IKN #284Premium

The IKN Weekly
Week 284, October 19th 2014
Contents
This Week: I’m going to buy a few Kinross (KGC) (K.to), Next week’s travels, China GDP
number, You wanted globalization folks, you got it, Illegitimi non carborundum.
Fundamental Analysis: Production numbers for Amerigo Resources (ARG.to), Timmins Gold
(TGD) (TMM.to) and First Majestic Silver (AG) (FR.to).
Stocks to Follow: Overview, Dalradian (DNA.to), Reservoir (RMC.v), NovaCopper (NCQ.to),
Rio Alto (RIOM) (RIO.to), GoldQuest (GQC.v), Minera IRL (MIRL.L) (IRL.to), B2Gold (BTG)
(BTO.to).
Copper Basket: Overview, Panoro (PML.v), AQM Copper (AQM.v), Copper Fox (CUU.v).
Low Cost Producer Basket: Overview.
Regional Politics: Brazil Presidential round two run-off: One week to go, Peru: Mining
investment set to drop 6.4% in 2014 and 8.1% in 2015, Argentina: Santa Cruz mining to
weather the storm.
Market Watching: Kinross Gold Corp (K.to) (KGC) should sell Paracatu and I should buy some
Kinross, Puno second round run-off and Bear Creek (BCM.v), Richmont Mines (RIC.to)/Primero
(P.to) (PPP)/Renaud Adams, Look to iron ore for clues about the future of the oil price.
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
I’m going to buy a few Kinross (KGC) (K.to)
Don’t read too much into it, won’t be a big position and I’m taking more than a little bit of a
chance with the proposed trade, too. However it will make it to the ‘Stocks to Follow’ list as of
next weekend and as a buy is a buy whatever size it might be, it’s getting a mention here all
the same. The reasons for the purchase are found in ‘Market Watching’ below.
Travel plans and meetings next week
Your author is spending a few days on the road next week, so blog coverage will be limited.
Meetings include further DD on at least one company not currently covered by The Weekly, plus
a meeting with Minera IRL to see if anything can be gleaned about these way overscheduled
financing meetings for Ollachea.
China GDP number
Monday sees the biggest macro datashow for our sector and just for a change, it’s not coming
from The USA. China’s GDP number is due out and guesses from the band of experts are for a
quarterly growth figure of between 7.1% (bearish) and 7.5% (bullish). You won’t need to be
fluent in Mandarin in order to see which end of the scale the eventual number comes, just
watch the overnight trading in copper.
1

You wanted globalization folks, you got it
No man is an Iland,
intire of it selfe;
every man is a peece of the Continent,
a part of the maine
Meditation XVII, John Donne, 1624
The subject is primarily deflation, but the real thoughts move to what the The USA is likely to
do about the threat. First what that threat is and I was sent this “five reasons why deflation is
bad” link from the WSJ (1), which I clicked on and read it even though it sounded very listicle (I
only read it due to the high esteem in which I hold the person who reco’d it, frankly). It turns
out to be worth recommending to this wider audience, one of those real-world, no-fluff pieces
that cuts to the heart of the matter and does it well, without resorting to jargon. Simple is
good. Repeat, simple is good.
So to thoughts arising and I’d like to reiterate a point made at the end of last week’s opening
ramble because I’ve seen little mention of it between then and now, probably due to the US-
centric focus of last week’s hairy ride in the broad markets. Stanley Fischer said it loud and
clear, the USA cannot afford to ignore the state of play in satellite countries if it wants to avoid
a recessive mess inside its own borders. As I look around Latin America, the single thing that’s
needed to keep things in order is better prices for commodities (soybeans, oil, copper, silver
and three dozen etcs). Everything depends on the dollar, the dollar’s strength is depressing
prices of things as well as prices of other currencies in dollar terms. Therefore (and putting this
more simply is impossible)...
• If, as seems to be the case, The USA has recognized its problem as the potential for
price deflation
• If The USA also sees that its own economic health is now dependent on the economic
health of other countries like no other time in history
• If The USA has full control over the currency that makes or breaks prices of
commodities and therefore the economic health of (for want of a better phrase)
“supplier countries”
...we’re about to see the dollar get cheaper. The steady-as-she-goes schedule for Yellen’s Fed
this year was to be the pomp and circumstance announcement of the end of QE at the next
FOMC on October 28th and 29th. In a change to our scheduled programming, anyone for QE-
Infinity? I’m guessing we’ll hear a lot about the upcoming FOMC in the trading week to come,
because it’s already being slated as one of those important ones. I’ll also go as far as to guess
that a) the Fed will indeed announce the end of QE b) and any new dovish measures it takes,
be they active in measures or latent in future possible jawbone, won’t come with the name
“QE” or “asset backed blahblah” in order that they might say “Well we said we’d close that
down and close it we did, we’re true to our word”. Style over substance you see, though we
must also be careful not to overestimate the intelligence of people in our wonderful and
interconnected financial market world as this quote from this FT report last week (2) makes
clear:
Wouter Sturkenboom, investment strategist at Russell Investments, said he was
concerned by how a slight change in sentiment from the FOMC could have such a
strong impact on the market. “It is worrying that the Fed can have such a major impact
on the markets,” he said.
Indeed, there are still people as stupid as Mr. Sturkenboom wearing suits, shouting into
telephones, pushing buy and sell buttons.
Final aside: While checking and getting that above quote exactly right (and for pedantic fun it’s
run today in its original John Donne 17th century spelling) I found out for the first time that the
title of the larger work that Meditation 17 is the most famous part is called, “Devotions upon
Emergent Occasions”. That’s rather apt, considering the emerging market context and the
2

occasion the market is about to offer us.
Illegitimi non carborundum*
Reader PMK wrote in on Friday, a few minutes before the close.
I am rather perplexed by the action today. The Dollar is finishing off a crappy
week with slight bounce. The price of gold is essentially where it was
yesterday. And yet the GDX ETF is down nearly 3%. I don't get it. Not to say
this isn't the first time (or last) I'm left scratching my head, but I find today's
action pretty depressing. I tried to ignore the market today and failed.
Sadly PMK, the markets tend to do things that don’t fit to our personally preferred timescale.
What happened on Friday looked pretty knee-jerk to me, with market players reacting in limbic
mode. “Dow up therefore gold miners down” was the battle call, but I think we’re about to get
a shift away from that binary play and into a market situation where the good miners, i.e. those
that make a profit, will also be able to ride up a broad market rally.
I found Friday’s market action a little frustrating too, particularly the depth of some of the
selling in higher volume juniors like BTO and AG, but it’s not something any of us should get
outright depressed about.
*Usually understood as “don’t let the bastards grind you down”, it is in fact an example of joke Latin or mock-Latin. As
most Latin scholars will quickly tell you (if you give them the slightest chance) it’s real meaning is “the unlawful are not
a carbon silicate”, or something similar.
Fundamental Analysis of Mining Stocks
This week we look at three of the companies owned and covered, as they all filed 3q14
production reports last week. Those companies are...
• Amerigo Resources (ARG.to)
• Timmins Gold (TGD) (TMM.to)
• First Majestic Silver (AG) (FR.to)
...and we look at them in that order too, because we do the best first, check out the acceptable
second and leave the worst until last, which also happens to be the longest and most
complicated piece (so feel free to skip it if you’re feeling depressed about holding FR.to stock).
No need for a big rousing intro today, let’s just get on with it.
Amerigo Resources (ARG.to) 3q14 production
Our new-ish small copper producer play, Amerigo Resources (ARG.to), filed its 3q14 production
report on Thursday (3) and although not a stunning quarter it was never expected to be, so
overall I’m OK with its contents. ARG.to offers a fair amount of production and preliminary sales
details with this regular NR so with some leeway, it’s possible to get pretty close to the type of
revenues number we can expect from the stock come those filings in mid-November. Here we’ll
concentrate on the most important datasets and then make a stab at earnings.
Here’s the copper sales chart, which marks 3q14 down at 10.321m Lbs Cu. That’s down on the
historical average but still the best quarter of 2014 so far. However the results were right on
our house estimates for copper (and for what it’s worth, slightly higher than expected for the
minor credit metal molybdenum) so no problems this end.
3

ARG.to: Copper sales
16
14
12
10
8
6
4
2
0
4
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source: company filings
htnom/uC
sblM
The reason for the low copper production number is
still it grades being run by ARG at its plant. We noted
this in previous coverage and how Q3 wasn’t
expected to get any better. This proved to be the
case but in the NR ARG.to has guided higher for
4q14 and beyond, so we’d expect things to get back
to something approaching normal soon as the low-
grading material is worked away and the higher-
grading stuff from the tailings reappears.
This next chart shows how “calculated gross
revenues” work out for 3q14. This gets done by
multiplying sales of both copper and moly with the
recorded price for each metal given by ARG.to in the NR (which may eventually differ by a
touch in any given quarter when the final results come in, but it’s an accurate gauge for our
purposes). According to this ARG will report revenues some $2m higher than in 2q14.
ARG.to: Calculated gross revenues (NB not same as filed
revenues) for Cu & Mo, per qtr
60
50
40
30
20
10
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
ARG.to: Average copper grade
0.2
(NB: please note cut-down y-axis) 0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
$m
calc on Mo $m
calc on Cu $m
source: company filings, IKN calcs
We can then compare the somewhat
artificial “calculated” number against true
revenues, as reported by ARG.to each
quarter. As you can see, real revenues are
always lower than the theoretical ones,
with the average difference around 9%
(understandable, there are middlemen to
pay after all). We can therefore take a best
guess that ARG.to will report $29.5m in
revenues in its eventual 3q14 financials in
November.
21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
% 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 41q2 tse41q3 tse41q4
$m
Total gross Cu/Mo rev $m
Real revenues filed
source: company filings, IKN calcs, IKN ests for 2q14

As for costs, that’s a little more difficult but after considering the guidance given in the NR plus
previous quarters, the IKN guesstimate is that ARG.to will report costs at $28m (which includes
just about everything, unlike other companies’ ideas of reporting their costs in a drip drip
manner).
ARG.to: Quarterly Earnings overview
60
50
40
30
20
10
0
-10
5
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
source: company filings, IKN ests
srallod
fo
snoillim
revenues
COGS
Gross profit
We therefore expect gross profit to come in at around $1.5m and operating profit at $0.5m, as
seen here:
ARG.to: operating profit
6 5.248
5 4.421
4 3.090 3.500
3 2.439
2 1.515
1 -0.061 0.500
0
-1
-
-
3
2 -0.839 -1.273-1.524 -0.933
-4 -3.203
-5 -4.253
-6 -5.048
-7
-8
-9 -7.823
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
$m
source: company filings, IKN ests
In these last couple of charts I’ve also included current best guesses for 4q14 and as we expect
production to increase thanks to improving grades, Q4 could turn out to be more than the “just
about breakeven” that we’re now predicting for the current reporting quarter. If ARG.to could
return a profit of $3.5m in 4q14, that would be a 2c/share EPS and not bad at all for a 36c
stock.
Discussion: Overall a reasonable looking quarter from ARG that will allow it to break even.
That’s all I was really expecting from the stock operations-wise at this point, so although it’s not
going to win any medals for the period I’m happy enough and at its current low share price, it’s
looking like a unlimited time call option on the price of copper. What0s missing from this story
is news on the closing of financing for its planned 2015 production upgrade that’s slated to
nearly double production and greatly improve project economics. We know the credit market
for mining projects is currently difficult, but as that’s the catalyst we’re buying into by taking a
position in ARG today, it’d be good to have news on that item sooner rather than later. In the
meantime the stock looks at a low level, unlikely to drop any further (esp on these reasonable
results and the likelihood 4q14 is better) and a decent one to hold in the portfolio.
Timmins Gold (TGD) (TMM.to) 3q14 production
Early Friday morning saw Timmins Gold (TMM.to) (TGD) report its quarter (4) and the results

weren’t great, though they weren’t that bad either so overall, I can live with these as well. As
this isn’t a complicated story, I’ll try to get the essence across today and leave an details for the
day it reports its financials in November.
Here’s how the gold sales number of 26,671 oz during 3q14 compares with previous quarters
and put simply, it’s the worst result since 2012 finished. The blame was put on the wet weather
in North Mexico and just for once I’m OK about accepting the “Sorry but it rained” excuse from
mining companies because weather conditions caused by the hurricane landfall really were
some of the worst in memory. As a result, TMM worked its lower grading stockpile and
production was down, but it wasn’t a disaster either.
Timmins Gold (TMM.to) (TGD): Quarterly gold sales
40000
35000
30000
25000
20000
15000
10000
5000
0
6
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
Oz Au
source: Company filings
TMM is still targeting the high end of its 115k – 125k oz AuEq for 2014 and in fact I expect the
company to beat that. If it puts in 29k oz gold in 4q14 (as above chart) we finish on 126k oz Au
and around 127.5k oz AuEq once the
Timmins Gold (TMM.to) (TGD): Avg realized price for gold
silver’s factored in. That’s a very
reachable number and will allow the
1800
company to puff its chest out end 1600
year (even though the original target 1400
looked quite modest). As for realized 1200
gold price, that was $1.284/oz and 1000
800
that shows like this (right).
600
400
And as we’ve noted before, by
200
ignoring silver sales and just doing the
0
gold ounces X gold price calc, you get
very close to the revenues number
that TMM.to eventually posts in its
quarterly financials. This time we’re
expecting $34.25m and that will compare like this.
Here’s how those revenues numbers stack up
against costs to give us a gross profit number. In
fact I may be overestimating costs at $30m for
3q14 because TMM.to has made the right noises
about cost reduction and it also shifted stockpile
material to the pads in September, which is a
cheaper thing to do. But I’ll stick with a high-ish
estimate until proven otherwise, which means
profits are going to be minimal things in 3q14 (and
probably 4q14, unless the gold price really zips up).
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
U$/oz
source: company filings
TMM.to/TGD: Revenues
50 45.889 47.05
45 41.74840.596 41.516 42.383
40 35.688 38.16 35.123 38.065 34.25 36.25
35
30
25
20
15
10
5
0
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
U$m
source: company filings, IKN ests

TMM.to/TGD: Quarterly Earnings overview
50
45
40
35
30
25
20
15
10
5
0
7
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
source: company filings, IKN ests
srallod
fo
snoillim
revenues
COGS
Gross profit
Here’s how profits evolution look and we’re predicting a couple of flat quarter ahead for
TMM.to.
TMM.to/TGD: Evolution of profits
26
22
18
14
10
6
2
-2
-6
21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
source: company filings, IKN ests
srallod
fo
snoillim
op profit
pre-tax profit
Net Income
Discussion: What we have in TMM is a company that looks oversold at current prices and will
react very well if gold starts to move back up. The original plan was to buy because the strong
jungledrums were about Argonaut (AR.to) stepping up and buying Timmins Gold. That still
might happen, but along the way I have sadly ridden the price up and back down again. I’m
now at the point where I’m looking for a dignified exit point on the stock, which may happen
while taking a modest loss, it may involve a modest profit. Either way it’s not a bad company,
but it isn’t as good as Top Pick Rio Alto (RIO.to) (RIOM) and I see no reason to hold this type
of second-string mining company for much longer, especially as it’s about to report a couple of
flat earnings quarters.

First Majestic Silver (FR.to) (AG) 3q14 production
First Majestic stuck in a poor 3q14 production performance, no matter how much you’d like to
blame it on the rain. Here’s the main chart (also featured on the blog Wednesday morning (5))
FR.to: Consolidated production,
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
8
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
Ag/AgEq
other AgEq prod
total silver prod
source: company filings
And simple eye-tracking shows that it’s the worst FR.to: Percentage of pure silver in total silver
single quarter for pure silver production at the equivalent production, per quarter
100
company since 1q13, though AgEq production 95
90
compares favourably to any quarter to the end of
85
2013, because these days non-silver production is 80
75
nearly a quarter of FR.to’s whole, as this chart notes. 70
65
60
55
We can split production down into its five mine 50
component parts, which we’ll do selectively by first
giving you this AqEq production tracker below.
Oz AgEq
FR.to: Silver Equivalent production, per qtr
4500000
4000000 La Guitarra AgEq
Del Toro AgEq
3500000 San Martin AgEq
La Parrilla AgEq
3000000
La Encantada AgEq
2500000
2000000
1500000
1000000
500000
0
1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14
source: company filings
And of those we check on how the four main producing mines got on, starting with the best
performance and working down the table. The best came from the San Martin mine, which did
well, got close to 600k AgEq and looks like this compared to previous quarters:
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
% pure Ag
source: company filings

FR.to: San Martin production
700000
600000
500000
400000
300000
200000
100000
0
9
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
Ag/AgEq
San Martin other AgEq prod
San Martin Ag
source: company filings
Next in order of loveliness is La Parilla. Although pure silver production at 705k oz was the
lowest since 2q12, non-silver production continues to fill the gap and the quarter came in-line.
FR.to: Production at La Parrilla mine
1400000
1200000
1000000
800000
600000
400000
200000
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
Parrilla other AgEq prod
La Parrilla Ag
source: company filings
Which leaves the negatives until last. The first chunk of bad news came from Del Toro, which
looks like this:
FR.to: Del Toro quarterly production
1000000 Del Toro other AgEq prod
Del Toro Ag
800000
600000
400000
200000
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14
source: company filings
Del Toro is still in (now somewhat extended) ramp-up mode and the quarter to come is set to
benefit from the new hook-up to the national electricity grid that’s expected to cut costs by a
very useful $3/oz. But still, this quarter was a clear step back in the development track and not
a good result for the company. However the worst is left until last, La Encantada:
La Encantada silver production, per qtr
1200000
1000000
800000
600000
400000
200000
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
Oz Ag
source: company filings

My biggest mistake in buying FR.to when I did is right here. After watching recoveries improve
to 60+% (at long last) and FR.to guiding the future of the mine away from the use of lower-
grading lower recovery tailings, i expected much
more than the 806.7k oz returned by La
Encantada. I expected at least 300k more in fact,
which was my stupid error.
It’s worth looking at this mine’s performance in a
little more detail (the way we did in the original
NOBS report on the stock back in IKN274, dated
August 10th) so here are the charts for La
Encantada. We start with recovery percentages
(right) which dropped back from 60% to 57% in
3q14. That 57% is the same level seen in 1q14,
in fact.
Next, average grades which also took a step back to 260 g/t Ag (they’d been over 300g for the
first half of the year.
FR.to: La Encantada silver grade, per qtr
350
300
250
200
150
100
50
0
10
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
g/t Ag
source: company filings
Finally, here’s the quarterly throughput chart which shows a slight drop from the previous two
quarters.
La Encantada: Quarterly throughput
300000
250000
200000
150000
100000
50000
0
31q2 31q3 31q4 41q1 41q2 41q3
source: company filings
dessecorp
sennot
cirtem
FR.to: La Encantada avg recovery %, per qtr
70%
60%
50%
40%
30%
20%
10%
0%
In its NR, First Majestic had this to say about the performance at La Encantada:
“The reduction in processed ore and grades were a direct result of a change in the
production sequence in order to have consistent grades and tonnage in the coming
quarters as well as a shaft rehabilitation project that occurred during the months of July
and August.”
On other parts of the FR.to 3q14 production miss I’m willing to cut the company a little slack,
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
source: company filings

as the heavy rains in Mexico have affected a lot of companies’ and their production numbers
(e.g. AuRico, Timmins (see above), Argonaut) and by all accounts they have been exceptional.
However on La Encantada I can smell the bullshit from here on the other side of the equator.
Let’s track back to the 2q14 MD&A and what FR.to had to say about this mine on August 13th,
just two months ago:
“With the increase of fresh ore from the mine and elimination of old tailings, the overall
cost per tonne of production has increased due to higher cost of mining from
underground versus the lower costs of hauling tailings to the mill, as well as the
additional cost of crushing, grinding and processing the fresh ore.”
Therefore in 2q14 we’re told about the “elimination of old tailings” from the production run, but
in 3q14 grade and recovery suddenly drops again. Later in the same 2q14 MD&A we’re told...
Fresh ore crushing and grinding mill throughput is expected to remain at approximately
2,100 tpd for the remainder of the year.
...when in fact that throughput dropped to an average of 1,844 tonnes per day in 3q14. That’s
not a “change in production sequence”, that’s a company cutting costs all of a sudden by not
mining anywhere near as much underground and topping up some of the missing feed from the
tailings once again. The silver lining (pun not intended) is that costs are likely to drop sharply at
this mine because of the cut in mine activity. The bad news is that FR.to blew smoke up my
nether regions via its 2q14 MD&A and at least part of my reasoning behind buying the stock
was based on its false guidance in that document.
The bottom line to the FR.to 3q14 production numbers is that I was very disappointed in what I
saw. La Encantada was the sour cherry on the stale cake, but with just one or two bright spots
(San Martin) and with some legitimate excuses set to one side (the rains), the company failed
to deliver a good quarter. However, be clear that my disappointment is as much in my own call
to buy as it is the company, because the idea behind my long in FR.to was that 2q14 was the
“kitchen sink” quarter and that’s obviously not the case, there were plenty of dirty dishes left to
be washed during the quarter just gone. As for 4q14, guidance is clearer and we can expect
better production and specifically lower costs in the last quarter of 2014, but at the same time
the disappointment here directs me to be leery about anything the company guides now. I’m
not giving them a red light and selling on just this bad set of numbers, but the light is on amber
and one more bad result will see me dump this at a loss, not a doubt.
What can we expect from the 3q14 revenues report
With production in hand, we can now take a ballpark stab at what we can expect from the 3q14
revenues report, due in mid-November but before getting to the charts, let’s first clear up a
sideshow that FR.to threw at us in the 3q14 production report. In its headline and NR, the
company reported that it was withholding the sale of 934k oz Ag because of low prices. The
text reads as follows:
Silver prices declined 19% in the third quarter representing the second largest
quarterly decline since the financial crisis in 2008. As a result of this weakness, the
Company decided to temporarily suspend silver sales in an attempt to maximize future
profits. This suspension of sales will result in lower revenues and earnings for the third
quarter, however, it is likely that these inventories of unsold ounces will instead be sold
in the fourth quarter. As of September 30, 2014, approximately 934,000 ounces of
silver were held in inventory.
We shouldn’t give a damn about this largely cosmetic move. To illustrate, let’s imagine that
FR.to did indeed sell its now-inventoried Ag during 3q14 and got an average of just $17.50/oz.
That’s $16.35m in revenues. So now let’s consider a near-optimum situation where silver
recovers to $20/oz in the weeks ahead and FR.to sells its 934k extra inventory at that price.
That’s $18.68m.
In other words, even in the most optimum of situations where FR.to has guessed exactly right
11

and then silver rebounds rapidly to a 2-handle during the current period when FR.to has said it
will sell the stocked Ag, the company makes an extra $2.33m in revenues. If you think two and
a third million dollars in
cash is the over-riding
reason to buy into a $840m
company, you need to get
your priorities ordered a
little better. What FR.to is
doing with this inventory
move isn’t anything else
but marketing; it appeals to
the silverbug
mouthbreathers, it also
allows the company to pad
its final quarter of the year
and show the world a
decent bottom line profit as
those extra ounces are
sold. Whoopee doo, it’s footnote stuff though.
So to the P+L and once we factor in the 934k worth of silver that FR.to says it won’t sell this
quarter, revenues are set to be lower than total expenses for the first time in a long time at the
company. To be clear and remind readers,
the “total expenses” in the above chart
include five items: Cost of Sales, G&A,
depletion/depreciation/amortization, share-
based payments, other. The difference
between revenues and total earnings gives
us operating earnings. In other words “total
expenses is plenty more than the simple
production cost of sales and to give an idea
of that, here’s the classic quarterly COGS
number for the last few years at FR sat next
to our Total Expenses number used.
Bottom line: Total expenses gives us a much better idea of what it truly costs FR.to to produce
an ounce of silver. Here’s another chart to reinforce that (I’m boring and repetitive, I’ll live with
it)
FR.to: total expenses per AgEq oz
18
17
17
16
16
15
15
14
14
13
13
12
12
11
11
10
12
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3
90 FR.to: Quarterly Revs vs Total Expenses
80
70
60
50
40
30
20
10
0
$/oz AgEq
source: company filings, IKN calcs
Here’s how we estimate operating income. By the time the positive financials are added, the
best guess for the bottom line in 3q14 is a $9m loss. That’s no big deal really, I’m also sure that
FR.to will make a lot of, “Yeah but we didn’t sell all those other silver ounces so it’s not really a
loss is it?” kind of noise.
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3
source: company filings
srallod
fo
snoillim
revenues
Total Expenses
FR.to: COGS versus Total Expenses
70
60
50
40
30
20
10
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2
$m
Cost of Sales
Total Expenses
source: company filings

FR.to: Operating Income per qtr
45
40
35
30
25
20
15
10
5
0
-5
-10
-15
13
90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3
source: company filings
srallod
fo
snoillim
It’s still a crappy quarter though. Financially FR.to is big and rich enough to handle this soft
period and it’s re-worked its expansion plans as well as cutting its costs. Those should start
showing through in 4q14 and then 2015. The good news (not bad news) is that even with the
lacklustre quarter posted, FR.to’s share price managed to perform well enough.
Barring that late Friday sell-off that was felt by most of the sector and totally out of the
company’s hands, the reaction to the numbers was positive. The market had obviously
discounted and over-discounted the poor quarter, so the words of Jim Morrison kick in and “I’ve
been down so very damn long that it looks like up to me”.
As for my own position, it’s not the place that I need to sell and low as this share price is, I’d
rather add than sell FR.to today. I’m not doing either though, this is a hold until the stock
improves and finds a more reasonable price level. It’s been an abject failure of an investment
and I will look to sell and take a loss at some point, but not right now. Let’s see where the
market relief rally takes it before making any decision.

Stocks to Follow
Once Friday afternoon had brought its sell-off and a lot of the gains during the week had been
erased, it turned out to be a similar week as the one we witnessed the week before; plenty of
stocks down a little, a few uppers, the week a net positive for the list thanks to the continued
strength in Top Pick Rio Alto (RIO.to).
Overall we saw four weekly winners (RIO.to, TGD, DNA.to, GQC.v), two unchanged stocks
(LRA.v, COP.to) and eight losers (IRL.to, BTO.to, FCV.v, RMC.v, AG, ARG.to, NCQ.to, SRL.v), of
which the best numbers were returned by Dalradian (DNA.to up 11.1%) and the worse by
Minera IRL (IRL.to down 17.4%).
There are currently 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
imposed maximum. Two of our fourteen are in the green, one unchanged, the rest in the red.
Reco Current
company Ticker this week Avg Price date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to hold/buy C$2.30 07-apr-11 C$2.91 26.5% 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$1.27 -8.0% $2 tgt, holding thru
Minera IRL IRL.to spec buy C$0.27 22-jul-12 C$0.095 -64.8% Waiting for financing
B2Gold BTO.to buy C$2.32 12-sep-14 C$2.31 -0.4% Top value entry point now
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.24 0.0% tgt 50c, added, avged up
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$3.80 -37.2% Time to add, Cu play
First Majestic AG buy U$10.51 10-aug-14 U$7.17 -31.8% Main Ag pos., hit hard by dump
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.70 8.6% Poss add, tgt $1.70
Amerigo Res ARG.to spec buy C$0.405 20-jul-14 C$0.36 -11.1% Small Cu play, adding here
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.86 -18.1% small Cu play started well
Goldquest Min. GQC.v hold C$0.26 27-oct-13 C$0.16 -38.5% looking for a reasonable out
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.53 -53.9% 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$0.05 -60.0% Cu spec play, can add
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.165 -35.7% 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
Santacruz Silver SCZ.v sep'14 C$1.04 26-jan-14 C$0.86 -17.3% silver/M&A spec, rel. small
2009, 2010, 2011, 2012 and 2013 closed positions in appendices below
Now for some notes on a selection of the above stocks.
14

Dalradian Resources (DNA.to): Position Added: It’s worked out pretty well so far too,
with DNA sticking in a decent climb a couple of days after the new purchase. Tuesday (or very
early Wednesday turned out to be the right day to buy as well, so fortune favoured the buy
decision of last weekend (that dragged into Monday but hindsight’s happy about that extra
day’s worth of mulling).
Reservoir Minerals (RMC.v): This one lost another 23c on the week, but it feels like a full-
scale winner. That’s because RMC continued to fall on Tuesday but the buyers finally turned up
and turned the stock around as from midday Wednesday and not even the crappy Friday
trading could take the shine off the rebound. Here’s a bullish looking near-term chart for your
visual pleasure:
Now for comments on last week’s comment, on which I received several interesting pieces of
feedback. Let’s do it in the form of a confessional because I found myself in a position of
watching a stock that I own in a heavy dip, one that didn’t make much sense unless there was
an undisclosed problem. I had a potential source of that problem thanks to an opinion from a
trusted source and I therefore thought it best to voice at least something, because these things
are better examined than left festering. Also be clear that if I’d heard these ground quality
concerns about Cukaru Peki (CP), other people had heard them too. So I wrote what I wrote
because i was keen on getting the potential problem either discarded (so that it would affect
the share price in the future) or identified (so that we could find out first and get out before
things got any worse). I was keen not to over-inform on what I knew and I didn’t want to scare
15

anybody out of owning RMC, but at the same time I wanted the message to get across. One
week later I can say that the little plan worked.
I can now say that after due investigation and discussion between other sources (who know
rocks far more deeply than I do) I’m satisfied that the worries I voiced last week aren’t going to
be a problem for RMC or Freeport at Timok. The negotiations between FCX and RMC for the
next stage of exploration are protracted and apparently complicated, but I get the strong
feeling (and others do, too) that FCX is playing mindgames with RMC in order to get its hands
on more of the interesting land at Timok for less cost and bother. It’s the kind of signal that’s
potentially negative in the short-term but bullish for the long-term and as I’m not into this stock
for a quick flip, I can live with FCX and its gamesmanship.
The bottom line: RMC looks cheap all of a sudden and it’s the place I’ll first add to copper
exposure if I decide to do that in the days to come. Far too much use of the first person
pronoun in this piece, time to move on and talk about more interesting things and people.
NovaCopper (NCQ.to): NCQ did what backwater, low volume stocks do under distressed
selling circumstances; it dumped hard. It’s one of those situations where in theory you say “hey
that’s cheap, could add some” but in practice you avoid adding or buying because there are
safer things to do with new cash than potentially tie it up into a low volume vehicle that you
may not be able to sell easily if circumstances warrant. I’m OK about holding through and it
would come as zero surprise to see it rush back up over a Loonie (just as it came as no surprise
to see it fade from the recent $1.20s level), it’s not a place I’m going to add at the moment.
This stock deserves the patience I’m fully prepared to afford it, maybe next year it’ll be back
over $2 and trading 100k a day.
Rio Alto Mining (RIO.to) (RIOM): A good week at the office, even though RIO.to could hold
on to the 3-handle it regained for a couple of days around the hump. For your information
RIO.to is holding its analyst site visit to La Arena and Shahuindo this week coming and there
are 20 or so booked on the shindig and bunfight. Expect Alex Black to work his smooth Lothario
magic, expect glowing reports from the assembled suits and you may even get reaction from
the stock later in the week as said suits finally twig that Shahuindo is going to become a
working mine, and sooner than they expect, cheaper than they expect, and with the backing of
the local population as well. There is after all cellphone and internet connection at the
Shahuindo project site.
Finally, a small chunk of trivia: Rio Alto Mining now has a larger market cap than First Majestic
Silver. Make of that what you will.
GoldQuest (GQC.v): Friday was the fun day to watch GQC, because a seller showed up and
started dumping blocks, which saw the stock down at 15c again, but then buyers arrived and
the price recovered to finish the week with a small gain. Over half a million shares changed
hands on Friday, the type of volume that had previously sunk the stock on heavy days but this
time, resistance was not useless. Overall another good signal that the bottom’s (finally) in on
this small exploreco.
Minera IRL (IRL.to) (MIRL.L): I got more mail on IRL than on any other company last
week. As noted above I have a meeting set up with the company this week, so Minera IRL will
be either main event or joint main event in IKN285, next weekend. For the moment I’ll note
that I know CEO Chamberlain spent most of last week on site at Ollachea but don’t know
exactly why and that, of course, the share price performed like shit again last week. On that
score and judging by the mails received some of you now hate even hearing the name of the
company, while others were licking their lips and buying at sub-10c prices.
Those of you who mailed in to me got a reply (I think I answered them all this week, send me
an angry mail later if I missed you out) and in most of those mails my reply was that I’m not a
buyer (too chicken) and not a seller (until I know more) and the only logical stance I can take is
16

to be a holder until material news is released. I want to know more and I’m going to try and
find out as much as possible (there’s always going to be a limit on what the company can tell a
snooping pain in the butt, though) and we’ll go through IRL in detail next weekend.
B2Gold (BTG) (BTO.to): BTO got caught up in the nasty selling of the high visibility sector
stocks on Friday and fared worse than most as well. Up until then I thought we’d see a weekly
win from the stock, but it was not to be and it’s back to the drawing board...just a bit at least.
BTO should give us its 3q14 production numbers next week, we’ll take a closer look at the stock
next weekend if so.
The Copper Basket
After forty-two weeks of 2014 The Copper Basket is showing a 12.44% loss to level stakes.
company ticker price 1/1/14 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 1.51 144.41 541.54 3.75 148.3%
2 Lumina Copper LCC.v 6.29 44.07 440.70 10.00 59.0%
3 NGEx Resources NGQ.to 1.43 168.71 259.81 1.54 7.7%
4 Reservoir Min. RMC.v 4.97 47.55 180.69 3.80 -23.5%
5 Nevada Copper NCU.to 1.35 80.5 109.48 1.36 0.7%
6 Copper Fox CUU.v 0.375 402.96 88.65 0.22 -41.3%
7 Hot Chili Ltd HCH.ax 0.425 333.11 76.62 0.23 -45.9%
8 Panoro Minerals PML.v 0.35 220.25 61.67 0.28 -20.0%
9 Western Copper WRN.to 0.76 93.68 57.14 0.61 -19.7%
10 NovaCopper NCQ.to 1.60 60.15 55.34 0.92 -42.5%
11 Curis Resources CUV.to 0.57 74.79 54.60 0.73 28.1%
12 Cordoba Min. CDB.v 0.90 58.81 11.76 0.20 -77.8%
13 AQM Copper AQM.v 0.11 139.24 10.44 0.075 -31.8%
14 Coro Mining* COP.to 0.10 159.37 7.97 0.05 -50.0%
15 Oracle Mining OMN.to 0.27 49.03 2.94 0.06 -77.8%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg -12.44%
The basket average dropped another two and a half percent, thanks to the overall score of just
two weekly winners (CUU.v, AQM.v), five
UNCHes (LCC.v, AZC.to, HCH.ax, COP.to, The Copper basket 2014, weekly evolution
25%
OMN.to) and eight losers (NGQ.to,
20%
RMC.v, NCU.to, NCQ.to, PML.v, WRN.to,
15%
CUV.to. CDB.v). The best winner was
Copper Fox (CUU.v up 29.4%), the worst 10%
losers were Panoro (PML.v down 20.0%) 5%
and Cordoba (CDB.v down 10.0%). 0%
-5%
To copper prices and it looked pretty -10%
nasty for the metal come Thursday and -15%
Friday morning, dipping as it did under
the psychologically important $3/lb level
on both spot and futures contracts.
However, the bulls fought back a little on
the last day of the week and copper managed to finish above $3/lb (just). The reason for the
drop was continued fears over world economic deceleration (the new fad), soft fundies out of
China and another nicely timed batch of warnings from bears about the supply glut to expect in
2015. Only on that last one can I truly call bullshit, thought the gnashing of teeth over a
worldwide economic slowdown seems overcooked to me, too.
17
ht5naj ht91 dn2bef ht61 dn2ram ht61 ht03 ht31 ht72 ht11 ht52 ht8 dn22 ht6luj ht02 dr3gua ht71 ts13guA ht41 ht82 ht21
source: IKN calcs

Then in separate price-watch news, Chile’s Cochilco beancounter people reaffirmed their
previous price forecasts for copper on Friday (6) which are still set at U$3.12/lb for 2014 and
U$3.00/lb for 2015. The main takeaway from the presser that came with the numbers was that
Cochilco sees supply and demand very evenly matched at the moment which is good for price
stability, or so they say. They’re still forecasting a small supply surplus in 2015, which is why we
have that forecast number slightly lower than this year’s.
Now for the inventories section, here are the bullet points:
• Overall world stock levels moved up significantly, the first real change for a while, with
totals going to 282,747 metric tonnes (mt) which represents an increase of 19,660mt or
7.5% from this time last week.
• The big change was on the Shanghai Futures Exchange, where copper warehouse
stocks went from 82,770mt to 97,235mt, an increase of 14,465mt or 17.5%. Big move
and another piece of the puzzle explaining last week’s price dip.
• The LME copper warehouse inventories went up too, but this one only slightly by
5,025mt (+0.3%) to finish the week at 154,650mt. Again, we note that the New
Orleans warehouses account for the lion’s share of that (~128kmt).
• Comex warehouses stocks hardly changed, up just 170mt to 30,862mt.
Here’s that 2014 year to date tracker chart of the Shanghai warehouse only.
Shanghai Futures Exchange Warehouse Stocks, 2014
220000
200000
180000
160000
140000
120000
100000
80000
60000
18
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 ts12 ht82 ht5tco ht21 ht91
Mt Cu
source: Cochilco
The move to 97k was significant but I’m not going to worry too much about my bullish position

on China copper until it breaks 120k. We’ve seen Shanghai fluctuate under that level since April
and nothing was broken last week. Didn’t even come close to breaking things, in fact.
For those of you wanting more nittygritty on the current politics of warehousing, this report
over at MetalMiner dated Friday October 17th (7) is worth your time. Its main focus is the LME
and its recent successes in moving its LILO rules through the courtrooms (to the detriment of
companies such as Goldman Sachs and Glencore, so one cheer to the LME for that) and
although the example metal in the report is Alu, most points made here also apply to the
copper sector. Here’s how the piece wraps up:
“The LME’s challenges are significant, arguably the most significant in the history of the
exchange, but it remains by far the largest non-ferrous metal price discovery service in the world
and, warts and all, provides a service the whole supply chain needs. Let’s hope they can get to
grips with these issues and focus on what is best for producers, processors and consumers rather
than just the financial community that has in large part distorted the workings of the exchange.
The process has a long way to run.”
Worth reading it all.
Now for some short commentary on three of our basket stocks:
Panoro Minerals (PML.v): The stock was down 20%, with most of the damage done on
Friday in heavy relative volume (1.2m shares traded) and what looks like a insto dumpage to
my eyes (though I didn’t check the tape carefully). As per the notes last week there’s no
surprise registered on these pages for PML’s weakness, but it may be connected with the
upcoming PEA on Cotabambas and less-than perfect contents therein.
In sum, a more obvious avoid call on a exploreco junior is difficult to imagine.
AQM Copper (AQM.v): One of only two weekly winners on our little list AQM actually brought
some positive news to the market last week when announcing on Wednesday (8) that drilling
had started on the program at Zafranal that would bring the project to feasibility study level.
AQM has to cover $12m of the total budget under terms of its JV with Teck and Co, that’s the
cash it raised earlier on in the year finally getting it solid budget. AQM has its corner paid for
and will now get the ride to feas level on this, which makes this company one of the better risks
in the pennycrapper zone of the market (in my opinion at least). During my travels next week
I’ll be looking to get some extra flavour on how things are going from people close to the
project.
Copper Fox (CUU.v): The other weekly
winner was CUU, which jumped nearly 30%
last week after a market move on Thursday
on the back of rumours of a meeting
between CUU and Teck, the majority JV
partner at Schaft Creek. That’s what happens
around scammy stocks with worthless assets
that have a hard core of True Believers
cheering it on.
This complete waste of time will fade again.
The Low Cost Producer Basket
After 42 weeks, the Low Cost Producer Basket is showing a 3.71% loss to level stakes
19

company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 37.74 1040 31.55 30.34 -19.6%
2 Goldcorp GG 21.67 812 18.61 22.92 5.8%
3 Barrick ABX 17.63 1000 13.41 13.41 -23.9%
4 Newmont NEM 23.03 497.87 11.15 22.40 -2.7%
5 Franco Nevada FNV 40.74 155.39 8.30 53.43 25.8%
6 Silver Wheaton SLW 20.19 357.39 6.97 19.50 -3.4%
7 Agnico Eagle AEM 26.38 173.43 4.98 28.72 8.9%
8 B2Gold BTG 2.02 948.9 1.98 2.09 3.5%
9 Pan American PAAS 11.70 151.41 1.60 10.55 -9.8%
10 First Majestic AG 9.80 117.02 0.84 7.17 -26.8%
all prices in U$, using NYSE ticker prices Portfolio avg -3.71%
The overall basket improved a tiny sliver-y 0.1% on the week, which might not look great to
you be to me it’s a positive signal of things to come. The benefits of following this group of
lower cost, larger cap producer companies is now showing up and the signal is that even with
the selling we saw on Friday, this sector has stopped its rot and is poised to rebound.
As for the count, last week saw four winners (NEM, SLW, FNV, PAAS) and six losers (FCX, ABX,
GG, AEM, BTG, AG) from our list, with most of those moves of the smaller and more
inconsequential type. The exception was Franco Nevada which moved up 4.2% as it re-gained
its market darling get-a-free-pass status. All is well with the universe, it seems.
The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
20
ts13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1nuj ht51 ht92 ht31 ht72 ht01 ht42 ht7peS ts12 ht5tco ht91
basket
gdx control
source: Yahoo! Finance, IKN calcs
I’m also happy to report that the gap between our basket’s performance and that of our
benchmark GDX has closed again. There’s now just 1.63% between the two and I don’t mind
admitting that I’d consider it a nice little Christmas present if our IKN list beat the ETF come the
end of 2014.
Low Cost Basket: Percentage difference between
basket and GDX control, 2014
8%
7%
6%
5%
4%
3%
2%
1%
0%
ts13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1nuj ht51 ht92 ht31 ht72 ht01 ht42 ht7peS ts12 ht5tco ht91
source: ikn calcs, NYSE/Nasdaq data

Regional politics
Brazil Presidential round two run-off: One week to go
With just one week to go before Brazil decides on its next President, the most respected polls
(Ibope and Datafolha) have Aecio Neves in the slightest of leads over Dilma Rousseff. But the
one or two points maximum are within any margin of error so in truth they’re both saying that
it’s too close to call. Add to that the increasing number of those polled who are undecided and
say they’re only likely to make up their mind in the last hours.
The second round campaign has also been marked by its negativity, with both sides caring less
about their own strong points and more about whacking the other as hard as possible. By way
of an example, this report in the Neves-leaning O Tempo (9) states that of the 24 TV adverts
from Dilma’s PT part during the second round, 18 of them are attack ads against Neves.
Meanwhile, Neves’s side has dedicated eight of its 18 slots as negative attack ads against
Dilma. It’s heavy stuff, no-holds-barred dirty politics and the stakes are as high as they come in
Latin America.
For the record I’m still fully expecting Dilma Rousseff to win this one, it will probably be closer
than I expected a couple of weeks ago, but all the same the win is the win. Notably, the signal
from the financial markets is moving
towards the pro-Dilma argument as well,
because the pop on Monday when Goldman
Sachs called Aecio Neves slight favourite
was liquidated on Wednesday and Thursday
when the latest “too close to call” polls
were published.
Either way, we’ll know this time next week
as the Brazilian fast count system will
probably get the result to you before
IKN285 turns up. Finally and most
importantly for our focus sector, neither
Neves or Rousseff as President for the next
four years should be any great cause for
concern for the mining stocks; Neves is considered the biz friendly candidate, but the PT party
has over a decade of solid proof that it’s also good for private enterprise and growth in the
country, too.
Peru: Mining investment set to drop 6.4% in 2014 and 8.1% in 2015
On Friday, the Peru Central Bank (BCRP) in its October report noted (10) that it expects
investment in its mining sector this year to drop by 6.4% compared to 2013, then another
8.1% compared to 2014. During the presser that went with the report, BCRP president Julio
Velarde (sidebar, one of the very few high ranking officials in the country whose word can be
trusted) said that the projections are based on projects that have already started development
and are nearing completion. These include Constancia (Hudbay HBM), the Cerro Verde
expansion, the continued ramp-up of Toromocho, the build-out of Las Bambas (of which
Chinese owner MMG said last week that initial production was now expected in 1q16 and they’d
need an other $3Bn to finish the construction phase) and also Southern Copper’s Tia Maria,
though whether that one starts on time or is further delayed by social protests remains to be
seen.
On the other hand, Velarde said that on the political/social side, the risk to Las Bambas since
the regional elections had been overestimated and that the project had no big problems. On
that we definitely agree.
Argentina: Santa Cruz mining to weather the storm
Mixed signals from Argentina, where the head of the politically powerful AOMA miner’s union
21

(around 85% of Santa Cruz mine employees are AOMA members), Javier Castro, said (11) that
mining was going through a “fragile and delicate moment” due to metals prices, as market
prices for gold, copper, silver etc had fallen below forecasts and that “costs in Argentina remain
high for mineral extraction due to salaries, supplies and suppliers”. However Castro also said
that the mining sector “fortunately enjoys very good [economic] health as an activity” in Santa
Cruz thanks to mines such as Manantial Esejo, Huevos Verdes, and Cerro Vanguardia and that
Goldcorp’s (GG) Cerro Negro is expected to start production by the end of this year.
Market Watching
Kinross Gold Corp (K.to) (KGC) should sell Paracatu and I should buy some Kinross
I made mention of Kinross (KGC) (K.to) on Friday on the blog in a quick post (12) that had at
its central point the low valuation now placed on the company by the market. The comment
under the chart was:
“Working cap of $1.9bn and book value of $6bn, now priced at a market cap of $3.3Bn”
What follows is a little more about today’s Kinross and a strategy piece that identifies the stock
as a potential buy at these current levels. It’s by no means a complete treatise on the stock, but
just by zeroing in on one corner of its operations I build the case that K is currently
undervalued. As my strong suspicion is that the gold sector is now turning, it stands to reason
that worthy assets that have been beaten to oversold status should rebound and show more
strongly. That includes even Kinross and its riskier book of operations as I hope to make clear.
The numbers
Before going any further, I’d like to clear up and explain that semi-cryptic comment left under
the K chart on the blog. It’s roughly correct but let’s get the the exact number in play, so as at
end 2q14 K offered these numbers (all in US Dollars):
• Cash & Eq of $738.9m
• Total Current Assets of $2.4294Bn
• Total Assets of $10.1786Bn
• Current Liabilities of $570.8m
• Total Liabilities of $3.9674Bn
• Shares outstanding: 1.1444Bn
• Share price: $2.93
Therefore, the stock currently has:
• Working cap of $1.8586Bn
• Book value of $6.2112Bn
• Market Cap of $3.353Bn
Which now gives us the exact figures, instead of the bloggy approximations. We can also note
in passing that cash works out at 64.5c/share, book value per share is $5.43 and even aside the
potential to roll over its long-term debt (virtually certain even in these tough times) current
assets very nearly cover all financial debt be it long or short term. As balance sheets go it’s not
the perfect specimen, but K’s isn’t in bad condition.
Finally and before moving on, where I was dragged up “book value” is simply defined as total
assets minus total liabilities, so that’s what you have above you there.
22

The current bad news
The latest problem to hit K is at Round Mountain, the mine it 50/50 owns with Barrick that had
a fire in its processing mill one week ago (13). According to the latest rumours doing the
rounds, things are worse than first thought and the fire has done structural damage to the
building, which may well mean the mill is out of action for months rather than a couple of
weeks. The repair bill won’t come cheap, either. This may the the reason for the latest round of
selling in K, but if so it may be doing us bottom-feeding speculators a favour.
The Kinross assets
When K is discussed in polite circles, the first subject that invariably comes up is Kupol (often
with “great mine” and/or “that Russia risk” as a side order). Then comes Tasiast (often with
“why did Tye pay so much?”) and then somewhere along the line you’ll hear about Round
Mountain, or even the Fruta del Norte snafu. Less common is talk about its Brazilian operation,
Paracatu, and that’s always struck me as more than a little strange because it’s one of the best
gold mines in the whole of South America. Time to explain:
Paracatu, the unsung jewel at Kinross
Feel free to check on the Kinross website for background on Paracatu (14), its location, its
community standing, its happy smiling employees in the corporate photos, the whole nine
yards. What we care about here are the numbers starting with the production and mine life
characteristics.
Paracatu the orebody: Paracatu is a ~500,000 oz per year producer and has been doing just
that type of number for quite a while, quarter in, quarter out. As for mine life Kinross currently
puts it at 18 years but that looks a under its true potential. As at December 31st 2013 Paracatu
had P+P reserves of 763.7 million tonnes grading 0.42 g/t for a total of 10.4m oz Au. At its
present rate of extraction it has a mine life of around 16 years from those reserves. If you then
add the 6.18m oz in separate M+I resource category (though at a lower 0.36 g/t grade) and
assume they all get mined eventually (which isn’t such a wild assumption, as K uses a
U$1,200/oz gold price as its baseline) we’re looking at 25 years’ worth of conceptual production
from the mine. But whatever way you cut and slice these numbers this is a long-life asset, no
doubts.
Paracatu operations: As for its operating criteria, those make it a fairly low cost producer that’s
certainly profitable even at current depressed gold prices. As its run and production rate has
been admirably regular for a while, taking the first half of 2014 gives us a more than
reasonable idea of Paracatu the profitmaking operation, so here we go with that:
In the first half of 2014 (1q14 and 2q14) Paracatu registered:
• 248,103 oz of gold sold (as mentioned above, it’s a ~500k oz Au per year operation)
• $319.5m in sales
• $214.7m in production cost of sales
• $74.4m in depreciation costs
Which gives it operating earnings of $28.7m. So far so good and we note that even in this poor
year for gold miners, the mine is making a modest profit. From those datapoints we can do the
following:
• Average sales price for gold: U$1,287.77/oz
• Prod cost of sales per ounce: U$865.37/oz
• Depreciation per ounce: U$299.88/oz
That gives us a reasonable breakeven price point of U$1,165/oz, though that’s probably lower
now because both the oil price and the US Dollar Brazil Real forex price have moved in favour
of lower costs at the mine (K uses $100/bbl oil and BRL2.27 to the dollar. With oil where it now
is and the Real at 2.44 to the dollar, dollar savings per ounce are now a certainty going
23

forward. I could go on, but the point I wanted to make about this mine should be just about in
place by now: It’s a large, long-life asset that makes money even at $1.2k gold and will make a
whole lot more if gold starts moving back up.
And now we swing back to the balance sheet, because we’re getting close to the nub of the
bullish case now. As at the 2q14 financials, Paracatu was carried as a $2.097Bn asset. As we
saw above, the current $6.21Bn in book value doesn’t jive at all with the $3.35Bn in market
capitalization so somewhere among those K assets there’s fat that needs to be trimmed and the
market is warning of write-downs of asset values to come. But Paracatu and it’s $2Bn looks
pretty safely valued to my eyes.
So let’s imagine a situation in which some third party approaches Kinross and offers to buy
Paracatu from them. The point here is that even though it looks fairly valued on its books,
being as it is a long life and profitable mine, any third party could bid well under the book value
and make K a tempting offer. If for example (and this is of course pure theory) a third party
offers $1.5Bn cash for the $2Bn valued Paracatu and K accepted, its working capital would
stand at $3.35Bn, which is the same as its market cap. You’d therefore get Kupol, Tasiast,
Round Mountain, Maricunga, La Coipa, Kettle River and all the other bits and pieces for free. Or
in another scenario, where Kinross holds out from the first offer but then accepts a carrying
value bid on Paracatu: That would give it a working cap/share value of $3.40, some 16% higher
than Friday’s close and again with all those fixed assets on top, starting with the very attractive
Kupol mine and working all the way through the asset book.
Discussion
The point here isn’t that Kinross should or should sell Paracatu (core assets and all that), the
point is that the market has now over-discounted this highly out of favour stock and it’s now
ready for a bounce. By theorizing the sale of one of its assets, a good one I’ll grant you but just
one of them, K would raise enough cash even on selling at a considerable (and unnecessary)
discount to cover 100% of its market cap in current liquid value. All the rest of its fixed asset
book and its goodwill would come for free, which sounds like a good deal from where I’m
standing.
I’ve had half an eye on Kinross this
year, more than anything to see just
how low it could go under the weight
of this distressed market. Up until a
few days ago it didn’t tempt as a
potential trade or long position, but
with (what looks like) the turning of
the macro tide towards a revaluation
of assets, plus the bottom in gold
(that one looks more certain, don’t
ask me if it rebounds strongly
though) plus the fall-out from people
still disgusted with underperforming
mining stocks there’s is by my
reckoning a window of opportunity
here. It’s obviously risky and may be
trying to catch a falling knife (just look at that five year price chart below if you need an extra
warning) but if you take your chances on the sentiment and momentum, you have a reasonably
good looking balance sheet to back up a long position in Kinross today.
I’m going to take a small, somewhat experimental long position in Kinross next
week, via its NYSE-listed KGC ticker. It will appear on the ‘Stocks to Follow’ list as of next
week, but I want to stress that I’m taking a bit of a flyer on my own storytelling and still only
partial analysis of the stock. If things start to run in the right way I’ll spend more time on K’s
moving parts and take a closer look at everything, perhaps with a view to making it a larger
24

and more solid position. If not, it’s one I’ll fold quickly and put down to experience. As for a
price target, none at all for the moment. I want to repeat and underscore and highlight and
bore you with the “it’s small and an experiment” message, don’t read too much into this one.
Puno second round run-off and Bear Creek (BCM.v): An update
We’re going to follow this one quite carefully as 1) I know there are a few of you with dogs in
this race already (I have the mails to prove that) and 2) there may be a trade in it for me (see
last week’s commentary) though I’m still on the sidelines and watching, rather than playing.
What follows is pure regional politics and that’s a acquired taste, to say the very least.
We start with the simple stuff and that there’s still no official final result from the voting body.
Luque’s PICO party staged a demonstration outside the electoral body’s offices on Friday (15)
as they believe their candidate got the 30% + vote needed in order to win in the first round,
rather than the currently computed 29.25% (Aduviri on 21.53%) (16). Yesterday Saturday in a
radio interview (17) Luque said the same thing. For what it’s worth, a date can’t be set for the
second round vote before the official count is made known, so we’re still using an “in
November” timeframe and can’t get much more accurate, though November 16th is now being
suggested as best date.
The campaign for the second round run-off has already begun and the two candidates have
unsurprisingly made a sideways step to try and catch the central vote, though Aduviri is coming
in from the left and trying to get support from parties he beat to the second spot (18), while
Luque is doing exactly the same and has already started calling the way he’s labelled a right
winger as a slur on his good name and that he is in fact a centre-left politico (yeah yeah yeah,
round two politics). The other notable move in round two is Aduviri trying to make a better
showing in the main cities of Juliaca and Puno, promising both places a new hospital (though
how he can guarantee the cash for that during as stump speech is beyond my understanding)
(19). Both are also courting the key tourism sector by saying that they’ll be good and stable for
the region.
Finally and to reiterate after that chunk of rather picky local politics, let’s be clear about the
depth and detail of our tracking on this election: We only care because we’re being greedy
capitalists and there’s a potential trade in the offing via Bear Creek (BCM.v). Well that’s my
position anyway, maybe you people out there care more than I do about the next five years in
the Puno region, its hopes, aspirations and governability.
Richmont Mines (RIC.to), Primero (P.to) (PPP), Renaud Adams
As promised on the blog (20) a short piece on last week’s decision by Renaud Adams, erstwhile
President and COO of Primero (P.to) (PPP) to leave the company and join Richmont Mines
(RIC.to) as its Pres/CEO (21). I received plenty of mail on the subject, but none better than
from A. Reader (not even initials this time) who gave me the skinny. Here’s the basic story in
bullet points:
• He was apparently spending too much time in Mexico and Timmins Ontario for his liking
and not enough time in his home in Quebec. This is something I fully get, family
counts, and the move to Quebec-located Richmont would have been attractive to him.
• Adams doesn’t like the Black Fox project very much, the one that Primero got via its
purchase of Brigus.
• With Conway firmly at the helm of Primero, Adams felt there was no promotion
opportunity left inside the company.
• He's made it known for several months to those around him that he’s not happy on a
personal level. Therefore the decision to move to RIC.to may have come all of a sudden
to Primero people (and apparently they’re not that happy about it), but it wasn’t a piece
of news that came totally out of the blue either.
• My contact also emphasized that Primero will get along just fine without Adams.
Although a highly respected mining man, P is the type of company with in-house bench
25

strength to be able to get on and do what they do after the loss of key personnel.
• As for the attraction of RIC.to, it may not look like much on its recent performance but
part of the package that persuaded Adams to make the move is that the mine is
moving into some of its best material soon, after a period of mining more mediocre
rock, which should last for the next few years too.
And overall, it’s that last point which prompts today’s piece on the Adams career decision, it’s
not the blog tittle-tattle that matters much round these parts. The announcement of a new and
highly regarded CEO, poached from a larger company under circumstances that are a mix of
personal and professional which stand to reason, may have shone the light on good things to
come at RIC.to. It’s not a company I personally have paid much attention to in recent times, I
know people with good reputations who have liked it over the long-term (e.g. Claude Cormier),
but the quickest review of its recent share price action shows there have already been people
more awake to its opportunity than I.
Richmont Mines (RIC.to) is officially filed under “worthy of more DD” and I’ll be doing just that
in the days ahead.
Look to iron ore for clues about the future of the oil price
Back in IKN279, Market Watching ran a short article entitled, “Iron Ore: No country for small
players” about the weakness we’d been seeing in the iron ore sector. Feel free to check back to
the issue if required, but the thrust of the argument is contained in this section:
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.
With the “big three” mentioned being of course the three biggest and most cost efficient iron
ore miners out there, BHP, Rio Tinto and Vale. Since then the carnage has continued, with just
this week news from Cliffs (CLF) that the company is writing off $6Bn (yeah with a B) from its
iron ore business asset value and also the move into receivership (aka Chap 11) of London
Mining, a medium scale iron ore company operating out of Africa.
Meanwhile, our example of price weakness and warning in IKN279 came from the junior world,
with Alderon (ADV.to) (AXX) and its Kami project in Canada. Five weeks ago the share price
had already been hit hard and stood at-or-around CAD$1.00. Here’s an updated price chart for
your consideration:
26

Ouch. Not many people crowing and cheering about that late week 18% relief rally to
CAD$0.59. And to repeat another part of the message in IKN279, I’ve gone over the numbers
that Kami has and on paper at least, it’s a solid project with good economics. But this is the
toughest of sectors and like it or not, the biggest will bully the smallest into submission in order
to protect their iron ore market because it’s the entry cost thats the big barrier and they want
all the mines for themselves, rather than allow a new batch of players in to dilute their
advantage away. ADV’s good on paper. Mines aren’t built on paper. And who told you
capitalism was fair, anyway?
We now get to the reason I dragged out the iron ore subject again, because it wasn’t to crow
about getting the call on ADV.to correct. The drop in oil price and the world’s conjecture as to
what Saudi Arabia will do in the near and medium-term future reminds me greatly of the above
cartel on iron ore. There are plenty of brand new US fracking companies working at the higher
end of the cost scale, while (it’s said that) the Saudis can keep on making a profit with oil as
low as $40/bbl. It’s very simple: the cure for oversupply is lower prices and when you have a
dominant player (or cartel) in any sector it’s that much easier to limit the supply pipeline. Then
once the bloodletting is done, longer-term we’ll have a new ceiling put on oil prices, somewhere
around the point that put the current new projects out of business. Overall that might not be
good or bad for gold, but it’s looking good for the gold miners.
Conclusion
IKN284 is done, we end with bullet points:
• The addition to Dalradian has started well. It’s all I can ask at this point.
• I started to write the piece on Kinross (K.to) (KGC) after checking back on the Paracatu
mine (one I’ve looked at and appreciated as a fine operation before), but the only idea i
had was to write a think-piece of sorts and highlight that K might be an interesting
speculative trade for those of you with a high tolerance to risk. As is sometimes the
case, I managed to convince myself while writing it about buying a few myself so here
we are. The risk is high, eyes wide open please, to start with I won’t be buying many.
• Of the three companies featured in our production report section today, Amerigo
(ARG.to) is the one that’s performed the best in 3q14. Timmins Gold (TGD) wasn’t
great but I can accept the excuses and it was always going to be a sort quarter
27

compared with the rest of 2014. I’ll continue to kick myself in the nether regions for
buying First Majestic (AG) badly but will hold on for at least a while longer, grimly and
such, because its share price reaction shows there’s too much negative baked in
already.
• Bear Creek (BCM.v) and the political risk scenario around Puno continues to intrigue.
• As for the oil price, don’t expect $100/bbl to upset mining company profits again for a
while. This is particularly good news for the heapleachers, as those trucks burn
hydrocarbons and any fuel price reduction can get added straight to bottom lines.
The top long-term pick is Rio Alto Mining (RIO.to). I thank you in advance for any feedback.
Flash updates will be sent promptly if required by events
I wish you good trading fortune, ladies and gentlemen.
Otto
Footnotes, appendices, references, disclaimer
(1) http://blogs.wsj.com/washwire/2014/10/16/5-reasons-to-worry-about-deflation/
(2) http://www.ftadviser.com/2014/10/15/investments/economic-indicators/markets-stunned-after-fed-meeting-
WUazA76OhgEz8msldhy1RK/article.html
(3) http://finance.yahoo.com/news/amerigo-announces-q3-2014-production-113000822.html
(4) http://finance.yahoo.com/news/timmins-gold-reports-production-27-100000229.html
(5) http://incakolanews.blogspot.com/2014/10/your-latest-precious-metals-producer.html
(6) http://www.aminera.com/index.php/component/k2/item/7472-cochilco-mantiene-proyecciones-de-precio-del-cobre-
en-us$-312-y-us$-300-para-2014-y-2015.html?
(7) http://agmetalminer.com/2014/10/17/the-lme-goes-back-to-work-on-warehouse-rules/
(8) http://finance.yahoo.com/news/aqm-announces-start-zafranal-pre-104500752.html
(9) http://www.otempo.com.br/cmlink/hotsites/elei%C3%A7%C3%B5es-2014/a%C3%A9cio-vai-processar-dilma-por-
inj%C3%BAria-e-difama%C3%A7%C3%A3o-ap%C3%B3s-an%C3%BAncio-de-tv-1.934346
(10) http://gestion.pe/economia/bcr-estima-que-inversion-mineria-caera-64-este-ano-y-81-2015-2111462
(11) http://www.tiemposur.com.ar/nota/77410-castro-insisti%C3%B3-en-la-muy-buena--salud-de-la-miner%C3%ADa-
en-santa-cruz
(12) http://incakolanews.blogspot.com/2014/10/kinross.html
(13) http://finance.yahoo.com/news/kinross-temporarily-halts-round-mountain-204001565.html
(14) http://www.kinross.com/operations/operation-paracatu-brazil.aspx
(15) http://www.pachamamaradio.org/17-10-2014/militantes-del-pico-exigen-ante-la-odpe-puno-los-resultados-al-100-
28

de-las-elecciones.html
(16) http://resultadoselecciones2014.onpe.gob.pe/OnpeResultados/Resultados-GeneralPreVice-PresVicep-ER.html
(17) http://www.pachamamaradio.org/18-10-2014/juan-luque-aun-tiene-la-esperanza-de-ganar-elecciones-en-primera-
vuelta.html
(18) http://www.radiopublica.pe/2014101712117/puno-walter-aduviri-promete-llevar-hospital-nivel-iv-a-juliaca.html
(19) http://www.pachamamaradio.org/15-10-2014/aduviri-advierte-que-habria-intereses-que-buscan-perjudicarlo-en-
segunda-vuelta.html
(20) http://incakolanews.blogspot.com/2014/10/renaud-adams-primero-richmont.html
(21)http://finance.yahoo.com/news/primero-announces-management-changes-200500407.html
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
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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.
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