IKN #224Premium

The IKN Weekly
Week 224, August 18th 2013
Contents
This Week: Adding to a position, PayPal glitches, Gold the US market interest rates inflation,
You don’t need stock pickers, Photo feedback.
Fundamental Analysis: Rio Alto (RIO.to) (RIOM) results.
Stocks to Follow: Overview, B2Gold (BTO.to) (BTG), Minera IRL (IRL.to) (MIRL.L), Gold
Resource Corp (GORO), Tahoe Resources (TAHO), Darwin Resources (DAR.v), Bear Creek
Mining (BCM.v), Pretium Resources (PVG) (PVG.to), Colossus Minerals (CSI.to), Lara (LRA.v).
Copper Basket: Overview, Nevada Copper (NCU.to), NGEx Resources (NGQ.to), Reservoir
(RMC.v), Candente (DNT.to).
The Lottery Ticket Basket: Overview, Marlin Gold (MLN.v).
Regional Politics: Chile Presidentials: A comment, Haiti: Mining may be waking up (though so
may the anti-mining sector), Argentina/Chile bilateral mining projects discussed at a
governmental level, Colombia’s Mining Conference, Next up Peru’s big mining party, The
proposed limits to Peru’s prior consultation law in trouble.
Market Watching: Still no call on BVN, Pretium Resources (PVG.to) (PVG): Second thoughts,
Fortuna Silver (FVI.to) (FSM) 2q13 numbers, Short potentials.
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
Adding to a position
I will be adding to my position in Minera IRL (IRL.to) (MIRL.L) tomorrow and averaging down
my cost on the stock already held.
PayPal glitches
For reasons unknown, we seem to be going through another one of those periods when PayPal
merrily rejects quite a few of your subscription payments. This moments have happened before
so if you’re one of the people involved (I know I am, but on the (non) receiving end) here’s the
plan:
1) If your PayPal subscription bounces three times (the system tries every third day after
the first bounce, so it’s over a week or so) it then automatically unsubscribes you.
2) If that’s happening to you right now (or the unsub has happened recently) then just let
it happen. Then...
3) If you are unsubbed and don’t want to be, please send me a mail next week and we
can sort it out together. In the end it’s not a difficult thing to fix (done it before).
4) And yes, having been away recently and being behind with correspondence (and being
plain ignorant, for which I truly apologize...especially to my wife) I know I haven’t
returned some mails on very subject to a few of you. I therefore humbly ask you to
mail in once again if your subscription has been recently closed involuntarily (or is in
the process of), I’ll apologize directly in a suitably grovelling manner for said ignorance
1

and then we can fix the glitch.
5) However, if you’ve recently unsubscribed and don’t want the Weekly any longer, no
need to do anything.
Usual address and thanks in advance for getting into contact (again).
Photo feedback
Sincere thanks for all the feedback on the photoshow last week. There was a lot, it was totally
positive and in one way or other, all of you reminded me that I have a fortunate life, which is
humbling. For those of you wanting to know more about chuño, this English language wiki page
(1) does a good job in a short space and covers all main points well. For those of you wanting
to know more about Huatia there’s only one real way forward; come down, I’ll make you one.
And the same applies if you like the look of the Lake Titicaca region.
Gold, the U.S. market, interest rates, inflation
I think it safe to say that we all enjoyed gold’s rebound last week, as I highly doubt there are
any net shorts on gold/metals/miners/juniors reading these words. What I’m more interested in
is why it happened last week and the working theory is coming at you now.
First up, the chart I stuck on the blog Saturday morning (2) seems to be a central part of the
rebound, which can be see more clearly if we use SSO, the “double S&P 500” ETF, as our
counter to the gold bullion ETF (GLD):
I know it’s not a perfect perfect fit (for one thing, it looks as though the beta is more 1.75X
than the rough 2X used), but it’s darned close and there’s an obvious enough inter-relationship
here which can be boiled down to the simple (and I like simple) phrase, “S&P down, gold up”.
So far so good. We also know that the drop from the $1,700/oz $1,800/oz level for gold was
either due to or at the very least accelerated by the selling of GLD by funds etc (Sidebar: A
quick calc to set the scene; GLD NAV holdings peaked at U$76.8Bn in October 2012 and
reached a recent low of U$37.5Bn in July 2013. In the same period as that 51.1% drop, the
GLD price dropped 32% so we can deduce easily enough that gold’s drop doesn’t account for
all the drop in NAV of GLD, top to bottom, and that physical ounces went from the fund into the
open market as well). On top of that, there are enough gold-watching sites and commentators
in this internet world, from loony goldbugs through to level-headed analyses so thake your own
pick, who are of the opinion that the recent move to under 1,000 tonnes of vaulted gold in
owned by GLD (it hasn’t moved up much since the recent lowest low of 29.2m ozt Au in early
August, now standing at 29.4m ozt Au) is about as low in physical terms as it can get (for what
it’s worth I’m not sure about that, but I’m going with the thought for theory’s/argument’s sake
2

at least). Therefore, any reversal and new collection of physical ounces in the GLD vaults would
mean a new trend, a reversal of the slide we’ve seen all year and a new reason to be long gold.
Last week we saw just that.
But before we look to the future, let’s step back an examine the dropping phase of gold.
Although not enamored of the straight supply/demand argument for gold I will buy into the
theory that GLD was causing a bubble in gold prices (20/20 hindsight and all that) and when
the fund went out of favour amongst Wall St funds etc, gold dropped because the world
decided to drop its holdings in GLD. But what’s more interesting to me are the potential reasons
why they decided to drop those positions. If you want to go with the “coke-filled traders”
argument then that’s fine but being the kind of guy I am, I prefer to look for something a little
more logical; after all, if the cokeheads don’t perform they get canned and then they have less
money for their preferred South American import (a combo of Adam Smith and karma,
perhaps).
The best fit reason (and remember that I like simple, so please excuse me if that wonderful
modern word “DUH” goes through your brain on reading it) is the US recovery, which meant at
the time that those alpha-seeking funds wanted to get long equity with as much cash as
possible. Gold, being understood as “the fear trade” round Wall Street way (whether right or
wrong, it has the long-standing epithet around the finance world) wasn’t going anywhere in a
low-interest rate environment that suddenly offered the potential for blue-chip type stocks to
break out of their funk.
However, since June we’ve begun to see interest rate in the benchmark-setting U.S bond, the
T-10, move up. Now that’s ok and fine
for a while and the market certainly
considered it healthy that, for example,
new people we’re happy to take out new
mortgages and new higher rates because
that signalled extra impetus to the
recovery, a loosening of the credit
markets and all the things that the nice
Mister Bernanke has been looking for in
his battle against recession. But look to
the right of that above T-10 chart and
you’ll see a spike higher that happened
last week. Since last weekend, the
interest on the T-10 has jumped 0.25%
and that’s a big move for this type of
giga-money indicator chart.
3

At this point, we channel our inner Wall St trader: “Sorry, did you say “interest rates are spiking
higher”? You mean there’s inflation in the pipeline? Oh, we weren’t expecting that! Oh crap!”.
And all of a sudden we have a scenario that fits with the first chart shown in this piece, the five-
day SSO vs GLD near-mirror image. For the first time in a long time, gold is being bought as an
inflation hedge and/or an antidote to market weakening, roles it plays to the upside that have
suddenly kicked in. Exactly where that turning point might be is up for debate, but as per this
chart I have it roughly around the August 12th to 13th moment when the t-bond popped, the
broad markets sagged and people started looking for a dollar denominated inflation safe haven
or two. Yup, that’s gold.
We’ve witnessed a bottoming process for the last three or four weeks and last week came a
real a change in direction that looks for all the world like an active rebound process, all fuelled
by people buying back into gold for their own market-related reasons. Not you and I, not us
retail mob, not the ones that like to buy coins and look at the corporate presentations and
books of scrappily traded junior explorecos late into the evening. Not analysts and experts in
the larger Canadian or specialist metals/mining brokerages, either. The people we’re talking
about are the bull-goose money people, as the ones that truly move markets hit some sort of
human or computer algo alarm bell when long-term trending interest rates went above what
they consider a trigger level. That’s the theory and that’s what I saw in last week’s moves, I
saw traders trading via GLD, rather than born-again evangelism for the long-term benefits of
owning the monetary metal.
But wait a moment, because if the above is truly the reason behind the pop in gold, the new
rebound of the juniors and the sudden transformation of mining analyst zeroes into analyst
heroes (oh we really like those “toldyaso” people, don’t we?) then we’re not out of the woods
yet. Thoughts on what might go wrong:
1) The bonds are forecasting inflation in the pipeline, but that ain’t necessarily so.
Especially in the near-term and we should also be able to agree that the bonds market
(via those that Krugman calls the bond vigilantes) has a bad record of predicting
inflation-to-come further down the line. US inflation, no matter what you might have
heard to the contrary, hasn’t shown up yet (for every gallon of gas there’s a cheaper
smartphone plan) and the Fed still says it has things under control...not to mention of
course that ‘tapering’ thing it plans to do when things get rosy enough for its taste.
2) This may just be a blip, the market decides that it’s building too much inflation into the
pipeline and things reverse. If so (and let’s face it, Bernanke’s Fed does a great job of
jawboning the market into its view of the world) then gold’s allure as a safe haven may
be short-lived. As a slight sidebar, the annual Jackson Hole Fed bash is just days away
(Aug 22-24) though this year the pundits say that focus is more likely to be on
Summers vs Yellen than direct policy speechifying.
3) We’re junior miner players and we’re investing in equities. The broad markets are also
equities. Any big dumpage or acceleration of the S&P/Dow etc downturn could easily
drag down all indices in the nearer-term, no matter if your gold miner’s gross margin is
improving or not. It would be nice to think that our sliver of the big market could move
up while the Dow moves down and that’s at least reasonable if the main index corrects
to 14,500. But 13k? 12k? Those aren’t impossible downside numbers if the US recovery
hits obvious headwinds and if so, we can’t expect the TSX components, as one
example, to ignore the downdraft.
4) I see plenty of evidence that the rebound has been potentially too quick and violent in
the junior space. Below in the main body of the Weekly today I throw out a couple of
examples in GORO and FVI.to, but those are just two of many. In other words, in the
space of mere days we’ve gone from a world that gives too little valuation to
profitmaking potential, to one that is baking in higher or much higher gold, silver, etc
prices in order to justify new price levels and earnings potentials. If the metals don’t
4

climb further, I predict that the quickest-bouncing stocks that depend on their
underlying metal prices at market will have to retrace somewhat.
It’s always worth recalling that the gold market, though seemingly big when stuck out on its
own, its a tiny thing compared to the main financial and monetary currents of the world and it
get get bent out of shape quickly by a relatively small flow of funds, in or out of it. Yes I’m
obviously encouraged by last week and I’m not trying to get you to sell out of positions by
writing this somewhat extended think-piece intro. I am saying that there’s still reason to be
cautious about the upmove because:
1) The juniors depend on their metals
2) The metals take their lead from gold
3) Gold gets moved around easily by big money moving in or out.
It goes without saying that enjoyed last week’s action greatly. I like the rebound, I like the way
in which the juniors have reacted but I’m clear about the base of the rally we saw last week; it
wasn’t a whole bunch of people on the Indian subcontinent flooding into jewelry stores, nor is it
“China’s insatiable demand for bullion” or whatever words it’s packaged in this week. The rally
is about the financial markets of The USA (like it or not, the centre of the financial world and
will remain that way) and those who work them deciding to put gold into its trade mix again. If
larger macro data changes, for example if that T-10 run-up turns out to be a quick spike and
drop, then gold’s use will again wane and the trader jocks will sell it down. If last week was the
beginning of a trend I’ll be a very happy guy, because a trend’s your friend and I’ll be adding to
my exposure in juniors along the way in order to recoup some losses/make money (the
promoter side of me prefers the second phrase, the realist knows the sad truth of mid-2012 to
mid-2013 and what needs to happen first). But if it is a new trend, it’s the very first steps in
one and until a bit more confirmation is shown, I’ll keep most of my powder dry.
Except for buying some IRL tomorrow. I’m doing that all right.
You don’t need stock pickers
In the end, that’s all I am around here. For sure the job can be dressed up a bit, with extra
adjectives added to explain the niche or specialist area, but the bottom line is that The IKN
Weekly is a stock-picking service. The question I’m forced to ask myself (and I’d like it to
bounce around your brains as well) is whether there’s any point in being a stockpicker, or
paying for the services of one, if the sector concerned doesn’t seem to give much credit for the
relative merits of company ABC over company XYZ over company ABC. Gold and company have
shown all signs of bottoming and now a potential rebound is setting in, but the stocks that float
on these waters are still merely reacting to the tide. As you know, I like Rio Alto (RIO.to)
(RIOM) and its prospects more than anything else out there right now, but it looks as though
you could have picked any name from the basket and got the rebound returns over the last
couple of weeks that would have put a big smile on your face.
After writing that last sentence I decided to put it to a somewhat unscientific test and the
results were interesting enough to show here. Below comes a chart that I literally put together
in 30 seconds this Sunday morning after picking a few names at random. I didn’t examine any
further or swap out names for others to try and show something different and I’m sure that you
can find other stocks with better or worse performances than the ones chosen (have a play for
yourself if you want and tell me what you came up with) but the random way in which I chose
my examples is its own indicator here, at least I think so.
My thoughts were these: “Ok, start with RIO.to. Now a comparable gold stock...errr, Argonuat
will do (AR.to). Now another goldie....errr, BTO, I like that one. Now a Tier Ine gold stock for a
bit of comparative....Kinross (K.to) will do. Now a dog goldie....well that’s easy enough, let’s go
GORO. OK, let’s round off with a popular silver name to give a bit of contrast on the leverage
angle...First Majestic (FR.to) will do for that.” Then hit buttons, draw up the 10 day timeline,
dial up the preferred background colour and here we go:
5

Bottom line: They’ve all done well. As chance would have it (hand on heart, I didn’t know what
the results would be and I’m fully aware that I could have chosen other companies that might
have done a bit better than my random examples) RIO.to comes out top at +30% over the last
10 days, but it’s very tight with AR.to. Then FR.to at +25% is still very good stuff, then BTO at
+21%, then comes doggy old GORO at +19% and bringing up the rear Kinross at +17%. Let’s
face it, if you own K and hear criticism of “Oh, only 17% in two weeks!” you’re not going to lose
much sleep over the performance.
What I’d planned in my head to say here is that you don’t need a guy like me in times like
these, as if this is truly a sector rally all you need to do is:
• Avoid the thinly-traded or scammy end of the sector
• Buy some quality, front row names with good liquidity
• Sit back, relax, go fishing, make a profit
• The end
However, the GORO returns put even that idea under pressure, because GORO might be your
idea of a quality gold mining stock but it sure ain’t mine (last week’s edition one of many to
evidence that). Even so, it rallied just like the rest of them. Or in the words of Iwnattos, who
replied to my Friday morning Flash update (see appendix 2), “I wouldn't short even the worst
stock in the world right now. Not if everyone stays so convinced about the end of the massive
two year miner collapse. Unless maybe it's some pinksheet scam that's guaranteed to go to
$0.”. He may have a point.
I digress once again. The point here is to doubt if you need a stock-picking service, be it this
one or any number of others, all with their own agendas and objectives that will rarely match
completely the targets or needs of their subscribers. The internal alpha of this most volatile of
sectors may perhaps enter into the fray at some point, but so far in 2013, be it the down phase
or the (hopefully only recently started) upwards rebound it’s the tide that matters the most, not
the boats. You don’t need to pay stockpickers to make good money in this market (or to lose
the same as the ‘experts’), be they your brokerage desk giving you worldly advice on this and
that company to earn their commission, some guy sitting in an office in Peru with a small thing
going on, or some bullshit newsletter tout sheet taking cash or sweet options deals from a
junior in order to pump it to its masses and get rich off both ends. Cut the stock market
parasites out of your life and get smart with the money you aim at investments. Seriously.
The only piece of advice that I’d insist upon at this moment is that you buy quality. Don’t
fanny around with the sketchy end of the market for real trades or investments (barring a few
6

smaller scale bets using the highest risk end of your treasury that are reasonable and allowed),
keep your eyes firmly fixed on the best of breeds, the sector leaders, the high liquidity stocks
that get glowing reviews for management acumen etc. My overused chart of how I see things
going forward, with cream rising, crud sinking and the average Joes doing ok, seems to be on
track now. So stick with the best of ‘em, forget the rest of ‘em.
However, I do suggest IRL as a decent alternative next week ☺
Fundamental Analysis of Mining Stocks
Top Pick Rio Alto Mining’s (RIO.to) (RIOM) 2q13 results
We’ve done a lot on Rio Alto Mining’s (RIO.to) (RIOM) recently and the way things have turned
out, what with last week’s potential sea-change in the underlying markets and the possible
consequences therein, this issue has moved to become a strategic type of discussion note
rather than a numbercruncher chart buster. Therefore today I’m going to be as brief as possible
on this segment. The bottom line to RIO’s quarter was that it was just fine without
being wowsers. The stock rallied as a result, not just because of the decent move in gold but
also because once the doomsayers that we’ve talked about on many an occasion had been
proven wrong about just about every metric you care to imagine (their cash cost estimates of
upwards of $1,300/oz and often much higher were wrong, their production estimates and
guidances were wrong and their rumour that Alex Black is retiring or that other directors are
wanted by Interpol were wrong...we could continue but the point is made) the result was
seeing RIO start to play catch-up to its peers (but it still has a ways to go on that, so stay long
people).
However, it wasn’t a perfect quarter either, costs came in higher than I expected and as such,
my earnings call of 9.5c/share missed. Also there is a deferred tax issue that has now worked
through (post quarter end Peru’s government wrote a $21m cheque to RIO) which means the
bottom line of the quarter was an undeserved loss and a bit messy, so we need to show a
better straight line metric than that to get a handle on things. There’s also a bit of news
gleaned about production going forward, so that gets shared here as well.
Let’s start with the gold production numbers and our forecast on those for the two quarters
ahead, because they directly influence our projected financials. After talking with RIO
management and getting guidance on how
things are going, I’m now expecting RIO to RIO.to: Gold production and forecast for 3q13-4q13
68000
produce slightly less than previous forecasts in 70000
3q13 but more in 4q13. The two months are 60000 55973 58081 56511 55000
48467
still going to be good and once you add up the 50000
year, the IKN forecast now comes in at 40000 36355
30548
207,800 oz Au, which is at the high end of the 30000
company guidance bracket (190k to 210k). 20000
The thing that’s changed for 3q13 is that we 10000
hear the company has spent about a month 0
doing essential maintenance work to the
pregnant solution collection pond, i.e. the pool
where the solution holding the gold in
suspension is collected after running off the
leach pads. Production from the pads themselves is still going very well, but the maintenance
caused a bottleneck in the part of the mine that gets the pregnant solution from the pool and
into the production facility that gets the gold out. In effect therefore, we’re expecting RIO to
7
21q1 21q2 21q3 21q4 31q1 31q2 tse31q3 tse31q4
Oz Au
source: company filings, RIO guidance/IKN ests

produce less in 3q13, but now that the bottleneck has gone, the backlog of production will lay
catch-up in 4q13 and that quarter gets to produce a higher number than expected.
What we do know is that bottleneck or not, the grade and leaching part of the circuit is doing
very well and the gold being produced will eventually find its way to the separation plant. It’s a
case of a slight delay in 3q than a disappearance of expected production.
Moving to the main points of the financials and here’s the earnings overview chart that indicates
just how the mine got on. The 2q13 revenues figure of $63.859m was very close to our
estimate, but the $36.712m in Cost Of Goods
Sold (COGS) was higher than our model by an $m RIO.to: Quarterly Earnings overview
unpleasant $6m. On consulting the company 100 revenues COGS amorts gross profit
90
about this, the two main reasons for the higher
80
than expected costs are fuel and strip rate. First 70
fuel, and RIO had to pay around 5% more than 60
in 1q13 which according to best in-house 50
40
estimates added around $2.5m onto COGS. The
30
way things are going in Peru, that’s not likely to
20
drop by much this quarter so I’ve factored in the 10
higher fuel cost levels for the quarters to come. 0
As for stripping, that came in at a rate of 2.3:1 1q12 2q12 3q12 4q12 1q13 2q13 3q13est4q13est
waste-to-ore, which was higher than expected source: company filings/IKN ests
but thanks to the higher grading ore than
anticipated production came in well. Going forward, RIO now says it’s done a lot of the heavy
lifting for waste needed for future production at its main pit wall and it expects the waste/ore
ratio to drop to 1.8X for the rest of the year. That means lower costs and that’s good, but as
you can see (just about) I’ve erred to the side of caution for the quarters to come anyway and
assumed a total COGS that’s roughly the same as 2q13.
As for revenues in the quarters to come, I’m not going overboard with gold assumptions yet
and for our purposes today, the revenues for both 3q13 and 4q13 are calculated on U$1,350/oz
Au. The result of all that is to see mine operating (i.e. gross) profits expecting to climb through
$71.5m for 3q13 in this revised model and reach $88m for 4q13.
As menitoned above the tax hole for 2q13 which will be filled in 3q13 has knocked the bottom
line net profits out by some. As a result, the better comparative financial results numbers are
either operating or pre-tax (the difference being mainly whether RIO decides to pay back some
of its forward gold pre-payment dues), which also makes sense because as a growth company,
we’re always going to be more concerned about how much money it makes than what it could
(potentially) return.
Operating earnings at 10c/share came in reasonably well in 2q13, with the 5c/share pre-tax
number due to a) the previously disclosed
partial settlement on its prepayment gold RIO.to: operating and pre-tax earnings per share
loan ($5.427m) and also a foreign exchange
0.50
loss ($3.197m), which are both beancounter 0.45
issues rather than operational ones. As for 0.40
0.35
the quarters to come, we never know when
0.30
RIO might pay back more of its gold loan (it 0.25
has until October next year to clear our the 0.20
0.15
~14k oz it still owes) and personally 0.10
speaking, I’d like the company to get it off 0.05
0.00
the books as soon as possible and make that
balance sheet shine. But for modelling
purposes we go for a more modest and
conservative line. Perhaps the operation
earnings are the best way to go, better straight line comparative or the two and all that, so
8
21q1 21q2 21q3 21q4 31q1 31q2 tse31q3 tse31q4
cents
pre tax eps
op eps
source: company financials/IKN ests

using $1,350/oz gold, production estimates and the higher adjusted cost inputs mentioned
above, we now have RIO making an ops earnings of 13c/share in 3q13 and 19c/share in 4q13.
Of course, any further pop in gold will help
those targets immensely.
RIO.to: Working Capital per qtr
110
100
Over at the balance sheet, the working
90
capital chart shows the hole that the tax
80
shuffle left in 2q13 and how it gets put 70
back in 3q13 (by our estimates at least). 60
Come the end of the year we’re expecting 50
40
RIO to have $68m in working cap, which
30
will be the highest since it started 20
production. 10
0
Finally to round off, assets and liabilities.
Again, the amount of gold that RIO prepays
from now until the end of the year is
unknown, so if they get aggressive (and I hope they do) on that, the debt pile may shrink much
more rapidly.
The bottom line: Fears unfounded in RIO’s 2013, the company has shown the world that it
makes money at the new lower price deck and although it’s not reeling in enough to pay for
stage 2 at these levels (we’re going to have to consider just how it might raise ~$300m come
2014) the prophets of doom who were calling RIO overvalued at $2 have had to eat a large
chunk of their own words. I’m expecting confidence in this stock to reappear and o a line
through 3q13 and 4q13 projected earnings, anyone willing to pay a reasonable 7X operating
earnings for RIO come early 2014 will be paying $4.55 per share for the privilege. That sounds
about right to me at this point. Strong Buy, Top Pick, the end.
9
11q4 21q1 21q2 21q3 21q4 31q1 31q2 tse31q3 tse31q4
source company filings/IKN ests
srallod
fo
snoillim
RIO.to: Assets Breakdown per qtr
440
400
360
320
280
240
200
160
120
80
40
0
11q4 21q1 21q2 21q3 21q4 31q1 31q2 tse31q3 tse31q4
source: company filings/IKN ests
srallod
fo
snoillim
RIO.to: Debt Breakdown per qtr
fixed 140
other current
cash 120
100
80
60
40
20
0
11q4 21q1 21q2 21q3 21q4 31q1 31q2 tse31q3 tse31q4
source: company filings/IKN ests
srallod
fo
snoillim
LT debt
current debt

Stocks to Follow
Another good week for the list. There were in fact three downers (GORO short, TAHO short,
DAR.v) and one unchanged (NET.v) so it wasn’t all one-way traffic and the percentage losses
on those positions were big ones as well (GORO short down 19.0%, DAR.v long down 18.2%,
TAHO short down 12.2%). But apart from those and the one UNCH (NET.v) things were sparkly
good, with the other ten positions all showing gains and many showing big gains. The best
percentage win came from Bear Creek Mining (BCM.v up 24.5%) and other double figure %
wins were seen in AQM Copper (AQM.v up 23.5%), Lara Exploration (LRA.v up 22.2%),
Colossus Minerals (CSI.to up 18.8%), Rio Alto Mining (RIO.to up 15.7%), Pretium Resources
(PVG.to up 13.1%) and Focus Ventures (FCV.v up 12.5%), with Minera IRL (IRL.to up 9.8%)
and B2Gold (BTO.to up 9.7%) not far behind.
We currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
imposed maximum. Eight of the positions are in the green, one is unchanged and five are red.
Company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to Str buy C$2.30 07-apr-11 C$2.87 24.8% rebounding well
Recommends
B2Gold BTO.to hold C$3.07 28-nov-12 C$3.40 10.7% sold 1/2, rest rides. Quality
Minera IRL IRL.to Buy C$0.73 22-jul-12 C$0.225 -69.2% Buying next week
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.17 1.7% solid biz model, LT hold
Gold Res Corp GORO short U$9.70 03-may-13 U$8.52 12.2% new tgt $5 star short
Bear Creek BCM.v hold C$2.06 30-may-13 C$2.49 20.9% ST trade, may sell soon
Rio Alto Mining RIO.to buy C$2.68 07-jun-13 C$2.87 7.1% ST trade position, separate
Pretium Res PVG.to hold C$8.20 11-jun-13 C$9.25 12.8% $11.75 tgt
Tahoe Resources TAHO short U$13.10 08-apr-13 U$17.44 -33.1% port hedge, easy2b short
Colossus Min. CSI.to buy C$0.72 24-jul-13 C$0.82 13.9% trading buy, 90c tgt
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.105 -66.1% 6c buy op gone, 15c tgt
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.09 -48.6% revised tgt 25c
Darwin Res DAR.v spec buy C$0.10 14-jul-12 C$0.09 -10.0% drill res-Aug'13
Network Expl. NET.v spec buy C$0.01 22-jul-12 C$0.01 0.0% V. small spec, foothold
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
B2Gold BTO.to hold C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
2009, 2010, 2011 and 2012 closed positions in appendices below
Now for some notes on a selection of the above stocks.
10

B2Gold (BTO.to): Sold half. In the end it was a long and tortuous route to earn a mere 12%
on half of this trade via Thursday’s Flash update (see appendix 1). The other half is still long
and as it was an outsized position, even half is more than chunky enough for me to care about
the future of BTO so I’ll be cheering it higher if it manages to prove my own nagging doubts
wrong (and I’m not going to abandon quality at this point). So some profit taken and due to the
change in holding size, now down to the recommends rack. We’ll do more on BTO another day.
Minera IRL (IRL.to): Buying Minera IRL stock tomorrow. It’s time to take advantage of
the big lag this stock has with the rest of the market. With or without the type of positive news
from Don Nicolas that I’ve been holding out for, IRL is now greatly behind its peers and as it
has a real mine or three on its books, including a small but profitable one operations and two
others that only need money and time thrown at them to be the same, it’s nowhere in the same
vicinity as other beaten up small stocks that are promoted on nothing much more than moose
of llama pasture and are now only half way down on their eventual slide to oblivion.
IRL isn’t a fakey junior; unlike so many other in its position, its assets (particularly Ollachea) are
real deal and in a rebounding market, that is going to be realized, sooner or later, by people
looking to invest in quality projects.
Gold Resource Corp (GORO) and Tahoe Resources (TAHO) shorts: In the words of the
song, “Regrets, I’ve had a few, but then again, too few to mention.” After doing the big NOBS
report update on GORO last week and re-setting the downside target to $5, plus musing fairly
extensively on TAHO in the ‘Market Watching’ segment and once again professing my comfort
in holding this short hedge position, the market did what it did and your author took sizeable
percentage losses (on paper at least) from both positions. Well that’s what happens when you
hedge things, part of the process and as last week was a very good net win for the back
pocket, you’re not going to find me weeping too much about the outcome, but the irony was
not lost on me either and I had to chuckle about the way in which both shorts were franked
and confirmed just days before the big uplift move.
Be clear however, that they’re staying put. The implicit trimming of the long side of the portfolio
from selling half of the BTO and raising cash was one thing, but the next move I make is to add
to the long in Minera IRL tomorrow. After that I hope to harvest some more cash as the near-
term trading plays (see Flash update Friday appendix 2) bear fruit, then after that the decision
to deploy more cash to investment-type (rather than trading–type) longs will be made. Only
after that will the option of trimming shorts (if the market has moved up even further in the
meantime) gets made, which is a long-winded way of saying the same thing as last week, that
I’m relaxed and happy about holding both of these short.
Before the mails arrive, I’ll state for the record that my preference of the two is GORO. We
already know that at U$1,386/oz gold and U$23/oz silver GORO makes an operational loss at its
mine and we know that because the 2q13 figures tell us exactly that. With around half of 3q13
already behind us, it would take a move to $25/oz silver in order for GORO to average that
price this quarter, so with gold and silver where they are GORO is a lossmaker for this quarter
and most probably 4q13 as well. Or in other words, any rally in GORO implies that the market is
pricing in a higher price for silver and gold than is actually on offer and that the stock is
currently ahead of today’s price. As for TAHO, it’s still a good short for all the reasons
mentioned last week; the only thing that’s changed is the price (as they say).
Darwin Resources (DAR.v): A headsup last week, another one today. We’re still in the time
window in which we expect the assay results from the Suriloma drilling campaign “mid-August”
they told us. The news, and whether it drives the stock or not, will determine our next move
here and it all boils down to three basic choices:
• News is bad, we sell this small trade position at a loss.
• News is reasonable, we can hold it without much sweat and see what happens.
• News is good, we can add to the position and scale in a little more.
11

As straightforward as is possible, methinks. Meanwhile in trading last week, DAR remained on
waferthin volumes while all around pinged and bloomed. Friday closed with bids of 10c being
unanswered, so ceteris paribus I’d expect it to click up a notch next week even without the
drilling results.
Rio Alto Mining (RIO.to): It had a good week, period. RIO joined in on the first round of
upmoves last week (it hasn’t been in the vanguard for a while) and moved up on good volumes
and plenty of market interest, with CAD$2.99 Thursday the best price of the week.
As mentioned in the Flash update of Friday, I’m now looking to take profits on the smaller-sized
and strictly near-term trading play (separate from the main position) at something like $3.10 or
above, though much will depend on the general market and I definitely won’t be hitting the sell
button the moment the low barrier price is printed. The rest is above.
Bear Creek Mining (BCM.v): The ramping early week was good and welcome (and it got the
attention of several professionals, my mailbox as witness) and although still not in the 0.5m to
1m daily volume range that it used to enjoy back
in 2010 or 2011, the 700k+ shares traded over
the five days (call it avg 150k/day) was
something of an improvement and made trading
nearly liquid enough for near-term flippers to
start caring. But BCM couldn’t follow-through
when the rest of them rallied and stayed flat
through to Friday around the $2.50 level.
Which is fine by me. Nothing goes up in a
straight line and the world may need a few days
to get used to the idea of BCM closing in on $3.
When it does (and it will), the plan hasn’t
changed and I’ll take my profits. It’s another
trade that would have made me a lot more had I waited for the lowest of the low prices, but
the regrets are again small compared to having planned the trade, traded the plan etc.
Pretium Resources (PVG.to) (PVG): I decided to put the thoughts on PVG in a separate
section in ‘Market Watching’ today, because I want to feature them a little more prominently.
Here we do the trading action and no complaints at all, with a strong 13% upmove and fine
volumes too. The edge was taken off the rally after its NR (see below) but I doubt PVG will get
held back next week if the market rallies further.
Colossus Minerals (CSI.to): The placement closed on time Tuesday (3) and was fully taken,
12

as expected. What was also unsurprising was to see big investor ARC Fund, headed up by
fairly-new CSI director Alberto Arias, take a big chunk of the placement and average down the
investment fund’s position (they’d previous taken pieces at around $2.50 and then around
$1.50, so the 9.4m units at 75c has brought
down the cost average substantially).
Meanwhile, the positive signal we’d mused
on last week of a fully taken overallotment
also happened, which was a psychological
fillip to the stock at the right time.
The result, along with the sector and gold
rebound momentum of course, was a good
week for CSI and although it faded a little in
the last hours of Friday on what looks like
totally understandable profit-taking, you’ll
hear zero complaints about the
developments of last week in this near-term
trade from this quarter. The volume
acceleration on Wednesday was also right in line with our expectations of last weekend.
CSI peaked at 89c early Friday morning, tantalisingly close to the 90c sale price your author has
on the stock (and just after that reaffirmation in the Flash update pre-open that day, too).
However, that’s a minor thing at this stage as I’m nigh on certain that we’ll see 90c+ in the
near future and I’ll get to take my planned profit. By the way, I’ve had some correspondence
with charters who say that my 90c is aiming low and something akin to $1.10 or $1.20 is in the
offing. Perhaps so, but I’ll stick with my plan thanks.
The main regret on this one (so far at least) is not taking advantage of the rock-bottom prices
that showed up after I’d bought at 72c. As that 10 day chart above indicates, there were oodles
of 65c stock available during the placement period and on Wednesday August 7th, all the 60c a
humble retailer could have asked for. The difference is obvious, as our planned trade of 72 to
90 offers 25% pre-commish, while a 60c to 90c trade would be a 50% gain.
Lara Exploration (LRA.v): Volumes were thin, but somebody paid up into them to grab some
LRA Friday and I cannot fault the person, frankly (esp as it managed to turn a blob of red into a
blob of green on the above table). Deserved trading catch-ups aside, we’re looking for news
form the Liberdade copper JV (with Codelco optioning in) but with a company like LRA, thanks
to its fingers in many pies and other companies spending the money to do work on its
properties, news can come from one of several sources at any given time.
If the market begins to reward assets again, LRA should move higher. I’m not adding to this
until volumes start to pick up and the company gets more market radar, however. Happy
holder.
The Copper Basket
13

After thirty-three weeks of 2013 The Copper Basket is showing a 24.15% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 168.66 318.77 1.89 -44.4%
2 Augusta Res AZC.to 2.43 144.35 307.47 2.13 -12.3%
3 Copper Fox CUU.v 0.83 402.96 290.13 0.72 -13.3%
4 Lumina Copper LCC.v 9.43 43.61 199.73 4.58 -51.4%
5 Reservoir Min. RMC.v 2.41 41.68 175.06 4.20 74.3%
6 Nevada Copper NCU.to 3.50 80.5 154.56 1.92 -45.1%
7 Hot Chili Ltd HCH.ax 0.72 297.46 133.86 0.45 -37.5%
8 NovaCopper NCQ.to 1.80 53.02 106.04 2.00 11.1%
9 Panoro Minerals PML.v 0.62 204.71 64.48 0.315 -49.2%
10 Western Copper WRN.to 1.39 93.68 58.08 0.62 -55.4%
11 Curis Resources CUV.to 0.70 63.13 38.51 0.61 -12.9%
12 Candente Copper DNT.to 0.375 122.05 28.68 0.235 -37.3%
13 Oracle Mining OMN.to 0.80 49.03 21.57 0.44 -45.0%
14 Yellowhead Min. YMI.to 0.59 63.45 11.42 0.18 -69.5%
15 Strait Minerals SRD.v 0.08 57.26 3.72 0.065 -18.8%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -24.15%
There were five stocks that lost ground in The Copper Basket last week (NGQ.to, LCC.v,
NCU.to, NCQ.to, YMI.to) so clearly not
one-way traffic here. either. However the Copper Basket 2013 average, weekly
ten winners (AZC.to, CUU.v, HCH.ax, 12%
8%
WRN.to, PML.v, RMC.v, DNT.to, OMN.to,
4%
CUV.to, SRD.v) came with some hefty 0%
percentage winner included and as a -4%
-8%
result, the overall basket average rallied
-12%
a big 6.61%. Best winner was Copper -16%
Fox (CUU.v up 45.5%), then came -20%
-24%
Candente Copper (DNT.to up 38.2%).
-28%
Strait Minerals (SRD.v up 18.2%), Hot -32%
Chili (HCH.ax up 12.5%), Panoro
Minerals (PML.v up 12.5%), Curis
Resources (CUV.to up 10.9%) and of
course any list of copper winners feels bare without
Reservoir Minerals (RMC.v up 10.8%) these days.
Before moving on, a quick housekeeping note. I took
the opportunity of the 2q13 dumpage of reports to
update all shares outstanding totals on the Copper
Basket table (and the Lottery Ticket table, for that
matter). Most didn’t change by much, a few didn’t
change at all, the biggest jumps totals on a percentage
basis came from Curis (CUV.to) which jumped by
~6.8m shares out, Hot Chili (HCH.ax) up by ~11m S/O
and Yellowhead (YMI.to) up by ~2.5m S/O.
Market prices for copper the metal were good again.
Copper has blown away from the near-$3 baseline and
traded in the high $3.30’s at the end of the week. I still
get the feeling that many of the copper junior explorers
are lagging this metal move, however. Things are better
but on the whole, the explosive-type gains we’ve seen in market leaders in the PM space have
been absent from the BMs.
14
ht6naj ht31 ht02 ht72 r3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 t5yam ht21 ht91 ht62 dn2nuj ht9 ht61 dr32 ht03 ht7luj ht41 ts12 ht82 ht4gua ht11 ht81
source: IKN calcs, TSX data
31/1/1
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To the regular inventories section and the Northern summer lull continues, with slack trading
reported on most desks and in many Reuters/DJNW/Bloomie notes (hardly worth linking any
here, it’s easier for you to put the word “copper” into Google News). World stocks dropped by
0.9% or 7,236mt to stand at 795,174mt. The component parts had different fates however,
with LMA down 1.8% to 584,075mt, Comex down a big 13.3% to 49,208mt and Shanghai up a
big 7.1% to 161,891mt. The Comex drop may be temporary, but we note that the Shanghai
gain basically cancelled out the 7.6% drop we reported last week; it takes more than a week to
start a trend, people...
LME cancelled warrants stood at 310,650mt, or 53.2% of stocks. No reason for the current
situation to change before Labor Day.
Cancelled Warrants at LME, IKN157 to date
60%
50%
40%
30%
20%
10%
0%
15
751NKI 951NKI 161NKI 361NKI 561NKI 761NKI 961NKI 171NKI 371NKI 571NKI 771NKI 971NKI 181NKI 381NKI 581NKI 781NKI 981NKI 191NKI 391NKI 591NKI 791NKI 991NKI 102NKI 302NKI 502NKI 702NKI 902NKI 112NKI 312NKI 512NKI 712NKI 912NKI 122NKI 322NKI
source: Cochilco, LME
rof
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EML
%
latot
yreviled
resu-dne
Now for updates on some of our basket stocks
Nevada Copper (NCU.to): The basic question is “Why isn’t this one moving?”. I’d expect it to
move with the crowd, being as it is a type of sector leading, advanced project that has had
M&A thoughts swirl about it for the longest time. It’s also apparently making progress with its
permitting track passage through the US Congress now, or at least that’s the clear takeaway
from its series of NRs. But as the 12 month chart shows, there’s been no reaction at all so far.
I don’t understand why that should be. Therefore I’ll avoid.
NGEx Resources (NGQ.to): Another one that continues to lag, and as mentioned a couple of
editions ago the Argentina connection isn’t helping matters here (also true for LCC.v). However,
it is looking pretty darned cheap on the Chilean Los Helados property alone and the presidential
elections there later this year (see a quick comment below on that) won’t affect that project’s
standing, no matter what you might hear otherwise; Chile secretly prides itself on not being

part of South America. As an investment, these levels should look very attractive to anyone who
likes the idea of moving into the copper sector. As a trade I’m not so sure, because its
underperformance could continue for a while and others may pop hard before it moves.
Reservoir Minerals (RMC.v): I’ve played this stock so badly by not playing it, but a decision
has now been made, for the time being at least. It’s gone too expensive for my blood now and
unless it retraces I’m not a buyer or a player. Therefore if it goes higher without me I wish all
those on board the best of fortune and congratulate them on their better reading of the stock
than I. Personally, at least I can say I’ve not lost anything, just the same as a thousand other
issues out there. I’m still kicking myself hard in the rump about it all, though.
Candente Copper (DNT.to): Darned thing is like a mosquito bite, can’t help but scratch the
itch even though I don’t want to touch it any longer.
I had my say on DNT a couple of times on the blog last week, firstly (4) to note that it’s now
working cap negative according to its 2q13
results (end June 30th) with the above chart
the main feature, and then to say (5) that its
price pop shows that there are still a whole
bunch of momo fools out there who’ll buy
anything, which does not bode well for the
health of the general market. These people
have obviously learned nothing from the last
year or so and until they’re flushed out
completely, we’re locked firmly into Einstein’s
definition of insanity. If you’re looking to risk
some true gambling money on a exploreco
copper story, then even if they’re not my cup
of tea I’m not going to complain much if you pick OMN.to, WRN.to or PML.v at these prices.
There’s even a case to be made for SRD.v and you know that I’m holding out on my dreaded
AQM.v shares for a higher price. But not this one, please, it’s going nowhere, it’s a dead
project. The same applies to CUU.v, by the way.
The Lottery Ticket Basket
After 33 weeks of 2013 The Lottery Ticket Basket is showing a 33.03% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 Marlin Gold MLN.v 0.10 680 40.80 0.060 -40.0%
2 Eagle Star Min. EGE.v 0.125 79.13 18.20 0.230 84.0%
3 Bellhaven BHV.v 0.14 136.81 17.79 0.130 -7.1%
4 AQM Copper AQM.v 0.08 105.57 11.08 0.105 31.3%
5 Fancamp Expl. FNC.v 0.125 177 10.62 0.060 -52.0%
6 Tango Gold TGV.v 0.13 76.24 7.24 0.095 -26.9%
7 Glass Earth GEL.v 0.155 105.67 4.23 0.040 -74.2%
8 Inca One Res. IO.v 0.12 34.0 2.89 0.085 -29.2%
9 Copper North COL.v 0.10 58.7 2.64 0.045 -55.0%
10 Darwin Resources DAR.v 0.20 26.16 2.35 0.090 -55.0%
11 Gryphon Gold GGN.to 0.085 194.64 1.95 0.010 -88.2%
12 Cream Minerals CMA.v 0.03 155.34 1.55 0.010 -66.7%
13 Rio Cristal RCZ.v 0.025 17.259 1.21 0.070 -72.0%
14 Netco Silver NEI.v 0.025 47.01 1.18 0.025 0.0%
15 Firestone Ventures FV.v 0.045 36.82 0.92 0.025 -44.4%
Portfolio avg -33.03%
16

The Lottery Ticket Basket saw seven winners (GEL.v, FNC.v, AQM.v, COL.v, CMA.v, RCZ.v,
NEI.v), four unchanged (MLN.v, BHV.v,
GGN.to, TGV.v) and four losers (EGE.v, DAR.v,
IO.v, FV.v). The biggest moves in percentages 25% Lottery Ticket Basket 2013 average, weekly
20%
terms came from Cream Minerals (CMA.v up 15%
10%
100.0%), Rio Cristal (RCZ.v up 55.6%), AQM
5%
Copper (AQM.v up 23.5%) and Fancamp 0%
-5%
(FNC.v up 20.0%), but there isn’t much to -10%
read into those big two, as they’re already -15%
-20%
companies broken into a thousand pieces. -25%
-30%
-35%
With all that, the basket added 3.9% and -40%
-45%
that’s not to be sniffed at, I suppose. The list
was worse at the end of May, after all.
Marlin Gold (MLN.v): After the rights offering closed successfully last week (6) and the
company announced that it had raised all the cash that it needs to take Trinidad into
production, we now have our shares out total at 680m (which might be out by a few thou
either way, but it’s close enough) and a market cap that outstrips all others on the list by quite
a way.
Another thing happened too: Your author received a mail from somebody inside Wexford
Capital entitled “Why your wrong about MLN going private” that stretched to 300 words and
made a convincing argument from several angles and showed the logic behind the acquisition
(private mail), but in the end I would have been just as satisfied with them saying “Because We
Say So” as we’re talking about the entity that owns nigh on 80% of stock at a 7c cost average,
therefore if they say the company isn’t being taken private, it isn’t being taken private. Period.
That’s fair enough. It also means that I’m not interested in buying MLN for the time being (let’s
see how it gets to FCF+) because without OPA potential I prefer to steer clear of any new
tinycap stuff and throw cash at larger, more liquid things, Cormark’s 15c target or not (AKA I’m
in enough schtuk as it is with FCV.v at 9c, thanks).
Regional politics
Chile Presidentials: A comment
Words and analysis are starting to swirl around the Chilean Presidential election scheduled for
November this year, so I want to lay out plainly the thing that really matters to us, reader of a
LatAm-centric mining publication in the English language aimed at investors. We now have the
candidate situation in place and the three main players are
• Michelle Bachelet, from the centre-left Coalition/Concertación party that’s now been
snappily re-named Nueva Mayoría, or ‘New Majority’.
• Evelyn Matthei, from the ruling right wing government Unión Demócrata Independiente
Independent Democratic Union (UDI) and Renovación Nacional National Renewal
(RN) party coalition.
• Marco Enriquez-Ominami, from the centre (or centre-left, depending on who you talk
to) Progressive Party (Partido Progresista) and Liberal Party (Partido Liberal de Chile)
coalition.
17
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 t5yam ht21 ht91 ht62 dn2nuj ht9 ht61 dr32 ht03 ht7luj ht41 s12 ht82 ht4gua ht11 ht81
source: IKN Weekly data, TSX
2102/1/1
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Firstly, Michelle Bachelet is the front-runner and will win, period. This has been mentioned on
these pages and on the blog already and it’s as easy to call as Rafael Correa in Ecuador last
time out. Second, the fight for second place is potentially interesting, because sitting
governments in Chile don’t tend to do well in the subsequent votes and Marco Enriquez-
Ominami, known to the world as MEO (or M E-O for his initials) is an up and coming political
figure who’s trying to break through the country’s ingrained two party system.
But now to the real comment of today and what I wanted to say. Last week Bachelet caught
headlines (7) from her presser with the foreign press corps she held and when asked about the
mining industry, she said that there may be policy changes coming in, which hinted at tax or
royalty increases, as well as being deliberately vague about the current semi-hot Pascua-Lama
project issue in Chile, saying that ‘the company needs to abide by the law’ or some-such. The
fall-out from these mining issues has included commentary about how the left is about to
punish the key and cherished Chilean mining industry, how permitting may become even
stodgier under a Bachelet government and stop much needed new investment in power plants
and mine infrastructure, how the left will screw the roost for FDI etc. The basic point to make
here is that politically charged scare stories are not to be heeded in the next few months and
Chile will remain the best place to go mining in Latin America whoever wins (i.e. Bachelet). But
a little more comment is needed, so we should be clear that the Bachelet coalition party is by
nature a centre-left party and has to win its votes. It would be of no surprise whatsoever to see
Bachelet and friends move a little to the left during the campaign period in order to shore up
the faithful and assure the win, which leaves room for more scare-story type headlines for the
mining sector (and hey, serious country Chile or not, it’s still a Presidential election and you can
bet big money that the noise will get louder as Sunday November 17th approaches). If that
happens, if you see new burden for mining , or Chile Mining Will Die Under Michelle type
headlines, then they’re ignorable. What’s said on the campaign trail and what happens once
Michelle is safely installed for her second term at the Palacio de la Moneda are two distinct
items.
Haiti: Mining may be waking up (though so may the anti-mining sector)
News from one of the freakshow nations we don’t cover much. Reports last week (8) were of
social organization in Haiti who are moving to protest a law bill that the government is finalizing
in order to attract foreign direct investment to the mining sector of the country. The opposition
say that the bill is far too favourable to foreign companies, would sell out the country and
smacks of corruption, because the whole thing has been put together behind closed doors.
One the one hand, the recent moves by the government, that include the freezing of new
concession grants until a law reform is passed, indicate that the country wants to move
forward. On the other, noise is now being generated by the NGO-side of the story who are
using the tried and tested fears of agro destruction/water pollution arguments to further their
anti-mining agenda. At the moment, we have Newmont (NEM) and Eurasian (EMX)
spearheading exploration in the country, though no project has seen much advancement and
there’s no production outside of the traditional and small informal sector. What we can be sure
about is that Haiti makes places like Guatemala or Honduras seem stable, so if the country is
about to use mining as a political issue, chances are that it won’t be a calm and reasoned
debate over tea and cucumber sandwiches.
Argentina/Chile bilateral mining projects discussed at a governmental level
Last Friday saw (9) a bilateral meeting meeting in Santiago Chile between members of the
Chilean and Argentine government-mining community, with people such as the Argentina
Secretary of Mining, Jorge Mayoral, and the Chile Vice-Secretary of mining, Francisco Orrego,
present (as well as the usual flunkeys and protocolaristas (dat a word?). the reason for the
meeting was to discuss bi-national mining projects currently being developed and although
Barrick’s (ABX) troubled Pascua Lama project gained most attention, others on the agenda
included NGEx Resources’ (NGQ.to) Los Helados/Vicuña project that we know about and
straddles the border and the Pachón project, owned by GlencoreXstrata, that is wholly inside
18

Argentina but plans to process and transport it wares out via Chile.
The message out of the meeting was to assure the companies and the investors involved that
Chile and Argentina were fully committed to this type of bi-national project and would try their
best to work together in order to make the mines a reality. It was the type of decent moral
support that political words can bring and although it’s easy to be cynical, the mere act of
getting these people together and making official-type support statements is a decent gesture
and can be taken at face value. My thoughts certainly drifted to NGQ.to on reading up about
the event and looked on its grand plans for three eventually integrated operations (two in
Argentina, one in Chile) in a more favourable light. They already have a lot of copper up there
via Los Helados and once the Argentina deposits get a 43-101 the combo may become very
attractive given the right bilateral support.
Colombia’s Mining Conference
We gave a headsup about this event last week and it turned out that not so much happened in
the way of newsworthy news regarding hard rock mining in Colombia. The main talking points
were taken by Colombia’s oil&gas and coal sectors and even the mood there was downbeat,
with estimates of a 10% drop in total exports in 2013, from ~$46Bn in 2012 to ~$42 this year.
As for metals mining, the discussion centred around the illegal/informal mining business and
what to do about it.
Next up, Peru’s big mining party
While on the subject, we’re now just a month away from Peru’s big mining conference, the bi-
annual Perumin (10) bash that happens in here in Arequipa September 16th to 20th (the last one
was 2011) and is said to be the biggest single mining show in The Americas, with 14,000
attendees expected and the city’s hotels booked to capacity already (I know taxis will try and
charge me double that week). Overall, a damp squib of a conference.
It tends to be a show for either the big miners or the suppliers of big miners (tubes, plant,
vehicles widgets), with less emphasis on the junior mining companies and not for the general
retail investment public either (rather different to the PDACs or Cambridge House shows, for
example). As I’m here and there are a couple of pals slated to give presentations I’ll likely go
along and see what’s what. I’d also expect some presence from companies quoted on the Lima
exchange, so it’ll probably be worth my while.
The proposed limits to Peru’s prior consultation law in trouble
A legal ruling in Peru, handed down on May 23rd by the highest court in the land,, The Supreme
Court, but only made public via its publication in Peru’s official gazette last week (11) could
become a big problem for the current government and its decision not to allow “prior
consultation” to any locality affected by large-scale projects such as mining or hydrocarbon
developments. As usual the ruling is full of legalese but the upshot is that it draws a line
between what is “prior consultancy”, says that it is not the same thing as “citizen’s
participation” and therefore the so-called prior consultancy law (which the Ollanta Humala
government introduced but then said only applies to what they call indigenous communities in
(with very few exceptions) the jungle regions and therefore no legally binding approval is
needed from simple rural communities such as in Cajamarca or around Cañaris, to name but
two topical examples) does not annul people’s right to a legally binding vote on projects under
the OIT169 international law, to which Peru adheres.
All that is a potted way of saying (12) that whatever the current government tries to say, the
Peruvian judiciary (and the highest court in the land to boot) says that locals have a right to a
vote on any project that affects them and that vote includes the right to a veto.
This ruling has gained basically zero coverage in local, national and international mainstream
press (potentially due to the “ignore it and it might go away” factor) but it’s a big decision and
is likely to have wide-reaching consequences, particularly to any big mining or O&G project. The
consequences potentially affect any concession that has been awarded since 1995 (when Peru’s
19

adherence to OIT169 began) and (13) may include all operations, be they still in exploration or
production stage. In strict accordance with this ruling, all concessions, no matter what region of
Peru, would have to run a public consultancy meeting and get explicit approval from the local
population in order to continue their operations or development (which, as you might imagine,
is a real can of worms). Whether or not that happens is a side issue, as tacit approval of any
current mining operation will probably be enough to allow status quo. However, this ruling has
handed opposition groups to new mining projects, such as those at Cañaris or those against the
Conga mine project, a significant legal weapon with which to do battle inside Peru without the
need to go to the international courts (who’ll almost certainly rule with the Peru Supreme
Court).
Therefore the practical bottom line to this one is not to worry about it if you’re exposed to Peru
in a project or operation that has reasonable, good or very good community relations (for
example, this is not a problem for RIO.to, IRL.to, BCM.v at Corani, Anglo at Quellaveco, Cerro
Verde, Toromocho, HudBay at Constancia etc, just to rattle off a few names that come to
mind). However, it’s another reason to steer well clear of exposure to Candente (DNT.to) at
Cañariaco, banking on Conga (NEM/BVN) opening, Sulliden (SUE) at Shahuindo and other
projects with less than good relationships with neighbours.
Market Watching
Still no call on BVN
During the week I did little else but DD BVN, but I’m not in any hurry to make a call on it and
still need to get a full grip on the company. That’s all, but when that changes you’ll be the first
to know.
Pretium Resources (PVG.to) (PVG): Second thoughts
The bottom line at the top: I’m starting to get a bit of cold feet about waiting to the bulk
sampling results on PVG and may prefer to take profits beforehand. No decision yet, though.
Now for the details and yet again, before jumping in, I want to clearly stress that I’m not in any
rush to make a change in call on this position that was taken (unlike most others recently) as
an investment with a longer timeline, but the company’s NR on Thursday August 15th (14) has
given me more than a little pause for thought. Here’s why.
Point one: If we go back to previous announcements from PVG, e.g. this one (15) dated June
19th, we read amongst other lines that, “The Bulk Sample Program excavation and sampling is
expected to be completed in late July or early August.” And also, “The drill program is expected
to be completed by mid-August.”
Cut to last week’s NR, very much mid-August, and we read (again amongst other words)
that:four fans remain to be drilled”, also that drilling “....is expected to conclude in early
September” and later that the 10,000 tonnes bulk sample has to date got to 8,600 tonnes. First
conclusion drawn, the program is late and I’d now expect it to run over the “by end 3q13”
timeline we were originally offered by the company. Maybe not a red flag in itself, but a pinkish
tinged one.
Point Two: The second thing to come from last week’s info is to look at the maps PVG kindly
offered and note exactly where they’re taking the 10,000 tonne bulk sample from inside the
VOK deposit. The idea was to offer up a representative sample of the whole of the deposit,
which sounded like smart idea to me, but we now have to factor in a new discovery from PVG,
the recently announced Cleopatra Vein and its location. If you consider this map (16) that
shows the area from which PVG is taking its sample, it seems pretty clear that a decent
proportion of this bulk sample is coming from an area right at and running parallel to the
Cleopatra vein system. Now I don’t know about you, but when you consider that Cleopatra has
20

returned samples of up to 27,000 g/t Au over 0.5m widths (17) and the whole idea of the bulk
smaple was to be representative of the whole of the rock in order to determine whether VOK
stands up as an underground bulk mining plan, a big fat question mark appears above my head
to wonder just how “representative” the material being extracted for this 10,000mt program
really is. Second conclusion drawn: The bulk sample may well pass muster on first look when
it’s eventually published, but I wonder whether the big mining companies, that’s to say the
potential purchasers of PVG and/or VOK, will be as impressed when they start getting granular
and picky on the data provided.
Point Three: There’s also the potential for points one and two to be related. After all, PVG has a
big team at VOK, it’s clement summer weather time and the original bulk sample program was
only going to be 10 weeks long. What’s the sudden logistical problem that’s spun out a
relatively short program covered by near optimal work conditions by 20%? Is it because,
perchance, PVG has decided to change the places from which it wants to take its
‘representative’ bulk sample?
Point Four: The final doubt that’s been floating round my brain regarding PVG this week is a
more general one, that I’m starting to feel a little uncomfortable about this long position
because I’m outside of my speciality field a little too much. It’s becoming clear that the
potential viability of VOK depends a lot of real hard data geology and the conclusions it spits
out, which will then have to pass peer review before it gets some sort of industry thumbs-up.
I’m not a geologist, never have been, never will be and never pretend to be and I even though
I can hold down my end of a conversation with the rockbangers (as long as they don’t start all
that pretty jargon talk on me) and get the idea on the wide-sweeping geological themes and
concepts these days, I know when I’m out of my depth and on this subject, it’s exactly that
feeling. Plus I’m dealing with a region of the world that’s not Latin America and I don’t have
any edge to offer to myself or to readers who’d be better off reading other experts who know
the North backwards.
To conclude this PVG piece I’m not half as confident and bombastic about this position as I
was when I first took it out (a slice of humble pie does the soul good). There is good news of
course, that after some pretty wild fluctuations it’s a position in profit on my money and 13% in
two months is not a bad thing. That helps foster patience, too.
Fortuna Silver (FVI.to) (FSM) 2q13 numbers
FVI reported its 2q13 on time, the results were lacklustre on the headline numbers and
lacklustre underneath as well, but the stock shrugged off the past and rallied strongly with the
rest of the market. In fact
even that statement is unfair
to the stock, as it rallied
better than most (+23.3%)
and got a big boost from
being a good, profitable
(barring those write-downs)
sector leader of a stock that’s
become one of the go-to
plays for anyone wanting a
small silver producer (along
with FR.to, EDR.to etc).
Without going over every
single step of the fundamental
territory we’ve covered in the
last few issues, I want to use
a few pointers to show that
FVI looks overpriced today because it’s assuming a higher silver price in the future. First this
21

chart, which shows how the silver fix average is getting on and if you go to the Kitco page and
do the averaging math, it turns out that the average price for silver so far this quarter (3q13) is
U$19.99/oz, we round up to $20. With that in place, we move to the second chart that shows
what FVI got for its product in 2q13. That came in
at a realized price of U$22.97/oz (comparing very
closely again and as usual to the London Fix
average of $23.11/oz for 2q13; as I said a couple of
weeks ago, FVI hits reliable numbers on this) and a
net realized price (after those smelter and
middlemen dues) of $19.78, very close to our
$20/oz best guesstimate.
Now homing in on our revenues chart (and eye on
the 2q13 results rather than the 3q13 guesses,
please) we see that from its production and market
price mix FVI got $30.101m in revenues, $23.623m
in costs and a Mine Operating Income (MOI) of
FVI: London Fix Ag versus FVI realized Ag price
$6.478m. By the way, we don’t care too much
U$/oz Ag versus Net realized price, per quarter
about the $15m ($10.2m post tax deferral) 35
Net realized $
write down on Caylloma, that’s the miner
30 realized $
keeping its book in order and doing things London fix
25
right. It did mean that FVI posted a big net
20
loss, but back that accounting charge out and
the final score was a slight ($0.4m) 15
loss...basically breakeven. 10
5
0
Therefore:
1q12 2q12 3q12 4q12 1q13 2q13 3q13est
• We know that at at $23/oz market price source: Kitco, FVI data, IKN ests
for silver, FVI break even. We know
that because that’s what 2q13 has just FVI.to: Quarterly Earnings overview
told us. 50
• We know that for the first half of 3q13, 45
40
silver has averaged $20/oz. 35
• Therefore, to get FVI to the level of 30
breakeven company for 3q13, we need 25
20 an average of $26/oz for what’s left of
15
this quarter, the next six weeks.
10
• Today silver is at $23/oz, therefore if 5
things stay the way they are, FVI is set 0
to post a loss in 3q13.
This brings me back to the first chart offered to
you at the top of this article, the FVI versus SLV comparative. We see that SLV is currently 20%
below its price at the beginning of the year, the time at which FVI was trading at or around the
level it returned to last Thursday and Friday. Also, back in 1q13 FVI got a net realized average
of $27.20/oz for its silver and returned a $16.7m MOI, so even if silver gets to $26/oz average
over the next six weeks (and rebound or not, I have to severely doubt that) the company will
earn around $10m less than it did when last priced the way it is today. Let’s note that in the
above two charts I’ve assumed a $23/oz level for silver again, giving FVI a better case situation
than my own opinion. Personally, I think FVI will be lucky to make $22/oz average (net realized
$18.50) for 3q13 and will post a small loss as a result.
I see nothing wrong with the speculative nature of the rebound in FVI over the last two weeks
(not least because I decided not to short the thing) and if silver continues its upmove, gets
through the $23/oz level and makes it to $25 or $26 the stock is likely to consolidate well at this
level. However, I do believe that once you step back, turn away from the momentum and check
22
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 tse31q3
source: company filings, IKN ests
srallod
fo
snoillim
revenues COGS
Mine Op. Income

out the fundamentals, it’s tough to justify today’s level on today’s prices and FVI has all the
hallmarks of the company that’s shot forward too quickly, which means that if silver stays
where it is the stock is likely to retrace. I’m not
saying to the $3 or U$2.90 level (for FSM) that I
FVI.to: Equity, BV, PPS, ratios
mused over a couple of weeks ago, that’s 3.40
3.20
because the silver price deck has now changed. 3.00
2.80
But $4 looks like my idea of a comfort limit now.
2.60
Finally there’s this chart, the meta-chart from 2.40
2.20
IKN221 updated to note that at Friday’s close, 2.00
FVI is running a 2.12X book to share price ratio. 1.80
1.60
That looks very pricey to me for a company 1.40
that’s not going to offer any sort of profitmaking 1.20
1.00
potential until 4q13 at the earliest. I’d pitch for a
1.8X ratio there, which would point to a share
price of $3.83.
Bottom line: I congratulate anyone who is long FVI and commend them on the recent win, but
would also say that from here it’s one to take profits in an rotate the cash into other sector
plays that haven’t moved this fast or furiously. The momentum could take it higher, as could
the silver price if it moves on, but there’s a limit to the value on offer and other vehicles look
like better places to continue enjoying any bullish rebound in silver and PMs.
Short potentials
The end of the Friday Flash update (appendix 2) made a vague-ish mention about stocks I’m
considering as short potential trades. I didn’t mention any names and I was keen to stress that
I’m not looking to open any shorts immediately, but would first watch to see where our newly
found sector rebound momentum takes us. Despite those clear caveats I got a whole bag of
mail asking for more details (methinks there are plenty of people sniffing around for short
ideas, particularly on the pro desks, so here’s an expansion on the thoughts, both on a
conceptual level and mentioning the ones I’m currently considering. It’s not just the examples
of GORO and FVI, seen above today, that indicate stocks have run too fast compared to their
potential for returns at these levels for gold and silver. There are other things in play and each
individual case will have its own wrinkles (it’s never apples to apples), but the four main filters
are as follows
• There are plenty of other examples and among producers, I’m particularly interested in
any producer company that can’t make a profit at these levels (discarding the type of
write downs that FVI took on Caylloma in quarter two, which are filed under good
housekeeping for my purposes).
• Second up, amongst exploration or development only companies, those without any (or
very little) income and burning cash, the short potential targets I like the most are the
big tonnage, low grade, high capex projects that are very much out of favour with
potential buyers these days. Even the ones at the potentially top end of theoretical
economics (such as Sunward at Titiribi, which I haven’t lost all hope for even after
selling and watching it sink and sink) are out of favour and recent hard-nosed economic
reports, such as the feas for International Tower Hill (ITH.to) (THM) at Livengood,
make it clear the average of these things don’t work at these gold prices.
• Thirdly, I’m looking at explorecos that might have great deposits or projects, but are
also dependent on outside circumstances for their success and don’t have full control
over their own fate. The lack of control may come from political risk, or from a reticent
partner, but if the market is baking in too much market cap right now, these could be
set for a fall if nothing happens or ‘unexpected’ bad news hits their rose-tinted future.
• Lastly I also much prefer anything with a full US listing, because it makes the stock
much easier for us retail grunts to play to the short side. This filters out quite a few
23
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 WON
BV/share
BV/PPS ratio
source: company filings

Canada-only stocks that might look overvalued, but are just too fiddly, expensive or
prone to tying up too much collateral if only available via a dot tee oh (or dot vee)
listing. Also, I like them above $1.00 per share, because that makes them easier to
short and to hold short as they drop.
Therefore, here’s my shortlist (geddit?) of companies that I’m considering as short plays (all are
shown with their USA ticker only).
Potentially Overvalued Producer Short Targets
Great Panther (GPL): Its 2q13 results (18) were nothing short of horrid and even if it slashes
its costs as it says it’ll do in the next quarters, the $3.8m net loss on mine operations and
$5.1m (4c/share) net loss (at average sales price of $21.58/oz Ag point to a company that will
make another loss in 3q13 unless silver springs really hard. How on earth this has managed to
rally, from 82c on results day to the U$1.18 close of last Friday, even with the silver pop, is
beyond my ken. Downside target here is 75c (i.e. 1.0X BV), or 36%.
Gold Resource Corp (GORO): Instead of opening a new short position, adding to GORO is a
decent alternative and for all the reasons we went into last week. For what it’s worth, according
to the model, GORO needs $23/oz silver and and $1,400/oz gold just to break even on
operations (that’s before G&A, burdens, dividends etc) so at today’s price it’s still fracturing
cash from treasury to pay for its overexpensive divis policy and will keep doing so until silver
reaches $27.50/oz. With metals priced where they are today, I’m expecting GORO to have to
cut its dividend once again and along with the next round of HOC selling in 4q13 (that will
happen) I’m confident about my new $5 downside target (and at ~40% profit potential from
Friday’s close, that’s pretty tasty now)
Fortuna Silver (FSM): For the reasons shown above. I don’t think it’s wildly overvalued and I
have more respect for FSM than most because the management are good miners (proven) and
the company still makes a reasonable operating profit. However, it’s certainly a candidate for a
softer shorting strategy, such as the shortside of a pair trade with some other silver miner.
Low Grade High Tonnage High Capex Short Targets
Exeter Resources (XRA): For the reasons considered in IKN223 last week. It’s been popped
on a speculative entry from a newsletter writer who is looking for leverage on his $5k/oz call for
gold in three years. On those criteria it may make sense, on anything under $1,500 Caspiche
simple doesn’t work (and even $2k/oz is debatable). Berst guess potential downside of 30%
from here.
NovaGold (NG): NG’s problem isn’t its cash, as it has an IKN estimated $210m in the treasury
at this point. However, with 316.6m shares out, that comes to around 66c per share and with
each quarter that passes without anything happening at its assets, the cash level drops (by
perhaps $20m/qtr on average. Meanwhile, its 50/50 JV on Donlin Creek is with Barrick, a
company with far too many issues on its plate than moving forward on another über-high capex
project in the foreseeable future. As for its other main asset, the 50/50 part of its holding of
Galore Creek with Teck, that one is unlikely to see any forward motion as Teck needs to do its
own consolidation (majors have been hurting and writing down, not expanding and spending on
capex). The problem with shorting NG is that its defended by its big holders (Paulson for one)
who can keep the plate spinning at a higher than value level indefinitely. However, its recent
pop to over $3 makes it look potentially shortable again and a move back to $2 if things go
slack is definitely possible.
Seabridge (SA): Owner of the KSM project, aptly named by a mailpal of mine “the worlds’s
largest anomaly”, a description with which I fully agree. This thing has been pumped since I
can remember in the sector and has this great habit of coming up with news that sounds great
at the time but never seems to amount to much. Multi-multi millions of ounces of gold yes, but
24

at such a low grade and in such a remote location that the economics would still be marginal at
best even if gold zooms much higher and then stays there.
International Tower Hill (THM): I honestly thought that disaster of a feas study would kill
this story off, only to watch it move much higher (in fact it’s doubled from the lows on the first
big sell-off day) on a new round of speculative pumping. The bottom line is that Livengood
doesn’t stand an earthly chance of becoming a mine unless gold does do one its $5k move and
even if gold goes a whole lot higher, there are umpteen other projects that will get developed
before this one ever sees the light of day. The disadvantage here is that THM is still chunkily
under $1 and tougher to short and stay short as a result.
Other Targeted Shortables
Tahoe Resources (TAHO): I’m already long and the reasoning has been laid out enough
times. There’s too much good news assumed and not enough risk understood in TAHO, so the
chances of a downside move, away from the action in the silver market and connected directly
to the political risk in Guatemala, makes this one stand out. It’s one I’d consider adding for a
third time if it spurts much higher (e.g. over $20)
MAG Silver (MVG): Everyone in the silver and junior mining world knows that the Juanicipio
mine project, owned 44% by MVG and 56% by Fresnillo (FRES.L), holds world class rocks. But
we’re again in the situation where FRES, as operator, needs to take the reins and in the long
time that MVG has had the vast majority of its market cap valued to Juanicipio, FRES hasn’t
ever shown itself to be champing at the bit to move the deposit forward and make it an
operating mine. That’s doubly true in 2013, the year of austerity, and although the JV continues
to commit cash to the project (total of $8.5m in exploration expenses during 3q13, according to
the results NR (19) the way in which majors are reeling in budgets and deferring capex-intense
projects means that FRES is unlikely to move on this in the months to come, either. Again, this
one is about finding an interesting entry point to short and as it often displays high beta, it can
run high before finding a point at which it consolidates its share price. One to watch for the
moment, not the highest on the list but that could always change with price action.
Bottom line: I see short potentials in many spots. When they’re a decently priced stock trading
on the NYSE, they get more of my attention these days. I’m not shorting anything next week,
that’s a certainty, as the momentum delivered last week is unlikely to have petered out over the
weekend. Let’s see how things develop first, but if the rally begins to tire, then these above
(and perhaps GORO is my favourite of the lot right now, followed by GPL) may come into active
play.
Conclusion
IKN224 is done, here are some bullet points:
• I’m buying Minera IRL (IRL.to) next week. If needed by circumstances you may receive
a flash update on this stock.
• Rio Alto (RIO.to) (RIOM) is our remaining Top Pick and put in a reasonable quarter. No
it didn’t sparkle but it was more than enough to allay the unfounded BS rumours it had
been suffering under during the worst of the gold price downturn. There’s a lot more
up left in this price and I strongly recommend that you own.
• But what the devil do stockpickers know, anyway?
• As for the big news of last week, I’m quietly optimistic that we saw the beginning of a
new uptrend but I’m not jumping to conclusions, either. The first job will be to collect
on the near-term trades that were put in place, the second will be to watch and decide
25

and if all is good after that, I’m going to put real money back into play.
• Yes I see shorting potentials out there, but at this time they’re only that; potentials. In
the same way that if lights are green a little down the line new longs can be put in
place, if lights go red I’ll be prepared with idea to trade the downside.
• Make no mistake, the Peru Supreme Court ruling that overrides the Humala
government’s plans to limit local votes on major works projects, which very much
includes mine projects, has the potential to be a big thing. That’s probably why you’d
heard nothing about it so far. The key to Peru is to have good, solid community
relations from the word go, which is something that all my current Peru exposed
shareholdings enjoy (or in the case of BCM enjoy at its key asset). But if your company
or project has a sketchy record on this score, watch out.
• I cannot tell you how annoyed I am with myself about Reservoir Minerals (RMC.v)
The top long-term pick is Rio Alto Mining (RIO.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://en.wikipedia.org/wiki/Chu%C3%B1o
(2) http://incakolanews.blogspot.ca/2013/08/the-s-index-and-gold-bullion-etf-over.html
(3) http://finance.yahoo.com/news/colossus-minerals-inc-completes-c-125600408.html
(4) http://incakolanews.blogspot.mx/2013/08/candente-copper-dntto-makes-it-to.html
26

(5) http://incakolanews.blogspot.mx/2013/08/more-candente-copper-dntto.html
(6) http://finance.yahoo.com/news/marlin-gold-successfully-completes-rights-184200906.html
(7) http://www.reuters.com/article/2013/08/13/us-chile-barrick-bachelet-idUSBRE97C0NL20130813
(8) http://www.mineriaaldia.com/invasion-de-empresas-mineras-preocupa-a-los-haitianos/
(9) http://www.diariodecuyo.com.ar/home/new_noticia.php?noticia_id=586415
(10) http://www.andina.com.pe/Espanol/Noticia.aspx?id=NjP+Prm5e+M%3D&utm_source=dlvr.it&utm_medium=twitter
(11) http://www.justiciaviva.org.pe/notihome/notihome01.php?noti=1129
(12) http://actualidadetnica.com/index.php?option=com_content&view=article&id=8778:peru-mineria-e-hidrocarburos-
ya-no-escaparan-de-la-consulta-previa&catid=75:peru&Itemid=130
(13) http://www.justiciaviva.org.pe/notihome/notihome01.php?noti=1129
(14) http://finance.yahoo.com/news/pretium-resources-inc-bulk-sample-090000275.html
(15) http://finance.yahoo.com/news/pretium-resources-inc-valley-kings-090000698.html
(16) http://media3.marketwire.com/docs/pvg815-level.pdf
(17) http://finance.yahoo.com/news/pretium-resources-inc-discovery-cleopatra-090000109.html
(18) http://finance.yahoo.com/news/great-panther-silver-reports-second-210000727.html
(19) http://finance.yahoo.com/news/mag-silver-reports-second-quarter-130000081.html
Appendix 1: Flash update dated August 15th
Good morning, 11am local time Thursday. Just a quick note to say that I plan to sell about half my position in
B2Gold (BTO.to) (BTG) between now and Friday's close. The reason is that I want to raise cash, the BTO position
holds plenty of that and I also feel that BTO, having recovered more quickly than just about any other junior out there,
might not be the place for alpha-type gains in the near future.
The remaining half of BTO will stay in the portfolio (and note that by implication I still like the stock and its potential,
because if not I wouldn't be long a single share) but due to the change in size of the position as of this weekend it's
going back down to the "recommends" sub-section of the Weekly, leaving Rio Alto Mining (RIO.to) as the sole Top Pick.
Finally, If Bear Creek Mining (BCM.v) decides to rally a little more I'm also planning to take the profits from this small
and near-term trade. $2.50 or below (as per today) isn't quite enough for me, but a move towards $3 would see me sell,
particularly if it came with a volume boost (as daily liquidity is by no means guaranteed on this stock).
Appendix 2: Flash update dated August 16th
Good Friday morning, just before 8am local time, half an hour before the open and it looks as though the worst of the
winter chills have passed here in the Southern parts.
Housekeeping on trades (rather than investments)
Readers will recall that your author has set up several near-term trades, all with relatively modest targets, as opposed to
the normally preferred longer-term investments that aim for higher gains. As several of these are nearing target, this
mail is to remind all that the following trades will close and profits will be taken if the targets are hit (each comes with a
couple of notes):
•
Colossus Minerals (CSI.to) at 90c (this one is a fixed target and the only one that's worked reasonably well
inside the envisaged timeline, because the ones that follow were bought too early and before the second drop period of
2013)
•
Bear Creek Mining (BCM.v) at "something over $2.80, preferably $3+" (as noted yesterday).
•
AQM Copper (AQM.v) at 15c (I didn't get extra shares at 6c, but the call to dump this at 15 if seen still
stands. Also, this one had news out this morning so that nudge may help, you never know).
•
Rio Alto Mining (RIO.to) Short Term trading position (NB: Separate from the main Top Pick core holding,
that's not moving a inch) at $3.10 or above (though this one has more daily volume and the final sell call will depend
more on momentum/sentiment than an exact number).
The change in market sentiment towards gold, metals and miners makes is very welcome, but it makes not one jot of
difference to the above trades. Because they're near-term trades, plain and simple.The right price comes and they're
gone, period.
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In other news, thanks to the pop in the sector yesterday i'm in the process of getting a better than expected price for the
half of BTO i'm selling. But I'm still selling them. Also, yes I have a couple of trades in mind for the raised cash
(answering a few replies here, rather than personally) but there is no decision as yet and I don't think there's any rush to
immediately deploy the cash, either. I'll go into this a little more in IKN224 on Sunday. Also yes, one of my main target
shares right now is still Buenaventura (BVN) long, but I again state that no decision has been made and i'm still working
on the model (it's a company with many moving parts).
Finally, I have to state that I see many shorting opportunities right now, though momentum build up this week indicates
that there's no need to short anything right now, let's see where these stocks get to first. I suppose that the bottom line
message is that I'm keen to harvest a bit of cash right now and can decide calmly what to do with it later.
Enjoy your Friday.
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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