IKN #181Premium

The IKN Weekly
Week 181, October 21st 2012
Contents
This Week: Fe errata, Gold back to pre-QE3 level.
Fundamental Analysis: NOBS update report on Gold Resource Corp (GORO).
Stocks to Follow: Overview, Sunward Resources (SWD.to), Strait Minerals (SRD.v), Gold
Resource Corp (GORO), Primero (PPP) (P.to), Minera IRL (IRL.to) (MIRL.L), Yellowhead Mining
(YMI.to), Plata Latina (PLA.v), Vena Resources (VEM.to), OceanaGold (OGC.to) (OGC.ax),
Lachlan Star (LSA.to) (LSA.ax), Focus (FCV.v), Lara (LRA.v), Lupaka (LPK.to).
Copper Basket: Overview, Copper Fox (CUU.v), Catalyst Copper (CCY.v), Western Copper &
Gold (WRN.to), Nevada Copper versus Yellowhead Mining (NCU.to) (YMI.to).
Regional Politics: Mexico: Ecologists making Baja California Sur open pit mining a cause
célèbre, Dominican Republic: Government encouraged to build a smelter, Ecuador: Chile’s
promotion of mining in Ecuador, More on Guatemala’s mining law reform, Chile: “Historic”
investment planned by Codelco in 2013.
Market Watching: Galway Resources (GWY.v) gets a buyout offer from Eike Batista’s AUX, we
get a good arbitrage opportunity, Dynasty Metals & Mining (DMM.to) news, Final short note on
Liberty Silver (LSL.to) (LBSV.ob), Fortuna Silver (FVI.to) waiting for revenues numbers, Rio Alto
3q12 production numbers.
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
Fe errata
Among the usual batch of annoying word typos there were two numerical typos in last week’s
edition that need clearing up. Firstly, in the note on Focus Ventures (FCVv) the phrase “10g/t
Au” was used while discussing the soil sampling. That should have been “10g/t Ag” (i.e. silver).
It was pretty clearly a mistake in context, but needs to be highlighted just in case.
The other was in the piece on Rio Alto (RIO.to) where I wrote that capex for the sulphide stage
two was slated at $350m. That should have been $250m and even though (again) it was a
fairly easy to see it was a mistake in the context of the numbers around it, these number errors
need to be corrected.
Evidence suggests that goldbugs were wrong
But don’t worry, they won’t admit it.
1

You can say what you like about Paul Krugman (and his political shrills annoy even me), but his
working theory on liquidity traps matches what has happened to capital markets over the last
four years far move closely than any of the Austrians.
Fundamental Analysis of Mining Stocks
In the light of last week we revisit and update on Gold Resource Corp (GORO):
NOBS bespoke update report dated October 21st 2012
Gold Resource Corp (GORO)
Company Overview
Gold Resource Corp (NYSE: GORO) is junior gold mining company operating in Mexico. Its
flagship property is the operating and producing ‘El Aguila’ silver/gold mine in Oaxaca, Mexico.
It also has a asset book of exploration and development stage properties in the same region.
Current share structure is as follows:
2

Shares out: 52.829m
Options: 5.702mm
Warrants: Zero
Fully diluted shares: 58.531m
Current share price: $17.58
Market Cap: $928.73m
Est Fwd Dividend yield: ~4.1%
Approx cash per S/O: $0.85
All prices are in US dollars unless stated. Forex U$1=CAD$1
Today’s update
In the light of last week’s production and guidance announcement from GORO, we update our
coverage on the company and consider what to do with our current short position in the
company that’s now nicely in the green. We’re going to tackle this update in three parts:
1) Look at the news release
2) Try to estimate how this will affect earnings estimates and adjust the forecasts that we
made in the NOBS report in IKN175, dated September 9th, that opened our short
position.
3) Consider what I believe to be the next key to any short/long position; whether GORO
needs to reduce or suspend its much vaunted dividend policy, because the basic
assumption is that if GORO has to cut the divi this already reduced stock price will go
much lower.
After considering those three aspects, we then make a call on how we see the rest of 2012 for
GORO and your author’s decision on what to do with this winning short position is made. Let’s
get on with it, but please refer to IKN175 for information on this stock that won’t be repeated
here (I’m going to try and keep this brief....try at least).
1) Production news
The news out post-bell Wednesday (1) contained bad news on three fronts for GORO longs:
1) Gold equivalent production for 3q12 was put at an estimated 22,300 oz AuEq
(comprised of gold and silver production, with a gold/silver ratio of 1:55 used), lower
than expected by those willing to believe what this company guides.
2) GORO lowered its 2012 production forecast for the third time this year, aiming now at
between 85,000 oz and 100,000 oz AuEq.
3) A dispute with a buyer during was reported, as the buyer of at least some of the 2q12
production says that the delivery was light by some 2,300 oz AuEq. At a best-guess, the
disputed metal is worth around $3.75m
Along with the bad news Wednesday came another NR later on (2) that announced the
departure of the General Manager of
GORO’s mining unit, responsible for the
El Aguila mine. Blame duly appointed.
Here in price chart form is how the stock
was affected by the news, basically a big
sell-off on heavy relative volume.
Next is this chart below that shows how
2012 production at GORO is shaping up
in chart form. For the 4q12 estimate
we’re splitting the new reduced (but still
pretty widely drawn) guidance basically
down the middle and estimating that
GORO produces 25,000 oz AuEq in its
final quarter. This would bring 2012
production to 92,316 oz AuEq according
to their figures (without adjusting for that
3

disputed 2,300 AuEq from 2q12 as yet) which is
as close to the 92.5k oz AuEq mid-point of the AuEq oz GORO 2012 AuEq production
new guidance as dammit is to swearing. What 35000
we see is a stock that hasn’t lived up to 30000
expectations created in 1q12, nor has it lived up 25000
to the overambitious guidance numbers set by 20000
the company. 15000
10000
It’s worth recalling that the over-promising goes 5000
back a long way too, for example let’s check in 0
on this chart that was included in the GORO 1q12 2q12 3q12 4q12est
2011 Annual Report (dated March 2011).
source: company filings, 4q12 est avg
• As we see, a year and a half ago 2012 production was
expected to reach 155,000oz Au Eq. But wait! There’s
more!
• At end 2011, GORO set its 2012 production target at
between 120,000 oz and 140,000 oz AuEq, a figure it
continued to used in official literature until May 2012.
• When it announced its 2q12 production figures in July
2012, the target was dropped to between 100,000oz and
120,000 oz AuEq.
• Now, as of last week’s NR we’re down to between 85,000
oz and 100,000oz AuEq.
It would seem that GORO has a growing credibility question, ladies and gentlemen.
2) Adjusting our earnings estimates
It’s safe to say that I wasn’t in the least bit shocked about the mediocre production numbers that
GORO announced post-close Wednesday (1), but they were a little better than we’d forecast in
our rough guesstimated numbers in the IKN175 NOBS report and really, without batting an
eyelid I’d say that it could have been worse. So here are the charts we ran in IKN175 adjusted
by the new information and we’re also adding tentative figures for 4q12 this time, too. However,
it has to be clearly stated that we’re still best-guessing because all we have to go on is a 22,300
AuEq number (made up of unknown numbers for gold and silver production) and aside that,
what we have here are production numbers rather than sales numbers, which have varied quite
widely in previous quarters as seen in the report six weeks ago (if you recall, GORO stuffed its
2q12 earnings by selling a big chunk of its inventory). So we’re still estimating here, just with a
little more information to go on.
Here are the revenues vs “true costs” (I explained what that was all about in IKN175, go check if
need be) charts, with the first the
absolute quarterly figures and the
GORO: Revenues vs "true costs"
second the “per tonne” breakdown,
U$m
both as seen in IKN175. 45
40.622 40
40 37.781 37.5
revenues 35.438
We’re estimating (non-dispute) 35 "true costs"
30.01
revenues to come in at $37.5m and 30
true costs slightly higher than 2q12 25 20.664 20.514 22.522 24 24
at $24m. The second “per tonne” 20 13.940 15.908 15.269
breakdown gives a visual idea of the 15 11.28
9.127
10
type of gentle recovery we’re
5
expecting from the worst quarter at
0
GORO, that of 2q12, with revenues
1q11 2q11 3q11 4q11 1q12 2q12 3q12est 4q12est
per tonne rising through 3q12 and
4q12 while the true cost of mining true costs = prod costs + deprec&amort+ accretion + G&A + stock
based compensation + expl expenses + construction & development
4

drops slightly. These two dynamics are giving the benefit of the doubt to GORO somewhat
(after all, it’s shown itself to be a highly
unreliable and overly bullish forecaster of its GORO: Revs/tonne vs True Cost/tonne
own production and costs on many occasions)
but as we’re short we don’t want to assume a 700
worst case for the company (which would 600
mean best case for us) because that’s not how
500
we do things round here. This is a happy
400
medium forecast, in my own opinion.
300
200
We’re now expecting COGS to come in a little
100
hotter than in other quarters which is reflected
0
in this chart (again updated from IKN175, see
that report for more on the breakdown):
Here are our earnings estimates for the current
and final quarter, which have to be taken with a pinch
of salt (due as mentioned above to the unknown
differences between production and sales, costs
uncertainties, the received prices for silver and gold,
then the further doubt about guesstimating 4q12
average market prices etc) but hey, we have to start
somewhere and a happy medium type of revenues
and earnings model is needed when we move to part
three of today’s report that attempts to answer the big
“can they keep paying the dividend?” question. We
therefore expect revenues to improve compared to
2q12, due to better production and better market
prices for gold and silver. As for 4q12, we’re basing
our forecast on that split-down-the-middle 25,000 oz
AuEq estimate, plus better average prices for silver and gold (thanks to Ben Bernanke).
As for working capital (we’re not going into all balance sheet items here, IKN175 is the place for
those), an all-important metric for a company that depends on its dividend policy to keep its
holders happy and share price high, we’re still
estimating that to be down a little on the previous
quarter at $60m. Of that, our model puts cash at
bank at ~$45m.
However, note once again (and it’s getting boring, I
know) we’re not taking the disputed 2,300 oz AuEq
that GORO mentioned in its Wednesday NR into
account. It’s possible that GORO puts in a charge or
a provision in the 3q12 numbers to cover this
disputed revenue, which would presumably be stuck
in the liability section of the balance and would
therefore chop working capital down that much
5
11q1 11q2 11q3 11q4 21q1 21q2 tse21q3 tse21q4
source: company data, IKN calcs
ennot/$U
revs per tonne
true cost per tonne
difference
GORO: Costs breakdown
14
12
10
8
6
4
2
0
11q1 11q2 11q3 11q4 21q1 21q2 tse21q3 tse21q4
source: company data, IKN ests
m$U
COGS
G&A + stock comp
exploration
cons+dev
GORO: Quarterly Earnings overview
45
40
35
30
25
20
15
10
5
0
11q1 11q2 11q3 11q4 21q1 21q2 tse21q3 tse21q4
source: company filings, IKN ests
srallod
fo
snoillim
GORO: Operating Profit vs EBIT
50
45
40
35
30
revenues 25
COGS 20
Gross profit 15
10
5
0
11q1 11q2 11q3 11q4 21q1 21q2 tse21q3 tse21q4
source: company filings, IKN ests
srallod
fo
snoillim
pre-tax profit
op profit
GORO: Working Capital per qtr
80
70
60
50
40
30
20
10
0
01q4 11q1 11q2 11q3 11q4 21q1 21q2 tse21q3
source company filings, IKN ests
srallod
fo
snoillim

further. The disputed 2,300 AuEq is worth a best-guess $3.75m on 2q12 prices, quite a
significant amount of cash for this size of company and aside from the potential problems that a
lack of trust in future sales agreements might entail due to this dispute between GORO and
buyer.
3) The dividend question
The potential to run a NOBS update report on GORO today was mulling round my head most of
Thursday and Friday, but only really crystallized post-bell Friday when considering the potential
GORO has in continuing its dividend policy, in the fairly-near-term at least. What we have today
is a short position that’s showing a profit, but to reach our pencilled-in $14 valuation for this
stock it needs to have more bad news in the pipeline. The big thing about GORO is its dividend
and it was a recurring theme all the way through our IKN175 report. Here’s an abridged extract
from one part of the report to give the idea:
The dividend policy at GORO is its key marketing and selling point ... and the company
never misses an opportunity to tell its holders about how lucky they are to hold a stock
that pays dividends .... It looks to return cash to its shareholders in the form of a
monthly payment and emulate larger precious metals mining companies .... The day
the dividend is stopped is the day GORO loses trust and goodwill with the people it has
managed to convince. Not only that, but there’s clear evidence that the company has
been paying dividends out of treasury and not its positive cash flow recently, as the
company saw its cash treasury reduced in 2q12 even though operations expenditures
were inside the range of the normal ..... It’s the kind of stunt you can get away with for
a limited period, but not for any length of time.
So the big question that needs an answer today is:
Will GORO cut its dividend in 2012?
Because if it does, this current price will be chopped down even further and our short position
rewarded. However, if the dividend policy remains as stands in 2012 I’d expect the rather
myopic fans of this company to support the price and see
it drift back higher in roughly the same way we saw after
the 2q12 production shock caused a sell off to under $17
that slowly rebounded to $21 and above (where we took
our short position recently). On consideration and taking
into account the company’s cash and working cap
position, I think it will be able to continue payouts until
the end of 2012 and here’s how that consideration works.
Let’s start with this little graphic (right)from the company,
which explains its basic dividend policy quite neatly.
GORO aims to deploy one third of what it calls “Cash
flow from mine site operations” (and is defined as seen in
the chart) as a cash dividend to shareholders and to date
has paid monthly dividends that amount to $63m since
declaring commercial production. Now, we need to state
for the record that “Cash flow from mine site operations”
is one weird financial metric and bears little relation to the amount of money the company
makes, because as we saw in 2q12 GORO is perfectly capable of paying out more cash than it
earns (in other words tapping into its cash balance and negatively affecting working capital)
which is a practice frowned upon by just about every reputable company I know of and even
banned by some company domiciles. However it’s not banned by the State of Colorado,
GORO’s domicile, which is important because the SEC recently asked GORO questions about
this heterodox dividend payment system as noted in this exchange between the US regulatory
body and the company (3). Here’s what the SEC asked GORO:
We note your response to comments five and eight in our letter dated May 30, 2012 that your
target is to distribute one-third of your mine gross profit as reflected in the Consolidated
Statement of Operations to shareholders. With regard to this dividend policy, please address the
following:
6

• As noted in our prior comment eight, you state that dividends are dependent on cash
flows when your response specifically indicates that dividends will be approximately
one-third of mine gross profit. This point should be clarified throughout your
document; and
• Further, you state that you intend to retain the remaining cash generated from your
mining operations to fund operating, capital and other expenses. According to your
cash flow statements for the interim period ended March 31, 2012, it appears that
dividends for this period were financed from your cash account and greatly exceeded
operating cash flows resulting in negative cash flows after remaining operating and
working capital items were paid. Please explain your basis in a one third of mine
gross profits dividend policy when you are operating at a cash flow deficit.
And here’s how the company responded:
We have clarified our disclosure in Form 10-Q for the period ended June 30, 2012 to reflect that we target
calendar year cash distributions to our shareholders totaling approximately one-third of cash flow from
mine site operations (See Non-GAAP measures below), subject to the laws of the State of Colorado that
govern distributions to shareholders. We have also expanded our disclosure to include that our target
dividend payment of one-third of cash flow from mine operations may be increased, decreased, suspended
or discontinued at any time at the sole discretion of the Board of Directors based on company development
requirements and strategies, current cash balances, spot gold and silver prices, taxation, general market
conditions or any other reason. We have also expanded our disclosure to reflect that we believe that based
on current metal prices and the expected operating performance of the La Arista mine, we believe that our
cash flow from mine site operations will be sufficient to fund our expected disbursements for operating,
capital, other expenses and our planned distributions to shareholders for at least the next twelve months
To sum that bit up, GORO says that it budgets dividends on annual projections rather than
quarterly results and that its policy is legal according to Colorado State. However, it did have to
add in conditions to its filing disclosures to make it clear that it could alter its policy if needed, at
the board’s behest. It’s also notable that GORO replied to this SEC mail before it cut its
production guidance down to 85k-100k oz AuEq, so they might not have the cash flow needed
to fulfill previous expectations. A little further down the same filing, GORO continues:
In response to the second question from the staff, we have clarified our disclosure to state that we are
targeting calendar year cash distributions to shareholders totaling approximately one-third of cash flow from
mine site operations (a Non-GAAP measure, which is mine gross profit adjusted for non-cash items),
subject to the laws of the State of Colorado that govern distributions to shareholders. Our target shareholder
distributions are based on one-third of cash flow from mine site operations, and not net cash flows provided
by operating activities or any other measure from the Consolidated Statements of Cash Flows. Furthermore,
our target dividend distribution period is the calendar year, so there will be quarters within the year when
our La Arista underground mine performs better or worse than what we forecast for the year. As a result of
these fluctuations, we may periodically make payments from existing cash balances for limited periods of
time. We have also expanded our disclosure to state that our target shareholder distribution of one-third of
cash flow from mine site operations may be increased, decreased, suspended or discontinued at any time at
the sole discretion of the Board of Directors based on company development requirements and strategies,
current cash balances, spot gold and silver prices, taxation, general market conditions or any other reason.
Therefore, it is our intention to make cash distributions to shareholders based on our calendar year forecast
of cash flow from mine site operation, subject to sufficient cash balances and the other criteria identified
above.
Here GORO explains its decision on basing dividends on annual budgets. In the SEC
correspondence, GORO also lays out its calculations for “cash flow from mine site operations”,
the figure on which it supposedly bases its dividend policy. In 1q12 the figure came to $34.621m
and in 2q12 it came to $18.501m. The total of $53.122m was used by GORO to justify its 2012
dividends in the first two quarters of 32c per share, that’s to say $16.905m. Now that looks fair
enough, because 1/3rd of $53.122m is more than $16.9m.
That was then and this is now and what we need to do is get a handle on whether GORO will be
able to cover its rate of dividend payments expected in the second half of 2012, where we are
now. Let’s also underscore that GORO now knows that the SEC is looking at the company on
this score, so it’s now less likely to try and play things fast and loose. The first part is to work out
how much it needs to cover and that’s fairly simple, because since May it’s been paying a 6c
monthly dividend so if the company doesn’t want to disappoint its faithful, it needs to pay out
36c in the period July to December 2012, i.e. 36c or a cash total of $19.02m, which we’ll call
$19m for our purposes today.
7

As GORO looks on this “1/3 of cash flow from mine site” bizarro calculation on an annual basis,
what we need to do is consider the 12 months of 2012 all together. This means that GORO, in
order to comply with its policy and continue to pay 6c/month until the end of the year, needs to
cover $35.9m in 2012 annual gross dividends. In other words, its cash flow from mine site ops
has to total at least $107.7m. From this we subtract the $53.122m already indicated by GORO
as its cash flow from mine site ops in the first half of the year and we have a target for the
second half of the year.
Therefore, after that rather sinuous route through a bunch of numbers we finally have a
target: GORO needs to do $54.6m (rounded) in “cash flow from mine site operations”
during the second half of 2012, e.g. $27m per quarter, in order to comply with its own
policy and continue to pay that dividend as stands without raising a second set of
eyebrows at the SEC (I’ve underlined and bold-typed that bit to help your eyes, because I
realize the above route to the conclusion is a bit gobbledygook and really, it’s the bottom line
call that you need to know). an they do it, now that production forecasts have been cut? At the
time of the SEC exchange GORO was guiding for 2012 production of between 100,000 and
120,000 oz AuEq at a 53:1 silver/gold ratio. Today, that guidance is down to between 85,000
and 100,000 oz AuEq, presumably at the same silver/gold ratio but as GORO used 55:1 in its
3q12 release, we can’t be 100% sure.
This chart suggests that GORO can cover its dividend policy in 2012. Only just mind you, but
“just” is enough to keep the SEC off its back for a
GORO: gross profit vs "cash flow from mine
couple of quarters. Here we see GORO’s gross
U$m site operations", 2012
profit figure for 1q12 and 2q12, set alongside its
40 gross profit
disclosed figures “cash flow from mine site
35 cash flow mine site ops
operations” to the SEC. We then take The IKN
30
Weekly estimates for 3q12 and 4q12 gross profit, 25
derived from the estimates and forecasts in the 20
previous section 2) above. 15
10
5
We estimate “cash flow from mine site operations”
0
at $26.5m for 3q12 and $29m for 3q12, totalling
1q12 2q12 3q12est 4q12est
$55.5 and about $1m more than the company
source: GORO data, IKN ests for 2h12
needs to continue with its dividend policy. It’s
close and if earnings fall off the rails (or costs
come in higher than expectations, or GORO has to quickly pay back that disputed $3.75m for
the 2,300 oz AuEq of “missing” metal, or any number of financial misses it might incur), it’s still a
policy that will be under pressure. I can’t write that I’m sure, or that I guarantee that GORO will
continue its policy but after checking out the evidence, I’d call it an 80% chance of happening
and that’s good enough for my blood.
Before we leave this subject, I want to say clearly that I think GORO’s method of dividend
payment calculations is bullshit because that measurement they use doesn’t take into account
charges for G&A, exploration, construction&development etc. All those things are supposed to
be paid by the 1/3rd of the above pie chart that’s labelled “growth”, whereas in fact the dividend
policy eats into far too much of the real cash flow at the company, leaving little or nothing left
over for its supposed growth and expansion plans (we talked about this in IKN175). But what
we’re doing in the above calculation today is using their measure, the one they were forced to
explain to the SEC. This situation is unsustainable in the medium and long term because they’ll
eventually deplete working capital and leaving nothing for capex. However, with an estimated
$60m in working cap and $45m in cash at end 3q12 they can play along for at least a couple of
quarters and as they have a 2012 annual budget planned here, they can also play along the
SEC for the two quarters left as long as 3q12 doesn’t come in substantially worse than in our
current model. But seriously, this dividend model is bullshit and not becoming of any serious
company.
An example of why the continued dividend payments are important
Before reaching the conclusion, I want, by way of a short aside, to illustrate my assertion that
GORO’s dividend payments are the thing that stops its share price from cratering. I’m using as
baseline data a mail I sent to reader ‘M’ on Friday evening (as we discussed the case and my
8

thoughts were crystallizing) as we discussed the position of Hochschild (HOC.L) in GORO.
Evidence suggests that HOC will stay on as 28% holder of GORO as long as those dividends
keep flowing, but if they stop (and the share price drops) then watch out below. It goes like this:
• HOC has a USD mkt cap of ~$2.7Bn.
• GORO was ~$1.1Bn, is now ~$930m
• HOC owns ~28% of GORO, so its mkt value share went from ~$310m to
~$260m. That’s small beer change in asset value for a $2.7Bn company
• If you check out the five day HOC chart from last week (4) it didn't bat an
eyelid Weds/Thurs as you'd expect, cos a $50m change for a $2.7Bn mkt cap
company is chickenfeed.
• Therefore, I'd suggest that HOC, passive investor as it is, doesn't worry about
the daily fluctuations in GORO, even bigger ones like last week’s, as long as it
gets its monthly cheque of a smidge under $900k in the post (14.9m shares
and 6c/month).
• Therefore HOC isn't going to bail as long as the divi continues to flow and
that’s backed up by the consideration that HOC’s board is busy doing its own
things and unlikely to be worrying about GORO’s own trials and tribulations.
• Therefore GORO will be very, but very keen on continuing the divi as long as
it can to keep holder like HOC happy.
The upshot to this is that GORO will fight hard to maintain the current policy, not rock the boat
or attract unnecessary attention. As long as it keeps its nose clean with the SEC, these people
won’t change the dividend policy and from what our model suggests, the most likely end to 2012
is a GORO that will have just enough in its tank to comply with its own policy and pay the 6c
monthly dividend. It’s not a medium or long term call mind you, I’m just looking from here to the
end of 2012. GORO’s model is still unsustainable unless it can start upping production but for
2012 it will probably survive intact.
Conclusion and recommendation
We had a dose of bad news from GORO and that was good for those of us who took up a short
position, but as our forecasts suggest that GORO will be able to avoid the second, big piece of
bad news by continuing with the dividend policy for the rest of 2012 at least, we’re going to
cover our short position next week and take the profits. Please note however that all we’re
going to do is cover (i.e. buy the same amount of long as is currently short, thus returning to
neutral) because now that your author has his lend it becomes very easy to uncover the short
position at a future date and go short again. This is a situation I’m not just hoping for but
expecting, as this company has the air of a “lather/rinse/repeat” type of short that will potentially
reward more than once. GORO is hyped by people who don’t know what they’re talking about,
it’s owned by the mouthbreathing
end of the retail investor
community, it’s run by self-serving
management and it has a clear
track record of promising far more
than it can deliver. That’s the kind
of combo I’d want to be able to
short over and over again, so
come the right time I’d expect to
go short on GORO very quickly,
either on newsflow or on
anticipated bad news.
However, today we’re going to
take our profits and leave the
playing field. The trade has worked
well until today but as we’re now
anticipating the unsustainable dividend policy to be sustained until the end of 2012, chances are
that GORO will drift higher (and no, before you ask I’m not going long under any circumstances,
this company is far too murky to endorse in such a manner). Therefore, we talk our profits and
will fight this fight another day.
9

Stocks to Follow
We’re now down to 14 open positions, of which six made gains over the course of last week
(RIO.to, LRA.v, IRL.to, OGC.to, GORO, PPP), two remained unchanged (VEM.to, AQM.v) and six
lost ground (LPK.to, BCM.v, YMI.to, PLA.v, LSA.to, FCV.v). The worst performance came from
Plata Latina (PLA.v down 12.0%) while the best were the gains registered in Minera IRL (IRL.to
up 18.5%) and the short in Gold Resource Corp (GORO short up 12.7%).
With the sale of Sunward Resources (SWD.to) and the dropping of Strait Minerals (SRD.v) from
our coverage list until it gets to drill, we now have 14 open positions, one less than our nominal
maximum. Nine of the positions are in the green and five are in the red.
Company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to hold C$2.04 07-apr-11 C$5.67 177.9% $6.29 tgt
Recommends
Vena Resources VEM.to hold C$0.70 31-may-09 C$0.28 -60.0% target lowered to 42c
Lupaka Gold LPK.to spec buy C$1.12 23-oct-11 C$0.58 -48.2% considering sale on news
Bear Creek Min. BCM.v hold C$3.38 07-nov-11 C$3.51 3.8% added 3rd time Fri 21st
Yellowhead Min. YMI.to hold C$1.00 01-apr-12 C$0.68 -32.0% considering sale
Lara Expl. LRA.v buy C$1.15 08-apr-12 C$1.33 15.7% solid biz model, LT hold
Plata Latina PLA.v hold C$0.79 10-apr-12 C$0.44 -44.3% considering sale
Minera IRL IRL.to hold C$0.73 22-jul-12 C$0.96 31.5% $1.56 tgt added, new avg
OceanaGold OGC.to buy C$3.03 16-sep-12 C$3.53 16.5% $5.34 tgt growth prod
Lachlan Star LSA.to buy C$1.50 30-sep-12 C$1.53 2.0% $2.23 1st tgt
Gold Res Corp GORO closing U$21.47 09-sep-12 U$17.58 18.1% Covering SHORT Position
Primero Mining PPP short U$7.26 07-oct-12 U$7.15 1.5% SHORT near-term play
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.11 -64.5% considering sale
Focus Ventures FCV.v hold 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
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% selling and taking loss
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
2009, 2010 and 2011 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Sunward Resources (SWD.to): Position closed As suspected there was no need to take a
discounted price on Monday morning, selling was fairly straightforward (just had to wait a while
for a buyer to step up) and I got out at the price I wanted. SWD isn’t a goodbye forever and I
still like its chances against the other big tonnage low graders out there (he repeats), its cutting
1

more about my realignment of this service that anything else. With new impetus in 2013 it’s
one I’d buy back, as long as circumstances allow.
Strait Minerals (SRD.v): Coverage dropped. After deciding to drop coverage on the stock
last weekend without selling my own very small holding (money-wise at least), it occurred to
me that there was a slight hitch in the way this decision should be booked on the charts. The
way I’ve decided to run is to stick SRD in the “closed” part of the table above, keep the 12c
price as per last weekend and in the event of re-covering the stock next year once the drilling
gets going (and the SRD/Teck JV is in good stead, etc), I’ll resurrect the line and keep that
12.5c price, no matter where the stock might be trading at that time. Also, it’s not as if we’re
ignoring the stock because we can still track what its price does on a weekly basis down below
in The Copper Basket. So that’s how I’m going to book SRD (unless any of you start wailing
unfair at me and have a better idea).
Gold Resource Corp (GORO): We do the stock above, here we note that the drop came on
accelerated volume and looks mightily like the one
GORO took just a few months earlier:
On that occasion it bounced back, with the incessant
cries of “4% dividend!” from the unsharp end of the
market overriding anything that approached logic or
normality. It’s another reason why I’m not going to
stand in front of the grazing herd on this occasion,
preferring a dainty toreador-style side step in order to
attack and win from a different angle a little further
down the line. As the old saying goes, “Retail, the crop
that never fails”.
Primero Mining (PPP): The PPP news last week (5) was that the company had decided to
move ahead with its expansion plans for the San Dimas mine and up throughput to 2,500tpd as
from early 2014. We again note the big brokerage promo push on this story and the lack of
movement in the stock’s price, despite all their best efforts. As there was a widely held
assumption that PPP would make this growth call, it looks as though it was already baked into
the price by longs. Our position remains marginally in the plus column without making any real
progress, so as we’re now getting closer to the 3q12 financial results date, we’ll hold for the
two or three weeks necessary now (unless something unexpected happens meantime).
Minera IRL (IRL.to): IRL had a good week. This position is now up 50% from our first 64c
purchase three months ago, though as your author added last week quite chunkily (and happily
just before the great news from Wednesday) our cost average is now up to 73c.
As for the good news, that came Wednesday morning (6) with the company announcement
that, as outlined in IKN180 last week, it had indeed been granted the necessary environmental
and construction permits by the province of Santa Cruz to build its Don Nicolas mine in the
province. I’ve even seen a PDF of the cover letter from the Santa Cruz Secretary of Mining, a
certain Leopoldo Klein, that’s dated October 16th, signed and sealed and specifically says that
IRL.to has all the permissions it needs to build its machine. As for a cherry on this permitting
cake, company president Diego Benavides was wheeled out in front of a speedily convened
press conference by the national Mining Minister Jorge Mayoral to give the project a national
seal of approval and in that presser clear backing was implicit from the very top of the tree,
Cristina.
With this, and slightly ahead of our “end October early November at worst” timeline considered
last week, we have a key event now in place for IRL. The position is now your author’s second
largest behind RIO.to and the only thing between us and this one being called Top Pick is a
looksee at exactly how IRL puts together a financing package for Don Nicolas. We’d expect that
to be finalized in 1q13 (though you never know with these guys, they’re starting to have that
overachiever label deserved and might be able to nail it down before Christmas) and once we
1

know more, we can make an informed decision. This one is going well and it’s nie to be able to
offer up a winning trade on these pages (and one we’ve grown in size along the way) after so
much pain and a seemingly non-stop stream of losers during the dog months of 2012.
Yellowhead Mining (YMI.to): We discuss YMI in more detail below in The Copper Basket,
setting it alongside both Nevada Copper (NCU.to) and the general state of the copper junior
market and making a few notes and observations. Here we point to the new “considering sale”
next to its name in the table above and then ask you to read on in the section below.
Plata Latina (PLA.v): PLA put in a big percentage drop but trading was again thin-to-nothing
and we’re still in the same kind of price range that, sadly, we’ve had to get used to in this
stock. On this one I insist on the patience button and there really can be no decision without
exploration results and updates from its project.
Vena Resources (VEM.to): Two things happened to VEM last week. Firstly its 2-for-1 reverse
split came into force and although it makes no difference to the valuations etc, we now have a
stock at 28c that’s unchanged from last week’s 14c close. The second thing had more
substance to it, as VEM announced (7) it had optioned out it Compin property in the La Libertad
region of Peru to a privately owned Peruvian company (that had only existed since August of
this year) in exchange for an immediate $100,000 payment and other payments along the way
that can total up to $1m, plus time limit on a construction decision for a mine at Compin and a
sliding scale NSR agreement on any eventual production from the property. It’s the type of deal
that’s good for VEM, as it sheds non-core concessions to concentrate on what it wants to do at
its favoured properties. We also note from the NR that VEM seems to have given priority to the
Esquilache property over the Pucará property, so we should get news from that soon enough.
OceanaGold (OGC.to): Another week, another unfussy 5.1% upmove in this nicely
performing position. We hear that a site visit for analysts happened in the course of last week,
with plenty of Australian brokerage
presence but a smattering of Canada-
centric analysts also made the journey.
We’re sure to get official impressions from
those who went in the near-ish future, but
a bit of off-record reaches this desk and
the message is that those on the tour were
impressed with the progress and the state
of things at Didipio. The company is bang
on course for its planned November
commissioning of the mine and from what
they’d seen, community relations were
nothing short of good these days (recall,
this was a project that had its rough
patches with locals a couple of years ago, so pats on the back for the community relations team
deserved, it appears).
Lachlan Star (LSA.to): I received several mails by way of feedback after last week’s piece on
LSA, so a bit of adelaration is needed. To my best knowledge (and I’ve been poking around,
getting views from several sources) the state of community relations between the locals of
Andacollo and Lsa the company is not a bad one. There are some grumbles, but at the same
time 1) this is a long-standing, generational mining community rather than a town getting its
first taste of having a mine located next door to it, so there’s nothing that can really surprise
them and also, there’s no room for anti-mine NGOs to try kicking up a fuss 2) the company is
being pro-active in dealing with the grumbles and there’s active dialogue in place 3) even
though never say never, it’s very unlikely to ever a situation that will blow up into a more
serious protest that could eventually threaten production at the CMD mine.
People, it’s a rare thing indeed to have a mining company that enjoys 100%, no-complaint-ever
relationships with their neighbours and there are nearly always some sort of grumbles to deal
1

with. In this case LSA isn’t out of the ordinary so a little context is needed. There are 50 shades
of grey (where have I heard that phrase recently?) between the white of perfect community
relationships and the black of protests and close-downs so as long as the company approaches
its relationships in an empathetic and responsible manner, it’s not something to lose sleep over.
The bottom line is that I’m far more likely to bail on a mining company holding if I think it’s
been unfair or treated its hosts poorly (and I have a track record to prove that, folks) and I’m
perfectly happy about holding through on this position.
Meanwhile, the stock traded quietly last week, moving in a tight-ish range on moderate
volumes.
Focus Ventures (FCV.v): More news from FCV Monday (8) with the company announcing
community agreements and the start of work at its Aurora property in Cusco. Land access
agreements are now in place and the company has hired a third party to run a IP/Mag survey
that is scheduled to run for the next month approximately. Meanwhile, as mentioned in passing
last week I’m going to try and cross paths with company president Cass as he passes through
Peru at the end of this month. More info then.
Lara Exploration (LRA.v): There’s always something happening at LRA. Last week’s NR (9)
on Monday wasn’t such a big one but again shows that the company is out there doing deals
and being proactive with its asset book. The decision to vend its Lampa property and leave just
a 2% NSR interest for the company was taken because, according to the company, the
prospects of it ever becoming a world-class property were slim and it made sense to hand it to
a company that would pay the concession upkeep instead of LRA and perhaps one day move it
forward into a small mining operation. As stated, not a biggie for LRA either way. Meanwhile,
the stock continues to trade lightly but in the right direction, as we’ve left the recent dip into
the $1.20s behind and we’re back in the $1.30s here, definitely the right side of the trade, even
though we’re hardly likely to make it to millionaire status on this trade alone at this rate. What
we have in LRA is the exploration risk spread over a lot of different projects and it only needs
the geology Gods to smile upon one of them for the company to make a decent gain.
Lupaka Gold (LPK.to): Feeling lucky, punk? We’re now closing in on the time window for LPK
to make a first announcement on drill results for the Chaska zone at its Crucero property and as
the stock has sunk back (sigh, it was
all but inevitable) from the merger pop
of a couple of weeks ago, the brave
amongst you might consider a
purchase in order to play upside on
positive drill numbers...if the numbers
turn out to be positive, that is. I’m
already in as far as I want to be so no
averaging down for me, but those with
a higher tolerance to risk might get a
reward to match your courage. The
three month chart hints at here or
hereabouts as the right time for the
bargain hunters but if this suggestion
does tempt you, go in with eyes wide
open please. There are no riskless
trades, which is quintuple true for drill assay spec trades.
The Copper Basket
After forty-two weeks of 2012 The Copper Basket is showing a 44.06% loss to level stakes.
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company ticker price 1/1/12 Shares out Market Cap current pps gain/loss%
1 Copper Fox CUU.v 1.15 398.97 430.89 1.08 -6.1%
2 Augusta Res AZC.to 3.17 144.1 387.63 2.69 -15.1%
3 Lumina Copper LCC.v 13.19 40.7 377.29 9.27 -29.7%
4 Nevada Copper NCU.to 5.18 72.8 264.99 3.64 -29.7%
5 Western Copper WRN.to 1.58 93.28 69.96 0.75 -52.5%
6 Candente Copper DNT.to 0.97 121.67 46.84 0.385 -60.3%
7 Regulus Res REG.v 1.24 99.88 37.46 0.375 -69.8%
8 Baja Mining BAJ.to 0.80 338.5 37.24 0.11 -86.3%
9 Yellowhead Min. YMI.to 0.80 52.82 35.92 0.68 -15.0%
10 Duran Ventures DRV.v 0.18 184.72 23.09 0.125 -30.6%
11 Catalyst Copper CCY.v 0.08 274.48 16.47 0.06 -25.0%
12 Excelsior Min MIN.v 0.63 56.12 15.99 0.285 -54.8%
13 AQM Copper AQM.v 0.39 105.6 11.62 0.11 -71.8%
14 Crazy Horse CZH.v 0.35 64.48 5.80 0.09 -74.3%
15 Strait Minerals SRD.v 0.150 56.86 5.12 0.09 -40.0%
Portfolio avg -44.06%
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’s the fifth overall drop in a row for The Copper Basket, which hasn’t had a pleasant time at all
since the euphoria of Bernanke’s QE3
announcement. Of our 15 stocks, six
20% Copper Basket 2012 average, weekly
moved up over the week (LCC.v, AZC.to,
15%
NCU.to, BAJ.to, WRN.to, CZH.v), one was 10%
5%
unchanged (AQM.v) and eight dropped
0%
(CUU.v, DNT.to, REG.v, YMI.to, MIN.v, -5%
-10%
DRV.v, CCY.v, SRD.v). There were some -15%
chunky losers amongst those too, starting -20%
-25%
with Strait Minerals (SRD.v down 25.0%) -30%
and followed by Catalyst Copper (CCY.v -35%
-40%
down 20.0%), Duran Ventures (DRV.v -45%
down 13.8%), Regulus Resources (REG.v -50%
down 12.8%), and Copper Fox (CUU.v
down 9.2%). On the other hand there
source: IKN Weekly calcs, TSX
were two decently sized winners to report
in Crazy Horse (CZH.v up 20.0%) and
Western Copper & Gold (WRN.to up 11.9%).
There were big upmoves registered in world copper inventories too, with the global total adding
5.1% that was largely driven by a big, 8.4% upmove in Shanghai Futures Exchange inventories
to 196,710mt. There’s no doubting the slack end user demand in China at present, so be
careful about that folks.
Now for an update on some of our featured basket companies.
Copper Fox (CUU.v): CUU impressed very few with its NR pre-bell Wednesday (10) that
marked the start of price weakness in the stock, all this despite the bullish sounds CUU
management made in the NR about what can only be described as very mediocre drill numbers.
1
2102/1/1
morf
egnahc
%

But if we take a step out and consider the 12 month chart, it’s notable how the $1 level has
been defended in this stock.
And as mentioned previously, our working theory on this is that majority owner of CUU, Ernesto
Echavarria, can’t afford to let his asset look too cheap so there’s a line in that affords a
potential rebound point here. As the long-delayed feasibility study is unlikely to turn up before
the end of this year now there’s room before the real news comes along, that will then be
followed by the real moment of truth when JV partner Teck has to decide whether to fund
Schaft creek and carry CUU for the ride, or cut its participation to a minimum. In brief, there
will be plenty of time for CUU to bounce back up to that $1.20 level on no apparent news, a
trick it’s done time and a again, before the hammer comes down. The reason for all that is to
mark the cards of any of your higher risk-takers in the audience who may be interested in this
type of 20% bounce trade. If CUU goes lower and as long as past patterns play out, a reversal
and return to $1.20+ wouldn’t surprise anybody.
Catalyst Copper (CCY.v): It really looks like the game is up from John Greenslade, as the
news from last week out of CCY (11) might ordinarily have seen the company rally, but instead
the NR was greeted by market indifference and selling. The resource update at the CCY flagship
La Verde project in Mexico announced an overall resource of 6.4Bn lbs copper M+I+I, which
was at a low 0.38% Cu average but did come with a low 0.2% Cu cut off (and no accounting
for the reasonable Au and Ag credit metals in the cut-off), due to the apparent low cost of
mining envisaged at the project (according to the company literature at least). It wasn’t a
massive lift of resource (up 400m lbs Cu since the last resource) but in another place/time with
another set of management sitting on top of the project this type of NR may have seen the
stock rally from its current low price (in in-situ of less than 0.2c/lb Cu, which is as close to zero
as you might care to consider). However, it now seems the bad rep of President and CEO
Greenslade goes before him due to the almighty mess he made of Baja Mining (BAJ.to), which
1

included the self-serving manner in which he paid himself and his family. The result last week
was a stock that hardly saw any trading and eventually lost ground.
Western Copper & Gold (WRN.to): A quick line to say better late than never, because the
stock we’ve picked for the last three (or was it four?) weeks as a potential rebound play did a
bit of just that and has moved back up into the solid 70s. It’s not a company I’d bet on for any
length of time, so if you picked up some of that 65c to 68c recently available I’d encourage you
to take the modest profit. Not one we officially called but I know a few of you bought into it, so
a win is a win.
Nevada Copper (NCU.to) versus Yellowhead Mining (YMI.to): Reader AN mailed in
during last week with this observation, reproduced with just the hellos and goodbyes edited out
and slight polish to a couple of typos:
I have the feeling that the decision to hold YMI instead of NCU was not the best so far. NCU goes
up almost daily and has doubled from the lows supported by good newsflow and much better
trading volumes than YMI. In my opinion is NCU a clear acquisition target therefore I wonder why
you prefer YMI with its quieter newsflow and very low trading pattern. I think NCU fits more with
the new strategy of the weekly due to the more advanced project.
The last weeks I asked myself almost daily if the upmove of NCU is already over or if there is still
further upmove left, and if it still makes sense to shift from YMI to NCU? (The first time I thought of
that shift, NCU stood at C$2.30)
And I think that’s very fair commentary, overall. My choice to buy YMI hasn’t worked out at all
(just check the red ink), it’s not one I can be proud of and meanwhile NCU, even though it’s
one I’ve liked for a while and featured as a potential investment, is not one on which I’ve
managed to pull the trigger, thus missing a winning trade of perhaps 40% to 50% between the
ID of value and today (might have been more in fact, as there was talk of its value when it
dropped to $2 and as AN mentioned, plenty more around the $2.30 point).
To this we have to add the news late hours Thursday from YMI (12) that the Chairman of the
company, Gregory Hawkins, was replacing the until-then Pres/CEO Ian Smith on an interim
basis (until a suitable permanent replacement can be found). The tone of the NR suggests than
Ian Smith “was resigned” rather than resigned and there was no indication in previous company
missives that he was going to move on and your author’s request for more information to the
company has, so far at least, been ignored. So be it, but this kind of change at the top is hardly
a good thing even when explanations are
forthcoming, so it’s a new negative piece we
have to consider in this situation (which also
happened after AN’s mail had arrived, it
should be said).
One of my personal problems here is that I
bought YMI.to badly, just after its feasibility
news in early April, before the big sector sink
took hold. If we look at the year-to-date
performance of YMI and NCU our preferred
(so far) stock has actually beaten out NCU
(though there’s not much in it), as NCU
started 2012 with high expectations and YMI
was still waiting for its moment in the limelight. However, for the last six months or so it’s clear
that NCU has beaten out YMI in the recovery stakes and there was good money to have been
made form buying NCU instead of trying to hang tough with NCU.
So the question is whether we should swap YMI for NCU, but there’s also another option that,
at this time, makes more appeal to your author. That’s the one where we turn our back on the
junior copper explorers altogether, sell out of YMI and not try to replace it with another stock,
NCU or other (note: we’d still have AQM.v left open but the plan is still to jettison that on a
PEA-type bounce...diehard romantic that I might be). With the way China data is moving in the
1

last couple of weeks, there has to be doubt as to whether new properties held by juniors will
find buyers in the sector atmosphere. The Codelco’s of this world can announce big investment
plans for 2013 (see below) but public quoted companies dance to a different beat and as such,
I have my doubts about any project finding a buyer, even the better quality ones. The jury is
still out on this, but at this time my preference would be to sell YMI and not buy NCU, instead
of swapping the position over to a company that’s already made a decent comeback from its
2012 lows but may itself struggle to find the long sought after buyer.
Regional politics
Mexico: Ecologists making Baja California Sur open pit mining a cause célèbre
Last week the anti-mining temperature in the Baja California Sur region of Mexico was raised
another notch by declarations (13) from Jean-Michel Cousteau, son of the world famous
Jacques (RIP) and campaigning ecologist in his father’s footsteps, who wrote an open letter to
outgoing Mexican President Calderón and incoming President Peña Nieto (that was also
addressed to the anti-mine leaning regional governor and other authorities) that the Los
Cardones gold mining project in the Baja California Sur region should not be given permits to
operate (it currently has its environmental permit application in with the regional and national
authorities). By way of an extract:
“...if the authorities charged with the protection of this fragile ecosystem, the protected
nature zone of La Sierra de la Laguna, do not act immediately and take into account
both present and future generations, the pollution and destruction of what Jacques
Cousteau described as the aquarium of the world will be inevitable.”
Which make it pretty clear. The project in question is the Los Cardones project (14) owned by
Mexican investment capital company Invecture Group, and while not directly affecting any
public company that we cover or may eventually cover, a rejection of this EIA would be a clear
precedent for other projects and blow to the chances of other companies in the region such as
Vista Gold (VGZ) or Argonaut Gold (AR.to) from getting their projects up and running. To this
we also need to reiterate that the new regional government in Baja California Sur has made its
position against open pit mining operations in its territory very clear, as noted in recent IKN
Weekly editions.
Dominican Republic: Government encouraged to build a smelter
We don’t get much news from The Dominican Republic on these pages, but an interesting story
floating past this desk on Wednesday and it’s worth a share here. Mine sector adviser and
Ecuador national Fernando Correa Ponce was invited by the new government of Danilo Medina
to visit and give suggestions on how to move the sector forward and his main suggestion (or
the one picked up by the press during the covering press conference) was (15) that the State
should construct its own gold smelting facility and then modify the contract it has with the
Pueblo Viejo mine (by far the mining biggest operation on the island) to buy the doré produced
at the Barrick (ABX) 60% owned, Goldcorp (GG) 40% owned mine. It could then process the
doré into refined gold and silver and then sell them to the world market as higher value
products, perhaps as Central Bank backed bullion products (bars, coins etc). Fernando Correa
Ponce also noted that the type of contract Ecuador had agreed with mining companies was
now, in his opinion at least, far more beneficial to his country than ones signed under previous
governments. The bottom line to what we read last week is that if the Dominican Republic
starts taking advice on mining matters from Ecuador and using that country as a model for
future mining development, then watch out below.
Ecuador: Chile’s promotion of mining in Ecuador
Two pieces of news that are unlikely to be coincidental, especially considering that we’re closing
in on a Presidential election in early 2013 at which current incumbent Rafael Correa is now a
clear and red hot favourite to win.
1

Last week (16) the Ecuadorean Minister for Coordination of Strategic Sectors (a bit of a
mouthful, but a faithful translation) headed up a pro-mining push on Thursday in the provincial
city of Loja and on Friday in the El Pangui area (location of the Chinese Mirador copper project)
called “Ecuador Minero”, at which guest of honour was José Andrés Herrera, the governmental
head of Mining Investments in Chile. During the days, computer equipment was donated to
local municipalities, open forums on the benefits of mining were held and presentations and
Q&As given.
Then on Saturday in his regular weekly address, President Correa announced he would be
going to Chile next week, with the main reason being his invitation to open the national book
fair in Santiago and present his 2009 book, “Ecuador; from banana republic to no republic”. But
he also said (17) (and we quote in translation), “We’re going to take advantage (of the trip) to
visit Antofagasta, location of Chile most modern mine, which has a long tradition of mining like
in Peru and Bolivia.” What seems to be happening is that Correa, sitting on a massive voter
intention margin for next year’s election, is going to press his pro-mining agenda and potentially
make it part of his re-election campaign. As this is a reasonably early move, it will also give him
time to see how voters react and gauge whether his opponents, particularly the anti-mining
ecology candidate Alberto Acosta, make any gains in the polls. If Correa’s popularity holds we
can expect him to make even more pro-mining noises as election day closes in. Anyway, with
Chile’s Codelco looking to explore and develop in Ecuador, it’s interesting that this close Chilean
tie-up is showing on a political level all of a sudden. Meanwhile, it’s going to be worth noting
carefully just how much of a fuss Correa makes about mining in the next three months or so,
because if he does and he gets re-elected he’ll consider it a mandate to really push through on
his big plans for mining in Ecuador. There will still be the problem of the proposed heavy State
burdens on companies working there, but let’s cross one bridge at a time. We continue to
clearly call “avoid Ecuador mining risk” but it’s also time to keep a closer eye on events to see
how things progress.
More on Guatemala’s mining law reform
More from Guatemala about the new mining law bill sent to its Congress and mentioned last
week. The main talking points (18) of the bill now centre around two of the proposals:
1) The government wants to remove the right of locals to decide whether a project goes ahead,
as laid out in the international covenant OIT169 to which Guatemala is a signature state, and
replace it with a type of overseeing body or mining council presided over by the ministry of
Energy and Mining and including all national and government bodies connected to mining
projects, including the Mining Chamber (i.e. the mining companies). This proposal has the anti-
mining campaigners up in arms (and be clear, they are many, have plenty of representation in
parliament, have managed to stop mining reform from going through in the past five years and
are not to be taken lightly), with this statement from the legal representative of main
environmental action group in the country, CALAS (Centro de Acción Legal, Ambiental y Social)
laying out the position well: “It’s definitively one of the most divisive aspects of social reality,
because one cannot judge one’s own trial in the way we’ve seen to date. The [mining]
companies would be inside the council and will try to manipulate a whole series of issues,
without the general population ever knowing, in order to approve mining permits.”
2) The second aspect of the bill now gaining attention is the relatively low royalty schedule
being proposed, lower than the figures proposed by President Otto Pérez Molina around the
time of his election (during the campaign and just after). Different royalties are proposed on
the type of mining product per mine, starting at 1% for construction mining (e.g. cement,
brick). The main mining metals of “basic metals” (e.g. base metals such as copper, zinc etc) are
slated a proposed royalty of 3% and precious metals (e.g. gold, silver) at 5%. The only
relatively high royalty on the bill is rare earths at 10%. The law bill has been generally received
positively by mining industry representatives with more commentary from business analysts
(19) on the recently granted exploration licences in seven regions of the country. It’s no
surprise that the business community welcomes the initiatives, because if it goes through as
stands it would make Guatemala a bargain basement place to do business compared to the rest
of the continent. Those against mining are vehemently opposed to its passage in the present
1

state however, saying that it would have no social consensus and would cause conflict. To this
mix we need to add a (20) march in the capital city scheduled for October 21st organized in
combined protest against the recent deaths of several indigenous locals in rural areas at the
hands of police, against plans for hydroelectric power projects and against mining project in the
country. Another event that will be used to gauge opposition to mining and the government’s
relative power to be able to push through its pro-mining legislative plans.
The bottom line to mining in Guatemala is that the issue is now beginning to come to a head.
Your author recommends that investors interested in potential plays with Guatemala stay on the
sidelines until we see how things start to play out. Public opinion will be a key factor as the pro
and anti sides make their cases (‘vox populi vox dei’ is particularly true in countries with
traditionally weak institutions), unless eyes are wide open before investing in Guatemala that
any cash there has to be considered high risk/high reward. That suits some readers’ investment
make up and that’s fine by me folks, so if that’s the case I’d point you towards the smaller
exploration names such as Radius (RDU.v) or Firestone (FV.v) who are active in the country,
have been there for a long time and know how to operate. However, we repeat (for perhaps
the 5th time on these pages) that just considering an investment in a $3Bn market cap company
such as Tahoe Resources (THO.to) (TAHO) brings your author out in a cold sweat, especially as
it’s cultivated a serious, low-risk, long-term investment image. Yes the rocks are great and on
that you’ll get no argument from me about the economic potential or the managerial expertise
at the company...but this is Guatemala folks, not anywhere that can be considered a serious
country.
Chile: “Historic” investment planned by Codelco in 2013
Meanwhile Codelco President Thomas Keller was in London for the annual LME Week get-
together. There were plenty of reports that picked up on his comments about how State-owned
Codelco, the world’s single biggest copper producer, saw demand and supply neutralizing each
other in 2013 and as a result, company forecasts were for copper to stay in the same price
range as we’ve seen in the second half of 2012. Keller also commented to the newswire press
that Codelco had seen steady order demand and no slacking from customers, although we
should take that in the context of Codelco enjoying some of the best long-term trade
partnerships in the business due to its size and reputation as a reliable source.
The best report about Keller’s London sojourn was found in the Chilean press, as La Segunda
ran a more extensive interview (21) that included this comment:
Q: How much will Codelco invest in 2013?
Keller: I wouldn’t like to share the exact number before revealing the three year plan, in
consideration to the representatives of the owners (i.e. Chile), but they’re numbers at
the high end of our historic range.
Q: Will it be a historically high investment [year] for Codelco?
Keller: It’s probably going to be the highest ever. This year we had an investment sum
around U$4.6Bn and, without doubt, 2013 will be higher than that.
This is true to form for Codelco, as those who remember how the company reacted in 2009 to
the financial crisis will recall. One of the basic attributes of a State run company, especially one
run by a government with a strong macroeconomic track record and a penchant for counter-
cyclical policies to help gee up its economy, is that it will go out and spend serious cash while
peer companies (BHP, Rio Tinto, Vale etc) are trimming back on their investment plans.
Market Watching
Galway Resources (GWY.v) gets a buyout offer from Eike Batista’s AUX, we get a
good arbitrage opportunity
Friday’s mining M&A headlines were made by Galway Resources (GWY.v) (22) which has
received a friendly bid from AUX, the mining company that previously bought out Ventana Gold
1

(ex-VEN.to) owned by Brazilian billionaire Eike Batista (who also bought 4% of Robert
Friedland’s Ivanplats last week, according to this (23). GWY is not one I’ve ever recommended
despite looking at it and noting the arguments from proponents that it would make a good
logistical fit to an eventual mine based on the VEN deposit, so it’s one that got away from me
and I congratulate all longs on their win (especially one guy sitting in Toronto who will read
these words and has patiently held a large chunk of GWY, bought at $1, for a couple of years).
The deal is a good one too, which raises the possibility that GWY is still buyable at today’s
$2.15 share price and is the real reason it’s getting space today. Some bullet points follow:
• As of today there are 125.63m shares of GWY.v outstanding. There are also 10.92m
options all below the new spiked share price and 9.38m warrants priced at $1.50, so
from here on we need to consider GWY on its fully diluted total of 145.93m. As the
cash component of the offer is $2.05, this values the indicated-plus-inferred (I+I)
resource at California that totals 1.09m oz Au at a touch under U$275/oz (assuming
CAD$1 = U$1).
• So, the happy GWY shareholders will get $2.05 in cash from Eike Batista but they also
get to keep the other, non-California project assets held by GWY today via the creation
of two spinoff companies.
• Firstly the Vetas spinco is based around the Vetas exploration stage deposit in Colombia
that backs on to CB Gold’s (CBJ.v) gold project (for those with a memory, Ross Beaty
bought into CBJ and caused a big price spike when he did so, he’s now slightly
underwater on that position). Vetas has already returned some interesting gold assays
and there’s plenty to read up on in company literature (check the 2q12 MD&A to begin
with). As part of the spinoff deal this spinco gets $18m in cash treasury in order to
advance and once a done deal, GWY shareholders will own 90% of the newco and AUX
will own the other 10%.
• Secondly the Victorio spinco is based around the eponymous tungsten-moly project in
New Mexico, which will now be targetted for advancement to pre-feas level. As part of
the spinoff deal this spinco gets $12m in cash treasury in order to advance and once a
done deal, GWY shareholders will own 100% of the newco.
• So to sum up, every GWY share today gets $2.05 in cash, 90% of a promising but early
stage gold asset in Colombia, 100% of a W-Mo asset in New Mexico, cash backing that
aggregates $28.2m (or 19.3c per FD share) and the same team that won the day at the
California property. The trick, as always, is to put a cash value on the extras that will
come with the $2.05 cash offer and as always it’s not easy, but I think it conservative
to place a 50c value on the “extras” package and consider GWY.v today as capable of
going to $2.55 as the deal is closed (and frankly it might be worth 60c or more, with
much depending on how interested the market gets with the Vetas project and its
results so far). A $2.55 target would imply an 18.6% upside to Friday’s close and that’s
not a bad arbitrage win, especially if we consider that the bid on the table is friendly, a
good one, a near certainty to be approved and therefore offers very little downside.
Conclusion on GWY: If offered $2.15 tomorrow Monday I’m going to buy myself a few GWY
shares and take advantage of this apparent very low risk, reasonably profitable arbitrage on
offer. It’s not a trade that I’m going to add to the formal ‘Stocks to Follow’ list due to its
somewhat punctual nature and limited upside potential, but that isn’t going to stop me from
taking a small slice of GWY for a quick trade and it shouldn’t stop you too (if the potential
appeals, that is). Even if I’m being overly optimistic about the 50c value of the GWY “extras”
(the assets of the spincos and their respective cash treasuries) the cash component alone
suggests that the deal is $2.25, so even if the market decides to totally hate the projects you
still get to cover your commissions if you get $2.15 as your entry point.
2

Dynasty Metals & Mining (DMM.to) news and a call
We noted the news release (24) out of Dynasty Metals & Mining (DMM.to) on the blog last
week (25), followed up with a quick look at the price action in a second post the next day (26)
and left it at that. As for the news in question, DMM seems to have found a way around the
concessioning and legality problems by cutting its Zaruma operation into five different
concessions, thereby classing its operations as 5X small mining company instead of 1X medium
sized mining company. In this way it avoids a whole heap of red tape, allows the company to
start official production and doesn’t have to sign a windfall tax (WFT) agreement thus avoiding
even more delays to an already very delayed project
All I want to do here is note that DMM’s news is, face value at least, positive for the company
but as per from the contents first blog post I’m leery about the whole deal. For one thing, DMM
hasn’t a great track record of transparency and this time around, it’s going to have to be “show
me”, offer up at least a couple of good quarterly financial (not production, but financial) results
and demonstrate that this patched solution to operating in Ecuador is going to work. For
another, Ecuador is still going to take its heavy state burden, with or without a WFT. Another
reason is that we now have no real idea on
its costs parameters so again, show me in
action. And finally, even if this does work
the chances of DMM being a takeover play
(one of the reasons I liked the stock way
back in 2009 and made good coin in it) are
zilch, so one has to wonder about price
upside even in the best of cases. I’ll be
paying more attention to the company’s
2013 financials than I’ve done to the 2012
filings, but for the moment that’s it. And by
the looks of the price chart, it seems that a
lot of people took the opportunity to exit
this underperforming stock on the news,
handing their bags over to the next person. That in itself is hardly a encouraging sign.
Final short note on Liberty Silver (LSL.to) (LBSV.ob)
Post-bell Friday Liberty Silver (LSL.to) (LBSV.ob) announced (27) its Canadian LSL.to listed
shares would resume trading tomorrow Monday October 22nd in a NR that had plenty to chew
over. The first jewel came in paragraph one with...
“For the present, the Company's stock will not immediately be listed, traded or quoted
on any of the OTC Markets.”
2

...which in essence tells us that appeasing the OSC is far easier than meeting the requirements
of the SEC. A very weird situation indeed: We now have a stock that started life as an OTC
pump with tens of millions of undisclosed free trading shares, then made it directly onto the
TSX main listing via a backdoor deal that must be strongly connected to the people brought on
board when the Canada listing happened, which can’t now be traded on the original US OTC
listing (a notoriously cowboy exchange) due to ongoing regulatory investigations but gets
approval from the TSX to continue trading on Canada’s premier exchange!
Then came paragraph two, in which LSL tries to distance itself as much as possible from any
connection with Bobby Genovese. The company had clearly worked hard on the wording here
to make things factually correct, to try and suggest that nothing untoward had been going on
and to plead official ignorance about its structural ownership background. It’s all total rot, as
director John Pulos has been Bobby Genovese’s front man from the start. Also, it’s frankly
incredible (in the literal sense of the word) to think that other members of board of directors,
when given million share awards from the shell company on arrival, didn’t stop to think where
those hefty chunks of stock were coming from. However, the script does a good job of tiptoeing
round these niceties via judicious use of words like “the company”. There are other matters too,
such as the way LSL says it never paid newsletter writers to pump its stock. Well of course not,
as those scumballs always get their payoffs from third parties. But the nicest piece of
copywriting skill comes at the end with "...[t]he Company also advises that it has no contractual
or other relationship with Mr. Robert Genovese, BG Capital Group or any other company owned
or controlled by Mr. Genovese (the "Genovese Companies") other than a subscription to a
private placement in November 2011 by a company controlled by Mr. Genovese”. As that’s
that's the whole point of these scams and it’s how they’re set up! The background shares aren’t
directly traceable to Genovese, because that's how these edifices are always structured. There’s
no point in having accomplices and offshore holding accounts if you’re just going to sign your
name at the bottom of some share cert receipts!
But aside from the sophistry evident in the excuse section of the LSL NR there's enough in just
the Trinity tech data disclosure further down the NR to sink the stock without trace, as the
information offered to appease the TSX sees LSL admitting the plan is based on 2.6m Ag oz of
inferred oxide. And when we hark back to the spirited and successful defence made by Ian
Rozier of Sennen (SN.v), his assertion that the NAV of LSL could be measured in pennies now
looks spot on correct in light of the new technical data disclosure and cut-off levels offered in
the NR. LSL says very clearly that it’s nowhere near any sort of “fast track to production”, a lot
of drilling and exploration work needs to be done and money that it doesn’t have needs to be
spent. And recall, this is a company that could get normal placement funding so it tried
backdoor methods to try and raise cash via the proposed SN.v buyout.
There is plenty more to come from this story, of that I have been clearly advised by people
close to events, so it will probably get more air time on the IKN blog than the IKN Weekly from
here on because this isn’t an actionable story or stock for us. The only thing left to say here is
to repeat that if you are unfortunate enough to hold LSL stock today, you should dump it on
the first possible occasion and not look back. If you hold LSL.to, that moment comes tomorrow
morning.
Fortuna Silver (FVI.to) (FSM), waiting for the 3q12 financials
At some moment on the blog about 10 or 12 days ago I wrote that we’d have a look at the
3q12 production numbers for Fortuna Silver (FVI.to) (FSM) in IKN180 last week, but as it
happens the section didn’t appear. I admit It was lapse of me to have totally ignored the stock
and as a result received “Hey! What about FVI?” complaint mails that I fully deserve so a quick
line is due here.
Put simply, I agree with several research update reports published on FVI by the houses up in
Canada that read along the lines of “production slightly better than expected, still worried about
costs profile here, let’s see how the financials come out”. That’s the right call in my opinion so
I’d expect the stock price to drift at-or-around its current band until we know how much it cost
to produce FVI’s 1,207,741 oz silver (higher than expected) and 5,348 oz gold (slightly lower
2

than expected). Therefore I’ll cover the stock in mid-November more fully and give a thought or
three then, but for the time being expect FVI to move with its underlying metal, providing
leverage to the up or downside.
Rio Alto 3q12 production numbers
Here’s how our Top Pick stock called its 3q12 production (28) and the headline was production
of 47,010 oz gold, which compares to our forecast of 45k to 47k oz Au therefore your author is
happy enough to see the top end of our lowered band come in. Here’s how that looks on our
estimates chart and with new data now plugged in, we can check on how we think RIO
continues from here, too.
La Arena 2012 forecast gold prod, per qtr
Away from our fairly accurate guess on the gold
70000 62676 62676
ounces produced, there were a couple of things 60000 55973 58801 58543
your author got wrong but they basically cancelled 47010 49284
50000
each other out. Our model used a higher gold grade
40000
but a lower average throughput for the quarter,
30000
when in fact RIO reported a gold grade of 0.59 g/t 20000
and a throughput that totals 25,752tpd daily 10000
average. However, when you run the basic 0
calculations on the published figures you end up
with a recovery rate of 99.6%, which can’t possibly
be right so first thing Thursday morning I managed
to get CEO Alex Black on the phone and got to ask
him about it. According to Black, the company was still trying to work out exactly what was
going on itself and even though it wa a nice problem to have, they need to get to the bottom of
it because RIO plans on updating the oxide gold
resource number at some time end 2012/start 2013, so
they need accurate information. The best guesses are
either 1) there’s better grade than the reported official
0.59 g/t being dumpleached, which sounds most likely
because this type of operation only gives hard and fast
information after the fact and it’s likely things are better
than even in-situ sampling reports. Or it may be 2)
there is some residual leaching of material previously
placed on the pads and that’s giving an extra kick to
production when it wasn’t expected. I think it’s 1).
Two other things that came from the exchange with CEO Black are:
1) No gold prepayment was made during 3q12, which means the company is still paid
forward to October 2013 as per today. I wasn’t told but I’m assuming that RIO
probably made that decision in order to give itself a revenues and earnings pep in the
3q12 financials.
2
21q1 21q2 21q3 tse21q4 tse31q1 tse31q2 tse31q3
Oz Au
source: IKN ests
La Arena 2012 forecast avg throughput
tonnages per day, per qtr
40000 36000 36000
34000
35000
28000
30000 25752
25000
17889 17802
20000
15000
10000
5000
0
21q1 21q2 21q3 tse21q4 tse31q1 tse31q2 tse31q3
tpd on
pads
source: IKN ests

2) Cash costs performance was fine and the company is happy about its current cash
costs guidance. As the last time we heard on this officially was in the MD&A that said,
“The cash cost per ounce of gold sold during 2012 should fall within a range of $500 to
$550”, that suits me fine, though remember that cash cost and total cost are separate
animals, as this chart shows:
Ro Alto (RIO.to): Cost of absolutely everthing per
ounce of gold produced
1400
1200
1000
800 649 580
481
600
400
532 550
200 428
0
1q12 2q12 3q12est
source: company filings
2
uA
zo/$U
all other costs
mine site cash cost
So to our forecast for the 3q12 earnings due out mid-November and after playing with the
model, adjusting here and tweaking there (though not by much, it should be said) here below is
how we see EBIT per share coming in. Note that we
still prefer EBIT/share as our benchmark on RIO, as RIO: EBIT/share
0.35 0.33
it’s still growing company and therefore better to
0.30 0.27
consider this than its classic bottom line. To give a
comparative, the 22c/share EBIT of 2q12 sits next to 0.25 0.22 0.23
reported earnings of 19c/share for the previous 0.20
quarter. 0.15
0.10
The bottom line to Rio Alto (RIO.to) last week is that 0.05
the 3q12 numbers are pleasing and it’s very easy to 0.00
reiterate our ‘Top Pick’ call, once again, on the stock. 1q12 2q12 3q12 4q12est
Finally, it was pleasant to watch how the market source: IKN ests
reacted to Thursday morning’s news, because as seen
on this chart any early weakness on Thursday or Friday was quickly considered a buying
opportunity and Friday finished on weekly highs.
In fact, next time I see CEO Black I must make a point of ribbing him for selling that big 1.6m
block of shares at $5.20 on September 20th (29), because as per Friday’s close he’s left
$750,000 on the table ☺.

Conclusion
IKN181 is done, we close with bullet points:
• We’re taking our profits and covering the short laid on Gold Resource Corp (GORO),
now that the company has once again disappointed its fans and sunk about half way to
our slated target. That’s because it looks as though the dividend policy will survive
through 2012 at least. When the 3q12 financials are known I’ll have another good look.
• Rio Alto (RIO.to)’s production came in nicely, we’re happy holders and Top Pick all the
way. Meanwhile, Minera IRL (IRL.to) took another large step towards Top Pick status
by getting its Argentina permits slightly ahead of schedule (though thankfully after we’d
called “add” on the stock in IKN179 and I had chance to to just that...luck has its place
in the equation after all). Vibes are good on both these stocks.
• There may be a near-term trade in Copper Fox (CUU.v) if it continues to act in the way
it has tended to act for the last year or two, but I’m more sure about the chances of
Galway Resources (GWY.v) to offer up a quick though modest profit opportunity. The
other thing to like about GWY is that with the cash offer in and the deal accepted by
the GWY board, downside risk is slight. Given a value entry point tomorrow I’m going
to take a small piece of GWY, but it’s not going to make it to our formal ‘Stocks to
Follow’ list for the reasons explained above
• Be careful about any Guatemala exposure, people. Watch from the sidelines is the best
call I have until we see how passage and/or acceptance of this new mining bill goes.
• And speaking of spectator sports, all eyes on Liberty Silver’s (LSL.to) share price action
next week, starting tomorrow morning when it (probably) opens for business. If you’re
in, please get out. If you’re out, enjoy the show.
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/gold-corporation-reports-third-quarter-200400149.html
(2)http://finance.yahoo.com/news/gold-corporation-appoints-general-manager-100000571.html
(3) http://www.sec.gov/Archives/edgar/data/1160791/000119312512350319/filename1.htm
(4) http://finance.yahoo.com/q/bc?s=HOC.L+Basic+Chart&t=5d
(5) http://finance.yahoo.com/news/primero-announces-expansion-san-dimas-220000914.html
(6) http://finance.yahoo.com/news/minera-irl-announces-approval-eia-060000383.html
(7) http://www.newswire.ca/en/story/1055645/vena-options-compin-property-for-1-million-in-cash-payments-and-a-
scalable-nsr-royalty-valued-at-3-million
2

(8) http://finance.yahoo.com/news/focus-signs-community-agreement-aurora-123000957.html
(9) http://finance.yahoo.com/news/lara-sells-lampa-gold-project-113000177.html
(10) http://www.4-traders.com/COPPER-FOX-METALS-INC-142724/news/Copper-Fox-Metals-Inc-Copper-Fox-Reports-
Diamond-Drill-Results-From-the-2012-Drilling-Program-at-15390482/
(11) http://finance.yahoo.com/news/catalyst-copper-announces-updated-la-165700595.html
(12) http://www.newswire.ca/en/story/1055633/yellowhead-announces-appointment-of-gregory-hawkins-as-interim-
chief-executive-officer
(13) http://www.radioformula.com.mx/notas.asp?Idn=278266
(14) http://loscardones.com.mx
/
(15) http://www.hoy.com.do/economia/2012/10/17/451004/Asesor-sugiere-Gobierno-refine-oro-Barrick-Gold
(16) http://www.portalminero.com/pages/viewpage.action?pageId=66650177
(17) http://spanish.china.org.cn/international/txt/2012-10/21/content_26857332.htm
(18) http://monitoreo.saas.gob.gt/noticias/2012/10/mineros-estaran-en-consejo-para-otorgar-licencias-4/
(19) http://www.grupoidc.com/boletin/Octubre_2012.pdf
(20) http://www.prensalibre.com/noticias/Marcha-recorrera-capital_0_795520506.html
(21) http://www.aminera.com/mas-noticias-nacionales/44170-keller-desde-londres-inversion-de-codelco-en-2013-sera-
qhistoricaq.html
(22) http://finance.yahoo.com/news/galway-resources-ltd-announces-premium-134500247.html
(23) http://www.bloomberg.com/news/2012-10-20/billionaire-batista-buys-stake-in-canada-s-miner-ivanplats.html
(24) http://finance.yahoo.com/news/dynasty-qualifies-key-zaruma-concessions-130000384.html
(25) http://incakolanews.blogspot.com/2012/10/so-i-get-this-cold-call-mail-from.html
(26) http://incakolanews.blogspot.com/2012/10/dynasty-dmmto-ten-day-price-chart.html
(27) http://finance.yahoo.com/news/liberty-silver-shares-resume-trading-222258028.html
(28) http://finance.yahoo.com/news/rio-alto-produces-47-010-110000406.html
(29) http://www.canadianinsider.com/node/7?menu_tickersearch=rio
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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