A
few days ago, Argentina’s newspaper of record, La Nacion, ran a note (12) that counted up
how many different controls had been placed on the movement of dollars by the Cristina
government in the last years and the answer is, an impressive 23. From the headline-making
ones that make it more difficult, time-consuming and expensive to remit profits abroad from
local subsidiaries, to restrictions on private exchanges of dollars for Pesos, to those stopping
people from taking dollars out of ATMs abroad and right down to the ones that don’t make the
news, such as the way pensions paid to Argentine nationals abroad and no longer paid in U.S
Dollars and now in Pesos. Argentina’s national executive is restricting the flow of money and is
particularly keen on getting its hands on as many dollars as possible to make its sovereign debt
obligations as painless as possible. That grab for dollars comes at the expense of the private
sector where you and I, as investors or potential investors in the country, are exposed.
Not only that, but according to a recent interview (13) granted by Argentina’s Finance Minister,
Hernán Lorenzino, to Argentina’s pro-government national daily newspaper Pagina 12, the
current policy is likely to continue and further restrictions are more likely than not. The subject
was the 2013 national budget that’s currently in presentation mode at Congress. Along with
other 2013 FinMin assumptions such as an official inflation rate of 8.9%, GDP growth of 4.4%
and a current account surplus of around $0.5Bn for the year, Lorenzino made it clear that dollar
restrictions were to continue when he talked about the forecast for the official exchange rate at
around U$1 = ArgP$5.10 and then said, “With this we’re clearly saying that the administration
of the exchange rate will continue on the same course. The administration of the [Dollar/Peso]
exchange rate is a means of support for the Central Bank and is due to the need to administer
our currency reserves in order to use them in the service of our country”. He went on to say
that fixing the exchange rate in this artificial way would allow Argentina to run a very positive
trade balance, to which Economics 101 would reply “no shit Sherlock”, because as long as
inflationary expectations are managed you’re getting a helluva bang in Pesos for every dollar’s
worth of soybeans you sell to China.
Again, I digress. The upshot to the macroeconomic direction Argentina is taking is that it’s
going to scare away Foreign Direct Investment (FDI) in the country, because unless you’re
already inside the country (and looking for a way to get your money out, e.g. Yamana), to put
it in the clearest and simplest way possible (that’s also wholly accurate...hey, I like simple) it’s
going to take guts to invest dollars in when it’s not so clear you can get them out again
afterwards. When it comes to a smallish investment, let’s take for example the type of money
IRL.to will need to put Don Nicolas into production, I’m kind of leery but do at least recognize
that it’s not a massive, company-breaking risk that needs to be taken and there’s enough
reward (in that specific project’s economics at least) to warrant to extra country risk. However,
my blood runs cold just thinking about the type of cash you need to throw at Taca Taca (LCC.v)
of Cerro Negro (GG) before any mine can get to production day one and by the looks of things,
Pan American (PAA.to) (PAAS) at Navidad has decided something along the same lines. Even
Vale, that’s now apparently starting to drag its heels on capex injection for the Rio Colorado
potash project in Mendoza, may be getting cold feet and on a project that’s already seen
hundreds of millions sunk into it.
This piece on Argentina is going on too long and I’m going to wrap it up, so a conclusion is
called for and i suppose what I’m really trying to say here is that although I’ve raised the
1

Argentina score by a point, it’s not a destination for the type of seriously large money that’s
needed for big mining operations or projects these days. The political noise at the moment is
one thing, but more important is that Cristina doesn’t have to care what the opposition thinks
or feels and will continue with the political, social and economic model as seen today. For
businesses, that means things will be more difficult and for foreign investors, Argentina is going
to have even less appeal than before to which we can add the potential for more significant
dollar movement restrictions. On a personal level, my exposure via a small capex project that’s
a single part of the plans of a junior mining company named Minera IRL (IRL.to), I can just
about handle the limited exposure and risk to my personal satisfaction, particularly as the Don
Nicolas project is one that offers robust economics and top quality exploration and strong
potential revenue/mine life upside outside of feasibility parameters that are already good. But
invest in a big project in Argentina? No way.
Ecuador: Political stability down one point. We’re notching down Ecuador this quarter via
its political quotient, but it’s more of a precautionary measure than anything else due to the
way in which the country is now moving into the start of campaigning for the 2013 Presidential
election. The way things are shaping up, current President Rafael Correa is red-hot favourite o
be re-elected in the February 2013 vote, as early opinion polls show (14) him with 44% of voter
intention, while 23% are undecided or have no preferred candidate at present, 9% go for
opposition leader Guillermo Laso, 5% for longtime Correa foe Lucio Gutiérrez, 3% for left
wing/ecology candidate Alberto Acosta (erstwhile close friend of Correa and once his minister,
now an enemy) and 2% for right wing banana magnate Álvaro Noboa (who lost against Correa
in 2006). We can expect the campaign to create more heat than light and it’s doubtful that it
will make many international headlines until a week or two before the vote, Julian Assange
issues notwithstanding.
Bolivia: Unchanged. Despite a politically more charged atmosphere I decided to keep ratings
the same here, because a lot of the upset is already factored into Bolivia’s low score. There’s a
lot of social and political unrest in today’s Bolivia and a lot of it is based around the mining
industry as well, but as the country is already low down on our scoring table (and for perhaps
the 12th time out of 12 we note that if it weren’t for its high score in historical mining culture it
would be much lower down) the bottom line call of “avoid Bolivia” isn’t going to change
anyway.
The main problem today is an increasingly acrimonious spat between the Evo Morales
government and the main mining union, C.O.B., which in the last couple of weeks has turned
violent as both sides entrench (we had a union member death a few days ago in a dynamite
incident in La Paz during a march). The latest demands centre around co-operative mines which
the unions want to bring under their control, while the government wants (15) to allow the co-
operative mining companies to continue with their status quo (they’re called co-ops, but often
they’re run by private individuals). The latest from the unions is a demand that all mining
operations in the whole of Bolivia be nationalized (and therefore under their control) (16) but
the government has no intention of doing that. As part of the fall-out from the disturbances and
violence, last week saw (17) Hector Cordova, the then-president of the state-run Comibol
mining company resign so political heads are rolling too.
On balance there seems to be very little chance of the COB’s latest and rather extreme demand
happening, that of blanket nationalizations in Bolivia. That means in turn that the privately held
mining companies such as the ones owned by Coeur (CDE), Orvana (ORV.to) etc will almost
certainly remain under their ownerships. However, we have seen the government’s propensity
to bend to the will of local population demands and strip private companies of their assets, with
South American Silver’s (SAC.to) loss of Mallku Khota a prime example (though that one did
have its own circumstances and as we’ve noted before, it was an accident waiting to happen
due to the poor attitude the company took in its community relations over the years). It all adds
up to a very risky state of affairs for anyone with Bolivia exposure, but thankfully I’m not one of
those people. You shouldn’t be, either.
1

Paraguay: Miner friendly up one point. What with the “parliamentary coup” (or just plain
coup if you like) in Paraguay and the ousting of President Lugo, you might think that Paraguay
would get marked down in this quarter’s edition, but really the change of head has done little
either way to the country’s reputation. In fact, we’re upping Paraguay a notch because we’ve
had some generally pro-business and even pro-mining comments coming from newly installed
ministers, so at least there’s some sort of acknowledgement of the sector in its government
today. But really, Paraguay remains too small, too Banana Republic and not wise enough in
mining to be of much interest to us. Great place to visit, however.
Guatemala: Miner friendly down one point. Guatemala is supposed to be getting all
miner-friendly under an Otto Perez Molina government, or that’s what the line was from the
Guatemala promotion band back when he took power anyway. The reality has been rather
different, with rising social unrest (see Tambor (18), as there was enough violence semi-
connected to that still-unpermitted project to see co-owner Radius bail, also see the trouble
now brewing around Tahoe’s Escobal project below) now the order of the day and raise
presence of NGOs in the country doing battle (sometimes quite literally) against mining
developments. Guatemala does have good rocks and it could one day turn into a place where
it’s possible to do mining business. But that day looks as far away as it did when Colom was in
power and the country’s parliament basically froze all debate on new laws and easier permitting
for miners. I’d like to like the place as a mining destination but it’s not possible.
El Salvador: Miner friendly up one point. During the quarter there have been some early
stage political moves aimed at trying to update the country’s basically defunct metals mining
laws. Today (19) it’s all very early stage stuff, with a congressional plan to put forward what’s
known as a “pre-law project”, a kind of test-the-water document that can be debated in
parliament and guidelines discussed for new mining regulations without those participating ever
having to come to anything remotely connected to a legislative decision. If El Salvador’s
parliament finds enough common ground in the “pre-document”, it might then move to law bill
status and we’d then see a real debate on the revamping of the country’s mining laws. As part
of the process, there has been some low level talk of allowing mining to resume work in the
country as long as the highest environmental and social world standards could be implemented
and controlled (a typical story). Overall, El Salvador is still a long way from putting a mining
industry into operation and any companies working there (start with Pacific Rim) can be
ignored. Still a real no-go area for the sector.
Venezuela: Political stability up one point. This may seem counter-intuitive with just two
weeks to go before polling day of a hotly contested presidential election, so two things need to
be said about this call:
1) We’re improving Venezuela’s overall score because barring a surprise (as noted on the blog
last week (20) not a massive shock, but a surprise) Chávez looks on course to win and that
means nothing much will change. Which is a sort of stable.
2) In the event of a surprise Capriles win, we can expect Venezuela-exposed stocks and
financial devices of all types to rally strongly. However, once the dust has settled on a
hypothesized surprise win Venezuela will still be a very poor location in which to do mining and
exploration work so whoever gets the job, the country will stay at or near the bottom of our
political risk pile, easily ignored. Therefore, a point here or there isn’t really much of a big deal.
This brings us to the end of this quarter’s edition of Regional Risk update, expect the
next one around Christmas time. Ho ho ho.
Market Watching
Primero Mining (P.to) (PPP): Goldcorp runs a secondary
1

Potential (if the price gets into the right frame) purchase Primero Mining (P.to) (PPP) had
fundamentally important news out last week, when on Tuesday (21) it launched a secondary
offering of shares held by its biggest shareholder, Goldcorp (GG). The 8,422,460 shares that
Goldcorp wants to sell to other people are the exact number of shares it picked up on August
7th (22) when P.to handed them to GG in exchange for full payment of a $30m note it held over
P.to as creditor. Before that August transaction owned 31,151,200 shares of P.to and that’s
where it will stand once this secondary is done. In other words:
• P.to gets rid of $30m in debt from its balance sheet by emitting 8.42m shares
• GG picks the shares up at a nominal price of $3.74 each
• Six weeks later GG sells the shares for $5.25 each, making $12.72m profit on the deal
• If you’re GG, nice work if you can get it.
Clearly, GG had more shares than it wanted of P.to and the recent share price run-up has given
it a chance to cash in the new ones in a politically correct manner. As for the market, it received
the news like this (right). Perhaps that
nice Mr. Market was worried that GG is
about to wholesale bail on P.to,
perhaps it’s worried that all this new
liquidity will affect future trading or
perhaps the signal is that GG is getting
out at something akin to a maxed out
price for P.to and is calling a top.
Whatever the reason, the reaction was
welcomed by your author because P.to
shares had already ran much further
than I’d previously expected them to
and brought them back under $5, for a
while at least.
Back in IKN173 when we ran the ruler
over P.to in our NOBS report, our price target using $1,600/oz gold stood at $4.39 (which
sounds low presented like that, but please check back at IKN173 to see we were using pretty
conservative metrics and offered up blue sky scenarios later on, as well). Since that time gold
has shot up and that makes a difference to our conservative-type model. If we dare to now use
$1,800/oz in the calculations, the nominal price target comes to $5.35, which still doesn’t leave
much headroom for profits on Friday’s $4.97 close but does if the market decides to reverse
from recent highs. I feel no rush to get involved in P.to unless the price that shows is a real
value opportunity, because for one thing I consider OGC to be better relative value and I
bought that one twice last week to boost gold producer exposure. However, P.to is an option if
the market reverses and will remain so.
Tahoe Resources (TAHO) (THO.to) and social risk in Guatemala
The events of last week at the Tahoe Resources (TAHO) (THO.to) were very unlikely to be
exactly how the shiny and polished company PR version (23) made them out to be. Neither
were they likely to be the way in which the anti-mining activists made them sound in this
English language report featured on Upside Down World (24). Somewhere between the two
seems to lie the real story but any which way you cut this, THO has a problem on its hands.
The episode started Monday when contractors hired by THO arrived to connect the mine to the
national grid power supply by constructing and locating pylons and then power lines between
the two. This work by necessity wasn’t done in the immediate location of the mine, the town
and surrounding district of San Rafael Las Flores, where the Escobal mine is located and where
by all reports the locals are happy (or a democratic majority are happy at least) with the
presence of the company and its project. Rather this time the work was being done in
neighbouring community areas and these people are not happy with THO’s presence in the
area. So on Monday there was a confrontation between the contracted workers and unhappy
1

neighbours who didn’t let them carry out the work and install the pylons. There are various
reasons given for this refusal to allow the work to be done (though notably nothing from the
company), with one repeated in various reports (25)(26) that locals had been tricked, and had
been told before the event that the pylons being installed were to connect their villages to the
national grid, only to find out later that their houses weren’t part of any power plans and the
line was to be strung to the mine site only.
The next day, the protesters took their grievances to the mine site itself and this is where
reports of what happened differ greatly. One side said the protesters were “outsiders” had
firearms, rushed the mine premises and came with the intent of destroying property. The other
says they were unarmed, were made up of local community members from around the San
Rafael zone (but not necessarily from the town) came to peacefully protest and were
subsequently ambushed by forces of order (police and army) and after defending themselves
retaliated by causing regrettable damages in the town centre. One thing that’s near certain is
that the use by THO of the word “outsiders” in its NR is almost certainly spinning things, as the
company can always say that anyone not from the town of San Rafael itself is an “outsider” and
lump in people affected by its project who live just a couple of Km away with others that did
indeed come from further afield to protest against the mining project. Another thing that’s
tough to believe is the widespread use of firearms by this protest group, because if there had
been we wouldn’t be counting three or five people merely injured by getting banged on the
head or arm with a heavy object.
So we can split hairs on what really happened here, but something for sure is that THO has
itself a serious social problem on its hands. We don’t doubt the good terms the company has
with the specific town of San Rafael Las Flores, but the chances are high that this town is now
being looked upon with jealousy by other nearby communities who haven’t been touched by
the economic fortune of THO but do have to suffer the downside of a big civil works project in
their neighbourhood all of a sudden. It smacks of a company that hasn’t done its community
relations in the right way and hasn’t included the people it needed to include, preferring to
concentrate on those it wanted to include and setting up rivalries, jealousies and fractured
community relations. This isn’t a good thing in any place, but it’s a really bad thing in a country
like Guatemala, with grey area laws and weak institutions at the best of times and also well-
organized, well.funded environmental campaign groups who make any anti-mine fight their
fight and are very good at making themselves into a real pain in the ass. If, as it seems, THO
has made a bit of a mess of its community relations so far it may already be too late for it to
avoid a sustained campaign against itself and the mine. This isn’t a small project, and the
combo of the political shaky Guatemala, the legal and operation minefield is faces and
communities close to the mine now turning against its presence means that there’s a lot of that
$3.1Bn market cap in play all of a sudden. Seriously people, I don’t care how good these rocks
are because this is a risk-laden company.
Goldgroup Mining (GGA.to) withdraws its environmental permit application
After mentioning GGA in passing in last Sunday’s edition, the company wasted no time and on
Monday informed us (27) that it had “deferred its evaluation” to Mexico’s Semarnat
environmental agency regarding its Caballo Blanco project in Veracruz province, Mexico.
In fact the decision by GGA to step back from the environmental permitting process was finely
timed by the company, as according to the process Semarnat had to hand down a decision on
the permitting by September 17th. The implication of this is that GGA had heard, in some way or
another, that the call was going against the company so rather than wait around and get told
no, it withdrew its application on the 14th. Not only that, but it doesn’t take a rocket scientist to
read between the lines in the company NR of last week that GGA is now going to wait until the
the Semarnat office is populated by PRI party people (those of President-Elect Enrique Peña
Nieto) before trying again, in the hope that the PRI party will give them the type of answer they
want to hear. The bottom line is that GGA is being sneaky and underhand in its permitting
application and using the lax rules to its advantage. It’s also betting on the national PRI party
giving it the permits it needs, despite the fact that the local Veracruz governor is also PRI and
has made his anti-mine project position clear to one and all on several occasions. We now have
1

a situation where GGA’s permit application is on ice until such time as the company decides to
submit it again. When it does, it will be able to retract its application if it thinks things are going
against it again. Even if its permitting eventually prospers there’s obviously a lot of strong local
opposition to the project and as there will still be local permits needed by GGA before Caballo
Blanco can operate, they will still be in the hands of the local politicos who oppose the mine at
some point before commissioning can ever happen. Plus, on a more general level the sneaky
way in which this company is going about its business suggests that it’s not an outfit that can
ever be truly trusted (locals, shareholders, you name it) and for that reason alone, even in the
best of circumstances and getting all its necessary papers GGA is easily passed over for other
management teams that go about their job in a more transparent, trustworthy and sincere way.
Argonaut Gold (AR.to) and San Antonio risk
Further to last week’s piece on the upswing in regional political risk in the Baja California Sur
province of Mexico that may well affect the San Antonio project of Argonaut Gold (AR.to), there
was more news last week, this time ostensibly positive for the company and its plans. After a
march and demonstration at the provincial parliament building in support of the San Antonio
project by locals from the town of San Antonio (which as the name suggests is the most local
community to the project), there were several opportunities for the 500 population town of San
Antonio to get their views aired both local (28) and national media (with local ‘Peninsular
Digital’ doing a good job in several reports and giving balanced coverage that looks fair to all
sides, for your author’s money at least) . According to the pro-mine locals, the project has
majority support from the locals and has also been approved by the local ejidatarios (land
holders in committee). They are clear about their position in this process and know that the
decision to grant environmental permits lies with the regional governors (the same group we
reported on last week who are openly against open pit mining activity in Baja California Sur),
but they’re also appealing to the regional government with an environmental message, noting
that the mine site is also an old, now disused mine that was operated in times when best world
practices weren’t applied. As a result, toxic elements and poisoned well water make the place
an environmental problem already and if AR.to are allowed their licences, the area will be
cleaned of pollution rather than having a pristine location polluted.
Therefore we have an interesting situation, somewhat the opposite to protests in many other
places in the LatAm region, where the governing authorities are against a mining project but
the locals closest to the project are for it (it’s usually a financially-minded government imposing
a mine on a location that doesn’t want to live with a mine, is it not?) It also highlights one of
the interesting aspects of the “ejido” system in Mexico, where the communities or ownership
groups of land packages have a lot of power in deciding what their land is used for, but can
come across blockages in the process if the government in the region where they live doesn’t
agree with the ejidatarios wishes. In this case, the land owners want the mine to go ahead for
their own economic reasons (which is fair enough). Meanwhile, the newly installed government
has made its position clear in that it doesn’t ant open pit mining operations to move forward in
the region. It’s a recipe for conflict and protest from those who want to financially benefit from
their held land (and as San Antonio is largely the site of an old mining operation, it’s not much
good for anything else).
The bottom line is that we can expect the locals living around the project to continue plugging
for the advancement of San Antonio, but we should also expect the new government in Baja
California Sur to oppose its advancement, if only on ideological terms. The practical result, as
far as your sees it, was fairly summed up in the last sentence of the IKN176 note last week:
“As the market expects [AR.to] to grow at (or around) [its] 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.”
That’s the problem here, I think. Basically, it looks like the Canadian market is assuming blue
sky all the way for AR.to at San Antonio, a scenario that’s looking much less likely. What
happens as this story unfolds is still unknown; perhaps permitting goes perfectly for AR.to,
perhaps the whole deal is cancelled, perhaps a delay is experienced, perhaps some nuanced.
1

The best call here is the same one as last week: 1) this situation is setting up San Antonio for a
significant permitting delay and 2) by the looks of the company share price, this risk is being
ignored (willfully or otherwise) by the market. I’d expect AR.to to underperform compared to
peers as a result, no matter what the ejidatarios might want to do with their controlled land.
Peru Cajamarca: Gregorio Santos now a marked man
To recap briefly, we had news from Peru last week that associates of Gregorio Santos, regional
governor of Cajamarca, had benefitted from regional government contracts to the tune of 90m
Soles (U$34.6m). Then as reported on the blog last week (29) an apparent phone-tap recording
of his associate, Wilson Vallejos, implied that he was some sort of front man for Santos and
that the two were sharing the proceeds of the multi-million dollar deals via an account set up in
Panama.
The latest is that Gregorio Santos has been formally “invited” (in this case, the invitation is one
of those that you don’t refuse, because if you don’t turn up arrest warrants can be issued) by
national level Congress anti-corruption officials (30) to an audience at which he’ll be questioned
about apparent financial irregularities in his regional government accounts (the exact accounts
or movements are as yet unknown).
What we have here is a regional governor who is a marked man. The national government, in
its battle to save/promote(push through the Conga mine project in Cajamarca has clearly
changed tactics and is now going after the central figure in the anti-Conga protests. This
smacks a little of political black ops, but as just about every political figure in Peru (nay Latin
America) has skeletons in their cupboard of some sort, and as corruption is basically the norm
in regional power politics in Peru rather than an exception, this is always the type of weak spot
that can be used against a public figure such as Santos who decides to step out of line and
challenge the national executive.
It’s therefore time to consider, in a simple hard-nosed way, what investment opportunities may
present themselves if Santos were to lose his power base in Cajamarca (or perhaps stay in
power but suddenly and mysteriously do a volte face and come to agreements about Conga and
other mining project in his region). Newmont (NEM) shares might benefit from a resurging
Conga, but probably a better option would be Buenaventura (BVN) as it is more highly
leveraged to the success of Conga compared to the rest of its asset base. As for junior mining
projects, one that comes immediately to mind is Sulliden (SUE.to) at Shahuindo, which has
seen its share price lag significantly due to its location (right next to Bambamarca, one of the
main protest centres in today’s Cajamarca and a Gregorio Santos stronghold). Its a good
project however, so if the regional political risk diminishes we might see its share price put in a
burst. There are others too and although it’s still early in this “Get Santos” process and really
difficult to estimate as to when and in what way he might fall from grace or lose power, the
bottom line message from the national executive in Peru these last two weeks is simple to
decipher; the gloves are now off and they’re going after Gregorio Santos and as noted on the
blog last week, Peruvian governments of all political flavours down the course of time have an
unerring knack of being able to neutralize, politically or otherwise, opponents that prove to be
too much of a thorn in their sides.
If you want a best guess right now, I’m still happy about my general roadmap of seeing 2012
and 2013 slip by in Cajamarca but then seeing Conga reactivated in 2014, when the regional
governorial elections happen and a change of regional presidency happens. With the new
moves against Santos things might accelerate, but it’s too soon to tell and there are an awful
lot of moving parts to this one and any one of which might change things.
Yellowhead Mining (YMI.to)
We made note last week that it might be regional politics holding back YMI at the moment, with
word from British Columbia (BC) that the NDP party look set to take political control in the
upcoming elections. As NDP has an anti-mining political manifesto (or as anti-mining as you can
be in Canada, at least) and one of its policy platforms this time around is “no new permits” in
2

the region, the knock-on effect being envisaged by many mining people that know the region
well is that projects such as YMI at Harper Creek look set for delays and disrupted timelines.
That being the setting, I asked for thoughts from those of you in the IKN Weekly audience that
know the BC political scene well and I’m happy (and humbly thankful) to say that I received
plenty of feedback on this subject. I’m also fairly happy to report that the range of opinions and
analyses on the subject suggests that things really aren’t that bad for YMI on this score and as
a result, I am this weekend a much more relaxed and confident holder of the stock with no
plans to sell any longer.
There was a range of views and I can’t really cover every base mentioned, but one repeated
theme was that the political power held locally trumps that of the regional government and any
of its formal policies. In particular, one aspect noted more than once is that YMI has good
support from its First Nations neighbours.
As mailer ‘GK’ wrote, “...[the] relationship can be tough to establish, but once you get the First
Nations on your side you got enviable regional risk”, then went on to say that by all accounts
received, YMI isn’t making things up when it says that it has a good relationship with its First
Nations community.
Meanwhile mailer ‘B’ wrote “..regarding permitting, I think that any project that has strong local support
(of First Nations, not just the local chamber of commerce) and moderate environmental impact could still
be permitted. “ and then later in his mail “..., the NDP are very anti-mining (going back to the 1970s,
when they tried in a stupid manner to kill the industry with windfall tax grabs), and there is big animosity
between the industry and those politicians. But they won't likely kill a project that is supported locally and
has limited impact....”.
Next, a mining CEO’s thoughts on the whole issue (no permission to share name or initials) that
came via kind reader ‘GC’ was that the NDP hasn’t said anything about “no new mines” in the
region at all. He envisaged the biggest risk from a new NDP government in BC as a hike in
taxes and/or royalties on operations, rather than some sort of blanket ban. In his opinion,
nobody in the industry should be overly concerned about the NDP taking power in BC because
even in a tax hike environment, BC is starting from a low net burden level and will remain
competitively priced compared to the risk/burden ratio in other parts of the world.
Reader ‘PL’ noted something along the same lines, with a view that the current “NDP is anti-
mining” schtick is some sort of political propaganda platform being set up by the current
government in order to scare voters away from the current election favourites (and back to
them, of course).
Finally, one point made by several mails (some mentioned above already, others not) is that it’s
not as if a mine can be permitted in BC in a matter of months anyway! The average process
time for a new mine in BC is multiple
years (“over a decade” according to one
of you, but quite frankly I’m not in the
position to be able to say so I’ll leave it at
‘multiple years’) so even if a government
comes around that isn’t the hottest pro-
mine administration possible, it’s not so
likely to be noticed in the great scheme of
things.
The bottom line is your author’s call, after
reading all the feedback sent in (and I
thank you all). There was a lot and
although it’s not possible to get every
view in, I’ve tried to select themes and
passages that represented the overall
2

sentiments offered. The baseline of just about all mails is “not as bad as that” whatever the
opinion of BC as a mining hub (and whatever the opinion of NDP, that ranged from sympathy to
calling them raging Socialist commies). What may be happening to YMI is that it’s being held
back by the current political atmosphere and rumour-mongering against the NDP candidacy for
this election but the bark on this one will turn out to be much worse than its bite. Does that
mean your author is now tacky enough to come out with a “great window of opportunity!!!” and
“Buy now it’s cheap!!!” and “misunderstood stock, going to fly when people figure it out, back
up the truck!!!” style of call on this stock, triple exclamation marks supplied in true promo porn
style? No of course not, but I will say that on a personal level I’m happy enough about having
my junior copper exposure here for the time being (IKN Weekly policy change notwithstanding)
and will hold through on this stock.
Atico Mining (ATY.v) sees interesting insider buying
What we noted on the blog last week (31) was that Fortuna Silver CEO Jorge Ganoza had sold
some of his FVI shares. What we didn’t note was that Ganoza used the funds to buy (32)
145,500 shares of Atico Mining (ATY.v), the Colombian exploration junior run by several
members of the Ganoza family that we’ve already mentioned on several occasions. His
purchase last week brings his held total of shares up to 3.78m and we also saw insider buying
by company president Jorge Ganoza Senior, who added 21,000 shares to his holding via the
open market and now holds 3.14m ATY personally.
That’s interesting insider buying at-or-around the time we’re expecting news from the
company’s El Roble project on the latest drill assays. It’s up to you to decide whether the team
We last mentioned ATY back in IKN168 dated July 22nd, just after its interesting initial drill
results were made known. At the time the call was to wait and see whether ATY could hit the
same type of high grade mineralization in other targets, not just in the first and always most
likely target to return good grades (see IKN168 for more details of the lens-type of
mineralization and the prospects of finding more lenses of the same ilk). If it could, then ATY
may turn out to be a live prospect, especially as the stock price has come back down from the
initial interest surge.
ATY has 39.76m shares outstanding and a fully diluted total of 43.84m with the options and
warrants all priced at or a touch above 50c. That’s where the share price is today, so with a
market cap of ~$20m it’s the type of price and share structure that could give a very decent
win if it hits the rocks it’s looking to hit as the company drilling campaign develops. As for cash,
we estimate that ATY will have around $2.5m in working capital left once its stage one
exploration/drilling program (from which it is looking to deliver those market moving results) is
done, early 2013. That’s not a bad place but it still means the coffers will be thin in the near-ish
future, so ATY is going to run some sort of equity placement at some time.
2

Overall, this is probably not a bad way to trade exploreco sector, as long as the company can
return the type of eyecatching drill returns it did in July but from a different lens or zone at its
property. One to watch for those of you wanting ideas in the exploration sector and run by a
team with a reputation for straight shooting and success.
Conclusion
IKN177 is done, we close with bullet points:
• I’m not happy about the quality of today’s edition. Not being able to make a clear and
decisive call on what i want to do with the company I’ve been working on these last
few days is frustrating and I can only beg your forgiveness and patience (until next
week) a final time.
• Gold’s looking good here, though I have my doubts about the industrials (and even
silver). By default I tend to prefer gold exposure for juniors and that’s particularly so at
the moment. I’m now getting longer on the gold producing end as per the new(ish)
plan and direction of the weekly and so far at least, the timing suits. Now, in a perfect
world the tiny explorecos will now all pop on volume and give me an easy place to
liquidate them...
• As well as reiterating my doubts over the perfect blue-sky scenario that Argonaut
(AR.to has for its permitting schedule at San Antonio, this despite the clear support of
locals living right by the mine site, the other clear message regarding risk for projects
today is that Tahoe Resources (THO.to) is looking at its own bumpy ride. Perhaps time
will show my concerns to be unfounded in both these stories, perhaps not, but I do
know that there are other trades out there that offer the same amount of reward for
less obvious risk so if only for that, these are stocks I steer clear of.
• If things go badly for Gregorio Santos they may go well for juniors in Cajamarca (and
seniors too, for that matter so it may be time to look at that region again. This isn’t a
time sensitive matter, more of a case of thinking about how this political chess game
may play out and getting ahead of that potential curve.
• As for nearer-term propositions, Bear Creek (BCM.v) still appeals though to be fair I
think that I might take a few profits from shares bought around the edges of my
personal core position if it runs higher next week. Also, don’t forget the potential for a
snap-back rally in the downtrodden Western Copper & Gold (WRN.to) as although it’s
hardly a personal favourite, it did get wholly clobbered last week. The key there is not
jumping out in front of that large looking seller before he’s done selling. We’re still in a
trader’s market.
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
Footnotes, Appendices, references, disclaimer
(1) http://finance.yahoo.com/news/sunward-intersects-significant-gold-copper-124700031.html
(2)http://finance.yahoo.com/news/lupaka-gold-andean-american-shareholders-173329648.html
(3) http://www.laraexploration.com/announcements/lara-exploration-to-raise-up-to-3-million-by-private-placement
2

(4) http://incakolanews.blogspot.com/2012/09/five-days-of-metals-and-miners_22.html
(5) http://incakolanews.blogspot.com/2012/08/updating-our-argentina-junior-mining.html
(6) http://www.gowebcasting.com/events/precious-metals-summit-conferences-llc/2012/09/07/western-copper-and-gold-
corporation/play/stream/5434
(7) http://incakolanews.blogspot.com/2012/08/eike-batista-and-chile-are-made-for.html
(8) http://www.df.cl/hernandez-preve-que-proyectos-mineros-se-demoraran-el-doble-tras-paralizacion-de-
castilla/prontus_df/2012-09-21/132306.html
/
(9) http://www.icso.cl/noticias/comunicado-oficial-lanzamiento-encuesta-nacional-icso-udp-2012
(10) http://noticias.terra.com.mx/mexico/estados/llaman-a-impedir-mineria-en-
chiapas,06300fa8706d9310VgnVCM3000009acceb0aRCRD.html
(11) http://incakolanews.blogspot.com/2012/09/peru-presidential-approval-ratings-rich.html
(12) http://www.lanacion.com.ar/1509869-las-23-medidas-que-en-once-meses-que-enducerieron-al-cepo-cambiario
(13) http://www.pagina12.com.ar/diario/economia/subnotas/204014-60539-2012-09-22.html
(14) http://www.telegrafo.com.ec/index.php?option=com_zoo&task=item&item_id=54114&Itemid=2
(15) http://noticias.terra.com.ar/internacionales/evo-defiende-derecho-de-cooperativistas-de-participar-en-
mineria,e4439f8a49ae9310VgnVCM5000009ccceb0aRCRD.html
(16) http://www.generaccion.com/noticia/167974/nacionalizar-todas-minas-bolivia
(17) http://noticias.terra.com.co/internacional/latinoamerica/bolivia-cambia-jefe-de-corporacion-minera-en-medio-de-
crisis,c05e15bfc4ee9310VgnVCM4000009bcceb0aRCRD.html
(18) http://incakolanews.blogspot.com/2012/06/radius-gold-rduv-provides-lesson-for.html
(19) http://elpais.com.sv/elsalvador/?p=11482
(20) http://www.incakolanews.blogspot.com/2012/09/ikns-final-post-on-2012-venezuela.html
(21) http://finance.yahoo.com/news/primero-announces-secondary-offering-goldcorp-231000199.html
(22) http://finance.yahoo.com/news/primero-announces-issuance-shares-goldcorp-210000362.html
(23) http://upsidedownworld.org/main/guatemala-archives-33/3876-guatemalan-government-and-mining-company-
attack-community-members-in-san-rafael-las-flores
(24) http://finance.yahoo.com/news/tahoe-reports-civil-unrest-outsiders-131513324.html
(25) http://www.prensalibre.com/archivo/?text=san+rafael
(26) http://hispantv.com/detail.aspx?id=195441
(27) http://finance.yahoo.com/news/goldgroup-defers-evaluation-environmental-impact-120000022.html
(28) http://peninsulardigital.com/extra/ven-ejidatarios-de-san-antonio-y-los-planes-con-buenos-ojos-el-proyecto-la-
pitalla/64986
(29) http://incakolanews.blogspot.com/2012/09/gregorio-santos-is-going-down.html
(30) http://peru21.pe/impresa/santos-y-alvarez-ante-fiscalizacion-2043273
(31) http://incakolanews.blogspot.com/2012/09/fortuna-silver-fvito-fsm-as-subscribers.html
(32) http://www.canadianinsider.com/node/7?menu_tickersearch=aty
Appendix 1: Flash update dated Thursday Sept 20th (midday)
I heard this morning that Alex Black, CEO of RIO, has sold a large block (i.e. something over one million shares, plus
some options) of his Rio Alto (RIO.to) shareholding.
This move does not alter the Top Pick call on RIO shares here at The IKN Weekly and I will not sell a single
share of my personal holding. This is why:
2

•
The trade was run through Raymond James, who found it very easy to obtain larger institutions as
counterparties for the sale. Put simply, instos have wanted in on larger blocks of RIO but are not so happy about
buying through the open market in dribs and drabs. This block sale gave those potential buyers a chance to be in
on RIO easily and quickly. And although surely done off-record, it would be a virtual certainty that RJ told the
potential counterparties who was the seller therefore seeing instos buy the shares happily is its own positive sign.
•
I spoke with Alex Black on the telephone a few minutes ago. He said that there is nothing wrong with
RIO the company, all was 100% fine. His motivation for selling the stock was to diversify his net wealth, no more
and no less. He said that he had just about all his wealth (bar house etc) tied up in RIO and wanted to spread his
investments around a little more in order to feel financially more secure. That's fair enough, I think.
•
He also noted that he still holds 5m shares of RIO post-trade, still has an awful lot of skin in this skin and
could hardly be accused of cashing in on a share that hadn't added value, both for him and for all shareholders.
•
Finally, this trade had apparently been planned for a while, as he wanted to take advantage of the extra
demand that the RIO listing on the S&P/TSX big board would bring.
Overall, this big insider sale isn't a bad thing. As the assurances of good ops at RIO were first and foremost from CEO
Black (which for me is the most important datapoint of the above list), there's no reason to get nerves about this insider
sale that also comes with acceptable reasons from the seller. We can expect the official filing on SEDI soon.
Appendix 2: Flash update dated Friday Sept 21st (pre-bell)
A quick note to say that in the light of the continued strength in the gold market I will be adding to my relatively new
position in OceanaGold (OGC.to) today. On top of that (recall that I have a chunky cash position at present and want
more exposure) I will also add more Bear Creek (BCM.v) shares as they look very cheap in comparision to
peers. I'm also considering an addition to Minera IRL (IRL.to) (MIRL.L) but that will depend on the opportunity to
buy at a correct price. It will also be a smaller buy than that of OGC, as I still consider Argentina permitting news to be
the key catalyst event.
Slightly OT I'd like to field a couple issues recently received in mails, because they've be voiced by several of you.
1) I prefer gold exposure to silver exposure today. Period.
2) That said, on consideration I think that Bear Creek is probably the single most undervalued stock on the current
Stocks to Follow open list.
3) Plenty of questions regarding the B2Gold (BTO.to) all-paper buyout of CGA Mining (CGA.to). Overall I think it's a
good deal for BTO and makes a lot of sense. If you own BTO there's no reason to sell and if it were me I'd hold through
happily (assuming you bought in at lower prices). However, I'm yet to be convinced about the "whole is greater than
sum of parts" theory on NewBTO that is supposed to send it higher from here and think the stock is pretty much valued
to the hilt at pressent. Bottom line is that I see much more value in OceanaGold at today's price rack.
That's all for now. By the way, I'm still working on the model but I think that we're going to have a new buy call on
Sunday on a gold producer stock, just to keep you in suspense for a couple of days. Well no, that last bit isn't true
because although the potential purchase appeals I still have some work to do to convince myself. Anyway, until Sunday
and enjoy your weekends.
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
2

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.
2