IKN #271Premium

The IKN Weekly
Week 271, July 20th 2014
Contents
This Week: New buy today, We went under U$1,300/oz for gold.
Fundamental Analysis: NOBS fundamental report on Amerigo Resources (ARG.to).
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), Eco Oro (EOM.to),
True Gold (TGM.v). Santacruz Silver (SCZ.v), Lara Exploration (LRA.v), Rio Alto (RIOM)
(RIO.to).
Copper Basket: Overview, Panoro (PML.v), Oracle Mining (OMN.to), Augusta Resource
(AZC.to) (AZC), AQM Copper (AQM.v).
Low Cost Producer Basket: Overview.
Regional Politics: Peru Cajamarca: Santos’s chances for re-election are high, China’s
President Xi visits Argentina, Nicaragua puts on its first ever mining conference.
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
New buy today
The standard top of the shop headsup, today we call buy on Amerigo Resource (ARG.to), with
all the details in ‘Fundamentals...’ below for those who care enough.
We went under U$1,300/oz for gold
Admittedly it happened sooner than I expected, but the move we saw midweek last week fits
right in with the type of rocky road upwards outlined at this point last week. Sorry people, this
isn’t going to be a direct road up and reversals of the type seen last week are part of the
scenery. Personally I was happy to see it because I’m not looking to sell anything right now
(not even TGD any more, see ‘Stocks to Follow’ for more on that) and I’m in fact a buyer of this
market, particularly for copper-exposure, so why should I be happy about buying at 48 when I
can get an entry at 44 instead?
What’s more there’s even good cheer for the full-on bulls in this audience and those already
fully bought in; we shouldn’t expect this current dip to last (and we stayed under $1.3k for less
than a day this time, a sign in itself) no matter what does or does not happen in Ukraine, Gaza
or any other political flashpoint you care to mention. The politics can come and go, gold has set
its course away from the bottom earlier this year and I fully expect it to trend towards my
modest but clearly bullish medium-term target of U$1,400/oz as the year unfolds. Don’t fret the
small stuff, use these moments for purchases because gold’s fundies are just fine.
Fundamental Analysis of Mining Stocks
This week we open coverage on Amerigo Resources (ARG.to):
1

NOBS report dated July 20th 2014
Amerigo Resource Ltd. (ARG.to)
Company Overview
Amerigo Resources Ltd. (Canada: ARG.to, USA: ARREF, Frankfurt RE8.f) is a producing junior
copper mining company operating in Chile. Its main asset is the MVC concession located next
to Codelco’s El Teniente mine which re-processes the tailings of the larger mine and produces
copper and molybdenum. Current share structure is as follows:
Shares out: 172.64m
Options: 10.915m
Warrants: none
Fully diluted shares: 183.555m
Current share price: CAD$0.44
Market Cap: CAD$75.96m
Approx cash per S/O: CAD$0.04
All prices are in US dollars unless stated. Forex U$0.90=CAD$1
Overview
Amerigo Resources (ARG.to) is a small copper producer in Chile that I’ve followed on and off
for a long time (and owned once for a reasonably successful trade, many years ago). Its
business is an interesting and different one, as its whole plan is to re-process the tailings that
come from Codelco’s massive El Teniente mine in the Central area of the country, not so very
far from the capital Santiago, and extract some of what’s left of the copper and moly content
that’s left behind.
After asking for suggestions on potential copper plays a few weeks ago and prompted to dust
off the ARG.to file, it quickly became clear that the current window is a good time to consider
ARG.to as an investment again. As this is an established producer with a stable operation a lot
of today’s note is number-related and the laying out of the financial arguments for investing in
ARG.to, rather than going into the details of its day to day operations. For those of you who’d
like a decent overview of what ARG.to does, with photos and explanations, the company’s most
recent corporate presentation is as good a place to start as anywhere else, found on link (1) in
the appendix below.
Why like ARG.to today
Let’s lay it out for all to see, here at the top, in easy-read bullet points:
• The stock is cheap. Yes that’s simple, but it’s the necessary first part of the “buy low
sell high” equation we’re always after as investors.
• Copper price leverage. At the current price point ARG.to provides excellent leverage
to copper price upside.
• I firmly believe that copper is going higher (as laid out in recent IKN editions). This
makes the current window most interesting to me the speculator.
• Limited downside. Even if copper disappoints, downside to ARG.to share price is
limited due to the nature of its operations, operational longevity and its balance sheet
position (e.g. equity per share ratio). This gives today’s ARG.to very advantageous
risk/reward balance.
2

• Its financial position is solid. In fact it may even be underestimated or misunderstood
by the wider market.
• Growth to come. ARG.to is in the process of baking very significant growth into its
operations and by 2016 should nearly double its production profile, the first major
upgrade since the 1990s and a key value-adding step for a high-volume/low margin
operation such as this.
With my cards now clearly on the table, it’s time to get on with it.
Management and shareholders
Klaus Zeitler is ARG Chair, CEO, has headed up the company since 2003 and in simple terms
is the man behind the whole thing. Zeitler is one of the top names in mining in The Americas,
with a CV second to none and his name is still connected with many active junior mining
companies (he is of course chair of Rio Alto (RIO.to) and the biography offered there shows
Zeitler’s range of interests and background (2)). The other main hands-on player is Robert
Henderson, the President and COO who’s a mining engineer by background and came from
Kinross to take over the day-to-day running of ARG. In 2010.
As for shareholders, first among equals is Ross Beaty (it’s that man again) who holds 30.093m
shares, or 17.43% of the company. Beaty took his position back in the late 2008/early 2009
crisis period when ARG.to was suffering from a cash crunch brought on from the sudden
collapse spike in copper market prices. To his credit he’s been a loyal holder since then, but has
shown little to suggest he’d add or subtract from his holding in any great way. His is best
described as a strong hands holder position. Second largest holder is Geologic Resource
Partners, a holding company run by ARG.to director George Ireland, which owns 18.36m
shares or 10.63% of shares out. The other big holder is Rick Rule, via his Rule Family Trust
vehicle, who owns 18.17m shares or 10.52% of shares out. As for Klaus Zeitler, he owns 3.93m
shares of his own company, or 2.28% of shares out.
Between them, these four tuck away 40.86% of shares out, which is a big chunk of the potential
float but more importantly provides ownership stability to ARG.to.
Production overview
As noted above, we’re not going into the nuts and bolts of how ARG.to produces its copper and
moly at its MVC production facility (although it’s a very interesting set-up, see the website (3) or
the above mentioned presentation for more). Suffice to say there that it takes both fresh (via a
direct sluice line) and old (via ‘mining’ old deposits) tailings from the El Teniente mine and re-
processes them, extracting maybe 20% of the copper and 50% of the moly that remains there.
It’s a high throughput but (very) low grade operation that relies on bulk and low cost operations,
and as it also has to pay a royalty (currently 13.5% on Cu) on the metal recovered to El
Teniente, ARG.to is a company than runs on much thinner gross and operational margins than
the average mining company which in turn makes cash liquidity an important part of its financial
make-up.
It also means that, to a certain extent at least and particularly with its supply of fresh tailings, it’s
tied to what El Teniente is mining and processing at its own operations upstream. In 2014 this
ARG.to: Copper sales
16
14
12
10
8
6
4
2
0
3
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
source: company filings
htnom/uC
sblM
ARG.to: Molybdenum (Mo) sales, per qtr
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
source: company filings
htnom/oM
sbl
M

has meant something of a production slump for ARG.to and as the 2q14 production NR out last
week indicated (4), the company expects that to continue for the rest of this year before
recovering to previous levels. What this means in practical terms is best done visually, via these
copper and moly quarterly production charts above and the projections for the rest of FY14
The 9.344m Lbs copper produced and 9.322m lbs copper sold are the lowest numbers since
2q11 (which spiked down for ARG’s own
operational reasons) and came as a function of
lower than average grades in processed tailings of
0.131% Cu, as seen in this chart. Normally the
company’s Cu grades run between 0.15% and
0.16%, but as ARG.to gave guidance that grades
from its old tailings extraction operation are likely
to stay low until the end of the year, we now
expect the type of production seen above, in line
with revised company 2014 guidance of 40m lbs
Cu and 500k lbs Mo.
Next up, two charts that show how revenues have
developed and run into the next section that’s more specifically financial. This first chart below
should not be confused with reported revenues at ARG.to, because other deductions and
adjustments get made before that number is filed. What we have here is a calculated “gross
revenues” type chart which takes the average selling prices for ARG.to copper and moly, plus
the total sales for each quarter, then does the math to give us a raw number.
ARG.to: Calculated gross revenues (NB not same as filed
revenues) for Cu & Mo, per qtr
60
50
40
30
20
10
0
4
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
ARG.to: Average copper grade
0.18
(NB: please note cut-down y-axis)
0.17
0.16
0.15
0.14
0.13
0.12
0.11
0.1
$m
calc on Mo $m
calc on Cu $m
source: company filings, IKN calcs
As we can see, copper typically makes
up between 92% and 96% of sales and
is by far the most important product.
We also note that on the math alone
2q14 is set to be the lowest revenue
quarter for many years, a function of
lower average copper sales price
(U$3.16/lb) and the aforementioned
crimp in production.
This next chart shows the relation
between our calculated revenues
number and the real revenues number
filed by ARG.to each quarter. There’s a
clear relationship here, one that follows all logic to show real revenues (green) slightly below the
“calculated revenues” (grey). In fact over the 13 reported quarters featured the average breach
between the two is 9.11%, which is understood to be taken up by the “middlemen” (transport,
refiners etc).
21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2
% Cu
source: company filings
ARG.to: Gross revs calc versus filed revenues, per qtr
60
55
50
45
40
35
30
25
20
15
10
5
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
$m
Total gross Cu/Mo rev $m
Real revenues filed
source: company filings, IKN calcs, IKN ests for 2q14

Cutting a long story short, there’s a clear relation between the artificial calculated number and
the real reported number, which means we can make a decent stab at the revenues ARG.to will
report on August 7th 2014 when it files its Q2 numbers. We expect it to be under $29m (best
estimate $28.5m) and the lowest for years, which leads us onto our careful look at corporate
financials.
Financial overview
Following on from that intro, in order to show that ARG.to is decent investment alternative we
need to show that ARG.to, in its present state of crimped production for 2014and with copper at
something-above-3/lb levels, will be able to get through a potentially tough period intact. We’re
expecting the company to report a loss for 2q14, so its effect on financials plus any further
losses in what’s left of 2014 need to be examined.
This is a two-part exercise which we’ll tackle first by looking at quarterly earnings effects, then
the knock-on to the balance sheet and its liquidity
position (which I hope to show is a vital cog in this ARG.to: Revenues
machine). 60
50.499
50 44.231 47.108 43.161
Earnings: Taking this one piece by piece and 40.013
40 37.035
starting with revenues, here right is the quarterly 31.446 31.95 32.37
28.5
development plus estimates for 2q14 (for the 30
record, no guesstimates for future quarters because 20
we’ll deal with thei potential a little later, but the
10
2q14 can be used as a decent reference because
3q14 and 4q14 are going to be roughly similar in 0
production terms).
Next here (below right) is a chart of total operational
costs, including on-site COGS as reported by ARG.to, G&A and the very minor “other” category.
The good news here is that ARG.to makes it
easy for the simple-minded anal yst such as I to
follow things, as COGS lumps together all major
costs including the fluctuating energy price in
Chile, the royalty it pays to El Teniente, as well
as all the normal mine running costs and et
ceteras. We see a company with low G&A that’s
trimmed things hard, but even before niceties
such as tax it still needs to pull in perhaps
U$31m from revenues in order to break even on
its operations and another look at the above
green-barred revenues chart makes it clear that
things must be pretty tight at the moment. Here’s
a chart that puts those two above together while
once again (and not for the last time) I draw
your attention to the obviously skinny margins
with which ARG.to plays; even in the good
times (e.g. 2011) it moves a lot of cash to get a
relatively small amount of gross profit for itself.
As these gross profit and ops profit charts
show, that’s the case. Things were pretty good
back in the 2010 and 2011 period, plus on a
couple of occasions ARG.to has made extra
money by selling held shares
5
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
U$m
source: company filings, IKN ests
ARG.to: Costs breakdown
60
55
50
45
40
35
30
25
20
15
10
5
0
-5 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
U$m
other
G&A
COGS
source: company data, IKN ests
ARG.to: Quarterly Earnings overview
60
50
40
30
20
10
0
-10
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company filings, IKN ests
srallod
fo
snoillim
revenues
COGS
Gross profit

ARG.to: operating profit
6 5.248
5 4.421
4 3.090
3 2.439
2 1.515
1 -0.061
0
-1
-2 -0.839 -1.273-1.524 -0.933
-3 -2.200
-4 -3.203
-5 -4.253
-6 -5.048
6
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
$m
source: company filings, IKN ests
We can put those next to net profits in this way, to underscore the same point (though I am
repeating myself on this one quite a lot; just want to show how it all fits together):
ARG.to: Evolution of profits
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company filings, IKN ests
srallod
fo
snoillim
ARG.to: Gross profit
7
6
5
4
3
2
1
0
-1
-2
-3
-4
op profit
Net Income
Gross profit
It’s fair to say that 2q14 isn’t going to impress anyone and the company is set to record a loss
on a sizeable reduction in revenues on August 7th. We can also see how margins have been
pretty thin for a while, barring the 1q13 quarter which saw a delayed sale of metals from 4q12
added to the numbers. ARG.to moves a lot of material through its plant but runs on thin
margins, which means every cent added or subtratced from its sales price counts.
The bottom line to the earnings checkover is that we know ARG.to is going to report a loss in
2q14 and if things don’t improve pricewise, the low-end production guidance for 3q14 and 4q14
means we’ll get repeats of that loss in those quarter too. What we need to look at is whether
ARG is in the position to weather any storm coming and that’s a balance sheet question
Balance sheet: We start as usual with
assets and liabilities. The lion’s share of
the company is tied up in its fixed assets,
which in turn is nearly all its MVC plant
and production facility. Cash&Eq looks a
little thin in comparison, but it’s not that
bad and we’ll take a closer look at this
line item in a second.
Over at liabilities evolution, at first sight
the large bars that typically add up to
between $50m and $70m look daunting.
But it’s really not that bad here, as most
of the carried liabilities are the trade
payables and the El Teniente royalties
that ARG will need to cover in the quarter ahead. The nature of its operations and the deal with
El Teniente mean that there’s a natural lag between knowing what it will need to pay the royalty
owner and writing the cheque (which is also calculated on the previous month’s average copper
market price), so the liabilities held here are of a rolling nature, largely covered by trade
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company data, IKN ests
srallod
fo
snoillim
ARG.to: Assets Breakdown per qtr
250
225
200
175
150
125
100
75
50
25
0
-25 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company filings
srallod
fo
snoillim
Trade/Rec
Inventory
fixed
other current
cash&eq

receivables/inventory in the assets section and simply part of its business. In fact strip away the
normal run-of-biz stuff here and ARG.to is to all intents and purposes a debt-free company.
ARG.to: Liabilities Breakdown per qtr
120
110
100
90
80
70
60
50
40
30
20
10
0
7
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company filings, IKN ests
srallod
fo
snoillim
LT debt
current debt
What’s more important about the balance sheet items is the cash position of ARG.to. As we’ve
noted already, 2q14 looks set to come in at a loss. With production guided as flat and at the
current low range for the rest of the year, if copper prices don’t turn up we need to examine
whether ARG.to is going to hit a liquidity problem
and fail to have the necessary cash on hand to 15 ARG.to: Working Capital per qtr
fund its payments at the right times. Therefore this 12
is less about its fixed and mining assets and more
9
about what’s in the treasury pot, so here are the
6
two charts we need to know about.
3
Working capital stood at $4.8m as at 1q14 and 0
according to our model, is set to drop to $3m once
-3
2q14 numbers are known. That looks tight, but if
-6
we consider the cash position alone (i.e. pure
liquidity), that was at $8.14m as at 1q14 and is
modelled at $6m for end 2q14 (only time will tell
how bad that call is, though).
Now for sure that’s hardly a de-luxe comfort
position, but it’s not bad either and what it means,
in effect, is that ARG.to will indeed be able to
make its royalty payments from treasury for the
rest of 2014 if the worst happens and 1)
production remains stagnant 2) copper prices
don’t rise or even fall away 3) and will be able to
do so without recourse to other options, such as
an equity sale. This is the type of backstopping
position I was looking for from ARG.to because it’s
clear that lowered production and low copper
prices relative to one or two years ago isn’t a great
thing, but it also means a lower entry point into the
stock and as that’s already with us, the balance
sheet examination strongly suggests that there’s
no big nasty surprise in the wings, or unwanted
dilution to shares, that could pull down share value
further.
On the subject of share dilution, take a look at the
shares outstanding count at ARG.to. The last time
a significant amount of shares were added was in
2009 when Ross Beaty bought in and got ARG.to
out of its sticky liquidity spot at the time. Since
then it’s been very minor stuff, nothing more than
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source company filings, IKN ests
srallod
fo
snoillim
ARG.to: Cash and ST
40
35
30
25
20
15
10
5
0
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company filings, IKN ests
ARG.to: Shares Out
200
180
160
140
120
100
80
60
40
20
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company filings, IKN ests
serahs
fo
snoillim

the occasional option exercise, for year upon year. This is a company keen to keep its share
count tight and that’s something we should applaud.
To sum up, balance sheet items show a company that won’t be able to take years of losses, but
at current prices and costs it has the wherewithal to take losses without having to change its
structure or production rhythm. In other words, ARG can see out the rough copper pricing
period and look forward to when the market truly improves, instead of hoping on the signs of
improvement we’re seeing today. When they come, the next chart gives an idea of what the
share price is capable of doing.
Asset ratios and the future: This chart shows the equity (all assets minus all liabilities) per
share ratio of ARG.to. We’ve seen that most of the company’s asset value is tied up in the fixed
assets of its production facility and as such, if they’re to be valued more highly by the market
they needs to perform at a profit instead of the slight financial losses we’re seeing today.
ARG.to: Equity per share
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
8
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 tse41q2
source: company filings, IKN ests
Between 2011 and today we’ve seen equity/share drop from 94c to (our 2q14 estimate) 69c,
due partly to depreciating assets, some investment sales and the drain on its cash treasury
position recently. However (and here’s the thing), the share price at 44c is trading significantly
under the equity of the company (0.64X) which we can expect to change if and when ARG.to
returns to being a profitable company on a regular basis. The rule of thumb on this ratio is
“lower than 1X and the company’s in trouble”, and though things are not great at ARG today
(you can tell, it’s making net losses) the company is hardly “in trouble”.
• As we’re about to show, we’re close to reaching the price inflection point for copper that
ARG.to needs to become profitable, even at its current low production levels.
• Its recent renegotiation with El Teniente means its contract to process tailings now runs
until 2037, which means 23 years of mine life here and that should be enough for
anyone.
• After recently securing key permits, its expansion plans to move production up to 88m
lbs Cu per year (nearly double its normal run and more than double the 2014 figure) are
moving forward well. The economics add up as economies of scale will improve cash
cost and debt financing to the tune of $140m is, according to the company, set to come
from Chilean banking circles (a far better idea than trying up North).
Even without a surge in the copper price, ARG is in position to weather the storm. If the
expected copper market price increase comes that 0.64X equity to market cap ratio isn’t going
to last long and that means a very decent share price increase in the cards.
These next two tables are done to show the ballpark economics of the inflection point between
lossmaking/breakeven and at what price ARG can be expected to move into profit. They could
have been more complicated but after a few tries I went with the clear and easy method, but
also in the case of the first table cuts up the normally presented ARG.to COGS figure into
component parts.
• We keep market price for copper

• We assume a blanket op cash cost of $2.30/lb for copper at the moment and through
the rest of 2014 (this is set to drop as the expansion project comes on line)
• We assume a 9% “middlemen” charge (smelters/refiners etc), in line with previous
company results.
• We subtract separately the 13.5% El Teniente (DET) royalty. This is set to change
slightly at lower or higher copper prices, but at their current levels or thereabouts
ARG.to reports that the new deal just struck is roughly equal to the old one. Therefore
for FY14 model purposes this is more than enough.
• We then show gross margin (pre G&A, tax, financial charges etc) in cash and also
percentage terms.
ARG.to: Ballpark Calculation on Future Margin Leverage on Operations
Cu selling price $/lb cash cost 9% for "middlemen" DET royalty gross margin $ % gross margin
2.50 2.30 0.23 0.34 -0.36 -14.50%
2.75 2.30 0.25 0.37 -0.17 -6.14%
3.00 2.30 0.27 0.41 0.03 0.83%
3.10 2.30 0.28 0.42 0.10 3.31%
3.25 2.30 0.29 0.44 0.22 6.73%
3.50 2.30 0.32 0.47 0.41 11.79%
3.75 2.30 0.34 0.51 0.61 16.17%
4.00 2.30 0.36 0.54 0.80 20.00%
source: IKN calcs from ARG.to and other data
I’ve highlighted a few boxes to draw your attention to them, for example on the $3.10/lb line
which roughly represents where ARG can break even on operations. But we also see margins
improve rapidly at higher copper prices, e.g. the $3.50/lb price which gives a near 12% margins
cetris paribus.
What higher copper prices and all the rest might mean to the ARG.to share price is developed
in this second chart, which includes G&A etc in its calculation to give a pre-tax EPS per quarter
at different copper prices, always assuming 10m lbs Cu and similar Mo credit production per
quarter. The “true cost” is used at a fixed $31.5m, which represents the average of previous
quarters when adjusted for the forecast lower production of the 2014 year.
ARG.to: Sample leverage from copper price upmoves on quarterly earnings
Copper Revs: 10Mlb Cu True cost avg pre-tax Qtr EPS (cents)
price $/lb & Mo credit ($m) per quarter ($m) margin ($m) at 172.65m S/O
3.10 29.61 31.5 -1.89 -1.1
3.25 30.97 31.5 -0.53 -0.3
3.50 33.25 31.5 1.75 1.0
3.75 35.53 31.5 4.03 2.3
4.00 37.81 31.5 6.31 3.7
source: IKN calcs from company data
We again see how around current copper prices ARG.to get s to breakeven, but at $3.50/lb and
above (prices I expect to see as the year moves on) margin and EPS moves to very attractive
levels (e.g. an annual EPS of 15c, or perhaps 10c post-tax, would mean a 3X to 4.5X multiple to
the current share price and means in effect that today’s share price would be simple past
history).
Other matter for consideration
Our investment thesis on ARG.to is based on two clear premises:
1) We think copper goes higher from here
2) ARG.to is a good way to play the leverage from a rise in copper, being undervalued at
the moment.
However, there are other aspects of the stock that give it advantages or edges and this final
9

section before the conclusions makes brief comment on each.
Growth plans: Chief among “other matters” is ARG.to’s plans for expansion between now and
2016. Mentioned briefly above, ARG is currently in the permitting process (4a) for a near-
doubling of production capacity for MVC and assuming its permitting track goes to plan, expects
to break ground on the expansion at the end of this year and bring it on line by 2016. Funding is
expected to come in at $140m and be supplied by a debt deal with local Chilean banks (no
share dilution). This expansion also comes hand-in-hand with a new deal between it and El
Teniente that has extended its right on tailings reprocessing to the year 2037 (from 2021). This
expansion is an important step for ARG, as operating cash costs would drop to an estimated
$2.20/lb including royalties, thus greatly improving gross margins.
Low political risk: In fact it’s very low. Not only is it run by a strong and experienced
management team, with strong hand backers, it’s also in Chile which is the best place to go
mining in Latin America. But there’s more, as not only is it in Chile but it’s in a traditional mining
zone and located right next to a very large copper mine, which is in itself locally accepted. The
only risk it entails is a political one as Codelco has seen union problems and inductrial action on
occasion that’s affected work at MVC as a knock-on effect of strikes. Apart from that
Chartwork: Although no fan of straight TA, there’s a place for a little here as I would like to
show how the current price action of ARG.to compared to the copper producer Etf (COPX)
indicates a decent window of opportunity at the moment.
t
The two lines follow each other fairly closely over the years, but ARG also has a tendency to
break away to the downside from COPX at certain points, only to catch up later. One of those
times is today and a 50% gap has developed between COPX and ARG.to, which is even more
interesting as COPX has been rising with the market these last few weeks while ARG.to has
lagged. That’s the type of set-up which smacks of value buying opportunity to me and along
with the expectations in copper for the rest of 2014 looks very buyable to me.
Dividend: We should also note that ARG.to is not averse to paying a dividend when the time is
right. Clearly cash is tight at the moment and until profitable on a net basis it’s not going to
happen, but in good years ARG.to has paid out such as in 2206 (a 9c dividend paid in half year
installments), 2207 and 2008 (13c, same terms) and 2011 and 2012 (4c, same half yearly
terms).
Conclusion: ARG.to is different from most other mining companies because of its high volume
low margin operations; in that respect its almost akin to a value-adding operation such as a
smelter or refiner than a normal mining company.
The main reason to go long ARG.to today is less about its bright future as a double capacity
operation. In the end ARG.to is offered as a pure and simple play on rising copper prices,
10

because the baseline call at The IKN Weekly today is that copper’s going up so it’s time to grab
hold and enjoy the ride. However it’s also importtant to choose your vehicle well and when it
comes to picking a copper producer, it isn’t easy to find the combination of production stability
and exposure to upside leverage at just the right price point that will maximize percentage
gains. That’s where ARG.to comes in and that’s the attraction of the stock today. Given a move
to $3.50/lb in copper, ARG.to will be seen as a profit-making entity once again, will get an equity
price that better reflects its book equity value and its stock could potentially double. At the
moment we’re not going to aim quite that high, but all the same The IKN Weekly calls buy on
Amerigo Resources Ltd and sets a 12 month price target of 70c on the stock, representing
a 59.1% upside from Friday’s close and based on the assumption that with a rise in copper,
ARG will see its equity per share ratio return to 1X.
The main risk to this investment is that of its underlying metal, as our clear assumption is a
rising copper price so if that doesn’t happen we don’t get the required leverage from the ARG
revenue improvement. However, downside risk seems limited at these levels and as ARG.to
has the cash to see it through another couple of quarters without recourse, its other attributes
should see the current level as close to the absolute bottom.
The bottom line is that ARG looks cheap today and its risk/reward balance looks strongly in our
favour. We buy and add to the copper plan here at the Weekly.
End Of Report
Stocks to Follow
Last week just one of our 14 portfolio stocks registered a gain, so well done Timmins Gold
(TMM.to) (TGD) in the face of adversity. Then we had one unchanged on the week as well
(FCV.v), which means 12 stocks lost ground and of those there were large-percentage losses in
GoldQuest (GQC.v down 13.6%), Coro (COP.to down 12.5%), Minera IRL (IRL.to down 10.6%),
NovaCopper (NCQ.to down 10.0%) and Dalradian (DNA.to down 9.2%). Those names weren’t
out of the ordinary in the sector last week either, as plenty of 10%+ losses came from juniors
that snapped back quickly once gold lost its upside momentum and sank under $1,300/oz.
We currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
imposed maximum. Six are in the green, eight are in the red. With the planned addition of
Amerigo (ARG.to) the list will have 15 this time next week.
11

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$2.56 11.3% 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$1.92 39.1% $2 tgt, good momo trade
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.21 -22.2% Added, news starting
Goldquest Min. GQC.v spec buy C$0.295 27-oct-13 C$0.255 -13.6% drillplay spec, good vibes
Reservoir Min. RMC.v buy C$6.13 18-jun-14 C$6.00 -2.2% 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$0.89 36.9% Going well, tgt up to $1.70
True Gold TGM.v hold C$0.395 02-feb-14 C$0.455 15.2% LT hold, takeover play
NovaCopper NCQ.to spec buy C$1.05 09-apr-12 C$1.08 2.9% 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$0.68 -40.9% solid biz model, LT hold
Eco Oro Min. EOM.to hold C$0.48 22-sep-13 C$0.25 -47.9% paramo resolution missing
Recommended short positions
None at moment
Smaller/Riskier
Coro Mining COP.to spec buy C$0.125 26-jan-14 C$0.07 -44.0% Cu spec play, can add
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.18 -35.7% 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): Added. As noted last week, I fished for and got a few NCQ at a nice
sub-$1.10 price and as such, the cost average has clicked up a couple of pennies. However, be
clear that this is still a small position, addition or not, as I’m not going to commit to this one
until trading frees up more (and even then it may stay a small one). Started well enough
though, even with last week’s welcome reversal.
Timmins Gold (TGD): Change of plan, this is a longer-term hold. The blog post of last
Thursday morning (5) week wasn’t some kind of arm-waving strategy or cunning ruse to pop
the stock higher (though that’s what happened), it was me passing on some reliable info for
once (though I’m going to keep the reasons why I decided to go public about the intel strictly
to myself). As a result, I’m changing the plan slightly with TGD, because up to now I’ve had a
“Sell at U$2+ or at least be sorely tempted” plan in place. That’s now on ice and I’m going to
afford at least 3q14 as a holding period for this stock, to see where that longer timeframe takes
it.
Minera IRL (MIRL.L) (IRL.to): If no news is good news then IRL has good news. There’s
suddenly a total information lockdown around the company, not a whisper getting out from or
for friend and foe alike, which is probably a good thing for the chances of news in the near
12

future. In trading it sank, but nothing to worry about either price action or volume terms.
Dalradian Resources (DNA.to): DNA got hit harder than most by the sentiment from the
gold selling. Though it tried to recover it couldn’t,
so come Friday afternoon it was at (near) lows
for the week and under 90c again. If you want a
dose of that hindsight medicine, try how the
state of the market couldn’t hold the stock over
and above the bought deal ticket price (it’s still
open, though it will certainly fully close) once
gold had fallen from overbought...how’s that for
a mouthful of nothing?
Very-near-term flippers among you might be
interested in DNA at 89c (or even lower), as the
chances of it regaining 92c and the bought deal
price are near-certain and buy-89-sell-92 is pre-
commish 3.37%..there are worse ways of spending a day.
GoldQuest Mining (GQC.v): GQC had a rotten week, which might have been a simple
reflection on the bad trading atmosphere for juniors or might indicate negatvie news in the
pipeline for the upcoming drill results. If I were ballsier I’d add some at the current prices but
I’m not, I prefer buying copper today.
It may also be connected with the filing of the PEA that was announced on Wednesday 16th July
(6) but in fact the PEA slipped quietly into SEDAR July 11th without a notice made or word
spoken (no, I hadn’t noticed either). It’s not the real reason why I’m long this stock, that’s the
drill results in the pipeline from the wider Tireo area, but the PEA is at least part of the current
driver so I took a look at the document and the part that had me a little concerned was
metallurgy, which may turn out to be more difficult that first expected to get a decent
percentage of recovery. It’s not a “simple” process and although testing is in an early stage
(plenty of solutions to discover) it’s obviously a bit of a headscratcher for the company, too. Not
what I’d call a red flag of any sort, but those with a longer-term interest in seeing GQC make a
success of Dom Rep should be looking for improvement on this part of the larger puzzle.
Focus Ventures (FCV.v): Somebody somewhere is keen on keeping FCV at 30c every
weekend, as for the second week running a late buyer steps up on the Friday and bids the
stock back to UNCH. Fair enough.
Eco Oro Minerals (EOM.to): Featured in Colombia’s bizmedia ‘Portafolio’ last week (7)
representatives of Eco Oro told press at the inauguration of their residual water treatment plant
in the California Vetas locality that they were maintaining their presence in the area but were
stymied until the government gave them the exact coordinates of the Páramo nature reserve
boundary. They do have a good point, because
until exact coordinates are given they’re in a
legal and environmental grey area.
True Gold (TGM.v): Unlike many others last
week, TGM held up well with just a half cent
lost on decent traded volumes. In fact its
rebound Friday, keeping its head while all
around were losing theirs, looks particularly
good in hindsight. Still my idea of a takeout
play, with plenty of potential buyers in that
neck of the woods (put me down for Endeavour
Mining or Nevsun, but there are other logical
suitors too). Very easy to hold.
13

Santacruz Silver (SCZ.v): A fellow-suffering long in SCZ is PS Dave over at the blog
Vancouver Venture, and he wrote up a rather negative post on the company’s 2q14 production
numbers (8) late last week, along with news (if it’s your thing) that the newsletter writer Brien
Lundin had downgraded his call on the stock. I care about neither of these things. Firstly, in my
opinion Lundin lives the lightweight promo-pump end of the newsletter writer world (a place
that’s densely populated, in more ways than one), his opinion is worthless. Second, PS Dave’s
opinion is far from worthless (he’s one of the smarter readers of the TSXV scene out there and
his knowledge comes to you for free) but in this case, my reasons for being long SCZ are not
the same as his. In fact, his negativity towards SCZ is concerned with the footdragging on
production ramping, something that I’ve always expected from the firm and in a perverse way
makes my long call on the stock more valid. That’s because I’m long this stock because I know
there are a whole bunch of management teams that will be able to do a better job with the
decent assets held in the SCZ balance sheet than this current group that sums up to mediocre.
Lara Exploration (LRA.v): I’ve said little or nothing about this stock for a few weeks, while
the only action we’ve seen from it is a slow, low volume slide into a new and very low price
range. Sadly stranger things have happened, but until LRA gets some volume on its side it’s one
that I’ve mentally put on the back burner. In the meantime, we’ve had a nominal change at the
top with the formal exit of André Gauthier (who’s moving and shaking in the worldwide gold
bullion market these days, but is still on the board) and Miles Thompson is now undisputed
head of the company as president, CEO and Chair...argue with that little bunch of titles. I’m
going to try and nail down some meeting time with Thompson in the days and weeks ahead
(busy guy, all over the place and Timok/RMC.v part of his world too) to try and work out where
things stand with LRA, as although it’s seen some handing back of JV properties one thing in its
favour are the quantity of very solid copper exploration projects on its books. With the new
trend pointing to that metal, LRA isn’t one to abandon and it’s a good way of spreading the risk
but potentially enjoying the reward of a big discovery.
Rio Alto Mining (RIO.to) (RIOM): The two bits of news last week from RIO.to were:
1) on Thursday both ISS and Glass Lewis announced their independent approval for the
RIO/SUE deal (9) which comes as no surprise (by the way, more of you reporting that
Kingsdale has been canvassing you for deal support; sounds like they’re being pretty thorough).
With the Special Meeting date now just ten days away, chances of an interloper are minimal
and shareholders on both sides must be happy with the way the stocks have reacted, so this
deal is happening, take that to the bank.
2) A financing update, in which RIO.to took my second-guessing out of the gold pre-payment
agreement discussion and announced it’s now 100% paid off (10), a good to hear because for
one thing it would cost slightly more if gold went over U$1,350/oz as it threatened to do a week
ago (and may well do again, fear not). Also in that Wednesday update RIO.to announced it had
drawn down $35m of its recent $50m loan facility. Nothing untoward there, I expect it’s
connected (no pun intended) to the electricity power infrastructure works in progress, due to be
complete 3q14.
As for trading the stock fell back, but finished off lows and overall fared ok (or at least in line
with peers).
The Copper Basket
After twenty-nine weeks of 2014 The Copper Basket is showing a 12.61% gain to level stakes.
14

company ticker price 1/1/14 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 1.51 144.41 529.98 3.67 143.0%
2 Lumina Copper LCC.v 6.29 44.07 457.01 10.37 64.9%
3 NGEx Resources NGQ.to 1.43 168.71 362.73 2.15 50.3%
4 Reservoir Min. RMC.v 4.97 47.5 285.00 6.00 20.7%
5 Nevada Copper NCU.to 1.35 80.5 198.03 2.46 82.2%
6 Copper Fox CUU.v 0.375 402.96 94.70 0.235 -37.3%
7 Panoro Minerals PML.v 0.35 220.25 91.40 0.415 18.6%
8 Western Copper WRN.to 0.76 93.68 82.44 0.88 15.8%
9 NovaCopper NCQ.to 1.60 60.15 64.96 1.08 -32.5%
10 Hot Chili Ltd HCH.ax 0.425 333.11 63.29 0.19 -55.3%
11 Curis Resources CUV.to 0.57 74.79 59.83 0.80 40.4%
12 Cordoba Min. CDB.v 0.90 58.81 41.17 0.70 -22.2%
13 AQM Copper AQM.v 0.11 139.24 14.62 0.105 -4.5%
14 Coro Mining* COP.to 0.10 159.37 11.16 0.07 -30.0%
15 Oracle Mining OMN.to 0.27 49.03 4.66 0.095 -55.6%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg 12.61%
A big 5.16% drop in the basket average, The Copper basket 2014, weekly evolution
25%
along with just two winners (AQM.v,
CUV.to) and a full 13 losers demonstrate 20%
last week’s copper junior scenario better
15%
than long-winded prose from your author.
In among the losers there were hefty losses 10%
taken by several as well, such as Oracle
5%
(OMN.to down 20.8%), Hot Chili (HCH.ax
down 17.4%), Coro (COP.to down 12.5%), 0%
Nevada (NCU.to down 10.2%), NovaCopper
(NCQ.to down 10.0%) and Copper Fox
(CUU.v down 9.6%), which fits right in with
the hallmarks of a sector that had been
overbought and was ready to snap back at the
first sign of a reversal (oh, isn’t this 20:20
hindsight stuff good?) from its underlying
metal.
And indeed that’s what we saw from copper,
as this hourly chart amply demonstrates.
Wednesday gave us part one of the waterfall
which was compounded on Friday and saw
around 8c/lb cut from prices. However,
regular readers will anticipate your author’s
mitigation coming up, as a look at the longer-
timescale charts for the metal show it’s in
pretty good shape at any price above
U$3.15/lb. We’re now well into the Doldrums
period for world markets and if copper does
little else than drift in the $3.15/$3.30 range
until people get back to the serious stuff in
September, it’d be classed under “no news is
good news” as far as IKN is concerned.
15
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 ht02
source: IKN calcs

Next up on copper fundies I’m going to put in another word for Cochilco and its excellent macro
coverage of the copper space, especially as they now run an English language version of their
weekly round-up report. Here’s (11) this week’s linked. As well as checking out the inventories
data you can see below there’s lots more in the Cochilco weekly report these days, such as the
copper buying record of China in the first quarter of 2014 and how much more that country
imported compared to 1q13. For example, Chinese refined copper purchases are up 56.1%
Year-over-Year, Chinese blister copper purchases are up 20.0% YoY and concentrate copper
purchases by China are up 20.6%. Not bad for a country the bears said was in the process of
imploding earlier on.
To our world copper inventories coverage, and the bullet points this week reveal a change in
the recent trend:
• Last week we saw a big in world stocks, up 27,259 metric tonnes (mt) (+10.5%), to
287,420mt. After three weeks of slight rises we finally get a signal from the inventories
market of note. Even if it is a bearish one for prices, it is a signal.
• The bulk of the change came from the Shanghai Futures Exchange copper warehouse
inventories, which rose by a massive 28.9% in percentage term, or 24,398mt in
tonnage terms, to finish the week at 108,851mt hedl in its system.
• The LME copper warehouse inventories also rose but only slightly, up 1,200mt or 0.8%
to finish at 157,700mt.
• The Comex warehouses copper inventories rose big in percentage terms, up 2,917mt or
16,2%) to 20,869mt. That’s a big percentage move but as Comex is the smallest of the
three futures warehouse systems, it’s a lesser deal in real terms.
Shanghai had become very low on stocks and a rebound was in the cards, which is what we got
here. It needs to be recognized for what it is, a bearish signal, and it’s no surprise to have seen
copper react negatively under this and other larger macro signals last week. What we’ll get to
see in the next five days is whether it’s a blip or a new trend, one that could last over the
Doldrums weeks.
16

Now for updates on a couple of our basket stocks
Panoro Minerals (PML.v): PML closed its public offered financing (12) and concurrent top-up
financing with Hudbay (HBM) last week (which HBM has by right to keep its overall percentage
stake intact), with the net result roughly $6m
in the treasury pot for PML and the new share
count you see above in the table of just over
220m.
Then on Thursday Laurentian Bank’s analyst
updated its coverage on Panoro, called the
financing event overall neutral and maintained
its buy call and 68c price target. Stranger
things have happened that such a target being
hit, but this is one I’m going to keep steering
clear of. As noted on the blog last week, it will
be interesting to see how PML treats the likely
obligatory re-location of the town of
Cotabambas in its upcoming PEA on the
project, due end 3q14. As we’re now at a stage when financial concerns and project economics
come to the fore, it should at least be broached as a subject.
Oracle Mining (OMN.to): This one got taken to the woodshed last week, as a couple of days
of elevated volume sent it well below 10c and reminded me that I’d considered it a potential
value buy a couple of times without ever buying it. One more missed bullet. The selling had all
the hallmarks of a larger holder throwing in the towel and willing to liquidate at any price. OMN
may recover from this if the selling’s now all done, but if our seller last week has more to dump
there’s every chance of extra pain here. Sadly to avoid.
Augusta Resource (AZC.to) (AZC): The deal’s done with Hudbay and 92% of the shares
have been taken up. It’s now a case of mopping up around the edges to which end an
extension on the offer has been made, which is likely to be followed by a compulsory purchase
order later on. We’ll continue to track AZC.to’s stock price movements until the de-listing (a few
weeks yet?) but from now on, what we have here is a direct proxy to the larger miner’s stock
price and not something that gives clues to the exploration copper sector.
AQM Copper (AQM.v): On Wednesday morning Teck (TCK) announced (13) it had bought
14.55m shares of AQM from the market (i.e. not a placement and no new shares or cash to
treasury for the smaller company, which brings its holdings up to 42.26m shares or 30.35% of
shares out. The news was greeted by some mild buying, but it faded in the end and although
AQM bucked the general trend by being a winner last week, there’s only half a cent in it.
There are two ways of looking at this Teck purchase news; one, that TCK felt obliged and there
was a seller who wanted out: Two, that TCK is picking up AQM shares on the cheap as part of a
stealth buyout of the stock to get its hands on more of Zafranal at the cheapest possible price.
I’m in the second camp, though recognize that the ~18 month timeline recently announced for
the work to bring Zafranal up to a pre-feasibility level (14) is a longer timeframe than many
would like for their junior copper vehicle. Thing is, with a JV partner such as Teck plus the Asia
component in Zafranal, it’s not going to be a BS study but a real one that serious player will
consider actionable afterwards. I also know that the people running Teck in Peru like this
project and have done so for a long time, so it’s not that much of a surprise to see them take
this extra stake in its equity and potentially make the final buyout of AQM that much cheaper.
I’m warming to this stock again and although one extra copper purchase this week is enough, if
this copper exploreco project of mine expands a little further, AQM is likely to be the next
thrown into the active, real-money basket alongside COP, RMC, ARG and others.
17

The Low Cost Producer Basket
After 29 weeks, the Low Cost Producer Basket is showing a 25.31% 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 39.88 38.35 1.6%
2 Goldcorp GG 21.67 812 22.70 27.95 29.0%
3 Barrick ABX 17.63 1000 19.19 19.19 8.8%
4 Newmont NEM 23.03 497.87 12.66 25.42 10.4%
5 Silver Wheaton SLW 20.19 357.39 9.52 26.64 31.9%
6 Franco Nevada FNV 40.74 147.01 8.29 56.38 38.4%
7 Agnico Eagle AEM 26.38 173.43 7.24 41.76 58.3%
8 Pan American PAAS 11.70 151.41 2.33 15.37 31.4%
9 B2Gold BTG 2.02 651.4 1.79 2.75 36.1%
10 First Majestic AG 9.80 117.02 1.23 10.50 7.1%
all prices in U$, using NYSE ticker prices Portfolio avg 25.31%
An overall drop of 2.29% for our bigger producers, with one stock going up (the market darling
AEM) and the other nine all dropping, though no real disaster moves to report among them and
the same going-with-the-tide feel is
out there, except that this time the The Low Cost Producer Basket: Weekly performance and
tide went out. comparative to GDX control
35%
30%
We saw slightly disappointing
25%
production numbers from B2Gold
20%
(BTG) for 2q14, though the market
15%
seems to have forgiven the company
already and is looking to the start of 10%
the Ojtikoto mine later this year. Also 5%
at the lower market cap end of our 0%
table, First Majestic (AG) gave us an
interesting and generally good
quarter (15) for the first time in a
while, with record production and a
plan already enacted to spin out some of its
exploration properties into a new vehicle,
which makes sense. Picking through the Q2
numbers, one datapoint that caught my eye
was the 60% Ag recoveries at its big La
Encantada mine, the highest for a while and
close to the figure that AG said it could deliver
way back in 2012 (a time when promises left
unfulfilled weren’t worried about half as much
as they are today). I’ve been asked by a
couple of you for some deeper analysis on AG
this week and although this is definitely one
that needs the financials in hand before making a decision, if Q2 turns out to be the turnaround
quarter it may be, this could be a good way of buying value stock in silver. Certainly a lot
cheaper than Fortuna or Pana American right now.
18
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%
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 ht02
source: ikn calcs, NYSE/Nasdaq data

Regional politics
Peru Cajamarca: Santos’s chances for re-election are high
Even though he’s banged up in jail on remand, Peruvian law states that until convicted Gregorio
Santos can run for re-election as governor of Cajamarca and if latest polls are anything to go
by, he stands a good chance of getting his win from inside prison. A recent poll taken in
Cajamarca region stated (16) that 55.1% of locals disapproved of his work as governor, while
31.5% approved and 13.4% gave no answer. The main reason given for support came from
14.9% of people who approved of his opposition to the Conga gold mine project.
At first sight, a 31.5% approval rating may seem low to you and in absolute terms it is, but in
the Cajamarca governor election there are over a dozen candidates running for the job and it’s
a one-time, no second vote, no run-off election in which the person with the most amount of
votes wins, no matter whether the total is a minority. It’s quite possible that 20% is enough for
any given candidate to win, while 30% would give a near-certain victory, so all Santos need do
is translate his current support and approval levels into valid votes and he’s in a good position.
China’s President Xi visits Argentina
On Friday as a working title to this section I had, for want of a better idea, “Argentina and
China: It’s love” because the mutual appreciation on show last week between the two countries
during the visit of President Xi went above and beyond the norm for Sino-Latino relations. This
may be because Argentina sees China (and its chequebook) as a saviour from the clutches of
the North, but the visit wasn’t an empty one by any means and plenty of concrete deals were
announced including a new currency swap deal (mentioned on the blog (17)) that’s finally set
at U$11Bn (18) and will allow the country’s central bank access to relatively cheap US Dollars if
deemed necessary (implied interest rate of around 6.5% per annum). In one fell swoop this
takes a lot of the pressure off the Argentina currency reserve position and should help the
Argentine Peso to stop its fairly rapid recent devaluation, which in turn is a big boost in the
fight against the internal inflation rate (it’s been clear for at least half a year that new FinMin
Kicillof has been keen on fighting inflation at a macro financial level). And if you think the
effusiveness was one-way traffic, think again because Chinese took it very seriously too,
sending a delegation of over 200 high ranking officials and business representatives along with
President Xi, the largest Chinese working group ever to visit Argentina (the coverage to the
delegation given by President Cristina’s official web page was significant in its detail (19)).
Definitive infrastructure deals were signed, including two hydroelectric dam projects for Santa
Cruz region worth U$4.7Bn (one to be called Nestor Kirchner) and expansion of the Argentina
Atocha nuclear power plants, a U$2Bn
earmarked project (20). The anti-CFK
press (there is a lot) and political
opposition came back with some weak
arguments, such as how the Yuan was no
reserve currency and only dollars count
(though looking at the CNY/USD exchange
rate over the last few years, the
Yuan/Renminbi looks ok to me) and that
most of the deals hadn’t shown anything.
Which was false and just politic
backpedalling, because despite anything
else you might say and think about
Cristina Fernández de Kirchner and her government, the relationship with China and the visit
last week was a clear and resounding success for her country.
Which brings us of course to our preferred subject of mining, because it’s no secret that:
• China wants to build big mines, mainly copper and some gold, and has demonstrated
that it will build them in friendly foreign countries.
• Argentina wants to promote its mining industry and develop the big deposits, especially
19

the copper and gold ones scattered on its side of the Andean Cordillera
• Northern foreign capital is more nervous about investing in Argentina than China is,
something obvious after last week. China may have spotted a bargain here.
As noted a couple of weeks ago, I’m starting to warm to the idea of Argentina as a destination
again and last week’s events kick me further in that direction. Buy no means an easy place to
do business, but there’s a big difference between juniors spreading rumours about Chinese
visiting their projects and country Presidents going there and signing multi-billion dollars
economic and financial deals.
Bottom line: Time to pay more attention to junior with good deposits in Argentina.
Nicaragua puts on its first ever mining conference
On August 12th and 13th Nicaragua will play (21) host to its first ever international mining
conference, the “International Mining Conference, Nicaragua 2014”. According to the VP of its
chamber of mining Caminic, Denis Lanzas, “This is the first conference and is very important,
because in the 19 years of the chamber of mining for the first time we are organizing an
international congress and one that has been received well.” The Caminic objective is to create
a mining cluster of new projects, based around current formal mines (La Libertad, Hemco,
Limon etc) with an emphasis on gold mine projects.
On August 14th, the government and mining chamber will also be visiting the B2Gold mine at La
Libertad, with guests of the conference invited.
Conclusion
IKN271 is done, we end with bullet points:
• A new purchase next week of Amerigo Resources (ARG.to), which offers the right type
of profile for your author, the copper bull. Small, a producer, undervalued, right on the
leverage point for earnings at current price levels, well-managed and strong backers,
clear growth profile, long mine life, top jurisdiction. It’s going to be a staged purchase,
with first a foot in the door and then look for a second buy if the market doesn’t like
what it sees from the 2q14 revenues numbers in three weeks time.
• Timmins Gold (TGD) is now a firm hold, thanks to the decently sourced intel picked up
last week about it and Argonaut (AR.to). I’m going to give it until end 3q14, rather than
the previous plan of looking to sell at U$2 or above.
• The Chinese delegation visit and State visit of President Xi to Argentina last week was a
significant moment, be in no doubt. Right now they’re all talking about the currency
swaps and energy deals, but China wants copper mines and Argentina has the projects.
It may be time to re-think this troublesome political zone.
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
20

Footnotes, appendices, references, disclaimer
(1) http://www.amerigoresources.com/_resources/presentations/Presentation_May_2014.pdf
(2) http://www.rioaltomining.com/corporate/board_directors/
(3) http://www.amerigoresources.com/
(4) http://www.amerigoresources.com/_resources/news/nr_2014_07_18.pdf
(4a) http://www.marketwatch.com/story/amerigo-announces-receipt-of-environmental-approval-for-cauquenes-
expansion-2014-07-14-71733124
(5) http://www.incakolanews.blogspot.com/2014/07/argonaut-gold-arto-to-buy-timmins-gold.html
(6) http://finance.yahoo.com/news/goldquest-files-preliminary-economic-assessment-100000069.html
(7) http://www.portafolio.co/negocios/eco-oro-mantendra-sus-operaciones-mineras-santurban
(8) http://vancouverventure.blogspot.com/2014/07/santacruz-leadzinc-numbers.html
(9) http://finance.yahoo.com/news/leading-independent-advisory-firms-iss-120000747.html
(10) http://finance.yahoo.com/news/rio-alto-provides-financing-110000952.html
(11) http://www.cochilco.cl/archivos/Semanal/20140718153232_MERC%202014%2007%2018.pdf
(12) http://finance.yahoo.com/news/panoro-completes-bought-deal-financing-154400993.html
(13) http://finance.yahoo.com/news/teck-announces-purchase-aqm-copper-125651200.html
(14) http://finance.yahoo.com/news/aqm-copper-inc-joint-venture-103000172.html
(15) http://finance.yahoo.com/news/record-3-86-million-silver-110000954.html
(16) http://noticias.terra.com.pe/nacional/santos-551-de-la-poblacion-rechaza-labor-de-
titular,c5956d5fc2f47410VgnVCM20000099cceb0aRCRD.html
(17) http://www.incakolanews.blogspot.com/2014/07/china-and-latin-america.html
(18) https://twitter.com/CFKArgentina/status/490654029513363456
(19) http://www.cfkargentina.com/cristina-kirchner-jinping-visita-oficial-china/
(20) http://www.americaeconomia.com/economia-mercados/comercio/argentina-recibe-al-presidente-chino-con-los-
brazos-abiertos?
(21) http://www.elnuevodiario.com.ni/economia/325101-nicaragua-sede-del-congreso-mundial-de-mineria
21

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
22

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.
23