IKN #290Premium

The IKN Weekly
Week 290, November 30th 2014
Contents
This Week: Next week BLS jobs for November, The official reason for last week’s metals
dump, Errare humanum est, sed perseverare diabolicum.
Fundamental Analysis: Stock filtering renews interest in Starcore International (SAM.to).
Stocks to Follow: Overview, Fortuna Silver (FVI.to) (FSM), First Majestic (FR.to), Rio Alto
(RIO.to) (RIOM), Coro Mining (COP.to), Reservoir Minerals (RMC.v), Lara Exploration (LRA.v),
Salazar Resources (SRL.v).
Copper Basket: Overview, Hot Chili (HCH.ax).
Low Cost Producer Basket: Overview, Franco Nevada (FNV).
Regional Politics: Uruguay: The second round run-off election is today Sunday, Peru: Lima
plays host to the COP20 climate talks, Peru: Las Bambas construction going at a good rhythm,
Mexico: Mining concessions lapsing, Colombia: Easier permitting by end 2015 (so they say),
Chile: Mining drags down industry growth numbers, Argentina: Chubut’s mining law changes.
Market Watching: Regulus Resources (REG.v)
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
Next week BLS jobs for November
The regular headsup on one of the main US macro datasets and one that can and often does
move commodities prices of all types. Current consensus (1) on the numbers is 225,000 non
farm payroll jobs added, plus a headline 5.7% unemployment. The consensus may change as
the week progresses so if you’re trading round this event keep your eyes peeled, usual story.
The official reason for last week’s metals dump
Somebody, somewhere, sat down in front of a computer screen on Friday evening and wrote
about the drop in the price of copper. Somebody else, in another place, had to explain to those
who fund their salary just why silver had dumped to under $16/oz. At the same time, third
person went about justifying Friday’s drop in gold away from the recovery $1,200/oz level and
back under the (what technical analysts called) the “key” $1,180/oz level and back to $1,160/oz
or so. To sum up what we saw in just four bullet points:
• Spot copper Wednesday 26th to Friday 28th dropped 3.1%
• Spot silver Wednesday 26th to Friday 28th dropped 5.1%
• Spot gold Wednesday 26th to Friday 28th dropped 2.1%
• Meanwhile, the US Dollar index, generally trading at 87.7 on Wednesday, finished the
week 0.8% higher at 88.4.
Here’s the official reason, as used and written to bosses and paymasters:
1

Yesterday’s sharp drop was a consequence of the decision by OPEC to reject calls for
a coordinated cut in world crude oil production in member states, which under the
context of weak global demand for hydrocarbons pushed spot prices for oil to new
lows. Under this scenario, investors sought refuge in the most liquid bonds markets,
principally in US dollar denominated issues, which saw the dollar appreciate against
the other major international currencies and thereby weakening demand for mining
commodities priced in dollar terms. With broader macroeconomic sentiment also taking
into account the outlook for weaker end-user demand in China due to its growth
deceleration, participants took the decision to mark down metals across the board.
Hey wasn’t that good? I could do this for a living, perhaps sell chunks of prose on a bespoke
basis to anyone needing that week/month/period report to be in the boss’s inbox first thing
Monday morning.
Now for an attempt at the real reason, as far as I see it: Market players took advantage of a
thin trading period around the USA Thanksgiving holiday to dump prices for most commodities
on the back of an OPEC decision that came as a surprise to absolutely nobody. It was a nicely
timed, opportunistic and wholly financial dump in all things that are heavy in buckets, set up
well and executed by those who move markets around in order to make short-term gains. Or
that’s what it looked like. In short, it’s easy to call BS on what we saw last week unless it gets
confirmed by the week ahead. As downdrafts go, it wasn’t one that worried.
Errare humanum est, sed perseverare diabolicum
Your author’s contempt for purveyors of technical analysis remains firmly intact.
This is not about requiring a perfect score from anyone stupid enough to attempt to predict the
future; after all, you and I do that every time we buy or sell a stock.
Nobody has a perfect score. Nobody gets them all right. Nobody.
And just as there are good’uns and bad’uns in fundies analysis, in merchant banking, in mining
directors and managers, in geologists, in the mining sector, in any other sector, in just about
2

any aspect of the movement of money from one pocket to another in exchange for goods and
services, you get good and bad people in the world of technical analysis. For example, just
about everyone on this reading list will know the high esteem in which I hold the excellent TA
of Gary Tanashian (Biiwii, Notes From The Rabbit Hole, featured columnist in many metals-
related places, etc), but there’s something (low barrier to entry?) about TA that attracts a very
high ratio of BS artists and complete charlatans for every good’un. To spot them, here’s a non-
inclusive list:
• The language of absolutes, “will do this”, “must do that” etc
• The peddling of dogma (yes we know what you think about fiat currencies, what Ayn
Rand thinks about social safety nets).
• The use of ‘not yet but just you wait I’ll be proven right soon enough’ line of argument
• A proliferation of exclamation marks (!) to point out (!!) when the author thinks (!!!)
the world has gone crazy (!!!!).
• But above all others, the convenient memory lapse when things don’t work as planned.
I know what it means to admit stockpicking failure to an audience (hey, just check out the red
ink below folks) and because of that I’ve been through the mental twists and turns, examined
the angles, thought of ways to explain failures in the nicest and most palatable way. I do not
and cannot demand perfection in admissions from anybody because I’m by no means perfect
myself. You don’t need wringing apologies or heartfelt mea culpas every time a trade goes
wrong, and I don’t need to put myself through the wringer for each occasion either. Neither
does any other anal yst, there’s no need to auto-flagellate every time, but at least one line that
says “OK people, this trade didn’t work out, I’m selling it at a loss”, or “I’m holding a bag here
and if you followed me in you are too, but for the time being I’m going to keep holding it”, so
some-such is required by moral law. What’s important is that in some way, shape or form your
failure is noted and therefore noticed, which then gives the reader (in my case the paying
customer, that’s you) a fairer concept of the pros and cons of taking the advice offered.
The mining sector’s reputation for attracting and rewarding dishonest people has been common
knowledge for literally centuries (for more on that, check out that famous Mark Twain quote
about miners, liars and holes in the ground). One of the reasons for its persistence is that the
people who comment on the sector are often as bad as those who run the companies.
SWMBO vacation news
Those of you who’ve been around for a while will remember this segment from previous years.
Today is a formal headsup that SWMBO* has spoken and this year’s summer vacation plans
mean that The IKN Weekly will continue its normal service during the Christmas period and all
January, but there will be a gap of either one week (with perhaps one other “bare bones”
edition) during February. The summer vacation this year involves 1) beach time, staying with
extended family at a coastal resort here in Peru and while there I’ll be in full contact with the
world, but 2) five to seven days in a remote area hiking the highlands and that’s when there
will be a one week break in the normal service.
The need to know: There will be one missing week of The IKN Weekly in February 2015.
*She Who Must Be Obeyed: know your Rumpole
Fundamental Analysis of Mining Stocks
Stock filtering renews interest in Starcore International (SAM.to)
Preamble
Some stages of the mining sector cycle are more interesting than others so let it be said, loud
clear and out loud, that the last few months have been a rather boring and drudge-laden
3

period to care about fundamental analysis of mining stocks. Stock prices dropping, metals
prices dropping, general interest in the sector
dropping and what’s more, all against a backdrop
of fun, fizz and frolics in broad markets and a
secular bull market in the USA (sidebar: note
that there are still people obstinate enough to
dispute that the USA is in a secular bull: To those
people, that chart is not a cycle).
But oh yeah quarterlies go on long after the thrill
of analysis has gone so through the current
period of quarterly production numbers and
financials it’s mostly been a case of keeping the
spreadsheets up to date in order to notice any
changes, or stand-out numbers among the producer end of the junior world. Interesting,
attractive, eye-catching sets of numbers have been few and far between and even when things
were better (or less worse) then expected it’s nigh on impossible to get enthusiastic about the
idea of new ownership of stocks. A good example of this that springs to mind on writing this
preamble today (Saturday morning bright and early if you care) is IMPACT Silver (IPT.v),
because the numbers that company posted were even good enough (less worse enough?) to
merit a passing comment on the blog last week (2). I was expecting disaster, I was met with a
small net loss and a decent effort at costs cutting by a company doing what seems to be
everything in its power to get through a rough period unscathed. But call buy on the stock
while silver is under U$17/oz is for the most optimistic among us only (for what it’s worth IPT.v
could be a buy if silver punches back through U$19/oz but until then, easy pass).
That rambling opener has finally brought us to Starcore International Mines (SAM.to) and the
production numbers it posted on November 19th (3) because even though the headline
production number wasn’t any great shakes, the modelling of the upcoming financial results
compared to its current share price made things look more interesting than most.
Previous coverage of SAM.to and recent corporate news
Today isn’t the first time we’ve looked at SAM.to as that came in a NOBS report in IKN227, back
in September 2013. Priced at 23.5c at that time, I bought the stock on the back of that analysis
and held it for a couple of months through a period when it offered a worse than expected
quarter giving up the ghost in November (i.e. roughly this time last year) at 17c. That turned
out to be a little early, because the
next couple of quarters from SAM
came in nicely and the stock rallied
into early 2014.
The last time we mentioned SAM.to
was in IKN276 at the end of
August, as the company caused a
bit of a stir and a price pop when
announcing a 2c/share dividend.
Back in IKN276 we liked the cash
bonus for shareholders but advised
against getting involved and buying
on the news and that one at least
turned out to be the right call.
SAM.to jumped from 15.5c pre-divi
announcement to around 22c on the news.
Since then it’s been caught up in the general malaise of the sector and sunk, slowly but surely,
down to its current 13c level. Along the way in this latest period we’ve seen insiders exercising
a total of 2.25m options into shares at 15c without selling a single one into the market (a
4

decent sign of confidence) and we’ve also seen SAM buy out American Consolidated (AJC.v), a
nanocap junior with directors in common with SAM.to and early stage properties that haven’t
seen much work because AJC has had no money to do any exploration work. That deal (4) is
nearly homed and hosed and is expected to close this week coming (Tuesday 2nd December
should bring confirmation news). The all-share deal means SAM.to will issue 5,856,397 shares
along with 557,139 warrants.
Along with that merger deal and dividend announcement, SAM announced (5) it was setting
aside up to $1m for share buybacks in the 12 months ahead. There haven’t been any filings on
purchases as yet, so we’ll only know whether the share count has changed when the 1q15
numbers are filed in the next week or two (SAM’s YE is July, therefore to end October is its Q1).
For the moment we’re assuming that SAM.to hasn’t bought back any shares and if so we’re
we’re left with this as current share structure:
Shares out: 151.621m*
Options: 11.537m
Warrants: Zero
Fully diluted shares: 163.158m
Current share price: $0.13
Market Cap: $19.71m
Approx working cap per S/O: 7.6c
All prices are in Canadian dollars unless stated. Forex U$0.90=CAD$1
*assumes closing of American Consolidated (AJC.v) in few days’ time
NB: As the all-share deal to buy out American Consolidated (AJC.v) has now been agreed and approved by both boards
and is just waiting on next week’s legal rubber stamps, we assume the new share count above.
The latest production report
With all that out the way, we get to where I wanted to be in this update on SAM.to, its latest
production numbers. Announced on November 19th (6) as noted above the top line production
number of 5,381 gold equivalent (AuEq) ounces (4,998 oz Au, 25,900 oz Ag) from the San
Martin gold/silver mine in Queretaro State, Mexico was low compared to other quarters and not
that inspiring. As silver is a very minor addition to revenue, the reliable way of tracking
production is via gold only and here’s the chart that shows what we know about SAM.to so
far...
SAM.to: Gold producer vs gold sold, per qtr
7000
6500
6000
5500
5000
4500
4000
3500
3000
5
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco
Oz Au
gold prod
gold sold
source: company filings, IKN ests for gold sold oct'14
...along with the assumption we make for the revenues guesstimates coming up, that gold
produced = gold sold. These next three charts show that throughput has risen slightly (make
sure you see the cut-down Y-axis on this chart)...

SAM: tonnes per day throughput
900
880
860
840
820
800
780
760
740
720
700
6
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco
tpd
source: company filings
...gold recovery percentages dropped slightly (again, the Y-axis is cut to show changes more
clearly)...
SAM.to: Gold recovery percentage
100
95
89.00
90 88.20 86.70
84.61
85 89.00 86.00 79.30 86.90 86.30
80 83.90
81.00
75 78.40
75.00
70
69.50
65
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco
source: company filings
...while average grade was down again in the October 2014 period, to 2.36 g/t:
SAM.to: Avg gold head grade (g/t) per qtr
3.50
3.00 2.81 2.89
2.50 2.40 2.14 2.15 2.03 2.01 2.23 2.38 2.55 2.34 2.42 2.36
2.00 1.70
1.50
1.00
0.50
0.00
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco
g/t Au
source: company filings
It’s fair to say that SAM.to isn’t trying to high-grade its mine. On the subject of grade and
before moving on to our guesstimates for revenue in the latest quarter (which is the core
reason why we’re featuring SAM.to today, so bear with me) we had a new resource count from
the company with a cut off date of July 2014. That looks like this:
SAM.to: San Martin Gold Reserve/Resource as at July 2014
Category Tonnes (m) Au grade (g/t) Ag grade (g/t) Oz Au Oz Ag Oz AuEq
P+P 0.49 2.31 18.5 36142 289448 40277
Inferred 0.90 2.37 24 68433 692990 78333
Total 1.38 104575 982439 118610
source: SAM data, IKN calcs
There are some significant changes in that table compared from the previous resource count,
as featured in the NOBS report of IKN227. Total gold ounces are down by nearly 40,000 oz, and
total gold equivalent ounces are down by nearly 62,000oz (were 180,452 oz AuEq M+I+I, now
118,610 ). This is mainly due to the mining cost assumption now at a (very conservative)

U$74/tonne cut, up from U$65/tonne, and the grade cut-off is now calculated at 2.2 g/t AuEq,
up from 2.0 g/t AuEq. Along with some other minor adjustments and of course the depletion
since the last calc, made in 2012, the gold resource has dropped considerably. However it’s not
that much of a concern to us because San Martin has a long history (20+ years) of new
resource discoveries replacing mined tonnages, as well and how the new P+P number still
covers at least six quarters of production. What we do have is a smaller resource, but now
based on more robust economic metrics that we can trust more as ounces that can be
profitably mined, even in our new low price gold world.
Predictions for revenues in the October quarter
We now get to the crux of the deal here, because even though the October production quarter
was low, our model suggests that SAM.to is in decent financial shape. However, we need to be
clear about the nature of a small mining operation such as this, because any small variation in
sales can make a big difference to the company’s overall financial quarter. Just on three
examples:
• If SAM.to sells less than it produces, revenues can easily come up shorter than our
forecast
• If SAM.to gets a higher or lower average price for its gold than the London Fix
assumption used, revenues can vary greatly in percentage terms on this small scale
• If SAM reduces or increases doré inventory (see chart) the effect of a few hundred
thousand dollars either side can make the
difference between an overall net profit or
net loss.
Those and a dozen other variables can come into
play. The idea behind today’s model isn’t to get
the upcoming financials exactly right, but it is to
provide a roadmap and show what SAM is capable
of returning financially. When the financials are
filed, we’ll be able to compare theory against
reality and also have a better idea of what SAM.to
has in store in 2015.
So with all that said, here’s our revenues calculator chart. The way in which we calculate
revenues (using spot prices and produced ounces) consistently underestimates SAM.to eventual
results, but as it’s consistent it does provide a useful straight line. We therefore guesstimate
that SAM will be able to return just over $7m in revenues for the quarter about to be reported.
SAM: "Calculated" vs Reported revenues, per qtr
12 (calc revs = tonnage + grade + recovery + realized prices for gold and silver)
11
10
9
8
7
6
5
4
3
2
1
0
7
21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco
$m SAM.to: Inventory
3
Doré other
2.5
2
1.5
1
0.5
0
july.12 oct.12 jan.13 apr.13 july.13 oct.13 jan.14 apr.14 july.14
source: company filings
$m
total rev calc
total actual revs
source: SAM filings, IKN calcs, Oct'14 ests
If that turns out to be the case, it would mean that revenues are down compared to previous
quarters, but hardly at a catastrophic level either.
The other side to the equation is that of costs. This chart shows how estimates run for that and

how costs per tonne at SAM.to’s mine are pretty consistent. This suggests that the mine is still
running at an operational profit, despite this quarter coming in with lower than average
production and suffering from the lower gold price deck.
SAM.to: Revenues/tonne vs cash cost/tonne
140
120
100
80
60
40
20
0
8
21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
$/mt
revs/tonne
cash cost/tonne
source: company filings
Here’s another way of cutting and slicing the same dataset, using per-ounce costs. Our best
guess is that the end-October 2014 quarter will see some savings in costs (plus more in the
current quarter to January, tentative figures added here) that go at least some way in offsetting
the drop in per ounce sales price.
SAM.to: Cash cost AuEq vs Au realized price
2000
1800
1600
1400
1200
1000
800
600
400
200
0
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco tse51.naj
U$/oz
Au realized price
cash cost AuEq
source: company data
Earnings estimates
This brings us to our P+L charts and estimates for earnings in the quarter. This the overview
chart shows how estimated revenues and COGS combine to give a thin but still positive-side
mine operating earnings. The model suggests that it’s going to be a close-run thing, and as
mentioned above any small change in the amount sold will make a difference between the mine
being FCF+ or FCF- in the quarter, but at least our best guess estimate gives reason to be
optimistic here.
SAM.to: Operations overview
22
20
18
16
14
12
10
8
6
4
2
0
01.tco 11.naj 11.rpa 11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
$m
revenues
COGS
mine op earnings
source: SAM filings, IKN ests
This chart gives a closer look at Mine Op. Earnings on its own, which we have slated at $0.5m

for the quarter just gone.
SAM.to: Mine Operating Earnings
10
9
8
7
6
5
4
3
2
1
0
9
01.tco 11.naj 11.rpa 11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
source: company filings/IKN ests
srallod
fo
snoillim
Then come the corporate and tax matters. As SAM.to took a $2.4m tax assumption in the
previous quarter (that estimates the charge taken from the new 7.5% Mexico royalty) things
should be calmer this time around. We’re estimating an overall loss, but one of only $0.5m
SAM.to: Earnings
8
7
6
5
4
3
2
1
0
-1
-2
-3
11.rpa 11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
$m
pre-tax earnings
net earnings
comp earnings
source: SAM filings, IKN ests
Balance sheet items
The heart of the matter is the balance sheet and liquidity position at SAM.to. We saw around
$2.8m in cash leave the company by way of the
16 SAM.to: Working Capital per qtr
recent 2c/share dividend, so the concern after
watching the leg down in gold prices is whether 12
it’s taken too much away from treasury. 8
4
As this chart of working capital shows, the likely 0
answer is that the dividend, the thin operational
-4
profit, plus possible extra legal charges for work
-8
connected to the acquisition of AJC.v (though not
-12
totally sure on that yet) will have chipped away at
liquidity, but not to a level we need to worry over.
Working cap is estimated at just under $11m as at
end October 2014 and of that, cash and ST
investments (SAM.to holds a time deposit in US dollars that pays 0.2% interest...better than
nothing) cover nearly $8m.
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
source company filings/IKN ests
srallod
fo
snoillim

SAM: Cash & short-term investments
12
10
8
6
4
2
0
10
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
$m
source: SAM filings, IKN ests
As liabilities these days are minor, ever since SAM.to paid off its financial debt with Sprott (the
near-term is accounts payable and normal, the long-term left is nearly all a deferred tax liability
that has no effect on SAM as a going concern)...
SAM.to: Liabilities Breakdown per qtr
45
40
35
30
25
20
15
10
5
0
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
source: company filings/IKN ests
srallod
fo
snoillim
LT debt
current debt
...it means the asset book is relatively clean. Most asset value is in the fixed, but cash and ST is
enough and book value is now at an IKN estimated $46.2m as at October 2014. That’s
32c/share and means this non-significant-loss-making-at-worst company is selling at 0.4X BV.
And that’s cheap.
SAM.to: Assets Breakdown per qtr
70
60
50
40
30
20
10
0
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco
$m
cash st inv other current fixed
source: company filings, IKN ests
To round things off, shares outstanding once the AJC.v acquisition is factored into the count will
look like this:

SAM.to: Shares Out
160
140
120
100
80
60
40
20
0
11
01.tco 11.naj 11.rpa 11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj tse41.tco tse51.naj
source: company filings/IKN ests
serahs
fo
snoillim
Theoretically, that number could go down by around 7m shares by this time next year if SAM.to
does indeed commit all of the earmarked $1m and buys back its full allotment of shares.
Discussion and conclusion
This fundies piece is almost as much about the dearth of interesting investment opportunities in
the junior producer world as it is about Starcore (SAM.to). For sure it’s not unusual to find very
few stocks that fit in the cheap and under appreciated category, the problem at the moment is
finding one that can also battle successfully against the overriding negative sentiment for
miners, large and small. Today’s fundies piece is as much about process, about weeding out the
stocks unworthy of consideration, than it is about the feature stock that’s a cut above the rest
right now.
What SAM.to offers today, potentially at least, is value. It’s the opportunity to get in cheap on a
stock that’s not going to show stunning headline numbers when it reports either next week or
(more likely) the week after, but if SAM.to can fit in general terms into the model shown today,
it will shape as a small producer that will be able to mine, turn a profit and perhaps even repeat
that dividend payment we saw earlier this year when the time comes round again. The lower
than average production schedule in the quarter just gone will put enough people off, as will
the slight net loss I’m expecting it to return. Because of that, the stock price that’s already
cheap could get a lot cheaper and undeservedly so.
Among the dross and mediocrity I’ve been filtering, SAM.to stands out as a possible. It’s not a
definite trade yet, not even a probable, but it has a better chance than most other tinycaps of
rebounding well and that’s because it looks to be a profitable gold miner at $1,200/oz gold in
2015. For those of you more open to risk, this current 13c price could tempt you in tomorrow
morning. I’m not one of those because I don’t think it’s going to move up when it reports its
quarter and I want to get more info on my side before deciding whether to buy it again. But at
its current price/book and considering the way it performs consistently well operationally, it’s
one set of financials I’ll be reading carefully when they appear.
Stocks to Follow
The nascent recovery of the previous couple of weeks wasn’t nipped in the bud during the
Thanksgiving shortened and somewhat fakey trading week, it was napalmed by B-52s dumping
a full payload from 35,000 feet. We did by some weird luxury get two big percentage weekly
winners in the Fortuna Silver short (FSM short up 15.3%) and the continued rally in Coro Mining
(COP.to up 18.2%), but that’s all the relief there is to offer. All the other 12 positions lost
ground, with double figure percentage losses registered in First Majestic (AG down 22.5%),
Minera IRL (IRL.to down 21.1%), Salazar Resources (SRL.v down 17.6%) and NovaCopper

(NCQ.to down 10.4%). There were a lot of other chunky losers in the mix as well, including the
8.4% in my biggest position (by far) Rio Alto (RIO.to). The paper losses were heavy last week,
period.
There are currently 14 open positions on our ‘Stocks to Follow’ list, one less than the self-
imposed maximum. Two green, one is unchanged since conception and averaging down (that’s
Dalradian) and the rest are in the red.
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$2.61 13.5% Top Pick, $3.30 tgt, Best PM Jr
Recommended long positions (in current order of preference)
B2Gold BTO.to buy C$2.32 12-sep-14 C$1.86 -19.8% Excellent entry point now
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.64 0.0% Nov'14 tgt $1.25, top Au expl
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$4.00 -33.9% Best spec Cu play
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.19 -17.4% tgt 50c, added, avged up
First Majestic AG spec buy U$10.51 10-aug-14 U$4.07 -61.3% Now in pair trade with FSM
Amerigo Res ARG.to hold C$0.405 20-jul-14 C$0.32 -21.0% Small Cu play, good value
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.075 -72.2% Waiting for financing news
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.69 -34.3% small Cu play low vols, hold
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.38 -67.0% solid biz model, LT hold
Goldquest Min. GQC.v hold C$0.26 27-oct-13 C$0.095 -63.5% no point selling so cheaply
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$3.87 6.1% In pair trade with AG
Smaller/Riskier
Coro Mining COP.to hold C$0.075 26-jan-14 C$0.065 -13.3% Added avged down Nov'14
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.14 -50.0% v. small spec, 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
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.
Overview: Last week newsflow was light and the trading was weird, stifled by the shortened
USA opening hours and had all the hallmarks of an unsustainable attack on the metals universe
by larger money. As a consequence, I’m not that bothered about any of the heavy drops seen
(FR.to, FVI.to, BTO.to, RIO.to, list goes on) and won’t be unless the moves are confirmed by
further weakness in the days ahead. Due to all that, individual stock commentary is light this
12

weekend with just a few names picked out for their specific reasons.
Fortuna Silver (FSM) (FVI.to) and First Majestic (FR.to) (AG) Pair Trade: Three things
I want to say about this one, and they come in strict order of importance (well, what I think is
important anyway):
1) First up and most importantly, I’m 100 times less concerned about the continued dump
in First Majestic than I was a couple of weeks ago before I put this pair trade plan into
action. The idea was to add some
balance into the port with this long/short
and leave it in place until at the very
least the end of this year (probably going
to run longer than that though), the
result is a couple of positions that aren’t
giving me a moment of worry any longer
(the grey hairs caused by FR.to came in
October).
2) The pair trade is still losing money, as
can be seen in the chart below. The
breach is around 10% in the last two
weeks (using the Canadian tickers this
time, due to the interrupted Thanksgiving trade patterns of FSM and AG) but I’m even
going to dare say out loud that FR.to was particularly oversold in last week’s weird and
artificial dump event and should gain back some ground in the days ahead.
3) Finally and least important, last week in IKN290 Market Watching, we noted that FVI
CEO Ganoza had sold a little under 100k’s worth of his shares after exercising options. That
accelerated last week and as noted on the blog (7) the total (so far) of insider sales from
Ganoza is 532,700, all options with a $4.03 strike and all sold at prices above $5 (the rough
average is $5.30). Those sales turned last week’s interesting datapoint into a significant
datapoint. By way of a small cherry on top of that large cake, company CFO (and brother of
CEO), Luis Ganoza exercised and sold 20k of his options as well.
Rio Alto Mining (RIO.to) (RIOM): The shape of this five day chart of RIO.to compared ot
the gold ETF (GLD) was repeated by so many mining companies, large medium or small, that I
lost count as I flicked through image after image on Saturday morning. Therefore, let us use
the chart of our Top Pick and let it cover all the others, in spirit at least.
The pattern is simplicity itself:
13

• Roughly unchanged on above average volume on Wednesday
• Dump into thin Canadian volume Thursday
• Drop accelerated on Friday as the NYSE half day selling kicked in.
That heavy Wednesday volume is a big part of my calling BS on last week’s action. Until and
unless the dump is confirmed in the five days to come, I find it very easy to ignore the selling of
last week
Coro Mining (COP.to): Four long weeks ago, the weekend after the big selling spree by
Sheldon Inwentash and Pinetree (PNP.to), I made my only exception to the wait-until-2014-is-
done-before-trading-again rule by adding and
averaging down on Coro Mining at the rock
bottom price of 2.5c. I’m glad to say that in a
sea of troubles, this one trade has worked out
well:
It’s not often I can claim a 160% win on a
trade in the space of a single month, but
that’s what’s buried under the overall loss I’m
still running on my COP.to shares.
But that’s in the past, what we need to
consider is the future. On the one hand, I like
the general concept of holding on to these
shares because of the line I’ve been trotting
out to you (nearly) every weekend; that COP.to is one of the very few tinycap/tinyprice shares
out there with real proactive plans to get busy in the months ahead, which include going into
production (on an admitted small scale). However, we must also recognize that the type of
rebound seen in COP.to over the last four weeks are the type that don’t last forever and with
copper spot price doing what it did late last week, it’ wouldn’t be any surprise at all to see
COP.to retrace some of the gains next week and towards the end of the year.
My own decision on my own shares is that I’m going to hold them through. I’m blessed/cursed
with patience and I like the company’s medium-term prospects. However, I wouldn’t blame
anyone for taking profits on this run and I’m happy to say that there are several readers of
these words that to my knowledge are sitting on decent November gains).
Reservoir Minerals (RMC.v): Down 30c
on the week, but only really dragged down
by late day trading Friday on very thin
volumes.
This is one of the few that tempt me to
break the “no trades until 2015” decision
that’s in place, if you’re braver than I,
anything at $4 or abouts is a great price.
Last week I got to read the best single
analysis of RMC and it’s current position in
a new note out of the Macquarie stable. If
you’d like to read it too, send a mail to the
usual address and I’ll be happy to forward.
Lara Exploration (LRA.v): Friday evening brought LRA.v’s 3q14 financials and the main point
can be summed up by this line from the MD&A:
14

“...the Company expects that it will have to raise some additional
capital to fund its business activities over the next twelve months”
That’s true. LRA has three ways of raising working capital, which are 1) payments from option
holders 2) selling assets and 3) the occasional equity raise. As today’s market is hardly
conducive to getting decent cash prices for assets and as LRA currently burns around $400k per
quarter, the working cap is has left...
LRA.v: Working Capital per qtr
6
5.5
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
15
80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
source company filings
srallod
fo
snoillim
...points us to a round of raising, even a parsimonious company such as this one needs cash
with which to work.
LRA.v: Assets Breakdown per qtr
20
18
16
14
12
10
8
6
4
2
0
70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
source: company filings
srallod
fo
snoillim
fixed
other current
cash
LRA.v: Debt Breakdown per qtr
2.5
2.25
2
1.75
1.5
1.25
1
0.75
0.5
0.25
0
70q4 80q1 80q2 80q3 80q4 90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
source: company filings
srallod
fo
snoillim
LT debt
current debt
With 30.97m shares out LRA has so far kept its dilution well under control but at some point it
will need to bite the bullet and run an equity financing. It’s a well-connected stock at a
corporate level, so the likelihood is that any financing it runs will be filled. But the market is
pricing in the dilutive round of equity financing at levels that will entice people to buy. If I had
to guess, I’d got for a 10m share round at 40c a pop which would be enough for LRA to keep

playing happily for the next two years and take the share count to around 41m. That’s just my
guess.
Salazar Resources (SRL.v): SRL also reported its 3q14 financials on Friday 3q14 financials
and as at September 30th the cupboard was looking pretty bare here, with just $143k in cash
and a working cap deficit of $583k. However on this one it’s China to the rescue, as post-filing
date SRL has already raised $500 by selling 2.27m units (unit = 1 share + ½ warrant) at 22c
apiece to new China JV partner Guangshou, plus the Chinese company is due to sponsor the El
Domo VMS project through to capex stage and fund SRL in the process (the first payment will
be $1m once the definitive agreement is signed).
At its current price, SRL is the type of nanocap high risk play that can revive quickly if the
market comes back. At some point assets will stop getting marked down to (near) zero value
and when they revert, it’s the high quality rocks such as these that will benefit first. We hold,
tiny position, no sweating.
The Copper Basket
After forty-eight weeks of 2014 The Copper Basket is showing a 18.01% loss to level stakes.
company ticker price 1/1/14 Shares out Market Cap current pps gain/loss%
1 Augusta Res AZC.to 1.51 144.41 541.54 3.75 148.3%
2 Lumina Copper LCC.v 6.29 44.07 440.70 10.00 59.0%
3 NGEx Resources NGQ.to 1.43 187.71 229.01 1.22 -14.7%
4 Reservoir Min. RMC.v 4.97 47.55 190.20 4.00 -19.5%
5 Nevada Copper NCU.to 1.35 80.5 104.65 1.30 -3.7%
6 Western Copper WRN.to 0.76 93.68 63.70 0.68 -10.5%
7 Hot Chili Ltd HCH.ax 0.425 333.11 56.63 0.17 -60.0%
8 Copper Fox CUU.v 0.375 402.96 56.41 0.14 -62.7%
9 Panoro Minerals PML.v 0.35 220.25 55.06 0.25 -28.6%
10 Curis Resources CUV.to 0.57 74.79 50.86 0.68 19.3%
11 NovaCopper NCQ.to 1.60 60.15 41.50 0.69 -56.9%
12 Coro Mining* COP.to 0.10 159.37 10.36 0.065 -35.0%
13 AQM Copper AQM.v 0.11 139.24 9.75 0.07 -36.4%
14 Cordoba Min. CDB.v 0.90 58.81 7.65 0.13 -85.6%
15 Oracle Mining OMN.to 0.27 49.03 2.21 0.045 -83.3%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1
split May'14 Portfolio avg -18.01%
There was just one week over week winner The Copper basket 2014, weekly evolution
25%
on our list, the 18.2% gain put in by Coro
20%
Mining (COP.to) on adding a penny to its still 15%
small price. Four others were unchanged 10%
(LCC.v, AZC.to, CUV.to, OMN.to) which 5%
leaves a full ten as weekly losers. Not listing 0%
them all, just listing the biggest losses seen -5%
by Hot Chili (HCH.ax down 11.8%), Nevada -10%
Copper (NCU.to down 11.0%), NovaCopper -15%
-20%
(NCQ.to down 10.4%) and Cordoba (CDB.v
-25%
down 10.3%). Plenty of others didn’t fall by
double figure percentages but still fell by
between 5% and 10%. In short, the list
bears faithful witness to a nasty reversal
16
ht5naj ht61 ht61 ht9 ht03 ht02 ht11 ts1nuj dn22 ht31 dr3gua ht42 ht41 ht5tco ht62 ht61
source: IKN calcs

after a couple of mildly encouraging weeks and the overall basket at -18.01% is now close to
year lows again.
The underlying weakness in the price of copper was the reason for the share price drops
(unsurprising), though as noted in places above there’s a fishy smell to the way in which large
cash dumped into the whole commodities complex, particularly the metals and I’d go as far as
to say that the action in copper was the most indicative of all that we went thought a rigged
couple of days while USA made merry. Expect a rebound next week.
We move to the inventories section and start with the month-end tracking charts, seen here:
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
17
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von
LME Shanghai Comex
source: Cochilco
Copper inventories, per month 2012-2014
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von
Mt Cu
LME Shanghai Comex
source: Cochilco

Apart from a small LME/Shanghai blip in July, the world of the warehouse has been pretty calm
for the last six months and the world has got used to there being little inventory held in the
price discovery system. As for the week’s
Shanghai Futures Exchange Warehouse Stocks, 2014
inventory bullet points, another quiet one for
you to consider: 220000
200000
• Overall world stock levels dropped by 180000
another small amount, down just 160000
over 4k metric tonnes (mt) to finish 140000
120000
the week at 273,272mt.
• The Shanghai Futures Exchange 100000
80000
warehouse stocks were nearly
60000
unchanged on the week at
88,278mt.
• The LME copper warehouse
inventories were down a modest
1.4k mt to end the week at
159,400mt.
• The Comex warehouse stocks number dropped by just the most, down nearly 3k mt to
end the week at 25,594mt.
Yet again little or no signal. We continue to monitor things, but chances are there’s going to be
scant news until the Chinese New Year shadow reaches us; that falls on February 19th 2015. For
what it’s worth, it’ll be the Year of the Goat according the the Chinese horoscope, an animal
that China usually connects to financial misfortune. Just in case you’re into that kind of thing.
Hot Chili (HCH.ax): Down to 17c and being Australian-traded, it missed out on the effects of
the Friday drop in copper to $2.91/lb as well, so we might see HCH go even lower if the metal
refuses to rebound.
The Low Cost Producer Basket
After 48 weeks, the Low Cost Producer Basket is showing a 17.92% loss to level stakes
company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 37.74 1040 27.92 26.85 -28.9%
2 Goldcorp GG 21.67 812 15.95 19.64 -9.4%
3 Barrick ABX 17.63 1164.67 13.85 11.89 -32.6%
4 Newmont NEM 23.03 499 9.18 18.40 -20.1%
5 Franco Nevada FNV 40.74 156.08 7.81 50.02 22.8%
6 Silver Wheaton SLW 20.19 357.39 7.12 19.92 -1.3%
7 Agnico Eagle AEM 26.38 173.43 4.07 23.49 -11.0%
8 B2Gold BTG 2.02 948.9 1.53 1.61 -20.3%
9 Pan American PAAS 11.70 151.41 1.42 9.36 -20.0%
10 First Majestic AG 9.80 117.02 0.48 4.07 -58.5%
all prices in U$, using NYSE ticker prices Portfolio avg -17.92%
A big drop in the overall basket last week, down 8.59% with all components registering losses.
The worst of the drops were suffered by the smaller end of the market cap scale, with double
figure reductions in First Majestic (AG down 22.5%), B2Gold (BTG down 12.5%), Agnico Eagle
(AEM down 11.8%) and Pan American Silver (PAAS down 10.9%).
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 ht62 dn2von ht9 ht61 dr32 ht03
Mt Cu
source: Cochilco

The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
40%
30%
20%
10%
0%
-10%
-20%
-30%
19
ts13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1nuj ht51 ht92 ht31 ht72 ht01 ht42 ht7peS ts12 ht5tco ht91 dn2von ht61 ht03
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 ht61 ht03
source: ikn calcs, NYSE/Nasdaq data
Franco Nevada (FNV): On the subject of big insider sellers, the last two weeks have seen
plenty of insiders taking profits from options and shares of FNV (8). Here’s a list, with all bullet
point prices quoted in Canadian Dollars:
• Kerry Sparkes (VP Geology) exercised 18,000 options priced at $45.85 and sold them
all at $62.73 (around $300,000 pre-tax profit)
• Philip Wilson (VP Technical) exercised 10,000 options priced at $31.45 and sold them
all at $63.36 (around $319,000 pre-tax profit)
• Debbie McEnaney (Controller) exercised 15,400 options priced at $15.20 and sold them
all at $63.14 (around $738,000 pre-tax profit)
• Geoffrey Waterman (COO) exercised 75,000 options priced at $15.20 and sold them all
at $62.08 (around $3,516,000 pre-tax profit)
• And to round off, FNV head honcho Pierre Lassonde sold 50,000 of his held shares for
around $61 apiece average, which is roughly $2.05m in pre-tax profits.
To be clear, I have no problem with successful people being successful and cashing in on their
wealth, this is after all the essence of
capitalism. What I am concerned about is the
signal it generates, as if insiders think now is
a good time to turn equities into cash then
we the little retail outsiders are being given a
strong hint by people who know their
companies in far greater detail than us.
Some insider trades are more of a tell than
others, what I see here is one of the
stronger tells. When combined with the
inventory overhand left over from the last
bought deal (back in early October reliable
though necessarily off-record word (9) was

that the book runners of the bought deal were left holding 1.3m in shares priced at U$59.75),
puts a cap on share price upside at FNV.
Regional politics
Uruguay: The second round run-off election is today Sunday
And everything that’s been said and written indicates that ex-President Tabaré Vázquez will
come out the winner of the second round run-off, with Lacalle Pou set to lose by around 15
points if the polls are to be believed. This represents a continuation of power for the current
ruling Frente Amplio party of current President Mujica, so Uruguay has basically chosen a
continuation of current policies.
Peru: Lima plays host to the COP20 climate talks
Starting tomorrow Monday, Lima Peru (as well as other cities in the country with satellite
events) plays host to the COP20 summit, a meeting between world representatives on climate
change and global warming issues. Expect calls to “do something now”, serious faces saying
serious things and a fudged joint declaration at the end of it all. We’re also likely to get a bunch
of human interest stories about how Climate Change is affecting things in Peru from reporters
parachuted in by their respective media empires, the way in which the Andes Cordillera is being
stripped of glaciers, water shortage reports and of course the curse of informal mining
operations, as well as other angles to enviro affairs. They’ll all be true enough but as I’ve been
on these stories in Peru for years, know that people pay attention for about 15 minutes and
then get back to their own things this is all you’re going to hear from me on the subjects.
Cynical enough for you? Good, you’re welcome.
Peru: Las Bambas construction going at a good rhythm
In reports in local Peru business media last week, VP Ops of MMG* Peru (the 62.5% majority
owner of the JV behind the Las Bambas copper project in the Apurimac region) Luis Rivera said
that the project is now 75% complete and on course for first production in 1q16. The thing that
most interested was the percentage figure, because back in April when the MMG led consortium
announced the purchase of Las Bambas from Glencore Xstrata the project was understood to
be 56% complete, with around $2Bn of capex left to be spent to get to production day one.
In rough and basic terms, this puts Las Bambas on course for completion in the new timeline.
In real terms, it’s clear that investment has been moving into the project and it also confirms
the “no news = good news” truism you want when a project is in build-out stage in South
America. The less you hear about a large-scale civil works project when under construction
(mining included, but it applies equally to hydropower plants, gas pipelines, roadways etc) the
better. Las Bambas has been off even local news radars here in Peru, which means by default
that locals are happy.
When at full speed operations, perhaps 2018 onwards, Las Bambas is set to be a very, but very
big copper mining operation that can produce at 450,000 tonnes per year. For context, that’s
around one third of the total production in Peru in 2014.
*In turn, MMG is 74% owned by China Minmetals
Mexico: Mining concessions lapsing
The job title of Mario Alfonso Cantú Suárez is “Mining Coordinator of the Secretary of Federal
Economy”, that mouthful means that his job is pretty important in the Mexico mining scene as
he’s the connection between the industry and the national Finance Ministry. He’s an economist
(and lecturer) by trade rather than a mining person and was given the job by the Enrique Peña
Nieto government took over control (a typical political appointment, in other words). Here’s a
translated excerpt from a report dated Thursday 27th November (10) in a Coahuila State
regional newspaper that caught up with the man on a visit to local mining ops
20

“So far during the current administration, 1,800 concession licences have
been granted, a low number due to the drop in metals prices along with the
increase in concession costs. During the current administration, nearly 8,000
concessions have been cancelled or handed back (to the government).”
It then goes on to quote Señor Cantú Suárez who comments on the situation in typical political-
speak and says some mildly optimistic things about forecasts for metals prices in 2015 (add his
opinion to the pile) but those figures above speak for themselves: In less than two years and
according to the man heading the office that counts these things, the number of active
concessions in Mexico has dropped by around 6,200.
Colombia: Easier permitting by end 2015 (so they say)
Last week and via the country’s National Mining Agency (Agencia Nacional de Minería, or ANM),
we heard from Colombia (11) that the government had made progress in wading through and
cutting out at least some of the interminable red tape faced by mining companies that are
looking to get exploration or operating permits. ANM president Natalia Gutiérrez said that the
bureaucratic progress will now be put before the national parliament and assuming a
reasonably smooth passage of the proposed adjustments in the statute, by the end of next year
Colombia will be able to emit permits in 180 days, in the way that was originally envisaged by
the mining law changes made two years ago.
I’ve reported that reasonably verbatim instead of adding my own analysis and for two reasons:
1) After looking at the proposed adjustments that the ANM and eventually the Santos
government want to make, I honestly don’t fully understand what they’re trying to
achieve and why the current situation is blocking Colombia from using the spirit of the
law as stands. If they did, they’d be able to grant permits in 180 days right now,
without needing any sort of change.
2) This is being framed as a “best case things get better by the end of next year”, so
there’s hardly a pressing need in the days and weeks ahead of us. Colombia’s painful
mining bureaucracy is going to stay that way for a time yet.
If things improve in Colombia’s permitting track for mining, it won’t be a moment too soon. If
nothing changes in 2015 I won’t be shocked or surprised. This is a story we’ll keep tabs on next
year for sure,
Chile: Mining drags down industry growth numbers
Latest figures from the Chilean beancounters INE on Friday (12) registered a 0.1% drop in
overall industrial output in the country. The main reason for the decrease was a 0.697% drop in
the Mining Production Index component weighting of the overall number. As a standalone, the
Mining Production Index (13) registered a drop of 1.3% for October 2014 which compares as
seen in this chart to the last couple of years:
Chile: Mining Production Index
12 month trailing growth, 2013 and 2014
16
14
12
10
8
6
4
2
0
-2
-4
-6
21
31naj bef ram rpa yam nuj luj gua pes tco von ced 41naj bef ram rpa yam nuj luj gua pes tco
%
source: INE

Chile has now seen four consecutive months of production downturn on its mining industry. It
will likely register a 5th when the November figures roll around, after that it will be up to the
copper price movements.
Argentina: Chubut’s mining law changes
Leaving aside for one moment the news noted on the blog last week (14) that Yamana Gold’s
Argentina management team were conversing with and directly influencing the debate, we
check in on the results of the mining debate and the new regulations passed by the Chubut
Province regional government in Argentina last week.
We could go into the details of what went on and bore you silly (I am fully aware that my
fascination with Argentine politics isn’t a widely held passion), but instead of noting how the
whole debate started as one thing and turned into another, or the party line split of votes, or
whatever other issue let’s just cut to the chase. Apart from a few small side-dishes, two main
things came from last week’s vote:
• There is now a 120 day moratorium on all mining activity in Chubut province.
• A social license will be required by any mining company seeking to develop a project
in Chubut province. That license can be obtained via local referendum and a majority
vote from local community members in the affected area.
The first item is no big deal: The 120 day period is meant to be a period that will allow for
discussion and debate among local communities who would be affected by a large-scale mining
project in the Chubut province (for example Pan American Silver’s (PAA.to) (PAAS) Navidad in
the central region, or Yamana Gold’s (TRI.to) (AUY) Suyai (ex-Esquel) in the western Chubut),
but those communities have largely made up their minds on what they think anyway. Also,
we’re now into the summer month season and Argentina is a quiet place bureaucracy-wise until
March anyway, so stopping anything from happening before (just before) April 2015 isn’t going
to put many noses out of joint among miners.
The second item is a bigger deal, but it’s not clear just how applicable it’s going to be in the
long run. Up to now, directly affected communities haven’t had an official voice or ability to
vote up or down any mining project. This has apparently changed and it’s a change that is
strongly pro mining company in essence. We now have the situation preferred by, for example,
PAA at Navidad, because this very large project directly affects only a couple of very small
communities (perhaps a total of 1,000 people) and they’ve been calling for the mine to go
ahead for years. The objections come from people outside the immediate area, who are
concerned about larger environmental effects (e.g. water pollution).
However, the chances that anti-mine opposition will accept any local pro-mine vote at face
value are between slim and none, with a lot of doubt already being raised about the Federal
constitutional validity of the new “local acceptance” referendum election potential. So even if
(as would seem likely) PAAS gets a green light from locals at some point next year on Navidad,
it would be wrong to consider it some sort of final irrevocable decision.
As for Suyai, the images of a local politico sharing a text message exchange with the head of
Yamana Argentina last week (see link above) may have caused more harm to it than the good
of getting the local vote opportunity. Chubut residents are scandalized by the clear influence
being exerted by the mining company, down to the way it wanted certain expressions and
words in the final mining bill draft instead of others, which will only serve to strengthen
opposition in the town of Esquel to its Suyai gold project.
Overall, last week was a positive one for the mining industry in Chubut province, as it’s
unblocked official opposition to mining projects and has in theory provided a path forward for
development. However, nothing should be taken for granted in Argentina and there’s a long
22

way to go before Navidad (which in itself is the most likely to be green lighted in the province)
gets on firm permitting ground, even if locals vote in favour of the project next year.
Market Watching
Regulus Resources (REG.v)
The latest round of financing at Regulus Resources (REG.v), called to replenish coffers so that
the company can start executing its plan of action at the newly acquired Antakori project in
Cajamarca, Peru, turns out to have a strong insider element (15).
That’s 3.585m of the total 11,111,111 units, or a little over 32% of the whole placement. And
that’s pretty decent insider participation. This is also the same team that scored a big success
with Antares Minerals of course, selling Haquira to First Quantum (FM.to), so they know their
Peru and they certainly know their copper rocks (for what it’s worth Kevin Heather is still the
most impressive geologist I’ve had the pleasure of meeting, in more ways than one, and if he’s
interested in a piece of land you’d better be interested as well).
As for its Antakori project it inherited after taking over Southern Legacy (ex-LCY), the latest
news is that there are baseline community studies being conducted by government officials at
the moment that are expected finished at the end of 1q15. After that, we’ll see if this new
vehicle can make progress with the locals, but it has to be said that to date, this Antakori (ex-
23

Sinchao) project, though boasting excellent rocks, has been one of the permitting and
community risk nightmares of Cajamarca and Peru. From what I’ve heard it’s not an impossible
job to turn locals around and get them onside, but it’s not going to be an easy one either. For
the time being REG.v is on watching brief and it’s likely to be one of the new additions to The
Copper Basket in 2015.
Conclusion
IKN290 is done, we end with bullet points:
• It was a funny, shortened week in which metals were dumped in a dubious manner and
caused a semi-panic round of selling on generally light volumes. It’s not a market week
worth too much brain time, but if the bad vibes are confirmed in the week to come
there may be more cause for concern. I’m expecting a rebound in the days to come.
• The place I’ll watch most carefully is the copper price pit; that should show us whether
the downmove was opportunistic or whether it’s enough to scare away real buyers. My
bet is that copper quickly regains the $3/lb level.
• Starcore (SAM.to) is more interesting than many other sets of numbers I’ve crunched
recently, particularly at this new low price deck. I want to see its quarterly filings before
taking it any further, but at least the model says it’s in good shape and a potential
bargain.
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
24

Footnotes, appendices, references, disclaimer
(1) http://www.calculatedriskblog.com/2014/11/schedule-for-week-of-november-30th.html
(2) http://incakolanews.blogspot.com/2014/11/impact-silver-iptv-3q14-numbers.html
(3) http://finance.yahoo.com/news/starcore-posts-first-quarter-production-213000617.html
(4) http://www.starcore.com/s/news-releases.asp?ReportID=684639
(5) http://finance.yahoo.com/news/starcore-announces-payment-dividend-shareholders-105500311.html
(6) http://finance.yahoo.com/news/starcore-posts-first-quarter-production-213000617.html
(7) www.incakolanews.blogspot.com/2014/11/insider-selling-by-ceo-of-fortuna.html
(8) https://www.canadianinsider.com/node/7?menu_tickersearch=FNV+%7C+Franco-Nevada
(9) http://incakolanews.blogspot.com/2014/10/franco-nevada-fnv-and-rbc-bought-deal.html
(10) http://www.vanguardia.com.mx/porcaidaenlosmetalesempresariosdesistendeconcesionesmineras-2215654.html
(11) http://noticias.terra.cl/mundo/latinoamerica/regulador-minero-de-colombia-busca-agilizar-permisos-en-un-
ano,865ec46c0e2f9410VgnCLD200000b2bf46d0RCRD.html
(12) http://www.entornointeligente.com/articulo/4283260/CHILE-INE-produccion-Industrial-cayo-01-en-octubre-por-baja-
en-mineria--Diario-Financiero-28112014
(13)
http://www.ine.cl/canales/chile_estadistico/estadisticas_economicas/mineria/series_estadisticas/series_estadisticas.php
(14) http://incakolanews.blogspot.com/2014/11/naughty-naughty-yamana-gold-auy-yrito.html
(15) http://www.sys-con.com/node/3244602
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
25

Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-apr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
26

Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
27