IKN #178Premium

The IKN Weekly
Week 178, September 30th 2012
Contents
This Week: More names, Not getting cute on gold.
Fundamental Analysis: NOBS report on Lachlan Star (LSA.to) (LSA.ax).
Stocks to Follow: Overview, OceanaGold (OGC.to), Bear Creek (BCM.v), Gold Resource Corp
(GORO), Yellowhead Mining (YMI.to), Rio Alto (RIO.to), Vena Resources (VEM.to), Lupaka Gold
(LPK.to), Minera IRL (IRL.to), Plata Latina (PLA.v), Lara Resources (LRA.v), AQM Copper
(AQM.v), Focus Ventures (FCV.v).
Copper Basket: Overview, Copper Fox (CUU.v), Crazy Horse (CZH.v), Western (WRN.to),
Lumina (LCC.v).
Regional Politics: Colombia: 12 reasons why the “mining locomotive” is failing, Argentina:
Santa Cruz versus Cristina, Argentina: Support for mining from the national government,
Guatemala: A legal challenge to the current mining law, Mexico: Mining investment rises in
2012.
Market Watching: Another new buy still in the offing, Thoughts on Lydian International
(LYD.to), China and iron ore, Tahoe and Fortuna downgraded by Dundee, Atico Mining (ATY.v)
update.
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
More names
Rather than have the feeling of being forced to swap out of some exploration stage companies
in order to feature producer stage juniors, I’ve been toying with the idea of moving up the 15
company maximum on the ‘Stocks to Follow’ list to 20. This also fits the current state of my
back pocket, because I’m in the fortunate position of having cash on the sidelines waiting to be
deployed thanks to recent liquidations. But any decision get made on this I thought I’d run it by
the intro here and see if anyone has any strong views either way.
Not getting cute on gold (or silver, or copper or...)
With the rise in metals prices comes a rise in the number of market commentators making
predictions, top-picking, bottom calling, whatever. This is one of the moments the boring,
numebrcrunchy fundies guy who hunts for value gets to catch a break because there’s really no
need to try and micromanage the price of gold or any other price medium, as long as overriding
sentiment is bullish. Frankly, offer me $1,700/oz gold from here to the end of 2013 and I’d
snatch your hand off, what with juniors priced the way they are at low multiples to earnings.
Fundamental Analysis of Mining Stocks
This week we look at Lachlan Star (LSA.to) (LSA.ax):
1

NOBS bespoke report dated September 30th, 2012
Lachlan Star Limited (LSA.to) (LSA.ax)
Company Overview
Lachlan Star Ltd (Canada: LSA.to, Australia: LSA.ax, US OTC: LSLCF, Frankfurt GY6.f) is a
junior mining company operating in Chile and Australia. Its flagship property is the operating
Compañia Minera Dayton, or CMD gold mine in northern Chile, located next to the Carmen de
Andacollo copper mine (90% Teck, 10% Chile government via Enami) that works 0.5% copper
at a throughput rate of 40,000tpd. It also holds non-core assets in Australia, including the
Bushranger copper project that is being optioned out to Newmont. The share structure is as
follows:
Shares out: 86,380,017
Options: 16,469,847 (majority at $1.20)
Warrants: zero
Fully diluted shares: 102,849,864
Current share price: $1.44
Market Cap: $124.39m
Approx cash per S/O: $0.20
All prices in United States dollars unles stated, unless stated. Forex U$1=CAD$1=AUS$1
Currency note: At time of press, one U.S. Dollar was worth 96.3 Australian dollar cents and 98.4 Canadian dollar cents.
We assume a straight 1-1-1 rate between the three currencies that affect LSA, as even though there is a little difference
in the forex we are at an unusual moment of near parity between the world’s three main dollar currencies and as such,
artistic licence in order to simplify the presnentation is begged.
Management and shareholders
Lachlan Star is an Australian domiciled company, headed up by exec-chair Mick McMullen,
exec director Declan Franzmann and GMD general manager Gaston de Parodi. From inquiries
sent to those who know the Australian mining scene far better than your author, the names at
LSA are considered reliable and trustworthy. Directors and executive officers own an aggregate
7.42m shares of the company, approximately 8.59% of shares outstanding. That’s a reasonably
decent amount and good enough to say that they have skin in their own game.
As for other major shareholders, some fo the names are more immediately recognizable to
those of us normally concentrated on the Canadian junior markets. Top of the list is Sentry
Investments of Toronto, the fund that owns large chunks of Rio Alto Mining (RIO.to) as well as
plenty of other successful junior trades. Sentry has recently added to its already large position
and last week declared (1) its holding at 11,454,000 shares, representing 13.26% of all shares
out, after adding another 980,000 shares of LSA to its pile between September 18th and 26th
(including one block purchase of 800,000 shares on Sept 18th). That a savvy fund such as
Sentry is aggressively accumulating LSA at or around current prices is its own good augury.
Along with largest holder Sentry, other large pieces of LSA are held by James W Stuckert
(8,820,850 shares, 10.2% of shares out), Intact Investment Mgmt (8,342,300 shares, 9.7% of
shares out), CMP Gold Trust (7,642,857 shares, 8.8% of shares out) Baker Steel Cap Mgrs
(5,430,939 shares, 6.3% of shares out) and Sprott Asset Mgmt (4,422,923 shares, 5.1% of
shares out) so between these larger funds and management, some 62% of all shares out are
under lock and key. LSA website can be found at link (2) below and is a good example of an
informative, well-maintained company site, so plenty more reading available for you there.
2

Company assets
LSA owns a couple of early stage properties in Australia as well as the Bushranger Copper
property in Australia, which is being optioned out to Newmont at the moment. As none of these
are key or core assets, our analysis today will focus entirely on the company flagship CMD
property in Chile and assume zero asset value for all other LSA properties.
CMD: CMD is a past worked mine that has produced over 900,000 oz gold in its time, but was
closed in 2002 due to low gold prices then re-opened not long before LSA bought CMD in
December 2010. Since then it has continued to produce gold via its underused heap leach
operation while exploring and developing the resource asset with a view to expanding the
operation and production. It’s a low grade bulk tonnage heap leach operation with a current
design capacity of around 22,000tpd throughput. When LSA acquired the asset, CMD was
running at around 5,000tpd average daily throughput, well below its capacity. In the 18 months
of its ownership to June 30th (the last reported quarter) LSA has moved production up to an
average of 11,500tpd and plans are for more growth in the next 12 and 24 months.
LSA recently revised its resource count for CMD after exploration drilling that has met with
decent success in developing the deposit. It has also dropped the cut-off grade for most of the
deposit due to higher gold prices. The result is this chart which shows the four different pit areas
inside CMD (Tres Perlas, Chisperos, Toro, Las Loas) and their respective resources. These add
up to give CMD an indicated resource of 2.059m oz gold and an inferred resource of another
1.354m oz gold. Most of this 3.4m oz (I+I) resource is contained in the largest, lower grading
Tres Perlas deposit that holds 2.74m oz gold in 229.5m tonnes of rock.
CMD compares with La Arena (in some respects at least)
The main reason to like the stock is that its story is a simple one. The mine plan is simplicity
itself as you currently strip the waste, scoop, crush and place on the pads. In many (not all,
there are no easy apples-to-apples comparisons in this game) respects LSA at CMD is similar
to RIO at La Arena; the mining is blast, scoop and dump, the heap leach/dump leach method
collects the gold in pregnant solution, the gold is refined and sold, lather rinse repeat. However,
there are differences in the two stories and here are a few details, suing La Arena as our
comparative because it’s a well-known story round these parts:
• At a recent run rate average of 0.55 g/t gold (plus the average grade of 0.4 g/t for the
material that looks set to be used for the dump leach expansion) the grade at CMD is
lower than La Arena.
• The leaching process takes longer at CMD, with a pad leach time of 120 days currently
used, which compares to the very quick 45 day pad placement time at La Arena.
• Also, recoveries at CMD are lower, at around 75% compared to around 85% for La
Arena.
• The CMD mining operation is smaller, with the company set to produce between 10k
and 15k per quarter during calendar 2012 (as opposed to the LSA financial year, which
ends June 30th), this is mainly a function of the lower throughput rhythm at CMD (less
than half that of La Arena, but also concerns the lower grade and recovery percentages.
• Also, cash costs are somewhat higher at CMD, due to more cyanide use and higher
salary costs of working in Chile.
• On the other hand, the location of Chile is prime for CMD and it should mean it enjoys a
better risk premium than RIO at La Arena.
3

• Another potential advantage for CMD is the recent discovery of good grading copper
mineralization in step-out drilling. LSA management has already made mention that with
the Teck Andacollo copper mine literally next door (as in 100 metres away), this
relatively high grading copper rock may be the source of a new revenue stream in
conjunction with Teck’s operation in some way or form.
• Finally, CMD has a lot of the cost of its upcoming expansion already bought and paid
for, with mining infrastructure that it says is worth $200m in replacement value alone
(which I don’t buy; if it’s that valuable they should sell it tomorrow and distribute $2.2o
per share to shareholder). But however much it might be worth, there’s no doubt it’s
there and exists
To sum up, there’s enough about CMD to allow comparison with Rio Alto’s successful La Arena
dump leach gold operation in Peru. There are differences in size, grade etc and production is
lower at CMD because of those, but the basic simple, low-tech mining story is the same. The
good thing about these heap leach/dump leach ops is that once you have them working and
producing at a profit, with decent management they become both predictable and scalable. Lsa
has shown it can run CMD at a modest throughput to make a modest profit in the last 18
months. Now that it has its new resource count, LSA should have the confidence to move CMD
up through a few gears and produce at a higher rate without having to worry about a shortened
mine life.
Financials and plans
We’re going to mix together two of the normal NOBS report items, as this company is more of a
story to be told than straight numbercrunching. I hope this format makes sense as you read
through.
LSA: Forcast quarterly gold production during 2012 to
Regarding growth, prospects are good as
2014 expansion phase
the operation has unused crushing and pad 30000
placement capacity as well as plans to 25000
significantly grow operations via an even
20000
simpler dump leach of run of mine (ROM)
material. Regarding the first stages of 15000
production expansion, production growth in 10000
the short term is expected from simple 5000
scaling up of present operations and as
0
CMD has plenty of unused capacity (it can
apparently handle nearly double today’s
capacity).
After stage one, we expect LSA to move on its plans to develop the larger, cheaper dump leach
ROM method that has recently seen successful scaled trial. The plan is to take the run of mine
rock straight from the mine face and process it directly in a large dump leach. The key to the
operation trials has been getting a reasonably efficient and workable recovery rate from this
cheaper mining method and after different tests, LSA was confident enough in its June 30th
report to claim a recovery of 76% which may go even higher, using a two stage leaching
method that first gets about 2/3rds of the gold and then another 10% when the mineral is moved
to a second pad for treatment.
We’ll know more about the exact plans and size of the dump leach program for CMD come
October, when LSA is due to report on its findings. At that point your author will probably refine
his production forecast for LSA and perhaps feel the need to adjust the target price (but gold
price is probably more important right now), all the same the unofficial word is that all systems
are go on the expansion, the company is happy with the results and expectations. And unofficial
thumbs up or not, LSA would hardly have gone ahead with a costly pre-strip at Tres Perlas if it
wasn’t expecting to use the resulting available lower grade mineralization soon in expanded
operations. In your author’s mind’s eye, the way CMD is expected to progress is to see the
current heap leach operation continue and concentrate on the best of the higher grading
material from the four CMD pits, while a larger dump leach operation is set up and run
concurrently to that on lower grading (~0.4 g/t Au?) rock from Tres Perlas. In this way, we can
4
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
source: company filings (black), IKN ests (light blue)

expect the combined heap/dump to reach the LSA production target of over 100,000 oz gold per
year by 2014.
As mentioned above, lot of the preparation work is now done. LSA has been investing not only
in the drill bit to grow the resource (with success), but in the last quarter has done a lot of the
heavy pre-strip work to prepare for the dump leach operations at the largest Tres Perlas
deposit. To quote the latest company filings:
Pre-production waste stripping continued at Tres Perlas, with more than one
third of the total waste moved during the June quarter coming from this cut
back. Whilst the overall strip ratio for this area was high during the quarter
(waste to ore ratio of 17.5:1), mining in July has shown a very rapid decrease
in this strip ratio to around 5.3:1. It is anticipated that this strip ratio will further
decrease over the September quarter as the hanging wall of the ore body is
exposed. The Life of Mine waste ratio for the Tres Perlas pit is expected to be
around 1:1.
In other words, LSA is doing the heavy lifting and investing cash in 2012 in order to reap the
benefits further down the line. We can see the
effects of that in the company balance sheet
AUS$m LSA: Balance sheet items per qtr (in AUS$)
items in this chart, as capitalized assets grow
120
sharply even as LSA continues to register total assets
modest quarterly financial losses. 100 total liabilities
net assets
80
And while we’re on the subject, the recent
$40m equity raise at CMD has given the 60
company all the cash it needs to move forward 40
with its plans. As a lot of the infrastructure
20
needed for expansion is already in place, we
don’t expect any significant dilution of shares 0
out in the future. There is the potential for one sep.10 dec.10 mar.11 jun.11 sep.11 dec.11 mar.12 jun.12
more modest sized placement in the next few source: company filings
months, but before making a call on that we
should look to see how the plans for the LSA cash position
AUS$m
expansion via the dump leach project shape 20
up in October. 18
16
14
Cost inputs are easy to track, with main cost
12
pressures coming from two sources, namely
10
cyanide and labour. Both those have increased 8
in 2012 and there may be some cost hikes left 6
to come, but both are manageable especially 4
2
in the face of faster rises in gold price. As in all
0
low grade operations, it’s the margin of
sep.10 dec.10 mar.11 jun.11 sep.11 dec.11 mar.12 jun.12
financial operation that should be the focus
source: company filings
and as long as that is good, the operation is
scalable.
Meanwhile, we can expect some significant costs savings from the cash cost per ounce levels
we’ve been seeing recently from LSA and there are three main reasons to expect costs to drop
significantly:
• Economies of scale: In general terms, the LSA growth production plan is for 50,000 oz
in 23012, 75,000 oz in 2013 and moving to 100,000 oz and above in 2014. The simple
production of more ounces means that cash costs for fixed priced items are spread over
more ounces and as a result, cash cost per ounce drops. We expect savings of around
$80/oz to $100/oz on this item alone in 2013 compared to the current year
• New fleet: Very recently, LSA has signed a deal for new machinery from Komatsu Chile
in a $20.4m deal covered by financings (we’ve adjusted for interest servicing in our
5

model) that once in operation in 2013 is expected to take around $150/oz off of current
cash costs, a big improvement
• Pre-strip done: As mentioned above, LSA has been investing in pre-strip at Tres Perlas,
is already over the worst of the pre-strip there and come 2013 should be working that
deposit at the life of mine expected
average of 1:1. LSA: Cash cost per qtr at CMD
1400
1200
Overall, we budget for a cash cost that drops
1000
to $900/oz from its current levels, but
800
recognize that the company expects more
600
savings per ounce than that in 2013 and
2014 so consider our $900/oz average for 400
the next 12 months as conservative. 200
0
And before we leave costs vs revenues, let’s 1 1 1 1 1 2 1 2 s t s t st
u a
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u
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in g
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a
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s e p.
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, IKN est
m
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here. Even with a cash operating cost on
operations well under the spot price for gold,
LSA has not been registering any sort of net
profit in the previous quarters as it ploughs
back the cash into exploration and deposit
development. In the last quarter (to June’12)
exploration/evaluation expenses came to
$2.92, and during the last year $9.31m.
The post-tax net profits recorded by LSA are
largely due to tax credits received from the
Chile due to its start-up status.
Summing up, LSA is a company that’s been
investing in its future during 2012 and is now
about to move forward, grow production, get
efficient and start posting net profits,
something it should do with ease as
production rises through 75,000 oz in 2013
to the target mark of 100,000 oz in 2014 as
long as the price of gold doesn’t completely
collapse on us.
Valuing LSA
There’s a lot on the story side of LSA and
CMD today, but when it comes to the
valuation it’s really pretty straightforward.
We’re going to value the company assuming
its production growth in the next year and using the following assumptions:
• Production of 75,000 oz gold. Well, to be exact 74,298.4 ounces derived from an
average throughput of 15,000tpd of 0.56 g/t gold (the pad average grade they’re
running now) at a 76% recovery rate. This doesn’t take into account how the new dump
leach operation we expect to be announced works into the production figures, as we’ll
probably get round to fine-tuning things once the details of that are known. What we do
with the 13 assumption is estimate an overall average gold production, taking into
account company goals (which are quite modest and gettable, especially as LSA
management has shown its trustworthiness in delivery so far).
• Cash cost averaging $900/oz in the period, with a tendency for it to drop as time goes
on. We’ll have to watch the cyanide cost input to see how things go, but the higher run
rate combined with the new fleet looks good to see average costs drop.
6
uA
zo/$U
LSA: gold sales vs total operating expenses, per qtr
AUS$m
25
revenues
20 total exp
15
10
5
0
sep.10 dec.10 mar.11 jun.11 sep.11 dec.11 mar.12 jun.12
source: LSA filings
LSA: Post tax net profit, per qtr
AUS$m
4
3
2
1
0
-1
-2
-3
-4
sep.10 dec.10 mar.11 jun.11 sep.11 dec.11 mar.12 jun.12
source: LSA filings

• Amortization/depreciation at 48m for the year, slightly higher than current levels to take
into account a higher mining rate. Interest payments of $5m for the year, up by $4.1m
on 2012 to date to take into account the financing agreement for the new fleet. Also,
G&A at $9.9m ( or $1.80/t) in line with current levels.
• Shares out at 86.4m, the current level. As mentioned above, a small(ish) extra
placement to add liquidity to LSA wouldn’t come as a massive surprise, but as the
company has managed its cash position well and has most of the infrastructure needed
for production growth in place, for the moment and on balance I’m going to stick with
the present day number.
• Royalty payments of 5%, 8% worker participation bonues on pre-tax earnings, Chilean
tax rates as applicable (no adjustment for potential tax credits at present, so
conservative there and besides, there are a mountain of little wrinkly tax rules in Chile
that may allow LSA to claim a rebate I’m not aware of as yet, so basically I’m pitching to
the conservative here and letting all surprises be pleasant as usual)
• Sustaining capex at $10m, which may be a little high but takes into account work LSA
may do on the dump leach plans.
With the scene set, we take our 2013 calendar year assumptions and apply them to four
different gold prices to give an idea of how LSA’s model holds up under good, average and bad
market price circumstances:
LSA.to: Income items for 2013 calendar year at differing gold prices
At 15,000tpd thruput $1,500/oz Au $1,700/oz Au $1,800/oz Au $2000/oz Au
Sales (U$m) 112.4 127.4 134.9 149.8
Cash COGS 67.4 67.4 67.4 67.4
Depreciation 8.0 8.0 8.0 8.0
SGA 9.9 9.9 9.9 9.9
Royalties 5.6 6.4 6.7 7.5
Op income 21.5 35.7 42.8 57.1
Interest 5 5 5 5
Workers Part. 1.3 2.5 3.0 4.2
Tax 4.5 8.5 10.4 14.4
Net income 10.6 19.8 24.4 33.5
Shares out 86.4 86.4 86.4 86.4
EPS 0.12 0.23 0.28 0.39
Sust Capex -10 -10 -10 -10
FCF/sh 0.10 0.21 0.26 0.36
Sources: LSA/IKN data, IKN ests
As you can see, we’re plumping for $1,700/oz gold as our benchmark for today’s valuation. We
then run that through our target box which comes out like this:
LSA: Sales and earnings Target price & valuation data on 75k/annum production
Gold Price $1500 $1700 $1800 $2000 using four different gold prices
Sales (C$m) 112 127 135 150 12-month target $2.23 (on 8x annual EPS, Au at
Upside to target 55% U$1700/oz + cash at bank)
EPS 0.12 0.23 0.28 0.39 Mkt cap (C$m) $124 Enterprise value $144
Cash flow 0.22 0.32 0.37 0.48 P/sales ($1500) 0.98 EV/sales ($1500) 1.13
P/E ($1500) 11.7 EV/EBITDA ($1700) 4.9
P/E ($1700) 6.3 EV/EBITDA ($1800) 3.3
P/E ($1800) 5.1 EV/EBITDA ($2000) 2.8
7

Using a reasonable 8X PE ratio on our annual EPS forecast and adding cash per share to the
target at period end, we arrive at a $2.23 price target for LSA, representing a 55% upside to
Friday’s closing price of $1.44.
However it has to be pointed out, and clearly too, that the eventual longer-term target for LSA
shouldn’t be based around what happens next year at CMD, but what lies further ahead
assuming that things go well for the growth plans in the next 12 months. If LSA starts moving
CMD at a rhythm of 75,000oz Au/annum, the market will quickly assume (and start factoring in)
the continued growth plans to get to 100,000 oz Au in 2014 and beyond. So if we use the same
type of assumptions as above but just perk the production rate up to get to 100k (in fact, our
model assumes 102k and bits for the year), this is how the target price would alter using
$1,700/oz gold.
LSA: Sales and earnings Target price & valuation data on 100k/annum production
Gold Price $1500 $1700 $1800 $2000 using four different gold prices
Sales (C$m) 154 174 185 205 12-month target $3.10 (on 8x annual EPS, Au at
Upside to target 115% U$1700/oz + cash at bank)
EPS 0.19 0.34 0.41 0.56 Mkt cap (C$m) $124 Enterprise value $144
Cash flow 0.28 0.43 0.50 0.65 P/sales ($1500) 0.71 EV/sales ($1500) 0.83
P/E ($1500) 7.5 EV/EBITDA ($1500) 3.7
P/E ($1700) 4.3 EV/EBITDA ($1700) 2.5
P/E ($1800) 3.5 EV/EBITDA ($1800) 2.1
In other words, if 2013 goes well and, if as we fully expect, LSA shows that the relatively
straightforward CMD expansion plans that it’s been planning on and preparing for in 2012 so far
can become reality, there’s every reason to expect further share price upside as long as the
price of gold behaves itself.
Conclusion
There’s a lot to like about LSA. The political risk profile is as good as it gets in LatAm, the
management is of the serious variety, the
mining is simple and so far at least, the
company has demonstrated that it can
produce and provide cash flow from CMD.
But the thing to really like about LSA today
is that we’re on the cusp of its
transformation from a small producer to one
that gets re-classified by the market as a
100k+ (or growing to 100k at the very least)
producer. Unlike other companies we’re
studied (and sometime bought), the
simplicity of the mining process at CMD
means that there’s nothing particularly
difficult or technically challenging about the
scale-up in the near future at the mine and
as all indications (successful dump leach
trials, aggressive pre-stripping, new fleet
purchased) are that LSA is moving forward with its growth on schedule, right now is the time to
get on this story (and it seems that Sentry agrees).
The IKN Weekly recommends Lachlan Star (LSA.to)(LSA.ax) as a buy and sets a 12
month target price of $2.23 on the stock, representing a 55% upside to Friday’s close of
$1.44. As from next week your author will be a holder of this stock and it will become a
component of our ‘stocks to Follow’ list, in the “recommends” sub-category. However, we point
out that if things go well that target should be considered a first step towards a higher target that
pitches above $3/share, as long as the company’s production growth plans stay on course, it
performs to our satisfaction costs wise and gold stays above $1,700/oz. This company has
picked up plenty of institutional fans, but so far at least is flying under the radar of the the more
8

general retail market. We expect that situation to change in the next few months and firmly
believe that now is the time to get on this stock before the noise starts to build. We buy.
End of Report
Stocks to Follow
Over the week our list of 14 open positions saw seven upmoves (RIO.to, SWD.to, BCM.v, PLA.v,
IRL.to, OGC.to, GORO), one unchanged (SRD.v) and six that lost ground (VEM.to, LPK.to,
YMI.to, LRA.v, AQM.v, FCV.v). Out of that lot the biggest moves to the positive were registered
in Plata Latina (PLA.v +26.4%) and the Gold Resource Corp short (GORO short up 9.4%), while
to the downside we saw the bigger drops in Lupaka Gold (LPK.to down 12.5%), Focus Ventures
(FCV.v down 12.5%) and AQM Copper (AQM.v down 9.7%).
There are currently 14 open positions on our list, one less than our self-imposed maximum. As
for the count, it’s even stevens for the first time in a long time with seven in the green and
seven 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$5.22 155.9% $6.29 tgt
Recommends
Vena Resources VEM.to hold C$0.35 31-may-09 C$0.165 -52.9% target lowered to 21c
Sunward Res SWD.to hold C$1.47 13-mar-11 C$1.32 -10.2% considering sale
Lupaka Gold LPK.to hold C$1.12 23-oct-11 C$0.70 -37.5% considering sale
Bear Creek Min. BCM.v hold C$3.38 07-nov-11 C$3.71 9.8% added 3rd time Fri 21st
Yellowhead Min. YMI.to buy C$1.00 01-apr-12 C$0.69 -31.0% value under $1, added Fri
Lara Expl. LRA.v buy C$1.15 08-apr-12 C$1.26 9.6% solid biz model, LT hold
Plata Latina PLA.v hold C$0.79 10-apr-12 C$0.55 -30.4% considering sale
Minera IRL IRL.to buy C$0.65 22-jul-12 C$0.88 35.4% $1.56 tgt added more
OceanaGold OGC.to buy C$3.03 16-sep-12 C$3.26 7.6% new position $5.34 tgt
Gold Res Corp GORO short U$21.47 09-sep-12 U$21.45 0.1% SHORT Position tgt $14
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.14 -54.8% 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$0.21 20.0% 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
9

Now for some notes on a selection of the above stocks.
OceanaGold (OGC.to): Of all the action in personal positions last week, the +5.8% move
seen in OGC pleased me the most. That’s probably because it’s a new position, I’ve bought it
twice so it’s already quite chunky and it’s the first evidence that the Weekly’s move to
producers isn’t such a bad idea after all (even though the decent end of the exploreco sector is
moving up too...quite aware of that). Volumes continue to be decent to trade with on both
Aussie and Canuck listings as well. Really, what’s not to like? (famous last words)
As for news, we had some on Tuesday (3) when OGC announced that it was buying into Pacific
Rim Mining (PMU.to), a junior I’ve hated for years because 1) it’s in El Salvador and 2) it’s had
all sorts of social problems, up to and including potential connection with the murders of anti-
mining activists (in the plural), accusations which the company has always strenuously denied.
In fact, the problems PMU has had at its El Dorado project (which is now in litigation as the
company tries to get compensation from the El Salvador government) is likely the poster child
that tipped the country into its current moratorium on mining activity. So anyway, OGC has
decided that it likes PMU at its current distressed price and to that end has spent $4.215m to
buy 19.98% of the company. Personally I think OGC has just flushed that cash down the toilet
and I said as much to its management team, but during the exchange was forced to admit that
firstly, now the deal is done and as OGC clearly chose the number of shares to be bought to
stay under the 20% control barrier and be a passive investor, this now isn’t much more than a
balance sheet line item for OGC in the medium term. Also, $4.2m is about 0.5% of the OGC
market cap, so it’s quite literally not a big deal for them. Finally, the fact that OGC feels
confident about spending cash like this suggests that it has its Didipio capex cash nicely
covered. That was tacitly confirmed during my exchange with management who said that as of
last weekend Didipio was 85% built and on track for its scheduled opening in 4q12. That’s a
good thing. So overall, even though I don’t like the signal OGC gave off from buying into El
Salvador, I’m basically neutral on that deal and after my exchange feel even better about being
long here because the reason to own OGC (along with the rising gold price) is Didipio, which is
doing just fine.
Bear Creek (BCM.v): Also good to witness
was the renewed market interest in BCM. I
mentioned in the closing comments last week
that I might sell a portion of my holding, take a
few profits, some money off the table etc. In
the end I didn’t do that, but $3.70 and a bove
looks a pretty decent place so if offered these
prices (or higher) again I probably will next
week. However, it will be a minor sale of the
whole and I’ll still be plenty plenty long this
stock and holding most for the longer term. Just
a bit of trading, that’s all.
Gold Resource Corp (GORO): Our short in GORO moved into the green by a whisker (two
cents, to be exact) though we should point out that on Thursday GORO announced its intention
to pat its regular monthly dividend to shareholders of record on October 10th. Assuming we’re
still short on that date, I’ll be subtracting the 6c from the cost average of the IKN Weekly GORO
short position in order to adjust correctly. We’re maybe two weeks from the production report
for 3q12 which I’ve pencilled in as one of the key information inputs of this relatively near-term
short trade. If (as I suspect) production numbers disappoint I’d expect that slender 0.1% green
to be more chunkily on my side. However, the whole point of this short position is that GORO is
overvalued even if it performs as expected and the only thing between it and a big drop is that
faddy dividend it pays, so any operational or production downside is simply icing on the cake.
Yellowhead Mining (YMI.to): Following on from last week’s discussion on YMI, the stock did
basically nothing. Also a quick shout-out to reader TM who bought 10k of YMI at an average of
1

66c on Friday. That’s a smart buy in my opinion and undoubtedly a darned sight better than
mine.
Rio Alto Mining (RIO.to): RIO saw the underside of $5 on a couple of occasions last week
but in general, any relative spike down
RIO.to: Monthly gold production figures, according to
soon found buyers looking for a
Mining Ministry (MEM) filings
decent bargain entry point. Although a Ozt Au
24401
sideways week, there was a lot to like 25000
about the way RIO traded in Canada. 22500 20144 19560
20000
17639
Meanwhile, Peru’s MEM published the 17500 16692 15426 15091
monthly metals production figures for 15000
the month of July (i.e. the first of the 12500
10000
three months in 3q12) and here’s how
7500
RIO’s July showed according to the
5000
numbers filed by RIO to Peru’s 2500
government. 0
Jan12 feb mar apr may jun jul
That’s 15,091 ounces of gold produced source: MEM
in July, which is a touch less than our
current guesstimate for RIO’s 3q12 of 50,000 oz if we do a simple extrapolation. On
consideration therefore, I’m cutting our expected production for 3q12 to between 45,000 and
47,000 ounces, but before you start a’worrying and a’fretting, recall that 3q12 was always
going to be the lowest producing quarter of 2012 as it falls after the best of the high grading
rock at La Arena was used up and before the production expansion from 24,000tpd to
36,000tpd at the mine begins. When RIO’s production number hits our eyeballs in the next few
days, we’ll find out the number for sure and I’m also pretty confident that RIO will make a point
of the 4q12 production expansion, as well as confirming its “we’re going to produce over 200k”
guidance for the year and on that score, put me down for 215,000 oz to 220,000 oz for 2012 as
a whole.
Vena Resources (VEM.to): The deal is done and the expected news came on Friday (4)
morning that VEM had sold its 70% participation in Azulcochamining SA, owner of the
Azulcocha zinc mine, to the most likely buyer Trafigura. The ticket price is made up of $20m in
debt that Trafigura now assumes instead of VEM, $2.5m in cash and then $2.5m in staged
payments of $100k per month as from October 2013. Finally, VEM gets to keep what amounts
to an NSR on Azulcocha production that Trafigura can buy out for $2m at any given moment.
All in all, it’s what we expected of the deal and the $25m is a decent result. It just about cleans
everything off the company liabilities (there will be a few salary and legal payments left to pay
from VEM’s corporate side, but nothing untoward), puts VEM cash flow positive and lets it get
back in the game. As discussed in recent editions (particularly IKN174, please refer to that one
for things unrepeated here) the company has plenty of projects to play with and we might even
see further asset sales if VEM, as I suspect, turns itself evermore towards a precious metals
focus (yes, that means I think its participation in the Macusani uranium JV is up for sale). The
other positive to come from VEM’s recent travails, now resolved, is that its corporate burn rate
has been cut down significantly and we understand that the underlying burn rate is down to
perhaps $250,000 a quarter (not including those unpaid salary cheques). That means the new
cash injection at VEM will go a long way and if new cash comes in via a sale (of Macusani?) the
company will have plenty of firepower to fulfill its ambition of putting one of its assets into near
term production (best guess something small scale on the better grading rock at either
Esquilache (silver) or Pucara (gold), best guess 12 to 18 months) and getting a revenue stream
going at last.
In fact the only thing that surprised me about VEM last Friday is that the share price didn’t
move up much, clicking as it did from 15c to 16.5c on modest volume in both Canada and Lima.
It’s not a perfect world for VEM as the company has just lost a mine it worked hard to build, but
this is a decent enough deal and a good one for the company, so this share price is still likely to
move up. But saying that, let’s be clear that I’m still a seller at my 21c target price because the
1

loss of Azulcocha means that VEM doesn’t have the producer profile that I want for The IKN
Weekly stocks to follow list going forward*. Again, no reason to bail on this at any price and the
few shares recently picked up at 15.5c as I traded around events are looking pretty good now.
But there is a target on this stock now, a reasonable one rather than a highly ambitious one,
and I’m sticking to it.
*I recently heard that the phrase “going forward” is now frowned upon, ever since a character called David Brent in
The Office started using it. However, I’ve never seen the series in any of its incarnations so I’ll just keep on using it
blissfully, ignorance or not.
Lupaka Gold (LPK.to): LPK sold off from that rather strange 80c+ pop on the merger news
the week before, so although the drop was annoying (again) it was hardly unexpected. The
merger with AAG is completed and done tomorrow, October 1st, so maybe we’ll get better
traded volumes in this ticker as from next week. But what we really need is Chaska news.
Minera IRL (IRL.to): The other Peru mining ministry July production number to show well
was that of IRL at Corihuarmi, which produced a better than expected 2,562 oz that month. So
doing like you do, I chased up on the figure and asked IRL how August and September had got
on as well and although they couldn’t tell me numbers, apparently August went well and
September looks in line. So taking all that into consideration, I reckon we may see another
7,000 oz quarter from IRL in 3q12, which is better than expected and good cash flow from the
company’s minor asset.
This brings me to a puzzling aspect of coverage of IRL, because I’ve noticed that the UK houses
and analysts that cover IRL (the majority of coverage, as MIRL.L is still the boss ticker of the
company and London is where most of the
MIRL: Monthly gold production, 2011 to date
volume flows) really love their Corihuarmi 4000
production numbers and make a big deal of 3500
them, even though the real reason to own 3000
IRL is Ollachea and Don Nicolas. So with a 2500
better than expected 3q12 in the cards, we 2000
may see a new clarion call from Blighty 1500
about our long position here and even 1000
though it may be based around the least 500
important of IRL’s three prongs, I’ll take the 0
publicity. As for trading, IRL was down all
week but somebody decided they wanted it
painted for the end of 3q, so we got to book
it at 88c this weekend. No biggie, but if you
want to buy or add IRL to your port next week, find yourself a lower price than that because for
what it’s worth, the 50p close in London is a forex adjusted 80c in Canadians.
Plata Latina (PLA.v): Down big last week, up big this week, the choppy trading in PLA
continues. However, there were a couple of changes in the substance of PLA last week that
hints at better things to come.
1) Traded volume, specifically a 625k cross on Thursday and 112k via a couple of trades
on Friday. Not liquidity defined, of course, but at least a bit of interest in owning this
thing from at least one new name.
2) News, specifically this NR on Thursday (5) that brought us up to date on progress at
Naranjillo. The thrust of the NR is that nothing mindblowing had been found by the
latest drills, but what they have found has added to the knowledge of how the Villa vein
system works and the company now suspects that good things are waiting to be found
near to the places where they’ve been drilling, as clues indicate there my be a multiple
vein structure in play. For more information read the NR and the very useful diagrams
and illustrations in the PDF that accompanies the NR (6), which PLA is making into a
very good habit. Also in the same NR, PLA announced it was now turning the drill on a
second Naranjillo target, so we’ll see what comes of that soon enough
1
11naj bef 11.ram rpa yam nuj luj gua pes tco von ced 21naj bef 21.ram rpa yam nuj luj
source: MEM Peru
dlog
fo
secnuo

PLA’s situation is one of those where patience must be exercised. The company needs room to
do its exploration thing and last week was a classic example of getting good information that
helps the company geols understand what’s going on without nailing a home run intercept. As I
personally am changing the emphasis of The IKN Weekly it remains to be seen how much
patience I assign to PLA this year, however.
Lara Exploration (LRA.v): I wasn’t surprised to read the NR on Friday (7) that announced
LRA was upping its current placement from $3m to $5m, because the company was clearly
getting a lot of interest from accredited investors about the already filled financing, the price is
right for both sides, the old junior mining saying “when they offer you money, take it” is in
operation and LRA’s parsimonious corporate structure means that it’s securing its future well
into 2014 with this deal and that suits the conservative style of head honcho Miles Thompson to
a tee. So although the new improved deal probably squashed the modest rebound that LRA
began to show last week, it’s not one I’m against seeing and strictly speaking, as I’m in at
$1.15 average it’s non-dilutive to me.
As for other news, we had two bits of interesting stuff from LRA which I’ll take in reverse order.
One came Thursday when LRA announced (8) a new deal with Chile’s Antofagasta (ANTO.L) to
go looking for copper in Brazil. See the NR for a the details but in a nutshell, the terms of the
deal are pretty much classic prospect generator stuff, with ANTO funding LRA’s people for two
years to the tune of $1.2m, so LRA uses its brains trust and extensive Brazil database and if
they find something of interest, ANTO gets the lion’s share and LRA gets to tag along on a free
ride until the exploration turns into something of real value.
However, the other NR of the week is, for me at least, even more interesting. The news
Tuesday was (9) that Codelco had decided to hand back the LRA-owned Curionopolis project,
which looks at first like a failure for the LRA
stable but if you check the details, it’s really
quite positive. The reason Codelco decided
to drop Curionopolis was that it wasn’t
shaping up to be the size of deposit that a
Codelco, the world’s biggest producer of
copper, needed for its portfolio. That’s
understandable because something
interesting for Codelco can’t just be big, it
has to be massive.
But if you look at what’s been found at
Curionopolis during the Codelco exploration,
you begin to feel that event though it’s not
cut out for Codelco it must be interesting for
somebody. This is the drill results table from
the NR dated December 1st 2011 (10) at the
project that includes intercepts of 53.8m of
9.59% copper and 14.05m of 8.04%
copper, along with very decent gold kickers
too. So there might not be the massive,
open pittable Codelco sized rock but we
already know there’s some really decent
veins to mine, the kind that would interest a smaller company looking for high grading rock to
throw in a smaller machine.
This is one of the hidden beauties of the prospect generator model that LRA uses; Codelco
assumes the risk and spends $1.82m to put over 8000m of holes into the target. It doesn’t suit
their needs and they hand it back, but LRA now has far more knowledge about its 100% owned
project, gained for free, and can use it to vend the project to another company. In the specific
case here, Codelco found some outstanding rock, so I’d be really surprised if Curionopolis
1

doesn’t get picked up by another company in the near future and at terms that will suit LRA
well.
AQM Copper (AQM.v): Another week no PEA news and although not truly delayed (the
guidance was unofficially 3q12) we’re now in 4q12 by a full day, so it’s pushing the window.
The share price seems to be affected by the lack of news too (delayed 43-101s tend, with
exceptions, to disappoint) and it’s pretty understandable, as I’m holding out of sufferance more
than joy as well, with the only difference between me and a seller being that I don’t need the
cash that would be raised. So wait I will, but I’ll also say that I haven’t given up hope on
Zafranal as it has the chops to be a mine, along with a decently grading heart-of-deposit that’ll
make for a capex payback starter pit, if the price to build the machine and supply the water is a
reasonable one. When we eventually see the PEA, all eyes on the capex estimate, please.
Focus Ventures (FCV.v): News from FCV too, when on Monday the company announced (11)
that the JV deal with International Northair was now official and slightly altered to its favour, as
FCV now has the right to option in to a maximum of 80% by completing a feasibility study if
things go well. It also took the opportunity in the NR to say this...
“Despite unusually heavy rains, exploration has continued throughout the wet season
at Santa Cruz and El Reventon. A full progress update will be provided over the
coming weeks.”
...which is a nice way of saying that things are slightly delayed, I think. Not a biggie, overall. As
for the stock, it traded very lightly and under 20c most of the week, with a bit of end-3q tape
painting that got it back to 21c by Friday’s close. Nothing of great substance as we wait for
some real news from its Mexico ops.
The Copper Basket
After thirty-nine weeks of 2012 The Copper Basket is showing a 38.47% loss to level stakes.
company ticker price 1/1/12 Shares out Market Cap current pps gain/loss%
1 Copper Fox CUU.v 1.15 398.97 498.71 1.25 8.7%
2 Lumina Copper LCC.v 13.19 40.7 411.07 10.10 -23.4%
3 Augusta Res AZC.to 3.17 144.1 407.80 2.83 -10.7%
4 Nevada Copper NCU.to 5.18 72.8 243.88 3.35 -35.3%
5 Western Copper WRN.to 1.58 93.28 62.50 0.67 -57.6%
6 Candente Copper DNT.to 0.97 121.67 60.84 0.50 -48.5%
7 Regulus Res REG.v 1.24 99.88 55.93 0.56 -54.8%
8 Yellowhead Min. YMI.to 0.80 52.82 36.45 0.69 -13.8%
9 Baja Mining BAJ.to 0.80 338.5 32.16 0.095 -88.1%
10 Duran Ventures DRV.v 0.18 184.72 25.86 0.14 -22.2%
11 Catalyst Copper CCY.v 0.08 274.48 19.21 0.07 -12.5%
12 Excelsior Min MIN.v 0.63 56.12 17.40 0.31 -50.8%
13 AQM Copper AQM.v 0.39 105.6 14.78 0.14 -60.3%
14 Strait Minerals SRD.v 0.150 56.86 6.25 0.11 -26.7%
15 Crazy Horse CZH.v 0.35 62 4.96 0.08 -77.1%
Portfolio avg -38.47%
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.
1

Our basket dropped again last week, this time by a chunkier 3.2% as ten losing stocks (LCC.v,
NCU.to, BAJ.to, WRN.to, DNT.to, REG.v,
YMI.to, AQM.v, CZH.v, CCY.v) were too 20% Copper Basket 2012 average, weekly
15%
much for the four winners (CUU.v, AZC.to, 10%
MIN.v, DRV.v) and the unchanged SRD.v. 5%
0%
As for the bigger moves, they were all to -5%
the downside and led by Crazy Horse -10%
-15%
(CZH.v down 40.7%) then followed by Baja -20%
-25%
Mining (BAJ.to down 26.9%), Regulus
-30%
Resources (REG.v down 18.8%), Candente -35%
-40%
(DNT.to down 12.3%), AQM Copper
-45%
(AQM.v down 9.7%) and Lumina Copper -50%
(LCC.v down 9.1%).
The general slump in the copper explorers
wasn’t due to any particular weakness in
the underlying metal either, as copper traded fairly
steadily and mostly in the low $3.70s/lb all week.
And no real news from the inventories front either, as
the world total for copper stocks dropped a small
0.9% to stand at 427,733mt (Shanghai accounted for
all the drop) and cancelled warrants ticked back up to
18.61%, keeping that dataset inside the recent 15%
to 20% range. Nothing we can really conclude from
that little lot.
Now for updates on some basket companies this
week:
Copper Fox (CUU.v): Unsurprisingly CUU
announced a delay to its feasibility study last week
(12) and hasn’t even given a projected arrival date.
The excuse this time is that CUU wants to get the
technical data peer reviewed, so the first thing
that comes to mind is to wonder just why it
hasn’t been peer reviewing it all along,
especially considering the amount of cash that
this company manages to burn through on a
quarterly basis.
The delay is unsurprising because as pointed
out on the blog last week (13) (though in slight
more....errrr...robust language), one of the key
elements here is that once the feasibility is
published, its JV partner at Schaft Creek, Teck,
has 120 days to consider its options and
whether or not it wants to buy into the project. So by delaying publication, CUU management
get to feed at the trough provided by Ernesto Echavarria for a while longer before the clock
really starts ticking on them. What, me cynical? Surely not! But more seriously, all eyes will be
on the capex number for Schaft Creek, firstly to see how big it is and secondly to see if the
number pitched is credible (the devil will be in the details on this one). If, as I suspect, we’re
offered up a multi-billion dollar ticket price for the proposed 120,000tpd (or more) mine plan, I
can’t see Teck going for it in the current inflationary cost environment for copper projects.
That’s just me of course, but any option other than one that sees TCK paying CUU to take
Schaft Creek forward will collapse the share price. Until then, we’ll continue to see it managed
artificially the same way as we saw last week.
1
ht8naj ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht4ram ht11 ht81 ht52 ts1rpa ht8 ht51 dn22 ht92 ht6yam ht31 ht02 ht72 dr3nuj ht01 ht71 ht42 ts1luj ht8 ht51 dn22 ht92 ht5gua ht21 ht91 ht62 dn2pes ht9 ht61 dr32 ht03
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%
19.1 1 0 6 % .0106%.4 1 0 8 % .3 1 9 6 % .06% 18.1 1 8 5 % .89 18 % .61%
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 871NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne

Crazy Horse (CZH.v): The news that this dog dropped can hardly be called a shocking
surprise and is yet another example of a high capex low grade copper project that does not
work (see Copper Fox above for another, in my opinion at least). On Tuesday CZH announced
changes in management (14) as the failed team got the boot, but the real news was this:
“...it has placed its Taysan Copper-Gold Project on a care and maintenance basis in
order to minimize expenses while it continues to pursue a trade sale or joint venture.”
In so many words, this project is being shelved and the company has thrown in the towel which
is why the few shareholders left with hope of a result in this stock did exactly the same thing. I
just hope that the same doesn’t happen to me when AQM comes out with its PEA soon.
Western Copper & Gold (WRN.to): We talked up the chances of WRN providing us with a
potential short-term rebound trade last week after its big loss of the week before, but with the
caveat that volume had to drop before any risky rebound trade could be considered. In fact last
week saw the high volumes continue in WRN, with the persistent seller taking any price
available and keeping the stock depressed, so no go on this one yet, even though Friday saw a
quiet day. If we get through at least a couple more days of low volume, it’s one that can still be
considered by you risk-takers out there but until that is confirmed, stay on the sidelines.
Lumina Copper (LCC.v): LCC popped the week before, it dropped last week. I don’t think
there was any new reason for the weakness bar the general suspicion of any high cost project
inside Argentina’s borders, but the chart notes all the drop basically happened first thing
Wednesday morning, so maybe somebody somewhere called it a sell (I wasn’t paying much
attention at the time, so couldn’t tell you).
Regional politics
Colombia: 12 reasons why the “mining locomotive” is failing
Website Colombia Confidencial is a preferred place for analysis on the country’s politics (and
sometimes economics) due to its intelligent and even-handed insight, so Spanish speakers (or
those who enjoy Google Translate) amongst you have a new reco there. On Saturday this
report appeared (15) entitled (translated) “Twelve reasons that show something’s going wrong
with the mining locomotive”, referring to the fact that President Juan Manuel Santos has based
his economic growth plans on several sectors which he calls “locomotives”, with mining being
one of them. Rather than reinvent the wheel, here below is the meat of the article translated by
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yours truly as it sums up the problems in the Colombia mining sector today, with all points
made in succinct, bite-sized pieces.
Royalties do not help sector control: The resources from royalties aren’t used to strengthen
environmental control in mining, neither do they guarantee funds so that authorities can control
illegal mining.
Lack of studies for production: The government doesn’t have technical, economic,
environmental and social studies that would assist in making the right decisions in large scale
mining.
Threat of terrorism: Groups outside the law are behind illegal mining activities in order to finance
their terrorist activities. Because of this, it’s imperative that mining is an issue taken into account in
the upcoming peace process talks with the FARC.
The ANM (national mining body) doesn’t cover the whole country: At the moment, the
national mining authority doesn’t have an institutional presence in all parts of the country. Until
now its activities are confined to the country’s largest cities, which opens the door to informal
mining in other areas.
Mining concessions vs environment: The granting of concessions without detailed knowledge
of what mining may mean in environmentally sensitive regions (eg the case of EOM.to in the
Páramos, etc) generates conflicts and legal cases between the concession holders and the State,
serious damage to the country’s water resources, confrontations between citizens and splits local
communities.
No rules for illegal mining: There is a large number of organizations mining deposits in
Colombia. The mining authorities have not yet managed to establish and organize effective
control of the informal or illegal mining. To date the mining ministry has organized workshops on
the formalization of mining in all parts of the country.
No company reports: There are very few mining companies in Colombia that report to the mining
authorities, which means a lack of deeper knowledge of the mining activity and control of
technical, economic and environmental obligations for the 9,043 active mining contracts.
Lack of environmental control: There are insufficient environmental rules for mining and mine
closures. Neither are there economic or human resources for mining clean-ups or closures.
The mining regulations don’t solve problems: One of the most worrying aspects of the mining
law reform that the mining ministry is now presenting is that, according to analysts in the sector, it
doesn’t solve problems created by the advancement of environmental science, it’s seen no debate
and it has been rejected by ethnic minority groups.
Instability of concessions: Technical modifications to the Colombian concessions regulations
mean that experts consider them to be unstable rules. A second problem is that introducing
improvements to the current system would cause uncertainty in the sector.
Delays in mining permits: The offices of the National Geological Service (SNG) still has permit
applications pending that are over two years old.
Weak mining authorities: One of the main concerns is that the National Mining Agency (ANM)
was created only a short time ago (November 2011) and has already seen two changes of bureau
president. The department still doesn’t have its own offices or sufficient personnel to carry out its
job as authority in the mining sector.
IKN back and the growing pains of the Colombia mining sector have been well documented in
recent months, on these pages and in plenty of other places. In my opinion, what’s needed
abo0ve all is real parliamentary progress made in the reformation of the mining law, as this is
the main bottleneck for permitting and getting the growing number of more advanced projects
into construction and production. Until the rules of the game are clear and understood by all, it
makes little sense for a big mining company to commit multimillion (at the larger projects
multibillion) dollar amounts.
Argentina: Santa Cruz versus Cristina
An open fight between the governor of Santa Cruz, Daniel Peralta, and the national government
of Cristina Fernández de Kirchner (who, we recall, is also from Santa Cruz) is developing, even
though Peralta ostensibly belongs to the same FplV section of the PJ party as CFK. The growing
animosity between the two parties was made public last week in interviews with Peralta (16),
who accused the national government of holding back on cash due to the province at this, a
critical time for a Santa Cruz in financial crisis.
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As Santa Cruz is one of the main “miner friendly” provinces and also home to our only current
Argentina exposure, the Don Nicolas project that is a minor part of Minera IRL (IRL.to) (MIRL.L)
we need to watch this one quite carefully, because any power struggle in the province may end
up using mining as a piece in the larger battle.
Argentina: Support for mining from the national government
On Tuesday, 30 companies either in or connected to the mining industry met with the Minister
for Industry, Débora Giorgi, in order to promote the national initiative of providing mine
supplies from national manufacturers. The meeting centred around the supply of steel grinding
balls and reported on the first batch of steel balls manufactured by Argentina’s Acindar steel
company (ironically, now owned by Brazilian capitals) and delivered to the La Alumbrera mine.
The market for steel grinding balls in Argentina is said to be $80m and it will eventually be fully
supplied by local companies. During her comments the tone was strictly pro-mining time, with
quotes (17) (18) such as, “Mining is an activity with great potential (in Argentina) and by
mandate of President Cristina Fernández de Kirchner, it’s a flagship sector in the process of re-
industrialization.” I’m again struck by the disconnect between the public declarations of support
for mining and the way in which Argentina does its utmost to scare away FDI through
restrictive management of its economy.
Guatemala: A legal challenge to the current mining law
While the Pérez government is still trying (and largely failing) to get passage of an updated
mining law, a legal challenge to the present law has been presented to the country’s
Constitutional Court by a citizen’s group named The Council of Western Peoples (Consejo de
Pueblos de Occidente, CPO) and a ruling is expected soon (19).
The group claims that the current law is unconstitutional because it doesn’t allow for binding
community decisions on mining projects as laid out in the OIT169 and to which Guatemala is a
signer. CPO’s lawyer said that the State neither guarantees or respects the law of prior
consultation as stipulated by OIT169 (the same law that’s applied in countries such as Bolivia,
and adapted by others such as Peru) when it’s their duty to do so. If the Constitutional Court
sides with the CPO it may invalidate current permits and mining operations in Guatemala and it
will certainly make for more confusion and delays to the mining rules and regulations in the
country.
Mexico: Mining investment rises in 2012
According to the sixth and last Federal government report of the Calderón administration just
published (20) Mexico expects private investment money in mining to reach U$7.647Bn in 2012,
up 36.3% from the 2011 figure of U$5.612Bn which itself was a record and 69.2% higher than
in 2010. In the period January to August 2012 Mexico has already seen a confirmed U$5.098Bn
in mining investment.
Market Watching
Another new buy still in the offing
We feature Lachlan Star this week and I’ll be adding it to the ‘Stocks to Follow’ and my own
portfolio next week, but LSA.to is not the company cryptically mentioned last week in IKN177.
That company is one I’m still trying to decide about and after consideration I’m going to wait
one more week, or maybe two maximum, before coming to a definitive call. That also means
our list, already at 14 names and at 15 this time next week, will have to lose at least one of its
explorer names to make room for a potential new guy.
Thoughts on Lydian International (LYD.to)
Here’s an idea for those of you looking for an exploration play and to start with, here’s a five
year chart of the company, Lydian International (LYD.to).
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I personally have had LYD on my radar since late 2009 when Mickey Fulp reco’d, liked and
owned the stock (by way of full disclosure, at that time I briefly owned it and made a bit of
money on the trade too, but it
was never a big position, it was
taken as a shorter-term trade and
I haven’t owned it since). Fulp
eventually dropped coverage of
LYD after watching company
officers make some pretty chunky
insider sales (a bad habit that the
company has basically kicked,
glad to say) at the time, but the
coverage baton was picked up by
Brent Cook who has championed
this company to anyone who
cares to listen for over two years
and also managed to get in
mostly before the big ramp that
took it from $1 approx to as high as $3 in mid 2011. But saying that, it’s also fair to say that
LYD’s share price hasn’t really done much more than track sideways for two years and bumble
about inside a $2 to $3 range. Cut to today, and the Friday close of LYD at $2.25 means the
company has a market cap of $281m (124.87m shares out, 132.99m shares fully diluted as at
27th September). While considering corp structure, we also note that its $37.8m in cash at bank
(that puts working capital at an IKN estimated $34m) is more than enough for the company to
move forward comfortably and as for the people on board, they come with high reputations
(e.g., Marc Henderson is a director and that’s enough on its own for the company to pass
muster).
So anyway, up to now I’ve liked and watched the company without ever getting involved and
the two main reasons for following it are simple, Messrs Fulp and Cook. When those guys say
“Look, this Amulsar project is a good gold deposit with growth upside and cheap mining
parameters for eventual production”, I listen. But alongside those two, I think that we’re now at
a moment when there’s more to like about LYD as recent newsflow from the company has been
more than interesting. In particular, there are two pieces of news that catch the eye:
1) On September 5th LYD announced (21) the findings of its 43-101 feasibility study (led by KD
Engineering and featuring a team of third party compilers). Here are the bullet points that came
in the NR to get those of you unaware of this company up to speed
•
Proven and probable open pit mineral reserves of 2.26 million ounces gold and 9.63 million ounces silver
•
Average life-of-mine (LOM) waste to ore ratio of 2.23:1 (1.80:1 years 1 to 3)
•
12 year LOM with expansion in year four from a nominal-ore feed rate of 5 million tonnes per year to 10
million tonnes per year
•
Steady state annual gold production for years 1 to 3 of 118,341 ounces per year and for years 4 to 12 of
186,047 ounces per year via heap-leach processing
•
Average LOM cash operating cost of $468.5/oz
•
Pre-tax net present value (NPV) of $646 million at a 5% discount rate generating an internal rate of return
(IRR) of 27.7%
•
Estimated start-up capital cost of $269.6 million
Those are good numbers, ladies and gentlemen, with plenty of the conservative-type pitches
and assumptions a guy like me appreciates reading. Below the headlines and in the details
there’s plenty to like, too (the 43-101 is filed on SEDAR, date September 7th, and is required
reading for those now interested). The project has a fast capital payback, produces an average
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of 200,000 oz annual over 12 years and is generally understood as “simple” mining. Then
waiting in the wings, there’s another 4m oz of inferred category material that can’t make it into
a feasibility study (must be considered waste by the 43-101 rules) but as the Amulsar deposit
has behaved in a predictable way up to now, we can assign a decent level of confidence to that
inferred and assume there’s plenty of growth left in the deposit (mine life or extra annual
production or both, you decide). As for that IRR, it moves to nearly 50% on current gold prices,
which is more than enough for anyone. As for locals, the government of Armenia has been
actively promoting its mining industry, looks upon Amulsar as a poster child to attract other
companies and its accommodating attitude has been evident in the prompt delivery of the
necessary permits LYD has required through the exploration cycle.
2) Last week, LYD announced it had made final payments to the original vendor of Amulsar and
now own the property outright. The timing of this announcement, right on the heels of the
feasibility study, piques your author’s attention as it’s the type of move made by a company
that wants to clear the way for an eventual sale (because the most likely exit strategy has been
crystal clear since day one on this play) to a major or mid-tier producer. This brings up the type
of price bracket LYD may demand and on consideration of Amulsar alone (LYD has other
properties on its books) an eventual sale at $4/share wouldn’t bat a single eyelid round this
way. A $4 selling price would value LYD at $532m (f/d) and assuming the price parameters in
the feasibility are accurate, the buyer would have its mine up and running for $800m all-in. For
a 200k/annum gold asset with a low cash cost profile and upside potential, that works.
The main concern I’d have is the political risk of operating in Armenia, as although the
government has made all the right noises regarding Amulsar and mining in general, we’re still in
unknown political waters and risks can pop up from left field. Take for example the recent story
about Armenia falling out with its neighbour over a pardon granted for a murderer there (22),
in which the country’s President resorted to good old fashioned, rally round flag populist sabre
rattling and undisguised threats of war against the offending neighbour, Azerbaijan. That’s the
kind of political atmosphere that should give anyone pause for thought.
Overall, there’s a lot to like about LYD and although not a riskless play, the economics and
geology of Amulsar are more than enough to balance that out and provide the type of reward
scenario that risk-takers like you (and me) go for in the farther flung countries and mining
projects. It’s not one I’m going to cover formally here at The IKN Weekly because I’m really
keen on making progress with coverage on producers before adding any explorers, but that
shouldn’t stop you from taking a closer look and deciding whether it’s for you. I make no bones
about the fact that the main reason to like is “Cook and Fulp like this one” and so I’m cribbing
off the work of others in a shameless manner, but the recent corporate developments and the
new chinks of light we’re seeing at the end of this 2012 tunnel for explorecos suggest, to me at
least, that now may be a good window to buy into the cut-above-the-average junior exploration
name.
China and iron ore
This report (23) from Caijing magazine (China business and financial, 14 years on the beat)
dated September 28th is presented with just a little extra commentary from me afterwards.
Metallurgical Mines' Association of China (MMAC) said Thursday that 40 percent of the country’s
iron ore mines had suspended production as the world’s largest steel market faces unprecedented
challenges.
About 40 percent of China's iron ore mines have suspended operations as a result of slumping
price, Liu Xiaoliang, executive deputy secretary general of MMAC said at an industry conference
in Dalian on Thursday.
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Iron & Steel is among the hardest-hit industries in China’s economic downturn as director of China
Iron & Steel Association(CISA) Zhu Jimin recently disclosed that total net income generated by
the association’s members dived 96% to 2.39billion RMB in the first half of 2012.
The entire steel market sank to a new low in August, and no steelmaker, including China’s largest
one Baosteel, could avoid losses, said honorary chairman of CISA Wu Xichun.
“The price drop is fatal,” he said, explaining that prices of steel products were 1000 RMB lower
than that of earlier this year and there’s no way to cover the losses by cutting costs.
Net income ratio of the industry dropped to 2.42% in 2011, from 2.57% in the previous year and
8.11% in 2004, weighed down by continuously-falling prices on higher inventory and imbalanced
demand-supply.
As of August 11th, inventory of five major steel products stayed at a history high of 15.15million
tons, up 1.35million tons from the same period in the previous year.
However, newly added capacity make things worse as latest statistics show that new raw output
grew 2.5% month-to-month in July which added to the demand-supply imbalance.
Liu predicted prices of iron ore will stay between $90 and $110 in the following two years.
As well as the report, I direct you to this link (24) that has some JP Morgan analyst calling a
bottom in iron ore on September 29th (one
day after the China news hit) due to the
large amount of relatively expensively
produced local Chinese iron ore that has
just been wiped from potential market
supply, leaving things in better shape for
the cheap, supertanker freighted iron ore
supplied by Rio Tinto, Vale and BHP.
Secondly, here’s a chart that shows the
any-origins iron ore spot price (the most
generalized price tracker for the
commodity) from Lehman time to present.
It shows spot at $107.50, but doesn’t
show the latest drop on the news to a
reported $90/t, which is closer to the bottom seen in 2008/2009.
So to the point: Away from the present day of price moves, anyone considering an investment
in iron ore junior plays (which are invariably exploration stage companies) on the prospects of a
price rebound needs to consider the amount of latent supply that will be waiting in the wings on
any recovery. Put simply, iron ore juniors is one sector to avoid until underlying fundies are
radically different, which means you should be counting in years rather than months.
Tahoe (TAHO) (THO.to) and Fortuna (FVI.to) (FSM) downgraded by Dundee
Although hardly a grand fan of the way in which the Canadian brokerages go about their work
(yes, I have my diplomat’s hat on today) I do follow with at least one eye recos from analysts
and houses that I’ve learned to respect as good judges. One of those is Dale Mah of Dundee
Capital Markets, who downgraded recommendations on both Tahoe Resources (THO.to)
(TAHO) and Fortuna Silver (FVI.to) (FSM) to neutral from buy, while price targets were
adjusted slightly upwards for both stocks (THO $21.20, FVI $5.30) mainly due to the recent rise
in silver prices. As for the reasons, Mah’s basic call was that FVI had put in a decent recovery
and was now fully valued, while at THO the good run up in price recently was coupled with “its
status as a developer with high geopolitical risk”. Although never that worried about it, I do
admit that it’s comforting to see a respected stockwatcher such as Mah agree on calls and give
the same reasons for their decisions as on these pages. And as this 10 day chart shows, when
respected voices such as Mah’s make a call, the market tends to react as come Wednesday
morning THO and FVI were down between 12% and 14% from their Friday closes. They both
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put in a decent recovery as the rest of
the week wore on (silver improved by
around 2% Weds thru Fri) but the
feeling that we left FVI at a reasonably
good window is reinforced here. As for
THO, I repeat the basic call of it being
a wonderful project but far too
expensive and risky for a country as
shaky as Guatemala.
Atico Mining (ATY.v) update
As covering a developments in a stock mentioned just last week is the only fair thing to do, a
quick word about the news release out of Atico Mining (ATY.v) last Monday (25). It was a fairly
long NR with plenty of information contained about El Roble, but the two main points were:
• Stage two drilling has recently begun and I for one was expecting it to have been more
advanced by now, perhaps looking for results rather than news of the drills beginning
to turn. In the end this isn’t a big deal, but it suggests that nothing happened for
something like two months at El Roble which is quite a long hiatus.
• There are two rigs now drilling, with one continuing the underground program that saw
decent results during stage one. Meanwhile, the other rig is drilling prospective targets
away from the known mineralized zone from surface and this is good news, because if
El Roble is a play worth considering, we’ll want some of the blind targets to turn up
trumps and add to tonnages.
Other pieces of information given include apparent success from the recent VTEM airborne
survey which has found six more targets deemed of interest by ATY. But with the drill program
only kicking off now, we may have to wait until November for assay result news and that’s not
really conducive to immediate stock price momentum, interesting insider buying or not.
Conclusion
IKN178 is done, we close with bullet points:
• I’m a buyer of Lachlan Star (LSA.to) next week. It’s one I’ve watched for quite a few
months and with the newsflow from the company almost certain to be about growth,
upping production and moving the company above the 100,000 oz Au per year barrier
in the next 24 months, the time looks right for the buy. There will always be those put
off by the low grade mined by this company, but as it’s already shown it can be
profitably mined, the move to scale up and create stronger cash flow is more than
logical. Also, those put off by low grade rock didn’t buy Rio Alto at 69c, either.
• The LatAm political scene is going to be noisy all next week, even for you guys up
there, due to the Sunday October 7th Venezuelan Presidential election. As we’ve
mentioned it a few times on these pages and in the great scheme of things it’s not
really a happy hunting ground for mining companies, nothing on it here today (bar this
concluding paragraph of course), but we reiterate that a Chávez loss would be a
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surprise. Not a massive heart-stopper surprise, but a surprise. If Capriles wins however,
you’ll see one mother of a rally in Venezuela exposed financial issues on October 8th.
• Lydian International isn’t framed for The IKN Weekly at the moment and its political risk
backdrop is a bit of a mystery to me, Armenia and all that, but it’s one that you may
want to consider. After all, it comes with the reco of a couple of very decent rock
doctors.
• China isn’t much more than a black box for me as well, but I know a demand slump
when I see one and if 40% of local iron ore mines are closed due to margin
destruction, the conclusions to be drawn are straightforward. Whether or not this slump
will move across to other metals commodities such as copper is a tough one to call,
because for one thing the dynamics of copper demand are different, for another we
have this much vaunted centrally planned infrastructure stimulus program kicking off
next year, for another copper is being used as a financial instrument in China (which i
think is dangerous, but then again I’m not Chinese) and for one other, China is a low
volume producer of copper and relies greatly on imports (GS once wrote that the ratio
of imported copper to locally produced copper was 5:1, by far the highest import biased
ratio of any major commodity in China).
• As for a quick one on near-term trading possibles, I’m really going to stick with Western
Copper (WRN.to) as long as volume dries up, but Vena Resources (VEM.to) didn’t get
the credit it deserved for selling Azulcocha for $25m (plus profit clause) on Friday and it
wouldn’t surprise me in the slightest to see it rally. Whether or not it meets my 21c
target in one shot is another matter. Also, i will take off a bit from BCM but only a little,
as this one is starting to re-catch bids from larger wallets, methinks.
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://www.lachlanstar.com.au/images/20120928_LSA_ChangeSubShareholderSentry26Sept12.pdf
(2)http://www.lachlanstar.com.au/
(3) http://finance.yahoo.com/news/oceanagold-corporation-takes-placement-pacific-181847709.html
(4) http://finance.yahoo.com/news/vena-resources-trafigura-sign-binding-114900590.html
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(5) http://finance.yahoo.com/news/additional-plata-latina-drilling-indicates-120000916.html
(6) http://stream1.newswire.ca/media/2012/09/27/20120927_C2081_DOC_EN_18556.pdf
(7) http://finance.yahoo.com/news/lara-exploration-increases-private-placement-113000720.html
(8) http://finance.yahoo.com/news/lara-antofagasta-form-strategic-alliance-113000561.html
(9) http://finance.yahoo.com/news/lara-exploration-ltd-codelco-relinquishes-000418004.html
(10) http://www.laraexploration.com/announcements/positive-drill-results-from-the-curionopolis-copper-gold-project-1
(11) http://finance.yahoo.com/news/focus-northair-sign-definitive-agreement-123000543.html
(12) http://www.newswire.ca/en/story/1041521/copper-fox-reports-the-status-of-the-schaft-creek-feasibility-study-and-
provides-the-mira-re-interpretation-of-airborne-magnetometer-and-titan-24-surv
(13) http://incakolanews.blogspot.com/2012/09/shock-surprise-gasp-copper-fox-cuuv.html
(14) http://finance.yahoo.com/news/crazy-horse-resources-announces-change-230000098.html
(15) http://confidencialcolombia.com/es/1/303/2325/Doce-razones-que-explican-que-algo--anda-mal-con-la-locomotora-
minera-minas-locomotora-colombia-econom%C3%ADa.htm
(16) http://www.lanacion.com.ar/1512924-peralta-algunos-que-agravian-no-superarian-una-rinoscopia-en-un-hospital
(17) http://noticias.terra.com.ar/giorgi-impulsa-produccion-local-de-insumos-
mineros,1a56daaafcef9310VgnVCM4000009bcceb0aRCRD.html
(18) http://www.diarioelargentino.com.ar/noticias/112779/para-giorgi-la-mineria-es-una-bandera-en-el-proceso-de-
reindustrializacion
(19) http://www.s21.com.gt/pulso/2012/09/26/piden-respuesta-recurso-contra-ley-mineria
(20) http://www.oem.com.mx/laprensa/notas/n2712212.htm
(21) http://www.lydianinternational.co.uk/press-releases/2012-09-05/lydian-international-announces-robust-feasibility-
study-for-its-low-cost-amulsar-gold-project-in-armenia
(22) http://www.businessweek.com/news/2012-09-04/ax-killer-pardon-reignites-caucasus-war-fears-in-oil-rich-region
(23) http://english.caijing.com.cn/2012-09-28/112161506.html
(24) http://www.businessinsider.com/chart-of-the-day-iron-ore-is-getting-destroyed-2012-8
(25) http://finance.yahoo.com/news/atico-commences-second-phase-drilling-113000062.html
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'1 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
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Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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