IKN #269Premium

The IKN Weekly
Week 269, July 6th 2014
Contents
This Week: Keeping an eye on the Greenback/Loonie exchange rate, Travel plans.
Fundamental Analysis: The long copper juniors call has started well, NovaCopper (NCQ.to)
announces its financing, Amerigo Resources (ARG.to): Under consideration.
Stocks to Follow: Overview, Minera IRL (IRL.to) (MIRL.L), Dalradian Resources (DNA.to),
GoldQuest (GQC.v), Focus Ventures (FCV.v), Salazar Resources (SRL.v), Timmins Gold (TGD)
(TMM.to).
Copper Basket: Overview, Lumina (LCC.v), Nevada (NCU.to), Western (WRN.to).
Low Cost Producer Basket: Overview.
Regional Politics: Regional risk review, revised edition, fifth update.
Market Watching: Minera IRL (IRL.to) (MIRL.L).
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
Keeping an eye on the Greenback/Loonie exchange rate
With Canada and The USA celebrating their respective Days (capital D), it was a generally quiet
week in the markets for metals and their miners. However here’s a subject that’s been getting
column inches in the biz sections and it’s one
that affects our play, that of the US
Dollar/Canadian Dollar exchange rate.
Since the beginning of this year, your author has
been using a set CAD$1 = USD 0.90 forex in
order to run fimancials and that’s been
reasonable up until very recently, but the last
days of June and the first days of this month
have seen the Loonie rally against the Greenback
to stand at around 1/0.94 this weekend. For me
we’re really on the edge of the acceptable with
the current house ratio so it’s going to be
watched carefully and any more rallying will see
me adopt a 0.95/1 forex. For what it’s worth, my scanning of the issue shows that the number-
chattering class seems split between what the Loonie will do from here, many calling today’s
number as high as things can get for the moment.
Travel plans
Next week Lima for a couple of days, as I have a new company to discover and an office visit to
get the viewpoint of the team about their assets. As well as the mystery new company (which
as usual won’t be revealed unless I get more proactive on owning the stock) I’m going to try
and fit in a handshake with Minera IRL and Rio Alto people, checking-in variety. Therefore
1

expect the blog to be quiet the second half of next week (though saying that, I’ve been quiet
on it anyway for a the last few days).
Fundamental Analysis of Mining Stocks
The long copper juniors call has started well
It’s just two weeks since the strategy call of “Long Copper Juniors” was made in IKN267 (June
22nd, but already the thinkpiece
that came with the market
position is beginning to look
good, in a right-place-right-time
way.
Here’s a three month chart that
compares gold (GLD), silver
(SLV) and the precious metals
ETF (GDX) to the development
seen in three copper vehicles,
chosen as representative of the
producing sector. Here you see
the copper ETF (COPX), Freeport
McMoRan (FCX) and Southern
Copper (SCCO) and they’re fairly
typical (but by no means the
best I could have gone for) of other names we’ve seen moving:
A three month timescale is chosen because I want to show that things have been getting better
for a while, not trying to pull wool over any eyes here, but there’s a change for the better now
kicking into the copper space. Since just before the end of June (i.e. the week before last)
copper issues have seen accelerated buying and have spiked up in dollar value and provided
strong leverage to metals market peers. And the reason is simple enough, it’s this:
2

The price of copper has made what looks like a definitive move away from the three-or-abouts-
dollar prices typical in Q2 and is back over $3.25/lb, which means we’re in the relatively happy
place seen throughout 2013. now for sure there’s more work to do to and 2013 wasn’t a great
year for metals, but the trend is the friend here and if this monthly chart holds a hint...
...there’s reason to believe we’re reaching an inflection point that could drive copper the metal
higher.
Back in IKN267 while making the formal call to get long copper, these were the six reasons
shown (direct reprint):
1) Copper demand is not going away.
2) The worries and potential shocks from main market China are overplayed
3) Copper prices are currently at a cycle low and will improve in the next 12 months
4) Deal-making and M&A activity in the copper sector is picking up, a good sign for the
nearer term.
5) The value assigned to in-ground assets is currently very low and will be the area that
sees most improvement
6) It therefore makes sense to take positions in beaten-down juniors with good (or merely
reasonable) assets.
From what we’ve seen, reasons 1 through 4 are looking pretty solid, especially after the Lumina
friendly deal with First Quantum underscored the M&A action. For our (well, in fact “my”) active
investments in the newly held NovaCopper (NCQ.to) and Reservoir (RMC.v) to bear fruit
numbers 5 and 6 still need to kick in, but seeing the process underway is good enough for the
moment. And on that subject, I’d like to underscore that the main reco from these pages was
“Be Long Copper” and not “Be Long NCQ.to/RMC.v/COP.to/RIO.to”, because the whole idea of
the IKN267 piece was to keep it thinkpiece style and a macro strategy call, rather than the
specific recos. My personal circumstances mean moving into a couple of explorecos suits best
(for one thing, in the little-mentioned long term portfolio I have Southern (SCCO) and First
Quantum (FM.to) sitting there, so adding a small position in a producer is less attractive than
searching for leverage in an exploreco) but that’s me, not you. I have received mails along the
lines of “Why not buy Capstone (CS.to)/Copper Mountain (CUM.to)/NameAnother (XXX.to)?”
(and sometimes with more than one question mark, reader LR ☺) and for somebody else, that
may well suit them nicely. On that score I have been looking at one small copper producer
which gets a quick mention below today, but no decision as yet on whether to add (I have a
little more direct DD to do first). But please, don’t let my fixation on small explorers put you off
buying a larger/much larger copper producer: The call here is “long copper”, the rest is details.
To return to the subject matter, as for any accusations you might level at me for preening and
crowing about this recently started and so-far-so-good copper call, this time you’re just going to
3

have forgive me for crowing a little loudly and for two reasons. 1) I do try to underscore and
point out my bad judgment calls along the way, so fair’s fair no? 2) Far more importantly, I feel
going long copper and its mining derivatives is the right play for the rest of the year and what’s
more, the rebound move in the beaten down copper juniors sector has only just started, so
don’t think for a second that you might be late to this game. If anything we’re still early and it
makes sense to point the ‘long copper’ idea out early and often.
With the update done and hopefully a useful nudge that’ll get you thinking more about buying
some copper exposure, here come two short company-specific notes. The first on NovaCopper
(NCQ.to) because I already own it and it’s come out with the overdue news of financing, the
second a quick word on Amerigo Resources (ARG.to).
NovaCopper (NCQ.to) announces its financing
The news release I’d been expecting for a while finally came through on Tuesday (1) and
overall the balance of the news was good. It also seems I took my first position in NovaCopper
(NCQ.to) at just about the right time, because the terms of the $7.5m placement are likely to
draw a line (in the sand) under its current
share price. NCQ is raising the $7.5m in a
NovaCopper (NCQ): Shares out
private placement with its big New York 65
60
sponsors (Electrum, Kaplan, the Novagold
55
crew) at $1.15 per unit, each coming with a 50
45
share and a full warrant. This adds 6.522m 40
35
shares to the S/O number and once closed
30
will bring the count to 60.15m, which is 25
20
slightly under our previous model forecast 15
10
of 62m S/O as at end 2014. 5
0
For what it’s worth, the full warrant (strike
$1.60) with each unit looks pretty
sweetheart for those long-term big
investors, but 1) I can’t blame them and 2) NCQ had very few derivatives out before this and
adjusted F/D on closure will be around 66.9m, which isn’t bad at all. Basically i have no problem
with the full warrant award here and what’s more, if they go in the money it’d mean I’d
personally be sitting on a 50% gain...that softens blows nicely.
The terms of the deal also stipulate how that cash is to be spent and in a nutshell, what we
have here are the big backers handing enough cash for NCQ to tick over for one calendar year.
We’re not going to get massive exploration programs, drillings and new discoveries, extra
resource additions, PEAs, PFSs, FSs or anything of the sort. We are going to get baseline work
done, a modest G&A budget that will pay the bills and a company this time next year that will
still have the same amount of shares out. Which all points to the theory your author is using on
this trade; we’re buying into an undervalued asset and hope the market affords its rocks a little
more value this time next year; because that’s exactly what Kaplan, Paulson and friends are
doing. It also underscore our basic valuation on NCQ, as 7.7Bn lbs CuEq and the post-close
market cap at $1.17/share gives us an in-situ value of 0.9c/lb CuEq. For marginal poundage
that might look right, but these are high grading rocks and as long as those roads and power
lines happen, they’ll eventually be dug out of the ground. There’s plenty of room for asset value
growth here, $1.50 would be my current rough target.
Amerigo Resources (ARG.to): Under consideration
Thanks for all the suggestions for copper vehicles, with special thanks to reader ‘TC’ for
nudging me on the name Amerigo Resources (ARG.to), a small producer in chile that I used to
both own and cover but fell off my radar a couple of years ago and never got back.
For those who don’t know, ARG is a neat little operation that takes the tailings from the Chile
State mining company’s (Codelco) massive El Teniente mine and re-processes them, extracting
copper and moly that El Teniente missed. It’s a cost-sensitive model because it has to cover
4
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2 tse41q3 tse41q4
m
source: company filings, IKN ests for rest of FY14

relatively high power and royalties from low grading material, but it’s good at what it does and
when copper prices run higher can offer very decent leverage.
The things that make ARG interesting at the moment are that 1) it’s just signed an updated
deal with El Teniente to keep the tailings running to its plant until 2037, so there’s plenty of
mine life here and then 2) it’s embarking upon a round of investment to improve and upgrade
throughput and production. Cash invested now will begin to show fruits in 2015/6, so in some
respects an investment in ARG.to now is akin to an investment in a development stage junior
exploreco. And I like that.
I need to do some more work on the model and with luck meet with a couple of people who
know the company intimately, so no decision as yet. However, this one is now on the potential
shopping list and therefore gets a mention on these pages.
And that wraps up our “I’m serious about this, be long copper” update. Another mainly
thinkpiece because that’s what I want you to do about this, think.
Stocks to Follow
The score last week was eight risers (RIO.to, TGD, IRL.to, GQC.v, RMC.v, FCV.v, NCQ.to,
COP.to) and six fallers (DNA.to, TGM.v, SCZ.v, LRA.v, EOM.to, SRL.v) which at first glance is
fairly even-stevens and in line with the modest gain in gold on the week (GLD was up 0.39%),
but in fact it was a pretty decent week all told for the ‘Stocks to Follow’ list and my personal
portfolio, because most (not all) of the ones I care most about at the moment (momo and cash
wise) made the upmoves and most (not all) of the losses were at the smaller and riskier end of
the list where least damage gets done.
Not only that, but the percentage upmoves in some of the names were good as well, admittedly
led by the tiny Coro (COP.to up 13.3%) but then happily by Focus Ventures (FCV.v up 13.2%),
Minera IRL (IRL.to up 9.5%) and Timmins (TGD up 7.8%). Only one large percentage downer
of note, that of Eco Oro (EOM.to down 10.3%).
We currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
imposed maximum. Eight are in the green, six are still showing red ink.
5

Reco Current
Company Ticker this week Avg Price date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to str buy C$2.30 07-apr-11 C$2.44 6.1% Top pick, $3.30 tgt June 15
Recommended long positions (in current order of preference)
Timmins Gold TGD buy U$1.38 09-apr-14 U$1.79 29.7% $2 tgt, good momo trade
Minera IRL IRL.to hold/buy C$0.27 22-jul-12 C$0.23 -14.8% Added, news starting
Goldquest Min. GQC.v buy C$0.295 27-oct-13 C$0.32 8.5% drillplay spec, good vibes
Reservoir Min. RMC.v buy C$6.13 18-jun-14 C$6.14 0.2% building position, M&A play
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.30 30.4% tgt 50c, added, avged up
Dalradian Res DNA.to hold C$0.65 27-oct-13 C$0.98 50.8% Going well, tgt up to $1.70
True Gold TGM.v hold C$0.395 02-feb-14 C$0.425 7.6% LT hold, takeover play
NovaCopper NCQ.to spec buy C$1.03 09-apr-12 C$1.17 13.6% small, adding slowly
Santacruz Silver SCZ.v hold C$1.04 26-jan-14 C$0.93 -10.6% silver/M&A spec, rel. small
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.70 -39.1% solid biz model, LT hold
Eco Oro Min. EOM.to hold C$0.48 22-sep-13 C$0.26 -45.8% paramo resolution missing
Recommended short positions
None at moment
Smaller/Riskier
Coro Mining COP.to spec buy C$0.125 26-jan-14 C$0.085 -32.0% Cu spec play, can add
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.17 -39.3% small risky spec, vg rocks
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 feb'14 U$13.10 08-apr-13 U$21.72 -65.8% short closed due to reality
Darwin Res DAR.v mar'14 C$0.10 14-jul-12 C$0.045 -55.0% tiny risk play dropped
B2Gold BTO.to mar'14 C$3.07 28-nov-12 C$3.35 9.1% closed to free up capital
Pretium Res PVG mar'14 U$5.38 22-nov-13 U$6.50 -20.8% short closed as port longer
Gold Res Corp GORO may'14 U$5.07 26-jan-14 U$4.12 16.7% Re-short now full position
Bear Creek Min BCM.v may'14 C$1.63 23-mar-14 C$2.05 25.8% Ag/pol risk trade, avged down
2009, 2010, 2011, 2012 and 2013 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Minera IRL (MIRL.L) (IRL.to): We had news, which takes up more room so is discussed
below in Market Watching. Here the trading and I liked the look of that on a slow week for
others, with volume and price fun in both London and Toronto. IRL has a bit of market radar
these days, which makes a pleasant change from the weeks of no volume.
Dalradian Resources (DNA.to): On a quiet week and halfway through 2014, a brief look
back on how DNA has done so far this year:
I’ll take that. Also (and with permission
granted), we note that this weekend Brent
Cook has spoken positively about DNA in his
weekly letter, after visiting the site along with
a group of analysts last week. Cook has held
DNA shares since mid-April and has made a
tidy profit already, but is holding through and
looking for the stock to go higher. That’s a
decent endorsement of this company in my
opinion.
6

GoldQuest Mining (GQC.v): We upped our near-term sentiment call to buy on GQC last
week, eyes wide open about the risks of drillplay speculation, and that’s still in place this
weekend despite its 4.9% improvement on the week. Your guess is as good as mine on when
the drill numbers arrive, but we’re in the time window and the background rumblings are
positive enough. There’s still room for the price to improve before the news starts to flow, too.
Focus Ventures (FCV.v): A short, pure trading report this time and what I liked about last
week from FCV was the 100k+ volume either side of Canada Day, all on improved pricing which
shows that if you want to buy into FCV in even moderate size, chances are you’ll have to pay
up to do so.
Salazar Resources (SRL.v): An interesting week at the market for SRL, not because of any
price move (it ended up losing a penny) but because traded volume suddenly showed up after
a way too long absence.
Here’s a ten day chart that shows the choppy action between 17c and 20c last week, as well as
the volume bars that show 100k+ days on Tuesday, Wednesday and Thursday (and we should
also remember that Monday was Canada Day and Friday was light trading on the TSXV due to
the U.S. July 4th holiday closure). Why’s that significant? Well, the last day SRL showed 100k+
daily volume was February 28th this year (we don’t get many) but to really underscore the
change in pattern, the last time we had two consecutive trading days of 100k or more in this
stock (let alone three) was on May 12th and May 13th ...of 2011!
Overall, it looks like somebody was liquidating a position, but the way it held 17c the the type
of bottom tick I want from my very-high-risk small holds. What with some signs of
improvement in the Ecuador mining scene coming through (see today’s section on Ecuador in
‘Regional Politics’ below), it’s easy enough to have SRL in the portfolio as our toehold (it’s too
small to be a even a foothold) in the country.
Timmins Gold (TGD): A nice week, with trading holding up well in both my preferred TGD
ticker and the higher volume TMM.to in Toronto. A reminder that if I see U$2 I’ll take it and the
ensuing profits on this trade, even though the general idea is to benefit from the rise of buyout
speculation on the company. This one’s a simple trade, no fancy stuff, selling higher than
buying is more than enough to satisfy the soul.
The Copper Basket
After twenty-seven weeks of 2014 The Copper Basket is showing a 17.58% gain to level stakes.
7

company ticker price 1/1/14 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 1.51 144.41 516.99 3.58 137.1%
2 Lumina Copper LCC.v 6.29 44.07 454.80 10.32 64.1%
3 NGEx Resources NGQ.to 1.43 168.71 369.47 2.19 53.1%
4 Reservoir Min. RMC.v 4.97 47.5 291.65 6.14 23.5%
5 Nevada Copper NCU.to 1.35 80.5 210.11 2.61 93.3%
6 Copper Fox CUU.v 0.375 402.96 106.78 0.265 -29.3%
7 Panoro Minerals PML.v 0.35 204.71 92.12 0.45 28.6%
8 Western Copper WRN.to 0.76 93.68 87.12 0.93 22.4%
9 Hot Chili Ltd HCH.ax 0.425 333.11 69.95 0.21 -50.6%
10 NovaCopper NCQ.to 1.60 53.4 62.48 1.17 -26.9%
11 Curis Resources CUV.to 0.57 74.79 60.58 0.81 42.1%
12 Cordoba Min. CDB.v 0.90 58.81 43.52 0.74 -17.8%
13 AQM Copper AQM.v 0.11 139.05 13.91 0.10 -9.1%
14 Coro Mining* COP.to 0.10 159.37 13.55 0.085 -15.0%
15 Oracle Mining OMN.to 0.27 49.03 6.37 0.13 -51.9%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg 17.58%
A largely positive week for the Copper Basket, as you might expect on the back of the pop in its
underlying metal. Just three stocks lost
ground (NGQ.to, PML.v, CDB.v) and two The Copper basket 2014, weekly evolution
25%
others remained unchanged (AQM.v,
OMN.to), which means the other ten all 20%
moved up. Not listing them all, but the
15%
bigger winners on the week were Curis
Resources (CUV.to up 14.1%), Hot Chili 10%
(HCH.ax up 13.5%), Western Copper &
5%
Gold (WRN.to up 13.4%), Coro Mining
(COP.to up 13.3%), and Copper Fox 0%
(CUU.v up 12.8%). The only larger loser
was Cordoba (CDB.v down 12.9%).
Copper market prices were the driving
force of last week’s rally, as noted above and as
seen right here on the five day chart. The combo
of China Fears abating (nothing new there) and
developed world economic expansion is the right
recipe for all industrial metals and especially
copper, the one that China need to import. I
doubt it’s straight-up sailing from here and
expect the rally to be choppy. Also, I’d expect
copper to go through a consolidation period at
the $3.20/lb / $3.35/lb range for while. But the
worst prices are now behind us, this is a place to
park cash.
As for our regular coverage of world copper
inventories, here are the bullets:
• Total world stocks rose very slightly, up
2,541 metric tonnes (mt), to 258,728,
which for the second week running
means that little changed in the world of copper stocks.
• Shanghai Futures Exchange copper warehouse inventories rose slightly for the second
week running, up 2,376mt (3.0%) to finish at 81,351mt.
8
ht5naj ht21 ht91 ht62 dn2bef ht9 ht61 dr32 dn2ram ht9 ht61 dr32 ht03 ht6rpa ht31 ht02 ht72 ht4yam ht11 ht81 ht52 ts1nuj ht8 ht51 dn22 ht92 ht6luj
source: IKN calcs

• The LME copper warehouse inventories remained unchanged 159,425mt.
• The Comex warehouses copper inventories moved up by a minor 165mt to 17,952mt.
So this week the same as last week, nothing much doing and no signal to report (though in
passing I’d point out that just one warehouse, the LME New Orleans depot, now holds
127,150mt and nearly 50% of all world stocks). This stands out against the interesting move in
copper pricing, with perhaps the story here that market prices are playing catch-up to the
underlying fundies we’ve tracked carefully and noted bullish for several weeks. At least that’s
the conclusion I’m drawing, as it justifies the existence of this section conveniently ☺.
Now for some notes on three of our basket stocks
Lumina Copper (LCC.v): LCC moved up strongly and caused a couple of “counteroffer??”
mails to arrive, but the answer is that no, there’s scant chance of a counter to First Quantum’s
(FM.to) offer and LCC.v will fall to them. What we saw last week was LCC reacting to the
improving share price of FM.to and the resulting arbitrage on the paper part of the buyout
offer, as you can see in this 10 day chart.
Nevada Copper (NCU.to): If this one were truly about to be bought out it would have
continued its climb in the last two weeks, rather than stall the way it has. Your author’s top
candidate for a drop against the grain, its Pumpkin Hollow property has more community
convenience than most but less economic punch. In the end, if you can’t make enough money
from the rocks they’re not going to be mined.
Western Copper & Gold (WRN.to): WRN did well on the week up 13.4%, but really it only
rebounded inside its trading range so I’m not that impressed. We could see it move North of a
Loonie, but without new news it looks set to hit the ceiling it’s hit several times already. For a
risk/reward play I prefer CUV.to to this one right now, though to its credit WRN’s Casino is still
a far better project than Copper Fox’s silly Schaft Creek.
The Low Cost Producer Basket
After 27 weeks, the Low Cost Producer Basket is showing a 24.27% gain to level stakes
9

company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 37.74 1040 40.05 38.51 2.0%
2 Goldcorp GG 21.67 812 22.47 27.67 27.7%
3 Barrick ABX 17.63 1000 18.44 18.44 4.6%
4 Newmont NEM 23.03 497.87 12.54 25.19 9.4%
5 Silver Wheaton SLW 20.19 357.39 9.49 26.55 31.5%
6 Franco Nevada FNV 40.74 147.01 8.33 56.63 39.0%
7 Agnico Eagle AEM 26.38 173.43 6.64 38.29 45.1%
8 Pan American PAAS 11.70 151.41 2.33 15.42 31.8%
9 B2Gold BTG 2.02 651.4 1.86 2.85 41.1%
10 First Majestic AG 9.80 117.02 1.27 10.83 10.5%
all prices in U$, using NYSE ticker prices Portfolio avg 24.27%
The same as last week, BTG went down and by the same amount, one penny. Then NEM
remained unchanged, which means eight of our names made ground. Most of them gains a few
pennies or a percentage point or two, with the exception Freeport (FCX), which rose 6.8% and
has finally managed to get into the green for the year. Its rally is a clear reflection on the
bullish sentiment for copper now prevalent in the marketplace.
The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
35%
30%
25%
20%
15%
10%
5%
0%
10
ts13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1nuj ht51 ht92
basket
gdx control
source: Yahoo! Finance, IKN calcs
Low Cost Basket: Percentage difference between
basket and GDX control, 2014
8%
7%
6%
5%
4%
3%
2%
1%
0%
ts13ceD ht5naj ht21 ht91 ht62 dn2bef ht9 ht61 dr32 dn2ram ht9 ht61 dr32 ht03 ht6rpa ht31 ht02 ht72 ht4yam ht11 ht81 ht52 ts1nuj ht8 ht51 dn22 ht92 ht6luj
source: ikn calcs, NYSE/Nasdaq data
Regional politics
Regional risk review, revised edition, fifth update
It’s quarter-end and time for the regular review of regional political risk for junior mining. This
is the 5th edition of the revised format (as seen in IKN218, IKN230, IKN243 and IKN255), which
I’m now reasonably happy with after its re-vamp this time last year (though not resting on
laurels and always up for suggestions on how it could be improved). Quickly, here’s the scoring
system overview (for full details, IKN218) and the 6 categories are:

a) National Government Miner Friendly: The country on its national stance towards
mining activity.
b) Community/Social Miner Friendly: The overall attitude of locals towards mining,
either in specific zones or in country regions.
c) Foreign Direct Investment (FDI) Friendly: The openness towards FDI and the
safeguards it gives to foreign capital looking for a home.
d) Mining Culture: Countries or regions with generational traditions in mining are easier
places in which to operate than those which have little previous exposure to formal
mining operations.
e) Geopolitical Optics: The way in which the outside world sees this country, an
important factor, no matter if the perception be right or wrong.
f) Internal/National Political Stability: A gauge of how stable the country in question
is politically.
We tend to concentrate on nine countries with the potential to host companies, rather than try
to offer a comprehensive LatAm-wide view that takes in countries with little or no appeal for
investment or speculation in juniors. Therefore we focus on Chile, Peru, Mexico, Brazil,
Colombia, Nicaragua, Dominican Republic, Argentina and Guatemala. We still keep an eye on
Panama, Uruguay and Guyana, but the others don’t appeal to us the junior speculator until
further notice. So to the updated table. Below come the country notes.
March 2014 Latin American Country Risk For Foreign Mining Companies
Nat. Govt Community/Social Geopolitical Internal Nat.
Country FDI Friendly Mining Culture Total
Miner Friendly Miner Friendly Optics Political Stability
LatAm countries under active consideration for junior mining project location
Chile 9 7 7 10 9 9 51
Peru 9 7 9 9 7 7 48
Mexico 7 7 6 9 8 8 45
Brazil 7 5 7 8 7 8 42
Nicaragua 8 5 7 6 6 6 38
Dom Rep 8 5 7 5 6 7 38
Colombia 6 4 8 6 6 6 36
Argentina 8 6 5 6 4 5 34
Guatemala 7 2 5 4 4 6 28
Potentially relevant LatAm countries for junior mining
Panama 7 4 9 4 9 6 39
Uruguay 7 5 7 3 8 7 37
Guyana 8 6 6 6 4 4 34
Ecuador 6 3 5 4 6 7 31
Countries of little or no interest for junior mining exposure
Bolivia 3 6 2 9 5 8 33
Paraguay 6 5 6 3 3 6 29
Honduras 7 3 4 5 3 4 26
Costa Rica 1 1 5 1 6 7 21
Haiti 6 3 4 1 3 3 20
El Salvador 1 1 4 1 6 5 18
Venezuela 1 5 1 3 1 2 13
source: The IKN Weekly house estimates
Overview
The main changes this quarter are:
1) Peru is now a clear second place to Chile in the regional rankings, as it has moved
11

forward miner-friendly and investment-friendly reforms while others have imposed
extra terms on the industry (e.g. Mexico)
2) Ecuador has been moved up into the “Potentially Relevant” category. This doesn’t mean
it’s suddenly buyable as a jurisdiction because it still has some pretty deep problems to
overcome in order to be attractive, but it does mean we should take the country a little
more seriously.
3) Argentina is becoming a little more interesting as a mining FDI destination. Again, by
no means are we talking of a sudden panacea and micro-regional issues must be
understood, but change is in the air and there are certainly some cheap assets on offer.
4) Colombia’s decadence for mining potential continues.
So with those four points the main takeaways, find details below as well as updates on all our
main countries of interest.
Chile: FDI Friendly down 1 point
The Chilean score gets notched down one point this quarter, as the image being sent out by
newly-reinstalled Michelle Bachelet’s government is one that’s mildly negative to foreign direct
investment. I’m not trying to overplay this (in the way the Chilean right wing and media does,
currently making her out to be some female Che Guevara) and Chile is still the single best place
to play at mining in Latin America, but at the same time recognize that her government’s
decision to send a bill to parliament that will strip mining companies of its tax stability benefits
and open the way to a higher base level of taxation isn’t a positive by any means. Meanwhile in
the background the Pascua Lama snafu rolls on and we’ve also had the cancellation of the
Hydro Aysen hydroelectric generator dam project, which was a clear victory for the enviro
lobby. These are negatives, but the positive side is also there such as the plan now being
developed by the Bachelet government to speed up permitting of key power plants in the North
of the country (alas mostly coal-fired) in order to cover the current growth shortfall and supply
power to the next set of mining projects and expansions.
Again, I may be making mountains out of molehills but its more the image reflected from Chile
that’s the problem here, rather than reality.
Peru: FDI Friendly up 1 point, Geopolitical Optics up 1 point
On the other hand, Peru seems to be doing everything it can to make itself attractive to the
world large-scale mining industry at the moment. This is the reason behind the two point jump
and it’s elevated the country to clear 2nd spot in our table. However, the current near-term good
vibes may turn around and bite the country hard in the longer-term so be warned.
The main reason Peru’s gone up in people’s estimation is what’s being called the “paquetazo”
by pro and anti alike; literally a “big packet” of measures proposed by the Ministry of the
Economy (MEF) and currently being pushed through congress that will act as a stimulus
package for the economy and jump it back into the 5% /6% GDP growth bracket, rather than
the current sub-standard 3% and 4% numbers we’re now seeing from the flagging economy.
The package’s main aim is to make the country more attractive to big business project and
that’s mainly mining, with items including a tax stability plan (as mentioned on these pages in
June) write-off of taxes owed, tax breaks for capex investments of over 500m Soles ~U$180m)
per year and (something particularly attractive to mining companies large and small), the
streamlining and speeding up of the permitting process for exploration and eventual production,
which will include fast-tracking a lot of the key environmental permits.
The measures have been welcomed by the business community (basically because they helped
write most of them) but environmental groups are already up in arms about the potential
effects of the measures (as well as others who take a more economics-based opposition to the
measures and say they’re not enough to produce the type of growth the government’s
advertising and therefore add up to little more than a big giveaway at the expense of rank-and-
file Peruvians). For a good resumé of the opposition to the measures, this Spanish language op-
12

ed from one of the country’s better social commentators (2) provides the arguments and plenty
of links to organizations that warn the relaxation of enviro controls could mean serious social
problems down the line when locals take protest matters into their own hands. Or for a quicker
read in English, this (3) from the worldwide covering Environmental Investigation Agency
covers the main points and starts like this:
WASHINGTON, D.C. - The Government of Peru is proposing a packet of
economic measures and regulatory rollbacks that will cause significant harm
to the environment and drastically diminish the Peruvian government’s ability
to hold corporations accountable for violations of environmental standards.
If approved, the proposed measures may violate obligations of the Peruvian
government under the U.S.-Peru Free Trade Agreement. Fifty civil society
organizations and indigenous groups in the United States and Peru have
taken a stand against the measures, which they cite as a serious
environmental setback.
The bill will probable pass into law and provide an image boost for Peru in the eyes of potential
foreign investors (start with China and mining). Add to this the shadier moves, such as
imprisoning Gregorio Santos on remand for bribery charges that will impede his re-election
campaign in Cajamarca (jailing him for these non-violent crime accusations is particularly odd),
and what you have is a government moving further right of centre as each year goes by, all
after being elected on a classic left wing social popularity ticket too.
What happens down the line is less clear, but for the moment we’re going to take the
government moves at face value and reward them with a ratings increase for the mining
industry. However, signs of civil unrest will have to be monitored and evaluated as and when
they occur.
Mexico: FDI Friendly down 1 point
Mexico’s tightening fiscal laws are the main problem here, with many companies now deferring
their social budgets because they say the new 7% EBIT royalty payments they’re obliged to
make to central government take away from their discretionary spending and should cover the
same type of local program needs as before. The other problem is with (re)negotiation with
local landholders (Ejidarios) on land use deals, as the communities are now demanding a lot
more from the mining companies (witness GG in Guerrero State recently).
Brazil: Internal National Political Stability up 1 point
Brazil’s overall score rises by a point because of the World Cup. Seriously. We’ve seen the
competition go off well (just one week to go and Brazil’s national team will play until next week
too, keeping things calm) and the feared social protests have been minimal to zero. The
successful hosting will provide a boost to President Dilma Rousseff’s re-election campaign and
as she was already comfortably ahead in the polls, the next vote looks sealed and signed
already. Not that it will change much in the world of mining and there’s still a supposed royalty
tax hike in the pipeline, the same one proposed four years ago (which is how Brasilia works),
but continuity is not to be sniffed at and Brazil’s PT Worker’s Party has come a long way under
first Lula and now Dilma from the leftists stance of yore. The economic slump needs to be
addressed, but we can expect the right sort of economic policies from the country under Dilma.
Nicaragua: Community/Social Miner Friendly down 1 point
The star of recent times has seen some headwinds finally appearing. To be honest, I’m
surprised we haven’t seen this sort of organized anti-mining protest before in Nicaragua and
President Ortega has been pretty effective in promoting the industry and keeping the anti-
miners without a voice until now, but as people cotton on to the profits being made by gold
mining operations and wonder where the country (i.e. their) cut is, so also comes the protests
against new projects (such as those by locals in the Northern Matagalpa province against the
B2Gold El Pavon project) with the classic anti-mining playbook being used
(water/profits/contamination/way of life etc). Therefore Nicaragua gets a point shaved off by
13

way of a pre-emptive, and we’ll watch to see if anti-mine feeling grows or whether the
arguments for the benefit of the industry win out.
Dominican Republic: Unchanged
Unchanged this quarter, as the positive stance of the government and anti-mine activists cancel
each other out. The current hot spot for mining there is the Falconbridge nickel mine expansion
project, which has its pro and anti factions (notably anti is the local Catholic church, not a force
to be underestimated) and the lines of battle there have been drawn, but on surveying the
issue via my regular news media channels I’ve been struck by the relative maturity of the
debate and the way in which deeper issues are raised, as well as the sides actually bothering to
listen to one another rather than shouting past each other. Dom Rep is still on watching brief
politically, though of course I’ve now got my own financial exposure to the place (at long last)
via the current position in GQC.
Colombia: Internal National Political Stability up 1 point
Although I’m raising Colombia by a point this quarter, that’s more to do with the stability and
potential for peace with the FARC thanks to Juan Manuel Santos’s re-election (and it looked
tight there for a while) and the resulting point added back after a big vote. With that point
added back it’s hard to see how Colombia will get further raises until it finally gets to grips with
its long-standing and long-delayed institutional problems vis-a-vis mining and as that doesn’t
seem to be happening any time soon (in fact it’s probably getting worse), the real story here is
the continued fading of the promise Colombia held a few short years ago. We only need to
point to the continued debacle around the Páramo de Santander (it was supposed to have been
decided upon in September 2013 and we still don’t know where the government has drawn its
boundary line or how it will rule on mining activity after that) for those outside looking in to see
the problems in investing in Colombia, but the real problem is the inertia on mining law reform
that continues to block any project from becoming a mining reality. The current government
war banner is against “illegal mining” in all guises, which is raising the hackles of the informal
mining community and causing unrest but does nothing to help the elephant in the room, the
laws that will allow legal and formal projects to become new mines (start at La Colosa).
So Colombia’s hard rock mining sector continues to drift without direction or purpose and while
it does, there’s little need to recommend more than minor exposure to it as a mining
jurisdiction. I have my small piece of EOM and although regretting even that at its entry price, I
can live with it. But adding significantly to Colombia exposure is silly at the moment. No point,
not when serious places offer cheap entry points.
Argentina: FDI Friendly up 1 point, Geopolitical Optics up 1 point, Internal National
Political Stability down 1 point
Heaven help me again, I’m starting to like Argentina political risk. The country gets one point
added to geopolitical optics and one to FDI friendly this quarter, but one’s lost to the political
stability column as well. Strangely (or not so strangely, as it’s basket case Argentina we’re
talking about here, where anything happens and often does), those three points moves are all
for the same general reason.
The political instability comes principally from the 2015 Presidential election, which may be
more than a year away but its effects are already being felt and its main cast of characters are
jockeying for position. What we do know is that President Cristina Fernández de Kirchner (CFK)
will hand over to a new President and although likely to come from the ranks of the PJ
(Peronist) party (Mauricio Macri would disagree with me on that), it’s up for debate as to how
loyal the new top job owner will be towards Kirchenrism, the overriding political force of the last
10 years in Argentina. It’s going to be a fascinating contest, as even those closest to the CFK
line, such as current frontrunner Daniel Scioli, are likely to move and alter positions away from
hardline K policies as the race develops. The question is by how much. Meanwhile, there are a
bunch of free market (or at least freeR market) candidates who’d be considered a welcome and
positive change by the outside world (though they’d do well to be careful about what they wish
for).
14

Second up, inflation. It’s well known that Argentina’s official rate (~10%) has been a lot lower
than its real rate of inflation (~30%) over the last few years, but in new Finmin Axel Kicillof
has been trying to tackle that and has been making (some limited) progress too. He’s rightly
recognized that the combo of international currency reserves and Peso printing are behind the
inflation problem (which may seem simple to you, but nothing’s a given in Argentina) and has
been tackling those root causes. Also he’s introduced a fairer official gauge for inflation and
we’ve apparently seen some success on that. If this becomes a trend and inflation is brought
under control, at some point we’ll be looking at a country with a very cheap currency that offers
great value in asset purchases. For capital heavy and asset-dependent industries such as
mining, that’s music.
Next in the mix right now is the Argentina debt issue, with the Vulture Fund holdouts also
dictating part of financial policy. From where I sit I see no immediate looming crisis for
Argentina (even if the weirdly defined ‘technical default’ is triggered), but again this is likely to
become a major issue in the 2015 election campaign and candidates’ positions to the debt and
whether or not to pay or negotiate with the vulture funds/holdouts will be a hot item.
As an offshoot of the debt issue and the inflation/macrofinancial issue and their potential for
weakened country finances, our main subject of mining comes along and it’s here where things
get specific and interesting. Being a high capital and easily taxed sector, mining is likely to get
popular in this government and the one to come, as large ticker capital projects along with their
job creation potential will be just what Argentina needs. Already we’ve seen frontrunner
candidates endorse mining (Scioli, Massa) and in the case of Scioli, he’s been endorsed right
back by the mining community. On a wider level, the time for elections in Argentina is the time
for promises of jobs and fuller back pockets, and as the ecologist message is set to be lost in
the maze of the right-centre-centre-centre-left-left wing coalition, the spoils will be taken either
from the right, from “classic Peronism” (PJ) or from inside Cristina’s version of Peronism, the
FpV sub-section party...and all those will put jobs and wealth creation way before
environmental concerns.
I don’t think the government or any campaign stump speeches are about to launch the type of
reactivation package for mining that we’re seeing in Peru today; far from it, the whole thing on
a macro level will be a case of not changing a thing, talking nice talk about how they’d like
investment and letting the world start considering the new level playing field that is Argentina.
Guatemala: Unchanged
The el Tambor/La Puya protests by locals have been dealt with rather roughly by President Otto
Pérez Molina and his government, but they haven’t gone away. By all accounts, neither has the
bad blood abated round Tahoe Resources (TAHO) (THO.to) Escobal property, not that you’d
know such a thing from the company which is now producing its silver commercially and
enjoying a rising share price (i’m glad I dropped that short position). So the country rating
remains unchanged and it’s likely to stay that way too, as the risks are high but the government
backing for mining and its strong-arm strategies help the sector stay running.
Potentially relevant countries
Panama: Community/Social Miner Friendly down 1 point
The Presidential elections went smoothly and just last week, new President Juan Carlos Varela
took over from the outgoing Martinelli and is now in power. Panama macro-scale isn’t expected
to move from its current pro-business free market position under Varela, so no changes there
and all good. However its mining industry has hit headwinds via the laying off and subsequent
strike action at First Quantum’s (FM.to) Cobre Panama project, which is not good publicity. So
down a point, but it’s still not a first choice place for junior explorecos.
15

Uruguay: National Government Mining Friendly down 1 point, Internal National
Political Stability down 1 point
We’ve been optimistic on the apparent progress of Uruguay this last year or so, but it seems as
though that’s been either a premature or a plain bad call. The latest from Uruguay is that
neither the mining law reforms nor the pathfinder contract with Zamin Ferrous for Aratiri have
been signed into action or have made much progress and the whole issue of whether large-
scale formal mining has a future in the country is in doubt. Anti-mining environment lobbies
have made enough noise for both the above matters to become policy points for the upcoming
presidential election (end of this year, so not only is everything on hold, but it’s now up to the
politicians’ judgment of their electorate on whether pro or anti mining will bring them more
votes and an elected position. As a result, and due to that election on the horizon, we drop
Uruguay’s score down by two points.
Ecuador: National Government Mining Friendly up 1 point, FDI Friendly up 1 point,
Geopolitical Optics up 1 point
Along with Argentina, the interesting move for the quarter on the table. That’s because we’ve
dragged Ecuador out of the “other countries” (i.e. forget it) section and into the “Possibly
relevant” section and that’s because there finally seems there are real moves afoot to make
formal mining in Ecuador user-friendly. The change starts at the top (as always) and with
President Rafael Correa, who in June admitted his country’s state burden policy on mining was
a failure and has called for a re-vamp of the tax and royalty system. The likely result of this will
be a relaxation or even total abandonment of the windfall tax on profits (he should have asked
me about it five years ago...hey ho) which would leave Ecuador looking like a reasonable priced
jurisdiction against other regional zones, but at the same time we should concede that things
happen at snails’ pace there and any reform isn’t going to happen tomorrow, or next month...in
fact even a change by end 2015 would surprise me. However, the move to a more miner-
friendly fiscal set-up in Ecuador has been put into motion and that’s not a bad thing. Also
playing in the favour of the country is it’s strong economic growth, which is also happening in a
relatively low inflation environment. I’m moot on the new moves from Correa to make any
President (i.e. him) indefinitely re-electable, because although concentration of power in a
Caudillo is usually a long-term negative, even his detractors have to admit the country is doing
well economically and is likely to continue doing so for at least the medium-term. All these
things play in favour of outside investors in mining looking in.
We need, however, to point out the serious issues still in play with Ecuador and junior mining.
First and foremost you need to be in the right area and have exceptionally good
local/community relations, because there are no end of bad tales about locals and mining
companies and those continue to today, with the latest hot issue once again Intag (ex-
Ascendent Copper), this time with protesters stopping a Ecuador State and Chile Codelco JV
from exploring and developing the property. Others have equally sticky relationships to this
today (Quimsacocha) and no manner of national legislation will help an incoming or in-place
junior if the locals don’t allow you in.
So there are signs that Ecuador’s getting a little better for mining exploration, and they seemed
to have learned by their mistakes on the issue of overtaxation. Right now I have a small
exposure via Salazar (SRL.v) (today decent community relations without being perfect, as
understood) and that’s more than enough. but as there are a cubic tonne of cheap stocks to
choose from, at least one eye will get trained on Ecuador for the rest of 2014.
Other countries
Bolivia: Geopolitical Optics up 1 point
The score is up a point because Evo Morales is now a virtual certainty to be re-elected (or
according to his enemies, re-re-elected), which along with the strong economic growth
16

numbers under Evo means Bolivia is likely to continue doing just fine in the years to come. But
please, this isn’t a place to play at junior speculation, stay well clear.
Paraguay: National Government Mining Friendly up 1 point
A new government and vague noises about opening up to FDI and mining projects. But
Paraguay remains a bit of a black hole and is to be avoided.
Honduras: Community/Social Miner Friendly down 1 point
That’s because the police have taken to shooting protesters again. Not a place for juniors.
Market Watching
Minera IRL (MIRL.L) (IRL.to): News arrives (and it’s generally good)
And so came news from Minera IRL, which was mostly good but still not definitive about the
financing for Ollachea. There were two NRs published on Tuesday (4) (5) by IRL, with the first
announcing that Ollachea had received its construction permit from the government of Peru and
the second updating in general terms at least on the progress made so far in the financing
package for the project. These NRs were of course the basis of the feedback that brought on
the Flash update sent out Thursday morning (see appendix 1).
The contents of the two NRs are inter-related, but let’s take them one at a time. First the
construction permit news, which was expected before the end of this quarter and has duly been
delivered. We can therefore place it under “positive, but not market moving”. The good thing
about it is that with receipt now formally in hand of the last big permit needed to build the mine
(there are always a bunch of minor ones along the construction track, then a final operating
permit will be needed before finished project can begin turning) the advanced negotiations on
the financing package underway can see resolution, because it’s clearly understood that no final
deal would be possible without this piece of paper. Which brings us to the second NR, the
(quote unquote), “...Update on Ollachea Financing Negotiations and Existing Debt Facilities”.
We now know the main parameters of the Macquarie financing offer, which in rounded terms is
$100m, $30m of which would extinguish the current financial debt held by the same house. The
resulting $70m would be a sizeable chunk of the estimated $177m in liquidity IRL would need
to build Ollachea, but it doesn’t need a rocket scientist to tell you the ~$107m shortfall is a big
breach for a ~$50m market cap company. The other limitation we’ve heard about is that
Macquarie require a larger than expected hedging program on the gold production covered in
the Ollachea feas study (some hedging was inevitable, too much takes away equity blue sky).
The upshot is that the debt financing offer as tabled by Macquarie isn’t the greatest. The
hedging aspect, plus the way the capex shortfall implies a heavy share dilution (instead of an
expected modest one), leaves less on the table for the asset shareholders (e.g. us) and a little
too much with the people who write cheques. To that effect, IRL is now shopping around for a
better way of financing Ollachea and from what this desk has picked up, there are more than
one alternative out there. I don’t know how it’s all going to pan out, but as mentioned in the
Flash update last week, it wouldn’t surprise me in the least to hear that IRL exchanges a
sizeable chunk of Ollachea ownership for necessary capex, in much the same way as the Don
Nicolas project in Argentina found its capex cash. And as mentioned, there’s no reason to
automatically assume that the Northern finance houses are the only place IRL can go for
funding, because South America has been cutting deals all by itself and IRL’s footprint down
this way is already well-established. The bottom line is that Ollachea has all it needs bar
funding, but on that score there are more than one serious alternative that owning company
can now consider.
Next, as noted on Thursday in this respect the booting forward by one year of the $30m debt
owed to Macquarie makes sense, as it provides more than the necessary time to finalize the
Ollachea package, whichever form it might eventually take. The cost of this debt renegotiation
is $1.5m upfront and an aggregate of 7.2m options (exercise price to be arranged), which is a
17

bit of a drain on the IRL treasury in the short term, but in the greater scheme of things isn’t too
bad. As IRL expects to have the deal wrapped up in the current quarter, its cash position is still
adequate (though hardly luxurious).
I’m going to meet up with IRL people next week for a head to head, so look out for any
information gleaned in IKN170 next Sunday. In the meantime, the call from the Flash update
last week stands as per; if you’re looking for a risk/reward gold play that could provide strong
returns from a low level, look no further.
Conclusion
IKN269 is done, we end with bullet points:
• It was another generally quiet week of trading, with holidays interrupting the flow.
Copper was the main attraction and I suspect that’s going to follow through again this
week. Amerigo (ARG.to) came as a suggestion and one I like the look of so far, though
no rushing in.
• Not much on Top Pick Rio Alto (RIOM) (RIO.to), but that doesn’t mean a thing. It’s still
the cheapest and best value thing out there.
• More about Minera IRL next weekend.
• Keep an eye on Dalradian (DNA.to) at the open tomorrow. If Brent Cook liked what he
saw and he was with a bunch of analysts, there may be more than one glowing report
it reacts to in the morning.
• I kind of hate myself for beginning to like Argentina as a spec cash destination again,
its Siren’s Song is dragging me back.
The top long-term pick is Rio Alto Mining (RIO.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
18

Footnotes, appendices, references, disclaimer
(1) http://finance.yahoo.com/news/novacopper-announces-private-placement-financing-201800154.html
(2) http://www.larepublica.pe/columnistas/de-centro-radical/autogolpe-al-peru-se-viene-el-baguazo-de-humala-06-07-
2014
(3) http://eia-global.org/news-media/environmental-rollbacks-in-peru-threaten-obligations-under-u.s.-peru-free-t
(4) http://finance.yahoo.com/news/minera-irl-receives-construction-permit-060000290.html
(5) http://finance.yahoo.com/news/minera-irl-provides-ollachea-financing-060000943.html
Appendix 1: Flash update dated Thursday July 3rd
Good Thursday morning and a windy one here, trying to get this Flash update out before 08:30am local time and the
opening bell.
Minera IRL Comment
In the last two days, I've received several mails from disparate sources about rumours and talk of a Minera IRL buyout.
Here come a few comments:
•
I know that IRL have plenty of options on the table re. the Ollachea financing and discussions with various
parties have been ongoing.
•
I'm sure that the deal offered by Macquarie (as seen in this week's NR from IRL) can be improved upon by at
least one interested party. Therefore side deal that boots the $30m obligation into the future is in this respect a good
one for IRL and gives it time to negotiate.
•
It's possible that one of those options is a full buyout of the company, but honestly I doubt it. For one thing, I'm
quite sure that the positive social capital the team has at Ollachea with the community is something that even a buyer
would not want to upset.
•
I believe a JV deal on Ollachea is more likely, something along the style of the deal IRL did at Don Nicolas in
Argentina, where a third party comes in and finances the project in exchange for a sizeable chunk of the mine. In this
way IRL and its team would remain in charge.
•
I'm also led to believe that a deal to finance the project is now close at hand. One aspect seemingly ignored
by the North is the prospect that IRL is funded for Ollachea via South America, with no need to bow to the financiers of
the Northern hemisphere. As deals are being struck regularly down this way now, I'd definitely open your mind to that
idea; it's a likely outcome.
•
Canaccord released a note on IRL today calling a 20p target on this 11p stock and giving a decent summary
of recent events. I've attached the note here.
As a result of all this, I am tempted to add to my IRL position today at these prices, but after careful consideration I think
I'm going to wait, as although clearly cheap at today's prices I have a whole bunch and don't think I can add more
without raising the recommendation back to Top Pick. As stated more than once, I want to see the nitty gritty of a final
financing deal before re-raising the reco, therefore I'm going to stay pat on my personal position. However, at current
prices I want to underscore that IRL looks very good value on a risk/reward basis as long as those going in do so with
eyes open about buying a CAD$0.21equity.
Bottom line: IRL has good assets, an excellent team, all its key permits and is only basically missing the money to build
its flagship mine. As that now looks close at hand, if you want a risk buy with high potential reward in the gold space,
look no further.
19

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
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
20

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.
21