IKN #240Premium

The IKN Weekly
Week 240, December 8th 2013
Contents
This Week: Hunkering down, A new spate of unsubscriptions.
Fundamental Analysis: Rio Alto Mining (RIO.to) (RIOM): Down sharply.
Stocks to Follow: Overview, B2Gold (BTO.to) (BTG), Eco Oro Minerals (EOM.to), Pretium
(PVG) (PVG.to), Dalradian Resources (DNA.to), Darwin Resources (DAR.v), Focus Ventures
(FCV.v), Tahoe Resources (TAHO) (THO.to).
Copper Basket: Overview, Reservoir Minerals (RMC.v), Curis Resources (CUV.to), Panoro
(PML.v).
The Lottery Ticket Basket: Overview, Inca One (IO.v).
Regional Politics: Is Argentina changing its attitude towards mining?, Uruguay: The mining
debate now centre stage, Central America’s anti-mining groups also organizing, Central
America’s anti-mining groups also organizing, Peru: Buenaventura’s (BVN) costs reduction
program hits a snag, Mexico: Two members of anti-mine opposition to Fortuna Silver (FVI.to)
(FSM) San José mine in Oaxaca reported “arrested” and “disappeared”, Mexico: Talk of two
multi-million dollar FDI mining projects cancelled in Durango, Argentina: Goldcorp (GG)
enjoying the country’s officialdom.
Market Watching: The large cap basket for 2014: Proposed names, Ryan Gold (RYG.v)
Radius Gold (RDU.v) and Galway Gold (GLW.v) update, Colossus Minerals (CSI.to): Scratching
the itch, The validity of 43-101: Follow-up.
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
Hunkering down
I’m giving up on the smaller, trading portion of BTO next week in order to add a bit back to the
cash reserve, this a sign of a market participant going into something akin to hibernation mode
with his funds. Put simply, on a fundamental basis I have no problems with my portfolio
positioning, but I’m just fed up to the back teeth with getting the port battered week after
week and any attempt of sticking head above parapet, however modest (such as buying more
EOM.to early last week) is immediately punished with more heavy selling and downmoves.
Bar very few exceptions whole sector is now oversold or very oversold. We’re due a relief rally
and that might be in order once a particularly vicious tax-loss selling season is done with, but
no matter whether logical and understandable or plain panic madness, there’s no point in
exposing any new cash to the sector until things turn around.
A new spate of unsubscriptions
Your author has seen five people unsubscribing from the service in the past two weeks. Some
have unsubbed from their end, some send me mails like these examples (on which I then act).
The first from reader MB:
1

Please cancel my monthly subscription effective December 31/13. If you could confirm this action
I would appreciate the effort.
As much as I have enjoyed reading your weekly my interest lean towards more senior liquid
resource stocks. Saying that, your research is excellent and I enjoy your hard thankless work
calling a spade what it is and publically exposing some of the junior market players for what they
are, crooks.
Keep up the good work and I look forward to returning in the future.
Thank you,
This one from reader RS:
Good day. [redacted family-related reason] and I plan to get out of the market for the next 6-12
months. How do I cancel my IKN subscription?
BTW, this is no reflection on the quality of your writing, which has been refreshingly honest and
insightful, or your service, which has been top notch. Thanks!
Regards,
First, thank you to MB, RS and others for being subscribers and for sending in pleasant mails to
read. I enjoy parting as friends.
Now for the message: I’ve spent at least the last year and a half advising people to leave this
service, other paid newsletter services on junior mining, the whole sector as an investment
alternative if they’re not comfortable about what’s offered in any/all the above. Along the way
I’ve lost plenty of subscribers and my monthly income is down, but that’s not a problem
because in my considered opinion ther should be more of you taking encouragement from the
examples set by MB and RS above.
Here’s a simple question: The junior mining newsletter business, what has it done for you
lately? Yes for sure you might like reading your weekly missive from me, the monthly event
from some other writer, the near-daily output from some place else but seriously, why are you
paying your money to somebody else in order to read about stock ideas that have failed, non-
stop, for coming on two years and show no signs of turning around in the future, either? This
sordid little corner of the financial world is populated by shysters, two-faced moneygrabbers
and outright parasites that, given half a chance, will lay in all the psychological hooks they can
to keep you paying them cash and transferring as much of your money possible into their back
pockets. And be clear, I’m not making a special case for myself or trying to separate myself rom
the bunch because when push comes to shove (and I might not like the idea):
• In 2012 and 2013, junior mining newsletters have benefitted writers more than readers
• The IKN Weekly is a junior mining newsletter.
• Period. I’ve done financially well from staying at home and writing this letter for the last
240 weekends of my life, I make no bones about it. How about you, what’s your
experience been of the juniors and how they’ve affected your back pocket in the last
100 of those weeks?
This is a parasitical sector of the financial world, with a small population that sucks lifeblood
away from hosts in order to benefit itself. You are the host. So rather than just railing against
scammy mining companies, it’s way past time that the scammy promoters and pushers of the
bullshit that took your money down the toilet got its just desserts too. It’s time that you, the
retail market participant, looked after your money by turning away from the get-rich-quick or
“just a little longer and things will be fine” or (worst of all) “keep the faith” Siren songs of the
quasi-criminals in the letter writing business.
Deprive parasites of their source of nutrition and they die. Quickly. It’s time for you to unhook
from every single newsletter service you currently subscribe to, stand up and walk away from
this world of charlatans, once and for all. The IKN Weekly and all others.
2

Fundamental Analysis of Mining Stocks
Rio Alto Mining (RIO.to) (RIOM): Down sharply
Just when I thought it couldn’t get any worse for the Top Pick stock here, it got worse.
Therefore we take time out in Fundamentals to consider the angles and what might happen in
the weeks to come. We’ve got to the
point where I’m receiving sympathy
mails! Thanks for those (you know who
you are) and I agree with the sentiments
offered as well, but instead of shaking
my fist at the sun it’s important to
remain practical and on-topic.
First, let’s consider the price action over
the last few days, which can get a visual
via several methods but a 10 day chart
that puts RIO.to up against the gold
bullion ETF (GLD) does the job as good
as any other. Late in the previous week
(mid-Wednesday to mid-Friday) we had
a bit of a rally, when RIO.to benefitted from a modest rise in gold. It couldn’t hold the best of
the gains however, and Friday the downturn began. Cut to this week just gone, gold jigged
down Monday and the stage was set, and another four days of unremitting sales was handed to
long-suffering longs (perhaps you, definitely me).
Now for sure RIO.to wasn’t the only stock to suffer, but 1) its losses were far greater than most
and 2) it comes on the back of a whole bunch of weeks of doing exactly the same thing. We’ll
consider why this might be further down this piece, first let’s cover the reasons why it’s not
happening (and answer several mails received all at once). It’s not, repeat not, operations at La
Arena. Nor is it any unexpected corporate financial glitch, wrinkle or problem at Rio Alto Mining
the company. On the contrary, things are going very well for RIO operationally at least (yes,
we’re offering crumbs of comfort today) so here are a few details.
First my reliable La Arena contact* has updates on production at the mine and they’re in line
with our best expectations. Here’s the monthly production numbers, which are known up to
September (the Peru Mining Ministry publishes the figures) and estimated for the 4q13 months.
Obviously it’s not possible to do much more than estimate the current month of December, but
the 22,300 oz gold produced/sold in October and the 23,000 oz gold produced/sold in
November are going to be very close to reality.
RIO.to: Monthly gold production figures
27500
25256 23000
25000 24401 23000
22300
22500
20144 19560 20184
1 2 7 0 5 0 0 0 0 0 16692 17639 1542615091 15998 17039 15635 15431 18109
15000 12887 1379313670 12897
11871
12500 1071210114
10000
7500
5000
2500
0
3
21naJ bef ram rpa yam nuj luj gua pes tco von ced 31naJ bef ram rpa yam nuj luj gua pes tco von ced
Ozt Au
source: MEM/IKN ests for 4q13 months

Which adds up to something like this:
RIO.to: 2013 quarterly sales, guidance vs result
68000
70000
guidance
59157
60000 result
48427
50000
40000 36355
30000
20000
10000
0
1q13 2q13 3q13 4q13
source: RIO data, IKN ests for results /4q13
The gold column are the quarterly production guidance given to us by RIO.to at the beginning
of the year (which, by the way, won’t be a company strategy for FY14 because they see it now
as creating a rod for their own backs; FY14 will be an annual guidance figure only) and the dark
red columns the production for each quarter. The bottom line here is that 4q13 looks set to
beat guidance by nearly 10,000 oz and if my 68k guesstimate is correct, annual gold production
will be a tad under 212,000 oz total, which beats the annual upper end guidance by a couple of
thousand ounces (RIO.to guided for 190k to 210k oz, which means it will meet/beat guidance
for the third year running and not many miners out there can say that). A final thought here is
that the chances of RIO.to beating my 68k call for 4q13 are quite high (e.g. my monthly count
already has 300oz missing from the quarterly).
As for current operations at La Arena, her and now and in December, it’s a case of no news is
good news because the mine is running smoothly, correctly and well. The no news = good
news rule also applies to community relations at and around the mine, which are in good order.
Next to the corporate side, and word is that RIO.to has just collected part of the money owed
to it by the Peru taxman from the IGV (rough equivalent of VAT or sales tax) paid in 2q13. No
bad news here either and the way in which things
RIO.to: Cash treasury per qtr
are going, the previously studied IKN financials
100
model for RIO.to looks in line with reality as well.
90
Here’s just one of the charts (not going over them 80
all), which pitches cash&eq treasury at $53m 70
60
come the end of 4q13. A lot depends on how gold
50
finishes the year of course and the current prices, 40
nearer $1.2k than $1.3k, aren’t helping the 30
forecast parameters, but even if gold remains soft 20
10
I’d expect RIO.to to have $50m in the treasury at
0
end quarter/year. This is not inconsequential cash
and what’s more, the lowered costs profile and
higher production we’re expecting for 2014 and
beyond means that RIO.to will remain profitable
and keep adding to its balance sheet position in the quarters and years to come, unless gold
really caves in dramatically on us of course.
Not inconsequential profits, either. With a reasonable-guess 12c/share net EPS in the cards for
4q13 and added to the 9c of 3q13, just by taking a straight line through those results and
comparing them to tonight’s share price, we’re looking at a company with a 3.2X P/E ratio and I
don’t care where you come from or what you do to make money, that’s a crazy cheap price for
a stock and as long as gold doesn’t cave in completely on us, the low cost production schedule
that RIO.to now has lined up (nearly all the hard work and extra stripping is now behind us and
the fleet gets reduced in the next financial year, not to mention the benefits from the drop in oil
price and the connection to the Peru national electricity grid scheduled for mid-2014) gives us
4
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 tse31q4 tse41q1
source: company filings/IKN ests
srallod
fo
snoillim

the prospect of the same type of quarterly operating profits in 2014 and 2015, minimum. We’re
now at the bizarre point that even if RIO.to finds absolutely nothing else to do with its cash and
can’t find another project to develop (i.e. worst of a worse case), it could end its corporate life
by distributing $2 a share. And that’s a lowball, easily reached figure.
But it’s also an extremis option for the company as the most likely situation is one where mine
life is extended at La Arena by new oxide deposits and/or the Stage 2 sulphide operation, along
with any number of other potentials in Peru and beyond to expand corporate ops (you might
have noticed, assets are going cheap these days).
So, why is RIO so cheap today?
That’s the big question. If everything is fundamentally sound then why is this company ‘s stock
being sold at such a deep discount, one that gets deeper by the week? Last week I took some
crumb of comfort from an unsolicited mail received from reader ‘R’, an industry pro (brokerage
side) who also takes a keen interest in RIO.to. He met with officers of the company last week,
on leaving his meet got in contact to agree with my position on the company and opined that
the market is wrong about RIO and is getting more wrong by the day. So much for that, but he
then went on to say...
“I don’t expect the share price bleed will stop before tax loss selling is
done and don’t believe that anyone is relying on any sort of analysis on
the mining stocks at this point.”
...and that sounds right to me. Tax loss selling this year has been brutal (not just in RIO.to) but
when you have a liquid and traded company that starts dropping fast, under present market
circumstances with larger instos and funds looking for tax offsets (that might have done very
well with tech, biotech, bank etc stocks and are looking for the counterweights) the selling can
quickly turn into a vicious circle that spirals well outside the normal bounds of logic.
However, reader R also said that the selling isn’t likely to stop until the end of the tax loss
season (December 27th) so under his scenario, which makes sense to me, we have another
couple of weeks of rocky road to get through.
Finally and before wrapping up, I’m going to cover all bases by mentioning the contents of a
mail received from long-time reader T, who talked TA to me. Not my thing of course, but T said
“I see the daily, weekly and monthly RSI values for RIO are 22.02 / 23.15 / 24.57”. As I didn’t
know what that meant I asked for a little more enlightenment, to which he replied “I use it as
an indicator of if a stock is oversold or overbought. Based on the RSI values I see, and every
thing else being equal (ie company is not sliding into bankruptcy), I think the stock is oversold”.
Apparently a score of under 30 in all three of the areas indicates accumulation time (at least I
can jive with the idea of the contrarian nature of the indicator). Anyway, make of that what you
will.
The bottom line to Rio Alto Mining (RIO.to) (RIOM) today is that the company is far from
an optimum situation, especially for someone like me who’s bought in and has ridden the thing
down through all the handles. However, one man’s crisis is another’s opportunity so the basic
points are:
1) There is nothing wrong with the company. It’s operating well, it’s producing a
record amount of gold this quarter, its costs profile is in fine shape, it will make a profit
this quarter and in all quarters to comes over the foreseeable future, as long as gold
doesn’t completely fall apart pricewise.
2) It’s being dumped by larger holders in what looks like very aggressive tax loss
sellling. We probably have to go through the same until the end of December. The
dumpage has turned into a vicious circle and the selling has taken on its own dynamic,
5

unconnected with anything approaching logical fundamentals
3) There’s a present opportunity to buy RIO.to and an extreme discount, either
now or in the next couple of weeks, that’s too tempting to resist even for a heavily
bought in investor such as I. Again gold is the caveat, but come the end of the month
and before RIO reports its production in 4q13 (probably week two or three of January)
I’m close to certainly going to buy more stock and play the rebound. I thought sub-$2
was a crazy price for the stock and that’s my mistake; the real crazy price is here and
now today and the craziest part of all is that it could get even cheaper if the selling
frenzy comes to a head in the days to come.
Of those three points, number one is by far the most important. Operationally the company is is
fine fettle and anyone trying to whisper to you otherwise at the moment is doing so for their
own ulterior motives. It’s not the first time I’ve been through the wringer on a stock position, it
won’t be the last, and the value trap has already sprung on me. But the underlying numbers
hold no argument, RIO is mightily oversold and no matter what your company or sector,
oversold stocks bounce back.
*Located in/around the town of Huamachuco and most definitely not anyone at board level, I want to make it clear
that no directors were harmed in the making of this intel
Stocks to Follow
It wasn’t all down, what with the Tahoe Resources (TAHO) short gaining 9.0% and Focus
Ventures’ (FCV.v) mini-rally continuing through the week. There were two unchanged stocks on
the week (DNA.to, NET.v) as well.
But that leaves nine of the 13 positions as losers and there’s no pretending on this once again,
the overall portfolio took a hard knock. The worst loss, in both percentage and personal back
pocket terms, was Rio Alto (RIO.to down 16.0%) with Eco Oro (down 15.4%) the other big
loser. Other losses seemed inside the most recent trading ranges and are a little more
palatable, it’s the latest round of RIO.to downdraft that did the damage round here and we
discuss that stock’s present-day in some detail below.
We have 13 open positions on our ‘Stocks to Follow’ list, two less than our self-imposed
maximum. All of the open positions are losing money.
6

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$1.37 -29.1% best LT value
Minera IRL IRL.to hold C$0.35 22-jul-12 C$0.15 -57.1% top pick called at 24c
Longs
B2Gold BTO.to hold C$3.07 28-nov-12 C$2.13 -30.6% sold 1/2, rest rides. Quality
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.69 -40.0% solid biz model, LT hold
Rio Alto Mining RIO.to str buy C$2.34 07-jun-13 C$1.37 -30.3% added Oct'13 avg down
Eco Oro Min. EOM.to hold C$0.50 22-sep-13 C$0.33 -34.0% st pol risk play, added
Dalradian Res EOM.to hold C$0.65 27-oct-13 C$0.60 -7.7% Avg down again
B2Gold BTO.to selling C$2.22 28-nov-12 C$2.13 -4.1% ST trade, didn't work
Shorts
Tahoe Resources TAHO short U$13.10 08-apr-13 U$16.18 -23.5% port hedge, easy2b short
Pretium Res PVG short U$5.38 22-nov-13 U$5.57 -3.5% new short, news driven
Smaller/Riskier
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.165 -5.7% revised tgt 25c
Darwin Res DAR.v hold C$0.10 14-jul-12 C$0.065 -35.0% 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.
B2Gold (BTO.to): Selling trading position. If I thought BTO was a waste of time from here
I’d sell them all, therefore the decision to pull the plug on the newish near-term trade and take
a small loss (most likely, unless something very perky happens to gold on Monday morning) is
all about my portfolio and nothing about the company. It’s a question of reducing exposure and
adding a tranche of cash to the treasury, it’s simple port management.
7

Eco Oro Minerals (EOM.to): Yes, I thought I was smart to have snagged some bits 37c stock
early in the week and averaged down my overall position price to 50c. I then had the dubious
pleasure of getting my “smart” move handed back to me on a platter when on Thursday
somebody, for their own reasons,
decided it was time to liquidate their
position. The result can be seen here.
The reasons for the selling are unknown,
but it’s apparently not connected with
developments at the grassroots level on
political risk. That’s because the big day
seems to be December 12th (i.e.
Thursday this week) when all sides,
miners, enviros, politicos etc, sit down
for the round table talks on the future of
the Páramo de Santurbán, where (quite
literally) the line is to be drawn and how
the government plans might be funded.
I’m still convinced that EOM (and other mining companies) are slow-playing a winning hand
here, as there have been enough comments to suggest that the mining projects and
developments in the Vetas municipality of the near-Páramo will not be included in the regional
reserve boundary and allowed to continue. This is backed up by complaints already coming
from anti-mine environmental groups that the government is being “held hostage” or has been
corrupted by the mining companies and their cash and that the discussions set for next week
are something of a charade.
The downturn in price last week was a personal bummer, but the reasons to hold on here are
still intact. December 12th may be the day when the skies are cleared and if all goes well, we
get the overdue upmove. If potentially market moving information comes my way, it’ll come to
you in a Flash...literally. One way or another, December 12th should provide decent clues on
whether to hold or fold EOM and all signs point to better things for the miners than for the
treehuggers.
Pretium Resources (PVG) (PVG.to): The stock jumped early week on the NR (1) that
handed us new drilling results, but the rally
topped out quickly once it had sunk in
there’s was nothing particularly new here.
We know PVG has ultra-high grade thin
intercepts in otherwise marginal host
material, the NR Monday simply added to
the confirmation.
Once the rah-rah news had worked its way
through Monday, PVG spent the rest of the
week revolving around U$5.60, which is a
reasonable result as far as I’m concerned.
Though it would have been nicer to be
short on a stock that follows the wider
market more closer and therefore counter
some of the serious pain felt in RIO, the
short in PVG is set up for other reasons and as it’s very much flavour of the month, it’s going to
react in its own way at any given moment.
But there was one weird thing, about the drill results of last week that should be mentioned
here. No matter which hole, every time PVG reported an uncut ultra-high grade intercept, the
8

width of the intercept was exactly 0.5m. That happened 13 times. I honestly don’t know why
that should be, perhaps the geos decided that when one of the big grading sections were hit,
the best way of getting a uniform return would be to analyse a standard 0.5m strip of the drill
core. Looks odd to see all those 0.5s lined up like that, though.
Dalradian Resources (DNA.to): For me, the best performing stock on our list last week (yes,
including the FCV.v long and the TAHO short).
DNA started the week well, then Tuesday
morning right on time announced (2) that the
ratification vote we made mention of last week
had come through without a hitch and that all
was now in shape for the underground
exploration development at Curraghinalt starting
early next year.
The 10 day chart seen here shows that the price
in which you can buy DNA shares nowadays is
60c (pay more or bid a little lower if you like, but
that 60c line looks like the place), while volumes
without being market-breakers show small but
regular activity. The difference between DNA and so many other issues out there last week was
that it showed no signs at all of weakness or bid-hitting. It probably helps at a time like this to
be a stock away from the general volume and trading limelight, but all the same (and as noted
in EOM.to), it only takes one seller to throw in a towel, for whatever reason, and these things
drop hard. With EOM.to there are buyers at 60c.
Darwin Resources (DAR.v): A bit of positive news from DAR, despite the general apathy
around the stock and the half cent drop on the week. DAR announced (3) on Tuesday it had
started its second drill program at Suriloma and as previously laid out, it’s after deeper targets
identified from IP resistivity surveying which may turn out to be a sulphide gold resource (if all
goes well). With this early December kick-off, we should probably look for first results in
January. Meanwhile and more topically, trading volumes were very poor all last week and
there’s not much reason to expect change on that until the drill results newsflow comes.
Focus Ventures (FCV.v): One of the few bright spots in our list to talk about, but still hardly
setting the world on fire. The main news was decent when FCV delivered on Monday morning
when the announcement (4) it had
successfully closed its $1.5m placement
and had the funds it needs to do its
exploration and drilling at its (relatively)
new phosphate targets in Peru. Also as
the filings show (5) company bigwig
Simon Ridgway took $100k worth of the
placement (we expect Mario Szotlender to
file around the same amount too, but no
sign on the SEDI system yet) so the
insiders are in with skin (another company
stalwart, Ralph Rushton, took 100k shares
of the deal).
As for the price action, good that it was
half a cent up o the week for sure, but
volumes were basically tiny (2k and 3k days) so there’s precious little we can read into that.
FCV is now set fair for its plans and the likelihood is that next real news will be from the drill
machine in 1q14 from its Bayovar drill program, which is set for two rigs that will drill 20 holes
for a total of around 3,000m, in order to test the company thesis that there’s a lot more
9

phosphate that’s as yet undiscovered on the property (the neighbour plays and the geology tell
them this). I’m looking to make the trip up and see the drills turn if possible (late January/ early
February) because FCV, unlike so many other juniors right now, may have found itself in a
sweet market spot and be worth watching much more closely.
Tahoe Resources (THO.to) (TAHO): Smart marketwatcher PS Dave over at Vancouver
Venture has also had his eye on the strange, gravity-free performance of Tahoe Resources
(TAHO) (THO.to) over the weeks and
months of 2013, noting on several
occasions how it’s managed to avoid
the downturn in silver while all about it
wither and fade- In the latest in his
series, dated last Tuesday December
3rd (6) he posited that the stock might
finally be breaking down and coming
back to the field. Here right is the chart
he used in his post and TAHO does
have that rollover look about it all of a
sudden. In local political/community
risk news, no developments of note and
as we’re now in the shadow of the
Christmas break, we’re not likely to
hear anything from the court cases
brought against TAHO by local
residents until the new year.
The Copper Basket
After forty-nine weeks of 2013 The Copper Basket is showing a 31.38% loss to level stakes.
company ticker price 1/1/13 Shares out Market Cap current pps gain/loss%
1 NGEx Resources NGQ.to 3.40 168.66 269.86 1.60 -52.9%
2 Lumina Copper LCC.v 9.43 43.61 235.06 5.39 -42.8%
3 Reservoir Min. RMC.v 2.41 41.68 225.91 5.42 124.9%
4 Augusta Res AZC.to 2.43 144.35 206.42 1.43 -41.2%
5 Copper Fox CUU.v 0.83 402.96 153.12 0.38 -54.2%
6 Hot Chili Ltd HCH.ax 0.72 297.46 118.98 0.40 -44.4%
7 Nevada Copper NCU.to 3.50 80.5 107.07 1.33 -62.0%
8 NovaCopper NCQ.to 1.80 53.02 101.27 1.91 6.1%
9 Panoro Minerals PML.v 0.62 204.71 75.74 0.37 -40.3%
10 Western Copper WRN.to 1.39 93.68 53.40 0.57 -59.0%
11 Curis Resources CUV.to 0.70 63.13 34.09 0.54 -22.9%
12 Candente Copper DNT.to 0.375 122.05 23.19 0.19 49.3%
13 Oracle Mining OMN.to 0.80 49.03 10.05 0.205 -74.4%
14 Yellowhead Min. YMI.to 0.59 63.45 9.83 0.155 -73.7%
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 -31.38%
The overall basket dropped again last week, but this time only by a stingy 0.22% thanks to
some decent-sized upmove from a few of the inmates. There were just five stocks that made
gains (LCC.v, CUU.v, PML.v, RMC.v, OMN.to) but of those, four of them were double digit
gainers. The moves in Panoro (PML.v up 15.6%), Oracle (OMN.to up 13.9%) and Copper Fox
10

(CUU.v up 10.1%) weren’t much more than technical type rebounds or making up for seriously
overbought lost ground on low volume
trades, but the move in Reservoir Minerals Copper Basket 2013 average, weekly
12%
(RMC.v up 17.6%) was stellar, genuine
8%
and on news and raised volumes. It’s 4%
0%
hands-down the star copper junior of
-4%
2013 and is now third on our market cap -8%
graded list (it started the year in 10th -12%
-16%
place). -20%
-24%
-28%
Apart from the one unchanged (SRD.v),
-32%
the others lost ground on the week. The -36%
worst downmove came from Augusta
Resources (AZC.to down 20.6%) as the
market still scratches its collective head
over its permitting track chances, with
other significant drops from Candente Copper
(DNT.to down 15.6%) and Curis Resources (CUV.to
down 10.0%).
All this while the copper price did OK, as seen here.
Early week it struggled under our $3.20/lb line in
the sand, late week it outperformed the precious
metals and rose, mainly on the solid U.S jobs
numbers and economic expansion expectations.
Over at inventories, as from this week we’re going
to drop coverage of the LME cancelled warrants
figure because it’s become a false witness to the
market action. Until the time comes when the
people running the warehouses stop rigging the
game and holding back supply via the constant
churn of stocks, there’s nothing to be gained by its
tracking. That’s partially true for the more classic
warehouse inventory numbers as well, because the rise higher and drop lower in warehoused
copper in 2012 then 2013 has been totally artificial and done by the large money in order to
prop up end-user prices. However, we’ll keep following those (and sending out the end-month
charts) because we can at least get a useful signal when the latest drop bottoms out.
Therefore, today we have world copper stocks at 566,088mt, which is 23,839mt or 4.04%
down from this time last week. Inside that figure, LME stocks are at 408,100mt (down 3.7%),
Shanghai at 141,670mt (down 4.7%) and Comex at 16,455mt (down 5.6%)
Now for updates on a few of our basket stocks.
Reservoir Minerals (RMC.v): Word was
already out that RMC had something for the
market to chew upon, so when the news hit
Monday (7) there wasn’t that much surprise
about it containing good news. What we got
was another round of very high quality drill
intercepts, headed up by the very impressive
FMTC-13-41 hole that included an intercept of
166m grading 6.65% copper and 7.75 g/t gold
(that a 11.29% CuEq if you need that number,
but really the single metal intercepts tell you
everything you need to know). The location of
11
ht6naj ht02 r3bef ht71 r3ram ht71 ts13 ht41 ht82 ht21 ht62 ht9 dr32 ht7luj ts12 ht4gua ht81 ts1pes ht51 ht92 ht31 ht72 ht01 ht42 ht8
source: IKN calcs, TSX data
31/1/1
morf
egnahc
%

the holes indicate (though it’s still a little bit of guess work and more holes are required) that
the mineralization found in previous holes continues and I’ve seen reasonable brokerage
guesstimates that these results have added 15% to 25% to an already sparkling resource.
With the combo of grade, big name sponsor and size that’s now growing RMC at Timok has a
lot going for it and the share price pop last week is fully justified. It’s also proof that even in
these worst of times for exploration stocks, the market can and will react correctly to a genuine,
world-class discovery story.
Curis Resources (CUV.to): Is it time to go long this stock? CUV might be down 10% on the
week, but that was more about a late-Friday
(what looks like) single seller and of no great
import.
Meanwhile, news from the Florence Copper
project last week is that the company has started
the official ball rolling on its legal action against
the town of Florence for its attempts to block the
project development. It filed a notice of claim
against the town of Florence and attached a
valuation for the property of $403m which, says
the company, the town will have to pay if they
decide to go ahead with their plans to change
the nature of the land in question under an
eminent domain bill. On the other hand, if they don’t go ahead Florence Copper will then be
allowed to get on with its job of producing at its in-situ copper development (or so says the
company).
The notice of claim is a first step and means the company has 180 days in which to file its full
legal suit. What it seems to be looking for at this point is the town to back down and allow the
copper mine to happen (the best report on the development I’ve read is here (8) by the way, it
goes into the angles and although it comes from a pro-company standpoint does a good job)
and that might even happen. However it’s not one to hold your breath about for the time being
and there seems to be a lot of local politicking, including some upcoming local elections, in play
so it’s highly unlikely that the situation is as cut and dried as it might seem. Overall, on this one
I’m leaning towards staying away until some definitive movement happens from one side or the
other and if the company does indeed get its way, missing out on the first upmove but buying
in quickly on the news to ride up the second flush of share appreciation sounds like a plan. At
the very least, I’d expect no movement from the town of Florence until the full suit is served
against them and after that, it’d be a case of gauging their response. One to keep an eye on for
a punctual trading opportunity though, that’s true.
Panoro (PML.v): Just 1,000 traded shares Thursday (with zero Friday) changed the stock
price from 29c to 37c, which is all you need to know about the interest and liquidity now being
suffered by this stock. Avoid, it’s going nowhere despite that apparently eye-catching
percentage move this week.
The Lottery Ticket Basket
After 49 weeks of 2013 The Lottery Ticket Basket is showing a 39.00% loss to level stakes.
12

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 15.43 0.195 56.0%
3 AQM Copper AQM.v 0.08 105.57 11.08 0.105 31.3%
4 Fancamp Expl. FNC.v 0.125 177 9.74 0.055 -56.0%
5 Bellhaven BHV.v 0.14 136.81 4.79 0.035 -75.0%
6 Inca One Res. IO.v 0.12 34.0 3.40 0.100 -16.7%
7 Netco Silver NEI.v 0.125 9.4 2.73 0.290 132.0%
8 Copper North COL.v 0.10 58.7 2.64 0.045 -55.0%
9 Tango Gold TGV.v 0.13 76.24 2.29 0.030 -76.9%
10 Glass Earth GEL.v 0.155 105.67 2.11 0.020 -87.1%
11 Gryphon Gold GGN.to 0.085 194.64 1.95 0.010 -93.5%
12 Darwin Resources DAR.v 0.20 26.16 1.70 0.065 -67.5%
13 Agave Silver AGV.v.v 0.30 21.55 1.29 0.060 -80.0%
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 -39.00%
Just three stocks went up on the week
(GEL.v, EGE.v, NEI.v) while six went 25% Lottery Ticket Basket 2013 average, weekly
down (BHV.v, AQM.v, TGV.v, COL.v, 20%
15%
DAR.v, AGV.v) and the other six 10%
stayed unchanged. The big upmoves 5%
0%
were in Glass Earth (GEL.v up 33.3%) -5%
-10%
and Netco Silver (NEI.v up 16.0%),
-15%
while the big downer came from -20%
-25%
Tango Gold (TGV.v down 33.3%).
-30%
-35%
-40%
-45%
Inca One (IO.v): I’ve been informed that the inside selling observed recently in IO.v and
featured in IKN239 last week is in fact a Gypsy Swap mechanism, where the two insiders are
selling to third party in order to raise money for a private placement of new shares. The end
result will be the directors receiving restricted shares for their previously free-trading shares,
the company with cash to move forward on its development and a share structure with more
shares outstanding. In other words, what we’re witnessing is a company raising capital using a
slightly exotic but legal and recognized method to raise capex cash.
This is, of course, a better angle on proceedings and negates much of my negative commentary
from last week. However I’m still very leery about the way in which this company is going about
its business and I’m not in any rush to take a piece, however small.
Regional politics
Is Argentina changing its attitude towards mining?
I’m not a big fan of putting question marks in titles, but exceptions are there to prove rules and
in this case, it’s pretty apt.
One of the more interesting presentations at the Scotia mining conference last week came from
Geoff Burns, CEO of Pan American Silver (PAA.to) (PAAS) and in particular his comments
13
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 ht8
source: IKN Weekly data, TSX
2102/1/1
morf
egnahc
%

regarding an apparent wind of change (perhaps a light breeze) in Argentina towards mining
activity. As well as running the Manantial Espejo silver mine in the country, PAAS has been well
and truly stymied on its massive Navidad project in Chubut region for years, but according to
his comments things might be getting better. A decent report was filed on the presentation by
Alex Emery of BN Americas (which makes a pleasant change, because I remember his
mediocrity when he worked for Bloomberg) which you can read on link (9) below, but here are
a few direct Geoff Burns quotes from the note, to set the scene:
"We're starting to see a glimmer of hope that we haven't seen in two-and-a-
half years," Burns said Wednesday at the Scotiabank mining conference in
Toronto. "Things are changing right now in Argentina."
Chubut province now appears to be ready to ask the company what it needs
to go ahead with Navidad, according to Burns. "I've been waiting for (them to
ask me) that question for the past year-and-a-half," Burns said.
"It's been a difficult place to work, there's no doubt about it. You never know
what's going to happen day after day," Smith said. "But there's definitely a
mood for change as they work towards a transition to the next presidency.
IKN back and now for a personal view, which boils down to “believe it when I see it” on
Argentina. One thing that strikes me about the Geoff Burns presentation (both the report above
and the show itself that was on webcast) was that he made very little if any distinction between
local/provincial political issues and national political issues, often fudging the line between the
two. In fact, the only thing that was specifically said about Chubut (home of Navidad) is quoted
above, and on closer examination that’s nothing more than an “apparently they want to talk”
instead of “they want to talk” or “we’re talking”. In my experience that’s a stretch on relations
with any government, let alone an Argentine government. Also, let’s be clear that Burns has an
active interest on putting things in a best possible light and also, his (and his board’s) track
record on calling Argentina on a political/risk level is poor (else they wouldn’t have sunk
hundreds of millions into the place and be in the current hole to begin with). I’m taking all the
above with a large pinch of salt.
We repeat: At a national Federal level, Argentina has been, is and will be pro-mining and is
looking to attract business (or at least gives the nice talk, while other things such as its macro
economic policy deeds turn prospects away). However, the main sticking points are at regional
level and the will of provincial governors, governments and citizens to accept mining projects
and operations into their area. Some are pro-mining (San Juan, Santa Cruz) some are anti-
mining (Mendoza, Rio Negro), and some fall between the two. Until there are clear and obvious
green lights, ones that comes with legislative backing, there’s no reason to buy into the pitch
here.
Uruguay: The mining debate now centre stage
A couple of weeks ago we made mention of the growth in anti-mining sentiment and resistance
to the industry in Uruguay, with protest groups now getting together and petitioning the
population for a change in the country’s constitution that would ban all open pit mining
activities, amongst other measures. We also made mention last week that two departments
(i.e. regions, states) of Uruguay have passed their own resolutions to ban open pit mining
inside their borders (it’s unclear whether those regional by-laws will hold up against national
law, hover). That number is now three (arguably), as on Friday last week (10) the southern
San José department government last week passed its own “we don’t want any open pit
mining” resolution and instructed its parliamentary representative (the equivalent of senator) to
begin a national level debate designed to legislate and control the activity.
Today we see the other side of the coin, as last week President Mujica signed into effect (11)
the large-scale mining bill, which gives official approval to the big scale projects, particularly
those of iron ore such as the Aratirí project owned by Indo-Brazil’s Zamin Ferrous.
14

It is no coincidence to see the rise of anti-mining activity at the same time as official national
government policy approves of the industry and for perhaps the first time ever, Uruguay now
has a rise in the debate on whether it should be a host to mining activity.
Central America’s anti-mining groups also organizing
Last week we reported on the conference of anti-mining organizations over the length and
breadth of Mexico, who have decided to come together under an umbrella organization and
pool resources in the hope of becoming a better, bigger voice in the national debate.
This week the same back-story, just a different location. Last Thursday and Friday (12), some
30 groups that oppose mining projects and activities in the Central American countries of
Nicaragua, Honduras, Guatemala and El Salvador, along with support from experts in mining
matters from Ecuador and Mexico, met in Managua Nicaragua and resolved to join forces in
order to fight the presence of large-scale mining projects and operations in their region. As one
of the organizers of the event explained (13), “The basic premise is that we want to join forces
and share experiences, in order to create a single block across Central America, in order to
counter the presence of (mining) companies at a regional level”.
Or for another quote, another representative from El Salvador, one David Pereira, explained the
the union of forces was urgently needed, as the communities affected by mining, normally poor
and in rural areas, find it very difficult to defend themselves against the large transnational
companies. He said, “The mining companies take advantage of the poverty in which the people
live and tell them they’ll leave poverty behind and, who doesn’t want to stop being poor these
days? But they hide the real impact of mining.”
Peru: Buenaventura’s (BVN) costs reduction program hits a snag
Covered in plenty of places (even a couple of English language reports on this one), last
Wednesday workers at Buenaventura’s (BVN) Uchucchacua silver mine in central upland Peru
went on strike to protest the laying-off of workers at the mine, as well as the decision by the
government (via Ministry of Work declaration) to call any strike action illegal (14). According to
BVN management, the workforce has stopped all machinery from operating and blocked all
entrances to the mine. As Uchucchacua is Peru’s biggest single dedicated silver mine (10.4m oz
produced last year) this is a significant event which also underscores that a company in Peru
saying that it will make significant cuts in its operating costs is much easier than a company
making significant cuts in its operating costs. Part of the problem here is in fatc the inverse of
the normal, as Peru’s organized union presence in mines such as Uchucchacua is both weak
and fractured. There is no equal opposite with which BVN sits and negotiates and historically
that has suited the company, but the trend of employees gaining (and believing they deserve)
more a fairer rights in a growing economy such as Peru’s is now playing against the traditional
employers’ rather arrogant attitude towards its employees (and it has to be said, BVN has one
of the worst reputations locally for employee conditions and treatment, as well as the lack of
concern it places with community and social issues).
Mexico: Two members of anti-mine opposition to Fortuna Silver (FVI.to) (FSM) San
José mine in Oaxaca reported “arrested” and “disappeared”.
This story began on Thursday at 7am, when according to somewhat confusing reports (15)
Olegario Víctor Ruiz Martínez and Salomé García López, married couple and two members of
the anti-mining groups fighting the presence of Fortuna Silver (FVI.to) (FSM) at San José,
Oaxaca, Mexico, were apparently picked up by some police operation (some of the confusion
lies here, as some state they were arrested by people in plain clothes that showed no official
police ID, others (16) said the arresters wore Federal Investigation Agency flak jackets) and
taken to parts unknown. Since Thursday, nothing is known of their whereabouts
We’re not jumping to conclusions here (let’s leave that to the anti-mining reactionaries) and
there’s no reason at this point to suppose that anything nefarious has gone on, but we are
15

watching this one for any developments because if the story takes a wrong turning, it’s the type
of situation that can cause a flashpoint and really bad press for the company. Watching brief
here, and if anything does happen between now and next week that needs immediate
coverage, it’ll be for a Flash update.
Mexico: Talk of two multi-million dollar FDI mining projects cancelled in Durango
According to (17) Durango gold mining impresario Jaime Gutiérrez (who refused to name the
two projects, two “multi-million dollar” mining projects set for development in Durango State by
foreign capitals have been cancelled. The reason in Gutiérrez’s words: “...due to the new taxes
that these companies will have to pay as from next year, under the tax reform law, to which we
also have to add the drop in the market price for metals.”
Argentina: Goldcorp (GG) enjoying the country’s officialdom
Last week Goldcorp (GG) was fined (18) a little over ArgP$20m (around U$3.3m at the official
exchange rate or U$2.1m at the unofficial street rate) for a series of infractions found by
inspectors when they visited the Cerro Negro gold development project. Problems encountered
included a lack of water for workers at the camp and the mine site, unhygienic or shuttered
bathrooms, unhygienic canteen conditions and storerooms in bad conditions.
This is the biggest of four fines imposed on the company since its arrival at Cerro Negro, with
three smaller ones levied in 2012. GG has been given leave of appeal on the latest fine.
Market Watching
The large cap basket for 2014: Proposed names
The idea to replace the failed Lottery Ticket basket with coverage of bigger cap mining names
was floated a few weeks ago and got a lot of support from readers, so from then to today I’ve
been pondering on the bets way of going about the exercise and how it can best help the
overall coverage of our main area of attention, junior mining companies. After due
consideration, these are the criteria I’ve moved to in bullet form:
• The single overriding factor in choosing the names is to have a basket
against which we can judge, benchmark style, the performance of the junior
mining companies we cover, own and follow in The IKN Weekly (that’s the only
bit underlined in the list). There were several ways to approach this new feature but in
the end I want it to be useful in two ways, firstly to show how the bigger boys are
getting on in a tough market and secondly to gauge whether it’s worth our time playing
the juniors or whether the larger cap plays are an altogether better place for our money
in 2014.
• I don’t want it to be a mere “GDX tracker” or “Precious Metals” tracker basket of
companies, because if so it wouldn’t bring anything new to the table. It hasn’t been
easy to blend the names to make it distinct from the large and established index or ETF
trackers either, but two things that help are 1) to have all components equally weighed
for the overall basket and 2) our normal habit, as seen in the other baskets, of paying
attention to the performance and development of individual stocks.
• I want a range of company sizes, with representation from the largest of the large
caps as well as established smaller names. For that reason I’ve imposed a “$1Bn
market cap minimum” on the companies allowed in the basket and I’ve tried to be
representative of a range of sizes from large to small.
• It’s not all about gold. Miners that have gold as their major product are a strong
feature, but they’re not exclusive either and as you’ll see from the list, there are mainly
silver names as well as one company that derives more revenue from copper.
16

• I feature profitable mining companies, preferably bottom line profitable but
acceptably operationally profitable, even at today’s lowered metals prices. Therefore,
the list components are chosen to reflect strong operations margins companies and
ones that will be able to continue generating cash flow as long as metals prices don’t
crash wholesale from here.
• In the case of these larger-scale miners, some preference has been afforded to
companies that have already bitten the balance sheet bullet and written down asset
values in 2012 and 2013 (e.g. recent high-profile examples NEM and ABX, but there are
plenty more).
• Geographically, I’m looking to reflect the focus of our normal IKN coverage, that’s
to say lots of LatAm, The Americas to a lesser extent, then a smattering of world over.
• They all have USA tickers with the exception of one, (and even Fresnillo, FNLPF, is
at least buyable on the US OTC). This because if the need or desire arises, I might
want to actively go long or short the name(s) and the US is a better place for shorting
activity (as previously discussed).
So with those the main points, here are the ten names I current prefer and suggest as the
basket for 2014:
company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 34.25 1040 35.62 34.25 0.0%
2 Goldcorp GG 21.06 812 17.10 21.06 0.0%
3 Barrick ABX 15.40 1000 15.40 15.40 0.0%
4 Newmont NEM 23.02 497.87 11.46 23.02 0.0%
5 Silver Wheaton SLW 19.83 357.39 7.09 19.83 0.0%
6 Fresnillo (uk) FRES.L 757 736.89 5.58 757 0.0%
7 Agnico Eagle AEM 25.45 173.43 4.41 25.45 0.0%
8 Pan American PAAS 10.29 151.41 1.56 10.29 0.0%
9 B2Gold BTG 1.99 651.4 1.30 1.99 0.0%
10 First Majestic AG 9.09 117.02 1.06 9.09 0.0%
all prices in U$, except FRES.L which is priced in GBP Portfolio avg 0.00%
One main point here: These are only suggestions, there’s nothing set in stone yet and if you
have a better idea for any name (or are particularly against including any company you see
above), it’s not too late to change my mind. I’ve juggled with several other ideas (just as five
others, BVN, KGC, TCK, PPP, TAHO).
To repeat; what I’m going for here is a bunch of stocks that can help us track a size of miner
that’s normally left untouched here at the Weekly (with exceptions, such as the lower-end
market cap B2Gold), and thereby give us a good idea of the way in which juniors compare in
terms of leverage etc. On a second level, the stocks are chosen because it’ll be good and
healthy to pay attention to large, profit-making mining companies as it’s an area I’ve neglected
here over the years and you never know, some close observation may lead to an active trade
with real money on the line.
To wrap up, all your thoughts and ideas on the above are welcome and adjustments can still be
made, but this list will go live and replace the moribund lottery ticket section as from 1/1/2014.
Ryan Gold (RYG.v) Radius Gold (RDU.v) and Galway Gold (GLW.v) update
Last week’s piece “Bargains that show at market bottoms” featured three stocks that have a
great deal of tangible asset backing to their share prices at the moment. Let’s see how they’ve
got on since then:
17

In brief, RYG is up ~4% but on such tiny volume that it’s basically untradeable. GLW is down
~6% and RDU is down ~10%. The message is that nobody wants a bargain, which is its own
market signal.
Colossus Minerals (CSI.to): Scratching the itch
There’s something about a wholesale project blow-up and disaster that’s difficult to ignore;
rubbernecking auto accidents is a thing as well, they tell me. Our call to definitively ignore
Colossus Minerals (CSI.to) (COLUF) went up a few weeks ago when the stock traded around
20c. Since then it dropped a bit, then rose again above 30c for a day on some sort of
speculative buying from the ultra-risk marke brigade but the bubble was burst in conclusive
style on Friday morning (during a trade halt) when CSI bit the bullet and admitted (19) the
obvious; they need more money and time to complete Serra Pelada.
The latest estimate of a $70m shortfall was also delivered with the tacit message (both big and
small Sandstorms, big backers until now, offered up NRs under trade halts and were hit
themselves at market) that there wasn’t anyone out there ready to add the necessary finances.
This project has turned into the archetype money pit and even ‘The Sandstorms’ seem to have
decided to stop throwing good money after bad (they’re lining up their investments as write
downs/offs for the end of the year, according to the simple reading between the lines of their
respective NRs). This leaves CSI with the
“choice”, known where I grew up as
Hobson’s Choice, of delaying start-up
development and fixing matters such as the
de-watering of the mine before proceeding
any further. The result is in the 10 day chart
here, which doesn’t need a whole bunch of
words by way of extra description
The question of whether CSI in its present
form is rescuable is a tough one. With a
share price beaten under 20c, raising around
$70m in straight equity financing in order to
get the mine to production (and even then
assuming that “this time they’re serious”, there will be no more delays and the mine will work
as planned, all of which are assumptions that take a lot of swallowing) would mean at least
tripling the current ~175m shares outstanding total (plus a whole bunch of warrants), which is
the type of prohibitive dilution that immediately prohibits a speculative bet.
As for debt financing, if I were the boss of a junior banking executive who came to me with the
idea of ploughing $70m into the track record of CSI in this current market, never mind its still
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high political risk profile with the ongoing COOMIGASP problems, I’d fire that junior banking
executive on the spot.
There is the potential for CSI to sell a part of its (today disputed by some inside Coomigasp, but
most probably defensible against accusations) 75% holding of Serra Pelada. Its fixed assets are
priced at $300m on the books today and that’s basically the mine. At today’s asset price, CSI
could sell 25% of Serra Pelada (to the Brazil government??) for $70m and we’re home free but
as $263m of that is covered by exploration and development of Serra Pelada and has never
been written down, the way things stand today it’s very doubtful that’s the true value of the
asset and a write-down is long overdue.
No folks, this one is as sticky as they get. The single piece of advice here remains a very clear
“avoid” call and for that to change, first we’re going to need to see progress on the
troublesome de-watering to the point where the mine is stabilized and under managed control.
We’ll need some sort of resolution and peaceful outcome to the community risk factor, too.
Unless things go very, but very well for CSI in the next six months, the chances that this
corporate vehicle never sees the production of a single ounce of gold and its share price goes
much lower than today’s are mightily high. Stay away.
The validity of 43-101: Follow-up
Last week, two articles from Kip Keen of Mineweb caught my and many other eyes. The first
was a report of the round-table event at the Scotia mining bash last week which featured an
exchange between Clive Johnson of B2Gold and Joseph Conway of Primero (P.to) (PPP) (20)
that covered plenty of ground but along the way included this snippet:
Conway: I can tell you 43-101 is a piece of garbage. It's not worth anything.
Johnson: It's a joke.
Conway: It's a joke. It's not protecting you guys in any way, shape or form.
Johnson: Absolutely.
Johnson: What we typically see where it falls apart is the block model. We just
say, give us your data...it usually fails right there. The extrapolation that
they're using for their reserves and resources is probably completely out of
whack relative to the geostatistical information or data that is there.
Moments later Johnson shared a thought; a bit in jest, but not entirely so,
perhaps.
Johnson: We've often talked in our group that one day, some day in the future
when we're ready for a change, it'll be interesting to take a technical team like
ours and start our own little fund. And with the ability to judge things, and I'm
sure you guys have that as well, I can tell you for sure that fund would be
short more than it would be long.
The note was quickly followed by the reproduction of a mail Keen received from an anonymous
“P. Geo”, who spoke a lot about the old-timer ways and the pressure put on report compilers
(21). Again most interesting, thought-provoking reading that’s highly recommended, especially
for the context of what follows here.
Along the winding road of IKN, I’ve been lucky enough to have made friends and acquaintances
(some physical handshakes, some appreciated virtually) with a wide range of people in the
mining trade. Many of them are experts in their field, such as long-time reader “W” who comes
from a highly experienced geological background and was kind enough to write in with the
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following last week, as well as give permission to share it with a wider audience (just one or
two minor redactions to protect both guilty and innocent, nothing in the message has changed)
as long as W’s ID is kept off the map (in his words, “I insist that it is anonymous – no lights for
me, let alone limelights”). His thoughts were about 43-101 and its usefulness thereof, sparked
by the Mineweb reports references above. Here’s W:
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
I have very little respect for the NI 43-101 system and agree with those panelists that if we
could, after reviewing the reports, we would short most company stocks who hold the
asset(s)! My thoughts:
1. The U.S. has had a “certified geologist” classification state by state for a very long time;
today, I believe that every state requires an exam for certification. Most of the work is for civil
projects, construction, etc., but there is a qualification hurdle!
a. Such geologist must have professional liability insurance (because he/she
is accountable for their work)
b. There is an oversight body
c. There are sanctions and “blacklisting”; “black lists” are generally published
in the state’s professional newsletter
Thus, while NI43-101 and JORC have provided some standards to abide by, in the end, no one
is accountable for these standards. When a company contracts a 3rd party to write a compliant
report, who is ultimately responsible for that report? The company? The 3rd party?
Everybody collectively even though the QPs may be responsible, but not really accountable,
for only certain chapters in the report? Generally, the 3rd party has a “hold harmless” clause in
their contracts, i.e., if there is a foul-up, the client still must pay for services rendered and the
3rd party gets a “do over” (this was inserted after the Hatch debacle at Galore Creek). Huh!
Early on the 3rd parties would have a disclaimer that essentially said “here are the data, this is
the way I interpret all of it, and I am not accountable for that interpretation”. Huh! With
respect to oversight and sanctioning, I will give you an example of an extreme case – a
Qualified Person was rendered guilty by the Canadian courts of violating a CA by using data
“unlawfully” acquired to advance a project, thus his client lost rights to the project. No
sanctions. Huh! No accountability, no meaningful oversight, no consequences. Morality and
ethics…….?????????
2. Resource – the basic CIM definition is “reasonable expectation of economic extraction”; the
SEC definition is “mineralized material”, i.e., it is not a reserve, but could be, or not. I agree with
the old-timer’s assessment of the process, for which you graciously provided a link.
a. On compositing, a company geologist can request that the compositing be
limited to defined boundaries for extrapolation, i.e., hard boundary, but if the 3rd-
party modeler or geologist (rarely are they one in the same person) says no
way, it’s “no way, dude!”
b. On shareholder-funded science projects, the tables with a range of cutoff
grades are just bullshit to me! The counter-argument is that they provide a
sensitivity – for what? Using the old timer’s logic, the cutoff grade is that which
can be mined at least break even or with a very small margin. How does a
0.2% Cu cutoff for a sulfide project meet that criteria – I don’t care how big the
pit or plant is, you just can’t make money on 0.2% Cu (that’s 4lb/t recoverable
or $12.80/t rock at today’s prices)!
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c. On NI 43-101-compliant Feasibility Studies, any worthy Jr.-company Board
would request a peer-review study before making a construction decision even
though the banks and/or possible suitors would do their own study, or review,
anyway. The old timer’s suggestion would make that a formal process with
his/her 2-track approach, but that would lead to a Strathcona-Snowden pissing
match (except that Pretium is actually mining/producing gold from a bulk
sample that Strathcona says is not a resource; imagine if it is all based on only
drillholes). Also, it opens the doors for lawyers (who quickly moved in on
Pretium after Strathcona’s statement) – who’s right? It goes to the old timer’s
point that in the old days, if a geologist/engineer “misguided” the shareholder, it
is because he trashed a project that came good later.
d. On common sense, the old timer is right. But as he aptly points out, we are
victims of a perverted system. In the old days, an underground vein mine
would be run very well if it had 2 years of reserves year after year, decade after
decade; with the current system, nothing is acceptable to the market unless
there are many years of reserves, and certainly no banks would finance such a
project without a reserve tail beyond the maturity date.
IKN back. When times are good, systemic weaknesses in the chain of mining development,
from resource discovery to eventual operation, are either left undiscussed or are plain ignored
because there are too many people making too much money. However (no need for evidence
to this educated audience) we’re not in those times now. Blame is being apportioned here and
there, with the first line of whipping boys so far the plethora of junior mining companies that
have promoted moose/llama/wildebeest pasture on the market and benefitted from easy (aka
dumb) money. But the blame cannot and should not stop at the door of the promoters, as
theirs is only one segment of the whole mining scene that needs to change for the better. My
personal bugbear are the parasite promoters and assorted mining hangers-on. We (and I very
much include myself, so yes I am looking to put myself out of business here) are in need of
some direct effect supply-demand economic lessons, another way of saying “unsubscribe from
the parasites, stop feeding them, let them starve and disappear”. Meanwhile, reader “W” points
the finger at another den of iniquity above, which can often be associated with the BS-
purveying junior but is also guilty as hell of profiting without being accountable for their
deceptions and lies.
If you believe the junior industry needs a shake-up, you’re in good company. However, it’s clear
from this observer, one with one foot inside and one on the outside looking in, that there’s a lot
more to do than just cosmetically scrape away a few hundred dead explorecos and then ride
the next upwave in metals when it comes.
Conclusion
IKN240 is done, we end with bullet points:
• Seriously folks, consider how much you’re spending on newsletter subscriptions (this
one and others) and consider how much value you’ve been getting for your money.
There are too many people making easy money by writing this tosh that should be
flipping burgers, if you ask me.
• It’s difficult for me to bang on the table about Rio Alto (RIO.to) (RIOM) at this point,
because it’s boy-who-cried-wolf material. But shameless I am and the number compel
me to state that we are faced with one of those rare buying opportunities in a stock.
I’m going to hold fire until the end of the month comes around, but it’s nearly time for
the reserve money to be dusted off and put into play.
21

• It’s tough to get too enthusiastic about the market today, even for a near-term trade
set-up (the GLW/RDU/RYG trio show the lack of interest in obvious though small
bargains). With that said, Curis may turn out to be one to follow more closely as if the
Florence town council blinks, there’s a lot of untapped value in this equity at-or-around
60c.
• To clean up the sector properly, the number of juniors in the market has to drop. The
number of parasites hanging on to the sector has to drop. And the system of resource
disclosure needs to be fixed, too. There’s a long way to go on all three of those, so in
the meantime I’m going to try my hardest to keep looking for and backing the good
guys when I find them. Two of those are mentioned in the next lines under “The top
long-term picks”.
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://finance.yahoo.com/news/pretium-resources-inc-underground-exploration-110000265.html
(2) http://finance.yahoo.com/news/dalradians-application-underground-approved-123000033.html
(3) http://finance.yahoo.com/news/darwin-commences-stage-two-diamond-134500609.html
(4) http://finance.yahoo.com/news/focus-closes-1-5-million-133000211.html
(5) http://www.canadianinsider.com/node/7?menu_tickersearch=FCV+%7C+Focus+Ventures
(6) http://vancouverventure.blogspot.com/2013/12/tahoe-finally-breaking-down.html
(7) http://finance.yahoo.com/news/reservoir-minerals-reports-drill-intervals-215242246.html
(8) http://www.trivalleycentral.com/florence_reminder_blade_tribune/news/florence-copper-price-for-our-property-is-
million/article_a312146a-5d25-11e3-a15b-0019bb2963f4.html
(9) http://www.bnamericas.com/news/mining/argentina-is-in-the-mood-for-change-on-investment-policy-silver-producers
(10) http://www.aminera.com/index.php/mineria-internacional/item/1356-junta-departamental-de-san-jos%C3%A9-
busca-limitar-miner%C3%ADa-a-cielo-abierto.html
(11) http://mineriaenlinea.com/2013/12/uruguay-mujica-autorizo-a-aratiri-y-la-declaro-mineria-de-gran-porte/
(12) http://elmundo.com.sv/opositores-a-la-mineria-en-centroamerica-forman-coalicion-en-nicaragua
(13) http://www.elnuevodiario.com.ni/nacionales/304281-opositores-a-mineria-centroamerica-forman-coalicion-
nicaragua
(14) http://gestion.pe/empresas/buenaventura-trabajadores-mina-uchucchacua-paralizan-produccion-huelga-2083024
(15) http://www.diariodemexicousa.com/desaparecen-a-pareja-por-oponerse-a-minera-canadiense/
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(16) http://www.nssoaxaca.com/estado/31-general/68988-ddhpo-investiga-caso-de-activistas-de-san-jose-el-progreso
(17) http://mineriaenlinea.com/2013/12/mexico-cancelan-2-proyectos-extranjeros-de-mineria/
(18) http://www.aminera.com/index.php/mineria-internacional/item/1357-multaron-a-la-minera-gold-corp-por-
m%C3%A1s-de-20-millones-de-pesos.html
(19) http://finance.yahoo.com/news/colossus-minerals-provides-153000507.html
(20) http://www.mineweb.com/mineweb/content/en/mineweb-canada?oid=220817&sn=Detail
(21) http://www.mineweb.com/mineweb/content/en/mineweb-whats-new?oid=220936&sn=Detail
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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