The IKN Weekly, issue 287 — Nov 09, 2014
The IKN Weekly
Week 287, November 9th 2014
Contents
This Week: A probable trade tomorrow, Contrarian thoughts, A quick line or two about Russia,
Last week’s rally.
Fundamental Analysis: Shorting Fortuna Silver (FVI.to) (FSM) tomorrow, First Majestic
(FR.to) (AG) next week, Amerigo Resources (ARG.to) 3q14 results.
Stocks to Follow: Overview, ), Coro Mining (COP.to), Kinross Gold (K.to) (KGC), Timmins
Gold (TMM.to) (TGD, Focus Ventures (FCV.v), Reservoir (RMC.v), Minera IRL (MIRL.L) (IRL.to),
Rio Alto (RIO.to) (RIOM), B2Gold (BTG) (BTO.to), Amerigo Resources (ARG.to).
Copper Basket: Overview.
Low Cost Producer Basket: Overview, Goldcorp (GG).
Regional Politics: Argentina precious metals sales lagging again, Brazil: Economic slowdown
may favour mining projects, Mexico Guerrero: Avoid, Colombia’s páramo de Santurbán: The
blind leading the blind, Who got the gold investment in 2013, Peru: Second round regional
governor elections to be held on December 7th, Peru: Environmental permitting to be
streamlined at last.
Market Watching: Amerigo Resources (ARG.to) 3q14 financials, Gold Resource Corp (GORO)
3q14 financials, Endeavour Silver (EDR.to) (EXK) inside selling update, Burkina Faso rant redux,
Scorpio Mining and US Silver & Gold merge, Shale oil and costs: There’s more potential
downside in the oil price, Not only Australia: Vale also expanding Brazilian iron ore production.
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
A probable trade tomorrow
Probable yes. I can’t say it’s a 100% definite trade but as long as two things happen within
reasonable parameters, namely...
• The price of silver doesn’t rocket (it can move up or down slightly, but a game-
changing price move will put me off)
• FVI’s share price doesn’t collapse (I want something either above or as close to U$4 to
get the right kind of leverage to a short-term trade)
...I’m going to short Fortuna Silver (FVI.to) (FSM) tomorrow Monday. Reasons in
‘Fundamentals...’ below, but let’s stress this will be another very-near-term trade that I don’t
expect to be open this time next weekend. Hopefully I’ll get more luck with metals timing on
this one than the failed BTO extra of a couple of weeks ago.
Contrarian thoughts
Warning: On re-reading there’s rather too much first person singular pronoun in this piece for
my usual taste, but due to the context on this occasion it gets a pass.
1
A nice, brief, thought-provoking post last week from Cam Hui entitled “Do you have what it
takes to be a contrarian investor?” (1), began like this:
Virtually everyone I speak to touts the idea of contrarian investing. But true contrarian
value investing is can be lonely and entails career risk. Do you have what it takes?
As Cam Hui points out, one of the problems in being a natural born contrarian are the times
when you’re totally out of fashion. It’s not merely being open to ridicule, because his “career
risk” phrase is right on the button in the alpha-hungry, results driven world of capital markets.
It can sound cool and renegade to class yourself as a contrarian, but when reality slaps a fund
manager in the face and offers them a choice between being able to pay the mortgage or being
the cool renegade without a monthly salary or means of supporting that four year old mortgage
(let alone that four year old daughter), it takes sterner stuff than mere words to remain one.
Here’s another wrinkle to the whole concept of contarianism when it comes to something more
specific to The IKN Weekly, namely the gold price. Are you bearish about gold and its prospects
in the key market of China? Look no further than this November 3rd 2014 article from Reuters
(2):
Chinese unmoved by gold price drop, see it cheaper still
Nov 3 (Reuters) - Even with gold prices dropping to near 4-year lows, buyers
in China - the world's leading market - aren't tempted, suggesting prices have
further to fall.
When gold prices are in a slump, Chinese buyers, eyeing a bargain,
traditionally move in and stop the rot. But that doesn't seem to be happening
this time around. (continues)
Ah, but are you bullish about gold and its prospects in the key market of China? Look no further
than this November 7th 2014 article from Bloomberg (3):
China Gold Buying Means Price Floor to Standard Chartered
The cheapest gold in four years is proving irresistible for shoppers
in China and India, where rebounding demand may signal an end to the
longest price slump in more than a decade.
Purchases in Asia will help support prices that are headed for the first two-
year decline since 2000, Standard Chartered Plc said. (continues)
The moral; Not only do you need to label yourself as a contrarian, you have to decide what to
be contrarian against. Isn’t this fun? And if you were wondering, both articles back up their
stances by telling us that demand in India is strong/weak, depending on the line in question.
As for me, I’m a contrarian investor. In fact I’m a contrarian period. I was one from the word
go, even before I knew what the concept meant way back at the time when I was simply
labelled stubborn at school. Tell me to do something one way and I’d try every way possible to
find another way of completing the task. A teacher or parent praises for being great at math?
I’d flunk exams, just to piss them off. Advise that I should drop art because I was crap at
drawing and would never pass an exam? Yup you guessed it, three years later I passed just
fine. Those and a hundred, nay thousand other examples of a life mentality. My wife is one
helluva patient person.
But don’t get me wrong, this isn’t some sort of preening and chest-puffing exercise because
after many years (decades in fact) of careful consideration I don’t know whether being a
contrarian is good or bad. I’m not trying to make myself look attractive to a bunch of readers
that for the most part have never met me (though you’re welcome to fly down anytime),
because there no point in that I don’t know if other contrarian investors are made or born,
whether the option to always go with the tide is a better career decision, whether life is more
2
satisfying that way. I have no idea because I was taught to be this way, it was (I firmly believe)
hardwired. And when I look around there seems to be successful players and investors on both
the trend-follow and the contrarian sides of the fence, so I don’t think monetary gain is the
main way of judging this either. There are advantages and disadvantages on both sides.
The point of this rant wasn’t in the last paragraph, it’s here: Being contrarian got me to buy
gold at U$451/oz and get laughed at for the move. It also means I catch myself muttering, “So
you want me to sell my gold do you? Well f___ you”, under my breath as the metal drops
precipitously from the U$1,300/oz level in September 2014. Sometimes it pays to be like this,
sometimes it doesn’t but what you need to know is that these words, and all the other sin this
edition, and all the others in all other editions of The IKN Weekly are written by this type of
personality. There are no right answers, but at least you get a little more idea of where the
ideas are coming from this way.
A quick line or two about Russia
I cannot forecast to you the action of Russia.
It is a riddle wrapped in a mystery inside an enigma;
but perhaps there is a key.
That key is Russian national interest
Winston Churchill
If...
...Russia is now feeling the pinch economically due to the fall in oil prices.
...the Ruble is under pressure and raising the potential of inflation/stagflation.
...Russia’s Central Bank gold purchases is being devalued by the dollar’s strength and
assumed economic good times to come in The USA.
...Russia has one of the biggest and most powerful military forces in the world.
...heightened conflict is seen by Russian leadership to bring a net economic gain to the
country.
Then surely it’s the place to look for your Black Swan event. Now I’m no expert on Russia in the
same way that I’m no expert on Burkina Faso in last week’s ‘Market Watching’ rant. But still,
this one seems too obvious not to point out to people who’ll cling desperately to any sort of
bias confirmation for gold’s bright future. On the subject, this op-ed (4) on the Russian RT TV
news channel entitled “Russia Today: why western cynics lap up Putin’s TV poison” that starts
with the statement, “Vladimir Putin is the world’s corrupt policeman” and continues by pointing
out the obvious bullshit emanating from the Putin government is well worth your time. Because
if you consider the budget increases quoted in the piece that RT is set to enjoy next year, it’s
only going to get worse. Are we living in interesting times yet?
Last week’s rally
• The good news: That was the bottom in gold
• The bad news: That’s what I said when gold bounced off $1,180/oz a few weeks ago.
So that’s what I think and that’s also what my thoughts on the subject are worth, but what’s
100% certain is that the rally of Thursday and Friday was very welcome. It’s one of those cases
of being confident things are oversold (as of last weekend) but not knowing how long they’d
stay oversold or whether there were deeper cuts to come. In the event the welcome snap-back
came and we now all get to nod sagely and talk about “the expected move”, use phrases like
“long overdue”, wisely comment on how gold “couldn’t possibly stay...” etc. Yes, we’re all clever
again.
3
Friday came and went, the jobs numbers were gauged to be weak, gold went up (that last bit
surprised me). What didn’t surprise was the incisive post-BLS commentary of Bill McBride at
Calculated Risk (5), who cut though it all and got to the main takeaway quickly (McBride’s own
bold type):
Unfortunately wage growth is still subdued. From the BLS: "Average hourly earnings
for all employees on private nonfarm payrolls rose by 3 cents to $24.57 in October.
Over the year, average hourly earnings have risen by 2.0 percent. In October, average
hourly earnings of private-sector production and nonsupervisory employees increased
by 4 cents to $20.70."
With the unemployment rate at 5.8%, there is still little upward pressure on wages.
Wages should pick up as the unemployment rate falls over the next couple of years,
but with the currently low inflation and little wage pressure, the Fed will likely
remain patient.
So fortunately we didn’t see my personal theory of “if the BLS report is considered negative it
will be brushed off with that old saw it’s a noisy dataset excuse” as mused last weekend come
true, we did see some benefit from a nominally gold-friendly set of figures. But what we saw
was a relief rally from a heavily oversold position, it’s unlikely to be a tide-turner on its own.
What I really think, really truly honestly, is that gold is very undervalued at the moment and
we’re in some sort of bottoming process, but I don’t know how long it’s going to last or whether
we’ll see the Goldman $1,050 or the Roubini $1,000 or any other of these bearish downside
targets that get trotted out for mass media consumption every time gold jags $20/oz. Which
means I’m going to be patient and not make any meaningful, longer-term investments until
December is with us and I get to see the teeth of the tax loss selling season.
Fundamental Analysis of Mining Stocks
Shorting Fortuna Silver (FSM) (FVI.to) as a trade tomorrow. Probably
The idea is to short Fortuna Silver (FVI.to) (FSM) via its NYSE ticker tomorrow, before it
releases its 3q14 financials after the close tomorrow Monday evening. The reasons are:
• FVI looks overpriced compared to peers
• I believe it will file a weak quarter of earnings
• Its Caylloma mine in particular looks under pressure from the new low prices for Ag.
• It looks set to take some substantial write downs
• Content of the conference call won’t impress
4
What follows elaborates those points.
I’ve been sizing this trade up for a few weeks, as a look back an month to IKN283 will show.
Here’s an excerpt from the October 12th, note on FVI that went under the title “Fortuna Silver
(FSM) (FVI.to): Priced to perfection”:
FVI is a good operator, but at its current market cap of U$567m it has every ounce of
that good will already baked into the price. It looks expensive and it wouldn’t surprise
me in the least to see its price drop again after last week’s spurt when the reality of its
financials is revealed. I’m officially calling neutral on the stock, but those of you who
look for shorts in order to hedge other positions could do a lot worse than to consider
FVI, it could break under CAD$4 easily before this year is through and even if it
doesn’t thanks to a rally in silver, a long position held in a reasonable peer paired with
FVI would be odds on to perform better from here.
Here’s the price chart of FVI since then. At the time of publication it was priced at $5. It
managed to stay at or slightly above that price level for most of October, but like so many
others showed no immunity to the big silver and gold price drops at the end of last month and
we did indeed get to see the stock under CAD$4 for a while.
That was then, this is now and it’s time to roll out the reasons to expect FVI to fall from its
CAD$4.46 (U$3.92) price level. It’s all about earnings and guidance.
Fortuna Silver (FSM) (FVI.to) is scheduled to released its 3q14 financial results tomorrow after
the close, with the company ConfCall scheduled for midday-ish Tuesday (6). As fact-checked by
the above excerpt, I’ve had a inkling about this trade possibility for a couple of weeks so as
long as a couple of likely things fall into place tomorrow I’m going to take a short position in
Fortuna, via the NYSE FSM ticker (because it’s a whole lot easier). Those conditions are:
• FSM trades close to, or even above, U$4. If it drops hard before i get there, the value I
seek in a quick trade won’t be available.
• Silver the metal doesn’t rally hard. I won’t mind if it rallies, in fact that would probably
be a good thing for the FSM stock price and therefore my short starting price, but if
silver started moving up very strongly and threatening to race through perceived
resistance levels I’m not going to stick myself out in front of a steamroller and short a
silver stock just because.
But as long as those two conditions are met (and chances are that they will), I’m going to
throw another speculation at the market tomorrow and short this thing. Now for why.
5
First let us tip our hat to the great job FVI has been doing at San José, as that mine’s
expansion and succession of record production quarters. Here’s the main silver production chart
for FVI...
Fortuna Silver (FVI.to) (FSM): Ag production by qtr
2000000
1800000
1600000
1400000
1200000 1215100
1000000 917668 997035 1101411
800000 100790 377377 468865486296 502835 491181 492773 580570 536191
600000
400000
200000 559959 536426 484226 509897 524906 519549 499445493438 568722 542457 539824 529011 588727
0
6
11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
source: company filings
rtq/gA
secnuo
San José Silver prod (oz)
Caylloma Silver prod (oz)
...and here’s gold production...
Fortuna Silver (FVI.to) (FSM): Au production by qtr
12000
10000
8000
6000
4000
2000
0
1q12 2q12 3q12 4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14
source: company filings
rtq/uA
secnuo
Caylloma Gold prod (oz)
San José Gold prod(oz)
..which both show the performance of San José well. It’s a good mine, it’s growing as per the
management plan, they promise and they deliver. Good company, this one. Add to that a
second strength I’m expecting from the FVI numbers tomorrow is its cash cost per ounce of
silver from both its San José and Caylloma mines, as the increases in production from both
mines mean the costs get spread that much more thinly and as a result, the per-ounce number
shines.
So why short now? I don’t have a problem with either of those things, the problem is with the
profitability of the FVI Caylloma mine in absolute cash terms (rather than per ounce). The way
we tackle this is to compare the Net Smelter Return (NSR) and operating cash cost figures
given by the company in absolute terms and from there, see the operating margin of the mines.
Again, thanks to the improvement in production at San José we’re expecting that mine to be
able to shrug off the lowered prices for its products and return good numbers. But as this chart
shows, the expectations for Caylloma aren’t nearly as good.
FVI at Caylloma only: Comparing NSR to cash costs
250
225
200
175
150
125
100
75
50
25
0
7
11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
U$/mt
cash costs nsr difference
source: FVI filings, IKN calcs
Our projections for the numbers at Caylloma in 3q14 (which will get checked against reality
tomorrow evening) are per tonne revenues of $133 and costs of $90, which leaves a gross
margin of 32.3%. That would be lower than at any point in Caylloma’s recent history and
means that once other deductions (G&A tax etc) are worked through the mine is hardly
breaking even.
But that’s where the real operational problems start for FVI because Caylloma as a breakeven
entity only is on 3q14 silver prices, which averaged a $18.74 for the quarter on the London PM
Fix (source Kitco). Our current quarter is headed towards perhaps $16/oz for silver and the
result of that can be seen in the above chart’s forecast for 4q14; gross margin is still there, but
we’re now down to just 22% and that’s not nearly enough to break even; if things continue at
current prices, Caylloma becomes a loss-making mine.
FVI.to: Quarterly Earnings overview
Here’s how we expect FVI’s consolidated
60
operating income (San José and Caylloma) to
50
be affected by the drop in profitability at
Caylloma in particular. Mine Operating Income 40
in the new low silver price environment of
30
4q14 is scheduled to drop to just over $10.3m
20
on our model, even after further cost
reductions are factored in, and for a company 10
that spends over $8m just on G&A per quarter
0
that’s not enough margin.
Now another negative to consider, as we’re
likely looking at more write-downs from both
Caylloma and San José and its more a question of when FVI takes the deduction(s), rather than
if. The baseline issue is that both mines still use U$24/oz as their silver price for reserves and
resources, as well as $1,400/oz for gold for their 2014 reserves and resources counts.
What’s more (and more pressing when it comes to the financial write-down question), we
haven’t seen any fair value adjustments for its mineral properties in 2014 and the last time
adjustments were made, back in 4q13, the 2014 assumption for metals values going forward at
both mines was $21.35/oz for silver and $1,361/oz for gold. I’d agree that if it were just gold in
question FVI could bide its time and see what transpires, but the drop to $6/oz lower than its
baseline assumption without any book trimming for its main product of silver looks to wide to
be ignored any longer.
As the “mining property” line item was $230m of the total $330m in assets held by FVI in its
2q14 numbers, the potential for a substantial balance sheet hit here is large. I’d even venture
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3 tse41q4
source: company filings
srallod
fo
snoillim
revenues
COGS
Mine Op. Inc
to say that we may see write-down in both 3q14 and 4q14, if the company decides to take
things step by step.
Assuming zero write-downs, here’s how the book value of FVI compares to its current share
price:
FVI.to: Equity, BV, PPS, ratios
3.40
3.20
3.00
2.80
2.60
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
8
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 tse41q3
BV/share
BV/PPS ratio
source: company filings
FVI is still trading at 2X book, that’s a long way above the sector average and I consider it
untenable what with it now carrying Caylloma, a dysfunctional mine at current metals prices.
This chart is calculated on the FVI.to Canadian stock price. If it adjusts back to a 1.5X
price/book ratio, we’d see FVI going back to CAD$3.20 per share, which represents a 28.2%
drop from Friday’s close of CAD$4.46. I think that sort of downside is perfectly possible for FVI
in the medium-term.
Finally and slightly more drama-laden, I’ll be listening in on the ConfCall for any clues on the
potential that FVI put Caylloma on care & maintenance. This is extremely unlikely to happen
after just one quarter of breakeven (3q14) or even a lossmaking quarter (4q14) as long as
some free cash flow comes from the mine, but if low silver prices continue one thing you won’t
see form a mining family such as the Ganozas is sentimental reasons to keep their mine running
at a loss; no way, they’ll shut it if need be in order to keep their books healthy. Another way we
might get this framed is FVI making noises about the potential to cut tonnage throughput
and/or concentrate on the better rock at Caylloma to shore up margins and get it through a low
prices period. This is better known as high-grading and can be done for a while, but it’s the
direct route to a shortened mine life and turning resource into waste.
Conclusion: My plan is to short Fortuna Silver tomorrow, via its FSM ticker in the New York
market, because of the most straightforward of reasons; I think its 3q14 financials due out
tomorrow evening are going to be weak and any guidance it gives in the filings and/or the
Conference Call on Tuesday morning will be negative as well. The plan is to trade in and out of
this shrot quickly, I won’t be hanging around
for a worst (best) case end year drop into the
tax loss selling season, nor overplaying the
state of the company as a whole. Assuming my
two criteria (above) are met the short is
opened, I’ll write suitably semi-cryptic post on
the blog tomorrow rather than bother your
mailboxes with an update. I’d say today Sunday
afternoon that it’s a 95% chance of happening
and only a big move in either of the variables
mentioned would put me off.
I do not think FVI is a bad company, I think it’s
an overvalued company. As such the trade on
that opinion in the week to come, I expect to cover and close the short by this Friday coming,
taking with it either my profit or my loss.
First Majestic Silver (AG) (FR.to): Analysis deferred
Yes I know that I said I do the “buy/hold/sell” analysis on this woefully poor trade on the blog
last Thursday, but it’s going to happen next week rather than this and here are your pathetic
excu..., sorry, your three logical and totally understandable reasons:
1) I’m not going to buy any: The secret reason, something I was only going to reveal at the
end of the analysis planned for today. So it’s time to fess up, the real choice I was debating for
this weekend wasn’t whether to add, but whether to hold through before the 3q14 numbers
came in, whether to dump this loser and change a big paper loss into a big real-terms cash
loss, or whether to at least wait and see what the financials and most critically the ConfCall
brought.
2) Friday’s rally: The real reason, period. Before the rally that started to kick in around the time
I posted my little note on the blog it was a case of witnessing a never-ending sell-off of all
silver stocks, not just FR.to, with little prospect of a reversal of fortune in sight. Suddenly things
have changed as seen on this...
...the two month price chart for AG (US ticker version) which shows the reversal clearly enough,
as well as the type of technical gap that chartists rend to drool over, just ahead. You know I’m
no TA fan but I’m not an ostrich either and there’s no point in burying my head in the sand
about charts; that looks near-term bullish and there’s a strong potential for a change in
momentum. If we look closer at the Friday action via a two day graphic...
...that’s something akin to a face-rip rebound and it’s good to see First Majestic keeping pace
with the sector average (GDXJ proxy). Therefore there’s suddenly much less reason to jump to
a Hold or Sell” call before this new move has played out.
9
3) November 12th: Wednesday coming and the filing of First Majestic’s 3q14 financial results on
that day was already in the back of my mind, and the toss-up was whether to run an earning
preview which will always carry assumptions and inaccuracies that will need correction, or an
analysis of the results and come to conclusions afterwards. Up to Thursday the balance in my
mind favoured pre-empting the 3q14 results (pre-open) and conference call (scheduled for
11am EST (7)), but what with the rebound let’s wait a while.
Bottom line: We’ll decide on what to do with First Majestic this time next week. For the time
being I’m holding while the larger tidal move plays out, as until then there’s less reason to play
fiddly with individual stocks.
Stocks to Follow
It was far from a uniformed, across-the-board rebound on Thursday and Friday, as in general
the bigger more liquid stocks got the bounce and the small illiquid juniors failed to follow suit.
That shows up on out ‘Stocks to Follow’ list as the bigger and more widely traded names we
cover or covered (BTO, KGC, AG, RIO) did nicely in the last two days, while smaller players
(DNA, ARG, NCQ, LRA) stayed underwater on the week.
But hey, I’m not complaining. No way. In fact there were just four upmoves from the stocks left
open (BTO, KGC, AG, RIO) and of those, the 14.2% put on by Rio Alto Mining was the best of
the wins, followed by the 12.5% gain in Focus Ventures. Two stocks remained unchanged
(DNA.to, COP.to) on the week which means seven lost ground (RMC,v, ARG.to, IRL.to, NCQ.to,
GQC.v, LRA.v, SRL.v) with the biggest losers being Lara (LRA.v down 25.3%), Reservoir (RMC.v
down 11.3%) and Minera IRL (IRL.to down 11.1%). But thanks to the RIO.to move it was a net
gain win for your author, the first time for too long. If gold’s move were to stick next week we
should expect a line to be drawn under the thinly traded names, too.
With the dumping of the losing trades in Timmins Gold (TGD) and Kinross Gold (KGC) there are
now 13 open positions on our ‘Stocks to Follow’ list, two less than the self-imposed maximum.
Only Rio Alto is in green which means we’re not out of woods, not by a long way.
Reco Current
company Ticker this week Avg Price date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.30 07-apr-11 C$2.73 18.7% Top pick, $3.30 tgt June 15
Recommended long positions (in current order of preference)
B2Gold BTO.to buy C$2.32 12-sep-14 C$1.96 -15.5% Top value entry point now
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.55 -14.1% New tgt $1.25, Nov'14
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.225 -2.2% tgt 50c, added, avged up
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$3.45 -43.0% Time to add, Cu play
First Majestic AG spec buy U$10.51 10-aug-14 U$5.33 -49.1% Sole Ag, hit hard by dump
Amerigo Res ARG.to hold C$0.405 20-jul-14 C$0.35 -13.6% Small Cu play, good value
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.08 -70.4% Waiting for financing news
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.77 -26.7% small Cu play low vols, hold
Goldquest Min. GQC.v hold C$0.26 27-oct-13 C$0.105 -59.6% no point selling so cheaply
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.37 -67.8% solid biz model, LT hold
Recommended short positions
None at moment
Smaller/Riskier
Coro Mining COP.to spec buy C$0.075 26-jan-14 C$0.03 -60.0% Added avged down Nov'14
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.15 -46.4% small spec, new China JV
10
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
Timmins Gold TGD nov'14 U$1.38 09-apr-14 U$0.99 -28.3% failed trade, sell, raise cash
Kinross Gold KGC nov'14 U$2.90 20-oct-14 U$2.15 -25.9% V small trade, didn't work, chau
2009, 2010, 2011, 2012 and 2013 closed positions in appendices below
Now for some notes on a selection of the above stocks.
Coro Mining (COP.to): Added and averaged down. I didn’t rush in, bid at 2.5c and got all
I wanted and then some more (went back to the well, just couldn’t resist), which has brought
the cost average down a great deal to
just 7.5c
We had some minor news from COP
as well last week, when it announced
(8) Thursday afternoon that it had
optioned out its Llancahue copper
property to Mexico’s Peñoles. The
terms of the optioning in deal are
fairly standard, though they do bring a
useful $150k signing fee that will help
the thin treasury position at COP right
now, as they finalize the financings for
its immediate projects. The stock
reacted well enough to the news on
Friday and even threatened to close at
3.5c for a while before settling for 3c. The Sheldon shadow is still over COP but that should
disperse in the days to come and we’ll be left with a tinycap stock that has a lot of activity to
bank on during the next couple of quarters, including the plan to become a producer before
1q15 is done. Not many stocks of this size can boast the same.
Kinross Gold (K.to) (KGC): Sold. As planned. Yes of course there were mixed feelings when
KGC rallied to finish the week over $2.50, but in the end the deal was always very small and
10% of small is very small, so I’m not sweating the bad exit timing either. The one I sweat is
the bad entry timing, because getting in at the wrong time is a sure fire way of turning a
winner into a loser.
Timmins Gold (TGD) (TMM.to): Sold. I was surprised to see TGD fail to join the
Thursday/Friday rally, closing at U$0.95. It’s not one I’m going back to, at least for a few
weeks, but any bargain hunters out there looking for a laggard or second wave type company
that can play catch-up to the big movers might want to consider a trade in TGD at under U$1.
Focus Ventures (FCV.v): FCV came back up a bit, again for no apparent reason following the
precious metals bounce. I got some feedback from the company officers who went on the
recent Singapore conference trip (see IKN285) and besides commenting on how expensive the
11
cost of living is in Singapore today were pleased with the meeting, greeting and contacts made
at the show. They noted anecdotally that showing face regularly at world-event meets such as
this and each time delivering new news on technical milestones achieved is gaining them kudos
with the right sort of phosphate industry people. The next one they’ll attend is in Beijing in April
2015, which hosts up to 1,000 industry players including (not surprisingly) all the Chinese
players of worth. Also, they note the atmosphere and style of doing business is different, with
nobody interested in booth visits or presentations, it’s all about one-on-one meetings.
Reservoir Minerals (RMC.v): This one sunk, which was roughly in line with what we saw in
the copper junior space (see below) but it has to be said, the selling here looked sharper and
there was little in the way of a relief bounce on Friday (unlike the goldies). Regular reader DQ
who likes RMC as much as your author wrote in on Saturday to ask whether I was “backing up
the truck” on Reservoir. Here’s how I answered that one:
As for backing up the truck on RMC, it does look as though somebody is liquidating for
their own reasons and there's an opportunity to add cheaply here, but I wouldn't "back
up the truck" on anything at the moment. We're into the shadow of tax loss selling and
all sorts of things could get a lot cheaper by the end of December. My best plan today is
to hold what I have (generally), perhaps play a little round the edges and keep the cash i
have sidelined until year-end. At which point i may crack some of it open.
So now you know.
Minera IRL (IRL.to) (MIRL.L): Friday 14th (no idea at what time though) should bring the
IRL.to 3q14 numbers, with the filings following straight on from the company board meeting set
for Thursday 13th. We’re also bound to get an update from the company on its progress for
financing Ollachea and although i know they’re looking to give us something positive, the way
in which the market has been in the two weeks since I met up with CEO Chamberlain, plus the
non-results and delays we’ve had from the company so far in 2014, mean that I’m not raising
my hopes for this week coming. I mean, just by forgetting the IRL position and considering the
counterparty, if I were a financier looking to put $100m or $150m into a gold mining project I’d
be watching the gold price very closely and wondering whether things were going to bottom
out or would get worse before better. I’d want the best deal possible under the circumstances,
with the option or playing it safe and not dealing at all.
Trading was quiet in the stock, it dropped a penny but only because someone decided to sell a
small tranche. A penny here or there is the least of my problems with this long position.
Rio Alto Mining (RIO.to) (RIOM): Here’s the ten day chart of RIO, some sort of inverse
vomiting camel. More seriously, what you see there is a 20% bottom-to-top gain between the
close Wednesday and the close Friday, which is
one helluva move for a producer even by junior
mining standards. We also see that RIO.to is
nearly UNCH compared to two weeks ago, even
though gold has dropped in the same period by
nearly 5%.
Why might that be? Well as mentioned in passing
in the introduction section above, the word on
the street is that RIO.to is about to post strong
results for its 3q14 period and those numbers are
due out post-close tomorrow Monday. Expect the
figures to shine compared to (just as one
example) the cross delivered by Argonaut (AR.to)
last week and expect RIO.to to establish its reputation even more firmly as the go-to junior/mid
gold name to own.
12
B2Gold (BTG) (BTO.to): The chart isn’t quite as visually spectacular as the RIO.to move, but
still up 15% from Wednesday and BTO managed to snap an awfully bearish run in the stock,
too.
BTO also reports this week, though its scheduled for pre-open on Friday November 14th. In the
meantime, it may be instructive to watch how BTO trades next to companies with known
results, good bad or indifferent.
Amerigo Resources (ARG.to): We got the 3q14 financials from ARG.to, see below for the
rundown on the numbers (which I thought were ok, all things considered). The stock didn’t rally
into Thursday and Friday, as the copper junior space decided it was going to follow copper the
metal rather than other juniors.
Without a copper price collapse, I see very little downside in Amerigo now. The problem is that
it’s thinly traded and not a useful flip vehicle. Holding.
The Copper Basket
After forty-five weeks of 2014 The Copper Basket is showing a 18.61% 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 1.43 186.52 249.94 1.34 -6.3%
4 Reservoir Min. RMC.v 4.97 47.55 164.05 3.45 -30.6%
5 Nevada Copper NCU.to 1.35 80.5 120.75 1.50 11.1%
6 Hot Chili Ltd HCH.ax 0.425 333.11 64.96 0.195 -54.1%
7 Copper Fox CUU.v 0.375 402.96 62.46 0.155 -58.7%
8 Western Copper WRN.to 0.76 93.68 57.14 0.61 -19.7%
9 Panoro Minerals PML.v 0.35 220.25 55.06 0.25 -28.6%
10 Curis Resources CUV.to 0.57 74.79 52.35 0.70 22.8%
11 NovaCopper NCQ.to 1.60 60.15 46.32 0.77 -51.9%
12 AQM Copper AQM.v 0.11 139.24 9.75 0.07 -36.4%
13 Cordoba Min. CDB.v 0.90 58.81 9.12 0.155 -82.8%
14 Coro Mining* COP.to 0.10 159.37 4.78 0.03 -70.0%
15 Oracle Mining OMN.to 0.27 49.03 2.45 0.05 -81.5%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg -18.61%
13
The basket average dropped just over 2% and the copper juniors didn’t get the same type of
bounce seen amongst their precious metals cousins in the last two days of last week. Just four
companies were weekly winners (WRN.to,
CUV.to, AQM.v, CDB.v) and of those, the
The Copper basket 2014, weekly evolution
best move was the 29.2% long overdue kick- 25%
back in Cordoba. Aside that one, the moves 20%
15%
in AQM and WRN were minimal and CUV
10%
rose 9.4% because the company taking it
5%
over, Taseko (TKO.to) rose with the tide of
0%
the larger miners. Other juniors weren’t so
-5%
lucky. There were three unchanged stocks
-10%
(LCC.v, AZC.to, COP.to) which means eight -15%
losers banked, with the worst moves seen in -20%
Oracle (OMN.to down 23.1%), Nevada -25%
Copper (NCU.to down 16.7% and toldyaso),
Reservoir (RMC.v down 11.3%) and Hot Chili
(HCH.ax down 9.3%).
On to market prices for copper and the week
was a question of sell-off plus recovery, but
the Friday rebound didn’t catch on in the
same way as the precious metals and failed
to grab the world’s attention. We’re still
bouncing around close to the key $3/lb floor
level and until that changes, there doesn’t
seem to be much appetite for this, the most
speculative end of the copper stocks world.
Now for the inventories section and the
weekly bullet points:
• Overall world stock levels dropped
last week, down 7,241 metric tonnes
(mt) (-2.5%) to finish the week at
278,939mt.
• The main reason for the overall drop
comes from the Shanghai Futures
Exchange. Its warehouse stocks
dropped by 5,531mt (-5.8%) to
finish at 89,570mt for the week. That’s the first meaningful drop in stored tonnages
there since the first week in
September and that alone is
something to think about. Reports
of China’s copper demand death
may have been greatly
exaggerated.
• The LME copper warehouse
inventories dropped a little, down
2,325mt (-1.4%) to finish at
160,350mt.
• By contrast, Comex warehouse
stocks moved up slightly for the
first week in four. Only 615mt
(+2.2%) perhaps, but it stops the
run of outflows. Comex ended the
week at 29,019mt.
14
ht5naj ht61 ht61 ht9 ht03 ht02 ht11 ts1nuj dn22 ht31 dr3gua ht42 ht41 ht5tco ht62
source: IKN calcs
Shanghai Futures Exchange Warehouse Stocks, 2014
220000
200000
180000
160000
140000
120000
100000
80000
60000
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 ht62 dn2von ht9
Mt Cu
source: Cochilco
Shanghai inventory chart here, which is still showing low numbers.
We’ll leave commentary on individual basket stocks for next week, though quickly note that
Nevada Copper (NCU.to) failed to impress anyone with its “look at us” NR last week and that
I’m still interested on a fundamental value-sniffer’s level about Hot Chili (HCH.ax), though see
little reason to commit to this type of stock until the macro backdrop gets a lot better for the
tinycaps.
The Low Cost Producer Basket
After 45 weeks, the Low Cost Producer Basket is showing a 14.28% loss to level stakes
company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 37.74 1040 29.47 28.34 -24.9%
2 Goldcorp GG 21.67 812 16.26 20.02 -7.6%
3 Barrick ABX 17.63 1000 12.16 12.16 -31.0%
4 Newmont NEM 23.03 497.87 9.55 19.19 -16.7%
5 Franco Nevada FNV 40.74 155.39 7.85 50.54 24.1%
6 Silver Wheaton SLW 20.19 357.39 6.74 18.86 -6.6%
7 Agnico Eagle AEM 26.38 173.43 4.27 24.61 -6.7%
8 B2Gold BTG 2.02 948.9 1.65 1.74 -13.9%
9 Pan American PAAS 11.70 151.41 1.53 10.08 -13.8%
10 First Majestic AG 9.80 117.02 0.62 5.33 -45.6%
all prices in U$, using NYSE ticker prices Portfolio avg -14.28%
But the rebound happened here all right, with nine of our basket up and only the base-metals
exposed FCX falling on the week. Of the nine winners, the best moves were made by Pan
American Silver (PAAS up 9.2%), Silver Wheaton (SLW up 8.6%) and Franco Nevada (FNV up
8.1%).
Check out this chart, which has the last two days of last week mapped out (i.e. the rebound
days) and the nine dedicated PM miners on our list (no FCX) as well as the gold bullion ETF
(GLD) to mark the bench. NEM lagged because it’s out of favour, FNV did its market darling
thing, a couple of the silvers outperformed (PAAS and SLW) but the thing that gets me (again)
is how the whole complex bounced on the same tide.
15
You have been hard pressed to feel jealous of the performance in AEM if you’d bought ABX
instead.
We note a gap opening again between the GDX benchmark and our basket, suspicion falls once
more on FCX. For the record I’ve got better value out of this section this year then the other
ideas from previous years (the tinycap basket, the zinc basket) and plan to keep this section
going in 2015, but FCX is going to have to go, in hindsight it was the wrong stock to include. I
may make a few more changes as well.
The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
40%
30%
20%
10%
0%
-10%
-20%
-30%
16
ts13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1nuj ht51 ht92 ht31 ht72 ht01 ht42 ht7peS ts12 ht5tco ht91 dn2von
basket
gdx control
source: Yahoo! Finance, IKN calcs
Low Cost Basket: Percentage difference between
basket and GDX control, 2014
8%
6%
4%
2%
0%
-2%
ts13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1nuj ht51 ht92 ht31 ht72 ht01 ht42 ht7peS ts12 ht5tco ht91 dn2von
source: ikn calcs, NYSE/Nasdaq data
Goldcorp (GG): We could highlight the strong performances in many of the stocks though as
noted above this mining world is more about the tide, less about the boats riding thereon. But
we’ll cover a but of Goldcorp (GG) today due to the news about its El Morro mine in Chile.
Late Friday GG announced it was scrapped its environmental impact study (EIA) for the El
Morro project in Chile (70& GG, 30% NGD, with NGD getting a free ride to production) and
would begin the process all over again due to the Chilean Supreme Court’s decision that the EIA
was badly executed as it sided with locals against the project as stands. This was greeted with
hurrahs and cheers in Chile (9) , but it was all rather obvious a decision to make. For one thing,
what with the state of the market it suits GG to put the roughly three years it will take to go
through the permitting process between it any construction decision. Neither did it seem to
occur to many that if GG had walked away from El Morro it would have put a $1.04Bn hole into
the company’s balance sheet come the day of the inevitable write-down (roughly 5% of its
current ~$20Bn book value) but that’s how little these people think things through so it’s to be
expected. So GG keeps its asset and doesn’t have to shell out money on an expensive capex
project for a while. No harm done.
Regional politics
Argentina precious metals sales lagging again
It’s not something that’s being widely advertised by those companies working there (no
surprise) but after seeing the MUX and TRY numbers come in then checking through a couple
of other filings, there’s a clear trend re-emerging of a lag in precious metals sales compared to
production in mines operating in Argentina. Here are some numbers for your consideration:
From McEwen Mining (MUX) 3q14 filings: Minera Santa Cruz
Gold produced: 48.6k oz
Silver produced: 1,535 k oz
Gold Sales: 37.0k oz
Silver Sales: 1,149k oz
Production/Sales lag gold: 23.9%
Production/Sales lag silver: 25.1%
From Troy Resources (TRY.to) (TRY.ax) 3q14 filings (i.e. to Sep 30): Casposo mine
Gold produced: 15.22k oz
Gold Sales: 11.46k oz
Silver produced: 734.9k oz
Silver Sales: 574.8k oz
Production/Sales lag gold: 24.7%
Production/Sales lag silver: 21.8%
From Yamana Gold (YRI.to) (AUY) 3q14 filings: Gualcamayo mine
Gold produced: 43.1k oz
Gold Sales: 40.1k oz
Production/Sales lag: 7.0%
From Barrick (ABX) 3q14 filings: Veladero mine
Gold produced: 178k oz
Gold Sales: 166k oz
Production/Sales lag: 6.75%
From AngloGold Ashanti (AU) 3q14 filings: Cerro Vanguardia mine
Gold produced: 62k oz
Gold Sales: 54k oz
Production/Sales lag: 12.9%
All figures taken from company filings (SEDAR, LSE, NYSE). Now some of those numbers are
more acceptable than others, for example the Gualcamayo production/sales lag of just 3k oz
gold would be acceptable under normal circumstances, as long as the lag gets made up next
quarter. The 12k lag at ABX Veladero looks a little too large for comfort in absolute terms (after
all it’s about $15m worth of metal), but a company the size of ABX can swallow that easily
enough without it affecting bottom line results to any significant extent.
But Cerro Vanguardia couldn’t sell 13% of its gold, Minera Santa Cruz (49% MUX, 61%
Hochschild (HOC.L) couldn’t sell 24% and 25% of its gold and silver, Troy at Casposo couldn’t
sell 25% and 22% of its gold and silver. I do not believe in coincidences.
Back in 2013 mining companies along with other export oriented companies in Argentina
complained bitterly about the barriers to exit for the goods and remittances for revenues, with
reports of long delays and suchlike. The government promised to improve things and for a
while that happened, but it looks as though the lag is back again. Less of a problem for the
small player, more of a problem for companies such as TRY and MUX who are dependent on
the cash flow from their mines. Even HOC could be feeling the pinch.
17
Brazil: Economic slowdown may favour mining projects
Science magazine this week (10) picked up on the bill currently in debate in Brazil’s congress
that will relax rules on large scale development projects in the country’s designated Protected
Areas (PA). Brazil’s jungle regions are host to around 15% of the world’s PAs by area covered.
The Science paper reports that Brazil has made great progress in protecting environmentally
sensitive areas (particularly the Amazon basin jungle regions) in the last 20 years, but the
country’s economic slowdown is now an active piece of the puzzle and if the bill being debated
in parliament passes as stands, around 105 of the PAs in the country would see development,
mostly from large-scale hydroelectric dam projects and mining projects.
Indeed one of the places that would be most affected by a relaxation in the rules is the Xingu
region in Pará State that plays host to the Volta Grande dam project and the nearby Belo Sun
(BSX.to) eponymous mining project. Therefore, there is a potential trade for us rapacious
capitalists on this bill and its eventual blocking, passage or partial passage. If the national
government decides to side with the case for economic expansion via large civil engineering
works, that’s a company that would surely benefit at current share prices no matter what
happens to the price of gold in the short or medium-term.
Mexico Guerrero: Avoid
The IKN Weekly has warned readers (and over at the blog, for that matter) about the off-scale
political and social risk levels in Guerrero State, Mexico, on numerous occasions. The events of
between September 26th and today in Guerrero are therefore covered quickly here:
• While travelling to an annual march held in the Mexico’s capital (Mexico City/DF
Mexico), busloads of students are stopped and then attacked by police officers under
orders of the local mayor of the town.
• Six students die from gunshot wounds at the scene, many are injured, 43 students are
arrested and taken away by police.
• For over a month, the whereabouts of the 43 students are unknown, despite there
being many rumours that they had been executed and “disappeared” (as the Spanish
saying from the 1970’s goes, one that has deep social meaning these days).
• The national government does nothing for weeks to investigate the troubles, until
public clamour forces their hand. Eventually the Peña Nieto government is dragged into
the affair, very much against its will.
• And so to last week and according to the official report made by the government
investigators (11) the 43 students, on orders from the local governor, handed the
students over to a known narcotrafficking gang who then executed all 43, incinerated
the bodies and dump the remains into a local river.
The case has rocked Mexico and caused a great deal of political damage to the governments of
Guerrero and the nation. Its effects are still very fresh too, as the riots outside the state
parliament of Guerrero this weekend show (12), including full-on Molotov cocktail attacks and
burning vehicles galore. Beside the obvious grief of the families of the 43 victims, the scandal of
the clear and corrupt connections between politicians, police forces and narco gangs is not one
that’s going to be easy to sweep under the carpet and chances of further instability are very
high, but more pressing for businesses in the region (e.g. junior mining companies) is the onset
of institutional instability from governors down that could open a whole can of worms. Another
aspect to this is how the notoriously violent region has to this point been able to keep its
troubles away from the Mexican national and eventual world spotlight, but that’s now almost
certainly a thing of the past and people are now looking and seeing things for the way they are.
It’s unlikely that mining companies working the region will be able to enjoy the free pass
they’ve been able to get up to now. The place has always been trouble with a capital T, in the
18
future it will be newsworthy trouble. Avoid any mining company exposure to Guerrero like the
veritable plague.
Colombia’s páramo de Santurbán: The blind leading the blind
You know things are bad in the Santander páramo region of Colombia (Eco Oro, Ventana Gold
etc) when they decide use Ecuador as a model to follow. Last week local representatives of the
Páramo communities, political organizations and mining co-operatives got together in a press
conference (13) to demand an audience with President Juan Manuel Santos in order to make
progress away from the current inertia besetting the region. In the case of the mining
companies, they want the high executive to intervene in order to allow mining to begin again in
the region, be it in the old style of traditional informal (now dubbed illegal all of a sudden) or
new style formal mining which continues to be blocked by the government’s own incompetence
in moving forward with its plans. It came just a week after a group of around 100 ex-miners at
the AUX (Ventana Gold) and Eco Oro projects who were laid off by the companies earlier this
year tried to force their way back into the concessions in order to re-start artisanal-type
informal mining operations. They were stopped by security guards last week but have vowed to
try again and if so, there’s the chance of headline-making disturbances. In the words of the
Workers’ Syndicate of Santander (Sintramisan), “they are now organizing to re-take and invade
the mining concession of sectors such as La Bodega, La Perezosa and La Armenia. At this
moment the scenario is of reorganization of the informal miners to enter and to mine, even by
force if necessary. We’re worried, because the community could suffer serious consequences
via legal actions, the breaking of laws and the national regulations, due to illegal mining that
does not respect the environment”. The atmosphere is tense, as those would-be illegal miners
would prefer a better option but they’re stymied and the lack of work is now pushing them to
consider more desperate measures.
Where the whole thing gets bizarre is in a second communique from the páramo committees,
who asked the President of neighbouring Ecuador, Rafael Correa, to meet with the mining
worker representatives of the Santurbán páramo, so that they can learn about Ecuador’s model
for sustainable mining and how they might be able to implement it in Colombia. When you
consider how little progress Ecuador has made in the last five years with its “nascent mining
industry” (a longer period of pre-natal labor pains is difficult to imagine), Colombia looking to
Ecuador for inspiration and advice is a sad reflection on how badly Colombia’s government has
handled its own state of mining affairs.
Who got the gold investment in 2013
Which countries received most Foreign Direct Investment (FDI) for gold mining projects in
2013? According to a paper released by the World Gold Council this week (14) the top seven
were as follows:
• USA: U$7.302Bn
• Australia: U$6.287Bn
• Canada: U$3.87Bn
• Dominican Republic: U$3.086Bn
• Argentina: U$2.546Bn
• Peru: U$2.325Bn
• Mexico: U$2.24Bn
Once you get the big three out of the way, that’s a pretty strong showing for the LatAm region
and although it may be a one-off thanks to the Barrica Pueblo Viejo (ABX 60%, GG 40%)
Project, Dominican Republic in 4th Hill surprise many.
Along with the top seven, other LatAm countries with significant gold capex FDI include Chile
(U$1.48Bn), Brazil (U$566m), Suriname (U$293m) and Colombia (U$278m).
Peru: Second round regional governor elections to be held on December 7th
We now have a fixed date for the regional election run-offs. Of the 25 regions of Peru, 14 have
19
second round run-off elections to decide their governors and vice-governors (for the record,
Áncash, Apurímac, Arequipa, Cusco, Ica, Lima Province, Pasco, Puno, San Martín, Tacna,
Tumbes, Huánuco, Junín and Madre de Dios) and the electoral body has decided that Sunday
December 7th is the day, which means 7.6m voters will be obliged to vote. Including my wife*.
And including the people of Puno, who will be voting for the one that we’ve watched more
carefully than others due to the Bear Creek (BCM.v) aspect, the Luque (pro-mining) versus
Aduviri (anti-mining) showdown.
*fwiw as a foreign national with residency I’m not obliged to vote
Peru: Environmental permitting to be streamlined. At last.
As part of a larger economic stimulus package put to together by the Humala government last
week (mainly under the auspices of the new FinMin Alonso Segura), the executive sent for
debate and (hopefully) eventual approval a measure to streamline the permitting process for
large projects such as mining developments. Here’s an excerpt from this Reuters report (15)
that covers the headline info:
Humala will now ask Congress to green-light a new legislative proposal that rolls
various environmental permits into one and allows for approved impact studies to be
shared, Finance Minister Alonso Segura said on Thursday.
Segura said the new system would shave three and a half years off the total waiting
time from the current process in Peru, a global minerals exporter with more than $57
billion in mining investments lined up for coming years.
Penalties for public officials and automatic approvals would be triggered if permitting
deadlines are not met, Segura added.
But this link (16) for those of you versed in Spanish give the most complete coverage of the law
change proposals. The main feature of the law proposal is that Environmental Impact Studies
(EIA) and eventual permits will be under the control of one body, SENACE, which is a branch of
the Ministry of the Environment. Up to today, each separate ministry is in charge of permitting
and approving projects in its own sphere (mining ministry covers mining, energy covers
hydrocarbons, etc) but each project has also needed separate permits and approvals from other
ministries and bodies covering controls for water, environment, archeology, etc etc. What the
new plan does is offer a so-called “single-window” for private sector companies; they’ll only
have to deal with one office and one set of government officials, and it will be up to the people
in SENACE to do the legwork (under the stopwatch, too) and get approval from the various
departments for any given project. And as Minister Segura explained in the Thursday presser
(17), “What happens today is that the EIA includes a series of permits and opinions are then re-
applied for at different entities and typically 80% of the information is exactly the same”. By
putting it all in a “single window” the idea is to streamline the process and not repeat the same
information over and over again, with the process ending up as a single global permit which is
then approved or denied.
Overall and after reading proponents and critics of the new government initiative I’m cautiously
in favour of the new plan, though I stress now that it’s going to have to be done right in order
to be an effective change. The two weak points I see are 1) SENACE itself has never run or
approved a single environmental study before today and as a bureaucratic institution is
untested, and 2) if projects are pushed through too quickly and without the necessary controls,
the results may cause even more friction with project opponents. But if done right, the plan
should indeed speed up the permitting process in Peru and make the country a more attractive
destination for FDI. At the very least, it’s unlikely to be any worse than the delay-ridden system
currently in use in Peru that has held back projects for too long.
Market Watching
Amerigo Resources (ARG.to) 3q14 financials
We last looked at the numbers for ARG.to in IKN284 dated October 19th when it announced its
20
production numbers for its Minera Valle Central (MVC) operation. As ARG gives plenty of detail
in its quarterly production NRs that goes above and beyond the necessary disclosures, simple
tracking of quarterly numbers usually allows anal ysts to get fairly close to its quarterly financial
reality (and therefore look smarter than we are come the day) and as things turned out 3q14
wasn’t an exception, apart from the final final bottom line which was affected by something I’d
missed. So here’s the overview.
Revenues at $28.881m were about $630k shy of The IKN Weekly estimate ($29.5m). while cost
of sales at $27.027m were $930k lower than The IKN Weekly estimate ($28m). This chart
shows those two next to each other, plus the ensuing gross profit of $1.854
ARG.to: Quarterly Earnings overview
60
50
40
30
20
10
0
-10
21
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source: company filings, IKN ests
srallod
fo
snoillim
revenues
COGS
Gross profit
Here’s a closer look at costs.
ARG.to: Costs breakdown
60
55
50
45
40
35
30
25
20
15
10
5
0
-5 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
U$m
other
G&A
COGS
source: company data, IKN ests
G&A came in at negative $15,000. Our estimate of $1m would have been correct enough, but
for the royalty rebate of $974k that ARG
received after renegotiating its royalty deal ARG.to: operating profit
6 5.248
with its feeder mine, El Teniente. The deal 5 4.421
h of a s t h f i r s e e y d e a u r p ( w ca e s ’l h l a fl l o so w s f e o e r A th R e G b u e n n t e il f i t t h i e n e t n h d e 2 3 4 2.439 3.090 1.515 1.968 3.000
1 -0.061
4q14 numbers) and is good for the company, 0
-1
as well as showing the decent partnership
-
-
3
2 -0.839 -1.273-1.524 -0.933
ARG enjoyed with its big partner. That
-4 -3.203
influence brings operating profit for the -5 -4.253
-6 -5.048
quarter to nearly $2m and we’re now -7
-8
expecting something around $3m for 4q14, -9 -7.823
what with the low grading material that’s
been crimping ARG production now expected
to give way to the more normal grades and
therefore improve production.
The one thing I got really wrong in the forecasts was the net profit, which came in at a
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
$m
source: company filings, IKN ests
$3.725m loss due to a $5.3m tax charge for the quarter. That was taken by ARG due to
changes in the tax code in Chile and it’s something I completely missed in my analysis. Must try
harder, but it changed a $1m win (forecast) to what you see on this chart below. The net profit
for 3q14 (green bar) sits next to gross and op profits. So be it and onwards, we can expect
4q14 to be a normal relationship.
ARG.to: Evolution of profits
6
4
2
0
-2
-4
-6
-8
-10
22
11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source: company filings, IKN ests
srallod
fo
snoillim
op profit
Net Income
Gross profit
However, the tax charge was a non-cash one, as these two charts from the balance sheet
demonstrate. In 3q14 treasury cash moved up over $10m again, and working capital also got
better thanks to that extra cash and slightly lower near-term liabilities. Working cap at $5.75m
is a reasonable liquidity position and shows the company is getting by just fine, even in these
days of tight operating margins due to lower copper prices.
ARG.to: Cash and ST
40
35
30
25
20
15
10
5
0
The one thing left pending from the quarter is the financing deal for the $140m expansion plans
for MVC that would virtually double production capacity. ARG had previously guided them to be
closed by now but as that’s obviously not the case the company is now giving us this (from the
covering NR):
Negotiations in respect of the terms and conditions and requisite documentation for the
expansion, including the US$131 million financing and all other key agreements, are
being finalized and credit approvals from bank syndicate members are in process, all
of which are expected to be completed during Q4-2014.
Fair enough. Let’s see how things get on by the end of December, but as we all know how
shaky the current situation is for the world of mining I’m not going to hold my breath. We find
ARG today in a holding pattern, its core business is doing just fine and if the expansion doesn’t
come exactly to order timewise it’s unlikely to affect the share price from current levels. A small
note that ARG has already capitalized $9m of the expansion costs, so it’s clearly serious about
getting things moving and only waiting on the deal with the money people.
Gold Resource Corp (GORO) 3q14 financials
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
15 ARG.to: Working Capital per qtr
12
9
6
3
0
-3
-6
source: company filings, IKN ests
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source company filings, IKN ests
srallod
fo
snoillim
GORO reported its quarter last week and although I don’t currently cover or short it, it needs at
least a few words here because its quarter was absolutely weird. See the full SEC filing here
(18), but this chart of the breakdown in revenues between silver, gold and base metals (Zn, Pb,
Cu) goes a long way to explaining things:
GORO: Percentage breakdown of revenues by metal
100
75
50
25
0
23
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
%Ag %Au %credits
source: GORO filings
Of the $21m and bits in revenue, GORO claims that 1/3rd of that was in zinc sales alone. It
suddenly, from nowhere, claims that it’s sold more than $7m in Zn at a time when it says it’s
holding back gold sales, but it’s never sold $5m worth of zinc in any quarter previously, let
alone seven. And it again claims suspiciously high realized prices for all its metals (far from the
first time) by saying its average sales prices were $1.295/oz Au, $20/oz Ag, $3.22/lb Cu,
$1.015/lb Pb and $1.085/lb Zn (just as one example, the London Fix silver average for 3q14
was $18.74/oz). There are many other strange things besides and if it goes much higher, I may
re-open my short position on this because it’s looking not merely incompetent but downright
crooked.
GORO has been hit hard recently and was well below $4 per share midweek last week, but
managed to rally with the rest of them on the tide and finished at $4.02 on Friday. I have no
idea why this company is still taken seriously.
Endeavour Silver (EDR.to) (EXK) inside selling update
Just two weeks ago in IKN285 we noted that Endeavour Silver CEO Bradford Cooke had been
putting through some significant insider sales. Today we note that even with the stock putting
in a rally at the end of last week, it finished Friday more than a dollar lower than the prices
received by CEO Cooke for his sales. Just saying.
Burkina Faso rant redux
According to the better and more informed Africa watchers the week in Burkina Faso hasn’t
been totally plain sailing, but the way in which it has quickly dropped off the news headline
map is commentary in itself; the
country has settled quickly after the
changes of the week before last.
This fits in with last week’s rant, as
does this chart of the two most
keenly exposed popular and widely
traded juniors to Burkina Faso,
Roxgold (ROG.v) and True Gold
(TGM.v). Those who heeded the
“sell now!!!” hype of the last
Thursday in October at the time of
the coup sold way too cheaply,
trading has settled down quickly,
the recovery has already added at
least 15% (and up to 25%) to the
dollar value of your shares if you ignored the jittery panick-mongerers.
I own neither stock, wish both companies good fortune and think that on the way they raised
their capital, Roxgold (ROG.v) is probably the better vehicle from here. But I’m not buying
either of them.
Scorpio Mining and US Silver & Gold merge
Ever since the Fiday evening announcement that US Silver & Gold (USA.to) and Scorpio Mining
(SPM.to) were joining in a friendly merger (19) I’ve been trying to think of a reason why I
should care.
Fact is, I don’t and neither should you. Two waste of time juniors getting together due to an
Eric Sprott decision that keeps Darren Blasutti in the comfort to which he has become
accustomed.
Shale oil and costs: There’s more potential downside in the oil price
It’s not a specialty of the house by any means [sidebar: O&G mining is a different world to that
of hard rock mining and I’ve tried and failed a couple of times to get a reasonable handle on a
couple of oily juniors] but because it’s a major cost input of mining companies, particularly the
large tonnage heap/dump leachers in the copper and gold worlds, your author has had a keen
eye on what’s going on with the oil price recently. Things such as the new supply of US shale-
type oil (and Canadian tar sands for that matter) and how they’re affecting current prices are
roughly understood.
I don’t mind admitting that I’m one of the people who’ve been assuming the “wildly wrong”
scenario mentioned by Eric Melvin in the Reuters report featured below (20)
.
HOUSTON (Reuters) – Output from U.S. shale oil fields will keep growing for
some time even if crude prices dip further, and people have been too quick to
write off companies in shale basins, the head of a company that provides
hedging services to U.S. producers said.
Conventional wisdom among oil analysts is that Saudi Arabia, frustrated by a
global supply glut caused by soaring output in the United States, is prepared
to let prices fall to squeeze U.S. capital-intensive shale oil producers out of the
market.
But that view is misplaced.
“This is something people have gotten wildly wrong – the cost structure of
shale production,” Eric Melvin, chief executive officer of the Mobius Risk
Group, told the Reuters Commodities Summit.
“We have a lot of clients in this area, and the cost structure I’ve heard is $70
or $80 a barrel. Well, that means I might slow some capital expenditures in
2015 and even into 2016, but that’s not going to change production for wells
24
that are funded and drilling or about to be drilled,” he said.
“So you are going to see continued production growth here another $20 to
$30 down,” he added.
And that’s interesting, not so much growth downside as I expected for the US oil patch for one
thing, for another there are plenty of projects in South America (start with Argentina’s Vaca
Muerta, the go to the Peru and Colombia Amazon basin, followed by Brazil’s) which I thought
might start seeing the crimping but apparently not. The capex hurdle, once cleared, seems to
be the main question.
As a slight aside, I’ve been asked as to how the drop hydrocarbons prices will affect Top Pick
Rio Alto (RIO.to) (RIOM) by a couple of you in 4q14 and beyond. The answer to that is 4q14
not much, beyond we’ll see. Fuel prices in Peru are notoriously sticky, as the government uses
a large lot buying system which means it buys a lot of inventory and will not move the price
down until that inventory is cleared. A couple of weeks ago, word was that fuel prices were
expected to drop “around the end of 2014” when the backlog of higher priced fuel had been
moved, which means RIO.to (and all the others) won’t see the benefit of $75 or $80 barrel oil
until 2015 at the earliest. At that time we’ll be able to take a reading on prices and work them
into the 2015 cost parameters. Until then RIO will have to make do with cost cuts from other
areas of operations.
Not only Australia: Vale also expanding Brazilian iron ore production
We know that iron ore prices have dumped in 2014 due to supply hikes from expansions of
mines in Australia, main culprits being BHP and Rio Tinto. Here’s an example of a thousand
reports on the subject (21) that starts...
“Iron-ore prices are down 40% this year, but it isn't because of China. Instead,
an Australian-led surge in production has left the industry with too much
supply even for China's massive steel industry to absorb.”
As for visuals, here’s a good chart of the iron ore price:
OK, if you want a real one this (22) is as good as any but be warned, the year-to-date chart is
only pleasant viewing for shorts or iron ore end users. But wait! There’s more! Now Vale (VALE)
in Brazil is getting in on the act and shoring up the third leg of the oligopoly in iron ore. Vale
last week was awarded the operations licence for the expansion of its N4WS pit, part of its
extensive iron ore operations in Carajás, Pará State, Brazil (23) from where around 35% of the
iron ore mined by Vale comes. The expansion is scheduled to kick in in 2015 to 2016 and will
add to the current operations in its other four pits there. However, holders of any junior iron
ore exploration stock that’s trying to move forward on its own project will be comforted by the
words of Rio Tinto’s boss Sam Walsh last week (24)
“Chief Executive Sam Walsh Says Suggestions of Coordination Among Producers Have ‘No Truth’”
And he said it out loud so it must be true. We’ve highlighted Alderon (ADV.to) as a victim in a
25
couple of recent editions, but there are more besides. Your author presumes that once these
projects are down to roughly a penny on the dollar Rio Tinto, BHP and/or Vale will mop the best
ones up and bring them into the New World Order fold. That’ll be roughly when iron ore prices
stage a rally.
Conclusion
IKN287 is done, we end with bullet points:
• A short trade on Fortuna Silver (FSM) next week, speculative and very-near-term in
nature, because I can’t see its 3q14 numbers impressing tomorrow evening.
• With Coro Mining (COP.to) added and K and TGD positions sold, it remains to be
decided whether I get rid of my First Majestic but aside that one, it’s going to be a case
of hunkering down for a few weeks and seeing where things stand after Canada has
done its tax loss selling.
• Avoid Guerrero Mexico, now more than ever.
• As for the week ahead, I’ll be looking for good numbers from Rio Alto (jungledrums are
very positive), better news than expected from Minera IRL (IRL.to) when it reports,
then taking a good hard look at BTO when it files its 3q14 on Friday. In the case of that
one, the ConfCall is probably more important.
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://humblestudentofthemarkets.blogspot.com/2014/11/do-you-have-what-it-takes-to-be.html
(2) http://www.reuters.com/article/2014/11/03/gold-demand-asia-idUSL4N0ST32R20141103
(3) http://www.bloomberg.com/news/2014-11-07/china-gold-buying-means-price-floor-to-standard-chartered.html
(4) http://www.theguardian.com/commentisfree/2014/nov/08/russia-today-western-cynics-lap-up-putins-tv-poison
(5) http://www.calculatedriskblog.com/2014/11/comments-solid-employment-report.html
(6) http://finance.yahoo.com/news/fortuna-release-third-quarter-financial-120000091.html
(7) http://finance.yahoo.com/news/first-majestic-silver-corp-conference-211800727.html
(8) http://finance.yahoo.com/news/coro-announces-optioning-llancahue-property-203228434.html
(9) http://noticias.terra.cl/chile/ministra-de-mineria-valoro-decision-de-goldcorp-de-reformular-proyecto-el-
morro,68cf6a8f41c89410VgnCLD200000b1bf46d0RCRD.html
(10) http://www.sciencemag.org/content/346/6210/706.summary?sid=869102f9-b42f-4098-9975-80fb2789128c
(11) http://www.lanacion.com.ar/1742134-mexico-hallan-quemados-y-enterrados-a-los-43-estudiantes-del-estado-de-
guerrero
(12) http://elcomercio.pe/mundo/latinoamerica/mexico-turba-provoca-disturbios-masacre-43-estudiantes-noticia-
1770008?ref=portada_home
26
(13) http://www.vanguardia.com/economia/local/285886-mineros-de-santander-piden-audiencia-con-los-presidentes-
santos-y-correa
(14) http://www.cpampa.com/web/mpa/2014/10/dominicana-lidera-gasto-en-mineria-aurifera-en-
latinoamerica/?cat=noticias-destacadas
(15) http://www.reuters.com/article/2014/11/06/peru-economy-stimulus-idUSL1N0SW0T220141106
(16) http://www.miningpress.com.pe/nota/273982/el-paquete-de-medidas-mas-esperado-por-las-mineras-tramitologia-
senace-y-la-ventanilla-unica
(17) http://www.rpp.com.pe/2014-11-07-mef-espera-que-congreso-apruebe-medidas-de-cuarto-paquete-
noticia_740217.html
(18) http://www.sec.gov/Archives/edgar/data/1160791/000116079114000024/goro-20140930x10q.htm
(19) http://www.newswire.ca/en/story/1442425/scorpio-mining-and-u-s-silver-gold-announce-business-combination-to-
create-a-well-funded-junior-silver-producer
(20) http://www.reuters.com/article/2014/11/07/us-commodities-summit-mobius-
idUSKBN0IR2A120141107?feedType=RSS&feedName=everything&virtualBrandChannel=11563
(21) http://online.wsj.com/articles/iron-ore-supply-glut-too-much-even-for-china-to-reduce-stockpiles-1411478626
(22) http://ycharts.com/indicators/iron_ore_spot_price_any_origin
(23) http://www.cpampa.com/web/mpa/2014/11/vale-obtiene-licencia-para-mina-a-cielo-abierto-en-brasil/
(24) http://online.wsj.com/articles/rio-tinto-ceo-defends-iron-ore-supply-expansion-1415449496
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-ene-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-ene-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-abr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-abr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-ene-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-abr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
27
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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