IKN #239Premium

The IKN Weekly
Week 239, December 1st 2013
Contents
This Week: Adding to Eco Oro (EOM.to) long, January vacation plans update, On farm animal
welfare in the Andean region and how mining companies can help, The way of the world.
Fundamental Analysis: Eco Oro (EOM.to) is a buy/add, Santacruz Silver (SCZ.v): Interest
rising.
Stocks to Follow: Overview, Starcore International (SAM.to), B2Gold (BTO.to) (BTG), Pretium
(PVG) (PVG.to), , Dalradian Resources (DNA.to), Rio Alto Mining (RIO.to) (RIOM), Focus
Ventures (FCV.v), Tahoe Resources (TAHO) (THO.to), Minera IRL (IRL.to) (MIRL.L).
Copper Basket: Overview, Augusta Resources (AZC.to) (AZC), Panoro (PML.v).
The Lottery Ticket Basket: Overview, AQM (AQM.v), Firestone (FV.v), Inca One (IO.v).
Regional Politics: Peru: Chindin shows model community relations, Peru: Back to the drawing
board for Gold Fields/Buenaventura at Chucapaca, Argentina: Cerro Moro to go ahead, Mexico:
Caballo Blanco in Veracruz again rejected, Mexico: Anti-mining groups getting organized,
Uruguay: Anti-mining sentiment growing.
Market Watching: The proposed “bigger caps basket” or “low cost producer” basket happens
next week, Bargains that show at market bottoms (featuring Ryan Gold (RYG.v) Radius Gold
(RDU.v) and Galway Gold (GLW.v))
I remind subscribers that no part of this newsletter can be copied, reproduced or
given to any third party without the express permission of the author.
This Week
Adding to Eco Oro (EOM.to) long
Front and centre, a quick line to make sure you see that I intend to add to my position in Eco
Oro (EOM.to) next week and average down on this losing trade. For details, see
‘Fundamentals...” below.
January vacation plans (and IKN Weekly frequency) update
Your author now has been given the finalized plans for the family (Southern hemisphere)
summer vacation by SWMBO. Therefore, and giving a little more detail than truly required, on
Tuesday January 14th we go to the city of Tarapoto in the San Martín region of North Peru,
where we’ll spend nearly a week in the tropical semi-jungle/jungle area, doing tours and sipping
on fruit rum punches etc. From there we go to Lima where we’ll spend a week with family and
friends, do beach things, big city things etc. We arrive back home on Monday January 28th.
Now for the relevant information.
• There will not be an edition of The IKN Weekly on the weekend of Sunday January
19th.
• There will be an edition of The IKN Weekly on Sunday January 26th. However, it will
likely be a light version, covering the numbers generated by the week and any key or
pressing events only.
• The blog will be between zero (while in Tarapoto) and light (while on coast) production
1

between January 14th and January 28th, too.
Apart from the above expect normal service, pre and post vacation time. Also, as the short non-
business type report on the Altiplano region of Peru went down well with readership earlier this
year, the same could be done for the Tarapoto/San Martín region once the trip is over with (if
any of you care enough, that is). If so it would be a separate document, in much the same style
as the last time around, with pure traveller tales and zero biz content.
On farm animal welfare in the Andean region and how mining companies can help
Community relations is now key to any mining operation or project in the high Andean region of
South America, a statement that I believe we can take as undisputed fact at this point in 2013
(after all, there’s a whole stack of evidence to support it). Due to this any mining company,
large or small, should be on the lookout for ways in which it can help the people in the area in
which it want to explore or mine as a prerequisite for eventual success; it’s not something you
can bolt on afterwards any longer. A big mining company or junior with funds has the
wherewithal to go in with a community relations team (i.e. several people), a pre-ordained
budget and follow ideas and strategies used to good effect by others of the same size.
However, it becomes tougher for the small exploreco on a shoestring budget to find effective
measures that can really help a local community and bring lasting benefit at an affordable price.
All that preamble is to introduce the article in ‘Regional Politics’ today which, as a rarity, is a
guest article and not written by my own hand. Francis Rainsford is an acknowledged world
expert on wool and animal fibre (e.g. in this particular case alpaca) and has reported on an
initiative to improve alpaca stock (and therefore its fibre product) being run by a Taiwanese
capital mining company (with strong connections to China, as you might imagine) in the
Arequipa and Puno regions of Peru. The whole subject of livestock improvement isn’t new
ground for a mining company community relations team, but the approach being used by the
company is innovative in that it promises to quickly improve the lot of the farmers in the target
area and that it’s not particularly difficult or cash-intensive to put into action.
In my opinion, anyone connected with a mining company in the type of medium/high altitude
region of the Andes would do well to pay close attention to this report. It will be featured on
the open public blog at some point next week too, as the more people who read it the better it
may be for the South American mining industry in general.
The way of the world
I’ve noticed in recent weeks that it’s not just me who is more interested in near-term, smallish
flip-trade type propositions, as feedback from IKN readers (here mainly, but also from the blog)
has been more voluminous when near-term specs are on the agenda. It’s not a great situation
and I don’t know how long that’s going to last, but for the time being we’ll keep on trying to
find a few, if only to maintain some interest in an otherwise crappy market.
Meanwhile in macro news, gold may be moved by the 3q US GDP report due Thursday and the
US employment report due Friday. Two for your trading calendar, as usual keep your eye on Bill
McBride’s superlative blog Calculated Risk (1) for more.
Fundamental Analysis of Mining Stocks
Eco Oro (EOM.to) is a buy/add
We’ve had movement on the big bad and long-delayed Páramo de Santurbán environment, the
one on which your author placed his bet on Eco Oro Minerals (EOM.to). It’s not all good
news so read what follows carefully, but there’s more than enough here to like and as a
2

result, we can expect Eco Oro Minerals (EOM.to) and potentially other stocks that were feeling
the weight of the Páramo decision (CBJ.v, GLW.v) to rally next week on the news. Therefore
I’m going to add to my position in EOM.to tomorrow and if it subsequently rallies as
expected, take profits. (that’s in bold type and underlined too...guess why?). However, as I
say there’s good and bad to consider in this latest development, so here we go with points:
The bad news
1) The final decision announcement has been delayed again, with the Colombian Environment
Minister Luz Helena Sarmiento saying that the all-important boundary location for the Páramo
will “possibly” be announced in the second week of January (she didn’t say January of which
year, but let’s assume 2014 ☺).
2) She didn’t even want to make that pre-announcement of a delay. However, the Colombia
government ombudsman (the Contraloría General de la Nación) sent her ministry a warning to
say that she’s dragging her feet and must say something. She therefore convened a presser
yesterday and announced the progress and developments so far (2).
3) From the looks of things, underneath the final Páramo decision the whole issue is now
threatened with getting bogged down in interminable bureaucracy. The “solution” being
planned by the Enviro Minister is beginning to sound very complicated (which invariably means
time added when it comes to LatAm politics) and involves a working round table group of all
interested parties that’s due to start on December 12th and some weird and wonderful
mechanism that she proposes to make the Páramo a profitmaking wilderness, which will then
allow those people living near or on the uplands to make their living from its protection rather
than from the agriculture of small.scale mining which will be banned inside its borders. The
shape of this “world first” and “innovative” idea (not my words but hers, which when read
caused your author to cringe inside at the thought of how long this silliness could get spun out)
is as yet unclear, but a strong suggestion already made is that the local users of the water
supply from the Páramo uplands, (mainly the city of Bucaramanga) pay a 1% tax on their
supply in order to maintain the water’s integrity and fund the preservation project. How that
might go down with locals remains to be seen and in theory it’d be an interesting test of the
population’s real environmental protection credentials if they’re asked to pay for the protection
from their own back pockets, however small the contribution. Left wing or right, it’s rare that
“money talks and bullshit walks” doesn’t come into play.
The bottom line to the bad news is that 1) there’s no final decision yet, even though it was
promised in November 2) the new minister is getting dragged into further potential delays by
“innovations” and “bright ideas” 3) she had to be dragged to the table and say something by
the national ombudsman, which shows the lack of will on the subject and 4) mid-January is the
latest line in the sand for a definitive boundary decision, but no holding breath on that. Which is
about all the bad news out the way so now for...
The good news
She specifically said two things that are very positive for Eco Oro (EOM.to) and its Angostura
project as well as other mining project in the area (AUX at Ventana, plus GLW.v, CBJ.v etc).
1) The municipality of Vetas, the location in which nearly all gold mining projects that concern
us are held, including Eco Oro at Angostura, is perhaps the most contentious and has caused
most doubt. This traditional mining town/community has been greatly worried that it would be
placed inside the new boundary and therefore lose the right to mine. Therefore I translate this
directly from the report (3) carried in Colombia’s official gazette/state media channel, El
Colombiano:
“Also, regarding the issue of the Vetas municipality, which has seen itself as
being affected, the Environment Minister said that she was well aware of the
social issues and (the town’s economic) activity, for which the municipal zone
and its area of influence was marked outside of the Páramo.”
3

In short, the Vetas municipality will not be moved inside the Páramo regional nature reserve
boundary and will be allowed to continue mining activities. This is a very important statement
by the Environment Minister and means EOM.to and others are now almost certainly in the
clear. Yes, this is bullish for the stock price.
2) Added to the above, she also stated in another moment of the presser that all mining
licences previously held would be respected. This means that if a mining company holds a
licence or concession that falls inside the new Páramo boundary, it will be allowed to operate as
long as it complies with all other necessary conditions until the time limit of the concession
lapses. After that, there will be no renewal. In the case of EOM at Angostura, its licence is good
until 2027.
With bad and good now on the table, the bottom line. In the presser yesterday Saturday
morning, the good news greatly outweighed the bad. We recognize, and clearly, that there is
no final resolution to this ongoing saga and as such (plus given the poor delivery track record of
this Colombian government on mining matters) there will be doubts remaining in the market to
the validity and prospects of the EOM.to cause. However, the clear statements to the effect that
1) Vetas is exempt from the boundary and 2) all currently held licences will be respected are
strong positives for your author’s speculative trade in EOM, because it’s exactly the type of call
we were looking for when starting the trade back in September.
The price of EOM.to has since that time gone against your author and the position is
underwater, but with Saturday’s developments the risk/reward balance has swung again and it’s
a pretty obvious chance to average down and take advantage of the (with caveats) positive
overall news.
As for exit strategy to the trade, there are now three potentials
1) It goes wrong, EOM.to dives on a subsequent change in the situation, I take my chops
and a loss. That now seems much less likely than before (very glad to say).
2) EOM gains momentum on yesterday’s news and runs faster and quicker than I’m
currently expecting. If so I’ll be happy to take profits (if they show) at a point before
Christmas Day.
3) I add and average down now, EOM stock improves a little in the days ahead but the
real stock price jump only happens when the definitive decision is announced on the
Páramo boundary and its consequences to the regional mining industry in January. In
which case I’ll wait it out and take my profits in early 2014.
All in all, thanks to this weekend’s
news I’m now a lot more confident
about having made the right call on
EOM and being long. The price at
which I’m bought is the wrong one,
but a bit of averaging down in the
face of a new and excellent looking
risk/reward balance can help my
average price (and eventual absolute
gains). It’s the logical thing to do at
this point, therefore I add Eco Oro
(EOM.to).
4

Santacruz Silver (SCZ.v): Interest rising
Back in IKN232 dated October 13th we ran a thinkpiece entitled “Idea: Fortuna Silver (FVI.to)
(FSM) buys Santacruz Silver (SCZ.v).” Read it again if you want, but the basic idea is that SCZ
looks a decent fit as a takeover target for FVI because of its location (Mexico), assets (three
projects, one coming online now, metals mix (mainly silver but credit metals too, the same way
FVI operates) and company circumstances (SCZ’s plans to grow organically via cash flow paying
for capex are scuppered by the drop in the silver price, while FVI has cash and wants to grow,
but has had trouble finding the right assets).
There are other things in play too, such as the quality management at FVI compared to the
team at SCZ which has shown it can talk the talk, but its execution on plans has been lacking.
Other things too (listed in IKN232) but the main drawback I saw at the time was the price of
SCZ, which was still $1.09 and with 91.331m shares out, a $100m market cap company.
In the weeks after IKN232 SCZ didn’t sink any further; in fact it rallied quite well (to my
surprise) and peaked at $1.34 at the end of October. However since then it’s sunk and here’s
where today’s update comes in.
1) At Friday’s close of 92c, SCZ is now running a market cap of $84.02m. Add in its
working capital of $9.783m as at Sep 30 and the EV is down to $74.24m...a more
interesting price tag for a potential buyer.
2) Friday also saw SCZ file its 3q13 financial results and MD&A and without beating
around the bush, the numbers and the guidance sucked. With the results seen and the
type of sell-given-any-reason capital market in which we find ourselves today, it
wouldn’t come as any surprise to see the SCZ share price drop even further and move
into the type of real bargain price level for our potential buyer.
Friday’s 3q13 results
In two words, they sucked. Now for more words. The first problem is that company reported a
slower than expected ramp-up at its stage one Rosario mine, as you can see in this chart.
SCZ: 2013/14 Rosario mine ramp-up, company projections
500
500
450
400
350
300
250
200
125
150
100 52.3
33.5
50
0
3q13 October November* by end 1q13
source: SCZ filings, SCZ guidance *28 days of Nov'13
Remember, this is a company that promised production to begin in 1q13 and even told us it
had reached commercial production during 2q13, only to rescind on that statement later.
Therefore the average of just 33.5 tonnes per day processed in 3q13 is that of a company
that’s not delivering, period.
In its MD&A, SCZ was keen to note that things are picking up and gave production totals for
October and November (to Nov 28th) which work out at the TPD figures you see above. That’s
fine and there’s obvious improvement, but we’re also given a target of reaching the nameplate
500tpd throughput level by the end of 1q14 (NB: not average for 1q13 but “by end”, which
5

means 2q14 will be the first true productive quarter). I’ve stuck that figure on the chart
because it sits next to the others pretty tall and gives a visual idea of what SCZ needs to deliver
in the next four months. I’m not saying they can’t do it, but I am saying that with the
company’s patchy record so far, if it falls short I won’t be surprised.
However, for the purposes of the model and what comes next, I’m going to assume that they
do indeed make 500tpd by March
31st 2014 and stay there in 2q14. $m SCZ: Cash and working cap, per qtr
I’m also going to assume a silver 20
price of $20/oz as we see today, 18
ore grades, recoveries and overall 16 cash
mining costs in line with the 14 working cap
expected, along with reasonable 12
guesstimates for G&A etc. When 10
you do all that, this (right) is how 8
6
the company cash position looks at
4
the end. We begin to see the
2
problem faced by SCZ in this chart
0
above. Even if (and be clear, we’re
4q12 1q13 2q13 3q13 4q13est 1q14est 2q14est
being generous to the company
source: company filings, IKN ests for 4q13-->
and assuming they hit their new
targets for Rosario) they make the
ramp-up, under the current silver price the mine will be losing money until 2q14 comes around.
The cash pile today ($5.6m as at September 30th, with net financial assets at $4.79m and
working capital at $9.78m) might, repeat might be enough to get it through as long as
everything goes well, but it’s not going to take much in the way of further glitches or delays to
see SCZ run out of money. That would be (in theory) going back to market and raising. And
that would mean being chewed to bits share price-wise in this bear atmosphere.
Here right is another chart generated by the spreadsheet assumptions. Because SCZ hasn’t
declared commercial production yet (well
it did earlier in the year then decided that SCZ at Rosario: Best estimate gross revenues vs mine
it wasn’t deserving of the label and costs, 3q13 to 2q14, using U$20/oz silver
retracted it, thereby keeping us in the $m
6 gross revenues
dark) it’s difficult to get an accurate COGS
5 mine costs
figure even for 3q13 just reported, but by
sifting through the filings it’s possible to 4
reverse-engineer a figure that’s going to
3
be close. As for revenues from 3q13, SCZ
2
reported metals sales of $0.494m, so
that’s clear (and it also makes sense with 1
the throughput, grade, recovery and 0
metals purchases numbers they gave). 3q13est 4q13est 1q14est 2q14est
source: IKN ests from SCZ data
As for the quarters coming up, the
problem should be clear enough on that
above chart. Even if a) my estimates for costs are out by a fair whack and b) the company
manages to keep to its new development track and get to 500tpd by the end of 1q14 as it’s
now promising, the Rosario mine isn’t going to go free cash flow positive until the second
quarter of 2014 with silver at U$20/oz. And even then, the cash it throws off won’t be much
more than the cash need to cover corporate G&A. In other words and in simple terms, with
silver where it is you can forget about Rosario paying for the capex at the stage two San Felipe
mine, so with that you can equally forget all about any development at stage three Gavilanes.
The simple and unavoidable fact of the matter is that SCZ needs more money to make good on
its plans. Rosario is draining treasury when it should have by now been gaining treasury, but
even if things go well from here SCZ doesn’t have the cash it needs to move forward its stage
6

two, and unless silver suddenly puts in the mother of all price rebounds the situation won’t
change for years. And as we pointed out in IKN232, it’s the main point of the whole thinkpiece
• Santacruz Silver has interesting silver assets and needs cash.
• Fortuna Silver has cash and needs interesting silver assets.
Which is where FVI comes in, of course. The way in which my fantasy mind’s eye sees this
playing out is that we’ll get to the point where SCZ management see the writing on the wall and
will know that all that they can look forward to in the future is a share price deterioration as
SCZ does little better than tread water, quarter after quarter. It could dilute and raise the cash
for San Felipe of course, but rocket scientists are not required to work out the consequences of
that to the PPS. However, if some bigger and cashed-up entity, e.g. FVI, steps up and offers to
incorporate SCZ into its fold, the two companies will be able to offer the “in the best interests”
line to their shareholders and we all live happily ever after. Or something like that.
Then again, FVI will want a bargain and as we’d imagine this as an all-paper deal, the next
charts, which were first featured in IKN232, are important and point to value moving towards
the bigger company. Between the theoretical hunter and hunted you may be able to see in this
first chart that, in general ballpark terms at least, FVI has managed to keep its share price
roughly intact recently, while SCZ first rose but has since fallen in comparison
Share prices of Fortuna Silver (FVI.to) and
Santacruz Silver (SCZ.v), 2013
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
7
2
naJ
51
naJ
82
naJ
80-bef 22-bef 70-ram 02-ram 3
rpA
61
rpA
92
rpA
90-yam 32-yam 50-nuj 81-nuj 20-luj 51-luj 62-luj 9
guA
22
guA
50-pes 81-pes 10-tco 51-tco 82-tco 80-von 12-von
CAD$
FVI
SCZ
source: TSX
But on this chart, the ratio between the two, the difference is stark:
Share price ratio of Fortuna Silver (FVI.to) to
Santacruz Silver (SCZ.v), 2013
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2
naJ
8
naJ
41
naJ
81
naJ
42
naJ
03
naJ
50-bef 11-bef 51-bef 22-bef 82-bef 60-ram 21-ram 81-ram 22-ram 82-ram 4
rpA
01
rpA
61
rpA
22
rpA
62
rpA
10-yam 70-yam 31-yam 71-yam 42-yam 03-yam 50-nuj 11-nuj 71-nuj 12-nuj 72-nuj 40-luj 01-luj 61-luj 22-luj 62-luj 1
guA
8
guA
41
guA
02
guA
62
guA
03
guA
60-pes 21-pes 81-pes 42-pes 03-pes 40-tco 01-tco 71-tco 32-tco 92-tco 40-von 80-von 41-von 02-von 62-von
FVI/SCZ
source: TSX, IKN calcs

Earlier in the year the stocks ran a ~2X ratio. By the time my IKN232 piece came out that had
moved to ~3.3X. Now the FVI/SCZ price per share ration has just touched 4:1 for the first time,
which means (again, in theory at least) that FVI could step up, make an all-paper offer for the
smaller company and get itself the new assets (that include near-term production) and a lower
share count dilution. This deal could be wrapped and done and leave FVI at around 160m
shares out, plus all the cash needed to move its new playthings into production. And if SCZ
goes lower on the 3q13 numbers just out, as I suspect it may well do, the value proposition
gets even greater.
Meanwhile, FVI has just reported its 3q13 and has $31m in cash along with $65m in working
capital, which doesn’t even make mention of its $40m untapped line of credit that it could use
to build a new mine. It’s also a company that’s just finished upgrading San José to 1,800tpd
and is making money at its two mines, even at $20/oz silver. All cashed up and no place to go,
a situation that would find a remedy if it had a new and advanced mine project or two that it
could move into production.
The bottom line to this note is that it’s going to be worth watching Santacruz Silver (SCZ.v)
next week, as if it starts selling off on its bad quarter results and crappy looking near-term
future under $20/oz silver, the share price may throw us sideline-watchers a bargain entry
point. Today’s 92c price is interesting enough, but this is the type of market where I eant
knockdown raging ranting screaming bargains, not just bargains. The Ganozas over in FVI HQ
probably feel the same way. Therefore SCZ is now on the active radar screen and its price
development gets watched closely in the day and weeks ahead, with a view to an eventual
purchase.
Stocks to Follow
There are now 13 open positions, what with Starcore (SAM.to) now sold and closed. Of those,
nine made gains last week (RIO.to, IRL.to, BTO.to, LRA.v, RIO.to trading position, DNA.to,
BTO.to trading position, TAHO short, FCV.v), one remained unchanged (NET.v) and three
recorded a weekly loss (EOM.to, PVG short, DAR.v). The biggest moves out seen on the list
were the wins from Focus Ventures (FCV.v up 18.5%) and Dalradian Resources (DNA.to up
9.1%), so overall it wasn’t the best of weeks ever but it’s surely an improvement from the dross
the rest of November served up.
8

With the loss of Starcore (SAM.to) from the list we now have 13 open positions on our ‘Stocks
to Follow’ list, two less than our self-imposed maximum. None green, one is unchanged the rest
are red.
Company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to str buy C$2.30 07-apr-11 C$1.63 -29.1% best LT value
Minera IRL IRL.to str buy C$0.35 22-jul-12 C$0.165 -52.9% top pick called at 24c
Longs
B2Gold BTO.to hold C$3.07 28-nov-12 C$2.22 -27.7% sold 1/2, rest rides. Quality
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.72 -37.4% solid biz model, LT hold
Rio Alto Mining RIO.to str buy C$2.34 07-jun-13 C$1.63 -30.3% added Oct'13 avg down
Eco Oro Min. EOM.to hold C$0.55 22-sep-13 C$0.39 -29.1% new trade, st pol risk play
Dalradian Res EOM.to buy C$0.65 27-oct-13 C$0.60 -7.7% Avg down again
B2Gold BTO.to hold C$2.22 28-nov-12 C$2.22 0.0% new ST trade, separate
Shorts
Tahoe Resources TAHO short U$13.10 08-apr-13 U$17.78 -35.7% port hedge, easy2b short
Pretium Res PVG short U$5.38 22-nov-13 U$5.43 -0.9% new short, news driven
Smaller/Riskier
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.16 -8.6% revised tgt 25c
Darwin Res DAR.v hold C$0.10 14-jul-12 C$0.07 -30.0% drilling again soon
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
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
ST trade didn't work, sm
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% loss
2009, 2010, 2011 and 2012 closed positions in appendices below
Now for some notes on a selection of the above stocks.
9

Starcore International (SAM.to): Position closed. Shares sold and the losing trade is
closed on SAM.to. However, I still firmly believe SAM.to is one worth watching closely, as its
small gold producer profile and decent financial position marks it down as one of the most likely
survivors in the small miner space. It’s my trade that was bad, not the company or its
operations, so another bite at this cherry in the future is very possible. Time, price and
circumstances will decide.
B2Gold (BTO.to): It got down to a $2.04 close on Tuesday evening and I was extremely
close, to the point of writing a draft, to sending out a Flash update that said something along
the lines of “if BTO doesn’t immediately bounce at the open tomorrow, I’m dumping the trading
position”. In the end (and with the realization that tomorrow’s open would depend far more on
the price of gold overnight than BTO itself) I decided to wait and see what Wednesday morning
brought and as gold rallied a little that evening, the pressure was off and I decided to hold as
per.
BTO improved the rest of the week and now that trading slice is the only thing above that isn’t
painted in red. As mentioned last week, I don’t have infinite patience with the new trading
position and will still dump it if gold shows signs of going South. The larger core position will
stay in place, however.
Pretium Resources (PVG) (PVG.to): Last week PVG revolved around the price this short
was set, which is an ok-ish start to the position I suppose, but as I’m thinking near-term rather
than long term on this one it would be nice to see it move under $5 at least in the days to
come. Friday saw PVG rally, but it was only with the market tide, no big deal.
Meanwhile, see Appendix 1 below for a full paste-out of the Q&A between trade rag Northern
Miner and Graham Farquharson of Strathcona that was mentioned over at the blog on Tuesday
(4). It’s a very interesting read, gives the Strathcona position clearly (up to and including the
obvious inferences of how angry Mr F is with the whole affair) and even if I say so myself,
agrees in nearly every major way with your author’s take on the situation last week, the one
that got my purse-strings loose enough to go short on the stock. I’ll make no bones about the
extra shot of confidence I got by reading that NM report you can see below.
Put short, I think Farquharson is making the right call here (well i would say that wouldn’t I?)
and the PVG/Snowden are digging themselves deeper into their non-economic bulk mining hole.
The main problem PVG faces isn’t rah-rah support or bashing from us guys in the peanut
gallery, its the diminishing likelihood that a real buyer steps up for the VOK/Brucejack property
or the whole company. From the soundings I’ve taken among other market watchers and
mining pros, my feeling that no major will touch this project in our current market is bang on
correct and what Farquharson said last week just underscores the amount of uncertainty there
is about the deposit. Happy to be short this name.
Dalradian Resources (DNA.to): On Thursday morning’s news (5) I added another (this time
admittedly very small) sliver and pulled the total cost average down by a penny to 65c. The
news in question was reasonably good too, and at least explained why we’ve had a delay to the
underground development permit that had been expected in November. There’s more to the
situation than just this snippet...
The application for the next phase of underground development and bulk sampling has been
progressing through the Department of Environment's (DOE) planning approval process, with the
Strategic Planning Division of the DOE recently recommending approval of the project. The
remaining steps in the approval process and key milestones that will follow on approval include:
Omagh District Council (final stakeholder) vote on December 2 to ratify the positive
recommendation from the Strategic Planning Division for the underground exploration program
...as a full read of the NR will show, but the key moment is that December 2nd vote by the
Omagh district council that’s will mark the unblocking of development. Assuming a positive vote
(and all signs and noises are that the motion should be a straightforward pass with plenty of
10

local supporters on the company’s side), the paperwork and logistics track should have DNA
moving earth by 1q14, which is a reasonable and acceptable timeline and should see the
company stock rally once the vote’s result is published. In fact, the late week rally (on
moderate volume) is almost certainly the market anticipating good news.
Rio Alto Mining (RIO.to) (RIOM): Up is better than down, so RIO’s performance in line with
the overall moderate sector improvement is to be welcomed, but I’m again forced to conclude
while watching intraday market action that there’s a serious weight being carried by RIO and
somebody, somewhere is keen on keeping this particular cork from popping back. I realize that
I have to be aware of my own bias on this subject (it’s my biggest position and at these prices
it’s the sector stock I’m most keen about, and by quite some distance) but the number of
occasions in which I’ve watched well-timed runs at the bid in RIO turn up, when volume
slackens or when the market day is drawing to a close, is very unlikely to be a coincidence in
my opinion.
Exhibit A: Two two day chart, five minute intervals:
I could expand this and talk of illuminati and a band of specially selected market experts hired
by nefarious forces in order to nobble RIO stock. But there’s no point, this is a market thing and
in the end, the true value of RIO will out. And it’s much higher than the price you see today.
Focus Ventures (FCV.v): Rick Rule bought that big block of FCV last week.
I think (though not sure) that it was for the
funds run by his companies, rather than for
himself, which means if true that the chunk
has been shared around his clients. I also
know that his USA-based fund tried to buy
into the current placement but was stopped by
US SEC rules (FCV.v has no US listing), so last
week is what amounts to a second attempt by
him/his fund to buy FCV. Whatever way it
happened, this was a significant purchase and
it was no surprise to see the stock pop to its
16c close once the block deal was done.
I’m not a buyer at 16c, but maybe a few at
13c if given the chance isn’t out the question any longer. FCV and its new phosphate profile is
attracting the right sort of eyes.
11

Tahoe Resources (THO.to) (TAHO): No news, but THO dropped and maybe, just maybe its
stardust quality is wearing off and it’s ready to come back to its field. Certainly hope so.
Minera IRL (IRL.to) (MIRL.L): After my moaning and groaning of last week, it was good to
see company Pres/CEO Courtney Chamberlain step up and do a good job of stopping the rot by
buying 200k shares for his own position at GBP 9 pence per share. The announcement came
Thursday morning (6) and as the chart
here shows, the reaction was solid and
positive enough to turn what was
looking like another losing week into a
winning one for the stock price.My
cynical side would note that it’s another
example of how this company’s actions
are better than its promotional
capacities, but there shouldn’t be too
much to complain about, here.
As a result IRL rallied Thursday, but the
Friday action is the day that really
catches the eye, with 1.4m shares
changing hands on the TSX and a keen
a persistent buyer on the scene.
Volumes were also pretty good in London trading end-week, though only a little more than the
normal rhythm. Have we finally found a bottom here? It’s be good to think so as this is the
position that causes me personally the most pain right now.
The Copper Basket
After forty-eight weeks of 2013 The Copper Basket is showing a 31.16% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 168.66 288.41 1.71 -49.7%
2 Augusta Res AZC.to 2.43 144.35 259.83 1.80 -25.9%
3 Lumina Copper LCC.v 9.43 43.61 223.28 5.12 -45.7%
4 Reservoir Min. RMC.v 2.41 41.68 192.14 4.61 91.3%
5 Copper Fox CUU.v 0.83 402.96 139.02 0.345 -58.4%
6 Hot Chili Ltd HCH.ax 0.72 297.46 124.93 0.42 -41.7%
7 Nevada Copper NCU.to 3.50 80.5 116.73 1.45 -58.6%
8 NovaCopper NCQ.to 1.80 53.02 111.34 2.10 16.7%
9 Panoro Minerals PML.v 0.62 204.71 65.51 0.32 -48.4%
10 Western Copper WRN.to 1.39 93.68 58.08 0.62 -55.4%
11 Curis Resources CUV.to 0.70 63.13 37.88 0.60 -14.3%
12 Candente Copper DNT.to 0.375 122.05 27.46 0.225 40.0%
13 Yellowhead Min. YMI.to 0.59 63.45 10.47 0.165 -72.0%
14 Oracle Mining OMN.to 0.80 49.03 8.83 0.18 -77.5%
15 Strait Minerals SRD.v 0.08 57.26 2.86 0.05 -37.5%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -31.16%
A 1.5% gain for The Copper Basket that includes seven weekly winners (NGQ.to, AZC.to,
WRN.to, NCQ.to, RMC.v, DNT.to, YMI.to), tow unchanged (CUV.to, SRD.v) and six losers
(LCC.v, CUU.v, NCU.to, HCH.ax, PML.v, OMN.to). The best performance came from from
Augusta Resources (AZC.to up 48.8%) as it rebounded on much better news than the previous
12

week, while the worst losses were seen in Oracle Mining (OMN.to down 26.5%) and copper Fox
(CUU.v down 15.9%)
Copper Basket 2013 average, weekly
12%
8%
4%
0%
-4%
-8%
-12%
-16%
-20%
-24%
-28%
-32%
-36%
13
ht6naj ht02 r3bef ht71 r3ram ht71 ts13 ht41 ht82 ht21 ht62 ht9 dr32 ht7luj ts12 ht4gua ht81 ts1pes ht51 ht92 ht31 ht72 ht01 ht42
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%
To copper market prices and it took until Thanksgiving Day to decide on the move, but copper
did manage to rally over $3.20/lb last week
and get back into its comfort zone price
channel. As a slight aside, the reason why I
prefer Reuters coverage of hard business
matters to most other wires and channels is
that it has a knack of getting to the point
quickly, no flim-flam or attempts at teasing
clickbait headlines to dumb things down.
Here’s an example (7) because here’s the first
paragraph of the note:
LONDON, Nov 29 (Reuters) - Copper
ticked higher on Friday, supported by a
weaker dollar and falls in stockpiles, but
still posted its biggest monthly loss since
June on expectations of growing supply
and tepid demand going forward.
And that’s all you need to know, three simple
and accurate lines of script about copper
which means you are now suitably informed
and can do something more worthy with your
time than read biznews.
And on the subject of those lower inventories, it’s the end of another month so here are our
stocks overview charts right on schedule:
Copper inventories, per month 2012/2013
1000000
800000
600000
400000
200000
0
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von
Mt Cu Copper inventories: percentage held per exchange
80
LME Shanghai Comex 70
60
50
40
30
20
10
0
source: Cochilco
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von
LME Shanghai Comex
source: Cochilco

The trend continues plain as day, with all three of the warehouse systems registering drops
over the November month. The LME still holds over 70% of all stocks however, and as that
warehouse continues to see artificially high cancelled warrant numbers, it’s still a system that’s
being gamed.
By way of a little reminder (as I’ve been prompted on this by a mail after comments from last
week), under normal circumstances we’d expect dropping warehouse stocks to indicate higher
world demand for copper and suggest upward pressure on prices. But due to the way in which
the system, particularly the LME warehousing system, has been co-opted by large financial
entities keen on shifting the system in order to maximize their own profits, over the last year
we saw warehouses stock up with a lot of copper that normally wouldn’t be there, then the
houses stop delivery on the metal while charging people for the right to keep the metals
warehoused. At the same time the financial houses were banking that extra demand would kick
in this time of year (traditionally the time of Chinese re-stocking) so that they’d be able to get
rid of the over-inflated metals stocks at good market prices and win on the sales price too. But
what’s happening now is that the demand hasn’t kicked in to the extent expected and copper
hasn’t risen (or if it has, not by much) and the sales to deflate the stocks bubble haven’t
affected the market price to the upside; in fact, they’re causing downside pressure if anything.
Once the whole overstock situation has unwound, we may (and only may) get back to a point
where the LME system allows true price discovery on copper and other metals. However for the
moment, the whole system is full of false signals and what’s normally white is today black.
As for the weekly figures, world total stocks stand at 589,927mt, down 3.3% on the week. Of
that total, LME stocks are down 3.5% to 423,825mt, Comex continues its precipitous drop and
is 7.6% down on the week to 17,432mt and the Shanghai Futures warehouses dropped by
2.1% to 148,670mt. LME cancelled warrants are still sky high at 62.7% of total stocks.
Cancelled Warrants at LME, IKN157 to date
70%
60%
50%
40%
30%
20%
10%
0%
14
751NKI 061NKI 361NKI 661NKI 961NKI 271NKI 571NKI 871NKI 181NKI 481NKI 781NKI 091NKI 391NKI 691NKI 991NKI 202NKI 502NKI 802NKI 112NKI 412NKI 712NKI 022NKI 322NKI 622NKI 922NKI 232NKI 532NKI 832NKI
source: Cochilco, LME
rof
yrotnevni
EML
%
latot
yreviled
resu-dne
Now for updates on a few of our basket stocks.
Augusta Resources (AZC.to) (AZC): You like ‘em volatile, right? Last week we reported on
the fun and games seen in AZC and its share
price, this week we report on the sudden rush
back up to its previous price on the news (8) that
its despite calls that it would be rejected by the
anti-mining groups in the region, the US Forest
Service has completed the Rosemont Copper
final Environmental Impact Statement and the
draft Record of Decision. This is a big step
forward for the company but it’s not the last, as
there is now a comment and resolution period
after which, the company hope at least, that its
final permits will be approved and issued. I

stated last week the following to wrap up the piece on AZC
For me, this one is an easy call: Avoid. The anti-mining people hit AZC with a
mischievous NR and did significant damage to the share price, but they’re unlikely to
be guardians of the whole and pure truth here. AZC explained its side well enough, but
for one thing there’s clear residual effect of last week and for another, AZC’s poor
track record of disclosure of its problems plus its endless timeline delays setbacks
hardly makes it the type of corporation that’s easy to take at its word, either. So on
this one I’ll remain a sideline spectator.
That remains true today. Even with this resolution, I feel as though AZC is trying to make it into
more than it is and implying the next steps aren’t much more than rubber-stamping. The
problem is that we’ve been here with this company before, so without the necessary trust in
eithe rpro or anti mine positions, staying out the fight is still my best idea.
Panoro Minerals (PML.v): This price chart is elegant in its simplicity. All interest has dried up
in this stock and anyone wanting out (looks like there was one person on Wednesday) has to
sell their chunk, however small, at a discount to market.
The Lottery Ticket Basket
After 48 weeks of 2013 The Lottery Ticket Basket is showing a 38.68% 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 51.00 0.075 -25.0%
2 Eagle Star Min. EGE.v 0.125 79.13 14.64 0.185 48.0%
3 AQM Copper AQM.v 0.08 105.57 12.67 0.120 50.0%
4 Fancamp Expl. FNC.v 0.125 177 9.74 0.055 -56.0%
5 Bellhaven BHV.v 0.14 136.81 5.47 0.040 -71.4%
6 Tango Gold TGV.v 0.13 76.24 3.43 0.045 -65.4%
7 Inca One Res. IO.v 0.12 34.0 3.40 0.100 -16.7%
8 Copper North COL.v 0.10 58.7 3.23 0.055 -45.0%
9 Netco Silver NEI.v 0.125 9.4 2.35 0.250 100.0%
10 Gryphon Gold GGN.to 0.085 194.64 1.95 0.010 -93.5%
11 Darwin Resources DAR.v 0.20 26.16 1.83 0.070 -65.0%
12 Glass Earth GEL.v 0.155 105.67 1.59 0.015 -90.3%
13 Agave Silver AGV.v.v 0.30 21.55 1.40 0.065 -78.3%
14 Rio Cristal RCZ.v 0.025 17.259 0.52 0.030 -88.0%
15 Firestone Ventures FV.v 0.045 36.82 0.18 0.005 -88.9%
Portfolio avg -38.68%
15

Overall there were five uppers (AQM.v, EGE.v, COL.v, IO.v, NEI.v), five unchanged names
(BHV.v, GGN.to, GEL.v, AGV.v, FV.v) and five losers (MLN.v, FNC.v, TGV.v, DAR.v, RCZ.v) and
with that lot the Lottery Ticket Basket average improved by 4.5% overall, thanks mainly to the
rebounds in early-year springer Eagle Star (EGE.v up 23.3%) and late-year springer Netco
(NEI.v up 19.0%), with Copper One (COL.v up 22.2%) the other winning percentage of note.
Losers were modest in comparison and so the basket gets a boost.
25% Lottery Ticket Basket 2013 average, weekly
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
-45%
16
ht6naj ht31 ht02 ht72 dr3bef ht01 ht71 ht42 r3ram 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 ht92 ht6tco ht31 ht02 ht72 r3von ht01 ht71 ht42 ts1ced
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%
AQM Copper (AQM.v): AQM reported its quarter on Friday evening and the main change is
the working capital move, up to $23.15m after the injection of capital, exchanged for the piece
of Zafranal given to the new JV partner, arrived in the company structure. This means that
even if we price AQM’s 30% of Zafranal at zero (they price it at $17.94m, or 17c/share), AQM
as at end 3q13 was worth 22c per share in cash.
For sure I’d agree that cash has been clearly earmarked for use in the development of Zafranal,
with the budget laid out and the burn schedule known to all, but on seeing this kind of
disconnect between price and liquid asset value, it makes all the more sense for project partner
Teck to pick up more shares and, effectively, get a larger portion of Zafranal at a significant
discount.
Firestone Ventures (FV.v): Meanwhile FV also reported but this comapny has the look of a
Zombie. The working cap deficit is rising (now negative $425k), cash if at a tiny $22k and
activity is apparently zero as the company hibernates, waiting like so many others for better
times. However, the chances of this one dying of hypothermia due to lack of food before the
thaw sets in are high. By the way, the same Death Warmed Up look was shown by Glass Earth
(GEL.v) in its financials Friday, just in case you think I’m just picking on one broken stock. In
fact there are several hundred to choose from.
Inca One (IO.v): What we want from the “pure story” exploration junior stock is a united
front and a management team that shows no cracks in its confidence or vision for the future of
the company. What we don’t want is a whole bunch of insider selling (9):

That’s 4,008,033 shares sold in the last ten days of November by two insider officers of IO.v
and a lot of disposal for this kind of stock, people. It also means that both directors (and
Edward Kelly is also the CEO) have sold down their share positions in Inca One to virtually
nothing. When it comes to insider selling, there are acceptable optics, neutral optics, somewhat
negative optics and plain bad optics. It’s less about the size of the cash involved and more
about the intent and style, but class what you see above firmly in the last category of those
four.
Regional politics
Peru: Chindin shows model community relations (hopefully other can learn)
As previewed in today’s intro, here’s today’s main ‘Regional Politics’ piece, written by wool and
fibre expert, Francis Rainsford. Required reading for any company exposed to Andean region
community relations risk.
25th November 2013
NEW INITIATIVE IS A MODEL FOR HARMONIZING PERU’S ALPACA AND MINING INTERESTS
By: Francis Rainsford
Background
Whenever problems involving issues of social conflict arise in Peru it is practically inevitable that the mining sector
is to the fore.
Whereas mining investments can be a source of great wealth to neighbouring local communities with the provision of
employment and social programmes such as road improvements, the building of new classrooms for schools, medical
clinics etc., it can also generate deep resentment in matters affecting the environment - mainly in the field of water
management.
As a rule mining operations consume vast quantities of water, often in areas where the supply is limited.
Unfortunately, too, and despite sophisticated water treatment processes in many cases, contamination of surrounding
land is often a cause of grave concern.
None more so than when mining companies and alpaca farmers are forced to be unwilling neighbours.
The Regions of Puno and Arequipa occupy first and second place as production centres for alpaca farming in Peru
and, almost without exception, the farmers in these two regions are bordered by various mining concerns.
Minera Chindin S.A.C.
One very new player on the scene is Minera Chindin S.A.C., an exploratory mining company set up in 2010 and
which is owned and managed by a Taiwanese family that has invested heavily in two sites in southern Peru.
The company’s President, David Chen, is assisted in the business by his two sons, Martin and Antonio, and has
established Arequipa as the centre of its operations.
Dedicated to the search for copper, zinc and iron deposits, the company has one centre of exploratory excavations in
Pocsi, which is situated on the outskirts of the city of Arequipa and another in Santa Lucia, Lampa in the Region of
Puno.
Its General Manager, Antonio Chen explained, “When we selected the two sites for our operations it was purely
coincidental that they both had connections with alpaca farming. In the case of Pocsi, we learnt that the area used to
farm alpacas some years ago though not any more. Santa Lucia, however, is at the heart of the Region of Puno’s
alpaca farming activities and has been instrumental in focusing our attention to study the needs of our alpaca farming
neighbours.”
A strategic business model for alpaca farmers
A generalistic view of the two protagonists is that, on the one hand, there is the wealthy mine and, on the other, the
poor alpaca farmer. This being the starting platform, the onus is on the mine to conduct itself in a socially responsible
manner in order to keep the peace. Usually, this is achieved by good works such as donations to the improvement of
educational and medical facilities in the neighbouring community.
17

For the alpaca farmer, his existence is one of attempting to overcome an economic trap of trying to earn his living
from a natural resource that has been in decline for at least four decades in terms of the quality of its product.
Specifically, an alpaca that is producing an inferior fibre quality that can only be sold at low prices does not provide
its farmer with sufficient income to live nor to reinvest in his herd. This scenario gets progressively worse as each
season passes.
Countless studies conducted in Peru during many years have highlighted the importance of strengthening the
country’s alpaca population with improved selection and genetic techniques and the fibre processing industry has
indicated that it is prepared to pay better prices for better quality fibre.
The road to a better future has been clearly signposted but the investment required to bring this about has been sadly
lacking. As a result, Peru’s alpaca farmers find themselves fighting a losing battle to survive whilst their mining
neighbours have the luxury of being able to extract a product that never seems to be out of demand and commands
ever stronger prices.
In the case of Minera Chindin’s two sites, the company has embarked on a different approach that encompasses a
strategy of partnership and opportunity for both parties:
a) Pocsi
With the knowledge that the area historically farmed alpacas, an investigation was carried out to determine why this
practice was abandoned and it was concluded that the area’s water table could only support pasture for the animals
for half the year.
In order to rectify this, Minera Chindin has re-routed natural water sources on its 1,600 hectares site to provide
sufficient volume for its excavation requirements which are then purified and recycled to irrigate the current
cultivation of grasses for alpacas.
Shortly, and in partnership with members of the local community, particularly Alcides Nina who is a professor of the
Inca culture and an expert in agricultural cooperative models, alpacas will be reintroduced to graze once more at
Pocsi’s elevated pasturelands at 3,000 metres above sea level with the aim of producing first class fibre for the
commercial benefit of the new partnership.
Additionally, plans are underway to construct a state-of-the-art laboratory on-site to monitor the herd’s genetic
markers so that optimum selection can be employed in breeding.
The introduction of equipment for freezing embryos is under consideration as a means to reach other alpaca farmers
within Peru as well as exporting to other countries such as the USA and Australia.
b) Santa Lucia
The community in Santa Lucia consists of some 500 inhabitants who farm around 4,000 alpacas and llamas on 6,500
hectares of land.
The community’s leader is Pablo Salas who is also Puno’s Regional Coordinador of the Confederación Nacional de
Comunidades Afectadas por la Minería (CONACAMI) - a body that possesses an anti-mining agenda.
Working with an anti-mining activist of many years standing has prioritised the company’s goal of establishing a
firm working relationship where environmentally friendly mining can co-habit with and benefit commercially the
community’s alpaca farmers.
As this site is presently more active in alpaca terms than Pocsi, the company is providing opportunities for the
farmers to improve the quality of fibre through modifications in diet and breeding programmes and for their families
to knit and export their alpaca finished products - an activity traditionally associated with alpaca farming
communities.
Minera Chindin has a good working relationship with Wu Han Jia Yi Lin Trading Co. Ltd., a textile distribution
company based in China. Its General Manager, Xu Li, has spent various months in Peru meeting with the alpaca fibre
processing industry and Santa Lucia’s community knitters to advise on styles and designs for the Chinese market.
Her idea is to use all the alpaca fibre produced on Minera Chindin’s two sites in both top and finished garment form
and sell it in China as a means to promote higher fibre quality and traditional hand-made garments directly from the
alpaca farmers whilst at the same time supporting this new initiative. Any shortfall in supply will be sourced from
other communities recommended by Santa Lucia.
Future
Antonio Chen summarises the advancement of the working partnership between his company and the neighbouring
18

communities on both sites by comparing this new business model to that of the practices carried out during Peru’s
Inca civilisation some 500 years ago.
“Historically the Incas were great miners in Peru, extracting both gold and silver. They also farmed alpacas and
llamas for textile and religious needs. They were successful in combining these activities and, at the same time,
protecting the environment. This fact has been the benchmark for our strategy with our neighbouring communities.”
“I believe that Minera Chindin’s initiatives have created commercial opportunities for its neighbouring alpaca
farming communities that will generate income for them to become self-sufficient entrepreneurs for the years ahead.
As a miner, I have found that I have now developed a new and personal interest in alpaca products, too ! Most
importantly, our partnership has set the way forward for commercial growth based on environmental and cultural
sustainability. This indeed is an excellent strategy for today’s world.”
Antonio Chen of Chindin and Pablo Salas, leader of the ostensibly “anti-mining” CONACAMI
organization who has found common ground and a harmonious working relationship
with Chindin in Santa Lucia, Puno.
Peru: Back to the drawing board for Gold Fields/Buenaventura at Chucapaca
The annual Peru business executives conference, CADE, was held last week in the coastal resort
of Paracas and as usual there little else bar the mutual appreciation, backslapping and political
soundbite generation that these things tend to (under)achieve. However, we did get one
interesting snippet from Ernesto Balarezo, general manager for Gold Fields (GFI) at its La Cima
mine in Cajamarca and the company’s number one guy in Peru, who said that the Chucapaca
gold project in the South of the country in 50/50 JV with Buenaventura (BVN) had been taken
back to the drawing board, the original plan to run it as a lower-grade open pit bulk mine
scrapped and they were now considering it as a small tonnage, higher grade underground
operation potential (10). Some of this was already understood by the local mining scene, but
this is the first time that either company has given solid, on-record information about the
project’s standing (e.g. BVN has been notably reticent to say anything concrete about
Chucapaca’s future in the conferences and pressers it had given in 2013). It’s not so much of a
19

surprise either, but we can now stick Chucapaca and its 7.6m oz of gold that was originally
slated for production from 2015 firmly onto the “delayed until improved market” pile...an ever
growing pile.
Argentina: Cerro Moro to go ahead
On the other hand, better news of development in Santa Cruz Argentina from Yamana (YRI.to),
which made the announcement in a high-profile presser with Argentina’s brand new cabinet
chief Jorge Capitanich, Minister of Federal Planning Julio De Vido and Mining Minister Jorge
Mayoral on hand (11) that the $450m Cerro Moro gold project (from the buyout of Extorre)
would see construction begin next year with a view to first production in 2015. By the way, the
fact that Argentina’s ministerial bigwigs were on hand is not a secondary thing, as putting their
faces on display means that this one is a solid and done deal that’s going to happen (woe
betide YRI if not).
The interesting rub here is that in its official communique YRI said out loud what we’ve
assumed all along; the combo of federal and national taxation along with the difficulties of
getting cash remitted out of Argentina led to the decision to buy and invest in Cerro Moro, gain
asset value and keep its Argentina revenues inside the country, building mines for the balance
sheet’s benefit. And indeed, YRI said at the presser that “the company will make this
investment from the profits obtained as operator of the Gualcamayo mine in San Juan province
and as minority partner in the Alumbrera mine in Catamarca province.
Finally, please note that Cerro Moro lies close to the Minera IRL Don Nicolas JV, also being built
next year. Also, when the Don Nicolas project was green lighted it got the same sort of
ministerial press conference backing.
Mexico: Caballo Blanco in Veracruz again rejected
Just to make sure we’re 100% clear about this project, the one that Goldgroup Mining (GGA.to)
bought from Almaden (AAU) (AMM.to), developed, promoted and then saw blown up by local
opposition. Here’s a report (12) from a local Veracruz newspaper last week (translated):
The governor of Veracruz will never allow the Caballo Blanco mining project to go
ahead, as it is poisonous not only to the environment but also to the health of the
population and that of the State’s economy, said the (Veracruz Region) Secretary of
the Environment, Víctor Alvarado Martínez.
He said the both State and Federal bodies had rejected the approval of permits for the
Caballo Blanco mine operation in the municipality of Alto Lucero.
For the record GGA.to files $64.6m fixed asset value for Caballo Blanco in its latest financial
report, which is over 2/3rd of the total book value it claims for its company. Which goes to show
that it’s not all about numbercrunching and accountancy in this game.
Mexico: Anti-mining groups getting organized
We’ve alluded to this story before, but last week it took a notable step forward when anti-
mining and ecologist groups from all over Mexico gathered in the capital and decided to form
themselves into one national group to fight against mining actvity (13).
The groups are from regions we’ve mentioned on many an occasion in separate protests
against mining operations in Mexico and include (Spanish group titles given, locations and quick
biog in parentheses) Coordinadora de Pueblos Unidos del Valle de Ocotlán (Copuvo Oaxaca,
protesting against Fortuna Silver San José and others), Medio Ambiente y Sociedad de Baja
California Sur (against the San Antonio project of Argonaut Gold and others); Lavida de
Veracruz (against the Caballo Blanco project of Goldgroup Mining and others), Movimiento
Morelense en Contra de las Concesiones Mineras de Metales preciosos (against the Esperanza
Resources/Alamos Gold Esperanza project and others), Tetela hacia el Futuro, de Puebla
(against the Wirikuta region mine projects of First Majestic, Frisco and others) y Pro San Luis
Ecológico/Frente Amplio Opositor FAO de San Luis Potosí (against the New Gold San Xavier
20

mine and others).
The first concrete move of the new umbrella group against mining activity has decided to take
is to collect at least 100,000 signatures that will allow an official petition to the country’s
parliament. The petition is to call for an obligatory “Social Licence” for all mining operations and
new projects that will require a prior consultancy with locals on any project and approval from
the affected community before it can go ahead. According to group spokesperson Romero
González, “The actions that we have taken and will take are moving to defend the land, health
and water over the whole of a country that’s being taken to the edge, above all because of the
delivery of a third of [Mexico’s] territory to mega-mining companies for its eventual
destruction”.
Uruguay: Anti-mining sentiment growing
As of last week (14), two of the 19 departments (i.e. States or regions) of Uruguay have voted
to ban all open pit mining and hydrocarbon fracking inside their borders, as Tacuarembó last
week joined Lavalleja in the blanket banning of these activities. The numbers in headcount
terms aren’t that big (together, those two regions have a population of less than 150,000
people) but the trend is now clear and growing; wherever mining activity is proposed, it’s being
rejected by local populations.
More seriously, as of tomorrow Monday December 2nd, anti-mining activists are beginning a
political and petition campaign to call for a change in the country’s constitution and an outright
ban of all open pit mining in the whole country
Market Watching
The “low cost producer” basket happens next week
As floated for the last couple of weeks on these pages, this idea for a more useful replacement
for the outgoing Zinc Basket, revolving around low cost precious metals producers, is in the
cards for next year. However there’s no rush on this and as I want to take a little more time
and get the plan for 2014 right, I’m going to take one more week before rolling it out. Next
week, thanks for your patience.
Bargains that show at market bottoms (featuring Ryan Gold (RYG.v) Radius Gold
(RDU.v) and Galway Gold (GLW.v))
On Monday evening on the blog, I broke with recent tradition and decided to write a post that,
just for a change, could be of use to the junior market speculator (instead of just holding it
back for this publication and therefore deliberately contradicting everything said back in the
intro to IKN238). It was about Ryan Gold (RYG.v) (15) and came after I’d read the quarterly
report filed by the company that evening. Go read the post for the full idea (or better, read the
RYG filings) but put simply, due to the change in corporate strategy at RYG (including the write-
down and de facto walk-away from its expensive Yukon properties) and the cash still held at
the company, it suddenly looked rather cheap at its until-then 11c share price. In fact RYG now
has around 20c/share in cash and as burn rate is set to drop to tick-over levels in the months to
come, very little of that will be lost until the company’s idea of an opportunity comes around.
Today and at Friday’s close of 13c (touched 14c last week), RYG has a market cap of $1.522m
so there’s still nominal cash value to be had here, not to mention the type of tax credits for
written-off work in the frozen North that would be welcomed by the CFOs in many a junior
mining company. The real chances of you actually being able to buy its $20m cash pile for less
than its face value are of course vanishingly slim, not least because RYG is very much a child of
the Ned Goodman/Dundee stable and its new management team strongly reflect that fact as
well; this one is staying inside his sphere of influence, no doubts. But on pure market valuation,
with a low-burn company now getting zero zip squat valuation for its (still held) assets and its
decent brains trust/goodwill and after that still trading at less than cash treasury, this is all ends
up a bargain.
21

Also, and as mentioned in that quick post on Monday, it’s also exactly the type of thing you see
at the bottom of a market, the mathematically illogical market caps that are not only below the
subjective valuation of book and include fixed assets, but are below the working cap of a
company strongly propped by plain straight cash. RYG isn’t the only one out there either, so
today we feature a couple more that have caught your author’s eye in the last few days.
Not all bargains are bargains, however. Today there are more than a handful of junior
explorecos trading “below cash” (as the cool and fashionable hip people say) but to be truly
attractive we need a bit more than that. Here’s a checklist of things we’d like to see:
• Cash&ST above, at, or (at a pinch and depending on circumstances) slightly below
market cap. This is the most important item because we’re looking for residual value
bargains, but it’s not everything.
• A decent amount of cash in absolute terms. This one is important, because a 1c or 0.5c
share could be trading under cash, but that money could be burned away quickly.
• A low burn rate, particularly if the corporate strategy points to hibernation. A large cash
pile is only useful to us if it’s going to stay a large cash pile, after all.
• A smart management team who know the ways of the exploreco world and tend to look
to the longer term and care more about the share price than personal salary cheques.
• No potential overhang from options and/or warrants at prices close to the current share
price, which could dilute away the price advantage.
• Preferably (though not necessary if the cash held is significantly bigger than market
cap) a decent and prospective exploration asset or two on its books.
And with those in mind, Ryan Gold (RYG.v) as noted above (and on Monday evening) passes
with flying colours. It may not have the juicy and potentially valuable exploration asset these
days, but it does have cash, low burn, smart management and no derivative overhang. But as
noted above, there are more that fit the bill so here are two others that I’ve come up with after
the suitable screening process.
Radius Gold (RDU.v)
One of the more interesting tinycaps we keep a semi-regular eye on via these pages, RDU
announced last week (16) that it was getting nowhere fast with its Santa Brigida exploration
property in Mexico and had decided to hand the property back. That leaves RDU with a few
assets here and there but nothing of real flagship status and as a result of the news, the share
price dropped to finish the week down a penny at 9.5c. Its current share count is 86.676m S/O,
which gives us a market cap of $8.23m and that’s when the fun begins because here’s a
rundown of the cash and marketable current assets held by RDU as at its latest financial, 3q13
ended September 30 (and Friday’s close for the two shares mentioned):
• BTO shares: $8.62m
• FCV.v shares: $0.16m
• Cash: $2.101m
• Total: $10.881
As it happens, other line items in current assets not shown here get very close indeed to
cancelling out the very small current liabilities held by RDU, so what you see above is basically
company working cap, or put another way free liquidity under no obligations. If we then
assume that RDU is running a burn rate of ~$500k/qtr (when it’s not drilling it’s slightly less
than that, but an upper end guesstimate will serve us well enough) we can reasonably estimate
that RDU will end 2013 with $10.3m in liquid assets, even if BTO doesn’t put in a rally from its
22

low $2.22 price.
$10.3m divided by 86.7m shares = 11.9c per share in cash
Now that’s two point four cents per share of free cash and pretty decent value I think,
especially for a company that’s used to sitting out the market and going into survival mode if
things get rough. And what’s more, that current asset value goes up by a penny per share for
every 22.3c that BTO might rally (and seeing BTO at $2.45 is easy to imagine, for me at least).
Plus, any buyer of RDU at under 10c gets a whipsmart management team on its side, headed
by a certain Simon Ridgway who is never seems lacking for a new deal to do.
Galway Gold (GLW.v)
Even after the price pop seen in Galway Gold (GLW.v) last week, this is another exploreco with
cash covering market cap. Here’s the basic math to start the section:
• Shares out: 166.5m
• Share price (as at Friday close): 8c
• Market Cap: $13.32m
• Working cap (as at Sep 30): $13.15m
With an underlying burn rate of (an IKN estimated) $400k per month, we may be around
$12.5m in cash/liquid assets at this point, but that’s still 7.5c per share for an 8c stock and if
things stay tough, this company can keep ticking over for all of 2014 and well into 2015 before
the stocky question of financing comes up. That’s a long ride for your buck in today’s market
and plenty of insurance for the speculator. However once you factor in the reason for last
week’s pop, the value looks even greater and may even be enough to beat out your author’s
aversion to Colombia exposure. Here’s the five day price chart for GLW
and here’s the NR (17) that came out pre-bell on Wednesday 27th that announced a maiden 43-
101 compliant resource at its flagship Vetas property of nearly 880k oz gold (all categories),
including 316k in M+I and 517 in inferred. But what’s really interesting here is the grade, as at
10 g/t Au it holds up very nicely and points to the type of low tonnage, small sized but
economically sound underground mine that’s going to be way easier to get moving in Colombia
than the big and high capex projects that normally grab the headlines.
Put simply, with GLW today you’re getting close to 900k ounces of high grade in-situ gold
nearly for free (and it will be for free if the share price drops just half a cent). For sure it’s
never as easy as that, for one thing GLW is one of the companies working close to the Páramo
de Santurban area that’s still waiting for a decision on the regional park boundary, so if it’s
caught in that things become tougher (though it’s now looking very likely that it’s not affected,
due to physical location and the new government decision on respecting held concession
23

licences (see above)). Then after that you’re still going to have a big battle on your hands to
convince the market to “buy Colombia” after the travails we’ve seen since it lost its fashionable
hotpot exploration region status. However, there’s no doubting the strong financial backbone
and the management team is the very same that sold Galway (ex-GWY) for a very decent win
(the one your author arb’d on and made decent cash, mostly due to dumping this GLW.v spin-
off at the start and getting more than expected for it).
Bottom line
In Ryan Gold (RYG.v) Radius Gold (RDU.v) and Galway Gold (GLW.v) you have three tinycap
precious metals explorers with an awful lot of asset backbone propping up their current share
prices, to the point where the liquidation value of current assets (forget the properties) matches
or outstrips current market cap. This combination is interesting because it’s just the type of
vehicle that gives money a low/no downside to current prices along with the same amount of
potential to enjoy decent upside as any other exploreco if things start to improve in the sector.
As stand-alone trades (or even longer-term investments), they make a lot of sense.
But there is a wider point to be made, too. This type of raging tinycap bargain isn’t for
everyone because of their small size and potential trade volume liquidity problems. But they are
just the type of clear and objective (no subjective opinion necessary on asset value when $20m
of cash is trading at $15m) bargain, the seemingly illogical bargain, that shows up at the
bottom of a market. So even if you don’t decide to wade in and buy some Radius, Galway or
Ryan on the strength of today’s note, take away the signal they’re offering for the long
positions you already hold.
Conclusion
IKN239 is done, we end with bullet points:
• I wasn’t sure about the Eco Oro (EOM.to) trade a couple of weeks ago, but the
situation has improved since then to the point where it’s time to add some more and
take advantage of a very positive political risk scenario that’s now opening up.
However, it’s still a trade, no more no less. The long term future of the company and its
project is for somebody else to worry about, my concern starts and finishes with the
desire to buy low sell high.
• In boardstroke terms, last week was a better one for the junior sector. Gold keeps
confounding its naysayers and refusing to drop towards their $1k bearish dreamworld
and among the miner names there’s evidence of bargains being picked up, particularly
24

for gold names. Silver miners with their metal at (under) $20 look under more pressure,
though.
• It’s about time we saw big blocks of more confident money move into the cheap prices
on offer for Minera IRL (IRL.to) and Focus Ventures (FCV.v). Time will tell whether last
week was the start of a new trend for those two, or whether we lapse back into more
of the same ennui afterwards.
• However, as our treatise on Ryan (RYG.v) Radius (RDU.v) and Galway (GLW.v) shows,
there are true bargains with share prices fully covered by cash these days, which is the
type of thing you’d want to see at the bottom of a bottom.
• If anyone would like to know more about the community relations success story at
Chindin, or get into contact with alpaca fibre world expert Francis Rainsford for more on
the ways in which a little community relations money can go a long long way for a
junior that knows how to spend it well, feel free to drop me a line.
The top long-term picks are Rio Alto Mining (RIO.to) and Minera IRL (IRL.to). I thank
you in advance for any feedback. 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.calculatedriskblog.com/2013/11/schedule-for-week-of-december-1st.html
(2) http://www.caracol.com.co/noticias/ecologia/hasta-enero-se-conocera-delimitacion-del-paramo-de-
santurban/20131130/nota/2028112.aspx
(3)
http://www.elcolombiano.com/BancoConocimiento/D/delimitacion_del_paramo_de_santurban_ya_esta_definida/delimita
cion_del_paramo_de_santurban_ya_esta_definida.asp
(4) http://www.incakolanews.blogspot.com/2013/11/the-pretium-pvg-pvgto-soap-opera.html
(5) http://finance.yahoo.com/news/dalradian-provides-development-exploration-milestones-120000420.html
(6) http://finance.yahoo.com/news/directors-dealing-165300821.html
(7) http://www.reuters.com/article/2013/11/29/markets-metals-idUSL5N0JE22M20131129
(8) http://finance.yahoo.com/news/augusta-announces-completion-availability-rosemont-190200157.html
(9) http://www.canadianinsider.com/node/7?ticker=IO
25

(10) http://elcomercio.pe/cade/1666123/noticia-gold-fields-proyecto-minero-chucapaca-vuelve-fojas-cero
(11) http://www.aminera.com/index.php/mineria-internacional/item/1236-yamana-gold-invertir%C3%A1-450-millones-de-
d%C3%B3lares-en-santa-cruz.html
(12) http://www.elgolfo.info/elgolfo/nota/217390-reiteran-rechazo-a-proyecto-minero-caballo-blanco/
(13) http://www.municipiospuebla.com.mx/nota/2013-11-29/tetela-de-ocampo/anuncia-tetela-hacia-el-futuro-nuevo-
frente-nacional-contra-la
(14) http://www.elpais.com.uy/informacion/votan-contra-mineria-fracking-tacuarembo.html
(15) http://www.incakolanews.blogspot.com/2013/11/noryannogold-rygv-files-its-quarterand.html
(16) http://finance.yahoo.com/news/radius-provides-santa-brigida-silver-191419866.html
(17) http://finance.yahoo.com/news/galway-golds-maiden-vetas-averages-110000778.html
Appendix 1: Q&A Graham Farquharson of Strathcona and Northern Miner, re
Pretium Resources (PVG) (PVG.to), dated Monday, November 23th
Strathcona's Farquharson responds to Pretium's bulk sample result
2013-11-25
VANCOUVER – The resignation of Strathcona Mineral Services from the Brucejack project in early October dealt a
huge blow to project owner Pretium Resources (TSX: PVG; NYSE: PVG), which had been pushing the high-grade gold
project in northwest British Columbia towards a production decision.
As part of that push in the summer Pretium brought in Strathcona to go underground at Brucejack and mine a 10,000-
tonne bulk sample and complete a secondary analysis of the bulk sample using a sample tower. Pretium was privy to
drill data, underground mapping results, and results from the sample tower.
After a few months the consultancy realized it was drawing very different conclusions from the data than had Pretium or
the project's longstanding consultancy, Snowden. Most importantly, Strathcona came to believe Snowden's late 2012
resource estimate for Brucejack was wrong. In particular, Strathcona could not support Snowden's claim that the area
known as Valley of the Kings (VOK) contained 16.1 million indicated tonnes grading 16.4 grams gold per tonne, plus 5.4
million inferred tonnes averaging 17 grams gold.
Pretium had already used that resource estimate as the basis for a feasibility study for Brucejack, which envisions a
2,700-tonne-per-day underground mine churning out 427,000 oz. gold annually for the first ten years of a 22-year mine
life.
Strathcona's assessment contrasts with that vision starkly. In its resignation letter to Pretium, Strathcona said, "there are
no valid gold mineral resources for the VOK zone, and without mineral resources there can be no mineral reserves, and
without mineral reserves there can be no basis for a feasibility study … Statements included in all recent press releases
about probable mineral reserves and future gold production [from the VOK zone] over a 22-year mine life are erroneous
and misleading."
Coming from a highly regarded independent geologic consultancy, Strathcona's resignation and condemnation made
tsunami-scale waves. After all, Strathcona's founder and president is Graham Farquharson, a member of the Canadian
Mining Hall of Fame best known for confirming Bre-X's Busang project in Indonesia as a fraud.
Farquharson does not believe that Brucejack is a fraud. He does believe the resource model is wrong and that the
actual resource at Brucejack could only support a much smaller mine.
Pretium's share price, which fell more than 50% in October, rebounded notably when the company announced there
was more than 4,000 oz. gold in the bulk sample. Through it all Pretium had maintained the bulk sample would contain
at least 4,000 oz. and that such results would validate its model.
Farquharson disagrees. In a confusing twist, it turns out he too expected 4,000 oz. from the bulk sample – but only
because Pretium stumbled on an unknown vein while mining the sample. Such stumblings being unreliable, he says the
problem is not with the bulk sample but with the rest of the deposit, where he is certain the grade is nothing close to 16
grams gold.
The Northern Miner: To start, do you have any comment to make on the results of the bulk sample?
Graham Farquharson: Those results were what we were anticipating: 4,000 ounces of gold production from the bulk
sample, based upon the tower sampling results. It's not any surprise. All the sample rounds that we took out of the
development workings and so on – those were up to the grades that would work out to in excess of 4,000 ounces in the
bulk sample.
26

TNM: If you were in agreement on that, what then were the specific reasons that you left the project?
GF: We gave a lengthy letter to Pretium with our reasons for withdrawing. I think some of the lines from that letter were
made public. But the main item was that we found the bulk sample program, which was composed of different phases
(underground drilling, underground geological mapping, and the results of the sample tower), the main objective of all
that was validation of the resource model that Snowden had prepared in November of 2012.
That was the basis for the feasibility study that Pretium did in June of this year, which suggested it was going to a be a
big mine producing 425,000 ounces of gold a year for the next ten years, within a 22 year mine life. All that was based
on the Snowden model, which had 16 million tonnes with a grade of 16 grams per tonne in the indicated category and a
further quantity in the inferred category – and we didn't find that.
And Pretium didn't find that, when they did all the underground drilling and geological mapping and the results from the
sample tower and so on, so we told them on several occasions that they should be alerting the world that the resource
model was not panning out. The whole objective of the bulk sample program was to confirm whether or not the resource
model was valid and we said it wasn't.
TNM: Looking at the resource model: if it were valid, how many ounces should there have been in the bulk sample? Is it
correct to say you believed 4,000 ounces was a low number?
GF: Not quite, because what did happen in the bulk sample program is that a new vein was discovered called the
Cleopatra vein. It's a narrow vein but very high grade and a very different geological occurrence than what was
anticipated. The Cleopatra vein is not something that would be mined using bulk mining methods, at 2,700 tonnes a day
and so on. It's very high grade material but it's a very narrow vein that you would only be able to mine at a very slow
rate.
At the end, the very good grades in that vein do not substantiate or corroborate the initial resource model, which was
based on big dimensions, big stopes, and the grade of 16 grams per tonne.
TNM: Right. And you do not think there are enough veins similar to Cleopatra to make what happened in the bulk
sample normal in terms of a mine at Brucejack?
GF: No, because they planned for 16 million tonnes, which is a lot of tonnes at that very high grade of 16 grams per
tonne in the indicated category in the resource model. The drilling and the mapping and the bulk sample and so on did
not find that.
TNM: Do you have an idea in where the error would have originated? We know that this is a very heterolithic deposit
with lots of nugget effect – do you have an idea of how Snowden came up with those numbers that you think are so
incorrect? Is it the nature of the deposit, is it the methodology that they're using?
GF: It's the methodology and we pointed that out. It's the interpolation method that they use and of course they disagree
with us. The big challenge with that project has always been: how far do you extract the latent values from the very high
grade assays that are scattered throughout the deposit? It's a very difficult assignment knowing how far to extrapolate
those spectacular assay results
We told Pretium that, from all the drilling they've done – and it's a heck of a lot of drilling – and with the sample tower
results and so on, none of those come anywhere close to finding a grade of 16 grams per tonne, which is what allows
the use of bulk mining methods.
TNM: In general one would assume that the overall grade of a bulk sample would be a more comprehensive test than a
sample tower, but what you're saying is that the bulk sample happened in this instance to get skewed by the presence
of the Cleopatra vein.
GF: The two will agree in the end (the sample tower and the bulk sample) and they will agree with the underground
drilling that they did and that we agreed on. But it is not representative of the rest.
TNM: If you were suddenly in charge of the project, what would you think is the correct path forward for the project from
here? I mean it's obviously a very interesting gold occurrence.
GF: Yes, and we told them that it has an excellent chance of being a small tonnage, high grade mine mining in the
Cleopatra vein and a couple of other similar occurrences that they found in the last drilling program. If they lined all
those up, there's an excellent chance that they could have a small tonnage, high grade gold mine. But they will not have
a mine producing 425,000 ounces a year for the next 20 years as they have been advertising so far.
We’re not saying there's no gold there – this is not Bre-X or anything like that. There is gold there but the project needs
a much different geological model now, based on the work that's been done and the bulk sample program being
different than what they anticipated before they went underground.
And they've been very slow to accept that, because it does make a big change from what they've been telling the
markets. But we're absolutely convinced that if this is what the results indicate, then you should tell the world.
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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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