IKN #293Premium

The IKN Weekly
Week 293, December 21st 2014
Contents
This Week: Top Pick on Argonaut Gold (AR.to), The Copper Basket 2015: Suggestions
gratefully received, A Christmas edition.
Fundamental Analysis: Timmins Gold (TGD) (TMM.to) buys Caballo Blanco: Reader feedback
and thoughts arising.
Stocks to Follow: Overview, Argonaut Gold (AR.to), Salazar Resources (SRL.v), Fortuna Silver
(FVI.to) (FSM), First Majestic (FR.to), Rio Alto (RIOM) (RIO.to), Minera IRL (IRL.to) (MIRL.L),
NovaCopper (NCQ.to).
Copper Basket: Overview, The 2015 Copper Basket, Panoro (PML.v), NGEx Resources
(NGQ.to), Copper Fox (CUU.v), Western Copper & Gold (WRN.to).
Low Cost Producer Basket: Overview, The 2015 Low Cost Producer Basket.
Regional Politics: Overview, Regional review next week, HudBay (HBM) and Nino Coppero:
Do not underestimate this issue, Peru’s campaign to formalize small miners: More sizzle than
steak, Mexico: Narco gang news, Yanacocha/Conga takes a loss in the courtroom, Ecuador: The
dollar thing.
Market Watching: Starcore (SAM.to) and Fortuna (FVI.to) (FSM) insider trades back up IKN
theories, The Páramo de Santurbán Colombia: Friday’s announcement and where we stand
today (EOM.to) (CBJ.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
Top Pick on Argonaut Gold (AR.to)
After recommending it and buying it last week, I’m moving Argonaut Gold (AR.to) to Top
Pick status this week and will buy more in the days to come. The move to Top Pick
status is likely to be temporary, I see this as a punctual trade with a time limit to the window,
but right now for me there’s no better place to park some speculative cash. As I’m fully
expecting AR.to to regain its 2-handle share price soon it’s a pretty logical extension to want to
ride the move in the days and weeks to come. In a perfect world (that a thing?) AR.to will be
bumped back down to standard reco some time in January after its New Year’s rebound is done
and we’re neatly over $2 a share. That’s the plan, what could possibly go wrong?
In other news, please note that there’s also a sell call on Salazar Resources (SRL.v) in the
‘Stocks to Follow’ section today. I’m not in a rush to sell out and it’s a tiny thing in cash terms,
but the sell call is out so it gets a mention here in the topbox.
The Copper Basket 2015: Suggestions gratefully received
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See ‘The Copper Basket’ today for thoughts on the make-up of the 2015 list, as there are at
least five names being dropped from the current 2014 component list and maybe as many as
seven. I have several names in mind for replacements already (a dozen or so in fact) but I’m
eager to hear from you people out there for suggestions, thoughts or even “Man you GOTTA
have this one next year” direct orders. See below for more and if you have ideas, you know the
mail address. Please note there’s one major difference this year; I’m happy to accept small
producer names for the list but they have to be small ones (no Southern Coppers, HudBays,
Capstones etc). The focus remains junior.
A Christmas edition
Here’s wishing you all a very Merry Christmas and the best for 2015. Health and happiness for
you and your loved ones is the priority, the rest is noise.
This week’s edition is somewhat abridged as the week ahead is bound to be a quiet one for the
markets, cut in two as it is by the 24th and 25th dates landing in the middle (and 26th for those
of you tuning in from the UK). Also Christmas preparations have been a part of my weekend,
too. Next week’s edition promises to be bulkier.
Fundamental Analysis of Mining Stocks
Timmins Gold (TGD) (TMM.to) buys Caballo Blanco: thoughts arising
When Timmins Gold (TMM.to) (TGD) announced it was buying the Caballo Blanco gold project
from Goldgroup Mining (GGA.to) for $10m cash plus around 16m shares on Thursday morning
pre-open (1) my immediate reaction was to be thankful that I had decided to cut my losses
earlier on TGD and sell when I did a couple of months ago. The second reaction was to post on
the blog (2) and the title of that one, “Timmins Gold (TMM.to) (TGD) throws $10m cash and
16m of its shares down the toilet”, sums up all you need to know on the message (i.e. no need
to read the thing). Feedback to the post was interesting, eg this from long time reader
(sufferer?) and mailpal DC, who wrote (here’s the whole mail with just typos touched up):
Say Mark I still own Timmins Gold - you owned it but are out I realize.
How can you be so sure Caballo Blanco will never be a mine?
I remember when RIO did their acquisition you had thought the mine they
were acquiring might never become a mine.
Perhaps in your next newsletter you could include a piece on why you think
Caballo Blanco is a bad acquisition.
Now that’s my idea of a great mail to receive because I get full disclosure of position, the
question and reference to my own weaknesses and shortcomings in just five lines and 69
words. Make your point, hit send, DC’s my kinda guy.
Let’s start by addressing the specific Caballo Blanco issues. That project and its woes were first
mentioned by The IKN Weekly in IKN131, way way back in November 2011 when it was still a
“live prospect” and very much in favour in the exploreco mining chatterworld. We followed the
story closely for the months that followed and it quickly became apparent that it had some very
serious permitting headwinds, as well as being run by people who were trying their very
hardest to hide the facts from the investment community (chief culprit one Keith Piggott, but he
was just one of the many).
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There was plenty of coverage (eg IKN150, IKN163 and those are just two from the period) and
I also strongly recall a telephone confcall I had with GGA.to management when they just
straight lied to me, but long story short and by the time IKN177 came around we were
reporting that GGA.to had “withdrawn its permitting application”, a move designed to avoid the
inevitable permit denial it was about the receive from the national government of Mexico.
The thing is, the national government were just about the most pro-project body in the country
for the project at that time. Sure Caballo Blanco was opposed by some national level politicos,
but also by local community, environmental groups, the city government and the regional State
government of Veracruz (and for the record, post election its current regional government is
anti the project as well). Its opponents include those who worry about the local fauna and flora,
those who worry about the dust contamination from the eventual mine and those who note
there is a nuclear power plant just 3km from the property and the affect constant open pit mine
detonations might have on that facility. It’s fair to say that it’s one of the most consistently
opposed projects I know of in LatAm today, the antis come from all sides and what’s more,
Veracruz is never going to be a place for happy mining company hunting grounds whatever
your project; as a region, Zacatecas it is not.
Now we get to why we suppose TMM.to has decided to buy Caballo Blanco. Here are a few
alternatives:
1. They’re stupid. Perfectly possible. There has been an improvement in the way political
and community risk issues are seen by some, even most mining companies large and
small over the last ten years or so (even five years) but there are still a number of
companies that don’t see them for what they are; true project killers in the same way
that price or geology or engineering red flags can kill a project. TMM may be one of
those minority stuck with the attitude of 30 years ago and may think that it’s a White
Man’s Burden thing, all they need to do is whip the local brown people into shape
(either figuratively or literally) and all will be fine.
2. They think it’s cheap and worth the risk at the price they’re paying. See point 1) above,
but on this we need to double back and understand that the word “asset” really needs
to mean something these days. If you try the “Yeah we have 3m oz 5m oz Xm oz of
gold in the ground there” and hold it indefinitely on your books, the dumber end of the
mining world will still try to make that out as an asset and put it as so on the balance
sheet. But we’ve all seen the writedowns and impairments being taken by mining
companies in the last couple of years, they don’t just appear out of anywhere. A piece
of ground that brings no cash or cash flow to a company but costs them to maintain is
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not an asset, it’s a liability. In ten years’ time TMM will still own Caballo Blanco and
would have paid real money in order to keep it on its books. In return, nothing. Well,
nothing except for $10m less in the warchest and 16m extra shares diluting the current
holders. That’s the essence of a liability and it matters not one jot what the CFO
decides it’s worth per ounce in-situ in the meantime.
3. They think they can turn around the political/community risk situation. They might think
that, but I’ll point you towards 1) again. The classic thinking in mining circles on this
one goes, “Well, we have this working mine at X (in this case San Francisco) and we
can show locals that we’re good, responsible operators and show them how mining
benefits the local community etc”. But as we see in the Morelos/Esperanza/Alamos
situation, or the MAG Silver Cinco de Mayo situation, or the Argonaut San Antonio
situation or many other examples too, when a community doesn’t want mining in
Mexico is can successfully stop it indefinitely no matter who owns the thing or how
wonderful its working environments are in other places. And in this case Caballo Blanco
isn’t opposed by one group but many (and let’s do the list again): It’s opposed by local
community, the town government, the regional government, the national parliament
and national oversight bodies such as the Semarnat environmental board, that’s not
even mentioned Greenpeace or Save the Frogs either.
4. Timmins has taken this on as a poisoned pill. That’s perfectly possible too. It wasn’t so
long ago that the TMM board faced a proxy slate from people who wanted to see
change and a move away from an infamously entrenched board of directors. Some
minor changes happened, the slate was dropped and for a while there were very strong
rumours that TMM would be bought out as a result (and hey, I bought and held the
stock due to very relaible sources telling me a deal was close between it and Argonaut).
In the end that fell through, perhaps due to the negatives from gold price at the wrong
time, but we’re now back at a place where TMM looks cheap and potentially vulnerable
to a buyout move, hostile or otherwise. Therefore taking on a crappy, unpermittable
project such as Caballo Blanco may be a defensive move from a board that wants to
keep its cushy number going as long as possible.
Those are a few thoughts arising and among them may lie the truth, or perhaps in a combo, or
perhaps there are other angles I’ve missed. But the bottom line here is that I do not want
anything, anything AT ALL to do with a board or a management team that thinks
Caballo Blanco is a reasonable purchase. It’s exactly the type of 19th century-think mining
company corporate decision that brings me out in an allergic rash, this darned project has been
bouncing around for years and as one IKN blog reader noted to me in a mail, time was many
moons ago that people would buy previous owner Almaden specifically because it owned
Caballo Blanco. AMM and Morgan Poliquin aren’t stupid, they flipped it to Goldgroup before it
was too late (and sidebar note, they also owned and flipped out Esperanza in Morelos before
the pol risk on that one blew up in people’s faces...not stupid at all). Now GGA has somehow
managed to rescue some marginal value by selling on to Timmins. Hot potato.
To round off, its time to address the point made by DC in his mail: What’s the difference
between the Caballo Blanco/Timmins Gold deal of the today and the Rio Alto/Shahuindo deal of
yesterday, one which I didn’t like when I first heard of it but eventually came around. Yes
indeed I was dead set against Shahuindo (bought by RIO.to) for a long time and mainly
because it was owned and run by the shyster Stan Bharti. But when RIO.to made to call to buy
it out I had no choice but to re-examine my position and I’m going to dedicate a few lines to
explain just why. Unlike the untrustworthy members of mining world (and there are many of
them) I’ve learned to trust the word of RIO.to CEO Alex Black (as well as his team, particularly
Jaime Soldi but most every other I’ve met inside RIO.to too) and not because Black’s
particularly smooth talking, handsome, suave, sophisticated, stylish haricut etc etc but because
over the years he’s (they’ve) consistently made calls and kept word on matters relating to
business and operations. Just like everyone else I run into in this snakepit sector, he was
afforded zero trust and confidence to begin with but when respect and trust is earned it’s a
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powerful thing.
Now, I know I’m a stubborn person in many ways and once I make up my mind about
something it tends to stay made up. But I’m not plug dumb stupid either so if an issue or
matter requires re-examination that’s what it gets. That happened to me recently with Argonaut
Gold (AR.to) and it happened when RIO.to announced its purchase of Sulliden for Shahuindo.
My beliefs came into immediate conflict with someone else who I’d learned to trust, therefore
both sides of that equation needed examining. And yes, that came to a head in the week of
IKN265 when I first went and met with RIO.to and got their detailed call on the deal, then went
to visit the Shahuindo project site, talk with Cajabamba people, see what there was to see etc.
The result: My trust in CEO Black and his team remained intact that week, my views on
Shahuindo gave way, I got on board the deal plan and since then, RIO.to’s share price has
fortunately gone the right way and done the right thing to back up my change in opinion.
In my considered opinion the Caballo Blanco case is very different to that scenario. This isn’t
about my subjective feelings on previous owner Bharti plus my incorrect opinion (at the time)
that the South corner of the Cajamarca region was as politically difficult as the main
central/northern high country zone that hosts the regional capital as well as
Yanacocha/Conga/Galeno/Michiquillay/etc. Caballo Blanco is formally opposed and strongly
opposed by National, State, Regional and local politicos, often from different corners of the
Mexico political scene and different political parties. Yes it’s also opposed by local environmental
groups of the treehugger variety but it’s also opposed by Semarnat and there are papers to
prove that (the ones that say “permit denied”). It’s next to a nuclear power plant and that
makes a lot of people nervous up there. Next, if Caballo Blanco goes ahead it threatens some
specific endangered species (including a cactus variety that’s culturally important to enough
people to make a real difference) which you might not care about sitting in your comfortable
centrally heated living space today but people in Veracruz do and they do a lot. These aren’t
subjective opinions, these are objective factual reasons to avoid this project like the veritable
plague and if you want me to pick just one out of the whole bunch, it would be that the
regional government has the sign-off on the Change Of Land Use documentation (cambio de
use de suelo) that any mining project needs to have if the land wasn’t previously used for
mining. Without that piece of paper in hand it doesn’t even matter what the national
government says, the treehuggers say, the nuclear worrybags say, a mine will never happen.
Veracruz, no way José.
I do not know why TMM has decided to buy Caballo Blanco, but I’d vouch for either ignorance,
arrogance or even a combination of the two as a baseline cause. And if the board’s ultimate
plan was to poison-pill themselves and
remove their company as a valid M&A
option, if true I’d say that they’ve
succeeded on that. But whichever way
you cut the cloth it makes TMM
unattractive as a company to buy, hold
or trade. My interest would be revived
by a proxy slate move against these
fools running TMM, but aside from that
there is now a big red cross through
the company name and “avoid” written
all over it.
I’ll leave you with a five day chart of
Timmins Gold versus the GDXJ ETF.
Stocks to Follow
5

We now have 15 open positions on our ‘Stocks to Follow’ list and of those, last week saw seven
put in gains (RIO.to, DNA.to, AR.to, RMC.v, FCV.v, AG, GQC.v), two remain unchanged
(NCQ.to, COP.to) and six show losses (BTO.to, ARG.to, IRL.to, LRA.v, FSM short, SRL.v). The
two double figure percentage wins came from GoldQuest (GQC.v up 20.0%) and Argonaut Gold
(AR.to up 12.2% on new average price position), though decent results came from Reservoir
(RMC.v up 9.2%), Focus (FCV.v up 9.1%), Dalradian (DNA.to up 7.8%) and Rio Alto (RIO.to up
7.6%). On the flipside, the worst percentage losses were booked by Minera IRL (IRL.to down
16.7%) and Amerigo (ARG.to down 12.1%).
With the addition of Argonaut Gold (AR.to) last week we now have 15 open positions on our
‘Stocks to Follow’ list, the self-imposed maximum. Three of the names show green, the other
twelve are still in the red and some heavily so.
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$2.99 30.0% 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$1.92 -17.2% V good entry point now
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.69 7.8% Nov'14 tgt $1.25, top Au expl
Argonaut Gold AR.to Str. buy C$1.47 14-dec-14 C$1.65 12.2% Remarkable value gold co
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$4.15 -31.4% Best spec Cu play
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.18 -21.7% tgt 50c, avged up, 1q15 news
First Majestic AG spec buy U$10.51 10-aug-14 U$5.12 -51.3% Now in pair trade with FSM
Amerigo Res ARG.to hold C$0.405 20-jul-14 C$0.255 -37.0% Small Cu play, good value
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.05 -81.5% 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$0.40 -65.2% solid biz model, LT hold
GoldQuest Min. GQC.v hold C$0.26 27-oct-13 C$0.09 -65.4% no point selling so cheaply
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$4.47 -8.5% 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 sell 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
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Now for some notes on a selection of the above stocks.
Argonaut Gold (AR.to): Position Opened, upgrading to Top Pick: I bought early
Monday, bought a little more close to the bottom on Tuesday and added Thursday too, this is
already a big position for me, in relative and absolute terms. It was a bit of a gut-wrench to
watch to action on Tuesday and after the year that’s been couldn’t help but go through the “Oh
No here we go again” feelings and thoughts, but they disappeared when I reminded myself
about the core underlying valure of this trade, the balance sheet position and the mine
profitability. So I bought again instead of hiding in a corner. As things turned out
Tuesday/Wednesday marked the low and it came roaring back, so this weekend Im’ even
daring to entertain the thought that I bought some of the lowest priced shares possible. We’ll
see on that, but must say it’s started well.
The feedback from last week’s note on AR.to was positive as even a hard-head like me enjoys a
little confirmation and back-up from other who shift numbers around on spreadsheets for a
living. Thanks people, you know who you are. Consensus was agreement with the call, yes
AR.to has got sillycheap and although a couple of the people who wrote in like the stock’s other
assets more than I do (they’re still under the mad illusion that San Antonio will make it as a
working mine) the basic idea that the company is worth much more than today’s market price
with just the two working mines and gold at $1.2k was underscored and franked by everyone. I
even got to hear about buyers
moving in on large portions
Wednesday through Friday
morning, so thanks for that as well
(and I took advantage a little with
my extra Thursday purchase...I
have no shame).
As noted above I’m moving
Argonaut (AR.to) top Top Pick and
as from next weekend it will sit at
the top of the table next to Rio
Alto, if only for a while. The current
window of opportunity here is
irresistible and my only caveat at
the moment is that of a gold price
slump. Therefore assuming gold stays at or around $1.2k i want to ride AR.to back to at least
the $2 level with more shares, once back there a more measured decision can be made about
whether to hold longer and ride any higher.
Salazar Resources (SRL.v): Selling (if possible): The news out of SRL last week went
largely unnoticed by the market (and that’s understandable, it’s the epitome of the backwater
stock) but it’s also a death knell for the current set-up and like it or not, like the rocks or not,
tiny and relatively insignificant position or not, it’s time to call sell here. On December 16th SRL
gave us the following (3) which I’m pasting here so we all see it:
Further to the Company's press release dated October 27, 2014, the
Company announces that the letter-of-intent ("LOI") with Guangshou Group
Co. Ltd. ("Guangshou"), a privately held Chinese international mining
conglomerate, is not proceeding at this time, though Guangshou has advised
they remain committed to finalizing a definitive agreement there is no timeline
on when Mr. Huang, the CEO of Guangshou, will be able to follow up on this
matter. In the meantime the Company is continuing to investigate other
opportunities to advance the Curipamba project in Ecuador.
In short, SRL just lost its sponsor and unless it finds somebody else quickly it’s going to run out
of money. This is a big blow for the aspirations of Freddy Salazar and SRL and although those
7

excellent VMS rocks aren’t going anywhere, we have to fear for the current corporate structure
on top of them.
It’s not going to be easy to sell out elegantly here, even with my very small holding. I’m not
going to rush at it either and will probably wait for days when liquidity shows up to sell (there is
no rush with a position this small) but as soon as I sell at least some of them I’ll take the line
away from the table above and book the hefty percentage loss.
Fortuna Silver (FSM) (FVI.to) and First Majestic (FR.to) (AG) Pair Trade: The last ten
days have seen this pair trade tilt definitively in our direction (I thought about crowing a bit last
week, decided to wait another week to see if
a trend was setting in).
As for news, there was solid stuff from
Fortuna when they announced Wednesday
(4) the positive decision on the ~$60m
expansion of San José, which will now
happen in 2015. Of that around $30m is
expected to be spent on expansion of the
production facility and $30m on the shift
from normal to dry-stack tailings.
Over at First Majestic the news was more
nebulous and unofficial. The pop early
Monday got your author (and others)
scrambling for information. At first I assumed it was connected with the GDX readjustment of
AG (Van Eck needed to add shares) but on asking around, well-sourced jungledrums (and after
the back-and-fro on the blog last week I want to stress the well-sourced nature here) placed
FR.to as talking with Pan American Silver (PAA.to) (PAAS) as regards a merger.
Let us be crystal clear: Mining companies “talk with” each other on a regular basis. The “talk
with” process could be formal, informal, CEO-to-CEO chatting, boardroom, Confidentiality
Agreement, and any stop in between. Also, just because person X has been placed talking with
person Y, we’re still a nautical mile away from any sort of deal being done let alone a major one
such as a merger, buyout or fusion. But rumour is as rumour does, I sought and found a
reasonable (and decently sourced) explanation for the abnormal Monday trading, I passed on
the intel via the blog. If you ask me I think it’s a possible deal, I wouldn’t go as far as to say
probable but if the assorted egos on either side find a chair in a newly constituted boardroom
with the corporate job title that suits them, it’s at least a logical proposition to tie these two
companies together and make a large silver player out of them.
Rio Alto Mining (RIOM) (RIO.to): There were some weird and wonderful price moves late
day Friday as the indices added and
subtracted shares for their new make-
ups, but none were more interesting
than for Rio Alto (RIO.to) (RIOM). Friday
saw the stock do a total of 23m in
volume over the various exchanges, with
19.99m shares traded over the TSX
alone and the bulk of those right at the
end of play. Here’s the chart.
But here’s the thing that makes it weird:
Rio Alto was not scheduled for any
sort of re-balancing. Not Van Eck at
the GDX or GDXJ, not S&P at its various
indices, not TSX for its bigboard or
8

mining index. Nothing. Not a one. And on the subject, after a quick exchange with RIO.to HQ I
can report that they don’t have a clue about who was buying either. It’s a mystery, a nice and
pleasant and wholly positive one but a mystery all the same. Which begs the question, who put
down something between $65m and $70m in order to buy around 7% of the RIO.to shares out
(and 8% of the float) late on Friday afternoon in what’s likely to be the last busy day of the
2014 stock market year? Possibles include:
• an insto/fund for pure investment purposes
• a fund that wants to start playing TSX/S&P tracker for the first time
• a larger miner who wants to take a quiet 9.99% without raising eyebrows
• Or it could simply be some rich person who wants to buy/hold on a very good gold
mining company.
• Somebody else (corporate or otherwise)
Answer that one and you're doing better than I, but what I will be looking out for in the next
few sessions are any signs of further buys of scale; if it turns out to be a one-off purchase then
fair enough (and I can’t blame them for wanting to own the best junior goldie out there), but
Friday might turn out to be the first chapter of something else.
In other news, I’m reminded that this time last year RIO.to was languishing at the weekend
price of CAD$1.49 per share, this weekend it’s a double on that number, a 52 week double (and
there aren’t that many of those out there this year). In a 2014 that’s been a drudge to get
through your author’s Top Pick stock has done nothing more nor less than saved the year, for
his portfolio at least. His wife and kids being healthy, happy and (in the case of the kids) doing
well at school is far more important but when it comes to cash, RIO.to’s the one that has got
me out of jail.
Minera IRL (IRL.to): At the other end of the scale, the non-bids at IRL mean the small selling
last week came with another price drop and as that drop’s now from 6 to 5, it means the
percentages are large. The single great disappointment of the year and the outstanding (if
that’s the word) failure of the portfolio, we still wait on news of a financing deal to get Ollachea
moving but with the holiday season now upon us, it doesn’t look too promising for this quarter.
We can expect a NR update on proceedings from IRL before the end of the year, apart from
that the call is to wait. Depressing situation, depressed valuation.
NovaCopper (NCQ.to): Reports from the Great White North last week made for interesting
reading about NCQ, as on Wednesday the local region’s community held a public meeting on
whether to build the road that will connect the world to the Ambler region (or it that vice-
versa?) (5). The report noted the opposition to the road, which is one of the key part to the
NCQ plan for development, as well as the support it gets from local and regional authorities.
The main report came with supplementary reports such as this one that notes the official report
into preliminary environmental impact for a one lane road through the region would produce
negligible impact (6) and this rather strange one (7) that highlights the lack of baseline
knowledge reporters have about what constitutes a junior mining company. The piece is
entitled “Mining company seeking Ambler road admits 'substantial doubt' on its financial health”
with the argument based around the “revelation” (sorry, irony speech marks are 100%
necessary this time) that in its regulatory filings NCQ includes the boilerplate...
“There is no assurance that we will be successful in obtaining additional
financing, that sufficient funds will be available to us or be available on
favorable terms in the future”
...as due warning over its financial position.
Well...errr...yeah. It’s an exploreco, it has a finite pool of money in its treasury at any given
moment, it has a burn rate and if you start subtracting numbers from other numbers you’ll
eventually get to zero. That’s the nature of the beast, but this basic fact of mining life seems to
9

have sailed over the head of our intrepid reporter Dermot Cole. But never mind, the main report
on the open house debate over the road was the main event and that one’s worth reading
carefully. Locals do have valid concerns about running a new road through what’s basically
virgin wilderness, not least for the out-of-town hunters it might attract. Meanwhile the jobs-
and-prospects angle is given by the company and supportive politicos. Sounds very similar to
Peru, in fact.
The bottom line to this stock hasn’t changed in 2014 and it’s unlikely to change in the year to
come, either: It’s holding high grading property in a very large land package that has a lot of
exploration left in it, but the lack of access means it’s rock that won’t see production for many
years yet. We’ve mulled over future initial production dates such as 2021 and 2024 before, they
may turn out to be optimistic and it’s all about the road that’s slated to be built to the Ambler
region as from 2019. The yea or nay on that project holds the key.
The Copper Basket
After fifty-one weeks of 2014 The Copper Basket is showing a 21.31% 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 1.43 187.71 213.99 1.14 -20.3%
4 Reservoir Min. RMC.v 4.97 47.55 197.33 4.15 -16.5%
5 Nevada Copper NCU.to 1.35 80.5 114.31 1.42 5.2%
6 Panoro Minerals PML.v 0.35 220.25 57.27 0.26 -25.7%
7 Western Copper WRN.to 0.76 93.68 52.46 0.56 -26.3%
8 Copper Fox CUU.v 0.375 402.96 52.38 0.13 -65.3%
9 Curis Resources CUV.to 0.57 74.79 50.86 0.68 19.3%
10 Hot Chili Ltd HCH.ax 0.425 333.11 44.97 0.135 -68.2%
11 NovaCopper NCQ.to 1.60 60.15 39.70 0.66 -58.8%
12 AQM Copper AQM.v 0.11 139.24 8.35 0.06 -45.5%
13 Coro Mining* COP.to 0.10 159.37 7.97 0.05 -50.0%
14 Cordoba Min. CDB.v 0.90 58.81 6.47 0.11 -87.8%
15 Oracle Mining OMN.to 0.27 49.03 1.72 0.035 -87.0%
NB: HCH.ax priced in AUD$, rest CAD$ //CDB 2x1 split May'14 Portfolio avg -21.31%
Last week saw just three weekly winners (NGQ.to, CUU.v, PML.v) but as they were all of the
large scale dead cat bounce variety, the
overall basket recovered by 1.29% from its The Copper basket 2014, weekly evolution
25%
new 52 weeks low of last week. The big wins 20%
(Panoro up 26.8%, NGEx up 16.3%, Copper 15%
Fox up 13.0%) are all fine but the amount of 10%
UNCH in the list (seven this week, namely 5%
LCC.v, AZC.to, NCQ.to, CUV.to, COP.to, 0%
-5%
AQM.v, CDB.v) makes for a static index these
-10%
days. With just one week to go to close out
-15%
the 2014 edition it’s time for a change or or
-20%
five, or seven (see below for more). To round
-25%
out this top block, there were four losers last
week (HCH.ax, NCU.to, WRN.to, OMN.to).
Copper prices dropped and then recovered to
the low 2.90s levels last week, but trading is light and will remain so until the New Year’s
celebrations are done.
10
ht5naj ht61 ht61 ht9 ht03 ht02 ht11 ts1nuj dn22 ht31 dr3gua ht42 ht41 ht5tco ht62 ht61 ht7ceD
source: IKN calcs

So to inventories and the same story of light trading here. The regular bullet points are:
• Overall world stock levels rose by 5,857 metric tonnes (mt) (+2.1%) to finish at
287,246mt. That’s the second week of modest gains to world stocks and though not a
big sea-change type move, it has added over 4% to warehoused copper. It explains the
price weakness we saw mid-last week and I’d call it at “let’s keep and eye on things”
right now.
• The Shanghai Futures Exchange warehouse stocks saw another rise and are up by
2,849mt (+3.2%) to finish Friday at 92,829mt. Two weeks running of inflows, but still
well under my idea of a trigger level 100k
• The LME copper warehouse inventories went up by 3,500mt (+2.1%) to end the week
at 167,000mt. That 2%-ish gain thing again, same story.
• The Comex warehouse stocks number lost a small 492mt and ended the week at
24,417mt.
Shanghai Futures Exchange Warehouse Stocks, 2014
220000
200000
180000
160000
140000
120000
100000
80000
60000
11
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 ts12
Mt Cu
source: Cochilco
Nominations requested for the 2015 Copper Basket: It’s that time of year again, when
we get rid of the bought out or crapped out from the list and bring in new names. This year
there will be at least five new names entering the list and perhaps up to seven. That’s because
these five are definitely about to disappear...
• Lumina (LCC.v): Bought out

• Augusta (AZC.to): Bought out
• Curis (CUV.to): Bought out
• Oracle (OMN.to): Broken stock, too small
• Cordoba (CDB.v): Broken stock, non-starter junior
...while the jury is out on these two:
• Copper Fox (CUU.v): Beaten down very hard (and deservedly). Schaft Creek going
nowhere, but the new Van Dyke project gives a potential lifeline (see below for more).
• AQM Copper (AQM.v): Another with big losses in 2014, which we add to the likelihood
of slow newsflow in 2015 as Zafranal is brought to feasibility study stage by its larger
operator partner Teck.
The others, larger or smaller, I plan to continue on the list in 2015 (unless you have some
specific reasons why any of them should be dumped).
And so to the replacements! Next week we’ll reveal the composition of the 2015 list and for
what it’s worth I’m already playing with a dozen or so name, larger or smaller but all junior, as
the new entries but I’m also all ears and happy to accept ideas, suggestions etc for new
members. Most of the criteria are the same as in years before but this year there’s going to be
something new. Here’s a list:
• I’m happy to use junior producer names. Up to now it’s always been junior
explorecos only, but the way things stand as from 2015 I’m going to consider small
copper producers too. They have to be small ones (e.g. shortlisted is ARG.to), so if you
have a favourite in this sub-sector, throw the name my way.
• I’d like another Australian name to add to Hot Chili (HCH.ax) if possible. I’m not
the greatest expert on the Oz scene and I know a few of the people on the IKN list
know mountains more about them than I. HCH.ax is staying, what could be a decent
complement people?
• Non-LatAm is fine by me. The IKN Weekly is LatAm-centric by nature, but when it
comes to The Copper Basket I’m more interested in getting a decent representation of
the whole of the junior copper sector, rather than just these parts. Therefore ideas on
companies working Africa, Asia, Europe, North America are welcome.
• The suggestions don’t have to be sparkling and promising companies. As
explained previously, getting underperformers as part of the basket is just fine too, we
need to show the range of market sentiment rather than just the up’n’thrusting. It’s
why, for example, I’ve continued to feature Copper Fox (CUU.v) for these years even
though I personally have a very low opinion of the company, the Schaft Creek asset
and its management. If a stock becomes “broken” then it gets discarded, but a
functioning trade vehicle can be on top of a good/bad/indifferent asset.
• As usual, we’ll be featuring large and small juniors to get a cross section. My
upper limit on market cap is perhaps $500m (negotiable), the lower limit perhaps
$10m.
Therefore, any suggestions please send them in (and if possible before next weekend when I’ll
have made a decision on which make the cut, be writing up the company details and be
generally busy).
Now for notes on featured stocks:
Panoro Minerals (PML.v) and NGEx Resources (NGQ.to): Your actual dead cat bounce
seen in both of these and while I have nothing against that, I see nothing changed in either of
12

these names and no reason to follow up.
Copper Fox (CUU.v): Yes I hate Schaft Creek and always have. Yes I never understood the
hype around this thing and vindication has come with time. Yes I hold the management team at
CUU.v in contempt for running a classic “fan club” type promo pump and attracting the type of
true believer hardcore following that rarely ends well for anybody, aside from the people
collecting those fat salary cheques every month. And up until a few weeks ago I had the near-
certain intention of removing CUU.v from the list (and my life) in 2015, but the new Van Dyke
project may have put that on hold.
In the last few weeks I’ve taken a cursory look at
the Van Dyke project (there are some interesting
historical documents and technical reports from
years past available online), I’ve also heard from
people who tell me the project will be a difficult
one to get going for political, community or
geological reasons (more on that if necessary in
2015), but on the other hand there are people
with letters after their names that have told me it
could work as well. We also know that CUU CEO
Elmer Stewart and his cohorts are ready and
willing to run BS-level pump jobs on the world
and we also know they use paid coverage
(Roulston for example) to promo their gigs to the retail dreamcatcher community. As the object
of the exercise here is “buy low sell high” and not “build a mine”, the release of the first
inferred resource under 43-101 rules last week (8) that shows 1.44Bn lbs copper may eb the
start of a run on this extremely beaten down share price. CUU is never a company I will be able
to trust and I’m still actively thinking about cutting it from the 2015 Copper Basket list. But is
there a trade here? That’s the question I ask and when it comes right down the the nitty-gritty,
that’s all us capitalists need to know. Check morals with coats and hats at the entrance.
Western Copper & Gold (WRN.to): Meanwhile, WRN is back at what’s turned out to be a
strong floor level price for the stock on several previous occasions, as a glance at this two year
chart demonstrates.
It’s also the price at which insiders have
previously added smallish chunk to larger
holdings and sure enough, last week saw
two insiders buy stock (9), namely CEO
Dale Corman (26.5k at 58c) and Julien
François (10k at 57c). I’m no big fan of
WRN the stock, but try as I might (low
grade, remoteness) I can’t seem to kill the
Casino project in my own mind. There are
worse Cu projects out there and if only for
that it’s a reasonable near-term trade at
the right price, but I’m not dying to be a
long-term shareholder in the thing either.
The Low Cost Producer Basket
13

After 51 weeks, the Low Cost Producer Basket is showing a 17.81% 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 24.34 23.40 -38.0%
2 Goldcorp GG 21.67 812 14.84 18.28 -15.6%
3 Barrick ABX 17.63 1164.67 12.61 10.83 -38.6%
4 Newmont NEM 23.03 499 9.54 19.12 -17.0%
5 Franco Nevada FNV 40.74 156.08 7.60 48.71 19.6%
6 Silver Wheaton SLW 20.19 357.39 7.31 20.45 1.3%
7 Agnico Eagle AEM 26.38 173.43 4.32 24.92 -5.5%
8 B2Gold BTG 2.02 948.9 1.56 1.64 -18.8%
9 Pan American PAAS 11.70 151.41 1.46 9.63 -17.7%
10 First Majestic AG 9.80 117.02 0.60 5.12 -47.8%
all prices in U$, using NYSE ticker prices Portfolio avg -17.81%
Four winners (FCX, NEM, AEM, AG) and six losers (ABX, GG, SLW, FNV, PAAS, BTG) and an
overall basket average that dropped 0.29% on the week, that’s your final score in a basket that
saw the good and the bad even itself out, more or less. The top performance came from
Freeport (FCX up 7.4%) with First Majestic (AG up 6.7%) in second spot. The worst was B2Gold
(BTG down 5.2%). All other moves were small in either direction.
The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
40%
30%
20%
10%
0%
-10%
-20%
-30%
14
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
Next Year’s Basket: Two new names
Overall I think this year’s experiment with a Low Cost Producer Basket has been a success. It’s
helped me mostly as a tracking device to gauge how well the juniors are doing comparatively,
but it’s also been good to watch goldies do better than silvers and to see how much stronger
the streamers (FNV, SLW) have been to the rest of the larger miner sector.
Therefore I’m going to keep this segment in 2015, but there will be two changes:
• Freeport (FCX) will be removed. I thought it would be a nice ballast type stock in the

mix, but after a while I realized the mistake of adding a company that gets only a
minority of revenues from gold. FCX is and will remain a copper play, plus its O&G
component is significant nowadays too.
• First Majestic (AG) will be removed. This one simply because at ~$60m market cap it’s
too small to be rightfully considered as a peer of the others. B2Gold and Pan American
are OK and survive, but $1.5Bn or so is as small as I want to go.
Therefore as from 2015 there will be two new names in the list. I have a shortlist already for
the candidates but (as in the Copper Basket above) I welcome any suggestions you might have,
especially if they happen to coincide with the companies I think will match the best. The criteria
on this list is simple, the company you like must be
• A precious metals miner
• A Tier One or Tier Two sized producer
• A low or relatively low cash cost operator
The relative health of the balance sheet is a secondary matter, what we care about first and
foremost (for this list anyway) is free cash flow from ops.
Regional politics
Regional review next week
Next week brings around the regular end-quarter regional risk review, when we check out the
state of play in the mining scene of focus countries and others that might eventually become
interesting. IKN294, next Sunday
HudBay (HBM) and Nino Coppero: Do not underestimate this issue
The news that Peru’s ‘Caretas’ has picked up on the nino Coppero insider trading story (10) and
ran its own Spanish language report on events (and for what it’s worth the report quoted IKN
on three separate occasions, which was nice of them) means this whole thing is likely to
become hotter for HudBay. Caretas isn’t a flimsy blog source, it’s a long-standing and respected
investigative journalism magazine and other media feed off its revelations and stories on a
regular basis.
Since first running this story in IKN285 dated October 26th I received plenty of mail (though
nothing from HBM or its lawyers) asking on updates or developments. What I understand is
that the SEC is investigating the case and HBM doesn’t want to make any public declaration
before the SEC makes a formal announcement. As the SEC is (in)famous for taking its own
sweet time over cases the timeline involved here is anyone’s guess, but do not be fooled by the
lack of progress or news so far; this situation is real, it’s serious for HBM and could cause a lot
of problems depending on how far the SEC decides to dig. Just for one example, it’s well known
that AZC insiders bought heavily into their own stock just days before HBM announced its
buyout move. The other side of the story is how Nino Coppero came to HBM from the
Norsemont deal to buy out Constancia and if dirty doings begin to be unveiled there, it could
cause HBM and its growth plans all sorts of company-changing problems.
This one’s been quiet for nearly two months, it’s not going to stay that way. My intel has been
rock solid on this from day one and I know that HBM has a serious problem on its hands; my
only question is how serious it might turn out to be, but there’s at least the potential for a
veritable can of worms scenario for HBM.
Peru’s campaign to formalize small miners: More sizzle than steak
A couple of weeks ago local headlines were captured by the announcement (right at the time of
the COP20 Environmental summit in Lima, sheer coincidence not) of the first small informal
mining company in the Madre de Dios alluvial gold mining zone to receive its formalization
15

papers from the government of Peru. The company employs around 500 people and the
company can now get back to work after going through the protracted bureaucratic hoop-
jumping exercise that’s taken two years to complete, but the spin put on the announcement
was wholly positive and all future-looking for the clean and nonpolluting shiny future of small
mining in the country. I took it was a large pinch of salt and didn’t bother reporting it, the
reason showing up last week when the same bureaucracy told us that just 16 licences of
formalization have been granted so far from the 58,835 applications received, and that 631
miners (not companies, individual miners) have now moved into the formal mining sector from
an estimated total of at least 300,000 people who are employed in Peru as
informal/artisanal/illegal (choose your preferred moniker) mining sector (11).
This result, 631 out of 300,000 (at least), comes at the end of two years of the program to
formalize the sector, so we’re hardly talking early days here either. For sure it’s a case of not
believing the hype and bluster, so no change there for these pages.
Mexico: Narco gang news
If there’s one subject that mining companies working Mexico hate to talk about, it’s the narco-
factor in the country. The country’s Chamber of Mining (CAMIMEX) and Mexico’s government
know that too, so there’s an apparent Omerta on the subject and rare indeed are any on-record
mention of the issue in press (but ask around and you’ll hear plenty of off-record chatter and
gossip on the subject).
But it suited the opposition miners union leader Carlos Pavón Campos, general secretary of the
National Mining and Metallurgy Syndicate (Sindicato Nacional Minero Metalúrgico) "Don
Napoleón Gómez Sada", to talk about the subject last week. During a press conference he
made his comments which were picked up by several Mexican media channels (though
amazingly, nothing in English yet). Here’s how this one (12) ran the story, which the first three
paragraphs here translated that give a good overview in a short time:
Mining companies in Michoacán and Zacatecas among other states are stopping
investment in exploration due to “entry payments” (exact Spanish phrase used “cobro
de piso”, which is more literally translated as “step charge”) charged by organized
crime, warned Carlos Pavón Campos, general secretary of the National Mining and
Metallurgy "Don Napoleón Gómez Sada".
“It’s a fact that crime comes to isolated mines and charges entry payments (protection
money), threatens management, kidnaps workers, takes engineers. We’ve seen
several cases of this sort so yes, it is worrying.”
In the press conference he warned the the security situation in those states, added to
the fall in metals prices, means that the mining sector is facing an adverse panorama.
Yanacocha/Conga takes a loss in the courtroom
Another story that’s been unsurprisingly under-reported in the English language press occurred
in Cajamarca on Wednesday 17th, when an appeals court threw out the conviction against one
Máxima Acuña Chaupe and other members of the Chaupe family that was handed down in
August 2014 (13). The original sentence said that the Chaupe family had usurped land that
legally belongs to the Yanacocha (NEM, BVN) and had taken possession of it in a violent
manner, sentencing the 50 year old Mrs Chaupe to two and a half years in prison. In throwing
out the case, the judge said that the land in question belonged the the Chaupe family and not
to Yanacocha SA, which is the crux of the whole case because the land in question is a
strategically important location in what Yanacocha one day hopes to be the contentious Conga
gold/copper mine (which you’ve heard too much about already).
The case has been dragging on for years and boils down to the fact that in 1994 the Chaupe
family bought the land, but in 1998 Yanacocha said that the land was theirs (and at this point
you sometimes hear from the company that the Chaupe family sold it to them, you sometimes
hear that the company bought it from the rightful owners and that the Chaupe family had no
legal deal on the land in the first place). For what it’s worth, the problem arises because under
16

Peru land law a property sales contract (known as a ‘compraventa’) doesn’t automatically give
the buyer rights to the land and if the owners’ name doesn’t change in the official government
registry a legal grey area is the result (sadly I could go into much greater detail, having been
through the whole red-tape process personally, but it gets boring quickly). Due to its precise
location the land is a key part of the Conga development plans so if Yanacocha loses all rights
the anti-Conga movement will have a very strong card to stop the mine from ever happening.
Therefore (and unsurprisingly) Yanacocha immediately said last week, on hearing that tha
Appeal Court awarded possession to the Chaupe family, that they would take the case to Peru’s
Supreme Court.
Ecuador: The dollar thing
President Rafael Correa’s comments at the weekend that he plans to reinstate trade barriers
from imports from Ecuador’s neighbours Peru and Colombia (14) bring into focus one of the
problems of working in Ecuador, that of the inflexible exchange rate. Correa noted that due to
cheaper Peru Soles (PEN) and Colombia Pesos (COP) versus the dollar (highlighting as he did
the 22% drop in the Colombian Peso) imports from neighbours had a new and strong
advantage over locally produced goods. That’s exactly right, but your author’s immediate
thoughts turned to explorecos (and eventually producers) in the mining sector of Ecuador. As
Ecuador’s economy has been dollarized since its last major crisis point in the year 2000, any
mining company working there won’t get to enjoy the better dollar/EM currency exchange rates
that others are now getting.
In other Ecuador news, Correa announced (15) at the weekend that he’s been invited on an
official State visit to China by his counterpart, which will happen on January 6th and 7th 2015.
Expect news headlines that week on the close relationship and all it might mean.
Market Watching
Starcore (SAM.to) and Fortuna (FVI.to) (FSM) insider trades back up IKN theories
Starcore (SAM.to) is the small gold producer on my shopping list as a potential long. Last week
company CEO Robert Eadie made a relatively small purchase of his company stock, 50,000
shares at 11.5c, but it’s the type of infrequent buy and direct purchase trade that makes it
interesting and good to see (16). On the other side of the insider coin but still a trade that
reinforces an opinion here at The IKN Weekly, we saw the VP Operations at Fortuna Silver
(FSM) (FVI.to), do the same thing as we’ve seen from CEO Ganoza and CFO Ganoza recently
(17) when he exercised 70k of his options at 4.03 and cashed them all in at prices between
CAD$5.26 and CAD$5.31, thereby making himself around $88,000 in profits on the shares.
The Páramo de Santurbán: Friday’s announcement and where we stand today
Last week saw another chapter in the ongoing saga that is the Páramo de Santurbán region in
Colombia, with this time a much-heralded announcement by the government of Colombia that’s
roughly two years late on the exact coordinates of the boundary that will separate the
protected nature reserve region of the uplands from places that can be worked by agriculture
and importantly for us, mining. As you may probably recall, we followed this issue closely in
2012, 2013 and early 2014 and I also held a long position in Eco Oro Minerals (EOM.to) in the
hope (ugh) that we could get a gain from a political risk play here, but all to no avail. I sold the
trade at a loss and walked away, but now comes the news that we were supposed to get all
those months and years ago. The condensed and potted from the Friday press conference and
announcement is as follows:
• We were given the long-awaited 1:25000 map that marks the boundary. You can see
an online copy here (18) and a little further down I’ve excerpted the bit that matters to
us, around the California/Vetas zone that’s home to the regions’ mining industry as well
as the projects with junior miner exposure.
• We still don’t have the exact coordinates of the boundary limits, they’re supposed to be
published tomorrow Monday 22nd December. Until they arrive the mining companies
have all said they prefer to wait until they know exactly how they’re going to be
17

affected.
• We also know that the off-limits zine starts at 3,100 metres above sea level, and not
the proposed 2,800masl of before. In theory this is good for the mining companies.
• Overall it seems as though the ruling from the Colombian government has favoured the
miners, with quiet approval from industry and local mining leaders (eg in the town of
Vetas) and complaints from the environmentalists and anti-mining campaigners. That in
itself is a positive. However there’s nothing cut and dried yet so caution is advised for
anyone considering a speculative trade here.
Now for a few details and I’ve spent a fair chunk of the last three days reading anything and
everything written in Colombia media on the press conference of Friday. The announcement on
Friday that 76% of the 129,743 hectares of the upland páramo region will become a protected
nature reserve, with the rest under strict control for agro and mining use, is fairly viewed as a
compromise that’s never going to please everyone but has tried to find a happy medium and a
best fit among sometimes diametrically opposed views. Or in the words of Colombia’s
Environment Minister Gabriel Vallejo López, on Friday, “The limitation of the Páramo de
Santurbán looks to protect the environment in a harmonic way with the necessities of the
communities that inhabit the area”.
It’s a big area and there are many pieces to the puzzle (want to know about the concerns of
the local onion growers?) but what really concerns us outsider capitalists is the area where the
miners play. That’s around the town of Vetas to the West of the páramo and we zoom into that
on this map segment from the main map (19):
Orange = “Areas destined for sustainable agroculture”
Yellow = “Areas for restoration of the Páramo ecosystem”
Green = The Páramo Complex Jurisdictions (Santurbán, Berlin)
White = “Potential páramo area”
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Please pay attention to that colour key as well, because the most important areas for the junior
miners seems to be (still not 100% certain, but seem is fair) in the yellow zones around the
Vetas town. Those are designated “Areas for restoration of the Páramo ecosystem” which in
effect means they can be developed and used for industrial purposes (i.e. mining) as long as
strict environmental controls are adhered to, according to the government. We don’t know what
those “strict controls” are at the moment, nor do we know the exact boundaries, but in principle
at least this is a good result for miners and the Vetas town leaders have already voiced
approval.
Meanwhile environmentalists are not happy with the decisions made around the Vetas area (as
pointed out above, a good sign for the miners). The best snippet found was from the mouth of
Florentino Rodríguez (20), a member of the anti-mining Committee for the Defence of Water
and the Páramo of Santurbán (Comité para la Defensa del Agua y el Páramo de Santurbán).
Rodríguez said “This is an unfortunate decision by the national government”, which echoed
many others, but the most telling thing came later, “The mining sector has won the first round”.
Because that sums it up. This is a battle victory for the mining companies there, it isn’t a war
victory. Those against mining in the zone rightly sense a decision has gone against them but
they’re by no means going to give up on their struggle, they see this as one setback, not a
major defeat. Those of us looking to pile into the juniors around the zone such as EOM.to
should keep that sentiment clear in the mind.
And talking of potential speculation, it probably hasn’t escaped your attention that the Eco Oro
(EOM.to) stock price has done some flying in the last few days on speculation that something
good was going to happen. With Friday’s presser it’s been given some vindication on that, but I
think the stock has flown too far too fast and these days we’re also talking about a company
that’s low on cash, so you can bet it will go
to market and raise cash sooner or later on
the back of last week’s news. We’re also
talking about a company with a more
generalized handicap than just being
exposed to the páramo de Santurbán; it’s
also exposed the mining nuthouse that is
Colombia the country.
I see little value in EOM.to, but those of you
looking for a risk proposition may want to
take a look at CB Gold (CBJ.v), also featured
in this three month chart, because it has
plenty of exposure to the Vetas region via its
wholly owned Leyhat subsidiary but as you
can see above, its share price has 1) not moved much from 2) very beaten down levels. In this
risk/reward equation I see much more to like about CBJ than I do EOM at today’s levels and
although I’m not going to partake personally in anything here (really want to avoid Colombia)
for those with the urge I’d point you at CBJ.v first. Here’s the company website if you want to
look (21) and if you do, I wish you the best of luck.
Conclusion
IKN293 is done, we end with bullet points:
• A somewhat shortened edition this week but I still managed to cover the things that
most caught my attention over the last five days. The main one, Argonaut Gold (AR.to)
is moving like a champ and is now a Top Pick based on what I’ve seen all week. If, as
seems to be the case, last week’s fundies piece on the stock got within two days of the
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absolute bottom I’m a lucky timing boy for a change. Ducks are in line here.
• Rio Alto (RIO.to) (RIOM) is trading well, I’ll be watching for any more large blocks.
• Suggestions for the two basket lists for 2015 will be gratefully received.
• A urge caution on the Páramo de Santurbán news, nothing here is cut and dried and
although the news was miner-friendly in general terms, there are many details left to
be known and some of them are likely to be very important ones. Also, don’t think for a
second that the anti-mining brigade there will roll over and die. EOM.to looks expensive
fro what it is today, if you’re feeling risk-averse try CBJ.v.
• The rumours picked up about First Majestic (AG) (FR.to) and Pan American Silver
(PAAS) (PAA.to) early last week were reasonable and from good sources. I would never
bank on talks automatically turning into deeds and neither should you, but neither is
this one out of the question. FR.to is a stock to watch closely and I’d much rather be
long it than FVI today.
The current Top Picks are Rio Alto Mining (RIO.to) and Argonaut Gold (AR.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://finance.yahoo.com/news/timmins-gold-purchase-caballo-blanco-110000450.html
(2) http://incakolanews.blogspot.com/2014/12/timmins-gold-tmmto-tgd-throws-10m-cash.html
(3) http://finance.yahoo.com/news/salazar-provides-corporate-130000351.html
(4) http://finance.yahoo.com/news/fortuna-announces-expansion-san-jose-120000470.html
(5) http://www.adn.com/article/20141217/ambler-road-plan-sparks-intense-debate-fairbanks-public-hearing
(6) http://www.adn.com/article/20141206/study-says-ambler-road-would-have-negligible-impact-caribou-habitat
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(7) http://www.adn.com/article/20141218/mining-company-seeking-ambler-road-admits-substantial-doubt-its-financial-
health
(8) http://finance.yahoo.com/news/copper-fox-completes-inferred-mineral-110000295.html
(9) https://www.canadianinsider.com/node/7?menu_tickersearch=WRN+%7C+Western+Copper+%26+Gold
(10) http://incakolanews.blogspot.com/2014/12/hudbay-hbm-and-nino-coppero-peru-media.html
(11) http://elcomercio.pe/economia/peru/solo-631-mineros-informales-han-accedido-formalizacion-noticia-1779703
(12) http://www.oem.com.mx/elmexicano/notas/n3643848.htm
(13) http://www.rpp.com.pe/2014-12-17-revocan-sentencia-contra-familia-chaupe-por-ingreso-a-tierras-de-yanacocha-
noticia_751954.html
(14) http://www.americaeconomia.com/economia-mercados/finanzas/ecuador-aplicara-salvaguardias-socios-andinos-
ante-depreciacion-de-moneda
(15) http://www.americaeconomia.com/politica-sociedad/rafael-correa-anuncia-visita-oficial-china-en-enero
(16) https://www.canadianinsider.com/node/7?menu_tickersearch=SAM+%7C+Starcore+International+Mi
(17) https://www.canadianinsider.com/node/7?ticker=FVI
(18) http://www.eltiempo.com/contenido/colombia/otras-ciudades/ARCHIVO/ARCHIVO-14997776-0.pdf
(19) http://www.eltiempo.com/contenido/colombia/otras-ciudades/ARCHIVO/ARCHIVO-14997776-0.pdf
(20) http://www.aminera.com/index.php/mineria-internacional/item/8916-con-la-delimitaci%C3%B3n-la-
miner%C3%ADa-tiene-una-%E2%80%98puerta%E2%80%99-entreabierta-en-santurb%C3%A1n.html
(21) http://www.cbgoldinc.com/
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
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B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
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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