IKN #279Premium

The IKN Weekly
Week 279, September 14th 2014
Contents
This Week: The week to come: FOMC and Denver Gold, Not a dumb question, Gold gets
whacked again.
Fundamental Analysis: NOBS report on Coro Mining Corp (COP.to).
Stocks to Follow: Overview, B2Gold (BTO.to) (BTG), Timmins Gold (TMM.to) (TGD), Coro
Mining (COP.to), First Majestic (FR.to) (AG), Santacruz Silver (SCZ.v), Rio Alto (RIOM) (RIO.to),
GoldQuest Resources (GQC.v), Focus Ventures (FCV.v).
Copper Basket: Overview, Curis (CUV.to)
Low Cost Producer Basket: Overview, Newmont (NEM), Agnico Eagle (AEM).
Regional Politics: El Salvador: Government versus Pacific Rim (now OceanaGold (OGC.ax)
(OGC.to), Mexico Baja California Sur: The Boleo mine construction halted by government,
Keeping an eye on the Brazil Presidential election run-up, Bear Creek (BCM.v) and the Peru
regional elections news provides an excellent example of my stupidity on market timing.
Market Watching: Iron Ore: No country for small players, Luna Gold (LGC.to) underscores
how Sandstorm (SAND) paid over-odds for shares, Santacruz Silver (SCZ.v) coverage opened
by Cormark.
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
The week to come: FOMC and Denver Gold
This week sees Yellen’s Fed get together on Tuesday and Wednesday, with the FOMC
statement released at 2pm EDT Weds and this time we get the Yellen press conference event,
half an hour later. Bill McBride over at Calculated Risk has this Sunday morning published a
longer than normal (for him) FOMC preview post (1), with plenty of detail and analysis of what
might come. Away from the obvious calls, McBride concentrates on the potential variables and
in my insignificant opinion, this is the key line of his thoughts as to what’s in store for next
week
“My guess is Yellen will clearly state the first rate hike will not happen for
some time, and that the rate hike will be data dependent.”
Those trading in and out of things in the week ahead should keep that firmly in mind.
Meanwhile, the Denver Gold Show happens this week (not last, as I got my brain in a twist in
the closing bullets last weekend, which was the precious metals summit) which is one of the
“serious” mining get-togethers of the year and features more industry pros and less retail
promo chatter than the average bunfight. It’s worth paying extra attention to the output from
this meeting.
1

Not a dumb question
Reader RT writes..
Dumb question, but why not hedge at some level with GDX or GLD? pull out
the commodity volatility?
It’s worth covering this subject again, as it’s one of the things that eats at me about The IKN
Weekly and how it’s received at the other end of the pipeline by its readership (that’s you
madam, you sir). First the background and then the answer to the specific question from RT.
Background first and the main point is that when it comes to the ‘Stocks to Follow’ and the very
occasional trades that falls outside of the list, what’s here shows what I’m doing with my money
in the junior mining sector of the stock market. I believe that going the eat your own food way
on these things is best overall and keeps what happens on the active trade level as straight and
integral as possible. From the feedback over the years I’d venture to say that you the readers
agree, but I’m also aware of the weaknesses of this method and a chief issue is how the focus
of these pages can mean the bigger picture is missed. I make a rare mention of my long-term
equity portfolio but don’t dwell on it at all (as one example I’ve mentioned a couple of times
that I hold SCCO for its dividend, have done so for many years and have no intention of selling
the stock). But there’s no talk about other parts of my asset book because it’s neither important
to you or necessary for me to do so, which means by definition that the overall “balance of
things” held isn’t a topic.
With the subject now broached, this now dovetails into the specific answer for RT. The trades in
The IKN Weekly are those made in junior mining companies, by nature a highly volatile and
speculative sector of capital market (arguably the most speculative of all). I sometimes play the
occasional short (TAHO, GORO), in part an attempt to balance the portfolio but they’re always
specific stocks and shorted for specific reasons. I don’t make calls on GDX, GLD, etc or reverse
leveraged vehicles attached to those main ETFs (e.g. DUST) because in the wider scheme, what
happens in the junior portfolio has already been designated as the section of the larger pie
earmarked “the cash with which I will take risks”.
I don’t know your circumstances as an investor and yes, this is where I trot out the old saw “I
am not you, you are not me”. Some of you take more risks than I with the market, others less.
Some of you only own mining companies, others have a minimal amount in them, et cetera ad
infinitum. So the bottom line is that GDX/GLD/reverse ETFs etc are good options that should be
considered by the metals investor, but they fall out of the scope of a publication that is about
junior mining companies (mostly) operating in Latin
America. Yours was not a dumb question RT, it was
an insightful one and the shortest of all short
answers is that I don’t run your portfolio or have
ever pretended to do so.
Gold gets whacked again
Though rather than depress you all with another
chart that drops off to the right, today we depress
you with a chart that zooms upwards.
The US Dollar’s strength has been examined and
analyzed in many places more worthy of note than
these pages, all I’m going to do here is note that a
lot of the weakness in gold, other metals and
commodities in general is dollar-specific. The US led
the world into recession and it’s leading the way in
the economic recovery stage, too. That’s what
leaders do.
2

Fundamental Analysis of Mining Stocks
This week we look at Coro Mining (COP.to).
NOBS report dated September 14th, 2014
Coro Mining Corp. (COP.to)
Company Overview
Coro Mining Corp (Canada: COP.to, USA: CROJF, Frankfurt E2E.f) is an exploration stage
junior mining company operating mainly in Chile. Its target metal is copper and it has several
early stage projects on its books, including the Berta/Planta Nora project in Antofagasta region
and the Marimaca/Planta Prat project in Copiapó region. Current share structure is as follows:
Shares out: 159.372m
Options: 8.695m
Warrants: 10.539m
Fully diluted shares: 178.606m
Current share price: $0.065
Market Cap: $10.36m
Approx cash per S/O: $0.01
All prices are in US dollars unless stated. Forex U$0.90=CAD$1
Overview
Coro Mining Corp (COP.to) is my idea of a throw the dice, risk play on copper. It’s a company
that’s been through a lot and has taken its blows along the way, which is why we find it today
with a share price of just 6.5c and a market cap of a little over $10m.
However, its attitude today, 3q14, is the one I want to see from a microcap junior. It has a good
geological brains trust, good contacts and partners, plus a strategy to move to production in the
near term and that alone sets it apart from the vast majority of tinycap junior explorecos who
have all-but given up the fight and pay lip service only to development and progress. COP’s
pitch isn’t just talk either, as the news releases and announcements of August and September
make clear (2) (3) (4). The company is now moving forward on two fronts, both in the preferable
jurisdiction of Chile, and has LOI agreements in with (what seem like) serious partners to fund
the ramp up to production in early 2015.
The main objective today is to size up its new and/or reactivated irons in the fire and decide
what they could mean to the company and its share price.
A potted recent history
COP is a stock we followed closely and traded back in the time when its main thrust was the
San Jorge copper project in Mendoza, Argentina. That project went to hell in a hand basket
when permission was denied by the government of Mendoza on environmental and social
grounds. Since then COP has done a deal to all but drop the project and if it ever gets off the
ground (it’s now basically in the hands of Russian capital), COP would most probably benefit
from either a 2% or 2.5% NSR on all copper produced there. However, we should not hold our
breath on that.
After licking its wounds and finding a strategic partner in Benton Capital (BTC.v), which bought
into the company to the tune of 61m shares in tranches and sponsored its efforts as it
3

persevered in Argentina San Jorge after the permitting negative, as well as becoming more
active in Chile. However, this year BTC.v has gone its own way and moved into medical
marijuana, and part of its move out of mining was to hand back its shares of COP, which is one
of the main reasons for the selling pressure we’ve seen this year. That now seems to be over
and done with and today, COP doesn’t have much in the way of funds (an IKN estimated 350k
in treasury with $500k due soon from the stage payments of its Chacay property to Freeport),
but it does have properties of merit, ideas and momentum in Chile.
Players
The company is headed up by President and CEO Alan Stephens, a successful geologist with a
string of deposit discoveries to his partial or full credit (at least four of which are now mines).
Stephens owns 1.8m shares of COP. The other main player is Executive VP Michael Philpot,
who owns 5.8m shares of COP and takes a very active role in the day-to-day running of the
company (if you phone up to speak to someone it’s nearly always Philpot who’ll eventually field
your call). As for big holders, now that Benton has left the scene and Dundee Corp has sold out
its large holding, step forward Sheldon Inwentash and his Pinetree vehicle, which has bought up
nearly 16m shares of COP in the last few weeks. Inwentash/Pinetree were holders previously
too, so it’s interesting to see this established player move back in.
Financials
With the following charts, I’m going back a long way into COP’s past in order to show the
changes we’ve seen in the corporate structure, particularly in the balance sheet items, as it
gives a good idea of the changes COP has been through and the now much smaller size entity
that it is.
Assets look like this. It’s easy to spot when
COP gave up the ghost of chasing after San
Jorge and burning its cash, that was a process
that started in 2010 and finished 4q12. Also,
the wrote-downs of 4q13 put more realism into
its books and these days, its fixed assets in
Chile are given low level and easily justified
valuations.
Liabilities are a strong point, as there’s very
little in the way of anything dragging down the
books there days. As far as explorecos go,
what you see here is absolute minimum stuff.
COP.to: Liabilities per qtr
7
6.5
6
5.5
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
4
70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2
source: company filings, IKN ests
srallod
fo
snoillim
COP.to: Assets Breakdown per qtr
45
40
35
30
25
20
15
10
5
0
LT debt
current debt
Here’s the working capital position and by selling Chacay in 2013 and cutting expenses and the
costlier types of exploration activities to the bone, COP has managed to limp through to now,
late 2014, without running its limited cash down to nothing. This is by no means or stretch of the
imagination a rich company, but it’s a company that’s managed to keep itself intact over the last
six difficult quarters.
70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2
source: company filings. IKN ests
srallod
fo
snoillim
fixed
other current
cash

COP.to: Working Capital per qtr
22
20
18
16
14
12
10
8
6
4
2
0
-2
5
70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2
source company filings
srallod
fo
snoillim
This parsimony has helped keep the share
count together, as you can see here. Yes there
was an acceleration as Benton
Resources/Capital bought in and funded, but
instead of blowing out any further COP has
managed to keep the share count at under
160m, a laudable achievement under difficult
circumstances.
Moving to operations charts and the main one to
consider is how it’s burned cash through
expenses. Once upon a time, COP spent cash
on drilling and suchlike, as well as cash burned
into lawyers’ fees as it tried to sort out the
Mendoza mess. Not so much these days
COP.to: Net Exploration Expenses, per qtr
3
2.5
2
1.5
1
0.5
0
80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3
COP.to: Shares Out 200
180
160
140
120
100
80
60
40
20
0
$m
source: company filings
We could go into a bunch of other charts, but
as this story is simple and fairly financially
“clean” in its 2014 version we can cut it short.
One more perhaps, as here’s the net losses
per quarter that shows the green “negative
loss” (i.e. profit) from 2q13 of just under
$1.6m, which was due to COP selling its
Chacay property in Chile for $2m. Please
note that on this chart, I’ve backed out the
$17.3m write down from 4q13 because it
would have skewed things out too much (and
it’s hardly representative).
70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
source: company filings, IKN ests
serahs
fo
snoillim
COP.to: Net Loss, per qtr
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
-0.5
-1
-1.5
-2
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2
source: company filings, IKN ests
srallod
fo
snoillim

The overall story we can glean from these charts is how COP has change dits dynamic over the
years. Once it was thrusting and with an advanced stage project at San Jorge Mendoza, then it
hit a very large roadbump and has had to attempt at least to reinvent itself. It’s not been easy
and there have been false starts at its Chilean properties as well as JVs that haven’t worked out
along the way (trying to keep things focused on the need-to-know here), but there’s reason to
believe COP may finally be onto something of worth at last. Two things in fact and although
neither are still slam dunk bets, speculative money should at least find enough to like.
Current projects
COP has other projects and properties on its books, such as
the aforementioned San Jorge, also Llancahue, the Celeste
Sur iron ore project (some early stage new out on that last
week) and Chacay (just about. These don’t concern us
greatly today, as the value or potential speculative upside at
COP is all about two projects. So from this point we
concentrate on those.
Here right is a simple map of the North end of Chile (above
Arica is Peru, so you get the to see the three most northerly
regions of this famously long and thin country) with regional
cities marked. Note in particular Antofagasta as fairly close
to that city is the COP Berta/Planta Nora project, then
further South Copiapó, rough location of the COP
Marimaca/Planta Prat project. They may look close-ish on
that little map but there’s in fact 414km as the crow flies
between Antofagasta and Copiapó, which means the two project centres we care about the
most at COP are most definitely separate entities and need to be treated as such. We’ll look at
both now.
Berta/Planta Nora
Here’s a close-up map of the area North of the city of Copiapó where the first two assets of note
at COP is located. The current 83% owned Berta (though with luck that changes, see below)
lies about 30km West of the small town of Inca de Oro
and at a relatively low altitude of 1,700masl. To the North
of Berta you’ll be able to make out “Planta Nora” on the
map and between them, these two names make up the
first part of why COP is likeable these days.
Berta is an interesting copper oxide deposit, has been on
COP’s books for quite some time and has been subject
to enough exploration work for the company to have put
together a resource on it. Below a company literature
provided table on that:
Aside from the overall M+I resource of 16.6m tonnes
grading 0.37% Cu (more precisely, 0.366%) using a $3/lb
copper price and a 0.14% cut off, Berta is interesting
because most of that resource is held in one place, the
Berta Sur pit, which has a lower 0.33% Cu grade but the
thing that stands out is a very low 0.25X strip ratio. That
makes for efficient and cheap mining and particularly now
that Nora has been added to the mix.
The reasonably nearby Nora is a 2,000tpd crushing
circuit, plus 3,000 tonne copper cathode production per
year capacity processing plant and it fits well with the
resource that Berta has to offer. The 83% owned
subsidiary has arranged (but not yet finalized) a $15m
financing deal via the JV partner Pro-Pipe that will be enough to put Berta/Nora into production.
Assuming that happens, Pro-Pipe would have complied with its optioning deal with Berta and
6

COP and ownership of the operation would be 50/50 with COP.
In short, as long as this financing deal closes correctly in the weeks to come and assuming no
cost overruns, COP gets a capex-free ride to production on 50% of Berta/Nora, with its only
obligation being the assumption of 50% of the financing loan (i.e. $7.5m, which also gets easy
repayment terms that only start one year after production begins and come at low interest
rates). The mine life would be approximately 23 years on Berta M+I which is more than enough.
As for an idea of how cash flow in a typical year might look, it’s of course tough to get a close
forecast at this point but by using some reasonable parameters we can get in the ballpark. We
assume the following for the whole company:
• Material from Berta Sur (the first 15 years or so of operations, more than enough)
grading 0.33% Copper.
• Recoveries at 95% (COP claims it could reach 100%)
• Total operating costs of U$2/lb, including mining, transport and processing. That’s
admittedly a rounded-out guess, though educated and also conservative.
• Depreciation/Amortization, G&A and interest all set at $1m per year each, again these
are guesses on the relatively small size of the operation.
• Tax and State burdens as per Chile.
We can then run those through different copper prices as follows
Condensed incomes statement for Berta (100%), Average year
copper price (U$/lb) 2.75 3.00 3.25 3.50
Total sales (U$m) 13.9 15.1 16.4 17.7
on site COGS 10.1 10.1 10.1 10.1
Depreciation 1.0 1.0 1.0 1.0
G&A 1.0 1.0 1.0 1.0
Op income (U$m) 1.8 3.0 4.3 5.6
Interest 1.0 1.0 1.0 1.0
Workers Part. 0.1 0.2 0.3 0.4
Tax 0.1 0.3 0.5 0.7
Net income (U$m) 0.6 1.6 2.5 3.5
Sources: IKN estimates
If we then assume 50% control of Berta/Nora by COP, this would mean a $0.8m annual net
profit to COP with copper at $3.00/lb, for example. At 160m shares out that a 0.5c EPS, which
isn’t much but it’s not bad sitting next to a 6.5c share price and as the above table shows, the
assumption of $2/lb cash costs means profit leverage is strong if copper moves higher. At
$3.50/lb copper, COP.to could reasonably expect 1c/year EPS from this low capex, low entry
barrier production facility that could be working as early as mid-2015.
Marimaca/Planta Prat
The second double asset project (if you like) now in play at COP is the Marimaca Copper Oxide
resource and the Planta Prat SX-EW processing plant, both North of the city of Antofagasta and
as seen on this map. As you may have guessed already, the basic game plan at COP is very
similar to Berta/Nora above, in that one can provide the other and out pops cathode copper at
the end.
7

There are some differences, however, the first one being that Planta Prat, as well as being an
SX-EW processing plant, is site of a large quantity of reasonably high grading tailings (0.75%
Cu that COP plans to re-process. Something needing mention is that old owners have tried and
failed to successfully re-process these tailings, but COP thinks it has the solution to the
problem, which would be a separate iron sulphate removal circuit that would then free up the
copper.
The current plant is small and COP plans to invest in order to get its ~650 tonnes per year
copper cathode production capacity up to 1,200tpy. If so, it calculates it has three years worth of
mine life from tailings re-processing after which the second part of this double act comes into
play.
Marimaca is a previously worked copper oxide deposit. It doesn’t have a 43-101 compliant
resource to its name but the company estimates Marimaca to come in at between 10m and 20m
tonnes of material that grades an average of 0.6% Cu. The idea here would be to mine and
process either on site or via sending a pregnant solution to Planta Prat (more likely). Grade and
recovery would mean a likely continuation of a 1,200 tonnes per year production level from
Planta Prat.
So again, it’s time for a little very ballpark guesswork on how the money would flow. From COP
comments, we know they expect to be able to put this plan into operation quite chepaly and
quickly, with perhaps a $2m capex re-start cost (that’s as cheap as they come for a near-term
copper production facility, folks). The operation wouldn’t be the biggest thing in the world by any
stretch of the imagination, but if we run with COP’s estimate of 1,200 tonnes of annual cathode
production and assume today’s $3.10/lb copper price, that would be
U$6,834/t X 1,200 tonnes = U$8.2m per year revenues
As for operating costs, that’s anyone’s guess at this point but let’s throw in a Chile.centric
reasonable guess of $2/lb. The line of math for that is:
U$4,409/t X 1, 200 tonnes = U$5.29m per year costs
Therefore, we’d be looking at perhaps $2.9m in mine operating profits per year, before G&A,
financials, tax etc. That isn’t a king’s ransom but it’s useful cash flow for a currently $10m
market cap company and we could reasonably expect it to generate $1m in net profits per year,
8

all on a capital outlay of perhaps $2m. As Marimaca would extend mine life very significantly
from its current three years of tailings (at 10m tonnes, the mine life at proposed throughput rates
could be as much at 50 years, which is tantamount to indefinite) the match is a good one too.
Conclusion
It’s at this point that I again break off the financial numbercrunching and move somewhat
prematurely to sum up the analysis. It’s one of those situations where I could go on, give a
consolidated revenues and profit target number or three, extrapolate a target price for the stock,
leave you with a firm buy call. But that’s not the way these things can happen in the current
market atmosphere, not for my taste at least. Yes indeed COP now shows distinct promise after
years of flailing around and getting nowhere, but we’re still a number of steps from seeing the
company move into the realm of the producers. Just three items of many possibles:
• For starters, it needs to turn memoranda of understanding into closed deals, both for
the financing of Berta/Nora and the closing of the Marimaca/Planta Prat agreements.
• Then construction and ramp-up has to go well.
• And even if everything goes perfectly, this is a small capital operation that will be
strongly affected by movements in the price of copper.
All that and more, even without considering the record of disappointing delivery on promises this
company has had in the past (start with San Jorge). If all goes well and prices do nicely, I can
see COP moving to be a annual 1.5c EPS company and easily, which should reflect in its share
price by the end of 2015. It could be a lot more, too. However, at this point I’d much rather leave
things with “two nice small projects that can turn a profit for this beaten down company” and
leave it at that.
At current prices, COP has a lot going for it as long as it can close first the Berta/Nora financing
deal and then later Marimaca/Prat. With financing in place things start to happen and as that
looks likely now, the activity and dealmaking advantages of COP compared to so many other
beaten down tinycaps looks good. As I continue to like copper’s chances in 2014 it’s one I’m
keen to hold and with a fair wind, it’s now probably as low as it goes. If you like them risky, 6.5c
is a great place to start.
End of Report
9

Stocks to Follow
Yes, it was negative again. Yes, it could have been worse again and that’s thanks largely to the
heavy weighting of Top Pick Rio Alto (RIO.to). Again.
We managed to book five gains on the Stock to Follow list (RIO.to, BTO.to, FCV.v, DNA.to,
COP.to) out of 15 names, which wasn’t bad compared to the carnage in the sector as gold got
whacked. But that does mean there were ten losers (TGD, IRL.to, RMC.v, AG, ARG.to, SCZ.v,
NCQ.to, GQC.v, LRA.v, SRL.v) and despite the worst of the losers being confined to the tiny end
of things in GoldQuest (GQC.v down 20.6%) and Salazar (SRL.v down 18.4%), there were a
couple of significant money losses too in Timmins Gold (TGD down 9.6%) and Reservoir
Minerals (RMC.v down 8.1%).
With the addition of the new trade in B2Gold (BTO.to) there are now 15 open positions on our
‘Stocks to Follow’ list, our self-imposed maximum. Six are green, nine are red.
Reco Current
company Ticker this week Avg Price date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to hold C$2.30 07-apr-11 C$3.16 37.4% 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$1.42 2.9% $2 tgt, holding in 3q14
Minera IRL IRL.to spec buy C$0.27 22-jul-12 C$0.155 -42.6% Ready for financing deal
B2Gold BTO.to buy C$2.32 12-sep-14 C$2.34 0.9% new position, value trade
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.28 21.7% tgt 50c, added, avged up
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$5.36 -11.4% Big deposit, M&A, Cu play
First Majestic AG buy U$10.51 10-aug-14 U$9.17 -12.7% Main Ag play, 1st tgt $13.60
Dalradian Res DNA.to hold C$0.65 27-oct-13 C$0.85 30.8% Poss add window, tgt $1.70
Amerigo Res ARG.to buy C$0.445 20-jul-14 C$0.44 -1.1% new position, sm Cu play
Santacruz Silver SCZ.v hold C$1.04 26-jan-14 C$0.93 -10.6% silver/M&A spec, rel. small
NovaCopper NCQ.to spec buy C$1.05 09-apr-14 C$1.18 12.4% small Cu play started well
Goldquest Min. GQC.v hold C$0.26 27-oct-13 C$0.135 -48.1% key drills results soon
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.73 -36.5% solid biz model, LT hold
Recommended short positions
None at moment
Smaller/Riskier
Coro Mining COP.to spec buy C$0.125 26-jan-14 C$0.065 -48.0% Cu spec play, can add
Salazar Res SRL.v spec buy C$0.28 02-mar-14 C$0.20 -28.6% small spec, new China JV
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% took profit
Bear Creek Min BCM.v may'14 C$1.63 23-mar-14 C$2.05 25.8% Took profit, sm near-term win
Eco Oro Min. EOM.to aug'14 C$0.48 22-sep-13 C$0.26 -45.8% sold small loser to make room
True Gold TGM.v sep'14 C$0.395 02-feb-14 C$0.41 3.8% M&A won't happen, sold
2009, 2010, 2011, 2012 and 2013 closed positions in appendices below
10

Now for some notes on a selection of the above stocks.
B2Gold (BTO.to) (BTG): Position opened. I can resist anything except temptation. As per
the Flash update of Friday (see appendix 2) and somewhat primed by the comments in the
Flash update of Wednesday (see appendix 1) I bought an opening position in BTO (using the
Canadian channel for this one) that’s aimed as a trade to take advantage of the near-term
weakness and expected upside catalysts of the next few weeks. As noted in the first Flash
update, the main stock specific reason for the ongoing weakness in BTO has been (on good
intel) unremitting selling coming from Australia as those holding Papillon Resources (PIR.ax)
look to cover their exits by arbitraging BTO before the highly likely successful vote for the
merger between the two stocks occurs. This has created a sort of pre-emptive rush for the door
in BTO, with PIR.ax holders looking to guarantee their exit price on the trade before it happens,
and the whole process has snowballed as the voting dates approach. And in fact the first part of
the deal is already done as late Friday, some three hours after the close and after my own
purchase, BTO announced (5) a successful shareholders’ vote for the merger with Papillon
(PIR.ax), with 99.9% of cast votes going for the deal that’s called a merger but is effectively
BTO’s takeover of PIR. By the time you read these words, PIR is likely to have followed suit at
its extraordinary meeting and from there, it will be left to the courts to rubber-stamp thing sin a
few days’ time.
The fate of BTO’s share price is still tightly leashed to the price of gold, of course. Gold’s drop in
the last two weeks has been the major push, but the non-stop selling that’s sourced in Australia
has been the deciding factor for the underperformance of BTO versus peers. Once that abates,
and it will soon, BTO should get back on course. And that’’s why I’m long the stock this
weekend.
Timmins Gold (TGD): Holding. As noted in the first Flash update of last week on
Wednesday (see Appendix 1), I decided not to be such a whuss about the world and will hold
through on TGD despite its precipitous drop from the decent percentage profit levels of just a
few weeks ago to basically breakeven today.
TGD has clearly suffered from the downturn in market sentiment, which directly implies that
any merger deal (i.e. AR.to buying the company) is off the table. That’s what the market thinks
and that may be so, but with Agnico Eagle (AEM) buying Cayden showing that M&A isn’t totally
dried up, I’ll still stay with the hope (ugh) there’s a deal to be done here.
If not, this company is still a good one, producing at a reasonable cash cost and still profitable
at current gold levels (though more modestly so). It’s not the most stupid hold out there in the
world of gold and that’s the thing that tips the balance for me.
Coro Mining (COP.to): See above for the details on the stock. Here we note trading action in
COP plus its bit of side news and considering the ugly market atmosphere, sneaking a 0.5c
profit on the week wasn’t a bad result. As for volumes, it was patchy but with two days at over
200k traded volumes it could have been worse. Hardly a daytrading vehicle, but a bit of liquidity
showing.
We had some minor level news from COP on Monday too, when it announced (6) exploration
results from its Celeste Sur iron ore project in Chile. It’s early stage baseline stuff there, and
being the horribly out of fashion metal sector of iron ore we shouldn’t expect this small but
potentially interesting project to move the dial at COP.
First Majestic Silver (AG) (FR.to): Along with Timmins, this is the place that the portfolio is
taking its current hit. I could continue by simply copypasting last week’s piece on AG here,
which would include the fact that silver exposure is risky and also that I’m holding through and
taking my chops if necessary. AG is a quality end operator, but even those drop with the rest of
them when the underlying metal is this weak.
11

Santacruz Silver (SCZ.v): The good news this week was SCZ’s NR (7) on the San Felipe PEA,
which shows good economics and a relatively easy barrier to entry from the low $36.3m capex
hurdle estimated at this stage (a PEA doesn’t come with numbers fixed in stone). IRR was fine,
and although using a silver price of U$19.91/oz is now One thing that did catch my eye was the
revenues mix for the metals from San Felipe, as it’s always been clear that the mine would be
polymetallic and revenues would depend on silver, lead and zinc, but according to the baseline
net smelter return numbers offered by SCZ some 57.8% of revenues would come from zinc
alone.
This got me thinking and after checking the numbers that have been returned by the new
Trevali (TV.to) Santander mine in the first ten months of operations between October 2013 and
July 2014 (source, TV filings to Peru’s Ministry of Energy and mining) I put this chart together:
Trevali (TV.to) at Santander versus Santacruz Silver (SCZ.v) at San
Felipe: Revenues per payable metal
100%
90%
80%
70%
60% Zn
50%
40% Pb
30%
20%
10% Ag
0%
TV Santander SCZ San Felipe
source: calcs from TV.to filings to Peru Mining Ministry in 2014,
SCZ.v San Felipe net smelter returns in PEA
My hunch was right, San Felipe has a very similar payable metals make-up to Trevali’s
Santander, even though TV.to is pitched as a zinc mining company and Santacruz has “silver” in
its corporate title. What’s even stranger is that being majority zinc may turn out to be a distinct
advantage to SCZ’s next mine in line, what with Ag down in the dumps and Zn catching
headlines and attention for its price climb of recent weeks. And thus the world turns.
We’ve covered SCZ quite closely in recent editions and fortunately, it’s managed to buck most
of the downtrend seen in other silver plays (as I seem to be into 10 day charts this week, here’s
another one that compares SCZ with the
juniors ETF (GDXJ) and the silver bullion
ETF (SLV) over the period) and lost just
a penny last week after Friday afternoon
brought a weak ending to a mostly
positive five days.
The key in the near-term will be to see
how Rosario is faring and we’ll find that
out from the 3q14 numbers. From there
and if all goes well, we can start making
a few tentative forecasts on the back of
San Felipe and the second projected
mine. I’m taking this one a step at a time
at the moment, however. Finally, note
the small article on Cormark and SCZ in ‘Market Watching’ below.
Rio Alto Mining (RIO.to) (RIOM): The neurosis of the week in my Top Pick stock? That
one’s easy, as the theory goes that RIO.to’s stock price has held up because everyone expects
it to re-join the indices e.g. the TSX S&P Gold miners, as announced Friday and gold miner ETF
12

GDX and the price has held up because of that. Once the process is over (next week, with the
additions officially happening September 19th) the theory goes that buying pressure evaporates
and RIO dumps in order to get back to the type of poor performance we’ve seen from peers.
Which is fine and as you can see once again in this chart (this time a 10 day timescale) RIO.to
(gold line) has done that much better than gold (GLD, black line) or the GDXJ juniors ETF (blue
line) these last two weeks. In fact, seeing RIO hold over $3 and even add a few pennies while
gold has gone South in a big way has been quite a change, a pleasant one and a portfolio
saving one, but a change all the same.
GoldQuest Mining (GQC.v): Hit hard again, as distressed seller took any price on the double
whammy of the last set of drill grades and the way gold is trading. This is the price that brave
people might consider as a new entry point, I’m not one of those but I am smart enough not to
sell at these highly oversold prices. I intend to hold and keep this nasty botch of red looking at
me for a while longer.
Focus Ventures (FCV.v): We got the maiden resource for Bayovar 12 from FCV and it was
much bigger than I expected, with an indicated of 114mt at 12.37% P2O5 and an inferred of
73mt at 12.44% P2O5 . That beats my 80mt or
90mt guesstimate into a cocked hat and as FCV
pointed out in the NR (8) there’s a high likelihood
of plenty more to come once they start sticking
drills into other parts of the concession, thanks to
the impressive flat bed uniformity of the
phosphate deposits (we’ve been over this point
many times).
However, the stock price didn’t move much on this
positive news, which might be about the dreadful
market optics at the moment, but I think is more
about the way in which the real catalyst for FCV
will be getting a big pocketed JV partner on board
to move the project forward. When that happens, FCV shoot higher.
The Copper Basket
After thirty-seven weeks of 2014 The Copper Basket is showing a 5.22% gain to level stakes.
13

company ticker price 1/1/14 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 1.51 144.41 541.54 3.75 148.3%
2 Lumina Copper LCC.v 6.29 44.07 440.70 10.00 59.0%
3 NGEx Resources NGQ.to 1.43 168.71 328.98 1.95 36.4%
4 Reservoir Min. RMC.v 4.97 47.55 254.87 5.36 7.8%
5 Nevada Copper NCU.to 1.35 80.5 159.39 1.98 46.7%
6 Panoro Minerals PML.v 0.35 220.25 95.81 0.435 24.3%
7 Copper Fox CUU.v 0.375 402.96 82.61 0.205 -45.3%
8 Hot Chili Ltd HCH.ax 0.425 333.11 78.28 0.235 -44.7%
9 NovaCopper NCQ.to 1.60 60.15 70.98 1.18 -26.3%
10 Curis Resources CUV.to 0.57 74.79 71.05 0.95 66.7%
11 Western Copper WRN.to 0.76 93.68 69.32 0.74 -2.6%
12 Cordoba Min. CDB.v 0.90 58.81 23.52 0.40 -55.6%
13 AQM Copper AQM.v 0.11 139.24 11.14 0.08 -27.3%
14 Coro Mining* COP.to 0.10 159.37 10.36 0.065 -35.0%
15 Oracle Mining OMN.to 0.27 49.03 3.43 0.07 -74.1%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg 5.22%
The basket average dropped 2.2%, dragged
down a little unfairly by some of the smaller The Copper basket 2014, weekly evolution
25%
end stocks on our list but the direction really
isn’t that much of a surprise after the 20%
pummelling taken by the metals market last
15%
week. In the end we did see four weekly
10%
winners (NGQ.to, HCH.ax, CUV.to, COP.to) and
three unchanged (LCC.v, AZC.to, CUU.v) but 5%
it’s the eight losers that set the tone headed by
0%
the bigger losses in AQM Copper (AQM.v down
20.0%), Oracle (OMN.to down 12.5%),
Reservoir Minerals (RMC.v down 8.1%) and
Nevada Copper (NCU.to down 7.5%). We
haven’t seen things this low since June and
let’s be clear, if it weren’t for picking and holding
two juniors that got bought out early year (AZC,
LCC) plus the recently under offer Curis (see CUV.to
talk below) we’d now be in the red on the basket
average.
Copper market prices were distinctly lower, with the
main part of the drop coming early week as the
dollar rallied, though the worst of the weekly prices
early Thursday were bought up and the metal
finished around $3.10/lb. Still a big slide from $3.20
this time last week, the industrial metals gave no
relief from the selling.
Next, inventories. Here are the regular bullets for
your consideration:
• Overall world stock levels moved slightly higher for a second week, up 5,035 metric
tonnes (mt) (+2.0%), to finish Friday at 260,544mt.
• Shanghai Futures Exchange copper warehouse stocks saw a small gain for the first time
in six weeks, up 668mt (+0.9%) to finish at 75,004mt and although a small change, it
14
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 ht72 dr3gua ht01 ht71 ht42 ts13guA ht7peS ht41
source: IKN calcs

pulls the number away from last week’s multi-year low.
• The LME copper warehouse inventories was the same story, a small increase of
1,775mt (+1.1%) to 156,475. Not much to read into that figure though, the LME has
been treading water stocks-wise for quite a time and last week wasn’t much different.
• However, the Comex warehouse stocks moved up quite sharply and the trend here is
plainly bullish for stocks numbers (therefore bearish for prices). Even though it’s the
smallest of the three warehouse systems, its US coverage makes it relevant and now
with 29,065mt has come back from nearly dead to a position of at least some influence.
Here’s the Shanghai warehouse weekly chart, which is still the most important price signal of
the three (China and all that).
Shanghai Futures Exchange Warehouse Stocks, 2014
220000
200000
180000
160000
140000
120000
100000
80000
60000
15
ts13ceD ht5naj ht21 ht91 ht62 dn2bef ht9 ht61 dr32 dn2ram ht9 ht61 dr32 ht03 ht6rpa ht31 ht02 ht72 ht4yam ht11 ht81 ht52 ts1enuj ht8 ht51 dn22 ht92 ht6yluj ht31 ht02 ht72 dr3gua ht01 ht71 ht42 ts13 ht7 ht41
Mt Cu
source: Cochilco
Overall, last week in copper was a clear negative for metal and miners, but the pull was more
from the dollar currency strength than the minor drift of sector fundamentals that look a little
soft but don’t come anyway near justifying the price weaknesses we’ve witnessed.
Now for an update on just one of our basket stocks.
Curis Resources (CUV.to): The takeover of the week in the copper space is the friendly deal
from Taseko (TKO.to) (TGB) to buy Curis
(CUV.to). With one director in common and
with TGB already a minor shareholder of CUV
this eventual deal isn’t much of a shock, the
surprise for me was the timing and how easily
CUV and its controlling company Hunter
Dickinson (HDI) has capitulated.
The deal was marketed as valuing CUV.to at
1.055 per share, compared to the 90c close
before the announcement. Here’s how CUV
reacted last week, moving to just 95c. That’s a
small premium for a friendly deal and it looks
for all the world like CUV throwing in the towel
and accepting something approaching an
acceptable price just to get out of the
permitting and social mess that is Florence AZ. One thing’s for sure; on paper CUV is worth a
lot lot more than a Loonie so there must be a good reason to accept a deal that’s clearly
lowball on the pure economics side.

The Low Cost Producer Basket
After 37 weeks, the Low Cost Producer Basket is showing a 8.92% 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 35.61 34.24 -9.3%
2 Goldcorp GG 21.67 812 20.40 25.12 15.9%
3 Barrick ABX 17.63 1000 16.52 16.52 -6.3%
4 Newmont NEM 23.03 497.87 12.53 25.17 9.3%
5 Silver Wheaton SLW 20.19 357.39 8.23 23.02 14.0%
6 Franco Nevada FNV 40.74 147.01 7.77 52.82 29.7%
7 Agnico Eagle AEM 26.38 173.43 5.89 33.98 28.8%
8 Pan American PAAS 11.70 151.41 1.93 12.76 9.1%
9 B2Gold BTG 2.02 651.4 1.37 2.11 4.5%
10 First Majestic AG 9.80 117.02 1.07 9.17 -6.4%
all prices in U$, using NYSE ticker prices Portfolio avg 8.92%
Bad again, all ten stocks went South again,
BTO led the losers (-9.1% week over week)
again. The basket lost 5% overall and there
was no escape, not even in Franco Nevada
this time.
The battering is even worse when we
compare the component stock prices for
Sunday August 31st to now, just two weeks
later. Last week we gave you a little extra
chart showing the weekly loss, here’s how
that looks if you plug the two weeks of
prices into the sheet:
BTO is now down 21.8% in
September 2014, another five are
showing double digit losses ijn the
fortnight, Freeport is the “best” (i.e.
least worst) at “only” negative 6.2%.
When I look at these numbers then
look at the relatively light damage in
the IKN port so far this month (TGD
notwithstanding) I consider myself
lucky. So far, at least.
Low Cost Basket: Percentage difference between
basket and GDX control, 2014
8%
7%
6%
5%
4%
3%
2%
1%
0%
16
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 ht72 dr3gua ht01 ht71 ht42 s13guA ht7peS ht41
Percentage change in basket components
Two Weeks of September 2014
0%
-2%
-4%
-6%
-8% -6.6% -6.2%
-10% -8.7% -7.6%
-12%
-14% -12.7% -12.5% -11.7% -11.7% -11.3%
-16%
-18%
-20%
source: NYSE
-22%
-24% -21.8%
BTG AEM PAAS GG AG ABX SLW NEM FNV FCX
The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
35%
30%
25%
20%
15%
10%
5%
0%
source: ikn calcs, NYSE/Nasdaq data
ts13ceD ht91 ht9 dn2ram dr32 ht31 ht4yam ht52 ht51 ht6luj ht72 ht71 ht7peS
basket
gdx control
source: Yahoo! Finance, IKN calcs

Newmont (NEM): The big news from the larger producers last week came from NEM, when
on Friday it announced (9) that it was selling its 44% participation in the Penmont JV to
majority owner Fresnillo (FRES.L) for
$450m cash. As $450m isn’t such a big
number next to the $12Bn market cap
that is NEM, the news didn’t make
much of a dent in the NEM share price
action on Friday (here’s the five day
comparative to GDX) but it’s another
step in the major’s recent strategy of
selling non-core assets and it’s all about
the big boys’ rationalizing operations.
This isn’t the type of move that’s made
by a company about to buy into some
other project somewhere else and start
snapping up junior explorecos left, right
and centre. Therefore the signal that
NEM is still in battening down hatches
mode is the main takeaway for consequences. By all accounts, that’s the same story at ABX and
GG, to name but two of the big gold players.
Agnico Eagle (AEM): Meanwhile, AEM bucks the trend (again) and on Monday announced
(10) it was buying out Cayden (CYD.v) in an all share (minus one penny cash) deal that’s
headlined as being worth $205m. The way CYD
had traded for quite a while was strong, obviously
trend-bucking and suggestive of an offer coming
in. I’d looked at it quite carefully and passed on it,
then didn’t buy into the hype that turned out to be
well-founded once it had started moving (normally
something that works for me, this time it worked
against me) so on a personal level it’s definitely
one to file under M for Missed. As for AEM, I
continue to scratch my head about this company
that seems to be capable of buying anything at
any time. Some of those trades work out and their
praised, others don’t and get conveniently
forgotten by company and market alike. In the
end I shrug, say WTFDIK and feel the same way
about AEM as I feel about other miners (e.g. AR.to): I don’t understand, so avoid.
Regional politics
El Salvador: Government versus Pacific Rim (now Oceanagold (OGC.ax) (OGC.to)
Next week sees the start of the final hearing process in the international arbitration
(ICSID/CIADI) case between mining company Pacific Rim (Pac Rim), now a wholly owned
subsidiary of Australian gold mining company OceanaGold (OGC.to) (OGC.ax), and the
government of El Salvador. To make my life easier and this edition of the Weekly shorter, El
Salvador expert Tim Muth over at his blog has put together a decent primer on the case so far
and what we can expect in these final stages (11). That post goes into fine detail, is well worth
reading and includes this passage, which is at the centre of it all:
“Pac Rim is suing over the government of El Salvador's refusal to give it a
permit to begin mining at its El Dorado site in north central El Salvador. The
17

refusal came after Pac Rim had spent years exploring and preparing the site
and was ready to actually begin construction of a mine. Pac Rim claims that it
complied with all provisions of Salvadoran law and that this action which
destroyed the value of its investment in the gold mine was illegal. El
Salvador asserts, in contrast, that Pac Rim had not fulfilled all the
requirements to obtain an exploitation permit and that the actions of the
country in placing a moratorium on new exploitation permits was legal and
justified because of concerns and uncertainty over the environmental and
social impact of permitting gold mining.”
We won’t get a verdict immediately, but this is another story that I’ll be keeping an eye on the
the five days to come. Though I will say at this point that from previous study of the case, I
believe the El Salvadorian position to be legally strong and that of Pac Rim weak, therefore
currently expect the mining company to lose come verdict time (which is the basic reason why I
haven’t followed this one carefully in the Weekly, not much of a trade opportunity in my view).
I’ll be looking out for any evidence that challenges my current opinion.
Mexico Baja California Sur: The Boleo mine construction halted by government
This is the type of thing I find bizarre about mining politics in Latin America in the 21st century
and to be clear form the outset, it’s the company’s behaviour that’s unbelievable and difficult to
justify and not the host country, state or regional government.
Our story concerns the El Boleo copper mine project in Baja California Sur, Mexico, the project
once owned by Baja Mining (BAJ.to) but after cost overruns and broken promises they were
diluted to a minor ownership, with Korean money now running the show. In February this year
development was stopped by the the local government because the company had not been
granted its construction permit, because it had debts to pay the government coffers (fines,
permit costs and surcharges for lost time on contracted timeline to production). This was
smoothed over at the time and after a few days construction re-started after the government
let the company delay payments for a while “as an act of good faith”.
Then this Friday September 12th the local government again shut down the development
because the El Boleo mine owners still hadn’t paid what they owed (12) to the local
government. It beggars belief in any province that a mining company should simply refuse to
pay what it owes to government, let alone in one that’s itching for any excuse to refuse access
and further permits to any mining operation in the State.
Keeping an eye on the Brazil Presidential election run-up
Just a quick line this week, to note the figures put on the blog Saturday (13) that show sitting
President Dilma Rousseff has cut the gap between her and the big challenge of Marina Silva to
technically zero. This is along the lines we expected and wrote about these last couple of
weeks, with our scenario that of Dilma winning out versus Marina in the second round run-off.
The big difference in campaigning has been the new aggression and activity of the ruling PT
party and particularly the way Lula da Silva has thrown is very considerable political weight
behind Dilma while at the same time accusing Marina Silva of all types of bad things. This has
hurt both Silva and her campaign, with the women who worked for 24 years with Lula in the PT
and then in his government admitting that his barbs have brought her to tears. Politics is a
rough sport.
Bear Creek (BCM.v) and the Peru regional elections news provides an excellent
example of my stupidity on market timing
It’s absolutely necessary to point out the weaknesses in your author’s market armoury and one
of them is market interpretation and timing on events. Last week in the IKN278 piece “Peru:
Aduviri in Puno has a shot at winning the regional presidency job” at the top of the ‘Regional
Politics’ section I went into the political side of Puno Peru in the run-up to the October 5th
regional elections, noted that anti-mine candidate was rising in the polls, explained that if he
won it would be bad optics for Bear Creek Mining (BCM.v) due to both Santa Ana (Aduviri’s
18

target project back in 2010) and Corani (by simple association) and all such things. I then
proceeded to snatch defeat from the jaws of victory by saying that a short position in BCM.v
may turn out to be a good trade, but there was no rush to get positioned. To quote last week’s
note:
“So a call to the insto desks; as this is a story that’s not going to make a
splash up North until polling day, it may be worth checking out short
availability on BCM stock as you have a month to get positioned.”
Wrong. To my dismay and personal regret, I read on Monday (14) that JP Morgan had
published a client alert on the Peru regional elections and had pinpointed Walter Aduviri’s rise
as one of the main problem points of the country. To quote the report (translated),
“The frontrunner candidate for the regional presidency of Puno is Walter
Aduviri, ex-member of the Gregorio Santos team in Cajamarca, which implies
an even more difficult scenario for mining projects in the [Puno] region”.
I strongly suspect that the JP Morgan call of “Aduviri Favourite” on Monday is the reason behind
the share price action in Bear Creek Mining (BCM.v) last week:
Others may blame the NR from BCM on Monday (15) on the Corani project and gave an outline
to the new, updated economic parameters BCM was using for the mine plan, but the outline of
a more streamlined mine with a probably smaller environmental footprint at roughly the same
capex cost as the last economic study in 2011 was fairly benign for project and company,
certainly not worth the 20% sell-off we saw.
No, that was the world waking up to the heightened political risk for BCM come October 5th and
that’s where I got my call very wrong last week. I thought others wouldn’t notice and that may
have been a reasonable assumption five or maybe even three years ago, but it was a mistake in
the information free for all world in which we live nowadays. I take some solace from my
overall “avoid BCM” call that’s been in place on the way up and now on the way down. That’s
not going to change, either.
Market Watching
Iron Ore: No country for small players
Blogger Junior Gold Miner Seeker (JGMS) is a useful one to have on your radar (I use RSS and
Feedly) because it does a good job of “covering the coverage”, as it were, mainly on the PM
side but with an eye to industrial metals too. Here’s a post last week that’s typical of its good
19

work, entitled “The End of the Iron Age - Goldman Sachs” (16) and here’s the main main of the
short cover note (the blog nearly always offers up necessary links to the reports when it can).
Goldman has a well reported note out on Iron ore where prices have been tumbling.
Rio Tinto and BHP are aggressively expanding capacity while demand has cooled. The
steep cost curve for iron ore looks likely to at least see closures at the high cost end
and will dramatically impact the big 3's margin.
The post also provides one of the slides from the GS report in its brief overview:
JGMS isn’t into analysis or subjective opinion, it’s more a curation of what other people in the
mining sector are saying (though the way which JGMS selects its coverage is an op-ed in itself).
The job of analysis and decision on what to make of the situation is normally left to the reader
and in this case, for me at least the obvious conclusion to draw is in the line, “Rio Tinto and
BHP are aggressively expanding capacity while demand has cooled”. If we add in Vale (VALE)
to the mix we have the three biggest iron ore production companies mentioned and, surprise
surprise, they’re also the three most cost-efficient producers being as they are largest scale,
vertically integrated and most flexible in their production outlooks. The big three are expanding
production and prices for iron ore are dropping, which means the smaller, less efficient and
higher cost companies are getting squeezed out of the market by this triumvirate cartel.
Nothing new or radical in this market cause and effect of course, but it’s the death knell
sounding for many a small player, exploration scale or production, that was planning on getting
a foothold in the market to the cost of the big three.
Which reminds me of the situation at Alderon (ADV.to) (AXX), with its ‘Kami’ development stage
iron ore project in Eastern Canada. On paper Kami’s economics have always looked strong, it’s
backed by large investment capital from the Altius (ALS) group and in a JV with serious Chinese
capitals, it has had a bit of a rocky road on permitting over time but to its great credit has stuck
to its task and although still facing some opposition has convinced enough of the locals and
(most important) regional political figures and parties in order to get most of the main permits
it needs in place. The Kami project has the China part of its JV finance package in place, long
lead items are on order and in 2014 its already moved through the first stages of construction.
None of the above explains this price action:
20

ADV closed Friday under $1, (AXX at U$0.87). Its most recent bout of selling started when BNP
Paribas pulled out as lead for the debt financing package arrangers for the ADV side of the JV
capex (17). ADV then engaged Endeavour Financial (Frank Giustra et al) but it hasn’t managed
to stop the rot yet. With the big three getting aggressive and protecting their oligopoly through
a supply-led price squeeze, that’s not so surprising.
There are some mining sectors that will allow the smaller scale start-up in and be successful;
the silver industry is one, as its world production mix is highly fractured with no one company
or country holding a large enough slice of overall production to be able to throw its market
weight around to the detriment of others. That’s not the case in the world of iron ore and it’s
why I’ve passed on ADV more times than I can remember, and that’s despite trusted voices
liking the project. Kami may eventually become an iron ore mine and a successful, profitable
one at that; it remains to be seen who will own it come the time and if so, at what price the
asset changed hands from ADV to its final owner.
Luna Gold (LGC.to) underscores how Sandstorm (SAND) paid over-odds for shares
A classic Friday post-close bad news NR (18) from a junior was delivered by Luna Gold (LGC.to)
this week, here’s the body of the text:
VANCOUVER, BC--(Marketwired - September 12, 2014) - Luna Gold Corp. (LGC.TO)
(LGC.TO) (LGCUF) ("Luna" or the "Company") announces that as a result of market
conditions, it will not proceed with the second tranche of its previously announced
private placement totalling 10,500,000 shares.
The first tranche equating to 19,500,000 shares was closed on August 5, 2014.
As at September 1, 2014, Luna had a cash balance of C$33 million, working capital of
C$40 million and 7,000 ounces of finished gold inventory.
At this point, we need to go back to the original placement NR of August 5th (19) and here are
two extracts for consideration:
VANCOUVER, BC--(Marketwired - August 05, 2014) - Luna Gold Corp.
(LGC.TO)(LGC.TO)(LGCUF) ("Luna" or the "Company")announces a non-brokered
private placement (the "Placement") of up to 30,000,000 common shares (the
"Placement Shares") priced at $1.02 per share, for gross proceeds of up to
$30,600,000.
...
Pursuant to the Agreement, Sandstorm will purchase a minimum of 19,500,000 of the
Placement Shares, for gross proceeds of approximately C$19.89 million
21

In other words, Sandstorm (SAND) agreed to pick up nearly 2/3rd of the placement at $1.02,
but just a month and a bit later LGC.to has cancelled the rest of the placement and that’s
because the share price has done this:
LGC is down to a Friday close of 85c and there aren’t many entities that are going to pay $1.02
for something they can buy on the open market at an 18.6% discount.
Regarding Luna Gold (LGC.to), it’s a company that’s promised much, delivered poorly and one
I’ve always found easy to avoid. Its descent hasn’t ever come as much surprise to this desk (it
was a $3+ dollar stock even after the moment that the gold price made its big waterfall drop in
early 2013) and though I’m keenly aware of my own bad calls on other stocks in the period, at
least in this case the avoid call was obviously the right one.
Regarding Sandstorm (SAND), things are more complicated. At face value the streaming model
is an interesting one to follow in these lean years (look no further than Franco Nevada or Silver
Wheaton for your evidence) but the latest decision to double down on LGC and get such an
immediate thumbs down from the market for the investment (term used loosely) call again calls
into question the judgement of the people running this shop (Nolan Watson at the helm, but
there are obviously others involved with the decision making process). Also, it must be noted
that we’ve already SAND buy into get hit and then double-down on a story with too many
similarities to be ignored, that of Colossus (ex-CSI.to). The list of gold, Brazil, promising story,
SAND investment, things go wrong, SAND doubles down, things go even worse is uncanny, also
because of the political risk angle at the Colossus Serra Pelada project and the foreign capitals’
total inability to read the political and community risk situation correctly. That one has turned
out very badly for SAND, but that hasn’t deterred the same company that’s supposedly a
streamer from buying more shares in a
troubled company it’s already exposed
to and investing into the asset side of
another Brazil-exposed junior with
obvious operational issues (and several
political ones too, if persistent hearsay
about is to be believed).
Here’s a 2014 year-to-date chart that
features SAND next to fellow gold
streamer, the more established and
sector leading Franco Nevada (FNV) as
well as the junior PM ETF (GDXJ) as
benchmark. Even after resetting at zero
on January 1st 2014 after the debacle of
Colossus in late 2013, SAND is now
underperforming both FNV and GDXJ
after being ahead (and sometimes way ahead) until August came along. The common
22

denominator is the LGC deal, which smacks of the market moving from love to hate about the
aggressive investment tactics at SAND.
For sure aggression is how empires are built, the winner CEO is the one that takes chances. But
SAND’s method would stick out like a sore thumb in these prudent times even if the bets made
by Watson et al had been successful. Colossus hasn’t, neither was its first tranche of LGC, now
its second tranche has been given an immediate fail mark. To what point will the current
management of SAND be allowed to squander the profits of the successful streaming model on
unsuccessful equity wagers?
Santacruz Silver (SCZ.v) coverage opened by Cormark
As part of a re-boot in silver sector coverage, Cormark opened coverage on IKN held and liked
position Santacruz Silver (SCZ.v) on Thursday. In its overview remarks at the top of the report,
they write the following:
“Santacruz Silver Mining Ltd. is ramping up its Rosario mine, which started
production on a small scale last year. As Rosario ramps up, we expect
Santacruz to see a rerating in response to the positive free cash flow
generating ability of the mine and the significant upside offered as focus
moves to the larger scale San Felipe development project.”
I would agree with both that and its more detailed coverage of the stock, which touches on just
about every pro-long argument these pages have previously put forward, as well as warning
that the current Rosario ramp-up is at a critical juncture because it needs to go free cash flow
positive as soon as possible in order to relieve the pressure on the dwindling corporate treasury
position.
Cormark has placed a buy call and a $1.50 target on the stock, both of which are also
reasonable. I’m often critical of brokerage analyst reports but not this time, and that’s not for
the facile reason of it largely agreeing with my own investment thesis, either; this report is well
argued, well written and a good job of work. If you’d like to read the note (which also covers
MAG Silver and Excellon, two companies for which I have less interest or opinion) drop me a
line and I’ll send you a copy by return, usual address.
Conclusion
IKN279 is done, we end with bullet points:
• BTO is a buy, as long as the deal closure with PIR marks the end (or near end) of the
heavy selling period for the stock. A little luck with the gold price and BTO could turn
into a great little near-term trade. We’ll do more on this one next week.
• I like the speculative chances of COP here too, though I’m not in a hurry to add to the
position and want to see these MOU and LOI agreements turn into fully closed deals.
Once they’re in, this could re-rate fast. All the tinycap caveats apply, though.
• Santacruz Silver (SCZ.v) stood out from the sinking silver pack last week and it looks as
though people are catching on to its asset value appeal. That’s why I bought the thin in
the first place.
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
23

I wish you good trading fortune, ladies and gentlemen.
Otto
Footnotes, appendices, references, disclaimer
(1) http://www.calculatedriskblog.com/2014/09/fomc-preview-more-tapering.html
(2) http://finance.yahoo.com/news/coro-signs-letter-intent-acquire-190214161.html
(3) http://finance.yahoo.com/news/coro-signs-letter-intent-acquire-175607796.html
(4) http://finance.yahoo.com/news/coro-announces-debt-financing-acquisition-143528792.html
(5) http://finance.yahoo.com/news/b2gold-corp-shareholders-overwhelmingly-approve-225627883.html
(6) http://finance.yahoo.com/news/coro-announces-results-celeste-sur-164344266.html
(7) http://finance.yahoo.com/news/santacruz-silver-reports-pea-results-111900781.html
(8) http://finance.yahoo.com/news/focus-delivers-initial-estimate-bayovar-181840423.html
(9) http://finance.yahoo.com/news/newmont-signs-agreement-sell-stake-060100602.html
(10) http://finance.yahoo.com/news/agnico-eagle-acquire-cayden-resources-210000066.html
(11) http://luterano.blogspot.com/2014/09/god-mining-arbitration-to-commence-in.html
(12) http://peninsulardigital.com/extra/cerro-el-ayuntamiento-la-minera-el-boleo/154283
(13) http://incakolanews.blogspot.com/2014/09/brazil-presidential-elections-pt.html
(14) http://gestion.pe/politica/jp-morgan-esta-preocupado-elecciones-puno-y-mira-simpatia-futuro-cajamarca-2107865
(15) http://finance.yahoo.com/news/bear-creek-provides-corani-peru-130000119.html
(16) http://juniorgoldminerseeker.blogspot.com/2014/09/the-end-of-iron-age-goldman-sachs.html
(17) http://finance.yahoo.com/news/alderon-provides-project-financing-204500323.html
(18) http://finance.yahoo.com/news/luna-gold-withdraws-second-tranche-203000514.html
(19) http://finance.yahoo.com/news/luna-gold-announces-strategic-investment-210100008.html
24

Appendix 1: Flash update dated Wednesday September 10th
Good Wednesday morning, 07:45am local time, 45 minutes to the open, bright and sunny with the winter now behind us
here.
Four short notes on covered and followed stocks
B2Gold (BTG) (BTO.to)
Reliable information is that BTO is being hit hard by arbitrage sell trades coming in from Australia, as shareholders try to
pre-empt the new liquidity that will come from the closing of the Papillon (PIR.ax) deal. What the little mouthful means is
that BTO is likely to see selling into its price until the deal is closed and then a little afterwards, as the stock-specific
effects wash through. I now firmly believe there is an obvious and lucrative trade in BTO to come, but it's not just yet so
I'll be holding off a while longer before taking a position. However, be clear that we're probably close to the best buying
moment so I expect to go long the stock in the near-ish future.
Timmins Gold (TGD) (TMM.to)
After some internal debate and checking a few sources for intel that can be gleaned, I will be holding through on this
position and I will not be a seller into the current weakness, as was suggested as a possible event in the last two
editions of The Weekly. I like TMM here, period.
Focus Ventures (FCV.v)
FCV gave us its first pass resource on Monday...
http://finance.yahoo.com/news/focus-delivers-initial-estimate-bayovar-181840423.html
...and it was an impressive result. The fact that the stock price didn't jump much on the news is testament to market
atmosphere, rather than a reflection on the quality of the news. To reply to a few mails recived in the simplest manner
possible, the news was good but the real catalyst will happen when the company gets a JV partner on board that will be
able to apply the type of big money a phosphate project such as this needs to become a reality.
Coro Mining (COP.to)
Thank you for all your mails, a big and pleasant surprise to see so many of you interested after the piece in IKN278.
Suffice to say that yes, COP.to will be a main feature on Sunday in IKN279.
Enjoy your Wednesday,
Best, O
Appendix 2: Flash update dated Friday Septmber 12th
Good Friday morning, 08:10am local time, the early sun promising a warm day.
The shortest of notes to say that I will be buying B2Gold (BTO.to) (BTG) today. Reasons:
•
BTO votes on the merger deal with Papillon (PIR.ax) today, while the PIR vote is expected on Monday during
Australian business hours. This should help stem the tide of arbitrage selling whether the vote goes positively (most
likely) or negatively (unlikely).
•
BTO is now at a considerable discount to just a couple of weeks ago and is still a sector-leading operator,
despite this weakness.
•
I may not be getting the bottom price by buying today (there is the obvious dangers of trying to catch a falling
knife in any purchase today), but the bottom is near and the stock will rebound at some point. I don't mind taking a few
days or a couple of weeks in the red if necessary.
•
There's a clear risk in buying into gold exposure at the moment. I'm clear about that, though I urge any of you
tempted to follow me into this trade to think carefully about the downside risks to gold before hitting any buy buttons.
Finally, I'll add a few more details to this buy call in IKN279 on Sunday, but the main event this weekend is on Coro
Mining (COP.to). I'm mentally slating in a detailed look at BTO in IKN280, two weekends down the line.
Enjoy your Friday.
Best, O
25

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
26

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.
27