IKN #228Premium

The IKN Weekly
Week 228, September 15th 2013
Contents
This Week: Fed watching, Two trade done and I’m also short NovaGold (NG), Happier about
portfolio positioning than before.
Fundamental Analysis: A MAG Silver (MAG.to) (MVG) overview.
Stocks to Follow: Overview, Starcore Intl (SAM.to), MAG Silver (MVG) (MAG.to), Rio Alto
Mining (RIO.to) (RIOM), Bear Creek Mining (BCM.v), Focus Ventures (FCV.v), Gold Resource
Corp (GORO), Minera IRL (IRL.to) (MIRL.L), B2Gold (BTO.to) (BTG) AQM Copper (AQM.v).
Copper Basket: Overview, Reservoir Minerals (RMC.v), Curis Resources (CUV.to), Candente
Copper (DNT.to), Lumina Copper (LCC.v).
The Lottery Ticket Basket: Overview, Bellhaven (BHV.v), Marlin (MLN.v).
Regional Politics: Perumin 31 this week, Mexico’s royalty debate hots up on schedule,
Colombia: The continuing saga of the Páramo de Santurbán and a potential trade thereof,
Ecuador: Codelco in Intag,
Market Watching: Toronto Resource Investment Conference 2013, We need to talk Silvercorp
(SVM) (SVM.to), Santa Barbara Resources (SBL.v) update, Updating the “Short Potentials”
stocks from IKN224.
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
Fed watching
This Wednesday at 2pm EDT brings the Fed’s FOMC meeting announcement and the quarterly
economic projections, which is followed swiftly at 2:30pm by a Ben Bernanke presser.
In the last week or so, the market’s opinion has firmed and now expects the Fed to begin “the
taper”, i.e. Bernanke & Co will reduce the amount of monthly asset purchases. People with
heavy-hitting positions in the bond market such as Mohammed El-Erian saying they’re expect
the taper (1) (for a easer-to-digest plain English summary of El-Erian’s piece, Felix Salmon here
(2) does his normal good job; he’s particularly strong on bonds market commentaries). Add in
the Goldman and Merrill calls, both for $10Bn of taper (3). Bet you were as shocked as I was
that they decided to mention exactly the same number. The El-Erian piece was widely read and
commented upon by the financial glitterati, the Wall St position is now set, it only remains for
Ben to confirm the market position or surprise it so remember the rule: Markets Do Not Like
Surprises.
And gold dropped last week on the “taper going to begin” assumptions, which is the Occam’s
Razor position for the financial market and along with the ratcheting down of bomb
expectations for Syria, moved the recent (and eventually short-lived) speculative money out of
the precious metals and all those who depends on them. For results of that check the Stocks to
Follow section below, but I’d expect you have your own bruises to show to me, too.
1

Two trade done and I’m also short NovaGold (NG)
As per the call in IKN227 last week I’m now long Starcore (SAM.to) and as per the Flash update
of Thursday morning (see Appendix 1) I’m now short MAG Silver (MVG) (MAG.to), which is also
the featured stock in ‘Fundamentals...’ below. In that Flash update I mentioned that NovaGold
(NG) would be a fallback position short if I couldn’t get any MAG Silver. In fact shorting MVG
turned out to be pretty straightforward but at the same time (half by accident, but I’ll leave the
details between my broker and I) I went short NovaGold (NG) as well. I mulled over covering
the NG short Friday but in the end decided to let it ride, so as I write these words this weekend
I’m also short NG.
Despite it being open, I’ve decided not to make the NG short position a part of the ‘Stocks to
Follow’ list, for the moment at least. I may well cover/close the thing next week and right now
consider it not much more than an extra layer of hedge protection in a rather nervy junior
market. Because of the likelihood that the NG short doesn’t stay very long, it’s not one I want
on the list. However, if I change my mind and decide to keep it or even expand upon it (it’s not
that big, either) you’ll hear about it on these pages.
Happier about portfolio positioning than before
It’s never perfect. If it were I would have sold the trading positions in BCM at $2.50 and RIO at
$3 instead of holding them back down to where they are, I would have shorted MVG when that
nice mister Putin told that nice mister Obama that bombing Syria really wasn’t such a good idea
instead of waiting until late last week. Et cetera.
But imperfect as my investment life is, it’s also true that I’m happier about the aspect of the
portfolio in the face of last week’s downturn. For sure I’ve taken a decent sized virtual hit in Rio
Alto (RIO.to), but aside from the separate trading position mentioned above (which nearly went
at $3, dammit) the position is a long-term investment that’s about being involved with the
better end of the junior market and so I’ll take my temporary hit on that with stoicism. Away
from that main chunk of unhappy, the recent rally from $1,300 (or $1,200 I suppose) to
$1,400+ per troy ounce of gold allowed me the chance to 1) trade in and out of a few 2)
position my shorts to the point where I’m pretty happy about that aspect now 3) more
importantly raise the cash position of the port, mainly via the half sale of the was-large-now-
normal BTO long position, but the cash pile has been helped along by other trades and last but
not least 4) get my argument straight for readers of The IKN Weekly. Being cautious and
setting the port to reflect that is good my financial health, but I’m happier about having sent
out a message of caution and asking in a meek and tiny voice that others might try to ignore
the wholesale codswallop that spews from the collective mouths of the goldbug rah-rah brigade
any time gold manages to move up more than $50 per ounce. Therefore the strategy as laid
out in IKN226 continues and here are those five points again, but this time the notes are
updated:
On a practical level, here’s how I intend to manage today’s chapter of the unfolding scenario:
1) Hold the investment positions without worry. Check.
2) Not add any further investment-timelength positions. Check, though let us note
here that Starcore (SAM.to) has been added as a near-term trade with a strict time limit
(mid-Nov)
3) Hold the shorts in the portfolio (GORO, TAHO) with the potential to add another
(see the IKN224 list for clues). Indeed, a new short via MAG Silver (MVG) (MAG.to) was
added to the pile last week.
4) Look to sell the other trading positions at a suitable opportunity (RIO.to separate
trade, BCM.v, AQM.v). There was a window to sell at okay-not-great exit prices on BCM
and RIO trades, I didn’t take it, I should have taken it. 20/20 hindsight sucks, I’ll live.
2

5) Keep the boosted cash position in the portfolio the way it is. Check. Since IKN226 a
bit of cash has been deployed to SAM.to and some cash has been made illiquid (rather
than deployed) in the new MVG short position, but things are still very comfortable here
as far as I’m concerned, the cushion is comfortable and will stay that way until further
notice.
Paul van Eeden talks about (or used to talked about, at least) the “Good Night’s Sleep
Principle”. Investments in equity markets should add stress and negativity to your life to an
extent where they affect the things that really matter (not the things that our neural
conditioning makes us think really matter). Are you losing sleep because of a junior mining
stock? Not eating enough, eating to much, getting snippy with your spouse, stopped laughing
at the mad show humanity offers you every single day? Then, respected reader, something is
out of kilter. PvE is spot on correct about this, and as 2013 has turned out to be the junior
mining sector time to be right by not being wrong (Gary), with risk management even more
important than it usually is. But that risk isn’t just about a hermetic bubble called “your
finances”, it’s a risk that, if left unchecked, can spill over and affect your real world.
OK, I’m rambling now so I’ll wrap it up and get on with the number blahblah. Bottom line, I’m
relaxed about facing any return to the junior bear market this time because I feel better
positioned to do so than earlier this year. Caution, caution, caution.
Fundamental Analysis of Mining Stocks
A MAG Silver (MAG.to) (MVG) overview
Today’s wont’ be a full NOBS report, but to get a better feel for MAG Silver (NAG.to) (MVG) and
why it’s now a short position at The IKN Weekly (see Appendix 1), in today’s Fundies section
we run the ruler over the need-to-know items of MAG.
Here’s the structure topbox for the company, with share data as at end 2q13 and share price
for the MVG US ticker as at today:
Shares out: 60.142m
Options: 4.197mm
Warrants: Zero
Fully diluted shares: 64.339m
Current share price: $6.78
Market Cap: $407.76m
Approx cash per S/O: $0.53
All prices are in US dollars unless stated. Forex U$1=CAD$1
As for projects, MAG assets can be divided into three parts:
• Juanicipio: This is the 44% owned JV that MAG has with Fresnillo (56%) and covers the
neighbouring Juanicipio and Desprendido projects that lie on the Valdecañas Silver vein
in Zacatecas State, Mexico. It’s far and a way the most important thing owned by Mag
these days and just about the whole of its asset value (barring that ~52c/share in cash
noted above) depends on this asset.
• Cinco de Mayo: This project in Chihuahua State looked like a promising second string
asset for quite some time, but in the last few months it’s become clear that there is
very strong community resistance to MAG’s presence. After a local community leader
who was vociferously against the MAG Cinco de Mayo project was murdered, along with
3

his wife, the project was been frozen and at this point looks unlikely to move ahead any
further.
• Other properties: As well as the above, MAG holds several other early stage
concessions and although not advanced, they may provide something in the future.
The bottom line to today’s MAG is that the whole ball game in Juanicipio, so let’s take a closer
look at that property. Here’s the current resource table on a 100% basis, ripped straight from
the 43-101 complaint technical report which offers the latest figures:
We note the following:
There are no reserves, merely indicated and inferred resources. In this case however, it’s not a
particular problem. Juanicipio sits next to an active producing zone where Fresnillo/Peñoles has
been active for many years and the vein structures and rock types are well understood by the
major JV partner.
• The grade is exceptionally good (728 g/t Ag indicated), and 231m oz of silver are under
43-101 resource compliance. There are some handy credit metals, but with
approximately 80% of projected gross revenues to come from silver this deposit will
live or die on Ag, period.
• Vein width is also very strong, and along with its optimal location next to a large-scale
producing mine and all the infrastructure that you’d imagine with that, it’s understood
to be high margin mining with very strong economics.
• Regarding the economics, the June 2012 PEA (the latest economic report on Juanicipio)
reports that the project on a 100% basis offers parameters such as a post-tax IRR of
$1.233Bn (using a 5% discount rate) which gives an IRR of a very healthy 43%, a
10.3m oz Ag average annual production over a mine life of 14.8 years, plus a capex of
$302m and a capital payback of three years.
There are other details on Juanicipio for those who’d like more than my bare bones overview
(find them at the website (4)) but that gives the general idea. It has to be said that since this
updated PEA we’ve seen cost creep in the mining industry. We’re now also looking down the
barrel of a royalty gun in Mexico, a deduction that wasn’t factored into the study. Finally, the
$23.39/oz silver price used in the study looks a little high against today’s market price to be
considered a base case. But even with those items that will eat somewhat into the project
economics, Juanicipio will be a very robustly economic mining operation when it is put into
production.
Financials
MAG Silver has some of the easiest, most straightforward, easiest to read and understand
financials in the junior mining world. To illustrate this, I decided to go back a long way into the
records and present quarterly numbers from the end of 2006 onwards. You’ll only get a few
word s on each chart today.
Here are assets: What happens here is that MAG raises cash (red bars), then pays its share of
exploration expenses with the cash (mainly the calls from FRES for the Juanicipio project) and
4

the expenses are capitalized. Then more cash is raised, more burn, more fixed asset value
booked.
MAG.to: Assets Breakdown per qtr
160
140
120
100
80
60
40
20
0
5
60q4 70q1 70q2 70q3 70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2
source: company filings
srallod
fo
snoillim
fixed
other current
cash
Liabilities have always been of the minimal type at MAG, with run-of-company outstanding
debts only at any given moment. This company is debt free.
MAG.to: Debt Breakdown per qtr
5
4
3
2
1
0
60q4 70q1 70q2 70q3 70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2
source: company filings
srallod
fo
snoillim
LT debt
current debt
So working capital comes out like this. From the pattern here, it’s fair to assume that MAG isn’t
in a hurry to go back to market and raise
more capital at the moment. We’re at $33m MAG.to: Working Capital per qtr
working cap today and MAG raises when the
80
float is between $10m and $20m. Potentially
70
this time next year, possibly as late as 2015,
60
but no rush at all for the time being, that’s
50
clear enough.
40
30
Thanks to its chunky share price, raising
20
capital doesn’t dilute the share count much.
10
However, on thing that MAG does see is
0
directors, officers and insiders regularly
exercising their options and pocketing very
sizeable chunks of cash for the pleasure of
doing so. That, for example, is how MAG
managed to add 1.1m shares to its S/O count in the two years between 2q10 and 2q12.
60q4 70q1 70q2 70q3 70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2
source company filings
srallod
fo
snoillim

MAG.to: Shares Out
70
60
50
40
30
20
10
0
6
70q1 70q2 70q3 70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2
source: company filings
serahs
fo
snoillim
As for operations, the expenses of running the company are for all intents and purposes the net
losses booked in any quarter. MAG’s
MAG.to: Expenses and Net Loss, per qtr
books are very clean, no extras to hang
12
on the obvious. 11
10
9
The bottom line to the financial 8
7
situation at MAG is that the company is 6
5
in good corporate position to weather 4
3
any financial storm. And as valuations 2
1
go, even when setting aside the cash
0
position and credits, its current market -1
cap values each ounce of silver at
$1.77/oz, which is low compared to a
just a couple of years ago when regular
deals were being done in the space.
So why short MAG?
There’s enough to like at MAG, the question is whether its asset value will be turned into true
cash value. For that the mine has to leave
development stage and become a working mine
and the fact is that Fresnillo, major partner at
Juanicipio, hasn’t shown that much enthusiasm
about fast-tracking MAG. Those with longer
memories might recall the opportunistic so-called
“take-under” that FRES attempted, trying to buy
out MAG when valuations were low just after the
financial crisis had done its worst. But since then
FRES has shown little in the way of urgency and
if we check on its recent actions Juanicipio seems
to be a long way down on its ‘To do’ agenda.
This table (right) comes from the Fresnillo
financial report for the first six months of 2013,
dated August 2013. As per the budget agreed
upon by FRES and MAG for 2013 at the end of
2012, $13.1m was to be spent on development
of Juanicipio during this current year. It shows
that Juanicipio has seen $1.7m in capitalized
expenses for FRES, which implies that $3.3m has
been spent on development there, which isn’t
much more than care and maintenance of the property, frankly. And that’s not the only delay to
70q1 70q2 70q3 70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2
source: company filings
srallod
fo
snoillim
expenses
Net Loss

timeline seen at Juancipio recently either. Original plans included a development budget of
$10m for 2012 and $15.4m for 2013, but (in the words of the MAG 2012 year-end MDA) “...the
majority of this budget has been rolled over into 2013 and the early part of 2014 because of
development permitting delays resulting from the Mexican government changeover. To
December 31, 2012, a total of $1.3 million of the Initial Development Budget had been
incurred, with the remaining $24.1 million now designated for 2013 ($13.1 million) and the first
half of 2014 ($11 million).” So to recap:
• $1.3m of a $10m budget was spent in 2012, with the blame put on the Presidential
election that had been scheduled for 2012 many years in advance.
• An annualized $6.6m in 2013 (using the $3.3m in the first six months in straight line)
from a planned $13.1m budget.
However, the delays are no longer merely implied by FRES’s expenditures at the JV. In
Fresnillo’s August 2013 presentation, here’s how it envisaged the timeline to production for
Juanicipio:
Now here’s the same graph taken from the Fresnillo March 2013 presentation:
See the difference? Just six months ago the plan was for production as from 2017. Now it’s
2018 and if we combine that with the latest exploration expense figures we have for Juancipio,
the foot-dragging on the project by its major partner is clear.
The state of the silver and general metals market is well-known to all readers here. If we then
add the recent developments in the Mexican parliament and its plans to impose a heavy looking
royalty (for more see Regional Politics below) and the clear evidence of foot dragging at
Juancipio by major partner Fresnillo, the current valuation at MAG looks ready to come under
renewed pressure to me. That’s why I’m currently short the stock. As for a downside target,
this isn’t a trade with a long-term perspective and it’s much more about its capacity to hedge
the portfolio. With that said, I think the chances of it revisiting the recent $5-or-thereabouts
prices seen over the Northern summer are high and if a quick 20% win appears, I’ll cover the
position and take the modest profit offered.
7

Stocks to Follow
The most annoying thing, apart from the continued weakness in Rio Alto and its effect on my
theoretical back pocket, was that one of the shorts didn’t return a winning week. We ended
with 14 stocks listed and of those, just three registered gains (TAHO short, MVG short, FCV.v)
while another three, all minnows, were unchanged (AQM.v, DAR.v, NET.v). That means eight
stocks registered a weekly loss (RIO.to, IRL.to, BTO.to, LRA.v, BCM.v, RIO.to trading position,
SAM.to, GORO short) and amongst those, the worst performances came from Bear Creek
(BCM.v down 26.4%) and Rio Alto (RIO.to down 14.3%). The only true positive to take form
last week was the 33.3% rebound gain that Focus Ventures gave us on reaction to its wholly
positive news.
With the addition of the Starcore (SAM.to) long and the MAG Silver (MVG) short we now have
14 open positions on our ‘Stocks to Follow’ list, one less than our self-imposed maximum. Two
of the positions are in the green, twelve are red.
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$2.16 -6.1% best LT value
Minera IRL IRL.to str buy C$0.47 22-jul-12 C$0.24 -48.9% new top pick, avg down
Longs
B2Gold BTO.to buy C$3.07 28-nov-12 C$2.63 -14.3% sold 1/2, rest rides. Quality
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.95 -17.4% solid biz model, LT hold
Bear Creek BCM.v buy C$2.06 30-may-13 C$1.84 -10.7% ST trade, may sell soon
Rio Alto Mining RIO.to buy C$2.68 07-jun-13 C$2.16 -19.4% ST trade position, separate
Starcore Intl SAM.to buy C$0.235 08-sep-13 C$0.23 -2.1% new trade, runs to Nov max
Shorts
Gold Res Corp GORO short U$9.52 03-may-13 U$8.30 12.8% tgt $5, best short, added
Tahoe Resources TAHO short U$13.10 08-apr-13 U$17.72 -35.3% port hedge, easy2b short
MAG Silver MVG short U$7.00 12-sep-13 U$6.78 3.1% New position
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.12 -61.3% 6c buy op gone, 15c tgt
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.14 -20.0% revised tgt 25c
Darwin Res DAR.v hold C$0.10 14-jul-12 C$0.09 -10.0% drill res-Aug'13
Network Expl. NET.v hold C$0.01 22-jul-12 C$0.005 -50.0% 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% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
2009, 2010, 2011 and 2012 closed positions in appendices below
8

Please note the changed format in the table: As of this week I’ve separated the
recommended longs from the recommended shorts and offer them in tow different sections.
Top Picks and “smaller/riskier” stay as per. With the rise in prominence of the short coverage in
the weekly (whether that’s good or bad is another question) I think it’s more logical to keep the
longs and the shorts separate from now on.
Now for some notes on a selection of the above stocks.
Starcore International (SAM.to): Position opened. I was pleased to get 23.5c and 24c on
Monday (volume was good without going crazy on Monday and Tuesday) and then added a
touch more at 23c later in the week, so the 23.5c booked price is as close to dammit. SAM got
pulled down with the rest of them on Friday, but that’s what happens to these things. I know at
least a few of you followed me in last week due to the mails received, but also recognize that
this type of small and near-term trade isn’t ever going to be everyone’s cup of tea. Now that
the analysis work is done it’s not going to take up a whole lot of our time until the key
newsflow from the company, starting with the decent financial result for the last quarter, starts
flowing as from mid to late October.
MAG Silver (MVG): Short position opened. Lots mentioned above, just a couple of trade
comments here. In the end I got all that I wanted fairly easily on the NYSE ticker and got a
decent $7 handle (just) as well. The decision to add more short interest to the port felt good on
Friday morning when I woke up and saw gold at $1,310/oz, too.
Rio Alto Mining (RIO.to) (RIOM): Last week I wrote:
“...the BS rumours of low grades, truck drivers strikes and other made-up
nonsense started doing the rounds. I’d venture to say that this will continue
to be a problem until the middle of October, because until RIO comes out
with its production number for the whole of 3q13, the rumour-mongers are
going to have little in the way of pushback.”
The plain fact is, that was a big factor in the continued and outsized drop we saw in RIO again
last week. This chart shows how RIO has
C$ RIO.to share price: Last four weekends
been whacked in the last month (and this
3
time, yes I did cut down the Y-axis to make 2.9
it look more dramatic). Obviously I didn’t 2.8
2.7
expect it to happen to this stock and that’s a
2.6
wrong call on my part. That alone should 2.5
give you pause on whether to follow closely 2.4
2.3
the trade decisions offered on these pages,
2.2
because it should be clear by now that I’ve 2.1
set my fundies stall out on this company. So 2
if I say “best of breed” and the market IKN225 IKN226 IKN227 IKN228
source: TSX
decides it’s better considered as a piñata, the
two opinions can’t sit next to each other well.
Not for an extended period, anyway. I make no bones about liking the future of this stock and
think the market’s getting its opinion all wrong. That’s where I stand, period.
Bear Creek Mining (BCM.v): Percentage-wise BCM got murdered, but the whole move
Thursday and Friday was on continued small volumes and so I wouldn’t read too much into it if
I were you.
X
9

The regret here is not having taken the modest profit when it was available at $2.50 or so (it
would have been around 20%, which isn’t great considering the extended length of the hold
but not zero either). However, the idea for a while has been to ride BCM into its feas study
update so that’s what’s going to happen. I will say that given a level price for silver next week,
the Friday selling looked particularly overcooked in this stock and if the same prices are
available next week, nimble traders should consider it a decent option.
Focus Ventures (FCV.v): Last week’s news from FCV (5) can be placed in the category of
“game changer” and for a couple of different reasons. The basic story is that FCV has secured a
70% option on a very prospective phosphate property in the Bayovar region of Northern Peru
and if that word Bayovar has a familiar ring to it, it’s because Vale (along with Mosaic and
Mitsui) has a producing phosphate mine just a few clicks down the road in the same zone with
the same name. As phosphate-in-South-America locations go, Bayovar is top of the tree and as
there are already producing mines and late-stage projects there, the economic viability of
worthy concessions is already proven.
For further background and details on the project and how it fits into the fast-growing book of
FCV phosphate assets, see this very good Q&A (6) done by Kip Keen of Mineweb with company
president David Cass, as it gives a lot of background on the deal. Also, make sure you check
out the newly updated presentation on FCV’s book of phosphate assets over at the company
website (7) as there’s even more detail there, plus an overview on where the other assets stand
today. One of the things the Mineweb interview notes in passing is that the deal involves the
agreement with big local players, such as the Romero Group (bigtime Peru family money), and
that’s more important than it seems. The Bayovar zone has seen staking and concessions taken
by other smaller sized companies, but it’s one thing to stake there and another thing to be able
to work the area. The FCV deal isn’t just about the land but about approval with people that
matter in Peru and the region, which makes it all the more interesting.
The other way in which this is game-changer news for FCV is in the company’s switch in
corporate direction. We’ve seen the Aurora copper project optioned out successfully and we’ve
seen that although it’s still active in the Reventón option (from International Northair (INM.to))
in Mexico, the company has dropped its option on the larger and adjoining Santa Cruz property
there.
[Sidebar: We hear that the long awaited drill results from Reventón should be
with us in the next couple of weeks, though their appearance has been
delayed by quite a bit and that’s not normally a good sign]
But at the same time FCV has picked up its fifth phosphate property so this major deal, which
we can safely catapult to flagship status amongst its phosphate book, begs the question as to
whether FCV is changing direction. That’s exactly what I asked pres. Cass last week and his
reply confirmed the suspicions (mine and others). Yes, FCV is now moving in a new strategic
10

direction and what we’re now seeing is the new face of the company, a phosphate junior that is
now unlikely to spin out the assets into a new vehicle and will make FCV a phosphate name,
rather than a precious metals name, over the medium term. Now, normally I’m very leery about
companies that change stories (especially when I’m a shareholder), but in this case, speaking
as a shareholder of FCV there are two reasons to like this change:
1) The company is dirt cheap right now. At around $5m market cap, it may be tempting
fate somewhat but there really isn’t that much in the way of downside. In percentage
terms that may be a bad call, but in absolute cash terms, the way in which the
company itself must look at things, I don’t think there’s that much to lose here.
2) The reason to be long FCV, no matter what its focus at any given time (pardon the
pun), has always been that it’s a brains trust vehicle. The bottom line to FCV is that a
buyer is betting on a team that knows its rocks, knows its region and knows how to do
deals. The idea of being long here is to sponsor the brains, to say “ok guys, free rein,
let’s see what you can come up with”. Now for sure, when first on board the company
was all about finding a nice PM (gold and/or silver) property, then later we’ve seen
copper and other things moved into the mix. So the jump to soft rock mining projects is
a bigger one, but it’s still a case of betting on the brains and experience of the team led
up by Cass, rather than insisting on the type of mining project.
So I’m good with the new main thrust on phosphates at FCV and happy enough to let this one
ride and see where the company can take these projects. There are more hurdles to negotiate
for the company, not least of which will be raising the type of cash it needs to fund the
optioning in at Bayovar and at Mantaro. With around $1m at bank, FCV needs financing and will
need it fairly soon, so I’d expect a placement deal to be in the works sooner rather than later.
As to the shape of that deal, I’m not privy to any special info but I’d guess they’d look to raise
about $2m from here (doubt they’d go for more at this low market point) and if that’s at the
current share price we’re looking at a company that adds about 14.3m shares to the pile...let’s
round all that up and assume FCV.v becomes a company with 55m shares out at the end of the
year.
It’s also a company with a lot of work on its plate all of a sudden, so that cash will be needed
no matter what comes back from the Reventon drill results soon. As for the prize, let’s not think
about the multi-billion dollar NAVs mentioned around the other Bayovar properties, for the time
being I think it’s worth considering a company like EGE.v, the phosphate play in Brazil that
we’ve tracked in the ‘Lottery Ticket Basket’ this year and has been just about the only real
success story of the whole group. Today EGE has a market cap of between $16m and $17m on
any given day, so if FCV with its larger sized phosphate deposits can get to that level, even
after a financing and dilution we’re looking at a double from today’s share price.
Gold Resource Corp (GORO): Am I allowed to make a short into a Top Pick? Would you
people out there complain if I did? It’s not really
about the way that Reid pere has passed the
baton on to Reid fils, as seen last week (8),
because the corporate style (both operational
and promotional) isn’t about to change, we know
that the news last week isn’t some sort of
harbinger of new brooms or a change towards a
serious attitude at the company. What’s more, I
do get that a speculative junior gold name with a
fanclub following and promotional pump from the
anal yst community will see the type of rebound
move we saw in it on Friday, so that’s not the
issue here.
11

The issue it its fundamentals, and GORO is about to hit some serious headwinds that not even
its biggest promo artists will be able to ignore.
1) In two and a bit weeks’ time, Hochschild (HOC.L) will be allowed by SEC rules to dump
another large tranche of the GORO shares it owns onto the market. It will do so, and
sooner rather than later.
2) At the current price for silver (and gold, but Ag is the main revenue generator) GORO is
not making a profit on its operations. Let’s be clear about what that means; it means
before it pays any dividends to shareholders and before it pays tax, the combination of
operating costs, necessary development, necessary exploration and G&A mean that
GORO makes a loss. Silver under $23/oz means GORO is a lossmaking mining
company, period
3) At some point the company will have to make the decision to lower its dividend
payments, else the depletion of treasury will continue. That’s not opinion, that’s basic
mathematics.
4) Mid October will see GORO releasing its 3q13 production numbers, which are unlikely to
be anything else but in-line.
As per Friday’s close, GORO is running a market cap of $442m and I doubt it’s worth even half
of that, but I’m happy enough in keeping with the $5 downside share price target. That’s a
40% upside to this short position from here and unless silver and gold put in a serious rally,
we’ll see $5 printed on this stock. Today’s GORO, especially after that Friday rally, is screaming
value at me and there’s perhaps two weeks of window in which to position yourself to the
downside.
Minera IRL (IRL.to) (MIRL.L): Except for Friday in Canada, when IRL attracted just 2000
shares worth of volume, trading stayed brisk in both London and Toronto listings for IRL so
even with the penny lost since last week I’d consider this another positive week for the
company on its comeback trail.
We even had news from the company and it was good, too. On Friday morning IRL announced
(9) that it had re-scheduled the options payments due to Rio Tinto for the Ollachea project. We
now have a schedule that’s the first third, of $7.3m, due by January 11th 2014 latest and then
the other 2/3rds approx in 2016, which has booted a chunk of debt off the current liabilities at
IRL and is a decent result from the negotiations the company has been having with the big
miner.
In other news, as noted on the blog yesterday Saturday (10) Diego Benavides, president of IRL,
appeared on Peru’s weekly TV show “Rumbo Minero” to talk about the Don Nicolas project in
Argentina. The TV program isn’t well known outside of Peru but it’s followed closely by the
mining world inside the country and means that the IRL story reached plenty of new ears over
this weekend. The Q&A is in Spanish (if you’re versed in the language it’s well worth 11 minutes
of your time to see what Pres Benavides had to say) and didn’t have much in the way of new
information about Don Nicolas that those of us who’ve followed the story closely don’t already
know. It was mainly overview stuff of the project, its operational and exploration parameters
(the emphasis once again was on how they expect Don Nicolas to grow from its current feas
study parameters) and the way in which the project is both fully permitted and now financed by
Argentine money “that believes in Argentina and believes in mining”. However there were a
couple of snippets to report, with first up some of the details of the conversation Benavides and
his entourage had with President Cristina Fernández de Kirchner on their official visit to the
President a couple of Mondays ago (as reported here). He said that the conversation revolved
around CFK’s desire to create jobs and wealth in Argentina, while always respecting the laws of
Argentina. Secondly and more interesting perhaps, while giving a corporate overview Benavides
let slip that the environmental permit (EIA) for Ollachea was due “hopefully by the end of this
month” (author’s direct translation). That means two weeks, folks. For sure we have to
highlight that he said ‘hopefully’ and combining that with the black box that is Peru’s
12

bureaucratic system, we cannot possibly hold the company to a guarantee on this. However,
this fits right in with the vibes I picked up from CEO Chamberlain during my recent meeting
with him (he was cagey and wouldn’t commit to a timeframe, but optimistic that it wouldn’t
take too long form here) and I’m pretty sure that the inner management team of IRL have a
very good idea just how far they are from that all-important final signature. Again, the
importance here is that with the EIA in hand the company can move to formal arrangements for
financing the Ollachea project.
All in all, last week had the signs of the ducks coming into line at IRL and I repeat that at its
current price, it’s an undervalued bargain that stands head and shoulders above the vast
majority of junior mining companies.
B2Gold (BTO.to) (BTG): I didn’t mention BTO last week and there isn’t much to say this
week on a corporate level, either. But a bit of tickertalk won’t go amiss, so we note that BTO
got hammered all week thru Thursday,
being a go-to stock in the junior gold
space and widely traded and all that, but
bargain hunters moved back in on Friday
(notably before that late rebound in gold
bullion had set in). And the move that day
took the edge off the worst of the losses,
which isn’t a bad thing. BTO got oversold
and as we know it’s a decent option as a
profitmaking gold miner even at
$1,300/oz, there are less chances that
we’ll see it sink to the lows we saw at the
June panic stage. I’m glad I sold half
when I did, but I’m also glad that I held
onto the other half and will hold this position very happily for the indefinite future. I’d have to
sell a lot of other shares in other companies before selling BTO again.
AQM Copper (AQM.v): We got news from AQM last week that made the Flash update on
Thursday morning (see Appendix 1). The company has produced an updated PEA and as noted
Thursday, the capex footprint has dropped somewhat due to the new option plan of building a
mine at Zafranal without a seawater de-sal/pipeline, as well as a plan that envisages a lower
40k/tpd processing plant that concentrates its efforts on the higher grading central zone of
Zafranal in the first years to give a quick capital payback.
The Copper Basket
After thirty-seven weeks of 2013 The Copper Basket is showing a 22.46% loss to level stakes.
13

company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 168.66 295.16 1.75 -48.5%
2 Augusta Res AZC.to 2.43 144.35 288.70 2.00 -17.7%
3 Copper Fox CUU.v 0.83 402.96 249.84 0.62 -25.3%
4 Lumina Copper LCC.v 9.43 43.61 211.07 4.84 -48.7%
5 Nevada Copper NCU.to 3.50 80.5 184.35 2.29 -34.6%
6 Reservoir Min. RMC.v 2.41 41.68 175.06 4.20 74.3%
7 Hot Chili Ltd HCH.ax 0.72 297.46 127.91 0.43 -40.3%
8 NovaCopper NCQ.to 1.80 53.02 108.16 2.04 13.3%
9 Panoro Minerals PML.v 0.62 204.71 83.93 0.41 -33.9%
10 Western Copper WRN.to 1.39 93.68 61.83 0.66 -52.5%
11 Curis Resources CUV.to 0.70 63.13 36.62 0.58 -17.1%
12 Candente Copper DNT.to 0.375 122.05 29.29 0.24 -36.0%
13 Oracle Mining OMN.to 0.80 49.03 19.61 0.40 -50.0%
14 Yellowhead Min. YMI.to 0.59 63.45 12.69 0.20 -66.1%
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 -22.46%
The overall basket average lost over 4% on the week, as eight stocks went down week-over-
week (NGQ.to, AZC.to, CUU.v, HCH.ax,
Copper Basket 2013 average, weekly
PML.v, DNT.to, CUV.to, SRD.v), three were
12%
unchanged (NCQ.to, OMN.to, YMI.to) and 8%
just four registered gains (LCC.v, NCU.to, 4%
0%
WRN.to, RMC.v). The bets of the bunch
-4%
was Lumina Copper (LCC.v up 14.7%), -8%
while the worst losses came from Strait -12%
-16%
Minerals (SRD.v down 23.8%), Candente
-20%
Copper (DNT.to down 11.1%) and Curis -24%
Resources (CUV.to down 10.8%). -28%
-32%
Copper market prices dropped, much in line
with metals and other commodities (barring
oil), with the big dumpage coming
Thursday and starting in Hong Kong trading. However,
$3.20/lb wasn’t meaningfully broken at any point and late
Friday saw the rebound reflecting the PMs action, so we’re
still very much in the $3.30 to $3.20 zone.
In inventories it was another week where world stocks
dropped, with the overall total down 2.5% (or 19,441mt) to
stand at 765,114 metric tonnes under warehouse. Of that,
the LME dropped by 3.8% to stand at 577,525mt, Shanghai
Futures warehouses went up by 3.6% to stand at 157,164mt
(and bucking the trend), while the carnage in the Comex
warehouse numbers continues and dropped by 6.6% to go to
30,425mt; the minor sibling is getting smaller by the week.
As for those LME cancelled warrants, we still wait for a
meaningful signal from the chart and note this weekend’s
total at 47.9% of total stocks.
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 ht52 ts1pes ht8 ht51
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%

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 522NKI 722NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
Now for updates on some of our basket stocks
Reservoir Minerals (RMC.v): The well-flagged site visit of analysts to Reservoir Minerals’
(RMC.v) Timok JV with FreePort (FCX) happened last week, so we can expect a raft of fundies
reports and brokerage opinions to hit the world soon, probably starting tomorrow morning
(after all, those guys need something to
write about on the long plane trip home).
However, what I was watching for last
week was some sort of unusual buying
pattern, particularly volumes, because in
this insta-connected world it wouldn’t take
more than a quick text message for the
buying opportunity to be afforded to the
preferred clients (let’s say) of any given
financial institution.
The three month trailing daily average
volume in RMC.v is 94,000 shares, so it’s
fair to say that buyers came a little on
Tuesday and Wednesday, before the trip had started and because of the relative bargain prices
that showed up then. But there wasn’t some sort of whisper volume surge on the days when
we might expect pre-coverage positioning.
As for the weakness, that came on the back of the NR out Tuesday pre-open (11) which
reported more great intercepts at Timok by all standards except the ones that RMC has set for
itself from the first discovery holes. The headline holes of 260m of 3.93% CuEq is another great
intercept and although at depth, the way in which Timok is starting to pan out is that one
section of the deposit closer to surface should be able to get mined first and then the deeper
stuff, such as the mineralization hit in last week’s NR, should be accessible via U/G (probably
block caving) at a later date, so although deep (the good stuff starts at 473m downhole) we’re
still in the theoretically very economic mining territory here.
Next week may be interesting for the stock and might give me that late opportunity to do what
I should have done weeks and months ago and buy some RMC (see IKNs passim for the auto-
flagellation). The suspicion is that the analyst reports next week will be glowing, but won’t be
enough to move the needle and if that’s the case, we might see people taking some of their
decent profits off the table. If it doesn’t happen and RMC stays solid around $4 (or even moves
higher), in the end I haven’t lost anything that I did lose a few weeks ago already. But if the
price weakness does show, there’s a last-chance saloon window. Let’s see how things pan out
in the next two weeks approx.

Curis Resources (CUV.to): CUV has some new friends (12).
Those two names, Abdulaziz Hamad Aljomaih and Shan Ashary, are fronting for The Al-Jomaih
Group, which is (and I quote) “A major Saudi Arabian conglomerate with interests in mining,
motor vehicles, investment brokerage and transportation support”. They also know their
copper, because they made very good money in the past by investing in the Ross Beaty Lumina
Group plays, Regalito and Global Copper (that last big Beaty winner sold Relincho to Teck in
2008, just before the crisis brought the shutters down on the big time copper deals) and are
still involved with the world of Ross via investment in Anfield Nickel. Therefore, the ~7.3m
shares they’ve taken between them, something like 11.5% of currently disclosed shares out, is
not to be taken lightly, nor is the fact that this new Saudi money is good about buying blocks
on the open market (65c being the apparent magic number right now). It’s also the type cash
cash that moves in for the long term, just the type that mining companies like, in fact.
Candente Copper (DNT.to): Last week DNT finalized its fusion with Cobriza Copper and the
company it decided to spin out a few years ago has been spun back in. No word on the value
created by Cobriza with the money it was granted by DNT in the spin-out, but I’m quite sure
the corporate lawyers working with the Candente people aren’t so worried about such details.
In trading, the stock dropped towards its true value without getting anywhere near it. The end.
Lumina Copper (LCC.v): A decent rebound in LCC and (Murphy’s Law in action), ever since
we last mentioned LCC in IKN226, saying things like...
“...the reason that LCC hasn’t sold Taca Taca is that the project is in Argentina, period.
Once bitten, twice shy major mining companies will no longer commit the quantities of
capital and time towards a major project that would be a severe political risk to its
owner at all points along its timeline.”
...the stock has put in a relief rally of 21.9% and counting. With hindsight it’s not that surprising
however (my stars that sounds conceited of me, apologies) because if we check a two year
chart of LCC that tracks the point since the bottom fell out of its plans to be sold to the highest
bidder (around May 2012), many of the sharp downspikes in price have seen a reply rally that
have shored things up afterwards, at least temporarily (chart below).
The problem with these things is to guess which spike gets the reply (and the bug June drop
for 7 to 5 saw no reply, for example). So overall and on consideration, I’ll leave such second
guessing to those traders who are better at market sentiment for individual stocks and repeat
my “avoid Argentina risk, especially for those projects that require large capex inputs” and be
done with it.
16

The Lottery Ticket Basket
After 37 weeks of 2013 The Lottery Ticket Basket is showing a 33.37% 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 57.80 0.085 -15.0%
2 Eagle Star Min. EGE.v 0.125 79.13 16.62 0.210 68.0%
3 Bellhaven BHV.v 0.14 136.81 13.00 0.095 -32.1%
4 AQM Copper AQM.v 0.08 105.57 12.67 0.120 50.0%
5 Fancamp Expl. FNC.v 0.125 177 10.62 0.060 -52.0%
6 Tango Gold TGV.v 0.13 76.24 7.62 0.100 -23.1%
7 Inca One Res. IO.v 0.12 34.0 3.57 0.105 -12.5%
8 Copper North COL.v 0.10 58.7 3.52 0.060 -40.0%
9 Darwin Resources DAR.v 0.20 26.16 2.35 0.090 -55.0%
10 Gryphon Gold GGN.to 0.085 194.64 1.95 0.010 -88.2%
11 Glass Earth GEL.v 0.155 105.67 1.59 0.015 -90.3%
12 Cream Minerals CMA.v 0.03 155.34 1.55 0.010 -66.7%
13 Rio Cristal RCZ.v 0.025 17.259 1.38 0.080 -68.0%
14 Netco Silver NEI.v 0.075 9.4 0.94 0.100 -20.0%
15 Firestone Ventures FV.v 0.045 36.82 0.74 0.020 -55.6%
Portfolio avg -33.37%
The Lottery Ticket Basket actually managed to improve its overall average last week 8by a few
tenths), thanks mainly to some of the
technically dead stocks showing a pulse 25% Lottery Ticket Basket 2013 average, weekly
and adding half a cent here or a cent 20%
15%
there, which made for big percentage 10%
5%
moves in some of the names.
0%
-5%
-10%
There were a total of four winners (FNC.v,
-15%
COL.v, IO.v, NEI.v), four unchanged -20%
-25%
stocks (GGN.to, AQM.v, DAR.v, RCZ.v) -30%
and seven losers (MLN.v, BHV.v, GEL.v, -35%
-40%
EGE.v, TGV.v, CMA.v, FV.v) on the week, -45%
with the best percentage performances
seen in Inca One (IO.v up 40.0%), Netco
Silver (NEI.v up 33.3%) and Copper One
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 ht52 ts1pes ht8 ht51
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%

(COL.v up 33.3%), with the worst losers Cream Minerals (CMA.v down 33.3%), Glass Earth
(GEL.v down 25.0%) and Firestone Ventures (FV.v down 20.0%).
Bellhaven Copper & Gold (BHV.v)
More decent drill result news from BHV on Tuesday (13) and more from the La Garrucha target
at it flagship ‘La Mina’ project. Three holes were reported by BHV with the headliner the 271m
of 1.03 g/t Au and 0.13% Cu for a 1.23 g/t AuEq, which is yet again a good return from
Garrucha. And yet again the market yawned and ignored BHV, as it clearly thinks this type of
result is now baked into the price at current gold levels. I can’t help but think that if we were in
a bullish market, this type of NR would see BHV pop very hard, but that’s not where we are
today, people.
Marlin Gold (MLN.v): As noted last week, MLN/Wexford was marketing in New York and
Toronto on Monday and Tuesday. The presentations got the team results too, because the 1m+
volume of Tuesday and again decent
volumes Wednesday saw the stock with
new impetus that put it back to 10c, which
is the price at which it stood on January
1st this year (and not many tinycap gold
plays can claim UNCH this year, so good
for them). The boost was short-lived
however, as Friday’s downday saw buyers
stay away and nothing to stop MLN from
dropping back to 8.5c on low volume and
staying there.
I’m still good about watching for a 7.5c
buy price and taking some for a quick
trade between now and end 3q13 (Sep
30), but see no reason why anyone should pay up for a small gold story in this market. A value
trade interests, an investment less so.
Regional politics
Perumin 31 this week
Arequipa hosts the 31st edition of the bi-annual Perumin (14) this week (Sep 16th thru 20th) and
although it might not truly live up to the billing of “The World’s Principal Mining Convention”
that it gets in the Spanish language press (15) it’s still a very big mining pow-wow and with
over 15,000 registered attendees it’s certainly a major conference. The guest list is strong too,
as amongst the main Peru players you’d expect to see on the roster (heads of Yanacocha,
Buenaventura, Volcan, Milpo, Minsur, Southern Copper, Xstrata-Glencore (Las Bambas),
Toromocho, Hudbay (Constancia), Antamina etc etc) we’re also being graced by the presence
of Freeport (FCX) CEO Richard Adkerson (mainly for the Cerro Verde connection) Newmont
(NEM) CEO Gary Goldberg (re. Yanacocha) and Gold Fields (GFI) CEI Nicholas Holland (re. La
Cima, Chucapaca etc) who are all scheduled to speak and do round-table discussions as well, so
Perumin does have industry pulling power.
It is, however, very much one of those in-industry conferences with most of the focus on the
supplier-company relationship. It’s a place where solid deals get done between those that make
things for mining companies and those who use those things, rather than the type of miner-to-
shareholder conference that PDAC Canada is. When it comes to our specific focus, the presence
of juniors is very sparse indeed and of all the companies we cover here at The IKN Weekly,
either actively or background on-radar-only type coverage, the only name that’s at Perumin is
AQM Copper (AQM.v). I’m going to hook up with them at some point in the week and I have a
couple of other meeting scheduled as well (nice of the world to come to me for a change).
18

Aside AQM I’m not expecting to glean too much from the scheduled schmoozing, bar getting a
feel from industry players on how they see the larger scale issues and longer term projections
of mining in Peru and the larger region.
Mexico’s royalty debate hots up on schedule
In the “royalty debate is back” section from IKN227 the prediction that this would soon become
a hot topic was right on the button, as last week’s Spanish language biz news picked up on the
unfolding story and made it one of the week’s biggest LatAm issues (along with plenty of
EngLang mining trade talk). What I didn’t expect, however, was that when the bill was sent to
Mexico’s Senate, the executive would propose a 7.5% royalty on earnings from mining activity
with a 0.5% surcharge on top for precious metals (gold, silver, PGM) earnings, rather than the
expected 5% royalty on mine gate revenues.
Though I don’t feel on my own, as the news was of the 7.5% to 8% royalty on earnings
(basically EBIT), rather than looking to levy 5% on gross revenues as passed in the bill by the
lower house earlier in the year, surprised most watchers. It presented by the government as
“fairer for all” because according to the Enrique Peña Nieto (EPN) team it would “protect the
miners” from any sudden drop in metals prices. This was greeted with howls (perhaps shock,
perhaps laughter, probably a mix of the two) by the mining lobby, with typcial reactions coming
from Keith Neumeyer (CEO of First Majestic (FR.to) (AR)) and Horacio Bruna, regional VP for
Goldcorp (GG) and in direct charge of all its Mexico operations. Said Neumeyer, “If the law is
passed as proposed by the government, it will hit [mining] investment hard in Mexico”.
Meanwhile said Bruna, “I hope that between now and December that number comes down,
because it’s very prohibitive as regards investment” (note, those two quotes translated from the
Spanish in this Reuters report (16)).
That quote from Bruna points to two things, firstly that we have a debate that’s not likely to be
resolved before the end of this year, therefore we’re looking to 2014 onwards for any new
royalty to be actively levied. Secondly, there’s likely to be plenty of negotiations and lobbying
happening in the weeks ahead and the main thrust of the miners will now be to try and reduce
the proposed royalty.
In other words, the EPN government played a strong card last week, because up to then the
growing talk from the mining industry was all about avoiding a royalty (as mentioned in last
week’s note). All of a sudden the miners, caught flat-footed by the 7.5% (8.0%) number are
talking about the reduction of the royalty. It seems to me as if the EPN administration is taking
an early hard line and may eventually offer concessions, thereby ending up with the original 5%
on mine gate revenues that was proposed previously. That way they get what they originally
wanted and the mining chamber of commerce people can also claim their own minor victory via
the concessions won. But whatever happens, the bottom line from last week’s note is the
bottom line for this week’s note; royalties are comnig to Mexico, get used to the idea.
Colombia: The saga of the Páramo de Santurbán (and a potential trade thereof)
This situation needs a bit of explanation and it also relies on previous analyses we’ve made of
this issue, but the bottom line is that we can expect in the next couple of months something
akin to a final decision on the environmental protection that the government of Colombia gives
to the Santurbán Páramo region and because of that, there may be a profitable trade in the
cards for us greedy capitalists who watch from afar.
The first thing we need to know is that as part of President Juan Manuel Santos’s recent cabinet
re-shuffle and government shake-up, we have a new Environment Minister. Her name is Luz
Helena Sarmiento, she’s highly qualified for the job and she also happens to be from the
Santander State, so she knows the controversy surrounding the Páramo limitations and
environmental designations intimately. There are other things I could sidetrack you on at this
point, such as the way in which many people assume she’s been picked for the minister’s job
specifically to clear up the political mess surrounding the Santurbán Páramo and may even be
setting herself up as the sacrificial lamb when the whole thing blows up, but we’re going to cut
19

to the chase on the politics and note that Sarmiento has already declared (17) that a decision is
going to be made about exactly where the limits to the
Páramo de Santurbán are set in the next three months
(18). The reason why this is important is that up to now,
nobody really knows where the boundaries to which the
environmental protection laws of the Páramo are
applicable, and that’s important to us because there are
several mining projects in the area around the town of
Vetas (aka California Vetas), such as the ones owned by
Ventana Gold or Galway (now both bought out). Those
are unlikely to be directly affected, but the one that gets
the most attention normally is the Angostura project
owned by Eco Oro (EOM.to), because it’s right in the
grey area and it’s still undecided whether Colombian
environmental law will stop or allow its project to go
ahead.
We’ll come back to EOM.to in a moment, first a 101 on
the boundary issue. This map right shows the whole
region known as the Páramos Systems of Gran Santander
(North and South Santander States as one). The Páramo
is a region of uplands, sparsely populated and with
fragile biosystems that also happen to provide the source
water for local rivers that in turn supply local town and
big cities. Therefore although untouched and biologically
delicate, they’re also of great importance to the larger
Colombian population in a very direct way; cut off or
pollute that water supply and there’d be hell to pay.
Therefore the Páramo must be protected and most agree on that, but the question is where the
lines are drawn. On that map you can just about see a blue shaded area in the centre; that’s
the Santurbán Regional Park which was designated in January this year. But you can also see
that the green border line of the Páramos system runs to the West of that blue area...and that’s
where the fun begins. Here’s a close-up of the area in question on that above map with a note
or two added.
20

The green line is the geographical boundary of the Páramo, the blue shaded area is the Nature
Reserve which won’t be touched, the area in between the two is the issue as it’s where our
brand new Environment Minister must decide on whether it gets protected in the same way as
the nature reserve or whether it gets the green light for development activities. And according
to her own words, that call is going to be made in the next three months.
Which brings us to Eco Oro Minerals Corp (EOM.to), the company that was taken over by New
York fund money and at the time decided its old name, Greystar, carried too much baggage,
what with it being the object of all types of negative press from anti-mining groups up to the
moment when its Environmental Impact Permit was denied for the original Angostura project.
Nowadays EOM.to is promoting a new, smaller project with a smaller environmental footprint
and part of that means the project isn’t going to take off the top of one of the Páramo
mountains any longer. However, the project still sits in the mystery zone between the official
nature reserve zone and the boundary of the Páramo. Personally I have no time whatsoever for
the people now running EOM/Greystar as I believe them to be two-faced and with ulterior
motives (such as the high likelihood of launching a lawsuit against the government of Colombia
if denied the permits to mine and trying to lawyer their way to riches, which I think is the
company’s only long-term strategy) and not only that but I’ve hear from enough expert rock
people without axes to grind that even in its modified form, this project is a no-go. However,
the profile and the way in which the Páramo reserve argument is going means that there may
well be a potentially profitable trade here and when push comes to shove, that’s what the job
of The IKN Weekly is all about. There is risk involved (there always is, begad) but the course of
least resistance for this issue and the way in which it’s most likely to unfold is that the new
Environment Minister will rule that the area to be protected from industrial activity (e.g. mining)
is the Nature Reserve only and despite the howls of protest from environmentalists, will rule
that mining companies in the “buffer zone” will be allowed to operate if they meet the
necessary environmental standards. If and when the Colombia Environment Ministry rules this
way, we can expect a fast spike up in EOM.to because...
…that’s what it always tends to do when a ruling goes in its favour. You’ll also note that aside
the instant spikes up (for example January this year, when the news of the designation of the
Santurbán Regional Park boundary was announced and the EOM modified project was seen to
be outside the boundary zone, the stock pop from a 63c close on January 13th to a $1.40 close
on January 14th, all on 2.3m shares traded) the stock has been a really poor one to own and
the trend is nobody’s friend. Therefore, there seems little point in buying in to this story today
and then waiting three months for the Enviro decision to be made, only to see the current 58c
fade down into the 40s zone. However, as we get closer to the time of the decision and
announcement there may be a trade (which is bound to be followed closely by the Colombian
business and mining press, so it’ll make it to your author’s eyes easily and often) in the offing.
21

Once again, I’m not in the least bit interested in becoming a long-term investor of EOM.to and a
sponsor of their somewhat shady ways, because this would be all about a quick trade on the
potential for a spike price win; Buy at X, Sell at X+1 a while later, walk away, the end. So
consider today’s note as a briefing on the latest political situation in Colombian mining and also
a headsup on a potential trade for some time near the end of the year.
Ecuador: Chile’s Codelco in Intag
Yesterday Saturday, the JV exploration team comprised of 49% Chile’s State mining company
Codelco and 51% Ecuador’s State mining company Enami EP (a far smaller entity than Codelco)
made its first attempt to start its exploration campaign at the Llurimagua copper project in
Ecuador. The plans to explore Llurimagua project were announced to the world two weeks ago
on the definitive signing of the JV (that even got attention in English language reports, e.g.
Reuters (19)) but at that time, little was mentioned about the potential for problems on site.
Which is strange, because the Llurimagua project is the very same one that used to be called
Intag and was run by Ascendant Copper up to the point where locals, quite literally, ran them
off the property after several violent clashes between company security and protesters.
So to yesterday at 10am, when the 20 or so strong technical team that’s been given the job of
collecting data for an eventual environmental report (as part of the permitting track) arrived at
Llurimagua/Intag they were stopped (20) from getting on site by locals blocking the only road
in and had to withdraw to an area some 2km from the roadblock. At that point the stories from
the pro and contra mining sides differ because the anti-mine locals say that the technical team
waited for an escort of a reported 100 strong team of military personnel and police officers to
arrive before trying again to get through the blocked road while the government said (21) that
the team was met by two patrol cars on normal duty, who stayed with them at the withdrawal
location in order to safeguard the team. Either way, it’s clear that the roadblock did its job and
stopped the team from doing its job.
Market Watching
Toronto Resource Investment Conference 2013
There were 42 listed junior mining companies with booths (or 41 if you don’t count Barkerville
Gold) at the Toronto Resource Investment Conference 2013, that happened September 12th to
13th last week. According to the Cambridge House website, at the same event in 2012 there
were 94 listed junior mining companies with booths. No further comment required.
We need to talk Silvercorp (SVM) (SVM.to)
The incredible (in its literal sense) news release from Silvercorp (SVM) (SVM.to) on Thursday
(22) got one of the slightly cryptic blog posts that I often prefer to mark the event (23). Here
comes a little more.
My major problem that arises from the SVM NR isn’t really SVM itself, because nobody in their
right mind should own that stock any longer any way, therefore it’s now left squarely in the
hands of people in their wrong minds. No, my major problem is the way in which the Canadian
brokerage community reacted to the news. Let’s just cover a point or two from the NR before
continuing here.
• First, we learned that for an undetermined amount of time, contractors working for
SVM at its Ying mine in China have been adding waste to the ore mined, because
they’ve been getting paid by the tonne delivered to trucks, rather than paid for the ore
mined. This beggars belief, not only because there’s obviously been no control
exercised by SVM over contracted third parties, but that the workers were allowed to
do this in the first place. I was, quite literally, amazed at what I read in that part of the
NR.
• We then get to read that since the “old method” was discarded and a “new method”
22

adopted (though it’s only new for SVM, it’s standard practice for the rest of the world)
ore production (and in this phrase the word “ore” must be taken with liberal pinches of
salt) has dropped by 45%. This implies that contractors were just adding a bit of waste
to the trucks, but nearly half the tonnage they were loading was waste! It’s truly
incredible for anyone who’s ever been close to a working mine, and on that score I
have had e-mail exchanges with half a dozen industry contacts who have all said the
same thing in different ways). Amongst miners who know their salt, this company is
now a full-scale laughing stock.
• We are then told that contractors have walked off the job due to the change from the
“old method” and that SVM is now in a “transition period” of “one to two quarters” after
which everything is assumed to be fine. People, this is not reinvention of the wheel or
rocket science we’re talking about here, it’s standard mining practice seen the world
over to be put into operation. I repeat: Standard. Mining. Practice. Nothing here needs
more than a week to rectify by any
competent mine manager, COO or
mining engineer.
Ok, so overview of the incredible information
in the NR complete, now to the real reason for
featuring SVM on these pages. The reaction to
the SVM news from Canadian anal yst houses
and brokerages was every bit as jawdropping
as the SVM NR itself. The reaction was “well,
there’s good and bad here” with tinkering of
models and minor adjustments to targets of
this widely covered stock. If this were the blog
I might start naming names, but as I decided
to hold this feature back for the Weekly that’s not going to happen. However, what I will do is
show a typical reaction from one un-named analyst of one un-named house that covers SVM,
as per the alert-type update put out the next morning (Friday 13th) on SVM. Here’s the body of
the text:
Silvercorp Metals announced an update for the Ying Mining district located in Henan Province,
China. As a result of the company’s review of operations, SVM found that dilutive mining practices
of contractors contributed to head grade decline over the past two reported quarters. Mining
contractors were paid on total tonnes mined, and it was discovered that some were blending
waste rock from development tunnels with ore to obtain higher mining fees. SVM has since
modified the method of calculating ore mined by using assayed grade to determine ore/waste
contact. The company is also measuring tonnes of ore to be delivered to the mill by calculating
the total volume of ore contained in scheduled stopes for the period and adjusting for dilution.
Silver and lead grades have improved by almost 35% and 21%, respectively, under the new
method, with a ~45% reduction in ore production. The net result was a 25% decline in overall
silver production m/m. The company expects that ore production will continue at a reduced pace
for a transition period of one to two quarters as the company implements the new method.
Rectifying the practice of intentional mining dilution will result in improved head grades, but the
discovery raises questions regarding the quality of oversight over contract miners. SVM trades at
1.7x the 10% nominal NPV estimate at spot metal prices, above peers at 1.4x.
This analysis was accompanied by the call that the impact of this news was “mixed” and that
the stock, SVM.to, was still a market perform call with a price target of CAD$4.50.
The problem here is that the analyst in question, and I repeat that the text above was just one
of several on offer that said roughly the same thing, makes it clear that the analyst in question
did not understand what he read. You cannot tinker and re-adjust the financial model of a
company that’s run by people who have just smashed their reputation as serious miners into a
thousand small pieces. By saying the news is “mixed”, by implying that there is good and bad to
be taken from the news, by noting that “yes, that part of the thing looks bad, but on the other
hand it means that things should get better at the company” means that the real message has
flown straight over the head of our numbercrunching technocrat. How about if we re-phrase the
maintain target price and performance message given out by several brokerages?
23

“Yes, these people have just shown themselves to be lacking in basic mining
skills, but they say things are fixed now and things will get better, so let’s not
be too hasty, yeah? Let’s give them another chance.”
It’s not just SVM that looks like a bunch of amateurs here, people. The junior mining world is
going through a process of hand-wringing and debate about the abject state of the
marketplace. There has been plenty of blame levelled at the purveyors of moose pasture (your
author included) but blame for the sorry state of the Tee Ess Ex Vee does not stop wholesale at
the doors of junior company management. Until the analyst community stops drinking its own
Kool Aid, the type of ridiculous call that we saw from brokerages re-SVM last Friday will
continue and people who should not be given the key to the front door of an office on
Bay/Howe St will be able to continue their stupidities.
Santa Barbara Resources (SBL.v) update
Right on schedule and less than 24 hours after our mention last week, Santa Barbara Resources
(SBL.v) announced (24) the start of its Rio Alto (RIO.to) sponsored drilling program at its main
Sancos property in Ayacucho region, Peru. The program is set to be 5,000m of RC drilling and
should take between 10 and 12 weeks to complete, according to the NR. Shares popped by half
a cent to 6.5c on the news, but settled back to the default position 6c come the end of the
week, all on thin volumes.
To be clear, I’m not a buyer of SBL today but may tke a punt at the exploration drill play type
trade closer to the approximate results date. However that will depend on 1) the state of the
market at the end of the year 2) the price and volume and 3) my desire (or lack of) to get cute
with yet another tinycap with a story to offer. However, I know that both SBL and RIO
management are keen on Sancos for genuine geological reasons, rather than BS promo
reasons, so it is one that’ll be on my radar come December.
Updating the “Short Potentials” stocks from IKN224
It’s been four trading weeks since we ran out list of nine stocks considered at the time to be
potential shorts and as mentioned in IKN225, we’re going to keep an eye on their progress to
see if the whole idea of picking short shorts is a worthy one (and also to gauge your author’s
prowess on the subject, as a bit of quantifying never hurt anything bar people’s egos). Here’s
the updated chart, with the gold bullion ETF (GLD) used as our nominal benchmark, notes
come underneath, recall that we chose US listed stocks deliberately:
24

Now for comments:
• Of the nine stocks highlighted as potential shorts in IKN224, only two are above
breakeven from the date. The other seven are in negative territory and also below the
benchmark performance of GLD
• Worst of the lot is International Tower Hill (THM), down 36%. Exeter Resources has
also been hammered hard. Along with the soft showing in NovaGold (NG down 11%)
and Seabridge (SA down 8%), this suggests that the strategy of shorting low grade
large capex bulk mining gold names is a good one.
• Fortuna Silver (FSM) and Great Panther Silver (GPL) have performed equally, at ~13%
down to date. As both these are silver producers it speaks more of the sector in which
they operate than the companies, because FSM is a profit-making company at current
prices while GPL is a high cash cost waste of time and space that’s almost certainly still
making a loss at 3q13 market prices for silver, cost-cutting regime or not.
• I find it notable that the three names on the list with which I’m actively short at the
moment (discarding NG for the reasons mentioned in the intro today) are the three
names that have held up the best of the lot. Hardly a strong advertisement for my
stock-picking ability, but it also provides me with hope for the future, regressions to the
mean and positive thoughts such as that.
However and flippancy aside, the bottom line is that (in my view at least) this list has been far
from successful so far. For just example, stick my idea of a good stock on the chart, Rio Alto
(RIOM), and it would be at -25% for the period and next to bottom and there are other ways to
cut and slice the picks on show. I’d agree that highlighting the concept of shorting the market
of juniors was a good one in IKN224 (particularly via the easier access NYSE tickers) and that
the low grade high capex bulk miners were ID’d well enough. As for the rest and as for my own
personal preferences for short vehicles (TAHO, GORO, MVG), the most generous I can be with
myself is “the jury’s out”.
We’ll come back and check on progress of these nine names mid-October.
Conclusion
IKN228 is done, we round off with some snappier-than-usual bullet points:
• So it turns out that Larry Summers isn’t going to be the Fed chief after all. Yes I’m
relieved, but only in that “least worst” way. However, just because the dovish Yellen is
now a shoo-in for the Fed Chair post, don’t think that Mr Ben will desist from starting
the taper on Wednesday. The runes on that are now clearly set.
• Mexico’s royalty issue is now hotting up and it’s one of the reasons MAG Silver (MVG)
(MAG.to) was made into an active short position last week. The evidence that FRES
looks willing to let MAG wither on the vine a bit makes the story, too.
• The Colombia Eco Oro (EOM.to) situation is one that might offer us a decent trade
before the end of the year, all on a pol risk play. I’ll keep a close eye on this one as the
decision date approaches.
• The Starcore (SAM.to) trade opened as per expected and at a reasonable entry price,
too. The timeline is tight at two months maximum and a lot will depend on what gold
does between now and then.
25

• I wouldn’t worry about the long-term fate of top pick Rio Alto (RIO.to) (RIOM) too
much, if there’s one company that’ll come out of the end of the current mess in good
shape, it’s that one. My message is the simplest one possible; today the stock is cheap.
• The other Top Pick, Minera IRL (IRL.to) (MIRL.L) is looking more attractive as each
week passes. If we get the Ollachea EIA, the wheels of financing its flagship will then
start turning officially. IRL is building momentum and from a low price deck, too.
• Put a gun to my head and make me choose one single trade for the next five days and
I’d go for GORO short. Now you know.
• I’ll be at Perumin for at least one day next week and maybe two, so there’ll probably be
moments when blogging is light.
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
Footnotes, appendices, references, disclaimer
(1) http://pimco.com/EN/Insights/Pages/Whats-Happening-to-Bonds-and-Why.aspx
(2) http://blogs.reuters.com/felix-salmon/2013/09/13/whither-bond-returns/
(3) http://www.calculatedriskblog.com/2013/09/goldman-and-merrill-economists-on.html
(4) http://www.magsilver.com/s/Juanicipio.asp
26

(5) http://finance.yahoo.com/news/focus-acquires-phosphate-project-bayovar-123000913.html
(6) http://www.mineweb.com/mineweb/content/en//mineweb-exploration?oid=204781&sn=Detail
(7) http://www.focusventuresltd.com/i/pdf/Focus_Corp_Pres_Sept-2013.pdf
(8) http://finance.yahoo.com/news/gold-corporation-ceo-william-reid-114500623.html
(9) http://finance.yahoo.com/news/minera-irl-rio-tinto-restructure-060000969.html
(10) http://incakolanews.blogspot.com/2013/09/spanish-mining-vocabularly-practice.html
(11) http://finance.yahoo.com/news/reservoir-minerals-reports-drill-interval-200500770.html
(12) http://www.canadianinsider.com/node/7?ticker=CUV
(13) http://finance.yahoo.com/news/bellhavens-la-garrucha-prospect-delivers-101500962.html
(14) http://www.convencionminera.com/perumin31/es/
(15) http://semanaeconomica.com/article/extractivos/125095-perumin-todo-listo-para-la-principal-convencion-minera-
del-mundo/
(16) http://mineriaenlinea.com/2013/09/mexico-dominan-extranjeras-en-produccion-de-oro-y-plata/
(17) http://www.vanguardia.com/actualidad/politica/224630-en-tres-meses-delimitaremos-santurban-minambiente
(18) http://www.lasillavacia.com/historia/santurban-la-primera-papa-caliente-para-la-nueva-minambiente-45618
(19) http://www.miningweekly.com/article/ecuador-and-codelco-to-explore-llurimagua-reserves-together-2013-08-30
(20) http://www.eluniverso.com/noticias/2013/09/14/nota/1439656/comuneros-impiden-ingreso-militares-tecnicos-
mineros-intag?src=menu
(21) www.elciudadano.gob.ec/index.php?option=com_content&view=article&id=45432:empresa-nacional-minera-
levanta-informacion-tecnica-para-estudios-ambientales-en-proyecto-llurimagua&catid=3:economia&Itemid=44
(22) http://finance.yahoo.com/news/silvercorp-provides-operation-ying-mining-211333508.html
(23) http://incakolanews.blogspot.com/2013/09/silvercorp-svm-svmto-beats-ottotrans.html
(24) http://finance.yahoo.com/news/santa-barbara-announces-commencement-drilling-110000011.html
Appendix 1: Flash update dated Thursday September 12th
Good Thursday morning, 07:10am local time, an hour and 20 before the open.
Adding a short, probably MAG Silver (MVG), possibly NovaGold (NG) (maybe even both)
I was just about hanging onto my "around $1,400/oz" call for gold (in skin of teeth manner) with yesterday's move down
to ~$1,360/oz, but this morning's follow-on which sees gold around $1,340/oz means that reality must be faced and
"wrong again" said out loud.
The charts and the chartists are calling the current level as a resistance, so we may see gold spring back, but all the
same I feel that some more downside protection is required for the 'Stocks to Follow' portfolio. Readers may prefer to go
for a blanket-type cover such as that provided by DUST (the 3X leveraged gold bear ETF) but I'll stick with my
stockpicking, specific calls on juniors and put money where mouth is as well.
The potential shorts list seen in IKN224 is the starting point and today, preference is for MAG Silver (MVG) (MAG.to) so
I'm going to try and short that one today. MAG is the chosen target because a) silver will provide more downside
leverage to gold and b) it hasn't dropped nearly as much as peers in the last few days of weakness, so a value entry
point is in the cards. The potential problem in MAG is that volume on the NYSE can be rather thin, so I'm not 100%
sure I'll be able to get a borrow (even though I'm only going for a relatively modest position). Therefore my fall-back
short is NovaGold (NG) if MVG is tough to get, as it's better volume traded. I may even end up shorting a bit of both.
AQM Copper (AQM.v)
In other news, AQM.v released an updated PEA for its 30% owned flagship, Zafranal, this morning (NR here):
http://finance.yahoo.com/news/aqm-copper-releases-updated-preliminary-100000787.html
Clearly the release is timed with the Perumin conference next week. The PEA shows lower capex framework that
assumes no need for a seawater based water supply and the numbers are reasonable, as although it's still basing its
economics on a $3/lb copper price, the NR also shows that at $2.50/lb Cu Zafranal returns a 12.1% post tax IRR, which
is a decent backstop position.
AQM may have turned out to be unlucky with the timing of its PEA release (the gold price droop this morning) but the
potential for a rally is still here. Therefore I reiterate that I plan to sell my AQM if we see 15c, either today or in the next
few days. The new interest in the stock may provide the volume and window which allows me to dump this losing trade
at the desired price.
Hope Thursday treats you well, O
27

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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