IKN #206Premium

The IKN Weekly
Week 206, April 14th 2013
Contents
This Week: Revisiting the call on 2013 from IKN203, Travel plans.
Fundamental Analysis: Bear Creek Mining (BCM.v) gets unanimous approval from Corani
locals, Aurcana Corp (AUN.v) position closed.
Stocks to Follow: Overview, Tahoe Resources (THO.to) (TAHO), Aurcana Corp (AUN.v),
IMPACT Silver (IPT.v), Rio Alto Mining (RIO.to), OceanaGold (OGC.to) (OGC.ax), Minera IRL
(IRL.to) (MIRL.L), Lara Exploration (LRA.v), Gold Resource Corp (GORO), Marlin Gold (MLN.v),
Focus Ventures (FCV.v), Bear Creek Mining (BCM.v), B2Gold (BTO.to).
Copper Basket: Overview, Reservoir Minerals (RMC.v), Hot Chili (HCH.ax), Curis Resources
(CUV.to), Lumina Copper (LCC.v).
The Lottery Ticket Basket: Overview, Glass Earth Gold (GEL.v), Fancamp (FNC.v).
Regional Politics: Paraguay: The other Presidential election of April 2013, Mexico: The PRI
party now officially pushing for a 5% royalty, Chile and Hochschild and Volcan, Argentina: Santa
Cruz province to debate raising local taxes on mining, Dominican Republic vs Barrick Pueblo
Viejo round 78, More Guatemala and Tahoe Resources.
Market Watching: The European Gold Forum, Sulliden Gold (SUE.to) Agnico Eagle (AEM) and
some flooded farmland, Ram Power (RPG.to) and Alterra Power (AXY.to), Goff Corp (GOFF)
(GOFF.pk) short redux, Trevali (TV.to) follow-up, Regarding short positions.
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
Revisiting the call on 2013 from IKN203 (it hasn’t changed)
Three weeks ago in IKN203 I ran that “How your author sees
2013 developing for juniors” piece in the Market Watching
section, the one that came with this chart (same but much
smaller here)
The general argument was that we’re closing in on a bottom
in the current time period for the quality end of the junior
miner sector, while those we called “acceptable” companies
might have a while before they see out the worst. However,
the dog end of the juniors sector still has plenty of pain left
to come. Here’s a section of the script from IKN203 by way
of reminder:
• I see the quality names bottoming around now, by which I mean they might have already
seen their lows or we might have to wait a few more weeks, but we’re close enough.
• I see the ‘acceptables’ with some more to drop yet, but they’re hardly lost causes and
worthy of your patience. Also, there may well come a time when rotating out of the highest
quality names and into those that have more potential upside will make sense
1

• I see no end of pain in sight for the dogs, which is a much-repeated meme amongst the
mining sector chattering classes of course (and I’m not claiming any original thoughts here,
just saying that I agree with the thrust of the panel-led arguments of the last few weeks, on
this issue at least.
So that’s the general idea folks, feel free to put this graphic in front of my nose six months or a year
down the line and ridicule my pathetic forecasting if you so desire. For the moment, it also means that
I will remain heavily weighted into the stocks I consider the highest quality components of the ‘Stocks
to Follow’ list here at the Weekly, which means RIO.to and BTO.to will continue to hold the most
portfolio cash. If and when an improvement sets in with the better of the bunch, we can think about
rotating into the more speculative names.
Back to the present day: Here we are in mid-April, we’ve just seen a big sell-off in gold that
looked very suspicious trading-wise, but all the same dragged down to whole complex, quality
names and dogs alike. So I’d like to be clear that i consider the sketched scenario as per
IKN203 as still valid and in-play. I’m not one who can micromanage the markets, preferring to
eschew the difficulty of calling every wrinkle and set my sights on a longer timeline. If, six
months from now, BTO.to is still under $3 and RIO.to is bouncing around in the low $4s instead
of chunky $5 or perhaps even $6 numbers, then the scenario laid out in The IKN Weekly that
you’re author is applying to his own asset position at this point would have been proven wrong,
no ifs buts or whatevers.
How do markets bottom? Sometimes with a bang, other times with a whimper, others still with
a sell-off spike then a rebound which is quietly retested a few days or weeks down the line
before the real recovery sets in. At this point and having witnessed the forced nature of the
high volume dump on Friday (a slightly more dilplo way of saying that Friday was bullshit
manipulation trying and at least partially succeeding in causing panic among smaller players)
the “with a whimper” theory is out (and I mentioned as much on the blog Friday (1)), so the
choice seems to be between last weekend being the type of violent spike down on volume that
turns out (nearly always in hindsight) to be the type of capitulation bottom the technical
analysts of this world drool over, that Friday was a mere dress rehearsal for the real pain still
waiting down the line. Place your bets, ladies and gents.
Ah yes, it’s at this point in the rant that the newsletter writer is contractually obliged to write
something that will gird your collective loins and instill new valour for the challenges ahead as
well as images of untold riches for those with the necessary internal fortitude. Well bollocks to
all that bullshit hype and my best advice is to stop paying money to anyone that treats you in
such an idiotic and puerile manner. It’s perfectly natural to be nervous about the current
market conditions facing us all, the only thing I’d advise is that you make sure your risk profile
is you’re comfortable with at the moment (and please note the use of the words “you”, “your”,
“you’re” in that last sentence...words chosen for a reason because the same way that I look
after my money, you have to look after yours). On that subject and for what it’s worth, when it
comes to juniors my personal exposure is enough to make homegrown neuroses operate during
the market day, but once the dust settles on any given day they cause me zero sleep worries:
Yes I have money in RIO.to and BTO.to, then modest money in seven other long positions,
then modest money in two shorts and outright small money in three other names. And yes I do
things around the edges (for example selling AUN.v last Friday, probably selling MLN.v this
week, etc) and I’m the first to admit that I’d prefer more of a cash position than there is in the
port right now, but overall everything is still neatly and safely inside my own comfort zone. I
think that’s important and it’s also why I’m not long RMC.v today (see below); the temptation is
there but it’s not the kind of risk profile for me at the moment.
These are personal questions, personal judgements and personal choices made. Sometimes
(well a lot of the time in fact) I feel a bit cheesy about banging on about this subject, but in the
end I do so because it’s at the heart of the whole relationship between the market participant
and the market. I cannot possibly tell you what to do with your money, what I can do is try to
explain my own circumstances and position, then tell you what I’m doing as regards these crazy
juniors. With luck you might be able to use a few of the ideas for your own ends.
2

Travel plans
Your author will be on the road next week, with a couple of days in Lima checking out several
covered companies. On this first of the road I’m particularly interest in what Minera IRL (IRL.to)
(MIRL.L) has to say about its financing deal progress for the Don Nicolas project, as well as
facetime with Andre Gauthier of Lara (LRA.v) scheduled that should provide insight on the
several fronts that company has seen developing recently. Once Lima’s done, I’ll then be
spending time and collecting a few airmiles with the Focus Ventures (FCV.v) crew as they show
me round the Aurora copper project in the Cusco region of Peru. I know they’re getting very
keen on it and it’ll be good to go see and find out why. Once that’s done it’s back to the bosom
of the family on Friday.
All the above means that posting on the blog will be light next week.
Fundamental Analysis of Mining Stocks
Bear Creek Mining (BCM.v) gets unanimous approval from Corani locals
This section could have gone in ‘Regional Politics’, ‘Market Watching’ or even ‘Stocks to Follow’,
but as we’re talking about the type of positive news that we wanted from a recently taken trade
that’s near-term in aspect, I want to put it first and foremost in today’s edition. Rather than any
long diatribe from your author, I hand you over to the Puno regional newspaper ‘Los Andes’
and its complete report (2) on the happenings of Friday April 12th in the town of Corani, Puno,
Peru. Here’s a full translation of the report, I’ll add a few comments of my own afterwards.
Bear Creek Mining Gets its Social Licence from the People of Corani
April 13th 07:05am
After diverse informative workshops and negotiations with the community, the
population of the district of Corani in Carabaya (Puno) yesterday finally gave
its social licence to the Canadian mining company Bear Creek Mining
Corporation to allow it to mine its precious metals concessions in exchange
for economic dividends and social help that it is already providing.
“Unanimously, the population has approved the presentation of the mining
company Environmental Impact Study (EIS), because they know that the
royalty that it will generate is going to benefit all of us”, said the mayor of the
Corani district, Edmundo Cáceres Guerra. “All the families have awarded
them its social licence”, concluded the mayor.
The silver mine is due to begin production in 2015 and is located between the
communities of Chacaconiza and Quelcaya, at 4,800 metres above sea level.
The area is inhabited by more than 1,000 people who live in extreme poverty;
according to the Peru Statistics Office (INEI) 92% of the population between
11 and 18 years of age suffer from chronic malnutrition. Due to this they see
the mine as a springboard for development.
The mayor of Corani said that 810 people signed up for the public audience,
however around 200 extra locals also came to the meeting to listen to the
presentation made by representatives of the Canada’s Bear Creek, in the
presence of functionaries from the Ministry of Energy and Mines.
Two officials from the General Direction of Environmental Energy Affairs
fromm the Ministry of Energy and Mines, Abel Díaz and José Luis Pimentel,
and Obed Álvarez of the Puno Regional Directorate of Energy and Mines,
closely recorded the presentation and are due to give their official suggestions
in 30 days’ time. Also present was Elsiario Antunez de Mayolo, Peru General
Manager of Bear Creek Mining.
3

The District Municipality of Corani contracted the consultancy company
Helios, a specialist in Environmental Impact Studies, in order to evaluate the
proposals offered by the mining company. At the end of the day, the
consultancy company asked that the budgets for environmental impact
remediation be raised.
Finally, the mayor of Corani also noted that during the meeting a member of
the public, Guillermo Tacar López, demanded that the mining company pay
for land that he owned that forms part of the future area of operations.
Confronted with this, the mining company signed an official act that committed
it to solving this impasse in the next 10 days.
Social Development
The mayor of Corani, Edmundo Cáceres Guerra, said that Bear Creek Mining
had agreed to contribute directly to the local communities where it will operate
by donating four million Nuevos Soles (approx U$1.55m) every year for the
first 15 years of operations. At the end of this period the deal is to be
renegotiated. “This contribution is apart from the mining royalties (that Bear
Creek will pay to Peru)”, said the mayor.
“This budget will be in the form of a fund”, said Edmundo Cáceres, after
explaining that the social fund would be administered by a committee made
up of directors of the local community and the mining company in order to
assure the development of the five communities in the Corani district.
Employees of the Canadian mining company said the mineral mining would
begin as from 2015, because first the Environmental Impact Study needs to
be approved and an operating licence obtained, then it will take around two
years to build the silver mining operation.
It’s estimated that the Corani silver mine will be the third largest mine of its
type in the world, which will greatly increase the current mining royalty budget
in the district, also benefitting Carabaya and the whole of the Puno region.
IKN back and simply put, the meeting last Friday (which is of course the reason why we bought
our near-term trading position in BCM.v very recently) couldn’t have gone better than it did for
the company. The vagaries of the wider market managed to pull BCM down with the rest of
them late last week but if, as I strongly suspect, BCM makes a big deal of this important
milestone on Monday (and silver doesn’t completely disappear down the toilet at the same
time) then I still fully expect to walk away from this trade with a win in the near-term. Your
author has already heard that BCM’s CEO, Andrew Swarthout, has lined up an interview with at
least one of the major business wires this weekend to talk about the public meeting and its
outcome, so expect BCM to look for as much radar as possible to convey its good news in the
days ahead.
To repeat, out set-up here is that of a near-term trade (not least because committing new cash
to longer-term positions at the moment has very little appeal). The trade was built around this
community decision and now that it’s in, and in optimal style, the part when the expected
reward turns up is upon us. If things turn out the way we planned (and what could possibly go
wrong? ☺) this position will be closed before the end of April. Meanwhile, the nastiness of last
Friday’s market means that those of you who didn’t partake at the same time as your author
have a good window on cheap BCM and post-factum, to boot. If the trade interests you, look
both ways before you cross the road and pay special attention to how gold (and silver) trades
tomorrow Monday morning, but if things are calmer there seems to be an easy trade win here.
Aurcana Corp (AUN.v): Position sold
To call myself disappointed with the Aurcana (AUN.v) 2012 YE financials is an understatement,
as the Flash update of Friday morning (see appendix 1) should have pointed out clearly. The
position sold as per Friday and the loss is taken so there won’t be a massive post-mortem here
4

today. However, a few notes on just why, above and beyond the outright lies that AUN.v has
used on the market, we don’t like the look of where AUN.v sits financially today follow.
Here bulleted are some of the items included in the company news release of December 14th
2012 (3) and between the bullets are updates, dating from last week, on how the information
released on April 11th (4) compares to the original news:
•
The assets at the Shafter Mine are ready for their intended use and the plant is now operating on a
continuous basis at an average rate of 600tpd.
According to last week’s results, commercial production has not been achieved at Shafter.
•
Processing of lower grade open pit ore, initially mined during the plant commissioning and testing phase, has
been discontinued. The plant is currently processing higher grade underground ore exclusively.
The company reported in its NR that ore at 5 oz /t Ag was currently being mined, lower than
the ~8oz/t average for the underground material. It also stated in the ConfCall that until the
CCD circuit is installed (supposedly happening “gradually through 2013”) recoveries are running
at 50%.
•
The Shafter Mine currently employs 152 personnel allowing for a continuous operation. Additional
underground miners have been recruited and will join the Shafter mine in January 2013, as the Shafter mine
ramps up.
During the conference call, CEO Rodriguez admitted that the company was still short of staff,
talking about 15 extra heads needed to bring Shafter up to 600tpd and that one problem had
been high staff turnover. To combat this problem the company is now building living
accommodation for employees.
•
Aurcana has implemented a production ramp up plan to gradually increase production towards the phase I
planned capacity of 1,500tpd, as mining operations proceed.
On December 14th the mine was apparently running at 600tpd. Last week, some 118 days after
the wholly false announcement of comercial production, it was running at 560tpd.
•
As part of the ramp up plan, the installation of additional thickener tanks, increasing the processing capacity
of the plant, will be commissioned early Q1, 2013. In addition, upgraded filters will be installed in Q2 2013.
Those installations have been delayed. Also, additional filter presses are needed but won’t
arrive until 2q13 or become operational before 3q13.
As well as those points, it was also clear that AUN has dropped its grand plans for M&A type
expansion. Back in 3q12 the company said it was in talks with another Mexico producer for a
merger (we guessed at Scorpio at the time), but the message last week was that AUN would be
concentrating on its organic growth. It’s unsurprising given the share price weakness between
then and now of course, because its lack of cash and serious paper closes the door.
Aside from the untruths told and now admitted, there are financial ramifications to the delayed
timeline for Shafter. This chart shows our forecasts for overall working capital at AUN during
FY13 which assumes steady state production and post credit at La Negra, Shafter that runs at
600tpd in 2q13 and moves up to 1,000tpd by year end (using 5oz/t silver and average 70%
recoveries) and an average $29/oz realized price for silver. On the ConfCall, CEO Rodriguez
(after some prompting) admitted that the 2013 capex budget for AUN would be around $20m,
which according to our model means that AUN is likely to go working cap negative for a while
before recovering at the end of the year. It does have a credit line in position that will be more
than enough to cover cash flow needs for a near-term period, but the problem here is if silver
doesn’t maintain a $28/oz average, AUN does more than just go through a couple of quarters
without profit; it runs out of cash.
5

On the ConfCall, CEO Rodriguez said that the company wasn’t planning any further equity
raises but quite frankly, with a track record like his there’s no reason to believe him. As AUN is
now about to enact its reverse stock split which will cut the shares out total eightfold (putting it
at 58.4m s/o) and the share price to over $4, a rollback of this sort smacks of a company
preparing to raise more cash via equity. Given the thin state of cash holdings forecast for this
year and the slipping in timelines for expansion, I’d say a dilutive round of raising in 2013 is far
more likely than the two-faced Rodriguez would like us all to believe.
AUN.v: Working Capital per qtr
Anyway, it’s all rather too much like sour
40
grapes from me on this trade today. I’m 35
now out and not going back until things 30
25
have substantially changed at AUN. That 20
would include a complete change in top 15
management as I’ve been fooled once by 10
5
these people, so shame on them. Next 0
time would be fool on me. But there is -5
one more thing I’d like to share here, -10
-15
which is the price chart for AUN since
-20
December 14th, date of the apparent
“commercial production” that turned out
to be a tissue of lies. It was due to this
announcement that its promised timeline
was being kept that AUN remained in the IKN portfolio. Since that time the stock has sunk,
from a December 14th close of $1.04 to the current 56c. That’s $224.3m in market cap wiped
from the stock and in my personal view, that leaves plenty of room for compensatory actions
from those who have lost money on this deal due to the lies and deception of company officers.
I for one know that I wouldn’t have held on this long if AUN hadn’t announced its
“achievement” of commercial production on December 14th.
Stocks to Follow
There are 14 open positions in our ‘Stocks to Follow’ list. Four of those positions went up last
week (IRL.to, OGC.to, GORO short, TAHO short) and two remained unchanged (PLA.v, AQM.v),
therefore that means the other eight lost ground (well, nine in fact as we should include the
now-closed Aurcana) (RIO.to, BTO.to, LRA.v, LPK.to, IPT.v, BCM.v, FCV.v, MLN.v, AUN.v). We
had one double figure percentage winner too in the shape of our Gold Resource Corp short
(GORO short up 10.3%), but that’s just about the limit for any good news, as amongst the
eight dropped there was some significant damage done in percentage terms, starting with
6
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 tse31q1 tse31q2 tse31q3 tse31q4
source company filings
srallod
fo
snoillim

Lupaka Gold (LPK.to) and followed by IMPACT Silver (IPT.v down 12.8%), B2Gold (BTO.to
down 12.2%) and Focus Ventures (FCV.v down 10.7%). But the true damage was in money
terms, real back-pocket differences that came from the big hit in BTO.to as well as the loss in
Rio Alto (RIO.to). It was not a good week for your author’s portfolio.
With the addition of Tahoe Resources (TAHO) short and the dumping of Aurcana (AUN.v)
Friday we’re still at 14 stocks on our open list, one less than our self-imposed maximum. Five
are in positive territory and nine in the negative.
Company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.04 07-apr-11 C$4.33 112.3% $6.29 tgt
B2Gold BTO.to buy C$3.42 28-nov-12 C$2.60 -24.0% $5.70 tgt 4 buys
Recommends
Minera IRL IRL.to buy C$0.73 22-jul-12 C$0.64 -12.3% $1.56 tg, added, new avg
OceanaGold OGC.to hold C$3.03 16-sep-12 C$2.49 -17.8% $5.34 tgt growth prod
Lara Expl. LRA.v buy C$1.15 08-apr-12 C$1.19 3.5% solid biz model, LT hold
Plata Latina PLA.v hold C$0.79 10-apr-12 C$0.45 -43.0% considering sale
Lupaka Gold LPK.to hold C$1.12 23-oct-11 C$0.235 -79.0% holding, tgt 61c
IMPACT Silver IPT.v buy C$1.14 13-jan-13 C$0.82 -28.1% new position, $1.85 tgt
Gold Res Corp GORO short U$14.11 25-jan-13 U$10.76 23.7% short, $9.60 tgt
Bear Creek BCM.v buy C$2.58 01-apr-13 C$2.42 -6.2% new near-term trade
Tahoe Resources TAHO short U$18.62 08-apr-13 U$17.04 8.5% new near-term trade
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.055 -82.3% holding thru for my sins
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.125 -28.6% revised tgt 25c
Marlin Gold MLN.v closing C$0.075 10-feb-13 C$0.075 0.0% closing this week (prob)
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-jan-13 U$0.17 81.7% tgt made, trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
2009, 2010, 2011 and 2012 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Tahoe Resources (TAHO): Short position opened. As per last week’s call, your author
opened his short in TAHO. First up, please note that this position is being tracked using the US
ticker (TAHO) rather than the Canadian
(THO.to) because the short was opened in
the US version, as simple as that. As for the
trade, I got some Monday at U$18.40 then
went back to the well for a for more
Tuesday when TAHO crossed through
U$19, but that’s just about all I want from
here on so this trade is now just about set
(I suppose I could tack on a few more, but
I’d only really get tempted from here if the
PPS rallies over U$20 and I could average
down). The action in TAHO for the rest of
the week was pretty typical of the wider
market, which means the rotten Friday for
mining stocks reflected favourably here. However, what we saw was the “hedging of the
portfolio” aspect of this now open trade, rather than the specific reason for opening a short on
TAHO showing through, namely the potential for trouble in Guatemala.
7

On the score there was some news, but not much barring smallish direct protests from locals in
the immediate vicinity of the Escobal project, with the one that caught most reports (5) news
that up to 500 locals who are against the mine have set up improvised houses on a strategic
area of the THO concession in order to try to claim possession and stop mining activity from
taking place. However, there’s plenty of time for the serious opposition to start flexing its
muscles here. Happy to remain short.
Aurcana Corp. (AUN.v): Position closed. I said all there really was to say about this
company in the Flash update of Friday morning (see appendix 1), that quick note expanded
upon a little in today’s Fundies section above. Here we note the losing position duly closed and
no more auto-flagellation.
IMPACT Silver (IPT.v): IPT had seven types of bejeez kicked out of its PPS on Friday, that
direct enough for you? Comparative
volumes were up that day too (175k
traded) as people searched for the exit
door and asked questions later. We’re at
the price point in silver that would have
seen operations at IPT in 2012 break even
at best, however as we’re now expecting
better grades and production from the main
RMZ area, plus early-stage test production
that should cover costs at the new ops, IPT
is still probably making a modest overall
profit with $26/oz Ag. The big difference
now is that the bulk of capex costs that
went towards the upgrades are now behind
us, which means more revenue gets to flow
to (or at least towards) the bottom line. That’s a long-winded way of saying that last Friday’s
selling in IPT was unjustified on a fundamental level.
Rio Alto Mining (RIO.to): Expect news Monday. Not only that, but I strongly suspect the
news Monday will explain why RIO didn’t drop as hard as contemporaries during the Friday
washout. We had negative news from Rio last week (6) as the company reported that an
employee had died while on duty at La Arena. From what your author gathers, the accident
occurred away from main operations and at the site of civil works where a trench was being
dug. It’s also wrong to speak ill of the dead, but it should be noted that Peru government
officials have in their preliminary report noted that the the individual made the mistakes which
cost his own life, RIO was quickly given a provisional all-clear and the mining operation re-
started within one day of the accident (48 hours is often the case under these circumstances).
RIO doesn’t expect 2q13 to be affected by the temporary stoppage.
OceanaGold (OGC.to): One of only two long positions here at ‘Stocks to Follow’ that went up
last week (the other IRL), the action in OGC
was interesting and pretty positive on each
of the five days. Yes, even Friday turned
out to be an optimistic trading day, as the
early prices that went sub-$2.30 and
mimicked the rest of the sector were
snapped up and good volume all day
reduced the losses considerably (we saw
over 1m shares traded in OGC on the
Canadian ticker alone Friday, that’s not
shabby).
But the real story and impetus came on
Tuesday April 9th with the news (7) that
8

OGC had made its first shipment of concentrate from the new Didipio mine via the port of San
Fernando. It’s difficult to know exactly what the metal content of the first reported shipment
5,000 tonnes of copper/gold conc might be (for one thing the copper part of the mix is higher
in the first years, while gold becomes a stronger revenue metal later one), but if we take the
results of the concentrate testing in the 2011 43-101 technical report as our guide, we’d expect
something in the region of 27% Cu conc and 17 g/t gold, which at a lowball-ish $3.30/lb copper
and $1,500/oz gold (and pre-deductions) would give that 5kt of conc a value of around $13.9m
($9.8m for the copper and $4.1m for the gold). The cheque for that first shipment should be
signed in mid-April, by which time the second 5kt should be out of port. There’s another 5,300t
of conc already produced too and waiting either at the dock or the mine.
The ins and outs of the Didipio export logistics aren’t our great concern, but we’re good about
checking how the first pathfinder sales are moved, presumably making for regularity later.
Minera IRL (IRL.to): Our other winner on the week didn’t really do much business in either
London or Toronto (and nowhere near the amount seen in OGC) so liquidity is still a concern.
The price is still sillycheap as well, but at least the fracturing of the price seems to have
stopped (he says, uttering famous last words). IRL HQ is first port of call on Monday for your
author, where I’m sue to meet up with CEO Chamberlain and hopefully get insight on the up-to-
date situation at IRL. Sadly Pres Benavides won’t be there, as he’s out in the world doing work
we hear, so the point man for the Argentina financing deal isn’t available. So be it, the buck
stops at the founder/CEO anyway so expect plenty more on IRL next weekend and if anything
turns up that’s time-sensitive, a Flash update is always a possibility.
Lara Exploration (LRA.v): Pennies here or there aside, another week in which LRA’s price
remained like a rock while all around crumbled. Once again there was an increase in the volume
traded, though it’s still admittedly modest stuff (only one day, Friday, saw more than 100k
traded). If all my positions were as steady and solid this game would be so much easier.
Gold Resource Corp (GORO): The way things are going, your author’s $9.60/share shorting
price target may be reached before this company announces the cut in dividend, such is the
speed of deterioration in GORO. That would imply that there’s more downside left to come than
our target price. The problem here is based more around the price of silver than of gold but as
both metals count towards company revenues and they’ve both dropped considerably, it’s now
more a case of how much the dividend be cut, not whether the cut will be necessary. For the
moment and after consulting the model I’m going to stick with my 2c cut to a 4c/month
dividend, but it wouldn’t surprise in the least to see that cut more.
Marlin Gold (MLN.v): Please note that as per the table above (and here), due warning is
given that your author will probably close this position next week. It’s a small one in cash terms
(win lose or draw) and as I’ll be looking to sell above Friday’s panic close price, any half cent
sneaked here or there will make this one into a small winner. If it’s not gone via an sticky ask
by Friday (while I travel) I’ll look to sell manually on Friday.
I think there’s a decent chance we’ll see 8.5c again before next week is out, gold panic or no
gold panic. That’ll be a modest win and enough to pay for the commish and a couple of bottles
of something fizzy to celebrate with. Or drown larger sorrows.
Focus Ventures (FCV.v): Next week a trip to the Aurora project of FCV. In IKN207 you’ll get
the full report on that, which may turn out to be a timely one as FCV is now at 52wk lows
despite having a decent cash treasury that backs up that tiny implied market cap. If Aurora or
any other moving part of FCV shows the necessary promise, we can go bargain hunting here.
Bear Creek Mining (BCM.v): See above, but assuming BCM’s officers and investor relations
department decides it’s a strategically wise move, we should get news by tomorrow Monday
morning from the company that it’s public audience meeting in the town of Corani went well
and this key part of the environmental permitting for the company’s Corani project is now in
9

place. This is, of course, the reason why we took a piece of BCM in this near-term trade in the
first place. All was looking pretty good with the trade before Friday’s big gold dump pulled BCM
(and a whole load of other names) down with it, so discounting that variable the trade seems
steady. Just a pity that variable mentioned
has such a large influence over this price,
but we should highlight that trading on
Friday at over 250,000 volume was good
and healthy.
We shall see what next week brings. For
what it’s worth, I’¡ll watch the action
actively tomorrow and depending on how
things go (e.g. we get a pop) I might stick
an optimistic ask on the shares bought and
leave it there while traipsing around cities
and countryside through Thursday. If they
sell, they sell.
B2Gold (BTO.to): We had news from our Top Pick BTO Wednesday (8) on drill results from its
Ojtikoto project in Namibia, with particularly good results from the so-called Wolfshag zone on
site, including the headline intersect of 35.7m grading 4.82 g/t Au (BTO estimates that true
widths are around 85% to 90% of drill widths). The reason we like Wolfshag, aside from the
very decent grades and widths it’s returning, is that this part of the deposit is not yet counted
as part of the Otjikoto 43-101 reserve count of 1.34m oz Au (which averages a grade of 1.42
g/t). Wolfshag therefore holds a lot of promise and although we’re going to have to wait until
the end of the year to get the official numbers when the 43-101 count is updated, the zone
looks likely to add plenty more ounces (I’ve seen guesstimates of between 450,000 oz and
700,000 oz so far) all importantly at a higher grade. This is a good thing, because Ojtikoto isn’t
just A.N. Other deposit owned by A.N. Other exploreco, but it’s a project that’s now under
construction and fully funded to do so via a company that knows how to deliver working and
profitable mines to the market. Therefore, Wolfshag promises to improve the already robust
economic scenario for the mine, adding both better grade (which improves annual production
capacity) and ounces (which lengthens mine life).
But of course, nobody gives a flying fig about such things when the results won’t be seen for a
couple of years minimum and the market is chock full of nerves about $50+/oz moves in gold.
Sentiment, led by fear, ruled the share price movements in BTO last week and as a result we
find our position even further underwater than it was. So be it, but the considered call of Top
Pick on BTO hasn’t changed in the slightest, as it’s something that necessarily has to look
beyond near-term nerves and intraday movements.
The Copper Basket
After fifteen weeks of 2013 The Copper Basket is showing a 12.81% loss to level stakes.
10

company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 158.5 397.84 2.51 -26.2%
2 Augusta Res AZC.to 2.43 144.1 380.42 2.64 8.6%
3 Lumina Copper LCC.v 9.43 43.46 329.86 7.59 -19.5%
4 Copper Fox CUU.v 0.83 399.61 267.74 0.67 -19.3%
5 Nevada Copper NCU.to 3.50 80.5 221.38 2.75 -21.4%
6 Hot Chili Ltd HCH.ax 0.72 286.78 157.73 0.55 -23.6%
7 Reservoir Min. RMC.v 2.41 41.46 108.63 2.62 8.7%
8 NovaCopper NCQ.to 1.80 51.89 90.81 1.75 -2.8%
9 Western Copper WRN.to 1.39 93.78 73.15 0.78 -43.9%
10 Panoro Minerals PML.v 0.62 176.25 72.26 0.41 -33.9%
11 Curis Resources CUV.to 0.70 56.31 43.92 0.78 11.4%
12 Candente Copper DNT.to 0.375 121.93 42.68 0.35 -6.7%
13 Oracle Mining OMN.to 0.80 49.03 31.87 0.65 -18.8%
14 Yellowhead Min. YMI.to 0.59 60.97 29.27 0.48 -18.6%
15 Strait Minerals SRD.v 0.08 56.86 3.41 0.06 -25.0%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -12.81%
This market is so bad that Reservoir Minerals (RMC.v) went down.
There were seven stocks that went up last week (LCC.v, AZC.to, CUU.v, OMN.to, YMI.to,
CUV.to, SRD.v), one unchanged (NCU.to) and seven stocks that went down (NGQ.to, HCH.ax,
WRN.to, PML.v, NCQ.to, RMC.v, DNT.to),
Copper Basket 2013 average, weekly
which along with an overall average that
16%
lost just 0.4% means that honours were
12%
even in The Copper Basket and if that
8%
surprises you don’t feel alone, because it
4%
surprised the merry hell out of me when I
0%
plugged the numbers into the table on
-4%
Friday evening. There were big moves to
-8%
either side as well, with the worst of the
-12%
losses seen by Reservoir Minerals (RMC.v
-16%
down 14.1%) as hot money took profits
(or licked wounds) after that company’s
very decent news-driven recent run. Hot
Chile (HCH.ax down 11.3%) was also hit
and the other sizeable loss was in NovaCopper (NCQ.to down 9.8%), while to the upside we
saw rebound gains in Oracle Mining (OMN.to up 20.4%) and Strait Minerals (SRD.v up 16.7%)
after recent poor showings on low volumes traded.
Inventories time. Last week overall world stocks rose a relatively insignificant 0.2% to stand at
894,244mt. The main gain was at LME, where stocks rose by 2.4% to reach 593,650mt. Comex
(subject of that interesting move reported in IKN205 last week) saw a +2.5% move to
72,304mt. However, Shanghai Futures Exchange warehouse stocks dropped a chunky 5.6% to
stand at 228,290mt, so the bottom line is once again the move towards LME dominance and
away from Shanghai. As we’ve noted in the last few weeks, there’s plenty of fun and games
going on in the copper markets at the moment, with Trafigura (mostly European Lme
warehouses) and Gelncore (mostly Asian Shanghai warehouses) playing their games in order to
maximize their own profits on warehoused copper, so it’s probable that we’re getting too much
noise with the daily and weekly numbers to be able to spot future price moves from current
inventory changes. However, there are signs that the bigger games being played are
unwinding, especially when we look at what’s happening in the LME cancelled warrants.
11
ht6naj ht31 ht02 ht72 r3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%

Cancelled Warrants at LME, IKN157 to date
35%
30%
25%
20%
15%
10%
5%
0%
12
751NKI 951NKI 161NKI 361NKI 561NKI 761NKI 961NKI 171NKI 371NKI 571NKI 771NKI 971NKI 181NKI 381NKI 581NKI 781NKI 981NKI 191NKI 391NKI 591NKI 791NKI 991NKI 102NKI 302NKI 502NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
Here’s the chart we use to track this metric and as you can see, LME cancelled warrants shot
higher last week to stand at 26.7% of stocks as per Friday’s close. That’s a massive move and
according to all sources, it’s due to rule changes now implemented by the LME which makes for
more movement of copper stocks in and (more importantly) out of the bonded warehouses.
One of the major complaints of end-users is that LME (and Shanghai) warehouses will only let
stocks held drip out slowly and although the rule changes last week only partially address the
complaints, they do help the situation. What we’re now probably seeing is a scramble from
those who want to rule the warehouses for control of outgoing supply. For example if,
theoretically at least, the Glencores and Trafiguras of this world wish to retain control on in/out
warehouse supply under the new rules, they could take delivery control of the copper held via
warrants that are cancelled, but later prevent it from physically leaving the warehouse by
reissuing the warrant (see IKN198 dated February 17th when we talked in a little more detail
about the system) and the same physical quantity of copper gets ploughed back through the
system. That may be what we’re seeing here, therefore we’re not going to jump to any “oh this
must be bullish” conclusions on the back of a single week’s worth of data. To be a truly bullish
change in the market, we’re looking for overall inventories to start dropping (esp in LME stocks)
at the same time as cancelled warrants remaining at the new high level. With three or four
weeks of that kind of action, copper would indeed look more bullish.
Now for updates on some of the basket stocks:
Reservoir Minerals (RMC.v): The last time we made mention of RMC was in IKN204 dated
March 31st. That piece acknowledged the positive vibes around the stock, noted RMC was
subject of strong and persistent rumours about good things to come but also made the call not
to jump on the bandwagon. It ended
with “...I’m not in an anxious rush to
chase and buy after an upmove in the
stock price. Not this company, not any
company in our current market.”
On Monday I began to seriously regret
that call, when after having been halted
all day pending news RMC came out with
an NR that announced (9) another
excellent hole from its Timok JV with
Freeport (FCX) in Serbia. If the headline
291.3m of 7.17% CuEq (includes 5.15%
copper and 3.4 g/t gold), then you
should go over to the very complete
supplementary information PDF (10) provided by RMC which shows the location of the new hit
(FMTC1223) as on-strike and perhaps 100m NNW of with the original discovery hole
(FMTC1213) and improving on another hit a little further up the line. If anything, last week’s

announced hole was more important than the discovery hole, because it greatly reduces the
chance of RMC/FCX having hit lucky with 1213 and with assays now pending South on the
strike line (I’ll be watching closely for news of the returns from holes 1221 and 1215) this thing
we’re now approaching the stage where Timok gets to be considered either a very good new
discovery or a major world-class discovery, with the chances of outright disappointment fading
fast.
I want to be clear:
• If I weren’t such a chicken, I’d buy this dip in RMC.
• If I wanted to risk on pure drill hole discovery right now, this would have to be the
choice stock.
• In fact, if it weren’t for my personal anxiety about catching another falling knife I
probably would have called buy on this thing Friday in a Flash update.
• If you consider last week’s drop as marking a bottom in both copper and quality
explorecos, this is the stock for you.
What we’ve seen in RMC in the last few weeks is a stock that has a piece of just about the only
legitimately exciting exploration discovery we’ve seen in 2013 (in fact, you could argue its
leadership over anything from 2012, too). This is not a bullshit story, these are clearly real deal
rocks and even after considering the potential of throwing more cash into a market as it dives
once again, I am sorely tempted to take the $2.60 or so price now on offer in RMC and play it
as a pure risk capital trade.
Hot Chili (HCH.ax): I’d just like to remind you of my stupidity. Last week I wrote about the
apparent underlying strength in HCH by stating “...the action seen last week is the type of
support you want to see in a junior, with someone somewhere quick to take advantage of a
punctual bargain and support the stock price”. This week HCH.ax dropped 11.3% as low
volume sellers at any price showed up more than any enthusiastic supporters.
Curis Resources (CUV.to): Last week we ran a piece considering the town of Florence’s
decision to rescind its ban on sulphuric acid use in town limits, one of the ways in which it has
been trying to block the development of the Curis Resources’ (CUV.to) Florence copper project.
There’s nothing particularly new to add this week, but I want to add an excerpt from this article
(11) to the mix which contains quotes from the Florence Town Attorney, James Mannato, as it
largely confirms our suppositions last week that the town’s decision to rescind the ordinance
was more of a tactical retreat than anything else. Here’s the excerpt.
“...whether the council believes the town, its residents and the environment would be protected by
other developments affecting the project, Mannato said.
“I think that question can be answered ‘Yes’ at this time,” Mannato told the council. These other
developments include appeals of Curis’ temporary permit to conduct a one- or two-year test run of
the project’s acid leaching operation, which Curis calls its production test facility.
13

The town is also one of the plaintiffs in a lawsuit against the Arizona Department of Environmental
Quality, challenging the agency’s right to grant the permit. The lawsuit will result in a “lengthy
review” of the permit, Mannato said.
With all this in mind, “At this time, staff believes that these efforts will serve the public’s interests
without the risk of unnecessary costs and legal expenses relating to the enforcement of” the
ordinance, Mannato stated in a written report to the council.
As for trading in CUV last week, it danced as high as 85c and as low as 72c on thinnish
volumes, ending the week a penny higher than the price seen in IKN205.
Lumina Copper (LCC.v): Pre-bell Tuesday LCC gave the market news (12) of its Preliminary
Economic Assessment (PEA, otherwise
known as scoping study) for its main Taca
Taca copper project in Argentina. This five
day chart notes the positive reaction on the
day, but we also see relatively low volumes
traded for a normally important event for
an exploreco and then as the week dragged
on LCc was subject to the same type of
selling as the rest of the market. In the end
it finished up one penny from this time last
Friday.
As for the PEA details, rather than a tedious
paragraph from my hand, here’s the
summary table ripped from the NR with a
couple of notes added in red.
The thing with Taca Taca is that it’s been clear from a long time that the grade and size of the
deposit would make for a robust and economic copper mining operation, so this PEA with its
strong reported economics was always going to show well. The post-tax IRR of 17.2% using
copper at a modest $2.75/lb and a conservatively pitched 8% discounted NPV is undoubtedly
interesting and the type of profile that wil stand up to scrutiny as the project moves from PEA
through pre-feas and feas (if necessary). The LCC team are no bunch of junior market
bullshitters; quite the opposite, they’re serious, successful and have a well-earned reputation to
maintain as well.
No folks, the problem here is the one we’ve talked about too many times already. Taca Taca is
in Argentina and because of that, prospective buyers look at the country and its political and
economic issues, then walk away. Taca Taca will need serious years and cash invested in it
before the first tonne of copper is produced, which means any company that buys LCC will have
to commit the purchase price of the junior (I’d guess that Strang, Beaty and company wouldn’t
even answer the phone for a number under $500m), then $3Bn in capex if this PEA is to be
14

believed (and on that score, I’d like to see the full PEA document when it arrives on SEDAR
instead of just the NR we have today, because due to the inflation and forex issues in
Argentina, the timing of construction and eventual production and the assumption of when
Taca Taca starts working are very important factors for the capex estimate) and then another
$1.8Bn ploughed in as sustaining capital that’s mostly due, it seems on reading the NR,
between years 6 and 8 of the mine life. It’s difficult to forecast the next six months in today’s
Argentina, let alone risking over five billion dollars over six years or more.
The Lottery Ticket Basket
After fifteen weeks of 2013 The Lottery Ticket Basket is showing a 12.00% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 Eagle Star Min. EGE.v 0.125 69.48 18.76 0.270 116.0%
2 Marlin Gold MLN.v 0.10 192.39 14.43 0.075 -25.0%
3 Bellhaven BHV.v 0.14 121.16 10.90 0.090 -35.7%
4 Fancamp Expl. FNC.v 0.125 118.41 13.03 0.110 -12.0%
5 Gryphon Gold GGN.to 0.085 194.64 9.73 0.050 -41.2%
6 Glass Earth GEL.v 0.155 104.79 8.91 0.085 -45.2%
7 FDG Mining FDG.v 0.13 45.59 6.61 0.145 11.5%
8 AQM Copper AQM.v 0.08 105.57 5.81 0.055 -31.3%
9 Copper North COL.v 0.10 58.62 4.10 0.070 -30.0%
10 Rio Cristal RCZ.v 0.025 149.26 4.48 0.030 20.0%
11 Darwin Resources DAR.v 0.20 26.16 3.40 0.130 -35.0%
12 Inca One Res. IO.v 0.12 34.0 3.40 0.100 -16.7%
13 Cream Minerals CMA.v 0.03 155.34 3.11 0.020 -33.3%
14 Firestone Ventures FV.v 0.045 36.32 1.27 0.035 -22.2%
15 Netco Silver NEI.v 0.025 47.01 1.18 0.025 0.0%
Portfolio avg -12.00%
Since last week, four of the components of our Lottery Ticket Basket made gains (FNC.v,
FDG.v, CMA.v, IO.v), three were
unchanged (AQM.v, DAR.v, RCZ.v) and 25% Lottery Ticket Basket 2013 average, weekly
eight lost ground (MLN.v, BHV.v, GGN.to, 20%
GEL.v, EGE.v, COL.v, FV.v, NEI.v). The
15%
basket average dropped by 4.21% as a
10%
result of all that and we’re now 12%
5%
underwater. Best winner was the 33.3%
0%
upmove in Cream minerals (CMA.v) which
-5%
sounds good until you note it was just half
-10%
a cent’s worth of low volume movement,
-15%
the difference between a bid and an ask,
in reality. The worst losses were in
Firestone Ventures (FV.v down 22.2%),
Netco Silver (NEI.v down 16.7%) and
Glass Earth (GEL.v down 15.0%).
Glass Earth Gold (GEL.v): GEL.v reported its annuals last week and as at December 31st the
company had cash at bank of $2.62m and working capital of just over $700k, which doesn’t
impress much when we consider the company raised $6.2m in gross proceeds from equity
placements that bumped the share count up from 66.2m to 103.8m in the period. With its
placer gold operations not able to throw off the type of cash expected (as a general rule, avoid
15
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%

any company that promises “near term cash flow” from this type of “cheap and easy to set up”
second string) and the company liable for its share of the Newmont JV, it points to another
tinycap that will get diluted out of its better asset. Another example of a small company falling
between two stools, eminently avoidable as an investment.
Fancamp (FNC.v): When put in absolute cash terms, the 131k shares traded on Friday isn’t
exactly the type of money that flows through AAPL or GLD on any given day, but it was the
best day’s volume for a month and when set against the horrid time had by most other juniors
that day, is worth a line or two here. We continue to point to the tangible asset backbone in
FNC (those shares we discussed in IKN205 last week) and the resulting low downside risk it
gives the company from current levels. Well, low compared to other junior exploration
companies with market caps of under $20m, at least.
Regional politics
Paraguay: The other Presidential election of April 2013
Everyone knows that Venezuela is voting today and we’re not going over that one again (unless
a real shock result sees Capriles winning, something I highly highly doubt). But on these pages
we’ve made no mention of the presidential and congressional elections set for April 21st in
Paraguay so far, mainly because Paraguay is virtually off-map for mining activity in LatAm and
so institutionally weak and corrupt that it’s difficult to take seriously anyway. However, we’ll run
a quick note today and say that the race is a pretty tight one between the traditional ruling
Colorado party’s candidate, Horacio Cartes and the centre-left Liberal (sometimes known as
“Blue”) party candidate Efraín Alegre, who was Minister of Public Works in the Fernando Lugo
government (until of course he was ousted in a congress-led quasi-coup).
At the last opinion poll survey, Colorado’s Cartes had 37.6% of ovter intention and Liberal’s
Alegre had 31.7%, but that was before Alegre came to a pact agreement with the party that
previously had Lino Oviedo as its presidential candidate before he was killed in a very recent
helicopter accident while campaigning (sidebar: why do these things always happen in
backwater countries?). The pact deal means that April 21st promises to be a very close-run
thing. The main repercussion of the election is that Paraguay will likely be welcomed back into
the regional fold by other countries that don’t currently recognize the government (due to that
Lugo coup).
Mexico: The PRI party now officially pushing for a 5% royalty
Mexico’s ruling PRI party (that of President Peña Nieto) last week made official its plans to push
for a 5% royalty on all mining company profits in the country by voting on and approving the
plan in-party (13). the PRI law proposal also states that 20% of collected royalties should go to
the Federal government and the other 80% should go to a fund for regional development
managed by the States and municipalities in which mining activity takes places, with the
objective of seeing those regions with mining activity benefitting the most. The bill will now be
presented to the national congress by the PRI and debated by all parties and as the plan has
the backing of the country’s largest congressional party by seats, the potential that the new law
be approved in 2013 as stands should now be considered pretty high.
Chile and Hochschild and Volcan
Last week Peru’s Hochschild (HOC.L), recent payer of $103m in cash for Andina Minerals (ex-
ADM.v) and its flagship Volcan gold deposit in Chile, announced that HOC initial plans for a
2015 start-up at Volcan were now being put on ice until a better commercial scenario for gold
was apparent. According to Chile’s business news medium Estrategia (14) Isac Burstein, VP of
business development at HOC, told the audience at last week’s CESCO meeting in Chile that
Volcan was earmarked as an $800m capex project by the company (sidebar: the 2011 feas
conducted by ADM put capex at $551m) and is now viewed as a long-term project. He said
(translated), “Volcan needs some time to mature. This year we are evaluating (the project) in
16

order to better understand it. For us, the work done previously demonstrates that the project is
viable and profitable, therefore what we have to do now is to optimize it.” Burstein also said
that HOC expects gold to average between $1,550/oz and $1,600/oz this year, but in future
years the company expected gold to go to $1,800/oz, a price at which Volcan and other
projects held by HOC would become viable.
Or in other words, HOC now realizes that overpaid for a project that doesn’t work at $1,600/oz
gold, so forget $1,500 or below.
Argentina: Santa Cruz province to debate raising local taxes on mining
This week the provincial parliament of Santa Cruz in the South of Argentina will debate the
regional fiscal budget for the current year that is looking to raise some ArgP$325m in order to
give pay rises to State workers. Although the regional parliament is as yet undecided on how
that money will be raised, it’s expected (15) that at least part of the amount will be raised by
levying a tax on “mineral real estate”, or in other words charging more for mineral concessions
in Santa Cruz province.
Dominican Republic vs Barrick Pueblo Viejo , round 78
Quote of the week on this ongoing saga came from one José Ramón Peralta (16),
administrative minister for the office of the President of The Dominican Republic, Danilo
Medina, who said that the directors of Barrick (translated), “…have to become more flexible in
their attitude because if not, the President has said they either negotiate or we impose more
taxes on them.” There was more noise out of the issue, with one government official expressing
his confidence that a deal would be reached by the end of this month. We’ll see on that.
More Guatemala and Tahoe Resources (THO.to) (TAHO)
I’m not going to beat you over the head with this story, especially as now that I’m short TAHO
the editorial position here couldn’t be clearer. However I would like to direct you to this Spanish
language report entitled “Mine, a forbidden word in San Rafael Las Flores” (17) which does a
good and balanced job of explaining both sides of the mining story around THO’s Escobal mine
and how some locals nearby are pro-mine, others anti-mine and to such an extent that the
subject is often banned as a subject when families and friends get together, due to the splits
and arguments it causes. Both pro and anti sides of the argument talk of antagonism, bad
blood and a ripped social fabric in the area. The report also quotes mine officials saying they
are willing to talk and negotiate points of order with locals.
Market Watching
The European Gold Forum
This week coming we have a big Euro shindig for the precious metals mining industry via the
European Gold Forum in Zurich (18), which runs from April 16th to 18th and as this list (19) of
participating companies shows, there are plenty of gold and silver names we know and follow
that will be presenting there. Ones that catch my personal eye include our Top Picks BTO.to
and RIO.to, as well as the interesting (and now cheap once more) Colossus Minerals (CSI.to),
OceanaGold (OGC.to) as well as for “different reasons” Tahoe Resources (THO.to) and Gold
Resource Corp (GORO) out of plenty plenty others (choose your own faves). As all the
presentations will be on webcast, those websites may turn out to be a good place to do some
DD next week.
Sulliden Gold (SUE.to), Agnico Eagle (AEM) and some flooded farmland
Agnico Eagle (AEM) (AEM.to) clearly thinks it’s getting a risk/reward adjusted bargain by paying
(20) $24m for nearly 27m units of Sulliden Gold (SUE.to) at 89c per unit (1 unit = 1 share +
0.7 warrants priced at $1.31 with a two year shelf life) and as day follows night, the sycophants
in the Canadian brokerage industry were quick to line up with their “bold and likeable”
comments on AEM’s move. Whereas your author does just think or believe but knows that AEM
17

has just flushed $24m of its shareholders’ money down the toilet. As for the wider market,
according to the action last week it quickly wondered why AEM had paid as much as it did for
nearly 10% of SUE as well.
Interestingly just two days after the announced deal a story appeared in the local Cajamarca
news (21) on how some 300 hectares of agricultural land had been flooded, causing damage to
crops, buildings and the household water system in the region that locals blame on the Sulliden
Shahuindo project. Here’s the quote (translated):
“According to locals in the zone, the flooding of the Pacae, Shahuindo and Higuerón rivers is the
consequence of the combination of heavy rains and earthworks at the Sulliden Shahuindo
mining company.”
Whether that’s true or not will probably (though not definitely) become clearer in time. What
we do know is that the same locals that already hold several grudges against SUE at
Shahuindo have decided that they have another reason to dislike its presence there.
Ram Power (RPG.to) and Alterra Power (AXY.to)
Not hard-rock mining, but as these geotherm power companies both operate in LatAm they get
a little room here. I’m watching these two jointly because they seem a really obvious merger fit
and with RPG, via its recent debt deal, having staved off immediate financial death the timing
starts to look reasonably promising, too. Although interested in both, I’ve been watching RPG
for perhaps six months, considering its financial position and just holding back and watching.
Today, although I’d say it’s deserved to dive the way they’ve dived (principally due to previous
gross management errors and the resulting fall-out), I do like the fact that a lot of the financial
front-end heavy lifting has now been done. The embedded asset value of plant/property way
outstrips the market caps and makes RPG, as long as it can show the world it’s stopped
fracturing cash on a daily basis.
Trevali (TV.to) follow-up
The note last week on Trevali (TV.to) turned out to be only half-right. The jungledrums picked
up and relayed about TV announcing via an NR that it was beginning operations at its
Santander zinc mine in Peru last week were in the right vicinity, because the expected NR did
appear (22). However TV managed to disappoint even with this news, because the
announcement was about “dry commissioning” (i.e. testing of plant, rather than any meaningful
production) and the company noted via its par-for-course twisting semantics that it would
“ramp up to full nameplate production of 2000tpd” by late second quarter. In other words, so
much for the latest in a long line of missed deadlines.
All this BS from TV doesn’t surprise me in the least, coming as it does from a company group
(in)famous for its doubletalk. And as clearly stated last week, I didn’t try to partake in any trade
18

here. However, I did meekly suggest TV.to last week as a potential fliptrade for the risk-tolerant
amongst you this time last week and as things turned out, as diluted as it might have been that
wasn’t a good call and I feel a little guilty about including the TV piece in IKN205. I suppose the
moral of this story is to avoid these dog stocks, even when the rumours are good for something
as inconsequential as a short-term fliptrade opportunity.
Goff Corp (GOFF) (GOFF.pk) short redux: A good idea in theory, at least
From last week to this week Goff Corp (GOFF) (GOFF.pk) dropped by 55.6% but on top of that,
last week’s piece identifying it as an obvious scam and potential short vehicle came with near
perfect timing. That’s because Monday saw GOFF trade at the same sort of 60c+ numbers as
the previous week, which meant time for any
IKN Weekly reader to get on board, then on
Tuesday the big waterfall drop that was
compounded the rest of the week as the
criminals behind this BS story pulled the plug.
Or so the theory goes. In practice I personally
couldn’t get a borrow on GOFF on a single
share and that’s true also for a pro house
that’s very good at this game normally, with
plenty of channels open to US OTC trades. So
unless you out there got a few (and I’d like to
hear from you, if only to be able to consider
last week’s piece as not entirely in
vain...anyone?) it looks as though our plan for
GOFF was a good one, right up to the moment when we tried to implement it. Oh well.
Regarding short positions
The reasons to have two open short positions at the moment (as well as having shorted one
OTC earlier this year and failed to short GOFF earlier this week) were all primarily related to
specific issues the companies in question face. THO has its serious social and political problems,
GORO will have to face the financial facts sooner or later, the OTC stocks are pure
pump’n’dump stupidities. However, in all cases we’ve been clear about the secondary bonus of
opening and holding these shorts. This publication also made the same call around August last
year when coverage here at The IKN Weekly was moved away from the smaller, riskier, less
liquid explorecos and towards producers and larger market cappers. That part of the equation
can be summed up in four words:
Shorts provide portfolio hedges
I’m not trying to make out that the gains produced the recent short positions balance out losses
in my long positions. That’s not the case, but I will say out loud that I’m happy that the two
current shorts are in position at a time like this, balancing out some of the portfolio and
providing a buffer, as well as some welcome green ink, to the rest of the snafu in the ‘Stocks to
Follow’ list. I’ve tried to be practical about the choices as well, holding back on some ideas to
short because access to borrows are difficult for the average retail investor. The main calls in
GORO (twice, both successful), Primero Mining (PPP) (that was a modest winner but I didn’t
play it well and covered too quickly) and the very recent TAHO (early days but a decent start)
are straightforward and relatively simple ones to short and if that fails, they both have
reasonable derivatives and options markets in which you can buy puts or write calls.
However and with a dose of that nasty 20/20 hindsight, I regret not having been more
aggressive on the short side. The main publically noted mistake made was to close Primero
(PPP) (P.to) too early, but here in the office I kick myself more about not going short on Great
Panther (GPR.to) (GPL) and prices around $1.80, then more recently at $1.35. Both occasions it
was considered, both times no trigger pulled. The other regret is aorund Argonaut Gold (AR.to)
19

at the beginning of the year, because although only listed in Canada and somewhat harder to
go short with, the lack of movement on its San Antonio project and the way in which bad news
never seems to come to light in the English press rooms on that story struck me as an
advantage on several occasions. The theoretical trade there was a short AR to balance out at
least some of the long RIO.to.
To wrap this small overview of my short-side ideas, I’d like to repsond here in the same way
I’ve replied to mails in the last two weeks on the subject of ETF short opportunities. The reason
why I haven’t ever mentioned devices such as GLD inverse vehicles (example DUST) is that in
essence, The IKN Weekly is more about individual company fundamentals and less about
overall market strategy. I know that plenty of places use ETFs such as DUST to hedge overall
portfolio positions at times, or when times are good go long GLD, SLV and all the others (that
you probably know much better than I). That’s fine by me but as the general subject sits
outside the normal scope of The IKN Weekly, don’t expect macro-sized short ideas to make
their way into the picture. I am looking for more short ideas along the way, particularly those
that can be traded relatively easily by all of us (not just the segment of readers with
institutional access), but we’ll be staying firmly with specific company calls in the same way we
do on the long side.
Conclusion
IKN206 is done, we close with bullet points:
• There are exploration companies with scammy management and exaggerated tales
about moose pasture to lure you in and part you from your cash. There are exploration
companies with serious people smart geologists that have no luck with prospective
looking projects. There are exploration companies that get hold of a decent project and
move it forward diligently but will still be at the mercy of the ebb and flow of market
trends. But then, on rare occasions, you come across an exploration company with
good people on board that ends up sitting on a brand new world class discovery. It’s
not a slam dunk yet, but Reservoir Minerals (RMC.v) looks like it’s going down that path
and the only reason I’m not on board yet is that I think we could get an even better
entry point a little further down the line.
• Yes, last week was horrid. The problem goldbugs have is that due to the way in which
they cry wolf on any occasion that the market doesn’t bend the way they assume it will
bend, the only reason they can possibly consider is that “they” have “fixed” it all. That’s
a problem because when true market manipulation and price pressure from parties
interested in their own wider games (and with the financial clout to make those wishes
into reality) use real market manipulation, the goldbug community screams its
righteous indignation at it all but it sounds just the same to those of us used to their
squeals. Markets are on occasion manipulated by big players and if that comes as news
to you, then hard luck. It doesn’t happen that often though, the trick is knowing it
when you see it. It happened on Friday.
• At the price Bear Creek Mining (BCM.v) closed on Friday there’s still plenty of near-term
trade potential left in this stock (and I’m not just saying that because I want volume for
an out). A lot depends on the action in gold, but assuming something net neutral or
perhaps even positive for the underlying metals, the manner in which BCM got its
approval from the Corani locals in an overwhelming and fully transparent way (distinctly
unlike the BS that Sulliden pulled a few weeks ago in Cajamarca) means there’s plenty
to like here. Add the potential of a company charm offensive and we could easily see a
3-handle in this stock in the near future. You want a trade? This is my top idea of the
week.
• Please note that although a very small position, I plan to close my Marlin Gold (MLN.v)
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next week. If 8.5c comes along I’ll take it, if 8c is there I might take it. If not, the
closing can wait another week.
• Looking forward to the FCV site visit, with that latent feeling of what could happen to
RMC.v could always happen to other tinycaps. At least with FCV you’re off to a good
start with a management team that’s clever about rocks and pulling for its
shareholders.
The top long-term picks are Rio Alto Mining (RIO.to) and B2Gold (BTO.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
21

Footnotes, appendices, references, disclaimer
(1) http://incakolanews.blogspot.com/2013/04/not-with-whimper-but-with-bang.html
(2) http://www.losandes.com.pe/Nacional/20130413/70457.html
(3) http://www.aurcana.com/s/NewsReleases.asp?ReportID=561871
(4) http://www.aurcana.com/s/NewsReleases.asp?ReportID=580538
(5) http://www.estrategiaynegocios.net/2013/04/09/guatemala-campesinos-en-pie-de-guerra-contra-mineria/
(6) http://finance.yahoo.com/news/rio-alto-reports-fatal-accident-231734857.html
(7) http://www.newswire.ca/en/story/1142581/oceanagold-announces-first-shipment-of-didipio-concentrate
(8) http://finance.yahoo.com/news/b2gold-corp-announces-further-positive-103000639.html
(9) http://finance.yahoo.com/news/reservoir-minerals-reports-drill-intersection-211118562.html
(10) http://www.reservoirminerals.com/files/Home_Page_Timok.pdf
(11) http://www.trivalleycentral.com/casa_grande_dispatch/area_news/florence-backs-off-on-acid-ban/article_7b2c4382-
a063-11e2-9739-001a4bcf887a.html
(12) http://finance.yahoo.com/news/lumina-copper-announces-positive-result-120000882.html
(13) http://www.milenio.com/cdb/doc/noticias2011/fbf9a679a7076e5568354577e0767601
(14) http://www.estrategia.cl/detalle_noticia.php?cod=76781
(15) http://www.laopinionaustral.com.ar/diario.asp?Modo=Noticia&NId=14658
(16) http://webcache.googleusercontent.com/search?q=cache:http://www.hoy.com.do/el-
mundo/2013/4/12/475546/Chile-y-Argentina-dijeron-no-a-Barrick-Gold-tambien-presenta-dificultades
(17) http://www.elperiodico.com.gt/es/20130408/pais/226720
(18)http://www.europeangoldforum.org/egf13/
(19) http://www.europeangoldforum.org/egf13/confirmed-participating-companies.html
(20) http://finance.yahoo.com/news/agnico-eagle-mines-limited-announces-120000551.html
(21) http://www.panoramacajamarquino.com/noticia/desborde-de-rios-inunda-300-hectareas-de-cultivos-en-el-valle-de-
condebamba/
(22) http://finance.yahoo.com/news/trevali-provides-santander-processing-plant-131500485.html
Appendix 1: Flash update of Friday April 12th
Good morning, just gone 5am this Friday morning,
I'll go through the numbers in more detail in IKN206 this weekend, but because Aurcana Corp has turned out not simply
to be a little economic with the truth but outright bare-faced liars, your author is looking to sell Aurcana Corp (AUN.v)
either later today (I'll wait at least two hours after the opening bell) or next week.
The information contained in the YE 2012 MD&A and accompanying news release...
http://finance.yahoo.com/news/aurcana-reports-end-financial-results-003002969.html
...includes the statement that its Shafter mine has not yet reached commercial production by the company's benchmark
of operating continuously at 600tpd minimum. To quote the NR, " As a result, Shafter mill has not yet reached its initial
target of 600tpd on a continuous basis."
This statement directly contradicts the company statement in the news release of December 14th...
http://finance.yahoo.com/news/aurcana-announces-commercial-production-shafter-130000263.html
...in which AUN.v stated (exact quote): "The assets at the Shafter Mine are ready for their intended use and the plant is
now operating on a continuous basis at an average rate of 600tpd".
We are now told, 118 days later, that commercial production has not been achieved at Shafter.
There is a difference between rose-tinted corporate spin and outright lies that look, for all intents and purposes, legally
actionable. However, with working cap down to a little over $7m as at end 4q12 and AUN clearly needing to invest more
cash than expected over a longer time period in order to bring its Shafter mine up to commercial status and positive free
cash flow, time has now run out on this failed trade and these shameless liars can raise the money they'll need from
someone else in 2013.
For what it's worth (very little) I personally feel downright stupid for hanging on in this stock during the first part of 2013
and being fooled this way by a management team with a previously marked patchy track record for delivery.
Best, O
22

Stocks To Follow Closed Positions, 2012
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-ene-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dic-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% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-abr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
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'11 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
23

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.
24