The IKN Weekly, issue 294 — Dec 28, 2014
The IKN Weekly
Week 294, December 28th 2014
Contents
This Week: Two serious forecasts for 2015, Copper is the critical metal for 2015
Fundamental Analysis: Next Year’s Copper Basket: The five new names, Next Year’s Low
Cost Producer Basket: The two new names.
Stocks to Follow: Overview, Argonaut Gold (AR.to), Salazar Resources (SRL.v), Rio Alto
(RIOM) (RIO.to), Coro Mining (COP.to).
Copper Basket: Overview, Copper Fox (CUU.v).
Low Cost Producer Basket: Overview.
Regional Politics and Market Watching: Overview, Australian juniors also feeling the pinch,
Lundin Gold (LUG.to) at Fruta del Norte, Continental Gold (CNL.to) changes tack slightly, Peru’s
gold production trending back up, The Páramo de Santurbán and Eco Oro (EOM.to): To be
clear, Peru: Tenements lapse, Chile: Mining redundancies, Rio Cristal Resources (RCZ.v): A new
Warke/Pirooz pseudoshell.
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
Two serious forecasts for 2015
As is usual for the time of year, next week on the blog I’m going to stick up my “Ten Random
Calls” post with predictions for the year to come. Some are more lighthearted than others, none
really make it out of the realm of pure crystal ball gazer,s o take them all with a pinch of salt.
However, here in the Weekly things are more serious so I’m going to give you two forecasts for
2015 that are actionable, specific and on which I can be fairly judged. Follow me in on these
and make some money. There is just one caveat on the calls (see below):
• Forecast One: Argonaut Gold (AR.to) may have started well since being
recommended and then moves to Top Pick here at the Weekly, but don’t think for a
second you’re too late to get on. You’re not. Get on. This stock is set to move
significantly higher in the weeks ahead. I’d like to have a more structured plan on what
to do with my shares but with the rough seas of December tax loss/January pop around
us, it’s difficult to be mathematically accurate during a momentum-charged period.
Right now my rough gameplan is to ride all my large position into January, maybe pick
a spot and sell a portion for a decent gain, add dollars to a somewhat cash starved
junior port right now, let the rest of the AR shares ride. But that plan is not fixed and
could change on new circumstances. Whatever happens, it’s took until the veyr end of
2014 to find a trade potential that had all ducks in line and got me buying in with real
confidence, no way do I let go too early because there’s money to be made here.
• Forecast Two: Rio Alto Mining (RIO.to) (RIOM) will be bought out in 2015 by a
larger mining company. Probably a paper deal, certainly at a premium to today’s share
price, a bidding ear may even develop come the time as more than one larger-scale
mining company decides it’s willing to pay up for 200k and 300k oz per annum of low
1
cash cost gold. Put simply, if Rio Alto exists as a separate entity come this time next
year I will be surprised.
My only caveat to the above calls is the gold price. If it doesn’t collapse on us (by which I mean
that we get it to stay at-or-around its current U$1,200/oz level) I’m very confident about those
predictions and be in no doubt, I have my money firmly where my mouth is on both. These are
not pussyfooting tentative positions. Own both.
Copper is the critical metal for 2015
Today I want to review where The IKN Weekly stands as regards copper (short story, not very
well so far) and then look to 2015 and consider what the year ahead might bring.
First things first, here’s how your author and these pages stand regarding copper at the
moment, easily digestible bullet points for your consideration:
• I turned bullish on copper during the second half of 2014 and that was a mistake.
Things haven’t gone well on a call that looked for the metal to move up from a $3/lb or
$3.10/lb level at the time, which can be easily spotted by looking at any copper price
chart. We’re under $2.90/lb this weekend, enough said.
• However damage to the portfolio has been limited because the route in, step by step,
and testing waters all the way, was the right call.
• Well hey, stop there Mark, that second bullet isn’t really true. Let’s be more honest and
say it was the less worse call, because the right call would have been to sidestep
copper. See that first bullet again.
• The main way into copper in the second half of 2014 was via Reservoir Minerals
(RMC.v) and Amerigo Resources (ARG.to). Both were started as foot-in-door purchase
and second or even third bites were taken. However even today they’re by no means
big long holdings (in portfolio percentage terms or in absolute cash terms) and there’s
room to expand the positions if copper recovers, rebounds and starts to perform the
way I’ve been expecting this last five or six months.
• Backing up those positions in RMC.v and ARG.to are the smaller and longer-held ones
in Coro Mining (COP.to) and NovaCopper (NCQ.to). Again, both were staged buys and
at least two small bites taken, again there’s plenty of room to expand the positions if
copper starts running.
By my eyes and as a matter of fact, even though there have been a couple of nicely timed adds
to the copper sub-portfolio along the way (e.g. RMC and COP recently) all four positions, as
well as the semi-coppery Lara Exploration (LRA.v) are underwater by some way. But you’ll also
note that I haven’t sold any of the positions nor thrown in the towel on the general bullish call
on copper; not yet anyway.
Which brings us to what to look for in 2015. This year I expect copper to really put on its
renowned “Doctor Copper” white jacket and provide the best clues possible about the state of
the greater economy and the direction for all commodities. Cutting a long story short, I consider
it to be the bellwether for 2015, the critical metal to follow and the person or people who call it
correctly will win the year’s financial competition.
We’ve seen recent negative signals from the copper space. Firstly the hike in Shanghai Futures
Exchange warehouse inventories in the last week (see The Copper Basket coverage below) and
secondly the hike in TC/RC prices expected in 2015 points to oversupply and a weakened end-
user demand. Here’s how a December 12th Reuters report (1) began:
2
Dec 12 (Reuters) - Copper ore refining charges are likely to rise sharply in 2015
following initial contract settlements reported in China, the CEO of Europe's largest
copper refiner Aurubis said on Friday.
U.S. miner Freeport-McMoRan Copper & Gold Inc has agreed to pay Chinese smelters
term treatment and refining charges (TC/RC) of $107 per tonne and 10.7 cents per
pound for copper concentrate shipments in 2015, up from $92 per tonne and 9.2 cents
per pound for term shipments in 2014, Reuters reported on Wednesday.
The rule of thumb of what’s good for the refiners is bad for the miners and sellers of
concentrate holds sway here.
On the upside, the continued recovery and move into outright economic acceleration in The
USA is good for the underlying fundies of copper. In its simplest terms China provides widgets
for the USA, so an expanding economy in the USA is an expanding economy for its provider
country. Chinese growth at “only” 7% (or a couple of tenths above) for the last few quarters
has knocked the edge off the dynamo and the concern is that the baked in infrastructure is
already too much, there’s slack that will need to be taken up before demand for raw materials
comes back and copper is the telltale commod for the Sino-year. The second fundy positive for
copper is from internal Chinese policy, as reported in this Reuters note last week (2) (as we try
to keep things balanced and show the bull/bear cases evenly)
“...prices were supported by reports that Beijing is moving to ease liquidity inside banks
in a bid to help the economy.
...
"Chinese copper consumption has been weak because of the economic slowdown,
while the year-end credit tightness has dampened demand further," said Yan
Duanhong, an analyst at Jinrui Futures.
"But talks that Beijing is going to ease liquidity is supporting prices."
China Business News reported on Wednesday that the central bank is planning to
include interbank lending by non-bank financial institutions as part of the calculated
deposit base, which will expand the base for calculating the loan-to-deposit ratios.”
Right now, December 28th 2014, I’m still tending to bullish but I’m also clear about the warning
signs that could show up in the next few weeks. We’re now starting to feel the shadow of the
Chinese New Year (as noted in IKN290, this time it’s February 19th and fwiw the year of the
Goat), a period that can throw out inventory patterns and make for spiky price and volume
action. But price must be our ultimate guide and the key level seems to be U$2.80/lb, because
if that breaks there’s plenty of fear and loathing that could push copper down towards $2/lb, at
least on a spike. I’m not a big believer in technicals as you are no doubt aware, but I don’t have
my head in the sand about their influence either and when China is your main market by a
country mile and the price driver, and when Chinese traders are famous for buying and selling
on chart predictions, the connection must be respected.
And so to the copper strategy I’m looking to run in 2015, which in the end is simplicity itself.
1) Today, hold. As long as copper price doesn’t break down I will hold my positions in
RMC.v, ARG.to, COP.to, NCQ.to.
2) If the price of copper breaks under $2.80/lb the first company I will sell is Amerigo
Resources (ARG.to), cheap as it is today or not, because it’s the most sensitive to spot
prices and any further weakness will also almost certainly delay the financing deal to
grow its plant in Chile. If copper continues further South I’ll then dump Reservoir
Minerals (RMC.v), for the simple portfolio management reason that it’s my biggest
copper exposure and it’ll raise more cash from the sale. COP.to could then go and the
last (because it’s both small and not particularly time sensitive, being a longer-term
plan) to go would be NCQ.to.
3) If copper starts to rebound and move up, I’ll consider adding to the current positions.
I’d like to see $3.10/lb or above before feeling confident enough for that and be clear
that I’d be very surprised to see such a price before the end of the Chinese New Year
period, even in the most bullish of conditions.
4) I’d prefer to add to current names before considering a new copper name at this time.
3
That, in a nutshell, is the gameplan. I’m currently in hold mode, I’ll sell if necessary, I’d be
happy to add exposure if my medium/long term vision of bullish copper becomes a reality. The
governing data will be the price of copper the metal at market.
Fundamental Analysis of Mining Stocks
We make space this week to cover the new additions to our two sector tracker baskets. This
year five new stocks enter The Copper Basket and two new stocks enter The Low Cost Producer
Basket, so seven little outlines and potted opinions coming your way. But before ploughing
ahead, I’m going to try my best to head off an issue that arises from feedback this time every
year. It’s a two part statement because, invariably, if I just mention the one it prompts the
other.
1) The Copper Basket and The Low Cost Producer Basket are not lists of
recommended stocks to own. They’re chosen as representative of their sectors and the idea
is to track how they do, as a group, over the year ahead. Yes (of course) some stocks I like
more than others and there are names I currently own (eg ARG.to, RMC.v, BTG), but that’s not
the baseline reason for these lists.
2) Of the new entry stocks, there are some coming in that I like more than others
and to the point where they’re getting included because I think they’re possible
investments/trades in the year to come (if circumstances fall into place). So to be as clear as I
can, here’s a list of the new ones I’m considering on the shopping list and in rough order of
preference, too:
• Buenaventura (BVN): I think this one has a great chance of doing something at last
• Kinross (KGC) (K.to): Higher risk than BVN, but if gold takes off it could fly fast and
high
• Regulus (REG.v): It needs to show real progress on political risk. If so it’s a buy, if not
no.
• Capstone (CS.to): This one at a pinch, but a Cu bull run would take pressure off its
balance sheet and make it attractive on a risk/reward basis.
To those you can add the stocks I already hold from both lists (RMC.v, ARG.to, COP.to, NCQ.to,
BTO.to) and the ones I still like as potential buys (HCH.ax, GG at a pinch, AQM.v at a pinch). So
of the new boys BVN is the one I like most (see below for more). Meanwhile and on the other
side of the coin, these are the new ones I’m not interested in owning:
• Catalyst Copper (CCY.v): The makings of a BS pump job, for somebody else.
• Metminco (MNC.ax): Interesting to follow as a stockwatching exercise, a decent enough
asset that may get some overdue love, but that’s all.
Bottom line: The basket stocks are for sector tracking, there are some brought in to watch
more closely and with a view to eventually owning, no decisions made yet. With that done, let’s
get to meatier subjects.
4
Next Year’s Copper Basket: The five new names
Copper is the flavour of the day here at the Weekly and as noted last week, we’re swapping out
five of the components of our (so far at least) successful and useful junior copper company
tracker, ‘The Copper Basket’, and replacing them with new names for the new year. Those five
in a moment, along with a short biog and opinion on each one, but first the news that this year
we’re making a significant change to the rules of the basket that’s done a good job over the last
four years in tracking the state of play in the copper sector. The change is to allow producers in
as part of the list for the first time, instead of relying on just exploration companies, and two
have been chosen. Along with those, two “normal explorecos” are added as a straight swap and
finally, one extra Australian-listed company is added that sits next to Hot Chili (HCH.ax), last
year’s incorporation. I hope that these new five along with the ten survivors will be able to keep
up the good work and provide insight into the state of play in what I think will be a key metal in
2015.
So without further ado, here come the five new companies that are replacing 2014’s LCC.v
(bought out), AZC.to (bought out), CUV.to (bought out) OMN.to (broken stock) and CDB.v
(broken stock) for the year to come. Let’s do them in alphabetical order:
• Amerigo Resources (ARG.to)
• Catalyst Copper (CCY.v)
• Capstone Mining (CS.to)
• Metminco (MNC.ax) (MNC.L)
• Regulus Resources (REG.v)
And now for a little write-up on each one.
Metminco (MNC.ax) (MNC.L)
Shares out: 1.8226Bn (that’s a B)
Share price: AUS 0.7c
Market cap: Aus$ 12.76m
Reasons for including MNC.ax this year:
• It’s an Australian and Oz-listed stock, something I wanted, but it also enjoys a London
listing so it should be reasonably accessible to most readers if it gets interesting.
• It fits our LatAm focus, with its flagship project in Peru and its other projects in Chile.
• With little treasury cash left and a blown-out share structure that’s typical in the
Australian market, it’s a stock that’s now valued on its rocks alone and that means not
very much these days. If copper exploration assets start getting a pick-up in value we
should see that reflected quickly in MNC’s share price. This chart tells you all you need
to know about the way in which MNC has dived and then seen the living daylights
diluted out of its share structure.
• Its flagship project, Los Calatos in Moquegua region of Peru, may not be the best thing
5
out there but it’s not bad either, with reasonable size and a JORC-compliant scoping
study in place that shows a medium scale copper project that can operate at a cash
cost of slightly over $1/lb.
• The Chilean assets are of little interest to us, so for valuation and prospective purposes
we concentrate on the flagship Los Calatos. As per the blurb on the project in corporate
literature:
The Los Calatos Project, located in southern Peru, has an open pittable Mineral
Resource of 493 million tonnes at 0.38% Cu and 0.023% Mo (at cut-off grade of 0.15%
CuEq) to a vertical depth of 700 metres below surface and an underground bulk mining
Mineral Resource of 926 million tonnes at 0.51% Cu and 0.022% Mo (at a cut-off grade
of 0.35% CuEq) commencing at an elevation of 2,300 metres (approximately 700
metres below surface).
• MNC also states its discovery and acquisition cost at Los Calatos to date is around
U$13.5m. As its current MNC market cap is A$12.76m (U$10.5m) anyone buying into
MNC today is, in theory at least, picking up the asset at substantially less than cost
after all that work was ploughed into the project. For sure it depends on whether the
asset is a workable and economic one and that will depend on future market
conditions, but the scoping study stands up to first pass examination so theoretically at
least, somebody could take over the project, throw $1.5Bn at it to build the machine
and then have a decent mine to their name.
Overall, this one makes the 2015 list because it’s an Oz stock (i wanted another) and because it
has a project with an economic study to its name that’s sell for peanuts compared to a year or
two ago. If the market turns around, MNC is the right fit for a company that will benefit. On the
other hand, if the market stays depressed MNC is the type of company that could be crushed
even further. Either way, we should get a tell from this one.
Amerigo Resources (ARG.to)
Shares out: 173.653m
Share price: 26.5c
Market cap: $46.02m
This is one we know quite a lot about already, as I own it and it’s covered in the ‘Stocks to
Follow’ list already. The poor showing from ARG.to is a result of its sensitivity to the copper
price point of $3/lb-or-thereabouts (and for what its worth that’s why I zeroed in on the stock
as my potential trade in the sector back in
3q14). ARG at current prices is a
breakeven-at-best proposition but as
shown in our analysis of the stock (see
IKN271 dated July 20th for the main note)
a small rise in the price of copper will
bring leveraged gains to ARG.to the stock
as it moves quickly into bottom line profit.
As $3.20/lb should be enough for it to
return decent bottom line numbers,
therein lies the attraction on a risk/reward
basis.
So far it hasn’t worked in my way, that’s
as clear as clear can be. But away from
my own personal money issues and as a case study, ARG.to provides the right mix as a small
producer finely balanced on today’s copper price level, that’s just right for the basket and its
newly opened door for producer stocks.
6
Catalyst Copper (CCY.v)
Shares out: 31.39m
Share price: 25c
Market cap: $7.85m
This could be my favourite new stock to follow in 2015, but not because I like the thing. On the
contrary I believe it to be a total dog, a vehicle for a succession of pumps that was once under
control of John Greenslade (who screwed up royally at Baja Mining) and is now under the
auspices of a rockstar team led by Richard Warke (Ventana, Augusta and plenty other fame),
Ian Telfer (Goldcorp and plenty other fame), Frank Giustra (Lion’s Gate films, uranium pumps,
Bill Clinton’s pal and plenty other fame)
and Tookie Angus (backroom corporate
fame). When the news that this team
was buying into CCY hit mid-last year
the stock did what you can see in this
price chart and although it’s faded since
then, the initial buy-in has been
reasonably modest and was done at
30c so what we have so far is the start
of a promo pump, rather than the main
event. CCY today has 31.4m shares
out, something less than half a million
dollars in the treasury chest and is an
obvious candidate for a larger round of
equity placement in the first months of
2015. The backing of the rich people
mentioned above means whatever figure they decide to raise will be a slamdunk, the chances
are that they’ll want to widen the shareholder base at the same time as well. Price and total
amount raised in the next round will be strategically interesting to note.
Its La Verde property has both community risk and geological issues and I don’t think it’s ever
c¡going to be a mine, but that’s never stopped anyone pushing a stock price into the
stratosphere in Canada (remember Copper Fox) so in CCY in 2015 we may have the honour of
being able to witness another battle of style versus substance. You can buy the promo (when it
gets going) if you want, I won’t go near this one but I will be following its progress closely, now
that it’s part of the 2015 basket.
Capstone Mining (CS.to)
Shares out: 381.95m
Share price: $1.88
Market cap: $718.1m
A late addition to the list by popular demand. This time last week I mentioned that I was
interested in ideas, I was also interested in adding at least a couple of producers for 2015 but I
didn’t want them too big. I even mentioned CS.to when talking about the “too big” size, but
reader FW took issue with that call last Monday in a mail that made the case for CS’s inclusion.
The main point that it might be big but these days, particularly after a rough Q4, it’s not too big
at under U$620m market cap, makes sense. It also appeals to my idea of the list set-up
because it was starting to look a little too concentrated in the tinycap sized company (which is
also due to the beating juniors have taken over the last couple of years, of course) so a larger
one that fits where LCc or AZC used to be gives more balance.
So yes FW, you were right and I was wrong, Capstone makes the 2015 Copper Basket.
The other thing I like about CS.to is the way it was mismanaged at a corporate level in 2014.
Yes seriously, I like this aspect. The key moment was September 5th 2014 when CS launched a
7
$300m senior note offering (3) with a maturity date of 2022 that was designed as a revolver to
replace the $200m it held that matures in 2016 and 2017, plus add that extra amount of
liquidity (after all was done, around $80m in working capital more than before). Moody’s
immediately slapped a B2 status on
this credit offering (speculative and
a high credit risk”, according to the
Moody’s system), lower than the B1
of before and a week later, tail
between legs, CS withdrew the
offering while saying that “While
the $300 million we were looking to
raise was available, the proposed
interest rate exceeded what we
were prepared to pay for that
purpose”. Welcome, Captain
Obvious.
At that precise moment CS.to
began to see its share price drop
from the $2.50/$3 range of all year and broach $2 a month later, ending up where we are
today, snugly under the $2 level. The whole thing smacks less of corporate stupidity and more
of Dunning-Kruger, as CS directors overestimated the amount of love they’d get from the credit
market. The type of situation that happens when you start believing your own hype. When the
offers on the debt revolver came back at a higher rate than CS management had imagined,
they compounded the error by not accepting the deal as in hindsight, pushing long-term debt
weakness to eight years instead of the current two would have helped support the current
share price.
Today’s CS.to has been hit by the copper price weakness and its own balance sheet weakness,
but it does have three working and producing mines and they’re all in reasonable safe and
secure political/social risk locations too. Pinto Valley in the US, Minto in Canada and Cozamin in
Mexico have a consolidated operating cash cost of around $2/lb and in 2015 they’re set to
repeat the same output we’ve seen this year of around 200m to 225m lbs CuEq. As well as the
operations, CS.to has the Kutcho and Santo Domingo projects as growth pipeline (or in the
event of major problems, potential disposals for cash). As with most miners these days CS.to
isn’t getting much equity love from its fixed asset valuations so this type of decent asset
backup, particularly the large Santo Domingo copper and iron ore development in Chile, could
supercharge any recovery if the market turns its way.
Overall (and I stand corrected from last week) Capstone (CS.to) will be a most interesting
copper stock to follow in 2015 and should provide a good indication of the health or other wise
of the producer sector. Compared with the real bigboys of the copper world (Southern, Freeport
etc) is a smallfry company but compared with most members of our list it’s a big market
capper. A good bridge stock.
Regulus Resources (REG.v)
Shares out: 56.39m
Share price: 34.5c
Market cap: $19.45m
The last time Regulus Resources (REG.v) was mentioned on these pages was in IKN290 dated
November 30th which pointed a light at the amount of insider buying there was in its recent
equity placement priced at 45c (answer, a lot). I wrapped up that little piece with these words:
This is also the same team that scored a big success with Antares Minerals of course,
selling Haquira to First Quantum (FM.to), so they know their Peru and they certainly
know their copper rocks
8
As for its Antakori project it inherited after taking over Southern Legacy (ex-LCY), the
latest news is that there are baseline community studies being conducted by
government officials at the moment that are expected finished at the end of 1q15. After
that, we’ll see if this new vehicle can make progress with the locals, but it has to be
said that to date, this Antakori (ex-Sinchao) project, though boasting excellent rocks,
has been one of the permitting and community risk nightmares of Cajamarca and Peru.
From what I’ve heard it’s not an impossible job to turn locals around and get them
onside, but it’s not going to be an easy one either. For the time being REG.v is on
watching brief and it’s likely to be one of the new additions to The Copper Basket in
2015.
And here we are today, so for the record let’s list the things we like about REG.v:
• Antakori’s rocks. The reason REG.v took over Southern Legacy (ex-LCY.v) this year is
plain and simple; the quality of the rocks at the Antakori (previously named Sinchao)
deposit. This is a copper/gold deposit with a potentially interesting silver kicker which
has a 43-101 inferred resource that dates from 2012 of 294 million tonnes grading
0.48% Cu and 0.36 g/t Au, giving it 3.1Bn lbs copper and 3.4m oz gold (plus around
13m oz silver, or 5.1Bn lbs copper equivalent once the gold and silver get converted
into something simpler to gauge. It’s also famously (infamously) open for expansion so
that resource could get bigger quite easily.
• The approximate $15m treasury position. REG brought cash into the structure and with
the latest round, has more than enough money to do everything it could ever wanted
to do in 2015 and potentially beyond.
• John Black and Kevin Heather. The top table people at REG (along with Mark Wayne in
the backroom) are successful, whipsmart and have prov en via the discovery,
development and sale of Haquira to First Quantum they combine top class geological
expertise with the type of empathetic approach towards community relations that’s vital
in any part of Peru and off-scale critical for the future of this particular project.
• Its new insto partner. Route One is a San Francisco CA hedge fund with roughly $1.8Bn
in AUM and principles that know their way around the resource sector. Route One
bought 50% of the recent 11.111m placement (which means that along with the
insiders that was over 80% of the whole raising) and now own 6.44m shares of REG.v.
Route One has the look of the serious partner and with two buys into REG already, a
loyal corporate sponsor.
And now for things we don’t like about REG.v:
• By far the most important, the community relations and wider political risk at Antakori.
This project is infamous in Peru (and beyond) for its tough community relations issues
and has been stopped in its tracks for years by locals who refuse to grant access, do
deals and be generally welcoming to companies trying to advance the project. There
are three main village groups in play on Antakori, one is apparently ok, one swings
between pro and contra, one is the toughest nut to crack. The fate of this project lies
squarely with REG.v’s ability to improve community relations and get permission to
explore, develop and progress from the people who live on top of it. If not, it will
remain a dead end.
• The Rio Grande project in Argentina. It’s big, very prospective for a while it showed
promise, but in the end REG.v blew its previous bankroll on Rio Grande and had little to
show for its efforts. One of these days somebody might make something of this
concession, but I think it’s going to need a lot of money thrown at it and being in
Argentina, the current period isn’t one to spend a lot on that pol risk backdrop. The less
REG.v does with Rio Grande in 2015, the better.
9
• The Southern Legacy legacy. I’ve met a couple of the officers from what was LCY over
time and the considered judgment at this point is potential red flag. Today I’m going to
be generous, give benefit of doubt, be diplomatic but also say that there’s a fine line
between promoting a good story and BSing your audience, there’s a moment when you
can try just too hard and come across as hyping and making something sound much
better, greater and more wonderful than reality. With Black and Heather on board this
Antakori project I’m more comfortable about it, but be clear that without them I’d give
the officers a wide berth, be they innocently overenthusiastic or not.
Bottom line: The success or failure of REG at Antakori, located firmly in the hot zone centre of
the tough Cajamarca province, depends on the company achieving better and friendlier
community relations than we’ve seen at the site in many years. It’s as simple as that, it’s a pol
risk play and it’s one I’m not going to buy into until there’s tangible evidence that things are
better. But if things do improve it’s one to grab with both hands because the deposit, pure rock
value alone, is as good as anything in Peru. If John Black and his team can work some
community magic and gain the trust of all villagers there, it’s a live prospect and because of
that it’s a worthy member of this year’s basket.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Next Year’s Low Cost Producer Basket: The two new names
We tried a Zinc Basket list, then we tried a Pennycrapper’s list, but neither of them lasted more
than their first year. However 2014’s experiment has been altogether more fruitful and even
though it hasn’t managed to nail down many winners per se, it has been very useful in
comparing the fates of the larger miners to our normal focus group juniors, along with showing
just how well the streamer model stocks have done compared to the classic PMs. The split of
gold to silver producers has helped shed light as well. In sum, The Low Cost Producer Basket
has been(in my opinion at least) a success and therefore we’re running with it again in 2015,
with a view to getting the same type of perspective in the year ahead.
But there will be a couple of changes along with the new list.
1) Two companies are dropped, FCX and AG, and two new ones take their place.
2) I’m going to pay more attention to the list components as potential trades in the year
ahead.
Less blahblah, more specifics. Here are the new companies taking over the spaces left by AG
and FCX:
10
New name one: Buenaventura (BVN)
Shares out: 254.187m
Share price: $9.57
Market cap: $2.433Bn
Buenaventura (BVN), the Peru gold miner of reference and the reason for the fortune of Peru’s
traditional mining family, the Benavides, is a company I’ve looked at over the years without
trading more t¡mes than just about any other gold miner I care to remember. In fact I did own
a little of the thing back in 2006/2007, (bought at ~$12, sold at ~$20, made reasonable profit,
sold way too early, no regrets) but these days that era seems like another lifetime. This 10 year
chart shows the rise and fall of BVN, which includes the heady days of 2010 to 2012 and the
subsequent collapse to the $9 and $10 levels of today.
That longview chart isn’t very useful for gauging the potential BVN might have for a trade. This
12 monther is better for that and as we can see, we’re now bouncing around historic lows.
So why like BVN today and why make it part of the 2015 basket? The answer goes something
like this:
• Despite the precious metals price drop it’s still making a profit on operations thanks to
its low operating cash cost for gold. That allows us to put it in this list and though its
production mix is watered down somewhat by its silver mining operations (some main
product, some byproduct) it’s still an efficient miner that runs free cash flow positive.
11
BVN: Total income vs total operating costs
500
450
400
350
300
250
200
150
100
50
0
12
01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
U$m
total income
total op costs
source: BVN
• It looks as if it’s been tackling its operating costs inputs. 3q14 came in a little hotter
than I expected on this score but overall, we have seen a drop in operating costs from
the peak in late 2012 and 2013.
• It has plenty of near-guaranteed growth in the pipeline and looks less reliant on its
minority share of Yanacocha SA than at any point in the recent past. BVN has shifted its
growth away from Conga and to a combo of Tambomayo (the next mine to come
online), its near 20% share of the massive Cerro Verde copper mine which is currently
undergoing a $4Bn expansion, then the new kid in town is San Gabriel (ex-
Chucapaca), which is is waking up and changing into a decent prospect in the South of
the country. Previously planned as a large open pitter, the new plan is to take
advantage of its highest grading rock as an underground operation. Community seems
to be onside and permitting is already on track, with BVN looking to get production
running there in 2017
• Traditionally BVN is run in a conservative, Peru-Family manner and values long-term
assets over short-term revenues growth. In other words, it understands the cyclical
nature of its sector and is set up to ride over the rough periods without suffering
corporate damage (ready to hand over ownership and control to the next generation of
the Benavides family when the time comes). With asset values now showing signs of
waking up, this should play to the company’s strong points.
Today is the overview, the reason to include BVN on a regular basis on these pages in 2015.
It’s a company I’ve been very patient with over the years, not because of any great love felt
towards it (in fact that’s probably to the contrary, as BVN has a poor historical reputation on
social, employee and community affairs) but because I’ve rarely seen value in it might as an
investment. That might be changing (with the emphasis on might) because its near and
medium term production growth profile, plus its typical slow’n’steady way of doing business
(which has kept its balance sheet strong and clean over the years) look the right sort of
combination for the mining scene ahead of us.
New name Two: Kinross Gold (K.to) (KGC)
Shares out: 1144.5m
Share price: $2.79
Market cap: $3.193Bn
(U$ using KGC ticker)
The second stock chosen is also selected because I’m interested in it as a potential purchase,
but common metallic product aside it’s a very different fish than BVN. Kinross is the gold
company that was built on risk, taking on projects and locations that larger and/or more
conservative companies baulked at. The somewhat cavalier approach under previous CEO Tye
Burt worked well while the party was in swing but the problems for “Special K” had set in
before the worst of the downturn began in 2013. K found (or more specifically, shareholders of
K found) it had overpaid for projects (Exhibit One: Tasiast) or had been stung by the emerging
economy countries in which it operated due to either opposition to mining or the rise in
resource nationalism (Exhibit Two, Fruta Del Norte). On that point, we also need to consider
the latent Sword of Damocles that Putin’s Russia may represent to K’s star performer mine,
Kupol in the Eastern reaches of that country. Kinross and pol risk are tightly intertwined on a
world scale.
Moving on to price action and in this case I find the ten year chart...
...more instructive than the one year chart...
...because it gives a real feeling for the rise and fall of this empire. The time of reckoning at K
seems to have begun in late 2011, the moment when it lost the U$15 level for the last time. It
was already a sub-U$10 stock by the time gold brought us its big sell-off in early 2013 and from
there it’s been downhill all the way.
We covered K a little a few weeks ago when I took a very small bite at the stock, only to let the
trade go quickly (insult to injury it turned out to be bad timing as it rebounded nicely, if I’d
waited a couple of extra weeks etc etc sigh). The purchase thesis was about the unlocked asset
value at K and how it could turn into a well cashed up, strong balance company just by
disposing of Paracatu in Brazil, my idea of a real star performer mine that’s getting little respect
inside the larger K structure today. From the angle of undervalued fixed assets there’s a
similarity to BVN above , but Kinross is all about leverage to gold price and its potential as stock
of choice for those gold buyers looking for higher risk/reward among the larger producers. But
the main criteria for this basket is that the company must be a low cost producer and in that K
fits nicely. 3q14 operating cash cost came in at U$697/oz and all-in cost, even factoring in
“attributable” and “gold equivalent” as factors that don’t favour corporate spin, were less than
U$1,000/oz. That leaves K the operator (rather than K the balance sheet) in good position and
13
with the likelihood we’ll see costs drop further in the year ahead, reason to be cheerful.
Stocks to Follow
Of the 15 open positions on our ‘Stocks to Follow’ list last week, four went up (AR.to, ARG.to,
GQC.v, SRL.v), one stayed unchanged (IRL.to) and ten dropped, though not listing them all.
The biggest up came from new Top Pick Argonaut (AR.to up 10.3%) while the biggest downs
were checked by Coro Mining (COP.to down 20.0%) and Lara Exploration (LRA.v down 10.0%).
With the dropping of Salazar (SRL.v) we now have 14 open positions on our ‘Stocks to Follow’
list, one less than our self-imposed maximum.
Reco Current
company Ticker this week Avg Price date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.30 07-apr-11 C$2.73 18.7% Top Pick, $3.30 tgt, Best PM Jr
Argonaut Gold AR.to strng buy C$1.47 14-dec-14 C$1.82 23.8% New Top Pîck ST
Recommended long positions (in current order of preference)
B2Gold BTO.to buy C$2.32 12-sep-14 C$1.84 -20.7% V good entry point now
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.68 6.3% Nov'14 tgt $1.25, top Au expl
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$4.00 -33.9% Best spec Cu play
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.175 -23.9% tgt 50c, avged up, 1q15 news
First Majestic AG spec buy U$10.51 10-aug-14 U$4.88 -53.6% Now in pair trade with FSM
Amerigo Res ARG.to hold C$0.405 20-jul-14 C$0.265 -34.6% 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$0.61 -41.9% small Cu play low vols, hold
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.36 -68.7% solid biz model, LT hold
GoldQuest Min. GQC.v hold C$0.26 27-oct-13 C$0.095 -63.5% no point selling so cheaply
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$4.57 -10.9% In pair trade with AG
Smaller/Riskier
Coro Mining COP.to spec buy C$0.075 26-jan-14 C$0.04 -46.7% Added avged down Nov'14
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
Salazar Res SRL.v dec’14 C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
2009, 2010, 2011, 2012 and 2013 closed positions in appendices below
14
Overview: It was a lightly traded week due to the Christmas holidays and the halt for Boxing
Day on the 26th in Canada (and London) only underscored this. It’s not a week to read too
much into price action and moves so we won’t. Just a few notes on a few stocks this time.
Argonaut Gold (AR.to): The new Top pick is doing very well so far and I expect it to return
to its $2-handle status sooner rather than later. ETA first week of January.
Salazar Resources (SRL.v): Sold: In fact some went at 14.5c, which is good enough for me
and that’s where we’re going to book this loser. It finished at 15c and found buyers on every
day, which is fine by me.
Rio Alto Mining (RIOM) (RIO.to): In the November monthly numbers posted by the Peru
Ministry of Energy and Mining (MEM) on Tuesday 23rd, Rio Alto (RIO.to) (RIOM) reported
November gold output at 18,199oz. That means it’s at 37k oz gold in the first two months of
this final quarter, it’s just 219 ounces short of 200k oz production in the eleven months and it’s
right on track for the top end of its revised production guidance range, we’re going to be close
to 220k oz once December and full year is known.
RIO.to: Monthly gold production figures
Ozt Au
1 2 8 0 0 0 0 0 0 0 17627 17812 17686 17488 18753 18190 19435 17199 18599 18793 18199
16000
14000
12000
10000
8000
6000
4000
2000
0
Jan14 feb mar apr may jun jul aug sep oct nov
source: MEM/IKN
But again and to underscore, it’s the “on rails” nature of these numbers that really catches the
attention. When a heap/dump leacher is working well and efficiently this is a telltale sign, so
expect the costs numbers for 4q14 to hit as well.
Coro Mining (COP.to): Down 20% but that means down a penny in real terms. It was light
stuff and no need to fret on the move.
15
The Copper Basket
After fifty-two weeks of 2014 The Copper Basket is showing a 22.04% 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 1.43 187.71 193.34 1.03 -28.0%
4 Reservoir Min. RMC.v 4.97 47.55 190.20 4.00 -19.5%
5 Nevada Copper NCU.to 1.35 80.5 120.75 1.50 11.1%
6 Copper Fox CUU.v 0.375 402.96 60.44 0.15 -60.0%
7 Western Copper WRN.to 0.76 93.68 59.96 0.64 -15.8%
8 Curis Resources CUV.to 0.57 74.79 50.86 0.68 19.3%
9 Hot Chili Ltd HCH.ax 0.425 333.11 49.97 0.15 -64.7%
10 Panoro Minerals PML.v 0.35 220.25 46.25 0.21 -40.0%
11 NovaCopper NCQ.to 1.60 60.15 36.69 0.61 -61.9%
12 AQM Copper AQM.v 0.11 139.24 8.35 0.06 -45.5%
13 Cordoba Min. CDB.v 0.90 58.81 6.47 0.11 -87.8%
14 Coro Mining* COP.to 0.10 159.37 6.37 0.04 -60.0%
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 -22.04%
Last week we saw five weekly winners in the
curtailed trading week (CUU.v, HCH.ax,
NCU.to, WRN.to, OMN.to), another five
remained unchanged (LCC.v, AZC.to, CUV.to,
AQM.v, CDB.v) and five went down (NGQ.to,
RMC.v, NCQ.to, PML.v, COP.to). The biggest
percentage wins came from Copper Fox
(CUU.v up 15.4%), Western Copper & Gold
(WRN.to up 14.3%), Oracle Mining (OMN.to
up 14.3%) and Hot Chili (HCH.ax up 11.1%),
while the big percentage losers were Coro
Mining (COP.to down 20.0%), Panoro (PML.v
down 19.2%) and NGEx Resources (NGQ.to
down 9.6%). In this way, the Copper Basket
ends the year not quite at its lowest point, but darned close. Here’s the component tracking
chart for the year, with the quarters in grey shades and the final result in colour.
Copper Basket Components after 52 weeks
200%
148.3%
150%
100%
59.0%
50%
19.3%
11.1%
0%
-15.8%-19.5%
-50% -28.0%
-40.0%-45.5%
-60.0%-60.0%-61.9%-64.7%
-100% -85.2%-87.8%
16
ot.CZA v.CCL ot.VUC ot.UCN ot.NRW v.CMR ot.QGN v.LMP v.MQA ot.POC v.UUC ot.QCN xa.HCH ot.NMO v.BDC
The Copper basket 2014, weekly evolution
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
source: IKN stats
ht5naj ht61 ht61 ht9 ht03 ht02 ht11 ts1nuj dn22 ht31 dr3gua ht42 ht41 ht5tco ht62 ht61 ht7ceD ht82
source: IKN calcs
The sad but true fact is that just four of our component companies managed to register a win
on the year and of those, three were bought out at
premiums. That leaves a lot of red on the screen for
the year with no fewer than six of our companies
sticking in 60%+ losses on the year. That’s heavy.
While at the very bottom of the bunch came the
85%+ losses suffered by Oracle and Cordoba, both
ejected from the 2015 list.
Copper prices dropped and finished the week at
lows. Although trading was thin over the holiday
period we’re now close to the do-or-die U$2.80/lb
level (U$6,172/tonne) and if we don’t see a bounce
soon, my bull theory for copper is going to have to
be re-set.
So to inventories and while trading was report light
here as well, we did have a significant move in one
of the datasets.
• Overall world stock levels rose sharply, up 14,760 metric tonnes (mt) (+5.1%) to finish
at 302,006mt. Week three of gains and the first biggish move in warehouse levels, this
is undoubtedly a bearish force on copper prices now, last week was “keep an eye on
it”, this week it’s both eyes and centre screen radar.
• Inside the global number, the Shanghai Futures Exchange warehouse number saw the
big move. These stock rose by a big 12,693mt (+13.7%) to finish Friday at 105,522mt
and plainly over our trigger point 100k level. The signal is of slack demand in China,
four words that worry any bull case.
• The LME copper warehouse inventories also saw a rise, up a more modest 4,850mt
(+2.9%) to end the week at 171,8500mt. A 2+% gain in stocks for the third week
running, not as concerning as the action in Shanghai but a factor for the negative
copper price action all the same.
• The minor Comex warehouse stocks number put on 217mt and ended at 24,624mt.
Here’s the Shanghai 2014 stocks tracker chart and that upwards move at the end there. We
saw the same stocks levels turn up in August without anything happening so the jury is still out,
but another week of similar sized gains would change things for good. I’d say.
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 ts12 ht82
Mt Cu
source: Cochilco
Now for notes on just one featured stock this week, I’ve bored you all too much already with
copper stocks and metals thoughts above:
Copper Fox (CUU.v): In the end CUU survived the cut and will stay in The Copper Basket for
2015. There does seem to be some momentum starting around its latest project (pump?) Van
Dyke and as we know these people are past masters at the Canadian mining BS-factor, it’ll be
worth watching to see how far it can be taken here. To be honest for me it already looks priced
to the hilt at $60m market cap (Schaft Creek is worth zero) but that’s never stopped them
before.
The Low Cost Producer Basket
After 52 weeks, the Low Cost Producer Basket is showing a 18.90% loss to level stakes
company ticker price 1/1/14 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Freeport FCX 37.74 1040 24.45 23.51 -37.7%
2 Goldcorp GG 21.67 812 14.90 18.35 -15.3%
3 Barrick ABX 17.63 1164.67 12.32 10.58 -40.0%
4 Newmont NEM 23.03 499 9.41 18.85 -18.2%
5 Franco Nevada FNV 40.74 156.08 7.78 49.82 22.3%
6 Silver Wheaton SLW 20.19 357.39 7.26 20.32 0.6%
7 Agnico Eagle AEM 26.38 173.43 4.22 24.35 -7.7%
8 B2Gold BTG 2.02 948.9 1.52 1.60 -20.8%
9 Pan American PAAS 11.70 151.41 1.38 9.12 -22.1%
10 First Majestic AG 9.80 117.02 0.57 4.88 -50.2%
all prices in U$, using NYSE ticker prices Portfolio avg -18.90%
There were three weekly winners (FCX, GG, FNV)) and seven losers (the others) in a very
lightly traded week which wraps up the year for our inaugural low cost basket. We finished in
the red, just one stock returned a meaningful profit (Franco Nevada, the streamer star) and
particularly bad numbers for the year came from First Majestic (AG) and Barrick (ABX), which
continues to suffer under its bloated corporate sprawl.
The Low Cost Producer Basket: Weekly performance and
comparative to GDX control
40%
30%
20%
10%
0%
-10%
-20%
-30%
18
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 ht82
basket
gdx control
source: Yahoo! Finance, IKN calcs
The other notable is how our basket failed to keep pace with the benchmark GDX ETF. This (for
my money) was due to 1) the inclusion of FCX 2) the equal-weighting style of our basket that
gave more emphasis to underperforming smaller stocks (AG, BTG, etc) and the relatively larger
amount of silver exposure in our list compared to the ETF. This gets a nudge in the right
direction in the year to come as we swap out AG (and copperish FCX) for KGC and BVN. As a
result of having more straight gold in the mix, i expect things will be much closer.
Low Cost Basket: Percentage difference between
basket and GDX control, 2014
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
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 ht82
source: ikn calcs, NYSE/Nasdaq data
This basket has been a valid and useful exercise in 2014, successful in the main job of providing
context to the moves in juniors. It showed a net loss at the end of the year but that’s how it
should be, it was a tough time for mining stocks which should be reflected accurately. On to
2015 and better times.
Regional politics and Market Watching
Overview
There are several end-year type stories going around that cast a different light on mining
jurisdictions in LatAm. The páramo thing in Colombia, the copper scene affecting Peru and
Chile, companies complaining about heavy tax and State burdens in Argentina and Mexico,
other matters too. As a result I’m going to wait until next week and until the dust has settled
slightly before putting some final scores to countries and running the quarterly review, while
this week I’m hotch-potching the two end-letter sections because they kind of melt into one
another even more than usual this week (and I also want to see if it’s a better idea to stick
them all together on a permanent basis...I’ve been wanting to freshen up the format in some
way of another for a while).
Australian juniors also feeling the pinch
The situation among the Canadian listed juniors is well known to us. I thank the reader who
forwarded this report (4) from Mining News dated December 23rd (behind wall), which fits right
in with my specific interest in the beaten to pulp Metminco, as well as general interest on the
state of the exploreco sector.
Tuesday, 23 December 2014
Andrew Duffy
THE number of cash-strapped juniors is growing, with more than half of Australia's listed
explorers lacking sufficient funds to make it through 2015, according to accounting firm BDO.
In its latest quarterly cash update, BDO said 56% of locally listed explorers didn't have enough
cash to sustain current operating expenses for a further three quarters, an increase from 53% in
the June quarter.
BDO corporate finance partner Dan Taylor said the report showed more worrying signs for
explorers, with another increase in the number of companies not exploring at all.
"Conditions continue to toughen for the sector, and although there are some explorers
experiencing success, for many there is still no light at the end of the tunnel," he said.
"In the September 2014 quarter, one in nine explorers did not undertake any exploration at all.
"This is an increase from one in 10 in the June 2014 quarter, and an increase of 66% since BDO's
first update which analysed the June 2013 quarter."
On a positive note the September data hinted at a boost to investor confidence, with fundraising
activity strengthening slightly.
Over the three-month period, 20 of the 831 listed junior miners successfully undertook capital
raisings of more than $10 million, building on the 19 recorded in the June quarter.
"The latest quarter also saw 47% of companies report a net inflow of funds, up from 42% in the
June 2014 quarter and the highest percentage recorded since the June 2013 quarter," Taylor
said.
Sirius Resources led the fundraising gains with its $207 million share issue, while Tiger
Resources netted $95 million.
CuDeco gained $62 million in borrowings, along with $44 million for Galaxy Resources and $40
million for Sundance Resources.
On the smaller side, BDO said the number of companies that raised more than $1 million in net
funding increased marginally from 17% to 18%.
Breaking down other key metrics, 63% of explorers had less than $2 million cash at the end of
September.
BDO said for the first time since its records began, less than 10% of explorers had more than $10
million available cash.
Elsewhere, median exploration activity dropped from $184,000 in June to $172,000 in September.
Looking forward, Taylor said falling iron ore, coal and oil prices and a decline in share values
continued to make exploration tough.
He said struggling junior explorers were being forced to make tough decisions like cutting board
sizes and operating costs.
"Iron ore and Australian thermal coal prices have continued to fall since early 2011," he said.
"Selling tenements, winding down exploration activities and looking for backdoor listing
opportunities will be the path some companies might need to take."
Lundin Gold (LUG.to) at Fruta del Norte
I was wondering what I could (or even should) write about the IPO of Lundin Gold (LUG.to),
the new vehicle that wants to succeed at Fruta del Norte in Ecuador where Kinross (K.to) (KGC)
had previously failed, when suddenly this short mail appeared from regular mailpal/subber PR:
Subject: Lundin Gold (lug)
Mark
What’s your take?
Management with decent track record, great asset, marked down asset price,
reasonable share count, single focus, …what could go wrong?…..let's ask Kinross!
Oh yea…..jurisdiction. Is this wishful thinking from Lundin? Or do you see an
investment opp (albeit for a patient investor)?
Suitably prompted I answered with my own short mail and once I had, the question of whether
LUG would get a mention in this week’s edition was answered.
It's Ecuador, I pass.
That said, I think it could eventually be a trading vehicle. My suspicion is that the
IPO price is no sort of bargain and we may see it drop before we find a volume-
backed trading level. Kinross will want out of its chunk of shares and that will
overhang on the price upside. BUT, remove those objections (maybe May 2015
it's cleaner) and it will be ripe for a pump. I'm going to watch it for the time
being.
LUG.to started trading on the TSX (and in Stockholm) last week and apart from an early $5 blip,
the trades priced at or slightly above $4 on light volume (barring a block). My basic objection is
the country location, no matter how bright and shining Rafael Correa insists that mining in
Ecuador is going to be. However that does not preclude this stock from being a trade vehicle in
the future and most everyone knows about the grade and contained ounces at FDN, so there’s
going to be plenty you can hang a promotional push on here. I see no reason to own at the
moment, it’s a $400m market cap that’s directly exposed to the whims of a country that’s
chewed up and spat out many mining speculations of similar of larger size already.
Continental Gold (CNL.to) changes tack slightly
Yesterday on the blog I put up a little reminder of how badly the stock price of Continental Gold
(CNL.to) has been doing since the announcement of its PEA in mid-November (5). However I
was a little naughty to write the post and not mention something that I noticed a few days ago,
that the latest plans as offered by CNL call for an extra 75,000 metres of drilling at the site in
order to bring more of the resource out of the inferred category and (apparently at least) the
plan to publish a feasibility study on the project before a final build decision is made, the feas
slated for mid 2016. The criticism so far has been CNL has planned to make a build decision on
the back of the PEA and up until very recently that was the case, so by the looks of things the
20
company has altered its plans. The obvious crit now is that the feas has been slotted into what
looks like a very tight timeline schedule and the company still expects to get Buritica into
production in 2017, so it might turn out to be a bit of a wallpaper job. But to be fair it is a
change for the better at face value.
Peru’s gold production trending back up
It took until August for Peru to register a month of consolidated gold production of over
360,000 ounces this year. Therefore the 413,450 oz for November, as reported on December
23rd and coming on the back of 432k oz Au in October, shows a marked improvement for the
country and potentially a new trend.
Peru gold production breakdown
non-Madre De Dios plus Madre De Dios Production, monthly, 2012 to date
550000
500000
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
21
21naj ram yam luj pes von 31.naj ram yam luj pes von 41.naj ram yam luj pes von
Oz Au/month
º
MDD ounces
Total Peru prod minus MDD
source: MEM, IKN calcs
Also, as the above chart showing monthly production since 2012 indicates, the improvement
has little to do with the controversial (and often illegal) alluvial gold mining in the Madre de
Dios pre-Amazon basin area. This longer-term version from the same dataset (runs from 2007)
Peru gold production breakdown
non-Madre De Dios plus Madre De Dios Production, monthly, 2007 to date
600000
550000
500000
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
70naj nuj von rpa pes bef luj ced yam tco ram gua 21naj nuj von rpa pes bef luj
Oz Au/month
º
MDD ounces
Total Peru prod minus MDD
source: MEM, IKN calcs
Shows the 2013/2014 dip and recovery in context. Peru’s returning to something close to its
previous production rates for gold after running into a sticky period.
The Páramo de Santurbán and Eco Oro (EOM.to): To be clear
Last week we ran a longish piece on the state of play at the Páramo de Santurbán after the
Colombian government’s boundary decision. Since then we’ve seen the final coordinates
published and ensuing statements from mining companies, local (pro and contra mining)
communities and committees, as well as the government and its departments.
What we’ve seen in the last week has run largely along the lines envisaged in IKN293 last
Sunday. Colombia’s government has made its announcement and has happily published the
exact boundary coordinates, but apart from that piece of transparency apparently been
deliberately opaque about the resolutions and consequences of the ruling; for me the
government is guilty of trying to please everybody (at least a little) and ending by pleasing
nobody. Also, as noted in this analysis of events from Colombian political website of excellence
‘La Silla Vacia’ on Monday (6) afternoon, the whole concept of areas that have been designated
“Paramo but you can mine on them” (the yellow zones from last week’s map from here (7) and
reprinted here)...
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”
...seem to be at very best an interpretation made by the environment ministry and more likely a
corruption of the existing law. That law (article 202 of the Development Plan Law) prohibits
mining in any and all páramo regions of Colombia, period. Therefore calling them “Areas for
restoration of the Páramo ecosystem” means they’re being recognized as páramo and thusly
the can of worms, in the form of legal suits against this government call, is opened wide.
Indeed, the anti-mining environmental groups have already picked up on the opaque nature of
the government decision, the legal grey areas and the lack of explicit declaration as to whether
Eco Oro and others can move forward with their projects in the joint statement that was
published on December 22nd (8). think what you want about their anti-mining cause, but the
objections they make about this latest episode of more-heat-than-light from the government of
Colombia are wholly valid.
Therefore and to be crystal clear about the position of The IKN Weekly and its author on this
issue (after receiving a few “what if?” type mails early last week) the call here is to avoid.
Avoid the region, avoid Eco Oro especially at this newly inflated price, and probably avoid the
generalized basket case that is Colombia the country when it comes to mining. This is the
country that has perfected the art of snatching defeat from the jaws of victory for its hard-rock
22
mining industry over the last five years, there’s so much going for it if it ever manages to get tis
act together, but until it does it’s not worth the heartache. I could go into the deeper tides of
this subject and how the Santos government itself plays hosts to bodies and State functionaries
that pull in opposite directions on the subject of mining but it’s probably not for now. Those of
you who’d like background reading on the subject can do the same as your author and
download and read this (9) 198 page text of close-spaced dense Spanish language report from
the nation’s Controlaria (enviro ombudsman) entitled (translated), “Mining in Colombia:
Fundamentals to Overcome the Extractive Model” dated March 2013. I’m sure you’ll find it as
fascinating as I did
Meanwhile and to reiterate the caveat, if you have some high risk can-lose-this-much cash and
fancy a risk/reward bet on the region, CB Gold (CBJ.v) still looks like a better option even one
week down the line from the main news. It’s been largely ignored, it’s in the right place, it’s
announced itself unaffected by the boundary location, it’s still dirt cheap in relative and absolute
terms after its torrid couple of years. I’m not going to partake, but CBJ does look like the best
of a bad lot here.
Peru: Tenements lapse
A combination of three factors will result in Peru seeing a large swathe of land under
concession lapse on January 2nd 2015. The tenements are due to be handed back to the
government and will be available for staking again (though by law, the companies that lose the
land cannot go back and pick them up again). The three reasons are:
First and foremost, the obvious one; The downturn in metals prices has made holding large
concession areas less attractive for mining companies, large or small. As a result they’re
handing them back to the government rather than pay the annual U$3 per hectare (large scale
mining) U$1 (medium scale) or U$0.50 (small scale or artisan).
The Peru body in charge of concession awards, Ingemmet (10), has become more vigilent and
is cracking down on companies that aren’t paying their dues.
The Year Seven Rule. In the Peru concessioning system, if you’ve held onto a concession for six
years you need to show that you’ve spent money on the holding via exploration or
development, else pay a fine in
year seven. The minimum spend
per hectare is 3,800 Soles (U$1,275
at today’s forex) over the six year
period and if you can’t demonstrate
that spend, you pay and extra U$6
per hectare in order to keep the
concession/tenement. If not, it’s
lost and goes back to the State. As
we’re now hitting year six-to-seven
on large areas of land that were
snapped up in the expansion period
of the exploration boom (pre-
Lehman and all that, when gold
and copper and all their friends did
nothing but rise) it means it’s time
to pay up or hand back on large
areas.
As the chart seen here shows
(taken from a Ingemmet presentation) the largest holder of expiring concessions/tenements is
BHP Billiton, which took very large chunks of South Peru as well as plenty of Andean region
areas in the North back in the mid-noughties. BHP is losing 712,179 hectares and the top ten
holders you see above are dropping 1.6 million hectares in total. For our purposes we should
23
note the Maxy gold, a subsidiary of Lara Exploration, is dropping 69,900 Ha of land. All the
above compares to the total of lapsed concessions at the end of 2013, which came to
173,000Ha, less than a tenth of the land area that’s handed back this time.
This looks to me like another piece in the jigsaw puzzle that marks an inflection point in the
mining sector. We can expect the healthier companies and those on-the-ball to scour the
handed back concessions and stake what they think are the best prospects. Staking surely
beats optioning in on projects and paying the holder for the privilege, this way you get to own it
yourself. Meanwhile, we’ll also see companies such as Lara make selections from their asset
book and hold onto what they believe to be their most prospective lands. Somewhere between
now and an indistinct point in the future, the batons will change hands and good project land
will begin to be explored again.
Chile: Mining redundancies
Chile’s government stats office INE last week reported (11) that 230,000 people were directly
employed in the country’s mining industry (i.e. not ancillary jobs connected to mining or jobs
supported by those earning from mining), down from 261k the same time two years ago.
Chile: Direct employees in mining industry
October 2012, 2013 and 2014
300
261
275
250 238 230
225
200
175
150
125
100
75
50
25
0
2012 2013 2014
source: INE
24
seeyolpme
s000
Blame is put on the drop in the copper price, softer demand for copper from main market
China, the problems and bureaucratic barriers in permitting new projects and the upcoming
change in the DL-600 law that mining companies say will take away much needed tax breaks at
an important time for the mining industry. In other words, we can distill that all down to the
drop in the copper price.
Another snippet from the INE data is how in 2012 the government of Chile claimed an
investment book of future projects worth U$110Bn for the next ten years. That’s now down to
U$50Bn plus U$60Bn “in process of revision” (to translate the Spanish literally), i.e. in doubt on
on ice.
Rio Cristal Resources (RCZ.v): A new Warke/Pirooz pseudoshell
Rio Cristal (RCZ.v) was one I cared about though never bought a few years ago as it had an
interesting but ultimately too-difficult zinc called Charlotte Bongara zinc up in the North of Peru.
That project was disposed of and these days it’s nothing but an empty shell of a company, but
a late evening NR on December 24th (talk about trying to keep it under the radar) caught the
eye. Read the whole thing here (12) but in short, thanks to a shares-for-debt agreement done
at a highly dilutive level, the company now has 93% of its share in the hands of Richard Warke
and Robert Pirooz. There’s an upcoming equity placement in which those two will participate as
well, plus they’re putting in one of their own as a director, Purni Parikh. Here’s the biog section
of the NR to remind one and all who these people are:
Mr. Warke is the founder, Chairman and CEO of Wildcat Silver Corporation and President, Chief
Executive Officer and Director for Catalyst Copper Corporation. Previously, he was the founder
and Executive Chairman for both Augusta Resource Corporation, which was acquired for
over $550 million in July 2014, and Ventana Gold Corporation, which was acquired in early 2011
for $1.5 billion. Throughout his 25 years of experience in corporate finance and marketing in the
global resource industry, Mr. Warke has been involved in raising over $1 billion dollars in equity
for resource companies. Mr. Warke's endeavours have primarily involved mineral resource
operations, however, he has an array of experience with oil and gas, forestry, technology and
manufacturing operations as well.
Mr. Pirooz has been a distinguished member of the Canadian Bar for over two decades and was
a 2012 Queen's Counsel appointee. Mr. Pirooz has been instrumental in the formation,
development and operation of over 11 different companies, and played a key role in the sale of
five of these companies – Regalito Copper Corp., Northern Peru Copper Corp., Global Copper
Corp., Lumina Royalty Corp. and Lumina Copper Corp. - which generated proceeds of over $1.6
billion. Currently, Mr. Pirooz serves as General Counsel and a director for Pan American Silver
Corp. and is the Executive Chair of Network Media Group Inc.
Ms. Parikh brings extensive business and corporate governance experience from 20 years in the
mining sector and is currently Vice President Corporate Secretary of Wildcat Silver Corporation,
Catalyst Copper Corp. and Plata Latina Minerals Corporation and previously held the same
positions with Augusta Resource Corporation and Ventana Gold Corp.
In short, these are Pan American Silver people, Ventana Gold people, Ross Beaty people,
Augusta Resource Corp people and most recently the drivers behind the takeover or our new
member of The Copper Basket above, Catalyst Copper. They’ve moved into RCZ.v and taken
over the whole structure (minus some remnant shares) in exchange for changing debt owed to
them into the company’s equity (that they wouldn’t have been able to collect in cash anyway).
Whether they plan to make RCZ (or its next incarnation) their Peru vehicle in the same way that
Catalyst is their latest Mexico show is up for argument, as is the time window of any decision to
make this (what is now a) virtual shell into a going concern. There’s an AGM/EGM set for
February 26th 2015 to vote on the changes in
directors, so it’s fair to say that this one will
probably go back to sleep until at least them.
This two year price chart shows how, after
rollbacks and complete failure, the stock has dived
from a (post rollback adjusted) $6 to the current
3.5c (go further back and you’ll see a split adjusted
$40 share price). Once the whole restructuring is
done, I’d expect RCZ.v to have around 30m shares
outstanding and enough cash to pay the
accountants and keep the office on tick-
over(though not much more). As the debt shares
are priced at 5c it puts the market cap at $1.5m
which, bar the small amount of cash being put in that’s bound to waste away on paperwork, is
the price we’re paying to coattail Warke and Pirooz here. That’s not such a big premium for the
rockstar management set-up in making at RCZ, no matter what they eventually decided to do
with the vehicle, and when we further consider the move CCY made when it came out of the
freezer in August 2014...
25
...I think RCZ may turn into a stock to watch next year. The plan here will be to pick up some
shares when nobody is looking and for that, I’m going to best-guess that we have between now
and the end of February at least. If RCZ pops on the late Christmas Eve news then let it pop,
because I’ll bet it goes quiet once people start thinking about January jumps and the usual
assorted market noise. As for what Warke, Pirooz and friends decide to do with the quasi-shell
your guess is as good as mine right now. But I bet when they do something it’ll be interesting
and make the share worth more than five cents.
Conclusion
IKN294 is done, we end with bullet points:
• If you listen to me just once this year, or just once next year, make it on these calls.
Own Argonaut (AR.to) for a near-term gain today, own Rio alto (RIO.to) (RIOM) for
strong gains in 2015. End.
• A very coppery edition today, with profiles of five companies to be featured in the 2015
basket and a piece that I’ve wanted to get off my chest for a while. I firmly believe
copper to be the key to the 2015 resource sector, I don’t know which way it’s going to
jump yet but when it does, I’ll be ready. A lot of money will be made or lost in the next
12 months by the people who get this one right. Or wrong.
• As far as I’m concerned, the páramo de Santander in Colombia is now a closed book.
The political and social situation there hasn’t got any clearer and there are as many
doubts now as there were a couple of weeks ago. Highest risk spec cash only and even
then, only if you dare. I see no reason why I should play this political black hole when
there are dirt cheap stocks available in politically safe LatAm zones that welcome
mining.
• Wishing you all a happy and healthy 2015. Look after yourself.
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
26
Footnotes, appendices, references, disclaimer
(1) http://www.reuters.com/article/2014/12/12/copper-aurubis-idUSL6N0TW1L620141212
(2) http://www.reuters.com/article/2014/12/25/markets-metals-idUSL3N0U917I20141225
(3) http://finance.yahoo.com/news/capstone-mining-announces-launch-300-183400589.html
(4) http://www.miningnews.net/storyview.asp?storyid=826941202
(5) http://incakolanews.blogspot.com/2014/12/checking-in-on-continental-gold-cnlto.html
(6) http://lasillavacia.com/elblogueo/blog/santurban-espaldas-del-debate-publico
(7) http://www.eltiempo.com/contenido/colombia/otras-ciudades/ARCHIVO/ARCHIVO-14997776-0.pdf
(8) http://www.aida-americas.org/es/release/ministerio-de-ambiente-de-colombia-debe-garantizar-que-no-
habr%C3%A1-miner%C3%AD-gran-escala-en-el-p%C3%A1r
(9) http://redjusticiaambientalcolombia.files.wordpress.com/2013/05/mineria-en-colombia-fundamentos-para-superar-el-
modelo-extractivista2013.pdf
(10) http://www.ingemmet.gob.pe/form/Inicio.aspx
(11) http://www.24horas.cl/economia/sector-minero-enfrenta-aumento-de-la-cesantia-y-menos-inversion-1538465
(12) http://www.newswire.ca/en/story/1467605/rio-cristal-announces-units-for-debt-transaction-private-placement-and-
new-board-nominees
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
28
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.
29