IKN #229Premium

The IKN Weekly
Week 229, September 22nd 2013
Contents
This Week: A new position and NovaGold covered (NG), No taper yet.
Fundamental Analysis: Eco Oro Minerals (EOM.to).
Stocks to Follow: Overview, Starcore Intl (SAM.to), MAG Silver (MVG) (MAG.to), Tahoe
Resources (THO.to) (TAHO), 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 (RMC.v), Curis (CUV.to), Western (WRN.to), NGEx
Resources (NGQ.to).
The Lottery Ticket Basket: Overview, Bellhaven (BHV.v), Marlin (MLN.v), Tango (TGV.v).
Regional Politics: Regional Risk update next week, The trend towards de-sal, Brazil: Serra
Pelada to see government inquiry, HudBay (HBM) (HBM.to) is looking for bargains in Peru.
Market Watching: Denver Precious Metals Summit presentations, Sprott Corp (SII.to) inside
selling, Bellhaven (BHV.v), a litmus test for PEAs.
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
A new position and NovaGold (NG) short covered
As seen in ‘Fundamentals’ today there’s a new trade planned, once again a near-term timeline
and trading only position. The circumstances of the trade in Eco Oro Minerals (EOM.to) are also
very specific and in this case there’s no way that I’m 1) a buyer at the first opportunity this
week or 2) chasing the price at all.
Also here, a quick line to note that I covered and closed my NovaGold (NG) short position last
week. It made me just under 10% post-commish but that’s neither here nor there, I just
wanted to stick in a line to call the semi-accidental short (which didn’t make the list) as closed.
No taper yet
This one will run and run. The Fed surprised the pundits (and therefore your author, who was
simply leaning on the weight of punditry while writing last week’s intro) by not starting the
taper last Wednesday. And thus the rally, thus the birth of a new ugly word in “Octaper” by
Thursday (1), thus the reversal of the short-lived relief for gold and all its friends. How next
week goes is beyond my ken, but it’s safe to say that the moves in gold and therefore our focus
sector of juniors will be an effect of the movement in the dollar, not the cause of anything.
Gold, silver, the other metals and all the miners than dig them out the ground are a sideshow in
this big ring event, don’t fool yourself otherwise.
The main satisfaction I got from last week was seeing the portfolio set-up work as well as I
could have hoped for (with the minor exception of RIO’s late Friday dive) as for once, over the
1

week both shortside and longside trades showed profits. That’s always going to be a rarity and
there’s no hubris in these words as a result, but it was nice to get it right on the money (literally
rather tha figuratively) even if only for one week out of the whole year.
Fundamental Analysis of Mining Stocks
Eco Oro Minerals (EOM.to)
What you get in this note:
1) An opening ramble that’s not needed at all
2) What’s changed in the Páramo situation since last week
3) A quick overview of the main financials at Eco Oro Minerals (EOM.to)
4) A decision to open a near-term trading position on the stock to take advantage of what
looks like happening in October 2013 (i.e. next month), but with strict criteria attached.
1) Vague opening ramble: Before diving in I’d like to get something off my chest. People
who know me know that on a financial basis I have a comfortable life. Nearly all luxuries are of
little interest to me, our household outgoings are modest, our family lifestyle is low key and
relatively inexpensive and that’s just the way we like it. In this respect my wife and I are a good
match, as neither of us are interested in a high maintenance way of life that burns through
cash which in turn is an effect of our attitude towards money. Yes, we’re in the fortunate
position to be financially comfortable, but that’s all that really interests us; neither of us strive
with the burning ambition to be multi-squillionaires or to collect money for the sake of it.
And it’s at times like this that the attitude hits home because, without trying to put too fine a
point on it, this type of trade outlined today is really one that’s built for the advantage of a lone
trader rather than one to broadcast to a wider audience. If I cared more about money and the
making thereof, I’d keep it to myself. As it is, the intellectual challenge of writing the weekly
trumps any thoughts of personal bank account gain and it doesn’t bother me to share and
potentially dilute my own pecuniary advantage. Maybe it should bother me more, I don’t know.
I’m not trying to cast myself as some sort of saint of altruism either, because I like my creature
comforts and personal possessions as much as the next capitalist bred westerner. Anyway,
that’s an opening vague ramble and it’s done with now, time for the meat.
2) News from Páramo de Santurbán: Last week IKN ran an extended piece on the
developing political situation around Colombia’s Páramo de Santurbán and how a decision on
border limits expected from the new Environmental Minister might give us the chance of a
trade. Since last weekend we’ve had one significant piece of news and more clues as to where
this decision is going and the result is that the potential trade in Eco Oro (EOM.to) now looks
interesting enough to run. On Wednesday morning (2) Colombian media ran update stories on
the appointment of Luz Helena Sarmiento, the new Minister of the Environment for the Santos
government. In more than one place there were new quotes on the thorny problem of the
Páramo de Santurbán and Ms Sarmiento was quoted as saying that although last week she’d
given a “before end of year” timescale for the eventual decision on the all-important boundary
delineation (see IKN228 for more on that), she had now agreed to make a final decision during
October. That means next month is the decision date and that means our “let’s wait and see”
attitude as noted last week has immediately been accelerated by necessity. If there is a trade to
make, there’s no time to waste.
On top of the official declarations, your author’s discreet inquiries in a number of directions
(political and mining sector) strongly suggest that the decision the government (via its new
Enviro Head, brought in especially to take the fall) is about to make is to set the limits at the
same place as the regional nature reserve, rather than at the limits of the geographical area of
2

the Páramo as understood by geographers. This is likely to be a controversial decision, but it’s
also one that will give an official green light to the development of the Eco Oro (EOM.to)
Angostura project which sits in the current and undecided grey area (again, for more details
see IKN228 last week).
In other words, in a maximum of five weeks we’re now confidently expecting a decision from
the government of Colombia that will be favourable to EOM.to and its Angostura project, take
away doubts that the mine will be refused the necessary permits and give it the official backing
of the government of Colombia to move forward. It will be controversial and we can expect
plenty of regional governmental/enviro group pushback about this national level decision, but
that will be for somebody else to worry about.
3) A few basic EOM.to financials. But before we get to the nitty gritty, a quick overview of
the company’s financials. We really only care about the balance sheet items here, but there one
chart added on how expenses and net losses have been doing because it’s a good indicator of
how the company has shifted down the gears in 2013. Let’s start with an overview topbox:
Shares out: 84.228m
Options: 4.115m
Warrants: 2.836m
Fully diluted shares: 91.179m
Current share price: $0.60
Market Cap: $50.54m
Approx cash per S/O: $0.12
All prices are in US dollars unless stated. Forex U$1=CAD$1
Now for some detail and first the share count, which looks like this. EOM’s share count has
been rock steady at 84.228m for quarters on end and the company has three major institutional
positions.
90 EOM: Shares Out
• Amber Capital LP, the NY based fund that 80
70
took over the company when it changed its
60
name in 2011, owns 17.48m shares or 50
40
20.76% of shares out. 30
• Paulson & Co Inc, the NY based (mainly) 20
10
gold investment fund run by John Paulson
0
owns 10.78m shares, or 12.79% of shares
out.
• The International Finance Corporation
(IFC), the investment branch of the World
Bank that funds several regional exploration stage mining projects and companies,
owns 9.05m shares or 10.74% of shares out.
Together these three make up nearly half of the count and Amber Capital basically run the
show via its placed people at board level.
As for quarterly expense and net results, we
note that exploration expenses and G&A
together account for just about everything
that leaves the company moneywise. Also, the
breakdown chart shows that EOM has been
cutting right back on exploration expenditures
at the Angostura project in 2013, a policy
that’s reported to have continued during the
current quarter (3q13 to Sep 30th)
3
11q4 21q1 21q2 21q3 21q4 31q1 31q2
source: company filings, IKN ests
serahs
fo
snoillim
$m EOM.to: Expenses
12 G&A
10
total exploration
8 evaluation
6
4
2
0
1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12 1q13 2q13
source: company filings

As a result net losses per quarter, which used to revolve around the $8m to $10m range while
EOM.to was doing its most aggressive
$m
development, are down to the $2m to $3m EOM.to: Total expenses vs total net loss, per qtr
levels. 16
14 tot expenses
12
Moving to the balance sheet items. assets tot Net Loss
10
show that EOM does not capitalize its
8
exploration expenses, a situation that would 6
change if given the green light to spend capex 4
on building its mine. This chart goes back in 2
0
time to when Eco Oro was called Greystar
1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12 1q13 2q13
Resources, a change that happened during
source: company filings
3q11 when the company was refused the
permit for its original, big open pit project and EOM: Assets Breakdown per qtr
120
was then taken over by Amber Capital 110
100
90
Liabilities were quite high for a while back 80
70
there, but the last quarter saw EOM bring
60
their exposure down and pay most all 50
40
outstanding bills. This is a company that’s 30
trimmed back its expenditures and the velocity 20
10
of money through its coffers has slowed, 0
which shows up here.
Working capital is the chart we wanted to get
to. EOM.to (ex-Greystar) burned through a lot
of cash in 2011 and 2012, but the heavy burn
has stopped and with just under $12m as at
end 2q13, has enough to get into 2014 if
necessary without further raisings.
However, its Angostura project currently has a
price ticket of $529m capex, so come the day
that it gets green-lighted, EOM.to will have to
raise very significantly in order to build its
machine. I personally think the mine will never
be built, but even the threat of the type of
cash it will require for its mine will be enough to cap any share price gain on the type of good
news we’re expecting next month.
4) The proposed trade. We could go into more detail about the Angostura project at this
point, but as the trade we’re lining up here is near-term only, it’s not really our subject of
4
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2
source: company filings, IKN ests
srallod
fo
snoillim
fixed
other current
cash
$m EOM: Liabilities position
LT debt
20
18 current debt
16
14
12
10
8
6
4
2
0
4q10 1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12 1q13 2q13
source: company filings
100 EOM: Working Capital per qtr
90
80
70
60
50
40
30
20
10
0
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2
source company filings, IKN ests
srallod
fo
snoillim

conversation. More can be found about the revised Angostura project at the company website,
such as its expected average production of 269k oz AuEq over a 10 year mine life at a cash cost
of $494/oz (post Ag credit), but even if I rattle off a whole list of spec to you it won’t ever
convince me about the prospective viability of the project, with or without locals protesting.
No people, this note today is all about the opportunity that being presented for a near-term, in-
and-out, wham bam fliptrade and to that we now turn our full attention. As noted last week...
...EOM.to is a stock with a clear downwards trend, but also gets affected by sudden upspikes
when positive (or positive sounding) news for the project hits the wires. Assuming we get the
now expected positive decision from the Colombian government next month (ask me for a
percentage call on this I’d say it’s an 85% chance we get the call going EOM.to’s way, so it’s
not a total lock and be very clear on that, but the odds favour a long bet). This is the trade
we’re looking to play here:
1) We are not investors in the long-term future of EOM.to.
2) The set-up is to buy now or in the next two weeks at the right price
3) Then we hold for the decision and sell on any spike-up bounce, wave goodbye and not
return.
4) The end
That’s now been repeated three times during this brief, note, so with luck the message may be
sinking in by now. Near-term trades have been quite the trend here at the Weekly as we try to
dip in and out of the market without adding too much portfolio commitment at a nervous time
for juniors. They’re not my personally preferred way to engage with the market, being a buy-
and-hold value seeking whuss more than a fliptrader and the percentage win potentials are
never going to be barnstorming either, but needs must and for the moment it keeps things
flexible and fresh.
In the case of EOM.to, here’s the trade parameters
First and foremost, there is no need to bid up this stock. I’d suggest paying an absolute
maximum of 60c for any entry, but even with that in mind the downtrend in EOM.to on that
above price chart should be clear to anyone, so there’s probably all you can eat at between 50c
and 55c as long as you exercise the necessary patience.
Secondly, I estimate that we have at least three weeks (i.e. to mid-October) to position for this
trade, so I for one will not be grabbing at the first price available tomorrow morning. We’re in a
highly volatile gold price situation and that’s going to set the tone for this stock and any other
in the next few trading sessions. As this is a near-term trade, buying well is more important
5

than it is if you’re aiming for a three bagger gain over five years.
Thirdly and assuming the position opens in good order at a reasonable price, all shares owned
in EOM.to get sold on the boundary decision when it arrives, or at most one trading day after
the decision is with us. We’re assuming an 85% chance of the Enviro Ministry going our way
and a 15% chance of it all going wrong, but whatever happens this is a trade that gets sold into
the news, period. Then it’s walk away and don’t look back.
Conclusion: The plan is to be in and out of Eco Oro Minerals (EOM.to) in perhaps six weeks
maximum and if all goes well, walk away with a quick win. However, in order for EOM.to
become the 15th spot on our ‘Stocks to Follow’ list, the correct entry price must be available. I
personally will be ok about laying down a marker at 60c, but won’t fully fill until I see perhaps
55c. This ten day chart shows that there has been trading at that level in the last few days and
combined with the overall downtrend shown in the 12 month chart above, as well as the
relative disinterest in stock seen in the last few months, I think I’ll get my 5-handle price ok.
As for an upside target, it’s difficult to tell at this point and on this short timeline, so I’m going
to leave that as uncertain and watch the story unfold. History suggests that EOM will see
people piling in on good news and that’s what really matter here; selling while others are
buying is the true objective of this trade, the price will decide itself.
Stocks to Follow
It was a strange week, affected greatly by the fall-out from the Fed’s decision not to start the
(in)famous taper, that saw all our three short positions do well but also register wins in long
positions, too. It would have been even better but for the late droop on Friday in many of our
stocks, but that’s a minor side-issue.
Eight of our fourteen open positions made gains (BTO.to, BCM.v, SAM.to, GORO short, TAHO
short, MVG short, AQM.v), four others remained unchanged (IRL.to, FCV.v, DAR.v, NEI.v) and
just three registered losses (RIO.to, LRA.v, RIO.to trading position), so apart from the minor
disappointment in how RIO.to ended the week there are no complaints here. The best gains
came from Gold Resource Corp (GORO short up 17.2%) and MAG Silver (MVG short up 9.0%).
We currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
6

imposed maximum. Two of the positions are in the green, one is unchanged since inception,
eleven 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$2.12 -7.8% 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$2.69 -12.4% sold 1/2, rest rides. Quality
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.90 -21.7% solid biz model, LT hold
Bear Creek BCM.v buy C$2.06 30-may-13 C$1.85 -10.2% ST trade, may sell soon
Rio Alto Mining RIO.to buy C$2.68 07-jun-13 C$2.12 -20.9% ST trade position, separate
Starcore Intl SAM.to buy C$0.235 08-sep-13 C$0.235 0.0% new trade, runs to Nov max
Shorts
Gold Res Corp GORO short U$9.52 03-may-13 U$6.87 27.8% tgt $5, best short, added
Tahoe Resources TAHO short U$13.10 08-apr-13 U$16.85 -28.6% port hedge, easy2b short
MAG Silver MVG short U$7.00 12-sep-13 U$6.17 11.9% port hedge, easy2b short
Smaller/Riskier
AQM Copper AQM.v hold C$0.31 16-oct-11 C$0.125 -59.7% 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-abr-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
Repeat Notice: Please note the changed format in the table: As of last week I’ve
separated the recommended longs from the recommended shorts and offer them in two
different sections. Top Picks and “smaller/riskier” stay as per. With the rise in prominence of the
short coverage in the weekly it’s more logical to keep longs and shorts separate from now on.
Now for some notes on a selection of the above stocks.
Starcore International (SAM.to): The new SAM position did well enough on moderate
volumes, what I liked most being consolidation at the new price range without any indication of
downside price pressure (aka people suddenly deciding they need to get out at any price at the
first sign of a sector downturn).
7

It’s a near-term trade but it’s also a fundies call, based on what we expect the next earnings
report to show. Until then.
MAG Silver (MVG) and Tahoe Resources (TAHO): The shorting of these two exploration
stage silver mining companies worked correctly last week, as this chart that compares the week
to silver (via the SLV ETF) demonstrates. Neither showed any company-specific weakness,
bother did what’s required of them.
Rio Alto Mining (RIO.to) (RIOM): Three things to note about the price action of last week:
First that spike on Monday, which I believe was
caused by a rumour that went round Perumin
Monday morning that RIO was about to be bought
by a larger company. I immediately thought it
sounded just like the type of unsubstantiated
bullshit you tend to get at these events and that
seems to be the case, as somebody must have
scalped themselves a few dollars for their efforts
and once done, the whole buzz faded quickly. I
really doubt RIO the company would even
entertain an offer at current prices, either.
Second up was the ramp on the Bernanke ‘no
taper’ decision, which was violent and came on 3X
average volumes for the day, which was better than most. The third act in the company’s week
was Friday, which started weakly, got worse and then the selling pressure accelerated into the
close; in other words, a lot like 90% of the junior miners out there. So overall, even though the
8

selling got a bit silly at the end of the week and the close is almost certainly unrepresentative of
the company’s real trading rhythm, RIO didn’t do much better or worse than anything else out
there. The same story this week as last: RIO remains very cheap and I’m expecting it to rally
once the 3q13 production figures are known, that should be mid-October and it should be
something in the region of 55k oz Au.
Bear Creek Mining (BCM.v): Down 17.8% on Friday, with a lot of that due to bid hitting into
the close by ITG (house 14) which meant that for a change this downdraft came on volume
(546k Friday). I know that it’s of no use whatsoever, but the thought to sell BCM and take the
small win occurred to me on more than one
occasion Thursday, and the thought that
BCM would get whacked into Friday’s close
the same way as the previous week wasn’t
far behind it.
All of a moot point now and in the end the
decision to hold through and wait for the
EIA permit award and the updated feas for
Corani overruled any snap decision.
Meanwhile, over at Perumin the local
politicos lined up to use Corani as one of
their poster child projects that showed
agreements between miners and
communities were possible in the country,
though their positive words didn’t manage to move any dials (once again) which confirms my
suspicions that 1) the EIA is a given now and 2) the market thinks the updated feas is more
important that the permitting process at this point.
Focus Ventures (FCV.v): On Monday FCV made its change in corporate direction official. The
NR (3) announced it was handing back on the Reventon property, basically because drill results
there weren’t much to write home about. Therefore last week’s extended note on FCV is
confirmed and we’re now lookng squarely at a company that wants to position itself as a
phosphate play. We also hear that FCV is still actively looking to do more deals and add more
assets to its phosphate portfolio. I’d guess that the next round of financing is on its way and
with the share price now looking steady where it is, the financing should be around this price.
Gold Resource Corp (GORO): Last week’s edition ended with “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” and as it
happened, it was one of those rare stop-the-clocks moments for the weekly. GORO dropped by
17.2% on heavy volume and all is right on earth as it is in heaven. The overriding reason for
the heavy drop in GORO came Monday evening, when long-time company supporter and
promoter John Doody, who runs a popular mining newsletter, decided that he’d also had
enough of the way in which this company is being run and pulled the plug on his support. I’ll
wrap up this paragraph by saying that I know what it feels like to be wrong on a stock call, so
it’s fair to say that I respect Doody’s decision to dump GORO and take his lumps more than his
endless years of promoting the stock that bore little resemblance to reality.
The October period will be interesting for GORO (in the Chinese curse way). I’m not exactly
sure when Hochschild (HOC.L) is green lighted for its second tranche sale of the stock, but a
kind reader who talked with the SEC assures me that HOC has to wait 90 full days, therefore
the next sale can presumably happen Monday October 14th onwards. It’s notable that retiring
CEO Bill Reid has 400,000 options at 25c strike that expire on October 8th, so we can expect
those to go through before the big HOC sale, too (this on top of his $1.8m golden
parachute...and they say the company makes no money for its stakeholders...). There’s another
27% of projected downside to go for my nominal $5 price target so don’t think you’re too late
on this. What’s more, my nominal $5 barrier may turn out to be generous to the company.
9

Minera IRL (IRL.to) (MIRL.L): I’ve been keeping my eye on traded volumes at IRL these
last few weeks, waiting for a drop-off in the newly arrived and more dynamic trading rhythm.
That finally arrived for the Canadian listing last week, as after three more days of decent
trading, there were zero trades on Thursday and just 5,500 shares changing hands on Friday.
However things continued well at the London listing, including big blocks on Tuesday that saw
no less than 5.5m shares traded that day. As for prices (and keeping our focus on the Canadian
stock) IRL traded between 24c and 25c all week (bar one single deal at 26c on Tuesday), all
part of the consolidation/turnaround process, I’d venture.
The next catalyst from IRL should be the awarding of the environmental permit for Ollachea
and that could even happen in the next seven days.
B2Gold (BTO.to) (BTG): Our sector leader position managed to rise back above $3 before
the selling began late Thursday, but still managed to put in a winning week despite the 10% or
so taken off by the reversal. In other news, a little reported protest has seen informal miners
block the road to BTO’s Santo Domingo property in protest against what they call broken
promises from the company (4). The protesters say that last year they and BTO came to an
agreement for compensation for lost income due to the company stopping access to land where
they used to mine, but to date BTO has not made good on its promises. Negotiations are
continuing (5) between the two sides, with the latest being the protesters demanding $7.5m in
compensation and the company refusing, saying that they are not responsible for lost revenues
on grounds in which the informal miners had no right to work in the first place. Therefore
access to the Santo Domingo mine is still apparently blocked this weekend, with no traffic
moving in or out.
AQM Copper (AQM.v): AQM managed to trade at 14c last week, just 1c away from your
author’s targetted exit price, before dropping back again on weak volumes. The company’s
project got a decent amount of discussion at Perumin last week without setting the world on
fire, though I also encourage you to read through the HudBay report below as AQM gets a
mention there in a slightly wider context. I’m still a seller at 15c, whatever happens.
The Copper Basket
After thirty-eight weeks of 2013 The Copper Basket is showing a 19.54% loss to level stakes.
10

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 2.43 144.35 313.24 2.17 -10.7%
3 Copper Fox CUU.v 0.83 402.96 249.84 0.62 -25.3%
4 Lumina Copper LCC.v 9.43 43.61 214.56 4.92 -47.8%
5 Reservoir Min. RMC.v 2.41 41.68 205.90 4.94 105.0%
6 Nevada Copper NCU.to 3.50 80.5 192.40 2.39 -31.7%
7 Hot Chili Ltd HCH.ax 0.72 297.46 127.91 0.43 -40.3%
8 NovaCopper NCQ.to 1.80 53.02 101.27 1.91 6.1%
9 Panoro Minerals PML.v 0.62 204.71 87.00 0.425 -31.5%
10 Western Copper WRN.to 1.39 93.68 67.45 0.72 -48.2%
11 Curis Resources CUV.to 0.70 63.13 41.03 0.65 -7.1%
12 Candente Copper DNT.to 0.375 122.05 32.95 0.27 -28.0%
13 Oracle Mining OMN.to 0.80 49.03 18.63 0.38 -52.5%
14 Yellowhead Min. YMI.to 0.59 63.45 12.69 0.20 -66.1%
15 Strait Minerals SRD.v 0.08 57.26 4.01 0.07 -12.5%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -19.54%
Copper stocks had a better week than precious metals stocks, with out Copper Basket showing
a fair representation of what was out there.
Copper Basket 2013 average, weekly
Just three of our 15 stocks had a losing week
12%
(NCQ.to, OMN.to, SRD.v) with another four 8%
unchanged (NGQ.to, CUU.v, HCH.ax, 4%
0%
YMI.to), That leaves eight winners (LCC.v,
-4%
AZC.to, NCU.to, WRN.to, PML.v, RMC.v, -8%
DNT.to, CUV.to) of which the best -12%
-16%
percentage gains were seen in Reservoir
-20%
Minerals (RMC.v up 17.6%), Candente -24%
Copper (DNT.to up 12.5%), Curis Resources -28%
-32%
(CUV.to up 12.1%) and Western Copper &
Gold (WRN.to up 9.1%). To the downside,
the week’s worst was Strait Minerals (SRD.v
down 12.5%). So overall, our basket put in a
near 3% average gain and got under the -20%
barrier again, which is better than being over it
(however, there are still just two stocks showing
green ink).
The positive development of the stocks was driven
by the underlying metals, which had a good week
and got back up and over $3.30/lb on the “no taper”
decision and managed to stay there.
Inventories last week showed small changes.
Aggregate world stocks stood at 761,916mt, with
that number made up of LME (down 0.5% to
574,600mt), Shanghai (unchanged at 157,164mt)
and Comex (down 0.9% to 30,152mt). LME cancelled
warrants made for 47.7% of all stocks, again a
mystery wrapped in an enigma.
By the way, did you know that over half of all that
copper, 418kt in fact, is found in the LME warehouses of New Orleans and Malaysia combined?
That’s just another snippet gleaned from the weekly Cochilco report (latest edition here (6))
which is recommended reading even if you don’t speak Spanish (the numbers are easy enough
11
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 dn22
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%

to understand).
Cancelled Warrants at LME, IKN157 to date
60%
50%
40%
30%
20%
10%
0%
12
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 922NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
Now for updates on some of our basket stocks
Reservoir Minerals (RMC.v): I think last week has brought the curtain down on my
aspirations for buying RMC at a bargain price and from now on I’m doomed to be a frustrated
watcher from the sidelines. This stock has turned out to be my biggest mistake of 2013. The
reception of the market from the site visit of the previous week was to give RMC another face-
ripping rally and the widely held assumption is that Freeport (FCX) will have to pay up in order
to buy out its minority partner at Timok. But the window of opportunity, for me at least, has
long gone here. If you’ve been smarter than I and own the stock, then there’s no reason to sell
until something substantive happens. Hold and hold again, smarter people. I’ll just spit my own
feathers at leisure.
Curis Resources (CUV.to): Following on from last week’s notification of CUV’s new friends
who’ve decided that 65c was the price at which to buy, the stock decided to move up and camp
more closely around that exact figure. Until political/community news comes along to make or
break the Florence Copper story, I’d expect CUV to trade around this price going forward, too.
Western Copper & Gold (WRN.to): it’s not the first time WRN has released a bullish
sounding progress report type of NR and it’s not the first time that the stock has reacted
favourably on the heels of this type of NR. The one that hit the wires Tuesday (7) didn’t have
much in the way of new news to give us
(and of course it was spun to the
brightside, as corporate literature will
always be) but it did make the valid and
undeniably positive point that the company
has a treasury position of $29.8m (as at
end 2q13) which more than enough money
to move forward on its plans over the next
three years and that’s not a factoid to sniff
at in this market.
My personal position on WRN hasn’t
changed; not my favourite company due to
the low grade and remote location of
Casino (which a layer of BS about what
looks like a very lowball capex estimate for the project) but on a like-for-like basis it’s a much
better prospect than Copper Fox (CUU.v) at current market caps. If copper takes off and big
absolute poundage deposits start coming back into fashion, WRN could easily rally back over a
buck. It’s not for me, however.

NGEx Resources (NGQ.to): News from NGQ last week, in the shape of an update about the
more interesting part of the company’s Vicuña project, Los Helados in Chile. The Thursday
morning NR (8) announced an updated 43-101 compliant mineral resource for Los Helados that
incorporates the findings of the 2012/2013 exploration campaign there (recall, winter in the
high Andes means little goes on between July and around now).
As expected (and using the company preferred 0.30% CuEq cut-off) the indicated resource
grew significantly from 10.34 Bn Lbs to 15.26 Bn Lbs. The average grade of the indicated
resource dropped slightly from 0.42% Cu to 0.40% Cu (or 0.55% CuEq to 0.52% CuEq when
including the gold and silver credits).
Meanwhile, the less reliable inferred resource number dropped from 8.41 Bn Lb Cu to 4.8Bn Lb
Cu as more of the mineralization made it from inferred to indicated. However, we need to note
the larger slippage in grade here, as in October 2012 inferred was measured at 0.38% Cu (or
0.47% CuEq) and now it’s down to 0.32% Cu (0.41% CuEq).
Here’s the table, as ripped from the NR and a few colour-coded circles which we’ll explain
below:
There are of course a whole bunch of things we can say about the table, but I’m going to limit
myself to three and they’re based around those colours you see above, so here we go
Blue circles: These show the best news of the lot for the Los Helados numbers. This project is
now twenty billion pounds of copper big and that’s world class by anyone’s standards.
Green circles: This project also contains plenty of gold and silver as credit metals. The grades
aren’t so hot but there’s plenty of rock, which means 11.3m oz of gold and nearly 100m oz of
silver.
Red circles: Now we get to the not-so-good news. These point out that at the 0.3% CuEq cut-
off, the copper content alone really doesn’t give much room for maneuver and therefore this
project really needs the benefit of its gold and silver kickers in order to work. And that’s not so
good, ladies and gentlemen, not least because of one of the footnotes we read in the NR at the
13

foot of the table: “CuEq - Copper Equivalent is calculated using US$3.00/lb copper, US$
1,400/oz gold and US$23/oz Ag, with no provision for metallurgical recoveries.” My problem
with that footnote is twofold: First, the combo of a $3.00/lb assumed copper price (on the high
end of acceptable, I’d much prefer $2.75/lb there) and the tight relationship between the cut-
off and the copper grade mean that economically speaking, we’re not going to have much room
to play with if things like copper prices drop, or recovery rates don’t work out, or metallurgy
throw up problems later that mean extraction turns out to be more expensive, or costs of
production (or the build-out) go over the expected, etc etc. Second, the “no provision for
metallurgical recoveries” bit means that the current model assumes 100% recoveries for all
metals. Now that might be acceptable at this early stage for the main metal copper, which
should get recovered at 90% or so under normal circumstances for this type of Chilean
porphyry, but gold and silver could easily be down at the 50% or 60% recovery range. And as
mentioned above, the obvious need for the kicker metals in order to make this project
economically viable means that margins look a little bit tight. Too tight for a speculator such as
I to be overly interested in NGQ right now, it has to be said.
In this post-boom time period, I want big thick margins and lots of comfort from my economic
assumptions of an early stage copper project, and what I see at Los Helados is somewhere
between thin and OK. After I’d played with numbers for a while, for example...
Copper: 0.4% X 90% recovery X $3/lb = $23.81
Gold: 0.16 g/t X 70% recovery X $1,400/oz = $5.04
Silver 1.43 g/t X 50% recovery X $23/oz = $0.53
Total revenue = $29.38 of metal per tonne of rock processed
Which compares to an assumed cut-off of $19.84 per tonne of rock processed (0.3% CuEq)
...I reached the conclusion that although big, and although likely to benefit from being located
in Chile and just up the road from Pan Pacific Copper’s main project, Los Helados (and
therefore NGQ.to, because my serious doubts about anything this company has over on the
Argentina side of the border have already
been aired here on several occasions), this is
a project that’s now a leverage play on the
price of copper. If we see copper move back
towards and then over $4/lb, Los Helados
becomes attractive. Until then less so,
particularly when taking into consideration the
company’s market cap. The good news of the
absolute tonnage is offset by the bad news of
questionable (though admittedly very early
stage) economics and overall, give the same
type of margin and profitability that you can
get in a much cheaper entry point stock.
AQM.v, for example.
The Lottery Ticket Basket
After 38 weeks of 2013 The Lottery Ticket Basket is showing a 32.52% loss to level stakes.
14

company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 Marlin Gold MLN.v 0.10 680 54.40 0.080 -20.0%
2 Eagle Star Min. EGE.v 0.125 79.13 18.20 0.230 84.0%
3 Bellhaven BHV.v 0.14 136.81 13.68 0.100 -28.6%
4 AQM Copper AQM.v 0.08 105.57 13.20 0.125 56.3%
5 Fancamp Expl. FNC.v 0.125 177 9.74 0.055 -56.0%
6 Tango Gold TGV.v 0.13 76.24 5.34 0.070 -46.2%
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 2.94 0.050 -50.0%
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 Netco Silver NEI.v 0.075 9.4 1.41 0.150 20.0%
14 Rio Cristal RCZ.v 0.025 17.259 1.38 0.080 -68.0%
15 Firestone Ventures FV.v 0.045 36.82 0.55 0.015 -66.7%
Portfolio avg -32.52%
Thanks to a serious piece of tape-painting at Netco (NEI.v up 4.5c on one trade of 1000 shares
end Friday) The Lottery Ticket Basket
actually managed a slight win on the week, 25% Lottery Ticket Basket 2013 average, weekly
but it’s hardly inspiring stuff and without the 20%
15%
big fakey pop in NEI it would have finished 10%
2+% down. Anyway, there were four 5%
0%
winners (BHV.v, AQM.v, EGE.v, NEI.v), six -5%
-10%
unchanged stocks (GGN.to, GEL.v, DAR.v,
-15%
CMA.v, IO.v, RCZ.v) and five losers (MLN.v, -20%
-25%
FNC.v, TGV.v, COL.v, FV.v) and aside from -30%
the NEI.v 50.0% move the other notable -35%
-40%
changes were the losses in Tango Gold Mines -45%
(TGV.v down 30.0%) and Firestone Ventures
(FV.v down 25.0%).
Bellhaven Copper & Gold (BHV.v)
See ‘Market Watching’ below for a comment that starts with BHV’s NR of last week but makes a
more general point.
Marlin Gold (MLN.v): I keep mentioning MLN here, with at least one of the reasons being
that it’s one of the few “interesting” stocks left on this failed section of the Weekly 2013. After
its fun and games volumes that were almost certainly product of the MLN/Wexford marketing
tour a couple of weeks ago, this stock went stone cold again last week with just 80k shares
traded in one burst late Wednesday. The rough plan that MLN might offer a trade at a 7.5c or
7c entry point looks even more likely now, though it should be added that time is running out
for the other part of the plan; window dressing for end 3q13 may happen and Monday
September 30th would be the day for that, so we have a week in theory.
I’m almost certainly going to stick with my EOM.to new trade and away from this tinycap priced
stock, but I’m a little ore tempted by the set-up than I was last week (or the week before). One
thing is certain, though; no need to pay up (9c 10c) to own this today.
Tango Gold Mines (TGV.v): Tango has a new corporate presentation up on its site (9) dated
September 19th (and marked “Europe”, so the team is probably looking to go out marketing
again on the back of this presentation). A lot of the presentation concentrates of the company’s
flagship Topacio project in Nicaragua, but we also get an overview of what TGV plans to do in
15
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 dr3ram ht01 ht71 ht42 ts13 ht7rpa ht41 ts12 ht82 t5yam ht21 ht91 ht62 dn2nuj ht9 ht61 dr32 ht03 ht7luj ht41 s12 ht82 ht4gua ht11 ht81 ht52 ts1pes ht8 ht51 dn22
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%

the rest of 2013 and in 2014 (FY’14 is all about getting a PEA or Pre Feas done, it seems). With
76.24m shares out and a new low 7c share price, TGV is now running a market cap of just over
$5m, with $1.5m of that covered by treasury cash.
There will come a point when TGV will bounce, and it might even bounce hard if Mr Ponte can
wow his marketing audiences the same way he did just the last time he went on tour (the hype
got the stock up to 20c before dropping back). Then again, the company plans for 2014 don’t
sit well with a treasury of $1.5m and a new round of financing will have to happen sooner or
later; that’s what this recent drop might be all about. It’s not one for me at the moment, but
maybe those of you who like bottom fishing should put it on your radar, now that it’s down to
7c and it looks like there’s a round of marketing on the way.
Regional politics
Regional Risk update next week
Next Sunday sees 1) my wife’s birthday and 2) publication of this quarter’s Regional Risk
update. The new format went down well with those who offered feedback last time, so that’s
good and we’ll stick with the new framework without tinkering any further. There’s plenty to
catch up with for our main mining regions, too. Until next weekend for that.
The trend towards de-sal
Manuel Pulgar Vidal is Peru’s current Minister of the Environment, and although the ministry is a
fairly new post in the Peru governmental world it’s become one with a voice that gets attention
in the last couple of years, not least because of the key role of community and environmental
relations for mining activity it now covers in the country. There were plenty of party-line type
declarations from ministers in Peru at last week’s Perumin conference (which went off generally
well and with over 100,000 people attending over the five days, turned into a bigger event than
even organizers expected) that were the normal “say nice things without saying anything” you
get from politicos in any country or language, but one of the few insights of worth came from
Pulgar Vidal when talking about water supply trends. His vision covered both Peru and Chile
and his view that water supply for large-scale mining projects in the future needs to look
towards the combo of ocean, de-salination plant and pipeline was well thought out.
Brazil: Serra Pelada to see government inquiry
More news on the complex political situation at Colossus Minerals (CSI.to) Serra Pelada project.
There are all kinds of pro and contra factions in the zone, but one theme that’s now made it out
of the local region and to a national stage is that of percentage ownership of Serra Pelada, as
the National Committee of Mines and Energy have approved a request (10) from those who
oppose the current deal status to discuss the contract in an official manner at the capital,
Brasilia.
The questions arise from the terms of the agreement, which give CSI.to 75% of the project and
local miners’ association Coomigasp 25%. The complaint says that each party should own 50%
(or 49/51) and that the current agreement was reached under dubious circumstances by the
ex-leader of Coomigasp. It’s not clear just how well this “we need to change the deal”
argument is going to fare, because up to now CSI has defended its corner on the deal and
sticks firmly to the “deal is a deal” principle, as it should. However, this is the first time this
issue has made it out of local political wrangles and onto a national stage, so it will probably get
some sort of definition at committee.
HudBay is looking for bargains in Peru
One of those pieces that could go in Regional Politics or in Market Watching; here will do fine. I
spent just one day inside the gates Perumin last week, but also attended a couple of interesting
events outside the conference (with specific thanks due to reader FR for one of those) and got
to meet up with and chat with several other people who were in town for the big bash.
Amongst the chit-chat and gossip, one thread that ran through just about all my time last week
16

was talk about HudBay (HBM) (HBM.to) and the company’s ambitions in Peru.
We got a taste of this in a published wire report out of Reuters (11) Thursday, which started in
this way:
Canadian miner HudBay Minerals hopes to buy at least one greenfield project in the next year
and expects to boost annual copper output nearly fivefold by 2016, the company's CEO told
Reuters on Thursday.
Chief Executive David Garofalo said higher industry costs and lower metal prices mean medium-
sized companies like HudBay are better positioned than ever to buy up small exploration firms.
"We're interested in a lot of junior opportunities ... they're really living on fumes a lot of them and
that's afforded us a lot of opportunities to look at the next generation of projects," Garofalo said on
the sidelines of a mining conference in Peru.
He declined to mention which firms HudBay is interested in.
"We hope that in the next year or so we'll be able to tuck in a greenfield opportunity or two,"
Garofalo said.
The report made no mention of exactly where HudBay was out looking for acquisitions, but
that’s where the gossip comes in because it’s clear from several separate sources (and I doubt
there was much duplicity) that HudBay has fallen in love with Peru and wants to become a
main regional player. Their plans have obviously started with the Constancia project, which is
currently in the advanced build-out stage and on track to begin initial production in 2014. then
we should consider HudBay’s strategic investment made in Panoro (PML.v), with the latest in
March 2012 (12) that sees the bigger company owning 12.78m shares and 6.39m warrants of
the smaller company, which 19.17, or around 8.2% of the fully diluted total. That percentage
total came down a bit this year from the ~11.2% of F/D because HBM didn’t participate in the
latest round of financing, which is worth a mention.
I invite you to read the latest Panoro corporate presentation (8) and check out page seven of
the PDF for a clear view of this same map, but as my added white rings show PML.v currently
has 13 properties on its books in and around the Andahuaylas porphyry belt, which is a sizeable
land position. Most advanced of those is Cotabambas and then comes Antilla, but due respect
must also be given to the very early stage concessions held by PML, including for example the
wholly owned Kusiorcco project that sits next to HBM’s Constancia, or Cochasayuas around
17

20km due west of Las Bambas/Haquira.
The thing with PML is that it may have a commanding land position in a region that HBM
obviously likes, but it’s hardly the “running on fumes” company that Garofalo was referring to
last week because at $87m market cap, cash at bank of $15m as at June 30th and a burn of
around $1m per month, PML is neither nanocap or in danger of running out of cash in the next
few quarters. However, the clear indications picked up from other contacts during Perumin
(who shall remain nameless and faceless) is that HBM is keenest of all about expanding in Peru,
which begs the question as to what they might be looking at.
Duran Ventures (DRV.v) may fit the bill. It’s been driven down to its current sub-$6m market
cap by delays to the Minasnoic JV (with RIO.to) drilling permits, a lack of results at the Ichuña
JV and a lack of own company cash (the “running on fumes” bit) to move forward at its Aguila
copper/moly project. It’s not in (what seems to be) HBM’s preferred southern Peru zone, but its
location in Ancash (northern Peru) isn’t bad and to add to Aguila, DRV also owns other land
packages around its most advanced project. I’m not a fan of Aguila personally, seeing in it a
smallish decent grading area surrounded by what’s little more than a low grading halo, but it
does have a 43-101 to its name with 1Bn lbs Cu indicated (as well as inferred on top) so HBm
may see prospectivity there. After all, I wasn’t a fan of Constancia before they bought that,
either (the WTFDIK factor).
Another which might fit is Strait Minerals (SRD.v), again in the right place for HBM (the
Andahuaylas porphyry happy hunting ground) and again tiny and running on fumes. It’s finally
got its drilling program for the Alicia JV property with Teck moving and there are plenty of eyes
watching for the results from that first stage campaign. If SRD/Teck returns good results, HBM
may swoop for the smaller company and make itself into a JV partner with Teck.
A third option is AQM Copper (AQM.v), closer to the coast than the Constancia project or that
above map, but with 30% of a Zafranal project that has a similar grade and production
footprint as Constancia, and is still going cheap.
One we haven’t mentioned much on these pages is Metminco (MNC.ax), an Australian company
with a copper project called Los Calatos in the Moquegua region of south Peru that’s big, low
grading and has just seen a new scoping study released that offers up 100kt/annum copper
over a big 34 years (if the study can be believed, that is). At A$71m market cap it’s not one of
the “on fumes” companies, but it does have the size to interest a mid-tier with pretensions of
being a major.
Indico Resources (IDI.v) may also fit the bill. Again it check on beaten-to-death share price
($3.4m market cap), check on copper project and check on South Peru. It also has two project
there rather than one, with the main Ocaña project nearer coastal Arequipa region and the
second string Maria Reyna project with is in the aforementioned belt that HBM seems to like.
This is yet another company that’s been mismanaged by the Cardero Group and is today behind
on the original schedule for option payments on the projects.
Finally, Candente Copper (DNT.to) might be a fit for HBM, as although its main Cañariaco
project is in real jeopardy due to the community relations mess, the recent fusion with ex-
spinout Cobriza means that a whole book of concessions are back within the main frame of
DNT, and again there’s plenty of greenfield on DNT’s books in South Peru.
To conclude this section, those are just some of the options that come to mind (you may have
others to suggest). Overall I’d think that HBM would be most interested in Panoro (PML.v)
today, thanks to its large land package, but from the whispers and suggestions picked up there
may be a deal brewing here with Duran Ventures (DRV.v). By way of full disclosure, as readers
know I did hold that stock recently and then closed the failed small trade, so today I do not
own DRV and that’s not going to change for the time being. Also, there’s probably going to be
time to sit back and see (and hear) how things develop, because HBM has enough on its plate
18

with the Constancia build-out and has already flagged 2014 as the year it will be out there
looking for its bargain(s). But the potential of DRV selling itself or just its copper assets and
leave precious metals in a new company is one that, according to sources, has already seen
early stage discussion. The others mentioned also fit and show that a company like HBM, with
cash to spend and looking to expand its exploration potential in Peru, has plenty of choice to
pick over.
Market Watching
Denver Precious Metals Summit
I’ve seen a few of them (e.g. BHV, CSI) and have downloaded a couple of others for viewing
during the week ahead, but a headsup is certainly needed here because the Denver Precious
Metals Summit website brings together a large bunch of corporate presentations (as well as
recordings of the talks given at the conference) in one spot. The link is (13) below and it’s one I
heartily recommend that all of you peruse. Days two and three of the conference are the
happiest hunting grounds, so open those up, browse at your leisure and download the ones
that strike your fancy.
Sprott Corp (SII.to) inside selling
A line to note some significant insider selling at Spritt Corp (SII.to), with Chairman Eric Sprott
raising some cash for himself by selling 6m shares at $2.70 a pop on Wednesday.
However, we also need to point out that Eric still has 88.14m shares of SII to his name, so it’s
not as if he’s about to bail wholesale on his own mothership company.
Bellhaven (BHV.v), a litmus test for PEAs
Wednesday morning pre-bell (14) saw the arrival of a Preliminary Economic Assessment (PEA,
aka scoping study in times past) for Bellhaven Copper & Gold’s (BHV.v) La Mina project in
Colombia and on a first pass take of the PEA, i.e. by looking at the NR and not yet having the
full 43-101 as filed on SEDAR yet (BHV has 45 days to do that), the contents were more than
reasonable. Here’s the main overview table of the production and financial parameters, as seen
in the NR, with a few notes from your author’s hand to get more quickly to the point:
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And the point is that even before adding into the mix the brand new La Garrucha at the La Mina
project and just by doing the economics on the more developed La Cantera and Middle Zone
targets, this PEA hangs together very well (and for more, check out the September 18th
corporate presentation was part of the PM Summit presentation by Julio Benedetti here (15)).
Once upon a not very long ago, the type of PEA we saw from Bellhaven Copper & Gold (BHV.v)
last week would have been a catalyst to move the share price of the company higher or even a
lot higher. But that was then and this is now:
The reaction from the market was one big
round of apathy. With 136m shares out, BHV
isn’t just a company with a cheap in-situ per
ounce valuation, it’s a company with a
project that shows positive economics per
ounce of gold, and those economic ounces
are priced at $15/oz. That’s cheap, ladies
and gentlemen, but the thing is that I
completely understand the market’s non-
reaction to last week’s news. The fact that
BHV’s La Mina is located in out-of-favour
Colombia, a country that hasn’t managed to
get its legislative act together on its (cliché
alert) nascent mining sector, is a factor. The lack of financing cash available to junior gold
projects is certainly another aspect that needs to be taken into consideration. But I’m quite
certain that one of the main factors is also that the market doesn’t trust PEAs any longer.
The fat-of-the-land years, when any old junior could throw out a PEA and get itself financed on
the back of numbers that were often “optimized” and occasionally plain fabricated and at the
very limits of moral good behaviour, are long gone. Here in 2013 the market has been burned
once too often by fuzzy math, overpromising, underestimated capex and opex and all the other
ways in which the iffy end of the junior market has bullshitted the people that put money into
their back pockets. Now, I’m not saying that either BHV the company or this BHV PEA is an
example of this bullshit; the only corporate criticism I have of the team is that along the way
they’ve managed to pick up the idiotic and proven criminal scamster Thom Calandra and can’t
seem to see him for the poison that he is, but that’s a third party issue, not something in-
company. In fact BHV the company since the arrival of Paul Zweng has always been serious in
its intent and there’s no problems with the PEA so far, as far as the contents of the NR allow us
to see (the full filing 43-101 comes later). I’m not talking about this PEA as an example here,
this is more about the whole 43-101 system, the way it’s been stretched past breaking point by
the raft of shady characters in the mining business (who sadly outnumber the good people by
about 2 to 1 in my view) and the way confidence has been lost, particularly at the scoping
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study end of the economic resource system.
These days, what companies like BHV need to do is get to at least pre-feasibility stage before
anyone’s going to take their project seriously and that takes more money than this company
has. At around $2m at bank, just the extra drilling BHV needs to do in order to move the
(mostly) inferred resource rock into M+I resource to allow it to enter into a pre-feas is way
beyond their financial capacity. Which means something like this:
The scam end of the market has screwed the PEA/PFS/FS system so
nowadays(cid:1)(cid:1)(cid:1)(cid:1)nobody believes in PEAs any longer(cid:1)(cid:1)(cid:1)(cid:1) tinycap juniors
can’t get a boost from a PEA(cid:1)(cid:1)(cid:1)(cid:1) the stock price languishes(cid:1)(cid:1)(cid:1)(cid:1) no
chance of raising the cash needed by a small but promising junior
without massive dilution(cid:1)(cid:1)(cid:1)(cid:1) investors see no reason to speculate on a
stock before the dilution(cid:1)(cid:1)(cid:1)(cid:1) equity markets stay closed(cid:1)(cid:1)(cid:1)(cid:1) company
finds itself stuck at PEA stage with no cash to move forward(cid:1)(cid:1)(cid:1)(cid:1) share
price still doesn’t move because(cid:1)(cid:1)(cid:1)(cid:1) nobody believes in PEAs any
longer(cid:1)(cid:1)(cid:1)(cid:1) etc
For a serious-type junior exploreco such as BHV, with a project they want to move forward,
there’s little choice other than to put together a PEA as it’s the first obvious step towards the
type of document that is still believable. However, the system has let the good guys down by
allowing itself to be played by too many scumbags that have burned too many pockets. The
first leg on the 43-101 is now in Boy Who Cried Wolf territory, so we can no longer expect
good, solid looking PEAs such as the one on La Mina last week to positively affect the share
price of the companies who pay for them
Conclusion
IKN229 is done, we do bullet points:
• Another week, another near-term trade in the making. This time EOM.to and built
around expected political risk newsflow that should go the company’s way. Not one to
take any price about, however.
• NGEx Resources (NGQ.to) isn’t such a bad junior and I’m not trying to knock its Los
Helados project too hard, it just seems expensive as a copper junior option compared
to the deeply discounted names out there now.
• That’s probably the reasoning HudBay (HBM) is using too. There’s always some sort of
surprise that comes from swapping mining gossip at events such as last week’s
Perumin, mine was hearing the strong ambitions that HBM has in the Peru region. Look
to Panoro (PML.v) as the safer bet on which way HBM jumps, but that’s already well
telegraphed by the stake the big company has taken so the gossip that had Duran
(DRV.v) as a target, running on fumes and all, should be registered, too. I’d guess that
Strait Minerals (SRD.v) wil turn into a clear target if these Alicia drill holes turn out
nicely (and for the record, I still own a few SRD).
• I’m not stupid or greedy enough to ask for both portfolio longs and short as winners
this week too, but it was a pleasant change to see both sides of the portfolio add cash
to the account bottom line last week and I wouldn’t be averse to seeing that luck
continue.
• As for a single trade potential, a lot will depend on the way gold decides to jump. I
think GORO has plenty more downside left and that’ll stay as my short pick, while over
at the longs Minera IRL (IRL.to) (MIRL.L) should be watched carefully for news about
EIA approval for Ollachea. That’s a catalyst in the making and the way the stock has
21

been consolidating at current levels has been very encouraging. You high-risk punters
may want to consider Marlin (MLN.v) as long as the price notches down another peg or
two, with a view to its quarter end being window-dressed. It’s all about price, though.
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://www.bloomberg.com/news/2013-09-20/bullard-says-weaker-data-prompted-borderline-fomc-taper-delay.html
(2) http://www.vanguardia.com/economia/local/225678-en-octubre-estara-lista-la-delimitacion-de-santurban-
minambiente
(3) http://finance.yahoo.com/news/focus-terminates-reventon-option-143000231.html
(4) http://spanish.china.org.cn/economic/txt/2013-09/17/content_30048449.htm
(5) http://www.laprensa.com.ni/2013/09/20/portada/163148-b2gold-sigue-negociando-mineros
(6) http://www.cochilco.cl/Archivos/destacados/20130917095511_MERC2013%2009%2017.pdf
(7) http://finance.yahoo.com/news/western-copper-gold-provides-casino-130000222.html
(8) http://finance.yahoo.com/news/ngex-announces-updated-mineral-estimate-123000343.html
(9) http://www.tangogoldmines.com/
(10) http://www.abn.com.br/editorias1.php?id=73880
(11) http://www.4-traders.com/HUDBAY-MINERALS-INC-1410301/news/HudBay-Minerals-Inc--Canadian-miner-
HudBay-eyes-junior-purchase-in-next-year-CEO-17282773/
(12) http://www.hudbayminerals.com/English/Media-Centre/News-Releases/News-Release-Details/2012/Hudbay-
Makes-Investment-in-Panoro-Minerals/default.aspx
(13) http://www.gowebcasting.com/conferences/2013/09/18/precious-metals-summit/day/2
(14) http://finance.yahoo.com/news/bellhaven-receives-favourable-preliminary-economic-103000060.html
(15) http://static.gowebcasting.com/documents/files/events/event_00001347_ND9l5Okh.pdf
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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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