IKN #210Premium

The IKN Weekly
Week 210, May 12th 2013
Contents
This Week: Travel plans, The latest unsubscription, Checking in on the 2013 roadmap.
Fundamental Analysis: Duran Ventures (DRV.v) a trading buy, Gold Resource Corp (GORO):
Quarter results indicate more downside to come.
Stocks to Follow: Overview, Bear Creek (BCM.v), Lupaka Gold (LPK.to), Duran Ventures
(DRV.v), Plata Latina (PLA.v), Gold Resource Corp (GORO), Tahoe Resources (THO.to) (TAHO),
Minera IRL (IRL.to) (MIRL.L), OceanaGold (OGC.to) (OGC.ax).
Copper Basket: Overview, Reservoir Minerals (RMC.v), Candente Copper (DNT.to), Nevada
Copper (NCU.to).
The Lottery Ticket Basket: Overview, FDG Mining/Tango Gold Mines (TGV.v), Darwin
Resources (DAR.v).
Regional Politics: Barrick (ABX) at Pascua Lama: Positive noises, Dominican Republic: Barrick
Pueblo Viejo (60% ABX/40% GG) backs down, Fortuna Silver’s (FVI.to) (FSM) community
relations in Caylloma Peru, Signs of movement in Colombia’s mining law, More anti-mining
protests in Argentina.
Market Watching: Jaguar Mining (JAG) (JAG.to) redux, More Capstone (CS.to), The Rio Alto
(RIO.to) La Arena site visit.
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
The latest unsubscription
This is the main point in the mail received from now ex-subscriber ‘JD’:
I really enjoy your newsletter but i simply cannot afford it presently. Always
thought you were a bit daft urging people to cancel but at this time I can
appreciate the advice! Enjoy the blog and think you are exceptional at the
calling of the scam etc.
There are at least a dozen reasons to stop subscribing to a mining sector newsletter such as the
IKN Weekly, with the basic money factor just about the best of them all. Or the worst of them
all, come to think of it. So while the current squeeze and misery continues, I again call on
readers to carefully consider whether paying for opinions in this crazy corner of the business
world really is something you want to do and if not, don’t hesitate in unsubscribing not only
from The IKN Weekly but from any other paid-for service that you current receive. It’s your
money, don’t waste it.
Checking in on the 2013 roadmap
This is not something we’re going to ignore, forget or sweep under the carpet. First present
seven weeks ago in IKN203, this chart roughs out the way in which your author sees the nastily
beaten-up junior mining sector developing in 2013 (and beyond):
1

The three lines roughly explain the way your author expects three different sub-sets of juniors
to behave and in the most general terms the idea is to be on the quality end of the market in
the form of well run, cash flow positive operators or high-class explorecos (with cash to see
things through) because they’re expected to rebound first and fastest. Meanwhile, at the other
end of the spectrum there’s going to be a lot more pain felt by the grotty, unlucky, marginally
economic or just plain scammy end of the whack world of juniors.
So in a single line and assuming a level playing field with the underlying metals (basically gold,
some additional input from copper, then the rest follow on) The IKN Weekly expects the best
companies to bottom out at-or-around now, the “acceptables” to see the worst of things
between now and 3q13, but the bad ones to get even worse.
So here’s a year-to-date chart, which has a few notes scribbled thereon and also takes in the
performance of the precious metals miners ETF (GDX), the PM juniors ETF (GDXJ) as well as
what your author considers the cream of the junior crop Rio Alto (RIO.to) and B2Gold (BTO.to)
(and money is firmly where mouth is on those two names, as well):
Since IKN203 we hit a big and painful bump when the price of gold went South in mid-April.
Gold has recovered from the worst of those lows (and it hasn’t threatened the gleeful
$1,200/oz, $1,100/oz or sub-thousand predictions of the anti-bug brigade either), but we
haven’t seen a return to $1,500/oz or above, either. The miners and the juniors and BTO/RIO
2

were duly affected, but since the big sell-off there hasn’t been a continued exodus from these
means of investment, either. It’s not a wonderful situation at all, but so far at least I don’t see
much that differs from our IKN203 roadmap bar the jag down. That will certainly change if by
end 2q13 we don’t have clear signals of improvement from the quality end of the junior market
but you’re just going to have to forgive me (or unsubscribe in annoyance...see above) for my
call of patience on this horrid market, for a while longer that is. We’re roughly half way between
the original IKN203 call and the end of 2q13, so when that moment comes we’ll revisit this
chart and make further observations on whether I’m looking good or bad about my 2013 call.
Travel plans
As alluded to in the Flash update of Friday 10th (see appendix 1) your author is on the road as
from early hours Monday May 13th (i.e. tomorrow morning) to Friday May 17th , but this time the
trip is purely pleasure. The kids have a week off from school and have never visited Cusco or
thereabouts so that’s where yours truly, wife, 9yo and 6yo are headed for a few days’ break.
It’ll be city tour buses, ice-creams, Sacred Valley ruins, museums, full-on Inca history overload
and hotel living for four nights. I will be checking my mail at some point in the evenings in
order to pick up any messages you might have, keep abreast of the market day, etc., but don’t
expect anything on the blog until next Friday.
Fundamental Analysis of Mining Stocks
Two parts to ‘Fundamentals...’ today. First we discuss the reasons to have bought Duran Ventures (DRV.v)
on Friday, then we look at Gold Resource Corp’s (GORO) 1q13 financial results which have reassured your
author that going short the stock for a third time is the right decision.
Duran Ventures (DRV.v): A trading buy
Not a full NOBS report, but we are going to offer background on the new long position as per
the call in the Flash update of Friday (see appendix 1) to buy Duran Ventures (DRV.v).
It’s a trade surprised at least some of you (by the looks of the mailbox at least) and that’s
understandable, as your author has never hidden his skepticism over the management strategy
at the company (we again opt for the diplomatic turn of phrase). But this trade is much less
about DRV, its leader Jeff Reeder and the over-pumped Aguila copper property and more about
one specific part of the package, namely its Minasnioc project in the Huancavelica region of
Peru. Before we get to that here’s a quick overview of the company, starting with the normal
IKN top-box to show structure:
Shares out: 222.36m
Options: 19.49m
Warrants: 21.36m
Fully diluted shares: 263.21m
Current share price: $0.04
Market Cap: $8.89m
Approx cash per S/O: half a cent
All prices are in Canadian dollars unless stated. Forex U$1=CAD$1
So a nastily diluted share count with a hatful of options and warrants on the sidelines for
further dilution, too. Not exactly inspiring stuff and with an IKN estimated treasury of around
$1m right now, we’re not looking at a company with money to spend on its projects in 2013.
However, the terms of the deal it struck with Rio Alto (RIO.to) last year include a clause that
means RIO needs to exercise its 2.5m 25c warrants at 18 months (2q14 approx) and then its
2.5m 35c warrants (2q15 approx) in order to maintain its options on Ichuña and Minasnioc, so
if DRV can limp through until then and RIO likes what it sees at either of the project until then,
Jeff Reeder and Co will get the cash to pay their salaries all right. Bet that’s a relief for you,
being all worried about destitute junior mining company directors who otherwise may have to
go flip burgers to make ends meet...
3

The other advantage is that DRV is being
carried by RIO at both Ichuña and Minasnioc,
with a free ride while the bigger company fulfills
the terms of the option. That means DRV can
batten down the hatches and reduce burn to a
minimum, but will still have newsflow to give to
the market in the next year (or so). Whether
that news be good or bad is as yet unknown,
but at least DRV isn’t going out of business in
the next couple of years. All this adds up to a
company that was no sort of bargain back
recently in its 10c to 15c range (which wasn’t
so long ago, as the price chart shows) but
today’s 4c price looks a reasonable entry point with which we can take a risk.
As for the other, non-Minasnioc properties held by Duran, here’s what you need to know:
• Aguila: DRV has taken forever to get 46 holes into Aguila and come up with a resource
but it does now have a 43-101 compliant count for the project, which comes to 2.5Bn
lbs copper. That’s a reasonable number at first sight, but when you look closer it turns
out to be a small, decently grading central area (374m lbs Cu grading 0.61% Cu)
surrounded by a larger and much lower grading halo of mineralization that DRV has in
its resource calculation but I think isn’t much more than waste rock. Aguila has the
potential to host a small mining operation for the higher grading stuff and then,
possibly once the capital payback is complete via the higher grade, continue processing
the low grade material for marginal gains, but that depends on the future price/costs
dynamics of the copper sector more than any big plan for Aguila. DRV maintains that
there’s plenty of exploration potential left at the Aguila project, which begs the question
as to why it’s never been explored in the multiple years that DRV has owned the thing.
This property is a waste of time under its current owner, much more of a liability than
an asset until the moment when it gets correctly explored and then true potential is
discovered or it gets killed once and for all. Forget it.
• Corongo, Don Pancho, Panteria: Other early stage properties in Peru held by DRV.
None of them worth writing much about here (from what we know to date, anyway).
Worth zero as far as we’re concerned.
• Ichuña: This is one of the properties optioned by RIO in the deal. It sits next to the
new and big Chucapaca gold discovery in the South of Peru (owned by GFI/BVN in JV).
So the address is good and the community relations are also reportedly positive
however from what we hear it’s not showing much in the way of potential so this isn’t
the reason took a position in DRV late last week, either. Never say never, but not a live
one.
We can sum up this by saying that the other parts of Duran Ventures hold no appeal to us at all
and if it weren’t for the next project to be mentioned, DRV would get a very easy, quick and
definitive “avoid” call from your author. So now to the reason why a small, trading-style,
speculative long position was taken on Friday:
Minasnioc
Along with Ichuña, on January 25th 2013 the definitive option agreement between RIO and DRV
was signed on the Minasnioc project in Huancavelica, Peru. Under the terms, RIO can earn 51%
of the property by reaching “economic assessment” stage within three years and making a
$500k cash payment to DRV. Then RIO can earn an additional 19% by getting Minasnioc to a
“production decision” stage within the next two years and paying DRV another $500k in cash.
4

DRV has owned the central 1,800 hectare portion of Minasnioc since 2010, when it outbid
Barrick (previous holders of the concession) and another bidder in a sealed-envelope auction.
Then in 2012 it added a 2,000 hectare area around the central portion by paying Barrick in
shares and 2% NSR for concession rights. To sum up, Minasnioc is 3,800ha, 100% owned by
DRV and with the most interesting bit in the middle free of any NSR.
Rockwise, it’s an interesting project. When previous
owners, Barrick put 40 holes into Minasnioc and hit the
type of assays you can see in this chart, ripped from the
DRV page on the project (1). Those are pretty good
numbers for the type of deposit that it is, namely a high
sulphidation oxide gold system that starts at/close-to
surface and has all the hallmarks of a potential open pit
bulk mining heap/dump leach operation. In other words,
exactly what RIO is doing at La Arena today right up to
and including the way in which more than one target has
been identified, including a main 1.2km long corridor
(shades of Calaorco at La Arena). Along with the 0.5 g/t
and above typical long-length returns there are clearly
decent patches of higher grading material, but the addition
of a decently grading silver content at Minasnioc makes
the project that much more interesting.
That’s an overview and to add to that, your author has
plenty of anecdotals because over the last couple of years,
whenever Minasnioc has come up in conversation with
Peru mining people (including third parties untouched by
RIO or DRV that include ex-Barrick geols) there’s never been a bad word said about the rocks
and it’s often been subject of glowing reports on its exploration upside, good geology, strong
economic potentials for a mine there, the whole nine yards. There’s never been much doubt
about its potential but another part of the equation has been the sticking point, to now at least.
Community relations
For the longest time, community relations at Minasnioc have been nothing short of bad with
locals simply not wanting anything to do with exploration stage mining companies on their
property and changing their lifestyle. That’s their right of course, but it’s also connected with
bad jobs of community relations done in previous years. From what’s been heard and gleaned
by your author (again it must be stressed, not just in the past few days) the problems started
with bad blood created in the Barrick time and then when DRV got the project, the smaller
company simply hasn’t had the money to throw at the problems or be in the position to
guarantee the type of job-creation program for locals that would unfreeze the poor relationship
between miner and community.
However, and here’s where things are changing, the good news heard this week is that since
RIO has been on the scene in Minasnioc, with a dedicated community relations team working
there for the last six months, relations have changed for the better and people who wouldn’t
even open their doors to a mining rep six months ago are now happy with the company
presence, baseline geological explorations are happening, targets are being generated and
we’re now closing in on an agreement to allow a full drill program to happen at the project. In
other words, RIO people seem to have done a great job of work in community relations (it
helps of course that they can point to the economic benefits and happy people around the
successful and operating La Arena mine) and have turned around years of bad blood in a few
short months.
And really, this is the long and the short of the move to buy DRV last Friday. The combination
of three main factors...
5

• A cheap entry point into a stock that’s been beaten up, but isn’t about to go to the wall
(despite its other faults as a company)
• A prospective project that’s always been talked about positively rock-wise and on which
DRV gets a free ride for 30%.
• And the key point, a removal of the big barrier to development thanks to much
improved community relationships between locals and those who want to explore
Minasnioc.
As for potential? Well folks, that’s anyone’s guess but just by going on the grades, the size,
making a few logical assumptions and sticking a wet finger in the air, there’s no reaosn why
Minasnioc couldn’t turn into a deposit to rival the size and economics of the La Arena oxide gold
operations, happening right now in La Libertad (see photoshow below for more). So if all went
well and DRV got a free ride to production on, let’s say just as a number, 30% of 2m oz gold
equivalent (mostly Au, some Ag) and was then bought out by RIO before the mine happened,
we’d need to value DRV on 600k oz gold. Guessing a price on that is another big and wild-assed
assumption, but even at $100/oz (almost certainly too low) we’re talking $60m in cash, or 23c
per fully diluted share. But be clear this paragraph is only to give the roughest of rough ideas, it
isn’t in any way setting a price target on DRV stock.
The bottom line is more simple than any SWAG calculation on project value that we could make
right now, and that’s how DRV is likely to get bought once a drilling program is
announced at Minasnioc. The geological and potential mining quality of Minasnioc is well-
understood in the world of mining in Peru and it’s also been common knowledge that
community friction has stopped the prospect from moving forward in the last few years. Any
announcement from RIO and/or DRV that a formal agreement between parties there has been
achieved and that drilling would be the next step isn’t going to go un-noticed by those in the
country that can put two and two together. As to how high DRV might go on the news, that’s
anyone’s guess especially in this horrid market, but I wouldn’t be surprised to see DRV float
back up towards the 7c or 8c level. If that happened a choice on whether to hold or sell would
have to be made, but that would be a nicer decision to make than the recent “Do I sell this very
bad loser?” calls I’ve needed to make in the last weeks and months, so that’s not going to bring
on insomnia. This position is already set (at 4.5c average) as per Friday, it’s not a big bet, risk
is always high in tinycap penny plays, treasury remains thin, management and its track record
of pumpo isn’t my cup of and so eyes wide open (despite all the optimistic scenario laid out the
the above paragraphs) is very much the order of the day. It’s also a trade with a near-term
timeframe in mind, so it’s going to get watched carefully and, as mentioned in Friday’s Flash
update, if a decent percentage win comes along it will be taken no matter where we might be
on the newsflow track. But overall, considering the cheap entry point today and after picking up
the clear company optimism over community relations improvement and the future potential
that the drillbit might offer, the risk/reward balance looks good so your author taking a shot at
a favourable outcome for Minasnioc.
xxxxxxxxxxxxxxxxxx
Gold Resource Corp (GORO): Quarter results indicate more downside to come
Gold Resource Corp (GORO) announced its 1q13 financials post-bell Wednesday (2) and here
we look at how the spreadsheet swallows up the
GORO: Assets Breakdown per qtr
information offered. Again, not a full NOBS report 150
here but we will base things around a selection of 125
pertinent charts and offer up resulting thoughts and
100
analysis. Here first are the balance sheet items,
which see cash down (as usual) and other current 75
up, mainly due to a big $5.2m jump in accounts 50
receivable (which nearly doubled compared to
25
4q12) for which no explanation is offered. The
0
liabilities side rose by a little over $3.2m in the
quarter, which means working capital dropped yet
again to $42.572m, the lowest it’s been since
6
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1
source: company filings
srallod
fo
snoillim
Bullion
fixed
other current
cash&ST

GORO: Liabilities Breakdown per qtr
40
35
30
25
20
15
10
5
0
operations began.
So far so boring and nothing here that surprises, especially when we note that GORO finally bit
the bullet recently and cut its dividend to 3c/month (which should help the fracturing of
working capital position somewhat) therefore let’s
move to production and revenues for the quarter, as
these charts come with the latest 1q13 results and
also our updated forecasts for 2q13 as well.
Here right is how earnings, costs and gross profit is
evolving and the first thing to note is how GORO put
in a record-breaking revenues quarter of $42.3m in
sales. Costs were also the highest ever (at $17.43m)
which means gross profit wasn’t a record, but still
pretty decent at $24.88m (best ever was 4q12 at
nearly $32m)
But still, that revenues and associated gross profit is
pretty impressive under the circumstances, under we look a little further under the hood. Here’s
what it says in the SEC-filing for 1q13 on the matter:
During the three months ended March 31, 2013, sales of concentrates totaled $42.3
million, net of treatment charges, compared to sales of $36.7 million during the same
period of 2012, an increase of 15.3%. The increase in first quarter 2013 sales
principally resulted from an increase in sales of concentrate held in year-end inventory
In other words, GORO boosted sales from the silver/gold room stores. In fact GORO sold
85,481 oz of silver and 1,055 oz gold more than it produced in 1q13, which works out at around
$4.4m in extra revenues if we take its average gold and silver selling prices ($1,648/oz and
$31/oz respectively) as our benchmark. Clearly GORO can bolster any given quarter in such a
way, but it’s not something that’s sustainable, even over a medium-term. And while we’re on
the subject let’s note that those extra sales-over-production amounting to $4.4m came from an
inventory reduction of just a tad over $1m on the quarter....you know, that’s the kind of thing
that really gets my head scratching. Is GORO really putting its gold inventory ounces on the
books at $400/oz or so?
Anyway, on to the costs and gross profits part of the story and here’s another quote from the
1q13 10-Q:
Mine gross profit. For the three months ended March 31, 2013, mine gross profit
totaled $24.9 million compared to $27.9 million for the three months ended March 31,
2012. The decrease in gross profit principally resulted from higher operating costs in
the current quarter. Our costs have increased as we mine deeper ore zones as La
Arista, and include increases in personnel, on-site contractors, repairs and
7
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1
source: company filings, IKN ests
srallod
fo
snoillim
80 GORO: Working Capital per qtr
70
LT debt
current debt 60
50
40
30
20
10
0
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1
source company filings, IKN ests
srallod
fo
snoillim
GORO: Quarterly Earnings overview
45
40
35
30
25
20
15
10
5
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2
source: company filings, IKN ests
srallod
fo
snoillim
revenues
COGS
Gross profit

maintenance, security, safety costs, fuel, materials and supplies. These and other cost
increases, along with lower production due to mining lower grade ore zones, slightly
lower recovery rates and lower realized gold and silver prices in the first quarter of
2013, have contributed to a decrease in our gross profit percentage from 76% for the
three months ended March 31, 2012 to 59% for the three months ended March 31,
2013.
Translation: Costs are up. At this point I could offer any one of several charts that cut and slice
the GORO costs situation, but we’ll stick with just one and get to the point here, the chart that
compares company revenues to our “true costs” (as explained in previous analyses on GORO
with the calc noted on the chart by way of reminder)
GORO: Revenues vs "true costs"
45 42.31
40.62
40 37.78 35.44 36.49 34.00
35
30.01 29.96
30 27.94
25.00
25 20.66 20.51 22.52 22.93 21.53
20
13.94 15.91 15.27
15 11.28
9.13
10
5
0
8
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2
U$m
revenues
"true costs"
true costs = prod costs + deprec&amort+ accretion + G&A + stock
based compensation + expl expenses + construction & development
In 1q13, “true costs” came to just under $30m and that’s a big jump (not just in the items
listed by GORO in that 10-Q excerpt). By the looks of things, there are some line items that
won’t repeat as badly in 2q13 as 1q13 (I’m giving benefit of the doubt) so we’re looking to see
costs drop to around $25m in the current 2q13
quarter, but what we do see is that without the GORO: Costs breakdown
20
extra inventory sales that came to $4.4m,
18
margins wouldn’t have made it past $8m and 16
that’s not even enough to pay the $9.5m in 14
12
dividends awarded in 1q13, let alone trivialities
10
such as tax. This, ladies and gentlemen, is why 8
GORO’s working cap number has just kept on 6
4
diving all this time. And just for fun, here’s
2
another chart we use to cover the costs, which 0
says basically the same thing in a different way.
Before considering the potential for 2q13
revenues and a forecast of what GORO can
return in its current quarter, a quick sidebar. It’s not the first time that your author has noticed
the way in which the claimed average selling price of GORO’s main products, silver and gold,
always seem to be at the highest end of the possible. Perhaps the company is just good at
selling at just the right time, but if we take the Kitco charts for the London Fix prices of gold
and silver for 2013 and draw in a couple of lines on each, one to show the claimed average
selling price at GORO and another to show where the quarter ends, one can’t help but feel
they’re getting a very high average price for both metals (and especially when you consider that
the company is selling concentrate, rather than bullion. I mean, forgive me for being suspicious
and cynical around this company, but...
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2
U$m
COGS
G&A + stock comp
exploration
cons+dev
source: company data, IKN ests

Anyway, whatever happens in 2q13, we’re unlikely to see GORO selling at an average anywhere
near that of the 1q13 prices. So after due consideration and a bit of guessing, we’re going to
set out 2q13 revenues number for GORO at $34m, which assumes the company sells 750,000oz
Ag at an average of $25/oz, 7,500 oz Au at $1,450/oz average amongst other forecasts. This
will leave GORO with a revs vs ‘true costs’ margin of $9m, which will be enough to pay the
newly reduced dividend (~$4.8m) and the tax bill as well.
In other words, if we assume a reasonable price deck on today’s evidence and then assume
that GORO manages to cut its costs somewhat, the newly reduced dividend means that the
company will be treading water, its financial position neither improving nor deteriorating, in the
quarter(s) to come. However, in the same way in which your author assumes a conservative,
bad case situation when considering a long position, this analysis assumes a best case situation
for the company as we’re short on the play. Our costs assumptions may turn out to be low
here, as operating costs are clearly rising and there’s no real reason as to why op costs should
drop as this mine matures, gets deeper and salaries etc keep rising. The lower grading ore and
worsening recoveries are assumed by our analysis to remain stable in 2q13 but the trend here,
once again, is of grades that are dropping away as time goes on. All this is beside that strange
and ‘lucky’ way in which GORO manages to secure top quarter prices for its concentrate sales.
There’s also the major underlying point of the 43-101 compliant resource left to mine at La
Arista (3), which is now down to under 300,000 oz AuEq indicated, There are inferred resources
for another 650,000 oz AuEq at Arista (as at December 2011 including the Baja vein) but they
come at a much lower grade and economics there are marginal at best. Or put another way,
the market is happy to value a mine with three years of decent mining left in it at over half a
billion dollars, so needless to say I disagree with that nice Mr. Market (it isn’t the first time).
GORO: Dividend Yield Percentage Spread
Share price (U$) 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
9

We await to see what Hochschild decides to do with the 25% of shares it owns of GORO once
its man, Isac Burstein, leaves the company at the AGM on June 20th (4), but even if (as we
suspect) HOC starts selling out (wholesale or retail) the normal yield percentage demanded by
owners of GORO suggests that there’s downside left here.
The bottom line is that we expect GORO can continue at an even keel financially at the new
lower prices for gold, thanks to its long overdue decision to cut its dividend. However, the
company cannot grow or develop from the limited cashflow left over once the dividend is paid
and is running to stand still as costs increase. With the resource at La Arista now showing
fatigue (grade is the first thing to drop) even our best-case of treading water won’t be enough
to keep this stock price from dropping further, assuming that silver and gold prices remain
where they are. GORO remains a great place to have a short position with which to hedge the
wider gold market, because even if gold rises again, GORO’s specific issues will temper its own
rise. As for the downside, the potential over the next few years is a target of straight plain zero
(unless it proves up more resource) and I’m sure that main holder Hochschild, with its director
about to jump ship, is even more aware of that than I am. Remaining well and truly short
GORO.
Stocks to Follow
There are 12 ‘Stocks to Follow’ open. Of those, four registered gains on the week (BTO.to,
LRA.v, TAHO short, GORO short) and the other eight registered losses (all the others), though
the mitigation was how the bigger drops were confined to smaller positions (PLA.v down
14.7%, FCV.v down 13.6%, DRV.v down 11.1%, AQM.v down 11.1%).
The changes (BCM.v out, LPK.to out, DRV.v in) means that there are now 12 stocks on the
open list, three less than our self-imposed maximum. Three of the trades are in the green, ten
are in the red.
10

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$3.54 53.9% $6.29 tgt, added Apr13
B2Gold BTO.to buy C$3.07 28-nov-12 C$2.44 -20.5% $5.70 tgt added Apr '13
Recommends
Minera IRL IRL.to spec buy C$0.73 22-jul-12 C$0.40 -45.2% $1.56 tg, added, new avg
OceanaGold OGC.to hold C$3.03 16-sep-12 C$2.11 -30.4% $5.34 tgt growth prod
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.12 -2.6% solid biz model, LT hold
IMPACT Silver IPT.v buy C$1.14 13-jan-13 C$0.66 -42.1% new position, $1.85 tgt
Tahoe Resources TAHO short U$18.62 08-apr-13 U$16.79 9.8% near-term trade
Gold Res Corp GORO short U$10.00 03-may-13 U$9.86 1.4% tgt $7.50
Duran Ventures DRV.v spec buy C$0.045 10-may-13 C$0.04 -11.1% new position, ST trade
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.04 -87.1% holding thru for my sins
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.095 -45.7% revised tgt 25c
Plata Latina PLA.v selling C$0.79 10-apr-12 C$0.145 -81.6% trying to sell
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% closing this week (def)
Bear Creek BCM.v may'13 C$2.58 01-apr-13 C$2.40 -7.0% near-term, time run out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
2009, 2010, 2011 and 2012 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Bear Creek Mining (BCM.v): Sold. They went Monday at $2.40 which turned out to be the
right move in the very-short-term at least, with the stock moving down the rest of the week (as
low as $2, a crazycheap price). To repeat
(and confirm a few mails fielded during the
week), the reason BCM has left the portfolio
is because the trade set-up was pretty
specific and has simply run out of personal
time. I still think Corani is a great deposit
and BCM is definitely one of those names I’m
going to keep clsoe on the radar (and may
even trade again), but due to the bad luck of
getting the social approval at the same time
as the big gold/silver swoon, the trade didn’t
make us any money and the market moving
influence of that social decision has now
waned. In this trade I was wrong for the
right reasons (and I still greatly prefer being
right for the wrong reasons) so we sell, take the small negative, move on. Bottom line: sold due
to straight portfolio management.
Lupaka Gold (LPK.to): Sold. As per the flash update Friday morning (appendix 1) we’ve
taken our lumps on LPK and moved on. After meeting with LPK management on Wednesday
morning, the company strategy that we read between the lines of no drilling at Crucero in 2013
in order to save money was confirmed. The company has also, apparently, slimmed down its
admin burn rate and that’s a good thing and its move to protect its treasury nest-egg is the
wise course on a corporate level, both in the near-term and in the longer-run. We talked a little
11

about the baseline geological plans it has for exploring and adding value to Crucero as well as
Invicta (confirmed plenty of exploration to do at that one) which will look to provide news and
radar at low cost and again, no complaints from a business point of view from me. The problem
here is that a small exploration company looking to batten down the hatches and (unlike DRV
for example) without a sponsor that can move things forward using OPM means a company
that’s going to drift through 2013. Come the end of the year it will have slightly less cash and if
the market picks up, its share price may even have improved by then (after all, it still had over
2m of gold under 43-101 compliance, which is not to be sniffed at). Today’s choices are more
about whether I want to hold cash instead of shares and in the case of LPK, it’s a fairly easy
call. I’ll take more cash in the port and less exposure to exploreco. Sold.
Duran Ventures (DRV.v): Position opened. We’ve done this one above in
‘Fundamentals...’. here we officially mark the opening and also mention that after thinking
about it, DRV is getting put into the “recommends” sub-section, rather than the “smaller/riskier”
sub-section which would have suited its size as well. The choice was made to put it where it is
because that’s where the near-term trades have been located recently. That’s what DRV is
going to be, too. Anyway, on Friday it opened at 5c but dropped back quickly enough to 4.5c
and finished at 4c, which suited me just fine. To repeat, this isn’t a market in which you should
chase prices, period.
Plata Latina (PLA.v): Still selling if possible, but window looks bad. I had that sinking
feeling about calling sell after all this time o PLA last week and the fears were well-founded, it
seems. The stock dived as low as 10c before a few buyers turned up, but it’s the lack of
liquidity that did for PLA more than its story or financial fundies, because the whole of last week
saw less than 40k shares doing the market cap damage. Personally no sale, my call on wanting
out at a reasonable price remains, but there’s no way I’d take any of the bids offered since the
May 2nd NR. In short, your author is well and truly stuck and as a result of this (plus the
absolute cash value of the position these days) PLA has been shifted down to the
“smaller/riskier” sub-section, where it’s likely to remain until dumped.
Gold Resource Corp (GORO): We do GORO above. Here we quickly note that trading in the
stock, which didn’t do much more than fiddle around the $10 level. My best guess (as noted
above) is that GORO will go with the flow and provide a straight hedge to our long positions
until June is done. After that, the potential company downside of the 2q13 numbers and the
mooted exit of HOC comes into play.
Tahoe Resources (TAHO): The main news from the disturbances around THO in Guatemala
last week was that (5) the government of Guatemala had on Thursday downgraded its actions
around the Escobal mine from State of Emergency to ‘State of Prevention’. This downgrade,
which restores some (not all) normal rights to citizenry, came after around two dozen arrests
were made inside the affected zone including the man suspected of having killed the police
officer in the period leading up to the clampdown. The Otto Pérez Molina government linked the
man to narcotrafficking operations, but the other main thrust of the army presence, that of
trying to recover the approximate 11,000 sticks of dynamite stolen in November last year, has
so far been fruitless.
The other news from THO last week was the announcement of its quarterly results on Friday
morning, which held no great surprises. The NR (6) kept away from any mention of its local
protests and troubles (it’s the company’s right to do so, I suppose) and concentrated on its
achievements in the quarter, including the award of the operating permit and progress on
engineering at the mine. We did get a minimal note of matters in the 1q13 MD&A (7) which
performed the necessary CYA and went like this:
Anti-Mining Resistance
In recent months outlier communities and non-governmental organizations (“NGOs”) have
become more vocal and active with respect to mining activities in Guatemala. These communities
and NGOs have taken such actions as road closures, power line opposition, work stoppages,
and law suits for damages. These actions relate not only to current activities but often in respect
12

to decades old mining activities by prior owners of mining properties. Such actions by
communities and NGOs may have a material adverse effect on our operations at the Escobal
Project and on its financial position, cash flow and results of operations.
Factors that influence the Company’s ability to succeed are more fully described in the
Company’s 2012 Annual Information Form available on www.sedar.com under the heading
“Description of Our Business – Risk Factors”.
Trading-wise, this five day chart suggests that the stock might display greater beta to its
underlying influences (your author chooses GDXJ, GLD and SLV to make the general point), but
we’re still not getting much in the way of effect from the specific local travails seen by THO at
San Rafael las Flores. In other words, THO is working as a straight hedge position against the
junior mining market, but its own specific negatives haven’t been factored in yet so when they
are (note careful choice of word ‘when’), there’s more downside to come here.
Minera IRL (IRL.to): I met up with the IRL team on Wednesday at company HQ and had sit-
down time with CEO Courtney Chamberlain too, which was a bonus due to his timetable being
disrupted (he was supposed to have been at the Corihuarmi mine at the time). It was useful to
be face to face with CEO Chamberlain when discussing the main issue at IRL today, that of the
financing package for its Argentine Don Nicolas project. On the one hand, the concern that the
negotiation is taking longer than desired was clear to see, but on the other, when he said that
he’s happy about the way things were developing is was obviously true and an honest answer.
Overall I came away from the meet happier
that a deal would be closed on Don Nicolas,
it’s just a case of when more than anything.
We also talked operations and IRL has
made expense cutting moves at its
operations in both Argentina and Peru to
cut non-essential burn at present. Ollachea
is now focussed on the permitting track and
although the drill program has been
deferred to save cash, the project will see
expended exploration in the second half of
the year once the main thrust of the
permitting cycle is cleared (and hopefully
the permits received in good order). Community relations remain good despite having cut down
on local labour temporarily and this part of IRL remains a poster-child for other projects around
the country (or the continent, for that matter).
As for the price today, yes it’s now tempting me greatly as an addition. The plan has always
13

been to hold steady and see the terms of the financing deal once closed, but at some point to
the downside there’s going to be a price that beats the current plan on a risk/reward basis. The
basic reward here is to have a company that gets totally de-risked from its Argentina exposure
thanks to Argentine money moving in and funding the project. From there, IRL will be able to
concentrate its efforts on the real jewel, Ollachea. In a world that wants medium scale,
fundable, politically safe low cost production ounces from its new mines, the thing just scream
value and my only question is whether it stays as a recommend or moves up to a Top Pick, a
very easy one to hold, despite its share price woes.
OceanaGold (OGC.to): I’m going to get to this one next week. Again, no problem to hold
through, but it deserves more time than I can give it this weekend, too.
The Copper Basket
After nineteen weeks of 2013 The Copper Basket is showing a 19.43% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 158.5 356.63 2.25 -33.8%
2 Augusta Res AZC.to 2.43 144.1 353.05 2.45 0.8%
3 Lumina Copper LCC.v 9.43 43.46 323.78 7.45 -21.0%
4 Copper Fox CUU.v 0.83 399.61 247.76 0.62 -25.3%
5 Nevada Copper NCU.to 3.50 80.5 188.37 2.34 -33.1%
6 Hot Chili Ltd HCH.ax 0.72 286.78 154.86 0.54 -25.0%
7 Reservoir Min. RMC.v 2.41 41.46 118.16 2.85 18.3%
8 NovaCopper NCQ.to 1.80 51.89 96.52 1.86 3.3%
9 Western Copper WRN.to 1.39 93.78 64.71 0.69 -50.4%
10 Panoro Minerals PML.v 0.62 176.25 57.28 0.325 -47.6%
11 Curis Resources CUV.to 0.70 56.31 42.80 0.76 8.6%
12 Candente Copper DNT.to 0.375 121.93 40.24 0.33 -12.0%
13 Yellowhead Min. YMI.to 0.59 60.97 23.17 0.38 -35.6%
14 Oracle Mining OMN.to 0.80 49.03 23.04 0.47 -41.3%
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 -19.43%
Eight of our basket stocks dropped last week (NGQ.to, LCC.v, AZC.to, NCU.to, HCH.ax, WRN.to,
NCQ.to, CUV.to), two were unchanged
Copper Basket 2013 average, weekly
(DNT.to, YMI.to) and the other five went
16%
up (CUU.v, PML.v, RMC.v, OMN.to,
12%
SRD.v). Of all those, only Panoro Minerals 8%
(PML.v up 14.0%) made the type of
4%
percentage difference that warrants 0%
attention, while the overall story in the -4%
sector (apart form the annoying RMC.v -8%
that refuses to drop for me) is that the -12%
bigger more interesting plays dropped -16%
-20%
while the smaller, less attractive plays
moved up.
The final score of all that is a basket
covering all sizes and shapes that moved
down just 0.18% on the week, so honours basically even I suppose but we can say that the
junior explorecos didn’t do anywhere near as well as copper the metal or the larger copper
producing names that bounced nicely on the back of the metal’s rally (eg FCX up ~5%). As this
price chart shows, copper has rallied 9% in the month of May...so don’t go away.
14
ht6naj ht31 ht02 ht72 r3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 ht5yam ht21
source: IKN calcs, TSX data
31/1/1
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Copper market commentary time and I’m not sure how many readers will beneift from this one,
but as it’s the best thing I read on copper last week it gets mention at this point. The report is
long and in Spanish, but those of you with the linguistic ability and interest in the metal will do
well to read “El cobre se vuelve palido” out of Chile’s
decent biz medium America Economia last week (8).
It goes into great detail about the problems faced by
the copper industry, with a focus on Chile but also
plenty of colour on the Peru side of the sector as
well. The thrust of the message is that copper miners
are facing a crunch of lower prices (the bearish
argument contemplates prices with firm $2-handles
per pound) and higher costs, particularly the costs
deck seen in Chile with high fuel costs and rising
salary pressure. The offset of demand is considered
too, with unsurprisingly China being signalled as the
main incognito. Overall, the piece is more bearish on
Chile than it is on Peru, as it expects industry player
to maintain production expansion, but look to the
lower capex/opex available in Peru as the place in
which to develop new projects. That quick summary
merely scratches the surface of this long and
thorough report.
Moving to our weekly coverage of the inventories scene and this week we have some new news
to offer. It’s bullish as well because world inventories saw a sharp drop last week, with last
week seeing a drop of 23,063mt (-2.6%) in world stocks to 877,256mt. We did see a slight
edging down the week before, but this is the first real reversal from the constant climbing in
world stocks we’ve seen since December 2012. Inside the world figure, LME stocks dropped
0.7% (to 604,250mt) and Comex stocks upped a slight 0.2% (to 77,963mt), but it was the big
8.8% drop in Shanghai Futures Exchange stocks, bringing them down the 195,043mt, that’s the
headline maker. Well, that and the big rise in LME cancelled warrants to 35.2% of total
inventories, which might be continued rigging of the market by Glencore/Trafigura but is more
akin to a real fundies based move than the previous four weeks’ worth of data and may well be
a sign that meaningful copper will leave the warehouses (at last). If so, it suggests that the
world market is firming up and copper is in a better state than that which I gave it credit this
time last week.
The bottom line personally is that I’m still way too leery about Cu to make a move into
exploreco names and this will only change if that desired cheap entry point into Reservoir
Minerals (RMC.v) comes along. But last week’s market as per the data we follow was much
perkier than the weeks and months that preceded it, so there’s reason to allow a little optimism
back into coppery thoughts. The riddle wrapped in a mystery inside an enigma continues.
Cancelled Warrants at LME, IKN157 to date
40%
35%
30%
25%
20%
15%
10%
5%
0%
15
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 902NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne

Now for updates on some of the basket stocks:
Reservoir Minerals (RMC.v): It went up again. Rats.
Candente Copper (DNT.to): DNT gave us news on exploration drilling results last week, this
time from the Cañariaco Sur (South) part of its Cañariaco concession, the bit that’s not part of
the current 43-101 resource. The headline result chosen by DNT was 302m of 0.32% CuEq
(0.27% straight Cu, the rest minor Au and Ag kickers) which talks up the mineralization widths
but doesn’t do much to impress on the question of grade. In a world without political risk these
results would perhaps catch the eye, as they indicate a larger mineralized footprint that may
give up mine life extending production way down the line once Cañariaco Norte has been mined
out, but as things stand, the project looks iffy at best so it’s fairly easy to ignore a bunch of
holes that would mean more population displacement in order to dig the rock out the ground.
There was more about the resignation of the Vice-minister Lanegra out on Monday (9), in which
he strongly hinted that Cañariaco is one of the projects that the Mining Ministry wants moved
forward without any sort of public consultancy process or vote, but it’s getting to the point
where the same thing gets said in different ways here. The bottom line is that the Ollanta
government wants to green light Cañariaco, the locals don’t want the thing to happen and at
some point there’s going to be a nasty fight. But even then the whole project is marginal at
best, so I get to wondering just how much blood might get spilled over nothing at all here. A
total and easy avoid of a stock, unless a punctual and specific trading opportunity on news
potential comes our way.
Nevada Copper (NCU.to): Two NRs in a week shows that NCU is trying hard on the promo
front, but the 11c drop since last weekend means the market, quite literally, isn’t buying it. The
first on Tuesday was another NR (10) extolling the virtues of the bill in passage through
congress that will provide the permitting for Pumpkin Hollow. The second came Wednesday
(11) and covered the three latest drill results
from the North target mineralization at Pumpkin
Hollow, which didn’t show great grade but did
expand the deposit and provided some love
from the near-surface intercepts. Not exactly a
market-mover this one, but the constant
newsflow from NCU shows its strategy. What’s
happening to NCU right now fits right in with
your author’s “stay away” thoughts on copper
companies that need a buyer, as laid out last
week (and partially refuted by the copper
market numbers this week, but nowhere nearly
enough for me to change my mind). Until the
NCU’s of this world with a good, big and
advanced project in a friendly zone and
permitting on course show some decent pep, there isn’t much point in caring about the lesser
names or the sector in general.
The Lottery Ticket Basket
After 19 weeks of 2013 The Lottery Ticket Basket is showing a 21.23% loss to level stakes.
16

company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 Eagle Star Min. EGE.v 0.125 69.48 20.84 0.300 140.0%
2 Marlin Gold MLN.v 0.10 192.39 13.47 0.070 -30.0%
3 Fancamp Expl. FNC.v 0.125 118.41 9.47 0.080 -36.0%
4 Bellhaven BHV.v 0.14 121.16 7.88 0.065 -53.6%
5 Glass Earth GEL.v 0.155 104.79 7.34 0.070 -54.8%
6 Gryphon Gold GGN.to 0.085 194.64 6.81 0.035 -58.8%
7 Tango Gold TGV.v 0.13 45.59 5.93 0.130 0.0%
8 AQM Copper AQM.v 0.08 105.57 4.22 0.040 -50.0%
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 Inca One Res. IO.v 0.12 34.0 3.40 0.100 -16.7%
12 Darwin Resources DAR.v 0.20 26.16 3.01 0.115 -42.5%
13 Cream Minerals CMA.v 0.03 155.34 2.33 0.015 -50.0%
14 Firestone Ventures FV.v 0.045 36.32 1.45 0.040 -11.1%
15 Netco Silver NEI.v 0.025 47.01 0.94 0.020 -20.0%
Portfolio avg -21.23%
Up just over 1% on the week, which sounds reasonable (and better than the stocks we actually
own round these parts) until a closer look is
given. There were no moves worthy of special
25% Lottery Ticket Basket 2013 average, weekly
mention either up or down (i.e. +/-20% for
20%
these smallfry) and just four that went up
15%
(MLN.v, EGE.v, DAR.v, IO.v). The better 10%
average was caused by the amount of 5%
unchanged prices, seven of those (FNC.v, 0%
-5% FDG.v, COL.v, CMA.v, RCZ.v, FV.v, NEI.v) and
-10%
the way just four names dropped, all by
-15%
exactly half a cent (BHV.v, GGN.to, GEL.v, -20%
AQM.v). The overall picture is therefore one of -25%
continued apathy and another nail in the
coffin of this section as a smart idea for
2013...unless you can see an angle that I
failed to appreciate that is (mails welcomed).
FDG Mining is now Tango Gold Mines (TGV.v): Last week FDG Mining, now under new
management headed up by the Swiss based Antonio Ponte, announced (12) a “re-branding” (I
think that’s how the cool kids say it these days) of the company, which is now called Tango
Gold Mines and goes under the ticker TGV.v. For what it’s worth I get why they’ve added the
word gold into the corporate title, but have no idea why anyone would want to connect a
company to Argentina when it’s not even close to there. But that’s just me. Anyway, FDG/TGV
ended the week unchanged.
Darwin Resources (DAR.v): We understand that the company is still waiting on the final
green light from the ministry for its drilling campaign but the delays are pure bureaucracy,
there’s nothing wrong with the application and there’s every reason to expect things to happen
this month as planned. Meanwhile, we hear that a mining outfit called Rio Alto has staked land
adjacent to Suriloma and will start baseline exploration there soon. I thought that was kind of
interesting, considering that what i saw at Suriloma seemed to be right up the street of that
company and its proven track record of bringing bulk mining ops into production.
Regional politics
Barrick (ABX) at Pascua Lama: Positive noises
We still need to ascertain whether the problems faced by Barrick (ABX) at its Pascua Lama
17
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 ht5yam ht21
source: IKN Weekly data, TSX
2102/1/1
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project (bi-national Chile-Argentina) will add to the already blown-out capex bill for the mine,
but we can report that news from either side of the frontier was more positive this week, just
for a change. On the Argentine side ABX got a decent chunk of official backing and support
from Mining Minister Jorge Mayoral, who was attending a mining conference in Buenos Aires.
He was quoted on record as saying (13), “Doubts have appeared in the press regarding the
Lama project in Argentina and the Pascua project in Chile. Lama, right now in the heart of San
Juan province, is generating more than 13,000 direct jobs. Pascua has suffered some problems
in Chile but the company and government are working together, trying to find a solution in the
near-term.”
Meanwhile, over in Chile the new heads of Pascua Lama (ABX recently decided to ‘recommend
retirement’ to the old heads of ABX LatAm) have officially recognized that their plans were
lacking at the project (14) and have put forward a plan to mitigate dust contamination at the
site (which comes to around $29m in costs, derisory next to the $8.5Bn total capex and makes
you wonder just why it wasn’t done in the first place). This won’t mean Pascua Lama is back at
full build-out next week, but other reports (15) suggest that the Chile side of ops will be back
and permitted to continue “by the end of this year” and if that comes to pass, it shouldn’t be a
massive delay to the overall project.
The director of Chile’s main mining
body Sernageomin (National Geology
and Mining Service), Julio Poblete, was
quoted by Chile’s main newspaper La
Tercera as saying “I have no doubt if
(Barrick) gains the trust of authorities
when facing them and presents its
plans in the correct way, this (problem)
will be overcome”. These developments
may be the reason behind the rally in
ABX shares last week, but the stock
may have also benefitted from the
completion of the $3Bn debt deal
completed May 2nd (16) or the tentative
agreement with Dominican Republic, as seen below.
Before leaving, a line is needed about the position of Chile the country as regards Pascua Lama.
I’ve seen a mountain of ignorance written about the country since this problem flared into a
full-scale stoppage recently, with both Spanish language and English language commentary
about Chile being miner-unfriendly all of a sudden. This is stupidity squared, as the Chilean
government’s position as a supporter of the mining industry couldn’t be clearer or much better
than it is; it’s still a world-class place to do mining business. If anything, Chile’s recent problems
stem from the fact that it has strong, non-corrupt and transparent institutions, rather than
institutions that show the type of systemic weakness so often the case in LatAm. Chile’s
judiciary sees no need to kowtow to the government (no matter whether under Piñera, Bachelet
or any other mandatory) and goes about its job of upholding the letter of the law without
buckling to political pressure. Chile’s laws on, for example, environmental and community
protection are clear on the statute which means that its courtrooms will uphold the law as fit
when cases are presented. What has changed recently is that communities affected by mining
operations have recognized the courts as a way in which they can get their voices heard,
another aspect of resource nationalism if you like (though on a regional or local scale). When
previously, the Barricks of this world would be able to get away with bending (or breaking)
laws, rules, agreements, things aren’t so easy in this day and age and it pays for the company
involved to keep its nose very clean indeed, which is something that ABX hasn’t done (and we
know that by its own admissions now).
We’ve said it a dozen times before and we’ll say it again: Community relations is no longer an
optional extra for mining companies in Latin America, no matter where they might be or with
whom they need to deal. The arrogant, high-handedness displayed by ABX at Pascua Lama
18

Chile has got the company into legal trouble and got its head people fired. Hopefully the
company will learn from its mistakes and things will get better fast at the project, but don’t
confuse a group of environmentalists and/or locals standing up for their rights as per the
written law with “country stupidity” towards the mining industry, as the moronic end of the
mining world’s chattering class is doing.
Now for that second ABX-related story of the week.
Dominican Republic: Barrick Pueblo Viejo (60% ABX/40% GG) backs down
The tipping point came when The Dominican Republic made the decision to block any exports
from the Barrick Pueblo Viejo mine, 60% owned by Barrick (ABX) and 40% Goldcorp (GG), a
move which brought the company to the negotiation table for serious talks. The agreement
from those talks, though still in “letter of intent” phase and not final, means that Barrick Pueblo
Viejo will not be able to set off tax payments against its inflated capital costs in the way it was
planning, that it will have to pay around 50% of cash flows to the State in the years 2013 to
2016 (previously due to the capex offset, that was calculated at only the 3.2% gold royalty
going to the country) and that, overall, the revenue split has moved from the previous
estimated 63% company/37% State over Life of Mine to 49% company and 51% State. The
preliminary agreement has also been greeted with approval from Dom Rep politicos and
empresarios alike (17) and is considered a big win for country President Danilo Medina.
We first reported on this issue in IKN196 back on February 3rd and in general terms, it’s worked
out along the lines expected. Here’s an extract from the piece that day:
“...in this case the devil is in the details, the nation’s government may well have a point and we
will probably get some sort of deal struck between the two parties. The main point of study in the
deal between Pueblo Viejo and the government is the clause that states Pueblo Viejo will not pay
the nation’s corporate and income tax rates (28.75% and 25%) until the capital costs of the
project are paid back. Until that time, the only payment to be received by the State is the 3.2%
gold royalty. All well and good and both sides signed onto this agreement as well, but at the time
of signing the expected investment was $700m (and gold was sitting at around $300/oz). The
final bill for Pueblo Viejo is estimated at $4Bn (19) which means the State is going to have to wait
a long time before that income. The image of a gold mine reaping in profits and accounting for
around 15% of DomRep’s total exports (20) without seeing any revenue from the operation for
the first years now sits badly with public opinion and the new congress now seeking to amend the
deal.”
And here we are today, with a revised deal that contemplates all that. The other point made in
IKN196 was contained in the closing lines as follows:
When countries “renegotiate” deals with mining companies it never sits well within the industry,
so it remains to be seen how the fallout from this review will affect other operations and projects
in DomRep, with particular thought going to the growing number of exploration stage companies
working there.
In his case, Dom Rep has been at pains to tell the world of mining that this Pueblo Viejo case is
different and separate from the mining world in general (for example, it’s told Xstrata that its
big plans in the country will not be affected in the slightest) so the immediate fallout shouldn’t
be too bad, though debate on whether Dom Rep is a trustworthy long-term partner is likely to
continue on-and-off. However, the episode does point to the rise in strength of host nations
and the position of weakness that mining companies now have, as considered in last week’s
edition when (the lack of) technology being incorporated into the mining industry was noted.
The rise of resource nationalism is more than just that issue of course, but the apparent
resolution between Pueblo Viejo and Dom Rep is another clear marker along the path.
Fortuna Silver’s (FVI.to) (FSM) community relations in Caylloma, Peru
Two short newspaper reports from yesterday Saturday sum up the rise in tensions between
locals from the town of Caylloma and nearby mining companies. As quick background, last
week locals staged a 48 hour slective roadblock at a strategic bridge in the region that let past
all transport except trucks connected to any mining company. When the blockade was done,
19

the Caylloma town mayor had specific words to say about Fortuna Silver (FVI.to) (FSM) aside
from the other local mining companies there (Orcopampa, Ares etc). Here’s the first short
report (18) translated in full:
After local populations from high altitude regions of the province of Caylloma had
finished their 48 hour strike action and begun a round table discussion with
representatives of mining companies that operate in the province, including Minera
Bateas, the provincial mayor Elmer Cáceres said that the mining companies didn’t
support the province.
He said that, for example, Minera Bateas had not moved on the projects that were
approved in an agreement in 2012. He said that the company had only handed over
wheelbarrows, seeds and agricultural tools. He added that if there weren’t a solution
before May 15th, the population and authorities of Caylloma would re-start their protest
measures.
And here’s a translation of the second short report (19), a type of right to reply with the views
and opinions of FVI via its wholly owned subsidiary and operator of the Caylloma mine, Minera
Bateas:
Pedro Gamio, head of the Community Relations office of the Bateas company, denied
that the mining company didn’t support the population of Caylloma. He said that
between 40% and 50% of the population works directly or indirectly with the company
and that he didn’t understand why a group of locals had moved to protest against the
mine. He also confirmed that a round table discussion group was started on Thursday
to resolve any problem with the sector.
He added that in 2012 the mining company had made several investments in the
Caylloma province, amongst which are construction of a dam to store water as well as
investing in sectors such as health, education and sustainable development.
As usual in these spats, the best guess is that the truth lies somewhere in between the two
stances and it’s therefore good that a round-table discussion has already been set up to solve
the problems. However, the act of holding a 48 hour strike means there were local grievances
that grew to a point of action, however justified (or not) those might be.
Signs of movement in Colombia’s mining law
According to reports (20) the next two or three weeks will see various executive decrees that
will begin to formalize the laws, rules and regulations around Colombia’s mining sector. On
Monday we can expect a announcement regarding the legalization of concessions (for example,
what can or cannot be claimed as a mining concession in the country) then later edicts are
expected that will make the country’s environmental rules and regulations clearer for all. It’s
another one of those “don’t hold your breath” moments in the Colombian legal mining scene, as
overhaul of the rules is now long overdue and the doubts it has caused have hit the industry’s
development hard. However, any news on rule clarity forthcoming should be viewed as positive
by us outsiders, as all the world really wants is a clear rulebook and a level, stable playing field.
More anti-mining protests in Argentina
The Famantina project owned by Osisko Mining (OSK.to) but never really moved forward due to
opposition from locals in the area at/around the eponymous town in La Rioja made headlines
again this weekend (21). The brief story is that the provincial governor was in town, anti-mining
protester made a point of greeting him with complaints about his support for the Famantina
project, the police stepped in and heads were cracked together. Hospitals reported at least 12
injuries and police said that five protesters were arrested out of “hundreds” on the scene.
Overall, it’s fair to say that Famantina is a branch of operations that OSK would likely prefer not
to highlight and that those protesting are on to a good thing under current circumstances.
20

Market Watching
Jaguar Mining (JAG) (JAG.to) redux
After writing up on the potential of Jag giving us a fliptrade opportunity, your author finished in
this fashion:
There is a possible near-term fliptrade here, but before moving in I’ll want to
see if any traction is gained by this weekend’s NR.
As it happens (and as this five day chart shows) said traction never really got hold and JAG
drifted lower all week instead of putting in a move so the trade wasn’t made. It’s still a potential
place for a fliptrade, though due to the travelling and orders from the boss to stay off-grid this
week (mails pick-up and price checking in evenings only) I doubt I’ll be partaking in the market
until Friday at the earliest. Still not dead, though perhaps down the list of urgency.
More Capstone (CS.to)
It was interesting to watch (while not travelling at least) how Capstone got its sparkle on last
week, closing at $2.37, as it was mere days ago that the deal to buy Pinto Valley (see IKN209
last week) knocked the stock back to under $2.00, plus all the time and asks you’d need to
make a decent 15% winning trade in less than two trading weeks.
Yes of course CS.to benefitted from the pop in copper last week and is probably enjoying some
very early applause for its good deal timing.
The Rio Alto (RIO.to) La Arena site visit
On Monday 6th and Tuesday 7th of May of last week your author went to see what’s going on at
La Arena, the operating mine owned by our Top Pick Rio Alto Mining (RIO.to). Here comes the
photoshow and commentary but before diving in, a prelude is in order.
21

It was the first time I’d been to La Arena since it was moved into operation, with the last time
at the site back in August 2010 (see IKN69, or I’ll send you a copy by reply). At that time RIO.v
(not RIO.to or RIOM) was a $1.00 stock and after the visit we raised our rating to ‘Top Pick’ for
the first time (we were already long at 69c, for those with the necessary memory). Therefore
the big outing for me was to see how things had changed, the development and landscape of
operations. That turned out to be much as expected (the road track, big trucks, mine ops and
benches, building etc) because when you’re expecting to see a 2,000+ employee mine, it’s
difficult to remain with the previous images. However, what really struck home on the visit was
the way in which the La Arena mine, or perhaps more precisely La Arena S.A. the wholly owned
subsidiary of Rio Alto Mining (RIO.to), was now a self-contained entity with a life of its own.
Theirs is not a world affected by sudden rises and drops in the price of gold (perhaps because,
as the mine’s head man as gracious, patient site tour guide Tim Williams explained, La Arena is
still happily free cash flow positive at $1,100/oz gold) and its life isn’t one tied closely to the ups
and downs of the listed share price. This is a fully fledged working mine with its own character
and culture, a world away from the normal situation of the junior mining company. It’s a big
mine though not the biggest in the world by any means, but it’s a fully functioning, smoothly
(to the point of excellently) run operation that hasn’t been set up to process a few million
tonnes of oxide gold material over six or seven years and then be done; the biggest and most
positive message of them all is how La Arena is going to be around for decades, rather than
years. The visit and to see how the next defined stage of growth the stage 2 sulphide
copper/gold operations, will neatly dovetail into the infrastructure already in place and present
made the long-term aspect of La Arena very clear indeed. This one isn’t about what happens in
2013, ladies and gentlemen, it’s more about what size it will be in 2020. The answer to that is
bigger, obviously bigger.
However, there are other more immediate matters we can mention and let’s do so up here at
the top, because otherwise you may get bored with searching between the endless photos for
any snippet of something interesting. So by way of a small bulleted list...
• Yes, that does say free cash flow positive at $1,100/oz gold and that means with
everything included. So if you want a rough idea of profit margins, take gold’s price,
subtract the 1100, snip the tax away and there you go. Personally I’m good about
putting in a baseline of $250/oz net profit for RIO at today’s market prices. As for
production...
• The mine people are happy about the way 2013 has started. They were keen to
underscore (time and again, from different people) how 1q13, the quarter gone, was
the heavy lifting quarter that was low on production because the waste/ore strip rate
was high. 2q13 is going to be better, but then things will really kick in from the second
half of 2013 onwards as RIO starts averaging production of around 20,000 oz per
month. Now, that could be 18k one month and 22k the next due to specific mining
reasons, but when quizzed on the confidence level of being able to churn out an
average of 60koz Au per quarter from July 2013 onwards, the responses were all
confident and affirmative. And be clear, this won’t be about producing 60k/qtr in the
second half of 2013 only, this is about 60k/qtr in 2013, 2014, 2015 and off into the
future, exploration success permitting.
• Costs are under control and there are projects in the pipeline to bring them down
further. Again, 1q13 and 2q13 are the higher cash cost periods, but once 2h13 comes
along costs are going down. One initiative that really catches the attention is the switch
from diesel generation power to the national grid. That’s now gained its permits and
RIO is investing in the necessary infrastructure, but the benefits to the oxide gold
operations only will be tremendous. The price of a KWh is projected to go down from
the current ~38c to just 7.5c and once the system is fully operational (which should be
the second half of 2014) it will mean costs savings of perhaps $2m per quarter and a
very tasty $34m over projected life of mine, which is money going to the company
22

bottom line instead of the company diesel supplier. Your author’s best ciggypack
scribbling puts that at $40/oz cash cost savings, to put it into context.
• The operation is smooth, well run and cost effective. Staff members are treated well,
with good food at a well run canteen, comfortable sleeping quarters for those living on
site during shift days, happy faces all around. As usual I managed to slip away from my
group on a few occasions in order to speak to whoever was around. No complaints
heard from office staff, truck drivers, security guards, etc.
• The stage two sulphide pit will move into production smoothly and without a problem.
It’s one of the issues I had with my own understanding of RIO the company, but now
I’ve seen the physical site of stage two and how it will begin, concerns are down to
zero. Another takeaway from the visit is to note the general and relative
straightforwardness of the whole operation. That’s likely to be as much of an illusion
set up by smart management running the show as the practical logistics, but in the end
simple and straightforward, for whatever reason, are very good things for a mining
company.
• There’s bags of exploration potential at La Arena, with the potential for more oxide gold
discoveries high. It’s pretty clear that RIO will continue to be a gold producer long after
the copper sulphide ops begin, with the likelihood of it being a company that produces
both copper and gold on a roughly equal basis over the long term high.
So to the show. Monday was travel day, with two flights and a drive to the mine that was made
slow by roadworks. On arrival
there was time for food and a
short briefing before hitting the
sack, ready for an early start
the next day. Here’s the view
from outside your author’s
sleeping quarters at 7am, on
the way to breakfast (and for
those of you tuning in who
know their mining company
canteens, yes of course there
was instant Nescafé on the
table but impressively RIO has
real butter instead of the near-
ubiquitous margarine).
Breakfast done and we were
taken to the admin offices for
induction (safety course etc, all
as it should be) and a look
around the place where the
staff of 75 pushes paper around.
23

From the window of the second floor, we get a clear view of the main mineralized zone,
Calaorco, which is basically that hill in the distance.
It was time to get closer to the dirt, so in the 4x4 (one of 36 on site, mostly rentals) and up to
where the real action is.
By this time the morning mist and low cloud was starting to clear and the view was getting
24

better. Here’s a snap from the 4x4 back to the main HQ area as we climbed up Calaorco
First stop was Calaorco 1, which is now mined out but gives a good view on how operations
have progressed. The typical bench is
6m high, which may change in the
future to a larger bench. One of our
posse that day was a consultant
engineer who’d been brought in to
assess the state of the pit walls and
advise on opportunities for costs
savings in the future. From what I
heard (aka eavesdropped) he was
happy with what he saw.
We moved on to Calaorco 2, the
operations end of the mine, and
watched as the Bucyrus 20 tonne scoop
loaded the big dump trucks, 95mt at a
time. The operation’s logistics as
witnessed were impeccable, with one
truck arriving as the other was filled and
the scoop never stopping. Also on site
were the drills that took 6.5m samples
from the parts of the hill due to be
blown up and mined. The drill samples
were processed by the on-site lab,
results compared with the forecast for
local grades, and from the comparatives
the charges set in order to optimize
ounces released per blast. Quizzing Tim
Williams later, it turns out that the La
Arena mineralization has been
performing very predictably, with grade
differences between what they expect
from any given area and what they find
of less than 4% at all times. Again, all
pointing to efficient and cost-effective mining.
25

Here’s a nice panoramic shot of three of those 95 tonners doing their duty. In total the fleet is
33 trucks, which allows for regular servicing rotation and earth-moving capacity of 33 million
tonnes per month.
We then moved on to the Ethel pit, which is now close to exhaustion of its oxide gold
mineralization but nevertheless was the most interesting stop of the day. That’s because the
mining of Ethel has now exposed the first showing of the material to be mined in the stage 2
copper/gold sulphide operations, and that’s what the grey coloured rock is in the picture you
see below. The median average grade of the grey stuff is 0.5% copper with a gold kicker of
between 0.13 g/t and 0.15 g/t, but grade spikes of 1.0% Cu were also reported.
On closer examination of the mineralization down at the face, its easy mining characteristics
were clear to see. The rock was crisscrossed with veinlets that hosted the mineralization, as this
typical example in the centre of this photo shows. A small piece of rock has fallen away, leaving
the copper/gold mineralization along the veinlet exposed
26

Here right is a close-up of the same spot, with the feature encircled.To go back to the overview
photo three shots up, this location of the start of the copper mineralization here shows how and
where the stage two sulphide operation will happen at La Arena.
The pit will centre on a space behind Ethel, the pit construction
dovetailing nicely into the operations that have already dug out
the oxide rock. The first stage for the sulphide pit is now being put
through permitting and will be an 18,000tpd operation that
centres on the higher grading material found close by to this pit
face (a little behind it, to be more accurate) and the cash flow
models from that show strong cash flow and simple mining for the
first six years. At that point, the stage 2 sulphide operation is set
to grow, with higher tonnage throughput offsetting the drop in
grade towards the average of 0.5% Cu. That’s all for the future,
but what I got from the visit was to get a very clear visual picture
of how stage 2 runs on from the current stage 1 oxide gold
operations. Although a couple of photos don’t really do it justice,
the obviousness of moving from stage to stage as the new
sulphide mineral becomes uncovered and accessible makes the
step a virtual no-brainer. Also, as it happens on a site that already
mined the permitting track should be straightforward. Be in no
doubt folks, stage 2 is happening.
Back up at the ridge above Ethel, a good idea of the layout of this
side of La Arena is given. This annotated shot should give the
general idea, as the leach pad (the only one in operation right
now, with another being readied for use in the near future) and
processing plant (where the gold is poured...sorry, they didn’t let
me in there) in the further distance. Behind my back as per this photo is the main building/HQ
area, to the left the Ethel face and behind Ethel, the road back to the Calaorco operation
(where most of the trucks move back and forth).
27

Here’s a shot of the Ethel oxide gold mining operation now in its last month. Again, logistics as
witnessed were smooth and zero time loss incurred by trucks or scoop.
We then drove down, checked out the dump leach pad (being irrigated in normal style)
And drove down to the processing area, which is the place where the security guards have
28

shotguns slung across their shoulders
A little further down is the collection pools and here we see the pool in which the pregnant
solution is collected (again, armed guards on show to prevent people scooping up the gold-
enriched liquid or, by way of a better technique, dipping sacks of carbon into the pool and
letting the gold soak in).
That liquid is then pumped up here where the gold content is stripped out in carbon columns
(standard technology I’m told, though as we didn’t go in the buildings there’s no visual
evidence for you), the carbon processed and the pure gold released, founded and poured into
doré bars.
29

The morning had flown by, so after a spot of lunch it was time to explore the other side of La
Arena. This shot from the other side of the main road gives a pretty good view of operations
And just a few yards on, we come to the new church and school built by La Arena for the local
population.
30

Again, emphasis was placed on the long-term relationship and how the company was looking to
get employees for the mine in ten years’ time from at lest some of the 400 children that attend
the school. Expansion work was evident at the school too, with a theatre annex currently being
built as part of the mine community relations program. We then followed the road further out
to visit the La Colorada exploration target which sits 8.4km as the crow flies from the current
mine (that’s about 30m minutes of winding dirt track road in real terms). Once there, we got to
see the bits of La Colorada that have been drilled already and it becomes clear as to why they
chose this spot to test first. If RIO had hit stronger grades than they did, this would have been
a great little annex resource because of the way it sits up out of the surrounding landscape and
therefore offers a very low strip. As it happens, the drill assays weren’t as good as the surface
sampling had promised and although not dead as a target, RIO has to think again about
whether this specific target La Colorada is the right one with which to start. However, once
you’re on project there it becomes clear that there are 1) plenty more prospective targets at La
Colorada and 2) a lot of area to make for a big oxide gold mining operation.
Of particular interest are two areas, firstly a site uncovered by a road cut that has shown typical
sample grades of 0.80 g/t gold to 1.0 g/t gold (and above, but I can’t tell you that ☺) which
you see here.
31

The second area was being trenched during our visit and is known as the “Tuff Zone”, probably
due to the tuff found there. This is a large surface area and forms the main target area for the
next stage of drilling. That’s being permitted now and we should get results during the course
of the year. The main takeaway from visiting La Colorada is the obvious exploration upside
there is at this target, as well as the half dozen or so other targets in other parts of the big
concession area. It’s worth noting that La Colorada is in eyeshot, perhaps 2km from, the
Comarsa San Simon/La Virgen mine that started as a 150,000 oz resource and is still producing,
1.5m oz later.
It was then time to go home.
To conclude, the trip last week is presented more as a travelog with less analysis than usual,
because I want to give an idea of the big, bad working mine RIO has at La Arena. As the trip
fully satisfied my hopes of what to see, the IKN Weekly’s ‘Top Pick’ recommendation on the
stock is confirmed and that’s all the investment advice you really get form the note today.
However, the trip was also about gleaning information in order to improve our company
modelling and forecasts, which is something that will happen in editions to come (probably
when we have the next set of production figures from RIO.
Conclusion
IKN210 is done, we close with bullet points:
• On revisiting IKN196 this weekend (while checking back on the original piece that
covered Dom Rep vs ABX), this jumped out at me in the opening op-ed section:
“...compan[ies] will be less concerned about giving or taking a percentage
point of gross profits and will value more highly those countries that can
offer a stable business environment. They’ll also be more interested in the
quality deposits that can take a sudden bump or two in the State burden in
their stride.”
Y’know, that still sounds absolutely right to me (which is good, considering that I wrote
it ☺). Political risk, at a national, regional or local level, is becoming a burden for many
companies, but that also suggests that those projects in prized pol risk areas will have
32

extra asset premium awarded to them. It’s always been easy to reject those names
exposed to Venezuela, El Salvador, Bolivia, Ecuador, etc and to those we can now add
Argentina, specific areas of Peru, specific areas of Mexico or Colombia...we’ve gone
through the place names before and the message is clear; be choosy. However, the
flipside is that names like NovaCopper (NCQ.to), Nevada Copper (NCU.to), Rio Alto
(RIO.to) and a host of others I could mention in safe national zones with welcoming
locals will continue to ride their strong political profile higher. We’re not at a plateau of
value for political risk yet, good and stable assets are going to increase even further in
value and yes, that also means a national, state or region revenues burden bump will
get taken in stride by the profitable and stable mining company.
• The new trade in Duran Ventures (DRV.v) is small, speculative, and near-term. We’re
not in this one to make a million bucks, we’re looking for a difference on news and
momentum from a company that has a history of moving on those kind of influences.
The word on the rocks at Minasnioc has always been positive, but the change now is
that locals are coming around and will allow formal exploration, including the all-
important drilling, to take place. We don’t care about Aguila or Ichuña for that matter,
we’ll take our chances on Minasnioc alone and consider DRV’s sub-$10 market cap and
30% overall free-ride on the project as a fair entry point to give us the type of leverage
required from a spec junior. Risk? You bet there’s risk, so only follow if you have your
eyes wide open.
• On the other hand, the time to risk on Lupaka Gold (LPK.to) has passed and its failure
as a trade set in stone. It might have started well but 20/20 hindsight tells, nay shouts
that I should have taken my lumps on this when it decided to buy into Andean
American (AAG.v) and take large-scale dilution in return for a cash treasury and some
very sketchy assets. My mistake, my failure, my loss and my overrriding stupidity was
to call the bad deal for what it was but do nothing about it. Sigh.
• Copper fundies perked up last week, as did the market price. The signal from the
BHP/Capstone deal is still foremost in my thoughts though, so no straight copper
exploreco investments for the moment (I’ll just continue to suffer from the thorn in my
side that is AQM.v).
• Time to pack a few clothes and get ready for a family break. Definitely looking forward
to switching off for a while and enjoying the company of my three favourite girls.
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
33

Footnotes, appendices, references, disclaimer
(1) http://duranventuresinc.com/minasnioc.php
(2) http://finance.yahoo.com/news/gold-corporation-reports-first-quarter-212745015.html
(3) http://www.goldresourcecorp.com/content/DE-00186_El_Aguila_Technical_Report_final_20120710.pdf
(4) http://www.sec.gov/Archives/edgar/data/1160791/000119312513187593/d527287ddef14a.htm
(5) http://www.estrategiaynegocios.net/blog/2013/05/09/guatemala-levantan-estado-de-sitio-en-poblados-anti-minerias/
(6) http://finance.yahoo.com/news/tahoe-reports-2013-first-quarter-124500801.html
(7) http://www.tahoeresourcesinc.com/wp-content/uploads/2013/05/1stQuarter2013-MDA.pdf
(8) http://www.americaeconomia.com/negocios-industrias/el-cobre-se-vuelve-palido
(9) http://gestion.pe/politica/lanegra-no-se-requiere-base-datos-realiza-consultar-previa-2065322
(10) http://finance.yahoo.com/news/nevada-copper-updates-lyon-county-123000978.html
(11) http://finance.yahoo.com/news/nevada-copper-corp-north-deposit-164721835.html
(12) http://www.fdgmining.com/News/News-Releases/News-Releases/2013/FDG-Mining-Inc-Announces-Name-
Change-to-Tango-Gold-Mines-Incorporated/default.html
(13) http://elinversoronline.com/2013/05/mayoral-aseguro-la-continuidad-de-proyectos-mineros-en-la-argentina/
(14) http://www.aminera.com/mas-noticias-nacionales/48069-barrick-estima-en-us29-millones-costo-de-plan-de-
mitigacion-para-tratamiento-de-aguas-en-pascua-lama.html
(15) http://www.oem.com.mx/eloccidental/notas/n2978197.htm
(16) http://finance.yahoo.com/news/barrick-completes-sale-3-billion-152246725.html
(17) http://www.listindiario.com.do/economia-y-negocios/2013/5/9/276390/Respaldo-total-al-pacto-con-Barrick
(18) http://www.larepublica.pe/11-05-2013/alcalde-caceres-llica-acusa-mina-bateas-de-no-dar-
apoyo?utm_source=dlvr.it&utm_medium=twitter
(19) http://www.larepublica.pe/11-05-2013/minera-bateas-niega-que-no-brinde-apoyo-
caylloma?utm_source=dlvr.it&utm_medium=twitter
(20) http://www.aminera.com/noticias-generales/118-internacionales/48075-no-habra-mineria-en-paramos.html
(21) http://www.lanacion.com.ar/1581095-dura-represion-policial-contra-ambientalistas-en-famatina
Appendix 1: Flash update of Friday May 10th
Good morning, it's around 07:30am local time with an hour before the opening bell.
Today's Flash update is partly a function of my next week, as I'll be travelling and on family vacation as from pre-bell
Monday 13th and not back in the office until Friday 17th. Because of this, i'm looking to make both trades mentioned
today Friday 10th May.
Selling Lupaka Gold (LPK.to)
After meeting with management this week, the decision here is to sell. The main reason is that LPK is going to go
through a quiet period in order to protect its treasury position, which on a corporate level is a correct strategy in this
current market, but means that meaningful newsflow is less likely to be forthcoming. This is a big loser of a trade, but its
profile doesn't fit the change of direction of the Stocks to Follow portfolio and it's time to take this loss officially. More on
Sunday in the weekly.
Buying Duran Ventures (DRV.v)
Please be clear that this trade will be both small in size and near-term speculative, in much the same way as other small
trades we've recently moved into and out of on the Stocks to Follow port. I'm not keen about the track record of the
management team at DRV, neither am I a fan of its main Aguila project, but the reason to buy this is that we understand
that good progress has been made with community relations at the Minasnioc project in Huancavelica. This project is
under option to Rio Alto Mining (RIO.to) who can earn up to 70%, and since RIO and its community relations team has
come on the scene, the community situation has turned from difficult to good. We're now close to the point where an
agreement to drill the very promising project (rockwise) is signed and with DRV now under $10m market cap, its 30%
free ride (and potential to earn a couple of small cash payments) means that it offers the type of leverage to a good
potential drill play that we look for in a spec play. The other advantage here is that DRV tends to have reasonable
trading liquidity and also a track record as a vehicle of speculative market movements (that's putting it diplomatically, of
course). This will be a small trade with a near-term timeframe that's based on potential newsflow and if a decent
percentage win results, profits will be taken without a second thought. More on this in Sunday's edition, too.
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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
35

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.
36