IKN #219Premium

The IKN Weekly
Week 219, July 14th 2013
Contents
This Week: Additions still pending, a new one to the list, A rebound week, Looking back to
IKN211.
Fundamental Analysis: Darwin Resources (DAR.v): Buying.
Stocks to Follow: Overview, Gold Resource Corp (GORO), AQM Copper (AQM.v), Minera IRL
(MIRL.L) (IRL.to), Tahoe Resources (THO.to) (TAHO), B2Gold (BTO.to) (BTG), Rio Alto Mining
(RIO.to) (RIOM), Bear Creek Mining (BCM.v), Lara (LRA.v), Pretium Resources (PVG) (PVG.to).
Copper Basket: Overview.
The Lottery Ticket Basket: Overview, Bellhaven (BHV.v).
Regional Politics: It’s protest season in South America, Colombia: A growing fight over a
referendum, Colombia: Miner’s strike set of July 17th Guatemala’s President proposes a mining
moratorium.
Market Watching: Alamos (AGI.to) buys Esperanza (EPZ.v), Coeur (CDM.to) (CDE) at La
Preciosa: Another self-inflicted wound, OceanaGold (OGC.to) (OGC.ax) rebounds better than
most, Lowell Copper (JDL.v) starts trading tomorrow: Here’s what you need to know.
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
Additions still pending, a new one to the list
We had no news of a deal from Minera IRL (IRL.to) and no 6c entry price for AQM Copper
(AQM.v), therefore the mooted trades from last week didn’t happen. However, they are by no
means cancelled and if circumstances prevail both can still happen in good order.
However, we now have a third trade on the potentials books. See ‘Fundamentals..’ for more,
but to make sure it’s known we’re looking to take a small (repeat small) and near-term trading
spec position in Darwin Resources (DAR.v) this week.
A rebound week
The dovish Fed remarks weren’t that
unexpected, as Ben does have this habit of
jawboning one way and then another (it’s a bit
like balancing on a high wire, constant weight
adjustments and all that) but I was a little more
surprised to see the reaction filtering directly
through to the gold (and other metals) market.
We’re nowhere near what could be called a
recovery, but the gains enjoyed last week are
still welcome and even more so if they signal a
bottom in this whole mess (we’ll find that out
later, of course). I also take some cheer from
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the way in which most reversals and new trends tend to start with a shift that’s dismissed as
“technical in nature”.
It came at the right time. My ongoing theory that was first floated in IKN203 dated March 24th
and is summed up in this chart...
...was, up until last week, looking pretty sickly and getting to the point where the idea might
have to be abandoned completely. I’m the first to agree that the original timeline envisaged
started its rebound and improvement (in the higher quality stocks) earlier than the first two
weeks of 3q13, but apart from that shift it’s starting to fit.
We have the “quality stocks” rebounding from their lows, with your author’s favoured examples
being Top Pick Rio Alto (RIO.to from a lowest daily close of $1.77 to today’s $2.10 = 16.9%
rebound) and B2Gold (BTO.to from a lowest daily close of $1.95 to today’s $2.63 = 34.9%
rebound) but I’m sure you can add half a dozen other examples easily enough.
We have plenty of “the acceptables” just about flattening out now, managing to stop the
bleeding without showing massive recoveries.
We have “the crud” showing little pulse, which is something I expect to continue.
Overall, the theory was taken off life-support last week and still has a chance of working
(though admittedly in delayed style). What I’d want to see in the next one to four weeks is
consolidation and any gold price weakness bought by the market. We’ll see, but in the
meantime the main message is clear; be long quality stocks, save the tilting at the dog end of
the market until later. Much later.
Looking back to IKN211
"Errare humanum est, sed perseverare diabolicum.”
Lucius Annaeus Seneca 4 BC – 65 AD
Between the xxxx lines below is an extract from the intro to IKN211 dated May 19th, slightly
edited to remove comments in parentheses and to stay on-topic:
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Therefore:
• I stay net long the juniors, mainly via the larger positions of RIO and BTO, because this
time is not different, we will see the quality end of the market rebound at some point,
we will have better share prices for the stocks that survive. I just don’t know when.
• I stay partially hedged via the shorts in TAHO and GORO
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• I stay with cash on the sidelines.
• I remain holding bags in several smaller long positions that haven’t worked out, even
after selling a handful of losers recently and raising some of that aforementioned cash.
It’s the nature of the speculative beast, sadly.
• I’m still interested in small and specific near-term trades and averse to new
investments. My interest in this market is very much alive but it’s not a place where I’m
adding meaningful exposure.
• I’ll leave the Saint Crispin’s Day calls to newsletters that care no one jot whether
subscribers lose money as long as they keep sending a few dollars every month.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
What’s changed since then? On the overall big picture, nothing. All those strategies are still very
much in place, with RIO.to BTO.to still doing the heavy lifting on the long side, TAHO and
GORO still short (though TAHO was covered then re-opened) cash position is there and
available for use, near-term trade ideas are still very much preferred to longer-term investment
positions, no troop rallying calls from these pages. However, changes have come, mainly in the
dumping of several positions that hadn’t worked (e.g. OGC, IPT, DRV) and the partial
replacement with new positions that are near-term aligned (e.g. BCM, RIO near-term separate
trade, BHV (though that was opened and also closed during the lapse)).
For me, the only real deviation from the plan in the last eight weeks has been the new position
in Pretium (PVG) (PVG.to) but like I said at the time, that’s because I’m a sucker for a strong
feas. And as for the market conditions between IKN211 and today, here’s a chart that starts on
the Friday May 17th with the gold bullion ETF (GLD), the PM ETF (GDX) and the PM junior ETF
(GDXJ) with which we can guide our eye:
Put simply, it got better for a while, then it got a lot worse, now it’s a little better. But we’re still
clearly negative compared to eight issues ago and that underscores the smarts that Gary
Tanashian showed on the weekend in question. We featured his quote from that edition of
NFTRH239 and it gets another airing today:
“This is not a time to be guessing. It is a time to be right by not being wrong.”
Exactly, Gary. I’ve said it before and I’ll say it again, Gary Tanashian’s work is the one I’d
recommend more than anyone else’s and if you’re going to spend cash on just one newsletter,
make it his. And yes, of course that statement very much includes The IKN Weekly.
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Fundamental Analysis of Mining Stocks
Darwin Resources (DAR.v): Buying
Today we call buy on Darwin Resources (DAR.v) for a near-term trade.
What follows in today’s ‘Fundamentals’ section is really little more than an amplification of that
first sentence above so feel free to skip if you like. It won’t be a massive overview of DAR
either, as we’ve done that sort of heavy lifting already in IKN199, the edition with the overview
of the company and the site visit to Suriloma report, plus odds and snippets since then
[Sidebar: It really is about time I did some real work in this section of the Weekly]. Our main
subject is about the trade set-up rather than the company, but it won’t hurt to give a brief
summary of what we know about DAR so here goes on that:
Corporate structure
Here’s the topbox with our estimated share structure and cash treasuries for Darwin Resources
(DAR.v) today:
Shares out: 26.16m
Options: 3.185m
Warrants:4.375m
Fully diluted shares:33.72m
Current share price: $0.08
Market Cap: $2.09m
Approx cash per S/O: 8c
All prices are in Canadian dollars unless stated. Forex U$1=CAD$1
The first thing to note is the share price, which is down to 8c from the 15c it was back in
IKN199. That might be a little unfair on DAR because in the last two to three weeks it’s seen
some intermittent selling (potentially one person unloading) which sees sales at the 7c to 8c
range and any new buyers having to pay 10c. But all the same, it’s a lot cheaper than on the
site visit report day of February 24th. It’s not a price drop that’s been unexpected either, as the
potential to buy into DAR at a lower price was one of the reasons we held off from buying at
the time.
Next let’s note the warrants, because they all expire April 2014 at 60c. Not much in the way of
overhang to worry about there. The options are a little closer at 25c and a 2015 expiry, but
again we’d still need a 200%+ rise before they come into play and there aren’t that many of
them anyway. No worries on the derivs, in other words.
Next up for consideration is the market cap because at just over $2m, along with its tight share
structure, this gives us a lot of potential share price bounce for our buck if the drills at Suriloma
hit something interesting. Even if we assume a 10c entry price and a $2.6m market cap, this is
a cheap company at current valuations and with drill spec play potential and that’s even before
we consider the cash treasury. In IKN216 dated June 23rd we reported on the meeting with
DAR management at their HQ in Lima and on that day DAR estimated that once the drilling was
done the company would have roughly $1m left in the bank (which is where we place our
above guesstimate today). For sure that cash will eventually be drained by normal corporate
run-of-things, it’s not that much to begin with and it’s pretty clear they’re going to need to top
up later on this year, but we’re still looking at a structure today with an EV of about
$1.2m...yup, that’s a cheap entry point by anyone’s standards.
The Suriloma project overview
DAR has other earlier-stage properties, but the reason to like the play today is Suriloma. Here’s
the map of the concession first featured in IKN199
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And its the zone on the bottom-right of the DAR concession, the La Puerta target, that’s the
main object of our affection today. That’s the spot which has seen the most preparatory work,
where most of the drill targets have been generated and where the drills are now turning, with
results expected soon (see below). As you can see from this map’s notes, the zone returned
interesting gold assays in chip and trench sampling (for example 16m of 2.12 g/t Au) and is
conceptualized as a near or at-surface heap leach or dump leach mine for oxide material that
would eventually work in much the same way as Rio Alto’s (RIO.to) (RIOM) La Arena oxide gold
operation a little further up the road but also in the La Libertad region of Peru.
Here below is one of the photos from the IKN199 site visit report that shows the La Puerta zone
clearly. The point of this replay is to show that La Puerta is a gentle slope and the near/at
surface mineralization target would make for a fairly straightforward open pit-type mine with a
low strip rate and operational advantages if the rocks now being drilled give the right sort of
results.
Other parts of Suriloma further to the West don’t have the advantage of this gentle slope (see
IKN199 for more) which is probably why Dar is aiming for this part first. However, our rough
5

ciggypack calcs (which were highly theoretical at the time and presumed good news from the
drills) estimated that we could see something around 1.35m oz of economic gold resource from
La Puerta alone if all went swimmingly well. With that number in play, the current market cap
and EV of DAR.v would look decidedly small. In fact, even less than half of that resource, let’s
say 500,000 oz, would put its in-situ price at $4.20/oz Au as per market cap.
Drill program update
The reason to call buy on DAR today is that we hear the company now has a number of holes
completed, some of them are already at the assay labs and as long as normal timings on these
things prevail, we should have the first results NR and newsflow from DAR next week or
perhaps the week after next. We can expect results from the first hole or the first two holes in
the first NR.
In other words, it was time to make a decision on whether to buy DAR for a trade or to let the
drill spec purchase opportunity pass and on consideration, especially when taking into account
the share price and the recent jaggedy price action, a low enough entry point should be
attainable and the obvious and clear risk of buying on a drill results spec play (yep that
one is bold typed and underlined because you’re going to have to be crystal clear about this,
folks; drill spec trading is about as volatile as it gets and it’s not for everyone)
Conclusion and the envisaged trade
On DAR, it’s put-up-or-shut-up time and I’ve decided to put up. However, the trade will have
some clear criteria and that’s what gets listed here:
• I’m a buyer of DAR.v next week at its current 8c price, but will accept 10c readily
as my entry point. Anything higher than 10c would give me pause for thought but it
wouldn’t be impossible either unless it goes to silly levels.
• This is a small-scale investment, not a life-changer. We’re still very much in the
“dancing round the edges” mindset of recent weeks, I’m not committing too much
here.
• This is a near-term trade, not an longer-term investment. If I can get in at a
reasonable level, the stock then rises (with or without news) and I can get out with a
decent profit, I’m out. No ifs, buts or sweats. My attitude towards this trade is the same
one used on the recent and successful Bellhaven (BHV.v) trade in June. It matters not
whether I think La Puerta/Suriloma has a long-term future and the fact that DAR
management are honest, straight-shooting
people with professional integrity is also a
side-issue: This is capitalism, baby.
• I’m well aware that my calling buy on a
tinycap, thinly traded stock in The IKN
Weekly may twist its PPS out of shape in the
short-run, as it only takes two or three people
to want in at the same time as I do for the
stock price to be moved considerably. This
isn’t the same as calling buy on PVG, not even
close. Well, that’s just part of the package at
the microcap end of the game and I just hope
that I get what I want. We’ll fight this one out
in the next days, ok?
• I’m not setting a target price on this trade due to its near-term nature and the fact
that a lot depends on newsflow and sentiment. However, a deal I’d happily take would
be to get in around this point and get out at 15c to 20c...let’s say that the potential for
a double is in my mind and leave it at that.
So, the bottom line: Assuming the entry is made correctly Darwin Resources (DAR.v) will be a
part of our ‘Stocks to Follow’ list by this time next week, slotted in as a member of the
‘Smaller/Riskier’ sub-category.
6

Stocks to Follow
Seven of the eleven open positions made gains last week (RIO.to, BTO.to, LRA.v, GORO short,
BCM.v, RIO.to trade, PVG.to), one remained unchanged (IRL.to) and three lost ground (TAHO
short, AQM.v, FCV.v), so all in all a positive week to report, which makes for a pleasant change.
Even the ones that lost ground were the “right” ones, as AQM.v nearly dropped into your
author’s add zone, TAHO short is a hedge (that lost an insignificant amount in the end) and
FCV.v is still a small and risky one (that lost the most, 25.0%). Meanwhile at the other end of
the table the best gains were registered in Gold Resource Corp (GORO short up 13.0%), Rio
Alto (RIO.to up 12.9%), Pretium Resources (PVG.to up 11.6%) and B2Gold (BTO.to up 10.6%),
a near best-case combo which made your author’s account balance look healthier than this time
last week (though let’s be clear, there’s still a long way to go).
The are currently just eleven open positions on our ‘Stocks to Follow’ list, four less than our
self-imposed maximum. Still only one green spot, but things do look a little more pleasant.
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$2.10 -9.5% $6.29 tgt, added Apr13
B2Gold BTO.to buy C$3.07 28-nov-12 C$2.60 -15.3% $5.70 tgt added Apr '13
Recommends
Minera IRL IRL.to spec buy C$0.73 22-jul-12 C$0.23 -68.5% $1.56 tg, added, new avg
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.85 -26.1% solid biz model, LT hold
Gold Res Corp GORO short U$9.70 03-may-13 U$7.27 25.1% to tgt, will wait a week
Bear Creek BCM.v hold C$2.06 30-may-13 C$1.77 -14.1% Cheap at $20 Ag, will wait
Rio Alto Mining RIO.to buy C$2.68 07-jun-13 C$2.10 -21.6% ST trade position, separate
Pretium Res PVG.to hold C$8.20 11-jun-13 C$7.52 -8.3% New position, M&A play
Tahoe Resources TAHO short U$12.42 08-apr-13 U$13.94 -12.2% newly re-short, port hedge
Smaller/Riskier
AQM Copper AQM.v hold/add C$0.31 16-oct-11 C$0.07 -77.4% want to add at 6c
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.09 -48.6% revised tgt 25c
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-jan-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-jan-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
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
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-jan-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-apr-12 C$0.13 -83.5% still trying to sell
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
2009, 2010, 2011 and 2012 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Gold Resource Corp (GORO): The reason GORO got murdered on Friday is contained in its
after-hours NR (1) that day, because as we’ve suspected for several weeks the 25% owner of
GORO shares Hochschild (HOC.L) is pulling out (oh, it’s nice to call one right for a change). The
filing Friday is for 3.4m shares to be sold of its total holding of 14,626,874 shares and that
7

3.4m filed is the most it can sell due to market rules in a 90 days period. In other words, HOC
wants out and you can bet it’s already tried and failed to shop its entire holding to other
companies or institutions before taking this, the price-negative route of selling on the open
market. You can also lay safe money that the 3.4m sales in this quarter won’t be the last shares
to be sold by HOC and once these trades have washed through, the next batch of 3.4m or so
will be sold into the market. In other words, what we saw on Friday (1.8m shares traded, so
even if they were all HOC shares there’s a way to go on this batch) is nothing like the end of
this selling story, and that’s not even considering the potential that other large holders (e.g.
Tocqueville and its 3.98m shares) decide to follow suit and get out while the getting’s still
relatively good.
Your author’s $7.50 downside target has now been reached and passed and thanks to the
recent addition to the position, the win here is fairly decent. However, now that the
circumstances are clearly and obviously negative for the GORO share price in the near-term due
the HOC’s selling, plus what we expect as a lacklustre 2q13 production results and later
financials in the pipeline, plus the decent effect of having a hedge to the long positions in this
portfolio, there now seems no need ot rush into covering this GORO short position so I’m
probably going to leave it open for a few weeks longer. Let’s see what happens and whether
me getting a little greedy turns out to be a good or a bad thing, but I will add a caveat to that
last statement by saying that I have hit my price target here and if things start to move in the
other direction by too much, I will cover the short and take profit (with notice given in a Flash
update, of course). There is a strong rumour picked up by this office that GORO management is
going on the offensive tomorrow and plans to fanfare more share buybacks, but even if it does
it’s a case of doggypaddling against a stronger tide and I doubt it will make much difference.
One final word. After my blog post on Friday (2) I was contacted by “an analyst house” (will
remain nameless in order to spare blushes) that has been vociferously long and obviously
wrong on GORO for a long time. The mail was the first contact ever received and laid out the
long case for GORO at this moment and price. It also included the line that GORO year to date
had performed no worse than Coeur
(CDE) Hecla (HL) or Silver Standard
(SSRI) and if you care to look that’s
true, but it did make me laugh to
think that Gold (with a G) Resource
Corp’s best peers are now apparently
silver (with an S) companies. It also
got me to dial up the 12 month chart
instead of just the six monther (my
nose always twitches when obviously
biased book-talking anal ysts try to
impose a preferred timeframe on
me) and that 12 month chart turned
out to look like this (right).
My only real takeaway from the exchange was “My stars, the GORO true believers (and those
that led them into the stock) must be really suffering out there” if the ringleaders of this sham
feel compelled to engage with me on this, which is the message I wanted to pass along here.
AQM Copper (AQM.v): No addition last week because our 6c maximum price is strict this
time, so when that nice mister Market tried to fish 6.5c out of me I didn’t bite (he knew very
well where I (and others it seems) were sitting and tried his best). This one may happen next
week and as AQM traded against the grain Thursday, dropping when the market rose I’m still
confident enough of getting my price.
Minera IRL (IRL.to): The only news from IRL was of its AGM (nothing untoward happened)
and there was zero sip nothing out of Argentina and Don Nicolas. The last I heard was ten days
8

ago and at that point things were close, but this is Argentina, where anything happens and
often does.
The only consolation I can offer you (and to myself as much as anyone) is that by sticking
firmly to the “no top pick until deal done” decision we’ve managed to avoid adding at what
looked like bargain price in the 40s and 30s. This company needs funding, at both Don Nicolas
and Ollachea, and we knew from 3q12 when first buying it that the financial deals were the
critical path items and Don Nicolas was the first in line. Here we are and two quarters’ worth of
delays to the original deal later, the share price is in the toilet. At least it’s clear what we need
from IRL to get it out of that toilet; a deal. We get it closed and the trade plan is on.
Tahoe Resources (TAHO): On Wednesday morning we had a NR (3) out from Tahoe
Resources (THO.to) (TAHO) that was of the general corporate update type and airbrushed
recent negative news on the company to within an inch of its life, but at least we did get some
official recognition that is not well at the company. There were four main subjects dealt with in
the NR, which your author sums up in this way:
1) The proposed mining moratorium on exploration projects in Guatemala: See
‘Regional Politics’ below for more detailed coverage on this, but in the case of the THO
NR it noted that it might crimp some planned exploration activities in the next two
years but if the presidential plan takes effect as stands, it won’t affect its upcoming
operations at Escobal. And really, that second part is all anyone outside the company
cares about.
2) Community update: This is where the bullshit starts, as THO decided to tell us all
about the benefits of trickle-down economics and the unalloyed benefits it has brought
to the San Rafael district when it only takes a cursory glance at any coverage of the
project to know that there are many (whether majority or minority is unclear, but it’s a
very sizeable chunk) locals opposed to the mine project. I’ve yet to come across a
mining project that has 100% support from the communities that surround it, but that
doesn’t stop them from being built and happening. This THO message is naive at best
and more likely makes the company sound as arrogant and ignorant as it has shown
itself to be over the years.
3) Security update: The spin doctors hit full gear, finally acknowledge that there was
trouble at the mine gates, try to make out that shooting at people with live shotgun
rounds constitutes “non-lethal force” in their books and shifts the blame to the ex-head
of security there (who’s been fired). No mention of the “Kill the n__gers!” (ugh, I’m
sorry, hateful word but the only translation that works) instructions before the guard
duty opened fire, no mention that the protesters carrying large sticks and machetes
were on the other side of locked gates and fences. Still, at least it’s a step closer to
reality than the May 1st NR from THO told us that the “...security manager was detained
by authorities on Tuesday due to the highly charged atmosphere and inaccurate press
reports about Saturday's events. He has not been charged with any crimes, and the
Company expects him to be released when the government investigation is complete.”
4) Project update: The strongest suit at THO is that the mine construction continues on
schedule and on budget, with emphasis now shifting to above-ground development as
much of the unnerground is now at the stage where mining can begin. Commercial
production was again slated to start in 1q14, which implies a 3,5000tpd run rate for the
mine. On this score those invested in THO (by which I mean long, rather than short
such as I) can have little complaints with what they hear and see (photographs
available from the NR link).
Overall, it’s pretty clear that Wednesday’s NR was timed to coincide with President Otto Pérez
Molina’s visit and broadcast from the Escobal mine site (see ‘Regional Politics’ below) with both
country and company hoping that what was reported would bolster confidence in the project
9

and the country’s mining sector. Well, as the chart here shows (a variant of the one in today’s
opening segment) that probably didn’t go as well as
THO planned. The stock dropped on Wednesday and
although it did indeed enjoy enough of a rebound on
the Ben-affected positive trading days Thursday and
Friday, the stock only just managed to break into
positive territory on the week compared with many
others (see GDXJ in particular) that had an altogether
better rebound.
B2Gold (BTO.to): We await the BTO 2q13 production numbers, which should arrive this week
coming. We know that Masbate will be slightly off due to the already announced production
stoppage (that’s now a thing of the past, it seems) and so most eyes will be on any guidance
given, production or exploration/construction, once the raw data is out of the way. We’re not
expecting any type of blowout quarter from the Nicaragua ops either, one that hits the targets
will be just fine. As for trading, BTO reacted very well to the sector rebound and did what
sector-leading companies are supposed to do, catching the first winds and staying in front of
the pack.
Rio Alto Mining (RIO.to) (RIOM): The production numbers for 2q13 came out on Thursday
(4) and at 48,427oz produced and sold the number came almost smack in the middle of our
expected 48k to 49k number. All fine so far and here’s a screenshot of part of the NR with a
note or two:
The lower ore and higher strip tonnages fit in with what I witnessed on site a few weeks ago;
RIO is getting good at adjusting its production in close to real time and deciding exactly what
dirt goes where. The result is a higher grade on the pads than expected and more efficient
mining (though admittedly, nearly the same amount of dirt has to be moved, and truck costs
are truck costs). Still, the numbers returned were good, no ifs or buts, and the market liked
what it saw.
Rio Alto (RIO.to): Ounces placed on pad monthly, Jan 2012 to date
26000
24000
22000
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
10
21naj bef ram rpa yam nuj luj gua pes tco von ced 31naj bef ram *rpa *yam *enuj
oz Au
source: MEM data/IKN ests

However, the above chart of RIO reported numbers and IKN estimates (which closely match the
overall result published last week of monthly placed ounces is the reason to really like RIO now.
What we saw in 2q13 was a successful ramping up of operations and the fruits will be borne as
the leach cycle of the mineral brings significantly higher production from those placed ounces in
3q13 and beyond. Your author is now comfortable with his 60k+ oz forecasts for the quarters
to come.
We had no word on cash costs in the rather brief NR, but on inquiring your author was told that
they should be “in line with expectations”, so that’s fair enough. We continue therefore to
assume a $700/oz op cash cost and and EBIT of 11C/share on a $1400/oz average gold price
and $1k/oz total costs.
The other parts of the short-ish NR to catch attention from the chattering classes were this
one...
“As part of its 2013 operational strategy, the Company continues to optimize
its mining activities at La Arena and management believes that, irrespective of
the recent falls in the gold price, its mining operations will continue to
generate strong positive cash flows.”
...and then this one.
“As a consequence of the recent drop in metal prices and the need to
conserve existing cash reserves, the Company has decided to evaluate
alternative sources of funding.”
Regarding the first excerpt, that for me was aimed squarely at the Lima market to address
those rumours that have been flying about. On the back on this, I asked management whether
that was still slated and whether it would occur
soon and the answer received was yes, and it’s
slated for just after the 2q13 financials are
published. As for the second part, it’s not much
of a surprise but we now have it in a piece of
official company literature. With the Stage 2
feas now expected for 1q14 (pushed back one
quarter, it seems) for a plan that’s ballparked at
$300m for the first level of sulphide production,
it doesn’t need a math genius to see that
returning profits of $15m or $20m per quarter
won’t be enough to self-finance if gold remains
at these levels. I understand that all types of
financing channels are being considered, which
would certainly include things such as off-takes,
straight debt, forward sales and equity as well as others.
As for trading, the stock did well and good fortune smiled on RIO as it managed to pick the
right day to supply good news to the market. However, Friday was a good day for the stock as
well, as it managed to hold its own and even finish up on a day when a lot of PM equities sold
off after the big rush up. Volume was decent in Toronto’s main RIO.to listing but also in the US
of A via RIOM and the stock finally seems to be catching on a bit there.
Bear Creek Mining (BCM.v): A quiet week. Even though we’re plenty off the recent lows
(51.3% from the very very bottom of the dish on June 26th, to be exact) the good and solid
groundwork being done by BCM at Corani, both on the EIS permitting track and the good
ongoing community relations via the round table, hasn’t really filtered through to the stock price
because that lowest low really was very silly indeed at $1.17. The reasons to hold on here are
as follows:
11

• Community relations are near-optimum
• Corani will get its enviro permits, on that you can bet the house
• The updated feasibility study.
The third one will be watched particularly closely for indications that Corani is still a project that
works at $20/oz silver. If it doesn’t (see the quick piece on Coeur (CDM.to) (CDE) in ‘Market
Watching’ below) BCM could suffer further, but on the other hand we’re now at the kind of
firesale price that has written in a bad case for the Corani feas at current metals prices. We
remind readers that the previous Feas dated November 2011 has this as one of its main criteria
(5):
The base case after-tax net present value ("NPV") is $463 million at a 5%
discount rate with an internal rate of return ("IRR") of 17.6% ($18/oz silver,
$0.85/lb lead and $0.85/lb zinc). On a pre-tax basis, the base case NPV at a
5% discount rate is $907 million with an IRR of 29.7%.
The question is one of cost inflation since late November, of course. We know that prices and
costs have risen in the year and a half since then, but we also know that BCM has worked on
project optimization that will (with fortune) cushion the costs blow. Previously BCM set its base
case at $18/oz Ag (looking smart in hindsight) and out the other end came a reasonable 17.6%
IRR under reasonable parameters. If the company can show something similar at (let’s say)
$20/oz Ag, this stock will offer plenty of upside from today’s low level.
Lara Exploration (LRA.v): An interesting deal from LRA last week. The NR on Wednesday
announced (6) that LRA was selling its Grace property to Peruvian private gold mining company
Aruntani, which owns an neighbouring property there, for $2m in cash, with the payments
coming in small stages and then $1.5m at three years from the time that Peru’s government
award permits. Grace was the project handed back to LRA by Malbex earlier this year.
This deal shows once again how LRA’s model of being able to monetize its land assets and keep
the exploration motor turning over works well for the company. The cash might not be
immediately forthcoming on the deal but come it will, it will prevent share dilution and in the
meantime it’s an extra $2m it can add to the company balance sheet (previously Grace’s asset
value to LRA was booked at precisely one dollar).
We hear that next in the news pipeline should be something from Brazil and Liberdade, which is
a subject that has more immediate interest to the stock price. Good news from that one could
make a real difference.
Pretium Resources (PVG.to) (PVG): Pretium did well and bounced with the market on
decent traded volume and no company news, which is what frontline explorecos are supposed
to do. The geological sniping about the deposit’s supposed weaknesses seems to have abated
for now so all eyes will be on the main 2013 catalyst that’s left in the tank, the bulk sample
results that are due out somewhere towards the end of this current quarter.
The Copper Basket
After twenty-eight weeks of 2013 The Copper Basket is showing a 27.52% loss to level stakes.
12

company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 168.63 349.06 2.07 -39.1%
2 Augusta Res AZC.to 2.43 144.1 328.55 2.28 -6.2%
3 Copper Fox CUU.v 0.83 399.61 223.78 0.56 -32.5%
4 Lumina Copper LCC.v 9.43 43.46 204.26 4.70 -50.2%
5 Nevada Copper NCU.to 3.50 80.5 164.22 2.04 -41.7%
6 Reservoir Min. RMC.v 2.41 41.46 130.60 3.15 30.7%
7 Hot Chili Ltd HCH.ax 0.72 286.78 123.32 0.43 -40.3%
8 NovaCopper NCQ.to 1.80 51.89 99.63 1.92 6.7%
9 Western Copper WRN.to 1.39 93.78 49.70 0.53 -61.9%
10 Curis Resources CUV.to 0.70 56.31 43.36 0.77 10.0%
11 Panoro Minerals PML.v 0.62 176.25 42.30 0.24 -61.3%
12 Candente Copper DNT.to 0.375 121.93 21.34 0.175 -53.3%
13 Oracle Mining OMN.to 0.80 49.03 21.33 0.435 -45.6%
14 Yellowhead Min. YMI.to 0.59 60.97 14.02 0.23 -61.0%
15 Strait Minerals SRD.v 0.08 56.86 4.26 0.075 -6.3%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -27.52%
The overall basket average is 3.36% better than it was this time last week, as although there
were an even balance of seven winners
Copper Basket 2013 average, weekly
(NGQ.to, NCQ.to, RMC.v, OMN.to, YMI.to,
12%
CUV.to, SRD.v) one unchanged (DNT.to) and 8%
seven losers (LCC.v, AZC.to, CUU.v, NCU.to, 4%
0%
HCH.ax, WRN.to, PML.v) the percentage
-4%
gains tended to beat out the percentage -8%
losses. The best of the bunch was our -12%
-16%
tinycap representative Strait Minerals (SRD.v
-20%
up 50.0%) which was followed by other -24%
smaller names Curis (CUV.to up 20.3%) and -28%
-32%
Yellowhead (YMI.to), while the worst of the
losses was suffered by Hot Chili (HCH.ax
down 10.4%).
Moving to the price action in the copper market last
week and at this point we usually have a five day
chart to show the week just gone, but today we
expand it a little further, back to US Independence
Day, to show how copper came back from its lull near
$3, rebounded well, but still hasn’t managed to break
back out of the immediate-term trading range.
As for the warehouse situation for base metals, copper
very much included of course, rather than bore you
once again with my twaddle here’s a short report (7)
discovered during my market day wanderings that
sums up the state of play in the “Storage Wars” (if you
like):
More on the Coming LME Rule Changes – The End of
the “Warehouse Wars”?? Market participants
meanwhile continued to debate the potential effects of the
LME’s complex proposals to reduce queues by making
warehouse companies with sheds where waits exceed 100 days deliver out up to one-and-a-half
times more metal than they take in. The rules, if adopted at LME board meeting in October,
would theoretically take effect in May 2014 but in practice they have already started to impact
market strategies as calculations for the first new load-out rate requirements have already
commenced. Warehouse companies have already reacted by cutting incentive levels – or even
13
ht6naj ht31 ht02 ht72 r3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 t5yam ht21 ht91 ht62 dn2nuj ht9 ht61 dr32 ht03 ht7luj ht41
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%

holding back from offering any number until they have analysed the situation – and traders have
started to position themselves against possible scenarios of lower premiums, backwardations and
re-warranting issues by borrowing the forward spreads and lowering their premium offering. The
rules probably means lower premiums at some point – that will benefit a number of people. But
there are a number of issues to be addressed including the logistical nightmare of loading more
trucks and the danger of being unable to warrant material in a tight market industry participants
are saying.
In other words nothing decided as yet, though main players are beginning to take evasive
action. However, with nearly a year to unwind things, it doesn’t seem very unfriendly to
participants and there should be time to move to a new (better?) system without too much
market disruption. Overall, I’d gauge that the chances of a sudden downspike in copper during
2013 have diminished, though that doesn’t mean true selling pressure won’t push it under
$3/lb...I think we’ll see a 2-handle before the year is out, for what that’s worth.
So to the inventory stats and the story last week was of a regular downtrend in all components.
World stocks dropped 2.9% (25,830mt) to stand at 871,747 metric tonnes (mt) by Friday’s
close. Of that total, LME stocks dropped by 2.9% to 640,775mt, Shanghai Futures Exchange
warehouse stocks dropped 2.7% to 168,376mt and Comex warehouse stocks dropped by 3.0%
to 62,696mt. As for the tell-us-a-tale-please LME cancelled warrants, they came off a little from
thier recent record highs but are still in the high reaches, at 52.6% of the copper held in LME
warehouses.
Cancelled Warrants at LME, IKN157 to date
60%
50%
40%
30%
20%
10%
0%
14
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 712NKI 912NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
No basket stock updates this week, as the sector was fairly quiet in newsflow and the only one
I truly like, Reservoir (RMC.v) made stubborn gains to frustrate me further. The macro scene
for copper is more important at the moment, however, and because I’m leery in the short-term
(certainly more leery than for gold) these stocks don’t appeal much as investment or even trade
vehicles. Until next week.
The Lottery Ticket Basket
After 28 weeks of 2013 The Lottery Ticket Basket is showing a 39.91% loss to level stakes.

company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 Marlin Gold MLN.v 0.10 379.9 17.10 0.045 -55.0%
2 Eagle Star Min. EGE.v 0.125 69.48 13.90 0.200 60.0%
3 Bellhaven BHV.v 0.14 137 13.02 0.095 -32.1%
4 AQM Copper AQM.v 0.08 105.57 7.39 0.070 -12.5%
5 Fancamp Expl. FNC.v 0.125 118.41 6.51 0.055 -56.0%
6 Tango Gold TGV.v 0.13 45.59 6.38 0.140 7.7%
7 Glass Earth GEL.v 0.155 104.79 4.19 0.040 -74.2%
8 Inca One Res. IO.v 0.12 34.0 3.40 0.100 -16.7%
9 Copper North COL.v 0.10 58.62 2.64 0.045 -55.0%
10 Darwin Resources DAR.v 0.20 26.16 2.09 0.080 -60.0%
11 Gryphon Gold GGN.to 0.085 194.64 1.95 0.010 -88.2%
12 Rio Cristal RCZ.v 0.025 149.26 1.49 0.010 -60.0%
13 Firestone Ventures FV.v 0.045 36.32 1.09 0.030 -33.3%
14 Cream Minerals CMA.v 0.03 155.34 0.78 0.005 -83.3%
15 Netco Silver NEI.v 0.025 47.01 0.71 0.015 -40.0%
Portfolio avg -39.91%
The Lottery Ticket Basket saw four of its components rise (GEL.v, EGE.v, TGV.v, NEI.v), four
drop (BHV.v, AQM.v, DAR.v, FV.v) and the
other seven remain unchanged (MLN.v, 25% Lottery Ticket Basket 2013 average, weekly
GGN.to, FNC.v, COL.v, CMA.v, IO.v, RCZ.v) 20%
15%
as the world generally ignored the beaten- 10%
to-death end of the market and traded 5%
0%
more liquid and/or interesting stocks. Quite -5%
-10%
right too. The overall average ticked up a
-15%
couple of percentage points thanks mainly -20%
-25%
to the half cent added to Netco Silver -30%
(NEI.v), which meant a 50% price increase. -35%
-40%
Worst loser was Darwin Resources (DAR.v -45%
down 20.0%).
Bellhaven Copper and Gold (BHV.v): BHV published news of a new drill hole at its La Mina
‘La Garrucha’ target on Wednesday (8) which was a long one at 311m of mineralization but
slightly lower in average grade than the previous La Garrucha drills (0.84 g/t Au and 0.1% Cu
for a 1.0 g/t AuEq). The market yawned at the news, basically.
Aside from its exploration activities, one of the main problems the company has is its
association with Thom Calandra (along with his Torrey Hills Capital promotion vehicle) who has
his dirty claws deep into the company via a large shareholding and possibly due to that reason
alone, the people at BHV don’t seem to want to rid themselves of his heavy burden. Until this
proven securities fraudster is jettisoned from the entourage doubts are bound to remain about
the integrity of this tinycap and it’s going to be far more difficult for BHV to get any traction
with the type of people that matter and can take the company back to a reasonable valuation.
Regional politics
It’s protest season in South America
As mentioned on these pages before, there’s a cycle for industrial protests and strike actions in
South America, particularly in the Andean regions, that coincides with the traditional agricultural
cycle. The basic story is that in upland areas, planting has to happen after the frosts have
15
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 t5yam ht21 ht91 ht62 dn2nuj ht9 ht61 dr32 ht03 ht7luj ht41
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%

departed (September) and harvests have to be in before the next frosts arrive (April/May) and
between those times, the ground becomes rock hard and is unworkable. As a result, people
have time on their hands, food stacked up in the storerooms and less hard labour to do, which
is a combo that makes room for the catching-up with social affairs. That can include
merrymaking and it’s no coincidence that most town/village fiesta celebration weeks happen
between June and August, nor that the “traditional” month for marriages in the Sierras is
August (as if decided by God himself), but it also means it’s one of the seasons for politicking
and as much of the region’s mining activity happens in and around places that have mountains
(check your 1973 edition of The Boys’ Own Big Book of Geology for reasons as to why that
might be) it’s the time of year when protests upset mining activities, be those disruptions direct
or via collateral damage.
Nowadays, the “protest season” has its subtle differences. One of those is the sudden lack of
strikes or planned disruptions in August because that’s when the big tourist money is made
(mainly from those coming from the North to spend part of their summer vacations). An
example of this came last week, when the often militant Cajamarca region of Peru announced
(9) it would be launching an all-out indefinite regional strike action against mining projects and
operations (names mentioned include Conga (natch), La Zanja, Gold Fields Corona etc) in the
region...that would begin on Thursday August 29th (a day before a national holiday that falls
this year on Friday 30th ....hey, take the long weekend, guys). In other words, they’re keen on
protests but not befoe the main tourist season is done and coffers are filled with greenbacks.
To quote Vonnegut, “So it goes”.
There have been sprouts and examples of other protests and strikes in the region (not just
Peru) this year, right on schedule. Here’s another, with a village in the La Libertas region again
protesting against a project drilling there (under the auspices of Goldcorp, for what it’s worth)
and reviving complaints last made in 2011. And below today we note the strike action in
Colombia planned for this Wednesday coming, July 17th. All those and more, but the takeaway
is not to make too big or drastic decision about social protests that flare up in this “protest
season”, because for one thing it’s part of the rhythm of the world in South America and for
another, it’s often connected as much with the fact that people have less to do in the fields as it
is with real and long-lasting grievances.
Colombia: A growing fight over a referendum
Here’s a story I’ve been watching with one eye and wondering if it might develop into
something that’s newsworthy. It did just that last week. The subject in question is a
referendum that’s been planned by locals around the AngloGold Ashanti ‘La Colosa’ gold mine
project in the Tolima region of Colombia. The plan for the referendum, promoted mainly by
local anti-mining activists, has been around for a while but back in May (10) the nation’s
Ministry of Mining and Energy (MME) issued a decree saying that individual municipalities are
not allowed to take autonomous decisions regarding mining projects. Clearly it’s in the MME’s
best interest to disqualify opposition to mining projects, but the decree was immediately
challenged in the courtrooms by those opposed to La Colosa.
Last week the courts handed down their ruling, sided with locals (11) and against the MME in
around eight weeks’ time (the vote was originally scheduled for tomorrow but the judgement
included a delay that now slates it for August) the people in the municipality of Piedras, in
Tolima region and sitting next to the La Colosa project, are almost certain to get their chance to
vote in a referendum that the national government is bound to call non-binding and anti-mine
activists will claim to comply with the international public consultancy rules of OIT169.
The battle has now shifted from whether the local referendum will happen to what shape it will
take. One of the main issues now is the exact wording of the question to which locals will be
required to answer Yes/No, as reps from AngloGold Ashanti said last week that if the wording
proposed by the municipal authority were used, it would be so biased that even they would
vote against themselves and their project.
16

Add to this more extensive comments made by Ken Kluksdahl, President of Colombian
Operations at AngloGold Ashanti, last week in this Q&A (12) published by Colombia’s biznews
medium, Portafolio. Here’s one quoted part that came just after the note underlined the size of
the project and its investment which would be one of the largest ever in Colombia. Said
Kluksdahl:
“We don’t want to create a conflict, (we want) to reach a consensus as to why
La Colosa is important...We aren’t going to let this (referendum) process
detain our project. We will take every opportunity we are given to protest our
interests.”
But as usual in the corporate world, carrots come with sticks and the strategy is laid out for all
to see in this next quote:
“We have a fiduciary responsibility towards our board of directors and our
shareholders. At some point our patience will end and we’ll simple go to to
them and take the position that, perhaps, Colombia is not the best place ot
invest.”
Issues are now coming to a head around La Colosa as it’s shaping into a classic test case for
the type of large-scale formal mining project that Colombia wants to promote in the country.
We’ll be watching the vote, the results, the reaction and fall-out from the results and the
resulting debate very closely in the weeks and months ahead.
Colombia: Miner’s strike set of July 17th
Meanwhile, another part of the Colombia mining industry is set ot make its own headlines next
week. The association (union) of small and medium-scale mining, Asominercal, has ratified and
confirmed (13) its planned indefinite strike due to start on July 17th that is expected to see up
to 250,000 workers in this sector in protest marches and strike activities. The small/medium
mine workers’ unions have a raft of complaints and demands on the table which include
improvement of low pay and the often abysmal health and safety conditions in which they work
(Colombia’s mining industry has by far the most amount of deaths per year in any LatAm
country), but their main claim for this industrial action is to get the government to officially
acknowledge the sector and give it the same legislative footing as the recent laws have given
the (still only in proposal stage) large-scale mining activities in the country. This complaint
centres on the way in which the government has sought to ban “illegal” mining, rather than
bring it under national auspices.
Guatemala’s President proposes a mining moratorium
We stuck the news on the blog last week including the Youtube of the half hour “De Frente con
el Presidente” (the gist translation would be “Straight Talk with the President”) program that
aired Tuesday evening on the State TV channel in which President Otto Pérez Molina (OPM)
talked mining industry to his fellow citizens. The main takeaways from the program (we watch
these things so that you don’t have to) are:
• OPM is a proponent of a responsible, formal mining industry for Guatemala
• The law bill his administration sent to Congress for debate in September 2012 has so
far been ignored by parliamentarians and no progress has been made on its passage.
• Because of this, and to try and stimulate debate and eventual passage, OPM proposed
(and sent to Congress the next day) a plan for a two year moratorium on new mining
concessions, licences, permits for exploration etc.
• The proposed moratorium as stands would not affect those mining activities already
permitted and granted.
There were also details from the program, such as the presence of his Mining Minister, the
constant pushing of the pro-mine agenda through the show (which is fair enough, he did his
job no more no less) and the detail that the whole thing was shot on site at the Tahoe
17

Resources (THO.to) (TAHO) Escobal project, scene of the recent social turmoil that brought
headlines and debate to the fore in Guatemala. Of all the sidebar issues, I thought this was the
most interesting and OPM was clearly not ducking the social problems that mining has brought
to the country. Also, his general “performance” (for want of a better word) was good and it was
interesting to see how much he’d clearly studied on the subject and could synthesize well in a
fluid on-camera way; he knows what he’s talking about, which isn’t so common to see when
our combo is Presidents and mining.
But back to the main issues covered and the one that’s caught all the headlines is the proposed
two year moratorium. The first thing to say is that it actually isn’t anything particularly new,
because a formal moratorium has been in place since the President Álvaro Colóm days and due
to this, many legal experts believe the three licences granted so far in the OPM admin era are
on shaky legal grounds. But aside from that, the OPM move has been greeted by “way too
much” on the right, with for example the Chamber of Industry (CIG) and the Coordinating
Committee of Agriculture, Commerce, Industry and Finances (Cacif) (14) both being major
business chambers in Guatemala, saying that the moratorium sends a negative signal to
potential foreign investments and should be killed at birth. Meanwhile those to the left of OPM’s
position (and there are many in Guatemala) are saying that the proposed moratorium doesn’t
go far enough, that all mining activity should be paused for at least a period of time in the
country (exploration and production) and that debate should open on whether public
consultancy should be given a priority on all projects before they’re allowed to go forward.
Overall and looking from the outside in, I’d say at this point that OPM has done his country and
his pro-mining case more harm than good with this gambit. The business community is right to
say that he’s sent a negative signal to the outside world (...is paved with good intentions etc)
and we only need to look at the weakness in TAHO (see above) after its “everything fine,
honest like guv” NR on Wednesday. Meanwhile, another violent death of a anti-mining activist
was reported last week (15), when one of the leaders of the protesters trying to stop the El
Tambor (ex-Radius Gold (RDU.v) which did a very smart thing and sold its participation to
erstwhile JV partner KCA last year) gold project from going ahead was shot and killed while
walking back from a group meeting last week. As usual, nobody is to blame. The question of
mining in Guatemala is a problem that’s not suddenly going to go away thanks to OPM’s
proposal and tension has not dissipated, no matter what the government might tell you
otherwise. My TAHO short is held principally as a hedge against port longs, but also because
there’s an accident waiting to happen in Guatemala and if things come to a head, the stock
could easily sell down in waterfall style.
Market Watching
Alamos (AGI.to) buys Esperanza (EPZ.v)
We had the deal (85c/share cash, just under $70m total) announced Friday morning (16) and
then I decided to throw out one of them there strident opinions on the blog a couple of hours
later (17). Now for a few extra (and more measured) reflections after further thought.
18

In the end, and looking at it from the AGI side of the deal, it’s not one that I’m particularly
stressed about. The idea of snagging EPZ is all about adding exploration assets to the company
and at $70m, AGI with its market cap of $1.7Bn working cap of nearly $0.5Bn as at the last
financials (March 31st) and $373m of that in cash, is not breaking the bank here.
So AGI bags some cheap assets, but there are problems with all of them. The only one I
continue to like to a certain extent after having pored over EPZ earlier this year (the decision
was to pass...one of my few good ones this year) is Pico Machay in Peru, but even that has its
community issues to solve. La Bolsa in Mexico has off-scale political risk (narco, basically) and
geols who know the property have told me they’re not that crazy about the rocks, either. Then
there’s the Calcatreu silver project in Rio Negro Argentina which...well, it’s in Rio Negro
Argentina. To that one I say, “Gracias, pero no gracias.”
That leaves the main “Esperanza” project in the State of Morelos, Mexico (ex-Cerro Jumil, and
when a project gets a quiet name change from a junior owner it’s a red flag al by itself), which
is the project that recently had its environmental permit turned down by Mexico’s Semarnat
environmental body (which is headed by a close ally of President Enrique Peña Nieto and
member of his inner circle, Juan José Guerra Abud). Much noise was made by the whining
Englaish language commentary brigade in mining circles about this permit denial as they tried
hard to cherrypick their data and blame it all on a bunch of lefty enviro-terrorists who’s stopped
the project because of a long-neglected historical site nearby. That aspect had a secondary role
according to Semarnat in its ruling, but the main reason for permit denial was that the mine
would take away too much water supply from agricultural zones nearby and that, ladies and
gentlemen, is a real project-killer in Mexico mining these days and will be a tough one to
overcome. I’m guessing that McCluskey over at AGI might fancy his chances of bringing the
Morelos people round to his way of thinking by being able to show them the producing mines
AGI already has in Mexico, but all the same the social opposition to Esperanza is now
entrenched and it will be a very tough one to crack, even over a long-term period.
But as suggested in the first lines of the above above, I don’t think this deal is necessarily bad
for AGI. Firstly it’s small compared to the company’s current size. Secondly, it adds assets into
the corporate structure in exchange for un-needed cash at a time when assets are at distressed
sale prices. Those can sit there, pad out the overall in-situ resource count at AGI for a few
quarters and then in the event of a sector rebound and new interest from dumb money, get
flipped out at a profit in the next round of junior speculation. However, all talk of some sort of
intense bidding war for EPZ should be discounted here; AGI has made a smart, lowball and
friendly bid that the guys at EPZ need to take (after having made their own mess of things and
been hit at the wrong time by a sector downturn). If you hold EPZ today, you’ve been offered a
reasonable out and should take it.
By the way, ‘esperanza’ is Spanish for ‘hope’. You’ve been told enough times already that hope
is not a valid investment thesis, I’m sure.
Coeur (CDM.to) (CDE) at La Preciosa: Another self-inflicted wound
One of the most popular* single posts on the blog last week was this one (18), the entry about
Coeur Mining’s (CDE) (CDM.to) news release on Monday (19) on the company’s PEA (scoping
study) for its newly acquired ‘La Preciosa’ project in Mexico. La Preciosa is of course the project
picked up when CDM bought Orko Silver (ex-OK.v) earlier this year when it outbid First Majestic
(FR.to) (AG) for the junior and the company.
Without beating around the bush, the PEA is a disaster and underscores just why I always
despised OK.v as an investment alternative (and was extremely surprised to see somebody as
smart as FR.to’s Neumeyer bid for the thing, but that’s another story). The bad news is
encapsulated in the scribbled-upon table that I ripped from the NR and put in the post,
reproduced here:
19

Be clear: At $20/oz silver this project will never happen. Even at $25/oz Ag it’s now best classed
as borderline and we must be crystal clear about the stage of development here; this is a PEA,
the documents that tend to be written by third parties with rose-tinted specs firmly placed on
nose before the writing begins.
CDM paid a ticket price of CAD$350m ($100m cash plus 11.5m shares, with the shares now
worth ~$142m so $100m has disappeared somewhere) and in hindsight obviously bought the
wrong asset at the wrong time. Such is the way of the market and there’s always a biggest fool
to laugh about, but this is just another in a line of corporate-level errors at CDM the company
(buying the half of the Argentina Joaquin property that it didn’t already own last year, the Rye
Patch/Rochester snafu) that gives no reason to trust the other decisions this company makes
regarding its future. I’ve seen a few opinion pieces reco’ing Coeur as a potential trade these last
few days because “it’s been hit the hardest” of its peer group. Well people, that’s exactly why
stocks such as CDE should be avoided and those that have weathered the storms better should
be higher on your lists of potential trade candidates.
*fwiw, the single most popular post last week was the short line about Lowell Copper and we’ll get to that in a second.
OceanaGold (OGC.to) (OGC.ax) rebounds better than most
A little dose of seller’s regret on this one, but that’s not why it’s getting a mention here today.
Well it is in part, but there’s a little more to underscore as well.
First the facts and as per Friday’s close of CAD$1.43, OGC is now 21.1% up from the point in
June which I booked my sales and exit from this
losing position. More topically, its share price
jump from Wednesday’s to Thursday’s closes was
$1.29 to $1.47, i.e. 18c or 14.0% (with +14.7%
in the OGC.ax Oz listing to boot) and even on a
good day for nearly any stock you care to
mention stood out as a big winning move.
Yes, this is one that I sold and yes, buying high
and selling low is a trade thesis that means any
analyst or investor goes out of business quickly.
However, the extra push move we saw from OGC
last week didn’t surprise me as this is a stock
that’s now trading right around its most sensitive point in the gold price. Our calculations at the
time and ongoing assumption is that today’s OGC is a company that needs U$1,300/oz gold to
break even (or turn a minor net profit). As gold sunnk below that number to $1,200/oz, it was
always going to be the case that its share price (which does nothing more or less than reflect
equity value of the company, after all) went South sharply. The reverse is also true, and gold’s
recent recovery to $1.3k/oz means that OGC is back in (or darned close to) the world of
profitmaking companies and that type of leverage showed up once again.
If you like the near term prospects of gold (more than I do) then this sort of highly leveraged
vehicle should be on your shortlist, because it will continue to offer high beta to the metal if
20

gold moves through $1,300/oz and towards $1,400/oz. Personally I’ll stick with the more
defensive BTO and RIO for the time being for my junior gold exposure, but risk tolerance
comes in all shapes and forms.
Lowell Copper (JDL.v) starts trading tomorrow: Here’s what you need to know
This short post on Tuesday evening (20) was the blog’s most read single post of the week over
at the blog, and by quite some distance, too:
If you're wondering about the new Lowell Copper (JDL.v) "Ricardo" property... ...it's
16,250 hectares big and is located near Calama, about 12 miles South of the big
Chuquicamata mine. In other words, smack in the middle of the porphyry copper
elephant hunting zone of Chile. No Surprise there.
The reason is, of course, the name of the man running the show at Lowell Copper, David
Lowell. Tomorrow July 15th (21) sees the start of public trading in the new vehicle, Lowell
Copper (JDL.v) and what follows is the need-to-know stuff about the company and what, in
your author’s view, seems to be going on around it. You also get a trade recommendation on
the stock at the end so if you can’t be bothered will all the blahblah (and I could never blame
you for that) skip the stuff and go to the bottom now.
The corporate structure
So to business and we start with a rundown of the structure of this newly floated JDL.v
company, presented in standard NOBS report topbox-style. Afterwards comes a few notes on
the numbers:
Shares out: 69,561,494
Options: 60,000
Warrants: 12,717,175 (most at 72c strike)
Fully diluted shares: 82,338,669
Nominal share price: $0.54
Nominal Market Cap: $37.56m
Cash treasury: ~$11m
Approx cash per S/O: $0.16
All prices are in CAD dollars unless stated. Forex U$1=CAD$1
Notes on those numbers:
The shares out count is made up as follows:
• 5,640,000 shares comes from the ex-Waterloo company structure as part of the RTO. It
should be added here that the RTO vehicle, ex-WAT.v, is a very clean structure with a
low entry share count, minimal debt assets (around $400k on both sides of the balance
as at its last set of financials) and just the type of shell that makes an RTO easy. No
need to move it out the NEX, no fuss, no bother.
• 42,857,143 shares are held by the Lowell Copper insiders. We aren’t privy to the exact
breakdown there, but we’d expect the majority of those shares to be held by David
Lowell himself, with other company members (and longtime and successful business
partners of Lowell) David De Witt, Catherine McLeod-Seltzer and Marcel de Groot to be
holders inside that package.
• 21,064,351 shares are held by the funders of the seed round of placements, which
happened at 54c per unit (one unit = 1 share + ½ warrant at 72c). Worth noting that
back in February the original plan was to run the seeding at 70c, so even a high level
name such as Lowell’s has been hit by the downturn. On the other hand, the plan was
to raise just $5m at this stage of the company and in the end $11m has been added to
21

treasury.
• The share price and market cap numbers are called “nominal” in the above box,
because we’re assuming the 54c placement share price for valuation purposes today.
That may change come tomorrow, the first trading day of the stock.
• The cash treasury is enough for JDL to do what it wants in the first year (or so) or
operations, including the type of drill program it would need to bring back initial results
from the Ricardo property. After that, you can be sure it will refi to raise more and if
results have been good, it’s a fair assumption that the second raising would be at a
higher price. That’s a coin with two sides though, of course.
The Lowell Copper assets
Ok, so that’s the company’s structure. Now we move to the company’s assets and there are
basically three things of note:
The Waritza property in Ecuador: Lowell must like this project because it’s the one Lowell
Copper carried into the RTO and he does have successes to his name in Ecuador via the
Mirador property discovery (though to be fair, other geols also claim they were the original
discoverers of that one). The property is in the elephant country of Southeast Ecuador and
already hasa 43-101 compliant resource of 195 million metric tonnes (mmt) grading 0.61%
CuEq (0.42% of that is copper, the rest is moly) for a deposit holding 2.6Bn lbs CuEq (1.81Bn
lbs of that straight Cu). JDL has reportedly been in contact with communities and locals there,
re-establishing relations and trying to get things moving, which suggests Lowell and Co like the
exploration potential still there and the deposit may have more tonnage to offer. However, it’s
in Ecuador. It’s in Ecuador. And it’s in Ecuador. If we’re at a stage today when even a world-
class high grade deposit such as Fruta Del Norte’s gold gets dumped by a major, the signpost
should be clear for all to read. Frankly I don’t care if they stick a 2km drill through a blind
porphyry, hit 1% Cu with grade improving at the end of the hole and extrapolate that they’ve
found the new Escondida, the asset value assigned here is zero.
David Lowell: The man himself, J. David Lowell (hence JDL.v, in case you were wondering) is
probably the most valuable asset inside this corporate structure. Not only did he quite literally
write the book on porphyry copper deposits (the iconic 1970 paper written in conjunction with
John Guilbert is the most famous of a whole series from Lowell in the 60s and 70s which
defined the geology of these deposits) but he’s also been responsible for the discovery of some
of the biggest mineral deposits in the world, including the world’s single largest copper mine La
Escondida in Chile, the Mirador deposit in Ecuador now being moved forward into production by
the Chinese monied ECSA, the ~8m oz Pierina gold deposit in Peru that via his junior Arequipa
Resources was sold to Barrick for $1.1Bn and the Toromocho deposit in Peru, which was sold to
Chinese capitals via his vehicle Peru Copper and is now close to entering into production.
There is no hiding the man’s success, no diluting it and I have nothing but praise for what he’s
done and the way in which he’s done it too, always brutally honest and never shying away from
the concept of failure, either. On that subject, here’s an excerpt from a recent interview Lowell
did (21) with Tommy Humphreys of CEO.ca (and we’ll return to this subject later):
Major mining companies have a “don’t make mistakes” approach, which “doesn’t fit at
all with the profile of the mad scientist who discovers mines,” he said. “When
something like one in five hundred good-looking targets will become a mine, a
successful explorationist needs permission to be wrong four hundred and ninety-nine
times.” Here he paused. “If there’s anything my career says about me, it’s that I’m very
good at being wrong.”
Lowell understands success and failure rates and this is something that we need to bear in
mind. He’s not afraid of failure, never has been and never will be, because in the field in which
he operates it doesn’t take more than one big win to get people to forget about any number of
misses, the rewards are that great. For example we’re not hearing much about the Lowell
22

titanium in Paraguay story that was the talk of 2011 these days. Also, we hear all about
Arequipa Resources Pierina gold discovery, but it’s easily forgotten that Lowell was in Peru at
the time looking for the next big copper deposit in the Cajamarca/La Libertad region, which
didn’t come to pass. However, hits and misses aside this is the one part of this new junior that’s
beyond any sort of reproach, a subject we return to in the ‘Discussion time’ section below.
The Ricardo property in Chile: The section in the news release last week that perked up
many eyes and ears was a discreet little sentence in paragraph four: “Prior to the closing of the
RTO, Lowell Copper Inc. completed the acquisition of the "Ricardo" property, a copper
exploration project in Chile” and was why I bothered to publish a post on the JDL just after the
NR hit. By the looks of the hits and feedback my little two-liner received, it’s the one thing
that’s got people buzzing about the company here’s more about the enigmatic Ricardo:
The reason for the interest is closely connected to the nearby Chuquicamata mine (wholly
owned by the State’s Codelco company, in operation in its present form since 1910 and one of
the biggest copper mines in the world), some 15 to 18km (depending from where you draw
your line) from the location of the Ricardo concession. The potted theory goes that what’s been
discovered at Chuquicamata is only 70% of the total orebody that was likely created and that
perhaps 30% of the body was at some point sheared off by a fault movement to parts
unknown. By mapping the fault systems in the area, geologists have theorized for quite a while
that the concession known as Ricardo may play host to this theoretical 30% of mineralization
“lost” from the main Chuqui body. If so (and there are many other theories abounding, but we’ll
stick with the best-case situation and the elephant-sized prize that’s apparently being hunted
here) the geological theory states that 30% of the the whole may contain close to 50 billion
pounds of copper at a grade of perhaps 1% Cu, with the same type of moly byproduct that
Chuqui gives to its production mix. In other words and to cut to the chase, find this “lost”
orebody and win the multi-billion dollar jackpot. However, a lesser but still juicy prize might
come if another theory holds, which says that the “lost 30%” fractured into smaller slivers and
one of them may be at Ricardo, so even if they could find 20% of the “lost” portion we’d still be
talking about a world-class copper discovery and a massive payday for the people who find it.
However, Lowell’s interest won’t be the first time around for Ricardo, not by a long chalk. The
deposit has a history and has been picked over and explored (and drilled several times) by
several well-known mining companies. Here’s a list of the programs and some of its relevant
ownership history so far:
• In 1967, the Anaconda company drilled either close to or on the now Ricardo
concession.
• In 1991, Codelco optioned in and drilled 11 holes in Ricardo (maximum depth 606m).
They found nothing and handed back the property to its owners.
• Then in 1992 and 1993, Codelco went back to the property under the pretenses of
drilling via a water rights permit) and drilled four more holes (max depth 404m)
• Meanwhile at the same time, Freeport McMoRan optioned in and drilled 14 holes in
1993, with total meterage coming to 5,095m. The results of the campaign were of the
“geologically interesting” type that indicate, hint and signal that more might be there,
but nothing in the way of economic metal content was found. Freeport handed back the
property in 1994.
• Next up was INCO in 1995 and 1996, who drilled 12 holes in a two phase program
(max depth 448m), again found interesting geological results and was the next
company to hand back to its owners and move on, in 1996.
• The next move came in 1998, when the concession owners, private individuals, agreed
to sell 100% of the property to Rockwell Ventures (now known as Rockwell Diamonds),
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a Hunter Dickinson company in exchange for 22.4m shares of Rockwell. Since that time
until the recent deal this year, Ricardo has stayed in the hands of the HDI group in
some form or another, but it has still seen work done.
• In 2000, HDI optioned the property out to Anglo-American who ran a 16 hole program
to depths of up to 250m, found nothing they liked and handed it back within a few
months.
• Then in February 2004 HDI again optioned Ricardo out, this time to Rio Tinto. We don’t
know exactly what Rio Tinto did there, but we do know that it was obliged by the terms
of the option to drill at least 2,000m in the first year and that once the year was up, it
handed Ricardo back to HDI.
At this point the story of Ricardo shifts into a different chapter and things go quiet on the
exploration front. Rockwell Ventures changed tack, added a diamond exploration property to its
asset book and changed itself into Rockwell Diamonds. The Ricardo asset was moved to the
back boiler and was apparently transferred to first one HDI holding company inside the group
structure in 2005, then another one in 2008. It’s here that things get a little hazy and
anecdotal, but I can at least pass on what I’ve picked up from an unconformable (but likely
reliable) source. It seems that at some point Ricardo was bought from the final HDI internal
holding company by a group of the HDI insiders (can’t say who) for a very small sum of money
(the rumour has it at $2,000). Nothing was mentioned or heard of Ricardo again until this year,
when the same group sold Ricardo to Lowell Copper for $250,000. I stress that this paragraph
is unconfirmed, but I’d be willing to bet that if not 100% accurate, it’s right there in the
ballpark.
So good for them, the people who bought Ricardo out of the HDI asset book have made
themselves a pretty penny, but it does beg the question as to why HDI people would want to
sell this property, held for night on 15 years, for $250k when there might just be 5Bn lbs, 10Bn
lbs or even 50Bn lbs under the ground, waiting to make somebody very rich indeed. We also
need to question just why so many big name companies (and words such as Codelco, INCO,
Freeport, Rio Tinto, Anglo etc are not to be sniffed at) have been enthusiastic enough to pick
up the option on Ricardo and drill the thing, only to find nothing and hand back.
Discussion time
We now have the JDL.v company structure laid out and an overview and history of its main
assets. One is a property in Ecuador that we can plain forget. Another is arguably the best and
most successful economic geologist that’s ever walked the planet. The last one is a property
that’s had a lot of theory posited about it and a fair few thousand metres worth of drilling at the
hands of some of the biggest names in the business, but the reality has never measured up.
Now for a little anecdotal. I have an acquaintance who happens to work at Chuqicamata and
(unsurprisingly) he was the first person I contacted when the Lowell Copper Ricardo news hit
last week. He got back to me a day later and we exchanged in quite some detail, but the
takeaways from the conversation were as follows:
1) If it were anyone else but Lowell, the move would be easily dismissed. However,
somebody with the reputation that he has gets instant respect wherever he goes in the
mining geology world so when the news came out the crews at Chuqui were quick to
get the old maps out, consider things, get into geol-type debate. In short it was the talk
of the camp last week.
2) However and even with Lowell at the helm, my acquaintance thinks it’s a long-shot play
at best and neither he nor anyone he’s spoken with will be holding their breath about
Ricardo. There may be a deeper target or there may be some follow-up work after
results that one of the majors didn’t do but Lowell has done and sees an opportunity.
But overall (and he’s well aware of the way in which discoveries often happen after
24

other people have drilled and failed at a site previously) he says that Ricardo has been
picked over too often and the mooted theory that the “lost” part of Chuqui (or at least
part of the part) had ended up in the zone worked just fine right up to the moment it
was tested. And tested on multiple occasions, to boot.
So let’s step back, assume that where JDL at Ricardo is leading is to a drill program to test
Lowell’s own theory about this concession’s potential, and consider the possible logical results
from a drilling program on site. There are many ways in which this story might play out, but to
help us get to the nitty-gritty of the matter here are five logically possible results from a drill
program at Ricardo:
• The orebody isn’t there
• The orebody is there and JDL misses it, by a mile or a metre or otherwise
• The orebody is there and the first round(s) of drilling find circumstantial evidence of its
existence without hitting it (as per some of the previous compaigns above)
• The orebody is there, it’s hit, but it turns out to be smaller than
expected/hoped/predicted. Paydirt, at least in the near-term.
• The orebody is there, it’s hit, it’s as big as hoped. Bigtime paydirt.
In the event of the first three the stock isn’t going anywhere, people. In the event of the last
two we’re sure to see JDL’s share price rocket and those on board are in the winner’s circle. If
time reveals that the mineralization hit is smaller than expected, then so be it. But if the biggest
and best result is in fact the reality, the wealth is assured. What we have to do here is assess
which of these five basic and rough outcomes best matches the fate of JDL.v at Ricardo, the
risk and the reward.
What the mining world is betting on, clearly, is the brain of David Lowell. Otherwise JDL.v
wouldn’t be able to command the type of nominal market cap it holds today, the day before
open trading starts, on what it owns: Let’s recap to give us a price/book of 1X for this shiny
new IPO:
• Nominal market cap at 54c/share: $37.56m
• Working capital: $11m
• Assigned value of Waritza property: Zero
• Recent purchase price of Ricardo property: $250,000
• Therefore David Lowell’s brain (or “goodwill” if you like): $26.31m
Or in other words, Lowell’s opinion of Ricardo , one which opposes evidence dug up (literally)
by several big name mining companies, is worth over $26m according to the pre-game
valuations (which may turn out to do silly things tomorrow if the hype machine gets traction).
To be absolutely honest, Lowell’s opinion may well turn out to be right and better than the rest
and the valuation placed on it above may turn out to be low by a factor of one hundred.
However and on totting up all the circumstances of this newco and its contents, I don’t think
this is the one for me. Ricardo’s history of promise then disappointment is too much of a
burden for me to ignore. Then there’s also this:
The seed placement warrants and the promotion machine
David Lowell is famous for his antipathy towards the market and its players, but that’s not the
case for other members of his team. I’ve been thinking more about 1) the way in which Lowell
suddenly agreed to a Q&A with newcomer promoter Tommy Humphreys back in January (22)
and also a piece (23) published very quickly on the back of the news last week from Humphreys
that had a) obviously been prepared beforehand and b) made it clear that Humphreys was in
on the seed placement round of JDL.v. Why did Humphreys get that gig from a normally
interview-shy big name player?
Then there was the seeding round itself, which came with a half warrant at 72c, and having a
best guess of how a drill program might be permitted and run in Chile, the escrow shares and
25

warrants would go free trading somewhere around the time that meaningful newsflow starts
coming from the project. In short, this is a classic clip-the-warrant set-up which (if all went well
and the promotion got legs) would leave the seeders carrying free shares in JDL, all expenses
covered.
Then I also got to thinking along “Cui Bono” lines, but more about reputations and standings
than monetary gains and losses. If Ricardo works out and JDL does indeed find the type of
mineralization that’s been theorized there for 45 years or so then everyone’s a winner (except
somebody like me, sitting on the sidelines watching the fun). But if Ricardo fails, nobody’s going
to think any worse of Lowell, who is a) already a legend in the business b) has nothing to prove
to anyone and c) has always been 100% honest about success-to-failure ratios in the
exploration business. But if the structure chose a young eager promoter to push the idea to the
masses and the project fails, the fall guy has made himself. The risks that youth will take I
suppose, or if you know your Ludwig von Mises his phrase “useful innocents” is closer to the
mark. I could wax on further here and make some sort of hard-hitting argument (in fact I’ve
edited one out already) but I think the message is clear enough; there just doesn’t seem to be
enough real skin in this game from the people that really matter, while at the same time there’s
an industry out there (Hello Vancouver) that’s in desperate need for a New Big Thing to pump
and promote, a story that can catch on and make their creaking business models a bit of cash
and interest. My cynic’s red flag is waving on this one, there’s a lot being pinned on a property
such as Ricardo.
The bottom line
I could be wrong, I know I could be wrong and I also know that it may turn out to be unwise to
bet against David Lowell, but this is not the exploration story, company or vehicle for me.
There’s too much baggage here, firstly from a property that’s seen too much theory and then
failure, secondly from the type of Vancouver promo hype that may well be whipped up around
this stock when those in the centre of things have little to lose and are really only interested in
doing what they love doing the most; going out and looking for rocks. For me the clincher is
seeing how the Ricardo property can go from a (rumoured) $2k valuation to $250k to
supposedly tens of millions now that Lowell’s on the case, with those last jumps in value
happening in the space of weeks and only because a exploreco vehicle is being built around the
idea...with Other People’s Money (of course) and with OPM that the seed investors know should
be covered by judicious use of the half warrant attached, all being well in the market of course.
The structure looks a) too expensive and b) prone to failure if things don’t go right straight
away at a property that’s seen multiple failures already. That combo means a quick and violent
deflation of valuations if things don’t go as planned. So the bottom line is that I’m going to sit
this one out and see what happens, because for my money I think I have a better shot at a
pure drill play in this week’s planned purchase, Darwin Resources (DAR.v), which is starting at a
much lower market cap and has solid results on an interesting (and to date undrilled) project
coming very soon.
Conclusion
IKN219 is done, here are some bullet points:
• We now have three trades pending; An addition to AQM Copper (AQM.v) if the price is
right, an addition to Minera IRL (IRL.to) if the news is right, and today’s decision to buy
Darwin Resources (DAR.v) for a near-term trade on its upcoming drill results.
• Lowell Copper (JDL.v) starts trading tomorrow and the nature of the beast means it will
capture plenty of market attention in the days to come. It’s not one I’m going to risk
my money on, however.
• Gold did well last week, therefore so did the things that now rely greatly on gold’s fate
for their price directions. We’re still taking it week by week on this score and I see no
26

reason to change the general plan (as seen in the intro today). Net long yes, cash on
standby yes, hedged via a couple of shorts and trading round the edges, yes.
• The sharks are now circling Gold Resource Corp (GORO) now that Hochschild (HOC.L)
has started to pull out. Our short target is reached but lets see what happens in the
near-term before making any decision to take the profit. There are always other
alternatives for short hedges and the MAG Silver (MAG.to) (MVG) idea, just for one, is
still an option. Price will dictate value, as ever.
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
Footnotes, appendices, references, disclaimer
(1) http://finance.yahoo.com/news/gold-corporation-comments-trading-volume-210300326.html
(2) http://incakolanews.blogspot.com/2013/07/the-most-amusing-part-of-gold-resource.html
(3) http://finance.yahoo.com/news/guatemala-proposes-temporary-moratorium-mining-123534479.html
(4) http://finance.yahoo.com/news/rio-alto-produces-48-427-110000323.html
(5) http://www.bearcreekmining.com/s/corani_project.asp?ReportID=369628
(6) http://finance.yahoo.com/news/lara-agrees-sale-grace-gold-113000001.html
(7) http://agmetalminer.com/2013/07/11/lme-warehouse-rules-probed-but-metal-price-distortions-spreading/
(8) http://finance.yahoo.com/news/bellhaven-drills-longest-intercept-ever-110100430.html
(9) http://caballeroredverde.blogspot.com/2013/07/paro-interprovincial-indefinido-contra.html
(10) http://www.elespectador.com/noticias/medio-ambiente/articulo-422660-municipios-no-podran-decidir-sobre-mineria
(11) http://www.elespectador.com/noticias/nacional/articulo-430732-municipio-de-tolima-decidira-votacion-si-quiere-
mineria
(12) http://www.portafolio.co/negocios/perdidas-anglogold-retrasos
(13) http://www.rcnradio.com/noticias/paro-nacional-minero-no-se-levanta-ni-se-mueve-asominercol-77270
(14) http://www.google.com/hostednews/epa/article/ALeqM5jZRUTAIAGXENMjZHCSv2d1WLm05Q?docId=2082977
(15) http://www.elpais.cr/frontend/noticia_detalle/5/83420
(16) http://finance.yahoo.com/news/alamos-announces-friendly-acquisition-esperanza-130000288.html
(17) http://incakolanews.blogspot.com/2013/07/alamos-agito-buys-esperanza-epzv-for.html
(18) http://incakolanews.blogspot.com/2013/07/the-funny-bit-from-coeur-cdmto-cde-news.html
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(19) http://finance.yahoo.com/news/coeurs-la-preciosa-project-pea-123000497.html
(20) http://incakolanews.blogspot.com/2013/07/if-youre-wondering-about-new-lowell.html
(21) http://www.newswire.ca/en/story/1198209/iiroc-trading-resumption-jdl-formerly-wat
(22) http://www.mining.com/web/worlds-greatest-explorer-dave-lowell-interview/
(23) http://www.mining.com/web/worlds-greatest-explorer-dave-lowell-interview/
(24) http://www.mining.com/web/mining-legend-dave-lowells-swan-song-swing-for-the-fences-lowell-copper-jdl-v-to-
trade-july-15th/
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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