IKN #296Premium

The IKN Weekly
Week 296, January 11th 2015
Contents
This Week: Do Not Feed The Animals Vancouver Resource Investment Conference edition,
Silver stocks rallying like they’re gold stocks.
Fundamental Analysis: NOBS report on Lake Shore Gold (LSG.to).
Stocks to Follow: Overview, Starcore Intl (SAM.to), Amerigo (ARG.to), Argonaut Gold (AR.to),
First Majestic (AG) (FR.to), Fortuna Silver (FVI.to) (FSM), Rio Alto Mining (RIOM) (RIO.to), Lara
Exploration (LRA.v), Reservoir RMC.v), Dalradian (DNA.to), GoldQuest Resources (GQC.v).
Copper Basket: Overview.
Low Cost Producer Basket: Overview, Barrick (ABX).
Regional Politics and Market Watching: Mexico: The effect of the crude oil and metals
price drops begins to show, Argentina: Mining as a pawn in the Chubut election chess game,
China and Venezuela, China and Argentina, China and Ecuador, Guatemala: Miners fight to
reduce royalties, Dominican Republic: Barrick’s hand slapped, Peru: Mining companies waning
influence in the local stock market, Troy Resources (TRY.to) (TRY.ax) receives its enviro permit
for Karouni/West Omai.
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
Do Not Feed The Animals, Vancouver Resource Investment Conference edition
Last week there were a sudden crop of news releases from the moribund end of the mining
world and they all started in much the same way:
“[NAME OF MOOSE PASTURE PEDDLER] is pleased to announce that it will
be exhibiting at the upcoming Vancouver Resource Investment Conference on
January 18 and 19, 2015.”
There are going to be a lot of stalls at this conference starting next Sunday January 18th
because we hear that Cambridge House has deeply discounted its normal exhibitors fees for
certain companies (in order to keep numbers up, I’d guess), plus that it’s in Vancouver so a lot
of the companies with nothing left in the treasury don’t have to fork out on plane tickets or
hotels for this one. There are a few decent companies on the long exhibitor’s list (1) and the
speakers’ list has three or four names worth listening to from a list of maybe 40, but for the
most part there’s a whole lot of dross trying to coattail on the few that will survive and thrive
over the long term*. It’s also free entry for you the visitor as long as you pre-register (yes, how
times change) so why not drop by if you’re a local resident? And while you tour the stalls, count
up the number of times you hear that the market has bottomed and that asset values will
return to junior properties this year. And how smart you’d be to be a contrarian. And how the
oil price will make low grade open pit projects economically robust again. I might even do one
of those bingo cards for you and stick it on the blog next week.
1

But more seriously, remember that the healing process in the mining sector has not ended with
the tax-loss selling window and the “January Bounce” we’re now experiencing, it’s only just
begun. There are still a whole lot of companies that must die before relative health returns to
the junior mining sector and most of all, the exploration sector. The days of placements for
directors’ fat salary cheques must remain a remnant of the past. Do not feed the animals, but
by all means go visit the exhibition next weekend and do what kids do at the zoo; point at
them, make funny faces at them, laugh at them.
*Applies to companies and pundits alike
Silver stocks rallying like they’re gold stocks
It hasn’t been unwelcome, because my long in First Majestic (AG) (FR.to) has been on the front
line of beneficiaries. But still, it’s been a bit of a headscratcher to see silver stocks of all shapes
and forms rally along with the gold stocks, like for like.
This six month comparative chart of SLV versus GLD makes half of the point; The percentage
drop in silver has been far greater than
that of gold (I could have done a
gold/silver ratio chart for you but
thought this one is a clearer visual) and
we haven’t seen the resistance in silver
that gold has managed to muster against
the non-stop rise of the US dollar.
In gold’s case, we’ve wobbled back and
forth but prices at $1,200-or-abouts are
the same as they were in September.
Not so silver, which was an $18/oz and
$19/oz metal back then and plays
around the $16/oz level today. Which
brings me to the second half of the deal, that there are far more gold miners profitable at
today’s prices than there are silver miners. Some of the moves can at least be reasoned as
rebounds from distressed levels, such as the over-selling of First Majestic (that I always
considered overcooked and unjustified) or the ~20% bounce we’ve seen in Hochschild (HOC.L)
since before Christmas (they’re getting
relief from a potentially fatal burden
weight of debt, so every 10c move in
silver counts for them). But others? I’d
guess that of the larger sized,
dedicated silver miners only Tahoe
(THO.to) (TAHO) is comfortably free
cash flow positive at $16 silver, then
come a few that will make a marginal
profit or break even, but the rump
majority of silver miners are loss-
making companies at anything below
$17/oz Ag. Seriously, I look at this
second chart and fail to come up with a
single reason for MAG Silver’s move.
Does anyone seriously believe
Fresnillo/Peñoles is going to step up and buy them out now? They have way more than enough
on their plate as it is right now.
January bounces comes and then they go, it’s the nature of the beast and one of the reasons I
preferred to take profits on Argonaut (AR.to) last week instead of wait around and risk profits
against time. But the gold space currently looks far more likely to be able to consolidate these
early gains, while there are too many silver stocks that look like they’re going up due to hope
2

for a brighter future rather than relief due to a brighter today.
For short potentials, I’m looking at silver stocks today.
Fundamental Analysis of Mining Stocks
This week we look at Lake Shore Gold (LSG.to).
NOBS report dated January 11th, 2015
Lake Shore Gold Corp. (LSG.to)
Company Overview
Lake Shore Gold Corp. (Canada: LSG.to, USA: LSG, Frankfurt L3D.f) is a junior gold mining
company operating in Canada. It has two operating mines, namely Timmins West and Bell
Creek, both in Ontario Canada, that feed a wholly-owned central mill. It also owns development
stage properties in the same area. Current share structure is as follows:
Shares out: 422.523m
Options: 20.695m
Warrants: Zero
Fully diluted shares: 443.218m
Current share price: $0.90
Market Cap: $380.27m
Approx working cap per S/O: 13c
All prices are in Canadian dollars unless stated. Forex U$0.90=CAD$1
NB: LSG reports its financials in Canadian dollars and operates in Canada. Therefore
unless otherwise stated all prices in this report are in Canadian dollars, including gold.
Overview of today’s note
The reason to cover LSG today is fairly straightforward; it’s been pointed to me any number of
times in the past six/twelve months by people who like the look of the stock’s recent
development and as many of those people are those with opinions I’ve learned to take very
seriously (yes MP and MM I’m looking right at you both) it’s not something to brush off easily.
However, through 2014 I’ve been more than a little concerned about the way in which LSG has
been mining at a higher average grade than its mine should really allow it to do, i.e. they’ve
been high-grading the property and that can have negative knock-on effects on resource
quantity and quality over the medium-term future. Cut to last week’s production results, that
came with good news on this score (2); although not close to its recent high production quarters
LSG returned a more sustainable average head grade and also managed a good production
quarter. It’s the thing I’ve been waiting for from this company, I considered the numbers
returned by LSG last week as wholly good and as such, it was time to stop ignoring smarter
people than myself and take a close, public look at this profitable gold producer.
Location, management, holders
This is going to be as short as possible today as the reasons to like or dislike LSG are a
function of its numbers and financials. But to cover the necessary, LSG has all its properties in
3

the Abitibi Greenstone Belt, located around the city of Timmins ON and in one of the world’s
premier mining clusters. Local mining culture is second to none, the industry enjoys strong
social and political support, the geology is deeply understood (pun intended) and there’s
everything to hand that a mining company could ever want.
The directors and top management are led by Pres/CEO Tony Makuch (with chair/founder Alan
Moon in the background). Makuch came with other directors from FNX Mining, and there are
connections with Dynatec Mining too. Overall, this is a team comprised mainly of directors and
seasoned operators of companies in the Canadian bizworld. They have the necessary gravitas
for the job, but one of the weak points in the LSG story is (and always has been) the lack of skin
they have in the game shares-wise. True they hold options and earned performance shares, but
director-level holdings of shares are very low (under 1% of total), which compares to the
salaries they pull down (Makuch is on $660k per year cash, and bonuses in 2013 brought his
full compensation package to $2.37m).
On the other side of the coin, LSG is a widely held stock among institutions and retail investors,
with a full AMEX listing in the USA as well as its TSX big board listing. Van Eck owns around
10% of stock for its ETF component purposes.
The bottom line to the background: Location couldn’t be better, the management team has the
necessary brainpower and experience but lack skin in the game, its widely held profile means
there’s plenty of liquidity and volume in the stock.
The turnaround story
This three year chart of LSG works as shorthand for what could be a longer and more rambling
section (I want to cut to the chase on this one today, really). I hereby re-cap the last three years
of company action via share price commentary:
We don’t see 2011 when LSG started as a $4 stock and ended at a $1.50 stock, but we do see
as from the beginning of 2012 and then how LSG spent most of that year at or around one
Loonie. Then 2013, which was a torrid time for the stock as it went much lower (spiking under
20c in June 2013) before finally getting its share price act back together about 12 months ago.
2014 was a recovery year for LSG and after peaking at $1.40 in August, has settled back a little
and here today (after LSG has enjoyed a bit of a January bounce along with the rest of them)
we’re looking at a 90c stock.
There wasn’t a single overriding factor that affected LSG during its downturn period, it was more
a case of a combination of events that didn’t go the way of the company.
• The acquisition of the Fenn-Gib property (from Barrick) came close to the top of the
market. It’s notable that since that time LSG has taken impairments totalling $456m on
its assets.
• The drop in metals prices affected the company in multiple ways, firstly by crimping
4

cash flow from current operations, secondly cutting off funding for its growth programs
and thirdly (note the impairments again) cutting into its reserves and resources count at
the operating Timmins West and Bell Creek mines.
• It funded its expansion largely via the raising of financial debt. That’s fine as long as the
market holds together, but the period between raising the debt (i.e. getting it onto the
balance sheet) and completing the work it was designed to fund coincided with the gold
price slump and for a while the balance sheet at LSG looked under significant pressure.
• We also saw deadlines overrun on the capital expansion programs at both Timmins
West and Bell Creek, as well as the central mill. Though in the end not critically bad
ones (e.g. things that were supposed to have happened by end 1q13 were completed
during 3q13) they were enough to spook the market for a couple of quarters. Hence the
big dump in mid-2013.
• Operating cost overruns in the meantime didn’t help matters at all. The crimp point is
seen clearly in these chart of operating costs and operating earnings: it’s ok (in a pinch)
to run a high Op. Cost while gold is at $1,500/oz and above, but when it drops to $1,200
and below the company doesn’t have time to react and gross revenues suffer.
LSG.to: Op. Earnings
20
(with 4q12 and 4q13 imparirments backed out)
18
16
14
12
10
8
6
4
2
0
-2 -4
-6
-8
-10
But eventually LSG got itself and its plan sorted out. Here’s a segment from the 4q13 MD&A
which, for me and in retrospect at least, shows the moment when LSG crossed the line and
became the turnaround story it crystallized in 2014:
During the third quarter of 2013, the Company completed a capital investment program
that had been conducted over a period of approximately four years, aimed at
developing the Timmins West and Bell Creek underground mines and expanding the
Bell Creek Mill to support a production rate of over 3,000 tonnes per day. The
Company’s target production rate was achieved for the first time in September 2013,
when production through the mill averaged 3,370 tonnes per day. During the fourth
quarter 2013, the Company averaged 3,500 tonnes per day, exceeding target levels as
a result of processing both mine production and ore from stockpiles established during
the mill commissioning period.
Overview of how LSG improved in 2014
That excerpt above homes in on the main
difference between LSG then and now, its
mill throughput. Since that time we’ve seen a
1q14 drop and then throughput rise slowly
but steadily and with a design capacity of
5,000tpd (which will need a little more
capex, but it’s there for the taking if LSG
require) there’s probably some wriggle room
left for 2015. That accounts for the 1q15 bar
you see at the end.
5
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3
source: company filings/IKN ests
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C$/oz LSG.to: Op Cash costs, per qtr
1100
1000
900
800
700
600
500
º 400
300
200
100
0
4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14
source: company filings
Lake Shore Gold (LSG.to): Tonnage milled
400000
350000
300000
250000
200000
150000
100000
50000
0
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 tse51q1
tonnes/qtr
source: company data, IKN est for 1q15

It was around the start of 2014, with the stock bouncing between 75c and $1, that I began to get
people I respect telling me to take a closer look at the “new” LSG. Which I did, but the quarters
were showing something else which put me off buying it, an apparent case of high-grading the
deposit. Here’s a table of reserves and resources at LSG, taken from the latest corporate
presentation dated November 2014 (a decent overview read and not too rosy-tinted specs, go
here (3) and find out for yourself):
Things to like about this reserve/resource include:
• There’s plenty of rock already identified as good for mining and the nature of the Abitibi
Greenstone Belt mines being as they are, chances are strong that continued exploration
as the veins are mined out will being more besides. Things such as mine life are not a
concern.
• The current reserve/resource is built on a $1,100/oz gold price. That means no more
hefty impairments in the foreseeable future of LSG which differs from the big hits it took
at end 2012 ($231m written down) and 2013 ($225m written down). It means the rock is
good to go for the years ahead, too.
• There’s plenty of pipeline upside from the development projects (Fenn-Gib etc) that yes,
will need exploration dollars thrown at them but these are real assets at decent grades,
not pie-in-sky deposits that have management praying on the gold price to make them
theoretically economic.
The question of high-grading your deposit
But the thing that catches the eye is the
overall average grade of the Lake Shore Gold (LSG.to): Au grade (g/t)
reserve/resource, particularly the 6 5.2 5.1 5.4
reserve currently at the head of the 5 4.7 4.6
4.2 4.3 4.2 4.2
mining operations. At 4.6 g/t for 3.8
4
Timmins West and 4.7 g/t for the
3
smaller Bell Creek, once mine dilution
is taken into account it’s difficult to 2
justify the type of average quarterly
1
head grades we were seeing reported
0
by LSG as 2013 became 2014:
6
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 tse51q1
g/t
source: company data, IKN ests for 1q15

Now for sure it’s nice to run at 5+g/t, but it’s not sustainable. I have no major problem in a
company doing such a thing for a while, and in LSG’s case there’s plenty of logical justification
for such a corporate strategy. In 1q14 the throughput rate dropped back a little, it was facing
continued low gold prices, it needed to get some quarterly profits rolling to show that it could
cover liabilities and pay down on some of the financial debt. Therefore yes, put your best
material through the mill and make more ounces. As this chart shows, the record 52,300 oz in
2q14 was one of the highlights of this
Lake Shore Gold (LSG.to) Au production (oz) 2014 strategy and as we’ll see in charts
60000
further down, the basis for the near 51700 52300
$18m operating profit that quarter. 50000 44600 45600 43200 43750
40000
But you cannot do that forever, so I was 30800 28900
30000
looking out to see what kind of figure 23200
would come from LSG in its 4q14 20000
production number last week. The 10000
answer was 4.2 g/t and that’s my idea
0
of sustainable. And that’s good,
because even in 4q14, with the lowest
quarterly average gold price of the last
few years now set in stone, LSG will be
able to return operating profit. Or as I put it to subber JH on Wednesday,
“...LSG at 4.2 g/t is sustainable now and they should run at that number in
2015. But the mid 2014 grade wasn't possible to continue. Thing is, the share
price has come down since then so one may have cancelled out the other.
Overall, LSG may be more attractive now...”
In other words, production was down in 4q14 but I was happy to see it. And with that point made
it’s time to look at what really matter here at LSG, its financials:
Balance sheet items
This is a good place to start because the 4q14 NR (4) brought good news about the balance
sheet as well. Here’s a quote from the text that quotes in turn Pres/CEO Makuch:
Tony Makuch , President and Chief Executive Officer of Lake Shore Gold, commented: "We have
made excellent progress reducing our debt levels while also generating net free cash flow. Earlier
this year, we said we would repay $20.0 to $25.0 million of debt in 2014 while also building our
cash position. With the $20.0 million repayment we will make later this month, we will have repaid
a total of $45.0 million of debt this year and increased our cash and bullion from $34.0 million at
the beginning of 2014 to approximately $60.0 million ending the year. Our increased financial
strength is largely the result of a solid operating performance during the year, with the Company
on track for record production of at least 180,000 ounces of gold and both cash operating costs
and all-in sustaining costs beating our full-year 2014 targets."
We like it when companies pay down debt, and what’s more I think the comments from Makuch
are fair and acceptable overall, LSG did put in a good year and has a right to strut.
Here’s how the liabilities at LSG have
progressed over the last three years and we
see the moment when the big raise happened
during 3q12. With the paying down of $20m in
principle to the standby debt facility LSG had
with Sprott (which was slightly more expensive
than its other debt facilities and therefore
smarter to pay off first) we expect near-term
liabilities to drop to their lowest levels since
early 2012.
LSG has managed to do this while seeing
cash treasury climb in 2014. In last week’s NR
LSG stated that cash+bullion stands at around
$60m as at end December and of that, the IKN best-guess is cash-eq will come in at $57m. If
7
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 tse51q1
oz Au
source: company data, IKN ests for 1q15
LSG.to: Debt Breakdown per qtr
200
180
160
140
120
100
80
60
40
20
0
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source: company filings
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LT debt
current debt

we add that to the numbers we know this chart comes out...
LSG.to: Cash treasury per qtr
100
90
80
70
60
50
40
30
20
10
0
8
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source: company filings/IKN ests
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...and that looks just fine to me; we have a company that’s pre-paid down $20m and still
remains nicely liquid. The inference here is that as long as the free cash flow quarters keep
rolling in FY15, LSG will have all it
LSG.to: Inventory holdings mat.supply inventory
needs and more to fund its exploration $m bullion
plans at the development projects. 30 stockpiled ore
gold in circuit
25
For what it’s worth (I’m never sure how
many charts I should include in these 20
reports, they get a bit too granular while
15
the main story is the thing) here’s the
company’s inventory position and our 10
estimates for the quarter just finished.
5
There’s bullion in the pretty gold colour,
sandwich filling. 0
4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14est
Over at assets, we see that despite the
source: company filings
two large write-downs LSG’s asset
value is still dominated by its mining
fixed assets. As at 3q14 the book value stood at $1.09/share (current IKN estimate
$1.14/share), a function of the share count that saw a bump from 416m in 1q14 to 422.523m of
today due to a flow-through placement, but has stayed at-or-around the current level for plenty
of quarters running. There are a lot of shares out here, but they haven’t blown out the structure
either.
LSG.to: Assets
1200
1000
800
600
400
200
0
Finally working capital and the improvement since the dog days of 2013 is plain to see, as is the
reason why people were sweating on whether LSG would make it through the year. Mid-2013
saw LSG threatened by liquidity crunch, which it did manage to overcome in the end. With the
production upgrades in place and better throughput on line as from 4q13, the company has dug
its way out of the hole in the old-fashioned way, by making profit on operations. Today’s LSG is
in far better shape and with the debt paid down in 4q14 (plus operating profits expected in the
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
$m
fixed LSG.to: Shares Out
500
other current
cash & eq 450
400
350
300
250
200
150
100
50
0
source: LSG filings
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source: company filings/IKN ests
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quarters of 2015) the working cap position looks set to improve further.
80 LSG.to: Working Capital per qtr
70
60
50
40
30
20
10
0
9
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
source company filings/IKN ests
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Before leaving balance sheet items a quick semi-OT word about the price to book ratio at LSG,
which has made great strides but for separate
reasons. Firstly the big impairments taken by LSG
at the end of 2012 and 2013 amounted to $456m of
asset value (with the word “value” used loosely of
course, as it was by then clear there was no real
monetary value in the accounting entries). With the
second impairment and the return to profitability in
2014the P/BV ratio started to climb and at the end
of 3q14 managed to break back over 1.0X, one of
the acid tests that separates the companies with
hope from the deadbeats.
Notably since then the ratio has dropped back and
this weekend stands at an IKN Weekly estimated
0.79X. That looks pretty low compared to the progress that’s been made over the year at LSG
and on reflection, I think it’s because the asset book still carries plenty of non-producing
exploration stage properties. However a 0.8X ratio suggests that there’s share price upside on
offer for buyers at today’s prices as long as LSG keeps delivering profitable quarters of the type
seen in 2014.
P+L items, earnings etc
On we go to the charts that show how operations have improved, starting with this one, the
overview:
LSG.to: Quarterly Earnings Overview
80
70
60
50
40
30
20
10
0
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
LSG.to: Price/Book ratio
1.2
1
0.8
0.6
0.4
0.2
0
$m
revenues Prod Costs
deplet/deprec gross profit
source: company filings/IKN ests
Of the four items here:
1) Revenues (green) is what it’s all about and the new higher throughput rate has made
the top line revenues grow even during the drop in gold prices.
2) Production costs or COGs (that kind of odd fleshy colour) has seen a jump as you’d
expect when more rock goes through your machines, but the change is minor compared
to the revenues and that’s exactly what you’d want to see
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 WON
source: company data, TSX, IKN calcs

3) Depletion and depreciation (grey) is fairly steep at LSG; it has touched $20m in a
quarter and for modelling purposes I’m assume $18m/qtr in 2015.
4) From those three comes gross profit (red). In fact LSG subtracts impairments from
mining gross profit so I’ve backed out the major ($231m and $2256m respectively)
charges to 4q12 and 4q13, in order to concentrate on ops only. What we see is a clear
improvement in margins since the throughput rose. However the current quarter (4q14)
is expected to be softer (at the moment, we’ll know more next week, see below) before
gross profit climbs back above $10m/qtr in 2015, according to the model at least.
By way of reminder (a similar chart was
above) here’s how production and sales of
gold has improved from 2013 to 2014. We
also add in the sales figures here (as usual
they’re slightly different from production but
even themselves out over the quarters in
normal style) and also our forecast for 1q15.
For that we take the LSG 2015 guidance
(170k to 180k) as announce last week, take
the happy medium of 175k and then split it
evenly into four quarters. Therefore we
assume (until otherwise proven wrong) that
the quarters of 2015 will see LSG produce
43,750 oz gold per period.
As the main overview chart (above) isn’t so easy to read, here are a couple of the items
displayed separately, along with forecasts for quarters into 2015. Here we see how production
costs now revolve around the $30m/qtr price point and that’s expected to continue (I use a
COGS/qtr of $31m for the simplified model for 2015 at the moment).
LSG.to: Production costs (COGS)
35
30
25
20
15
10
5
0
10
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
$m
Source: LSG filings, IKN ests
Then here’s the gross profits chart. With the gold price at its likely low point during 4q14 and
lower sales of gold (41.3k oz), gross profits look set for a drop in the quarter just gone. We
expect them to regain traction in the quarters of this year however, as long as LSG can stick to
its guidance and cost/revenue inputs don’t vary dramatically.
LSG.to: Gross profits, per qtr
25
20
15
10
5
0
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
Lake Shore Gold: Gold production vs sales, per qtr
60000
55000
50000
45000
40000
35000
30000
25000
20000
$m
source: company filings, IKN ests
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 tse51q1
oz Au
Au prod
Au sold
source: company filings, IKN ests for 1q15

Moving on, here are two charts showing operating earnings and op earnings per share.
The impairments are again backed out of the 4q12 and 4q13 numbers. The per share chart
shows how operating earnings (i.e. post G&A and exploration, but before financial costs and
tax) are set to drop to just 1c/share in the current quarter. That points to an overall net loss in
the pipeline for 4q14. However, all the assumptions for 4q14 are still preliminary because LSG
is due to give us guidance on costs etc this week coming. In last week’s NR it said...
Preliminary cost estimates for 2014 and Q4/14 are expected to be released next week.
The Company's full financial results for the year and Q4/14 will be released in March
2015, with further details to follow shortly.
...so when the next NR turns up I’ll know more. At this time I’m working on a $690/oz op cost
level and then slightly higher for 1q15 (more for conservative approach than anything else) but if
those assumptions change significantly after next week’s LSG information you’ll hear about it
next weekend.
LSG.to: Op Cash costs, per qtr
1100
1000
900
800
700
600
500
400
300
200
100
0
11
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
LSG.to: Op. Earnings
20
(with 4q12 and 4q13 imparirments backed out)
18
16
14
12
10
8
6 4
2
0
-2
-4
-6
-8
-10
C$/oz
source: company filings
Price sensitivity to gold
The final subject that needs to be broached before wrapping up this overlong and rambling
analysis is LSG’s potential for share price movements on changes in the gold price. At the
moment I’m only working in the most basic of terms on this and it’s a model that’s bound to get
refinement as 2015 wears on. Aside from my widely cast and really basic cost and depreciation
assumptions (see table) one of the key aspects that needs monitoring is how the Canadian
Dollar /US Dollar forex changes as gold rises or falls against its benchmark currency. So far at
least in 2015 gold has done well to keep tabs on a strengthening dollar, but I’d imagine that at
some point one will outperform the other and if gold moves up, the likelihood is that the loonie
will put in a bit of a rebound against the greenback too.
Anyway, all that’s for another day, here’s a simple table that shows gold prices in Canadian
dollars (CAD$1,400/oz is our current benchmark) and how we see GROSS profits (not
operating or net profits) changed under different prices.
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
source: company filings/IKN ests
srallod
fo
snoillim
LSG.to: operating earnings per share
(with 4q12 and 4q13 impairments backed out)
0.06
0.05
0.04
0.03
0.02
0.01
º 0.00
-0.01
-0.02
-0.03
21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
cents
source: company financials/IKN ests

LSG.to: A basic idea of price sensitivity to gold on 2015 quarterly production
CAD$/oz Au Revs at 43,750oz Au COGS Deprec/deplet Gross Profit (C$m) Gross profit Cent/sh Fwd P/GE at 90c pps
1000 44 31 18 -5 n/a n/a
1050 46 31 18 -3 n/a n/a
1100 48 31 18 -1 n/a n/a
1150 50 31 18 1 0.31 73
1200 53 31 18 4 0.83 27
1250 55 31 18 6 1.34 17
1300 57 31 18 8 1.86 12
1350 59 31 18 10 2.38 9
1400 61 31 18 12 2.90 8
1450 63 31 18 14 3.41 7
1500 66 31 18 17 3.93 6
1550 68 31 18 19 4.45 5
1600 70 31 18 21 4.96 5
1650 72 31 18 23 5.48 4
1700 74 31 18 25 6.00 4
1750 77 31 18 28 6.52 3
source: IKN SWAGs
The basic story here is that LSG is pretty sensitive to changes, with $2m in top line revenues for
every $50/oz move in the gold price. Further along, I’d venture the opinion that at $1,400/oz
gold and a 90c share price, the 8X ratio to gross profits may be a little on the cheap side but not
by much. But that’s just me.
Conclusion and recommendation
There are plenty things to like about Lake Shore Gold (LSG.to) today. Compared to where it
was just a couple of years ago, with an uncertain financial position and expansion plans that
looked badly timed (to put it nicely) today’s company is in much better financial shape. The
balance sheet still has debt to contend with but it’s already a lot cleaner and assuming operating
profits in the quarters to come will improve further in 2015. as regards it operations, thanks to
the slightly late but ultimately successful throughput upgrade and higher production rhythm, its
margins have improved along with its production ounces and that will drive its success. The
plan may have looked shaky for a while but LSG’s plan came through and for that, management
should be warmly congratulated. At today’s share price its assets look cheaply priced and
there’s room for upside as long as the profits keep rolling. Plus it’s taken all the write-downs it
needs to take and with reserves/resources priced at $1,100/oz gold its books are more realistic
to the state of the industry than many other mining companies. The hits have been taken by
LSG already.
On the other hand, unless costs come in substantially lower than expected for Q4 (we’ll know
more next week) the current 4q14 financial results due in March are set to be a soft spot in an
otherwise very decent rebound and turnaround story. Then there’s the whole no skin in game
things with the management, plus the way in which they were quick to use high-grading for
three or four quarters in order to dig themselves out of (pun intended once again) a tough spot.
It’s ok for a while, it starts to look a bit, well...a bit mercenary after too long.
Overall and today I’m not a buyer of Lake Shore Gold (LSG.to). The two reasons are:
1) Rio Alto is a better company and a better investment today. I see no reason to buy a
new position in LSG at current prices, instead of an addition to RIO.to.
2) It looks as though the current quarter will be a softer one. My opinion on that may
change once we get next week’s costs NR for Q4 (and I reserve the right to be totally
hypocritical at all times) but my best guess today is that LSG could provide a better
entry point a little further into 2015, if I still want to buy more gold exposure at that time.
However, and on balance I like what I see here. No company or stock is perfect, it’s always a
case of balancing the good versus the not-so-good. LSG has improved enormously in the space
12

of six or so quarters and its management deserve applause for sticking with the task and
delivering well. Don’t be at all surprised if a Flash update comes out of the blue at some point a
few weeks or months down the line that tells you I’m buying into this company.
End Of Report
Stocks to Follow
Of the 14 positions open this time last week, three moved down (FCV.v, IRL.to, FSM Short) and
one remained unchanged (LRA.v). The other ten put in gains so I’m not listing them all, but let
us certainly shine a light where due on the big winners on the week that include Argonaut Gold
(AR.to up 44.5%), GoldQuest (GQC.v up 40.0%), First Majestic (AG up 19.5%), NovaCopper
(NCQ.to up 17.7%) and B2Gold (BTO.to up 13.7%). Those are hefty gains and made the first
true trading week in 2015 a successful one for our portfolio of companies.
With the sales of Amerigo (ARG.to) and Top Pick Argonaut (AR.to) plus the addition of Starcore
(SAM.to) we currently have 14 open positions on our ‘Stocks to Follow’ list, one less than our
self-imposed maximum. Two are in the green, one is unchanged since conception, eleven are in
the red.
Current
company Ticker this week Avg Price Reco date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to buy C$2.30 07-apr-11 C$3.06 33.0% Top Pick, $3.30 tgt, Best PM Jr
Recommended long positions (in current order of preference)
B2Gold BTO.to buy C$2.32 12-sep-14 C$2.32 0.0% V good entry point now
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.77 20.3% Nov'14 tgt $1.25, top Au expl
Reservoir Min. RMC.v buy C$6.05 18-jun-14 C$4.28 -29.3% Best spec Cu play
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.18 -21.7% tgt 50c, avged up, 1q15 news
First Majestic AG spec buy U$10.51 10-aug-14 U$6.24 -40.6% Now in pair trade with FSM
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.73 -30.5% small Cu play low vols, hold
Starcore Intl SAM.to buy C$0.12 10-jan-15 C$0.115 -4.2% new position
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.045 -83.3% Waiting for financing news
GoldQuest Min. GQC.v hold C$0.26 27-oct-13 C$0.14 -46.2% no point selling so cheaply
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.395 -65.7% solid biz model, LT hold
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$5.01 -21.6% 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 2015 closed close price
Argonaut Gold AR.to jan'14 C$1.47 14-dec-14 C$2.53 72.1% Big gain small time, profit taken
Amerigo Res ARG.to jan'14 C$0.405 20-jul-14 C$0.285 -29.6% Given up on weak Cu prices
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
Starcore International (SAM.to): Position opened. The smallish buy I made at 12c last
13

week was a reasonable entry point, even though there’s clearly a seller out there and the 11c
SAM showed on Friday, when most every other gold producer was making progress, is ample
evidence of that. I’ve left myself room to buy more if the price shows well (and I get the urge),
but I’m aware this one is more speculative and risky, so you should be, too.
We looked at SAM.to in detail in IKN290 and then briefly commented on its latest set of
financials in IKN292 (they were fine, nothing wowsers but in line) so I direct your attention to
those editions for further thoughts on this new trade. When SAM.to files its next set of
production figures (early February) we’ll take a closer look. Until then I may add on any
unexpected selling dips, but the likely situation is to simply hold. The basic attraction of this
company is to own a profitable gold mining company with a market cap of less than $20m,
because if the gold sector begins to show a sustained recovery that type of market cap can
double without any problem at all.
Amerigo Resources (ARG.to) Position closed. As noted in the first Flash update last week
(see Appendix 1). This sale is less a reflection of ARG.to and more on the weakness in the
world copper market, but as one of the prime reasons to buy this stock was for its impending
financing deal that would see its production capacity double, and now that deal is looking less
and less likely, it’s the obvious place to begin lightening the copper exposure. Therefore a loss
is taken, because that’s just what you have to do sometimes when you play the junior mining
world.
Argonaut Gold (AR.to): Position closed. A clear statement; I sold too early. That’s easy to
state because my exit average turned out to be $2.53 and come the close on Friday, AR.to was
at $2.76 which means 23c/share for somebody else, not me.
But I’m not too worried about that ☺. The position was sold as per the second Flash update of
last week 8see Appendix 2) and rare are the moments you rack up a 72% winner, start to
finish, in less than one calendar month and rarer still are those that make a significant cash win
as well as a sizeable percentage win (that will sit prettily on the top of the 2015 Closed list for
the rest of the year).
There have been plenty of feedback mails on this trade. I thank you all for those and
particularly pleasing to hear from people who bought at the same time (on-topic, reader PR and
your mail of Saturday morning; you made my week with yours). But I’d prefer to address those
who said things along the lines of “Congrats, but I didn’t follow you in because XYZ”. After a
year or two of at-best spluttering trade performance at the IKN Weekly nobody can be blamed
for feeling leery about a new reco here on these pages and preferring to watch for a while. In
this case the rebound was faster and more violent than even I, as heavily bullish as I was on
the trade, expected and left a window of a few scant days to get on, when normally we’d have
a couple of extra weeks. I did try to convey my “ducks in line” strongly bullish opinion about
AR.to in December as much as I could, firstly by the way I wrote it up in the original analysis
and then by promoting it the Top Pick and adding more on the way up. But still, when I
received replies in December such as this one from reader B, “Although I can't bring myself to
buy AR, your reasoning is compelling”, it didn’t come as much of a shock or disappointment.
First my track record has to improve on that of most of 2014.
In today’s list the only stock that has me as fully confident is Rio Alto, which is why of course
it’s my biggest position and sole Top Pick. Yes I own the others so that means I certainly do like
their chances, but they’re all a little more guarded and with risk/reward balances always in
mind.
Trade opportunities such as the one in AR.to don’t come around very often, but when they do
there’s a feel about them (yes, it’s an emotional, belly-driven feel) that’s different. Perhaps the
difference between the average trader and the great one is to be able to recognize ore than
their fair share.
14

Fortuna Silver (FSM) (FVI.to) and First Majestic (FR.to) (AG) Pair Trade: The acid test
of this pair trade is simplicity itself: If AG does better than FSM, it’s a win. If not, it’s a lose.
It’s taken from mid-November to early January to go our way but finally there’s a clear gap to
our favour here, as our long AG is 13% to the better than our balanced short FSM. This week
coming should see the key 4q14 production numbers show up for at least one of these, perhaps
both. Forward looking clues as to what to expect from the financials (mid-March ETA) and 2015
as a whole will be pounced upon and digested as well.
As things stand today I’m keeping an open mind on the pair, but as per the comments in
today’s intro I’m tending towards cutting or even fully closing the First Majestic long and
keeping, or even extending, the Fortuna Silver short.
Rio Alto Mining (RIOM) (RIO.to): We can expect RIO to publish its 4q14 production report
next week, maybe as early as tomorrow. I’ve been gauging opinions of what we might get from
the number since IKN295 and the word on the street is that the company’s going to put ina
good quarter. This time last week I wrote...
“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”
...and I’m still good with that, but I now think we could even beat the upper end guidance
number of 220k on the year. That’s where I’m pitching my guess, so I’m now taking the over
and forecasting 57k Au for 4q14 (and maybe even a bit more) as 57k would put 2014 at 221k
thereby allowing full bragging rights to the RIO.to team.
Although there’s no guarantee, as well as the look back number we may get a guidance for
2015 with next week’s NR and if we do, I’d consider it a happy bonus. Although we also need to
underscore that the Shahuindo build-out is likely to be a main catalyst for the RIO share price in
2015 (aside from my predicted buy-out, anyway).
Meanwhile, in last week’s share price action there were some large lumps of shares through the
market that are rumoured to be IAMGOLD selling out of its roughly 8m share position. That
would make sense from IMG’s position, what with its downsizing and batten down the hatches
corporate strategy (aka “Save Letwin’s Job”). It may have capped the upside too, because
although 10c up is better than 10c down, RIO.to didn’t put in the type of performance we saw
from other gold miners in its peer group (BTO.to, AR.to etc). We’ll have to wait on a declaration
from IMG for confirmation on those sales.
Lara Exploration (LRA.v): I’m late to this presentation by Miles Thompson dated November
2014 (5) but it’s still worth visiting, because it does a good job of laying out the LRA strategy at
the moment and the way it’s still managing to move forward on property development and
15

exploration using OPM, even in this rough market for explorecos. The reason to hold LRA today
is its land asset potential, which has seen values beaten down to nickels on the dollar but won’t
stay like that forever and once things pick up, the type of prime land held by LRA will resume
its premium. In the meantime the LRA corporate structure sips at its treasury position, which
improves its low risk profile. It’s been a rough ride holding LRA in the downturn, but it’s the
type of company i’m keen to sponsor and the best (only?) way of doing so is by owning a small
sliver of its equity.
Reservoir Minerals (RMC.v): A better week pricewise and one in which RMC managed to
swim against the bearish tide for most
copper mine names, but we should also
recognize that volumes remain light (no
day even threatened to break 100k vols)
and even now we’re still stuck in the
middle of a trading range unbroken since
October. I’ve pointed at $4.50 as some
kind of trigger number for the stock price
on this chart and for me, the only way
we’re going to get a change is from new
buying interest that pushes volumes
higher. And the only way that happens is
from solid fundies news out of the
company. And that means Timok drills.
Putting that all together and thinking about when the latest program began and how deep
we’re expecting FCX/RMC to drill, my best guess is we have until PDAC and then the hammer
will drop.
Dalradian Resources (DNA.to): We had news from DNA last Tuesday (6) which was
basically of the “Hey everybody look at us” variety, but I suppose the main message that the
company had completed its initial underground blasting at Curraghinalt was material enough for
the purpose. One of those things where the
locals living round the project will care
more, I hope they were ok with the effects.
The blast is part of the early stages of this
year’s (fully budgeted and covered by
treasury) program that aims to upgrade as
much of the inferred resource as possible
so that it qualifies for the pre-feas further
down the line.
Meanwhile and although I pulled Iwnattos’s
string a little about it, I also think that the
stock is poised to put in a run here. I’m also
not so sure that I care much because
there’s no plans at all of selling this position and all my conjectures are merely about near-term
moves, but momentum seems to be building again and a re-visit to the 85c-90c zone that was
common six months ago looks very reasonable.
GoldQuest (GQC.v): I have no idea why, but I’ll take a 40% week over week upmove any
time you care to offer one without ever asking you why.
In fact GQC did bring us news on Tuesday (7) and Tuesday was the day we saw 400k in
volume and the stock move from 10c-11c to 13c-14c (where it stayed the rest of the week on
lighter trading), but on any day you’d care to pick in 2014 GQC could have released the news of
picking up extra concessions at its Tireo project (all close to the main Romero discovery) and
nothing would have happened. In fact GQC has indeed announced similar news to rounds of
16

apathy in 2014, so what’s changed here is more likely to be circumstances and market risk
appetite.
As you know (because I’ve said it enough times) GQC today is wildly cheap compared to what it
is, but that doesn’t stop people from ignoring it in a bad market. Therefore I’ll take the new
interest happily and it’s surely a relief to see the stock at least in double figures again (8c and
9c was embarrassing), but i’m under no illusions either and if a suitable exit point at a
reasonable price shows up, I’m still a leaver and a loss-taker on this poor trade.
The Copper Basket
After two weeks of 2015 The Copper Basket is showing a 1.99% gain to level stakes.
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 779.18 2.04 0.5%
2 NGEx Resources NGQ.to 1.17 187.71 206.48 1.10 -6.0%
3 Reservoir Min. RMC.v 3.96 47.55 203.51 4.28 8.1%
4 Nevada Copper NCU.to 1.65 80.5 135.24 1.68 1.8%
5 Western Copper WRN.to 0.68 93.68 62.77 0.67 -1.5%
6 Panoro Minerals PML.v 0.295 220.25 59.47 0.27 -8.5%
7 Hot Chili Ltd HCH.ax 0.16 333.11 54.96 0.165 3.1%
8 Copper Fox CUU.v 0.135 402.96 54.40 0.135 0.0%
9 Amerigo Res ARG.to 0.27 173.65 53.83 0.31 14.8%
10 NovaCopper NCQ.to 0.58 60.15 43.91 0.73 25.9%
11 Regulus Res REG.v 0.35 56.39 18.61 0.33 -5.7%
12 Metminco MNC.ax 0.008 1822.6 14.58 0.008 0.0%
13 Catalyst Copper CCY.v 0.305 31.39 9.26 0.295 -3.3%
14 AQM Copper AQM.v 0.06 139.24 9.05 0.065 8.3%
15 Coro Mining* COP.to 0.045 159.37 6.37 0.04 -11.1%
NB: HCH.ax & MNC.ax priced in AUD$, rest CAD$ Portfolio avg 1.99%
Week two saw a slight overall gain in the basket average, but the reality was a real mixed bag
sector with companies that are far less
bullish than their precious metals cousins. Six
stocks made gains on the week (RMC.v,
PML.v, ARG.to, HCH.ax, NCQ.to, AQM.v), six
made losses (CS.to, NGQ.to, WRN.to, CUU.v,
REG.v, COP.to) and one stayed unchanged
(MNC.ax). The biggest winner was
NovaCopper (NCQ.to up 17.7%) and the
biggest loser Coro Mining (COP.to down
12.5%).
Apart from the initial drop in copper we saw
as Sunday turned into Monday, copper had a
steady price week. That’s to say it had a
losing price week, with our preferred futures
contract tracker staying at $2.75/lb all
though the five day period, give or take a
penny or so. As noted in the Flash update on
Tuesday morning (see Appendix 1) that was
enough to see your author begin to trim
copper exposure by selling Amerigo
17

(ARG.to).
Inventories now, trading at the major hubs (LME, Shanghai) was reportedly brisker than normal
for this time of year and a big step up from the last two weeks of holiday traffic.
• Overall world stock levels rose 7,020 metric tonnes (mt) (+2.3%) to finish at
313,717mt. Five straight weeks of gains.
• The Shanghai Futures Exchange saw the major changes under the world total, as
stocks rose 7,144mt (+6.8%) to finish the week at 112,666mt. The chart underneath
shows that things are getting more bearish by the week, the trend is no friend here.
We’re now at the highest stocks level in the Shanghai system that we’ve seen since the
end of the big waterfall drop April last year.
• The LME copper warehouse inventories stayed unchanged at 177,025mt.
• The Comex inventories dropped a tiny 124mt to finish at 24,026mt.
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
220000
200000
180000
160000
140000
120000
100000
80000
60000
18
ts13ceD ht5naj ht21 ht91 ht62 dn2bef ht9 ht61 dr32 dn2ram ht9 ht61 dr32 ht03 ht6rpa ht31 ht02 ht72 ht4yam ht11 ht81 ht52 ts1enuj ht8 ht51 dn22 ht92 ht6yluj ht31 ht02 ht72 dr3gua ht01 ht71 ht42 ts13 ht7 ht41 ts12 ht82 ht5tco ht21 ht91 ht62 dn2von ht9 ht61 dr32 ht03 ht7ced ht41 ts12 ht82 ht4naj ht11
Mt Cu
source: Cochilco
That’s all for today. More detailed coverage of The Copper Basket 2015 and its components will
start soon enough, but the precious metals space is more interesting at the moment and that’s
where I’m concentrating my time.
The Low Cost Producer Basket
After 2 weeks, the new Low Cost Producer Basket is showing a 12.52% 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 16.86 20.76 12.1%
2 Barrick ABX 10.75 1164.67 12.80 10.99 2.2%
3 Newmont NEM 18.90 499 10.34 20.72 9.6%
4 Franco Nevada FNV 49.19 156.08 8.13 52.09 5.9%
5 Silver Wheaton SLW 20.33 357.39 7.76 21.70 6.7%
6 Agnico Eagle AEM 24.89 173.43 5.16 29.78 19.6%
7 Kinross KGC 2.82 1114.5 3.81 3.42 21.3%
8 Buenaventura BVN 9.56 254.19 2.81 11.06 15.7%
9 B2Gold BTG 1.62 948.9 1.85 1.95 20.4%
10 Pan American PAAS 9.20 151.41 1.55 10.27 11.6%
all prices in U$, using NYSE ticker prices Portfolio avg 12.52%
January bounce, you better believe it. All ten of our basket stocks registered gains last week,
from the well-below average Barrick (ABX+0.7%) all the way up to the star performing Kinross
(KGC. Up 15.2%). Other big gainers worth highlighting are Buenaventura (BVN up 14.4%)
B2Gold (BTG up 12.7%), Agnico Eagle (AEM up 10.3%) and Goldcorp (GG up 10.2%). All in all,

a strong week for the miners.
Barrick Gold (ABX): This stock underperformed by a mile and I’d have more than a slight
suspicion that’s because of the research report published by Macquarie on Thursday that I sent
out to you people on the list Friday morning.
This five day chart brings together the gold producer stocks in our basket (we include FNV as a
producer, it is of sorts) as well as GLD for our gold proxy and shows how ABX clearly
underperformed its peers; even bullion beat it out.
We saw those two brokerage downgrades on Thursday pre-open and one of those, the
Macquarie report, was a high standard indeed of research. For what it’s worth I heard from one
the authors of the report who said that the firm had received a great deal of feedback and
inquiries due to the note, phone ringing of the wall etc etc. However it’s fair to say that ABX
was already underperforming, so perhaps it’s a tail-wag-dog situation here; ABX has had its
well-reported troubles since gold dropped in early 2013 but they haven’t gone away. It may
have taken a sharp, intelligent and insightful report for scales to fall from the market’s eyes, but
there probably weren’t any revelatory truths being uncovered by Macquarie either, more a case
of “no folks, ABX doesn’t deserve to bounce like the rest of them” and that’s something the
market has signalled already.
Regional Politics and Market Watching
Mexico: The effect of the crude oil and metals price drops begins to show
The November industrial activity figures for Mexico were published on Friday January 9th by the
State stats people, INEGI (8) and as they comprise 34% of the Mexico GDP weighting, it’s an
important indicator of the country’s state of overall economic health. The headline industrial
activity number was +1.8%, the lowest growth figure since August (+1.1%) and had recovered
to +2.9% in September and +2.5% in October. Here’s a couple of charts ripped from the
report, with the left chart showing the overall monthly activity reading:
19

To the right, the other chart shows the breakdown of the four components in Mexico’s industrial
activity reading and in November. They came in as follows:
• Manufacturing: + 3.6%
• Construction: + 5.3%
• Electricity/Gas/Water generation and supply: +0.7%
• Mining: -5.6%
Then within the mining figure (which covers all types of extraction from the ground), non-
petroleum mining dropped by 9.9% and petroleum mining/extraction dropped by 4.4%.
That was in November, a month when the WTI contract started at $80/bbl and closed at
$66/bbl. We’re now at $48/bbl and with news such as last week’s (9) that PEMEX had slashed
third party service contracts and 10,000 people had been laid off as a consequence, it’s fair to
say that repercussions have only just started showing up in the economic figures.
Argentina: Mining as a pawn in the Chubut election chess game
Some interesting development in the Chubut region of Argentina last week. The need-to-know
results of the moves for capitalists us on the outside looking in and wanting trade info:
• It’s all about provincial governor Martín Buzzi positioning himself for a re-election bid
• It’s bad for Yamana (YRI.to) (AUY) and its Suyai project
• It’s good for Pan American Silver (PAA.to) (PAAS) and its Navidad project
There were two pieces of news out of Chubut Argentina for mining last week, both on January
8th. Firstly the governor of the province, Martín Buzzi, signed a decree (10) that bans mining
activity in the Western mountainous region of the Chubut province. Secondly (11) he signed a
decree stating that there would be local referendums on mining projects in the province on
October 25th, with each zone affected by a project allowed an up/down vote on whether it goes
ahead, run concurrently with the national Presidential election set for that day. Those are the
facts of the events, now for the reasons:
1) Martín Buzzi is an ally of presidential candidate Daniel Scioli, is from the Kirchnerite FpV
wing of the Peronist party and is looking for re-election in October.
2) He’s up against ex-governor of Chubut Mario Das Neves, who is also a Peronist but of
the “traditional” section of the party which is opposed to the Cristina FpV brand.
3) Up until recently it’s been assumed that Das Neves would beat Buzzi easily in October
20

and become governor once again, but Buzzi staged a strong comeback in 2014 to the
point where he’s a live candidate for re-election in October. Whatever happens from
here, it’s going to be close between the two.
4) Therefore Buzzi has started positioning himself for the campaign by enacting policies
that please local electorate. Hence the two moves on the mining industry last week.
At this point we step back and explain a little about the make-up of Chubut province, which can
basically be split into three parts. 1) The eastern Atlantic coast, host to the main cities and
majority of the population. 2) The central “Meseta” zone, sparsely populated and with little
industrial or employment activity, it’s a classic looking Patagonia semi-desert/semi-tundra
region. 3) The western mountainous area, with small towns and a developed agro/tourist
industry (well known for its winter ski resorts and lakeside retreats, for example).
We can go into other niceties of the province but it’s time to cut to the chase, keep on-topic
and talk mining. The East coast population tend to be left of centre politically and are normally
anti-mining by choice (though not to a militant level), but the weight of population makes that
moderate anti-mining preference important. The central zone population, though small, is
known to be strongly pro-mining because it offers the only hope of meaningful and gainful
employment and would provide a strong economic boost to their area. Plus on an enviro level
there is less to totally screw up (real world practical). The West mountain/foothill populations
are clearly anti-mining in the majority (though there is a pro-mining movement among them,
it’s not 100% anti) because they have a good thing going with eco-tourism and agriculture and
putting it bluntly, don’t want to screw up their good thing and pristine environment (and hey,
anyone who’s toured the lakes area will know how damn pretty it is).
Therefore and playing the political numbers game, Governor Buzzi knows that anti-mine is a
vote-winner in the Andean zone, therefore he’s decreed the whole zone free of mining. He also
knows pro-mining will be a vote winner in the centre so he’s going to let them vote in a
referendum that’s purely local in nature and doesn’t let the mildly anti-mine West join in to
sway things. Yes it’s blatant political maneuvering to the point of populism, but what else do
you expect from Argentine politics in a key election year?
The upshot of the Buzzi moves last week, apart from the complaints from the opposition (I
particularly liked the anti-mining UCR party’s call that having local referenda on mining projects
was “immoral” (12)) is that some mining projects in Chubut have a more promising future than
others. The Navidad Silver/Zinc/Lead project in the central Meseta zone will probably get a
green light from the people that live there. However the projects in the Andean foothills such as
Yamana Gold’s (YRI.to) (AUY) Suyai project (previously named Esquel and run by Meridian) has
just been handed another big red light, even though YRI insist that the project is very different
from the one previously blocked by a referendum a decade ago and is far more eco-friendly.
Other mining projects such as certain uranium deposits are now halted from development in the
West, too.
That’s the situation in Chubut province today, but it also provides a taster of the type of upset
and shifting ground that will be part of the Argentina political scene in 2015. Mining is going to
be used as a pawn in wider election fights in many provinces, of that we should be in no doubt.
China and Venezuela, China and Argentina, China and Ecuador
Every newspaper across the region seems to be running a “China and [name home country]
announce [large amount of money] deal” or “China and [name home country] to develop closer
ties” type of report this week, mainly due to the big two day Sino-CELAC conference held in
China last week (in which CELAC is the umbrella group that doesn’t include just two countries
on the of Americas/Caribbean continent, The USA and Canada, which may explain why you
haven’t heard much about it before). There’s always plenty of focus put on China’s relationship
with Ecuador, Argentina and Venezuela because it makes a convenient box for Northern
commentators (“oh they need the money and so China’s bailing them out”), but that’s way too
simplistic I’m afraid. Not only do we have Peru, Chile and Colombia actively courting China for
21

large-scale investment and infrastructure deals, business relationships and even scrapping hard
for its fast growing tourism trade (apparently minor items such as (13) being chosen as a big
Chinese online tourism website “best destination” makes headlines in Peru), but the opposite
happens when Bolivia (one of those “enemy countries” you talk about up there) kowtows far
less because it already has its economic house fully in order. And then there’s the obvious fact
that a close and friendly relationship with Latin America and the Caribbean suits China as well;
this is no one-way street and China’s desire to secure long-term natural resource supply means
that we’re not talking simple charity or cash for murkier, purely ideological reasons (as per the
USSR in LatAm for decades).
But away from the why’s and wherefores, the important point is as clear as it is obvious;
China’s influence in the region is growing and it’s growing fast. From the way in which
Argentina’s President was first invited to China on a State visit in December and the trip was
last week confirmed (14) for February (lightning quick by diplomatic standards), to President
Correa in China waxing lyrical about China (15) as well as signing deals (16) so that teams of
Chinese geologists come to Ecuador in order to conduct detailed geological mapping of the
country, many places for the first time ever, to the $20Bn loan handed to Venezuela last week
that got plenty of headers because of its obvious bail-out nature. All those and plenty other
Spanish links besides.
Meanwhile, for a decent overview of the CELAC/China summit Reuters has covered the issue
this week with an English language report on the two day event (17) which covers the main
points and notes that China has pledged around $250Bn (with a B) to CELAC country large
scale industrial and infrastructure projects, with that number set to rise to $500Bn over the next
ten years. Those are big numbers by anyone’s reckoning.
Guatemala: Miners fight to reduce royalties
The new 10% royalty on mining operations in Guatemala is still facing the stiff pushback, but as
noted last week the complaints and court actions aren’t coming from the large formal
operations such as GG and THO (who now see the PR advantages in paying a little more and
getting a lot more stability, it seems). The fight is now in the hands of the small mining
companies which state that the new blanket royalty is far more detrimental to their sector (that
claims to employ 500,000 people) and that the royalties “should be directly proportional to
production volumes, type of material extracted and final destination of the product (18). In
other words, they say big miners sending gold and silver abroad should be more heavily taxed,
locals less so and they say a fairer royalty level for their operations would be 3%. At the
moment and according to the newly enacted law, a royalty of 10% is due on all mining
products (be they metals or construction materials) except nickel (5%) and jade (6%).
Dominican Republic: Barrick’s hand slapped
Last week in Dom Rep Barrick, 60% owners (40% GG) and operators of the Pueblo Viejo gold
mine, got its hand well and truly slapped by the national congress for trying to build a new
explosives warehouse at its mine without the necessary permits in hand (19). When congress
found out that ABX had started building the warehouse without having received its permits first,
the plans were summarily rejected and work has had to stop on the project. It caused a minor
controversy in parliament, with opposition legislators demanding that all explosives warehouse
be prohibited from private hands and put in charge of the armed forces, while government
people stressing that they would allow the construction to take place as long as all permits were
first awarded.
Although it’s probably a small story on the great scale of things, it offers another window into
the attitude of ABX and its corporate culture. Why a company this size and in charge of a
politically sensitive mining operation such as Pueblo Viejo should take it upon itself to “pre-
construct” anything without permits, be it a new toilet or an explosives safe house, shows the
type of arrogance that remains to this day inside the company despite all the social, political
and environmental reversals it has suffered in the last few years. This type of attitude should
have been killed years ago and in the smarter companies it has, but ABX has yet to catch on.
22

Peru: Mining companies waning influence in the local stock market
The latest re-weighting of the Peruvian stock exchange (Bolsa de Valores de Lima) was
announced last Monday January 5th (20) and we can take a little encouragement in the new
heavier weighting given to Rio Alto Mining, because that company has been moved up to
~7.5% of the General (IGBVL) index and nearly ~9.7% of the Selective (ISBVL) index and is
now the second heaviest weighted company in the main Peru indices (behind zinc miner Volcan,
for the record. But away from Rio Alto and Volcan, it’s notable how the indices that used to be
heavily miner-favoured are now far more diverse. The latest edition of the flagship IGBVL has
~37% of weighting in mining stocks, which although slightly more than in the second half of
2014 is still a long way down from the 60%+ weighting that miners used to get on the Peru
market. And when it comes to the INCA index, which covers the 20 biggest market cap
companies with strongest local volumes, the emphasis heavily is on financial stocks such as
Creditcorp, Banco Continental (part of Spain’s BBVA) and IFS.
Troy Resources (TRY.to) (TRY.ax) receives its enviro permit for Karouni/West Omai
Tonight Sunday evening (a bit of a stop press here) Troy Resources (TRY.to) (TRY.ax)
announced (21) the receipt of the key enviro permit for its Guyana Karouni project as follows:
Gold producer Troy Resources Limited (ASX:TRY)(TSX:TRY) is pleased to announce that it has
received the Finalised Environmental Permit (Permit) for the construction and operation of its
highly rated Karouni gold project (Karouni).
The Permit follows a detailed review and assessment of the Company's Environmental and Social
Impact Assessment (ESIA) by the Environmental Protection Agency (EPA). The Permit is valid for
5 years and forms an essential requirement for approval and operation of the Mining Licence.
Notably, the Permit has been issued in accordance with the timeline and guidance provided by
the EPA to Troy, at the start of the review process. As a result, Karouni remains on track for the
start of operations in Q2 this year.
Here’s the three month share price chart of TRY.to and as you can see, it’s done the same as
many other gold companies and made a decent recovery from mid-December lows. We’re now
at or around 50c per share which is still
very cheap compared to its historical
trading range.
Last week I mentioned TRY and its
interesting exposure to Guyana during the
Regional Risk overview, but it wasn’t
much more than a “I like the idea”
comment. The problem with TRY is its risk
factors and to cut a long story short they
come from 1) it’s taken on financial debt
to build this new mine 2) the mine’s in an
unproven jurisdiction 3) its other main
mine is in Argentina (Casposo) and 4) it’s
less a gold mine these days and more a
silver mine. To its advantage, TRY is run
by a reliable and reasonably trustworthy team of people (certainly way more trustworthy than
the average in this sector), they’re seasoned operators, they know LatAm and they’re typically
pathfinders in new and less understood locations, with a great record of success too. If I had to
back a company to make a go of Guyana it would be this one.
I’m not a buyer of TRY yet (though I made very decent money by buying it way back when) but
I am interested here, at this price. Risk is high and that needs to be understood. My job will be
to run the numbers and see if under the weight of the financial obligations there’s enough
reward to make a speculation attractive. Watch this space.
Conclusion
IKN296 is done, we end with bullet points:
23

• I want to repeat the concluding words of that Argentina Chubut piece in ‘Regional
Politics’ here in the conclusion because I know some of you skip that political section
entirely, or won’t care about the political comings and goings of a single minor
province. What happened in Chubut last week is indeed “...a taster of the type of upset
and shifting ground that will be part of the Argentina political scene in 2015. Mining is
going to be used as a pawn in wider election fights in many provinces, of that we
should be in no doubt”. You need to be 100% clear on that point, Argentina is a basket
case at the best of times, 2015 is going to be triple-basket. For political watchers such
as myself it’s going to be a rare treat and fascinating stuff, but for those of you looking
for a solid place to which you can trust investment cash...probably more frustrating.
• In the closing bullets for IKN298 on December 28th I wrote the following: “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.” Today, one of those predictions is already true to the point where the
money has been banked. Ka-ching, end of story. That leaves the other one and I’m
equally as confident about RIO.to and its buyout potential in 2015 as I was about the
AR.to trade.
• Don’t get me wrong, I’m warming to Lake Shore Gold (LSG.to) as an investment and
it’s way better than it used to be as an operator. I don’t dedicate a dozen or so pages
to any old stock just for the fun of it, there’s reason to look closely at this company and
like what’s there. Right now it’s not for me because a better buying opportunity is likely
further down the line. But that’s all i really have against it, if you’re already in and
making money I’d tell to to hold and smile, because you probably bought well.
The current Top Pick is Rio Alto Mining (RIO.to). I thank you in advance for any feedback.
Flash updates will be sent promptly if required by events
I wish you good trading fortune, ladies and gentlemen.
Otto
Footnotes, appendices, references, disclaimer
(1) http://cambridgehouse.com/event/33/20th-anniversary-vancouver-resource-investment-conference-2015/exhibitors
(2) http://finance.yahoo.com/news/lake-shore-gold-reports-record-110000886.html
(3) http://www.lsgold.com/files/doc_presentations/LSG_20141117_49NorthConference.pdf
(4) http://www.lsgold.com/Investor-Centre/Press-Releases/Press-Release-Details/2014/Lake-Shore-Gold-to-Repay-20-
Million-Standby-Line-of-Credit/default.aspx
(5) http://onthegroundgroup.com/documents/9%20-%20Lara%20Exploration%20-%20Miles%20Thompson.pdf
(6) http://finance.yahoo.com/news/dalradian-completes-initial-blast-curraghinalt-070000983.html
(7) http://finance.yahoo.com/news/goldquest-granted-concessions-surrounding-romero-110000416.html
(8) http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/comunicados/actbol.pdf
24

(9) http://www.bloomberg.com/news/2015-01-08/mexico-cuts-10-000-oil-service-jobs-as-pemex-funds-fall.html
(10) http://www.diariolaprovinciasj.com/elpais/2015/1/8/buzzi-firmo-decreto-prohibe-actividad-minera-cordillera-chubut-
24561.html
(11) http://www.ieco.clarin.com/economia/Chubut-consulta-mineria_0_1281471959.html
(12) http://www.diariocronica.com.ar/124754-risso-utilizar-las-elecciones-para-hacer-consultas-sobre-proyectos-
mineros-es-inmoral.html
(13) http://elcomercio.pe/peru/pais/agencia-china-elige-al-peru-como-mejor-destino-turistico-noticia-1783897
(14) http://www.lanacion.com.py/2015/01/09/presidenta-argentina-visitara-china-en-febrero/
(15) http://www.elcomercio.com/actualidad/china-ecuador-rafael-correa-gira.html
(16) http://www.andes.info.ec/es/noticias/china-ecuador-firman-convenio-investigaciones-geologicas.html
(17) http://www.reuters.com/article/2015/01/08/china-latam-idUSL3N0UN1CP20150108
(18) http://www.elperiodico.com.gt/es/20150107/economia/6849/Piden-reducir-regal%C3%ADas-a--las-minas.htm
(19) http://lanaciondominicana.com/ver_noticia.php?id_noticia=49865&sesion_periodico=30
(20) http://www.bvl.com.pe/empresas/alertas/AvisoBoletin291214.pdf
(21) http://www.marketwired.com/press-release/troy-receives-finalised-environmental-permit-for-the-karouni-gold-
project-in-guyana-1981877.htm
Appendix 1: IKN Flash update dated Tuesday January 6th
Good Tuesday morning, 07:30am local time, two hours before the opening bell, cloudy outside and the rainy season has
begun locally (good for the reservoirs).
I plan to make a couple of trades today.
Selling Amerigo Resources (ARG.to)
As noted a couple of weeks ago, there's a limit to the price levels at which I'll keep my current exposure to copper intact
and that was breached overnight. Copper is currently trading at $2.80/lb spot and $2.76/lb on the earliest futures
contract and that's as low as I go without taking action.
The first disposal is Amerigo Resources (ARG.to), as per the plan of IKN294. If things remain soft I'll sell other positions
later down the line, this is a staged process.
Buying Starcore International (SAM.to)
This is speculative and small. It also shows my greed glands in operation and the desire to parlay on recent gains in the
gold producer section of the portfolio. I've tracked the stock for a few weeks and although the preferred 10c-or-so entry
point didn't show up in December, its profile as a small, financially solid gold producer with a beaten down share price is
attractive for risk/reward today. I'll take 12.5c maximum as an entry point but ideally would buy at yesterday's close of
11.5c. Anything above 13c would be too expensive for my speculative set-up here. The caveat on the trade is the gold
price, which needs to stay above $1,200/oz today. I repeat that this one will be a small spec treade, not nearly as large
as the position in Argonaut (AR.to) taken in December.
Other news
Regarding AR.to, I've taken several mails on the stock in the last 24 hours. It's going well but I'm in no hurry to take
profits as yet and will keep 100% on the table until at least its 4q14 production numbers NR is published.
To answer a couple of mails, I have no clues about oil, sorry.
Small fe erratum from IKN295 last Sunday, the Wexford/Sailfish royalty play is not Caza, it's Golden Reign.
Have an enjoyable Twelfth Night.
Appendix 2: IKN Flash update dated Wednesday January 7th
Good Wednesday morning, 9am local time, 30 minutes before the markets open and I'm happy to report my eldest
daughter really likes her new bicycle.
Argonaut Gold (AR.to): SELLING 100% and taking profits
This is a difficult call. Buying well is hard and in this case we were luck to do just that. Selling well is even harder and
though I'm fully aware that I could be leaving money on the table here, I'm going to sell the large position taken in two
stages in December and take profits.
Argonaut Gold (AR.to) reported its 4q14 production numbers this morning...
http://finance.yahoo.com/news/argonaut-gold-announces-full-2014-123000979.html
...which justifed running the preview in IKN296 last Sunday, because this one is earlier than expected. It's also a
blowout quarter from AR.to, with production at 44,312 Gold Equivalent Ounces (GEO) and sales of 41,178 GEOs, both
those numbers at the high end of guidance.
Those are excellent numbers, be in no doubt. The pre-market is bidding up AR.to (i saw CAD$2.78 a few minutes ago
before beginning to write this Flash update) and I expect the stock will be a popular buy this morning.
As for revenues and financials, my model indicates an estimated revenue of $48.8m and operating earnings of
$11m. Those are also good numbers and compare well to previous quarters. That would normally translate into a net
25

profit of around $7m (ops EPS of 7c), but this time as I believe AR.to will take impairments on fixed assets, operating
earnings may not translate into net earnings.
And that's the rub here. The bet has always been that 4q14 production would be good, the Year End financials less so. I
planned to take profits at some point between production results and YE financial results (slated for March 15th or 16th)
but as AR.to has already seen very fast and strong share price appreciation I'm going to take profits sooner rather than
later. My guess (and it's only a guess) is that this is a case of "buy rumour sell news". We're also controlled by the gold
price so if gold goes up further so will AR.to, but if it drops the rally will come to an abrupt halt. I'm happy with my gains
in this trade and in a very short time period too. I'm taking those profits at some point today (though not at the opening
bell, let's see how things trade first).
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
26

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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