IKN #303Premium

The IKN Weekly
Week 303, March 1st 2015
Contents
This Week: Next week’s macro, Add in the graft.
Fundamental Analysis: The new land grab: Be part of it, Legend Gold (LGN.v).
Stocks to Follow: Overview, Teranga Gold (TGZ.to) (TGZ.ax), McEwen Mining (MUX)
(MUX.to), Starcore Intl (SAM.to), First Majestic (AG) (FR.to), Fortuna Silver (FVI.to) (FSM),
B2Gold (BTO.to) (BTG), Rio Alto (RIOM) (RIO.to), Dalradian Resources (DNA.to), Focus
Ventures (FCV.v).
Copper Basket: Overview, NovaCopper (NCQ.to), Nevada Copper (NCU.to).
Low Cost Producer Basket: Overview, Silver Wheaton (SLW), Buenaventura (BVN).
Regional Politics: Guatemala: La Puya turns three years old, China lends to LatAm, Chile:
“Been down so long...”, Argentina at PDAC, Peru at PDAC, Ecuador at PDAC, Mexico at PDAC.
Market Watching: Thoughts on the First Majestic Silver (FR.to) (AG) 4q14 results, Tinka
Resources (TK.v), Argonaut Gold (AR.to).
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
Next week’s macro
Top of most mineheads’ agendas will be PDAC of course. But looking beyond the year’s main
bunfest, on Friday March 6th it’s another episode of the US Non-Farm Payrolls from the BLS with
all the macro bells and whistles that go with it and as usual, your author’s best advice is to use
Calculated Risk as your top quality source material for all things USA-numerical.
Plus next week there’s another interesting piece of US macro data, when US crude Oil
Inventories are published on Wednesday morning March 4th. This one was a minor market
mover for a long time but has suddenly become an anticipated dataset from people looking for
(over)supply clues.
Add in the graft
Late on last week, after the second regular mailpal sent me the photo, I post on the blog (1)
this photo of a cuneiform tablet dating to around 1750 BC labelled “Complaint about delivery of
the wrong grade of copper”.
1

It came with this translation of the text...
Tell Ea-nasir: Nanni sends the following message:
When you came, you said to me as follows : "I will give Gimil-Sin (when he comes) fine quality
copper ingots." You left then but you did not do what you promised me. You put ingots which were
not good before my messenger (Sit-Sin) and said: "If you want to take them, take them; if you do
not want to take them, go away!"
What do you take me for, that you treat somebody like me with such contempt? I have sent as
messengers gentlemen like ourselves to collect the bag with my money (deposited with you) but
you have treated me with contempt by sending them back to me empty-handed several times,
and that through enemy territory. Is there anyone among the merchants who trade with Telmun
who has treated me in this way? You alone treat my messenger with contempt! On account of
that one (trifling) mina of silver which I owe(?) you, you feel free to speak in such a way, while I
have given to the palace on your behalf 1,080 pounds of copper, and umi-abum has likewise
given 1,080 pounds of copper, apart from what we both have had written on a sealed tablet to be
kept in the temple of Samas.
How have you treated me for that copper? You have withheld my money bag from me in enemy
territory; it is now up to you to restore (my money) to me in full.
Take cognizance that (from now on) I will not accept here any copper from you that is not of fine
quality. I shall (from now on) select and take the ingots individually in my own yard, and I shall
exercise against you my right of rejection because you have treated me with contempt.
...and the whole ensemble is wonderful. The reason I didn’t post it once I’d first received it is
that I was trying to save it for this edition of the Weekly* and that’s because I see a modern
day lesson in that ~3,765 year old slab of baked clay. On viewing the photo in my mailbox
tablet it got me reflecting on what I need to buy as a retail mining investor today, here in the
early 21st century. The best answer I came up with is high margin projects or operations, which
in turn nearly always means high grade deposits. Duh, you say. Now I’m fully aware this isn’t a
magical new revelation, as the mining engineer saying goes (ty reader R)...
“When times are tough mine your high grade, when times are good mine your high grade”
...but give me a moment to expand on the connection between high grade/high margin
deposits today and copper delivery complaint four millennia ago:
2

1) Slimeballs and rip-off merchants aren't a transitory thing in the mining world, they're
part of its very fabric. That tablet above is offered as prime evidence.
2) Therefore, in order for the retail investor to have a cat in hell's chance they must take
that into consideration.
3) The simplest example I can think of, which boils it down to the essence:
a) A project has All-In costs of U$800/oz Au (i.e. everything costs). We add in
$200/oz graft and the buyer of the equities still has a chance of making
money at U$1,200/oz Au
b) But a project with All-In costs of U$1,000/oz? Add the $200/oz world
average for managerial/owner greed and the investment is going nowhere.
In today’s 43-101 project studies, such at PEAs (scoping study), pre-feasibility studies and
feasibility studies, there is already a line item “contingency”. What’s notable is how any
percentage given to this is inevitably used, even though it was never assigned any specific cost
item. From this comes IKN’s modest proposal; That CIM changes the rules and next to
“Contingency” insists on an "Expected Graft" line item for all 43-101 compliant economic
studies. For what it’s worth, I'd pitch it at 20% of operating cash costs.
Do you think I’m just doing droll and witty act? Think again. For the serious and practical side
to an apparently flippant intro, you can consider that in my simple “U$800/oz All In” example, if
you back a project of that ilk being run by trusted, seasoned management with a track record
of doing right by shareholders and NOT ripping them off at the first opportunity (they’re not
common but they exist) you’re getting $200/oz worth of value by going with good and
honourable people. But side with the shadier types in the mining business, no matter how good
their deposit or project might seem on paper, and sooner or later it’s going to cost you.
*The reason it went on the public blog after the second receipt is that by then it was obviously doing the rounds out
there in internet land and I would have got it a few more times if I didn’t do something about it, such is the way of our
complex and interconnected world).
Fundamental Analysis of Mining Stocks
The new land grab: Be part of it
Today’s “Fundamentals...” section consists of three main parts:
1) A strategy piece that lays out a new tendency that’s beginning to grow in the junior
mining sector, one that can deliver profits for those on early enough in the right places.
2) Potential ways we the retail investor can play the rising new trend.
3) A specific company that ticks the boxes of what we need from a strategy play at the
moment. It’s one I plan to buy.
The new land grab
There’s a new trend picking up steam, the renewed interest in land assets. Now for sure the
collection of neverwrong sector philosophers and wise commentators on mining have
understood for quite a while that prices for land assets have been in the basement and there’s
been plenty of ink spilled as well as voices raised on the subject. The concept isn’t new and
there were enough “why oh why” articles and speeches in 2013 and 2014, but what’s changed
is that instead of mere lip-service, we’re seeing moves made by mining companies to exchange
cold hard cash for concessions and projects in the junior sector. Let’s consider just a few of the
latest and most topical examples:
3

• Timmins Gold (TMM.to) (TGD), which bought Caballo Blanco for cash and has now cut
an all-paper deal with Newstrike (NES.v) to buy out that company and its main Ana
Paula project in Guerrero.
• Starcore Intl (SAM.to): First last year it took over American Consolidated, a cousin
company to SAM.to with plenty of near-zero valued land holdings, then in the last few
weeks SAM.to has paid $2m cash to control the Creston Moly assets, sold in disposal by
bankruptcy receiver.
• Great Panther Silver (GPR.to) (GPL), which via a dubious-looking not-very-arm’s-length
deal is taking over younger cousin company Cangold (CLD.v) in an all-paper deal
• First Mining Finance Corp (soon-to-be FF.v): This company being set up by Keith
Neumeyer of First Majestic Silver (AG) (FR.to) fame and semi-spun out of same is going
to be a publically quoted “incubator” or “warehouse” company, to be filled with 18 or
20 properties to begin with (they’re eyeing up to 60 others as well), which will then
supposedly be sat on with minimal exploration spent until the market picks up, at which
time they’ll start monetizing their assets. This company is still in pre-IPO stage and is
due to be floated before the end of March (if you’re interested in knowing more I can
send you the company’s pitch presentation and I’m happy to say that the new FF.v has
hired the highly reputable Patrick Donnelly as company president, too).
All those and more, but I’ve listed a few recent headline-making deals to underscore how the
move by mining people and mining companies to secure land assets is now out of the world of
theory and very much in the world of reality. In my personal and subjective opinion some of the
deals and plans in those examples are better than others, but they all have one thing in
common: These are companies buying up cheap land assets for longer-term purposes.
The business plan behind land purchases
So, that’s all said, what’s the model? I’m going for the bare bones only (if it’s too pared down,
apologies):
1) Put cheap mining concession/land assets into a holding company at the bottom of the
mining cycle.
2) Wait.
3) When valuations move back up, sell your land assets to somebody else.
What could be easier? What could possibly go wrong? The answer to that one is “plenty” of
course and we’ll discuss a little on that in a page or two’s time, but first to give an idea of what
can be acheived, let’s consider a massive success story.
A case study of incubator success: Ross Beaty and Lumina Capital
In order to get a handle on the “what could go wrong?” question we examine one of the most
successful exponents of incubation in the last cycle, arguably the most successful in fact. Ross
Beaty and his Lumina Capital Limited Partnership ran the model from the late 1990’s until
(basically) last year. Reams have already been written on his impressive and visionary success
and before I go any further I want to say in my personal opinion his plan was brilliantly
conceived, brilliantly executed and Beaty deserves every single dime of the success it has
brought him.
When you start staring at the Beaty story, things start showing up that demonstrate how well
he thought it all through.
• Pick assets that people will want. In the Beaty Lumina company they went for large
porphyry copper deposits at in the late 1990’s were priced at the “can’t give them
away” level. Galeno, Relincho, Taca Taca are just three of the names picked up by
4

Lumina for a song.
• Be prepared to hold. And hold. Beaty did that by shipping the assets into a private
company, which means running costs and overheads were low but most importantly,
there weren’t any impatient minority/retail shareholders (such as I) that would insist
that the company “did something” in order to justify its director’s salaries.
• Spin the companies out into a public vehicle at the right time. Beaty/Lumina did this
with a maestro’s touch, as those who remember the appearances of Northern Peru
Copper then Global Copper then Lumina Copper will remember.
• Add value to the baseline asset. Lumina/Beaty did this by raising cash into an IPO,
putting together a specific and targetted drill program at the right time, then came the
option of a second round of financing that was non-dilutive and allowed the
exploration/definition/economic study process to accelerate. The plan worked to
perfection time after time and majors lined up to buy the assets.
To cut a long story short, in this Mineweb report (2) that noted the end of the line for the
model on the sale of Taca Taca last year, this paragraph summed up the 15 year process:
Taca Taca is now the last of Beaty’s 10 major copper assets to be sold, which when
combined, sold for a total exceeding $1.6 billion. Beaty acquired these assets at
bargain prices when copper prices were 60-cents per pound.
What Beaty managed to do was first identify a business opportunity that was being ignored by
everyone else, with brilliant insight and timing to pick up assets at the bottom of the market.
Second, he bought the right assets in the right sector. Third, he set up his ‘incubator’ to be able
to hold the assets long-term with little or no fuss. Fourth, he knew the right time to hit the
accelerator pedal, develop and advance the projects as well as their marketing, then find
buyers who would pay many multiples of the prices he paid at the bottom as the market rose
and hit its peak. And he did all that while at the same time being straight with all those he did
business with, maintaining integrity at all times. He’s now rich like Midas and deserves it.
Which brings us to today
Beaty and a few others like him beat a path of success in what’s little more than “buy low sell
high”, but with land assets that fell completely out of favour, only later to become hot
properties. Here in 2015 we’ve also witness two years of cycle drop from a boom through bust
and with many people now calling the bottom in gold (include me in) and better times ahead,
thoughts turn to ways to play any upsurge. The fact that cheap mining land is out there isn’t
something that’s a secret, and this time around neither is the well-beaten path (Beaty et al) to
riches fame and glory.
Yes I know you’re smart and see the problem already. The world’s innovators and pathfinders
are few compared to those that follow them, which means the basic business plan we’re
outlining here...
1) Buy cheap land
2) Wait
3) Sell high
...is going to be copied, subjected to the law of diminishing returns and eventually beaten to
death by those who see the quick buck. What we do know is that it can work, what we must
recognize at this point and moving into the future is that it’s not going to work for everyone.
The incubator model of business is going to be successful for some people and in some
circumstances, so it’s time to consider the criteria for 2015, for the next cycle and Mine Land
Warehouse 2.0, Here’s what I’m looking for:
5

• The land must be cheap, by which I mean as a retail investor I want to buy public
traded and market quoted stocks that have a beaten to death share price, probably
little in the way of cash, but a decent land package on their books.
• The land must be reasonably attractive. I’m not asking for miracles, but on the
other hand if you buy into the type of BS moose pasture that was fobbed off as live
exploration and project targets during the peak of the fun a few years ago, you’re
asking for trouble. However, an early stage land package with plenty of exploration
potential ticks the right boxes. And on this score, the bigger the concession (as in
hectares, Km2 etc) the better.
• The location must have a reasonable political/community risk profile. This, for
example, is where Timmins Gold (TMM.to) (TGD) fails when buying Caballo Blanco. It
may be pretty rocks, it’s never going to be a mine and the type of “oh we’ll sort out the
local brown people later don’t worry about that” attitude you still get in many mining
companies needs to go the way of the dinosaurs as soon as possible. People running
mining companies can and often do make ignorant and stupid decisions, forget that at
your own financial peril
• The management must have a record of honestly and integrity to uphold.
Mark my words, once this ball starts rolling there are going to be all the crooks and liars
of before jumping on the idea, if only for the fact they ran scams on crappy land
packaages before and still have them on their books. There are too many shysters in
this game, but on the other hand there are decent people to be found and at least
some of them will be in control of severely beaten down tracts of exploreco-ready land.
• Good financial contacts inside mining that can fund or re-fund their
company. You’ll sometimes find a tinycap junior with a decent land package but with
nobody to dig them out of a financial hole. That can be a problem, but if the junior in
question is alreayd known and appreciated by people who can and will write big
cheques, or by companies that may be interested in buying the little guy out and
getting control of that land, then our beaten down land holding exploreco can get a
jump on the others, can start this ball rolling more quickly and, above all, can bring
benefit to minority shareholders such as you and I.
• The ability to hold and wait. This is not as easy as it might seem. Take the example
of absolute success in this business model, that of Ross Beaty/Lumina. He saw that
putting land assets into a private company would a) keep overheads cheap and b)
avoid the boring questions that come from shareholders of public companies. In a
private holding company he was in absolute control and could execute his “wait a long
long time” strategy without annoyance or distractions. This is a potential weka point for
the new Neumeyer start-up First Mining Finance (will be FF.v), for example. What
happens when the assets are bought and in the corporate structure, then the company
does very very little for a couple of years? What happens when shareholder complain
about paying a management team $200k/annum per head for doing little or no work?
What happens when the pressure to “do something” becomes too great? The trap can
cause burn rates to go up, dilution follows, share price is frittered away at the wrong
point in the cycle. Ross Beaty avoided this problem, can Neumeyer (and others)?
As it happens, I think I already own a company that fits many of those criteria and its name is
Lara Exploration (LRA.v). The ‘prospect generator’ model will come back into fashion and a
company such as LRA, with control over big land areas, highly respected management (start
with head honcho Miles Thompson, an impeccable mining figure) and all the industry contacts
you care to mention is a good example. There are other out there too that fit from the
“prospect generator” model and to name just a handful Riverside Resources (RRI.v) working
mainly Mexico, Arena Minerals (AN.v) in Chile, Revelo in Chile or even the current fusion
between Tarsis and Estrella Gold (mainly Peru) may fit the bill.
6

As it also happens, this is another reason why I really like the purchase Starcore (SAM.to) made
of the Creston Moly disposal assets, as that company can stick those assets on the back burner
and keep everyone (including themselves) happy by being busy at its working and producing
mine.
But back to the true prospect generators for a moment, most of those including Lara have seen
their share prices tumble as well. However and although I’m happy to hold LRA.v and patient
there too, it isn’t the type of deep, extreme value “land squat” play I’m looking for at this stage
of proceedings. I’d call LRA.v a clear bargain at today’s level, but it’s not a desperate screaming
down-to-nothing land value play at current prices.
So LRA.v is for me a hold, SAM.to has got me feeling good about its sideline but right now, at
the beginning of this new trend, I’m looking for the true low-hanging fruit, the ones that make
you go “oh my stars that could double in a week”. And here’s the one I’m going to buy next
week under those circumstances.
Legend Gold (LGN.v): My idea of a land play
To re-cap the main practical points from the extanded ramble above what I want from a
prospective “land warehouse”, “incubator” or “land squat” play are the following:
• Dirt cheap share price
• Big and interesting land package
• Management with a record of honestly and integrity to uphold
• Acceptable community/political risk location
• Big name sponsors that can provide cash to the structure in the weeks ahead
• The ability to hold and wait
Legend Gold (LGN.v) scores on all counts except for the last one, but due to its ripe appearance
as a low-hanging fruit today, I think it’s just a matter of time before that gets revised. When it
does this stock will be at a higher price but that’s OK, because I’ll already be long and in profit.
It’s cheap: Here’s the shares out position.
Legend Gold (LGN): Shares out
80
70
60
50
40
30
20
10
0
7
21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1 tse51q2
m
source: company filings, IKN ests
With the distribution of shares announced last week (see below) LGN has just under 52.5m
shares out. At Friday’s close of 9c, that’s a market cap of CAD$4.73m, or ~U$3.8m if you like
your numbers in world currency. There are warrants outstanding but as they’re way out the
money, they’re no big issue and won’t stop any upside from happening.
It has land, pol risk is aceptable. LGN has a big land package in the Mali region of West
Africa, well-located inside an established region for mining operations (which means reasonable
good community/political risk, too). I encourage you to check out the corporate presentation
(3) found on the company website (4) for a decent overview of this aspect, but we note the
following here:

• It has six main concessions in two regions of West Mali.
• Main project so far is Diba, which has an all-categories 43-101 compliant resource of
just over 7m tonnes grading 1.36 g/t gold for a little over 300k oz gold. Now that’s not
particularly big, but the grade is good and it’s near working mines such as one run by
Randgold (GOLD) that might be interested in buying it to bump up average feed grade.
Plus there’s still plenty of exploration potential.
• Also interesting is a JV between Legend and Randgold (GOLD) on a separate property.
LGN is being carried to pre-feas level as Randgold options in, but what seems to be
happening is Randgold is dragging its heels deliberately, knowning that LGN is tight for
cash and may be waiting for the moment it can swoop and get all the land for a song.
Good management. The company is led up by Michael Winn and others connected to the
Eurasian Minerals (EMX.v) (EMXX) company. These are peer-respected people with a lot to lose
if they suddenly go to the dark side. Not only that, but they also have a track record of looking
after shareholders large and small. For sure their companies have seen share prices drop during
the slump just like many others, but their reputation for looking after all stakeholders (not just
themselves) is intact. Compare that to the underhand move Kaare Foy/Robert Archer of Great
Panther just made on holders of Cangold (CLD.v), the flipside of what can happen to tinycaps.
Larger sponsors. There are three names of note attached to LGN.v.
1) First up the aforementioned Randgold (GOLD), in JV with LGN.v and obviously interested in
at least one corner of its land package. As Randgold is in the Mali region heavily there’s every
reason to consider it as a buyer for more of the LGN land package while prices are cheap.
2) As at February 2015, Sprott Global Resource Investment (“Sprott”) has 8.766m shares of in
Legend Gold (LGN.v) (16.7% of total S/O) as well as 9.71m warrants. Those come almost
exclusively from the mid-2013 financing run by LGN.
3) As of last week, Endeavour Mining (EDV.to) owns 9.8m shares of LGN.v or 18.7% of shares
outstanding. The joint news out of LGN and Endeavour Mining (EDV.to) last week (Feb 25) (5)
in which LGN transferred 2.5m shares to Endeavour means that, according to the deal at least,
the main Diba project has finally got some overdue permits issued by the government of Mali.
As noted in its quarterly financial filings...
Legend will only issue the remaining balance of 2,500,000 common shares to
Endeavour if and when the transfer of the registration of the Diba permit has
been completed.
...and that’s probably pretty good news for LGN.
This price chart of LGN shows the way
in which it was sold down in 2014 from
the 30c mark to under 10 by October.
Since then it’s bobbled around between
6c and 10c on very low volumes.
This is the kind of tinycap and largely
forgotten company share price I’m
looking for. Now it would be great to
pick up shares at the 6c or 7c end of
the price scale we’ve seen in the last
six months, but I’ll be just fine about
paying the top end 10c too. However
there’s no reason to pay up and over
10c at the moment, as part of this process is keeping all purchases at the bargain basement
8

level and not overpaying.
Some financials
Via a few basic financials charts, here comes a little more light on the other main reason why
it’s not necessary to overpay for LGN shares; It may have decent land, but it’s got no cash.
Here’s the assets chart...
$m LGN: Assets per qtr
16
cash&ST other current fixed
14
12
10
8
6
4
2
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14
source: company filings
...here’s liabilities plus a guesstimate of what we’ll see for Q4...
LGN: Liabilities per qtr
$m
1.2
LT debt
1 current debt
0.8
0.6
0.4
0.2
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14est
source: company filings
At least it has no long-term debt. Here’s working capital, which went negative in 3q14 and since
then the company hasn’t run any sort of financing so it’s going to get worse:
LGN: Working capital
6
5
4
3
2
1
0
-1
-2
9
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
U$m
source: LGN filings
We saw LGN raise ~$6.3m in 2013 and then spend it on exploration and suchlike, to the point
where in 3q14 it had a slight negative working cap. What it’s been running on since then I have
no idea whatsoever, fumes or somebody’s credit card for all I know (and I don’t care much as
long as the burn rate was chopped to a minimum). But today they got no moolah, period.

There are more financials charts and thoughts I could go through with you, but in the end it
would be a case of details around the edges. The point here is that LGN is cheap, it’s got land,
it’s at the right time for a revaluation and what’s more, there are at least three large
chequebooks that are logical buyers of the company or its shares. Maybe more.
The bottom line
LGN doesn’t have any money, but it does have decent management (the EMX guys, etc).
Although the exploration may have underwhelmed to date (plus Randgold apparently messing
them around on the pre-feas for its JV project, as heel-dragging probably suits the bigger
partner) what it does have is a very decent land package in an interesting spot on the planet.
And it’s cheap. It’s a $4m to $5m mkt cap and right at a time when the smart and savvy
contrarian strategists are taking positions in land assets and thinking about the future. On this
aspect, what I really like about this is that the three “bigger players” already involved with
LGN.v, namely Randgold, Sprott and Endeavour (EDV.to), are not stupid and they’re exactly the
type of longer-term thinking entities that would be interested in snaffling up a dirt cheap land
package at the right time in the cycle.
They may end up competing against each to fund LGN, which can only be good for the share
price. Overall this one ticks all my boxes, including the key “low hanging fruit” aspect that can
see it returning a near-term profit and as such The IKN Weekly considers Legend Gold
(LGN.v) as a speculative buy at current price levels. I will buy some next week, with a
plan of paying a maximum of 10c but if I can, I’ll buy or add at cheaper levels too. As of
next week Legend Gold (LGN.v) will be part of the IKN Weekly ‘Stocks to Follow’ list in the
‘smaller riskier’ sub-category.
It’s going to be a small investment and I’m not kidding myself about the high risk involved,
either. But if it gets a funding deal from one of its three main sponsors, or even a buyout offer,
current prices will look cheap indeed. Initial target price 20c, it could go a lot higher later.
Stocks to Follow
A good week for the list. Of our 13 open positions, ten posted gains (not listing them all) and
three were weekly losers (FCV.v, LRA.v, FSM short). There were plenty of big percentage
winners among them too, with in order of merit Dalradian Resources (DNA.to up 22.6%),
Starcore Intl (SAM.to up 14.3%), Teranga Gold (TGZ.to up 13.1%), First Majestic (AG up
11.0%), McEwen Mining (MUX up 8.7%) and NovaCopper (NCQ.to up 8.0%). I’ll even throw in
a mention for my biggest cash winner, the 5.4% upmove seen in Rio Alto. To the downside the
biggest loser was Lara Exploration (LRA.v down 12.8%).
We currently have 13 open positions on our our ‘Stocks to Follow’ list, two less than our self-
imposed maximum. Four are in the green and nine are in the red, so better days or not there’s
still plenty of room for healing.
10

Current
company Ticker this week Avg Price Reco date PPS Gain/Loss% Notes
Top Picks
Rio Alto Mining RIO.to hold C$2.30 07-apr-11 C$3.92 70.4% Top Pick, Best PM Jr, M&A tgt
Recommended long positions (in current order of preference)
McEwen Mining MUX STR buy U$1.16 25-jan-15 U$1.13 -2.6% New position, excellent value
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$1.14 78.1% Nov'14 tgt $1.25, top Au expl
B2Gold BTO.to buy C$2.32 12-sep-14 C$2.11 -9.1% Dependent on Au price moves
Teranga Gold TGZ.to buy C$0.55 15-feb-15 C$0.69 25.5% New position, 83c tgt
Starcore Intl SAM.to buy C$0.12 10-jan-15 C$0.16 33.3% Small Pos., added, tgt 19c
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.195 -15.2% tgt 50c, due Feb'15 financing
First Majestic AG hold U$10.51 10-aug-14 U$6.18 -41.2% Now in pair trade with FSM
Minera IRL IRL.to spec buy C$0.27 22-jul-12 C$0.07 -74.1% Waiting for financing news
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.81 -22.9% small Cu play low vols, hold
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.375 -67.4% solid biz model, LT hold
Recommended short positions
Fortuna Silver FSM SHORT U$4.12 10-nov-14 U$4.50 -9.2% In pair trade with AG
Smaller/Riskier
GoldQuest Min. GQC.v hold C$0.26 27-oct-13 C$0.135 -48.1% may sell soon
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
Now for some notes on current basket stocks.
Teranga Gold (TGZ.to) (TGZ.ax): It gets to the point of embarrassing to buy the absolute
exact bottom price at the right time,
so my saving grace is that I bought at
55c on Tuesday 17th rather than the
54c or even 52 available on that day.
But as you can see on this ten day
chart (right) the Tuesday (second to
left day) was the best day to buy
along with half the next day, because
since then the stock’s re-rating has
been rapid thanks to the catalyst of its
strong 4q14 financials and 2015
guidance that the market applauded.
It won’t keep going up in a straight
line, be clear on that. It’s been an
impressive and welcome start to the
trade, but as well as my longer-term bullishness on the stock there comes other thoughts. As
this isn’t my biggest position (forget RIO.to, this is smaller than both BTO and MUX) and it’s
going to spike overbought at some point if it keeps rolling, I’m not against taking profits on
TGZ.to if the current sketched 83c hit is hit in the near-term with a view to playing it cute and
trying to buy back in at a lower price further down the line. We’ll see on that.
McEwen Mining (MUX) (MUX.to): Lower to higher, volumes increasing and Rob McEwen
11

popping up to promo his stock at BMO too, it was a good week to be long this stock.
We’re now on PDAC and McEwen promo
territory, we’ve also been promised the MUX
4q14 financials “early March” and as that period
starts today, those could come down at any
time.
The NOBS report in IKN298 dated January 25th
explains the strategy behind this trade, it’s the
turnaround we’re looking for from the financials
and the bet laid is that MUX becomes a newly
profitable entity as of this quarter. My theory
begins its acid test and as always, the money is
where the mouth is.
Starcore International (SAM.to): We now know the identity of block buyer mentioned in
last week’s edition, as the filing last Monday (6) named Eric Sprott (you’ve probably heard of
him) as the newly minted owner of the 21.65m shares moved, representing 14.25% of shares
out. That’s interesting and as I wrote on the blog in a separate post the next day (7), “I've
been dubious about Sprott's investment theories many times...[b]ut he's got this one right and
has zeroed in on a small producing gold miner that's run well, financially solid and capable of
good gains”. Mind you as a SAM.to I would say that, wouldn’t I?
In trading SAM.to did well, undoubtedly helped by the naming of its new large shareholder. I
like the new 16c prices it printed but I really like the sustained volume in the ticker, as these
days it does six-figure volumes every day and allows for small but reasonable trading space.
That’s healthy.
Fortuna Silver (FSM) (FVI.to) and First Majestic (FR.to) (AG) Pair Trade: As is our
wont, here we print the pair trade tracker chart that starts from the launch of the equal-
weighted pair trade (AG long, FSM short) as at November 16th 2014.
First Majestic (AG) is up ~21%, Fortuna Silver (FSM) is down ~2%, our pair is ~23% to the
good. That’s a slightly wider gap than the last few weeks and in fact, it’s the widest it’s been on
any given day since the pair trade began. What that in turn does is justify the chance taken in
holding FR.to through earnings last week.
Today we continue the bias of coverage on AG over FSM but down in ‘Market Watching’ as First
Majestic reported last week and Fortuna Silver didn’t. We’re perhaps two weeks away from
12

finding out whether my general assessment of FSM as overpriced and a short is correct, which
happens when its Q4 numbers are published. In the meantime see below in ‘Market Watching’
for a longer section and comments on what we got from AG last Monday.
B2Gold (BTG) (BTO.to): With a grind and an effort on Friday, BTO managed to get back up
above breakeven on 2015.
I don’t have anything smart or insightful
to say about BTO this week, waiting as I
am for the company to file its 4q14
financials before taking the next deep
look at the stock (that’ll come with a full
NOBS update report, for sure). However
my gut today says that BTO is
undervalued and ready to rebound.
Along with MUX it’s the junior goldie I’d
buy today.
Rio Alto Mining (RIOM) (RIO.to): Our Top Pick stock continues to trade in near-exact
lockstep with its buyer Tahoe Resources (THO.to) (TAHO), which means the market is ever-
firmer in its opinion that the merger deal will be successful as stands, without third party
interference or the deal falling apart at the shareholder approval stage.
Therefore price moves are still all about the combo of
1) the moves in the silver and gold price
2) the way the market’s bigger entities approve of the new bigger company that’s coming
and are happy to buy and be a part of it.
And that’s good. With the chances of a third party or a sweetened bid dropping lower by the
week (I was at 15%, I was at under 10%,
I’d give it a “less than 5%” chance at this
point) be clear that I’m sticking to my plan
and once PDAC is out the way, which is
really the last chance of seeing something
different show up on the price radar screen
of TAHO/RIOM, I’m going to sell my shares
and cash in before the deal is done. When
exactly I don’t know and right now I have no
special day in mind. It’ll be about the silver
and gold market more than anything else, I
suspect.
Dalradian Resources (DNA.to): Holy Moley, I actually managed to call a near-term move
correctly. Last week in IKN302, after commenting on the soft action that came from the
warrants exercising and what looked for all the world like warrant holders cashing in, I wrote...
It’s nothing to be particularly concerned about, nothing has changed except for near-
term prices. Could even be a bargain entry point and one of the last times you’ll be
able to buy DNA at under a Loonie, but that daring statement depends less on my
wishful thinking and more on the gold price action in the weeks to come.
...and here were are, one 22% weekly move later. I’ll take that as a call, you can argue
13

amongst yourselves if you think I’m full of it. Even nicer is to forget the warrant dip completely
and consider we’re now 11%
higher than two weekends ago,
The other thing, volumes. For
exmaple, the 6% move on Friday
that capped off the excellent week
for DNA.to came on 800k+ volumes
traded, that’s double the average.
Theoretically there’s a warrants
overhang at $1.15 (the recently
closed Ross Beaty financing gave
him warrants at that price), but I
think they’re not going to hold this
one back if buyers are still keen
next week. DNA now has all the
look of a company going under the
hammer, but as mentioned in previous weeks I’m not going to be cute or over-greedy on this
one, if I see my $1.25 target I’m taking it and will wish the buyer of my shares the best of
fortune and higher prices.
Focus Ventures (FCV.v): There’s a new presentation (8) on the company website (thanks for
the quick headsup PB) which complements the company’s presence at PDAC. FCV is making a
decent show at the conference this year by showing off samples of Bayovar 12 at the core
shack and those geols amongst readers would be wise to go along and have a look. This is one
of the best phosphate projects in the world that’s not in the hands of a big mining player, if not
the best.
The Copper Basket
After nine weeks of 2015 The Copper Basket is showing a 4.44% loss to level stakes.
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 542.37 1.42 -30.0%
2 NGEx Resources NGQ.to 1.17 187.71 198.97 1.06 -9.4%
3 Reservoir Min. RMC.v 3.96 47.55 198.76 4.18 5.6%
4 Nevada Copper NCU.to 1.65 80.5 136.05 1.69 2.4%
5 Western Copper WRN.to 0.68 93.68 65.58 0.70 2.9%
6 Copper Fox CUU.v 0.135 402.96 56.41 0.14 3.7%
7 Amerigo Res ARG.to 0.27 173.65 55.57 0.32 18.5%
8 NovaCopper NCQ.to 0.58 60.15 48.72 0.81 39.7%
9 Hot Chili Ltd HCH.ax 0.16 333.11 46.64 0.14 -12.5%
10 Panoro Minerals PML.v 0.295 220.25 41.85 0.19 -35.6%
11 Regulus Res REG.v 0.35 56.39 22.27 0.395 12.9%
12 Metminco MNC.ax 0.008 1822.6 10.94 0.006 -25.0%
13 AQM Copper AQM.v 0.06 139.24 9.05 0.065 8.3%
14 Catalyst Copper CCY.v 0.305 31.39 8.16 0.26 -14.8%
15 Coro Mining* COP.to 0.045 159.37 4.78 0.03 -33.3%
NB: HCH.ax & MNC.ax priced in AUD$, rest CAD$ Portfolio avg -4.44%
A marked improvement for the overall basket average last week, up by nearly 4% top finish at
negative 4.44%. This despite there being just six winners (CS.to, NCU.to, CUU.v, ARG.to,
NCQ.to, REG.v), along with six unchanged stocks (PML.v, WRN.to, HCH.ax, MNC.ax, AQM.v,
COP.to) and three losers (NGQ.to, RMC.v, CCY.v). The goodness was sprad by the decent
14

percentage wins in many of the winners, with double figure upmoves seen in Regulus
Resources (REG.v up 19.7%), Amerigo
Resources (ARG.to up 16.4%), Copper Fox 4% The Copper Basket 2015, weekly evolution
(CUU.v up 12.0%) and Nevada Copper 2%
(NCU.to up 11.9%). There were no double 0%
figure downers. -2%
-4%
So to the price action for copper the metal
-6%
and that was plain straight good. Here’s the
-8%
chart that shows it nicely as it includes the
-10%
tail-end of last week, all quiet and Chinese
New Year influenced, then an anticipatory pop
on Tuesday 24th that turned into a fully-
fledged relief rally Thursday, with copper
breaching the U$2.70/lb level for the first time since
the waterfall selling in early January.
Below right we also have a bonus copper price chart
this week, which shows how the copper mining
company ETF (COPX) fared against the PM ETFs GDX
(the big boys) and GDXJ (the juniors). Indeed COPX
beat them out, but it wasn’t a big beat either. Copper
moved up, the stocks moved up, but neither ripped
the proverbial face off markets or shorters.
There was a lot of “BUY COPPER NOW!” screaming
and shouting from the brokerages last week on the
back of the Chinese-induced price pop, but frankly I’m
still leery, was leery when I saw the move over U$2.70
and stayed leery during the Friday pullback. The
reasoning is simple enough:
1) According to what we know to a decent level of confidence now, the waterfall drop in
copper prices early January was run by a group of high-powered (and very well funded)
Chinese financial entities.
2) I highly doubt they would have run a
successful short attack in the way they did
without the approval (overt or tacit, I
don’t care) of the Chinese government
and State.
3) Which means they’re not going to go
away at the first apparent reversal, plus...
4) ...if I were a Chinese shorter of copper
playing a longer and altogether more
lucrative game, allowing copper to pop the
way it did on the day back after Chinese
New Year is exactly what I’d let the price
do.
So I’m not jumping to conclusions on the back of one single price move and I’m not moving
away from a wholly neutral stance on copper yet. It is, however, time to watch the copper price
moves very carefully.
It’s the end of the another month (they come around so quickly, it must be my age) and time
to catch up on the monthly world warehouse tracker charts. As you can see, stocks that spent
nearly all 2014 at low levels are moving back up, though we’re still a long way from the totals
registered in 2013 because the copper rental scam run by the big players at LME warehouses
15
ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dn22 ts1ram
source: IKN calcs

has been dismantled. In percentage terms, holdings at Shanghai are again nudging at the low
40% number, its traditional ceiling. That’s one to keep an eye on when the March figures are
printed.
We move to the weekly inventories tracking and resulting bullet points:
• Overall world levels rose sharply, up 48,449 metric tonnes (mt) (+10.3%) in strong
trading, particularly reported from Asia desks, for a total this weekend of 517,779mt.
• The Shanghai Futures Exchange was the big big mover. We saw the price pop come on
the first day of China trading after their New Year and then a bucket of cold water in
the form of inventory figures, which saw an upmove of 50,475mt (+32.6%) to bring its
stocks this weekend to 205,146mt. As the chart below shows, Shanghai warehouse
stocks have more than doubled in the space of just a few weeks, not even the copper
bulls or those who mistakenly pooh-pooh the influence of warehouse numbers on prices
can ignore that type of shift.
• LME warehouses stocks moved down slightly, but it wasn’t the driver of price or news
this time. Stocks were down 1,825mt (-0.6%) to 296,375mt, but they still hover near
the 300k barrier and the three year highs.
• Comex inventories dropped by a small 201mt (-1.2%) to finish the week at 16,258mt.
Our tracking chart of the key Shanghai warehouse in 2014 and 2015 looks like this, and that’s a
big big pop. If we move further back in time the highest recent level of held copper stocks in
the Shanghai Futures Exchange warehouse system came in early 2013 (it always times to the
Chinese New Year) which was just under 240,000 metric tonnes. The speed of last week’s move
suggests that number is under threat, this time next week we’ll have a better idea.
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
220000
200000
180000
160000
140000
120000
100000
80000
60000
16
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 ht52 ts1bef ht8 ht51 dn22 ts1ram
Copper inventories, per month 2012-2014
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
Mt Cu
source: Cochilco
Now for some updates on a couple of basket stocks
NovaCopper (NCQ.to): Being a shareholder, I’m mildly encouraged to note that as of this
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef
Mt Cu Copper inventories: percentage held per exchange
LME Shanghai Comex 80
70
60
50
40
30
20
10
0
source: Cochilco
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef
LME Shanghai Comex
source: Cochilco

weekend NCQ.to is the best performing basket component in 2015 to date, up 39.7% in the
first two months. Yes for sure it’s coming from the bottom of a big sell-off and the timing of
that bottom probably helps things a lot. And yes volumes have still been lightweight, so until
real trading volume of the type seen in this stock in 2012 and 2013 comes back we’re not going
to know whether it’s a live one or not. But I am encouraged. Mildly.
Nevada Copper (NCU.to): On Friday morning I received a pleasant mail from subscriber ‘DV’
which covered plenty of subjects, but talked first about a trade he’d just closed that had used
my disdain for NCU as one of the timing points. Cutting a
long story short, he’d noticed how NCU reacts short-term
to news, noticed the way the tunnel development news
releases were being spaced (thanks to the IKN Weekly
and blog coverage), thought about the PDAC factor and
guessed, as it turned out correctly, that NCU would
announce its “major achievement” of getting to the
bottom level of the tunnel excavation this week just gone
or tomorrow “PDAC Monday”. Sure enough his reading
was spot on and what’s more, the price pop came right
on schedule as well.
Now that’s my idea of a smart way to use the information in The IKN Weekly and it’s why I
encourage you all to make anything written here a starting point for your own DD, rather than
taking any personal opinion offered as some sort of gospel. Nice trade, DV.
The Low Cost Producer Basket
After 9 weeks, the 2015 Low Cost Producer Basket is showing a 15.25% 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 17.85 21.98 18.7%
2 Barrick ABX 10.75 1164.67 15.16 13.02 21.1%
3 Newmont NEM 18.90 499 13.14 26.33 39.3%
4 Franco Nevada FNV 49.19 156.08 8.23 52.75 7.2%
5 Silver Wheaton SLW 20.33 357.39 7.72 21.59 6.2%
6 Agnico Eagle AEM 24.89 173.43 5.58 32.15 29.2%
7 Kinross KGC 2.82 1114.5 3.17 2.84 0.7%
8 Buenaventura BVN 9.56 254.19 2.94 11.58 21.1%
9 B2Gold BTG 1.62 948.9 1.59 1.68 3.7%
10 Pan American PAAS 9.20 151.41 1.47 9.68 5.2%
all prices in U$, using NYSE ticker prices Portfolio avg 15.25%
Nine winners (not listing them) and just one loser (PAAS) last week, so a strongly positive
period for our larger producers list that
The Low Cost Producer Basket: Weekly performance
added 3.85% to the overall basket average.
and comparative to GDX control
The best move by a long way was put in by 25%
Buenaventura (BVN up 11.4%) on the back
20%
of its decent Q4 numbers (as well as a
15%
rebound from overselling the week before
last). However, we note that the GDX 10%
control is now at +15.78% for the year and 5%
outstripping our basket, which I think has a
0%
lot to do with the relative out-performance
of the bigger names compared to the
smaller. As we have relatively small market
cap companies such as Kinross,
17
ts13ceD ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dr42 ts1ram
basket
gdx control
source: Google Finance, IKN calcs

Buenaventura, Pan American and B2Gold with equal weighting to the big boys, if the money
starts flowing into the Tier 1 names our basket will underperform to a weighted index.
That’s a long-winded way of saying that the comparative performance of our basket is currently
suggesting that new money in flowing in from the top, and that’s a good signal.
Low Cost Basket: Percentage difference between
basket and GDX control, 2014
1.00%
0.50%
0.00%
-0.50%
-1.00%
-1.50%
-2.00%
-2.50%
-3.00%
18
ts13ceD ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dr42 ts1ram
source: ikn calcs, NYSE/Nasdaq data
Silver Wheaton (SLW): Post-close Friday news releases are normally bearers of bad news,
but on PDAC weekend all bets are off and they can be used to bring interesting or even positive
events to market. On Friday evening SLW announced (9) that it had increased and booted
forward its revolving credit facility, allowing it to draw $2Bn and move out repayment to 2020.
With this new faciolity and treasury cash it has paid off a term loan and has a little over $1.3Bn
left to play with. The message here is clear, SLW has just cashed itself up for a new round of
acquisitions.
Buenaventura (BVN): BVN announced its Q4 financials (10) before the open on Friday,
here’s how they were received (chart right):
In short, they went down very well. The world was
ready for the net net loss reported by BVN
because the rump of it came from the write down
at Conga, which has already been flagged by
Yanacocha SA JV operator Newmont (NEM). But
its adjusted EBITDA of U$166.9m (which includes
its ownerships in Yanacocha and Cerro Verde) was
strong and impressed analysts.
For the record I love wonking out on the BVN
year-end filings (one of the most complete and
detailed sets of corporate mining numbers out
there) but what with having a lot on my plate I haven’t got to them yet. They deserve time to
study, not just to scan and I’ll be doing exactly that this week.
Regional Politics
Guatemala: La Puya turns three years old
Tomorrow Monday March 2nd marks the third anniversary of the setting up of La Puya, the
pacific resistance by locals to the El Tambor gold mine project in Guatemala. Whatever you
might think of the motives, keeping a passive and peaceful gate blockade in place for three
years, sometimes in the face of police and army aggression to get them to move such as the
one in May last year (11), is no mean achievement.
And a reminder: Guatemala has its Presidential election later this year.

China lends to LatAm (and it’s often for mining projects)
According to the presentation made by the Washington Inter American Dialogue in conjunction
with an investigation group from Boston University last week (12), the World Bank plus the
Inter American Development Bank lent the LatAm region U$20.0Bn for development projects in
2014. Meanwhile, China lent the region U$22.12Bn.
Loans to LatAm Region in 2014: China vs
U$Bn World Bank + Interamerican Development Bank
25
22.12
22.5
20
20
17.5
15
12.5
10
7.5
5
2.5
0
China World Bank plus IDB
source: Wash. Interamerican Dialogue, Boston Univ.
This is the first time China has “out-lent” the world’s normal primary lender of money for
development and infrastructure project in the region. By way of comparison, in 2013 China lent
the U$12.9Bn.
U$Bn China loans to Latin America countries, 2013 and 2014
25
Costa Rica
20 Honduras
Jamaica
15 Mexico
Ecuador
10 Venezuela
Argentina
5
Brazil
0
2013 2014
source: Wash. Interamerican Dialogue, Boston Univ.
This second chart also shows the main destination breakdowns for the Chinese loans in 2013
and 2014.
• 2014: Brazil U$8.6Bn, Argentina U$7Bn, Venezuela U$5.7Bn, Ecuador U$0.82Bn
• 2013: Venezuela U$10.1Bn, Mexico U$1.0Bn, Jamaica U$0.749Bn, Ecuador U$0.691Bn,
Honduras U$0.298Bn, Costa Rica U$0.101Bn.
According to professor Kevin Gallagher of Boston University and his team, “The majority of the
loans are concentrated in the resource extraction (mining and energy) sector and infrastructure
(transport and electricity transmission)”. According to Gallagher at the presentation, the loans
will continue to flow from China to LatAm as China considers them a “diplomatic tool”.
Chile: “Been down so long...”
“...it looks like up to me.”
Last week, Chile’s official stats office INE announced that mining production was up 10.1% in
January 2015. As this screenshot shows, the news was top story on the State stats office
website, it was also picked up by all the Chilean national press and international wire services
(i.e. Reuters here (13)) who did exactly as expected by regurgitating the INE news without
scratching the surface.
19

Anyone with an inkling of reality could smell the statistical BS from a mile away. Here below is
the chart of the dataset which includes the latest January reading for mining production from
Chile and, as you can see, there’s a big spike in the January 2015 figure largely due to the big
slump in the January 2014 figure of negative 0.9%.
Chile: YoY mine production growth, 2010 to Jan 2015
20
15
10
5
0
-5
-10
20
2102naJ ram yam luj pes von 3102naJ ram yam luj pes von 4102naJ ram yam luj pes von 5102naJ
% YoY
source: INE
If we consider the February 2014 number (+7.2%), I will take bets on the Feb 2015 figure
coming in at around +3% give or take and the newswires will “forget” to cover the
development. However, come the end months of 2015 we’re bound to see the fanfares, pomp
and circumstance rise again when the 2015 numbers get compared to the abysmal late 2014
data returned by Chile, including that negative 6.3% reading for November 2014.
Overall, the thing that really counts in the trend line for this dataset (added in broken red),
which we can see fading from the +6% level to today’s +2%.
We’re due a lot of this type of statistical BS in 2015 and not just in Chile. Another that comes to
mind is the “region leading GDP” that the World Bank is now predicting for Peru, but what
nobody will talk about is how they’re going to compare 2015 with the 2014 numbers that were
supposed to be +5% or above but came in at +2.45 once 2014 was done.
Post Script Sunday March 1st: The above was penned Saturday evening, today Sunday March 1st
I note this headline (14) out of Peru, passing on information from the country’s INEI official
stats office and proclaiming (translated), “Mining and Hydrocarbons Reverses Negative
Tendency And Grows 5.6% In January 2015”. Inside that main stat header, metals mining in
Peru is reported at 5.76% growth. I rest my case, m’lud.

Argentina at PDAC
From the way the prep material has been laid out in the Argentine national press, it’s a fair
assumption to say that Argentina at PDAC 2015 will be all about stressing how it’s a perfectly
great jurisdiction in which to do mining business. This blurb (15) for example, made for the
general public’s consumption and distributed via daily newspapers (just one link of many
offered today) says the following (translated):
In just ten months, 14 new investments from eight countries and four continents have
financed projects in seven Argentine provinces. As for inaugurations, Australian
operators in Calingasta have invested in the new underground Casposo mine and
Canadians in the new underground operations at Gualcamayo, located in Jinchal. The
Chilean company Enaex has built the first non-explosive emulsion factory in the
country at Iglesia, Frabricaciones Militares has opened it new factory in Jachal, and
through a joint investment of national, Australian, Canadian and Japanese capital the
new Olaroz lithium plant in Susques. The lithium project Cauchari Susques is from
Korean and Canadian investment capital, German investors have expanded the Knauf
gypsum plant in Cuyo and just last Monday the Argentine, Canadian and Swiss
investors commissioned production at the Vajo el Durazno mine in West Cajamarca.
In construction at the moment is the Don Nicolas project, the mine and 240 megawatt
generator at Rio Turbio and in West San Anontio the Alpat project is being expanded.
Soon to be inaugurated is the Canadian capitals Cerro Negro mine in Perito Moreno
and a recently announced investment is the Cerro Moro project in Peurto Deseado,
also via Canadian capitals.
IKN303 back and with a list like that, the thrust of the Argentine marketing at PDAC is clear;
the country will for the next four days try to convince you that contrary to rumour and smear
it’s a place for mining people. It’s up to you to decide how much of the Argentine government
line you’re ready to believe.
Peru at PDAC
The 400 person strong Peru delegation to PDAC 2015 is led by Igor Gonzáles (16), VP
operations at Buenaventura (BVN) and chair of the government mining consultancy committee
on mining. He was also at Barrick in charge of ABX’s South America operations and then
promoted to VP Ops Global until getting fired due to the mess he made of Pascua Lama, but it’s
probably best not to mention that to his face next week.
Ecuador at PDAC
According to the blurb (17) published by the government of Ecuador, “PDAC will dedicate a day
to Ecuador” at this year’s conference, which if translated and handed around Toronto may
cause a little surprise. But the Ecuador presence will be decent and it’s headed up by the
country’s Mining Minister, Javier Córdova (in the recently set-up Ministry of Mining, now
separate from the “non renewable natural resources” umbrella that saw it a very minor partner
next to hydrocarbons). Ecuador will be promoting the benefits and advantages of mining in the
country during its presentations, that currently include 11 public sector and eight private sector
projects moving forward, plus up to 25 concessions ready to be awarded via tender or auction
to the highest bidder.
Mexico at PDAC
One country that can lay fairly lay claim to “a day” at PDAC 2015 is Mexico. It’s hosting a big
presentation and bash on Tuesday 3rd, a dedicated room with seating for 200, a host of mining
companies working the country booked to speak and present, plus you get a free hardback
copy of Mexico Mining Review 2015 (18) if you turn up and watch. The list price for that book is
U$159, just out of interest. The chances of eating tacos and being offered a margarita or two
by ladies wearing red green and white clothes are very high, I’d venture to say.
21

Market Watching
Thoughts on the First Majestic Silver (FR.to) (AG) 4q14 results
What we have here today isn’t a full analysis on the AG numbers, because for one thing this
widely covered stock has had five days’ worth of picking over by the market and analysts and at
the end of it has seen its stock price rise by 11%. In other words, they went down well. What
follows are the observations of a long who’s OK about holding into this quarter but wants to
point out a few weaknesses as well.
Last week in IKN302 I wrote on AG among other things...
I decided to hold because I’m guessing (and that’s all I have) that even bad news from
the 4q14 numbers due out tomorrow was being baked into the pie. That guess also
came with the thought that the Q4 bottom line from FR.to is set to be pretty good on
a headline basis, so even if the underlying fundies suck, there’s a decent chance of
being able to sell into a pop tomorrow or more likely Tuesday. If I sell, expect a Flash
update first.
...and once the financials were out pre-open Monday and I’d looked at them, instead of writing
a Flash update to sell (or even hold), I was already feeling relaxed enough to wind down the
personal tension and write a more simple blog post on the morning (19). The financials looked
reasonable, the expected impairment was a chunky though ultimately non-cash $102m, costs
per ounce were dropping and overall, operations were profitable.
However, things are not perfect. The first thing that jumped out at me was the negative
working capital number that AG had
FR.to: Working Capital per qtr
filed, which got a top line mention in
120
the blog post. Cash treasury at just 110
100
over $40m was is but slightly light (I’d
90
had the estimate at $50m), but as this 80
70
chart shows overall working cap has
60
dropped to negative. It was one of two 50
40
questions I posed to FR.to
30
management that morning and the 20
10
reply given was very similar to the one
0
fielded by the company in its -10
conference call on Monday. Here’s the
transcript (20) of the exchange
between CFO Polman and an analyst
from Dundee (which was, notably, the first question asked in the Q&A):
Matthew O'Keefe Dundee Capital Markets: “... the one thing that stood out to us was that your
working capital slipped slightly just to a little bit of a negative territory here. I was wondering if you
could remind the measures you’re taking to address that?
Ray Polman, CFO FR.to: “Yes the measures that we’re currently taking, we have a number of
financial partners those working with us on the prepayments, those working with us on our leases.
They are all friendly parties, we’re working with them to do some rescheduling to push out some
of the debt to future years rather than the current year and that will help us with trimming down
and moving some of the current liabilities to long term liabilities and we expect to have something
in place no later than reporting for the first quarter.”
Matthew O'Keefe : “And you don’t have an operating line of credit, or do you have any plans to
do anything like that.”
Ray Polman: Yes, that’s a good question. We have a number of banks that are negotiating with
us at this time to address, align of appropriate size that would assist us with any downside
protection. Again that figures into the financial partners that are working with us and putting
proposals to get it for the line of credit. We are just going to make sure that we have the best deal
with the least covenants and the least restrictions in the company.
That sounds reasonable, but it also sounds cosmetic. And let’s reiterate; we’re ok with the cash
treasury position but the concern is overall current liabilities, so something’s going on in the
other line items. After digging a little deeper into the numbers this chart...
22
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
source company filings
srallod
fo
snoillim

FR.to: Trade payables vs Trade receivables, per qtr
$m
45 trade payables
40 trade receivables
35
30
25
20
15
10
5
0
4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14
source: company filings
...for me shows the problem. Trade receivables vs $m FR.to: Difference between trade payables
payables (the same metric I wheeled out to make a 30 and trade receiveables
point in the recent TGZ.to analysis) suggests a company 25
that’s insisting it gets paid by those who owe it money, 20
but dragging its own heels when it comes to the 15
moment to cut cheques. This second chart (right) 10
shows the difference between payables and receivables 5
each quarter and highlights the trend. 0
4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14
FR.to isn’t going through a fully-fledged cash crunch. It source: company filings, IKN calcs
also has the wherewithal to be able to improve liquidity
substantially if need be (its company reputation is good, it’s FCF+, the plan for 2015 makes
sense, etc), but things are tighter than they’d like, that’s. So here’s the call: I submit that AG is
more vulnerable to a silver price reversal than they’re representing. That’s fine as long as silver
sticks at-or-around it’s new normal level (let’s call that U$16.50 to U$17.50 per ounce) because
that’s how they’ve set the company for 2015 and budgeted things. But if silver takes a serious
leg down it won’t just be the share price under pressure here, it’ll be the whole balance sheet.
On the subject of 2015 guidance, I’m fine about just about every line item they’ve given
including the new costs guidance of U$13.96/oz to $15.48/oz AISC (even though they missed
on 2014 costs guidance by aiming for U$15.87-U$16.69 and returning an AISC of U$17.71/oz).
My one query was the second question posed to management about expected recovery levels
at La Encantada, which are set at 60% for the year ahead. FR.to has been aiming for a 60%
recovery at its mainstay mine for as long as I can remember without ever achieving it more
than briefly, so when I asked management and was told (and I quote)...
“Re: La Encantada - silver recoveries have fluctuated between the high 50's to
low 60's thru 2014. It's all about managing the manganese content of the ore
and we are projecting lower grade manganese this year - less than 2%”
...my immediate thought was “bullshit”. This chart
FR.to: La Encantada avg recovery %, per qtr
(right) is why.
70%
60%
A
la
G
st
h
q
a
u
s
a
h
rt
it
e r
t h
i
a
t
t
w
6
a
0
s
%
b a
ta
ck
rg
t
e
o
t i
t
n
h e
ju
d
st
r u
o
d
n
g
e
y
q
5
u
3
a
%
rte
l
r
e
a
v
n
e
d
l. 5
6
0
0
%
% 50%50%48%
42%43%
46%48%46%45% 52% 49% 52% 57% 57% 53%
40%
The last time I checked, the number fifty-three
30%
was not part of the group known as “high fifties”.
20%
But however much I’m allergic to mining company
10%
executives attempting to blow smoke up my
0%
nether regions the Mn comment above makes
sense and if true, it’ll mean AG runs less of its old
tailing through the production pipe and more fresh
23
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4
source: company filings

material. This in turn will mean significantly better production at the company. It’s one that I’m
keeping an eye on when the 1q15 numbers comes out.
Bottom line: I’m holding onto my long position in First Majestic Silver (FR.to) (AG) but
the company is still on probation as far as I’m concerned. Three points:
First and foremost I’m looking for the company to improve its working capital position, that’s
primordial and for the record, I’d be open and relaxed about seeing AG run an equity financing
in order to improve its cash position. The suggestion made by the Dundee guy in the transcript
above also makes sense, I see no reason why a company of this size and standing can’t take
out a modest line of credit. A mining company, especially a producer, needs to run a positive
working cap. Seeing it negative for one quarter is not good, but under the “turning a corner”
circumstances I see in AG it’s acceptable, just about. Two quarters in a row and I’m out of
here.
Second, I want to see better production and a continuance of the improved costs when the
1q15 production and eventual financials appear. If they do I’ll be more comfortable about
holding AG for a longer period. If they don’t I’m a seller.
Third, if the market price for silver dives hard (by which I’m not talking a fluctuation inside
current level but a clear new leg down) I’m out of here and it doesn’t matter what Fr.to does
operationally. Its liquidity position today, as things stand and ceteris paribus, is acceptable at a
pinch. With lower silver prices it won’t be.
Those are the three things I want to see in the 1q15 numbers, plus it would be nice if just for
once a mining company stopped trying to BS its audience with petty lies about recoveries, and
masking the small things sure makes us out here wonder what BS they might be feeding us
over the larger things. Yes, that’s a message. In the post on Monday I used the phrase “turning
a corner” and that still stands to reason after due deliberation of the results. But it0s “turning”
and not “turned”, the jury is still out and if something negative happens to silver I’ll still sell this
in a heartbeat.
Tinka Resources (TK.v) gives us a resource for Ayawilca
In IKN289 dated November 23rd we took a first-time look at Tinka Resources (TK.v) in an
extended fundies note that wasn’t exactly a full NOBS fundies thing, but still went on for six and
a half pages on the stock, its properties and its potential as a play on zinc. It’s time to look
again, thanks to significant newsflow from the company.
Its Colquipucro (mainly) silver deposit was then and is still now of lesser interest to us, because
of its low grading aspect and the way it’s been picked over (and on which the stock was heavily
pumped) previously. No, the potential reason to like TK.v is its Ayawilca zinc project that sits
close to Colquipucro in the Pasco region of Central Peru and last week, earlier than I’d originally
expected, TK.v published an initial 43-101 compliant resource on Ayawilca. The NR is here (21)
and to get straight to the paydirt, here’s the resource table that was included for Ayawilca.
Below come the notes:
The first thing to note is that compared to my guesstimates in IKN289 (that I made clear were
best guesses only at the time), the Ayawilca deposit is smaller than I’d guessed at but it’s also
higher grading. The guesstimate I highlighted had Zn content at 2.96 Bn lbs grading 4% Zn,
but the 43-101 resource filed last week has it at 1.72Bn lbs Zn grading 5.9%.
24

The second thing: We don’t care about the ZnEq number (7.7%), this deposit and its
economics will stand or fall on its zinc content. Indium (and perhaps even lead and silver, see
below) may one day play a part in the economics, but if it’s not robust on Zn alone, it’s never
going to work.
Next, a note on the TK.v table footnotes. Underneath the table in the NR came five footnotes.
As well as telling us the cut-off for the resource used a $60 per tonne net smelter revenue, the
main footnote was this one which I’m reproducing in full:
• The NSR value was based on estimated metallurgical recoveries, assumed metal
prices and smelter terms, which include payable factors, treatment charges, penalties,
and refining charges. Metal price assumptions were: US$1.20/lb Zn, US$550/kg In,
US$24.00/oz Ag, and US$1.10/lb Pb. Metal recovery assumptions were: 90% Zn, 75%
In, 50% Ag, and 75% Pb. The NSR value for each block was calculated using the
following NSR factors: US$15.24 per % Zn, US$5.57 per % Pb, US$0.33 per gram In,
and US$0.34 per gram Ag.
The TK.v NSR theory breaks down like this:
• Zn: $80.92/tonne
• Pb: $0.84/tonne
• In: $16.83/tonne
• Ag: $2.55/tonne
• Total: $101.14/tonne.
• Operating margin (on cut-off): $41/tonne
But there are plenty of “optimizing factors” that TK.v seems to have used in its NSR calculation.
If we take into account that:
1) the silver will in theory be recovered to the lead conc and with lead and silver making
up a small proportion of revenues, it’s unlikely to be economically feasible to run that
second recovery circuit. Therefore I’m going to discount that revenue completely.
2) Zinc NSR at $80.92 per tonne is based on $1.20/lb zinc! For a more realistic and
conservative estimate we should use something more reasonable that pertains to the
current market, i.e. 20% lower at $0.96/lb.
3) However, as indium over the last five years has a market price of between U$530/kg
and U$800/kg, basing things on the TK.v assumption U$550/kg is reasonable for this
line item.
4) With one less circuit, operating costs will be lower. Using the current Trevali (TV.to)
Santander operating zinc mine in Peru as a price guide (and excluding the usury fees
that TV.to pays to Glencore to run its mine), pitching at $50/tonne is a reasonable
ballpark for mining costs.
So if we throw those four into the mix the revised TK.v NSR theory breaks down like this:
• Zn: $64.74/tonne
• In: $16.83/tonne
• Total: $81.57/tonne
• Operating margin: $31.50.
So already we’ve seen margins drop, largely due to plugging a more realistic zinc price into the
mix. Not a promising start, according to the way TK.v is cutting and slicing things at least.
Valuing Tinka Resources the IKN way
But what we can do now is make a slightly better stab at a valuation of TK.v at Ayawilca using
a cash flow model, thanks to the better data now available on deposit size, grade etc. Last time
in IKN289 I had a go at half of the model but because of the loose guesses made it clear it was
25

very preliminary and offered no formal target. This time we can add some more in, but it must
be stressed that we’re still very much ballpark only here, my guess is as good as yours on some
of these parameters and we could argue the numbers up or down until the cows come home.
But, what I’ve tried to do in the numbers that follow is to be both reasonable (towards basic
logic) and generous (towards TK.v) to get end up with figures that aren’t wildly optimistic and
don’t try to kill the project stone dead with numbers, either. We have to give this thing a
chance to work but what we’re really only ever going to care about is whether Ayawilca can
turn TK.v into a big moving share price.
Some of the following assumptions are similar to those in the IKN289 analysis, some are wildly
different Assumptions for the new model include:
• A 2,000 tpd processing facility (very similar to Trevali at Santander). This would give
Ayawilca a long 32 year mine life operation based on its current 43-101 inferred
tonnage.
• Grade of 5.9% Zn with a 68g/t indium byproduct kicker. No credits for any lead (Pb) or
silver, as we assume the separate circuit for these metals would be uneconomic to
build, at least for the first years.
• Recovery grades of 90% for the zinc, 75% for the indium, as per the TK.v assumptions.
• Operating cash costs of U$50/tonne (similar to Trevali at Santander)
• Reasonable but low-end guesses for G&A, depreciation, etc.
• 10% TC/RC deduction (higher than the 5% guess of before and more realistic)
• A mine that costs $100m to build and is paid 50/50 debt/equity. This means TK.v takes
$50m in debt and pays it off at $10m per year for six years, and also ends up with
300m shares out. This is a really difficult one to guesstimate, as capex could turn out a
lot higher and the eventual mine raises its building money in a different way. But this
classic method plus a $100m round number does give us an idea of eventual
profitability parameters for the share price, at least.
• State burdens as per Peru (e.g. royalties, worker participation and 28% corp tax level).
• Four different price levels for zinc, as seen in the table, but using U$0.95/lb as our base
case.
• A flat U$250/lb price for indium.
• Forex of CAD$1 = U$0.80.
With those in place, let’s start with production and assumed revenues at 95/c lb zinc and the
other three model prices:
TK.v at Ayawilca: Annual model revs by metal type (U$m)
model 90c/lb Zn 95c/lb Zn 100c/lb Zn 110c/lb Zn
zinc (Mlbs) 84.3 84.3 84.3 84.3
$/lb. 0.90 0.95 1.00 1.10
zinc revs (U$m) 75.9 80.1 84.3 92.7
Indium (Lbs) 80,952 80,952 80,952 80,952
Indium revs (U$m) 20.2 20.2 20.2 20.2
Mining revs (U$m) 96.1 100.3 104.5 113.0
TC/RC/Royalty 13.9 14.5 15.2 16.4
Net sales (U$m) 82.2 85.8 89.4 96.6
Source: TK data, IKN ests
We have TK.v at Ayawilca with net sales of $85.8m. Stage two is to stick that into the
condensed incomes table, as follows:
26

TK.v at Ayawilca: Income items for model year 1-6
At 2k tpd thruput 90c/lb Zn 95c/lb Zn 100c/lb Zn 110c/lb Zn
Sales (U$m) 82.2 85.8 89.4 96.6
Cash COGS 36.0 36.0 36.0 36.0
Depreciation 5.0 5.0 5.0 5.0
SGA 3.6 3.6 3.6 3.6
Op income 33.2 36.7 40.1 46.9
Interest 10.0 10.0 10.0 10.0
Workers Part. 2.7 2.9 3.2 3.8
Tax 5.8 6.6 7.5 9.3
Net income 14.8 17.1 19.3 23.9
Shares out (m) 300 300 300 300
EPS 0.05 0.06 0.06 0.08
Sust capex -5 -5 -5 -5
FCF/sh 0.05 0.06 0.06 0.08
Source: TK data, IKN ests
From $85.8m in sales, operating income comes in at $36.7m and assuming TK.v pays off that
interest at $10m/annum in the first years, net income is $17.1m. So to the target box:
TK: Sales and earnings Target price & valuation data
Zn Price 90c/lb 95c/lb $1/lb $1.10/lb using four different Zinc prices
Sales ($m) 82.2 85.8 89.4 96.6 12-month target $0.41 (on 6x fwd EPS using
Upside to target 52% TK base case)
EPS 0.049 0.057 0.064 0.080 Mkt cap ($m) $31 Enterprise value $27
Cash flow 0.066 0.074 0.081 0.096 P/sales (90c/lb) 0.37 EV/sales (90c/lb) 0.32
P/E (90c/lb) n/a EV/EBITDA (90c/lb) 0.7
P/E (95c/lb) 4.7 EV/EBITDA (95c/lb) 0.7
P/E ($1/lb) 4.2 EV/EBITDA ($1/lb) 0.6
We’re a long way off year one production and this is a base metals mine, not a precious metals
mine. As such I could have dropped a much lower P/E multiple than 6X on this target and made
it come in a lot lower if I felt mean or decided to make a point about this thing being marginal
at best. On the other hand, come the day of the mine zinc may be trading at $1.50/lb. Or the
terms of financing the mine may mean TK.v keeps share dilution lower than 300m S/O and debt
servicing gets a longer repayment period. Who knows? This is the point I’m trying to make
when talking “ballpark only”, but in each situation I’ve tried to be reasonable to logic and
generous to the bull case. Honest.
The upshot is that after weighing this against that and trying to be nice, TK.v gets a target of
41c. And that’s not enough for a risk-laden proposal such as this.
Bottom line
TK.v has a reasonable project on its hands at Ayawilca, but at the moment and under present
zinc price circumstances it’s not attractive enough to get over my basic risk/reward barrier. Yes
it has the potential to become a profitable mine at some point, but as that point is a long way
in the future and given the reasonable assumptions plugged into this model, our target is
around 50% higher than Friday’s close (which in itself dropped hard from the high 30s prices
seen just before the 43-101 came out last week) and that’s not enough for this type of high risk
play.
There’s also one other thing in the mix, that of the way TK.v is being used as a vehicle in an
aggressive promo pump. We made mention of this in the IKN289 piece, particularly the way it
got the full rah-rah in February 2014 (just before PDAC) and, sure enough, this year we’ve seen
27

much the same sort of rapid spike up and drop in TK.v.
Playing the odds on tinycap explorecos is bad enough without having to contend against bullshit
pumps run by newsletters that are being paid by company insiders and their cohorts. It’s just
another reason why TK.v isn’t getting any of my money today.
At the moment TK is interesting enough to keep an eye on and if zinc the metal sees a serious
price move, it looks a reasonable way to play the sub-sector. But today it’s not a screaming or
obvious buy, which sat next to the very high risk makes it easy enough to avoid.
Revisiting Argonaut Gold (AR.to)
Here’s a three month chart of Argonaut Gold (AR.to) with some notes scribbled on it:
The reason for a section on AR.to isn’t to bask and crow about past glories, the reason is that
with its stock price going under $2 last week on its continued retrace from the $3+ prices, the
prospect of a possible re-purchase has come up. I took two mails on this very subject last week
and when the second one came in, from long-time reader/subscriber and mail exchanger “A”, I
decided to write a fuller reply to him that would be good for direct cut’n’paste here in this
weekend’s edition of the Weekly. So here it is:
28

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Good question, A. Good question. I've been pondering it myself.
First there was a target price and although it's not a final call here, it's a good place to
start the answer. Here's the end of IKN292:
The IKN Weekly calls buy on Argonaut Gold (AR.to) and sets a near-term
(two months or less) price target of $2, which represents a 29% upside to
Friday’s close of $1.55. And by setting a target there I’m deliberately going
lowball, because if it starts to move in the manner I expect it could crash
through that barrier and go a lot higher before I consider taking profits. What
AR.to offers this weekend is a clear and specific opportunity trade, I’m not
going to let it pass and will buy tomorrow. Argonaut Gold will be part of the
‘stocks to Follow’ list as from next weekend. I haven’t liked a trade set-up this
much for months, these are the type of entry that makes waiting patiently
worthwhile.
So the original buy price was $2.00. If we spit and swear a little that's what we have in
AR.to today (precisely, it was $1.93 while I was writing to A on Tuesday morning, after
rallying through the week it finished at $2.08, which is a decent 15c upmove but can
still be reasonably described as “around two”).
• On the day of that IKN292 analysis, gold was priced at U$1,217/oz
• In January it went above U$1,300/oz
• Today it's U$1,200/oz
We also need to consider the "momentum factor" in AR.to, it got a big boost from the
combination of December overselling and January overbuying reaction. It was in
essence why I bought the thing (remember, I'm no fan of this stock and only bought it
because it ticked all the boxes I'd want from a "January Bounce" play). I guessed it
might go higher than my $2 target in IKN292 and then just before the end of the year
reiterated that by saying "don't think you're too late, you're not" as the momentum was
clearly building.
Let's also remember that I sold too early. I cashed at average $2.53, AR.to went over
$3 on the spike. So I didn't read the momentum and gold price factor very well and
could have squeezed more out of the trade (and hey I'm not complaining about the win
because I was very happy, just stating with 20:20 hindsight the weak with the strong).
Bottom line: On December 14th with a U$1,217/oz gold price, I considered AR.to a $2
stock with a 2 month time window. Today it's a $2 stock at $1,200/oz gold. I can live
with that call. The January bounce was more violent and impressive than even i
suspected. If gold goes up again I would fully expect AR.to to do the same, with
perhaps $2.50 to $2.70 as a rough target at $1.3k gold. That would be a decent gain.
However, fundamentally I think AR.to is priced correctly today considering gold's price
and the "January bounce hangover", to give a name to the current market sentiment.
Plus, remember that on a fundies level I do not like this stock or the way it's run, so
personally it's one I can talk myself out of buying very easily. Therefore I'm not a buyer
today.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
AR.to: Quarterly Revenues
IKN303 back. We have two more weeks
to wait until we get the AR.to Q4
55
48.8
f M in o a n n d c a ia y l s M , a w rc it h h 1 it 6 s t h re (w su h l i t c s h c m all a y d u m e e a o n n 4 4 5 0 5 0 43.08 44.93 42.447 34.604 39.054 40.943 37.31 43.5
the financials are filed over the 35
30
preceding weekend, or on that day). By 25
way of a quick reminder, we know via 20
15
the January 7th production report how 10
many ounces were sold as well as 2015 5
0
guidance so here’s how a couple of the
financials operations charts are set at
the moment:
29
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
$m
source: company filings/IKN ests

What we’re expecting is a good Q4 operating
number from AR.to and a reasonable follow-on AR.to: operating earnings per share
in 1q15 (of 36k oz Au production). Net profits 0.13
0.12
are more of a guess because as things stand 0.11
0.10
AR.to is due to take write-down and 0.09
0.08
impairments on assets (unadjusted price/book
0.07
ratio is 0.4, so there’s plenty of asset slack to 0.06
0.05
cut) and the size of that may dampen reaction 0.04
0.03
to its operating results. Then again, as we’ve
0.02
seen in the recent set of mining numbers large- 0.01
0.00
ish impairments haven’t stopped stocks from
rallying on good operating performances (take
FR.to last week as a decent example).
The bottom line: As I wrote to reader “A” on Tuesday, I’m not a buyer of AR.to as I think that
on its fundies and where gold is today, it’s priced correctly. The things I liked about it in
December such as its low debt and recovering production still stand. The things I didn’t like
about it such as its overpriced white elephant assets (San Antonio, Magino) and low overall
production schedule compared to peers, for example...
• Teranga: CAD$245m mkt cap, 55k oz Au production per quarter
• Argonaut: CAD$315m mkt cap, 36k oz Au production per quarter
...still stand. Saying that and noticing how other stocks have performed through their Q4
reporting periods there’s a decent chance that AR.to rallies once the numbers are known, so
those of you who like a risky flip opportunity may want to consider AR.to on the morning of
Monday March 16th as a trading opportunity, all depending on where the stock is priced at that
time and what the final results look like. Fundies are one thing, momentum and sentiment is
quite another. I may even partake myself but I won’t move back in until the fundies are
published and even if I do, it’ll only ever be a quick flip of a day or three. As far as
fundamentals go I’m much happier holding RIO.to, MUX, BTO.to, TGZ.to and SAM.to as my
producer gold plays at this time, that’s long enough for the moment.
That’s the bottom line for Argonaut Gold: It may be good for a trade. That’s all.
Conclusion
IKN303 is done, we end with bullet points:
• I’m a buyer of Legend Gold (LGN.v) next week as it fits the newly forming trend of land
asset revaluations. This is one that will benefit from the early end of land revaluation
and with the Diba permit catalyst of last week, a new injection of cash (or even an
opportunistic buyout from one of its connected partner companies) is likely to be
sonner than later. At any price under $5m market cap, it’s a steal.
• Rio Alto (RIOM) (RIO.to) continues to make us all proud and the way things are going I
may even get my yearned for 4-handle on the day I sell. RIO saved my year in 2014,
it’s made my year in 2015.
• For near-term upmoves I say to look to McEwen Mining (MUX) and B2Gold (BTG)
(BTO.to) during PDAC, without forgetting the rising buzz around Dalradian (DNA.to).
Though be clear, on that one if I see my target price I’m taking it.
• Tinka Resources (TK.v) is one to consider at higher zinc prices, but until that point it’s
just getting a nasty case of paid promo pumping and should be avoided. Only those at
30
31q1 31q2 31q3 31q4 41q1 41q2 41q3 tse41q4 tse51q1
$
source: company financials/IKN ests

the centre of such schemes know when the P in pump changes to a D.
• First Majestic (AG) (FR.to) put in enough of a Q4 to calm my nerves, but it will get
another close examination come the 1q15 numbers. Meanwhile, silver market price will
determine everything.
• For those of you at PDAC this week, enjoy your time there but make sure you’re tucked
up in bed early every evening in order to be bright and breezy for the networking
action the next morning. One glass of red wine with your evening meal is allowed, of
course.
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://incakolanews.blogspot.com/2015/02/another-copper-market-rip-off-but-this.html
(2) http://www.mineweb.com/uncategorized/ross-beatys-decade-long-copper-dream-comes-to-an-end/
(3) http://www.legendgold.com/i/pdf/ppt/LGN_Presentation_2014-11-19_LegalSizeFinal.pdf
(4) http://www.legendgold.com/s/home.asp
(5) www.newswire.ca/en/story/1493283/endeavour-mining-files-early-warning-report-related-to-shareholding-in-legend-
gold?relation=org
(6) http://incakolanews.blogspot.com/2015/02/your-humble-scribe-finds-himself-in.html
(7) http://incakolanews.blogspot.com/2015/02/regarding-starcore-international-samto.html
(8) http://www.focusventuresltd.com/i/pdf/FCV_Presentation.pdf
(9) http://www.newswire.ca/en/story/1494741/silver-wheaton-announces-amendment-to-credit-facility
(10) http://finance.yahoo.com/news/buenaventura-announces-fourth-quarter-full-062400233.html
(11) http://incakolanews.blogspot.ca/2014/05/happening-right-now-at-el-tambor-gold.html
(12) http://www.americaeconomia.com/economia-mercados/finanzas/china-presto-latinoamerica-us22100-millones-en-
2014-mas-que-bid-y-bm-junt
(13) http://economia.terra.com.co/chile-mineria-crece-101-y-manufacturas-1-en-enero-de-
2015,7a140fff79acb410VgnCLD200000b1bf46d0RCRD.html
(14) http://gestion.pe/economia/mineria-hidrocarburos-revierte-tendencia-negativa-y-crece-560-enero-2015-2124808
(15) http://www.energypress.com.ar/index.php?r=noticias/verNoticia&q=77665
(16) http://gestion.pe/economia/delegacion-peruana-viajara-canada-promover-inversion-minera-2124753
(17) http://www.prensa-latina.cu/index.php?option=com_content&task=view&idioma=1&id=3576781&Itemid=1
(18) http://www.mexicominingreview.com/2015/index.html
(19) http://incakolanews.blogspot.com/2015/02/first-majestic-frto-ag-4q14-results.html
(20) http://seekingalpha.com/article/2951236-first-majestic-silvers-ag-ceo-keith-neumeyer-on-q4-2014-results-earnings-
31

call-transcript?page=3&p=qanda&l=last
(21) http://www.newswire.ca/en/story/1494009/tinka-announces-initial-inferred-zinc-resource-of-13-3-million-tonnes-
grading-7-7-zinc-equivalent-at-ayawilca-peru
Stocks To Follow Closed Positions 2014
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dic-13 C$3.19 13.9% small ST trade closed
Rio Alto Mining RIO.to jan'14 C$2.06 07-jun-13 C$2.30 11.7% trading position finally closed
Network Expl. NET.v feb'14 C$0.01 22-jul-12 C$0.005 -50.0% position closed, did nothing
Tahoe Resources TAHO feb'14 U$13.10 08-abr-13 U$21.72 -65.8% short closed due to reality
Darwin Res DAR.v mar'14 C$0.10 14-jul-12 C$0.045 -55.0% tiny risk play dropped
B2Gold BTO.to mar'14 C$3.07 28-nov-12 C$3.35 9.1% closed to free up capital
Pretium Res PVG mar'14 U$5.38 22-nov-13 U$6.50 -20.8% short closed as port longer
Gold Res Corp GORO may'14 U$5.07 26-ene-14 U$4.12 16.7% took profit
Bear Creek Min BCM.v may'14 C$1.63 23-mar-14 C$2.05 25.8% Took profit, sm near-term win
Eco Oro Min. EOM.to aug'14 C$0.48 22-sep-13 C$0.26 -45.8% sold small loser to make room
True Gold TGM.v sep'14 C$0.395 02-feb-14 C$0.41 3.8% M&A won't happen, sold
Santacruz Silver SCZ.v sep'14 C$1.04 26-ene-14 C$0.86 -17.3% silver/M&A spec, rel. small
Timmins Gold TGD nov'14 U$1.38 09-abr-14 U$0.99 -28.3% failed trade, sell, raise cash
Kinross Gold KGC nov'14 U$2.90 20-oct-14 U$2.15 -25.9% V small trade, didn't work, chau
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-ene-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-ene-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-abr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-abr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-ene-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-abr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
32

Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-apr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
33

Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
34