IKN #215Premium

The IKN Weekly
Week 215, June 16th 2013
Contents
This Week: Stressing the Rio Alto Mining (RIO.to) (RIOM) near-term trade, Travel plans, Fed
week.
Fundamental Analysis: Pretium Resources (PVG) (PVG.to)
Stocks to Follow: Overview, Pretium Resources (PVG) (PVG.to), Rio Alto (RIO.to) (RIOM),
Bellhaven (BHV.v), B2Gold (BTO.to) (BTG), OceanaGold (OGC.to) (OGC.ax), IMPACT Silver
(IPT.v), Bear Creek (BCM.v), AQM Copper (AQM.v). Minera IRL (IRL.to).
Copper Basket: Overview, Panoro (PML.v), Lumina (LCC.v), Reservoir (RMC.v), Strait (SRD.v),
Candente (DNT.to), Hot Chili (HCH.ax).
The Lottery Ticket Basket: Overview, Darwin (DAR.c), Inca One (IO.v).
Regional Politics: Regional risk update next week (with changes), Argentina: Santa Cruz
approves its new mining tax, Ecuador: Mining law reform passed Kinross (K.to) (KGC) leaves
anyway, Chile: Exponor this week.
Market Watching:
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
Lame excuse (literally)
I apologize for the content in today’s edition, specifically the cut short analysis of Pretium
(PVG). I hurt my foot a couple of days ago and the pain has intensified this weekend to the
point where I can’t concentrate on what I need to write. Therefore I’ve cut the analysis short
and will finish it off next week. I just hope things are better tomorrow for the trip.
Stressing the Rio Alto Mining (RIO.to) (RIOM) near-term trade
I want to lead off this week by underscoring, banging on that there table, about the opportunity
in the near-term for a trade in Rio Alto Mining (RIO.to) (RIOM). The clear risk is in the gold
price because if the tide goes out over the next month or so, all boats fall so you have to be
aware of that and willing to accept the exposure to a suddenly rather nervy metal (in dollar
terms at least). But if you want a near-term trade in precious metals, look no further than this
stock because it’s quality, it’s been beaten up unjustly due to unfounded and false rumours, it’s
about to put in a strong quarter of production and guide higher for the future, it has a long life
of mine future and it has a strongly positive community relations profile as well.
You too can consider RIO.to a strong longer-term investment, but this set-up is more about the
near-term prospects and what looks to me like a great trade opportunity over the next four to
five weeks. Buy a few now and as long as gold behaves, sell them with a $3-handle in July.
Travel plans
1

Tomorrow Monday through Wednesday evening, your author will be making one of the semi-
routine whistle-stop rounds of mining offices in Lima, with scheduled stops at Strait Minerals
(SRD.v), Darwin Resources (DAR.v), Minera IRL (IRL.to) and Rio Alto Mining (RIO.to) among
the companies that get covered to a greater or lesser extent here at the Weekly, as well as a
couple of other meets that are more to do with tapping the brains of people about the general
political scene rather than mining (ok, I admit it, it’s a fancy way of justifying a few hours of
gossiping with friends). There are more details in the main sections below on the whys and
wherefores for the planned company visits, but here’s a line on each to map out the plans:
• Strait (SRD.v): I want to find out how this seemingly endless permitting proces for the
Alicia project is going and whether drilling is going to happen anytime soon. If it is,
then SRD will be back on the radar at these prices.
• Darwin (DAR.v): Find out about the just-started drill program at Suriloma and any other
snippets that are offered.
• Minera IRL (IRL.to): I want to find out about progress on the Don Nicolas financing
plan (if any) and also hear anything about apparent negative rumours doing the rounds
about IRL.
• Rio Alto (RIO.to) (RIOM): Anything that can be gleaned about the trashtalk campaign
that was mentioned in the Flash update of last week (see appendix 2) and any updates
on operations.
Expect light blogging the first part of next week, but if anything comes up that’s time-sensitive
I’ll send out a Flash update if necessary.
Fed week
Nest week sees the FOMC meet and Wednesday lunch we get the announcement followed this
time by a Ben Bernanke presser. As always your author takes his cue from Calculated Risk on
these matters and here’s what McBride has to say (1) this weekend
The key event this week will be the FOMC statement and press conference on Wednesday. No
changes in policy are expected, but Fed Chairman Ben Bernanke is expected to reiterate that
rates will stay low for a long long time.
Excuse me if mistaken, but this seems a long way from all the “tapering” talk we’ve been
hearing recently. Also, there was a GS paper out last week (2) that talked down big changes
and went as far as to warn the Federal Reserve (if warning the Fed is possible) about
encouraging the market into assuming that tightening is on the way. Meanwhile, was all this
action of last week due to the gravitation pull of this week’s FOMC? Gold and silver did ok, the
miners got another pummelling.
2

Fundamental Analysis of Mining Stocks
We look at our new position in Pretium Resources (PVG) (PVG.to)
NOBS report dated June 16th 2013
Pretium Resources Inc. (PVG) (PVG.to)
Company Overview
Pretium Resources Inc. (Canada PVG.to, US: PVG, Frankfurt:) is an exploration stage gold
mining company operating in Britisn Columbia, Canada. Its flagship asset is the Brucejack
project in Northwest BC Canada, which includes the main high grading Valley of the Kings
(VOK) target. Share structure is as follows:
Shares out: 102,256,532
Options: 8,626,950 (4.3m at $6/$6.10, rest out of money)
Warrants: Zero
Fully diluted shares: 110,883,482
Current share price: $7.94
Market Cap: $880.41m
Approx cash per S/O: $0.49
All prices are in US dollars unless stated. Forex U$1=CAD$1
NB: For valuation and modelling purposes, we use the US listing as our benchmark
3

Management and share structure
Pretium Resources (PVG), often spelled with a V instead of a U in a slightly annoying Roman
style (e.g. the website address), is a company created in 2010 by Silver Standard Resources
(SSRI) specifically to explore and develop the Brucejack and Snowfield deposits, at that time
held by SSRI. In late 2010 SSRI sold the projects to the newly formed PVG in a U$450/C$442m
deal (paid by roughly half cash/half shares).
PVG is headed up by President and CEO Robert Quartermain, who was president of SSRI for
15 years before leaving to run PVG. The rest of the team hold the type of strong resumés you’d
expect for a top line Canadian precious metals exploration project, with many of the geology
team also having come from SSRI from set-up. No particular problems about personnel quality.
When PVG was floated SSRI held a little under 50% of all shares out. Since then that total has
been diluted by several rounds of equity financings. As at today, here is a chart (ripped from the
company website) that runs down the largest shareholders and their percentages:
SSRI is still the biggest holder and along with the influence of its executive officers will almost
certainly have the controlling voice on any future M&A activity, which means that if some
company wants to buy PVG it’s going to have to be in a friendly deal that gets the approval of
SSRI. Another worthy of mention is fourth on that list of holders; Liberty Metals & Mining
Holdings is a subsidiary of Boston’s Liberty Mutual Insurance, who in April 2013 paid (3) C$40m
for 5.78m shares of PVG at C$6.92 apiece and provided PVG with the funds it needs to develop
in 2013...just about. What it does show is that PVG has bigtime institutional and financial
backing for its project, which sets it apart from the vast majority of cash-stricken juniors at the
moment.
Financials
Our look at the PVG financial development brings up several points of interest. First we’ll run
some of the charts, then comes the a discussion of the books.
We’ll start with debt and liabilities look like this.
4

$m PVG: Liabilities position
50
45
40 LT debt
35 current debt
30
25
20
15
10
5
0
4q10 1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12 1q13
source: company filings
The short-term debt position at PVG has crept up a but but it’s nothing untoward (sidebar: that
4q10 show was a technical leftover from the SSRI deal and of little importance today), as the
company’s accelerating activity means that normal run-of-company type stuff will show larger. I
haven’t extrapolated the liabilities chart into the future quarters because it’s not that necessary,
but we do show our forecasts for the next three quarters for assets, working cap and share
count.
So to assets:
PVG: Assets Breakdown per qtr
800
700
600
500
400
300
200
100
0
5
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2 tse31q3 tse31q4
source: company filings, IKN ests
srallod
fo
snoillim
fixed
other current
cash
PVG started life by booking its acquisitions as assets and has capitalized expenditures ever
since (note, any eventual operator of Brucejack will have chunky amounts to book on its
amortization/depreciation line item). With no writedowns along the way today’s company shows
$628m in fixed assets and what’s interesting about this figure is that to date $309.6m of it is
covered by the Snowfield resource and $311m by the headline-grabbing Brucejack.
An aside: Snowfield. In other words, nearly half of PVG’s asset value is covered by the
Snowfield project which is a big tonnage, low grade deposit very much along the lines of the
projects now very much out of favour up and down The Americas (from ITH.to in the North to
Caspiche in the South).
Here’s the current resource table for Snowfield, which has has a 43-101 compliant M+I resource
of 25.9m oz Au and an inferred resource of 9.02m oz Au (with Ag, Cu, Mo and Re kickers) but
grade at 0.59 g/t Au at a 0.3 g/t cut-off looks really marginal and considering the remote location
and market disdain for such projects, there has to be a lot of doubt about the true value of a
resource that was last calculated in February 2011 when these big low graders were still
considered reasonable investment options by the market. Snowfield backs onto another big low

grade resource, that of Seabridge’s (SA) KSM property and the two companies have a
confidentiality agreement in place that may end up reaching some sort of deal, but even so the
acid test is whether these big capex ticket deposits can be mined at a profit. Having never liked
(understatement) SA at KSM and considering it not much more than the world’s most expensive
anomaly, it’s difficult to assign much true value to half of PVG’s fixed asset position.
This is why it’s not reasonable to value PVG to book value parameters. This investment is all
about Brucejack and that project covers just 35% of its current market cap by asset value
Back to the financials and here are working cap and shares out, presented together because
PVG relies heavily on equity financing to fund its heavy burn rate for development. The $40m
added by the Liberty Metals & Mining Holdings financing in April should see PVG end the
current quarter with around $40m in working capital (our conservative-minded guesstimate is
$37m, that might come in a few million higher if there’s a let-up in activity now that the feas is
in). What’s almost certian is that assuming PVG isn’t bought out, the company will look to go
back to market and sell more shares before the end of this year. We’re assuming that PVG
raises another $40m in our model (by selling 5m shares at $8 each), but there are other
scenarios possible, such as raising ALL the money it might need to construct its mine and go
into production or raising half now, or even getting bought out. Our model makes the asumption
that PVG will still be an exploration stage company at the beginning of 2014, for pure valuation
purposes.
100 PVG: Working Capital per qtr
90
80
70
60
50
40
30
20
10
0
6
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2 tse31q3 tse31q4
source company filings, IKN ests
srallod
fo
snoillim
We therefore estimate that shares out, current around ~97m, move to around 1.02m by the end
of this year. PVG has a clear track record of raising its necessary cash by equity placements
and unless it goes for the type of large cash needed to build a mine (and gets maybe half of that
via debt financing), there’s little doubt that will continue. Again for the sake of the model, we
assume shares are added at the current share price.
110 PVG: Shares Out
100
90
80
70
60
50
40
30
20
10
0
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2 tse31q3 tse31q4
source: company filings, IKN ests
serahs
fo
snoillim
As for the P+L, it’s really not that enlightening compared to the big picture of what’s going on at
PVG. As you can see from this chart, recent quarterly losses at PVG have revolved around the
$4m mark which doesn’t explain where the money is going at such a fast rate. The only thing

that is of interest here is to note just how much of the quarterly net losses are covered by share
based payments, these guys aren’t nervous about chunky sized options awards for the staff.
U$m
PVG: Net loss, per qtr
8
7 Net Loss
6 part of net loss covered by share based payments
5
4
3
2
1
0
4q11 1q12 2q12 3q12 4q12 1q13
source: company filings
No, the place to go and see how the money is being raised and used by PVG is over at the
cash flows statement and here’s a chart that compares the “big in” and the “big out” per quarter.
In dark red we have the cash that PVG has raised per quarter and in grey (along with future
estimates) we have the expenditures on mineral interests, that’s to say the cash it’s burning at
Brucejack. Extra drill work in 3q12 pushed the bill up to $37.9m that quarter, but apart from that
one the recent quarters have seen PVG spending between $20m and $25m per quarter at its
projects and we expect that to continue to the end of this year (at least). Therefore comes the
assumption that PVG will need to raise more cash before the end of the year and our best
guess that will be $40m during 4q13 (note that since becoming active, PVG has never seen two
quarters go past without going to market and raising cash via equity sales).
PVG: Mining activity expenditures vs Net cash from
80
financing
70
60
50
40
30
20
10
0
7
01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 tse31q2 tse31q3 tse31q4
source: company filings, IKN ests
srallod
fo
snoillim
Expenditures on
mineral interests
net cash from
financing
To sum up the financials section, what we have in PVG is a big boy’s exploration stock
Development of Brucejack is expensive and the people running the company aren’t afraid to
pay themselves well. This makes the burn rate heavy, at perhaps $7m or $8m per month on
average in recent quarters. The type of cash PVG burns in a fortnight would cover plenty of
explorecos that I know (even own) for a year.
The main cash spent at the company is capitalized and have seen the value of Brucejack go up
by $125m since exploration began Snowfield hasn’t seen its asset value change since the
property was taken on to PVG’s books.
Snowfield is a question mark on the asset balance. This company is all about Brucejack, its
contained VOK deposit and the mine that should come of it, but come the day of M&A it’s up for
debate whether any purchaser would want to whole of PVG of just Brucejack, leaving PVG to
spin out its big lowe grader deposit.
Despite the heavy burn and the questions about the fixed asset value of Snowfield, PVG is in

the enviable position of having plenty of institutional support to finance its operations and having
the type of share price level that allows it to raise cash without serious dilution. PVG will need to
raise again and most probably before the year is out, but as long as the bulk sample tests go
well (see below) it won’t have any problem to do just that.
Part two of today’s cut-short analysis next week
Stocks to Follow
There was very little in the way of mitigation to a bad week for our ‘Stocks to Follow’. Once
Pretium (PVG.to) was added our 15 open positions had just two winners on the week (LRA.v,
GORO Short) and two unchanged prices (DRV.v, BHV.v), which mean eleven lost ground (not
listing them all). The worst losers in percentage terms were AQM Copper (AQM.v down 14.3%)
Bear Creek Mining (BCM.v down 10.7%), Focus Ventures (FCV.v down 100%) and OceanaGold
(OGC.to down 9.6%).
With the addition of Pretivm to the list we now 15 open positions, our self-imposed maximum.
Just three of them are showing a profit, the rest are red (and some are very red indeed).
Company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to hold C$2.30 07-apr-11 C$2.51 9.1% $6.29 tgt, added Apr13
B2Gold BTO.to buy C$3.07 28-nov-12 C$2.24 -27.0% $5.70 tgt added Apr '13
Recommends
Minera IRL IRL.to spec buy C$0.73 22-jul-12 C$0.26 -64.4% $1.56 tg, added, new avg
OceanaGold OGC.to buy C$3.03 16-sep-12 C$1.60 -47.2% $5.34 tgt growth prod
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.09 -5.2% solid biz model, LT hold
IMPACT Silver IPT.v spec buy C$1.14 13-jan-13 C$0.62 -45.6% $1.85 tgt Ag spec play
Gold Res Corp GORO short U$10.00 03-may-13 U$9.52 4.8% tgt $7.50
Duran Ventures DRV.v spec buy C$0.045 10-may-13 C$0.035 -22.2% new position, ST trade
Bear Creek BCM.v hold C$2.06 30-may-13 C$2.00 -2.9% near-term, 2nd trade in '13
Rio Alto Mining RIO.to buy C$2.68 07-jun-13 C$2.51 -6.3% ST trade position, separate
Pretivm Res PVG.to buy C$8.20 11-jun-13 C$8.07 -1.6% New position, M&A play
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.03 -90.3% holding thru for my sins
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.14 -20.0% revised tgt 25c
Plata Latina PLA.v selling C$0.79 10-apr-12 C$0.16 -79.7% trying to sell
Bellhaven BHV.v hold C$0.065 03-jun-13 C$0.13 100.0% new ST position, sell June
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 ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-apr-13 U$14.70 21.1% took profit on ST short
2009, 2010, 2011 and 2012 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Pretium Resources (PVG.to): Position opened. We do part one of our coverage in the
8

Fundies section above today. All that’s left to note here is how trading went in the stock and
there seems to have been a decent little tug-of-war happening once the Feas Study (FS) news
was out.
PVG traded up Tuesday morning (recall, the NR hit 5am EDT on Tuesday June 11th (5)) then
sank hard to sub-$8 late day Tuesaday. Then Wednesday and early Thursday it rallied well
(with gold Weds) but Thursday again saw weakness moving in as volumes sold, before rallying
again into the close. Friday was less postive for PVG and selling returned, but by then the
general funk in the junior sector was also weighing and volumes dropped compared to the
previous days, so perhaps the direct influence of the FS news had started to wane by then. So
much ofr that running commentary, what we saw last week wasn’t that unexpected because
PVG is a stock which polarizes opinions and (as mentioned above) will continue to do so until
either the mine happens or the geology issues are shown to be a fatal flaw. There are few
people left on middle ground regarding PVG these days (hell, I’ve made my call on it after
sitting out the fray for a long time) so the push-pull market action is merely a reflection of the
black/white attitude the market has towards PVG.
One final thing: Pretium trades in both the USA and in Canada (New York PVG, Toronto PVG)
but here at the Weekly it will be carried in its Toronto incarnation, PVG.to. That’s because it’s
where I bought my position and that’s only because it was easier funds-wise to move into that
ticker last week. No big deal either way, but we’ll be tracking the Dot Tee Oh here.
Rio Alto Mining (RIO.to) (RIOM): All that was needed to be said was said in the Flash
update of Thursday morning (see appendix 2). PVG aside (which, so help me Lord, is set up
with a longer-term mindset in place) this is the only trade that’s of any interest to me today,
because of its near term catalyst potential as once the production numbers for 2q13 hit the
streets, RIO.to will rally because I’m as confident as I can be that they’re going to come in
much better than guidance (~43k oz Au) as well as having strong guidance potential for 3q13
and beyond. As mentioned in the Flash update, the wild card is obviously the price of gold
because even if RIO.to rallies on the day of its production results, if it rallies from a position
that reflects the $1,200/oz or $1,100/oz gold price of that day we’re not making any money,
we’re just losing less than the day before. There is always risk, ladies and gentlemen. There. Is.
Always. Risk. I personally am comfortable about having extra exposure to this stock at the
moment and think the risk/reward balance is exceptionally good right now, which is why the
extra long was bolted on.
Bellhaven Copper & Gold (BHV.v): Other
may have been disappointed that BHV didn’t
scorch off into the stratosphere last week after
its strong Monday, but I was pretty impressed
in the way it traded on all five days, not just
9

those first two you see with movement and volume on this five days chart. That mooted 10c
entry point we suggested last week? Not even close.
There seems to be enough interest leaft over after that first pop of the week before and once
the quick profit-takers had left, support at 13c is clear. The gamble now (and we make no
bones about it, this is casino-style spec drill trading, not cooly calculated targets on cash flow
multiples and assets values) rests on the next couple of holes which are in progress now and
should give us results before June is out. So yes, I’m good about holding ths for a couple more
weeks, but be clear that this remains a near-term flip play and it’s not going to go any further
out than June. We’ll close this one this month win, lose or draw (but it must be said that the
win is looking likely, what’s up for debate is the size of the percentage).
B2Gold (BTO.to): BTO’s AGM presentation (that went off on Friday) is available for download
on this link (6). As always in these corporate presentations of a company that’s closely covered,
it’s a detail here and there that tends to catch the eye more than the bigger story, as most of
that is known (to a greater or lesser extent) already. So here are a couple of comments arising
from things that got my attention.
At 76 pages the presentation covers a lot of ground. The amount of time and pages dedicated
to BTO’s exploration programs (10 pages of “exploration only” details covering plenty of bases)
particularly the operating mine and the Otjikoto development, was interesting as the company
seems to be underscoring its growth angle at a time when others are reeling in their capital
expenditures programs. I like this.
BTO looks very keen to drill and explore at/around Masbate in particular, with 44,000m of
drilling planned for the year (and at a total budget of $11m that’s a more than reasonable price
ticket for that much drilling, decent bang for your diamond bit buck).
The company offered up a 2013 cash flow projection of $200m to $220m using $1,400/oz gold
as its benchmark. This figure is before deductions such as financing costs, G&A corp tax etc,
but it’s still a strong number for a $1.45Bn market cap company and demonstrating operational
profitability at the new lower price deck shows that it’s in touch with the latest concerns (or
neuroses if you prefer) of us shareholders
A lot of space also dedicated to social programs and community relations initiatives at all its
operations (entitled “Corporate Social Responsibility” because that sounds good). Again, this is
a place where BTO has always been on the ball and recognized long before most of the industry
that good community relations weren’t just important any more, they were absolutely vital.
The 2013 exploration budget for Gramalote, the 49%/51% JV with AngloGold Ashanti in
Colombia, was given as “pending” by BTO. In other words, we’re half way through the year and
nothing has happened there. There’s a lot of speculation going on around this asset right now,
with some jungledrums saying that it’s been put on ice by operator Anglo because the
economics of this low grading open pit bulk mining project don’t work any longer, due to higher
costs and the lower gold price. Meanwhile other jungledrums say that Anglo wants to do a deal
with BTO, get 100% of the thing and move it forward in preference to the bigger and more
troubled La Colosa project, also in Colombia. The idea there is that
OceanaGold (OGC.to): An poor week for this stock, no matter how you cut it, and one which
that sapped a lot of my optimism for its rallying potential. This is the chart of the Toronto listing
that your author owns, even though the price driver was clearly the Australia listing which saw
strong selling Monday through Thursday lunchtime, with just the last day and a half offering
something of a respite.
10

The concerns of the market seem to be the same concerns we’ve voiced here recently, with
current top of the list being the uncertainty over changes to the tax burden in The Philippines
and overall (lack of) profitability at the current gold price. The result is larger money leaving the
stock, particularly Australia based funds. However, I can allay to a certain extent one of our
previously voiced concerns, that of the company being able to make its schedules debt
repayments at the end of this year. Company management got in contact to explain to your
author that via the credit facility put in place in July 2012, the convertible bonds payments are
covered entirely. I need to be honest and admit my mistake here, that of mis-reading the
company MD&A disclosure, because I’d read that there was a LOI-type of deal in place and the
facility wasn’t finalized (I should have read the July 2012 NR, which made it crystal clear). So
what we have here is a company that does indeed have its financial obligations fully and
officially covered and means that OGC won’t come any balance sheet pressure at the end of
this year. We can add to this that the company expects Didipio to build its cash balance at
current gold and copper prices, with the company’s own ballpark estimates much along the
lines that we discussed in the “Stress-testing OceanaGold (OGC.to) (OGC.ax)” note of IKN212,
dated May 27th. I thank the member of OGC management who reached out and corrected me
on this matter.
As for the price action, things need to improve at OGC which isn’t going to happen whiel insto
cash makes for the exits. If that selling is now done then it should get better but there’s no
guaranteeing that in this current market and atmosphere. The bottom line is a company which
looks fundamentally sound but with a share price under specific market pressure and as we all
know by now, just because an equity price looks very cheap in this market it doesn’t mean that
it can’t get a whole lot cheaper in the future. For the moment I’ll stick with my fundies
argument, but admit that my patience is wearing a little thin.
IMPACT Silver (IPT.v): This chart shows the last ten days of IPT at market and as you can
see, the trading range has kept intact (bar a couple of spills either side) and volume remains
low, so we do have some consolidation going on after the worst of the lows in late May (when
we saw 52c) but it’s hardly setting the world on fire, either. Overall, this sits well with the
analysis and hold reco of last week. IPT offers decent value comapred to many other small
silvers, because the thing I like the most is its strong balance sheet back-up, something many
of its peers can’t even dream about, let alone emulate. I want some Ag exposure here in the
Weekly and IPT is as good a place to have it as any. An easy hold.
11

Bear Creek Mining (BCM.v): This ten day chart which puts BCM alongside the juniors ETF
(GDXJ) and the silver ETF (SLV) illustrates how BCM got hit hard than the average stock last
week. But it also shows a spike in volume Friday through Monday (perhaps Tuesday which
looks like someone cashing out (taking near-term profits?) from the recent move that started
handily under $2. If so, that person has better timing than your author because the droop late
last week on nothing volumes now has me holding a small bag on this near term position.
Again (worth repeating), this trade is both small and short-term in nature and I won’t bat an
eyelid about closing it, be that close for a profit or a small loss as it wouldn’t be the first time
that I thought I’d identified some extra value trade position, only to find that my judgement
were out. Up to early last week this was going well enough, but the sector-wide negativity hit
BCM as much as anything else so enough small money was willing to bail and see it drop back
under $2 before closing on that button.
No hasty decision, let’s see how the market (with eyes firmly fixed on silver for this one)
behaves next week before making a sell/hold decision.
AQM Copper (AQM.v). Rather than re-hash the same thoughts, here’s how the bulk of a mail
exchange between your author and reader ‘DS’ went (permission requested and received) as it
sums up how I feel about the stock well enough and via DS’s position it also puts forward the
type of speculative potential that’s still there if only a few ducks would come into line.
Here’s what DS wrote:
I know that AQM is currently rated as "hold" in the weekly and that it is listed as one of
the "lottery tickets". But particularly as regards the latter, wouldn´t it be quite an
interesting play at the moment?
12

According to the latest financial statement they have still enough cash (cash about 3m
= current market cap) for this year where they are working on an update of the PEA.
So in case some positive newsflow can be generated, there should be some significant
share price potential.
Question is, do you think that positive newsflow is likely for AQM in relation to the
PEA?
Here’s how I replied:
The problem as far as i see it isn't one of valuations per se, but of market traction. It
may indeed make sense to scoop up a whole bunch of these at 3.5c or 3c, but
chances are that you could spend the same money and get 33% more shares in a
couple of months' time when they're at 2c. The $3m at bank allows AQM to hibernate,
but that's about it. That's not enough to cover its end of any exploration program and
on that, Teck has a whip hand. I know that Teck and AQM had talks earlier in the year
when Teck wanted to move ahead aggressively with a drill prog but AQM couldn't
afford its end of the deal so tried to open up discussion on a change in contract (eg
give Teck a portion of its 50% in exchange for a free ride) but it's clear that those talks
didn't get very far because here we are, nothing doing at Zafranal.
What this thing needs is a new interest from somewhere or other at exploration level,
not at equities level. If/when that happens AQM could go higher. Problem is that we
don't know when that might be and it could go a lot lower percentage-wise (in absolute
cash terms, there's not much left to go lower). So the answer is that yes, if you have
play money to throw at the market, you're willing to go through a period where nothing
happens and you may hold a serious % loss and you have a long-term bullish view of
copper, it's a buy at these levels. But in all seriousness, I can't possibly go that route.
Well i could personally but it's not a call i could make via the Weekly. It's something
that Kaiser and his bottom fishing model could reasonably make, kind of "buy now,
stick in deep freezer, look at it 2 years from now" but the weekly has to be more
relevant.
Minera IRL (IRL.to) (MIRL.L): After putting out that Flash update on RIO Thursday that told
of the unfounded negative gossip going around Lima regarding the company, I heard from two
separate sources that mentioned IRL had been suffering under its own whispering campaign.
Therefore, part of the trip to Lima next week will be to drop in on the IRL offices and find out
for myself whether this is true and more specifically, exactly what they might have heard. With
that said I’m not so sure that IRL is suffering because of nasty false rumours in the circles of
Lima, because very little of its stock is floated there and its own problems in closing the
Argentina financing deal for Don Nicolas are more likely the source of the weakness. I’ll see
what I can dig up (both at the company and from third parties face to face) and report back
next week
The Copper Basket
After twenty-four weeks of 2013 The Copper Basket is showing a 25.65% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 168.63 345.69 2.05 -39.7%
2 Augusta Res AZC.to 2.43 144.1 324.23 2.25 -7.4%
3 Copper Fox CUU.v 0.83 399.61 259.75 0.65 -21.7%
4 Lumina Copper LCC.v 9.43 43.46 199.92 4.60 -51.2%
5 Nevada Copper NCU.to 3.50 80.5 187.57 2.33 -33.4%
6 Hot Chili Ltd HCH.ax 0.72 286.78 143.39 0.50 -30.6%
7 Reservoir Min. RMC.v 2.41 41.46 122.31 2.95 22.4%
8 NovaCopper NCQ.to 1.80 51.89 103.78 2.00 11.1%
9 Western Copper WRN.to 1.39 93.78 58.14 0.62 -55.4%
10 Panoro Minerals PML.v 0.62 176.25 47.59 0.27 -56.5%
11 Curis Resources CUV.to 0.70 56.31 38.29 0.68 -2.9%
12 Yellowhead Min. YMI.to 0.59 60.97 24.08 0.395 -33.1%
13

13 Candente Copper DNT.to 0.375 121.93 23.17 0.19 -49.3%
14 Oracle Mining OMN.to 0.80 49.03 13.97 0.285 -64.4%
15 Strait Minerals SRD.v 0.08 56.86 3.98 0.070 -12.5%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -25.65%
The Copper Basket average lost a chunky 2.66% in a week despite having a positive average of
eight winners (CUU.v, NCU.to, HCH.ax, PML.v, NCQ.to, RMC.v, OMN.to, CUV.to) and a couple of
those decent sized percentage wins too, with NovaCopper (NCQ.to up 12.4%), Curis (CUV.to up
9.7%) and Panoro (PML.v up 8.0%) putting in strong weeks. The reason for the overall average
drop is that amongst the seven losers (NGQ.to, LCC.v, AZC.to, WRN.to, DNT.to. YMI.to, SRD.v)
were some big losses, headed by Lumina Copper (LCC.v down 34.3%) and followed by Strait
Minerals (SRD.v down 26.3%), Western Copper and Gold (WRN.to down 16.2%) and Candente
Copper (DNT.to down 9.5%). Those were more than enough to make a significant dent in the
average.
Copper Basket 2013 average, weekly
16%
12%
8%
4%
0%
-4%
-8%
-12%
-16%
-20%
-24%
-28%
14
ht6naj ht31 ht02 ht72 r3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 t5yam ht21 ht91 ht62 dn2nuj ht9 ht61
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%
Copper prices trended down during the week, with the new line in the sand now at-or-around
U$3.20/lb.
Moving to inventories and the overall picture shows signs of a slowdown. World stocks stood at
871,049mt at the close Friday, 1.0% or 8,802mt higher than this time last week. As for the
breakdown, LME inventories moved u by 1.3% to 618,075mt (with reportedly the main stock
hikes in the somewhat remote Malaysia warehouses), then Comes dropped 1.9% to 69,564mt
and Shanghais Futures Exchange stocks also went up, by 1.1% to 183,410mt. Cancelled

warrants this weekend make up 35.4% of LME inventories, which is slightly down on recent
weeks but still at the new higher level that kicked in when the exchange tweaked its delivery
rules. Jury’s still out here.
Cancelled Warrants at LME, IKN157 to date
45%
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 112NKI 312NKI 512NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
Now for updates on some of the basket stocks:
Panoro Minerals (PML.v): Featured last week as one that’s perhaps been too beaten up,
PML rebiunded a bit last week but voluems remained low and it’s yet to be seen whether the
bounce was of the dead cat variety or not. This is an example of how you shouldn’t read much
into a move on low volume, no matter how eyecatching the percentage change might be.
Needs real news.
Lumina Copper (LCC.v): It’s been in the cards for some time and last week it came in full
force; a waterfall-type selloff on raised volumes that display all the signs of a bigger position
giving up and walking away. The 309k traded Thursday and 238k Friday did the main damage
but as this year-to-date chart shows, the slide was already happening and all the last 48 hours
did was to accelerate the day on which LCC dropped under $5.
The most interesting part of this is that to date LCC has been a stock with a price that’s been
defended by its proponents (start with Ross Beaty) but last week had no sort of defence put up
and bids that were taken out time after time.
Reservoir Minerals (RMC.v): Strength in share price on low volumes continues to be the

order of the day at RMC, with $3 touched on a couple of occasions last week and your author
currently kicking himself about begin too whussy and not picking some up a couple of weeks
ago in the $2.50 to $2.60 range. My only mitigation is that the rule not to chase stocks in this
currrent market makes an awful lot of sense and it’s only with this one that the failings of the
strict decision become apparent.
Strait Minerals (SRD.v): I meet up with SRD’s team Tuesday morning and will report on
anything of interest this time next week. Meanwhile, SRD’s share price got beaten back down
from whence it came last week and the midly promising but low volume rebound came to a
screeching halt. That’s the kind of thing that happens very easily in low volume world.
Candente Copper (DNT.to): What remains of the working round table in Cañaris, that was
set up to resolve issues arising from the Cañariaco project, yesterday unanimously decided that
it would not discuss any matter concerning the Cañariaco project in future meetings (7). The
official reason given is that the matter can’t be discussed any longer because the local
population has taken its anti-mine case to the International Court of Human Rights, which will
be the venue for any future debate. Thus the government of Peru decides that ignoring
something in the hope that it goes away is the way forward. Not the first time, won’t be the last
either.
In trading, DNT was weak on lowish volumes but it still has lower to go from here because
Cañariaco is not going to happen.
Hot Chili (HCH.ax): This one had two pieces of interesting news last week (8) and was
rewarded for its efforts with a reasonable little rally on stronger than average traded volumes
(three days last week saw 600k+ volumes each day, not bad). The first news came Tuesday
with the release of drill results form HCH’s second string (but still interesting) ‘Frontera’ project
in Chile, which were headlined by an intercept of 348m grading 0.4% Cu and 0.3 g/t Au
(including 162m of 0.5% Cu and 0.3% Au). That’s a pretty decent return, both in width and
grade, for Chilean porphyry type deposits and has added to the intial exploration success at the
project.
But the more interesting of last week’s two NRs came Wednesday when the company
announced a deal with Chile’s State run ENAMI (the secondary company behind Codelco that
often covers exploration activity in the country) to explore the potential of the oxide copper
resource at its flagship ‘Productora’ project (some 45 miles from Frontera, so not that far apart
and synergies aren’t impossible further down the line). The deal with ENAMI is aimed at finding
a way of profiting from the 14.1mt of 0.6% Cu (with minor Au and Mo kickers) resource that’s
not currently part of the JORC resource HCH is moving forward. It makes sense to do this, as
oxides are nearly always near surface, easy to mine and if not used, might even be part of
overburden that would have to be stripped at a cash cost. If HCH can gain some cash flow (and
earlier in the timeline than its main sulphide resource production) it makes commonsense at a
business level.
To give an idea of the oxide resource size, 14.1mt of 0.6% Cu is a contained metal content of
around 186.5m lbs Cu. If any operation manages to earn a buck profit from that rock it’s decent
cash and pays plenty of bills as HCH moves its main plans forward, even if it turns out to be a
50/50 JV.
The Lottery Ticket Basket
After 24 weeks of 2013 The Lottery Ticket Basket is showing a 30.92% loss to level stakes.
16

company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 Marlin Gold MLN.v 0.10 379.9 20.89 0.055 -45.0%
2 Bellhaven BHV.v 0.14 137 17.81 0.130 -7.1%
3 Eagle Star Min. EGE.v 0.125 69.48 13.55 0.195 56.0%
4 Fancamp Expl. FNC.v 0.125 118.41 8.29 0.070 -44.0%
5 Tango Gold TGV.v 0.13 45.59 7.75 0.170 30.8%
6 Glass Earth GEL.v 0.155 104.79 4.72 0.045 -71.0%
7 Inca One Res. IO.v 0.12 34.0 4.25 0.125 4.2%
8 Copper North COL.v 0.10 58.62 3.22 0.055 -45.0%
9 AQM Copper AQM.v 0.08 105.57 3.17 0.030 -62.5%
10 Darwin Resources DAR.v 0.20 26.16 3.14 0.120 -40.0%
11 Gryphon Gold GGN.to 0.085 194.64 2.92 0.015 -82.4%
12 Rio Cristal RCZ.v 0.025 149.26 2.24 0.015 -40.0%
13 Cream Minerals CMA.v 0.03 155.34 1.55 0.010 -66.7%
14 Firestone Ventures FV.v 0.045 36.32 1.45 0.040 -11.1%
15 Netco Silver NEI.v 0.025 47.01 0.71 0.015 -40.0%
Portfolio avg -30.92%
There were just four gainers in our basket last week (TGV.v, DAR.v, IO.v, FV.v) then five
remained unchanged (BHV.v, GEL.v, FNC.v, RCZ.v, NEI.v) and six lost ground (MLN.v, GGN.to,
AQM.v, EGE.v, COL.v, CMA.v). There were some big percentages moves in both directions, with
best wins recorded by Tango Gold (TGV.v up 36.0%) Firestone Ventures (FV.v up 33.3%) and
Inca One (IO.v up 25.0%) and worst losses in Gryphon Gold (GGN.to down 40.0%) and Cream
Minerals (CMA.v down 33.3%). Overall the basket average gained just under 2%, which isn’t
bad but there’s still mountains to make up here and with several of the stock to all intents and
purposes now dead as investment alternatives, interest from now on is reduced to a selective
level.
25% Lottery Ticket Basket 2013 average, weekly
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
17
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 t5yam ht21 ht91 ht62 dn2nuj ht9 ht61
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%
Darwin Resources (DAR.v): One of the few of the interesting ones, DAR offered the market
some genuinely good news last week (9). The permits it needs to drill the Suriloma project in
La Libertad were finally granted by the government of Peru (after a delay we can count in
months rather than weeks and the company immediately deployed the waiting rigs to the site
(a silver lining of the sector turndown is that drill companies are now fighting for business,
rather than explorecos having to beg for some service from them). DAR is uising two hand-held
rigs for the program, which makes sense because the drill holes are set to go down about 150m
maximum each and the rock isn’t expected to be a tough target, so this will provide flexibility
and speed for the job in hand.
I’m happy to report that company CEO Graham Carman will be in Lima at the same time as
your author (he is apparently laying over for a few hours between visiting a property in the

south of the country and going to Suriloma to supervise the drilling), so I’ll get the chance to
find out more about the present day situation face-to-face. Expect more next week, including a
best guess on when we can see first assay results from the drill program.
Inca One (IO.v): This stock also moved up on positive permitting news, when on Thursday it
announced (10) that its environmental impact study for its proposed drill program at the
flagship Huaquillas project in cajamarca Peru had been approved by the government of Peru.
And if that little lot sounds like a mouthful, there’s a reason for that and it’s one of the things
that makes me doubt the validity of this company as a trade.
1) This isn’t the permit it needs to drill Huaquillas, it’s the one that comes before any drilling
permit is approved by the Mining Ministry. IO.v can’t drill the thing yet.
2) It makes a big fuss about getting an enviro permit for its drilling program, including halting
the stock. The fuss works too, in the very-near-term at least, because it got a pop on 600k
volumes once the halt had been lifted. But as you’d expect (once it sinks in that IO.v isn’t going
to actually drill due to this news) things go quiet. It all smacks of a bit too pumpy for my liking,
frankly.
3) The project is in Cajamarca, in other words the politically hot region for mining (Gregorio
Santos, Conga, Shahuindo, Antakori, El Galeno, Yanacocha etc etc) that we’ve discussed at
great length previously. Of course this isn’t necessarily a project killer because Cajamarca is a
patchwork quilt of risk and some locals are open and friendly, but others aren’t and the regional
government has made its antipathy pretty clear so far.
4) I’ve tried and failed to contact IO.v in order to arrange a meeting on several occasions. Errr,
let’s put it like this: By running a blog with a certain reputation for shining the light on less
pristine companies in the junior sector, I’m also fully capable of taking a hint when I get big fat
zero back from junior executives and IR departments on initial contact inquiries. Yes, ignore me
and I do go away, but before I do I tend to leave a fat red flag stuck in your company’s front
porch.
Regional politics
Regional risk update next week (with changes)
We’ll keep things short in the Politics section this week, as next week we run the bigger
quarterly Regional Rick Update. I’ve been thinking on how to improve this quarterly round-up
because although I think it a useful feature for the Weekly (and by the feedback it always
seems to generate, its popular enough with you people) there’s now a trend away from the
political importance of some locations and a trend towards the political happenings affetcing the
mining industry in others. I’m still playing around with possible formats, but the general way
forward from here will be to drop formal coverage of the minor states (e.g. El Salvador) or the
places that have shown themselves to be unwelcoming to FDI for mining (eg Bolivia,
Venezuela, now Ecuador) and not places that capitalists via juniors can be expected to make a
profit. Instead, we’ll concentrate on places that are, in theory at least, happier hunting grounds
for junior mining companies in LatAm (e.g. Mexico, Peru, Chile, Brazil) or places where risk
might be higher, but there’s still a decent chance that things improve and a miner could make
hay (e.g. Argentina, Guatemala, Dom Rep).
Tat’s the general idea, but as mentioned above I’m still playing with potential formats so if you
have an idea on what you might like to see from the regular ‘Regional Rick Update’ in the
future, don’t be afraid to drop me a line and suggest improvements.
Argentina: Santa Cruz approves its new mining tax
We have resolution on this issue we’ve been following recently. Last week the Santa Cruz
province of Argentina voted to approve (11) a new tax on its mining industry that levies a 1%
18

tax on held metal reserves and is expected to bring in around ARGP$500m (call it U$85m per
year at the official exchange rate) to regional coffers. The tax is calculated on the amount of
reserves (note: not resources) held by any given mining operation or project at its project
feasibility stage and affects the larger mining operations in the region (e.g. Cerro Vanguardia,
Cerro Negro, Minera Santa Cruz) more than the exploration stage operations. However and in
a notable plus for mining companies, the province decided to reject a proposed tax on metals
exports from the region (with the Cristina party faithful voting this part of the tax project
down). The local Chamber of Mining came out and said that the new raising of taxes put mining
jobs at risk (12) as they’re supposed to do, but to be honest this round of tax raising could
have been a lot worse than it was and the deal means Santa Cruz is still a competitive place to
do mining business. If the region weren’t in Argentina it would be a great place.
Ecuador: Mining law reform passed Kinross (K.to) (KGC) leaves anyway
As expected, the mining law reform bill that we’ve been watching was passed easily by the
Correa party controlled parliament last week (on Thursday, by a big 105 vote margin). As
expected President Correa was quick to praise the approval and said that (13) the reforms
“were positive for the country, were defences for its sovereignty, simplified paperwork and
protected the environment.”
What wasn’t expected by your author, particularly for the timing aspect, was the Monday
evening announcement from Kinross (K.to) (KGC) (14) that it was dropping its Fruta del Norte
project in Ecuador and taking a $720m hit to the balance sheet in writedowns for its pleasure.
Unsurprising were the quick-to-the-mike declarations of the Minister in charge of the mining
sector, Rafael Poveda, who said (15) that Kinross’s decision was “a strictly economic issue” and
“in no way” does its abandonment of the FDN project affect Ecuador’s image as a place for
foreign diretc investment in mining or any other sector of business. If you’re good with that, my
bridge is still for sale. We could go into the project economics and what 6.8m oz of high grading
gold (with a decent silver kicker) would need to be mined successfully and with a low footprint
in a difficult (but by no means impossible) environment such as a deeper Ecuador Amazon
basin jungle, but the real conclusion is far more simple: If FDN doesn’t work, no project works
in Ecuador could ever work for any privately owned mining company.
I will freely admit that the K decision to pull out of FDN and (what amounts to) hand back the
concession to the government in exchange for nothing at all came as a surprise. My playbook
for Ecuador these last few weeks had been one where the government passes its laws, then
Kinross reaches agreement, FDN goes ahead (probably on a foot-dragging type of timeline) and
everyone gets their necessary pleasant photo opportunity. That was, quite clearly, the wrong
assumption. What seems to have happened is that the government of Ecuador, rather than
ceding during the negotiation process, has dug its heels in on purpose, knowing that its
demands were too great for a publically accountable company such as Kinross and that in the
end FDN would be handed back by a company with somewhat limited pockets at the moment
(due largely to the Tye Burt era, but that’s another story). Ecuador then gets 100% of FDN and
will be able to move and develop the project itself, of perhaps bring in a JV partner (all eyes
move immediately to China) on its owns terms.
In effect and in hindsight, it’s not a bad move by the government as long as it doesn’t give a
damn ever again about attracting mining expertise from the industrialized world to its shores.
Also, the likelihood of closer ties with China on mining (we have Mirador copper (ECSA) moving
forward and both sides seems happy enough about progress there) would mean that Ecuador
would have access to mining know-how (debate amongst yourselves whether China is up to
scratch in world terms on gold mining technology). However be clear, be crystal clear, that the
optics of K leaving Ecuador are the worst possible for any public traded company with exposure
there and looking to move forward and profit from mining business activity in the country. The
questions “Will Ecuador have a successful mining industry?” and “Will Ecuador be a good place
for junior mining companies?” are now totally separate. For the first one the answer is I don’t
know, but it doesn’t matter any longer and the newly reformed mining law is a mere detail.
That’s because the second one is a confirmed and resounding no, so wish the country luck if
19

you desire but don’t go near the place with any of the cash you have set aside for speculation
in the world of junior mining.
Chile: Exponor this week
June 17th to 21st (i.e. this week) sees the Exponor 2013 conference in Antofagasta Chile, one of
the biggest mining shows of the year (here’s the conference EngLang page (16)) and the main
one for the big copper producers located in the North of Chile. We can expect plenty of
comment and analysis to hit the newswires from this show, as all the big names in the industry
will be there and the noise has already started, with Chile last week reading (17) how the
president of BHP Billiton Copper Division, Peter Beaven, notes that costs of production in Chile
have risen by 45% since 2007, while the world average cost hike is around 25% (BHP operates
La Escondida, the world’s biggest single copper mine).
Market Watching
Nothing here this week.
Conclusion
IKN215 is done, we close with bullet points:
• Seriously, buy Rio Alto Mining (RIO.to) for a near-term trade. It’s my single best trade
idea of the year (so far).
• Pretium (PVG) will be a hot topic for debate until that famous 10,000t bulk sample
result is know. It’ll then be a hot topic for debate. However, there’s enough to like here
and more than enough space in its economic parameters to justify a purchase today at
$8. The 43-101 compliant feasibility study is both its strength if you’re willing to trust
the Canadian exploration system, or its weakness if you consider the other side of the
coin (there’s enough
• Sorry for the cut short edition, I need to take some zonk-pills. Some of the formatting
isn’t so good, either.
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
20

Footnotes, appendices, references, disclaimer
(1) http://www.calculatedriskblog.com/2013/06/schedule-for-week-of-june-16th.html
(2) http://www.calculatedriskblog.com/2013/06/goldman-fomc-preview-calming-market.html
(3) http://www.pretivm.com/news/news-details/2013/Pretivm-Closes-Financing/default.aspx
(4) http://finance.yahoo.com/news/pretium-resources-inc-positive-feasibility-090000489.html
(5) http://finance.yahoo.com/news/pretium-resources-inc-positive-feasibility-090000489.html
(6) http://www.b2gold.com/wp-content/uploads/2013/06/2013-AGM-final-2.pdf
(7) http://www.larepublica.pe/16-06-2013/mesa-de-trabajo-de-canaris-no-tratara-en-adelante-controversia-minera
(8) http://www.hotchili.net.au/investors/announcements/
(9) http://finance.yahoo.com/news/darwin-obtains-drill-permits-suriloma-125000017.html
(10) http://finance.yahoo.com/news/inca-one-obtains-dia-approval-142111611.html
(11) http://www.opisantacruz.com.ar/home/2013/06/14/aprobaron-la-creacion-de-nuevo-impuesto-a-la-actividad-minera-
con-reservas-de-parte-del-fpv/16434
(12) http://noticias.terra.com.ar/empresarios-mineros-advierten-que-impuesto-que-quiere-aplicar-santa-cruz-pone-en-
riego-trabajo-a,fc734b65d463f310VgnCLD2000000dc6eb0aRCRD.html
(13) http://www.prensa-latina.cu/index.php?option=com_content&task=view&idioma=1&id=1516871&Itemid=1
(14) http://finance.yahoo.com/news/kinross-announces-cease-development-fruta-210000099.html
(15) http://noticias.terra.com.ar/internacionales/ministro-asegura-que-retiro-de-minera-no-afectara-imagen-del-
pais,3fd30effe573f310VgnCLD2000000ec6eb0aRCRD.html
(16) http://www.exponor.cl/ingles/
(17) http://www.pulso.cl/noticia/empresa-mercado/empresa/2013/06/11-24254-9-presidente-de-bhp-billiton-cobre-la-
mineria-no-ha-dado-los-resultados-prometidos.shtml
Appendix 1: Flash update on Pretium (PVG) (PVG.to) dated Tuesday June 11th
Good Tuesday morning, just under half an hour before the open.
I've always been a sceptic of Pretium Resources (PVG.to) (PVG) and in the "too good to be true" camp, therefore I
watched the last couple of years as the stock moved from $6 to over $17 and then back to $6 again (before its recent
move back up over $8). However, today brings news that changes my scepticism, this NR...
http://www.pretivm.com/news/news-details/2013/Pretium-Resources-Inc-Positive-Feasibility-Study-Completed-for-
Brucejack-High-Grade-Gold-Project/default.aspx
...on the publication of the 43-101 compliant Feasibility Study (FS) for its "Valley of the Kings" (VOK) Brucejack project.
It's one of the most impressive FS I've seen in a long while, with a base case post-tax IRR of 35.7% (that uses gold at
U$1,350/oz) and a 2.1 year payback on a 22 year mine life, all with a reasonable capex bill of $663.5m (which includes
a ~20% contingency). There are plenty more numbers and forecasts in the news release that impress to an equal level
as those selected figures, though mention should be made of the way in which post tax IRR still shows 13.7% even if
gold drops back to U$800/oz...that's a lot of insurance for any potential buyer of PVG.
Overall (and assuming there isn't a project-killer buried in the full 43-101 that we'll get to see when it's filed on SEDAR,
but I highly doubt that) this FS blows out of the water just about all the objections I've had to VOK as a project and PVG
as a potential investment. Its location is remote but in a good political risk region of the world, the project shows very
robust economics, the FS demonstrates that the engineering for the mine works, grade is high which means margins
stay strong. I'm left with the following as "what could go wrong"?
Capex blowout: Its remote location may cause problems, but as the $664m estimate for the FS isn't too high, we're
unlikely to see a Pascua Lama type overrun. Also, as mine construction is planned to begin in 2014, we're less exposed
to the winds of change.
Community objections: Always a potential problem in First Nations territory, but PVG does seem to have the issue well
under control.
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The 43-101 is too optimistic. As recent times have shown, even third party 43-101s can turn out to be inaccurate. It's a
small risk in this case (PVG has hired some of the best out there) but needs to be considered in the mix.
Stock price leaves little upside: For me, the equity investor rather than the miner, this is the only objection that could
carry weight. If we assume PVG is bought out (which in this case isn't a given as the company could indeed take it to
production) we need to consider the buyout price as a part of capex for the eventual Tier 1 purchaser. With 110.8
shares fully diluted and the $664m capex bill, any eventual buyout price leaves less room between us and the NPV
(we'll use the base case post tax number of $1.76Bn).
•
Share price is currently U$8.18, which gives us a FD market cap of U$906.3m
•
With approximately $70m in working cap right now let's put the gap between EV and NPV at $900m.
•
That suggests that PVG's share price has room to grow under a buyout situation and if I had to guess, would
see majors paying a maximum of $12/share for control of a company, which would leave half a billion margin to the
base case NPV.
This quick calc assumes of course that gold stays above the $1,350/oz base case price. If gold drops further what will
happen is that the project remains attractive but the financial benefits are squeezed out of the share price rather than
the mine. Or put another way, the mine still happens but the shareholders don't get to benefit (as much).
The bottom line is that PVG, while an expensive market cap compared to many peers in the gold, suddenly looks
cheap. There is risk to the share price if gold goes lower, but that's one I'm willing to take. As long as I can get a
reasonable price at-or-around the current CAD$8.35 / U$8.18 I'm a buyer of PVG today and will add it to the IKN
Weekly 'Stocks to Follow' list as of this week. More on Sunday, including a formal price target.
Best, O
Appendix 2: : Flash update on Rio Alto (RIO.to) (RIOM) dated Thursday June 13th
Good morning, the market already open on this Thursday.
Rio Alto Mining (RIO.to) (RIOM)
I've debated with myself whether to send this now as a Flash update or wait until IKN215 this Sunday, because it's not
really a time-sensitive matter and does not change our Buy and Top Pick calls on the company. In the end I've decided
to run this as a Flash update because there are clearly nervous people out there who hold this stock and would like to
know more about the current market situation as soon as possible. Preamble done, now for the news.
Over the last couple of days I've been digging a little further into the potential causes of the persistent selling patterns
we've been seeing in Rio Alto Mining (RIO.to) (RIOM), because it became apparent that my assumption of a fund that
was unwinding a position, as mentioned in IKN214 last weekend, isn't the case. What seems to be happening is
Peruvian investors, mostly retail, have been unloading their positions in RIO.to with most of the selling being arbitraged
to the Canadian market. I can't be 100% sure about this conclusion but there's enough circumstantial evidence around
to make it a near certainty.
That was the first discovery, the second was the reason why Peruvians, seemingly en masse, have decided they don't
want to own RIO any longer and this is the more interesting bit. After working out that the selling is almost certainly
Peru-based, then ringing round and hearing from from several sources who are closely in touch with the Peru market
and mining scene in Lima over the last 24 hours, it soon became apparent that there's some sort of whispering
campaign going on against RIO.to inside Peru based on the spreading of unfounded rumours about the company. I've
heard in the last 24 hours that, for example a) members of the company executive are wanted by Interpol b) Alex Black
is leaving the company soon c) cash costs at La Arena are running much higher than disclosed to this point, (I heard
just this morning "over $1400/oz", for the latest example) amongst other trash talk.
All this is totally false. I made a point of talking to CEO Alex Black this morning who said he'd picked up rumours of the
same ilk. He also said that all the stories being bandied about are 100% false. He also mentioned that in in the near
future RIO.to would address the rumours (or call them "concerns") of Peruvian investors in RIO and put minds at rest
over these unfounded and incorrect rumours.
Personally, I understand to a certain extent the position of those Peru investors who have been spooked by the rumours
(recall, the share ownership base of RIO.to among Peru investors is high, perhaps around 30% of all shares out today
and mostly held by individual/retail investors) because part of the "survival mode" mentality of the Peru financial world,
particularly those involved with the cyclical mining world, is to value cash (i.e. the us dollar) more than anything else and
not be afraid of taking a loss for the sake of asset preservation and liquidity. It's a difficult thing to explain well in a few
short lines, but it's smarter than mere "herd mentality" and means the moneyed families that run the show have
managed to survive the decades (centuries even) through thin times and prosper when mining has been profitable.
However, it also means that this type of rumour-mongering is easier to set in motion and gets quicker traction and it
must be stressed, the rumours flying round Lima today about RIO.to are clearly and absolutely false. What seems to be
happening is that these rumours are being generated as part of a larger game, but as yet I haven't found out (or been
given a clue about) the source of the rumour or what the bigger picture reason might be. If I had to guess, I'd say that
someone somewhere wants cheap shares of RIO but that's rather unspecific and exactly why or how etc escapes me.
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Anyway, back to facts rather than blahblah: In order the reverse the situation RIO.to needs to provide a solid catalyst
that shows things are the opposite of bad. It's at that time, with facts on the table that disprove negative rumours, the
local doubts will disappear. I received confirmation this week that the 2q13 production at La Arena is running much
better than guidance and from here, it's my strong opinion that it will provide the necessary catalyst.
The bottom line to today's Flash update is basically the same as the one in IKN214 on RIO.to: You have a month to get
on. We can expect nerves to continue over the next few weeks but once the 2q13 production numbers for La Arena are
out (and assuming a level playing field with the gold price between now and then, which has to be mentioned as the
obvious risk and wild card) RIO will reverse its downtrend and move higher. We'll then get confirmation that all is well
once the 2q13 financials are released, net profit is returned and people see that the rumours of extra high cash cost at
La Arena are wholly untrue.
We reiterate the Top Pick, buy and near-term trading buy call on Rio Alto Mining (RIO.to) (RIOM).
Best, O
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
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Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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