IKN #251Premium

The IKN Weekly
Week 251, March 2nd 2014
Contents
This Week: Ukraine, Fed Watch.
Fundamental Analysis: NOBS report in Salazar Resources (SRL.v).
Stocks to Follow: Overview, Darwin Resources (DAR.v), Eco Oro (EOM.to), Santacruz Silver
(SCZ.v), Pretium Resources (PVG.to) (PVG), Gold Resource Corp (GORO) Lara Exploration
(LRA.v), Focus Ventures (FCV.v), Coro Mining (COP.to), Rio Alto Mining (RIO.to) (RIOM).
Copper Basket: Overview, Augusta Resources (AZC.to) (AZC), Oracle Mining (OMN.to), Curis
Resources (CUV.to).
Low Cost Producer Basket: Overview, First Majestic Silver (FR.to) (AG).
Regional Politics: Argentina: More stability, Chile: Pascua Lama coming back to life, Uruguay:
Pro-mine progress, Peru is “Mining Country Sponsor” at PDAC.
Market Watching: You are about to be bombarded with picks, Gold flat and that’s ok.
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
Ukraine
I almost published a short piece on the Ukraine this time last week. It was only a six or seven
lines long but as the end result of the piece wasn’t much more than “this is why we own gold
bullion”, once it was laid down it looked out of place so I spiked it. After all, this is LatAm junior
mining and the word “Ukraine” has never been mentioned on these pages before, so adding a
few superfluous words and becoming one of the insta-experts on a new geopolitical topic...well,
it didn’t seem right. But today a word is necessary, because the whole Ukraine situation has
spookily gone in almost exactly the way my lines of last week had indicated (though you’ll just
have to take my word on that one, no proof is left, not even in a personal draft). I’m not
claiming expertise on the geographical location either, but I know a person who does because
by some quirk of fate, my wife (a Peruvian) went to university in Kiev and resided in the city for
six years. As well as knowing about the people, politics, culture etc from first-hand experience
she’s kept in touch with friends etc over the years and basically has forgotten more than us
mortals know about the country. Her first reaction last weekend was “Watch out for Crimea and
the East, they’ll want to be part of Russia, not part of Ukraine”. And as the Crimea events have
unfolded over the last few days, she’s been pointing at a region called Luhansk (aka Lugansk)
on the map (find it in the far eastern corner of your handy map of the Ukraine) and saying
“Crimea is a picnic compared to what can happen there”. In short, a pragmatic Ukrainian
(interim) President might let the Crimean peninsula go back to the Russian rule it prefers but if
the East of the country starts voicing its intent to break away hot war could soon develop. This
from another point mentioned by the wife, as she notes how most Ukrainians recognize that the
Crimean Peninsula is more Russian than Ukraine, therefore it’s going to be slightly difficult to
whip up the necessary motherland defence feelings among both public and soldiery. On the
other hand, they start trying to take lumps out of the East of the country and there will be hell
to pay.
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Today’s note still comes with a simple bottom line of “this is why we own bullion”, but addenda
of “a lot of nat gas runs from Russia through Ukraine to western Europe” and also “a lot of
wheat gets grown in Ukraine”. Unfolding events are obviously not inconsequential for the world
economy, but be clear that there are some very direct consequences for some important
primary commodities in the mix, too.
Anyway, own gold bullion, that’s all I really wanted to say about Ukraine.
Fed Watch
To mark cards of the traders among you remember that once PDAC is behind us we have the
US jobs report coming on Friday 7th, the first under Janet Yellen’s official tenure. Here’s how the
unbeatable US macro website Calculated Risk kicks off its coverage on that event (1):
“Employment Report for February. The consensus is for an increase of 150,000 non-
farm payroll jobs in February, up from the 113,000 non-farm payroll jobs added in
January.
“The consensus is for the unemployment rate to be unchanged at 6.6% in February. “
So now you know. Also a quick personal comment on Fedthings; from what I’ve seen to this
(admittedly early) point from down here looking up there, Yellen has done a smooth and
unruffled job of informing the US politicos/the market of the Fed’s position and forward
strategy. Sure there have been no big surprises or jolting data to make public, but neither have
there been faux pas or signs of stage fright. This is good, no matter what your opinions might
be regarding the content of the Fed message.
Fundamental Analysis of Mining Stocks
This week we take a look at Salazar Resources (SRL.v):
NOBS fundamental report dated March 2nd 2014
Salazar Resources Ltd. (SRL.v)
Company Overview
Salazar Resources (Canada: SRL.v, USA: SRLZF, Frankfurt CCG.f) is an exploration stage
junior mining company operating in Ecuador. Its flagship is the Curipamba VMS project in
Bolivar region of central Ecuador, containing the main exploration target of El Domo. Current
(estimated) share structure is as follows:
Shares out: 56.123m
Options: 0.97m
Warrants: 4.8m
Fully diluted shares: 61.89m
Current share price: $0.27
Market Cap: $15.15m
Approx cash per S/O: $0.01
All prices are in Canadian dollars unless stated. Forex U$0.90=CAD$1
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Overview
I can hardly believe it myself, but here we are writing up a piece on a junior exploreco in
Ecuador. However, the difference between Salazar Resources (SRL.v) and the bullshit brigade
that’s also found in this country is that:
• In Fredy Salazar, SRL is a company run by a serious professional.
• It doesn’t try to hide the fact that working in Ecuador is difficult and has done a good job
with its community relations.
• It has a genuine, world-class deposit in El Domo
• It has a major backer waiting in the wings as a potential source of financing
What follows is a few pages of analysis that can (and will) be summed up with “risky, but the
rewards could be very good”, so if you’re not looking for a high risk play this isn’t one for you.
But as ever, value is only ever a function of price and at its current dirt cheap share price level
plus its total-off-radar profile, SRL has a lot going for it. However, in order to keep things as
concise as possible (yeah I always say that and always fail miserably) some part of a full
analysis get left aside today (e.g. the financials overview which doesn’t shed much light, or the
location and geo-stuff). Instead we concentrate on three main aspects:
• The PEA as announced last week, plus what it means to key inside shareholders
• The project economics and resulting potential valuation
• The political/community risk factor, a key element in Ecuador.
So let’s get on with it.
Why SRL today
In short, the news from last week (2). To flesh that out a bit, SRL had promised a Preliminary
Economic Assessment (PEA) for its main ‘El Domo’ deposit, part of the larger Curipamba
concession in Central-West Ecuador, by the end of last month but as these things often go, we
saw nothing from the company until last month. Then came a new 43-101 resource number,
followed earlier last week by key metallurgy results (which weren’t bad at all). However the main
event was saved for Friday when SRL announced its PEA and the numbers are nothing short of
sparkling. Ecuador or not, it would have been remiss of me not to have at least commented on
what SRL offered up last week in this edition of The IKN Weekly and as the analysis went
deeper on Friday evening, the call was made to make it into a concise style of NOBS report that
focuses on the potential economics of El Domo.
The PEA details
Well, perhaps not the details, but the main points to consider and SRL offered up parameters
including the following (3) italicized bullet points, which are presented with some personal
commentary in between to help get the idea of what El Domo can do for us:
• Mine life of 14 years split into 9 years for open pit (at 2,000 tonnes per day) + 5 years
for underground mining (at 1,000 tonnes per day).
At this point we’re not going to consider what would amount to a second stage underground
operation, because El Domo will almost certainly win or lose its build decision on the early year
economics and that means the initial nine years of open pit mining. That’s what interests me
here today and what follows is a scenario built solely upon the open pit, with the U/G as
potential and unrealized gravy.
• Total open pit production -which has been factored for mining extraction and mining
dilution- of 6,213,029 tonnes (79% Indicated and 21% Inferred resources) at 2.06% Cu,
2.98% Zn, 0.39% Pb, 2.90 gr/t Au and 57 gr/t Ag.
Those grades are very impressive. What happens in a VMS is that you get pods of polymetallic
mineralization and it doesn’t always come out evenly (some quarters or years offer up more
copper, other more zinc etc). But on overall financial modelling we can average out the
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production to all metals in any given year. We have also been given a good indication of
recovery percentages and metallurgy parameters from last week’s earlier NR, so those can be
applied to each metal on a average-out basis when it’s time to build the spreadsheet model.
• Total waste production for open pit of 46,220,572 tonnes. Mining strip ratio of 7.44.
That’s a high strip rate, which is part of the reason why we model costs high during the open pit
stage (and then it’s also why the last years of the deposit are planned as underground
operations). This needs to be taken into account
• Pre-Operational CAPEX of US$110.28 million including studies, mine equipment, pre-
stripping, processing plant, tailing reservoir, waste dump, power supply and ancillary
services.
That’s a reachable capex number, particularly as SRL has a large corporate sponsor lined up
(in theory at least).
• Price assumptions were US$3.06/lb for Copper, US$0.86/lb for Zinc, US$0.95/lb for
Lead, US$1,200/Oz for Gold and US$20/Oz for Silver.
Those are reasonable assumptions for a base case in today’s market. Further on when building
the model, I’ve gone for some different numbers to show a range of prices and how they affect
SRL as a profit-making company, but we like the reasonable price levels SRL uses here.
• After-tax Net Present Value of US$86.72 million at a 10% discount rate.
• After-tax Internal Rate of Return of 30%.
• After-tax Payback of 2 years.
• Net after-tax cash flow of US$202.58 million.
All those point to strong economics for this project, which is in turn a function of the grade of the
rock. Again, more later on that but first we need to look at the corporate structure side, as it’s an
important factor in the chances of SRL funding and building its mine
Management and shareholders
SRL is run by President, CEO and Ecuadorian Fredy Salazar, who is the driving force of the
company. He’s also the biggest shareholder of SRL with 14.6m shares (~26% of total shares
out). The other big insider holder is CFO Pablo Acosta, who roughly doubled his holding to
1.07m shares in the small-ish September 2013 financing round. In total, SRL management hold
around 30% of shares out so there’s plenty of skin in this game. Mostly Fredy’s. The other big
holders of SRL shares are public traded Lundin Mining (LUN.to) with around 5m shares and big
metals player Trafigura, who hold around 7m shares and then Silvercorp (SVM) with around
3.7m shares. That leaves around 24m share freely floating, which isn’t many away from the
tight-hand holders.
The most interesting holder for our purposes, apart from Señor Salazar, is Trafigura. That’s
because in March of last year Trafi signed up to be a financial sponsor of SRL and its El Domo
project, which it has done so far by buying its equity position. SRL to this point has used the
cash raised from the Trafi buy-in to pay for development of the project and to produce the PEA
we saw last week. It’s now that Trafigura has to decide want it wants to do with this project
sponsorship, because according to the terms of the deal last year it must decide on whether to
finance (and help finance) El Domo towards production or not via its wholly owned subsidiary
Urion. Here comes the relevant passage from the covering NR at the time (4):
On receipt of the engineering study, which the Company anticipates in approximately
eight months, Urion may elect to provide additional financing through an investment in
the Company or in its wholly owned Ecuadorian subsidiary, Curimining. In return for
additional financing, beyond the $2 million referred to in this news release, on terms
and conditions to be determined, Urion can earn a maximum 35% interest in either the
Company or Curimining. Under the Agreement Urion is committed to provide financing
for up to 50% of the total project costs to bring El Domo into production. Urion also
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undertakes to assist the Company in obtaining the balance of the funding required to
bring El Domo into production. The Agreement grants Urion off take rights to purchase
all production from future operations.
What that means in potted terms is:
1) Trafi can decide to walk away from SRL and its El Domo project, now that the PEA is
with us.
2) Trafi can buy into the project and help finance it to production status, either by buying
up to 35% of SRL’s wholly owned subsidiary ‘Curimining’ (which holds the Curipamba
concession) or by buying directly into SRL via shares.
3) Trafi would then be responsible for providing up to 50% of the cost of building the mine,
and would help SRL to raise whatever else were needed.
After seeing what SRL has at El Domo in the way of project economics, I’m going to bet that
Trafi doesn’t go for option 1) and walk away. That’s the bet being made on the results of the
PEA (numbers coming up for that) so assuming that, there are several ways in which Trafigura
can make its investment. However, as these days SRL is entirely valued on the El Domo
project, it a secondary-level issue as to whether Trafigura buys into SRL or into Curimining S.A
(the SRL subsidiary that holds El Domo). Because of that (and finally I get to the point), we’re
going to assume a simple scenario for the next round of financing and development until
otherwise corrected. It goes like this:
• Trafigura holds ~12.5% of SRL, so according to the rules it can buy another 22.5% of
the company (it’s limited to a 35% holding in direct ownership)
• The current S/O total is Current S/O 56.123m.
• If SRL ends up with 100m shares out, then Trafi can hold 35m of the new total
• That brings us our simplified scenario: SRL sells a little over 43m shares and Trafi takes
28m of them (to get holding up to 35m or 35% of the final 100m), while SRL sells
another 15m to third parties. If SRL sells all those at 25c apiece that’s $10m cash raised
once fees are paid.
• According to Friday’s PEA announcement, Capex for El Domo is a touch over $110m,
so we’re going to assume $120m for the moment. That would mean Trafigura supplies
$60m (50%) of the financing directly and then helps SRL find another $50m (as SRL
now has $10m in treasury). Again for simplicity’s sake, we assume a) Trafigura supplies
a $60m line of credit then b) SRL raises its final $50m via a 50/50 debt equity deal
(classic style) that adds perhaps 70m S/O (raise maybe $25m in equity at 35c a pop)
Now I’m aware that there are a dozen (nay a hundred) other ways that the financing and
ownership cookie might crumble, but we have to start somewhere and for the moment (and until
otherwise informed), simple is good. Therefore to re-cap all that mess above, we assume
Trafigura wants in (the most important piece of the puzzle) then once things are in place:
• SRL owns 100% of El Domo
• SRL has 170m shares outstanding
• SRL holds $30 in treasury cash and has debt financing for $85m
• The mine gets built, goes into production and we all live happily ever after
What could possibly go wrong?☺
Yes a hundred things but as you’re about to see, the rock at El Domo is so good that in the
event of a mine being built on top of it, there’s so much leeway that even a bad operator
(something that Freddy Salazar is not) would have a problem not walking away with a fat profit.
Valuing Salazar Resources (SRL.v)
It has other targets at Curipamba (which roughly translates as gold lands, by the way) and it has
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other early stage properties. It also has five years of underground operational life tacked onto
the end of El Domo, but we’re going to value SRL on the open pit mining potential of El Domo
only. Here come the production and financial assumptions baked into our model:
• A 2,000 tonne per day (tpd) throughput mining operation. This is an important number,
because new Ecuador mining legislation has created a “medium sized” mine category
that can run up to 2k tpd and benefits from easier permitting and lower overall state
burdens (including a 4% royalty, instead of a higher sliding scale royalty that needs
negotiation...the stupid rule that did for Fruta del Norte amongst others).
• Rock that gives head grades on average 2.06% copper, 2.98% zinc, 0.39% lead, 2.9g/t
gold and 57g/t silver, as per the 43-101 PEA announcement of Friday.
• Recovery percentages are based on the results of the met testing announced last week
(5) and are then averaged out over life of mine. The numbers used are 85% recovery
for the main revenue producing metal of copper, then 85% recoveries for zinc, 75% for
lead, 50% for gold and 65% for silver. For what it’s worth, I’ve built plenty of
conservatism into those recovery percentage assumptions and they might turn out to be
a lot more (e.g. if it works out to be a smart trade-off to give gold extra treatment).
Before moving on, we need to note that both head grades and recoveries for the metals are
more complicated than presented here, because the rock at El Domo will turn into the products
of either two or three recovery circuits (a Cu conc, a Zn conc and a Pb conc) and that rock isn’t
going to be uniformly mined either. So sometimes there will be lots of copper and very little zinc
produced, sometimes vice versa. What we’re doing in this model is averaging out production
over mine life and then taking that average over one of the nine years. It provides a decent
snapshot and is a good valuation method for the share price, but reality would be more
complicated in any eventual mine.
Which gets us to the point where we can put together a production table.
SRL.v at El Domo annual projected revenues by metal type (U$m)
Case 1 Case 2 Case 3 Case 4
copper (Mlbs) 28.18 28.18 28.18 28.18
$/lb. 2.8 3.0 3.2 3.5
copper revenues 78.9 84.5 90.2 98.6
zinc (Mlbs) 40.765 40.765 40.765 40.765
$/lb. 0.80 0.85 0.90 1.00
zinc revenues 32.61 34.65 36.69 40.77
gold (Oz) 34035 34035 34035 34035
$/oz. 1100 1300 1400 1500
gold revenues 37.44 44.25 47.65 51.05
silver (Oz) 869662 869662 869662 869662
$/oz. 18 20 25 30
silver revenues 15.65 17.39 21.74 26.09
lead (Mlbs) 4.71 4.71 4.71 4.71
$/lb. 0.80 0.90 0.95 1.00
lead revenues 3.77 4.24 4.47 4.71
Gross sales U$m 168.38 185.07 200.73 221.25
less middlemen -16.84 -18.51 -20.07 -22.12
Net sales U$m 151.54 166.56 180.66 199.12
Sources: SRL data, IKN ests
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As you can see, we also apply four different price cases which go as follows:
Case 1, The lowball: Cu $2.80/lb, Zn $0.80/lb, Au $1,100/oz, Ag $18/oz and Pb $0.80/lb
Case 2, The baseline: Cu $3.00/lb, Zn $0.85/lb, Au $1,300/oz, Ag $20/oz and Pb $0.90/lb
Case 3, The optimist: Cu $3.20/lb, Zn $0.90/lb, Au $1,400/oz, Ag $25/oz and Pb $0.95/lb
Case 4, The blue sky: Cu $3.50/lb, Zn $1.00/lb, Au $1,500/oz, Ag $30/oz and Pb $1.00/lb
Once we have our annual gross sales, we assume 10% goes to middlemen (refiners, transport
etc) and a net sales figures is arrived at. For example, in our Case 2 baseline scenario (the one
used for price target generation later) annual net sales come to U$166.56m. By way of a
yardstick, that’s a net sales figure of $228.16/tonne of rock mined.
• As for costs, we set the bar high at U$100/tonne operating costs. For one thing, this is
polymetallic rock which needs more than one circuit and for another, I’m very keen on
baking in a lot of leeway at this point. If we consider Fortuna Silver (FVI.to) at Caylloma
runs at around U$90/tonne and is both smaller in size and an underground operation,
as well as producing two concs (Zn/Ag and Pb/Ag), it gives you an idea of how high this
costs bar is being set. Be clear that costs could come in a lot lower. Finally, as seen in
the table calcs above, when the baseline metals prices (really, nothing exaggerated
there) and reasonable recovery percentages offer up over $228/tonne in net sales, you
can afford to run plenty of leeway on costs and still show a great operating margin. As
for other items:
• Depreciation is set at a standard $7m per annum
• G&A is guesstimated at $3m/annum
• Interest and debt servicing at $9m/annum, which assumes $85m of debt is raised as
per our simplified scenario above
• A total shares outstanding count of 170m, as per the financing scenario above
• State burdens as as per Ecuador, including a 4% royalty on mine gate (not EBIT as in
Mexico), an 8% workers’ participation deduction, corp tax of 25%
• Other minor adjustments
• A forex rate of CAD$1 = U$0.90
We again apply our “average year” calculations to those parameters and our four price cases,
which bring us to this condensed incomes statement table:
SRL.v at El Domo Income items for model year at differing metals prices
At 2000tpd thruput Case 1 Case 2 Case 3 Case 4
Sales 151.5 166.6 180.7 199.1
Cash COGS 73.0 73.0 73.0 73.0
Depreciation 7 7 7 7
G&A 3 3 3 3
Royalty (4%) 6.1 6.7 7.2 8.0
Op income 62.5 76.9 90.4 108.2
Interest 9 9 9 9
Workers Part (8%) 4.3 5.4 6.5 7.9
Tax at 25% 12.3 15.6 18.7 22.8
Net income 36.9 46.8 56.2 68.4
Shares out 170 170 170 170
EPS (U$) 0.22 0.28 0.33 0.40
Sust Capex -5 -5 -5 -5
FCF/sh 0.23 0.29 0.34 0.41
Sources: SRL/IKN data, IKN ests
And from that, we get to a target price generator
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El Domo (100% part) Model sales/earnings SRL mine valuation data in model
Ag U$/oz C1 C2 C3 C4 year using four metals price scenarios
Sales (C$m) 152 167 181 199 share value (100%) $1.21 (on 4x EPS case 2
% of current pps 449% and CAD$1 = U$0.90)
EPS 0.22 0.28 0.33 0.40 Mkt cap (C$m) $15 Enterprise value $15
Cash flow 0.26 0.32 0.37 0.44 P/sales (C1) 0.09 EV/sales (C1) 0.09
P/E (C1) 1.2 EV/EBITDA (C1) 0.2
P/E (C2) 1.0 EV/EBITDA (C2) 0.2
P/E (C3) 0.8 EV/EBITDA (C3) 0.2
Yes, that says +449% in the target box and I’m not joking, either. The combination of its deeply
discounted share price, world class rocks at El Domo and a workable mine plan (at this early
PEA stage at least) with a low capex threshold and high margin in the years of open pitting
(even with a lot of very conservative assumptions built in) make this stock a potentially
mouthwatering winner, even when using a low 4X multiple to earnings. Add the attraction of a
big partner that’s in for financing purposes and the obvious risks involved in buying a tinycap
junior in a risky jurisdiction have a large amount of counterbalance.
But of course there are problems with a stock like this one, else it wouldn’t be able to offer such
a big potential to eventual valuations in the event of its mine becoming reality, which is what we
look at now.
Political risk
Why is SRL so cheap? The answer in one word is ‘Ecuador’ and I’m not going to start prettying
up the subject just because there happens to be a cheap stock that I like in the country all of a
sudden. Ecuador is still a crappy place in which to place your junior mining investment cash and
the last few years have proven that to most people’s content. There’s substance and style about
the poor reputation the country has as well and here’s a little list of anti-points:
• The government took an age to sort out its new mining law.
• Once settled, the law demanded both a high level of State burden and a separate
windfall tax that’s been particularly difficult for mining companies to stomach.
• In negotiations, President Rafael Correa (via his underlings, but it’s clear who bangs the
drum) has been intransigent and unwilling to concede ground to mining companies.
• To make things worse, all this has come from a country with no tradition for formal.
Large scale mining or the type of “mining culture” that makes things easier and
smoother in countries that know how mining companies operate (Chile, Mexico, Peru
etc). Ecuador’s neophyte status and lack of mining know-how and infrastructure, when
added to the unattractive financial terms on offer, has made it an easy country to avoid.
• The best example on offer is that of Kinross (K.to) (KGC), who opted to bail on Ecuador
despite having one of the richest deposits in the world at its disposal in the shape of
Fruta del Norte.
• Along with governmental problems, formal mining companies and larger-scale projects
have been generally unwelcome in the country to date. There are some exceptions
(such as ECSA, or the traditional mining zone around El Oro or Portovelo) but the
combination of rich biodiversity in jungle areas, a lack of knowledge about mining and a
strong environmentalist lobby that has made a strong case against the mining industry
with many locals (using fair and unfair arguments along the way) has resulted in public
opinion on mining in Ecuador as sceptical at best, very often roundly negative.
• However, along with the negatives about community we ust add that mining companies
have also spoiled their own advantages in Ecuador through several cases of poor
community relations and mistreatment of locals (those who recall the violence used
against Intag Valley residents by Ascendant Copper will agree readily) and the same
people who saw lands poisoned and people beaten not so very long ago are now
supposed to welcome mining companies in with open arms because they promise them
they’ve changed and nothing like that happens any longer.
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That little lot is just for starters, to which we can add party politics, indigenous pressure groups,
corruption, lack of government-level expertise on mining, social protests that piggyback the
emotive subject of mining for other motives...the list goes on. However (and here we go folks,
there’s always a but, right?) there’s at least some reason to mitigate the woes in the case of
SRL. Before this continues I’m not trying to make out a great case here, I’m under no illusions
about the state of play in Ecuador when it comes to juniors so bear that in mind. I’m fully aware
that the first reaction from anyone to this stock pick suggestion will be “But that’s in Ecuador!”
and 90% of people will switch off there and then. And I wouldn’t blame them either, because I
do exactly the same thing. So with that in place, consider these as the list of pro-points:
• SRL has done a good job with its community relations so far. It helps that your CEO is
Ecuadorian himself, it also helps that he’s a smart guy. The company has an ongoing
program of community support initiatives (check the website) and has slowly built up a
reputation of trust.
• That trust has come from little short of zero, as well. In 2010 the company faced strong
local protests and decided to withdraw from the El Domo project for a while under
tempers cooled (or before too much machinery was wrecked). It went through a re-
permitting process with the government and paid particular attention to the main worry
of the local population, that of water. Most protests centred around fears that a mine in
the zone would contaminate or drain away vital water supplies to local agro, so the re-
permitting process made sure that all bases were covered on that. Since then, SRL has
engaged with locals, run an open door policy, been a source of (admittedly casual)
employment and sponsored local matters (soccer team, etc).
• It matters that Curipamba/El Domo is to the West of the main Andes Cordillera not in
one of the Eastern side key biodiverse jungle zones of Ecuador. It’s still very much in a
rural area and being where it is on the map (the country’s called “Ecuador” for a very
good reason) leafy and green is part of reality (either forest zones or grasslands cleared
from forest for cattle grazing). At a maximum altitude of 1,000masl (~3,300 feet) i’ts not
in any sort of delicate environmental area, either.
• Ecuador has been enjoying strong economic growth for the past couple of years (good
GDP growth, low inflation) and its population is beginning to enjoy the fruits of that
success (larger middle class, more disposable income at all socioeconomic levels, etc).
Much of the credit for this growth is given to President Correa (in my opinion rightfully,
others say luck) and as a result he’s become a popular President and consolidated his
support.
• Correa is a firm proponent of (in his words) “the responsible mining industry”. He wants
more formal mining to be set up in Ecuador and is quick with the “Ecuador is open for
business” line. The combo of a popular president who’s in favour of mining activity and
a population that wants its share of the wealth is a positive one for a company such as
SRL, which can offer both those things to a locality where it’s done good community
groundwork already.
• Finally (and already mentioned in this analysis), things got better for smaller sized
mining operations and developments last year with the passage of new rules and
regulations for medium sized mining operations of up to 2,000tpd throughput such as El
Domo (it’s not by chance that El Domo’s open pit ops have been set at that level and
don’t expect any production upgrades in the future, either). The new laws cut the royalty
payments to a flat 4% with no windfall taxes on top (a big help) and also make the legal
paperwork more straightforward for the smaller miners.
Overall, it’s still a complicated situation for SRL, particularly on a general public perception level.
What the somewhat improved situation may do however is to tip the balance for its financial
backer Trafigura and make the funding decision for El Domo that much easier for the big
company. On a personal level, I’m aware of my own antipathy towards Ecuador but I’m also
aware that value is always a relative matter and a direct mechanism of price. Rio Alto’s a great
company, but I wouldn’t pay $4 a share with gold under $1.4k/oz. Equally, SRL has a major
9

sales and marketing problem due to its country of location, but at 27c a share and a market cap
of $15m, those problems are addressed by the deep value offered by those world class rocks
going for pennies on the dollar.
Conclusion and recommendation
Even though it’s located in the junior mining graveyard of Ecuador, I’ve kept a quiet eye on SRL
over the years because of the high reputation of its rocks and its people. Up to 2012 the project
was in trouble on a community level and in 2013 it managed to get through the year by securing
funds from Trafi and then spending them in the most economical way possible in order to make
it to today and the PEA announcement. It’s been worth the single-eye radar and patience,
because the numbers that SRL delivered on its El Domo project last week (the met and then the
PEA) were nothing short of outstanding and from here, it’s odds-on that Trafigura will elected to
fund the project and add to its participation. There’s clearly risk involved in this stock, but the
low price and potential for upside (and to underscore, if I felt like BSing you all I could have
“optimized” (that’s what they say these days, don’t they?) that 449% target to something with
four figures if I felt like really throwing sequins into your eyes, because if things go well at a
community acceptance and a corporate financing level, SRL has a clear run at being one of
those mythical ten-bagger trades they all talk about.
That isn’t the objective today, though. Today’s analysis is more to say “look people, risk is high
but there’s more than enough to love in order to make this a spec buy” and that’s how I see
today’s SRL. On the back of one of the most interesting PEAs I’ve seen for many a month, The
IKN Weekly recommends Salazar Resources (SRL.v) as a specualtive buy and sets a 12
month 60c price target on the stock, derived from the above target analysis and then cutting a
deep 50% to account for its above-average political and social risk profile. However, even by
going the low road the target still offers a 122% upside to Friday’s close, more than enough
potential recompense to balance out the disadvantages. I will open a small position in SRL
between now and next weekend and as from IKN252 SRL will take its place in the
“Smaller/Riskier” category of the ‘Stocks to Follow’ list below, replacing the failed spec play
Darwin Resources.
End of Report
10

Stocks to Follow
Ir was a negative week for the list, despite having seven of our currently open 13 positions in
the win category (BTO.to, LRA.v, EOM.to, DNA.to, PVG short, GORO short, FCV.v), one
unchanged (IRL.to) and five losers (RIO.to, COP.to, TGM.v, SCZ.v, DAR.v). That’s because Rio
Alto Mining dropped by a hefty 11.6% and caused a large hole to appear in your author’s virtual
back pocket and no matter what the others do, that kind of loss in the biggest held position
isn’t going to be countered. Along with that one, double figure negatives were also seen in Coro
Mining (COP.to down 10.7%) and Darwin Resources (DAR.v down 10.0%), though the chances
of both those small financial positions rebounding soon are high. To the plus side, a decent
move from Lara Exploration (LRA.v up 10.0%).
There are 13 open positions on our ‘Stocks to Follow’ list, two less than our self-imposed
maximum. Five are in the green, seven are in the red, one is unchanged.
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$2.36 2.6% best LT value
Minera IRL IRL.to buy C$0.30 22-jul-12 C$0.18 -40.0% top pick called at 24c, added
Longs
B2Gold BTO.to hold C$3.07 28-nov-12 C$3.20 4.2% sold 1/2, rest rides. Quality
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.10 -4.3% solid biz model, LT hold
Eco Oro Min. EOM.to add C$0.48 22-sep-13 C$0.46 -4.2% adding more, spec pol risk
Dalradian Res DNA.to hold C$0.65 27-oct-13 C$0.86 32.3% Holding on good run
Coro Mining COP.to buy C$0.125 26-jan-14 C$0.125 0.0% Cu spec play, can add
True Gold TGM.v buy C$0.395 02-feb-14 C$0.385 -2.5% Was flip, now LT hold
Santacruz Silver SCZ.v hold C$1.04 26-jan-12 C$1.11 6.7% added, now full position
Shorts
Pretium Res PVG short U$5.38 22-nov-13 U$6.21 -15.4% $4 downside target
Gold Res Corp GORO short U$5.07 26-jan-14 U$5.15 -1.6% New re-short now full pos.
Smaller/Riskier
Focus Ventures FCV.v spec buy C$0.175 01-jul-12 C$0.245 40.0% revised tgt 25c
Darwin Res DAR.v hold C$0.10 14-jul-12 C$0.05 -55.0% drills mediocre, hold for now
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dec-13 C$3.19 13.9% small ST trade closed
Rio Alto Mining RIO.to jan'14 C$2.06 07-jun-13 C$2.30 11.7% trading position finally closed
Network Expl. NET.v feb'14 C$0.01 22-jul-12 C$0.005 -50.0% position closed, did nothing
Tahoe Resources TAHO short U$13.10 08-apr-13 U$21.72 -65.8% short closed due to reality
2009, 2010, 2011, 2012 and 2013 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Darwin Resources (DAR.v): Selling. After thinking it over and now with the potential to
replace this ‘smaller/riskier’ position with one in the shape of Salazar (SRL.v) which holds a lot
more potential for the near and medium-term future, the decision is to bite the bullet sell, DAR,
take the loss and walk away. The reason to hold through was to see whether DAR could bring
something from the second stage of drilling at Suriloma and as that turned out to be a miss and
with treasury coffers now looking rather bare, the reasons left to hold it (good management,
smart geols, good land positions in Peru) aren’t enough for the moment to justify the long. It’s
one I’ll return to given a chance (and I’ll be honest and say that the small personal size of this
one in absolute dollar terms may mean I hold my shares “off balance”, rather than sell them in
a hurry), but reality must be faced. This one will become a necessary ego-popping blob of red
percentage loss for the above table in 2014.
11

Eco Oro Minerals (EOM.to): I’ll have my virtual ear to the ground during PDAC to check
whether Colombian bigwigs give away any hints on the Páramo e Santurbán situation while up
there in Canada, but this is still the stock that’s going to jump on a favourable political decision
and that’s set for later this month, so be positioned accordingly at these low prices.
Meanwhile, more evidence that the government’s mind is made up and that the
environmentalists don’t like it came from the State non-governmental bureau ‘Comptroller
General of the Nation’ (CGN), which tends to be left wing in its political position and unafraid of
going against a government or party line. In a statement last week (6) the CGN said the two
side sin the páramo dispute are going through “...a dialogue between “autistics”, nobody listens
to anybody else” and it expected protests once the government decision is handed down.
Santacruz Silver (SCZ.v): SCZ continues to do OK and has found reasonable support at the
$1.10-or-abouts level, which is fine for the time being. This is another one about which
whispers may develop during the PDAC bunfest, because it’s at times like these that all the
world loves a takeover possible.
Pretium Resources (PVG) (PVG.to) and Gold Resource Corp (GORO): The two short
positions did what they were supposed to do and helped cushion the hit of a negative week on
the larger long positions. GORO is due to report its annuals this week and may do, though last
year asked for more time and didn’t deliver until mid-March (they have that habit). If and when
we see those numbers, GORO will get closer inspection on these pages.
Lara Exploration (LRA.v): The problem I have with last week’s decent percentage move is,
of course, the lack of traded volume in the stock, Apart from an announcement on Monday
regarding a small deal on its Colombian coal assets (7) that’s not going to move the dial much,
nothing much from Lra. The next real news may well be results from the early.stage drilling at
the Sami project by JV partner Antofagasta, but that’s still a few weeks away.
Focus Ventures (FCV.v): Here’s an interesting photograph, taken last Friday
There you see the FCV team (David ‘Corky’ Cass to the left, Ralph ‘Schwarzkopf” Rushton to the
right) at the Bayovar 12 phosphate project in North coastal Peru and most importantly, the first
of the two drill rigs set to run the upcoming exploration program is in the picture too. We
understand that drills are now turning and the FCV team will be in PDAC as from tomorrow
(direct flight) in order to brief anyone who wishes to listen.
12

In other news, please see both Appendix 1 and the section in ‘Market Watching’ below, because
FCV has been highlighted as one of just eight explorecos to follow in 2014 by Clarus Securities.
It’s a most interesting analysis too, because they speak about the multiple-bagger potential of
the stock (though in my opinion, they haven’t taken into account the likely dilution needed in
order to fund development).
Coro Mining (COP.to): A couple of things to cover at COP. First the NR (8) dated Feb 27th,
which announced the results of the El Desesperado drilling program and showed results that
were mediocre at best. The stock sold off on this news but not by so much (this one isn’t like
DAR.v and has more fundies backbone, particularly Berta), however word from the inner
sanctum of the company (kindly supplied by reader P, a guy with good and rapid contact) is
that the company considered the news “overall neutral”.
Well they may have a point in the longer-run, but it’s a little rich to expect poor drill numbers to
be taken as a neutral for the stock. What we can say now is that thanks to these misses COP
now has a better understanding of the layout (the faulting that showed up helps on that) and
the company still sees plenty of potential at El Desesperado, though it’s not going to make the
direct $650k option payment due soon and
will take the opportunity to re-negotiate the COP.to: Assets Breakdown per qtr
deal with the underlying owner if possible. 45
That makes sense. 40
35
Then Friday evening saw COP file its 2013 30
annuals and the only unexpected part (for me 25
20
at least was the company writing down
15
$17.438m on its now flipped out San Jorge
10
project in Argentina, which took its carrying
5
value down to $13.5m. This isn’t much more
0
than good housekeeping in the face of a bad
market
So overall a negative week for our small
copper exploreco play, but Bertha is the real reason to own this one because it makes potential
downside minimal and offers plenty of upside as long as things go well. Easy to hold COP.
Rio Alto Mining (RIO.to) (RIOM): So with last week’s drop, gold where it is and the costs
guidance for 2014 (let us also
remember that RIO is that rare animal
that doesn’t miss on its guidance
figures), RIO is currently trading at
6.2X forward earnings and if that’s not
cheap enough for you, I suggest you
retire from the juniors section and buy
an annuity with your cash.
Seriously, how cheap do you want your
producing miner to be? More on RIO
next weekend.
The Copper Basket
After nine weeks of 2014 The Copper Basket is showing a 18.96% gain to level stakes.
13
70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1
source: company filings. IKN ests
srallod
fo
snoillim
fixed
other current
cash

company ticker price 1/1/14 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 1.51 144.41 499.66 3.46 129.1%
2 Reservoir Min. RMC.v 4.97 41.76 308.61 7.39 48.7%
3 NGEx Resources NGQ.to 1.43 168.71 307.05 1.82 27.3%
4 Lumina Copper LCC.v 6.29 44.07 236.22 5.36 -14.8%
5 Hot Chili Ltd HCH.ax 0.425 333.11 146.57 0.44 3.5%
6 Copper Fox CUU.v 0.375 402.96 128.95 0.32 -14.7%
7 Nevada Copper NCU.to 1.35 80.5 117.53 1.46 8.1%
8 Western Copper WRN.to 0.76 93.68 83.38 0.89 17.1%
9 NovaCopper NCQ.to 1.60 53.4 72.62 1.36 -15.0%
10 Curis Resources CUV.to 0.57 74.79 69.55 0.93 63.2%
11 Panoro Minerals PML.v 0.35 204.71 62.44 0.305 -12.9%
12 Coro Mining COP.to 0.10 159.37 19.92 0.125 25.0%
13 Cordoba Min. CDB.v 0.45 31.88 17.85 0.56 24.4%
14 AQM Copper AQM.v 0.11 139.05 15.99 0.115 4.5%
15 Oracle Mining OMN.to 0.27 49.03 12.01 0.245 -9.3%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg 18.96%
Five went up (LCC.v, NGQ.to, RMC.v, CUV.to, OMN.to), two stayed UNCH (WRN.to, CDB.v) and
eight lost ground (AZC.to, CUU.v, HCH.ax,
NCU.to, NCQ.to, PML.v, COP.to, AQM.v) but The Copper basket 2014, weekly evolution
25%
despite those numbers, the basket average
managed to add one percent to the total. 20%
That’s basically because of some very
15%
decent wins registered by Curis Resources
(CUV.to up 29.2%) and NGEx Resources 10%
(NGQ.to up 12.3%), while the only double
5%
digit loser was Coro Mining (COP.to down
10.7%). 0%
Copper the metal had yet another quiet
week and although it did garner some
“lowest for three months articles in the trade press, it’s a
case of tenths or a penny or only. However, the bullish
tone in the market has now changed distinctly, with those
who would cheer the metal higher now far more subdued.
That’s probably because of the stories coming out of China
and at this point we go to the inventories, with numbers
supplied as usual by Cochilco (9) and the monthly charts
this time, as well as the weekly update. Total world stocks
dropped by 7,670 metric tonnes (mt), or 1.5%, to finish
the week at 487309mt. Of that total, Comex stocks drop
by 2,720mt (17.5%) to finish at 12,798mt (a big
percentage move, but small in absolute terms and the
Comex these days is not part of the bigger game). Then
LME stocks dropped by 9,125mt (3.2%) to 276,225mt,
while Shanghai Futures Exchange warehouse inventories
moved up 4,175mt (2.2%) to finish at 198,286mt.
As it’s the end of month two, here are our tracking charts of world copper stocks and the move
from LME to Shanghai has been nothing short of dramatic. The percentage of world copper
inventories held in the Shanghai holds shot up 10.89% in just one month, from under 30% of
14
ht5naj ht21 ht91 ht62 dn2bef ht9 ht61 dr32 dn2ram
source: IKN calcs

the total to over 40% (40.69% to be exact) which is a violent move by any standard.
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
We can note that the overall stocks held didn’t change much form the previous month either
(first time in a long time), which underscores the sea change we’re witnessing here. The
acceleration of “Out of LME, into Shanghai” has made a lot of people nervous and bulls are now
reaching for explanations such as how copper’s being used as an asset class (that’s reaching) or
how the warehouses are stocking up because the new wave of Chinese credit is about to be
unleashed onto the copper market and snap all the metal up (ditto). Me, I’m obliged to take the
warehouse number at face value and say that we’re seeing an oversupplied market which
hasn’t been helped by the unwinding of the lucrative “hold it forever” LME warehouse stuffing.
Finally, I’ve been asked about the situation in the LME cancelled warrants database, one that
we used to follow quite closely until the signal was lost under the big finance shenanigans at
the LME warehouses. After finishing 2013 at a new record high of 66% of LME copper stocks
held under cancelled warrant, that number has now dropped to 53.1% of total LME stocks. The
inference is that the large financial and trading houses are beginning to unwind their constant
stock rollover (by keeping large amounts under cancelled warrant and then simply rolling over
the cancellation, they kept a lot of the copper from leaving the warehouses and going to real
end users), but it’s still a very high, artificial number and not something worth tracking for the
moment.
Now for some updates on component stocks on just two of our component stocks:
Augusta Resources (AZC.to) (AZC): A slightly bizarre situation last week. It started
normally when AZC told the world that it should not sign up for the Hudbay (HBM) unsolicited
(hostile) bid because the company was worth a lot more. That’s a typical attitude for a target
company to take of course, as they rarely submit to the first pass of a hostile takeover attempt.
But then the strangeness started when HBM replied to AZC’s rejection by stating (10) that aside
from the fact that AZC doesn’t have the money to build Rosemont (well, HBM doesn’t either,
but that wasn’t carefully addressed by Mr Garofalo for some reason) the company wasn’t such a
great and risk-less play as it was trying to make out and it still faced plenty of political and
social risk from its permitting process at the mine project. In the words of HBM:
• Although the regulatory process requires review of comments on the draft record of decision
("ROD") within the 45-75 day period referred to by Augusta, there is no requirement that the final
ROD be issued at the end of that period and, as publicly acknowledged by the U.S. Forest
Service in December 2013, there is a possibility that additional studies or mitigation will be
required. The final ROD and Clean Water Act 404 permit will not be issued until all matters are
resolved.
• Augusta's new final environmental impact statement (FEIS) is based on a revised mine layout,
which will require some of the previously granted key permits to be amended. The amendment
process may include a requirement for additional public consultation which would then reopen the
administrative appeal process.
• Two of the seven key permits Augusta has received are currently subject to legal challenges,
which are unlikely to be resolved in 2014.
15
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 ced 41.naj bef
Copper inventories, per month 2012/2013
1000000
LME Shanghai Comex
900000
800000
700000
600000
500000
400000
300000
200000
100000
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 ced 41.naj bef
Mt Cu
LME Shanghai Comex
source: Cochilco

Or if you like, HBM tells the world “Hey people this company is really risky because it might not
get permitted for a long time...but hey, we’re willing to risk buying it for three hundred million
dollars!” Ok, I’m being slightly facetious, but still you have to wonder just why HBM wants to
buy this rather flawed looking project that’s at risk of serious delay...according to the very
people who want to buy it.
Oracle Mining (OMN.to): On Wednesday, OMN gave us (11) an updated resource count for
its Oracle Ridge property and the main feature was how the amount of contained metal, along
with the overall average grades of the copper and sundries, dropped significantly (NB: please
note all measurements are offered by the company (and therefore IKN) in short tons, i.e.
imperial measurement tons).
• Put in the same context as last week’s headline, the previous Oracle Ridge 43-101
resource came from a March 2013 (i.e. less than a year ago) 43-101 report, which gave
a measured an indicated resource of 9.9m tons grading 1.98% CuEq (contained metal
323m Lbs copper and 4.2m oz silver), then an inferred resource of 6.9m tons grading
1.87% CuEq (CuEq (contained metal 217m Lbs copper and 2.8m oz silver). That was
using a 1.0% copper cut off
• As of this week. The 43-101 resource is now presented as 7.3m tons grading 1.88%
CuEq in the M+I (contained metal 236m Lbs copper and 3.8m oz silver), then 5.6m
tons grading 1.75% in the inferred category (contained metal 173m Lbs copper and
2.8m oz silver). The resource now uses a 1.0% CuEq cut-off.
• In other words, in less than a year Oracle Ridge has lost 131m Lbs of copper from its
total M+I+I resource, along with 0.4m oz of the silver kicker.
Notably (and as this 5 day chart shows), the market
largely ignored the OMN news and trading remained
thin. What OMN can now say is that is has a better
and more conservative base case form which it can
realistically work on a mine plan for Oracle Ridge.
What we can say is that it’s going to be easy enough
to sit on the sidelines for this one, cheap as it might
be, until we have a solid plan for making this smaller
deposit into a real mine.
Curis Resources (CUV.to): Back in IKN247, CUV got mentioned in not one but three different
spots of the issue (copper basket, market watching, closing bullets) as a potential buy at the
riskier end of the spectrum and although I didn’t pull the trigger myself (preferring to wait and
see what would happen at its mid-March court date), the underscoring of its potential value
came at the right time (even if I say so myself). Then 68c and now 93c, it’s up by 36.8% in a
month and that’s not bad. There’s clearly some speculation going on now, with assumptions
that CUV will get at least the go-ahead for its pilot mine plant in the near future.
The good news is that if you think you might have missed the boat on this trade, you haven’t.
If CUV gets the right decision, there’s plenty more upside potential left in this stock thanks to
the strong underlying economics. Though that’s a bridge we’ll cross if we get to, those of you
wanting a) a cheap company b) in copper c) with risk/reward speculative opportunity in the
near term could still do a lot worse than this under a Loonie.
16

The Low Cost Producer Basket
After 9 weeks of 2013, the Low Cost Producer Basket is showing a 17.59% gain to level stakes.
company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 37.74 1040 33.92 32.62 -13.6%
2 Goldcorp GG 21.67 812 21.87 26.93 24.3%
3 Barrick ABX 17.63 1000 20.38 20.38 15.6%
4 Newmont NEM 23.03 497.87 11.58 23.26 1.0%
5 Silver Wheaton SLW 20.19 357.39 9.12 25.53 26.4%
6 Franco Nevada FNV 40.74 147.01 7.52 51.15 25.6%
7 Agnico Eagle AEM 26.38 173.43 5.57 32.12 21.8%
8 Pan American PAAS 11.70 151.41 2.13 14.09 20.4%
9 B2Gold BTG 2.02 651.4 1.87 2.87 42.1%
10 First Majestic AG 9.80 117.02 1.29 11.01 12.3%
all prices in U$, using NYSE ticker prices Portfolio avg 17.59%
The basket average added dropped hard, by 4.18%, and all components registered weekly
losses so we can’t complain about
consistency at least (though a small The Low Cost Producer Basket: Weekly performance and
shout-out for my minor muse NEM, comparative to GDX control
30%
which was least worst of the week
and only lost 12c of share price while 25%
others were hit hard). The GDX 20%
control benchmark also lost ground,
15%
though by a percentage point less
10%
than our chosen few.
5%
What we saw last week was 0%
interesting from the bigger players,
as while gold consolidated and
continued to flit and buzz around this
new $1320/$1330 level hot money
that had decided mining was the next big thing drained away and the entry level miners quickly
went from overbought to oversold. Today we see a list that’s well priced compared to gold (and
silver) and that’s a healthy thing, part of the way in which a stronger sector is built.
First Majestic Silver (AG) (FR.to): I watched FR report its annuals, took a look at the NR,
mentally noted “disappointing” and made a public note of the main takeaway from the numbers
on the blog last week (12).
This chart shows the story of FR as well as any, as revenues have been holding up but internal
costs really ate into company margin, the result being a lower than expected mine operating
income (MOI). However, I left it at that and didn’t go into the figures that deeply when perhaps
I should have done, because PS Dave over at Vancouver Venture did just that and noticed
17
ts13ceD ht5naj ht21 ht91 ht62 dn2bef ht9 ht61 dr32 dn2ram
basket
gdx control
source: Yahoo! Finance, IKN calcs

some line items that smack of laxity in the company’s financial position (13). FR can be
criticized a bit for holding a position in Sprott’s silver bullion fund PSLV (after all, if the only
thing a silver miner can think of doing with its money is buying a silver bullion fund, then
maybe it should be concentrating more about investing in mining operations and making silver
bullion at a cheaper price than spot), but the holding isn’t that big compared to market cap and
is a minor thing all told, and it’s been around for at least a couple of years and just sits there in
the assets column, harming nobody in particular. But the one picked out by PS Dave that
caught my (and others’ (14)) eye and causes more concern was the derivatives loss that FR
took on silver call options.
The Company carries a long position on silver futures, expiring in March 2014, equivalent to
480,000 ounces of silver at an average price of $19.70 at December 31, 2013. The derivatives
asset of $0.8 million (2012 $nil) reflects a deposit of $1.0 million for the margin requirement to
hold the silver futures, net of an unrealized loss of $0.2 million at December 31, 2013. During the
year ended December 31, 2013, the Company recognized a loss of $4.8 million (2012 gain of
$6.2 million) related to investment in silver futures, recognized in investment and other income.
Under normal circumstances, a silver miner might be willing to hedge production by writing calls
or buying puts, but buying calls is plain speculation on the price of silver and adds risk to a
silver miner (that again, should be more concerned about mining and producing the stuff,
rather than playing its markets). Also, the 2012 position registered a gain and although that
year’s financials just puts the profit down as coming from “investment in silver futures”, it’s the
type of result you’d want form a company hedging into an uncertain market. What that 2013
loss is about is beyond me frankly, and the only explanation is that of a company that’s playing
the market by adding to its own risk profile (when it darn well would be cutting it). This is not
the hallmark of a company that’s being serious about its financial wellbeing, people. If you want
to play the market then fine, but a company that’s supposed to be A-list taking a leveraged
derivs loss on falling silver prices? That’s odd and I don’t like odd in the CFO department of any
company, even less when its a $1Bn+ market cap miner. It’s certainly different from the
message given to PDAC this weekend by David Harquail, CEO of another one of our basket
stocks Franco Nevada. He said, “Get rich slow, stay consistent, don’t compromise your project
for short-term investment themes”. Now there’s a guy I can agree with.
Regional politics
Argentina: More stability
When the western media dubbed “financial crisis” kicked off in Argentina earlier this year,
marked mainly by January 22nd/23rd devaluation decision that took its Peso currency to a Forex
of roughly 8 to the dollar, your author’s call was to expect the unofficial and official rates to
start closing the gap as matters calmed (whereas the world expected the Dolar Blue to fly off
into the distance in much the same way as Venezuela’s Bolivar Fuerte). And sure enough, that’s
what we’ve seen happening.
Argentina Forex: Difference between official exchange rate and
unofficial "dolar blue" rate
5.5
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
18
2
naj
4
naj
6
naj
8
naj
01
naj
21
naj
41
naj
61
naj
81
naj
02
naj
22
naj
42
naj
62
naj
82
naj
03
naj
1
.bef
3
.bef
5
.bef
7
.bef
9
.bef
11
.bef
31
.bef
51
.bef
71
.bef
91
.bef
12
.bef
32
.bef
52
.bef
72
.bef
1
.ram
ArgP$
source: @dolarblue / la nacion

Argentina: Official exchange rate and "Dolar Blue" (unofficial
street dollar rate) in Pesos
13.5
13
12.5
12
11.5
11
10.5
10
9.5
9
8.5
8
7.5
7
6.5
6
19
2
naj
4
naj
6
naj
8
naj
01
naj
21
naj
41
naj
61
naj
81
naj
02
naj
22
naj
42
naj
62
naj
82
naj
03
naj
1
.bef
3
.bef
5
.bef
7
.bef
9
.bef
11
.bef
31
.bef
51
.bef
71
.bef
91
.bef
12
.bef
32
.bef
52
.bef
72
.bef
1
.ram
source: @dolarblue/La Nacion
$U
rep
$PgrA
The ‘Dolar Blue’ closed last week at 11.25, its best level since January 16th when the Peso was
under pressure from the downward speculation that eventually forced the government’s hand.
Also, the gap between official and street rates is now lower than it was at the beginning of
2014 before all the shenanigans kicked off. We’re seeing a calming of waters in Argentina (to
the disappointment of many) and that’s good for us, outsiders looking for a potential
investment opportunity inside the country.
It’s not time yet, because public perception is bound to be jolted by the inflationary spike that
comes (as day follows night) with a devaluation move in a national currency. But that one will
be transitory, so come the middle of the year, we can begin to search for evidence that inflation
is coming under control in Argentina. If that item shows up, there may be a good investment
opportunity here after all, albeit speculative and risky, in juniors exposed to the country.
Watching brief.
Chile: Pascua Lama coming back to life
The blog’s most popular post last week by quite some distance (I checked the stats yesterday)
was this (15) short report on a jungledrum rumour picked up from Chile that Barrick (ABX) was
in talks with Chinese mining company Citic over a JV on Pascua Lama. It happened because a
week or two ago I’d heard a small rumour coming out of the legal world in Chile, but at the
time didn’t chase up on the story (mind on other things). Then a mail arrived from a contact
asking whether I’d heard anything about Chinese sniffing around Pascua Lama (PL), memory
stirred and a few re-pulled strings later, some pretty reliable (though necessarily off-record and
will stay that way) talk came about Citic being in fairly advanced stage talks with Barrick.
This came at the same time that ABX CEO Solansky stood up at the BMO Conference in Florida
last week and said that the project would only re-start if the economics improved. Which makes
sense, but it goes against the clear urgency ABX has shown in lobbying Chile’s parliament (with
success so far) to make sure they don’t need to submit a new environmental impact study. On
that score (and as noted a couple of weeks ago) Barrick has already scored a win in
parliamentary committee and it’s now expected that Chile’s congress will follow that lead and
unfreeze the project, legally at least, in the weeks before the Piñera government bows out and
the Bachelet government moves in.
On a corporate level, a deal with Chinese money on PL makes sense. Not only is ABX in hock
with Silver Wheaton (SLW) on its stream delay and would like to see PL freed up, but the
company has made it clear since late 2013 that “everything’s for sale (at the right price)” and
has already done several disposal deals at a minor level, which have helped improve its sagging
balance sheet along with that big equity raise. And as ABX has spent something in the region of
U$5.5Bn (with a B) at PL and now, after 2013 impairments, has a carrying value on the
property of just $2.05Bn at at the end 2013 annual financials, any JV deal could add immediate

oomph to company asset value, not a mere detail in one as large as ABX.
Uruguay: Pro-mine progress
It’s taken longer than expected (the original signing ceremony was scheduled for mid-January),
but we can now expect the formal signing of the deal between the government of Uruguay and
iron ore company Zamin Ferrous to take place in the next few days (16). Not only is this a big
deal in itself, but it’s a significant moment in the country’s ongoing debate about allowing
formal, large-scale mining to happen within Uruguay. What we’ve seen in Uruguay’s political
circles (and anyone who’s spent time there will know that the circle is large, as the citizenry is
politically switched on and will debate politics with over at any given moment) is a longer
debate, done in a sober way, over whether the country really wants large-scale formal mining
to take root and it’s now a given that Zamin’s Aratirí is a test case for greater things to come.
The debate has moved through its levels in the way informed debate is supposed to work (you
look at all sides, you make a majority decision, winners happy losers obliged to accept),
something of a rarity when it comes to the combo of LatAm and mining, and the upshot seems
to be that the pro-mining case is winning out.
Uruguay isn’t going to be an automatic open door and easy picking country for large mining,
but it will be one that accepts the industry’s presence in the future on its own (rather strict
environmental) terms. This is good, so expect Uruguay to see extra points added to its country
score the next time we run our quarterly regional risk review.
Peru is “Mining Country Sponsor” at PDAC
Pee Dee Ay Cee is on and down this way, South America mining nations (or the wannabe
nations) are making a big fuss about how they’re sending big delegations of Very Important
People to the show (having your mining minister hanging out with your Ambassador to Canada
is now the default setting). Though this year the shrillest press has come from Peru, very proud
as it is that it’s become the first ever “Mining Country Sponsor” of the world’s biggest mining
conference.
To me this sounds more like a smart marketing exercise from the PDAC committee which has
found another great way of financing their gig, but for Peru it means sending a delegation of
five hundred people (seriously) including the country’s Vice-President, Mining and Energy
Minister (the brand new one appointed last week, Eleodoro Mayorga, who knows way more
about energy matters than mining), various suits form the Chamber of Commerce and also (for
those of you who want to government spin on community relations and political risk, Vladimiro
Huaroc, who covers that specific corner for the government and will insist that everybody’s
happy with mining in the country except for a few raging Commies and terrorists who are on
their way out anyhow.
One thing is sure, though: Get an invitation to one of the Peru receptions this year and you
should attend, the food and drink will be top class.
Market Watching
You are about to be bombarded with picks
At this point, on the first official day of PDAC and hours before the real action kicks off on
Monday morning, I’m going to put in a word for the “PDAC Pick” report published by Clarus on
Friday Feb 28th because it highlighted eight junior names and the top three well and truly
caught my eye. Here’s the intro table from the note entitled “Explorer Names to Watch For at
PDAC 2014” (if you want, ask me for a copy in the usual manner, I’m happy to send one
along):
20

As well as five names that I’ve never looked at, the bods as Clarus point the spotlight at:
• Cordoba Minerals (CDB.v), one of our 2014 Copper Basket components and in your
author’s opinion one of the more interesting new stories out there.
• Falco Pacific (FPC.v), the junior that was written up in IKN247 (Feb 2nd 2014) as a
possible trade idea when priced at 60c. It closed Friday at 81c, which doesn’t surprise
me much.
• Focus Ventures (FCV.v), which is more than interesting considering the company’s low
radar reach about Bayovar 12 (so far at least).
I’m good about some brokerage light being shone upon FCV in particular (no shock there) but
what strikes me about the Clarus list in general is its adventurous nature; It would be difficult to
imagine such a high risk list being considered just a few weeks ago by a brokerage with a
reputation to make or keep, let alone this time last year when the more sensible world of
juniors was all about hunkering down, no about pointing out pennycrappers (and yes, those
selections are all under a Loonie in price this weekend). It’ll be interesting to see what line the
other main houses take with their PDAC coverage, especially as many of them made wholesale
layoffs from their mining desks in the second half of last year. More on FCV above and in
Appendix 1, below.
No problems with flat gold
This five day chart cuts out a few hundred words and presents the necessary information in a
way that sinks in more quickly and
effectively than my blabber.
Gold was slightly down on the week, but
the volatile sectors that depend on the
mothership metals all had a hard time as
the hotter end of the money sector
decided that it wasn’t such a good idea to
pay any price for the miners, after all. The
result was a sell-off (as mentioned above
in the bigger-cap miners’ section) but we
also see that the juniors were harder hit
again, at least in general terms.
That’s what you’d expect, of course. We’re in the business of betting on the miners (and
specifically the junior miners) on these pages, so a down week is never welcomed. However,
we’re in a newly forming bullish situation for gold and it’s the metal that will drive the progress
of our preferred companies and stocks in 2014, so a week or a few days of weakness just after
a decent upmove isn’t something we should fret about at this point. Gold at $1320/oz or above
will do us just fine for the time being, the good companies will take case of themselves and the
bad ones will feel the same hurt they felt at $1.2k.
21

Conclusion
IKN251 is done, we end with bullet points:
• Salazar Resources (SRL.v) shows enough in its project to counterbalance the obvious
weakness of being located in Ecuador. It’s going to be a ‘smaller/riskier’ position
because of that, but it wouldn’t take much to see this improve rapidly (Trafigura’s
financial nod of approval #1 on the list) and if ducks eventually come into line, the
rocks would make for a superbly profitable mining operation no matter how high the
State burden goes. Worth a shot at these prices, most definitely.
• Gold may have disappointed the hot money jocks last week, I’m good about the way
things are progressing. The stocks I most like benefit from this new price range (RIO.to
due to the cash flow, IRL due to its Ollachea feas baseline at $1,300/oz, BTO due to
the high radar love it gets, Dalradian due to the prospectivity and takeover potential,
etc etc) and if the broader sector has to lag while the cream separates from the whey,
so be it.
• Those of you looking for the next big deal catalyst may do well to consider Pascua
Lama, because there’s more than one reason to suggest that it’s coming back to life
again. If ABX can off-lay some of the risk, it would make a lot of sense.
• PDAC is with us, so take care and don’t overdo it is the message to those of you who
are going along. As for your author, tomorrow sees the start of the new school year in
the Southern Hemisphere, bound to be as “fun” as ever.
• Ukraine = hold gold bullion. That’s all
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/2014/03/schedule-for-week-of-march-2nd.html
(2) http://finance.yahoo.com/news/salazar-announces-preliminary-economic-assessment-214500029.html
(3) http://finance.yahoo.com/news/salazar-announces-preliminary-economic-assessment-214500029.html
(4) http://www.salazarresources.com/docs/nr-salazar-march26-2013.pdf
(5) http://www.salazarresources.com/docs/eldomo/Summary_of_Metallurgical_Testwork.pdf
(6) http://www.caracol.com.co/noticias/regionales/8203contraloria-critica-proceso-para-definir-limites-de-
santurban/20140226/nota/2100141.aspx
(7) http://finance.yahoo.com/news/lara-exploration-ltd-agreement-signed-123000322.html
(8) http://finance.yahoo.com/news/coro-announces-drilling-results-el-180520802.html
(9) http://www.cochilco.cl/Archivos/destacados/20140228115016_MERC%202014%2002%2028.pdf
22

(10) http://finance.yahoo.com/news/hudbay-highlights-augustas-critical-permitting-110000190.html
(11) http://finance.yahoo.com/news/oracle-mining-announces-updated-ni-003008168.html
(12) http://www.incakolanews.blogspot.com/2014/02/why-first-majestic-silver-frto-ag-is.html
(13) http://vancouverventure.blogspot.com/2014/02/random-observations.html
(14) http://myownmarketnarrative.blogspot.com/2014/03/permashave-dave-asks-pertinent-question.html#comment-form
(15) http://incakolanews.blogspot.com/2014/02/citic-buying-into-pascua-lama.html
(16) http://www.mineriaaldia.com/la-mineria-uruguaya/?utm_source=dlvr.it&utm_medium=twitter
Appendix 1: Clarus on Focus Ventures (FCV.v), Feb 28th 2014
23

Stocks To Follow Closed Positions, 2013
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
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
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-jan-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-dec-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-apr-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
24

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
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
25

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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