IKN #295Premium

The IKN Weekly
Week 295, January 4th 2015
Contents
This Week: US Jobs Friday.
Fundamental Analysis: Previewing 4q14 production results for precious metals companies
(Rio Alto Mining (RIO.to) (RIOM), Argonaut Gold (AR.to), B2Gold (BTG) (BTO.to), First Majestic
(FR.to) (AG), Fortuna Silver SHORT (FVI.to) (FSM)).
Stocks to Follow: Overview, Argonaut Gold (AR.to),First Majestic (AG) (FR.to), Fortuna Silver
(FVI.to) (FSM), Rio Alto (RIOM) (RIO.to), Dalradian Resources (DNA.to).
Copper Basket: Overview, Capstone Mining (CS.to), Reservoir Minerals (RMC.v).
Low Cost Producer Basket: Overview.
Regional Politics: Regional risk review, revised edition, seventh update.
Market Watching: CB Gold (CBJ.v) makes a spec move, Peru fuel prices drop by another
10%, Nevada Copper (NCU.to) refinances.
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
US Jobs Friday
The customary headsup on the BLS jobs report with the December numbers due pre-open
Friday, January 9th. Calculated Risk this weekend (1) reports current consensus as +240k and
5.7% as the main headline numbers, though as usual expect those to be refined as the week
wears on.
Fundamental Analysis of Mining Stocks
Previewing 4q14 production results for precious metals companies
The next couple of weeks are important for several companies and positions held by your
author and reco’d by The IKN Weekly because they’ll include production results from the key
4q14 quarter for most producers. In the case of our list and excluding companies that have
either base metals production or minor production that’s not the reason for ownership, that
means we’re talking about five companies which also happen to include most of the biggest
held positions and most strongly recommended stocks:
Rio Alto Mining (RIO.to) (RIOM)
Argonaut Gold (AR.to)
B2Gold (BTG) (BTO.to)
First Majestic (FR.to) (AG)
Fortuna Silver SHORT (FVI.to) (FSM)
Today we preview those five companies in the light of the upcoming 4q14 and try to work out
1

what we want or would like to see from each set of numbers when they arrive. The idea is to
get a handle on just how much each stock and its price can be affected by the 4q14 production
NR when it arrives. So without further ado, here come the five names and I’m presenting them
in some sort of Q4 order of importance, because I’m going to be watching some sets of
numbers more closely than others (which are held for other reasons).
First Majestic Silver (AG) (FR.to)
Our main silver play and horribly beaten up position First Majestic Silver (FR.to) (AG) gets first
show today because it’s the one I’m most concerned about. FR.to normally gives us a news
release with its quarterly production numbers in week two of the following month. For example
from last year:
• 4q13 (ended December 31st 2013): Production NR published January 14th 2014
• 1q14 (ended March 31st 2014): Production NR published April 8th
• 2q14 (ended June 30th 2014): Production NR published July 14th
• 3q14 (ended September 30th 2014): Production NR published October 14th
That suggests we’ll get the 4q14 production numbers from FR.to not this week coming but the
week after next (post IKN296 next Sunday, at some point between Monday 12th and Friday
16th), but despite that we’re running this preview this weekend because;
The 4q14 production numbers may come this week
They’re going to give us an important tell on the health of FR.to operations
If things don’t come up to scratch, it may be the moment I throw in the towel on this position
and turn a virtual loss into a hard cash loss.
Therefore this week’s preview coming up, which is set out to give concisely (or at least I hope
so) what we’d like from FR.to’s 4q14 to bring further upside, what we’d need from them to be
reasonably happy long holders, what we’d need from them to remain long. Anything below that
last category would signify the sale.
It’s all about production: The 3q14 numbers were poor compared to both expectations and the
growth profile of the company in the previous quarters and years. In its 3q14 production results
NR (2) FR.to gave reasons (excuses) for that quarter and also gave us updated production
guidance for the 2014 year, which was lower but still points at real improvement expected for
4q14. Here’s the chunk at the end of the NR that matters:
To date, the Company has produced a total of 8.7 million ounces of silver (11.0 million
silver equivalent ounces). After adjusting for the recent quarter and the reduced
expectations for the fourth quarter due to: a delay in accessing the higher grade El
Colosso area at La Guitarra and additional planned maintenance at San Martin, the
Company has revised its 2014 annual production guidance to within a range of 11.5 to
11.7 million silver ounces (14.6 to 14.9 silver equivalent ounces).
In fact if you go to the company website, on the front page you’re greeted by these words
(excerpted)
The Company presently owns and operates five producing silver mines; the La Parrilla Silver
Mine, the San Martin Silver Mine, the La Encantada Silver Mine, the La Guitarra Silver Mine, and
the Del Toro Silver Mine. Production from these five mines is anticipated to be between 11.5 to
11.7 million ounces of pure silver or 14.6 to 14.9 million ounces of silver equivalents in 2014.
Right up to January 4th 2015 they’re not hiding this guidance call. This is what the top of those
ranges looks like on a chart, compared with previous quarters:
2

FR.to: Consolidated production, per qtr
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
3
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
Ag +AgEq prod
other AgEq prod
total silver prod
source: company data
It would mean that FR.to produce 3.03m ounces of pure silver and a silver equivalent of 3.9m
oz, with that last figure being a new company record for any given quarter.
I recently had reason to re-check my model for FR.to thanks to a comment from reader M, who
said he’d run a few numbers on the company and expected them to run out of cash in a couple
of quarters’ time if silver prices didn’t pick up. As reader M is someone who’s opinion I greatly
respect as a pro-analyst, even though he said his DD was basic it was a wake-up call and I
checked on my model and forecasts. The upshot of my checking is that I think (to the point of
being pretty sure) that M was being overly pessimistic about FR.to, but it also gave me the
criteria to judge the production numbers
FR.to: Working Capital per qtr
in context of financials.
120
110
My current model is based on FR.to 100
90
producing 2.92m oz pure silver in 4q14. 80
If that happens and assuming FR.to has 70
60
sold and received on the 934k oz Ag it 50
held back in 3q14, as well as making 40
30
good on the type of costs savings I’m 20
expecting, the model says that cash 10
0
treasury moves back to $40m (was
34.7m 3q14) and working cap back to
~$22m. As this chart shows that’s hardly
a healthy position compared to a year or
so ago, so there’s not a great deal of room for error in these quarterly financials for my taste.
But the model at least points to an improved liquidity position compared to Q3 and if that
happens, reader M’s pessimism would be misplaced.
However, my 2.92m oz Ag is almost exactly in the middle of FR.to’s guidance for the quarter
and to make the bottom end of that guidance for pure Ag they'll need to produce 2.83m oz in
Q4 (was 2.68m in 3q14). This doesn’t include the aforementioned 0.934m oz Ag held over from
Q3 and have already said they've sold. If FR came in at the bottom end of guidance it wouldn’t
be a bad thing but it is perhaps $1.6m less in revenues. To the upside potential of Q4, knowing
how miners like to fill their Q4 numbers I wouldn't be surprised to see it return a 3m oz Ag
number (implying ~3.9m oz AgEq).
The other thing you get from FR.to production NRs is a pretty detailed breakdown of the
company’s performance mine-by-mine, including data that allows us to get a handle on mine
cost efficiency. Just as one example, they’ll give you tonnage and recovery rates at the
important La Encantada operation and those really help to get an idea on how well that mine
performs. We should also get some sort of guide on how costs at the Del Toro mine are
shaping, because guidance has been for cheaper running costs since it was hooked up to the
national electricity grid. Finally, any clue on overall costs will be gratefully accepted (FR.to is
guiding the 3q14 number as a blip and AISC should go well under $18/oz). For more on costs
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source company filings
srallod
fo
snoillim

check out the latest corporate presentation here (3) as it gives some ballparks on what to
expect from its costs parameters for Q4 and beyond.
The bottom line to the FR.to $q14 production numbers is that they should provide a very
decent tell as to the financial state of the company, they bring plenty of clues and as Q4 is
going to be an important one for First Majestic in which it needs to show that it’s turning away
from the poor 3q14 numbers and to a level where it can survive low silver prices, that’s
important. So the actionable call is:
• If FR.to announces pure silver production of less than 2.8m oz pure silver (not AgEq
that includes Zn, Pb, Au etc), i.e. it fails to make its revised 2014 guidance minimum, it
will be time to sell the stock and cut losses before things get any worse.
• I’ll be relaxed and happy about holding if we see something above 2.9m oz Ag (pure
silver) from Q4 production.
• Anything above 3m oz Ag could set off a rally in the stock, to the point where I’d even
consider adding to the position and averaging down a bit.
Argonaut Gold (AR.to)
Second to be put before you is AR.to, because I think its share price has a decent shot of being
actively moved by the Q4 production NR when it arrive. The good news this time is that I see
plenty of opportunity for upside moves, much less chance of a downside hit. We begin by
noting, in much the same way as above, the previous year’s quarterly production result NR
dates for Argonaut Gold (AR.to):
• 4q13 (ended December 31st 2013): Production NR published January 20th 2014
• 1q14 (ended March 31st 2014): Production NR published April 15th
• 2q14 (ended June 30th 2014): Production NR published July 15th
• 3q14 (ended September 30th 2014): Production NR published October 15th
That points to week two or week three of 2015 as the estimated time of arrival for the 4q14
production numbers, we’re unlikely to get them in the five days ahead of us.
However and aside from the way it’s been rallying like a champ so far, there’s reason to like the
optics for the 4q14 production announcement from AR.to and looking forward to enjoying even
more rally pleasure from the new Top Pick as a result. Here’s how I reason that out.
On October 15th while announcing its lacklustre 3q14 results, AR.to dropped its production
guidance for 2014 to between 130,000 oz gold and 135,000 oz gold. As that date is a scant 2½
months from years end there’s at least some reason to assume the company will hit it. If we
then give AR.to the absolute best benefit of the doubt and include all silver production as Gold
Equivalent Ounces (GEOs), that means in order to meet the low end of adjusted guidance AR.to
has to return a gold production number of 36,532oz. For the top end, it will need 41,532 oz Au
(in fact AuEq because we’re giving them the help of the minor silver numbers too).
But that will make things more than interesting for us, the longs. In my recent analysis of AR.to
in IKN292 dated December 14th, the one in which we called buy on the stock, we noted the
guidance facts and decided to ignore them. Check that analysis at your own leisure if you want
details, but this short extract from the text...
“I’m not going to assume a 37k production quarter here but aim slightly
lower, which allows for upside surprise but also recognizes that AR.to is set to
put in a much better quarter than we’ve seen in quite a while.”
..covers the main point. For our purposes, we’re looking for a production number of 34,455
GEO from the company in 4q14 to keep our long casde on course. Therefore anything above
that will come as a bonus and to visualize it all, here’s a chart:
4

AR.to: How 4q14 production estimates look compared to
estimates and current company guidance
GEO
44000
extra to reach AR.to top end guidance
42000
40000 extra to meet AR.to minimum guidance
38000
IKN Production estimate for 4q14
36000
34000
32000
30000
28000
26000
24000
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14est
source: AR.to filings, IKN ests and calcs
NB: Please note the cut down Y-axis on this chart, done to show the
contrasts and not to fool you
As you can see, even our lowered number would be almost the best quarter from Argonaut in
the last two years. Therefore, even hitting the minimum guidance number would be in record
territory and anything above 130k GEO for 2014 would be pure gravy.
I like the set-up here at AR.to and the chances of further stock rallying on the production
number news are good, because it all seems loaded to upside surprise (or at least surprise for
those who haven’t been watching carefully). With the company setting a new annual guidance
less than three months ago, I’m confident enough about my level being a base level and I need
to emphasize here, I’ll be 100% happy with AR.to if my 34,455 GEO estimate is hit, that’s more
than enough for me at this point and with a stock priced where it is. However today we’re
talking blue-sky and if AR.to manages to return a 36k or 37k oz production quarter, that will sit
very prettily against the rest of its 2014 and the market scribes can start telling us how AR.to
has “turned a corner” along with all the other wise saw and common instances the chatterers
like to come out with at times like these. And then, on top of that, is the outside chance that
AR.to really knocks one out of the park and gets near to 40k on the quarter. If that happens
you won’t want to sell a single share you own until the buyers have stopped queuing up to
become new owners.
B2Gold (BTO.to) (BTG)
The third in our list, B2Gold needs to show a better Q4 than its particularly crappy 3q14
production but there are other things in play here that make these quarterly results less
important in the great scheme of things. Let’s start with last year’s NR schedule for the
quarterly production announcements, to get an idea of when we can expect the NR:
• 4q13 (ended December 31st 2013): Production NR published January 21st 2014
• 1q14 (ended March 31st 2014): Production NR published April 30th
• 2q14 (ended June 30th 2014): Production NR published July 17th
• 3q14 (ended September 30th 2014): Production NR published October 28th
The first thing we notice is that BTO tends to report production later than other companies (in
fact of the whole junior/midcap/senior universe it’s about the last of all), so we shouldn’t expect
anything from this company until week three minimum and week four wouldn’t be a surprise.
However, when they finally report production BTO is nice enough to give us a big clue on its
financial quarter in its production result, because it will typically report preliminary revenue
numbers for the quarter, give some detailed breakdown on the operations of each mine and
although it doesn’t give any specific cash cost numbers for the quarter just gone it does update
on annual cash cost guidance, letting us make fair guesses at operating margins before the
financials are published.
5

To add to the transparency here, for this specific 4q14 we already have very recent guidance
from around 50% of BTO’s total production number, because on December 23rd BTO told us (4)
this:
The Masbate Gold Project operations remain on track to deliver to the updated guidance for 2014
of approximately 180,000 ounces of gold and the SAG mill continues to perform well as the
Masbate Gold Project completes a strong quarter.
Throughput for October was 613,400 tonnes at an average grade of 1.29 g/t and November was
601,164 tonnes at 1.38 g/t. October monthly adjusted gold production was 21,177 ounces and, for
the month of November, 22,429 ounces were produced. December production remains as strong
as well.
We still need to add Libertad, Limon and now the first ounces from Otjikoto, but all signs look
good for this quarter.
We then need to add in the growth factor for BTO, as the ramp-up at Otjikoto will make for
more market moving news, as well as any developments from the recently acquired Fekola
mine (ex-Papillon) that should provide newsflow of growth in the future. Overall, the potential
for market moving news from the production NR at BTO in January is, for me at least, more
moderate and could go either way:
• To the downside, signals from the contained numbers that costs are higher than
expected could put pressure on the stock.
• To the upside, a better than expected production number is possible and as long as
cost signs are good we could get a bounce.
But in this case I’m expecting the real market moves to come in March as BTO reports its year
(which will be just after PDAC, for your information). Guidance for 2015 production and the
growth pipeline is what matters, plus any guesses on how BTO plans to make it to major status
(hopefully without diluting out us longs too much in the process).
Fortuna Silver (FVI.to) (FSM)
Here’s last year’s NR schedule for the quarterly production announcements from FVI:
• 4q13 (ended December 31st 2013): Production NR published January 13th 2014
• 1q14 (ended March 31st 2014): Production NR published April 14th
• 2q14 (ended June 30th 2014): Production NR published July 10th
• 3q14 (ended September 30th 2014): Production NR published October 9th
In the case of FVI, we shouldn’t expect too much market-moving information on the release of
4q14 production numbers. More interesting in this case will be the update on resources and
reserves as at December 31st 2014, which should come in mid-February, then the release of its
2014 year-end financials due mid-March. That’s because we expect the cut-off price for silver
(and other metals, but silver first and foremost) that FVI will need to factor in is going to hurt
first its reserve/resource levels and then may trigger impairments to its fixed asset carrying
values for the mines, particularly in the case of the weak link operation Caylloma.
Rio Alto Mining (RIOM) (RIO.to)
Of all the precious metals producers owned (or in the case of FVI anti-owned) at the moment,
this is the one that causes the least fretting and worry about 4q14 production numbers. For the
record and to copy month. For example from last year:
• 4q13 (ended December 31st 2013): Production NR published January 20th 2014
• 1q14 (ended March 31st 2014): Production NR published April 15th
• 2q14 (ended June 30th 2014): Production NR published July 15th
• 3q14 (ended September 30th 2014): Production NR published October 15th
That suggests we’ll get RIO.to’s 4q14 results in week two or three of this month. As for the
6

reasons why we should sweat this one:
We know the production numbers for the first two months of the 4q14 period already, thanks to
the Peru Ministry stats. As noted in IKN294 last week, October and November come to 39,992
oz gold, a direct extrapolation of those would give us 55,488 oz for the quarter, La Arena runs
very regularly these days and there’s no reason to expect a sudden drop. Something at or
around 55k for the quarter would suit us just fine and bring us in for the year very close to the
company’s high end guidance of 220k for 2014.
People are starting to worry more about the construction and timeline for Shahuindo, therefore
La Arena production numbers are more baked in and assumed good. The share price upside for
RIO.to in 2015 will come from growth, rather than current operations. That or a buyout. As
mentioned last week and a thought on the subject in ‘Stocks to Follow’ below.
Stocks to Follow
Of the 14 open positions on our ‘Stocks to Follow’ list last week, just one showed a loss (FSM
short), while one other remained unchanged (IRL.to). That leaves 12 winners in a classic
springback week one in Canada and I’m not listing them all, but the best percentage gains
came from Coro Mining (COP.to up 12.5%), B2Gold (BTO.to up 10.9%), Lara Exploration
(LRA.v up 9.7%) and Amerigo Resources (ARG.to up 9.4%).
We currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our self-
imposed maximum. Three are in the green (including the two Top Picks and biggest cash
exposure positions), the rest are horridly red.
Reco Current
company Ticker this week Avg Price date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.30 07-apr-11 C$2.96 28.7% Top Pick, $3.30 tgt, Best PM Jr
Argonaut Gold AR.to strng buy C$1.47 14-dec-14 C$1.91 30.0% New Top Pîck ST
Recommended long positions (in current order of preference)
B2Gold BTO.to buy C$2.32 12-sep-14 C$2.04 -12.1% V good entry point now
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.74 15.6% Nov'14 tgt $1.25, top Au expl
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$4.05 -33.1% Best spec Cu play
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.19 -17.4% tgt 50c, avged up, 1q15 news
First Majestic AG spec buy U$10.51 10-aug-14 U$5.22 -50.3% Now in pair trade with FSM
Amerigo Res ARG.to hold C$0.405 20-jul-14 C$0.29 -28.4% Small Cu play, good value
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.05 -81.5% Waiting for financing news
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.62 -41.0% small Cu play low vols, hold
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.395 -65.7% solid biz model, LT hold
GoldQuest Min. GQC.v hold C$0.26 27-oct-13 C$0.10 -61.5% no point selling so cheaply
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$4.68 -13.6% In pair trade with AG
Smaller/Riskier
Coro Mining COP.to spec buy C$0.075 26-jan-14 C$0.045 -40.0% Added avged down Nov'14
Closed in 2015 closed close price
none as yet
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
7

Overview: Last week was still part of the end-year quiet period. Things should get back to a
better rhythm as from this week. While we have seen reasonable trading in the larger sized
stocks as well as the first moves of the expected January bounce, the tinycap stocks haven’t
had much about them. Therefore comments are again restricted to just a handful of names this
weekend.
Argonaut Gold (AR.to): A breath of fresh air to be able to talk about a wholly successful (so
far) trade that’s working out as close to the
gameplan as can ever be wished. Here’s
AR.to versus the juniors ETF (GDXJ) and
gold ETF (GLD) since this trade kicked off,
a chart that speaks for itself.
If the stock is kind enough to keep
following my personal playbook (and what
could possibly go wrong?☺) we should get
to a h2-handle on the price by this time
next week. As noted above in
“Fundamentals...” today, the playing field
for aR.to looks tilted towards upside
surprise for the 4q14 production numbers
and so I’m going to hold 100% of this
pretty large (for me) long until they show up.
Be clear: I framed this trade as a near-term one and I’m going to stick with that in some
measure or another. The plan as stands is to sell at least some of the shares in January (long-
termers who scoff with, “You’ll throw away a fivebagger, stupid! Hold for three years, man!” are
free to scoff away), maybe all of them. The whole/partial sale decision can come later in the
month, however. Right now I’m just enjoying the ride.
A reminder of the major caveat here, the gold price. Any metal collapse and all bets are off, so
it’s not a trade on autopilot and I’m watching the markets daily/hourly basis in the month of
January (February involves hiking hills and sitting on beaches, however).
Fortuna Silver (FSM) (FVI.to) and First Majestic (FR.to) (AG) Pair Trade: Here’s the
chart of this pair trade since it began on November 16th
Happy to say we’re back at evens on the pair trade, thanks to a combo of FSM stalling at the
same upper level three or four times (which coincides with insiders selling at that price, if
8

coincidence is the right word) and AG coming back from the worst period for wholesale selling
around when November became December.
On the subject of insider sales at Fortuna Silver, here’s a chart from this (5) Canadian Insider
page:
That’s 872,600 options, all exercised at $4.03, all sold at prices over $5.20, all since mid-
November 2014...seven weeks of cash bonuses for the people who know the books of this
company more intimately than anyone else. (over 880k if we add in the 7759 shares exercised
and sold at $3.38 at the beginning of November). There’s been no building of paid-up share
positions by selling most and keeping some (thereby paying nothing for new shares) either; it’s
been 100% sales and take the money. We should also point out that the management and
directors of FVI have very little skin in the game of the company in the shape of shareholdings.
• CEO Jorge Ganoza owns 32,100 shares
• CFO Luis Ganoza owns zero shares
• VP Ops Ruiz-Conejo owns zero shares
Those are our three sellers above, but the “zero or thereabouts” story is repeated all through
the board of directors. In fact the only meaningful shareholding of any director is the 525,000
shares held by VP exploration Tom Vehrs (a person in no hurry to cash in on $2.5m, on that I
can assure you all).
Rio Alto Mining (RIOM) (RIO.to): RIO chops up and down in 10% lumps week after week,
taking its cue from the gold price (not a surprise) but it hasn’t managed to break CAD$3 in a
meaningful way either, and that’s after trying on several occasion these last few months.
I’ll leave that thought there (it’s not a new one) and move to feedback from my calls at the top
of last week’s note, specifically about my belief that Rio Alto Mining is a top buyout candidate in
2015. I received several mails on that statement (thank you all) and want to make clear that
no, I don’t have inside information. And I think the obvious candidate is New Gold (NGD).
Dalradian Resources (DNA.to): I’m no chartist (yes I know you know that) so I don’t tend
to out searching for these things, but when I had the chart for DNA.to shown to me yesterday
Saturday by Iwnattos in this post (6) I couldn’t help but mutter, “Yup he’s right, that one is
interesting”. So I’m stealing it and putting it here, so that you might do the same.
9

I was also nudged into congratulating myself on adding to my position during that November
downspike moment, but that’s beside the point.
I’ll stick with a few fundies datapoints for a line or two and say that yes, for sure it’s recovered
nicely and is back higher at 74c, but DNA.to is also 3.5m oz of high grade ounces selling at
$30/oz this weekend (not even taking into account its IKN-estimated $32m treasury, if i did that
would pull those ounces down to a little over $20 in-situ). That tells me there’s a lot of space
for this one to go higher and that my current $1.25 price target (that uses $1,200/oz gold) is
fully within the bounds of logical possibility, even in our crappy market. However that chart also
says (or seems to say to my untrained and rather TA-jaundiced eye) that DNA.to today is at
some sort of breakout level and just a penny or two higher will get the trader jocks piling on for
much higher prices. Fundamentally I see no reason to stop DNA if it does.
The Copper Basket
After one weeks of 2015 The Copper Basket is showing a 1.35% gain to level stakes.
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 805.91 2.11 3.9%
2 NGEx Resources NGQ.to 1.17 187.71 219.62 1.17 0.0%
3 Reservoir Min. RMC.v 3.96 47.55 192.58 4.05 2.0%
4 Nevada Copper NCU.to 1.65 80.5 135.24 1.68 1.8%
5 Western Copper WRN.to 0.68 93.68 65.58 0.70 2.9%
6 Panoro Minerals PML.v 0.295 220.25 59.47 0.27 -8.5%
7 Copper Fox CUU.v 0.135 402.96 56.41 0.14 3.7%
8 Hot Chili Ltd HCH.ax 0.16 333.11 53.30 0.16 0.0%
9 Amerigo Res ARG.to 0.27 173.65 50.36 0.29 7.4%
10 NovaCopper NCQ.to 0.58 60.15 37.29 0.62 6.9%
11 Regulus Res REG.v 0.35 56.39 19.74 0.35 0.0%
12 Metminco MNC.ax 0.008 1822.6 14.58 0.008 0.0%
13 Catalyst Copper CCY.v 0.305 31.39 9.57 0.305 0.0%
14 AQM Copper AQM.v 0.06 139.24 8.35 0.06 0.0%
15 Coro Mining* COP.to 0.045 159.37 7.17 0.045 0.0%
NB: HCH.ax & MNC.ax priced in AUD$, rest CAD$ Portfolio avg 1.35%
10

Week one was in fact just one day of trading, as the new baseline prices were set after the
close on Tuesday December 31st then trading on those prices only happened on Friday January
2nd. It’s therefore a bit of a false week and what’s more volumes were rather light on Friday,
but you have to start somewhere I suppose We
can expect a better gauge of action this time
next week. Still there was time to register seven
winners (CS.to, RMC.v, NCU.to, WRN.to, CUU.v,
ARG.to, NGQ.to) and one loser (PML.v), with the
other seven remaining unchanged (a lot of the
UNCHes from the tinycap end of the basket list).
The futures contract for copper that we use for
our weekly tracking of prices rolled over in light
trading and is now on a March date. Apart from
an anomalous downspike in the first trades after
Christmas, prices kept very steady and we again
find the metal defending the key $2.80/lb level.
As the world gets back to real work next week,
we may get some definition here. My position is
the same as this time last week, medium-term
bullish, worried about that call near-term, ready
to jettison some copper exposure if necessary.
It’s the end of another month and of another
year, which means IKN wheels out its monthly tracker charts for world copper inventories. On
the left we see the slight rise in copper stocks is a trend that’s now five months old. But we’re
still a mile away from the type of number seen in 2012 and 2013 when the big banks and
concentrate dealers were blatantly rigging the market.
Copper inventories, per month 2012-2014
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
On the right we note the continued relative stability of market share, with a slight trend
benefitting Shanghai but no real sign that the gap’s about to close.
So to weekly inventories and trading was again reported light again, which is unsurprising but
still needs stating.
• Overall world stock levels rose a little in the shortened trading week and a period where
the world closes down, up 4,691 metric tonnes (mt) (+1.6%) to finish at 306,697mt.
It’s still four straight weeks of inventory gains, though.
• The Shanghai Futures Exchange warehouse number was unchanged on the week due
to the holiday closure. We stay at 105,522mt.
• The LME copper warehouse inventories made the largest move, up 5,175mt (+3.0%)
to end the week at 177,025mt. Trading was light, however.
• The Comex inventories dropped a bit, down 474mt to finish at 24,150mt.
11
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced
Mt Cu Copper inventories: percentage held per exchange
80 LME Shanghai Comex
70
60
50
40
30
20
10
0
source: Cochilco
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced
LME Shanghai Comex
source: Cochilco

Now for notes on just one featured stock this week
Capstone Mining (CS.to): I don’t really have much to say about any of the stocks this early
in the year on on the so-far flaccid volumes, but let us in passing note that when I changed my
error-strewn mind, listened to one of you and decided to include CS.to in this year’s list it was
at $1.88. This weekend it’s at $2.11, up a cool 12.2% in just two holiday-interrupted weeks and
bouncing harder than most anything in the copper space. This is probably due to it being way
oversold in early December during the tax loss season.
Reservoir Minerals (RMC.v): In the BNN TV slot that I linked to on the blog on December
30th (7) Brent Cook talked up RMC as one of his three picks for the exploration sector in 2015
(for the record, the other two were PLG.to and MRZ.v). As Cook’s is an opinion that we should
all take note of, that was good to hear and a nice franking of why I like the stock’s chances,
too. It didn’t move much on the pump, but neither should it in these depressed resource stock
days.
Nevada Copper (NCU.to): See Market Watching for thoughts on NCU and its news last week.
The Low Cost Producer Basket
After 1 week, the new Low Cost Producer Basket is showing a 3.1% gain to level stakes
company ticker price 1/1/15 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Goldcorp GG 18.52 812 15.29 18.83 1.7%
2 Barrick ABX 10.75 1164.67 12.71 10.91 1.5%
3 Newmont NEM 18.90 499 9.65 19.34 2.3%
4 Franco Nevada FNV 49.19 156.08 7.66 49.07 -0.2%
5 Silver Wheaton SLW 20.33 357.39 7.45 20.84 2.5%
6 Agnico Eagle AEM 24.89 173.43 4.68 27.00 8.5%
7 Kinross KGC 2.82 1114.5 3.23 2.90 2.8%
8 Buenaventura BVN 9.56 254.19 2.46 9.67 1.2%
9 B2Gold BTG 1.62 948.9 1.64 1.73 6.8%
10 Pan American PAAS 9.20 151.41 1.45 9.57 4.0%
all prices in U$, using NYSE ticker prices Portfolio avg 3.10%
A sprightly start to 2015 for our new list, as with just one trading day between our benchmark
level and this weekend we already have nine out of ten in profit and a 3.1% positive basket
average. The only loser was Franco Nevada (FNV), while the best of the moves Friday were
form Agnico Eagle (AEM up 8.5%) and B2Gold (BTG up 6.8%). GDX was 3.05%, so they’re
basically level.
Agnico Eagle (AEM): So why did AEM go
on more of a tear than its peer on Friday? I
don’t have a clue, apart from noticing plenty
of background chat on the company for a
couple of weeks as a “high alpha potential”
gold stock that’s “tipped to outperform
[insert Tier One of choice] in 2015”. In other
words, it’s being talked up by the chattering
classes and though that’s not necessarily a
bad thing, it’s a thing that has tended to
have a limit date in the last few months.
12

Regional politics
Regional risk review, revised edition, seventh update
It’s quarter-end and time for the review of regional political risk for junior mining. This is the 7th
edition of the revised format (as seen in IKN218, IKN230, IKN243, IKN255, IKN269, IIN283),
and as a reminder, here’s how the scoring works (full details, IKN218). The 6 categories are:
a) National Government Miner Friendly: The country on its national stance towards
mining activity.
b) Community/Social Miner Friendly: The overall attitude of locals towards mining,
either in specific zones or in country regions.
c) Foreign Direct Investment (FDI) Friendly: The openness towards FDI and the
safeguards it gives to foreign capital looking for a home.
d) Mining Culture: Countries or regions with generational traditions in mining are easier
places in which to operate than those which have little previous exposure to formal
mining operations.
e) Geopolitical Optics: The way in which the outside world sees this country, an
important factor, no matter if the perception be right or wrong.
f) Internal/National Political Stability: A gauge of how stable the place is politically.
We tend to concentrate on nine countries with the potential to host companies, rather than try
to offer a comprehensive LatAm-wide view that takes in countries with little or no appeal for
investment or speculation in juniors. Therefore we focus on Chile, Peru, Mexico, Brazil,
Colombia, Nicaragua, Dom Rep, Argentina and Guatemala. We keep an eye on Panama,
Uruguay, Ecuador and Guyana. Here’s this quarter’s table, below the country-specific notes.
December 2014 Latin American Country Risk For Foreign Mining Companies
Nat. Govt Community/Social FDI Geopolitical Internal Nat.
Country Mining Culture Total
Friendly
Miner Friendly Miner Friendly Optics Political Stability
LatAm countries under active consideration for junior mining project location
Chile 8 7 8 10 9 9 51
Peru 9 7 9 9 7 7 48
Mexico 8 7 6 9 7 7 44
Brazil 7 5 8 8 7 8 43
Nicaragua 8 5 7 7 6 6 39
Dom Rep 8 5 7 5 5 8 38
Colombia 5 4 8 6 5 6 34
Argentina 8 6 4 6 3 6 33
Guatemala 7 4 5 4 4 6 30
Potentially relevant LatAm countries for junior mining
Panama 7 5 9 4 9 7 41
Guyana 8 6 6 6 6 4 36
Ecuador 7 4 5 4 7 8 35
Uruguay 6 5 7 3 6 7 34
Countries of little or no interest for junior mining exposure
Bolivia 3 6 2 9 6 8 34
Paraguay 7 5 6 3 4 6 31
Honduras 7 3 4 5 3 4 26
Costa Rica 1 1 5 1 6 7 21
Haiti 6 3 4 1 3 4 21
El Salvador 1 1 4 1 6 5 18
Venezuela 1 5 1 3 1 2 13
source: The IKN Weekly house estimates
13

Chile: National Government Mining Friendly down 1 point
It was a marginal call, because at least half the problem faced by Chile’s new Bachelet
government is from right wing commentators that are trying to paint a centre-left-at-worst (or
best if you prefer) administration as the second coming of Stalin’s Soviet Empire. But that fact
remains that tax advantages such as the DL-600 exemption have gone and the courtrooms are
again holding up project development (admittedly separate from the admin, but we can lump it
all under “gubmint” at a pinch) so a point gets docked this quarter from Chile’s score.
It’s not all bad news and Chile’s still the best place to go mining (I tend to repeat that refrain
every time this section comes up, but only because it’s true), the country is attracting FDI (e.g.
the $7Bn BHP is ploughing into La Escondida) and Codelco has embarked on a big investment
program for key projects that will run until 2018, thereby guaranteeing national scale growth.
The downturn in 2014 is due to metals prices (note the very similar economic numbers posted
by Chile and Peru) and not politics and one thing we know about Chile is that on a
macroeconomic level, it’s run smartly and well.
Peru: Geopolitical Optics up 1 point
The category in question for Peru dropped a point last time out, it gets it back this time out.
We noted in October that the recently completed regional elections had kicked up a bit of dust
with foreign commentators who saw more devils and demons than there in fact were. This call
has turned out right, because optics towards Peru have settled down and three months down
the line it’s as if the Commies lost everywhere. We also had a bit of sanity confirmed when
Walter Aduviri lost in Puno, which helped to frank the country’s apparent move away from the
hard left (or so it was framed).
Meanwhile, we’ve also had a corporate tax cut announced by a government that’s looking high
and low for new ways to make it more attractive to FDI (though the high FDI friendly score
already reflects official policy). We’ve seen moves to make permitting easier and more direct for
mining companies and there have been vague guarantees of more measures to come. Overall,
Peru stands out from the rest of the region at the moment as the country doing most to attract
FDI, rather than repel it via higher bars of the Resource Nationalism type (as seen in Chile,
Mexico etc). A country that fully deserves it’s clear second place on the list and obviously better
than Mexico these days.
Mexico: National Government Mining Friendly up 1 point, Geopolitical Optics down 1
point, Internal National Political Stability down 1 point
A difficult quarter for Mexico politically and one that’s having direct effect on its mining industry,
too. However it’s not nearly as bad as a the dramatic headlines make out for the Enrique Peña
Nieto (EPN) government’s overall stability and his admin will ride the storm out easily enough.
The main event in Mexico has been Guerrero and the horrific events surrounding the 43
students who are presumed killed with 99.99% certainty, though with their bodies burned to
ashes and then dumped in rivers the lack of evidence means their families have no 100%
closure and must suffer the heartbreak of tiny glimmering hope (if ever “insult to injury” were
an understatement, it’s here). These pages and over at the blog have carried no end of
warnings about the highly dangerous state of Guerrero over the years, usually in relation to
mining projects and with “not exposing my cash there” messages. Therefore and (somewhat
cynically, I ask for forgiveness) leaving aside the gruesome details of the specific incident for
our macro-commentary purposes it needs to be said; the oinly thing new about Guerrero today
is the media attention to its problems, not its problems.
The knock-on effect has been the damage taken to the EPN government, which was slow to act
in Guerrero and then when it did it tried to support the obviously corrupt and guilty police force.
Adding to EPN’s problems have been corruption scandals that include the providence of his
wife’s mansion (a presumed kickback for government contract favours) and for a while the
protests that erupted in Mexico looked like a serious threat to social stability (which was the
time the world’s media glare was the strongest. But since then the ruling PRI party has moved
14

up the gears and spun things away from crisis point and it must be said, the PRI’s arch-corrupt
past make the current scandal seem like small potatoes; this isn’t a situation that will bring
EPN’s presidency to its knees and he’s much too good a politico to let that happen.
Meanwhile, over in the mining space the government seems to have finally realized that low
metals prices are bad for its mining industry and along with the oil price drop that’s hitting
Pemex revenues hard, they’re back trying to be nice to the industry players. In the cards now is
a rollback of the recent tax/royalty hike on metals production and perhaps more immediately
tax breaks to help the sector get through a rough moment. That’s where the point added to
Nat. Govt Mining Friendly comes from. But as Mexico’s economy these days is mostly reliant on
making things for its northern neighbour and as The USA’s economic recovery moves into net
growth mode, Mexico is in decent enough economic shape at the moment. Mining is in a bit of
a trough, but we should expect country-level stimulus to come in 2015 which will benefit our
preferred sector. Overall, Mexico mining isn’t in bad shape.
Brazil: Internal National Political Stability down 1 point
The election comes, the election goes, Dilma and the PT still hold executive office. At first not
much seems to have changed in Brazil and under normal circumstances our coverage would
add a point to the political stability score of a South American country after a successful, non-
controversial and largely peaceful election process. But no in this case because there’s a big
looming cloud over the Dilma government and that’s Petrobras.
The story of large scale corruption in Brazil via the quasi-State owned Petrobras has made
headlines in English language bizpress and been breaking slowly over the last weeks of 2014,
but the scale and gravity of the issue hasn’t really sunk in up North as yet. This is a major story
in the making and is set to dominate Brazil’s political and economic scene in 2015, be in no
doubt. We’re taking hundreds of millions of dollars siphoned off into people pockets here, not
the occasional free plane ride, SUV Christmas present, Caribbean vacation etc. And the
beneficiaries of the cash have often been key political and business figures with close ties to the
PT party of Dilma Rousseff, Lula da Silva etc. The political opposition to PT is only now
beginning to wake up to the size of the snafu the government has on its hands and although
(to its great credit) the Brazilian political opposition has been quick to state that Dilma herself is
not guilty of anything, the size of the corruption scandal in PT ranks below Dilma threatens to
stop her government from being able to get anything done in the 2015 parliament. How this
story unfolds is as yet unknown, but if things go badly for Dilma is could lead to the dissolving
of parliament and new elections because, potentially at least, it’s serious enough to bring down
the government.
Nicaragua: Unchanged
The quiet achiever, Nica continues to throw out the welcome mat to mining FDI and is the best
place to go digging in Central America, period. When it comes to specific plays on the country
and aside from the clearly established B2Gold (BTO.to) (BTG) which I own and like, so far
there’s been more heat than light among explorers.
I again take space in the Weekly to lament that there’s a lot going for the country except a
vehicle with which I’m happy to make a spec investment. Special mention needs to go to
Calibre Mining (CXB.v) that’s in JV with B2Gold on a couple of projects, has its own 100%
owned concessions to move forward and in the last few months also got sponsorship from
Pierre Lassonde (he of Franco Nevada) via a large chunk of placement cash for new shares. I
know a few people I read and trust (via public sphere and via mail) like this one but I’m forced
to pass for the moment, there hasn’t been much in the way of real discovery from its
rocks...not yet anyway. If something turns up there will be plenty of profit potential for us all,
until then I prefer to watch from the sidelines. Another company making a few noises is Caza
Gold (CZY.v). It’s just completed a new funding placement with sponsors Polygon, a London
based investment house with a natural resources arm that’s invested a couple of times in CZY.
By investing $3.8m at its current tiny share price Polygon has now gone all-in on CZY, taking
79% of shares out and diluting the merry hell out of anyone else who was long the stock.
15

Polygon is an interesting outfit because the people running the natural resource department are
very smart rock people and chances are they’ve seen something they like here and are happy
to be in for the long haul. There’s also CZY’s hook-up with Wexford (the people behind Marlin
Gold) and the deal in place to stream from CZY via its new royalty company Sailfish. As for me,
it’s again a case of waiting and watching from the sidelines as these larger instos position and
settle in. It will be worth watching CZY for the promo pump at some point, though.
Colombia: Unchanged
A difficult country to judge through this period, but the final call is to leave all scores as stands.
We’ve recently had the latest episode in the páramo de Santurbán soap opera of course, I
made my feelings clear on that one this time last week (best call avoid, it’s still way too messy)
but that one is symptomatic of the inertia and bad government of mining matters in Colombia.
A government that wants to please all sides invariably ends up annoying everybody concerned,
such it is with the issue that now has environmental groups threatening court actions and the
town of Vetas complaining bitterly that it still can’t get on and develop its mining projects, even
now when the official boundary decision has been given. The government is now trying to crack
down on illegal/informal mining, particularly coal mines and alluvial gold operations along rivers,
with the latest measure a bill to ban mercury being used in mining in the country (which is a
good idea in theory, in practice tough to enforce).
In wider issues, the government’s peace talks with the FARC-EP terrorists continue at a slow
crawl pace and there are more than a few signals of growing impatience in the population. The
FARC recently called a unilateral cease fire that wasn’t anything of the sort, the right wing
(Uribe-led) dissidents of the Santos government calls for military action and breaking off of talks
are gaining a little traction. If the talks collapse it would be a case of back to square one for the
country and heightened political risk in regions ripe for exploration, too. Not good for mining
explorecos.
Argentina: Geopolitical Optics down 1 point
The election shadow begins. At this point the country is relatively stable because half of Buenos
Aires is on a beach somewhere (lower middle class Mar Del Plata, middle class any one of
several more exclusive small beach resorts on the Atlantic coast, upper middle class Punta Del
Este in Uruguay, high society places that need a few hours in a plane) but once January is done
things will start getting noisier and after February (when everyone gets back to work) the real
campaigns will begin.
The other issue in Argentina is the default, or “technical default” or “no we’re not in default
they’re just a bunch of opportunistic vulture funds” (depending on who you talk to, of course)
and the way in which it’s dropped right off the international media agenda. Argentina’s
economic is going through a sluggish patch but it’s in no emergency situation either and there’s
more than enough in the tank to get the current government to October without any need to
bend a knee to the bonds holdouts. That means the current government (and it’s likely dauphin
Scioli) will be able to play the patriotism card against opponents and use the holdout for its
political advantage and be in no doubt, this will be a vote winner for the eventual officially
sanctioned government candidate (as noted above that’s likely to be Daniel Scioli, but it could
be Randazzo or even a squeak for Insaurralde or Urribarri) and a card to play against main
rivals Sergio Massa or Mauricio Macri.
On the mining front little has changed, with regional spats on the future (or not) or the industry
in the largely anti-mining Mendoza, Rio Negro and Chubut provinces, progress on projects in
largely pro-mining Santa Cruz and San Juan provinces, environmentalists making a couple of
small legal wins in the courts in Jujuy.
Guatemala: Community/Social Miner Friendly up two points
Interesting developments in Guatemala and ones that I didn’t expect to report upon, either.
The recent decision by the Otto Pérez Molina government to raise royalties on metals mining
from 1% to 10% (though the big players such as Goldcorp and Tahoe were already paying a
16

“voluntary” 5%), which came as part of the 2015 government budget proposal and was signed
into law by the President (while giving a stout defence of the somewhat murky parliament
decision) was a play straight out of the Tin-Pot Country playbook but now that the dust has
settled, has helped the mining companies’ image in-country. For sure stocks such as Tahoe
Resources (THO.to) (TAHO) took a hit on the news but after the trough has come the expected
bounce. For the record, in IKN291 dated December 7th I called TAHO a reasonable near-term
rebound play on the royalty news. That weekend it stood at U$13.52, the bottom came on
December 16th (combo with ETF re-assignments) at a daily close of U$11.43, today the stock is
U$14.15.
But more interesting is a new feeling of acceptance of mining now that’s it’s seen to be “paying
its way” (even though the difference to the State in real terms is very small). It’s still a tough
place for mining projects and you want to steer well clear of the polemic ones such as El
Tambor, but the quarter has brought better political optics to the industry in general in
Guatemala and that’s a good thing.
Potentially relevant countries
Panama: Internal National Political Stability up 1 point
The extra point is awarded due to the country’s new President and administration bedding in
well. President Varela (the Veep under ex-Prez Martinelli) has overseen a smooth transition and
has also managed to move his political line away from the somewhat seedy and corruption
tinged legacy of Martinelli without altering the course of the country in any great way.
In mining matters, we have the current Petaquilla Minerals (PTQ.to) problems that look set to
end with the government rescinding the company’s concessions, but that’s likely to be viewed
by the industry as a one-off and the removal of a bad apple, rather than a sudden official surge
in anti-mine policies. More important is the continued development of First Quantum’s (FM.to)
massive Panama Cobre project and on that it’s always a case of no news = good news, the
quieter things are in the media the smoother the development of the mine. As you’re unlikely to
have read about Panama Cobre in the last six months (without detailed DD on FM.to at least),
the news is good.
Guyana: Geopolitical Optics up 1 point
This is an interesting one, because away from national and international politics at least two
and arguably three mining projects in the country have been making significant progress.
Guyana Gold (GUY.to) has started the main build process at its Aurora Gold project there,
including the finalization of financing of the project and the arrival at site of its SAG ball mill.
Troy Resources (TRY.to) (TRY.ax) has made the build decision on its West Omai project and
has secured debt financing to build the thing, then (stretching country boundaries a little, I
claim artistic licence) Columbus Gold (CGT.v) has been drilling out its big Paul Isnard project in
French Guyana (sometimes spelled Guiana). For the record:
• I like the chances of Troy Resources (TRY.to) most from here and have looked at the
company a couple of times recently, trying to convince myself that it’s a great buy at a
cheap price. I haven’t managed to get over the double risk it has of 1) operating in
Argentina and 2) taking on debt at a time like this to build in an unproven jurisdiction.
Yes there is potential reward in this stock at this price, but the risk is slightly too high
for my blood right now.
• Guyana Gold (GUY.to) will continue to be a pass for me but when it’s de-risked to the
point of first gold pour I’ll have another look. I owned it once, briefly way back when
and made some money before selling too early. Since then I’ve never regretted not
owning the thing and it’s been passed over too many times by too many majors to hold
my attention for long.
17

• Columbus Gold (CGT.v) has all the look and feel of a bullshit Canadian promo pump. A
very easy pass.
So yes, Guyana interests me because of the commitment the smart people at TRY have made
to the country. They’re good at pathfinder locations and sniffing out bargains and if it weren’t
for TRY there my interest in this corner of the continent would be much lower. As it is, I’m
watching carefully.
Ecuador: : National Government Mining Friendly up 1 point, Geopolitical Optics up 1
point
Here’s a chart that tracks the improvement in Ecuador’s score in our quarterly reviews that goes
back two years to IKN190 in late
Ecuador: Score in IKN "Regional Risk Review", December
December 2012. We’ve gone from it
being viewed as an absolute pariah 40 2012 to December 2014 35
state two years ago to a country that’s 35 31 33
30 28
getting serious consideration from 25 21 21 21 23 25
mining people (or at least the ones that 20
wear suits and never get their hands 15
dirty) and that’s for factors that 10
5
include:
0
ikn190 ikn204 ikn218 ikn230 ikn243 ikn255 ikn269 ikn283 ikn295
• Correa’s pro-mining message.
source: IKN
Give credit where due,
President Rafael Correa has been constant with his message of “pro responsible
mining” over the years. Also, he’s apparently seen the error in adding too much to the
State burdens via windfall taxes on mining operations and the country, slowly but
surely, should roll back that prohibitive law.
• Correa’s approval ratings. I don’t care what you think for the guy if you don’t live there,
the Ecuadorians as a whole like him and that’s what matters. Therefore the simple
equation is People Like Correa + Correa Likes Formal Mining Industry = People Will
Accept Mining, or at least that’s the way is can be easily spun abroad.
• The drop in oil prices. The theory here is 1) Ecuador gets ~50% of its export revenues
from crude (and refined) oil, the drop in the oil price will hurt the country, the country
needs new investment channels...therefore mining. And because of their desperate
need Correa will lay out the red carpet and offer great new terms for setting up there.
• The move by Lundin. The purchase of Fruta Del Norte by the Lundin family, which has
now set up the new Lundin Gold (LUG.to) vehicle to carry it, has brought new level of
scrutiny to the Ecuador mining scene. The theory is that the Lundin’s see opportunity,
so why not the rest of us. And we note that Ross Beaty has moved in a smaller way on
a Ecuador junior exploreco, Odin Mining (ODN.v) earlier this year. And Chile’s Codelco,
in JV with Ecuador’s State mining body, is busily sniffing around at least two
prospective copper deposits all with the open encouragement of both governments.
So overall there has been a thawing in attitudes towards Ecuador and all of a sudden it’s being
touted as the next great frontier for mining exploration. And indeed the improvement in our
overall country score reflects those improved optics. But I’m still very but VERY leery of any
exposure to Ecuador and recommend that you don’t follow in Lukas, Ross and all their pals. By
way of explanation, here’s a slightly expanded version of a mail I sent to A. Person on the
subject a few days ago that I hope covers my opinions succinctly.
The baseline problem for mining there isn't Correa, it's Conaie, the umbrella group of
indigenous and community associations, a powerful political force in the rural and
jungle areas of Ecuador.
On the one hand you have Correa handing down the national rules of the game to the
mining companies, which boil down to "Ok folks, the deal is 51% to us, take it or leave
it". It comes with national government level approval for “responsible mining” and it’s
now without the windfall tax burden (probably). The message is they want the FDI but
18
)06
xam(
erocs

they’re also setting the rules. This 51% deal sounds very expensive at first and did
sound exactly that a few years ago when put in place, but Correa isn’t stupid and
seems to have foreseen the trend to resource nationalism in peer countries. Therefore
he puts the rules in place than sits and waits for the rest of the world to catch up to his
decided level of resource nationalism. We're not there yet, but we’re now at a place
where 51% doesn’t sound too bad and at least the best deposits (list headed by FDN
obviously) are now economic and workable on a comparative basis. Therefore Lundin
moves in (spreading the risk via OPM, of course) and claims it’s getting a bargain. The
world sits up, checks out the pro-mine noises form Correa & Co, gives cautious
approval.
It sounds ok, the national rulebook looks reasonable to miners, and the national
executive welcomes them as well. That’s Correa’s direct influence but the problem is
that Correa is by no means the only issue for mining companies in Ecuador. Correa
alone cannot guarantee a welcoming jurisdiction because he only controls the national
macro-politics. Grass roots is another thing, a whole other thing, a big other thing.
There are enclaves such as the Zaruma valley area which has mining traditions, but
the jungle zones do not, nor do the rural agro areas (eg Salazar) nor do the upland
areas (eg Quimsacocha, now owned by INV and re-named Loma Larga). All these
places are tough sales where communities don’t have economic growth as first priority
and to cut a very long story short are run on Sumaq Causay (cultural concept of
environmental balance and human wellbeing) and Pachamama (mother earth) values
that are hugely underestimated by us whitefaces (both figuratively and literally).
Anyway, the upshot is that Correa can't play at strongman leader in places he doesn't
control. The concentration of population in urban areas gives a false sense of his
popularity in geographical terms; yes he scores 70%+ approval ratings because he hits
80% in Quito. Down in green places his authority is minimal. To focus on what Correa
says or doesn’t say, to base your investment decisions on the government’s latest
policy or to blithely assume that you’ll be able to talk the small brown people into
accepting your presence is naive at veyr best, more likely arrogant, definitely
dangerous for your risk capital.
Bottom line: Why expose your cash to unknown, badly understood and undue risk in a place
like Ecuador when there are knockdown bargains on offer via mining companies working in
politically and socially safe places for mining? I didn’t mind having a small nibble at Salazar
Resources (SRL.v) recently and have no regrets on the recent sale at a loss, because the cash
was small start to finish. I was also clear about the risks involved going in, but when the
Chinese backers of SRL pulled out, it was time to take the big hint and do the same. Mine was
tinymoney, what Lundin are doing is a much large scale. I avoid.
Uruguay: Unchanged
The presidential elections and subsequent handover to former and new President Tabaré
Vázquez, from the same coalition party as now ex-Prez Mujica, went smoothly and pretty much
along the expected lines of political watchers. As a slight aside, Uruguay has a developed
political scene and the debate is more civilized (word chosen carefully) than the average South
American democracy with a sophistication only matched only in Argentina and Brazil, the other
countries where politics is a national sport.
The handover to the same party means a continuation of policies in broadstroke terms, which
for our purposes means further obfuscation and lack of movement on matters mining. The
slump in iron ore prices has brought a de facto halt to what was set up as the pathfinder
project for formal large-scale mining in the country, the Aratiri project owned by Indo-Brazilian
Zamin Ferrous. So today we’re left with a stable democracy looking for investment
opportunities, but also a left of centre government that reflects the stance of the general
population who are leery at best (often outright opposed) to having hard rock mining as a
significant part of their economy. A couple of years ago Uruguay looked promising as a place to
go exploring, nowadays less so and we have it on a watching brief only for 2015.
Other countries
19

Bolivia: Unchanged
Here comes a necessary word or three about Bolivia. There’s a bit of a pump starting on Bolivia
and its mining potential for Vancouver-type junior explorecos, which seems to be based around
the move made by the arch-scamster John Lee and his Prophecy (PCY) company, that’s just
bought ex-Orvana properties in Bolivia. Lee’s being assisted in his pump by another scumbag,
Thom Calandra. Alongside the direct promo on his company, Bolivia is now getting touted as a
place that will welcome FDI for at least some of the same reasons Ecuador is being promo’d,
with all that about the dump in hydrocarbon prices meaning these States are now newly
desperate for foreign capitals and will welcome northern capital with newly open arms, do
anything for us tall paleskinned people, etc etc. It’s total bullshit and I can’t stress that too
highly. Bolivia will accept FDI on its terms, but as things stand and as things will stand while
Evo Morales is in power (let’s call that indefinite for our purposes today), those terms are
nobody’s idea of good. As things stand today Bolivia is in good shape, it’s just posted 5.5% GDP
growth in 2014 (8) (the best in all South America last year) and despite the drop in gas prices
its Finance Minister expects 5.9% growth in 2015. Quite right too, because the North seems to
forget that Bolivia sells its gas on long term contracts to Brazil and Argentina that are less
affected by the moves in spot market prices; its revenues may change from year to year but it’s
not boom/bust, either- We should also note that Bolivia’s international reserves are now at 50%
of annual GDP, the highest percentage level in Latin America. Be clear; this country is not
desperate for your dollars. In fact if things go unexpectedly badly for Bolivia’s economy in 2015,
or things don’t pick up and 2016 or 2017 start looking soft, it’s manifold times more likely that
the country nationalizes its mining industry than opens it up to neoliberal type investment
opportunities. Companies at the scam end of the junior mining world such as PCY will be able
to spin out their hoodwinking games on properties there, but please don’t take these people
seriously.
Bolivia has been an impressive economic success story in the last ten years. But it’s done that
by ignoring the orthodox western model, by wholly rejecting it, by nationalizing and spending
the cash in classic left-wing social program ways. Perhaps it’s a special case, perhaps not, the
debates on the philosophy behind its success and whether it’s sustainable are for other places
but if you think it’s about to change the model you need to change the books you’re reading.
The country is and will remain Socialist with a capital S and not the place for the most cutting
edge of capitalist money, that which funds junior mining exploration companies. End.
Honduras: Unchanged
For our purposes of junior mining companies we shouldn’t really care much about Honduras,
that’s the cruel reality. However we note that in 2015 the country’s official mining sector control
body, the Honduran Institute of Mines (Instituto Hondureño de Minas, or Inhgeomin) last week
announced (9) that they have made available an new batch of 250,000 hectares of prospective
concessions for mining, of the metallic and non-metallic variety. According to the director of
Inhgeomin, there are some 31 companies already confirmed as new investors from a total of
500 applications, including foreign capitals companies. These companies will start work in 2015
and create some 20,000 new jobs by doing so. I’ll say right now that all this sounds very
optimistic to my ears and his statements were probably designed for a home audience but the
new concession lands are a fact, whether they’re staked and explored during the next 12
months is another question.
Market Watching
CB Gold (CBJ.v) makes a spec move
Volume is light in dollar terms, it’s still a sub-10c thing you wouldn’t ever risk much on, as
stated clearly these last two weeks I haven’t partaken at all. But all the same, our speculative
pick on the páramo de Santurbán news has woken up and performed well in the last few days.
Here’s a ten day chart that tracks its move against GLD, GDXJ and the stock that’s taken on the
20

mantle of leader in this little promo, Eco Oro (EOM.to). In real money terms, CBJ.v started at 5c
and closed Friday at 9.5c.
I know at least couple of IKN Weekly
readers bought some CBJ and that’s
turned out to be a good thing (happy to
say). To those and to any others out there
I would encourage to take at least partial
profits on the play. There have been
plenty of 200k and 400k volume days in
the last month but it’s not always that
easy to move in and out of this thin and
small thing and even at these types of
cash days (half a million shares is still less
than $50k in real terms) it’s not so easy to
make more than Christmas expenses
money. It could go higher, it could go lower, it could stay where it is for the rest of time. I don’t
know, but I do know that a chunky percentage profit in this tough market isn’t to be sniffed at
so at least drag your cost average down to zero, people. Ross Beaty is way long this stock but
he’s the type of guy who can forget about a big buy-in for a decade or so, then come back and
check prices.
Peru fuel prices drop by another 10%
After the drop seen in December, fuel in Peru has dropped again and we can expect more in
the pipeline (pun intended) for roughly March. Our example this time is Repsol, who on January
1st announced (10) prices for wholesale (e.g. mining companies) were reduced by just under
10%. And the Finance Ministry expects a further cut in wholesale prices once the current batch
of bought fuel is cleared, which should come into effect at end of February (11). We did a
whole big analysis on Rio Alto (RIO.to) as a decent benchmark for costs in Peru back in IKN292.
A big part of that was fuel, as this from the 3q14 MD&A that was also quoted in IKN292 makes
clear:
Mining costs of $45.1 million for the nine months ended September 30, 2014 and
included $11.0 million for 2.8 million gallons of diesel, $11.8 million for equipment
rentals, $8.5 million for mining spares parts and ground engaging tools, $5.5 million of
labour, $4.0 million for blasting materials and $3.9 million for services.
In rough terms, RIO.to was spending $3.67m per quarter on fuel. We’re expecting that to drop
in 4q14 a little as the cheaper prices started to kick in later in the quarter, then there’s every
reason to expect a bigger drop in 1q15. In straight line terms, seeing that drop to $3m for the
same amount fuel is reasonable, which is $670,000 less in costs. So if we assume 1q15 turns
out to be a 55,000 oz production quarter, that’s $12/oz less. And that’s not bad.
Here’s one of the charts from that piece...
RIO.to: COGS per ounce sold
1000
869
900
803
800 757 729
700 640
600 532 571 574 572 540 518 505 515 505
500 452
400
300
200
100
0
21
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2 tse51q3
U$/oz
source: RIO data, IKN ests futute qtrs

...that predicted 1q15 op costs at U$505/oz. Fuel is only a part of the cost savings we’re
expecting for RIO (other inputs include forex, the new national grid electricity connection and
then the general trend on cheaper costs for the industry, slightly offset by an expected small
rise in plant salaries.
Nevada Copper (NCU.to) refinances
Tuesday December 30th brought news from NCU (12) that it had re-negotiated its $200m debt
facility with Red Kite (RK), an event that gave rise to a suitably snarky post over at the blog
(13). But that doesn’t mean my snark was ill-founded; quite the contrary, this company looks
more toxic as the weeks go by First you have
the cash financing, which was considered in NCU.to: Development costs/qtr
detail in the post but in effect means that (statement of cash flow line item)
NCU has loaded itself with financial debt in 16
order to have $36m in cash in treasury to 14 11.444 12.054 13.078 13 13
12
finish its delayed and behind schedule 10 8.98 8.852 8.36
tunnel. 8 7.525 6.973
6
4
This first chart (right) tracks the
2
development costs at NCU per quarter, which
0
gives a decent proxy on the amount the
company is spending on tunnel construction.
As there’s every reason to believe the spend
will continue at 3q14 pace in during the
December and March 2015 quarters, this
second chart (right) shows how we expect
the working capital position looks on receipt
of the new financing (we assume the Red
Kite deal was closed before end December
31st) and the way in which we expect NCU to
burn through most of that by the end of this
current quarter (note working cap is lower
than cash on hand). In fact, according to the
ballpark combo of burn rate to treasury, NCU
will run out of cash in April 2015
Here below are two charts that matter, assets and liabilities, along with your author’s best
guesses for the quarter just ended that also assume closure of the Red Kite refi.
The story here is the financial debt, that’s ballooned thanks to the deal with RK that adds $90m
to long-term liabilities (the principle is due in 2020). And the story is also liquidity, because NCU
has a tunnel to finish before its cash runs out. And while it’s on my mind and just for fun, let’s
22
21.ced 31.ram 31.nuj 31.pes 31.ced 41.ram 41.nuj 41.pes tse41.ced tse51.ram
$m
source: company filings, IKN ests
NCU: Working capital
80
70
60
50
40
30
20
10
0
-10
-20
21.nuj 21.pes 21.ced 31.ram 31.nuj 31.pes 31.ced 41.ram 41.nuj 41.pes tse41.ced tse51.ram
U$m
source: NCU filings, IKN ests
NCU: Assets per qtr
250
200
150
100
50
0
21.nuj 21.pes 21.ced 31.ram 31.nuj 31.pes 31.ced 41.ram 41.nuj 41.pes tse41.ced
$m NCU: Liabilities per qtr
cash&ST other current fixed 120
100
80
60
40
20
0
source: company filings
21.nuj 21.pes 21.ced 31.ram 31.nuj 31.pes 31.ced 41.ram 41.nuj 41.pes tse41.ced
$m
LT debt
current debt
source: company filings/IKN ests

note that because it effectively borrowed $83m but is paying an estimated 13% (LIBOR +10%)
on $90m, NCU is in fact paying 14.1% interest on the money it borrowed. Then there’s the
small matter of $7m extra in principle to cover come the day. Man, those Red Kite guys have
them by the short and curlies. Anyway, to cut this short I’m not going deeply into the numbers
today, the main need-to-know is that NCU has loaded itself with debt in order to finish its
tunnel. Once that tunnel is done it will, in theory at least, be able to start production from its
underground mine operation and make itself some free cash flow.
However, 2014 saw its tunnel development hit plenty of delays and go behind schedule, which
is of course the main reason why NCU needed to find new funds. And that in turn is why they
re-jigged the deal with RK, bent over backwards and paid through the nose in order to get
funds, but that also means they need to finish the tunnel before this new batch of cash runs
out. And that’s where they may have another problem. In fact I’m pretty sure they have a
problem and here’s why:
We know the tunnel needs to be 2,100 feet long, a length that includes 1,906 feet of sink rate
from surface and then nearly 200 feet of lateral tunnel, in order to reach the mineralization to
be mined in the U/G operation.
We know from NCU’s own filings (14) that on that on November 3rd the tunnel was 1,475 feet
long. We also know (because they told us) that the sinking rate claimed at the time was 6 or 7
feet per day.
But we also know form the latest corporate presentation (15) available on the company website
that on November 25th the tunnel had reached 1,520 feet length. That means that in most of
the month of November (which is also the last official data we have been given as they’ve told
us nothing about December tunneling rates so far) they were running at just over 2 feet per
day sink rate and that’s a long way from the claimed 6 or 7 feet.
We also know that as from November 25th NCU has another 580 feet to go to get to the
paydirt, so with that in mind here are three lines to give some approximations of when that
might happen at different average tunneling rates, starting November 25th:
• At 5 feet per day = 116 days = 3 months 26 days = completion ~end February
• At 4 feet per day = 145 days = 4 months 10 days = completion ~April
• At 3 feet per day = 193 days = 6 months 10 days = completion ~end May
In other words, they need to get this thing running at plenty more than the November rate else
April is going to come along and they’re not going to have any more money for tunneling. Be
clear, three feet per day is too slow, two feet per day they're not even in the game. At 4ft/day
it's neck and neck just to get the tunnel built. That doesn’t even include forget the niceties of
digging ore out, processing it, making saleable things etc. I'd suggest that at 5ft/day they're at
an absolute limit for success without throwing any more cash at it. Then there’s the little matter
of the $24.3m they have earmarked a the bill for the production equipment they need for the
underground operation. Your author understands from good authority that NCU hasn’t spent a
dime on that as yet, so it will need to fund the purchases some way.
And there’s your problem, folks. NCU is taking on debt to pay for things things should have
been covered by the original capex raises because it’s behind schedule. As the cash is being
raised as senior debt on assets, it’s now ahead of the queue if things go wrong and the money
runs out. This financial debt position is too much, it’s going to squeeze out equity and if things
don’t go well, very well, nigh on perfectly well for NCU in the first quarter of 2015 we’re going
to see a situation similar to that of Baja Mining at Boleo, which saw its share price torn to
shreds by the cash crunch of a badly executed build out.
A lot will depend on NCU’s next update on progress at Pumpkin Hollow. If progress is speeded
up, it has a chance of emerging unscathed but right now, here today, I’d call the risk way
23

higher than the potential for reward and considering the poor track record of execution we’ve
had from this company over the years, making NCU a loud avoid is the easiest call in the mining
world right now. And we haven’t even touched on the marginal economics of the open pit stage
2 operation this week.
Conclusion
IKN295 is done, we end with bullet points:
• This quarter’s Regional Risk review got me thinking specifically about the wilder and
more speculative zones of LatAm this time. Guyana is interesting, Ecuador less so,
Uruguay is going off the boil and don’t for a second believe any of the hype that’s
starting around Bolivia. Great place, fine people, good economy, not for juniors.
• As for the 4q14 production number primer, I’m most concerned with the First Majestic
(FR.to) (AG) numbers, while to the bright side Argonaut (AR.to) has a good shot at
giving us more price upside.
• My eldest turns 11 on Wednesday. I’m clocking out and taking her wherever she wants
to go, so expect the blog to be light that day.
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://www.calculatedriskblog.com/2015/01/schedule-for-week-of-january-4-2015.html
(2) http://www.firstmajestic.com/s/NewsReleases.asp?ReportID=678487&_Type=News-Releases&_Title=Produces-3.5-
Million-Silver-Eqv.-Ounces-in-Q3-Postpones-the-Sale-of-934K-Si...
(3) http://www.firstmajestic.com/i/pdf/presentation.pdf
(4) http://www.b2gold.com/press-releases/12/2014/fourth-quarter-update-at-b2gold-corp's-masbate.html?id=1907882
(5) https://www.canadianinsider.com/node/7?ticker=FVI
(6) http://myownmarketnarrative.blogspot.com/2015/01/some-weekend-goldbug-charts-and-then.html
(7) http://incakolanews.blogspot.com/2014/12/brent-cook-does-bnn.html
(8) http://gestion.pe/economia/economia-bolivia-crece-55-2014-apenas-debajo-lo-previsto-2119231
(9) http://www.aminera.com/index.php/mineria-internacional/item/9164-listas-250000-hect%C3%A1reas-para-
inversi%C3%B3n-minera.html
(10) http://gestion.pe/economia/repsol-reduce-precio-combustibles-al-mayor-hasta-99-2119224
24

(11) http://gestion.pe/economia/mef-estudia-nuevas-medidas-acelerar-reduccion-precios-combustibles-2119225
(12) http://finance.yahoo.com/news/nevada-copper-closes-us-200-214629730.html
(13) http://incakolanews.blogspot.com/2014/12/nevada-coppers-ncuto-financing-deal.html
(14) http://finance.yahoo.com/news/nevada-copper-project-130000681.html
(15) http://www.nevadacopper.com/i/pdf/presentation.pdf
Stocks To Follow Closed Positions 2014
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dic-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-abr-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-ene-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-ene-14 C$0.86 -17.3% silver/M&A spec, rel. small
Timmins Gold TGD nov'14 U$1.38 09-abr-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 hold C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-ene-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-ene-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-abr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-abr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-ene-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-abr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
25

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