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The IKN Weekly
Week 318, June 14th 2015
Contents
This Week: FOMC this week, Been down long that it looks like down to me, Presidential office.
Fundamental Analysis: NOBS report on Minera IRL (IRL.to) (MIRL.L).
Stocks to Follow: Overview, Minera IRL (IRL.to) (MIRL.L), Teranga Gold (TGZ.to) (TGZ.ax),
B2Gold (BTG) (BTO.to), Lake Shore Gold (LSG.to), Atacama Pacific (ATM.v), Timmins Gold
(TMM.to) (TGD), Dalradian Resources (DNA.to), Phoscan Chem (FOS.to), Starcore Intl
(SAM.to), Focus Ventures (FCV.v).
Copper Basket: Overview, Western Copper & Gold (WRN.to), Nevada Copper (NCU.to).
Low Cost Producer Basket: Overview, Goldcorp (GG), Newmont (NEM).
Regional Politics: Peru mining employment figures.
Market Watching: INV Metals (INV.to) doesn't move, Gary calling silver higher.
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
FOMC this week
We get the statment communique thingy on Wednesday lunchtime. We also get a Yellen press
conference with this month's edition of the show and it seems the important financial people
are expecting Yellen to "preserve optionality on the baseline expectation of a September hike".
I love the way the financial people speak, a command of the English language over which we
mortals can only sigh and yearn. Anyway, keep abreast of the FOMC doings via the usual
channel of US macro excellence, Calculated Risk (1).
Been down so goddamn long that it looks like down to me
With apologies to The Doors for the obvious corruption in the title line. Despite having picked
several decent trades in the producer sector so far this year, it's tough to shake off the abject
negative sentiment and somehow feel good about owning a few winners.
Here are the producing mines I've bought this year, in chronological order of purchase:
• Starcore Intl, bought January 2015, now up 8.3%
• McEwen Mining, bought January 2015, now down 11.0%
• Teranga Gold, bought February 2015, now up 41.8%
• Lake Shore Gold, bought April 2015, now up 22.1%
• Timmins Gold, bought April 2015, now up 9.0%
Four winners out of five in the producers and on level stakes, that's a 14% average return. And
those don't include the wins booked in RIO.to, AR.to or even the FSM short (all positions taken
before 2015 came around). And all that while the peer group (here's a chart of GDX, GDXJ and
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GLD) are net unchanged on the year. And to top it all off, I managed to do my usual dumb
thing and buy three of those five in the end-January-to-mid-February period when the 2015
market was at its highest.
The bottom line is that the the trades struck recently by The IKN Weekly in the junior producers
sector really haven't been that bad. McEwen Mining (MUX) is having a rougher time of it than
I'd like, B2Gold's still in preparation for take-off in the first half of 2015 and should provide
gains in the second half, but if I truly felt like it there's enough real success to point at without
getting cocky by massaging things, preening in front of mirrors or doing the Oh Wonderful Me*.
So what's so depressing? Why do I feel like 2015 is a losing year? Three things:
1) My 2015 exploreco trades have sucked so far. There are two parts to this, one is the
excusable and the other is my weakness for bad timing showing through again. The excusable
part (in my mind at least) is that these 'Land Grab' plays are being taken with a long-term
timeframe as a clear part of the mix. You
buy something at 10, you take the near-
term or medium-term rough waters if they
come, you look to the longview and clean
up when asset prices rebound. The first
period of this set-up is going to be
uncertain and I went in with eyes wide
open on that.
However plain numerical evidence shows
that, by and large, I've been too early on
these trades so far. I could choose as
example the small loss in Atacama
(ATM.v) or the big percentage drop in the
riskier and tiny Legend (LGN.v), but
perhaps the best one here is to point to
Lara Exploration (LRA.v) (chart right) and the way it's dropped another 35% or so since March,
the time in which I've been clear about the "this stock is classic Land Grab material" message.
On sober reflection, these Land Grab plays will need time and patience to play out in the way I
want them to and as noted in last week's intro, it's going to make a lot more sense to
concentrate on the producers and trades thereof in this first part of the sector
recovery. (underlined and bold typed for a reason, folks). But the image and the red ink in the
'Stocks to Follow' table due to the slow start of the Land Grab plays chosen, yes they're a bit of
a downer.
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2) I'm carrying plenty of long term baggage in this portfolio. Sadly, the real world doesn't allow
opportunity to neatly ignore previous bad picks
because this portfolio isn't a virtual reality game
or an easily manipulated showcase, it's what I'm
doing with mine. If it were just 2015 things
would be great, take for example the 120%
improvement in Minera IRL this year, but that's
not how it works. The truth is I'm 57% down on
the money I've stuck into IRL over the years and
in capitalism that the way it's scored, it's what
matters. So I lightened the First Majestic load by
running a pair trade with a Fortuna Silver short?
Oh that's cute but it still makes me 50%+ down
on my AG long; count the dollars.
3) It's a generally drossy, uninspiring market. I've moaned about this before and I'll moan again
today (but only a bit, the point's been made). The world doesn't care about juniors, specs aren't
into a metal called gold that has "Forever Twelve Hundred" as its calling card or a metal called
silver that has "Worse Than Gold" as its top message. Covering a sector closely that's going
nowhere is plain straight boring and as much as one tries to detach from human emotions and
stick to the numbers, enough time passes and it's going to get you down to some measure.
Most of us get how there are still hundreds of zombie juniors peddling thousands of hectares of
moose/yak/llama pasture and at some point they need to go away there haven't been many
straight-up bankruptcies in the junior exploreco world so far. Yes there have been a handful,
and yes we've seen mergers (with the Dundee/Goodman-Cntric "New Oban" last week a high
profile version), but I think we're also seeing how the outright dregs of the explorer world, the
scumbag lowest rungs, are able to keep their shells alive just by pumping a few ten thou in
there ever so often and the founders aren't short of readies because they made so damned
much in the fat cow years.
The bottom line: Is this what bifurcation feels like? I think so.
*Easy to avoid because I'm not wonderful. Ask my wife.
Presidential office
When in the flow of writing, it's not a viable option to stop every couple of minutes; there's a
narrative building in the head and it needs to be put down on paper (virtual or otherwise)
before it disappears into neuron heaven. So you keep on writing even when you get to a point
where a fact is needed and instead of checking it, you go with memory even though you're not
sure and that memory item is sketchy. Getting the words down is the thing and yes, of course,
while the blur happens you make a mental note to re-check the information later on during the
edit. Then later you forget your exact state of mind at that moment and the edit misses the
fact. And sure enough, the fact turns out to be incorrect and even though it's a minor detail in
the great scheme of things it's also the item I get most feedback on the next morning.
The ex-President of Burkina Faso is Blaise Compaoré, not the name I wrote last week.
My sincere apologies.
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Fundamental Analysis of Mining Stocks
This week we take a look at Minera IRL (IRL.to) (MIRL.L).
NOBS report dated June 14th, 2015
Minera IRL Ltd (IRL.to) (MIRL.L)
Company Overview
Minera IRL Limited (Canada: IRL.to, London MIRL.L, USA: MRLLF, Frankfurt DZX.f) is a junior
gold mining company operating in Peru. Its flagship is the Ollachea advanced stage gold mine
development project, in the Puno region of South Peru. It also owns the small operating mine at
Corihuarmi and several other early stage exploration properties. Current share structure is as
follows:
Shares out: 280.04m
Options: 46.59m
Warrants: Zero
Fully diluted shares: 326.63m
Current share price: $0.11
Market Cap: $30.8m
Approx working cap per S/O: 1.5c
All prices are in Canadian dollars unless stated. Forex U$0.80=CAD$1
Overview of today’s note
We've run analyses on IRL previously, but as the last full fundies look was literally years ago
and as the circumstances of the company have changed a great deal since then, I'm not even
going to reference the previous notes.
Today's report comes on the back of the good news from last week that was featured in the
Flash update of last Monday (see Appendix 1). After much delay and several false starts, IRL
last week reported (2) it had tied down the first part of a two part financing deal for its Ollachea
mine in Puno region, Peru. Although the deal to date is a bridge loan for $70m and the company
will need to raise a lot more than that in order to build and open its mine, the nature of last
week's deal means that the eventual full funding is as close to a certainty as one can get under
the circumstances.
The $70m first tranche financing with Peru's COFIDE (though headed ostensibly by Goldman
Sachs and brokered by a small Peru firm named Sherpa) does three things immediately:
• Pays off the Macquarie loan of $30m plus interest (a total of $30.3m)
• Pays off the last option payment due to previous owners Rio Tinto, a total of $12.94m
• Once fees are paid for the legal, technical and financial advisory on the deal (approx
$2.6m) and other sundries debts are paid off (there was a $2m short term loan out there,
for example), the consolidation and funding leaves IRL free of all creditors bar its new
sponsor COFIDE and with an estimated $22.3m in treasury with which it can reactivate
Ollachea (that figure according to IRL Executive Chair Daryl Hodges during the Tuesday
conference call). The company is now ramping up final engineering studies and
outstanding metallurgy work on the project, as well as a 5,000m drill program that's
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planned to expand the resource by targeting the nearby (400m away) Minapampa area
where limited drilling has already identified the continued mineralizaed trend.
Two weeks ago In IKN316 I reported on some of the atmosphere at IRL after the office visit and
how things were surprisingly optimistic. We now know why. Today's NOBS report takes the
information given to us by IRL last week in its news release and in the subsequent conference
call and makes a call on whether this company that looked close to death just a few months ago
is now a viable investment opportunity.
The do-not-need-to-know about today's Minera IRL
I've had nearly a week to think about what goes in this report and in that time it's morphed from
(yet another) multi-page chart-laden monster to what you have before you today. What's been
pared away from the script are the things we don't really need to know about IRL, even though
I'm sure the company would take issue with some of these:
We don't need to know who's in charge. Here's the paragraph to annoy the top brass at IRL. I'm
not 100% au fait about the situation (and frankly I could have asked more but didn't, it's gossip-
fest stuff and I don't care) but since the untimely death of Courtney Chamberlain there's been
some sort of power struggle at the top of the company. At the moment we have an Interim CEO
in Diego Benavides, an Executive Chair in Daryl Hodges and somewhere in the background the
London-based directorate from the original listing of IRL. We've recently had a "voluntary"
resignation or two as well. None of this matters much to me any longer, however the politics
might play out and who may get to sit in which seat. What we have that does matter are plenty
of people at IRL who know more than enough about mining, any group of whom are good
enough to move the company and its project(s) forward and make a success of the corporation.
Who the exact top person turns out to be is their problem, not yours or mine.
We don't need to know about Corihuarmi. The small operation at Corihuarmi in Peru has always
been a neat, tidy and profitable gold mine. There's nothing wrong about a business that can
produce 5,000 oz to 6,000 oz of gold per quarter at an all-in-nothing-else-to-pay-at-all cost
significantly under U$1,000/oz. Do the math folks, that's the type of cash flow that keeps a small
head office running and G&A charges covered. What's more, we can expect Corihuarmi to get
yet another mine life extension soon and its production to continue to 2018.
It's all good, but it doesn't matter a single jot to the stock price today. Maybe, down the line,
somebody's going to give Corihuarmi a little more credit and a piece of news from the operation
will move the stock by a couple of pennies, but not today. IRL's stock price is about Ollachea,
no more no less.
We don't need to go over the salient points of the Ollachea project. Those should be known to
you by now, if not there's always the latest and reasonable corporate presentation over at the
IRL website on this link (3) that can fill you in. Here we can say "it has a feas study, it's fully
permitted, it's 100k+ oz Au per year over 9.5 years, it's low operating cash cost". That'll do.
We don't need to know about the exploration upside at Ollachea: Here's the section that will
annoy VP Exploration Don McIver. The Concurayoc zone next to the main Minapampa deposit
has plenty of potential for sure, they've already found 0.9m oz of inferred resources there and
the company is about to stick another 5,000m worth of drilling into the zone and its probable
connecting system in order to get a better handle on what's there, perhaps even convert some
of that inferred into M+I resouce and get it incorporated into a future mine plan.
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I can tell you all that there's very little doubt that the current nine-to-ten year mine plan will be
substantially increased over time, there's a lot more gold in them thar hills around the town of
Ollachea and people both inside and outside of IRL with strong reputations in mining will look
you in the eye and tell you that as long as they're happy it all stays off-record.
It doesn't matter today. Yes mine life will matter in the future, be in no doubt, there's plenty of
value to be added to the mine and therefore the company by changing Ollachea from a ten year
mine to a 20+ year mine (yup, it'll operate for 20 years, easy). But today we shouldn't care, what
matters is getting the mine off the ground and how it gets off the ground, that's what's going to
affect what we care about, its share price.
We don't need to know about the usual suspects financial charts. This is where I've annoyed
myself, by updating and fixing all the P+L and balance sheet and cash flows charts for the
company to date, only to leave them all out of today's report after due consideration. With the
consolidation of the debt and the new path to financing Ollachea now set out, what the
company's corporate structure has been in the past isn't totally irrelevant, but it's not something
that's going to alter its share price potential in the months ahead. This is a forward looking
analysis on a company that is all about what's going to happen, not what it has acheived to date
financiallly. That's because financially it's achieved precious little.
The need-to-know about today's Minera IRL
And with that, we now move on to what matters and once you boil it all down, there are only two
things that we really, need to know:
1) Will Minera IRL secure the financing it needs to build Ollachea in 2015?
Answer: Yes.
2) Will Ollachea be a robust and profitable mine at current gold prices?
Answer: Yes.
What's left of this analysis tackles those two subjects.
1) Securing the financing
What we had last week from IRL was a solid step forward, but immediately the pushback of
"yabbut this is only $70m, there's no guarantee of the final deal happening" came from the
market. Agreed, and it surely doesn't help that IRL is hamstrung in what it can and cannot say
due to the rules and regulations of the market (quite right too). As a result, ou get chunks of
prose from sellside analyses such as this one (this is from a Canaccord note out last week):
The Company has signed a Mandate Letter with COFIDE to structure a Senior. Project
Debt Facility for up to US$240 million which includes retirement of the Bridge Loan.
Minera IRL expects to seek equity participants to reduce the amount of debt and
leverage on the project to what the Company determines to be an acceptable level,
and will include input from COFIDE and potential debt and equity providers. It is
expected that one or more financial institutions will be invited to participate in the
Senior Project Debt Facility. Although there can be no guarantee on the timing and
terms, it is the intent of COFIDE and Minera IRL to have the Senior Project Debt
Facility in place prior to the end of 2015.
Like many other commentaries written last week it's all "we expect" and "potential" but not at
liberty to state what I can state in my uncontrolled and uncontrollable rag of a letter to you: This
is a done deal. This funding is happening, period. IRL will get all the cash it needs to build its
mine and in the timeframe it prefers, too. I'll stake my reputation as a political risk observer and
mining commentator living and working in Peru on that statement, so if you believe me on only
one thing this year, make it this.
COFIDE is the key. Not only is it a source of significant funding in itself, its quasi-State
existence and gravitas in Peru mean that there's a serious message being sent. This is the first
ever mining project being sponsored by COFIDE and it comes at a time when the government
of Peru, trying its hardest to promote its mining-friendly FDI-friendly status to the world, has
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been under pressure from a) bad publicity from badly conceived projects such as Tia Maria that
are being flatly rejected by locals who simply don't want them and b) the drop in commodity
prices that have stymied a great deal of planned investment. Peru and its government "needs a
win" in the mining sector and there's no better way than this combination. With IRL at Ollachea
you now have:
1) A project that has all its major permits in place, including construction, that will move forward
and be built and go into operation because it's also economically viable at today's metals prices
(see below). For example, one thing that's conveniently forgotten in the whole Conga debate is
that at $1.2k gold and $2.75 copper Conga doesn't work and never will.
2) Overwhelming support of the local community, to the point where regional governors in Puno
who use anti-mining stances as political weapons daren't even mention the project. And this
support for Ollachea is due to the sound and smart community relations program that IRL has
run at the project over the years, it's going to be a great model for the future. This gives Peru at
a governmental level a great flag to wave to the world.
3) A government not only promoting this project, but funding it too. Yes for sure COFIDE is only
quasi-State and not a true part of the public sector structure, but it takes its cue from the
government and in return, the government will get its reflected glory. What Peru will be able to
show the world is how not only it permits mines but funds them too! A strong message to send
to the world and at the right time, as well.
It's not a big deal that IRL has got COFIDE on board to head up its funding, it's an enormous
deal, it cannot be stressed too clearly that it's the difference between, possible, probable and a
lock. This is a lock.
As a matter of fact, COFIDE is mandated to be able to participate directly in up to 50% of the
senior debt funding, which according to the slated $240m limit as annoucned last week means
that it's good for $120m and will have to find another $120m from other places. However, if you
care enough, take some time to check out the COFIDE website and see how many private
banks work with them, then imagine how those banks will react when COFIDE explains that the
government of Peru "suggests" that this Ollachea project become its poster child project for a
pro-mining message. What we don't know are the terms of the deal, what percentage over
LIBOR they'll end up paying, how much will be raised (I take a guess at those things in the
model below), which banks and/or financial entities take what percentage of the overall umbrella
debt deal. The details are to come but the main takeaway is already set in stone; with COFIDE
heading this up IRL will get its cash, period.
This is the advantage I offer to the readership of The IKN Weekly today. I freely admit it to be a
personal call on this deal and I can point to this'n'that scrap of evidence or make confident
suppositions until the cows come home, but ultimately it's a subjective call.
Stock calls are always subjective. On any stock. By any person.
But what we now have is an excellent window of opportunity. While the world will hum and hah
about the risk, it's crystal clear from this desk that the project has already been de-risked and
the senior debt deal isn't one that comes with doubt, it's one that's going to be about sorting out
the details, crossing "t"s and dotting "i"s. In the end I'm not really asking you to trust me, all I'm
doing is laying out the reasons why I'm going to buy a large new slug of Minera IRL in the days
to come. Do what you want with your own money.
Ollachea, a robust and profitable mine
The second and final need-to-know is whether Ollachea stands up as a profitable mine and
whether IRL the company can expect significant share price appreciation on the back of its
development. The answer to both of those questions is yes, here's why.
It comes down to the model: What we need to work out is whether the deal structure we're
looking at for IRL makes its shares a buy today at 11c. Even though we now have a clear path
to financing and eventual construction we need to make quite a few assumptions in our
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modelling and because of that, I'm going to temper my obvious optimism that the big deal will be
done to fully finance the mine (because it will happen) with plenty of conservative estimates and
assumptions. Be clear, it would be very easy to wow you all with a highly bullish model. If you
want one of those just shoot a mail over and ask, I'm ready to throw all the sequins in your eyes
that you might need in order to get you to buy or add this stock.
What today is about isn't playing cute, cutting corners or "optimizing forecasts" in the great
traditional of sellside, it's about setting down a solid, obviously attainable conservative
framework from which I would hope any surprises or changes are ones to the upside. My only
optimistic assumption today is that IRL closes on the final financing deal for Ollachea this year,
2015. I'm confident that will happen, you are in your rights to argue with me on this score as we
are talking about a company that's promised and failed to close on this very financing deal more
times than I care to remember. My case is already made on this above, but I understand if you
have your doubts, boy-cried-wolf and all that.
Modelling the financing package: With that set out and assuming the big global answer of
"yes, IRL gets the money it needs" is covered, it's time to consider the main moving parts of the
financial model and how that overall package is comprised. My conservative case model for the
capital needed to build Ollachea looks like this:
A) Senior project debt facility of U$220m. With this cash, IRL retires the current U$70m
bridge loan facility (which is basically a first tranche) and retains around U$150m for the
Ollachea build-out. The terms of the deal with the main go-between broker Sherpa point to IRL
raising between U$200m and U$230m in straight senior debt. I believe that's a perfectly
gettable range, more if you consider that according to its mandate COFIDE itself can take up to
50% of the debt as lead lender. That would mean COFIDE is good for U$110m under my
scenario, with another U$110m brokered to third parties (and again, word from Lima is that
there's plenty of interest to fund now that the quasi-State banker is leader).
B) Subordinate loan of $20m with an equipment provider. This is envisaged as one of those
typical "lease type" deals with CAT or suchlike for the plant needed for the mine and can come
in after the main senior debt deal is closed. Fairly straightforward and would take some of the
weight off the front-end capex.
C) Shares out go to 550m. This is the line item I've spent most time trying to estimate (well,
trying to guess is more accurate). In the end I've decided to take a high-end dilutive estimate as
my base case in order to go very conservative and build in auto-downside to the model. There
have been strong hints from management that even thought they're looking to raise as much as
possible in the senior debt facility the company also wants to raise at least part of the cash
needed via a final round of equity financing. This makes sense as an up-front partial de-risk of
financing, but in practical capitalism terms it gives the chance for the long-holding (suffering)
large instos backed the project from the beginning to get cheap shares on board.
We're currently at 280m shares outstanding, give or take. If the count goes to an eventual 550m
come production day one I'm assuming IRL raises around $30m by selling 270m shares. That's
probably too many shares and I'm assuming too much dilution here, but we're in the world of
conservative estimates today and I'm not going to assume best cases. It might be far less, not
even making it to 400m come day one, but I don't want flashy best-case numbers, I want "look
folks this trade even works at these crappy levels" numbers.
Financing bottom line: The combo of mainly senior debt, some subordinate debt and a
tranche of equity financing as outlined above would bring in a total of around U$200m to IRL. If
we add on the approx $22m left from the current bridge loan that IRL will mostly dedicate
towards Ollachea project development (let's assume $15m of that goes to in-project matters) we
get to U$215m available under my conservative scenario.
According to the post-feasibility optimization study run by IRL in 2014 and with results first
published in June 2014, total project capex would be U$164.7m (a figure that includes a 12%
contingency), to which is added sustaining capital of U$51.1m and closure costs of $4.2m for a
total life of mine capital cost of U$220.0m (see table below right).
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The house scenario above covers nearly all capex costs, both initial and sustaining. However
the good news is that since then there has been a notable drop in
costs for mining (both capex and opex) thanks to the industry
recession, the drop in commodities prices in general and the rise of the
dollar versus foreign currencies. It's now a general rule of thumb in
Peru that "to go mining" costs between 15% and 20% less than this
time last year. And not only are you paying less for your rebar and
cement in Peruvian Nuevos Soles, but you're also getting 3.15 Soles
for each dollar instead of 2.75 when that IRL optimization study was
penned; that's a 14.5% cost saving in US Dollar terms right there.
With initial capex easily covered, then taking into account the costs
saving in the mining world, I'd safely vouch that U$215m is more than
enough to be fully funded on this mission to finally build out the IRL
flagship. If anything, that sort of cash will be too comfortable and they
won't raise as much, but steady is as steady does in today's model.
With the financing package model and that probable wild guess on the
number of shares out come production day one now in place, it's time
to move to the other major parts of a financial model.
Our twofold goal is to show 1) whether Ollachea is a robust and profitable mine and 2) whether
the current 11c share price shows upside on the back of the project. So again and to
underscore, all the main inputs are on the reasonably conservative to fully conservative side. If
you believe my cash cost number is too high I'm not going to argue much with you. If you think
gold will be U$1,300/oz come 2017 and not U$1,200/oz, you're in the same boat as Clive
Johnson of B2Gold and that's fairly good professional company (as long as you hide the whisky
bottle). Therefore and with those in mind:
Production of 105,000 oz gold per year: We use a model year to price IRL today and inside
that, just over 100k/annum average production looks right.
Annual average debt servicing of $20m: The model year scenario at various gold prices and
into that one of the asumptions is the average burden of debt servicing and repayment. This
isn't an easy one to call, as on the one hand you'd expect IRL to want to pay off balance debt as
punctually as it can, on the other they'll care about bottom line annual profits and building their
own treasury to go and do other things. It's going to be a big total financial debt and not a quick
one to pay off, so on balance I've gone for a steady longer-term pay down schedule that take
sin the whole of the current mine life.
I'll be the first to admit that IRL may decide to be more aggressive with the paying schedule, but
as it's not ultimately going to affect the profitmaking potential of the mine it's perhaps moot.
Gold price base case U$1,200/oz. As you'll see below, we also consider the U$1,100/oz,
U$1,300/oz and U$1,400/oz cases for gold in our tables, but the way gold has steadied around
the current at-or-about U$1.2k makes for an easy one to choose today, mid-2015.
Cash costs of U$555/oz. This is a key input in
the model and I've been playing with it all week.
The baseline for the figure is the information
given in the June 2014 optimization study, from
there (and keeping it conservative at all times)
I've made a few adjustments, as well as
separating a few of the cost line items to make
things a little clearer.
This table (right) is from that study and shows
how IRL gets to its "op cash cost" number of
U$509/oz and a "total cash cost" of U$587/oz.
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There are a dozen ways of cutting and slicing the term "cash costs" and they differ even within
the confusing prefix terms such as "operating" "total" "all-in sustaining" "all-in". What I've done is
split down the cost line items and isolated those IRL needs to pay in order to get to earnings,
where it shows a profit or a loss. My U$555/oz figure includes mining costs, processing costs,
the Peru mine gate 'special tax' (canon minero), the Peru state royalty, transport, refining and
G&A costs of U$45/tonne. It doesn't include the 8% worker participation levy, as I subtract that
further down the model.
The way this one has been left conservative is to largely ignore the effects of the stronger US
Dollar against the local Peruvian Sol currency. There's a case to be made for slashing the cash
cost levels by at least 15% due to the stronger dollar, lower commodities and supplies prices,
lower costs for labour in mining and so forth. The other benefit on this score in the relatively low
inflation in Peru (between 3% and 4% annual) which has kept pressure off local prices. I've
made a minor adjustment, perhaps $15/oz, but nowhere as deep as I could have gone.
Overall, this key input cost number is a balancing act. I didn't want to stray too far away from the
IRL model and give them the full benefit of the cheaper dollar prices out there, but on the other
hand it's important to remain faithful to the core fact that Ollachea is going to be a low cash cost
per ounce operating mine; there's a reason the deposit is as attractive as it is, after all.
Therefore the reasonably conservative call here is U$555/oz. By the way, if you feel my best-fit
idea on the cash cost here is wrong, or you'd like to play yourself, consider that every $20/oz
move in the costs number adds or subtracts $2.1m from the operating profit. Extrapolate that
further and it's perhaps 3c/share on the target if you stick with my other criteria.
Amortization/Depreciation at $10m/annum: This is the only estimate on which I've bent my
own rules and assumed Ollachea is a longer-lasting mine than its current 10 year mine plan. I
could have set amorts/deprec/deplet higher than this for the average model year, but overall
and taking it all in as the mine's almost certain to be around longer than the current feas study
says I've let the real world influence this number to the downside somewhat.
A 3% NSR and 5% minority ownership of Ollachea by the local town. This is made up of a)
the 1% NSR held by Macquarie and b) a 2% NSR that will be held by the broker of the current
senior financing deal assuming it closes as expected with more than $200m raised. To this point
the in-between, the local Peru firm Sherpa run by stockbroker José Antonio Cabia Vega, has
earned a 0.9% NSR by setting up the $70m bridge loan deal. That NSR was disclosed by IRL in
its NR last week, but Señor Cabia will get another 1.1% NSR to add to his 0.9% if the senior
debt is closed in good order. He also gets 20% of the share count in options at 3% of the senior
debt deal in cash...nice work if you can get it, but it's also part and parcel of this sort of deal, like
it or not. The options are priced at 20c and won't cause a big overhang in the short term, nor
should they stop any longer-term price appreciation. The number's a bit heavy for my liking, as
is the cash fee, but then again I didn't call the deal nor am I struggling to raise $200m in a bear
market. I'll live with it.
What we're left with is a 3% total NSR on Ollachea, which adds to the 5% of the mine that's
owned by the town of Ollachea. For the record they own 5% of the subsidiary company and not
an NSR, so that 5% gets subtracted in a different place on the financials model, but it adds up
as a rough 8% of Ollachea taken away from IRL the company.
Forex of CAD$1=U$0.90 and U$1=PEN3.15. The important one here is the Loonie to the
Greenback and though we could base the future model on 1 = 0.8 or so, after taking in the
longer-term chart and assuming the Loonie recovers from its present lows at least a little it
makes more sense to go for the 0.9X ratio. This is the one that most affects the conversion from
the US Dollar model that I use all the way through into share price appreciation, therefore
choosing 0.9 is more conservative, too.
10

As for the Peruvian Sol (PEN), that one's a tougher one to predict in the longer term, but what
will most matter is the capex build out costs so on those I'm going to assume the current 3.15/1
exchange. As noted above, I've left plenty of slack for cheaper dollar prices for capex and opex
inputs, leaving surprises to the upside for our stock price.
Peru State burdens as stand: We've mentioned the "canon minero", the royalty, the 5%
owned by Ollachea town and the worker's participation, so add in the 28% corporate tax and I
think we're about done on this one.
Other minor matters as usual, but the main ones and the things that will make the difference
between this mine working or not are all up there and listed.
We now get to the tables produced by the model and a target for the stock but to underscore
one final and boring time, getting a good handle on the inputs here is far more important than
the actual numbercrunch. It would have been (and still is) easy to blow smoke up your collective
recta by picking some cool and juicy numbers for Ollachea and coming out with a very sparkly
target price. We're not doing that, we're assuming low-end just about everywhere and once
that's all done we can better see whether it's a model and a mine that is robust and can stand
less-than optimum market conditions. A stress-test, if you like.
So here's the condensed income items, with the base-case U$1,200/oz column highlighted. To
be clear on one of the line items, it shows the deductions for the 8% worker participation added
to the 5% community ownership of the Ollachea mine.
Ollachea: Income items for model year
At 105,000oz Au $1,100/oz Au $1,200/oz Au $1,300/oz Au $1,400/oz Au
Sales (U$m) 115.5 126.0 136.5 147.0
Cash COGS 53.6 53.6 53.6 53.6
Depreciation 10.0 10.0 10.0 10.0
SGA 4.7 4.7 4.7 4.7
Royalties 3.5 3.8 4.1 4.4
Op income 43.8 53.9 64.1 74.3
Interest 20.0 20.0 20.0 20.0
Wkr Part+ 5% comm 5.7 4.3 5.1 5.9
Tax 5.1 7.5 10.0 12.5
Net income 13.0 19.4 25.8 32.2
Shares out (m) 550 550 550 550
EPS 0.02 0.04 0.05 0.06
Capex (6) (6) (6) (6)
FCF/sh 0.03 0.04 0.05 0.07
Source: IKN ests
At U$1,200/oz gold from a highly diluted share count and assuming a less-than-perfect world for
mining companies, Ollachea spits out a (near, fraction not shown) 4c EPS on its average model
11

year. So to the target box:
IRL Ollachea: Sales and earnings Target price & valuation data at various gold prices
Gold Price $1100 $1200 $1300 $1400 using four different gold prices
Sales (C$m) 116 126 137 147 12-month target $0.23 (on 6x annual EPS using
Upside to target 112% gold at U$1200/oz)
EPS 0.02 0.04 0.05 0.06 Mkt cap (C$m) $61 Enterprise value $48
Cash flow 0.04 0.05 0.07 0.08 P/sales ($1100) 0.48 EV/sales ($1100) 0.38
P/E ($1100) 4.6 EV/EBITDA ($1100) 0.9
P/E ($1200) 3.1 EV/EBITDA ($1200) 0.7
P/E ($1300) 2.3 EV/EBITDA ($1300) 0.6
cash flow defined simply as EPS + depreciation
The final conservative input to the model is to choose a 6X P/E multiple. In the real world today,
the average P/E for profitable mining operations large and small is 11X. That of course includes
the big name Tier 1 companies which usually command higher prices for their shares, but all the
same it'd be no stretch to use 8X at this point. But the call is 6X, firstly because I don't want to
shoot too high and second because Ollachea still needs to be built. We lowball all the way.
But even so, once the CAD/USD forex is taken into account we're left with a 23c price target on
an 11c stock, which represents a 112% upside on Friday's close. That would value the 550m
S/O entity I've envisaged at around U$110m if the target is reached, so the question is whether
a operating gold mining company that runs a robustly profitable gold mine at over 100k oz per
year is worth over U$100m. I say yes, easily.
To round out, a word about the non-reverse engineering of financial models. While putting the
finishing touches to the piece this Sunday afternoon I noticed that my average annual net
income figure of $19.4m works out at $175m if you multiply it by the nine full years of production
expected at Ollachea. That's very close to the 5% discounted NPV figure of $177m published by
Minera IRL in its June 2014 optimization study (4). That's unlikely to be a coincidence, but it
wasn't me trying to reverse-engineer results to fit somebody else's model or analysis, either.
Conclusion and recommendation
Last Monday morning brought some long-overdue news from Minera IRL, the announcement of
a package that will eventually get Ollachea built and operating. My main concern all this time of
waiting has been whether the eventual financing package would be shareholder friendly, which
is why I've been reluctant to make any sort of buy or sell call on the position.
We now know the main backer COFIDE and if I had to handpick a financial partner I don't think I
would have dared choose that name because it would have been asking too much. They're a
perfect fit. The fact that IRL at Ollachea is the first incursion of Peru's highly respected semi-
State financial entity into mining investment is its own statement regarding the quality and future
of the project and isn't something that is fully appreciated outside the country. Not yet, at least.
This gives us the investor a gilt-edged buying window advantage, which should last until IRL
and their backers close the main senior facility and put in place every last red cent needed to
build Ollachea. Today the market still has its doubts that Ollachea under IRL is going to happen,
for me the only thing that can stop it now is if IRL.to is bought out by another company.
The IKN Weekly is happy to report that Minera IRL is back, after a long period in the relative
wilderness. We recommend the stock as a buy and put a 12 month target of 23c on the
stock, representing a 112% upside to this weekend's 11c price. The market may have its
doubts about whether IRL will be able to close its main debt deal, which is our opportunity to
pick up shares that already are de-risked, no matter what others may think.
I am buying more IRL shares and averaging down on this long-term underwater position of mine
as from tomorrow, though I stress that patience in purchases will bring its own fortune as well.
12

There's no need to wade in and buy the first price that nice Mister Market offers us tomorrow, or
the day after, or the day after that. We're in a flat bearish situation, interest in juniors is often
fleeting and sellers turn up, plus there will be those who'll sow doubt about IRL's ability to get
the main deal done. All those items run in our favour, in my favour, as a buyer. Once the deal is
done and the mine is built we'll look back on the days of 10c and 12c shares with a sigh of
nostalgia, no matter if gold is still flat at $1,200 by then. Minera IRL is now an excellent sector
buying opportunity and will be in the weeks ahead, take advantage.
End of Report
Stocks to Follow
Last week six of our open portfolio positions made gains (LSG.to, TGZ.to, SAM.to, FOS.to,
ATM.v, DNA.to), one remained unchanged (IRL.to) and nine showed losses (BTO.to, MUX, TGD,
AG, LGN.v, NCQ.to, LRA.v, REG.v, FCV.v). So on the count an apparent losing week, but once
again I came away with a net win on the week in cash term) thanks to the larger moves made
by significant holdings Lake Shore Gold (LSG.to up 9.5%), Teranga Gold (TGZ.to up 11.4%)
and Dalradian (DNA.to up 11.1%). The 13.0% rebound in Starcore was welcome too, in fact
the only real downer in cash terms was B2Gold and that was only a 4c drop on the week. We
did get some larger percentage losers in Lara (LRA.v down 10.5%) and Legend (LGN.v down
10.0%), though.
We currently have 16 open positions in our Stocks to Follow list, one more than our our self-
imposed maximum in a temporary situation that will change soon enough. Of those, seven are
in the green and nine are in the red.
13

company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICK
B2Gold BTO.to STR BUY C$2.17 12-sep-14 C$2.00 -7.8% Top Pick, 1st tgt $2.70
Metals Producers (in current order of preference)
Lake Shore Gold LSG.to buy C$1.04 07-apr-15 C$1.27 22.1% FCF+ prod. M&A tgt. Adding
Teranga Gold TGZ.to hold C$0.55 15-feb-15 C$0.78 41.8% Good prod. 83c tgt
McEwen Mining MUX str buy U$1.09 25-jan-15 U$0.97 -11.0% Leverage value, cheap now
Timmins Gold TGD hold U$0.60 19-apr-15 U$0.654 9.0% near-term, will sell June
Starcore Intl SAM.to spec buy C$0.12 10-jan-15 C$0.13 8.3% Also "land grab", tgt 19c
First Majestic AG hold/sell? U$10.51 10-aug-14 U$4.76 54.7% See less reason to own
Land Grab Stocks (in current order of preference)
Phoscan Chem FOS.to hold C$0.28 29-mar-15 C$0.30 7.1% 36c/share of cash
Atacama Pacific ATM.v spec buy C$0.19 26-apr-15 C$0.18 -5.3% Spec buy, cheap adv proj
Legend Gold LGN.v hold C$0.085 01-mar-15 C$0.045 -47.1% Spec buy, v small trade
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.69 -34.3% small Cu play low vols, hold
Lara Expl. LRA.v spec buy C$1.15 08-apr-12 C$0.255 -77.8% solid biz model, LT hold
Other Recommended Stocks (in current order of preference)
Dalradian Res DNA.to buy C$0.64 27-oct-13 C$1.00 56.3% Nov'14 tgt $1.25, top Au expl
Regulus Res REG.v spec buy C$0.30 06-apr-15 C$0.31 3.3% Bet on 2016 drill prog.
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.215 -6.5% tgt 50c, 3q15 PEA
Minera IRL IRL.to buy C$0.27 22-jul-12 C$0.11 -57.4% New tgt jun'15 23c, adding
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
Fortuna Silver FSM mar'15 U$4.12 10-nov-14 U$3.75 9.0% Short used as hedge
GoldQuest Min. GQC.v mar'15 C$0.26 27-oct-13 C$0.085 -67.3% given up ghost
Rio Alto Mining RIO.to apr'15 C$2.30 07-apr-11 C$3.57 55.2% Top pick, bot out, big win
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
Now for some notes on current basket stocks.
Minera IRL (IRL.to): Adding. A quick confirmation line on the decision to add and average
down on this position on the back of
the strongly positive news and
guidance on IRL and its Ollachea
project last week. I see no reason to
wade in and pay up, the market last
week showed that after the first rush of
interest people weren't buying in
chunks, so it's going to be a case of
picking the right moments to buy. I
think I should be able to get all I want
at 11c, but 12c wouldn't be difficult to
pay either.
Teranga Gold (TGZ.to) (TGZ.ax): Will sell at 83c if offered. Darn, I was close to taking
profits here. On Thursday and Friday TGZ.to floated up to 82c, just a penny shy of my 83c
target, before dropping end of both days. I would have sold given the chance (and yes, I was
14

tempted by that 82c but with hindsight I don't think I would have got a sale even if I'd dropped
my ask, so perhaps a moot point). Volumes were strong too, with an excellent 3m+ shares
traded on the main moving day of Thursday.
But be clear, if I see my 83c next week I'll take it and ring the bell on this trade, no need for a
Flash update or a second reminder.
B2Gold (BTG) (BTO.to): Friday saw the company AGM and there was a public level
presentation tacked onto the end of the show (I think it's still on the webcast at the company
site). I took three things away from the presentation and accompanying literature about my
Top Pick stock that only reinforced my view of this position:
1) Operating cash costs for 2015 expected to be between U$630 and U$660/oz. That leaves
plenty of room for post-exploration budget earnings this year. BTO was keen to underscore the
positives coming from the new Otjikoto operation which is ramping well, and though CEO
Johnson was obviously being careful on disclosure the signals are that Masbate is also doing
well and has followed up in Q2 on its strong 1q15 quarter.
2) Community relations and programs. I think it's the first time I've heard B2 go so deep and
detailed on what it's doing to keep locals happy in and around its operations. There was plenty
more, but one section in the post-AGM presentation that's stuck in the mind was when CEO
Clive Johnson moved on to talk about how things were going in Nicaragua, mentioned that he
had "three pages of notes" on community relations programs there, said that he wouldn't go
into them all but then (seemingly) went and did just that, going into detail about program after
program sponsored or run by B2Gold in Nica. These guys do a lot to help locals. I like that.
3) Fekola project numbers. The main block of information on the new Fekola mine project in
Mali came in the NR on Thursday (5) which contained the overview results from the company's
optimized feasibility study on the project. We don't have the 43-101 report on SEDAR yet, but
the 'optimized' seems to come from re-working numbers in light of the changing economics
around mining. There were all the charts and spiel you'd want to point to an economically very
robust mine and though the company used U$1,300/oz gold as its baseline, even at U$1,200/oz
the estimated IRR of 30% shows very nicely. Fekola was an expensive purchase for B2 and it's
the one that they shouldn't have paid up for however good the project might be, but that's now
water under the bridge and baked into the share price. What we're left with is a project that will
be built out for under U$400m, a sum covered by the newly signed revolving credit facility and
treasury.
What BTO has is a clear path to its next growth, which is apparently on track for Q4 2017 and
now has the company syaing that 2018 production will be "well over" 900k oz Au, not just
"over". I'm not going to drag over the numbers at BTO again, as we did that recently in the
NOBS report of IKN314 when this stock was moved up to its Top Pick status. What we got from
BTO last week was right in line with expectations, which means it's a fully deserving Top Pick
this weekend, too. Now is the time to accumulate on this name, the second half of 2015 is
15

when the harvest will begin.
Stop press: Reader RK sent me a link to an article on Seeking Alpha written on B2Gold's
Fekola feas study (find it on link (6) below if you care enough). The guy who wrote it is stupid
and here's part of his stupidity.
B2Gold also seems to be proud to announce a NPV of $1.01B, but I'd like to make three remarks
regarding these numbers. First of all, that's the pre-tax net present value, and as you know, the
tax rate isn't particularly low in Mali (you should expect a 30% tax rate), so the after-tax NPV will
be closer to $800-850M. On top of that, the NPV was calculated using a 5% discount rate which is
way too low for an African country. If one would have applied a more appropriate discount rate of
8%, the after-tax NPV would very likely have come in below the $750M mark. And finally, the
numbers were based on a gold price of $1300/oz, that's right, a 10% premium compared to the
current spot price of the gold.
If one would use a discount rate of 10% and a more appropriate gold price of $1200/oz, the NPV
would come in at just $615M pre-tax, so very likely just $550M on an after-tax basis.
He goes on and his argument (whoever he is, never heard of him before) is basically "Fekola
isn't worth what BTO thought it was worth when they bought it, so it's not a good project".
Err, we knew that about the buy price already! But the crux of his argument is that he thinks
the market hasn't priced into the stock the change, when it most obviously has since the June
3rd 2014 announcement to buy Papillon and Fekola (see above chart). He says B2 isn't much
more than a call option on gold now, that's utter BS. It's a growth stock for crying out loud! Not
only that, but the growth is now fully baked into the pie by a done financing deal. For sure if
gold goes up then so does B2, but the thing that makes it stand out from the pack today is the
clear price appreciation even if gold remains where it is. Anyway, enough, that seeking alpha
piece was free for you and I to read which is probably all that needs to be known about it.
16

Lake Shore Gold (LSG.to): The move by Goldcorp (GG) to improve its warchest via an
expanded credit line (see below) didn't just get me talking about the obvious, it got everyone in
the mining sector asking it; What's Chuck buying? (7). I floated three ideas on that blog post in
LSG, Detour Gold (DGC) and B2Gold (BTO) but
mentioned there and will mention now, I think
this stock, LSG, is far and away the most
obvious purchase for GG today. Let's also be
clear that a company like GG doesn't expand its
credit lines by a cool billion (with a B) just their
banker friends unexpectedly offered them the
money during a friendly round of golf.
And the thing is, the market seems to agree.
The most obvious is how LSG traded, with
double volume days Tuesday through Thursday
and a stock that touched CAD$1.30 and wholly
bucked the sector trend (plus decent 300k+
trading all week on its quieter US ticker). This comparative chart of LSG.to versus the junior PM
ETF (GDXJ) is the picture worth a thousand words.
Atacama Pacific (ATM.v): Added. A little liquidity came and I added at 18c, but it's still such
a small position I think I'm going to leave my cost average at the original 19c (there's a case for
18.5c now) because it matters little.
We did get some positive news from ATM.v last week, when on Wednesday it announced that
the first (and main) block of a private placement had closed (8), raising gross proceeds of
$1.753m by selling 8.765m units at 20c apiece (1 unit = share plus half warrant at 25c). That's
useful working capital in these hard times and the terms weren't that onerous, either. For the
record, it puts the ATM.v shares out count at 65.075m which means its market cap is $11.7m
barring the smaller decimals.
The big taker of the placement was the Harrington Global Opportunities Fund of Toronto, which
was already a minority holder of ATM and has added significantly by taking 6.15m of those
units. Its holding now stands at just over 10.54m shares (plus 3.075m warrants). That means
Harrington now holds 19.98% of ATM, just under the magic barrier. I think they're a smart fund
and they're seeing this land grab the way I see it.
Timmins Gold (TGD) (TMM.to): I'm not sure what
to make of the action in the last six days of TMM,
because that pop two Fridays ago should have
disappeared completely if it were an accidental (aka
fat finger) trade. In fact the price held up quite nicely
and though the stock was down, the 2.7c drop is a
decent result all told considring there was no news of
import. We did get a regulatory filing to tell us that
Sentry Investments holds exactly 27,812,100 shares
of TMM at the moment, which is slightly up on its last
filing and good to know without changing anything
much.
Dalradian (DNA.to): No bones about it, DNA did well last week. closing at a round Loonie is
good, touching higher during the week is also good, but the thing that catches the eye most is
the increase in volume, there's obvious accumulation going on here.
17

Phoscan Chemical Corp (FOS.to): FOS reported its quarter on Friday afternoon (one minute
before the closing bell, aren't they cute?) and though there was a slightly higher burn than
expected due to the company doing some DD in Q1 that came to naught (apparently, so they
say at least) there's little in the way of surprises here. FOS is now in-play due to events of the
past couple of weeks, not due to its numbers from 1q15.
In trading the stock did okay, which surprised me slightly because the trend these days is for a
"news" stock to have a couple of days' worth of trading and then go back to sleep. Volume
wasn't massive but there's clearly interest about owning this at 30c all of a sudden; cast your
mind back a month and there was all the 27c you could have wanted.
We await the results of the strategic review to see if FOS.to manages to Do Something, once
we know that we can make a trading decision (i.e. hold or sell).
Starcore Intl (SAM.to): News Friday evening, but still nothing about outstanding quarterly
production numbers from the San Martin gold mine (which is disconcerting). The news Friday
post bell (9) was very much along the lines of the original plan in late April and confirms that
the Cortez (CUT.v) merger is going through as planned, with SAM.to paying three shares for
every share of CUT.v. As there are 9,555,850 shares of CUT.v as at this weekend, that means
SAM.to will issue 28.668m shares in the deal, bringing its total shares out number to 180.62m
(options and warrants for another day). That puts pro-forma SAM.to at a market cap of $23.5m
this weekend and that's way cheap compared to what it's going to have on board.
Just out of interest, a certain Eric Sprott owns 1.25m shares of CUT.v (i.e. 13.08% of its shares
out). That means he gets another 3.75m shares of SAM.to once this deal is done, which adds to
the 21,652,500 shares he bought in SAM.to in February. We round that to 25.4m shares, which
will be 14.1% of total shares in the newly merged SAM.to.
The deal is set to close on August 5th. There's no reason to suppose it won't happen as
planned.
Focus Ventures (FCV.v): The FCV filing (10) for the recently closed $4m raising confirms
among other snippets that there were a total of 151 takers on this 20c placement. That's a lot
of paperwork. Among the bigger buyer are the following:
• Sprott Global: 1,859,500 Units
• The Casey Research fund KCO LLC 2,000,000 Units
• Marin Katusa 535,000 Units
• Radius Gold 1,831,000 Units
With one unit = 1 share + whole warrant at 26.5c that's good for two years. Those named four
takers make up around $1.25m of the total $4m and at least some of them prove that you can't
choose your neighbours.
18

In other news, we hear that Tim Oliver has resigned from the company. There are no details
out there on exactly why as yet, but if we take as read that 1) Oliver was there to move
forward with the engineering plan for the big formal project to make Bayovar12 into the next
Miski Mayo and 2) FCV is now voicing great interest in moving the concession forward by
producing a Direct Application product that would involve far less capex (taling tens of millions
rather than hundreds of millions for set-up), it's a fairly easy guess to relate the two. If that
guess is right then I'm a happy guy, because the direct application economics look like a no-
brainer winning formula at this time and in this market. So if Oliver's left due to FCV liking the
chances offered by Direct Application rather than his big and formal project plan, that suits me
just fine because it's going to be better for the share price. Yup, it's that simple.
The Copper Basket
After twenty-four weeks of 2015 The Copper Basket is showing a 12.84% loss to level stakes.
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 481.26 1.26 -37.9%
2 Reservoir Min. RMC.v 3.96 47.55 209.22 4.40 11.1%
3 NGEx Resources NGQ.to 1.17 187.71 172.69 0.92 -21.4%
4 Nevada Copper NCU.to 1.65 80.5 134.44 1.67 1.2%
5 Amerigo Res ARG.to 0.27 173.65 76.41 0.44 63.0%
6 Copper Fox CUU.v 0.135 402.96 60.44 0.15 11.1%
7 Western Copper WRN.to 0.68 93.68 51.52 0.55 -19.1%
8 NovaCopper NCQ.to 0.58 60.15 41.50 0.69 19.0%
9 Hot Chili Ltd HCH.ax 0.16 333.11 34.98 0.105 -34.4%
10 Panoro Minerals PML.v 0.295 220.64 31.99 0.145 -50.8%
11 Regulus Res REG.v 0.35 56.39 17.48 0.31 -11.4%
12 Metminco MNC.ax 0.008 2410.5 12.05 0.005 -37.5%
13 AQM Copper AQM.v 0.06 141 8.46 0.06 0.0%
14 Catalyst Copper CCY.v 0.305 31.41 5.65 0.18 -41.0%
15 Coro Mining COP.to 0.045 159.37 3.98 0.025 -44.4%
NB: HCH.ax & MNC.ax priced in AUD$, rest CAD$ Portfolio avg -12.84%
It was an ominously bad week for The Copper Basket. There were two winners on the week
(CS.to, RMC.v) and two others unchanged
(ARG.to, AQM.v), but eleven losers marked 4% The Copper Basket 2015, weekly evolution
the tone and the weekly average at minus 2%
0%
12.84% (see right) hits new yearly lows by a
-2%
long distance. The current was "sell copper
-4%
exposure" and very few swam against that -6%
(CS and RMc really were two rarities), selling -8%
was across the board. -10%
-12%
-14%
As for copper prices, the bearish atmosphere
is a direct knock-on from the copper price
action last week. It's less important that
copper the metal finished a couple of pennies
lower than this time last week, the real party-killing atmosphere was caused on Wednesday and
Thursday when first copper tried to rally and for a while looked like doing so, before bigtime
selling hit the new prices and killed off any optimism. I made a point last week of contacting an
old friend who worked the LME for years, someone I used to talk with regularly but we've kind
of slid apart a bit. He no longer works there but has old contacts and his word is that there's an
awful lot of people relying on one specific market participant in the LME who's propping up daily
19
ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dn22 ts1ram ht8 ht51 dr32 ht92 ht5rpa ht21 ht91 ht62 r3yam ht01 ht71 ht42 ts13 ht7nuj ht41
source: IKN calcs

trade prices by holding onto a large copper position
(and thought the ID is unknown, they all think it's Red
Kite). If that position gets liquidated, copper's going a
lot lower, says he. Take that for what it's worth.
Moving on, we get to the weekly inventory section, here
are the main bullet points:
• Total world copper stocks continued the
downward trend last week, no new news for
you. Overall they dropped by 9,975 metric
tonnes (mt) (-2.1%) to finish the week at
470,961mt.
• Shanghai Futures Exchange stocks took another
leg down, dropping by 10,567mt (-7.3%) to
finish Friday at 134,816mt.
• LME warehouses stocks dropped too, down by 8,125mt (-2.5%) to finish at
314,025mt. Trend, trend, never end.
• Comex warehouse stocks bucked the trend and moved up by 1,692mt (+8.3%) to
finish at 22,120mt.
Here's the Shanghai-only inventories chart. The drop in inventories has continued unabated
since the last weeks of April, which is better than I was originally expecting. Plus it shows little
sign of slowing its rhythm, for the moment at least. I didn't think we'd see Shanghai stocks go
back under 100k again, but now I'm nowhere near as confident on that call.
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
260000
240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
20
31'13ceD ht21 ht62 ht9 dr32 ht9 dr32 ht6rpa ht02 ht4yam ht81 ts1enuj ht51 ht92 ht31 ht72 ht01 ht42 ht7 ts12 ht5tco ht91 dn2von ht61 ht03 ht41 ht82 ht11 ht52 ht8 dn22 ht8 dn22 ht5rpa ht91 dr3yam ht71 ts13 ht41
Mt Cu
source: Cochilco
Now for notes on a couple of basket stocks:
Western Copper & Gold (WRN.to): A brief word on this one, as I was asked during the
week whether I was still holding my small "off portfolio" position I took in the low 50s a few
weeks ago. Yes, I still have it, as WRN hasn't yet reached my targeted 70c price (plus trading
was thin when it managed to crawl into the mid-60s, not much temptation there). I'm in no
hurry on this one, it's nothing to break any banks win lose or draw either. I like WRN enough to
hold these few, that's about it.
Nevada Copper (NCU.to): No amount of hype can save a marginal project. Since the Nevada
Copper (NCU.to) feasibility study NR came out on May 28th, the change in price trend has been
as abrupt as it is obvious on that 2015 year-to-date chart. We've also had NCU's management
team aggressively marketing the project in both Toronto and New York in the post-NR period,
so the reception for the message among professionals is clear; not buying.

I'm aware that Pumpkin Hollow is "one of the last big copper projects not in the hands of a
major" or whatever other line they use to sell the thing. Well folks, perhaps one day it'll dawn
on people just why no major has bought it in the years it's been shopped around. Or perhaps
that fact is finally dawning on people this month. It's about time it did.
The Low Cost Producer Basket
After 24 weeks, the 2015 Low Cost Producer Basket is showing a 2.73% gain to level stakes.
company ticker price 1/1/15 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Goldcorp GG 18.52 830 13.99 16.85 -9.0%
2 Barrick ABX 10.75 1164.67 13.13 11.27 4.8%
3 Newmont NEM 18.90 528.08 12.44 23.55 24.6%
4 Franco Nevada FNV 49.19 156.5 7.46 47.69 -3.0%
5 Silver Wheaton SLW 20.33 403.75 7.41 18.36 -9.7%
6 Agnico Eagle AEM 24.89 214.12 6.61 30.89 24.1%
7 Buenaventura BVN 9.56 254.19 2.73 10.75 12.4%
8 Kinross KGC 2.82 1146.2 2.71 2.36 -16.3%
9 B2Gold BTG 1.62 921.27 1.52 1.65 1.9%
10 Pan American PAAS 9.20 151.64 1.36 8.97 -2.5%
all prices in U$, using NYSE ticker prices Portfolio avg 2.73%
The overall basket lost another 2.66% last week, with eight losers (GG, ABX, NEM, FNV, SLW,
KGC, PAAS, BTG) and two winners
The Low Cost Producer Basket: Weekly performance
(AEM, BVN) among the bunch. Biggest
and comparative to GDX control
drop came from Newmont (NEM down 25%
9.1%), which has either lost some of its 20%
early year shine or is being marked
15%
down for paying cash for Cripple Creek
10%
& Victor.
5%
0%
-5%
21
ts13ceD ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dr42 ts1ram ht8 ht51 dr32 ht92 ht5rpa ht21 ht91 ht62 dr3yam ht01 ht71 ht42 ts13 ht7nuj ht41
basket
gdx control
source: Google Finance, IKN calcs

Low Cost Basket: Percentage difference between
3.0% basket and GDX control, 2014
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
22
ts13ceD ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dr42 ts1ram ht8 ht51 dr32 ht92 ht5rpa ht21 ht91 ht62 dr3yam ht01 ht71 ht42 ts13 ht7nuj ht41
|
source: ikn calcs, NYSE/Nasdaq data
Newmont (NEM): The shine has come off NEM these last couple of weeks, with the market-
leading performance among the big golds. But
with NEM, the company is putting its market-
leading position to good use as last week it
agreed to pay $820m cash (plus a NSR) for
AngloGold Ashanti's Cripple Creek & Victor mine.
Nicely done and it's paying the lion's share of
that ticket by running a 29m share placement
through Citigroup and JP Morgan that's raising
gross proceeds of $682m, which in turn implies a
U$23.52 price on each share (i.e. matches
closely the Friday's close). In other words NEM
wanted to pay in paper, AngloGold Ashanti
wanted cash, the nice men at the banks provide
the solution...for a price.
We featured Cripple Creek & Victor /CC&V) as part of a 'Land Grab' essay in IKN204 in March.
Here's the main segment on the mine from then:
Located in Nevada, Cripple Creek & Victor is a working open-pit heap leach gold mine
that can produce gold at at rate of around 250,000oz per year, though FY13 (231k oz)
and FY14 (211k oz) saw lower production. All-in sustaining cash cost revolves around
the U$1,000/oz price point (FY13 lower, FY14 higher). As at the last reserves and
resources report dated December 31st 2013, CC&V had an all-categories (measured,
indicated and inferred) resource of 10.84m oz gold grading an average of 0.71 g/t Au,
with just 0.56m oz of that in the inferred category. In other words, there’s a whole lot
of mine life left in this asset. Current permits are good until 2025 and there’s no
reason to suppose the mine cannot go on for a lot longer than that.
It’s widely known in the mining world that AngloGold Ashanti is under balance sheet
debt stress and needs to raise cash. It’s also widely understood that it wants to sell
some assets and CC&V is one that’s been put up for sale. The AngloGold Ashanti
position is one that can perhaps be called “semi-distressed”; the company knows it
needs to reduce its debt load in the near-term and although it is representing that it
has several options to do so, those with a less biased viewpoint see little else than a
company that needs to sell assets. This adds up to a potential sale of CC&V that for
sure AngloGold doesn’t want to do as it’s one of their more attractive assets (~5% of
corporate total production, long mine life ahead, poilitically very stable jurisdiction) but
recognize that they’ll be able to get a decent price from the sale.
It’s understood that CC&V today has a preliminary price tag of around U$800m and it’s
also been widely telegraphed that several companies have been kicking its tires
recently, including “The Chinese” (that nebulous catch-all title), Agnico Eagle and (for
me the most likely buyer) Kinross.
And so as it happens it wasn't my guess guess of Kinross, nor the nebulous Chinese that won

out. It was NEM, who paid slightly more than the kick-around figure of $800m last week
(leaving the NSR on the deal must have been the clincher, AngloGold Ashanti can put that on
its assets balance). And with that AngloGold Ashanti sells a mine that it wouldn't have sold if it
weren't in financial straits. NEM has got itself a stonking good deal here, not only a high quality
land grab asset but also a long mine life producer with the type of annual production that
moves the dial even at a bigboy like Newmont. By way of comparison, consider that NEM paid
$2.3Bn in 2011 for Fronteer and its Long Canyon project in Nevada that NEM said in April this
year will need another $300m invested in it to turn it into a 150,000 oz per year mine.
Goldcorp (GG) (G.to): Thursday morning brought the gossip news of the week in mining,
when GG announced (11) it was expanding its multi-bank credit facility from U$2bn to U$3bn
and pushed out the term limit to June 2020. Its
official reason is that the cash is "intended to be
used for liquidity and general corporate purposes"
but the world knows it's only doing this for one
reason only: GG's going to buy something.
GG had been trading slightly higher than its peer
(here GDX) over the last couple of weeks but it was
basically in lockstep. There was a approx 1%
murmur on the news Thursday morning but nothing
big or lasting; that means this hasn't come as much
of a surprise to "those who know".
On the blog last week I floated my idea of the three names GG might be after, namely Lake
Shore Gold (LSG.to), Detour Gold (DGC.to) or B2Gold (BTO.to). Of the three, I think LSG is the
most likely target by quite a way (hey, it's why I own the thing after all). I also got feedback
from that post from a few of you out there, most of whom agreed with the LSG call, some who
think the bigger and riskier purchase of DGC is now the favourite, but other names floated at
me include Pretium (PVG), Rubicon (RMX) and Eastmain (ER.to).
On further consideration I'm sticking with LSG as my bet, I can't shake the way in which LSG
would fit almost perfectly into GG's plans. But one thing's for sure, Goldcorp's about to buy
something. Take that to the bank.
Regional politics
Overview
There really wasn't much that's massively new to report in the regional political sphere as
relates to mining. Tia Maria has gone into its "pause" quiet period, Guatemala's political
upheavals rumble on though it's looking as though Otto Pérez Molina will now survive and limp
his presidency home, the Argentina election season is looking more like a Scioli win and only
Macri can challenge that. So no big Regional Politics section this time, though we're only a
couple of weeks away from the regular end-quarter Regional Risk overview now. Just one thing
caught my eye this weekend.
Peru: Official employment numbers recovering in the mining industry
In Peru's Ministry of Energy and Mining's (MEM) monthly review came figures that show a
distinct rebound in the number of people employed in the country's formal mining industry. This
news report (12) was one source, but a visit to the source document allows charts to be built:
The number of people employed by formal mining in Peru peaked at 208,382 in 2013, but come
the end of 2014 that number had dropped by 13,021 (-6.2%) to 195,361. There hasn't been a
big pick-up in sector activity since then, so at first light the April 2015 total of 201,646, more
than six thousand higher, is a bit of a mystery.
23

Peru: Number of people employed by formal mining
225000 companies, 2006 to date
200000
3rd party contracted
175000 direct employed
150000
125000
100000
75000
50000
25000
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 April
source: MEM 2015
The answer is that Peru's move to formalize (or at least "get into the formalization track" those
miners who were previously considered illegal or informal) has made up the difference.
Finally, it's worth noting how the employment mix of directly employed and third party
contrasted has changed over the years. Back in 2008 for example, nearly 48% of mine workers
were employed by the company itself and benefitted from greater job security, better pay,
private pension and health plans etc. But the rise in employment has been almost exclusively
through the cheaper and more flexible (aka very easily to make redundant) third party contract
workers, who now comprise 67.07% of the formal workforce. There are now less people
diretcly employed by mining companies in Peru than there were in 2010.
Market Watching
INV Metals (INV.to) doesn't move
This is the company that I floated last week as a possible name to fiddle with on news that
President Correa was vociferously backing the project. It didn't move an inch.
I didn't buy any, either.
Gary calling silver higher
Gary Tanashian's NFTRH 347 this weekend was up to his usual high standards. This segment
got my attention to the point where I mailed him and asked for permission to quote it here
today. He kindly agreed, here it is:
You know I do not speak in hyperbole and in fact probably go over the top in
identifying and making a big stink about it. So consider this to be a market
24

watcher simply telling you what this chart says. It says silver is ready to rally.
Now we will see what other indicators have to say.
For the full context, with charts and his thoughts on the call, you'll need to be a subscriber and
reader of his missive. I recommend that you do that. One thing I've learned after reading
Gary's high quality material over the years is to pay very close attention when he makes a call
of this nature.
Conclusion
IKN318 is done, we end with bullet points:
• The Minera IRL (MIRL.L) (IRL.to) report put together this weekend reminded me that
running an independent publication allows me to break up the normal style and
concentrate on the parts I think most important. For sure it's nice to have a standard
formula, but sometimes cookie-cutter formatting doesn't do the right job.
• As for the IRL.to news, it was better and more shareholder friendly than I'd dared hope
for. While the market remains in doubt we have a great opportunity to load up on
what's going to be a 100k+ gold miner in a couple of years' time that's selling at a deep
discount.
• I'm a seller of Teranga (TGZ.to) at 83c if given the chance. It's a great little miner for
sure, but there's going to be a limit on its share price upside at the current at-or-about-
$1,200 level and according to my Casio, we're just about here.
• B2Gold (BTO.to) (BTG) continues to be misunderstood. That's okay, come the ned of
the year when it's a lot higher the doubters will fall into lline. Top Pick, great stock to
own at current levels.
I thank you in advance for any feedback. Our Top Pick stock is B2Gold (BTG) (BTO.to). Flash
updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen.
Otto
25

Footnotes, appendices, references, disclaimer
(1) http://www.calculatedriskblog.com/
(2) http://finance.yahoo.com/news/minera-irl-announces-us-70-060000004.html
(3) http://www.minera-irl.com/files/images/investor-centre/MIRL-Investor-Presentation.pdf
(4) http://www.minera-irl.com/en/projects/ollachea/ollachea-optimization-results
(5) http://finance.yahoo.com/news/b2gold-announces-robust-results-optimized-010933515.html
(6) http://seekingalpha.com/article/3256215-b2gold-fekola-project-has-a-lot-of-lipstick-on-so-dont-try-to-kiss-
it?app=1&auth_param=cdh0s:1anqb3s:b1a5f8ec32ce9639188610758279f0e8
(7) http://incakolanews.blogspot.com/2015/06/chucks-going-shopping.html
(8) http://www.juniorminingnetwork.com/junior-miner-news/press-releases/1639-tsx-venture/atm/8124-atacama-pacific-
closes-first-tranche-of-non-brokered-private-placement.html
(9) http://finance.yahoo.com/news/starcore-international-acquire-cortez-gold-203000333.html
(10) http://www.bcsc.bc.ca/ViewDocument.aspx?DocNum=A7P5D6K7D7L5O7PFE6P3F7J5C7I3
(11) http://finance.yahoo.com/news/goldcorp-announces-increased-credit-facility-130000940.html
(12) http://gestion.pe/economia/empleo-sector-minero-se-recupera-y-supera-total-registrado-2014-2134678
Appendix 1: Flash update dated Monday June 8th
Good Monday morning, 07:10am and an hour and bits before the Americas opening.
Minera IRL (IRL.to) (MIRL.L) this morning confirmed the strong rumours and announced a financing deal for Ollachea.
http://finance.yahoo.com/news/minera-irl-announces-us-70-060000004.html
This is strongly bullish news for the stock and it's not a surprise to see the stock trading up over 20% in London this
morning. We will run a full NOBS report on IRL this weekend, but for the time being:
The deal is arranged by Goldman Sachs but they're little more than a front. The real funder is Peru's COFIDE (read the
basics about COFIDE in English here...
http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=5927159
...which also has a link to its website), a well-established quasi-state bank that provides capital to various parts of the
Peruvian economy. It works with private banks, government offices, private businesses of various sizes. Although
nominally State-run, it works as a fully accoutanble profitmaking entity. It's considered in Peru an excellent partner in
business and in a nutshell, I couldn't think of a better provider of funds to the Ollachea project. We note in passing that
Peru and its mining sector is in need of "a win" and also in need of evidence to the world that its national government is
a friend to the mining industry. This deal will give the executive a lot to boast about, even though the project isn't Conga-
sized.
At this stage the deal comprises of a $70m bridge loan, with intent to raise a full senior secured loan of up to $240m.
After speaking with management, I can say the chances of the senior secured loan not happening are virtually zero so
in real terms this is the first tranche of the larger loan this morning. The funds are being lent at reasonable rates. There's
an annoying 0.9% NSR being given as part of the deal, but on balance I can live with that because the main point here
is that IRL has managed to keep hold of its possession of Ollachea. In previous mooted deals (that never came to pass)
part of the terms was often a large percentage of the project in return for funding (perhaps 30% or 40%). This is pure
debt funding, and (quite bizarrely) the senior debt is being guaranteed by the very thing it's going to fund. On that
subject, there's no hedging on gold (yet)and management tell me they're keen to keep it that way.
The main immediate use of the funds is to pay off the Macquarie loan ($30m that was due the end of this month) and
the last payment due to Rio Tinto. Just paying off the welter burden of Macquarie will be enough to see this stock rise
today, forget the rest. The rest of the cash will be put to use on the project while the main loan is secured, Ollachea
comes out of hibernation as a project as from now. Once the senior loan is finalized, it will retire this bridge loan (they
won't be concurrent).
There's going to be an equity raise at some point (the long-standing early seed funders of IRL will have the opportunity
to get some cheaper shares). I'd expect that to happen this year, only time will tell how much they decide to raise. We're
currently at around 280m shares out, my initial guess is that IRL will be at 400m S/O come production day one, but
that's really a guess, nothing else.
It's been a long time coming, but on first pass this is a better deal than I dared to have hoped for IRL at Ollachea. The
backer is a great fit, the terms are shareholder (i.e. us) friendly and it's a company with a project that now has a clear
passage to production. As for a price estimate, I'd guess the market will see the 20c options that come with this deal as
a place that marks an overhang, so I don't think it's going to rally to the moon immediately. It was also want to see the
senior loan closed (that will happen), but there's every reason to expect IRL to move back into thr 15c to 18c share price
range on the back of this deal.
So ends the first reaction Flash update on this piece of good news for a long-suffering portfolio position. Expect a full
NOBS report on IRL this weekend with better numbers.
Enjoy your Monday, O.
26

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
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Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-apr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
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Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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