IKN #292Premium

The IKN Weekly
Week 292, December 14th 2014
Contents
This Week: Buying Argonaut Gold (AR.to), FOMC this week, Fuel and a penny for your
thoughts.
Fundamental Analysis: NOBS report on Argonaut Gold (AR.to)
Stocks to Follow: Overview, Comment, Fortuna Silver (FVI.to) (FSM), First Majestic (FR.to),
Coro Mining (COP.to), Reservoir Minerals (RMC.v), Dalradian (DNA.to), B2Gold (BTO.to) (BTG),
Rio Alto (RIOM) (RIO.to), Minera IRL (IRL.to) (MIRL.L).
Copper Basket: Overview, Panoro Minerals (PML.v), NGEx Resources (NGQ.to), Cordoba
Mining (CDB.v).
Low Cost Producer Basket: Overview, Freeport (FCX).
Regional Politics: Overview, Volcan and Grupo Mexico, Guatemala: Tahoe Resources (TAHO)
(THO.to) quick update.
Market Watching: The “Death of the Mining Sector” redux, Bargain hunting with PM, Starcore
(SAM.to) 1q15 financials, Rio Alto Mining (RIOM) (RIO.to): Costs, currency and quarterly
details.
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
Buying Argonaut Gold (AR.to)
Tomorrow morning I’m a buyer of Argonaut Gold (AR.to), as I think there’s an excellent
opportunity for a good win in a near-term trade on this stock. The whole thesis is laid out in
‘Fundamentals...’ below but be clear that this won’t be a tiny, toe-dipper trade or a timid start
to something that may become bigger eventually. I’m taking a full sized position as from
tomorrow, I like its chances a lot, I’ll be good about seeing out volatility if necessary between
now and the end of 2014 and I expect to sell the position at some time between January and
March of 2015 for a decent profit.
FOMC this week
This week sees another meeting of Janet And Friends, with the meeting that starts Tuesday and
release (plus subsequent presser) scheduled for lunchtime Wednesday, normal type fare.
Expect the usual poring over each sentence, word, semi-colon for things that the Fedwatchers
think will clue them into what is in store in 2015 (for example, Goldman Sachs reckons we’ll
lose the “considerable time” phrase and if we do, the Fed will start hiking in September 2015).
As always, keep an eye on the superlative Calculated Risk site for the details and nuances.
Headsup complete.
Fuel and a penny for your thoughts
It’s suddenly on everybody’s mind:
• Crude oil has dropped sharply, miners use oil so the cost profile of the mining
companies must be dropping.
1

• The dollar is strong, regional/local currencies are weakening versus the dollar, cost
inputs in dollar terms must be dropping.
• Gold’s doing ok against the dollar, gold miner margins must be increasing.
The main subject of mails received this week is “let’s find a bargain” and that’s great to see. It’s
also what I’ve been concentrating on all week and as a result, you get a couple of slightly
different pieces as main fayre this week. The first is the focus on the one stock that’s jumped
out at me as a great trade under the new market circumstances, that Argonaut Gold (AR.to).
The second is to take a closer look at what’s been happening and what we expect to happen to
the cost profile of the stock we follow most closely round these parts, Rio Alto.
There are also a few sidebar thoughts here and there in this weeks’ edition, but the main thrust
is via two specific stocks, rather than trying to scattergun the whole sector this time. That’s
because both are actionable as trades and in the end, that’s why this publication exists.
Fundamental Analysis of Mining Stocks
This week we look at Argonaut Gold (AR.to).
NOBS report dated December 14th, 2014
Argonaut Gold Inc. (AR.to)
Company Overview
Argonaut Gold Inc. (Canada: AR.to, USA: ARNGF, Frankfurt ASU.f) is a junior gold mining
company operating in Mexico and Canada. It has two operating mines, namely El Castillo and
La Colorada, both in Mexico. Along with the working operations it has development stage
properties in Magino (Canada) San Antonio (Mexico) and San Augustin (Mexico) as well as
other minor early stage properties. Current share structure is as follows:
Shares out: 154.446m
Options: 3.2m
Restricted Shares: 0.414m
Fully diluted shares: 158.06m
Current share price: $1.55
Market Cap: $239.39m
Approx working cap per S/O: 26c
All prices are in Canadian dollars unless stated. Forex U$0.90=CAD$1
Why cover Argonaut Gold (AR.to) today
It’s December, it’s tax-loss selling, it’s a weird moment in the oil sector and the dollar’s strength
has been taking chunks out of the relative value of just about every other world currency out
there. It all adds up to one word...
opportunity
...and the scenario hasn’t been lost on the world of junior mining, as the resistance put up by
2

gold means there’s new and real reason to look at the precious metals sector in order to find a
bargain or three.
I’ve filtered and filtered for the stock that fits the bill in as many categories as possible and the
stock I’ve come back to, time after time, is one that I’ve disliked for as long as I can remember.
Therefore part of the process of getting to a formal analysis of AR.to has been getting over my
own prejudices and mental blocks about the company and the stock. I’ve been obliged to face
my own preferences, examine my own entrenched opinions, reconsider what I “knew” in light of
new evidence. That’s a healthy process to go through, keeps one on their toes as they say.
So to business and why Argonaut kept cropping up as I filtered through potential names to the
point where I couldn’t ignore the darned thing any longer. I’m no fan of the company, never
have been and I’m on record saying as much on more than one occasion, but as value is a
function of price rather than quality there comes a point when even the lacklustre, overhyped
and unimpressive goldies such as AR.to become attractive.
The problem/advantage here is that in just about every subject I have considered on the way
through the filtering system AR.to does well, here’s your list to consider:
A beaten down share price. This is perhaps the most important of the lot, because (cue Bing
Crosby and Dean Martin crooning)
it’s that wonderful time of the year
when we want a knock-down
bargain. On this score AR.to
passes with flying colours but
instead of showing you its squiggly
line all alone, here’s a 2014 year-to-
date chart that sits AR.to next to
Rio Alto (RIO.to, happy to say that
one’s done well), the GDX and
GDXJ ETFs to show the rough
market average for precious metals
names large and small, as well as
picking out Timmins Gold (TMM.to)
as an example of a company that
has a very similar production make-
up to AR.to (Mexico, heapleach,
gold) but hasn’t been hit half as
badly.
AR.to is down 71% on the year and
as the three month chart (right)
shows, the really nasty stuff has
happened recently. While others
have tended to put up a fight
AR.has been downhill all the way.
Since that November sector-wide
dip, some have fought back, while
others have managed to tread
water at worst, but not AR.to that’s
just gone from bad to worse. Friday
saw the stock hit $1.52 and close at
$1.55, which for all intents and
purposes (pre-2010 doesn’t count
on this stock) is an all-time low
Suffering heavy tax loss selling. A lot of the commentary above applies here too, particularly
the action of November and December. Tax-loss season can push down individual stocks in a
vicious cycle type of way and there comes a moment when they’re going down only because
they’re going down. Nobody sits on the bid and sellers enter into neurosis that can border on
3

panic. From what I’ve seen in AR.to these last two weeks, it fits the model near-perfectly.
Potentially other heavy selling for pure market related reasons. Here’s an extra wrinkle in
the extreme weakness of AR.to recently. AR.to is under threat of deletion from several market
leading stock indices between now and next weekend, including the high likelihood its moved
from the GDX, GDXJ and TSX Composite. This is another reason for the selling-just-because
action, in fact it may be more powerful than the tax-loss selling, but it’s also another factor with a
limit date to it. Come Christmas latest this negative influence will be washed through.
A poor operating performance expected to improve or put more simply, a turnaround story.
AR.to shows the right profile here, further down come the details, but the selling of recent days
and weeks doesn’t seem to be connected at all with the numbers expected in the current 4q14
period. AR.to has spent 2014 getting its mines in better operational shape, which has taken
time, $10m of (capitalized) capex and in the interim has crimped operations too. With Q4 that
should be behind the stock. The market has got bored with the lower than expected numbers
returned by AR.to, but its patience seems to have run out just when AR expected to turn things
around. This points to a distinct advantage for first-time buyers such as us.
Ex-market darling: There’s an advantage here as well; when a company gets love and
brokerage sponsorship for a long time, the moment of rejection when the market turns its
collective back on the company can make for a violent negative reaction...once again, check
those comparative price charts above. However it means there’s going to be latent support from
the analyst houses that championed its cause, if only to help bail out clients that are heavily
underwater (or even better, convince them not to sell or keep selling). If such a stock turns
around it gets a goodly amount of positive radar as
a result and as I believe AR.to fits the bill, AR.to: operating earnings per share
0.13
0.12
Profitable: Or at least operationally profitable 0.11
before the CFO starts doing things to the P+L 0.10
0.09
below the line. On this score AR.to also passes as 0.08
0.07
although its last few quarters have hardly been
0.06
sparkling, this operating earnings per share chart 0.05
0.04
shows that a) AR.to even managed to keep its 0.03
head above water in the very crappy 3q14 period 0.02
0.01
and b) the model predicts things are about to get 0.00
much better operationally and AR.to will be able to
leave behind its 2014 and return to the type of
levels last seen in 2013.
Reasonable balance sheet (i.e. not going Chapter 11 on us anytime soon). We’re not going to
go into great detail about the balance sheet items today, but there is some work below (that’s
mainly used as a guide to where we can expect AR.to to trade if the rebound sets in and to offer
a loose target price on the stock. But to give the essential info here, AR.to’s balance sheet,
while not perfect, is one of a company that can handle the current rough weather. As at 3q14 it
had a tad under $45m in cash, a working capital position of $129m and although its fixed asset
values are these days a work of fiction, as we’ll see its equity price has been hammered so hard
that even if it takes a large impairment charge at the end of this current quarter (i think that’s
likely) there’s all of that write down and more already baked in; it’s not going to come as a
surprise nor affect the share price in any big way. The only practical concern at AR.to is the
$20m and bits it needs to pay in cash at the end of 2q15 (to SSRI for an asset deal), but with its
current assets in shape and operationally free cash flow positive, that shouldn’t pose a real
problem.
Will benefit from dollar strength against local currency. Apart from the dog exploration-
stage asset Magino, AR.to operates in Mexico and as the local Peso currency is down by a cool
11.6% in just the last three months, it’s getting cheaper all the time for companies to operate
there in dollar terms.
Will benefit from falling fuel prices. On this score AR.to has a promising future, instead of
current benefit. Despite the precipitous drop in crude oil prices so far, Mexico’s end user fuel
4
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
$
source: company financials/IKN ests

prices haven’t seen much of a dip as yet. That’s expected to change at the beginning of 2015
when new price decks come into operation.
Will benefit from resilience in gold. Which is kind of an obvious thing to say about any gold
miner, AR.to included, but it’s still worth a mention in order to show the difference between the
gold miners, miners of silver (benefiting less) or base metals miners 8even less, to the point of
negative against recent dollar moves). The dollar has been strong but gold in December has
kept pace and even beaten out the greenback (slightly), thereby adding to the attraction of
discounted gold miner companies-
Good traded volume and liquidity. Last but not least, when choosing your tax-loss trade
vehicle it’s optimum to have one that you can trade in and out of easily, as well as being able to
place all the cash exposure you’re looking to place without worry. As much as I like the chances
of stocks such as Starcore (SAM.to) or Coro (COP.to) to name just two,the limitations of their
small and sometimes illiquid marketplaces is always a handicap. Not so AR.to, which does
strong volumes most every day (and on this score let us note that the US pinkie, ARNGF, offers
a reasonable window as well with trading just about every day).
So as I filtered and looked for strong trade candidates in our new market scenario of December
influences, gold rebound-ette, strong dollar, etc the name Argonaut kept cropping up, time after
time, and due to that I’ve had to re-think my negativity towards a stock that was first way
overhyped and then way overpriced for too long a time. Today’s note is the fruit of that re-think.
End of the intro, time for some charts
Let’s now move to some charts that illustrate some of the points made above. The points are a
bit of a mish-mash, I’m not trying to
wow you with my A-to-B narrative
skills on this one, what Io want to do is
lay out more details in the most
important areas as to why AR.to looks
like a great trade opportunity right
now. This chart of AR.to market cap at
the end of each quarter (plus the
“now” for this weekend) makes for a
sobering sight. Just two years ago
AR.to was a $1.4Bn market capper,
today it’s just managing to keep its
head above $200m. Back then life
was beautiful, AR.to had just thrown in
a 42k production quarter, its growth
profile looked set with projects coming
online and even though 4q12 at under 309k production was a little soft, the market firmly
believed AR.to’s future to be bright and shiny. Then came the big gold drop which took nearly
half of that market cap away come the end of 2013, but even that drop looks bearable
compared to the type of 2014 AR.to has suffered.
Argonaut Gold (AR.to): Gold sales per qtr
45000 42534
40000
3 3 0 5 0 0 0 0 0 0 29502 25441 31756 30792 26918 28639 30822 29410
25000 23247
20468
20000 18461
15000 14414 14331 13260 14498
10387
10000 7994
5000
0
5
01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
AR.to: Market cap at qtr end
1600
1400
1200
1000
800
600
400
200
0
Oz Au
source: company filings
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 WON
$m
source: TSX, AR.to filings

This chart above shows half of that story, with production that hasn’t managed to move away
from the 30k-or-abouts level that was supposed to have been a thing of the past (if you’d
believed the 2013 and early 2013 corporate presentations, at least). The other half of the story
is the way in which AR.to has failed to bring forward its growth projects, with the main failures at
San Antonio (Baja California Sur) and Magino (Canada) coming for different reasons
I’ve been going on for quite literally years about the headwinds AR.to faces at the San Antonio
project in Baja California Sur (BCS) both on these pages and using errr...more strident
language over at the blog. In the case of San Antonio I’ve bored you all silly over time by
repeating on the strong and deep felt community resistance to the San Antonio project from
BCS locals, which also has important political institutional backing from the regional parliament,
governor down. San Antonio has been going nowhere fast for years and I see no reason to
expect its very problematic permitting track to unblock at any time in the future. As late as April
this year, with the publication of AR.to’s 1q14 production number that day, I was still scratching
my head about the way in which AR.to was valued compared to peers, with this blog post as
evidence (1). Here’s an excerpt from the script that day:
“Do these guys have porn photos of brokerages bosses with sheep or something? How
can a serially underperforming gold producer with sketchy "growth" assets like the
marginal Magino and a San Antonio that continues to go nowhere and the production
profile of a gold miner with 1/3 of its market cap get continued brokerage love and
affection otherwise?”
And indeed, Magino is another part of the overall AR.to plan that’s always been a mystery to
me. From the day of the announcement I mentally noted “paid too much for marginal deposit”
on the deal and as gold has dropped and market sentiment has moved away from that type of
project, the opinion has solidified into certainty. Today AR.to can only be left hoping (yes that
verb, not a way to conduct a serious investment strategy) that gold bounces, gets to a level that
makes Magino work and bails out the ticket price paid. That doesn’t seem to promising a trade
theory to me, not least because if Magino gets to work there will be dozens upon dozens of
other currently marginal project from which we can choose.
Without putting too fine a point on it, AR.to has really screwed up on its purchases and growth
pipeline. It’s read BCS badly, it bought Magino at the wrong time (and for the wrong price) and
the result today is the ownership of two assets that aren’t anything of the sort; they’re liabilities.
In spite of that Magino is still carried on the
books at over $266m and San Antonio is AR.to: Price / Book Value Ratio
carried at over $107m, together supplying over P/BV
1.20
40% of the total asset value of the company.
That’s crazy and it’s long past the time when 1.00
these “assets” should have been marked down
0.80
to a more reasonable level (on that score I’d
0.60
say “zero”, but I doubt the company will go that
far in one fell swoop. This chart that tracks the 0.40
price/book value ratio for AR.to over the last 0.20
year tells it better than I ever could: at the end
0.00
of last year AR.to was still getting a 1:1 ratio on
4q13 1q14 2q14 3q14 NOW
P/BV, which is nothing great for a going
concern company but at least it isn’t saying to source: TSX, AR filings, IKN ests
the world that its asset balance is a crock. Since
then things have been going very badly and assuming the 3q14 asset value and today’s share
price, we’re down to 0.3X.
However, with 4q14 looming, gold and silver at new lower price decks and the clearing-out of
overpriced balance sheet items and/or goodwill now the flavour of the day, I fully expect AR.to
to take a big hit in its upcoming year-end filings and this next chart tries to illustrate what we
could expect.
6

NB: Theoretical Only for 4q14
AR.to: Assets
1000
900
800
700
600
500
400
300
200
100
0
7
31q4 41q1 41q2 41q3 tse41q4
fixed
$m other current
cash
source: AR.to filings
As noted above, Magino is currently carried at over $266m and San at over $107m. I could
chop $250m off the asset value of those two without blinking an eye and have done just that in
the theoretical 4q14 asset column above. This would mean AR.to would take a minimum
$1.50/share net loss from 4q14, the bottom line would look horrible but (the important bit)
because that would only adjust the P/BV back to around 0.4X there’s obvious plenty of room to
slice into these now fictional asset values without worrying the equity price.
Meanwhile its working mines of El Castillo are carried at $190m and La Colorada at $128m. Put
those two together (and they’re both profitable, with El Castillo making $1,483m and La
Colorada making $1.305m from operations even in the crappy 3q14 just gone) and we’re at
$311m, in other words the current market cap still doesn’t cover those assets (0.77X P/BV ratio
to those assets alone, forget cash, other current, corporate etc).
$m El Castillo La Colorada
gross profit profit from ops gross profit profit from ops
1q13 14.091 13.824 6.868 6.03
2q13 12.799 12.508 4.051 3.38
3q13 10.34 10.28 2.363 1.74
4q13 5.552 5.353 3.001 2.147
1q14 5.533 5.218 2.485 1.84
2q14 4.394 3.887 2.964 2.559
3q14 1.986 1.483 2.381 1.305
The bottom line here: AR.to has overpriced fixed assets on its books, typified by Magino and
San Antonio. The thing is, the share price has got so low that we can write them off completely,
assign them zero value and there’s still more than enough to like about the stock to see its
share price rise just from its operations. The two working operations fully justify their current
asset values (and as we’re about to see, profits should start moving back up in the quarters to
come from them). My idea of an absolute lowball
target for two decent and steady ops would be to 200 AR.to: Working Capital per qtr
180
value the company at 1X their book, which would
160
mean AR.to is a $2 stock again. That’s still way
140
low compared to two years ago, but it’s a 29%
120
upside from Friday’s close and in this market, I’ll 100
grab at a near 30% near-term winner. 80
60
40
To round out this very quick tour of (mainly)
20
balance sheet items, here’s working capital and
0
how we can expect 4q14 to look. This is a strong
area for AR.to as, thanks to increasing
inventories, tax credits (the sales tax/VAT should
come back to the company as a cash cheque
soon enough) and that pretty decent cash position there’s plenty of financial liquidity here. No
31q4 41q1 41q2 41q3 tse41q4
source company filings/IKN ests
srallod
fo
snoillim

it’s not AAPL, yes its more than enough to see the corporate structure through a protracted
rough period if needed. This company is not in financial straits or facing a liquidity crunch, unlike
many others in this sector. That’s a good thing and provides its equity with plenty of backbone.
Production at AR.to: Has been poor, looks to be improving
Here comes another good reason to consider AR.to as your end-year rebound trade; all signs
point to its mines doing better after a long period of sub-standard operations. The need-to-know
reasons for this are
• 2014’s quarters to date have been poor
• AR.to is guiding more strongly in 4q14 and less than two weeks ago recently ratified
that guidance.
• The market has ignored the expected upcoming operations improvement and continued
to sell the stock
• As long as AR.to delivers on its flagged uptick in operations performance, the company
will post improved profits and be able to guide higher for 2015.
• Just by concentrating on the two working mines and forgetting everything else owned
by AR.to, the stock looks cheap.
Let’s start by considering just why things look set to improve operationally. AR.to adjusted down
its 2014 production guidance in its 3q14 filings and here’s a chunk of script that explains more:
“Due to these seasonal effects, the Company is adjusting full year production
guidance to between 130,000 and 135,000 GEOs (based on a silver to gold
ratio of 55:1), from previous guidance which was at the lower end of the range
of 135,000 to 150,000 GEOs. Cash cost per ounce of gold sold (see non-IFRS
measures section) in 2014 is expected to be between $740 and $760 per
ounce.”
For what it’s worth, I can forgive the bias that’s generated from using a 1:55 gold/silver ratio
because a) AR.to is one of those companies that decides on a ratio at the beginning of every
year then sticks to it, but more importantly b) silver production is minimal compared to gold, so it
doesn’t really matter much anyway. With that said, taking gold and silver production from both
mines and using that ratio, up to end 3q14 the company has produced 92,395 oz AuEq (aka
Gold Equivalent Ounces, or GEO), therefore to get to the lower end of the adjusted production
target, AR.to needs to produce 37,605 AuEq in 4q14.
That sounds like a big ask to me compared to previous quarters, as it would suggest something
along the lines of 25,000 ounces from El Castillo and 12,000 from La Colorada. I’d agree the
vibes are better than before, particularly at La Colorada that got talked up again in the
company’s December 2nd corporate presentation (in that document AR.to mentioned a daily
production of 150 oz in Q4, which points to something as high as 13,500 ounces. But as this
chart shows, getting 37k oz from AR.to in 4q14 would be big jump up, all of a sudden, and it’d
also be the second best production quarter ever from the company (the best, 3q12, was an
anomaly for its own specific and one-off reasons)
Argonaut (AR.to): Gold sales
45000 42534
40000 35605 36000
35000 29502 31756 30792 28639 30822 29410
30000 26918
25441
25000 23247
20000
15000
10000
5000
0
8
21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
Oz Au
source: AR.to filings, IKN ests

So as you can see above, I’m not going to assume a 37k production quarter here but aim
slightly lower, which allows for upside surprise but also recognizes that AR.to is set to put in a
much better quarter than we’ve seen in quite a while. This chart breaks down production into
the two mines, with my best guesses being 12k from La Colorada (which is expected to put in
better numbers) and 22k from El Castillo (roughly in line with what we’ve seen in previous
quarters).
AR.to: Pure Gold Produced per quarter
40000
35000
30000
25000
20000
15000
10000
5000
0
9
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
Oz Au
La Colorada El Castillo
source: company filings, IKN ests
In short, by using the 3q14 guidance figures and assuming that AR.to doesn’t even reach the
lower guidance level (rather it comes up short by over 2,000 ozs Au), the charts point to a
significantly improved quarter that’s about to be announced. However, there are signs and
reasons to suppose that AR.to could indeed beat my lowball estimate, produce the “big ask” 37k
oz and comply with its adjusted guidance levels. That’s because we know:
1) Production at La Colorada has improved greatly and we know that because AR.to has been
telling everyone about it. If you check slide 14 of the latest corporate presentation available on
the company website and dated December 2nd you’ll see nice graphics along with these bullet
points:
• Record ounces loaded to the pad in Q3 (21,195 Au Oz)
• Since rainy season has ended we have seen a steady increase in solution grade.
• Since mid-September through October, solution grade has more than doubled
• Record ounces are being recovered at a rate of 150+ Au oz/day
That along with pre-strip work done earlier in the year which will now start showing its fruits.
2) Production at El Castillo is set to improve too, as the rainy weather which affected Q3 is a
thing of the past and the stacking sequence at the mine in previous quarters meant lower grade
material was making it to the pads. In Q3
AR.to stacked more ounces to the pads
AR.to: GEOs produced vs sold, per qtr
which should now show up in production in
Q4. 40000
35000
3) The final production benefit to note is that 30000
in 3q14, AR.to sold 2,725oz GEO less than it 25000
produced. That kind of thing isn’t unusual in 20000
a run-of-mine world and sometimes sales get
15000
deferred from one quarter to another for pure
10000
administrative reasons, but it does mean that
5000
we could get a nice 2k oz au sales boost in
0
the Q4 numbers.
To sum up production, it’s been under 30k
per quarter for the last few quarters and the
world has got slightly used to (and bored with) this company’s habit of under-delivery. But that
looks set to change with the 4q14 numbers (which should get an airing in the first or second
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
Oz Au Eq
Total Au sold (GEO) Total GEOs Prod
source: company filings, IKN ests

week of January 2015) and even my ~35k oz AuEq guesstimate may come up short if AR.to
pulls out all the stops and meets its annual guidance figure.As it happens i’m going to stick with
my 35k number for financial modelling purposes, but if AR.to manages to add $2m or $3m extra
to gross revenues it will make things look even better than the estimates we’0re about to
consider below.
What we can reasonably expect from the 4q14 financials
As usual, there are details and extras we can consider, not least of which being any big hit to
the financial bottom line that AR.to decides to take from any write-down of its overpriced assets
in 4q14. There are also tax considerations that spin off from that, so here we’re going to keep
clear focus on the thing that matters, i.e. whether AR.to can turn in a better operational
performance from its working mines. And as usual that’s about the two major items of revenues
versus costs.
Let’s start with revenues and here’s a chart:
AR.to: Quarterly Revenues
4 5 5 0 43.08 44.93 42.447 39.054 40.943 42 43.5
40 37.31
34.604
35
30
25
20
15
10
5
0
10
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
$m
source: company filings/IKN ests
And let’s state here, nice and clearly, that I’m adding in plenty of wriggle room for 4q14. I’m
assuming production at 35.6k oz AuEq (including the minor silver credits and including any
remnant sales from 3q14) and then instead of the London Fix average for gold of U$1,201/oz
for 4q14 (so far), I’m going low-end and expecting U$1,180/oz average sales price for 4q14.
This gives the revenues estimate of $42m but be clear, that could reach $45m without much
problem as long as those operations deliver. Then for 1q15 we can expect slightly better prices
and production (~36k oz AuEq) without going crazy about it, which brings up the $43.5m revs
estimate you see above.
Now for costs and here’s how we expect cash costs to progress. We hit a peak in 2q14, but
the better levels of production expected in 4q14 should pull the COGS/oz number (note, NOT
op cash costs even though the two numbers are similar) back under $700/oz. As for a little
further out and assuming AR.to can
manage to string together two decent AR.to: COGS per ounce produced
production quarters (we guesstimate (GEO, not including amort/deprec/deplet)
1000
36k GEO for 1q15), the reduction in
900 802 801
fuel costs and the favourable forex 800 731 736
climate for companies that work in 700 615 644 668 611
567
Mexico but report in US Dollars should 600
500
bring down cash costs even further;
400
frankly I could have played with the
300
number and and shrunk that U$611/oz 200
estimate even further, but let’s not get 100
0
too ahead of ourselves (and as
always, it’s good to leave some upside
surprise potential).
Here’s how that translates into the real-deal number, absolute costs of goods sold:
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
U$/oz
source: company filings, IKN calcs

AR.to: COGS
30
25
20
15
10
5
0
11
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
U$m
Source: AR.to filings, IKN ests
As production rises in the next two quarters we expect costs to drop back towards the $22m-or-
so levels we’ve seen before. This second chart also shows the type of lower cost backdrop we
can reasonably expect from the operations in Mexico. We put them together and this is what
comes out:
AR.to: Quarterly Earnings Overview
50
40
30
20
10
0
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
$m
revenues prod costs
amorts etc gross profit
source: company filings/IKN ests
Once our lower trending costs and amortization/deprecation/depletion comes out from the
improved revenues figures for 4q14 (and potentially 1q15), we’re left with gross (mine
operating) profits that are expected to climb back over $10m this quarter and then stay there.
No it’s not a king’s ransom or the proverbial licence to print money, but the quarter coming will
be more than enough to revert the negatives around AR.to and show the world it’s still capable
of running at a profit. Also, if the conservative house revenues estimate of $42m turns out to be
closer to $5m, just add $3m straight onto the profits number (or 2c/share extra)
This comes out too once we make normal type adjustments for other cost inputs (G&A etc). As
long as the influence of impairments and write downs are ignored (esp for 4q14).
AR.to: Op. Earnings
20
18 17.2
16
14 12.8
12
10 8.8 9.2
8 6.7
6 5.1 4.6 4.5
4
2 0.8
0
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
source: company filings/IKN ests
srallod
fo
snoillim
A $6.7m earning from operations (EBIT by any other name) is 4.3c per share and would put
AR.to back on the map as a company that’s going to be just fine in the low gold price
environment.

Finally, semi-OT but necessary comment, shares out at AR.to are one of its strong points.
Things haven’t changed to any great extent for years and the ~155m S/O total of today is
unlikely to move unless AR.to does a paper merger deal with somebody or other. But at these
low levels, I doubt they’d be that silly right now.
AR.to: Shares Out
200
180
160
140
120
100
80
60
40
20
0
12
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
source: company filings/IKN ests
serahs
fo
snoillim
On the other hand, at what point does the hunter become the hunted?
Conclusion
To start the wrap-up here I want to point out that by concentrating on the subjects above, I’ve
totally ignored the potential upside of AR.to’s latest project, San Augustin, that lies just
down the road form El Castillo. That’s a potential catalyst too because 4q14 (i.e. this month)
we’re supposed to get the new PEA from the company on that project. If the numbers turn out to
be good (and the market decides to care about a PEA) that too could provide some share price
boost. But as I’ve been at pains to point out, we can price all other assets at AR.to at zero and
still make out a strong case for ownership at this beaten down share price level just by
considering its two working assets, El Castillo and La Colorada.
The second item in the conclusion section considers what can go wrong with our proposed
trade in AR.to. For your consideration, here are my top five:
• The gold price collapses and if it does (and Goldman Sachs gets its U$1,050/oz price
dream after all) then all bets are off. Mind you, that applies to everything I own on these
pages except the Fortuna Silver short. Of them all, it’s the biggest price risk today
• Selling continues to the end of 2014 and that’s perfectly possible. My plan is to buy in
this week, preferably tomorrow, but I’m not going to be shocked or surprised to see
further volatility in the days to come so if that means holding through a very-near-term
percentage loss, so be it. This one isn’t like the tiny and aborted Kinross trade, this is a
larger position about which I’m far more confident. Courage comes with conviction and
therefore market wobbles, if they show up, will be taken as part of the territory. However
if you follow in on this one, don’t think for a second you’re nigh on certain to be buying
in at the absolute bottom tick price and then it’s smooth sailing all the way. Realism,
please.
• Operations don’t deliver. On this score I haven’t assumed the 37k oz Au implicit target
set by AR.to for 4q14, preferring to set a slightly more conservative 35k oz for my
purposes. But if AR.to disappoints again (e.g. comes in under 30k) there are going to be
a lot of unhappy holders of this stock. Overall I think this is the biggest risk, it’s the one
we have to be most aware of: AR.to has come up short before and could do so again.
Eyes wide open.
• Costs come in higher than expected: It shouldn’t affect things too greatly but a couple of
million extra where I’m not expecting it could take the gloss from improved financials
and nip any rally in the bud.
• People only care about the bottom line number in 4q14. By assuming AR.to is going to
take heavy impairments on its fixed assets (Magino, San Antonio) the message is that

bottom line net profits will come in heavily negative. As mentioned in passing above,
something around the negative $1.50 per share wouldn’t be any sort of a shock...to me
at least but it might be for others who aren’t into looking at books and only care about
net numbers. This may cause limited shockwaves, but then again it could open up a
new window to buy/add AR.to...if you know what you’re looking for in a set of financials,
at least.
With risks considered (or what I consider the main ones), it’s time to state clearly my
enthusiasm for this trade.
• The current macro backdrop suddenly favours gold miners that have a high level of cost
input from fuel, that report in US Dollars but work in places with weak currencies to the
dollar. AR.to checks all boxes.
• The tax-loss (and de-list) backdrop means stocks are being sold down heavily.
Argonaut has been hit harder than most and it down to truer bargain basement levels
• The operations situation at AR.to is most likely improving, with good vibes coming at
last for the current ops in 4q14. I’d be very disappointed if we didn’t see significant
improvement in the set of production numbers to come in early January, then also in the
eventual financials. Production looks set to pick up and move away from the mediocre-
at-best levels seen in the quarters of 2014 so far. Vibes from La Colorada are
particularly strong and AR.to made mention of that in its latest corporate presentation
dated December 2nd, so the information has had a recent refresh too.
• Financially AR.to is in reasonable shape. It needs to clean up its books by pricing down
some of the poor asset purchases it made in years gone by but cash position is good,
debt is more than manageable and FCF+ ops mean it can keep going through this
mess indefinitely. Aside from a wholesale collapse in gold, AR.to will be just fine.
Argonaut has thrown open a window of opportunity and although I’m not 100% sure about the
exact timing, the general timing is good
enough for me. AR.to could wait until
January before the rebound starts, in classic
tax-loss selling hangover style, but the way in
which it’s been beaten down in the last
couple of weeks suggests that the de-listing
from indexes is the greater influence on the
current dumping.
I think this is a great chance to buy into a
deeply discounted stock that’s as close to a
no-brainer rebound in the weeks to come as
you can get. Selling pressure has been
heavy, but that has three weeks maximum
before it disappears. Production is improving,
the ops are profitable, the balance sheet is
fine. The IKN Weekly calls buy on Argonaut Gold (AR.to) and sets a near-term (two months
or less) price target of $2, which represents a 29% upside to Friday’s close of $1.55. And by
setting a target there I’m deliberately going lowball, because if it starts to move in the manner I
expect it could crash through that barrier and go a lot higher before I consider taking profits.
What AR.to offers this weekend is a clear and specific opportunity trade, I’m not going to let it
pass and will buy tomorrow. Argonaut Gold will be part of the ‘stocks to Follow’ list as from next
weekend. I haven’t liked a trade set-up this much for months, these are the type of entry that
makes waiting patiently worthwhile.
End Of Report
13

Stocks to Follow
Of the 14 open positions of the Stocks to Follow list, seven made gains last week (RIO.to,
BTO.to, DNA.to, AG, NCQ.to, LRA.v, SRL.v), three were unchanged on the week (RMC.v, IRL.to,
GQC.v) and four showed a weekly loss (FCV.v, ARG.to, FSM short, COP.to). Best of the winners
were First Majestic Silver (AG up 17.6%) and Lara Exploration (LRA.v up 17.6%), while the
biggest loss by a long way was in Coro Mining (COP.to down 23.1%).
There are currently 14 open positions on our ‘Stocks to Follow’ list, one less than the self-
imposed maximum. Just the top pick is in the green, then Dalradian is unchanged since
inception and the average down. The other 12 are in ugly 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$2.78 20.9% 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$2.01 -13.4% V good 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$3.80 -37.2% Best spec Cu play
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.165 -28.3% tgt 50c, avged up, 1q15 news
First Majestic AG spec buy U$10.51 10-aug-14 U$4.80 -54.3% Now in pair trade with FSM
Amerigo Res ARG.to hold C$0.405 20-jul-14 C$0.29 -28.4% Small Cu play, good value
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.06 -77.8% Waiting for financing news
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.66 -37.1% small Cu play low vols, hold
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.435 -62.2% solid biz model, LT hold
Goldquest Min. GQC.v hold C$0.26 27-oct-13 C$0.075 -71.2% no point selling so cheaply
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$4.35 -5.6% In pair trade with AG
Smaller/Riskier
Coro Mining COP.to spec buy C$0.075 26-jan-14 C$0.05 -33.3% Added avged down Nov'14
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.145 -48.2% 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.
14

Fortuna Silver (FSM) (FVI.to) and First Majestic (FR.to) (AG) Pair Trade: The minor
improvement in FSM (5c on the week) combined with the major rebound in AG (72c on the
week) and means the gap between the two parts of our pair trade moved in the right direction
over the last five trading days. Here again is the chart of the pair since conception (Nov 14th)
and we’re down to around 7% as the difference.
However, I’ll say the same thing today as
last week, this is all about balancing out a
tough silver sector until December is done
(and then we’ll see), relative weekly gains
or losses are of minor import. So yes it’s
good to see the gap coming down, but it’s
not the main reason why we’re here for the
time being.
Coro Mining (COP.to): COP finally hit a
December headwind, couldn’t get any late-
week tape painting this time and closed at
five cents, down 23.1% on the week. Can’t
say I’m surprised, though it was good to
see continued insider buying of shares last week (2) as founder and Corp Sec Michael Philpot
added another 273k to his holding, now up to 7.146m shares. And to re-cap, since Sheldon
Inwentash/Pinetree dumped their holding in distressed selling late October, COP.to insiders
have picked up nearly 7m shares of their own company without selling a single one. That’s
closing in on 5% of total shares out and that’s not a bad little signal.
Reservoir Minerals (RMC.v): Unchanged on the week after popping up and not holding the
4-handle again, RMC continues to wander around its current level as we wait for news from its
price-driving project the JV with FCX. And that’s about it for the moment.
Dalradian Resources (DNA.to): As noted on the blog (3) DNA saw a heavy hitter
shareholder sell part of its holding in the company last week when Rousseau Asset
Management parted with 2.5m shares, leaving it with 13.78m share of the company. As that
number happens to be just under the key 10% reporting barrier level, there’s reason to
suppose that Rousseau is still looking to dump more but without having to file every time it
happens.
It’s going to be a headwind against DNA in the near-term, as even if Rousseau decides that it’s
not a seller any longer there will be jitters about pushing the stock higher while there’s risk that
nearly 14 shares are waiting to flatten any rally.
B2Gold (BTO.to) (BTG): Thursday saw BTO announce the anticipated first gold pour from
Otjikoto, which they framed as ahead of schedule, though exactly how December 11th sits next
to the “first pour mid-December” marketing we had before is a bit of a semantic thing, rather
than a trumpet banner and aren’t we wonderful thing. But still, it is good news to see the
company’s new mine deliver this key stage on time.
The pump didn’t get going last week, perhaps there’ll be an effort from the friendly brokerages
via reports as from tomorrow morning.
Rio Alto Mining (RIOM) (RIO.to): Notably, RIO.to failed at $3 once again last week. Its
movements do seem to be indicative of the larger tides in the sector and we certainly can
commend it for holding onto its share price value while many around it fade and drop heavily,
but all the same it’s not been doing much to threaten my $3.30 target level recently (and I’d
even say that was a modest one).
Plenty about Rio Alto and its costs profile in ‘Market Watching’ below.
15

Minera IRL (IRL.to): I received a mails on IRL last week from three or four of you, with the
ever-lower share price being on your (and my mind). A couple of the mails were of the
‘harrumph’ variety and I can’t blame you for that, it’s how I feell too at times. Another couple
were on whether IRL is a good deep bargain here in this tax-loss season.
The last time IRL was mentioned seriously was in IKN284, with the write-up on meeting with
the company. Back then the call was that we need to wait until we have solid news on
Ollachea, today I’m sticking with that call. It’s a case of necessarily neutral until fundamentals
change, but I will add that I haven’t seen much in the way of tax-loss selling in this one, it has
the look of being too small to worry the judge now.
I wrote more on IRL as part of mail to reader PM last week, which is reproduced in ‘Market
Watching’ below.
The Copper Basket
After fifty weeks of 2014 The Copper Basket is showing a 22.60% 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 1.43 187.71 183.96 0.98 -31.5%
4 Reservoir Min. RMC.v 4.97 47.55 180.69 3.80 -23.5%
5 Nevada Copper NCU.to 1.35 80.5 123.97 1.54 14.1%
6 Western Copper WRN.to 0.76 93.68 57.14 0.61 -19.7%
7 Panoro Minerals PML.v 0.35 220.25 45.15 0.205 -41.4%
8 Copper Fox CUU.v 0.375 402.96 46.34 0.115 -69.3%
9 Hot Chili Ltd HCH.ax 0.425 333.11 46.64 0.14 -67.1%
10 Curis Resources CUV.to 0.57 74.79 50.86 0.68 19.3%
11 NovaCopper NCQ.to 1.60 60.15 39.70 0.66 -58.8%
12 Coro Mining* COP.to 0.10 159.37 7.97 0.05 -50.0%
13 AQM Copper AQM.v 0.11 139.24 8.35 0.06 -45.5%
14 Cordoba Min. CDB.v 0.90 58.81 6.47 0.11 -87.8%
15 Oracle Mining OMN.to 0.27 49.03 1.96 0.04 -85.2%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg -22.60%
The overall basket dropped 4.19% and was hit hard by plenty of double digit percentage losses
among our group of explorecos. There were just two weekly winners (NCU.to, NCQ.to) and five
unchanged stocks (LCC.v, AZC.to, RMC.v, CUV.to, OMN.to), while the eight losers were all
double digit losers bar Hot Chili, and even that one was darned close. Your list from worst
16

down: COP.to down 23.1%, NGQ.to down 18.3%, PML.v down 18.0%, AQM.v down 14.3%,
WRN.to down 12.9%, CDB.v down 12.0%,
CUU.v down 11.5%, HCH.ax 9.7%. Weird.
The net result of all those heavy losers in
our basket is a -22.6% basket average on
the year and that’s a new low for 2014, as
the tracking chart right shows clearly
The jitters were with the stocks and the
market for base metals names, because
once again we saw the copper price hold up
in reasonable manner, though without ever
threatening that psychologically important
(or so it seems) U$3/lb level. We dropped
under 2.9 early week, trading was choppy
and reported light in London and Shanghai, but price
improvement is price improvement and the fact that
the metal finished the week at highs is its own
encouragement. I’m not reading too much into the
copper action either way in the quiet period, though
the impression is of a metal that’s holding up better
than just about any of its industrial metal siblings.
We move to inventories, information from our normal
weekly Cochilco report source (here’s the English
language version (4), which saw a slight change of
tone and modest rises in tonnages at both the LME
and Shanghai warehouses.
• Overall world stock levels rose by 6,181
metric tonnes (mt), or 2.2%, to finish the
week at 281,389mt.
• The Shanghai Futures Exchange warehouse stocks dropped by 3,575mt (+4.4%) to
finish Friday at 89,980mt. As the chart below shows, that wanders the line back up to
the top of its recent range after trending slowly down for a few weeks. A move above
100k would catch the eye and make it into strategic calculations, until then it’s still a
relatively benign signal.
• The LME copper warehouse inventories went up by 3,025mt (+1.9%) to end the week
at 166,500mt. Still fiddling around this level, same story as Shanghai really
• The Comex warehouse stocks number lost 601mt and ended the week at 24,909mt.
Shanghai Futures Exchange Warehouse Stocks, 2014
220000
200000
180000
160000
140000
120000
100000
80000
60000
17
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 ht7ced ht41
The Copper basket 2014, weekly evolution 25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Mt Cu
source: Cochilco
ht5naj ht61 ht61 ht9 ht03 ht02 ht11 ts1nuj dn22 ht31 dr3gua ht42 ht41 ht5tco ht62 ht61 ht7ceD
source: IKN calcs

Now for notes on a couple of our featured stocks:
Panoro Minerals (PML.v): The damage to PML was done Friday when somebody decided to
dump over 600k shares into this normally thinly traded stock, In other words, PML was
whacked by tax-loss selling.
NGEx Resources (NGQ.to): In IKN285 I wrote that NGQ was destined for lower prices than
its $1.50 at the time, and predicted a sub-$1 price in 2015. As noted on the blog last week (as I
gloated, which was naughty) we didn’t even need to wait until 2015.
The reason again seems to be tax loss selling, as the last time NGQ traded over 100k shares on
two consecutive days was in September, and the last time we had three days of 100k+ share
volume days was between June 10th and 12th. That’s not the case any longer, as Wednesday
(157k shares) Thursday (100k) and Friday (320k) saw some heavy dumping of NGQ and with
nobody bidding, the damage was done.
Cordoba Mining (CDB.v): Tax loss selling was also evident in this one, with 400k+ dumped
on Friday but quite frankly the penny and a half that CDB lost on the week is small beer
compared to the rest of the losses this year and in this one, the damage was done a long time
ago. The selling came Friday mostly through Clarus, which was one of the main conduits for
CDB’s set-up financing round from the beginning of 2014 that closed in February.
It’s worth considering that the $15m CDB raised in (officially) February was via a placement
priced at 50c, then after that came a 2:1 stock consolidation which means those shares have
lost a cool 89% in ten months as per Friday’s close. For sure there have been plenty other large
sized percentage losses among juniors this year, but in this one we really do have a case of
flushing the money directly down the toilet.
The Low Cost Producer Basket
After 50 weeks, the Low Cost Producer Basket is showing a 17.52% loss to level stakes
company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 37.74 1040 22.65 21.78 -42.3%
2 Goldcorp GG 21.67 812 15.28 18.82 -13.2%
3 Barrick ABX 17.63 1164.67 13.36 11.47 -34.9%
4 Newmont NEM 23.03 499 9.51 19.05 -17.3%
5 Franco Nevada FNV 40.74 156.08 7.67 49.11 20.5%
6 Silver Wheaton SLW 20.19 357.39 7.36 20.59 2.0%
7 Agnico Eagle AEM 26.38 173.43 4.20 24.24 -8.1%
8 B2Gold BTG 2.02 948.9 1.64 1.73 -14.4%
9 Pan American PAAS 11.70 151.41 1.48 9.76 -16.6%
10 First Majestic AG 9.80 117.02 0.56 4.80 -51.0%
all prices in U$, using NYSE ticker prices Portfolio avg -17.52%
The overall basket dropped by 1.24% last week, a loss that was mainly due to the copper and
oil and large market exposed Freeport (FCX) dropping a massive 16.3% on big fat
copper/hydrocarbon headwinds. The other five losers (ABX, GG, SLW, FNV, PAAS) were all
modest, while among the four weekly winners (NEM, AEM, BTG, AB) First Majestic (AG up
17.6%) stood out and managed to tilt things back the other way a great deal.
18

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 ht41
basket
gdx control
source: Yahoo! Finance, IKN calcs
Low Cost Basket: Percentage difference between
basket and GDX control, 2014
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1% 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 ht41
source: ikn calcs, NYSE/Nasdaq data
Freeport McMoRan (FCX): Its big drop deserves some focus here. FCX got done hard
because of its exposure to oil production, but also because it was telling how the copper sector
stocks chased down the oil price in near-lockstep (see the chart on the blog Saturday (5) for
more. It did have an air of panic button selling about it and FCX in particular looks cheap now.
Copper is the main deal and that will rebound,, oil may be a drag but FCX carries a large
exposure to PMs as well, there’s extra backbone compared to many “big coppers” here.
I’m not advocating the way over-simplistic “what goes down must come up” because life
doesn’t work that way. But in FCX’s case, the punishment meted out does not fit the crime and
it now looks way oversold.

Regional politics
Overview
Not much in this section this week, as just for a (very pleasant) change The IKN Weekly is more
about active trade ideas than passive regional backdrop. There was a nice chart that showed
the way in which local currencies have dropped against the US dollar in the last quarter,
including the 24% loss seen in the Colombian Peso, the 11% lost by the Mexican Peso , the 7%
lost by the Peruvian sol etc. But for some reason the chart crashed the report once I’d stuck it
in and froze the computer too, so I think it best not to use it, nor to wrap it in a PDF and send
it to other people’s mailboxes.
Volcan and Grupo Mexico
The share price of leading Peruvian zinc miner Volcan (VOLCABC1) popped from 75c to 79c on
raised (though not crazy) volume on December 9th,as a rumour did the rounds (6) that Grupo
Mexico (GMEXICOB.mx), parent company of Southern Copper (SCCO), was in talks to buy 20%
of Volcan. Even when Volcan denied the story with an official rebuttal note filed with the Peru
stock market (7), the stock managed to close last week at 80c, suggesting that the story had
legs.
The story is sourced to Peru biznewspaper Gestión and this story (8) (paywalled) written by its
editor Raúl Castro (which adds to the gravitas, as this isn’t some hack but a respected member
of Peru bizmedia). A copy of the story not behind paywall can be read here (9) in Spanish. In
sum, the report says GMEX and Volcan have been in talks for a few weeks, they’re looking to
seal the deal within the next two quarters, no price has been decided upon yet and it also drops
a great big hint as to where Raul Castro got the information from, as he wrote the deal is being
brokered by LXG Capital.
It’s one of those tales you hear all the time in Peru and my first reaction we to discard it, but
the framing of the report (it’s rare for a pump job to claim a six month timescale for a deal
down here, they’re nearly always “on the point of” so that the share price action is better suited
to a BS rumour-monger), the details offered and the relative logic behind the hook-up (GMEX
would like some Zn exposure (Volcan produced 21% of Peru’s zinc last year and is the 5th
largest zinc producer in the world), Volcan would appreciate a working capital injection for its
expansion plans, it would be done via A Shares (preferential shares) that would supposedly give
GMEX two seats on the board) make sense as well.
The bottom line here is that I don’t think this is actionable information, mainly due to the
timescale and doubt that brings, but it is interesting. As I’m keeping an eye on the zinc sphere
as 2015 comes around, plus my current main target for the metal is Peru-based Tinka (TK.v), if
the deal comes to pass it would be a reasonably positive signal for the metal.
Tahoe Resources (TAHO) (THO.to) quick update
It’s beginning to look as if the new mining royalty will be declared illegal and inapplicable in the
courts of Guatemala (10), with the chamber of mining taking to the courts in the way that’s
been done regularly and successfully on previous occasions in Guatemala to stop extra levies on
private sector companies. Also telling is the news that the government is now drafting a revised
budget for 2015 that discounts the amount of income it was expecting from the royalties it
passe don mining, the cement industry and the telephone industry.
TAHO went lower last week (therefore against my idea that it would rebound soon), but with
the legal blocking of the royalty that may easily reverse, and quickly, once word gets around.
TAHO’s fate also depends on the price of silver (of course) so that adds an extra wrinkle, but
the chances that it will have to pay the new higher royalty (even though it really isn’t that
onerous anyway) are dropping.
20

Market Watching
The “Death of the Mining Sector” redux
Back in IKN278 dated September 2014 we took a look at the moneyflows in the TSX and TSXV
exchanges and deduced a few things from the figures. Here’s the conclusion from the piece
again, offered to sum up what was written
Conclusion
We hear a lot about the “death of the mining sector”, but quantifiable evidence suggest
that this death cycle is evolution and not wholesale extinction. Despite cries to the
contrary there is money flowing through the TSXV which isn’t in the same quantities of
the best times in 2010 or 2011, but is already clearly better than 2013. However,
access to that money flow and capital is being restricted to the higher cap end of the
market, the bigger average share prices and that’s a numerical observation which fits
right in all the anecdotals we’re hearing about explorecos withering on the vine, moose
pasture peddlers giving up the ghost, tinycap rockbangers suddenly deciding that
medical marijuana is a far smarter business plan, or simply the moment when the
TSXV company doesn’t have the cash to pay for the signature to its annual audit, is
removed from the TSXV and goes to chill in the NEX list (where companies die and are
turned into shells).
The numbers demonstrate that things are improving for the whole, but to see that
improvement you need to be in a serious company doing serious things. I for one
thought this process of evolution would have been more rapid and the thinning process
has taken longer than I expected, but slower or not it’s happening and as a result, little
by little, the TSXV is cleaning up its act. So when you hear the next round of whining,
find the source and recognized it for what it is; the whiners are that part of the TSXV in
the Have Not column, meanwhile things are getting better for the Haves and if 2014
showing us the start of what I believe to be a new trend, that’s reason to be cautiously
optimistic
I’ve noticed in the last couple of weeks that more is getting said about the whole concept of the
health and state of the Canadian mining market, the TSXV, the potential that the whole system
as stands today might collapse. It’s about time this debate was had in the open.
It’s also clear that there is money out there if your plan, or your reputation, or your project, or
your ability to guarantee (or combo of the above) is in good standing. Meanwhile, the BS
moose/llama/yak pasture projects are being starved of funds and quite frankly it’s about time
too. The best thing that can happen to this market today is that a whole bunch of penny stocks
pack their bags and disappear forever, while at the same time liquidity and profitability (for the
companies and for us speculators who buy and sell shares) returns to the quality end of the
market. Let the whole thing split in two, let the BS merchants leave the TSX(V) and go play on
the CSNX, let sanity return.
Bargain hunting with PM
I’ve taken a smattering of mails this week of this ilk, as there are obviously people doing the
same as me and hunting around trying to find a bargain in the year-end sales. I think I’ve
found mine in AR.to but down in the penny world this exchange I had with reader PM kills a fair
few birds with one stone. As it sits nicely with the general fuel/currency/costs theme of the
week as well, I offer up the exchange with no further comment.
Here’s what PM wrote (excerpted):
What speculative name is worth buying down here? Is Minera IRL still a
worthy option? I'm thinking about Belo Sun, Minera or Starcore as my spec
trade for 2015. I'm adding to Dalradian and buying Focus Ventures this week
as well.
Here’s my reply
As long as we're clear about the caveat that i can't really offer you tailored
21

advice etc etc and my calls are necessarily about what i do with my money (in
your case i think we're roughly on the same page though).
I've held IRL...and held it all the way down (tear drops from corner of eye)
because it has every chance of making it. I cannot stress too strongly that it
needs a closed deal on Ollachea financing to be a live investment option. Until
that happens i have to be zen-like in my hold position, nothing else. With
news it may jump quickly, but even afterwards it'll be a really excellent
opportunity as long as the news is the right shape and the details are
shareholder friendly.
FCV.v: This is my idea of the best tinycap spec for 2015. Its two issues are 1)
securing the financing to get the Feb 2015 (or early march, don't remember
offhand) payment done and 2) getting a JV partner in place. Part 1) will
happen and part 2) is the one that will send it much higher if it happens. It's
spec, it's risky, it has tremendous upside if things fall into place.
DNA.to could double easily. Of all the ones you mention above, it's the one i'd
add first today and it's top of my January shopping list right now.
Belo Sun: It's not for me. I understand the context of tinycap high risk spec
and yes, i see that it could pop under certain circumstances. From this level it
could put in a big % upmove too. If you have the risk in your blood i'm not
one to stop you. However on this one i just know too much about the
permitting and community problems it has and for me it's never going to be a
mine. Yes, you don't need to build a mine to have a successful trade in a
junior exploreco miner but all the same, the fundies are just too heavily
against it for my money.
Starcore: Yeah, i like it too. One problem a tiny producer brings is that
quarterly production can vary greatly due to small factors, so it's never going
to be a financially smooth ride. But the concept of being able to buy a gold
miner that's profitable at current prices for under $20m mkt cap...there's the
attraction. Really hoping the next set of financials gives me a deep bargain
entry point...would love to see 10c light up, i'd buy the hell out of it.
That’s all, apart from saying that since that mail SAM.to has reported its quarter and the result
was neutral. Timing is a key factor for all the above trade (potentials) however. In theory I’m
on the sidelines until January apart from AR.to today. In practice things can change quickly.
Starcore (SAM.to) 1q15 financials
Right on time, Starcore (SAM.to) filed its quarter last week and as it’s one I’m actively
interested in as a potential trade vehicle, the numbers were of immediate interest.
22

We looked at SAM.to closely in IKN290 and the upshot was, not a bad little potential trade here
but we need to see how the quarter’s financials look, because signs were that they’d be on the
mediocre side.
And indeed they were, but SAM.to managed to make the numbers look somewhat better than
they really were, at headline level at least, thanks to a tax credit that changed a near-certain
net loss (of the type we’d estimated) into a breakeven quarter (bar a few thou either way). At
this time I’m good about watching SAM.to, with a view to picking up a new position if it gets hit
by further sellers in the days ahead. We can do the fine details in the 1q15 results if the trade
gets opened, until then check below
Rio Alto Mining (RIOM) (RIO.to): Costs, currency and quarterly details
Last week I did that whole thing on RIO.to and how it’s future years are looking. Some decent
feedback came from the note (I thank you all, you know who you are) and as a result, along
with the snowballing interest toward costs and how fuel/currency is becoming a positive for the
mining sector, here come supplemental thoughts arising, mostly around thew subject of costs
at its working mine at La Arena. First up let’s consider just why RIO.to is going to see lower
costs in the quarters to come, including the current 4q14 and for this there are three parts.
1) Roughly one quarter of the mining costs at RIO.to come from fuel and that’s because an
open pit operation of this sort runs a lot of large trucks, scoops etc. Let’s quote from the 3q14
MD&A to give a better feel for things:
Mining costs of $45.1 million for the nine months ended September 30, 2014 and
included $11.0 million for 2.8 million gallons of diesel, $11.8 million for equipment
rentals, $8.5 million for mining spares parts and ground engaging tools, $5.5 million of
labour, $4.0 million for blasting materials and $3.9 million for services.
As fuel costs in Peru are now dropping, with diesel down around 12% from the mid-year peak
and set to come down by another 10% or so once the national lag in stocks is cleared and the
new price levels start flowing through the economy
2) Meanwhile, one of the main cost inputs up to now at RIO.to’s processing plant at La Arena
(the building where the gold is separated from the gold bearing solution that comes from the
leach pads) has been fuel to run the generators that power the facility. There’s good news here
as well, because as from late October the processing plant has been connected to the national
electricity grid and is now enjoying power at greatly reduced prices.
Putting these two line items together (and for the moment ignoring all other cost inputs), by
adding in the known figures from previous quarters to projections based on what we
(conservatively) estimate to be the savings on 1) fuel going into trucks and 2) power savings
now that the plant doesn’t need diesel, here’s what the chart looks like:
RIO cost items: Mining Cost plus Processing Cost, per quarter
$m
25 process plant cost
20 mining cost
15
10
5
0
1q14 2q14 3q14 4q14est 1q15est 2q15est 3q15est
source: RIO.to filings, IKN ests for future qtrs
23

In fact 1q14 was a bit of an outlier on those costs, but even if we take 2q14 as our benchmark
we expect costs to come down by $3m when 2q15 swings around. If we assume La Arena
produces at its average of 55,000 oz gold per quarter, that’s U$54/oz less per ounce of gold.
Even by comparing 3q14 (the latest reported quarter, which was also last full quarter of diesel
generator electricity and “full price” fuel production) and 1q15 estimates (the first full quarter of
grid electricity and “new price” fuel production) gives us a difference of $1.3m, which is more
than a $23/oz cash cost saving.
The final cost saving we can readily expect
comes from the recent devaluation of the
Peruvian Nuevo Sol (PEN) against the US Dollar
(USD). Here’s a chart:
Now obviously there’s some estimating going
on here, but the three quarters gone are
darned close and I’m, going to be very close
with the average for 4q14 as well (PEN 2.92 =
USD1), give or take a penny. The estimates for
2015 are just that, but if the trend continues
they’re probably on the conservative side. Even
so, by running the costs numbers for RIO.to through the more favourable forex (people earn
the same amount of Soles, but it costs RIO.to less in dollars to pay them) we can expect some
savings in the quarters to come (i’m getting period averages of maybe $300k/qtr, which is
about U$5.50/oz off the cash cost number)
Here’s how our costs estimates work on a per-ounce basis:
RIO.to: Cost per ounce breakdown
U$/oz
700
all other COGS/oz
600 mine+plant costs/oz
500
400
300
200
100
0
1q14 2q14 3q14 4q14est 1q15est 2q15est 3q15est
source: company filings, IKN calcs
And as that’s not my best ever or most readable chart, here’s the global COGS/oz chart updated
to include our latest projections for the quarters ahead:
RIO.to: COGS per ounce sold
1000
869
900
803
800 757 729
700 640
600 532 571 574 572 540 518 505 515 505
500 452
400
300
200
100
0
24
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2 tse51q3
Peru Sol (PEN) US Dollar (USD) forex rate, average per
3.2 financial quarter
3.1 2.97 3 3 3 2.92
2.85
2.9 2.8 2.8
2.8
2.7
2.6
2.5
2.4
2.3
2.2
2.1
2
1q14 2q14 3q14 4q14est 1q15est 2q15est 3q15est
source: Yahoo Finance, IKN ests
U$/oz
source: RIO data, IKN ests futute qtrs

As explained in previous analyses on RIO.to, we prefer to use a COGS/oz metric here instead of
the operating cash cost number, even though they are pretty similar, because COGS/oz gives a
nice straight-line benchmark from which we can compare the quarters easily and simply (via
the COGS number as reported in the P+L, there’s no flimflam with that GAAP-compliant figure).
In fact in 3q14 the operating cash cost number for RIO.to came in at $538/oz, very close to the
$540/oz in the above chart.
Then in 3q14 all-in sustaining costs per ounce of gold sold were $783 per ounce and the all-in
cost (that’s the “everything-everything” number, tax and warts and all) was $940/oz.
These type of estimates are always ballpark and the further out you push the projections, the
more difficult it is to get them right. However, we need to make some kind of call on the type
of cost savings we can expect from RIO.to in the quarters to come and once the model has
churned over some reasonable guesstimate numbers, we’re looking at a company that should
be able to run at an operating cash cost number of just over the U$500/oz level for the whole
of 2015. In other words, those people who were impressed with the $538/oz op cash cost
number that RIO.to returned in the last quarter are going to have more pleasant news to come.
For RIO.to, 2015 is going to be a transformation year with the build-out of Shahuindo. That’s
going to place different pressures on the bottom line profit number and as such, it’s not going
to be the way to value this growth story until the new mine is truly up and at 100% speed.
We’re going to have to watch the free cash flow capacities of La Arena more than the bottom
line, that means we’re watching operating margin or EBIT more than EPS.
So here are a couple of our regular P+L tracker charts with the new estimates for 2015 baked
in. Using a flat U$1,200/oz gold price for all quarters in 2015, slightly lower gold price average
for the current 4q14 quarter, then gold production that drops slightly in 1q15 but then returns
to full whack in 2q15 once the rainy season is done, here’s what we have:
RIO.to: Quarterly Earnings Overview
90
80
70
60
50
40
30
20
10
0
25
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
$m revenues COGS amorts gross profit
source: company filings/IKN ests
The details are nice, the bottom line is that we expect RIO.to to churn out $30m gross profit
per quarter from La Arena. As for operating
RIO.to: Op. Earnings
earnings barring unforeseen line items we should 50
get used to a company that returns between 45
40
$25m and $28m per quarter, or 7.5c to 8c per
35 32.2
share. That’s not post-tax EPS, as there may be 30 27.8 24.9 28.6 25.0 26.5 27.5
some strange things going on with bottom line 25 20.5
numbers next year as Shahuindo gets built. 20 18.0
15.0
That’s the amount of money it can reasonably be 15
10
expected to make at La Arena and with spending
5
in the pipeline, that’s going to be very useful
0
cash indeed, all at $1.2k/oz Au. Add $100/oz to
each ounce and add $22m to the earnings
number for the year.
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
source: company filings/IKN ests
srallod
fo
snoillim

Bottom line: Last week we considered the annual projections, today it’s a little more granular on
costs for the quarters to come. Thanks to the drop in the price of oil, the strength of the dollar
versus the local currency and the resilience of gold in the face of that dollar, the costs profile
for RIO.to is moving in the right direction. That’s true for our Top Pick company, it’s true for
other producing gold miners as well.
RIO.to: Op. Earnings
65
60
55
50
45
40
35
30
25
20
15
10
5
0
26
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
source: company filings/IKN ests
srallod
fo
snoillim
Conclusion
IKN292 is done, we end with bullet points:
• We need to keep a close eye on gold and of course, the FOMC and those subtle
changes in language come the 2pm Wednesday bulletin can change all sorts of things,
but despite all the variables I’m going to buy a decent slug of Argonaut Gold (AR.to)
tomorrow and then sell them back at a higher price in early 2015, because the reward
potential on this stock at this price under present circumstances vastly outweighs its
risk potential.
• This AR.to trade is the first one for months that has me confident about the outcome
(caveat gold price) and excited about putting down real money. It’s been way too long.
• The look at Rio Alto (RIOM) (RIO.to) and costs in this new price environment for oil and
the dollar is company specific for sure, but there are a lot of parameters than can be
used in other mining companies there. To hit the sweet spot, you want your company
to be cost exposed to fuel as much as possible, you want them in a country that’s seen
its currency weaken against the dollar, you want them mining a metal that has held its
value recently against the dollar. That means you want an operating gold heapleacher.
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://incakolanews.blogspot.com/2014/04/the-argonaut-arto-hypnosis-set-to.html
(2) https://www.canadianinsider.com/node/7?menu_tickersearch=COP+%7C+Coro+Mining
(3) http://incakolanews.blogspot.com/2014/12/dalradian-dnato-rousseau-dumps-25m.html
(4) http://www.cochilco.cl/archivos/Semanal/20141212163610_MERC%202014%2012%2012%20(ingl%C3%A9s).pdf
(5) http://incakolanews.blogspot.com/2014/12/metals-versus-miners-versus-oil-last.html
(6) http://proveedoresdemineria.com/?p=nota&id=6711
(7)
http://www.bvl.com.pe/jsp/ShowDocument.jsp?_www_doc=/hhii/CM0001/20141209174701/RB450324514324532ACLA
R32GESTION.PDF
(8) http://gestion.pe/impresa/grupo-mexico-negocia-compra-20-acciones-volcan-2116194
(9) http://www.gatoencerrado.net/store/noticias/88/88528/detalle.htm
(10) http://www.prensalibre.com/noticias/politica/reubicaran-fondos-ante-amenaza-impugnaciones_0_1265873409.html
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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