IKN #270Premium

The IKN Weekly
Week 270, July 13th 2014
Contents
This Week: Those objectives.
Fundamental Analysis: Rio Alto Mining (RIOM) (RIO.to): Three items on our Top Pick.
Stocks to Follow: Overview, NovaCopper (NCQ.to), Timmins Gold (TGD) (TMM.to), Minera
IRL (IRL.to) (MIRL.L), Dalradian Resources (DNA.to), GoldQuest (GQC.v), Focus Ventures
(FCV.v), Eco Oro (EOM.to), True Gold (TGM.v).
Copper Basket: Overview, Panoro (PML.v).
Low Cost Producer Basket: Overview.
Regional Politics: Peru communities to protest new environmental permitting laws.
Market Watching: An upcoming site visit
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
Those objectives
It’s been a decent couple of weeks for the metals and miners, including the juniors, and right
on schedule the positive price moves have brought the the To Da Moon brigade with them. No
surprise there. Now, I’m not changing my bullish stance towards the sector and have enjoyed
the rally as much as the next person, but we need to keep rational about the next few months
as well. Therefore and to repeat:
• I’m looking for U$1,400/oz gold by the end of 2014 (with implication of roughly
$23.50/oz silver and $3.40/lb copper). The silly numbers are for other places, the target
here is positive, reasonable, reachable and would flow through to the (junior) miners as
higher PE multiples for the producers and better in-situ valuations for the explorers.
• I expect quality assets to re-rate higher, which is why I’m positioning in them. Feel free
to buy masses of beaten to death penny stocks that will offer you fivefold gains in a
matter of months if everything goes perfectly for the most bullish of sector scenarios; I
might dabble at the edges of that, but the real cash will stay in the names that already
have plenty of equity. Money goes to money, risk will be managed, envy of somebody
else’s 200% profit when you make 100% is for the fool.
• However another downmove still wouldn’t surprise me in the least, so I’m ready and
willing to take another sub-$1,300/oz gold moment on the chin. There’s a difference
between firmly believing that the bottom is in for gold (~$1,180/oz) and recognizing
that it’s unlikely to be one-way traffic. After all, it hasn’t been that even while this
recovery has set in. Again that’s all about betting at the quality end of the sector, the
issues that can take a reversal and bounce back if necessary. We live in and try to solve
the puzzles of a particularly volatile sector; if we get a smooth run up it would be
pleasant, but don’t expect one.
1

Accuse me of dampening down the rising bullish momentum if you like, or if you prefer call me
optimistic and believe the impending collapse will take me and my portfolio to the woodshed.
All I seek is to keep things real, manage risk and if things go reasonably well benefit financially
from the set-up.
Fundamental Analysis of Mining Stocks
Rio Alto Mining (RIOM) (RIO.to): Three items on our Top Pick
This week we spend more time on our Top Pick and my personal top weighted position,
becuase there are three items I want to discuss on the company.
• Its 2q14 production numbers and ensuing financials forecasts
• My meeting last week with CEO Alex Black
• The stock’s re-rating potential
They’re all somewhat interlinked of course, but more like three chapters of a novel or three acts
of a play so today we give them separate treatment.
2q14 production numbers: Last Tuesday came the NR on 2q14 production figures (1) which
were headlined by 54,517 oz of production, which was precisely 483 oz under the IKN house
model prediction so no problems and
right in line for me. The average pad g/t Au RIO.to: Average gold grade on pad
grade dropped to 0.51 g/t Au which 2.0
didn’t help things, but there was good
news on the undercard in that the 1.5 1.37
strip ratio at 1.01X dropped more than 1.09
the company had predicted. 1.0
0.59 0.63 0.51 0.65 0.58 0.59 0.52 0.51
So minor technical details of plus and 0.5
minus nature aside, the quarter was
smack in line with expectations and 0.0
that’s a good thing, as RIO has La 1q12 2q12 3q12 4q12 1q13 2q13 3q13 4q13 1q14 2q14
Arena running on rails. From the soure: company filings
production numbers we can therefore
take a guess at the financials for 2q14, even though (and this one’s quite important) the actual
financial performance for RIO.to will in the next three or four quarters be a lesser influence on
its share price movements now that the company is about to nearly double in size via the
swallowing of Sulliden (SUE.to). Here
are the inputs and assumptions: U$/oz Au Rio Alto: Average gold selling price vs London Fix Avg,
1800 last ten quarters
• We know the company 1700
produced 54,517oz gold and if 1600 London Fix Avg
recent history stays with us, RIO gold avg
1500
that’s the number of ounces
1400
the company will ship.
1300
• We’re now near the end of the 1200
Gold Prepayment Agreement 1100
and thanks to the numbers in 1000
the 1q14 filings, we know that 1q12 2q12 3q12 4q12 1q13 2q13 3q13 4q13 1q14 2q14
RIO.to definitely prepaid its
NB: Cut-down Y-Axis source: RIO filings, London Fix, Kitco
July obligation of 1,941 oz.
Assuming gold stays in the U$1,250 – U$1,350/oz range, that means the company has
another 5,434 oz to cover the last payments, due August, September and October,
2

before this liability is totally cleared. Your guess is as good as mine on whether they’ve
prepaid another month or three, but i’m going to guess that since the 1q14 filings
they’ve pre-paid August as well, which would be 1,941 oz. Therefore, I’m, going to
base revenues on sales totalling (54,517 – 1,941 x2) 50,635 oz.
• As for average sales price (above), RIO.to typically gets London Fix minus a few dollars
for its gold. As the London Fix Gold average for 2q14 came in at U$1,288.5/oz, I’m
going to pitch the RIO.to realized price average at U$1,270/oz for the quarter. You’ll
note at this point that I’m deliberately baking in a conservative price and the chances of
upside surprises, as usual.
• So sales (50,635oz) times revenues (U$1,270/oz) gives us a guesstimate total revenue
of U$64.3m.
• As for costs, with the much improved strip rate announced by RIO.to for 2q14 (1.01X)
and the comments made by the RIO.to team on the back of that numbers, there’s
every reason to believe they’re going to post decent cost savings. For my guesstimate
I’m going to plump for U$605/oz in op.cash costs (down from U$651 in 1q14) and
when you run that number through the sheets it estimated COGS at $33m.
Then add some company-in-line estimates for amortization/depreciation and G&A (which is
usually low for this size of operation), here’s what pops out the other end of the model:
RIO.to: Quarterly Earnings Overview
$m
revenues COGS amorts gross profit
90
80
70
60
50
40
30
20
10
0
1q13 2q13 3q13 4q13 1q14 2q14est
source: company filings/IKN ests
We’re therefore expecting a gross profit of U$23.3m, which then runs into an operating profit
RIO.to: Op. Earnings
65
60
55
50
45
40
35
30
25
20
15
10
5
0
3
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2 tse41q3 tse41q4
source: company filings/IKN ests
srallod
fo
snoillim
of U$19.3m, which is slightly under the 1q14 but not a problem from where I stand, the
difference being small and wholly covered by the slightly lower gold price Q2 to Q1 (and hey
hey, we’re nicely higher so far in Q3). If you want a guesstimate for bottom line net profit (not
one I’m so worried about, as RIO.to is a growth story that’s more about cash flow than
earnings) that would fix around $12m, in line with 1q14.
In short, we’re expecting another solid quarter from RIO.to once its financials are published in
August. From there (as the op.earnings chart above suggests) we’re looking for better numbers

from the La Arena mine, as the rise in the gold price definitely suits and the costs savings as
cheaper energy and the continued drop of strip rates (set to go under 1X) bring their benefits.
Meeting Alex Black
On Friday I caught up with RIO.to CEO Alex Black for a non-formal meeting (we met for coffee
near his office, in fact) that took a little under an hour. His principle concern at the moment
(well, “concern” is too strong as he’s obviously not too worried about it, perhaps “thing
occupying his mind” is better) is closing the merger deal with Sulliden and that’s a lot of
logisticals and corporate-ese, basically. Kingsdale has been hired for the proxy work (both I and
reader “A” got their proxy forms and FOR reco advice sent over late last week, so I’d expect
that to be replicated among other people reading this). Assuming all goes well and the Special
Meeting at the very end of this month goes smoothly, the merger will be completed and then
Black and his team will be in position to tell us more about their plans for the development for
Shahuindo. Confidence has risen on the deal due to the upmoves in both RIO and SUE stock
(we shareholders tend to approve of such things) and it’s almost certainly too late in the day for
an interloper to try a higher bid (not to mention the lack of synergies to Shahuindo that RIO.to
brings to the table, but that’s another story).
As for La Arena, the company is very happy about the way things are proceeding and apart
from hanging on moves in the gold price (just like the rest of us) are good about the future,
too. On hearing that Black and his team had visited Shahuindo the previous week, we talked a
little about timelines and cost guidances and although obviously very guarded about what he
could say to a gossipy little jerk such as your author, the impression received was positive and
there may be pleasant surprises in store once the merger has closed.
The stock’s re-rating potential
One of the main reasons for RIO.to to push on this merger, from the initial conference call
announcement onwards, was to make claim for a whole-greater-than-sum-of-parts, which
argues that RIO.to and SUE.to together will become a more valuable entity due to a size
premium and worth more than the two separate companies pre-deal. As I’m sure you’re well
aware, both RIO.to and SUE.to stock prices have jumped considerably from the pre-deal levels,
as once the initial shock and doubts (mine as big as anyone else’s) had been processed we’ve
seen the prices go up. That’s good of course (for us longs at least), but the question remains,
has the re-rating of RIO begun? Here’s a chart that compares RIOM the US listing (keeping the
underlying currency uniform) to the junior mining ETF GDXJ. And the answer to our question
is...
...no, not really. We’ve seen perhaps 15% added from the worst of the bottom to today, but
that’s pushing the window to its absolute limit and probably not representative. The last few
4

days have seen RIOM outperforming GDXJ by around 8% and I’d take that as evidence of some
re-rating, but not enough to care about, so far at least. In my opinion, once the deal closes
we’re going to get a further breakaway of RIOM from GDXJ and a 30% gap is very possible,
which (by some weird coincidence ☺) would bring RIO.to close to my CAD$3.30 current price
target. The case for RIO’s re-rating is that of its new larger size and market cap affording it a
higher (forward) PE multiple or NAV multiple to its current situation. It’s not unusual and as the
Sulliden acquisition (theoretically at least) solves the market’s worries about shorter than
average mine life and upgrading production of gold via expansion projects, in this case it
wouldn’t be something confined to the wildest optimist.
The bottom line to RIO.to this week is that its production looks in shape for 2q14 and the
company is waiting on the closure of the SUE.to (every reason to expect that to happen
smoothly now) before being able to lay out its plans for the quarters to come. The stock is
showing some signs of a positive re-rating but if history is anything to go by, there’s more in
the tank. Rio Alto remains a strong Top Pick on the events of last week. We’re not at a 52 week
high just yet but as this chart shows, it’s not that far away either. A 3-handle on this price will
make everybody feel better about the future, I’d safely wager.
Stocks to Follow
Last week we witnessed eight of our Stocks to Follow make gains on the back of the gold
strength (risers (RIO.to, TGD, IRL.to, RMC.v, TGM.v, NCQ.to, SCZ.v, SRL.v), two remain
unchanged (FCV.v, DNA.to) and four lose a little ground (GQC.v, LRA.v, EOM.to, COP.to). And
once again, the happy news is that most of the larger positions were the winners, while most of
the losers were at the small and risk-bound end of the list. The two best percentage gains came
form Top Pick Rio Alto (RIO.to up 12.7% and yes I am happy about that, thanks for asking)
and the tiny Salazar Resources (SRL.v up 11.8%). No big losers.
We currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
imposed maximum. Seven are in the green, one is unchanged, six are in the red.
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-abr-11 C$2.75 19.6% Top pick, $3.30 tgt June 15
Recommended long positions (in current order of preference)
Timmins Gold TGD hold U$1.38 09-apr-14 U$1.84 33.3% $2 tgt, good momo trade
Minera IRL IRL.to buy C$0.27 22-jul-12 C$0.235 -13.0% Added, news starting
Goldquest Min. GQC.v buy C$0.295 27-oct-13 C$0.295 0.0% drillplay spec, good vibes
Reservoir Min. RMC.v buy C$6.13 18-jun-14 C$6.18 0.8% 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 buy 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$0.46 16.5% LT hold, takeover play
NovaCopper NCQ.to spec buy C$1.03 09-apr-12 C$1.20 13.6% small, adding slowly
Santacruz Silver SCZ.v spec buy C$1.04 26-jan-14 C$0.97 -6.7% silver/M&A spec, rel. small
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.69 -40.0% solid biz model, LT hold
Eco Oro Min. EOM.to hold C$0.48 22-sep-13 C$0.255 -46.9% paramo resolution missing
Recommended short positions
None at moment
Smaller/Riskier
Coro Mining COP.to spec buy C$0.125 26-jan-14 C$0.08 -36.0% Cu spec play, can add
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.19 -32.1% 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.
NovaCopper (NCQ.to): Looking to add at the right price. On the market front, NCQ
continues to be thinly traded and erratic in pricing, as this five day chart shows (it moves
between $1.11 and $1.27 for no particular
reason). We did have news from the
company last week though, first Monday
(2) when it announced the successful
closing of its $7.5m raising (tapping the
bigger holders, as noted last week) which
provides all the company needs until this
time next year. Then came its Q2 financials
on Wednesday (3) which held no surprises
at all and underscored that the NCQ will be
playing things slowly and cheaply in the
quarters to come, it has the cash it needs
and the limited exploration and data
gathering program kicks into gear this
month, July 2014.
6

So overall it was news-that’s-no-news, but the feeling coming from this relatively recent long
position is good. NCQ fits right into my worldview that good exploration assets, ones with
longer-term potential, will get a valuation boost as the market comes back and send equity
prices higher. Therefore I will be looking to add more to this still small position (bought twice so
far, neither were big chunks) though as the choppy price action indicates, there doesn’t seem
to be any real reason to pay up for the moment. The plan will be to stick in a couple of lowball
bids (between $1 and $1.10 perhaps) and just leave them there as a fishing expedition. If any
of the bids hit, all good and you’ll hear about it the next weekend.
Timmins Gold (TGD): Considering taking profits. Another positive week, though at one
point we had the stock into the U$1.90s and I was starting to think about selling. Still am in
fact, because there will come a valuation limit to this stock even though the 2q14 production
figures were on the right side of the tracks. Production numbers came from TGD last week as
well, and as noted on the blog (4) the 33k oz of gold sold didn’t quite match the blowout 1q14
quarter but was still is decent result. It’s quite pleasant to have bought this one well and be in
this current position and although it would be nice to ride it up on an M&A deal (it’s always
possible still), as noted on a number of occasions already it’s not one I’m going to hold loyally if
the right price comes along. The current $1.80s - $1.90s range is close, but not quite enough
yet.
Minera IRL (MIRL.L) (IRL.to): From what I’ve picked up, both from the naturally guarded
comments from those inside the company and people outside the company, a deal on Ollachea
is now close. I’m now expecting it to have the following components:
• Macquarie is paid off, barring its equity component and NSR on Ollachea
• A joint venture partner is brought in that exchanges capex cash for participation
• IRL keeps control of the project as operator
• The deal is sourced in South America, as for just one thing Canada has been far more
of a hindrance than a help to this company and its mine projects.
In other news, things seem to be going as smoothly as can be expected on the development of
Don Nicolas (translate as “Argentina is difficult, but we’re getting there”). Another somewhat
intriguing line is that on more than one occasion now I’ve picked up rumblings about
Corihuarmi, the company’s small producing mine in Peru. It’s always been a very efficient and
profitable operation but it’s never been that big, its cash flow mainly good for covering
corporate G&A and reducing equity dilution over the years, also it’s official mine life is now
rather limited. Regarding Corihuarmi, there’s probably a little more life than most expected and
there may be a whole new lease of life to it as well. Up to a few weeks ago I’d personally and
largely discounted that part of IRL as a real contributor to share price value in the future, but
that may turn out to be premature on my part.
Dalradian Resources (DNA.to): Post-close Tuesday DNA announced (5) it was running a
gross proceeds CAD$20.16m financing, with the plan to sell 22.4m units at 90c a pop (1 unit =
7

1 share + ½ warrant priced at $1.50), with half the placement going to first comers and the
other half to Sprott Private Wealth LP, because Rick Rule likes this company. A few hours later,
DNA announced (6) it was raising the open-to-
everyone part of the placement to CAD$15.03,
which when combined with the over-allotment
facility means DNA will sell a total of 30.405m
units at 90c to all parties (and they’ll fill that
overallotment without a single problem, this
placement is by all reports highly oversubscribed).
On news of the placement the stock fell off a small
cliff first thing Wednesday morning, but as the
market realized the subscription was being
snapped up very quickly the open trading share
price rebounded nicely and managed to finish the
week unchanged at 98c, all told a very positive
week for the sentiment in this one. Fortunately we’re in earlier and cheaper and the action
around this financing is pointing the stock higher. Hold on to every share you own.
GoldQuest Mining (GQC.v): Cause for concern? While all around rose and enjoyed the
upmoves in gold, GQC had a harder time of it and dropped away. the other thing not to like
was the way in which the pattern was set by days with higher volume, particularly Tuesday and
Friday, because although not massive selling (663k Tuesday, 340k Friday) was a rise in the
rhythm and both days smacked of people rather keen on getting out. As this pattern coincides
with the time window for drilling news out of Dominican Republic, the optics are suddenly not
half as good as they were.
Am I scaring out out of a position? Certainly hope not and I for one will stick in with GQC and
stay fully long. Negative trading patterns in juniors aren’t some cast-iron guarantee of bad
things to come either, but on the other hand it’s smart to acknowledge their existence. Eyes
peeled on the newswires here.
Focus Ventures (FCV.v): Same trading story as before here, with the price drifting until the
moment when volume picks up (e.g. Friday’s 302k) and then the price pops back. The message
is simple enough; if new money wants in it needs to pay up.
We shouldn’t expect much from FCV during the doldrums Northern summer period, as the next
solid news is likely to be the first pass 43-101 inferred resource for Bayovar 12 and that’s
something we could expect around Labor Day.
Eco Oro Minerals (EOM.to): EOM announced management changes last Wednesday (7), first
8

up changing Anna Styliandes from Interim CEO to full, official CEO. Second up adding an
engineer, Stuart Smith, and a geologist, Callum Grant, to the company and to a technical
advisory committee. We’ll see if this accelerates matters at EOM, but as the NR also noted that
“Company awaits the final coordinates of the Santurbán Páramo from the Colombian
authorities”, thereby putting an official stamp on the comments we made last week about the
whole climate of obfuscation and delay around the Páramo, we’re probably at the behest of the
Santos government still.
As EOM isn’t a big position it’s not one I’m in a hurry to jettison, so it’s currently considered an
affordable luxury in the portfolio mix. However it’s a hold at very best so until real news comes
along, I wouldn’t consider it an add or new buy recommendation.
True Gold (TGM.v): As Iwnattos pointed out on his blog last week (in his own inimitable
fashion (8)), we’re now a little more than one
month away from a big warrants expiry moment
for TGM and as those warrants have a strike of
47c, the move up to 46c last week has probably
hit the overhang. Saying that, such overhangs can
come as an advantage because if the stock
manages to clear the magic 47c number, it could
run and use it as a new floor, rather than a
ceiling. Not only that, but the large amount of
warrants about to come due, 64,734,200, would
bring in a very useful $30m in treasury at a time
when TGM is looking to build its mine at Karma.
Could we see it hit and run beyond in a nice piece
of timing? Yes, it’s certainly possible.
The Copper Basket
After twenty-eight weeks of 2014 The Copper Basket is showing a 17.87% gain to level stakes.
company ticker price 1/1/14 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 1.51 144.41 534.32 3.70 145.0%
2 Lumina Copper LCC.v 6.29 44.07 467.58 10.61 68.7%
3 NGEx Resources NGQ.to 1.43 168.71 369.47 2.19 53.1%
4 Reservoir Min. RMC.v 4.97 47.5 293.55 6.18 24.3%
5 Nevada Copper NCU.to 1.35 80.5 220.57 2.74 103.0%
6 Copper Fox CUU.v 0.375 402.96 104.77 0.26 -30.7%
7 Panoro Minerals PML.v 0.35 204.71 88.03 0.43 22.9%
8 Western Copper WRN.to 0.76 93.68 83.38 0.89 17.1%
9 Hot Chili Ltd HCH.ax 0.425 333.11 76.62 0.23 -45.9%
10 NovaCopper NCQ.to 1.60 53.4 64.08 1.20 -25.0%
11 Curis Resources CUV.to 0.57 74.79 58.34 0.78 36.8%
12 Cordoba Min. CDB.v 0.90 58.81 44.11 0.75 -16.7%
13 AQM Copper AQM.v 0.11 139.05 13.91 0.10 -9.1%
14 Coro Mining* COP.to 0.10 159.37 12.75 0.08 -20.0%
15 Oracle Mining OMN.to 0.27 49.03 5.88 0.12 -55.6%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg 17.87%
9

Seven winners (LCC.v, AZC.to, RMC.v, H CH.ax, NCU.to, NCQ.to, CDB.v), two unchanged
(NGQ.to, AQM.v) and six losers (CUU.v, PML.v, WRN.to, CUV.to, COP.to, OMN.to) is the final
score for last week, with (interestingly for me) no stock making a double-figure percentage
move in either direction. That, as well as a the minor improvement in the basket average,
points us at a week when the sector consolidated.
Keeping in line with that sentiment, The Copper basket 2014, weekly evolution
25%
copper market prices didn’t follow
through with a big move from the 20%
previous week’s very bullish action, but
15%
neither did they fade and overall we saw
a slight (~2c/lb) improvement on trading 10%
is a tight range. 5%
0%
Meanwhile, the ever-conservative
Cochilco (the Chile government’s copper
beancounter brigade) last week raised its
expectation for average copper prices in
2014 from U$3.05/lb to U$3.12/lb (9).
the main driver for this upgrade is improved
demand from China, which Cochilco now expects
will grow 10% compared to 2013 (previously the
estimate was +4.5% YoY). I’m well aware that
Cochilco are regularly accused of being behind
the curve on this forecast, but it’s never really
their job to make speculative forecasts as theirs
comes from evidence-based observations.
As for our regular coverage of world copper
inventories, here are the bullets:
• Once again we see a slight rise in world
stocks rose, this time up 1.433 metric
tonnes (mt) (+0.6%), to 260,161mt.
That’s three weeks of slight rises in a
row and a wholly neutral signal.
• Shanghai Futures Exchange copper
warehouse inventories rose by 3,102mt (+3.8%) to finish at 84,453mt.
• The LME copper warehouse inventories dropped by 2,925mt (-1.8%) 156,500mt.
• The Comex warehouses copper inventories rose 1,256mt (+7.0%) to 17,952mt, which
is a chunky move in percentage terms but as the minor warehouse system, still a bit of
a drop in the ocean.
In other words, little change from the
last three weeks and no extra signal to
help along the recovery in copper (even
though it’s price playing catch-up to
previously marked fundies, not the other
way around). Here’s the overall
inventories chart which shows today’s
low position compared to the last couple
of years; no matter how much copper
has been moved to non-market bonded
warehouses in China, that’s a tight
market right there and you shouldn’t
ignore the obvious signals of the
traditional markets.
10
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 ht31
source: IKN calcs
Copper inventories, per month 2012-2014
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj WON
Mt Cu
LME Shanghai Comex
source: Cochilco

Now for some notes on just one of our basket stocks:
Panoro Minerals (PML.v): Nothing to report but a bit of gossip, as twice during my travels
through Lima last week I received off –record advice to avoid this stock from people whose
opinion I respect. That’s a bit like preaching to the choir with me because I’ve never really been
a a fan of Cotabambas, though I have been pondering on whether I should review my own
negatives. They are in a nutshell:
• Away from the reasonably grading central core, the grade drops off and is low for a lot
of the mineralization.
• To build the mine, you’re going to have to move not just a village, but a 6,000
population provincial capital.
That second reason is why I’m considering an uninvited visit to the town of Cotabambas,
though that might be on hold because something more interesting has come up. See ‘Market
Watching’ for a bit of necessarily cryptic script.
The Low Cost Producer Basket
After 28 weeks, the Low Cost Producer Basket is showing a 27.60% 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 40.26 38.71 2.6%
2 Goldcorp GG 21.67 812 23.08 28.42 31.1%
3 Barrick ABX 17.63 1000 19.29 19.29 9.4%
4 Newmont NEM 23.03 497.87 12.91 25.93 12.6%
5 Silver Wheaton SLW 20.19 357.39 9.74 27.25 35.0%
6 Franco Nevada FNV 40.74 147.01 8.55 58.19 42.8%
7 Agnico Eagle AEM 26.38 173.43 7.08 40.84 54.8%
8 Pan American PAAS 11.70 151.41 2.36 15.61 33.5%
9 B2Gold BTG 2.02 651.4 1.88 2.88 42.6%
10 First Majestic AG 9.80 117.02 1.28 10.94 11.6%
all prices in U$, using NYSE ticker prices Portfolio avg 27.60%
Another very positive week for our bigger fish tracker, with all ten of the stocks making gains
but once again, it’s notable how moves were generally uniform and not so very large. This is a
sector moving up with the tide, alpha more difficult to locate.
The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
35%
30%
25%
20%
15%
10%
5%
0%
11
ts13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1nuj ht51 ht92 ht31
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%
12
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 ht31
source: ikn calcs, NYSE/Nasdaq data
What we seem to be getting from following the larger market cap stocks is a sense of higher
PEs being awarded, as gold’s not doing much more than it did in April or May (we discount the
Ukraine panic bump in March) but the GDX has risen to near-2014 highs all the same.
If this indeed is the process, it’s one we’ve picked up on in our basket (perhaps ex-FCX, the
only one I slightly regret including) and if things continue it’s bound to filter down into the
ranks of our more closely watched junior companies and smaller explorers eventually.
Regional politics
Peru: Pushback against the new mining incentive laws begins
UIT the new rules and regulations that determine Environmental Impact Assessments and
eventual permits coming into effect in Peru tomorrow Monday (10) under a system that’s meant
to speed up the whole permitting process (much of it will now be online and paperless), the
National Confederation of Peruvian Communities Affected by Mining (Confederación Nacional de
Comunidades del Perú Afectadas por la Minería (Conacami)) has announced it will debate and
vote on whether to implement a package of protest measures this Tuesday, July 15th. Conacami
says (11) that it’s concerned the new and much laxer rules will allow mining projects to move
ahead without the correct or necessary community consultation, which in practical terms may
mean mining projects are forced upon communities that don’t want them.
Market Watching

An upcoming site visit
I’ve arranged a site visit at the end of this month to a property that may have a lot going for it .
What’s most interesting, it’s owned by a company with a beaten down share price and a lot of
potential value. I need to keep the name and details under wraps for the time being, but I can
assure you that IKN Weekly readers will be the first to know about both the visit and this
company’s investment potential come the time (and of course, as always I won’t be buying any
shares beforehand; for just one thing, if this is as promising a deal as I think it might be there’s
going to be a lot of profit to go around.
It’s going to take two (or maximum three) editions to get this analysis and visit done, so stay
tuned. All this might come across as a crude hook to keep you hanging around here, it’s not
meant to be like that though, this is a genuinely exciting prospect and I don’t get this type of
feeling about a junior very often.
Conclusion
IKN270 is done, we end with bullet points:
• Rio Alto (RIOM) (RIO.to) continues to shape well and the price move we’ve enjoyed is
fully justified by the company fundies. There’s more to come, so buy, add or just plain
hold.
• Timmins Gold (TGD) is also clicking up nicely, but as it’s always been more of a nearer-
term trading set-up, a 2-handle on the price would probably see me taking profits. A lot
still depends on the way gold trades and its knock-on effect to the juniors, but a Flash
update to call a sale may come your way if the market stays benign.
• Minera IRL is close to a deal. When and what details I don’t know, but the signals are
clear.
• The reaction to Dalradian’s (DNA.to) financing was very bullish. This one’s to hold.
• Slightly more concerned about the optics coming from GoldQuest (GQC.v) this week.
I’m not selling on what might eventually turn out to be an overly negative signal, but it
has put me off any further additions.
• The 2014 World Cup Finals in Brazil are now over. This newsletter will get back to full
business and normal size as of next week.
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
Footnotes, appendices, references, disclaimer
(1) http://finance.yahoo.com/news/rio-alto-produces-54-517-120000924.html
(2) http://finance.yahoo.com/news/novacopper-completes-private-placement-financing-211500680.html
(3) http://finance.yahoo.com/news/novacopper-announces-second-quarter-financial-110000934.html
(4) http://incakolanews.blogspot.com/2014/07/and-pretty-decent-2q14-production-from.html
(5) http://finance.yahoo.com/news/dalradian-announces-financings-raise-gross-193100024.html
13

(6) http://finance.yahoo.com/news/dalradian-announces-increase-previously-announced-004300061.html
(7) http://finance.yahoo.com/news/eco-oro-minerals-announces-executive-005500204.html
(8) http://myownmarketnarrative.blogspot.com/2014/07/true-gold-mining-and-how-to-be-kamikaze.html
(9)
http://www.cochilco.cl/Archivos/destacados/20140708122057_COMUNICADO%20DE%20PRENSA%20Informe%20Te
ndencias%20abril-junio%202014.pdf
(10) http://gestion.pe/economia/eia-detallados-medianas-y-grandes-mineras-se-presentaran-sistema-evaluacion-linea-
2102791?
(11) http://www.larepublica.pe/13-07-2014/comunidades-anuncian-protesta-contra-gobierno
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
14

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.
15