IKN #208Premium

The IKN Weekly
Week 208, April 28th 2013
Contents
This Week: Travel plans in May, A good week no a better week yes, Consider your risk profile.
Fundamental Analysis: Why added to my B2Gold (BTO.to) position last week.
Stocks to Follow: Overview, Marlin Gold (MLN.v), OceanaGold (OGC.to) (OGC.ax), Tahoe
Resources (TAHO) (THO.to), Rio Alto (RIO.to), B2Gold (BTO.to), IMPACT Silver (IPT.v), Bear
Creek (BCM.v), Minera IRL (IRL.to) (MIRL.L), Plata Latina (PLA.v).
Copper Basket: Overview, Reservoir Minerals (RMC.v), Nevada Copper (NCU.to), Hot Chili
(HCH.ax), NovaCopper (NCQ.to).
The Lottery Ticket Basket: Overview, Eagle Star (EGE.v), Darwin Resources (DAR.v).
Regional Politics: Argentina: Vale negotiating a graceful exit, Why Bear Creek Mining (BCM.v)
at Corani, Mexico’s mining royalty update. Rumours on Ecuador mining law changes.
Market Watching: The potential to short Gold Resource Corp (GORO) again, Colorado
Resources (CXO.v), Western Graphite (WSGP) (WSGP.pk): Shorted.
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
Travel plans in May
On May 6th I’ll be visiting the Rio Alto (RIO.to) operations at La Arena, with an eye for any
insight on operations as well as explorations and development at both the La Colorada target
and the phase two sulphide copper project. Expect a full report on that trip in the IKN Weekly
edition due out on Sunday May 12th.
The other trip planned is a family break May 13th to 17th to take advantage of the week of
school holidays, when husband/wife/child/child will be in and around Cusco for four days. If I’m
not off grid in that time I’ll still have my computer turned off.
A good week no, a better week yes
What we saw last week fits right in with what we’d need to see from a market that has very
recently been through a major capitulation moment. To the plus side, we saw the type of floor-
placement in the metals and miners which underscores the general market viewpoint that your
author put forward last week. Another plus was plenty of reports that physical gold purchases
around the world were suddenly robust with reports from Asia, China and North America all
pointing in the same direction (my fave was how the U.S. Mint sold 62,000 oz au in coinage of
all types in March and then 196,500 in the period April 1st to 24th, which isn’t a market rocking
number but is a clear tendency). I’d also like to point you to the thoughts Iwnattos has had
about the relationship between the action in GLD and physical gold, plenty of insights with
which I agree on his blog (1) these last couple of weeks, far more intelligent than the guff and
nonsense from the silly goldbug commentators.
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Nothing wrong with that but there’s no way that any sort of victory can be called, either; the
general viewpoint also calls for turbulence at the bottom of a market, no definition for a while,
sharp moves in both directions at any given time for our focus sector and the rough passage to
continue. A good example of this was Friday, which all of a sudden saw gold dump from the
$1,470/1,480s back to $1,450 or so, more than enough to send the jitters through the other
metals and the mining companies. So what were you expecting, a market that hits an absolute
bottom and then rises steadily, with no jitters or upsets or profit-taking along the way? You
think that the people behind the move that pulled the whole gold and metals and mining
complex down would then walk away, or not be capable of any sort of further influence on
prices? If so, please send me a postcard from your home planet.
People, get wise and make sure you go
into this post-capitulation metals/mining
market with eyes wide open: Ir’s going to
be rough, choppy, turbulent for a while
yet. Things will go up and down, gold has
taken two steps forward from the lows but
on Thursday and Friday it took one clear
step back; that isn’t bad, it’s
understandable (I’d even go as far as to
say it’s necessary). I’m happy with what I
witnessed as it fits with the scenario
sketched out at this point in last week’s
edition. I’m also happy to have closed that
GORO short and added to the RIO.to and
BTO.to positions as stated, all of which has put me further long the market. I’m not expecting
15% snap-back gains in a question of hours on those additions, however: It will take time.
Consider your risk profile
I’ve had several mails in the last few days with suggestions on other companies to consider as
investments, which in itself is a good sign. However, I want to pick up on a common thread
seen in the mails, that of “Well, if you like RIO/BTO I think you’ll love XYZ, because....” and
then reasons follow to consider other companies as trades. They could be deemed better value,
maybe the chart looks better, perhaps the upside potential is stronger and the suggestions
offered have normally been well thought out, very respectable and worthy of consideration on
my part. I thank you all and also hope the suggestions will keep coming but before we go
further, consider this: If I were convinced, if I absolutely knew, no doubts, that gold was about
to re-gain $1,500 then zoom through $1,600/oz and find itself at $1,700/oz again (with suitably
similar moves in silver, copper, you-name-it) then I would NOT be touting and pushing BTO.to
or RIO.to at you as my Top Picks. If that were the case, I’d be screaming “Buy Lachlan Star
(LSA.to)!” or “Buy Great Panther Silver (GPR.to)!” or “Buy U.S Silver & Gold (USA.to)!” because
given that kind of market shift, while BTO and RIO moved up 50% those would give us a 100%
win, a 150% win or maybe even more from the price deck we find them today. Why make big
money when there’s massive money there to be picked up?
Potential reward is one factor, potential risk is the other. Yes, it’d be grand to make spot-on
calls about the wider market moves in the next few weeks/months and be perfectly positioned
to take full advantage of that nailed-on call. And do you know what? On the subject of
risk/reward I could even risk trying to make a fancydancy name for myself by shouting from the
market rooftops some sort of “I’m certain THIS going to happen!!!” prediction which, if proven
correct by time, would bring fame and riches my way as the next mega-guru of the metals
world (all hail me, Kitco/Gold Report/Yahoo! Finance featured author, autographs $5 each
please provide PayPal receipt).
I’m not saying I’m right about preferring RIO.to and BTO.to as the places to carry the largest
weight of my junior mining cash. I’m not saying your suggestions and thoughts and investment
ideas are wrong, right, better or worse than mine. I’m not saying I know nothing about the
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market and expect to be proven wrong. I’m not saying I know everything about the market and
expect to be proven right. I’m just managing risk, that’s all.
Fundamental Analysis of Mining Stocks
B2Gold BTO.to): Why it’s a buy now
NB: Everything that follows here assumes CAD$1 = U$1
NB: This update on B2Gold (BTO.to) leans heavily on the previous analyses presented in the
stock, particularly the most recent full examination as seen in IKN194 dated January 20th 2013.
Today’s overview and adjustments are best read in conjunction with the analysis of IKN194 (the
context is important, I believe) so if any of you would like me to send over IKN194 again, just
mail me and you’ll get your copy by return, no problems.
As mentioned in IKN207 and along with the addition to Rio Alto, your author added to his
position in Top Pick B2Gold (BTO.to) last week, taking advantage of the new low prices that
resulted from the gold (and sector) slump. Also as mentioned last week, today we look at the
new circumstances in the stock and put a near-term price target on BTO.to which reflects the
changes we’ve seen. And to wrap up the quick introduction paragraph, as per the Flash update
of Tuesday (see appendix 1) we now have more information on how things are going in the
company thanks to the 1q13 production report (2) that day.
The exercise today is similar to the one run on Rio Alto (RIO.to) last weekend, with the
objective to consider the new lower gold price and the new lower share price in BTO and (along
with a few minor adjustments to our production model) consider a new, nearer-term target for
BTO that reflects these changes.
Production update and forecast
Before getting to the adjusted valuation, the first step is to take in what we now know about
the development of production at BTO and
BTO: gold production by mine
tweak the model slightly. Here’s how gold
production stood in 1q13 compared to 120000
previous quarters and how we now expect 100000
things to develop in the rest of 2013. 80000
60000
As mentioned the other day in the Flash
40000
update, BTO’s numbers came in very well for
20000
its Nicaragua operations. Masbate was
0
slightly lower than expected, as the company
has decided to embark on plant upgrading
that is due to take the edge off production in
the short-term (i.e. first half of 2013) in
order to benefit the longer term. Total
production came to 86,748 oz (we include
the January 2013 Masbate production in our
figures, even though the merger was not still
not closed, in order to keep things like-for-
like in the quarter) and sales caught up with
the inventory lag we’d noted in IN194 to
stand at 95,042 oz. So in the roughest and
most conceptual terms possible, things are
working as imagined here, with the addition
of Masbate having doubled both share count
and production. As cash costs at the
3
01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2 tse31q3 tse31q4
oz Au
Masbate prod
Limon prod
Libertad prod
source: company filings
BTO: Gold produced vs gold sold
120000
100000
80000
60000
40000
20000
0
01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2 tse31q3 tse31q4
OzAu
gold produced (oz)
gold sold (oz)
source: company data

Nicaragua and Philippines ops are roughly equivalent, we’re expecting the same type of ~5c
EPS from BTO as before.
As for upside expected in 2013, the main boost is expected from Libertad as the higher grading
material from Jabali starts to improve average head grade there. We also note that BTO did
quite a bit of the heavy lifting costs-wise in 2012, with pre-strip work expected then expected
to improve opex costs now. Limon is slated to add a little extra production as well, while on the
downside and in the light of the new
information from the 1q13 NR we’re BTO: production and IKN forecast production, per annum
trimming back on our Masbate forecast 900 791
800
for 2013, with higher production now 700 620 641
expected 4q13 and then 2014 onwards
600
470
once the planned improvements are 500 392
worked into ops. 400
300
144.5 158
200 108.7
This means that our 2013 annual
100
forecast has been dropped to 392,000
0
oz, which may turn out to be too
conservative but is still 7,000 oz higher
than the BTO guidance of 385,000 oz. As
mentioned in Tuesday’s Flash update,
there’s plenty of indications that suggest
BTO is underpromising on that number
so I’m happy to point higher, but there’s
also decent reason not to point too high,
being the conservative soul that I am at
heart.
Here’s the other way of looking at those
annual production numbers and
estimates, broken into component parts.
I thought hard about adjusting down
“Other Nica” for 2014 but for the
moment I’m leaving that be. However,
the change when Otjikoto comes online in 2015 is the other that will really make the next big
difference and turn BTO into a 600k+ oz producer.
Adjusting our target for current gold price
In much the same way as last week for RIO.to, we now move to consider a new, lowered
target for B2Gold that takes into account the potential gains from the discounted share price set
against the lowered expectations for revenues, profit and share targets forthcoming. First we
quickly recall how the current $5.70 price target was set in IKN194 (but for the full context,
best to read the whole anal ysis). We used a sum-of-parts method that considered cash flows
from its operations for 2013, plus some basic NAV calcs (which were undiscounted but also set
low and conservatively) for other parts of BTO such as its treasury, exploration projects etc.
Here (edited slightly) is the final tot-up of the sum of parts:
• Limón: 59c per share based on 2013 operations
• Libertad: $1.67 per share based on 2013 operations
• Masbate: $1.94 per share based on 2013 operations
• Otjikoto: 77c per share based on average LoM production and FS parameters
• Gramalote: 1.9m oz gold (M+I+I total) at $100/oz in-situ = 190m, or 29.5c per share.
• Other projects: $80m NAV, or 12c per share
• Net cash at end 2012 (BTO and CGA combined, incl debt): $190m, or 29.5c per share.
• This brings our adjusted sum-of-parts valuation for BTO to comes to $5.68 share, which
is rounded up to $5.70 as our price target.
4
0102 1102 2102 tse3102 tse4102 tse5102 tse6102 tse7102
OzAu
source: BTO data, IKN ests
OzAu BTO: annual production and estimates
900
800 Gramalote (50%)
700 Other Nica
Otjikoto
600
Masbate
500
Limón
400 Libertad
300
200
100
0
2010 2011 2012 2013est 2014est 2015est 2016est 2017est
source: BTO filings, IKN ests

That gives an idea of context, now for the adjustments and the main one is that back in
January we were using U$1,700/oz gold in our calculation (it seemed logical then, it seems so
long ago now). With the turmoil in April that’s clearly too optimistic for near-term purposes, so
today we put the same criteria for each of the operations (plus Otjikoto, the advanced stage
project now under construction) through varying gold prices. A second adjustment is on gold
production, now based on 392k oz Au for 2013 for operations (was 428k, with the main
difference being the lowered production at Masbate for the first quarters of this year due to
those upgrading works). The final adjustment made is on the “other” parts of BTO, as the
company is getting little credit for its exploration projects these days. Therefore cash,
Gramalote and “other” have all been lumped together and dropped to 45c per share, down
from the aggregate 71c in January (that 45c is mostly backed by cash, please note).
Everything else is kept ceteris paribus, which means that were good about the costs parameters
used in the January anal ysis, for example (see the report for everything else). The result of the
adjustments are seen in this table below:
B2Gold (BTO.to): Adjustments to IKN194 model using various gold prices, updated production estimates etc
operations adv. project other+cash Target
Au/oz Libertad Limon Masbate subtotal Otjikoto other total
$1,300 $0.87 $0.41 $0.90 $2.18 $0.49 $0.45 $3.12
$1,350 $0.93 $0.44 $0.98 $2.35 $0.53 $0.45 $3.33
$1,400 $0.98 $0.46 $1.06 $2.50 $0.56 $0.45 $3.51
$1,450 $1.04 $0.49 $1.14 $2.67 $0.60 $0.45 $3.72
$1,500 $1.10 $0.51 $1.22 $2.83 $0.64 $0.45 $3.92
$1,550 $1.15 $0.54 $1.30 $2.99 $0.67 $0.45 $4.11
$1,600 $1.21 $0.56 $1.39 $3.16 $0.70 $0.45 $4.31
source: BTO data, IKN ests/calcs U$1 = CAD$1
Once again, as per the RIO report from IKN207 last week we’re using a range of gold prices
from $1,300/oz to $1,600/oz in $50 increments to show the spread and the effect of several
different average prices for 2013. I’ve also included a sub-total that’s derived from operations
only (last column, blue area) as some of you may prefer to totally ignore what BTO has by way
of assets or near-term growth upside and concentrate valuations on what’s going on today,
production and revenues-wise. However, as you can probably make out after a few seconds of
squinting at the table, my current preferred scenario is to value the near-term upside in BTO on
its ops, Otjikoto project and “other + cash”, all at U$1,500/oz gold. This gives a near-term
target of $3.92, which represents a potential upside of exactly 60% from Friday’s close.
Conclusion
Operationally, BTO is doing everything just fine, as witnessed by last week’s 1q13 numbers.
The company share price was whacked hard as being one of the “tier one juniors” in the sector
during the gold and mining sell-off, so now that the dust is settling and people begin to realize
that gold isn’t going to do what its prophets of doom expect of it and dive further we can
expect cash to slow return to the junior positions. As BTO is one of the leaders in its sector
there’s every reason to expect it to benefit first and fastest from the rebound and return to a
more logical equity price, considering its proven capacity for profitability and its strong growth
profile. Although we’re in no rush to change our official 12 month target (in the same way as
RIO last week, if things stay the way they are we can do that in a few weeks’ time) our model
strongly suggests there’s plenty of near-term upside for BTO at its current share price, even
after taking into account its lowered revenue potential from gold at these new price levels. This
why your author bought more BTO.to last week. We therefore set an unofficial, near-term
target on BTO of $3.92 per share, but things will remain in flux for w while and as such, a close
eye is to be kept on the recently added shares in BTO (and RIO for that matter). The decision
may turn out to be selling the new shares for a trading profit while keeping the previously held
shares as the core. We’ll just see how things go, first.
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Stocks to Follow
Of the 13 ‘Stocks to Follow’ open this time last week five made gains (RIO.to, BTO.to, OGC.to,
LPK.to, AQM.v), two were unchanged (LRA.v, MLN.v) and six were losers (IRL.to, PLA.v, IPT.v,
BCM.v, TAHO short, FCV.v). The biggest win was seen in Lupaka Gold (LPK.to up 22.2%) and
followed by AQM Copper (AQM.v up 11.1%), even though the real cheer was provided by the
improvements seen in Rio Alto and B2Gold. On the other side, the worst losses were registered
in Plata Latina (PLA.v down 33.3%), Minera IRL (IRL.to down 16.0%) and the Tahoe Resources
short (TAHO short down 10.6%). As mentioned in today’s intro it wasn’t a good week, it was a
better week. There’s a difference.
Meanwhile, as per the additions to the BTO and RIO positions (announced IKN207) please note
the new cost averages. BTO’s has dropped a little, RIO’s has risen a little.
With the sale of Marlin Gold (MLN.v) and no additions (yet) there are now 12 stocks on our
open list, three less than our self-imposed maximum. Still only two blobs of green out there, the
rest red.
Company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.30 07-apr-11 C$3.80 65.2% $6.29 tgt, added Apr13
B2Gold BTO.to buy C$3.07 28-nov-12 C$2.45 -20.2% $5.70 tgt added Apr '13
Recommends
Minera IRL IRL.to buy C$0.73 22-jul-12 C$0.42 -42.5% $1.56 tg, added, new avg
OceanaGold OGC.to hold C$3.03 16-sep-12 C$2.13 -29.7% $5.34 tgt growth prod
Lara Expl. LRA.v buy C$1.15 08-apr-12 C$1.08 -6.1% solid biz model, LT hold
Plata Latina PLA.v hold C$0.79 10-apr-12 C$0.30 -62.0% considering sale
Lupaka Gold LPK.to spec buy C$1.12 23-oct-11 C$0.275 -75.4% holding, tgt 61c
IMPACT Silver IPT.v buy C$1.14 13-jan-13 C$0.64 -43.9% new position, $1.85 tgt
Bear Creek BCM.v buy C$2.58 01-apr-13 C$2.52 -2.3% near-term trade
Tahoe Resources TAHO short U$18.62 08-apr-13 U$16.74 10.1% new near-term trade
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.05 -83.9% holding thru for my sins
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.11 -37.1% revised tgt 25c
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-jan-13 U$0.17 81.7% short 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
Gold Res Corp GORO apr'13 U$14.11 25-jan-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% ST trade, v small $ loss
2009, 2010, 2011 and 2012 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Marlin Gold (MLN.v): Position closed. The 6.5c price seen Thursday and Friday is where we
leave this small, time-constrained trade. For a while before the implosion our thesis looked like
working and we saw 8c and 8.5c, but MLN was never going to be immune to what was
happening to the rest of the sector, and down she went. Although my trade sticks with the
“close end April” I really don’t see anything wrong about holding through on this stock if you
have some, especially as it might be about to get some decent radar from its hosted site visit
for anal ysts and supporting market flotsam on the week beginning May 6th (I hear it’s a
double-header, with the group also visiting Scorpio Gold nearby and even taking in a bit of
fishing). The other catalyst for MLN may be the way in which it raises the second tranche of
6

capital needed to complete construction at Trinidad, as the company’s main backers Wexford
mentioned that the raising has an innovative edge. If that goes down well, there’s still reason to
look for MLN as a tinycap with a future.
But for the time being, we’ll leave coverage of MLN at ‘Stocks to Follow’ and keep up with its
progress in the next weeks via its inclusion in the Lottery Ticket Basket. It hasn’t been a
winning trade, but neither has it been a disaster and the small monetary loss taken is more due
to victim of circumstances. At least, that’s what I’ll tell myself.
OceanaGold (OGC.to): The OGC five day chart typifies so many others (featured in The IKN
Weekly or otherwise) so it’s worth having
it here. Nervy start, rising with gold
midweek, sell-off on metal weakness to
end the show.
In other news, reader DC down under
kindly sent over a Citi Australia analysis of
Aussie gold stocks (mail me for a copy if
you’d like one) which includes its abridged
coverage on OGC. Here’s the blurb it has
on our featured company, to which it has
set a newly adjusted AUS$2.90
(CAD$3.10) price target after lobbing 7%
off its 2013 gold price estimate (now
U$1,555/oz, was U$1,675/oz).
OceanaGold
Company description
OceanaGold (OGC) is one of the larger mid tier gold companies in Australia. The main
assets are in New Zealand with the Didipio Gold/Copper project in the Philippines
being the growth asset.
Investment strategy
We rate OGC Buy, with a target price of A$2.90. OGC is ramping up the 3.5Mtpa
Didipio operation over 2013. This is projected to initially add 100kozpa to the
company’s current 250kozpa from its New Zealand operations. OGC targets 600kozpa
from CY2016. The company has no hedging in place and is therefore fully leveraged to
the gold price.
Valuation
Our target price of $2.90/share is based a blend of NPV, PE, and EV/EBITDA for OGC.
The target price represents a blend of 1.3x multiple to NPV (mid-cap gold benchmark),
PE of 10x and EV/EBITDA of 5x based on one year forward estimates. Benchmark
earnings multiples adopted are in line with global peer averages.
Risks
Our valuation of the company is exposed to macroeconomic developments affecting
the gold price and exchange rates, operational risks that might affect volumes and
input costs, and political risks that might affect costs and the company’s reputation.
Upside risks to our forecasts and target price include a better than-expected operating
performance from the company’s assets. Other upside risks include a higher-than-
expected gold price and weaker-than expected operating currencies. If the impact on
the company from any of these factors proves to be less/more negative than we
anticipate, the stock could materially outperform/underperform our target price.
My thanks to DC for the report, which goes quite deeply into the house views on the gold price
and where Citi sees things going. Overall, Citi Australia seems to be taking a very cautious
approach to sector valuations right now and for me, there’s more potential upside than the
model bakes in. That’s from someone who’s usually one of the most conservative in the house,
too.
Tahoe Resources (TAHO): It must be said that the TAHO short, along with the now covered
GORO short, haven’t provided much in the way of company-specific reasons for their short
gains so far. Both are still winning trades of course, but that’s far more concerned with the
7

overall market conditions than anything that’s happened in Guatemala (or in GORO’s case,
Oaxaca). However, it’s still a most useful exercise to have this short left in place and it’s going
to stay that way for the moment.
Rio Alto Mining (RIO.to): RIO didn’t perform wonderfully last week and there were several
other stocks out there we can consider “junior tier one” material which put in better
performances. But neither was it bad
and as RIO beat out both GDX and
GDXJ (this chart shows BTO.to as
well, saves space below) we’re not
sniffing at it, nor the Friday selling.
It did feel a little strange to add on
Monday and then realize I was
actually bumping up my cost
average on RIO, even at this deep
discounted recent price. However,
it’s not all about trying to wring the
best possible fanfare-worthy
percentage move to show to the
world...it’s much more about making
a meaningful cash profit. Consider
my portfolio now heavily weighted in
favour of RIO.to and BTO.to, the two Top Picks.
B2Gold (BTO.to): Plenty more on BTO above this week and not really that much more to add
about its price performance, as BTO is largely covered above. It’s worth noting that BTO fell
more heavily from intra-week highs Thursday. Volumes were always liquid (as you’d expect) but
at no point last week were the three month average volume numbers challenged
IMPACT Silver (IPT.v): I’m still mulling this position over. The low share price remains, as
does the operations that aren’t doing much more than breaking even with silver where it is. IPT
will stay in the ‘stocks to Follow’ list if I decide to keep some risk capital on a leveraged silver
play but if not, I’ll sell it. It’s simply that I haven’t made up my mind yet.
Bear Creek Mining (BCM.v): Please see ‘Regional Politics’ below for more on the BCM.v
situation. Last week it was pointed out to me that Rick Rule has said openly that he bought into
BCM on the lowest point in the stock’s
downturn, which is very nice of course
but it doesn’t mean that he’s still long
either; he may have flipped them back
to the market for a quick 10% or 20%
profit the moment that people
followed him in...we don’t know.
Anyway, the chart showed decent
action in BCM, though Friday saw
sharp selling (profit taking?) just when
I thought it might have slipped away
from this near-term anchor and moves
towards (then above) $3. It’s still a
position with a near-term objective
and I’m not going to get greedy about
potential gains, but on the other hand I’m happy about giving this time to trade up. Considering
the advanced state of the Corani project and the support it has from all walks of Peruvian life,
it’s still plain cheap even when admitting that big silver projects are out of fashion.
8

Minera IRL (IRL.to): Further to the “rough, choppy, it’ll take time”— comments in today’s
introduction, we come to Minera IRL (IRL.to) and its 16.0% drop last week. This is the single
company about which I had most mails, which most coming Wednesday and Thursday to ask if
anything was wrong with the company.
No, nothing (as far as my knowledge extends) is wrong with the company. As this chart shows
we had (what looks like) one seller on the Canadian listing Wednesday for 172,500 shares (plus
a semi notable 90k shares Tuesday in
London) which was enough to drag the
price down 16%. Nobody (including
myself) is in an apparent rush to take the
other side and snap up cheapo shares, so
that’s where IRL stayed. Once again I
note that the bottoms of markets don’t
come with the uniformity or “fairness” and
some stocks, particularly those thinly
traded, can still take dives when others
have apparently started on the road to
recovery. I’m not happy that IRL was one
of the divers, but I’m not wringing my
hands about it either (even though I’m
underwater the position to the point
where a snorkel starts to be insufficient and scuba gear may be needed soon). One mailer
asked whether I still considered IRL a potential Top Pick: The answer to that one is yes, but as
I’ve said before and will say again, the deal to finance Don Nicolas is a key event and if/when
that closes and we have the details, only then will a decision be made. Today I’m looking at this
low low price but still prefer to wait out and not add any more; not until we know more.
Platra Latina (PLA.v): It stayed at 45c for a long time without trading, last week somebody
wanted out and wanted out at the poor price offered, which is how 75,000 shares worth $2,250
can wipe 33.3% off a company’s market cap. It happens in thin-traded juniors. That’s all.
The Copper Basket
After seventeen weeks of 2013 The Copper Basket is showing a 20.04% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 158.5 380.40 2.40 -29.4%
2 Augusta Res AZC.to 2.43 144.1 353.05 2.45 0.8%
3 Lumina Copper LCC.v 9.43 43.46 332.47 7.65 -18.9%
4 Copper Fox CUU.v 0.83 399.61 247.76 0.62 -25.3%
5 Nevada Copper NCU.to 3.50 80.5 202.06 2.51 -28.3%
6 Hot Chili Ltd HCH.ax 0.72 286.78 166.33 0.58 -19.4%
7 Reservoir Min. RMC.v 2.41 41.46 109.87 2.65 10.0%
8 NovaCopper NCQ.to 1.80 51.89 98.59 1.90 5.6%
9 Western Copper WRN.to 1.39 93.78 74.09 0.79 -43.2%
10 Panoro Minerals PML.v 0.62 176.25 51.11 0.29 -53.2%
11 Curis Resources CUV.to 0.70 56.31 42.23 0.75 7.1%
12 Candente Copper DNT.to 0.375 121.93 32.92 0.27 -28.0%
13 Oracle Mining OMN.to 0.80 49.03 26.48 0.54 -32.5%
14 Yellowhead Min. YMI.to 0.59 60.97 20.12 0.33 -44.1%
15 Strait Minerals SRD.v 0.08 56.86 3.13 0.055 -31.3%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -20.04%
9

The week-over-week scores are six basket companies making gains (NGQ.to, CUU.v, HCH.ax,
WRN.to, NCQ.to, RMC.v), two unchanged (CUV.to, SRD.v) and seven showing losses (LCC.v,
AZC.to, NCU.to, PML.v, DNT.to,
OMN.to, YMI.to) and an overall basket Copper Basket 2013 average, weekly
16%
that lost 0.9%, which isn’t so much
12%
considering all the recent volatility. The
8%
best performance was registered by
4%
Hot Chili (HCH.ax up 13.7%) on the
0%
back of positive newsflow (see below) -4%
while the worst numbers came from -8%
Yellowhead Mining (YMI.to down -12%
17.5%) and Oracle Mining (OMN.to -16%
down 10.0%). -20%
Over to the bigger picture moves and
copper had a generally better week
pricewise, although it wasn’t immune to
the Friday weaknesses either (and again
blame laid on the China market break for
the extended Labour Day festivities).
While here and to answer a query or two
that have arrived over the course of time
here’s a word on the price chart we
prefer to use at this point in the
Weeklies, that of the futures for the
nearest expiring contract (rather than
spot). As you can (probably) see here,
Friday saw the futures contract close at
$2.176/lb, whereas spot trading closed
at $3.20/lb (bar thirteen thousandths).
So to inventories and we’re at another
month’s end (why are these time periods
passing so quickly? Is it something to do
with my age?) we catch up on our
inventory tracker charts. Once again the
big story is the way that the LME
continues to boss the world market. Yes
indeed, just one year ago the Shanghai Futures Exchange warehouses was within 7.14% of the
holdings of the LME and held a sliver under 40% of the world’s inventory copper. Cut to today,
end April 2013 and LME holds 68.45%, Shanghai has 23.99% and Comex has 7.56%. What a
difference a year makes.
10
ht6naj ht31 ht02 ht72 r3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa
Copper inventories, per month 2012/2013
1000000
LME Shanghai Comex
800000
600000
400000
200000
0
source: Cochilco
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa
Mt Cu
LME Shanghai Comex
source: Cochilco

As per this weekend, there are 905,222mt held in world warehouses, which is down 0.9% from
last week’s number. Inside that, LME stocks stand at 619,600mt (up 0.9% from last week)
Shanghai at 217,180mt (down 2.9% from last week) and Comex at 68,442mt. As for the LME
cancelled warrants, they remain high for the third week running, standing at 26.8% of
inventories. There has been a lot of talk in the market about this hike, with most of the savvy
commentary voices now clear that the larger market players (let’s name them, Trafigura and
Glencore) are clearly gaming the new LME system. The theory is that by tying up a large
portion of inventory in cancelled warrants which will then be re-processed into the trade cycle
without ever leaving the bonded warehouses, the companies are taking a temporary control
over copper supply and holding it away from end users, thus keeping the copper price from
tumbling. General opinion is that the current state of affairs can carry on in the next few
months, but come the Northern autumn is should finally wash through when China moves to re-
stock at its traditional buying moment.
Cancelled Warrants at LME, IKN157 to date
35%
30%
25%
20%
15%
10%
5%
0%
11
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 702NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
All that’s a long-winded way of saying that for the time being, cancelled warrants are not the
place to look for a market indicator. We’ll continue to monitor the dataset, however.
The copper sub-sector is just about the most interesting place in the metals world right now.
Pulled by gold and its shenanigans, pushed by the dollar, dragged hither and thither by the
enigma that is China. What I go back to is “Oh look, China wants to buy Las Bambas from
Xstrata and secure resource supply.” Though hey, long-term timescales are so much easier.
Now for updates on some of the basket stocks:
Reservoir Minerals (RMC.v): I refuse to chase the price. Must. Not. Chase. Stocks. Jesting
aside, I am paying close attention to what’s going on here and I am looking for a discount
window in order to open a position. I received some snippets of deeper intel on RMC from one
reader in particular (who, I hasten to add, is not part of the RMC team but does have a good
idea of what’s what at Timok) who has heard that JV partner FCX has added another rig to
explore the north/northwest area of Timok. The best guess is now seven drills turning there,
with three of those concentrating on very deep holes that could be up to 2km length). That’s
not a bad little rig count for such a crappy time in the market.
As for this “wait for a cheap price” thing, it’s as much about the smallish cash that I’d invest
compared to big money players than any big smart-assed strategy. If I were in charge of big
money looking for a copper exploreco destination I wouldn’t think twice about nailing down a
deal with RMC at current prices (be it via the open market or some sort of direct participation).
But when the absolute result in cash term needs a chunkier percentage win in order to make a
difference, then it gets more important to fish for that value entry point because if the stock
stays where it is today and then runs away without me, the win would be less likely to have
covered the risk/reward gap that I’d want.

Nevada Copper (NCU.to): The key piece of legislation that NCU needs for its Pumpkin Hollow
project is the Yerington Land Bill and news last week from the office of Senator Harry Reid (3)
is that the bill is making progress through the US Congress. I’m no expert on the ways and
weirdnesses of the USA political system, but in this case there does seem to be bipartisan
support for the bill and willingness on all sides for a positive result for the mine development.
Devils may, however, still be in details (much was made of how many jobs would be created for
Nevada residents only by the Pumpkin Hollow mine, as well as more talk on exactly what
natural areas should come under protection by the bill).
Overall it was positive news for NCU last week and needs to be considered along with the
company’s announced plans (4) dated April 23rd to move forward independently on phase one
of production (via processing on a smaller scale the higher grading underground
mineralization), funded by the $200m off-
take agreement with Red Kite (which we
noted back in March).
NCU has always been a realistic take-over
play, but the company is now doing more
than just play-acting that it can move the
project to production without outside help.
Taking on the type of heavy liability it’s taken
with the off-take agreement is a considerable
step and in the current market, loading the
balance sheet with debt doesn’t come
without raised eyebrows, either. However, if
the Yerington Land Bill gets through
Congress this year as expected, the current
$200m market cap, considering the plans and the size of reserve/resource at Pumpkin Hollow,
does look cheap, fundamentally-speaking at least. My personal problems about going long NCU
are that 1) fundies mean squat in this nerve-driven market that cares far more about 5c/lb
moves in copper than life-of-mine IRRs and that 2) my track record in this stock is already poor,
with a tendency to move in and out at just the wrong time.
Hot Chili (HCH.ax): The best Basket component performer of the week, HCH delivered strong
drill numbers from its Frontera copper project in Chile (which sits some 40 miles from its
flagship Productora project) on Wednesday (the NR most easily accessed from the company
website front page, right here (5)) and got a decent rebound in share price on reasonable
volumes, too (nearly 300k traded Wednesday and nearly 200k Friday). The highlights of the
assay results include 256m of 0.5% Cu with a 0.3 g/t Au kicker from hole 8, as well as 188m of
the same type of rock from hole 7. Both those holes are presented as giving a 0.7% CuEq
grade, which is reasonable by any standard but particularly good in its location of Chile. Up to
now the second-string, Frontera may turn HCH into a dual project company.
More flavour on Frontera came from Chilean mining sources, such as this report (6) which was
full of glowing terms for the company and the project (which is typical of the way in which
mining is reported there, always optimists etc) but still gave a decent overview of HCH, with its
plans to be a producer at Productora within five years and be a 120kt/annum producer by then,
too.
NovaCopper (NCQ.to): And what about a shout-out for one of the most solid equities on our
list so far in 2013 (which might just be a kiss of death, but we’ll risk it)? NCQ has shown decent
backbone while all around fail and fade, perhaps due to its strong insto backing (the NovaGold
guys and behind stairs money), perhaps due to its safe looking political risk address, perhaps
due to the much better than average mineralization grade at a time when low-grade high
tonnage deposits and projects are very much out of fashion.
12

The Lottery Ticket Basket
After 17 weeks of 2013 The Lottery Ticket Basket is showing a 24.16% 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 16.33 0.235 88.0%
2 Marlin Gold MLN.v 0.10 192.39 12.51 0.065 -35.0%
3 Fancamp Expl. FNC.v 0.125 118.41 10.66 0.090 -28.0%
4 Bellhaven BHV.v 0.14 121.16 9.09 0.075 -46.4%
5 Glass Earth GEL.v 0.155 104.79 7.86 0.075 -51.6%
6 Gryphon Gold GGN.to 0.085 194.64 6.81 0.035 -58.8%
7 FDG Mining FDG.v 0.13 45.59 5.93 0.130 0.0%
8 AQM Copper AQM.v 0.08 105.57 5.28 0.050 -37.5%
9 Copper North COL.v 0.10 58.62 3.81 0.065 -35.0%
10 Rio Cristal RCZ.v 0.025 149.26 3.73 0.025 0.0%
11 Darwin Resources DAR.v 0.20 26.16 3.53 0.135 -32.5%
12 Inca One Res. IO.v 0.12 34.0 2.72 0.080 -33.3%
13 Cream Minerals CMA.v 0.03 155.34 2.33 0.015 -50.0%
14 Firestone Ventures FV.v 0.045 36.32 1.27 0.035 -22.2%
15 Netco Silver NEI.v 0.025 47.01 0.94 0.020 -20.0%
Portfolio avg -24.16%
Exactly 1% lost since last week, which means the basket average is now 24.16% down on the
beginning of 2013. To the individuals and
there were four that rose (AQM.v, COL.v, 25% Lottery Ticket Basket 2013 average, weekly
DAR.v, RCZ.v), six that remained unchanged 20%
15%
(MLN.v, GGN.to, GEL.v, FDG.v, CMA.v, FV.v)
10%
and five that dropped (BHV.v, FNC.v, EGE.v,
5%
IO.v, NEI.v), which adds up to an 0%
inconclusive signal from the nanocap end of -5%
the market. Best riser was Rio Cristal (RCZ.v -10%
-15%
up 25%) and the worst losers were Inca One
-20%
(IO.v down 20.0%) and Netco Silver (NEO.v
-25%
down 20.0%), but all those moves were
more a function of a tiny move on low
volume at low prices than any news or
sentiment driven event.
Darwin Resources (DAR.v): DAR is one of the few companies on this list I still care about,
due in part to the basket’s mediocre showing but more positively, the interesting and
prospective Suriloma property held by DAR and recently visited. We had some minor news from
the company last week (7) on the announcement that it has picked up a few more concessions
but when I got in contact with the guys at DAR to ask about this development, more interesting
word was made about Suriloma. Progress has been continued at Suriloma with community
relations, as DAR has managed to track down more of the smallholder land owners and secured
access agreements for their plots (if you recall, DAR is going about the job of tracking down
dispersed landowners and getting permissions in a responsible and respectful manner, which is
slower but is smart in the long run). The water permit for its upcoming drill program has been
awarded and the team is now waiting on the final “Permit for Activity Initiation” (a literal
translation of the Permiso de Incio de Actividades) which is the definitive green light. Assuming
a timely permitting (no reason why not), drilling at Suriloma should start next month.
The takeaway from DAR, once again, is that this small exploreco is one of those that’s going
about its job in the right way. No mess, no fuss, no blahblah fanfare pumpy NRs, just a team
that’s doing good baseline work. If the drills return good assays, its diligent work will get its
reward. Make no mistake, this one is on your author’s radar screen (see the short note on
13
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%

CXO.v in ‘Market Watching’ below for an idea as to why).
Eagle Star (EGE.v): Our sole winning play of the bunch dips under the 100% win level,
following on from the brief update of
last week. However, we should also
note that traded volumes in EGE have
dropped on this retrace, so there’s no
particular technical damage being
done to the company here.
Your South America speculative agro
play, perhaps (until FCV gets its
phosphates act together, at least).
Regional politics
Argentina: Vale negotiating a graceful exit
First Vale’s (VALE) president Murilo Ferreira told press Thursday (8) that conversations with
Argentine authorities were cordial and were looking for a way that Vale could leave its Rio
Colorado potash project in Mendoza province “in the most serene and pacific way possible.
Then Brazilian President Dilma Rousseff suddenly turned up “on State business” in Argentina
and held private talks with President Cristina Fernández de Kirchner (from all accounts, the two
Presidents get on very well with each other). And now unofficial word is that VALE and
Argentina have reached an agreement. Although details are as yet unknown, they’re expected
to revolve around the guarantee of salaries for current employees and the smoothing of any
sale of the project to a third party. Argentina has already strongly hinted that Chinese capitals
are interested in taking over at Rio Colorado, which presumably have the type of deep pockets
that can handle the capex blowout that has taken Rio Colorado from a U$5.8Bn ticket price to
VALE’s recent estimate of U$12Bn.
Why Bear Creek Mining (BCM.v) at Corani
Are you accustomed to reading reports of Peruvian rural locals marching on a regional capital in
order to protest the presence of a mining company and draw attention to their cause? Well,
how about those moments when a small village community marches on the bigger city in order
to draw attention to its pro-mining credentials and asks that national government executives
come to their area in order to underscore their approval of the nearby mining project? This (9)
from Peru’s national newspaper La Republica yesterday, Saturday April 27th:
Puno: The Young People’s Front for the development of the community of Chacaconiza, district of
Corani (Carabaya), arrived in the city of Puno yesterday afternoon and announced they would
formally request the presence of the Prime Minister Juan Jiménez Mayor and the Minister of
Energy and Mining Jorge Merino Tafur in their region. They want them to witness the support and
social licence that the Corani project of Canadian Bear Creek Mining counts upon, which plans to
mine silver for 20 years, in which time Peru hopes to become the third biggest producer of this
metal in the world.
Odilón Condori, leader of the Young People’s Front, said that there are 600 families among those
communities directly and indirectly affected that see in the project hopes for employment. “We are
in favour of mining”, he said.
Any further questions? If the Peruvian PM and/or the Mining Minister decides that this is a good
idea and a great way of promoting mining in the country, they’ll go to Corani and meet the
people. If that happens expect a wave of positives for BCM and all who sail in her. Or put
another way, it surely would be nice to see these Lima suits getting off their collective butts and
visiting a provincial project soon, wouldn’t it? If they get a bit of altitude sickness, who cares?
14

Mexico’s mining royalty update
The passage of this law is rapid, as the PRI EPN government seems to have taken it as a cause
celebre and is looking to it as a first main achievement of office. Last week (10) the bill passed
through the second committee reading and went straight to the floor of the lower house, where
it was passed quickly on a one day debate. The other news from the debate is that the original
plan to levy 5% is back, with the committee 4% option (that we reported last week)
overlooked. Also, the bill that passed the lower house stated that 70% of revenues from the
royalty would be destined for local municipality governments and 30% would go to the Federal
(national) State. This law bill now passes to the upper house Senate for debate and although
eventual passage and conversion into law wasn’t expected until late 2013 or early 2014, the
quick pace of what’s happening may change all that.
Ecuador mining law changes
There has been some talk going around Ecuador circles that President Correa plans to change
certain aspects of the current mining law. One mooted change is that the government create a
new category of “medium-scale mining company” that sits between large-scale and small-scale
miners, but actual sizes involved are unknown. But the main change being talked about is that
the windfall tax law, currently a big sticking point and unpopular with those companies who’d
invest in country projects, would only be levied on companies once any project had recovered
its initial capex to build its mine (a bit like the situation in Dominican Republic, but probably
getting a more precise framework that avoids controversy after the fact). These rumours come
from circles close to Kinross and the tone is that if the Ecuador state makes room on this item,
then Kinross will finally commit to building its mine at Fruta del Norte. However, it should be
stressed that these are rumours only and as we know by now, betting on hearsay in Ecuador is
often a one-way ticket to trouble
Market Watching
The potential to short Gold Resource Corp (GORO) again
By no means out of the question, ladies and gentlemen.
The target was set at U$9.60, which was hit and profit duly taken. However, part of the thesis
was always that the selling to reach $9.60 would happen once GORO cut its dividend down
from the current unsustainable 6c/month with our calculations indicating that 4c/month is
where GORO would set the divi. As your author’s best guess is that they’ll do that at the end of
this month of April (recall that GORO raised the dividend to 6c this time last year and
subsequently told the SEC that its distribution plans were set on a 12 month basis) we may well
be on the cusp of that waterfall moment. Not only that, but with the sharp drop in the price of
gold and even sharper drop in silver (yet another reminder that “Gold” Resource Corp’s name is
rather misleading and the company gets most of its revenue from the sale of silver, with only a
15

small percentage from gold) GORO may feel that even promising 4c/month going forward is too
much under our new circumstances and it might just drop the monthly dividend lower.
Here below is an updated version of the dividend yield forecast chart we used in our last
analysis of GORO, now adapted to new circumstances. Back at the time GORO was trading at
U$12.72 (and in the end we got short a couple of days later at over U$13, which was good)
and the calcs indicated that the market was factoring in a yield that fluctuated around 5% to
support that price. We’re now down at U$9.89, which is smack in the zone we expected for the
assumption of a 4c/month dividend and right now the feeling is that Nice Mister Market is fully
assuming the cut to 4c/month, which means it could be baked in already. However (and this is
where the fun starts) if, thanks to the new silver and gold price brackets, GORO decides that it
cannot commit more than 3c/month to its much-vaunted (and seriously BS) dividend policy the
same straight line calculations that worked nicely before suggest that GORO could sink to
between $8 and $7 per share before finding the same fundamentals support.
GORO: Dividend Yield Percentage Spread
Share price (U$) at 6c/month at 5c/month at 4c/month at 3c/month
20 3.60 3.00 2.40 1.80
19 3.79 3.16 2.53 1.89
18 4.00 3.33 2.67 2.00
17 4.24 3.53 2.82 2.12
16 4.50 3.75 3.00 2.25
15 4.80 4.00 3.20 2.40
14 5.14 4.29 3.43 2.57
13 5.54 4.62 3.69 2.77
12.72 5.66 4.72 3.77 2.83
12 6.00 5.00 4.00 3.00
11 6.55 5.45 4.36 3.27
10 7.20 6.00 4.80 3.60
9.60 7.50 6.25 5.00 3.75
9 8.00 6.67 5.33 4.00
8 9.00 7.50 6.00 4.50
7 10.29 8.57 6.86 5.14
6 12.00 10.00 8.00 6.00
source: IKN calcs
Conclusion: I’m not going to return to GORO and go short again immediately for the following
reasons:
• It looks far too smart-assed to flip out, then flip back in just a few days later at just a
few pennies higher.
• I want to see what happens in the market next week, as GORO at $10+ or even $11+
would be a more tempting short than at Friday’s sub-$10 close.
• I want to see what GORO says about dividends, with the next announcement expected
any day now (the company usually publishes a dividend NR at the end of each month.
However, given the right circumstances in the days ahead I could change my mind on
that quickly. If GORO cuts the dividend to 4c, it’s a potential quicktrade short (and as my
block of short shares are already in position it’s simply a case of uncovering them, as simple as
selling the shares used as cover). But if GORO cuts harder to 3c then the re-shorting game is
well and truly on and there’s a rough 20% drop, which is the a potential win that gets taken
without much thought. Therefore the call here is to wait on newsflow from the company,
specifically its next dividend declaration NR. Once that’s known, we can check market prices
(above $10 pleasant, above $11 more so) and make a decision but if I do decide to go short
again a Flash update will be sent to that effect.
16

Colorado Resources (CXO.v)
I dropped the ball on this company last week. Thursday morning pre-bell Colorado Resources
(CXO.v) announced (11) the first drill result from its ROK (aka ROK North property in BC
Canada, not far from the well-known Red Chris copper project owned by Imperial Metals
(III.to)). Here’s the table ripped from the NR with a few annotations in red from your author’s
hand.
And now for the part where I dropped the ball. I’d noticed that CXO has halted pre-
announcement and as always on a morning, picked up and read the NR as soon as it hit the
wires. On reading it, the following thoughts occurred:
1) Hey, good grade
2) Hey, good width
3) Hey, good address
4) And if there were any semblance of a market out there I might be interested.
The mistake, obviously, was number four. I closed the NR, was foolish enough not to put the
stock on the daily radar and didn’t give another thought to it until just after the close when a
market pro pal got into contact with a one line mail: “SHOCK! CXO.v: The market actually cares
about a drill hole!”. I opened up the price chart:
In fact this 5 day version shows Thursday’s 237.5% rise on 6m volumes and Friday’s extra
bonus on top (another 4.4m shares traded), all of which has changed last week’s 15c stock into
today’s 65c stock, but you get the idea. With that it was time to know more and after few
exchanges (including a non-solicited comments from a kind person who will remain un-named)
we can now pass on that the target monzonite porphyry fits well with previously taken MAG and
IP readings. The drill was aimed at the middle of the anomaly that is roughly 500m by 750m
17

(though that’s very rough and it could turn out to be more/less and word from the company is
that they like what they see because the mineralized grade is consistent, rather than made up
of a couple of high grade portions inside less interesting material. As for the team, that’s led up
by one Adam Travis, who’s well regarded by peers and perhaps the leading geological expert on
this corner of the world, having worked at or around the Red Chris area for over 25 years. Your
author had no problems collecting bonafides on the people involved.
To the downside, another example of a drill hole result that caused a big pop but never got
anywhere came to mind later, that of Serengeti (SIR.v) at Kwanika in the Quesnal Trough area,
BC, back in 2008 which saw the first two holes hit excellent grades and lengths but then follow-
up drilling that didn’t see the same type of return at all. SIR eventually put a 43-101 together
on that property (and The IKN Weekly followed it and even traded it in 2010/11 as a small spec
idea, registering a slight profit on the deal) but the grade dilution all-but killed the property as a
live candidate for development (that aside from the messy community relations). The thing that
SIR showed at its porphyry target in BC, something that countless projects have shown over
time, is that a mine is not made by one good hit and it’s early days for CXO.v at ROK, no slam-
dunks or cash flow calculations on working mines allowed yet.
The bottom line to this is to underscore the real error I made here last week, in the hope (I’d
say “guarantee”, but I know myself too well) that it doesn’t occur again. It isn’t that I was or
wasn’t bought into this stock before last week’s news. It isn’t that I did or didn’t move into the
stock early on Thursday either. No, my mistake was to fail to recognize that even in this
current market, true and genuine good news will move stocks. That’s something we’ve
seen with Reservoir Minerals (RMC.v) recently and this fact was underscored by the way in
which CXO.v took off last week. The combo of good grade in good circumstances at a politically
safe location that’s favoured by Canadian capital markets was enough and it was something I
failed to recognize. It also means that yes, this market is still showing a pulse and there is cash
out there, either on sidelines or transferrable from weaker to stronger stories, which can
provide a trading (and dare I say investment?) win.
I wish CXO, its people and its shareholders good luck. It’s not one I’m going to buy into, as
RMC.v still has my eye more readily for a spec play if I decide to jump back into copper and
LRA.v with its Liberdade project JV gives enough scope for the big deposit dice roll (plus I’m
going to be a cop-out and call “not my geography” on British Columbia). However, I am going
to take away a lesson from last week, which is the reaction of the market can be every bit as
good if you show a good enough drill assay, especially at the small, leverage to market cap end
of things. There’s still life in the smallcaps, which is good.
Western Graphite (WSGP) (WSGP.pk): Shorted
I can report, happily, that after trying, failing, then trying a little harder (without getting too
obsessive) I managed to take a modest
short position in WSGP on Wednesday
at just under 84c (though commissions
were a little steeper than I’d normally
pay). I’ll fish for some more next week
and while the pump is on there may be
a chance.
We had “news” from the company last
week, including the announcement (12)
that it was in discussions with Acme
Labs (which is a wholly reputable
company and doesn’t deserve my
thoughts of Wile E. Coyote under these
circumstances, but gets them anyway)
over retaining its services for assay
analysis. This, in the world of the BS pump and dump, is sequin-in-eyes material. Also we heard
18

from WSGP that (13) “Fox News Business Panelist Tobin Smith” had initiated coverage of
WSGP. No mention of the $1.8m he was pocketing for the coverage of course...but details,
right?
A reminder that this trade will not make it to the ‘Stocks to Follow’ list, as shooting fish in a
barrel then registering a fat percentage win would look too much like self-pumping on my part,
too. I’ll keep this one as a sidebar trade.
Conclusion
IKN208 is done, we close with bullet points:
• It’s that annoying ‘Sell In May and Go Away’ time of year which never ceases to get my
goat, not least because we’re rarely told what we’re supposed to sell (or where we
should go, either). The S&P? Ok fair enough, but if “Sell In May and Go Away” is
applied to gold bullion over the last ten years, you would only have saved yourself
money in 2006 and 2008. The other eight years (yes, including last year 2012) you
would have made money by buying in May and then selling late December. All the chart
evidence you need for that is here (14) (because I’m not padding out IKN208 with ten
annual gold charts, go see them yourself at source and just for once I’ve managed to
bring in the weekly at under 20 pages of script).
• A quick note that Chinese markets will be closed Monday through Wednesday for
Labour Day holidays (they know how to party). This little datapoint was also pointed
out as the potential reason for the Friday profit-taking reversal in gold etc, which had
me laughing.
• I’ll be keeping a close eye on Gold Resource Corp (GORO) because if circumstances
come right, there’s a potential third bite at the shorting cherry. However, no decision
will be made before market prices and company news on dividends are known.
• I’m now heavily weighted in RIO.to and BTO.to.
• The moral of the story of CXO.v is that there is a pulse in this juniors market. I was
wrong to ignore good results from a drilling program and that, in the end, is a good
thing.
• As luck (?) would have it, I featured four of the five most interesting copper stocks in
the 2013 basket today, with the only one I’d add to HCH.ax, NCU.to, NCQ.to and RMC.v
being NGEx Resources (NGQ.to). The problem is getting the big call right on copper
and my best hunch today is that we’re going to have to wait until 3q13 minimum to get
any improvement in the underlying fundamentals of the copper market, price etc. All
these five look potentially buyable, but first in line has to be RMC.v.
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
19

Footnotes, appendices, references, disclaimer
(1) http://myownmarketnarrative.blogspot.com/
(2) http://finance.yahoo.com/news/b2gold-corp-reports-record-first-103000003.html
(3)
http://www.reid.senate.gov/newsroom/pr_042513_reids_testimony_on_yerington_bill_calls_company_to_hire_nevadans
.cfm
(4) http://finance.yahoo.com/news/nevada-copper-proceed-two-stage-120000504.html
(5) http://www.hotchili.net.au/
(6) http://hablemosdemineria.com/2013/04/23/minera-australiana-hot-chili-apunta-a-convertirse-en-un-actor-de-la-gran-
mineria/
(7) http://finance.yahoo.com/news/darwin-acquires-interest-ayacucho-properties-124500740.html
(8) http://america.infobae.com/notas/70461-Minera-Vale-acuerda-su-salida-de-Argentina
(9) http://www.larepublica.pe/27-04-2013/corani-pide-que-premier-testifique-apoyo-mineria
(10) http://www.vanguardia.com.mx/leymineraesreformadamunicipiossellevaran5deganancias-1727545.html
(11) http://finance.yahoo.com/news/colorado-resources-drills-242-m-130549795.html
(12) http://finance.yahoo.com/news/western-graphite-discussions-acme-labs-100000014.html
(13) http://finance.yahoo.com/news/fox-business-news-panelist-tobin-100000986.html
(14) http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx
Appendix 1: Flash update ofTuesday April 23rd
Good morning, less than an hour before the open on Tuesday, nice and sunny outside as well.
News from our Top Pick B2Gold (BTO.to) this morning...
http://finance.yahoo.com/news/b2gold-corp-reports-record-first-103000003.html
...is of a strong 1q134 production (86,747 oz), with both Libertad and Limon beating estimates. The new Masbate mine
(from the CGA Mining purchase) adds to the production for the first time this quarter and came in on BTO's forecast,
though lower than the previous CGA mining guidance because since then , the new management decided to add plant
to improve the mill circuit and lost a little production time as a result.
Sales came in at 95,042 oz, as BTO has finally adjusted for the inventory build-up we'd noticed in the last couple of
quarters and added 6k in sales on its quarter production numbers, which adds a decent little ~$10m boost to
consolidated revenues. Talking of which, the IKN house estimate for revenues in 1q13 is now $152.5m and although
operating revenues are a bit tougher to guesstimate, due to a Masbate's unknowns on costs this quarter, I'm now
pencilling in $77.5m for that. After expenses etc this would put EPS at around 5c, but we'll know more about the
revenues position on May 15th when BTO reports the quarter financials.
Overall, a good quarter and particularly strong numbers out of the Nicaragua ops, especially when considering that
we're only just beginning to see the positive influence that the new high grading Jabali vein will make on Libertad head
grades and production. The suspicion that BTO is under-promising on its year with the current 385,000 oz Au guidance
has been underscored by today's numbers.
I added to my BTO yesterday as announced in IKN207 on Sunday. We'll go into the numbers in IKN208 as promise,
including the way in which we estimate the now lower gold price to influence financial performance. The bottom line
here is that BTO still looks mightily cheap, even after yesterday's mini-rebound.
20

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
21

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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