IKN #297Premium

The IKN Weekly
Week 297, January 18th 2015
Contents
This Week: Adding to the Starcore Intl (SAM.to) long, MLK Day tomorrow, A good week for
the portfolio, Helvetia in a handcart: Why I own gold (and why you should, too).
Fundamental Analysis: First Majestic (FR.to) (AG) and Fortuna Silver (FVI.to) (FSM) 4q14
production numbers.
Stocks to Follow: Overview, Starcore Intl (SAM.to), Reservoir (RMC.v), Coro Mining (COP.to),
First Majestic (AG) (FR.to), Fortuna Silver (FVI.to) (FSM), Rio Alto Mining (RIOM) (RIO.to),
Dalradian Resources (DNA.to), GoldQuest Resources (GQC.v), B2Gold (BTO.to) (BTG), Minera
IRL (IRL.to) (MIRL.L).
Copper Basket: Overview, Capstone Mining (CS.to), Panoro Minerals (PML.v), NGEx Resources
(NGQ.to).
Low Cost Producer Basket: Overview, Buenaventura (BVN).
Regional Politics and Market Watching: Rio Alto Mining (RIO.to) (RIOM) 4q14 production
and 2015 guidance thoughts, A word on the Canadian Dollar (CAD) forex rate with the US
Dollar, On the subject of forex: Peru’s cheaper by the day and there’s more to come, Ecuador:
Intag, Lake Shore Gold (LSG.to): A week is a long time in politics.
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
Adding to the Starcore Intl (SAM.to) long
The only change to The IKN Weekly ‘Stocks to Follow’ portfolio this weekend is that I’m going
to add to the new and small Starcore (SAM.to) position. Last week 12c was generally available
and that’s what I’ll be shooting for as my addition price. There’s a small piece on the reasons
for this addition in ‘Stocks to Follow’, but I’m really still basing the trade on the previous
analysis in IKN290, then the re-visit in IKN292.
MLK Day tomorrow
Independence days, though important and worthy, are typical around the world. Religious
holidays (Easter etc) come from a different place. Thanksgiving and MLK Day are the reasons
for US Citizens to feel justly proud of their annual holidays schedule and, why not, their country
too. Due to tomorrow’s date, the US markets are closed Monday and Canada trading is likely to
be light. In equities at least, let’s see how this disruptive January shapes for other issues.
In other news, the main macro event of the week looks set to be European rather than
Stateside, as the ECB keeps us on tenterhooks with, “To QE or not to QE, that is the question”.
I think EuroQE is now baked in, personally. We’ll see.
A good week for the portfolio
"And what is well and what is badly—need we ask Lysias,
or any other poet or orator, who ever wrote or will write
either a political or any other work, in metre or
out of metre, poet or prose writer, to teach us this?"
1

The Phaedrus, Plato (standard translation)
A clear statement; This was a good week for The IKN Weekly’s portfolio. It wasn’t perfect
because they never are perfect. No I don’t own or reco ‘that stock’ which flew harder and
faster. Indeed I talked about Troy Resources as a good buy at 50c or so instead of doing
anything about it and watching from the sidelines as it shot to 70c. Yes I sold Argonaut at
$2.53 instead of $2.90*, no they didn’t all go up, yes I thought about selling First Majestic (AG)
(FR.to) on Tuesday at its highs but did nothing. You and I can write lists and fill pages of things
that didn’t go right and what fun we could have doing so.
Once upon a thirty years ago I was a glass-half-empty person. Once upon a fifteen years ago I
was a stupid and ignorant person. Today I’m still a stupid and ignorant person, but now I see
my stupidity and ignorance for what they are and it’s much easier to live with them. However,
that glass-half-empty thing has disappeared as my passage through time has taught me to
appreciate life’s positives, be aware of the present, not get trapped in this modern and constant
“When X happens I’ll be happy” psychosis, give thanks when good things come your way,
remain thankful when good things come and stay for longer. And that’s the trick for this edition
of The IKN Weekly and the ones that follow, let’s see if we can make a few correct decisions
and keep the good as a welcome guest a while longer.
*Even more happiness: It couldn’t make $3 even when it should have
Helvetia in a handcart: Why I own gold (and why you should, too)
“We are not wholly bad or good
Who live our lives under Milk Wood”
Under Milk Wood, Dylan Thomas, 1953
When it comes to the money events in and around Switzerland last week, it’s difficult to recall
an episode in recent financial times when there was such a massive, ten tonne, snorting,
stomping elephant in the room and how the spectrum of Very Serious People made such a
concerted effort not to talk about gold. And in the end it’s not a difficult subject nor a hard
concept to grasp. It’s also one of the mainstay arguments of the hard-core goldbugs so I
suspect the moment I announce my full and unequivocal adherence to it I’ll be pigeonholed and
labelled as “one of those nutbars” (sorry to disappoint in advance and head y’all off at the pass;
I’m not a goldbug, I’m an owner of gold).
Gold has no counterparty exposure.
But let’s not jump the gun, let’s take Dylan Thomas’s advice and begin at the beginning. The
important near-term effect of the move by the Swiss National Bank (SNB) to remove its hard
peg (1.2/1) against the Euro was not the price move of precious metals, particularly gold. Not
in the near-term at least. The important near-term effect is found inside stories such as this one
(1) and here’s an extract (IKN bold-type):
Alpari, the London-based brokerage firm that sponsors the shirt of English Premier
League football club West Ham United, said it had to shut down its business.
In a statement, the firm said the majority of its clients sustained losses which exceeded
their account equity. "Where a client cannot cover this loss, it is passed on to us," it
said. "This has forced Alpari (UK) Limited to confirm today that it has entered
into insolvency."
The scale of anger within the firm is evident in a note that its market analyst, Craig
Erlam, published Friday before news of the wind-down. Bemoaning the "idiotic
actions of the SNB," Erlam warned over the "longer term impact on the markets."
Alpari's demise follows that of Global Brokers NZ., a small currency trading house
in New Zealand.
Its director, David Johnson, announced on the website of affiliate Excel Markets, that it
could no longer meet the regulatory minimum to continue business.
"News of the impact of this event on companies and traders is just beginning to come
to light," he said. "As directors and shareholders we would like to offer our sincerest
2

apologies for this devastating turn of events."
The two could be joined by FXCM, a New York-based currency broker, which has
already warned that it "may be in breach of some regulatory capital
requirements" after its clients experienced significant losses. Those losses, it said in a
statement, "generated negative equity balances owed to FXCM of approximately
$225 million."
Traders aren't hopeful. FXCM shares are down a staggering 74 percent in pre-market
trading following a 15 percent fall on Thursday.
Other firms, such as CMC Markets in London, said they can absorb the hit. Though its
chief executive, Peter Cruddas, conceded that the firm sustained losses, he said the
overall impact has not materially impacted the group. "It's business as usual," he
insisted.
We’ve had other “non-material impacts” reported by other financial institutions, a phrase used
in a context that made me laugh as the mere fact they’ve had to announce them (and will have
to announce them, as there are surely more to come) makes these impacts material by nature
and definition, it’s whether they’re large or small compared to the size of the shop that will
make them important. Semantics aside, we’ve had Barclays and a hit in the “tens of millions”,
Deutsche Bank out by perhaps $150m, Interactive Brokers having to bear the brunt of non-
coverable client losses to the tune of $120m (at least IB issued an official statement and noted
liabilities came to around 2.5% of IB’s net value, which as an account holder was a personal
positive). And be in no doubt, there are more to come. The big shops will take their hit and
move on, the medium-sized may suffer longer, some small shops may have to close. UPDATE:
After writing up this note, news of the demise of a $830m dollar hedge fund, Everest Capital
Global Fund, is now doing the rounds Saturday afternoon. That’s more than just a “small shop”.
Details here (1a).
And the reason for all these losses, be they paper or real or job-in-suit? A top financial
executive in Switzerland, supposedly the most reliable, dependable and financially boring
country in the world, went and did something unexpected. Oh, the horror! And if I’ve seen the
word “stupid” used to describe Thomas Jordan (head SNB honcho and where the buck
ultimately stops) and/or his decision, I’ve seen it a hundred times from the financial
mainstream, e.g. it peppers this note (2) from economist Scott Sumner who then goes on and
ends this way:
But there is a lesson here. Just as war is too important to leave to the generals,
monetary policy is too important to leave to the central bankers. Once again we see
the markets are way ahead of the central bankers. One more example of why we need
market monetarism. Let markets determine the money supply, interest rates and
exchange rates. Peg your currency to NGDP futures prices. And if you are not going
to do that, then for God’s sake level target SOMETHING.
Sumner goes off on his personal agenda of Nominal GDP targetting (and the new NGDP futures
market, in which he has a central role) and that’s his right; he’s a smart guy and he’s brought
NGDP-think into the midst of macroeconomic debate largely single-handedly over the past five
years, which is good. But he also touches on a point repeated in many places about central
bankers and about the anchor of policy, that of trust in Central Bankers. Financial types have
placed their absolute trust (up to and including their employment status, reputation and net
wealth, see above) in the people who run central banks. What they’ll tell you is CBs are to
“anchor” or “lock onto” or “target” their policies, what they really mean is to make money. Lots
of money, lots of easy money. And now that trust has been vaporized and...oh again the
horror!...by the Swiss of all people. The Swiss! Gnomes of Zurich, accurate timepieces, discreet
bank accounts, enter the meeting room at 12:01 and expect a frown. Last week’s episode is big
because it’s about the trust one party places in another to make the money world go round.
Suddenly the people the really big moneymakers trusted, well they can’t be trusted any longer.
The SNB has showed, in one quick and very painful move (for some) that risk is much higher
than the mainstream financial world ever suspected. Call it the risk/reward balance, call it
counterparty risk, call it VaR (value-at-risk), it’s all the same thing. “How dare a sovereign state
do something that’s good for the sovereign state and not for us!”, they snort as one, to which
Jordan replies (3), “SNB is an independent central bank. It is our prerogative to prepare our
3

decisions on our own”. Jordan is now “the most hated man in finance” because he caught a
very large number of self-important people off guard, causing them to lose money and look as
they truly are, lazy and complacent, in the eyes of their paymasters.
Paul Krugman’s double-article take on the Swiss affair last week also caught my attention (4)
(5). He too zeroes in on the aspect of trust in the Central Bank mechanisms and how that
particular hull was well and truly holed, which agrees with the consensus (after all it was my
own first thought, so macroeconomic minds far greater than mine are duty-bound to see the
most obvious). But with Krugman, as with so many others last week, it was the subject he
didn’t mention that screamed loudest. His gold-mocking credentials are well known, he even
mentions the metal in his piece but in another context (FDR and the gold standard) so it wasn’t
as if the aspect of what gold is and what it does and why great lumps of it sit in Central Bank
vaults was a missing thought. But when the conclusion to his note arrives...
Two things to bear in mind. First, having in effect thrown away its credibility – in today’s
world, the crucial credibility central banks need involves, not willingness to take away
the punch bowl, but willingness to keep pushing liquor on an abstemious crowd – it’s
hard to see how the SNB can get it back. Second, there will be spillovers: the SNB’s
wimp-out will make life harder for monetary policy in other countries, because it will
leave markets skeptical about whether other supposed commitments to keep up
unconventional policy will similarly prove time-limited.
...and although he makes a spot-on point about the punchbowl, he can’t bring himself to
mention the absolute obvious about gold in light of the Central Bank decision. And that brings
us back to the ten tonne snorting elephant in the room, back to the Very Serious People (which
of course includes Krugman, even though he uses the
same phrase non-stop to mock his opponents), back to
the non-counterparty advantage that gold brings to the
table and why it popped hard last week. On this subject
I’m in complete agreement with the most hardcore
goldbug you’d care to mention. I’m two-thumbs-up with
all the libertarian-leaning monetary thinkers and self-
styled gurus. Jim Sinclair? Yup. That King guy whose
first name eludes me that runs King World News? Count
me in. Doug Casey? Yep, he’s always been right on this.
On other things we disagree, but on this one Casey’s
been constantly and consistently correct for decades.
Don’t own gold to be rich because gold doesn’t make
you rich, it stops you from becoming poor. Gold has no
alpha, it’s not a vehicle for speculation and while we’re
at it, if you want to know whether it’s an asset class or
a simple commodity like all the other commodities (as
we’re told non-stop by people without the first clue of
the stuff) just check the recent price chart for nickel. And copper. And lead. And zinc. See much
storing of value in those materials? No, me neither.
For sure I play the market. I speculate with the rest of them and that’s the reason this
publication exists. Buying and selling mining stocks, be they copper, moly, gold, vanadium,
quartz, silver, uranium, frac sand or any other miners, is speculation and the act of playing on
the market. But there comes a time when the playing has to stop and you put your serious
financial face on, you think about your kids, you consider what type of life you want when our
charming capitalist society decrees that it has no use for you any longer so can’t you just go
prune some roses or take a cruise or just get out of the way and stop blocking the road with
your slow moving vehicle, please? Which is the time that gold bullion enters the scene. Owning
Rio Alto is very different from owning the thing that Rio Alto produces, period. It’s not just a
different set of priorities, it comes from a whole different place financially speaking. Personally
my needs and wants are modest, but I still own gold because I know that even my reasonable,
normal, comfortable, unobtrusive, undemanding and pleasant middle class lifestyle could be
4

stripped away from me if I’m not careful. Owning gold is the act of being careful. And if that
applies to me, what kind of magnification applies to the people who are world-level wealthy and
worried that their wealth might be taken away from them (thoughts that must lie on a deep
inner level of their personal circles of hell)? Those are the people who have placed their trust in
Central Bank policy and last week watched as their sure thing set-up took a very hard hit. How
many of them, this weekend, are asking their financial advisor why they don’t own any/much
gold? These are the people who don’t need to get rich, their overriding desire is to avoid the
potential of being poor. They want minimum risk, zero risk and in things such as the Swiss
Franc they thought they had one. Today, for the first time ever, Switzerland is a land where
negative interest rates apply to savings and even to its bonds. Give them a thousand and they’ll
give you back 999, that’s not going to go down well with the serious money.
The ownership of gold removes you from the 10-1 chance, the 100-1 chance, the 1,000-1
chance the (here comes the SNB) 1,000,000-1 chance that a human being on the other end of
the line does something that suits him better and suits you less, thus costing you money (the
mainstream call it “stupid”, see above). Owning gold isn’t about its monetary value today, or
tomorrow, it’s about its monetary value all the time no matter what system of government,
what currency you buy your bread in, whether you must bow your knee to a king else get
thrown in jail, whether you can call your head of state all the names under the sun in public
without issue. Though some do have grey areas, the value of just about every other asset class
is dependent on a calculation that involves you + thing + other person’s opinion. But not gold,
with gold it’s you + thing, there’s no Thomas Jordan around to mess your relationship up.
Last week was no ordinary week for gold. We can expect the media to minimalize or even
ignore the issue and hope it goes away, but this time it really is different. I have suspicions but
don’t really know how it’s going to affect the price of gold in the next week or even the next
month. But a year from now? Gold under U$1.3k? No way.
Fundamental Analysis of Mining Stocks
This week we check out the 4q14 production numbers posted by our silver pair, the long First
Majestic (AG) (FR.to) and the short Fortuna Silver (FSM) (FVI.to). We also consider their 2015
guidance parameters and come to some sort of a conclusion on whether to keep rolling with
the two trades. First FR.to, then FVI.to.
First Majestic (AG) (FR.to)
In the great wide scheme of things, FR.to’s numbers were better than FVI.to’s, which is good
because FR is the long and FVI is the short. However, FR’s results require a look at the mine
breakdown because some operations were definitely better than others.
FR.to: Consolidated production,
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
5
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
Ag/AgEq
other AgEq prod
total silver prod
source: company filings
...and here’s one of the charts I stuck on the blog last week (6) once the numbers had been

published (7) Tuesday 13th, the one that shows silver equivalent production via a per-mine
breakdown.
FR.to: Silver Equivalent production, per qtr
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
6
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
Oz AgEq
La Guitarra AgEq
Del Toro AgEq
San Martin AgEq
La Parrilla AgEq
La Encantada AgEq
source: company filings
It’s pretty easy to gauge by simple eye-scan the drop in importance of the La Encantada mine,
the way La Parrilla is now a cornerstone and the emergence of Del Toro as a new and part of
the company. So with sweeping overview done, here come charts and comments on each
operation.
La Encantada: Non-silver production at La Encantada is a tiny minimum (under 4k oz AgEq)
so the production chart here is about silver only, and here’s how it looks:
La Encantada silver production, per qtr
1200000
1000000
800000
600000
400000
200000
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
Oz Ag
source: company filings
The 788.369 oz Ag produced in Q4 was the second disappointing number in a row from what
used to be considered (perhaps still is) the flagship operation of FR.to. The problems stem from
a combo of continuing low throughput tonnage, recoveries that dropped back to 53% in Q4
La Encantada: Quarterly throughput
600000
500000
400000
300000
200000
100000
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
metric tonnes FR.to: La Encantada avg recovery %, per qtr
processed 70%
60%
50%
40%
30%
20%
10%
0%
source: company filings
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
source: company filings

and average grades that moved above 300 g/t in the first half of 2014 but are back at the 250
g/t or so level again. Together, these parameters
strongly suggests FR.to is saving money by mixing
in the high manganese grading tailing again,
something it told us would be a thing of the past in
2014.
FR.to reports that the production capacity upgrade
to 3,000tpd was still on track and scheduled
complete and on line by July 2015. With this the
company expects production to pop back higher
and the 2015 guidance for the mine (see table
below) is 4.0m to 4.5m oz, or an average of 1m to
1.125m per quarter (presumably back-end-loaded).
This was again the weak link in the FR story this quarter. Report card: Must try harder.
La Parrilla: This chart...
FR.to: Production at La Parrilla mine
1400000
1200000
1000000
800000
600000
400000
200000
0
7
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
FR.to: La Encantada silver grade, per qtr
350
300
250
200
150
100
50
0
Parrilla other AgEq prod
La Parrilla Ag
source: company filings
...is all we really need to know today. What we see is dropping silver production (646k) due (so
the company says) to restricted access in the San Marcos mine area of La Parrilla, but thanks to
high grading zinc material from the Vacas mine part of La Parrilla the AgEq number (1.16m) has
stayed on an even keel. FR.to has reported niggling problems at La Parrilla for a couple of
quarters, so presumably there’s improvement potential if it gets things straight. Guidance for
2015 (see below) looks to set this operation at around 700,000 oz Ag per quarter on average,
which suggests La Parrilla will operate at-or-around current numbers in the year ahead.
Del Toro: An excellent quarter from this mine, which papered over the small cracks in other
places and made the difference between the consolidated company posted 3m+ oz of silver.
When it comes to the pure silver production,
we quote the company NR for the reasons
things were good: “The increase in production
was primarily due to a 31% increase in
throughput, a 14% increase in silver grades
and an improvement in silver recoveries from
68% to 75%”. As for AgEq, Del Toro hit a high
grading sulphide area, heavy with lead, that
shot production up to 7.91m lbs, a new record
by quite way.
Del Toro’s quarter may turn out to be a one-
off bonus. FR’s 2015 guidance for the mine (see below) is for a maximum of 2.9m oz silver and
4.2m oz silver equivalent, suggesting that something a little over 700k oz Ag will be the 2015
quarterly average, rather than Q4’s 818k.
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
g/t Ag
source: company filings
FR.to: Del Toro quarterly production
1400000
Del Toro other AgEq prod
1200000
Del Toro Ag
1000000
800000
600000
400000
200000
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14
source: company filings

San Martin: This operation stuck in a good quarter in Q4 and here’s the comparative chart to
prove it.
FR.to: San Martin production
800000
700000
600000
500000
400000
300000
200000
100000
0
8
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
Ag/AgEq
San Martin other AgEq prod
San Martin Ag
source: company filings
• Pure silver production came to 592,698 oz
• Non-silver production in AgEq terms came to 105,907 oz
• Therefore total Ag Eq production came to 698,605 oz
All three of those numbers are records for the facility and FR.to credited its strong quarter to a
5% increase in silver grade and a 6% increase in recoveries. According to the basic level figures
offered up in the NR, the company has cut down on exploration and development, which is
certainly a cost cutting move in light of silver prices. We should see similar figures for the
current quarter, but it’ll be worth watching out for any drop-off due to a lack on investment as
2015 matures. As the 2015 guidance chart (see below) shows, FR.to is forecasting a quarterly
average of 500k Ag from San Martin in 2014.
La Guitarra: FR’s smallest working operation returned figures that looked like this:
FR.to: La Guitarra quarterly production
600000
La Guitarra AgEq
500000 La Guitarra Ag
400000
300000
200000
100000
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14
source: company filings
That was a strong quarter, with FR telling us it was due to mining from the newly developed El
Coloso zone at the mine. The guidance for 2015 for La Guitarra is set at between 1.2m oz and
1.3m oz AgEq. That suggests we’re going to see production at an average of a little over 300k
oz AgEq per quarter, substantially lower than 2013 or 2014. It’s also a little strange, something
we’ll pick up on below.
Not so pure silver these days: Before leaving the 4q14 numbers and taking in the 2015
guidance table offered up by FR.to last week, here’s a different version of the chart I put on the
blog last week that shows the percentage of revenues at FR.to coming from pure silver. All the
way to the end of 2012 it was above 90%, which made the company be known as “the pure
silver miner”. Not any longer folks, because at 72% today it’s on a head-to-head level with
Fortuna Silver and others of its ilk. These days FR is significantly exposed to the vagaries of the
zinc and lead markets and as you may have noticed, they’re not doing half as well as gold and
silver in 2015. It’s certainly one to keep in mind.

FR.to: Percentage of pure silver in total silver equivalent
production, per quarter
100 97 97 95
95 93 91 91 90 90 89
90
85
85 80 80 80 80
80 76
75 72
70
65
60
55
50
9
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
% pure Ag
source: company filings
First Majestic 2015 guidance: Here’s the chart they gave us, it has all the figures I
referenced in the individual mine comments above and the consolidated totals, which interest
us more at this point:
The basic numbers to know are 11.8m to 13.2m oz silver, 15.3m to 17.1m oz silver equivalent
for 2015. That means FR is taking the
2014 production numbers as its
FR.to: Annual production and 2015 guidance
baseline for this year. If we take the
(using mid-point of 2015 guidance figures)
18
midpoints of the 2015 guidance
16
numbers (12.5m oz Ag, 16.2m oz
14
AgEq) and compare them to the last
12
four years of the company, it looks like
10
this right.
8
6
So FR is guiding us slightly higher, but
4
for me this guidance has all the
2
trappings of a company trying to
0
severely underpromise the market. As
2011 2012 2013 2014 2015est
we went through the component parts
source: FR.to filings
of FR above, guidance figures for Del
Toro, La Guitarra and La Encantada look very much to the low side. As things shape, FR.to
should offer better quarters in the second half of 2015, so if Q1 comes in at 4m+ oz AgEq, the
smell of UPOD (under-promise/over-deliver) will be even stronger.
Revenues estimates: We’ve already done work on this and after these numbers, all I’ve
really done is made some adjustments to the model. We’ll know more in mid-March once FR.to
reports but until then I’m going with just two charts to give you some parameters.
This one shows operating income, which I have estimated at $23.5m. As things stand I’m
expecting some write down on mineral assets in the YE financials so net net profits for the
quarter may be hit. Therefore operating profits gives a better straight line on the day-to-day
qEgA
zo
M
other eq
ag

health of FR, despite the quarter being skewed by the 934k oz silver that was left unsold from
3q14. That helps boost things of course
FR.to: Operating Income per qtr
45
40
35
30
25
20
15
10
5
0
-5
-10
-15
10
90q1 90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
source: company filings, IKN ests for 4q14
srallod
fo
snoillim
As for the key balance sheet feature of working capital, that’s looking in better shape. It’s not
an easy one to nail down pre-report as there are plenty of moving parts, but for the time being
I’m going to stick my peg in the $27m point for this metric, that’s plenty higher than 3q14 and
should alleviate the rumblings about a cash crunch here.
FR.to: Working Capital per qtr
120
110
100
90
80
70
60
50
40
30
20
10
0
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4
source company filings
srallod
fo
snoillim
Bottom line: Last week FR.to offered us a decent set of Q4 figures and a reasonable, if
somewhat conservative, guidance figure for 2015. As I’m sure you’re aware by now, the market
took the opportunity to sell FR.to on the report news, the stock peaking Monday/Tuesday
morning and fading fast. We did see it recover with the others as the week rode on and
tonight, its U$6.24 CAD$7.45 still looks competitive, and cheap in a rising silver environment (if
that metal keeps up the good work).

Fortuna Silver (FSM) (FVI.to)
A less complicated company to cover, for the simple reason that it has just two operations. The
4q14 production numbers turned up on Thursday pre-open (8) and the main numbers look like
this compared to previous quarters. Here’s the silver chart:
Fortuna Silver (FVI.to) (FSM): Ag production by qtr
2000000
1800000
1600000
1400000
1200000 1215100
1000000 917668 997035 1101411 1083215
800000 100790 377377 468865486296 502835 491181 492773 580570 536191
600000
400000
200000 559959 536426484226509897524906 519549 499445493438568722 542457539824 529011 588727 544977
0
11
11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
source: company filings
rtq/gA
secnuo
San José Silver prod (oz)
Caylloma Silver prod (oz)
Here’s the gold chart:
Fortuna Silver (FVI.to) (FSM): Au production by qtr
11000
10000
399 335
9000
8000 542 562
7000
632
6000
780
5000 640 847 502 9352
4000 514 532 545 7627 7957 8561
3000 6420
2000 4497 5066 4501 3854 3960 4681 3970
1000
0
1q12 2q12 3q12 4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14
source: company filings
rtq/uA
secnuo
Caylloma Gold prod (oz)
San José Gold prod(oz)
As usual, we confine the Caylloma Pb and Zn base metals production to by-product credit
status.
When it comes to analyzing a long position, I always prefer to bake in conservative figures that
allow surprises to be good ones. And the reverse is true, so with the current FVI short it’s best
to give the company benefit of the doubt, bake in a best (or at least better) case, try to knock
holes in your own short case. Therefore is the correct thing not to be too critical of the 4q14
production numbers from FVI in order to avoid my own bias confirmation but still, there’s no
way round it, the totals of 1.628m oz silver and 8,896 oz gold produced in 4q14 were at very
best only just managed to meet market expectations. Or put another way, if I were wildly long
the stock I wouldn’t be happy with those numbers.
2015 guidance: As for 2015 guidance, here’s the table FVI gave us in its NR:

If we take the pure silver production guidance as our guide (which in the case of FVI has
always proven to be a fair yardstick) this
is how the 6.5m oz projected for 2015
FVI: Silver production per annum, with 2015 guidance
Moz Ag
stacks up against the previous three years
8
(i.e. since San José has been operational).
7 6.599 6.5
6
And again, I’d like to be generous here. I 5 4.631
3.988
understand that San José has reached a 4
maturity point and is likely to move ahead 3
on production once the capital works to 2
upgrade its production from 2,000tpd to 1
0
3,000tpd are complete by (FVI-estimated)
2012 2013 2014 2015
mid-2016. At that point and according to source: FVI filings
CEO Ganoza (9) the company expects to
be a 9m oz silver producer (though straight line calculations from current production puts it
more at 8m oz/year, so maybe FVI has something up its sleeve for the missing million). But
still, that 2015 column doesn’t stand prettily next to the year just gone, nor does it look as
interesting as the FR.to guidance and from a personal view, I see less chance of FVI being able
to under-promise on this one.
As for the cash costs guidance for 2015, we see the AISCC (all in sustaining cash costs, i.e.
everything but the financials and the tax) for each mine, while the consolidated AISCC guidance
is $16.61/oz Ag (which includes corporate G&A). Remember that figure is for silver only and
assumes all other metals, including gold, are used as a cost offset. Therefore at U$17/oz FVI is
just about breaking even but you’re not going to get any profit of note until silver passes
through U$19/oz (~U$13m, or 10c/share on the year). Now again, agreed that San José will
enjoy a build-out in 2015 and come mid-2016 will run at a higher throughput, but at current
metrics I’m forced to assume, shorter or not, that unless silver puts in a big pop FVI is a
company that’s running to stand still this year.
Bottom line: In the last 12 to 24 months FVI has assumed a role of market darling, almost
market leader in this sector. I’ve never
said it was a bad company (quite the
contrary, it’s well run and several cuts
above the average drossy silver stock)
but I am saying it’s an overvalued
stock. My short thesis never really
rested on these Q4 production
numbers, it’s more about what
happens when FVI updates its
reserves/resources in February and
then the big moment when it files its
Year End financials, mid-March. Until
then I’m staying short and as things
stand today, I believe FVI is either
valued to the penny on optimistic
outlooks for silver, or just plain
overvalued. Short and staying that way.
12

Stocks to Follow
Nine of the 13 positions open this time last week made gains, so no point in listing them but we
will list double-figure percentage winners Dalradian (DNA.to up 13.0%), Minera IRL (IRL.to up
11.1%) and Focus Ventures (FCV.v up 11.1%) with a hat-tip to the 7.8% gain in the biggest
position, Rio Alto. There were two names unchanged week-over week (AG and COP.to, I sold
my COP.to at 3.5c) and two losers (NCQ.to and GQC.v).
With last week’s sales of the copper-exposed Coro (COP.to) and Reservoir (RMC.v) we’re down
to just 11 open positions on our our ‘Stocks to Follow’ list, four less than our self-imposed
maximum. Three are in the green, one is unchanged since conception, seven 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$3.30 43.5% 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$2.52 8.6% V good entry point now
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$0.87 20.3% Nov'14 tgt $1.25, top Au expl
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.20 -13.0% tgt 50c, avged up, 1q15 news
Starcore Intl SAM.to ADDING C$0.12 10-jan-15 C$0.12 0.0% new position, tgt 19c
First Majestic AG hold 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$0.71 -32.4% small Cu play low vols, hold
Minera IRL IRL.to hold C$0.27 22-jul-12 C$0.05 -81.5% Waiting for financing news
GoldQuest Min. GQC.v hold C$0.26 27-oct-13 C$0.12 -53.8% no point selling so cheaply
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.40 -65.2% solid biz model, LT hold
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$4.75 -15.3% In pair trade with AG
Smaller/Riskier
none at moment
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
Reservoir Min. RMC.v jan'14 C$6.05 18-jun-14 C$4.12 -31.9% sold on Cu downturn
Coro Mining COP.to jan'14 C$0.075 26-jan-14 C$0.035 -53.3% sm, sold on Cu downturn
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
Starcore International (SAM.to): ADDING. The reason to add to my SAM.to position is
simple enough; I want more risk exposure in the light of last week’s events. SAM.to hasn’t
budged from its 11.5c-12.5c trading range (yet), it looks as though there’s a persistent seller
there (for the moment) and I’m going to take the opportunity to add without raising my cost
average. The fundies of the story haven’t changed since the IKN290 analysis (plus the short
IKN292 update) so I’m fully aware about how I’m taking a gamble on the quarter production
numbers (its quarter ends January 31st). With this kind of smallfry company, 500 oz of
production either way moves the financials a great deal, it only needs a rich section of ore/a
weak section of ore to go through your machine and the quarter is changed.
Though be clear, this is no Rio Alto or Argonaut sized position, I’m adding to a small position
only to make it “less small”, it won’t even come close to my idea of medium. So it’s a risk, but I
have cash to work with thanks to the recent raisings (AR.to, RMC, COP.to) and it’s the right
kind of market to push the risk profile out a little further while I ponder on whether to get really
13

serious and buy a chunk of LSG.to (see below).
Reservoir Minerals (RMC.v) and Coro Mining (COP.to): Positions sold. As per the Flash
update of Wednesday (see appendix 1) these open positions are now booked losses. IKN294 on
December 28th was the place where the serious copper face was put on and the strategy to
confront potential weakness in the price was discussed. Here’s a chunk of that script by way of
reminder:
I’d already let ARG.to drop the week before (for what it’s worth, my average out price of 28.5c
compares to Friday’s close in ARG.to of 26c) when the $2.80/lb line was broached. So when
copper stopped beating around the bush and made a clear downmove, the path was clear and
set, RMC and COP were dumped. And so be it. Two positions that had been net losers for a
long time are lost and my bullish position on copper is now a thing of the past, there’s no hiding
away from facts.
As noted in the Flash update, cutting the lines on COP.to was a simple decision based directly
on the copper price, but selling RMC.v was more difficult. By way of a little more, after receiving
feedback from long-time reader DL on the decision who said (paraphrasing) that he’d been
thinking of selling as well but the chances of it being bought out are high so the option is to
stay in, here’s what I wrote by way of a reply:
Totally agree [name redacted], the risk of selling RMC is that FCX moves for it while
i'm out. Not only that, but FCX has a board that's independent of spirit and won't be
afraid of potentially pissing off its shareholders by making a countercycle move.
However, i highly doubt RMC will allow a friendly deal at these low prices (by which i
mean anything under $5) and the alternative is FCX going hostile, which would be risky
(considering the prize). Therefore i think i can get away with selling and not being long
at the critical moment.
RMC is the one i'll buy back first, if copper cleans up its act. If that's any help.
14

After that DL replied and noted the market support for the stock, his observations underscored
as the week wore on and RMC managed to rally (on low volumes) while most every other
copper stock of note continued to go South. So no, it’s never an easy call to sell a world-class
discovery and stand-out rocks at a loss (the loss due to my badly timed buying, not anything
that RMC did or didn’t do) but the reality of the copper market and the desire to raise (more)
cash is stronger, for the moment at least. As noted to DL, RMC is a company I’ll buy back if
copper gets friendlier to trading positions but for the moment I’ll be a coward about it and run
and hide.
Fortuna Silver (FSM) (FVI.to) and First Majestic (FR.to) (AG) Pair Trade: First the
updated chart of the pair, with AG in gold (+22%) and FSM in blue (+3.5%). Therefore this
pair is 18.5% to the good.
As for more recent action, this ten day chart shows the pop into AG’s 4q14 production release
and the subsequent drops (a.k.a the place I should have sold instead of holding, see the Flash
update of Wednesday 14th in appendix 1)
We also see a Fortuna Silver (FSM) (FVI.to) that’s flatlined for the last ten days and has even
seen the metal out-do it by around 10%. Now that could mean that FVI moved fast and first
and has less left to move from here, it could mean the rally is tired, it could mean there’s
negative news in the pipeline or it could of course mean that I’m reading way too much into a
ten day price chart. But what I do know is that it confirms my short-thinking about the stock, as
least for the time being.
15

Rio Alto Mining (RIOM) (RIO.to): The Rio Alto bit got long, so I stuck it down in ‘Market
Watching’ below. Here let’s note the decent share price action and move on. The $3.44 printed
last week was a new 52 week high for RIO.to and although it couldn’t hold that level....
...the $3.30 close is a pleasant number. Onwards.
Dalradian Resources (DNA.to): A stock that punched through the apparent resistance zone
(you know how I love that TA), a distinct pick-up
in traded volumes (1.5X to 2X the three month
average all last week), a junior exploreco that
was in the front rank of movers in the gold
sector (most of the best moves came from
producers). All these things are good things and
the patience awarded to DNA is starting to see
some reward. This 12 month chart tracks the
drop and the rebound in the DNA price chart, the
drop was nothing out of the ordinary for the
sector in the second part of 2014 but it’s good to
see how well and quickly it’s come back. I think
we got a live one here.
As for a bit of fundamental valuation, as at this evening the in-situ gold at Curraghinalt is
valued by our model at U$31.64/oz (pink shaded):
DNA.to Curraghinalt in-situ gold valuation
at 3.5m oz Au shares outstanding
PPS (S) 140m 160m 180m 200m
0.60 21.82 24.94 28.05 31.17
0.70 25.45 29.09 32.73 36.36
0.80 29.09 33.25 37.40 41.56
0.85 30.91 35.32 39.74 44.16
0.87 31.64 36.16 40.68 45.19
0.90 32.73 37.40 42.08 46.75
1.00 36.36 41.56 46.75 51.95
1.20 43.64 49.87 56.10 62.34
1.50 54.55 62.34 70.13 77.92
2.00 72.73 83.12 93.51 103.90
source: IKN calcs, U$0.90=CAD$1
16

For the grade and project economics shown (so far) at the project that looks pretty cheap. Also
our model still uses a preferred (and conservative) U$1 = CAD$0.90 forex, so if the current
forex was factored in that valuation would drop to under U$30/oz. It doesn’t include the high
chances of extra ounces from further exploration, either. My current price target zeroes in on
the salmon (orangey? dark flesh? why does Excel have this colour?) shaded quartet of in-situ
prices, all of which I believe to be eminently makeable even before the inevitable offer from a
larger miner comes in. The 160m share band is included because DNA.to will probably need to
top up on working capital for 2016, it all depends on how this year goes. Anyway, $1.20 would
be a new 52 week high and a price unseen since the 1q13 gold price drop, but on fundies
there’s no reason for it not to happen.
GoldQuest (GQC.v): GQC didn’t hold onto the 40% gain of the previous week and in general
terms gave half back on weak-ish weekly volume. Can’t say I’m surprised, can say I’m a little
disappointed. We also had news from the company on Tuesday (10) that it had picked up
another 550 hectare package for its Tireo project and the new package includes some of the
specific targets it wants to drill in the 2015 season. The good thing about GQC is that it has
money in the bank and can get to work drilling and doing the things that small explorecos are
supposed to do.
B2Gold (BTG) (BTO.to): I’m holding back on comments for BTO, as its 4q14 production
numbers (plus normally they give preliminary revenues) are coming soon so off those, as well
as any clues given on the state of the
development projects, it’ll be time to take
a closer fundies look at the company. But
a few words on the decent and sustained
rebound we’re seeing in the stock are
justified, as this chart plus the type of
ramping in volume we’ve seen in BTO in
2015 has all the signals you want for this
well-known volume monster. Word on the
street about the upcoming numbers is
positive (and it’s known as a bit of a leaky
boat too), so when the numbers hit we’ll
step aside and take a good hard look at
BTO, probably via a NOBS update report.
Until then, absolutely no selling of this one
please. Hold is the minimum call, buying or adding in a rising gold situation is fine by me.
Minera IRL (IRL.to) (MIRL.L): During the week I took more mails about this Saint Jude
Thaddeus of a stock than just about any other. Well no, that’s a bit of an exaggeration, but I
had mails from four different readers with IRL in the title line. The contents were all on the
optimistic side too (I admire you all) and echoed the way I’ve been itching at the stock at its
current five cent price (or 4.5c).
The premise is simple: In a rising gold price scenario, the chances IRL doesn’t just get a deal
done but gets a good, equitable, shareholder friendly deal done on its Ollachea mine capex
package start rising. If so, the stock will pop hard, it’ll be back in the game, live again etc etc.
And yes I agree, and yes it’s tempting and also yes, I’m going to try and track down the
management in the next couple of weeks (most likely last week in January) in order to know or
find out how things are going since the last update (late December, still working on it).
BUT, as things stand I cannot change my position on the stock and rest easy at night. It’s been
a “hold and let’s see what happens” for far too long already and although I still hold faith in the
company, because they’re decent honest people who deserve support and a bit of extra loyalty,
it’s still undoubtedly a big fat horrid black mark fail blotch on my (not very pristine at all)
copybook. It’s a case where I’ve swallowed the story and should have steered clear once the
deadlines weren’t met (see PML.v below, I’m as guilty as hell here). All the same, I’m going to
17

stick to guns and hold the stock until the Ollachea deal pops out the other side, but that also
means it’s a hold, an official, standard not adding any more hold until material news
arrives (block typed and underlined for a reason).
Despite the heavy financial/percentage loss, I’m calm about holding through (and perhaps
that’s wrong of me too, the mistakes multiply). But until something real happens, I see no point
in trying to second-guess matters, at least I’m not going to run that specific mistake again.
The Copper Basket
After three weeks of 2015 The Copper Basket is showing a 8.99% loss to level stakes.
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 500.35 1.31 -35.5%
2 Reservoir Min. RMC.v 3.96 47.55 208.27 4.38 10.6%
3 NGEx Resources NGQ.to 1.17 187.71 178.32 0.95 -18.8%
4 Nevada Copper NCU.to 1.65 80.5 107.87 1.34 -18.8%
5 Western Copper WRN.to 0.68 93.68 58.08 0.62 -8.8%
6 Copper Fox CUU.v 0.135 402.96 52.38 0.13 -2.7%
7 Panoro Minerals PML.v 0.295 220.25 48.46 0.22 -25.4%
8 Amerigo Res ARG.to 0.27 173.65 45.15 0.26 -3.7%
9 Hot Chili Ltd HCH.ax 0.16 333.11 44.97 0.135 -15.6%
10 NovaCopper NCQ.to 0.58 60.15 42.71 0.71 22.4%
11 Regulus Res REG.v 0.35 56.39 18.61 0.33 -5.7%
12 Metminco MNC.ax 0.008 1822.6 12.76 0.007 -12.5%
13 Catalyst Copper CCY.v 0.305 31.39 8.79 0.28 -8.2%
14 AQM Copper AQM.v 0.06 139.24 8.35 0.06 0.0%
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 -8.99%
Week three brought near-unmitigated carnage to The Copper Basket, all thanks to that well-
documented slump in the price of copper (if you believe all you read, some sneaky Chinese
funds who have the temerity to use “better information on the China market” than us are all to
blame). It certainly brought a crashing end to your author’s bullish stance on copper, though to
be fair to myself that had seen plenty of cracks and doubts emerge in the period leading up to
last week’s denouement.
Anyway, to business and we can report one weekly winner on our list thanks to the 10c put on
by Reservoir Minerals (RMC.v) in light volume (some of that volume came from my own shares
of course, as I sold them to somebody else). There were two unchanged stocks on the week as
well (REG.v, COP.to) and that leaves twelve others that all lost ground. Not listing them all but
the big drops were suffered by Capstone (CS.to down 35.8%), Panoro (PML.v down 21.4%),
Nevada Copper (NCU.to down 20.2%), Hot Chili (HCH.ax down 18.2%), Amerigo Resources
(ARG.to down 16.1%), NGEx Resources (NGQ.to down 13.6%) and Metminco (MNC.ax down
12.5%). A lot of pain in that list.
So to the copper price chart and we offer up two price charts for your consideration this
weekend, a longview and a closeview. Here’s the period from January 8th (a bit of last week is
better to show the drop context) which shows the cracking on Jan 12th, the full-scale waterfall
drop on the 13th and the rebound from the lows to Friday’s contract close of U$2.63 and bits
per pound.
18

Here’s the monthly candle chart, which shows the breakdown of a price floor that’s held ever
since the Lehman/subprime fun and games. For sure the rebound from lows was welcome, but
as they say in the world of technicals “a lot of damage was done to the chart” last week and
the Weds-Fri period has to be taken as a dead cat bounce until otherwise disproven.
We move to our regular inventories tracking, which shows bearish fundamentals that back up
the price drop.
19

• Overall world stock levels rose a big 44,067 metric tonnes (mt) (+14.0%) to finish at
357,784mt. The sixth week that inventory has been added to the official warehouse
systems and by far the biggest jump as well. With a full month to go before the
Chinese New Year, this is a clear bearish indicator and we can expect the trend to
continue for at least the next month.
• Unsurprisingly, the The Shanghai Futures Exchange was a place where big tonnes
landed, being as it is the most exposed to the China market. Stocks here rose saw the
major changes under the world total, as stocks rose 24,150mt (+21.4%) to finish the
week at 136,816mt. Please note the Shanghai-only warehouse chart below, as in the
space of one month its stocks have risen by more or less 50%. The bear roars.
• The LME copper warehouse inventories also moved big time, up 21,700mt (+12.3%) to
finish the week at 198,725mt. That’s a clear shift for the LME, which had been treading
water for quite a while. It all adds up to slack demand.
• The Comex inventories were the contrary to all this, but as its system is dwarfed by the
others it made little difference (though the silver lining of better US demand is one
tentative conclusion that can be drawn here). Its stoc dropped by 1,783mt (-7.4%) to
finish the week at 22,2436mt.
The inference here couldn’t be clearer and gives lie to the immediate reaction in some quarters
that last week’s big copper price downmove was a speculative bearish raid and we can expect
copper to rebound. We can’t and we shouldn’t. What we saw last week was a speculative
attack, yes for sure, but it was one based on sound research and as is always the case in
successful market moves of this sort (metals or anything else), one side reveals its hand and
the other is exposed for having represented a stronger position, when in fact it was weak.
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
220000
200000
180000
160000
140000
120000
100000
80000
60000
20
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 ht81
Mt Cu
source: Cochilco
Now for notes on a couple of basket stocks:
Capstone Mining (CS.to): CS.to first got into my crosshairs on the blog last week (11)
because of the BS it tried to peddle to the market about its results. Post two came when the
market had done exactly what it should have done, i.e. chewed up its poor 4q14 numbers
(along with the “nothing to see here move along” stupidity from its CEO) and spat it out (12).
But the third post wasn’t just me ranting and had a bit of thought to it. That’s because on
Friday January 16th CS.to announced (13) an extension to its senior debt facility that takes it
immediately to $440 (from something around $265m today as far as we can gather, we’ll know
more when the 4q14 financials are filed) and with a facility to $500m. On the blog Friday
morning I parsed the news (14) and here’s what came at the bottom of that post:
As business decisions go it's conservative and there is logic there, but it's
taken another slug of share price upside potential away from the company
and it's now looking heavily in the hands of (aka at the mercy of) the banks. Its
market cap is now the same as its financial senior debt, give or take a million

or two.
CS.to filed a small net loss on operations in 3q14 when copper was at
$2.98/lb. Is there any reason to own this with copper at $2.60/lb and a dog's
dinner of a balance sheet? I think not, so financial stability via new loans or
not steer well clear of this one, at best it'll underperform peers if the sector
rebounds, at worst its equity price will be crushed between the jaws of rising
debt and writedowns.
I’m a guy who doesn’t just care about balance sheets but obsesses over them, which I know is
hardly mainstream in these days of “show me growth” on one side and “it’s the bottom line,
stupid” on the other. What CS.to did last week was to batten down the hatches and prepare for
a rough period, which from a corporate
perspective is exactly the right thing to do. The
inane BS it tried to peddle over its 4q14 numbers
is another issue, the debt move on Friday is the
serious stuff, the decision taken by a company
that doesn’t want to risk complete collapse and
isn’t going to gamble with what it’s got. Now
that’s fine by me, it’s also fine by the people
CS.to employs from the canteen kitchen staff to
the CEO. I’m good with Friday’s NR but it also
puts a big fat cross through its name as a
potential trade, even at this new and much lower
price deck. The reasons to buy into the equity of
a company (i.e. “the small sliver of hope that lies
between assets and liabilities on the balance sheet”) are not the same as the reasons to agree
with corporate decisions. CS.to has just put a big sign on its door that says “Our Stock Will
Underperform Peers”, so no matter which way the copper sector twists and turns in the weeks
ahead, it’s not the one you want to own.
I’m very happy that a certain reader decided to convince me to include CS.to in the 2015
Copper Basket. It’s going to be fun to watch.
Panoro Minerals (PML.v): This was the other copper junior I took to task on the blog last
week (15), as I’d given it a bit of leeway to deliver its now infamously delayed PEA on the main
Cotabambas project, but two weeks after its latest “end 2014” deadline had passed, it was time
to say something. Here’s the list of deadlines from the post that PML has given us on its
project, all of which are now missed.
• In April 2013 PML.v said the Cotabambas PEA would be with us in December 2013
• In February 2014 PML.v said the Cotabambas PEA would be with us in July 2014
• In April 2014 PML.v said the Cotabambas PEA would be with us in mid-2014
• In July 2014 PML.v said the Cotabambas PEA would be with us by the end of September 2014
• In November 2014 PML.v said the Cotabambas PEA would be with us by the end of 2014
The post went up Wednesday midday, the day that the copper sector dumped. PML saw heavy
selling on Thursday and I happen to know it was because of that post (don’t ask me how I
know) so if you’re long this wretched thing feel free to blame me.
But there is a serious point here and once again it’s not a new one. Boil them right down to
their essence and what junior mining companies sell to you is a story, nothing more and
nothing less. Some of those stories can have great substance, be very exciting and turn out to
be factually correct and those are the stories that reflect in rising share prices and eventual
success. Others may look good on the surface, but are eventually found to lack substance, or
excitement, or veracity or whatever other diplomatic euphemism I can come up with on this
pleasant and sunny Sunday morning (but you get the idea). Other can be solid but outside
circumstances turn against them and the story is no longer popular. However once the story
21

offered has been shown as false, it’s time to walk away. Nobody demanded that PML inform the
market it would deliver its PEA on December
2013, or “mid-2014”, or any of the other dates
on that list. They set their own deadline and
they missed it, only to re-set and fail again and
again. We do not know the detailed comings
and goings inside the company, but we must
recognize a massive red flag that something is
very wrong when we see one. When all you
have is a story and your story doesn’t stand up,
you have nothing. It’s that simple.
NGEx Resources (NGQ.to): My “avoid” call on NGQ.to that has morphed into “avoid like
plague” has been in place long enough and last week’s events accelerated all the reasons as to
why that’s been the right one. The stock is back under $1 and has nowhere to go but South in
a market that (and I cannot emphasize this strongly enough) will not want low grade high
capex copper projects. The way in which low grade high capex gold projects dropped off on
gold’s big waterfall in 1q13 and 2q13, there’s your model for what’s about to happen to NGQ.to.
Others too, so even the somewhat interesting WRN.to that’s held at least a corner of my
attention is now on the full avoid list.
The Low Cost Producer Basket
After 3 weeks, the new Low Cost Producer Basket is showing a 20.61% gain to level stakes
company ticker price 1/1/15 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Goldcorp GG 18.52 812 19.33 23.81 28.6%
2 Barrick ABX 10.75 1164.67 13.68 11.75 9.3%
3 Newmont NEM 18.90 499 11.12 22.29 17.9%
4 Franco Nevada FNV 49.19 156.08 8.58 54.97 11.8%
5 Silver Wheaton SLW 20.33 357.39 8.33 23.31 14.7%
6 Agnico Eagle AEM 24.89 173.43 5.67 32.72 31.5%
7 Kinross KGC 2.82 1114.5 3.98 3.57 26.6%
8 Buenaventura BVN 9.56 254.19 2.83 11.15 16.6%
9 B2Gold BTG 1.62 948.9 1.99 2.10 29.6%
10 Pan American PAAS 9.20 151.41 1.67 11.00 19.6%
all prices in U$, using NYSE ticker prices Portfolio avg 20.61%
The January bounce not only continued, it accelerated. The main catalyst was Switzerland’s
effect on the gold price of course, but all our stocks managed to put in a winning week and
were notably led by the big jump in sector leading Goldcorp (GG up 14.7%), a move fit for a
champion.
It’s still a little early to roll out the comparative charts because three weeks of data doesn’t
make for elegant visuals, but I can tell you that with GDX up 20.67% in 2015 and our basket up
20.61%, there’s basically nothing in it.
Buenaventura (BVN): Along with the smaller Lake Shore Gold (see below) I’m starting to
knock my hand away from the buy button on this one, too. We’ve talked on its wholly owned
gold/silver development projects, starting with Tambomayo due online. Also the BVN share
(19.58%) of the growing Cerro Verde (which is copper yes, but it’s profitable copper even at
$2.50/lb). But the thing to like about BVN in this rising gold scenario is its balance sheet which
looked solid enough as at end 3q14 (last filings) with ~$120m cash and ~$190m working cap
22

after cutting back its exploration program in 2014 and tightening belts on operating costs. This
means free cash flow moves to the bottom line in the event of a bonus gold (and silver) price
move and that’s been largely overlooked by the market so far in this upmove.
To the downside in 4q14, we can expect impairments of fixed assets that are going to smack
into the bottom line number. At this time I’m factoring in a $280m write down at the company,
which means its main ADR is going to return a net loss of over $1 per share whatever the
production profile.
But there is reason to be cheerful here, all the same. The main positive is its production profile,
which is quietly improving as its 4q14 preliminary production numbers out Monday January 12th
(16) showed to great effect. Here are two charts that map the main BVN metals of gold and
silver (ex-the Cerro Verde copper participation) with the first one the important one, that of
gold:
BVN: Gold production 2014, per quarter
Oz Au
275000 Other BVN gold production
Yanacocha gold attributable to BVN
250000
225000
200000
102065
175000
105915
150000
98008 105897
125000
100000
75000 140688
50000 90579 83238 108876
25000
0
1q14 2q14 3q14 4q14
source: company filings
The news here is that Yanacocha has worked its way through a lower production period (a
grade thing) and is seeing better quarterly figures. As the 43.65% of Yanacocha owned by BVN
is by quite a distance its most valuable asset, this production bounce is news that doesn’t seem
to be baked into the BVN share price as yet.
Here’s the silver chart, which also shows improvement (the 4q14 numbers are boosted by a
one-time “other” addition of 1.16m oz, but on a like-for-like basis to the others it was still a
4.98m oz Ag quarter):
BVN: Attributable silver production, per quarter
Oz Ag
7000000
6147251
6000000
5000000 4332756 4691914
4000000 3698213
3000000
2000000
1000000
0
1q14 2q14 3q14 4q14
source: company filings
With a 2014 attributable (i.e. owned by BVN) annual total production of 835,266 oz gold and
18.87m oz silver BVN is still very much a gold-dependent company (for every $1 of silver
revenues it has $4 of gold) and should be treated as such when looking at the metals price
performances. However BVN isn’t a “sexy” gold stock, its corporate agenda is different to peers
because it’s more concerned with keeping the Benavides family dynasty intact in Peru (the
family has full executive control of the company via class A shares). But it’s efficient and it
knows its Peru very well, so all the cost savings draining through the Peru mining sector at the
moment will be of full benefit here. In the event of a reversal in this gold price move BVN is
23

going to sit well, thanks to its hatches already battened down and thanks to that stronger than
peer average balance sheet position (which makes its case very different from that of CS.to
above, for just one example). The other thing from a shares trading strategy perspective is that
it’s rarely in the first group of movers, but will often play catch-up on the move (a manifestation
of its conservative unsexy corporate approach, I suppose).
I’m going to take another close look at the model for BVN this week. One of these days I’ll buy
the thing but until the 2014 year-end numbers wash through and the large expected write-
down is taken, I’m not in a hurry.
Regional Politics and Market Watching
Rio Alto Mining (RIO.to) (RIOM) 4q14 production and 2015 guidance thoughts
As for news, that came Monday morning (17) with its strong 4q14 production print and on-
target guidance for 2015. Here’s the quarterly production chart...
...as per our post that morning (18) and here’s the section of the NR that considers 2015
guidance.
The Company forecasts its La Arena Gold Mine will produce between 210,000 and
220,000 ounces of gold in 2015 at adjusted operating costs as defined by the World
Gold Council ("WGC") to be in the range of $570 to $600 per ounce of gold sold. WGC
All-in sustaining costs - including selling, general and administrative costs, exploration,
and sustaining capital - are forecast to fall within a range of $730 to $765 per ounce
and WGC all-in costs within a range of $740 to $775 per ounce for the year.
24

In short, La Arena is set to produce the same amount as in 2014. The potential bonus comes
on costs, which are already sector leading cheap but may turn out to be pretty conservative, at
it uses a U$3.70/gallon fuel price and right now the diesel fuel that runs the trucks at La Arena
sells for U$2.20 in Peru thanks to the recent drops in oil prices (that have now seen at least a
portion of the new low prices get through the supply chain and into end-users’ motors here in
Peru). If we estimate on 2014 numbers, minus the amount they used at the production facility
which is now supplied by grid electricity, that RIO.to uses 0.9m gallons of diesel per quarter,
the current price set against budget gives a a theoretical $1.67m quarterly saving, or a touch
over $30/oz on 55k oz/qtr gold production. Not shabby.
Finally, a word about the Stage 2 sulphide copper project and price targets on RIO.to,
necessary in the light of the recently shifting sands of the sector and the price deck. First up I
offer you a preliminary (repeat, underline, bold type) preliminary price target on RIO.to today,
based on the previous model and adjusted for:
• A target price based on 2016 production, rather than the 2017 production previously.
By pricing in next year we get the starter phase of Shahuindo and a closer tie to current
operations
• A 10X EPS (previously 6X) that reflects the better optics in the sector than our last
formal pricing six months ago, as well as pricing on 2016 estimates rather than the
further out (thus more risk prone) 2017.
• The lower op cost deck of $600/oz (was $700/oz), which is the upper end of RIO.to
guidance and leaves room for pleasant surprises.
Sales and earnings RIO.to: Initial target price & valuation data
2014 2015 2016 2017 At U$1300/oz gold
Sales ($m) 251 275 382 444 12 month target $3.55 (based on 10x EPS
Sales growth 10% 39% 16% Upside to target 7% for 2016)
EPS 0.15 0.19 0.32 0.40 Mkt cap ($m) $1.082 Enterprise value $1.108
Cash flow 0.24 0.29 0.44 0.52 P/sales (2014) 3.94 EV/sales (2014) 4.03
P/E (2014) 22.0 EV/EBITDA (2014) 10.5
P/E (2015) 17.4 EV/EBITDA (2015) 8.9
P/E (2016) 10.2 EV/EBITDA (2016) 6.0
At $3.55 (previously $3.40), there might not be enough cloth for your taste and profit-taking
might be on your mind. I wouldn’t blame you (hey, a profit’s a profit) but I won’t be joining you
because, as stated on too many occasions in 2015 already, RIO.to is prime buyout material and
at today’s price deck you’d need to offer at least $4.30 (pps plus 30%) to be able to have a civil
conversation with the RIO.to board, let alone a deal.
Also, that target will be subject to revision and become a formal target only when we know the
4q14 financials, and that’s going to be in mid-March. Ceteris paribus, that’s when I expect to
run a full update report on RIO.to. Finally, note that my target was, is and will be cash-flow
based. There’s no stage 2 sulphide baked into that price and as things stand, I don’t think a
single penny of today’s PPS takes into account stage 2 or its NAV potential and that it’s been
that way for months, perhaps even years. Which is a good thing I suppose, because with sub-
$3/lb copper prices I can’t see a Stage 2 sulphide operation with a revenues split of roughly
66% Cu and 33% Au in my model (slightly more generous than you, MZ) as ever getting a
green light on capex. It will come into consideration in any M&A talks as there’s longer-term
NAV value locked into those rocks. But today, at deck prices I value it at zero and the $3.55
comes from La Arena oxide gold and Shahuindo alone.
The next news expected from the company is the reserves and resources update, which is
slated for some time in February and is widely expected (to the point where brokerages are
assuming and telling people in written notes) that La Arena will see an increase in
25

reserves/resources net of 2014 production, thanks to its 2014 expansion drilling campaign
around the current operating pits. Another factor may be a reduced cut-off grade that will allow
waste to become ore, thanks to the ever-dropping cash cost profile of this excellently run
operation.
A word on the Canadian Dollar (CAD) forex rate with the US Dollar
For the last few months I’ve been using a standard forex rate of CAD$1 = U$0.90 for valuation
purposes in the financial models here at the Weekly, even though the trend of the pair has
been for a weakening Loonie for quite a while. With this weekend seeing the pair go to nearly-
but-not-quite CAD$1 = US0.80 it’s starting to look as though my conservative assumptions are
skewing things a little too much. I have my eye on proceedings and if 0.8/1 is fully broken, I
think it will be time to do something about it.
On the subject of forex: Peru’s cheaper by the day and there’s more to come
Another round of fuel price cuts came into effect in Peru last week (e.g. 4.6% off a gallon of
standard car fuel), which is one reason for foreign companies to like the cost profile of the
country. The other is the currency, which has been edging closer to the psychologically
important Three-Soles-For-One Dollar level and hitting the headwind of a Central Bank that
hasn’t wanted to to breach that
level. But last week the barrier
fell (19) after The Peru Central
Bank tried to hold it back by
selling just U$5m into the
market when on other days it
had used larger ammunition.
This came on the heels of the
CenBank decision to cut its
minimum lending rate by 25
pips to 3.25%, the market got
the message and the Nuevo Sol
(PEN) hit a new five year low
against the US Dollar, closing
out the week at S/. 3.015 per
U$1. Here’s a simple but useful
chart of the PEN/USD pair
(from here (20)) that shows
how the Sol has tried to defend the 3-level for the last month, with CenBank dollar sales
knocking down the spikes. That’s now a done deal and most Peru market commentators now
expect the Sol to weaken further against the dollar, with 3.1-to-1 a common consensus level
This is of course good for people such as your author, who gets paid in dollars (by you nice
people) and buys bread, cheese and so forth in Peruvian Nuevos Soles. It’s also good for
Northern companies working the country in dollar terms (particularly the US Dollar), as every
gets easier to pay for in the currency of the company’s financials. We’ve seen a devaluation
spurt put on other regional currencies recently, with Colombia feeling a pinch from oil that saw
the Colombian Peso drop to ~2450 per dollar, though that’s now off its lows and trading around
~2350. The next round started with the Chilean Peso (copper currency of choice) which ended
2014 at 605 to the dollar and is now around 625. It’s looking like the turn of the Peruvian Sol
has come and I for one am not exchanging any Dollars into Soles for the next couple of weeks
minimum. Let’s see where it goes on this move first.
Ecuador: Intag
An interesting report on the continued resistance to mine development in the Intag Valley
region of Ecuador, came out last week. The January 12th article in Equal Times (no, you’re not
going to get balanced reporting on the anti-mine brigade in the mainstream, you need to read
the eco-sites folks, sorry) entitled “Ecuador’s 20 Year Old Mining Conflict” which comes in
26

English language (21) and Spanish language (22) versions, for your reading pleasure. The Intag
copper deposit, previously named Junín after the local village and now re-named Llurimagua,
has been a sensitive project for many years and local opposition to development has already
managed to stop at least two efforts (probably more under the title names) in their tracks. But
now the project is in the hands of the governments of Ecuador and Chile, via the Ecuador state
mining company Enami-EP and the Chilean state mining company Codelco, who want to move it
forward as a joint venture between the countries. That’s a new type of pressure on the locals,
but resistance as reported by the article is still strong despite some of the tactics used by
Ecuador government forces against them (e.g. arbitrary arrests and holding in jail without trial).
The article finishes in this way...
In 2007, after Rafael Correa was first elected, mining concessions had been
suspended or cancelled, raising great hopes among the communities in the
remote regions of the country.
“When Correa won, we thought we had been saved,” recalls Marcia Ramírez.
“But Correa has changed and now all he wants is to exploit all our natural
resources. It is a terrible let-down. We voted for him, we believed in him, and
now we want him to go,” she concludes, bitterly.
...which reflects the sentiment in the Regional Risk review of IKN295 on the country (go check
if you can be bothered).
Lake Shore Gold (LSG.to): A week is a long time in politics
In last week’s analysis on Lake Shore Gold (LSG.to) we looked at the profit potential of the
company in 2015 and tried to make a few reasonable assumptions about costs and benchmark
prices for gold. Here we are one week later throwing them out the window, in part thanks to
those strange and gnomic Swiss, in part thanks to the details in LSG’s update NR of
This time last week, part one. Here’s what we said about costs:
“...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.”
So I’m going to cut myself some slack and note that my numbers last week were preliminary
and I was ready, willing and able to dial in new info on costs once known, but all the same I
was impressed by LSG’s total production cost number of $28m, that’s $3m lower than my
guesstimate and means the mine’s running well. I like that number.
This time last week, part two. Here’s what we said about the gold price:
“...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
changed under different prices.”
And now, all of a sudden, my CAD$1,400/oz model is looking very out-dated thanks to gold
trading at CAD$1,530/oz. This double dose of good news from LSG saw the stock trade higher,
though I have to say I thought it would do a little better than end the week at 97c. To cut a
long story short, let’s go back to the rather basic price sensitivity chart, change the necessary
inputs and see what kind of multiple LSG is expected to run in 2015. Here’s the result and
please remember, in the case of LSG we’re staying with prices struck in Canadian Dollars unless
specified):
27

LSG.to: REVISED 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 97c pps
1250 55 28 18 9 2.05 11.8
1300 57 28 18 11 2.57 9.4
1350 59 28 18 13 3.09 7.9
1400 61 28 18 15 3.61 6.7
1450 63 28 18 17 4.12 5.9
1500 66 28 18 20 4.64 5.2
1530 67 28 18 21 4.95 4.9
1600 70 28 18 24 5.67 4.3
1650 72 28 18 26 6.19 3.9
1700 74 28 18 28 6.71 3.6
1750 77 28 18 31 7.23 3.4
source: IKN SWAGs
By moving the COGS number down from $31m to $28m, then by moving our benchmark
bracket to CAD$1,530/oz gold, then moving the share price from last week’s 90c to this
weekend’s close of 97c, our forward price to gross earnings (P/GE) ratio is 4.9 to 1. If you care
to check back at IKN296 last week you’ll see it was at 8X and a level I called a little on the
cheap side but not enough to get me interested.
At 4.9X I’m interested. I’m interested to the point of wondering whether I’m just about to miss
the boat. I’m interested more this week than last, because the change in the metrics we’ve
seen, plus the way in which LSG has obviously controlled its costs, bode well for 2015. A
profitable producer in the 110k+/year ounce bracket, in the right spot in the world and with
exploration upside, that’s a pretty good combo for a CAD$410m market cap. Therefore the
question, how have i managed to talk myself out of buying LSG this week (and this weekend)?
The answers are:
• Last week was nosebleed bullish in gold. I certainly like the metals chances and set-up
from here (see today’s intro) but I am leery about the very-near-term action, i.e. this
week coming.
• My other main problem is the state of the 4q14 financials when they come, which are
going to be a tad better than my model from last week thanks to the $3m saving in
costs compared to by guesstimate, but they’re still not likely to sparkle.
• Also, when push comes to shove, if we’re really at the cusp of a massive new bull
market for precious metals stocks, I really won’t mind missing the first chance to buy
this and catching it 10c or 20c later. When it’s at $2 we’ll all be happy.
So for the time being, by which I mean this week, I’m going to sit back and watch things before
committing to LSG. Any eventual purchase here won’t be of the small type that reflects a more
prearious risk/reward make up as seen in Starcore (SAM.to). If I buy this one, it’ll be a chunk
and not a nibble. And because I’m a yellowbellied chickenshit at heart another week of thinking
about it won’t hurt. At least I don’t think so.
Conclusion
IKN297 is done, we end with bullet points:
• Gary Tanashian’s NFTRH issues 326, out this Sunday morning, was a great read (yes,
again I urge to to subscribe). It was full of stuff and I need to go back and digest the
PMs sector commentary, but I’d like to share with you just one of his wrap-up bullet
point notes about the gold/PM stock sector (used without permission, I don’t think he’ll
mind) because it gets strong agreement from here: “There will be hype in the air.
28

When the most cartoonish gold sector stuff starts trumpeting it may be time
to pull back and be careful. While some of the pom pom brigade appear to be
getting optimistic again, I have not noted the really obnoxious stuff. But
then again I have not really gone out looking for it.” Absolutely, Gary.
• The SNB move last week has changed the playing field for gold and don’t let that point
get drowned out by the fud and the noise that’s undoubtedly coming your way in the
days and weeks to come, dear market participant. How it affects the next week or
month is up for debate and a grey area in my opinion, but the longer term prospects,
looking at say a year form now, that’s a bull for gold.
• I’m adding to Starcore (SAM.to), I’m thinking hard about Lake Shore (LSG.to) and I like
the look of Buenaventura’s (BVN) longer term prospects as well. Thanks to recent
trades I have cash (to burn?) and I’m looking to position myself longer gold (first and
foremost gold), but there’s no rush...or at least i think there’s no rush.
• Silver remains a bit of a conundrum to me, frankly. I’m happier about life since I put
the pair trade in place and reduced exposure to its whips and saws (even happier now
the pair’s going my way) and at some point I’m going to lose one side of the trade and
make a stand, long or short. Today my leaning is towards selling FR.to and taking my
loss, while holding FVI.to through an earnings period in which I doubt it will shine.
Then covering the short and forgetting about the damned poor man’s gold once and for
all. Harrumph.
• Enjoy MLK Day, US readers. Put your feet up and read something pleasant. Eat
something tasty. Relax a little, you deserve it.
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://www.kitco.com/news/2015-01-16/Swiss-Franc-Massive-Surge-Claims-Brokerage-Firm-Scalps.html
(1a) http://news.yahoo.com/large-everest-capital-hedge-fund-closing-swiss-franc-162047805--sector.html
(2) http://www.themoneyillusion.com/?p=28393
(3) http://news.yahoo.com/swiss-central-bank-chief-defends-franc-move-001635009.html
(4) http://www.nytimes.com/2015/01/16/opinion/paul-krugman-francs-fear-and-folly.html
(5) http://krugman.blogs.nytimes.com/2015/01/16/regime-change-in-switzerland/?_r=1
(6) http://incakolanews.blogspot.com/2015/01/first-majestic-silver-ag-frto-4q14.html
(7) http://www.firstmajestic.com/s/NewsReleases.asp?ReportID=690762&_Type=News-Releases&_Title=First-Majestic-
Produces-a-Record-4.2M-Silver-Eqv.-Oz-in-Q4-and-Annual-Recor...
(8) http://finance.yahoo.com/news/fortuna-reports-2014-record-production-120000176.html
(9) http://finance.yahoo.com/news/fortuna-reports-production-1-8-110000592.html
29

(10) http://finance.yahoo.com/news/goldquest-granted-concession-near-romero-110000968.html
(11) http://incakolanews.blogspot.com/2015/01/capstone-mining-csto-guidance-0.html
(12) http://incakolanews.blogspot.com/2015/01/mo-capstone-csto.html
(13) http://capstonemining.com/news/news-details/2015/Capstone-Mining-Announces-New-500-Million-Corporate-
Credit-Facility/default.aspx
(14) http://incakolanews.blogspot.com/2015/01/capstone-csto-decides-that-it-needs.html
(15) http://incakolanews.blogspot.com/2015/01/further-panoro-minerals-pmlv-continued.html
(16) http://www.b2i.cc/b2iContent/1454/1_12_15Operational_PR_4Q14_-
_FINAL.PDF?D=1&M=du&B=1454&F=1_12_15Operational_PR_4Q14_-_FINAL.PDF&Download=Click+to+open
(17) http://finance.yahoo.com/news/rio-alto-produces-record-222-123000137.html
(18) http://incakolanews.blogspot.com/2015/01/rio-alto-rioto-riom-4q14-production.html
(19) http://gestion.pe/mercados/tipo-cambio-dolar-sigue-subiendo-y-llega-s-3015-2120772
(20) http://www.exchange-rates.org/history/PEN/USD/G/90
(21) http://www.equaltimes.org/ecuador-s-20-year-old-mining?lang=en
(22) http://www.equaltimes.org/20-anos-de-conflicto-minero-en-el?lang=es#.VLfEICuG9ch
Appendix 1: IKN Flash update dated Wednessday January 14th
Good Wednesday morning, 07:45am local time, a beautiful blue sky summer's morning, though the lack of rain in the
rainy season so far is a latent concern.
Selling Reservoir Mineral (RMC.v) and Coro Mining (COP.to)
This is a direct function of the copper market price action, not a commentary on the two stocks. Of the two, Coro is by
far the easiest sell decision to make because for one thing it's small, for another it's dependent on the copper price for
its financial health in 2015 and as things stand, that's not looking great.
The sell decision for RMC.v is more difficult, first because it's a larger position and second because it is more a
discovery/development story with an eventual sale to Freeport (FCX) as the most obvious exit strategy. As the big
mining companies work on different time horizons, RMC is less likely to be hit badly by the copper slump. But in the end
this is about personal portfolio management more than anything else and what I want as January turns into February is
more cash, less exposure to copper. I considered a half-sale as an option, but the final call is to cauterize.
Therefore two large percentage virtual losses will be turned into large percentage real world losses, as of this week.
Other
In other news, I liked First Majestic's (AG) (FR.to) 4q14 production numbers, but the 2015 guidance wasn't sparkling.
There's more than enough to say "hold" at this point, but I'm in no hurry to buy more even with the 3.07m oz Ag in 4q14
living up to the high end of my expectations. I hold, I do not add. Adding to the Fortuna (FVI.to) (FSM) short is still more
likely.
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
30

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
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
31

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
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
32

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.
33