IKN #225Premium

The IKN Weekly
Week 224, August 25th 2013
Contents
This Week: Three trades next week, Is it a trade or an investment?
Fundamental Analysis: Minera IRL (IRL.to) (MIRL.L)
Stocks to Follow: Overview, B2Gold (BTO.to) (BTG), Minera IRL (IRL.to) (MIRL.L), Darwin
Resources (DAR.v), Rio Alto mining (RIO.to) (RIOM), Bear Creek Mining (BCM.v), Lara
Exploration (LRA.v).
Copper Basket: Overview, Nevada Copper (NCU.to), NGEx Resources (NGQ.to), Curis
Resources (CUV.to), Strait Minerals (SRD.v).
The Lottery Ticket Basket: Overview, Fancamp (FNC.v), Cream (CMA.v).
Regional Politics: A Q&A with Diego Hernandez of Antofagasta (ANTO.L), B2Gold (BTO.to)
won’t buy Lydian (LYD.to): Do not underestimate political risk, The Peru stock market chart for
2013 compared to gold. Brazil: Belo Sun (BSX.to) Volta Grande to get an Enviro inspection,
Mexico: This should make headlines next week, Panama fishing for Peruvian mining brains.
Market Watching: The Alamos/Esperanza saga, Further to the short potential plays
mentioned last week, Three trades next week (CSI.to, PVG.to, GORO).
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
Three trades next week
On the heels of last week’s decision to move Minera IRL (IRL.to) (MIRL.L) up to Top Pick (see
appendix 1), three more changes to the ‘Stocks to Follow’ list are announced in this week’s
edition. I plan to sell Colossus (CSI.to) and Pretium (PVG.to), as well as adding more to the
short position in Gold Resource Corp (GORO). Each trade has its own specific reason, details
are in ‘Market Watching’ below.
Is it a trade or an investment?
At the risk of repeating myself far too many times, I want to clearly state my own personal view
on this theme. Three bullet points:
• I define a trade as having a near-term target, while an investment has a longer-term
target.
• An investment typically aims for a larger sized percentage gain. A trade will often look
for a quicker but altogether more modest return.
• An investment should have a stronger fundamentals backbone than a trade. In other
words, ducks should be (totally or largely) in line for the purposes of an investment-
style position, while a trade can be taken for other reasons, such as a specific
political/social risk issue, perceived value from newsflow or a price entry point, general
market psychology, etc.
This small section is added to try and head off any mails of the “Huh? You don’t make sense
because you raise IRL to “Top Pick” and less than a week later you’re trimming other places
1

because you think gold and the market is going to sag soon” variety. I do take all my moves
into and out of the market seriously, but some will always carry more weight than others.
Weight of money, weight of conviction and yes, even weight of reputation. That’s how it works
in this tiny corner of capitalism. Or put another way, here’s a list of my latest neuroses (from
the never-ending list):
• I feel slightly cheesy about selling Colossus (CSI.to) before the target is reached. That
wasn’t the plan and I’m now chickening out, period.
• In the same way, a pang of regret comes when I think about the way I could have
covered my GORO short at target ($.750 and below) on at least two clearly defined
occasions but preferred to let it ride. It’s now ~20% worse off and if I’d stuck to the
plan more strictly I could short again today with less capital at risk for the same sized
exposure. Short positions naturally suffer in a macro market rebound situation however,
it’s part of the ‘pleasure’ of owning them.
• A greater regret is changing my mind on Pretium (PVG.to) (PVG) and selling now what
was taken as a longer-term position. It’s the clear mind-change moments which bring
the “which wrong decision shall I make this time?” feeling.
However, decisions can’t be made about things now set in the past, it’s all about playing the
hand you’re currently holding. More importantly, none of these negative neuroses come close to
the positive, “Yup, you were right to wait” feeling I get from the decision to hold off on Minera
IRL before its financing deal was in place. That’s because the investment there is a bigger one
than all the three above put together, it’s going to work on a different timescale and the stock I
bought at 25c last week will, one of these days, get sold back to the market at a much higher
price, not just 5% here or 20% there. Some trades are planned cover kids’ birthday presents,
while others are planned cover their university fees.
Fundamental Analysis of Mining Stocks
I’m going to do Minera IRL (IRL.to) (MIRL.L) next week
I need some more time on this, for which I apologize. However I want to tell you why I want
some more time to think it through.
Today’s IRL has its problems and has its advantages. Let’s consider a couple of the good things,
starting with the Corihuami mine that may be small but is nicely profitable (gross profit 2q13
$2.62m) and continues to cover all corporate-type expenses (i.e. after G&A at $1.72m for the
quarter just gone and other bits and pieces, it still returned an operating profit of $810,000 and
only showed a net loss due to a regulation tax expense assumption). Corihuarmi does have a
limited mine life now, but it will see IRL through to its expansion stage and has kept supplying
useful cash flow at a difficult time. It’s also a clear advertisement for a simple fact; these guys
know how to mine gold at a profit.
Then last week, the news (1) that the Don Nicolas financing problem has finally been solved
came as a big fillip for the company. In exchange for 45% of the subsidiary that wholly owns
the Argentina mine project and 9.1m shares of IRL (that brings total shares out to ~183m) the
project gets $45m directly from its financing partner and a $35m loan that ensures all the capex
needed to bring Don Nicolas into production. But even more importantly, IRL the corporation
has just seen all that Argentina exposure risk penalty stripped away from the company. The
market hasn’t simply been marking Don Nicolas as worth zero, it’s been considering it a liability
to the company. What we have now is a project, fully funded and permitted, that may be a
year late in getting off the ground (start-up is now slated for 4q14) but is financially self-
contained. It’s been blocking the development of the real prize at IRL as well, the Ollachea
project but with the deal now done, IRL can get on with building its Argentina mine without it
being any sort of liability to the central corporation any longer (it’s all OPM from now) and it can
2

turn its attention to financing and moving the jewel in the crown into production
So, advantages there are but away from the fact that the market is giving scant value to
exploration-stage mining assets these days (which is reflected in the share price), its main
problem going forward is a lack of funds for Ollachea. The market is therefore wondering, quite
rightly, how it’s going to raise $178m to build its mine at Ollachea and with just $4.9m cash at
bank at end 2q13.
This raises the potential of a large dilution to an already pushing-the-limits share count at IRL,
because if IRL insists on keeping the mine all for itself (well, 95%, as 5% is now owned by the
town of Ollachea) and raising the capex by selling shares, we might end up holding shares in a
company with a very bad case of “Australian Disease” (a term coined by Mickey Fulp), a count
ranging toward a billion S/O and no upside left for the people who’ve dutifully owned the stock
as long-term and loyal holders. But there are other potential ways of raising the financing that
would not dilute its current shareholder base out of the picture, which is where my unfinished
deliberations come into play. Options that the company has include:
• Debt financing
• Forward metals sales (which is a type of debt financing, of course)
• A rights issue that asks for more cash from those already bought in (e.g. me) and gets
them in for more cheap share in return.
• Running the same type of deal at Ollachea as it’s done at Don Nicolas, and selling a
percentage of the mine in exchange for the capex cash
• A combination of the above
The 100% mine would have this type of earnings ability, even at our current prices for gold...
Ollachea: Income items for model year
At 3,000tpd thruput $1,300/oz Au $1,350/oz Au $1,400/oz Au $1500/oz Au
Sales (U$m) 137.7 143.0 148.2 158.8
Cash COGS 70.4 70.4 70.4 70.4
Depreciation 12.0 12.0 12.0 12.0
SGA 6.0 6.0 6.0 6.0
Op income 42.4 47.4 52.4 62.5
...the question is how the company maximizes cash flow for the benefit of its current
shareholders. The model shows that even in a worst case situation (which for the record is
heavy dilution of the share base) the upside to IRL today is still strong and makes it worthy of a
top pick. That’s not the question which is bugging me (and still does, as I type these words at
9:30pm Sunday evening). The question is how IRL should maximize, and for that I need more
time and information. I therefore beg your forgiveness for being both lazy and stupid this week.
Stocks to Follow
Six went up (RIO.to, IRL.to, BCM.v, RIO.to trading position, PVG.to, FCV.v), six went down
(BTO.to, LRA.v, GORO short, TAHO short, CSI.to, DAR.v) and two of the tiny end plays
remained unchanged (AQM.v, NET.v), so basically it was honours even on the week. The best
percentage moves came from Minera IRL (IRL.yo up 11.1%) and Focus Ventures (FCv.v up
11.1%), while the worst of the downmoves were in Darwin Resources (DAR.v down 22.2%)
Lara Exploration (LRA.v down 11.1%) and B2Gold (BTO.to down 10.0%)
We currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
imposed maximum. Six of the positions are in the green, one is unchanged and seven are red.
3

Company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.30 07-apr-11 C$2.89 25.7% rebounding well
Minera IRL IRL.to buy C$0.47 22-jul-12 C$0.25 -46.8% new top pick, avg down
Recommends
B2Gold BTO.to hold C$3.07 28-nov-12 C$3.06 -0.3% sold 1/2, rest rides. Quality
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.04 -9.6% solid biz model, LT hold
Gold Res Corp GORO short U$9.70 03-may-13 U$8.90 8.2% new tgt $5 star short
Bear Creek BCM.v buy C$2.06 30-may-13 C$2.51 22.3% ST trade, may sell soon
Rio Alto Mining RIO.to buy C$2.68 07-jun-13 C$2.89 7.8% ST trade position, separate
Pretium Res PVG.to selling C$8.20 11-jun-13 C$9.61 17.2% $11.75 tgt
Tahoe Resources TAHO short U$13.10 08-apr-13 U$17.92 -36.8% port hedge, easy2b short
Colossus Min. CSI.to selling C$0.72 24-jul-13 C$0.78 8.3% 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$0.10 -42.9% revised tgt 25c
Darwin Res DAR.v hold C$0.10 14-jul-12 C$0.07 -30.0% 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.
Gold Resource Corp (GORO): Adding to short. We cover this in ‘Market Watching’ below.
Colossus Minerals (CSI.to): Selling. We cover this in ‘Market Watching’ below.
Pretium Resources (PVG.to): Selling. We cover this in ‘Market Watching’ below.
B2Gold (BTO.to): As mentioned in the Flash update on Tuesday morning (see appendix 1)
the half sale of BTO at $3.44 has turned out to be lucky in its timing. The news (2) that
dumped the stock back under $3 on Monday (though it held the line well enough during the
week to trade between $3 and $3.10) was the company decision to raise cash via a convertible
notes offering that was then priced on Tuesday (conversion marked at $3.93, which looks
lowball to me) and the whole thing was closed by Friday (3) with overallotment taken and a
total of $258.75m raised. Wham bam, thank you ma’am. We made plenty of comment on this
deal on the blog during the week and there’s even that fun “What will BTO do with the money?”
4

contest now running (thanks for the entries, there are a lot). There’s a little more on that
subject in Regional Politics below, but one comment received from a handful of you is worth
floating here, that perhaps BTO isn’t going to buy anything and it needs the cash in order to
cover its present set of growth projects. After all,
gold may have bounced to $1.4k but it’s still at a
level that brings less profit in for companies such
as BTO. As this company has a blue chip aura
and is in the enviable position of being able to
raise cash easily, it might be a case of padding
out treasury and covering eventualities here,
rather than adding a new asset.
That was one idea received and as I honestly
don’t know what BTO is about to do, it’s fair
enough. However on balance I think these guys
are about to add something else to the corporate
structure and as mentioned to a couple of you already in mails, my criteria for any acquisition
are:
1) It will have to be big enough to move the needle on a $2Bn market cap company. And
it’ll have to be a gold mine or advanced-stage gold project, no other metal will do.
2) Therefore, I think the $250m or so raised is only a part of a bigger price ticket deal,
with BTO likely to emit new shares to cover the difference (it’s never been shy about
paper deals before, either). Best guess is that $500m would be a minimum bar price
and it could be a lot higher.
3) Location is likely to be in the the type of country or region that BTO specializes in: Not
flat-out high political risk (Bolivia, Ecuador) and not world class low pol risk perception
either (Nevada, Canada). The BTO/Bema team has always been good at finding
acceptable risk areas before others (eg Nicaragua) and that’s its niche.
Of all the entries received, the one that makes most sense to me is Navachab (and many of you
have picked that one), as AngloGold Ashanti has made is clear it’s selling and that bids are in, it
fits with BTO’s political risk profile, it adds decent production size to the BTO mix immediately
(Navachab produced ~75k oz Au last year) and it also fits right in for synergies to the new BTO
Otjikoto mine project close by. Also, buying disposal assets from a bigger company makes
sense at this point in time for both parties and a 50/50 type cash/share deal fits right in, too.
But Navachab might not be the result, we’ll see what happens.
As for the stock and its position here, BTO is now considered by your author to be a solid hold,
the right size for the right time and it will continue to be a part of the ‘Stocks to Follow’ list. The
luck in selling half at just the right time is duly acknowledged (the best prices since February,
when gold was at $1,650/oz) but there’s no reason to sell the rest on this corporate move; we
know BTO operates well and is a quality story, I want to remain a part of that at what is, after
all, still a cheap price. Happy holder of B2Gold from here.
Minera IRL (IRL.to): Position added. This one again. Here we note but two things.
1) On a housekeeping level, please note that the cost average displayed for IRL in the
above table has dropped significantly, that’s because I’ve loaded up at 25c. It’s now set
to stay as a read blob until the stock nearly doubles from here but that’s ok, this isn’t
an ego massage operation, it’s all about real returns.
2) The volumes seen in IRL last week were very encouraging and for me that’s more
important than the topline price move. This chart below shows how last week went in
both of its major listings (London and Toronto) as well as the 90 day average before
last week. Not only were volumes much higher than the average in both exchanges,
but once the big trading news had washed through is was particularly encouraging to
5

see the stock holding onto liquid volume days, as even the ~250k traded in Toronto on
Thursday was acceptable and let anyone who wanted in or out of the stock at-or-
around 25c to trade with ease.
Minera IRL: Volume in London (LSE) and Toronto
(TSX) trading last week
3.5 3.23
3.01
3
2.4
2.5
2
1.5
1.03
1 0.85 0.82 0.75
0.54 0.61
0.5 0.25 0.3
0.1
0
Aug 19 Aug 20 Aug 21 Aug 22 Aug 23 90 day avg
source: LSE/TSX
6
dedart
serahs
fo
snoillim
LSE
TSX
However, let’s point to Toronto on Tuesday as the real star of the show, as the 3m
traded that day was exceptional for a listing that’s been suffering from bone dry
liquidity for too long. It is in fact the first time IRL.to has seen more than a million
shares traded on a day since June 15th 2011, more than two years ago.
Darwin Resources (DAR.v): The news on the drills came through and as mentioned in the
Flash update Tuesday (see appendix 1) it’s best described as so-so, but due to the
circumstances of 1) very small position 2) exploration potential at Suriloma, which was by no
means killed by these results and 3) the good team on top of it the call here is to hold through.
Rio Alto Mining (RIO.to): “Why isn’t RIO moving?” was the grumble received from reader
TW on Friday morning. My best answer is “I don’t know”. My next best is that RIO has just
come off a big spring upmove and may well need time to consolidate just below $3 before the
casino players decide they’re
psychologically ready to put a 3-handle on
the stock. Though I also remind readers
that RIO got smashed harder than most
peers due to the rounds of bullshit rumours
it suffered in Lima and there’s probably still
some repair needed for people who fell for
the BS and were burned by the lies.
In minor RIO.to related news, Duran
Ventures (DRV.v) filed its 2q13 this
weekend and in the MD&A, confirmed that
RIO had relinquished its option on the
Ichuña property as expected. RIO is still
optioning into the potentially more
interesting Minasnioc property (to 51%) but the report notes that little else except for baseline
work has been done there so far. This is due to the lack of permits for drilling and the lack of a
formal agreement with the historically troublesome community there. The Minasnioc project
was the reason we took a punt on DRV.v earlier in the year, but we folded on that small trade
after a while once it became clear the projected thawing of relations and permitting wasn’t
going to happen. However, DRV may still be a play if the right papers are signed and the
drilling gets going.
Overall, a quiet week on middling volumes for our Top Pick. Not a bad thing.

Bear Creek Mining (BCM.v): For your information, this weekend (to be precise Aug 24th to
27th) up at Corani the townpeople are holding their eighth annual agricultural and artisan fair
(4) and the main sponsor of the event is
Bear Creek Mining, such is the integration
the company enjoys these days. Over at
the market, BCM showed signs of coming
back to life on Friday after a stretch of low
volume days around $2.50. Traded volume
Friday popped back up to 239,000 and the
stock quickly reached $2.65. Yes, it did fall
back to the 2.5 level by close of play, but
the pattern of buying makes the
interpretation easy enough; if any new
money wants more than small size in this
stock, it will need to pay up. I remain ready
to sell at $2.80 absolute minimum and
more likely something over $3. If it happens next week then fine, if not, I’ll wait for my price.
Lara Exploration (LRA.v): Volumes were thin, no news from the company and the price
jagged back down from the spike finish we reported last week. It’s likely to stay around this
level until a news catalyst comes along.
The Copper Basket
After thirty-four weeks of 2013 The Copper Basket is showing a 21.54% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 2.43 144.35 314.68 2.18 -10.3%
2 NGEx Resources NGQ.to 3.40 168.66 313.71 1.86 -45.3%
3 Copper Fox CUU.v 0.83 402.96 269.98 0.67 -19.3%
4 Lumina Copper LCC.v 9.43 43.61 194.06 4.45 -52.8%
5 Nevada Copper NCU.to 3.50 80.5 185.15 2.30 -34.3%
6 Reservoir Min. RMC.v 2.41 41.68 170.89 4.10 70.1%
7 Hot Chili Ltd HCH.ax 0.72 297.46 133.86 0.45 -37.5%
8 NovaCopper NCQ.to 1.80 53.02 107.63 2.03 12.8%
9 Panoro Minerals PML.v 0.62 204.71 69.60 0.34 -45.2%
10 Western Copper WRN.to 1.39 93.68 59.96 0.64 -54.0%
11 Curis Resources CUV.to 0.70 63.13 42.93 0.68 -2.9%
12 Candente Copper DNT.to 0.375 122.05 28.68 0.235 -37.3%
13 Oracle Mining OMN.to 0.80 49.03 21.33 0.435 -45.6%
14 Yellowhead Min. YMI.to 0.59 63.45 12.37 0.195 -66.9%
15 Strait Minerals SRD.v 0.08 57.26 4.58 0.08 0.0%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -21.54%
7

Eight of our basket stocks registered gains on the week (AZC.to, NCU.to, WRN.to, PML.v,
NCQ.to, YMI.to, CUV.to, SRD.v), one was
unchanged (DNT.to) and six lost ground
(NGQ.to, LCC.v, CUU.v, HCH.ax, RMC.v,
OMN.to). Best of the bunch percentage
wise was Strait Minerals (SRD.v up
23.1%) but the real star was Nevada
Copper (NCU.to up 19.8%), while Curis
(CUV.to up 11.5%) made the other
notable gain. To the downside the losses
were more modest with Copper Fox
(CUU.v down 6.9%) the worst.
So at -21.54% it’s the best position for
overall basket average since May 19th
and we have a new biggest market cap league
leader too, with Augusta taking over (somewhat by
default, but leader is leader).
Copper market prices had another good week, with
futures closing solidly in the $3.30’s range. The post
on the blog Friday (5) that noted $3.30/lb to
$3.50/lb as a key trading level wasn’t put there to
waste bandwidth as technically speaking at least,
we’ve entered a price range that promises to be
bullish for near-term copper exposed issues. All the
above fit that description.
To the regular inventories section and the
worldwide situation was of lessening stocks once
more. This week copper stocks dropped by 32,277
metric tonnes (mt) to stand at 757,898mt. The LME
part of that total dropped by 3.4% to 564,225mt,
Comex dropped a massive 23.7% to 37,563mt and Shanghai Futs Ex dropped 3.6% to
156,110mt. LME cancelled warrants finished the week at 51.9% of total inventories, a slight
drop but still at the heights never before seen.
Cancelled Warrants at LME, IKN157 to date
60%
50%
40%
30%
20%
10%
0%
8
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 522NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
Copper Basket 2013 average, weekly
12%
8%
4%
0%
-4%
-8%
-12%
-16%
-20%
-24%
-28%
-32%
Now for updates on some of our basket stocks
Nevada Copper (NCU.to): Ha! As if by magic, one “why isn’t this thing moving?” and “I don’t
get it, so I’m not playing” segment from your author and off she goes. A 20% upmove on the
week and good volumes too, which may mean other names at the decent/advanced end of the
copper exploreco track are about to make a move, too. Speaking of which...
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 ht52
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%

NGEx Resources (NGQ.to): If I had to choose one copper exploreco to rebound from here,
it’d be this one. The recovery in copper prices has been decent and if indeed it’s time to look
around for laggards with decent projects, NGQ should be on your shortlist. It’s a stock I’ll be
watching carefully next week because if traded volumes rebound to the type of levels we saw
end 2012/early 2013, the story behind the Los Helados part of Vicuña is enough to propel this
one back on people’s radars, forget the Argentine stuff.
In other words, yes I’m considering this as a potential trade vehicle.
Curis Resources (CUV.to): Word from Florance is that CUV is trying to win people around for
a change, rather than simply trying to legally batter its tenacious local government opposition
into submission. Probably a good thing, as the heavy legal tactics haven’t got it very far to date.
Florence Copper (the wholly-owned local subsidiary of CUV) last week announced the formation
of the Florence Copper Community Foundation (6), a non-profit organization that looks to fund
local groups that do work to “enhance the community”. The Foundation is starting with a
relatively modest budget of U$70,000, but the plan is to feed more funds once the Florence
mine is underway (in other words, dangling the carrot in front of locals, which may be a very
direct strategy but it’s probably not a bad one, either). Considering the size of the prize, this
type of effort makes a lot of sense for CUV as $70k/year is akin to a rounding error. In fact, it
makes me wonder why they didn’t think of it before, but that’s a little cynical perhaps.
The stock bounced back to its 70c level (as we mused it might a couple of weeks ago) but
volumes remain low. I’d expect CUV to continue to revolve around this price level until
permitting news comes along (be it positive or negative). Not one I’m looking at carefully until
something fundamental happens.
Strait Minerals (SRD.v): A lot of the last segment on CUV applies here, too. The percentage
rebound catches the eye, but volumes remain very thin and until big partner Teck gives the
green light on the drill program at Alicia, there’s no reason to return to SRD. At least the
permits are in place now.
The Lottery Ticket Basket
After 34 weeks of 2013 The Lottery Ticket Basket is showing a 35.37% 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 44.20 0.065 -35.0%
2 Bellhaven BHV.v 0.14 136.81 17.10 0.125 -10.7%
3 Eagle Star Min. EGE.v 0.125 79.13 17.01 0.215 72.0%
4 Fancamp Expl. FNC.v 0.125 177 13.28 0.075 -40.0%
5 AQM Copper AQM.v 0.08 105.57 11.08 0.105 31.3%
6 Tango Gold TGV.v 0.13 76.24 7.62 0.100 -23.1%
7 Glass Earth GEL.v 0.155 105.67 4.23 0.040 -74.2%
8 Copper North COL.v 0.10 58.7 2.94 0.050 -50.0%
9 Inca One Res. IO.v 0.12 34.0 2.72 0.080 -33.3%
10 Gryphon Gold GGN.to 0.085 194.64 1.95 0.010 -88.2%
11 Darwin Resources DAR.v 0.20 26.16 1.83 0.070 -65.0%
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 0.94 0.020 -20.0%
15 Firestone Ventures FV.v 0.045 36.82 0.74 0.020 -55.6%
Portfolio avg -35.37%
9

The Lottery Ticket Basket saw four winners (MLN.v, FNC.v, TGV.v, COL.v), five unchanged
(GGN.to, GEL.v, AQM.v, CMA.v, RCZ.v) and
six losers (BHV.v, EGE.v, DAR.v, IO.v, FV.v, 25% Lottery Ticket Basket 2013 average, weekly
NEI.v). Best of the bunch was Fancamp 20%
15%
(FNC.v up 25.0%) and the worst were 10%
Netco (NEI.v down 25.0%) and Darwin 5%
0%
(DAR.v down 22.2%). Overall the basket -5%
-10%
average dropped back 2.34% and displays
-15%
its contents of a bunch of broken -20%
-25%
companies clearly enough.
-30%
-35%
-40%
-45%
Fancamp Exploration (FNC.v): Fancamp probably didn’t move up because of the
announcement (7) that it had secured another $50,000 in its private placement round (total
proceeds now a tad under $1m gross) last week, even though records show that insiders were
happy to take up on some of that deal (8), not a bad thing. It probably did move up because
there are speculative bargain hunters coming back into iron ore plays in Canada (check ADV.to,
others) which is probably a knock-on from a better vibe out of China. This is the one with the
firm asset foundation from its own plays and shares held in other iron ore exploreco companies,
which might give it extra leverage to peers if iron prices do start picking up. As for thoughts on
where iron ore is going, your author’s best advice is “read the Australians” because they tend to
have their finger right on the pulse of this market. Here’s a recent example report from
Australia’s The Age (9) entitled “Investors are bracing, but iron ore price stays steady”. The
general gist of the report is “we expected it to be worse than this”, so perhaps room for
optimists to play a rebound.
Cream Minerals (CMA.v): Its 2q13 financials, out this weekend, include the following: Total
current assets, $67,187. Total liabilities (all current), $481,449. Then at the end of the filing in
“subsequent events” we’re reminded that the company is in the process of selling its only asset
worth mentioning, Nuevo Milenio, for $600,000 to a group that includes company insiders.
In other words, CMA is currently being cleaned out and turned into a shell. Its life in this
incarnation is over and at some point in the near future we can expect it to be mothballed on
the NEX. From there, at some point in the deep and distant future, somebody else may decide
it’s the right size, shape and price for their new project, reverse into it and probably change its
name. Put simply, CMA is a dead stock.
Regional politics
A Q&A with Diego Hernandez, President of Antofagasta (ANTO.L)
This weekend saw Diego Hernandez, president of Antofagasta for the past year, give a wide-
ranging interview to Chilean business press. Read it here in Spanish (10) and there’s a lot to get
through as he touches many bases, but the three issues that jumped out at me are:
ANTO plans to invest much less than previously planned, particularly in the deferral of its
Pelambres expansion plan, due to high costs. In general terms, ANTO is looking to invest
enough in order to maintain its present level of production through 2021.
10
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 ht52
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%

Energy costs are the reason why ANTO has recently bought 40% of a local power station
company (that energy supply comes online in 2017/2018) The current high cost climate for
energy in Chile is a big problem according to him and has forced the company to abandon plans
to sign long-term supply contracts with electricity companies (they tried for the last three years,
with no success) and is now buying its energy at spot prices. Later on in the interview
Hernandez mentions that the company is currently working hard on reducing costs across the
board.
He says the company has the type of cash position and non-conservative attitude that makes a
“counter-cyclical” (his expression) acquisition of another company possible, with Canada, USA
or Australia mentioned as preferred locations for M&A. However, Hernandez reports that
nothing they’ve looked at so far passes muster, being either low quality, too small or too
expensive.
B2Gold (BTO.to) won’t buy Lydian (LYD.to): Do not underestimate political risk
In its NR on July 24th (11), Lydian International (LYD.to) broke the news that the Armenian
government had moved its goalposts and screwed up the plans for LYD’s mine (officially
“modified the area defined as the catchment basin” of the local Lake Sevan, which meant that
the company’s plans for the layout of its Amulsar gold mine would be invalid under the new
conditions). For the record, here’s the chunk of the LYD NR that broke the bad news:
However, during a Government session on July 18, 2013, the Armenian Government passed a
resolution (the "Resolution") that modifies the area defined as the "catchment basin" to Lake
Sevan, Armenia's largest freshwater resource. The Resolution is yet to be promulgated and is
then scheduled to come into force 10 days after its promulgation. According to the text of the
Resolution, the borders of the catchment basin have been expanded to include the horizontal
zone 3000 meters on each side of the "axis" to the Vorotan-Sevan tunnel. Based on the
Company's understanding of the Resolution, if projected to surface, the modified catchment basin
includes the Company's currently proposed location for its heap leach processing facility.
Furthermore, the Resolution states that this part of the "catchment basin" is to be classified as the
"Immediate Impact Zone" to Lake Sevan. This impacts the Company's current mine layout plans
as mineral processing activities are not permitted in this "Immediate Impact Zone".
The reaction to this news is best illustrated by the price/volume chart:
That’s the bones of the case and since then LYD has been more or less treading water, but as
the name came up more than once in the entries for my “What’s BTO going to buy?”
competition over at the blog I thought I’d expand a little on the subject today and add an
opinion.
A few days after the LYD NR hit, I exchanged thoughts on a few market issues with a market
professional (yup I’m being annoying again, apologies but it’s necessary). In the course of the
exchange LYD was mentioned so I sent over this as part of my opinion:
11

A golf joke: The club pro gets challenged to a $1000 head to head round by a new
amateur member, handicap 22, in his 50s and way overweight. The only thing the fat
challenger wants, he says to the pro, is "two gotchas". The pro is puzzled by the term
but agrees. Come the day, the pro is lining up his tee shot on the first hole when
suddenly fatguy creeps up behind him and whacks him between the legs with a nine
iron. The pro doubles over in agony and fatguy shouts "Gotcha!" at him. Come the
end of the round and fatguy has won. The pro gets quizzed by the club chair, "But
how could you lose? He might have whacked you in the groin but it was only one hole
and you're still a much better player than him. Did he hit you again?"
"No", said the pro, "and that's the problem. You try playing golf waiting for the next
gotcha."
Ok ok, not a very funny joke (i'm not good at telling 'em either). But that's what LYD
is up against now. At least the LYD mgmt team didn't try to sugarcoat the news, I'll
grant them respect for being honest with the world.
As well as being keenly aware that a alternative career in stand-up doesn’t await me, I state for
the record that my call since then hasn’t changed a jot and is extremely unlikely to change in
the months to come, either. Amulsar is lauded by miners, geologists and market alike for its
potential as a easy, cost-effective project that shows strong economics (28% IRR at $1,200/oz
gold according to the September 2012 feas study), not to mention its very decent potential for
exploration upside, but that doesn’t matter any more. Neither does the fact that the company’s
share price is now on offer at $1, when not so long ago it traded steadily above $2 and close to
$3. This one isn’t a bargain unless it goes up in price and as the clear and obvious (in fact, the
only) exit strategy here is some other company buying the stock, this stock won’t move unless
it becomes an M&A target. Therefore the lack of political certainty in LYD’s background,
confirmed by the Armenian government’s decision to move the goalposts in July, means that in
your author’s firm opinion this stock has dropped way down the shopping lists of people like
Clive at BTO. Bottom line: this one isn’t get bought soon, cool rocks or not.
You can tell me that Amulsar would be a relatively cheap mine to build. OK, but we’re still
talking about $415m in capex (pre-prod and sustaining) plus the amount any major/midsize
would have to shell out in order to buy LYD. At 130m shares out that’s another $200m for a
seemingly “bargain” $1.50 (and by way of reminder, when LYD traded at $2.50 all talk was of a
$4 or $5 buyout price). I put it to you, clearly and simply, that 2013 is not the year that any
mining company spends and then commits at least $600m to a country with doubtful political
risk that could pull another ‘gotcha’ on your plans one, two, three years down the line. In all
likelihood, 2014 isn’t either. Or 2015, because the rules and the playing field have changed
since the days. Earlier in the cycle, when exploration teams moved on any area looking for
rocks with the assumption that “they can talk the locals round”
I don’t know what BTO has planned for the $258.75m in cash it raised last week via its
convertibles sale. My best guess (along with at least half a dozen others) is for the Navachab
mine in Namibia owned by Anglogold Ashanti, because Anglo has been open about its desire to
sell, has just this month said (12) that it’s finalizing things and what’s more, BTO has expressed
interest in purchasing the asset. However, other entries I’ve received make plenty of sense as
well, so I’m not ruling out most of them. But here and now, at the risk of egg-on-face, I am
ruling out LYD as a buyout play be it to BTO or anyone else. The days in which iffy pol risk
profile could be dismissed if “the rocks are great” have long gone and most major mining
companies have fully digested that lesson. However, the market doesn’t seem to have got the
message yet, even after the catalogue of projects, even entire companies, that have fallen by
the wayside due to badly calculated political risk moves.
True for Armenia, true for Namibia, true for LatAm. Do not underestimate the political risk
factor in this crazy juniors game, people. If there’s one thing this weekly publication bangs on
about more than any other theme, it’s that location in LatAm makes or breaks a project. That
definition starts at a country level and it’s why our ‘Regional Risk Quarterly Update’ series exists
12

(and it’s why it’s been modified to make it more useful recently, see IKN218 for more). It’s why
I avoid a whole list of countries in this region these days, it’s why I try to keep myself and you
the reader focussed on the best four countries (Chile, Peru, Mexico, Brazil) and will allow three
others (Nicaragua, Colombia, Dominican Republic) as long as specific circumstances allow. But
it’s also why you can’t just assume things like “It’s Mexico, so it’s safe because IKN said
Mexico’s good!” or “It’s Peru, so it’s safe because the government said in a speech that the
country is pro-mining!” because inter-country regional risk matters can be every bit as
important For more details on this, ask Candente Copper about Cañariaco, ask Argonaut Gold
about San Antonio, ask Newmont or Buenaventura about Conga, ask Gold Group about Caballo
Blanco, ask Bear Creek about Santa Ana, ask Esperanza/Alamos about Morelos, ask Linear Gold
or Blackfire or Radius about Chiapas, ask Dorato about the Cenepa...and we could continue.
Political risk is not an optional extra, it’s not something that can be assumed, ignored or
overlooked any longer. $600m for a profitable gold mine may look like a bargain compared to
many other places, but if that $600m gets turned into zero by some left-field governmental
decision, the second gotcha, it’s likely that people will consider it less of a bargain and that
some corporate development guy in some office of some major mining company will never
work in this town again. That’s why LYD is now a lame duck junior and will remain that way for
the foreseeable future.
The Peru stock market chart for 2013 compared to gold
As regulars know, I keep an eye on the IGBVL “General” index of the Lima Peru Stock Exchange
(BVL) because it’s packed full of mining exposure and shows how emerging markets are faring
compared to the big ones up North. While checking in on the data to put together the quick
blog post Saturday (13), the shape of the year-to-date 2013 chart reminded me of something,
so I compared it to GLD. This is what came out:
It would seem that playing this market is as simple as that. For this year, at least. Certainly a
great deal of food for thought about the classic argument of emerging market risk there.
Brazil: Belo Sun (BSX.to) Volta Grande to get an Enviro inspection
Brazil media reports (14) that the Para State Environmental Secretary (Sema) received the
environmental impact study from Belo Sun (BSX.to) for its Volta Grande project last
Wednesday. The occasion Wednesday included a meeting to discuss contents with all parties
involved (including representatives from Sema, Belo Sun, the Brazilian Mining Institute (Ibram),
the Procurator General of Para, the Federal Public Ministry and the Secretary of State for
Industry, Commerce and Mining.
In practical terms, last week’s event means that the environmental permitting track has begun
and what happens now is that Sema will study the document and its plan in the normal Enviro
13

body manner. As you are well aware, these things take time.
Mexico: This should make headlines next week
Last week (15) the representatives of a 77 person strong landowner group (ejido) ‘El Bajío’ won
an important court ruling again the La Herradura mine owned by the Penmont JV
(Fresnillo/Peñoles 56% and Newmont 44%). The ejido owners filed their suit in 2009 that said
the mining company had illegally occupied 3,025 hectares their land area, which has always
been disputed by Penmont who said that their actions only affected 300 hectares of the
disputed area and that they had obtained all permits to use that area.
The ruling last week came after appeal, is immediately actionable and upheld the argument of
the ejido landholders who now have the legal right to evict Penmont from their property as of
this week, as well as being awarded compensation. That eviction of all Penmont assets and
operations may begin in some symbolic manner this week, but the landholders have already
indicated that they prefer to come to a full financial compensation deal and not threaten the
jobs of the 5,000 or so workforce at La Herradura than carry out their legal right of eviction.
The bill may be eye-popping too, as in the words of the legal representative for the El Bajío
ejido, the estimate for the damage already caused to the 3,025 hectares is around U$100m and
that “Today the mining company is condemned to total eviction and the payment of damages”.
A deal needs to be reached and the likely size means that it’s one that neither Fresnillo or
Newmont will be able to sweep under some regulatory carpet.
Panama fishing for Peruvian mining brains
As a little background, in 2011 Panama and Peru signed a free trade agreement (FTA) that was
then ratified and began its life in May of last year. Since then Panama in particular has been
pushing the deal as a new source of trade, all with Peru’s blessing, so it was interesting to see
Peru’s official government gazette, El Peruano, carry a note last week (16) in which the
president of Panama’s Chamber of Mining, Roberto Cuevas, said that Panama wanted to start a
new cycle of expansion in its mining industry, that Peru was its model country for mining and
that it was looking to attract Peruvian mining brains and expertise to the country in order to
move the sector ahead. There was nothing particularly new or stunning in the report, apart
form perhaps the direct invitation for Peru mining people to the country, as we know that
projects such as First Quantum/Inmet’s big Panama Cobre will need a lot of manpower to
become reality in a country that has little in the way of formal mining operations at the
moment. But its feature in El Peruano gives it an official seal of approval and hints of plans and
arrangements that have been put in place already.
It also puts a positive light on what Panama wants to do for its long-delayed growth plans in
mining.
Market Watching
The Alamos/Esperanza saga
I ran a couple of strident view posts on the blog regarding the situation around Esperanza
Resources (EPZ.v) and Alamos Gold (AGI.to), what with the fall-out from the recent
declarations by the Morelos State that was tantamount to “cyanide not allowed here”. One of
the facts that was later presented to this desk by A.N. Other is that Morelos does not in fact
have any control or jurisdiction over the use of cyanide, as its use is controlled at the Federal
(i.e. national) level. I replied to that comment with the following:
All enviro controls are directly federal rather than regional/state, but the
regions do have rights to set out conceptuals in the way Morelos did. Again,
we'll see people jumping on what they want to read just like they did on this
before (i.e. it's not the historical site next door, it's the water supply to local
agro that got the EIA permit denied). In this case Morelos has used
14

Esperanza and cyanide as an example of the much more general and wider-
sweeping edicts that are the real bones of the gazette publication and are
general enough to be quasi-constitutional. That won't stop people saying they
have no jurisdiction over cyanide, but that's not the point.
That neatly sums up my view on this, as yes indeed it’s another “if you don’t have locals on
your side you’re screwed” situation, no matter how the fine-print works. But then Friday
evening post-bell saw another NR (17) from EPZ (a kind of joint NR in fact) that underscored
next week’s vote by EPZ shareholders on the deal and tried to smooth frayed nerves. A lot of
the NR is irrelevant to the true problem, because we know that EPZ shareholders will vote for
the Alamos takeover, especially under these new circumstances. The issue on the deal is
whether Alamos decides to go ahead or back out.
There were two interesting points in the NR, however.
1) Back on July 25th, date of the Management Information Circular filed on SEDAR by EPZ,
Sprott Asset Management (the biggest single shareholder of EPZ) owned 13,708,032
shares. Come Friday’s NR, one month later, Sprott agreed to pledge its 9,919,200
shares to the lock-up agreement. In other words, Sprott Asset Mgmt has apparently
dumped 3.8m shares of its position in the space of the last month (and unless it was
due to a panic button being hit in the last couple of days, all presumably at the 90c-or-
about level we’ve seen since the deal was announced).
2) More interesting than anything announced by EPZ (we repeat, EPZ is bound to vote yes
next week) was the section of the NR with words from John McCluskey, head of
Alamos. He said, “We are continuing to assess the risks associated with the Esperanza
gold project, but we feel we are well-positioned to manage these risks. We also believe
the completion of this transaction is an important step toward strengthening the future
of Alamos.” Those were almost certainly some very carefully chosen words that both
sides could agree upon before they got into print, designed once again to try and calm
the waters. If you read them over a couple of times you see that they don’t actually say
that much and affirm that AGI wants to do the deal, but as the company is continuing
to assess the risks it’s also clear that AGI will decide to do what’s best for AGI on this.
Taking the only two bits of real and new information into account and then considering the
“let’s relax, people” message that EPZ obviously wanted to convey on the eve of the M&A vote,
chances are that EPZ will regain
some of the lost ground of last
week once trading opens.
However, close inspection of the
McCluskey position also makes it
clear that if AGI decides to back
out (and considers that it has a
decent legally supported reason to
do so) it will do what’s best for
itself. AGI may have made a
mistake by moving on EPZ
without doing much homework on
the obvious political and
community risks the Esperanza
project holds, but in the end it’s a
~$70m deal for a ~$2.1Bn market
cap company and win, lose or draw it won’t make that much difference to the stock or the
company for the time being. EPZ’s position, on the other hand, it far more critical. If AGI pulls
out of this one, there won’t be any backstop white knight saviour deal to save the company’s
share price from dropping a long way.
15

Further to the short potential plays mentioned last week
After a suggestion or two from you people out there and a bit of thought on the subject, I now
plan to keep an eye on all the “short potentials” stocks mentioned in IKN224 last week (Great
Panther (GPL), Gold Resource Corp (GORO), Fortuna Silver (FSM), Exeter Resources (XRA),
NovaGold (NG), Seabridge (SA), International Tower Hill (THM), Tahoe Resources (TAHO), MAG
Silver (MVG)) by charting their progress in relation to the gold bullion ETF (GLD). Here’s how
they all got on in the last week, to start the ball rolling:
Best of the lot was Seabridge (SA) (SEA.to), Gold Resource Corp (GORO) and MAG Silver (MVG)
also did well, most came in around the GLD’s performance figure, while only two, Exeter (XRA)
and Great Panther (GPL) had negative weeks.
We’ll come back to this tracking chart in perhaps three or four weeks for another official look on
these pages. In the meantime however, I’ll be watching both the group and the market,
because if things turn any of them could become active short trades (or further additions to) in
my port.
Three trades next week (CSI.to, PVG.to, GORO)
"There are three things extremely hard: steel, a diamond, and to know one's self.”
Benjamin Franklin
The decision to move Minera IRL (IRL.to) up to Top Pick and add a whole bunch of shares to
my position is one that looks to the preferred timescale of The IKN Weekly, one that expects to
bear fruit in 12 months or so. Meanwhile in the near-term, I’m trimming some of the portfolio
length in the trading-type positions. The call is threefold:
• Selling Colossus Minerals (CSI.to)
• Selling Pretium Resources (PVG.to)
• Adding to Gold Resource Corp (GORO) short
The main reasons for these trades are stock-specific and we’ll get to those in a moment, but
first a loose thought or three on the macro scene. Gold at $1.4k (bar a couple of dollars, as
16

near as dammit) has made a good recovery and Friday’s mini–pop to end the week put the
sector in a good mood, but I don’t see why it has to surge through 1.4k as all expect it to do
(and suddenly there’s more than a little goldbug euphoria in the air, which is it’s own red flag).
I do have a list of Very Serious Sounding Reasons for this call, including:
• We’re still in August, we’re pre-Labor Day, the market isn’t fully wound up yet
• Friday’s gold move was not about gold strength and all about dollar weakness on a set
of housing numbers that will wash through the memory quickly. The US economy is
recovering and it’s not lapsing, we’re bound to be reminded of that in the week to
come.
• Even gold stocks aren’t immune from a broad market rollover, which is what the main
indices are looking like doing at the moment (plus on a seasonal basis September is
notoriously bad for US markets).
• I’m still as sure as this time last week about the way in which the new prices for junior
mining equities, particularly the sector leaders, have baked in metals prices that are
above what we see today. The market as a barometer is predicting much fairer weather
than I can see on the horizon (I can see as far as the end of this quarter, perhaps the
year). It will take gold and silver to explode away from their current prices and towards
$1,500/oz $26/oz respectively to get me to change my mind on this.
All of those are valid and come next week (or next month) one of them might even turn out to
have a grain of truth, too. However, behind all those sober and logical sounding thoughts is a
whuss that doesn’t buy the new near-term arch-bullishness in the sector or believes this current
rally has the type of legs needed to push gold back from whence it came early year. Therefore
although I’ll still be net long juniors this time next week (don’t be confused about that) and I’m
not really that bothered about the very-near-term metal price moves per se, I’m scaling back
the near-term exposure via the three trades listed above. Now for the stock-specific reasons
Colossus Minerals (CSI.to): The placement closed correctly, the post-close pop looked
promising and we even had the formal start of the Canadian brokerage pump last week when
on Thursday 22nd AM George Albino of GMP revised coverage and put a $3.25 target price on
the stock (you see that needle spike to 82c on 300k volume Thursday morning?).
Here’s the recommendation paragraph from Albino’s note:
We have updated our valuation to account for the newly issued shares (on a fully diluted basis
adding 75.9mm shares to the capital structure). Additionally, we have made minor adjustments to
our production and cost estimates. Based on these changes, our NAV decreased to $3.56/sh
from $6.94/sh. Despite recent challenges, mill and surface infrastructure is gradually starting
commissioning and the mine should see production by year-end. Serra Pelada remains a solid
asset that we believe will be a low-cost operation due to the high-grade gold and PGM of the
central mineralized zone (“CMZ”). We reiterate our BUY rating, however we are reducing our
target to C$3.25/sh from C$7.15/sh – this represents a 0.9x multiple of our NAV8% and an
approximate 4.2x P/CF multiple (of average 2014 to 2017 CFPS).
17

I particularly liked how “minor changes” plus the new share count reduces the calculation on
NAV by nearly 50%...but everyone’s sense of humour is different, I suppose.
And now to the point: Despite all the pieces falling into place as expected, CSI hasn’t seen the
near-term upmove to 90c that I fully
expected under the circumstances. That
thought moves from mild concern to full
worry when the upmove in gold is taken
into consideration as well. I take little
comfort from the “well, this bought deal
was successful and big money had no
hesitation in climbing aboard” line of
thinking either. You only need to remember
the bought deal that Great Basin Gold ran
in March 2012 at 82c per share (18) (19)
for ample reasons to distrust the closing of
such a deal as a positive signal. Headed by
RBC, fully subscribed, all raised $50m for a
company that promptly flushed it down the
toilet and announced suspension of activities and then bankruptcy less than six months later.
But back to CSI and the bottom line here is that rightly or wrongly (and I may be guilty of
talking myself into these nerves) the way CSI has been trading has spooked me. Due to that,
and due to the fact that this was only ever going to be a near-term trade and limited shelf life,
target reached or not I’m going to close it and walk away. It looks as though I’ll make a very
small post-commish profit on the round trip but that’s a minor issue. This one doesn’t feel right
and the stock hasn’t picked up on the right-on-schedule Canadian brokerage pump the way I
thought it would. Once you add in the obvious issues the Serra Pelada project has had over the
months and years, both in project risk (time delays, cost overruns etc) and political risk (the
previously reported Coomigasp rumblings continued last week, with a meeting described as
“tense” by the local press (20) without anything of great import happening), this time I’m going
to prefer discretion as the greater part of valour, sell my small stake and bow out. I’m in
contact with those who are both bullish and bearish on this story and I’ve listened carefully to
their arguments and rebuttals on any dissent I’ve thrown at their positions in fair devil’s
advocate style. The resulting feeling I’m left with about Colossus Minerals is akin to the
Gertrude Stein’s observation about Glenway Wescott, “He has a certain syrup, but it doesn’t
pour”. My fears may turn out to be misplaced and, if so, there will always be another
opportunity to revisit the stock and run the numbers under a more de-risked environment. But
until then, my gut tells me to sit this one out and watch others win or lose from the sidelines.
Gold Resource Corp (GORO): The decision to add to the current short position was a much
easier one to make than the calls on either CSI.to (above) or PVG.to (below). In the case of
GORO, the market may have taken cheer from silver’s rise over $23 and gold brushing at
$1,400/oz, but the model clearly, but clearly shows a company that’s still making a loss at these
market prices and therefore cannot support its current 3c/month dividend. Whether GORO cuts
that dividend to 2c this month or next, or decides to hold out longer is up for debate, but
without further strong appreciation of metals prices (silver really needs to be at $27/oz for
GORO to tread water even without any further bad news in its numbers, something that the
company regularly supplies to its shareholders) things can’t stay the way they are. We also
need to remember that come early October HOC will dump the next tranche of its GORO onto
the market.
Thanks to the rebound in the stock to the high-8s of Friday, the decision to add more to this
short has moved from tempting to plain obvious. Anything at or around the current price will do
me fine and I plan to add enough to the short to bring down my cost average to roughly $9.50.
18

Pretium Resources (PVG.to) (PVG): I went over the four points that have given me pause
for thought on this position, taken as a longer-term investment back in June and now showing
a welcome, though modest, 17% gain (thanks more to the rebound in gold than anything the
company has done, I again plead not-guilty on the grounds of luck m’lud). The clincher that
now shakes me out and will see me sell in the week to come is point four, because as
mentioned last week I’m feeling out of my comfort zone with a story that rests squarely on
highly technical geological findings of a now somewhat delayed (that are unlikely to be
reflected well in any for-the-masses news release headline, come the time) and a geographical
location that is not my strong point, either.
And I’m feeling chicken about the market, yes. The combination has me reeling in the cash and
minor profit from the PVG position. Come next week, flush with some more cash, I may find
myself buying a new trader on the long side (for example, if my worst fears are unfounded and
the rally has legs, there will be trading gains on the long side to make).
The bottom line to the three trades I’m making next week is one word, caution. I’ve read
plenty of market literature over the week, from those I respect greatly to others I take with a
pinch of salt to others for whom i have zero regard. The overwhelming message from nearly
everywhere is that “we’re going higher”, which is something that gets your author’s contrarian
teeth (which are directly connected to his contrarian body and contrarian mind) grating all by
themselves. As all near-term predictions on gold, the metals and the miners boil down to what
the dollar is going to do right now, and I fail to see why the dollar should collapse into oblivion
on command in the next 48 or 72 hours, I’m again obliged to return to my clearest observation
that there are plenty of overbought stocks out there which need further rises in gold&co just to
maintain their new, higher valuations. The result is that at least on the trading, near-term end
of my portfolio exposure I’m going to take some more long money off the table.
Conclusion
IKN225 is done, here are some bullet points:
• Two sales and one addition to a short mean that I’m clicking down on market exposure
again, but please be clear that the addition to Minera IRL earlier this week more than
offsets all that. Investments and trades.
• A poor edition of the Weekly this time around, which is leaving me frustrated about the
lack of coverage in IRL given. The drafts I wrote on the stock weren’t good enough
though, I need more time for my slow brain to get a better handle on it. Sometimes
this IKN Weekly thing is so easy to write I wonder how 15,000 words had poured out
so quickly, other times it’s like pulling teeth. This weekend was a tough one.
• Must try harder. Will do next week. In the meantime, I remain more cautious than most
about the near-term future of this market.
• However, if metals prices shoot up in the days to come and make my caution look
stupid, NGEx Resources (NGQ.to) is one that might catch a few of my trading shekels,
as it’s the shape, size and profile of company that could play catch-up.
The top long-term picks are Rio Alto Mining (RIO.to) and Minera IRL (IRL.to). I thank
you in advance for any feedback sent in. Flash updates will be sent promptly if required by
events.
I wish you good trading fortune, ladies and gentlemen.
Otto
19

Footnotes, appendices, references, disclaimer
(1) http://finance.yahoo.com/news/minera-irl-announces-80-million-060000502.html
(2) http://finance.yahoo.com/news/b2gold-corp-launches-private-offering-113803037.html
(3) http://finance.yahoo.com/news/b2gold-corp-completes-private-offering-151609852.html
(4) http://www.pachamamaradio.org/23-08-2013/corani-prepara-la-xiii-feria-agropecuaria-y-artesanal-fecasaac-
2013.html
(5) http://www.incakolanews.blogspot.com/2013/08/chart-of-day-is_23.html
(6) http://www.trivalleycentral.com/florence_reminder_blade_tribune/news/florence-copper-forms-
foundation/article_397bf1c8-0b50-11e3-95e2-001a4bcf887a.html
(7) http://finance.yahoo.com/news/fancamp-announces-completion-second-tranche-211633661.html
(8) http://www.canadianinsider.com/node/7?menu_tickersearch=FNC+%7C+Fancamp+Exploration
(9) http://www.theage.com.au/business/investors-are-bracing-but-iron-ore-price-stays-steady-20130811-2rq7z.html
(10) http://www.aminera.com/component/content/article/114-expomin2010/50403-grupo-luksic-posterga-millonaria-
expansion-de-los-pelambres-por-altos-costos.html
(11) http://finance.yahoo.com/news/lydian-international-provides-amulsar-project-133640185.html
(12) http://allafrica.com/stories/201308070329.html
(13) http://incakolanews.blogspot.com/2013/08/perus-stock-market-performance.html
(14) http://www.agenciapara.com.br/noticia.asp?id_ver=132922
(15) http://www.dossierpolitico.com/vernoticias.php?artid=132423&relacion=&tipo=Principal1&categoria=1
(16) http://www.elperuano.pe/Edicion/noticia-panama-requiere-experiencia-peruana-9368.aspx#.Uhj12tK_X3s
(17) http://www.marketwatch.com/story/alamos-and-esperanza-provide-update-on-arrangement-transaction-2013-08-
23-22173124
(18) http://incakolanews.blogspot.com/2012/03/great-washbasin-gold-gbg-gbgto-i-love.html
(19) http://incakolanews.blogspot.com/2012/09/oh-yeah-great-basin-gold-gbg-gbgto-haha.html
(20) http://www.diariodopara.com.br/N-171250-CLIMA+DE+TENSAO+DOMINA+SERRA+PELADA+.html
Appendix 1: Flash update dated August 19th
Good Tuesday morning, an hour or so before the opening bell.
Minera IRL (IRL.to) (MIRL.L) moved to Top Pick
First the small confession: As many of you have guessed, yes I'd got wind of the deal very late last week and was asked
by the company to wait until the news was made public before saying anything. The compromise was that I'd make
clear my intention to buy more stock in IKN224 without saying exactly why. Also, I didn't send out this Flash update
yesterday because I didn't want to make it into a suspected pump of the stock on the back of the news (and my intention
to buy had already been made clear). 24 hours later, I've now added all I wanted to add, things are calmer, so I'll make
the points I want to make.
This deal...
http://finance.yahoo.com/news/minera-irl-announces-80-million-060000502.html
... is a good one. In terms of Don Nicolas itself, the funding is now in place and IRL can get on with the job of doing what
mining companies do, instead of being blocked. It retains a 55% ownership of the mine and is operator. In straight
valuation terms of Don Nicolas I largely agree with financial argument put forward by Adam Melnyk in the Desjardin's
analysis note attached (the Canaccord note published yesterday is also attached for your consideration).
More important however is the new impetus this will give to IRL. This deal is set to break the logjam for the company
and the next part of the puzzle, moving Ollachea forward, is the one that promises to add real and significant value to
the company. The current share price is still throwaway cheap, potentially because the world is looking to September
and expecting IRL to have to dilute further in order to pay its option installment to Rio Tinto (~$7m) for Ollachea in
shares. Personally, I'd expect IRL to come up with cash for that and send another positive financial signal to the market.
We're now (hopefully) entering a phase in juniors when gold projects with strong economics are rewarded. Ollachea is
just that, having an advanced mine plan that works at $1,300/oz (as per the feas, not as per your author), projected
annual production of plenty over 110k oz Au/annum and bags of exploration upside as well, all in a zone with strong
community support. Due to the having the right sort of project at the right time and because the market has yet to
recognize that (it's still mulling over Don Nicolas and doesn't see the real prize), your author is moving Minera IRL
20

(IRL.to) to Top Pick status as of today. Put simply, there is risk in this stock (as there is in all juniors) but that risk is
vastly outweighed by the potential for big gains from this current share price. The balance in favour of speculation here
is compelling. Expect a full fundies report on the stock next weekend.
Darwin Resources (DAR.v)
Yesterday DAR reported its drill results from the Suriloma project...
http://finance.yahoo.com/news/darwin-drills-13-1-metres-122500988.html
...and the results were ok without being great or able to move the needle on the stock. Good grades on offer, but widths
weren't so impressive and overall the market reaction was in my view a fair reflection. The results here don't warrant any
addition of stock to the current small position, but overall and taking into consideration that a) the position held is indeed
small b) the team at DAR is a good one and c) Suriloma has plenty more exploration potential, I'm going to hold it
through for the time being and see what happens. That's all.
In other news, my half sale of B2Gold (BTO.to) (BTG) last week has turned out to be very lucky in its timing. Nothing
wrong with a bit of luck on occasion.
Hope you enjoy your Tuesday, O
Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-ene-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dic-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-abr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
21

Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
22