IKN323 (with attach) — Jul 19, 2015
The IKN Weekly
Week 323, July 19th 2015
Contents
This Week: Watching, Macro tourism.
Fundamental Analysis: NOBS update report on McEwen Mining (MUX) (MUX.to).
Stocks to Follow: Overview, First Majestic (AG) (FR.to), Minera IRL (IRL.to) (MIRL.L),
NovaCopper (NCQ.to), B2Gold (BTG) (BTO.to), McEwen Mining (MUX) (MUX.to), Teranga Gold
(TGZ.to) (TGZ.ax), Lake Shore Gold (LSG.to), Focus Ventures (FCV.v), Atacama (ATM.v).
Copper Basket: Overview.
Low Cost Producer Basket: Overview, Goldcorp (GG), Barrick (ABX).
Regional Politics: The Pope and mining, Peru: An early take on the 2016 Presidential election,
What will a Scioli presidency mean for mining in Argentina?, Chile: Economy > Environment,
Guatemala: The political scene as the Presidential election approaches, Chile: Two
desalinization plants planned, Peru: Missing geologists and a journalist, Ecuador thinks
Colombia's mining industry is a model for its own development.
Market Watching: Primero Mining (P.to) (PPP) and sellside analyst whores, Belo Sun
(BSX.to): Local indigenous call for social consultancy, Golden Predator (GPY.v) raises cash at a
cost, Votorantim and Milpo, Red Eagle (RD.v) and GyM, Tinka Resources (TK.v): Trip firming
up, but..., ELECU and X2: Big money waits.
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
Watching
Let chaos storm!
Let cloud shapes swarm!
I wait for form.
Pertinax, Robert Frost, 1936
A statement: I am net long junior miners, no ifs or buts. This short intro and its message isn't
trying to be cute, it's not sugar-coating bitter pills, isn't some weekly commentator trying to pull
rank or be smart because the type of downdraft we got hit with last week, with particular
emphasis on the performance of biggest position by some way B2Gold, hurt my back pocket
period. With that said, I do have money on the sidelines and aside from the small plays around
the edges (adding some IRL, selling the AG, buying a few modest positions in April 2015), since
cashing in on Rio Alto the only thing that's really moved the dial was a significant addition to
the B2Gold I already held when it got moved up to Top Pick. And by luck or otherwise I still
have funds to be deployed, by luck or design.
As noted in 'Fundamentals...' below today I'm very likely (gold dropping heavily the only caveat)
to take a trading position in MUX this week that will run separately to the current longer-term
trade, but the context of that is important. It's a sidebet trade, it's near-term, it's liquid and if
1
necessary closed in minutes if gold worsens. Aside from that I see no reason to deploy sidelined
cash while things remain as volatile as they are. Now's the time for hunkering down with the
real money, waiting and watching, applying patience. As the author himself pointed out in notes
on his own verses, the title of the Frost's Pertinax is a derivative of the Latin for 'stubborn' or
'persevering'.
Macro tourism
I stuck up a quick post on the Barry Ritholtz 'Macro Tourism' article that came out today Sunday
on the blog this morning, because it makes a strong argument and deserves more eyeballs. Go
read the whole piece yourself (it's on link (1) in the appendix below), it's well worth the effort,
but here I'll just excerpt one section in which Ritholtz marks out three truths
Before becoming a “macro tourist” foolishly trading on headlines, consider these truths:
• News is factored into stock prices by the time it’s on the front page. These stories all develop over
time. The headlines tend not to come out of the blue but are the result of incremental events over
months and years.
• Headlines don’t drive markets. Profits and valuations do. These geopolitical events make for big
splashy headlines, but ultimately have little affect on what matters to stock prices: corporate
profits. Earnings are a fundamental driver of company valuations and therefore equity returns.
• Guessing isn’t investing: Making big bets on outcomes that are binary — i.e., a 50-50 probability
— is not investing, it’s speculation.
That's correct. It's also something I see on a regular basis in the world's coverage of LatAm, up
to and and including the way people send me links to news stories in English about something
I'd read a day or two before. If it's a headline it's already baked in, but you can often double-
bake that cake if it's an English language headline about South America.
However, it's mightily tempting to Do Something from time to time, this trading as a macro
tourist. I find it easier to avoid when it's LatAm, but temptation can get the better of me. The
zero-sum effect of it is also why I'm keen to stay in my own area of relative expertise and not
get misison creep on other geographical areas. LatAm's where IKN has something of an edge to
offer, that's the bottom line.
Fundamental Analysis of Mining Stocks
This week we update on McEwen Mining (MUX) (MUX.to).
NOBS fundamental update report dated July 19th 2015
McEwen Mining Inc. (MUX.to) (MUX)
Company Overview
McEwen Mining Inc. (Canada: MUX.to, USA: MUX, Stuttgart MCF.sg) is a junior producing gold
and silver mining company operating in Mexico and Argentina. Its flagship asset is the El Gallo I
mine in Sinaloa, Mexico, its other major asset is its 49% ownership of Minera Santa Cruz S.A,
2
owners of the San José mine in Argentina. McEwen Mining also has exploration stage assets in
Mexico and The USA. Current share structure is as follows:
Shares out: 300.53m
Options: 5.1m
Fully diluted shares: 305.63m
Current share price: $0.758
Market Cap: $227.8m
Approx cash per S/O: $0.11
All prices are in United States Dollars unless stated. Forex U$0.80=CAD$1
NB: Today’s report uses the US Dollar and the NYSE ticker MUX as default.
About today's update
Here are the TL:DR bullets:
• We don't cover all the ins and outs, this is an update report.
• Operations at MUX have gone largely according to our forecast so far.
• But the share price action has not, which is the only thing that really matters in
the end.
• A combo of market circumstances have oversold the shares, so if gold manages
to stop falling there's a strong prospect for a decent near-term rebound.
Today's report leans on the work done in our original report on McEwen Mining (MUX.to) MUX)
in IKN298, dated January 25th 2015. Which means we gloss over some of the basics that were
covered back then, which also means (as usual) that if you'd like a re-send (or for newer
subbers a send) of that edition you know the mail address, happy to send by return.
Then since we ran that report, fundamentally speaking most things have gone roughly along the
expected lines we'd forecast. MUX has turned into a smaller, lowered ambition, leaner and more
profitable mining company. It's also accelerated and beaten its production at its flagship El Gallo
I mine as anticipated, which has made the operation handily profitable for the past couple of
quarters. BUT there's one thing that hasn't gone anywhere nearly as well, which sadly happens
to be the most important number of them all; its share price, which has dropped heavily from the
U$1.22 it was on the day of the IKN298 report through the U$1.09 cost average that I personally
set up via a series of entry trades to today's rather sad looking 75.8 US cents per share price
this weekend. This needs to be addressed, and today's the day.
Recent newsflow
One side of the reason we need to revisit MUX is its price drop, down very sharply in July to
Friday's close of U$0.758. The other is the amount of newsflow that's been piling up in the
stock, because a lot of it's material and affects our model. Even if we leave aside the April 7th
robbery and the mess that Rob McEwen made when he tried to do all the public relations stuff
by himself and ended up linking the company to narcotraffickers in the regional around El Gallo
I, and even if we focus only on the last month there's been plenty of news.
• On June 18th MUX announced (2) its new dividend policy of paying 0.5c per six months,
with the first payment due this month. We considered this when the news came out and in
the end it's a minor matter as far as fundies valuations go.
• Then came the July 2nd NR which told of the problems MUX is having with its NYSE listing
(3). The upshot here is that MUX has six months to get its share price back up to over U$1,
else risk losing its NYSE ticker. The news seems to have caused some selling among US
holders (more fool them, it's of zero import to the company's fundamental value) and may
have got short players circling, too.
• Then came two NRs last week, first the July 15th NR which announced the company's
2q15 production totals (4) and we go into those carefully below.
3
MUX: El Gallo 1, gold production vs sales
20
18
16
14
12
10
8
6
4
2
0
4
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2
• Finally, in its July 16th NR announced MUX had received insurance proceeds (5) of
apparently $6.4m of the approx $8.0m worth of bullion doré stolen in early April. That's a
good thing, but the payment has come too late to change to numbers for the 2q15 filings.
We consider the effect of this below as well.
To sum up, we've a big sell-off that's partly due to the gold price drop, partly due to company-
specific matters. The market has jumped on the negative headlines and hit the stock but on
further consideration of MUX's fundies I think there's a lot to like at the current price. Therefore
our job from here is to take a good look at the company and see how the 2q15 is going to shape
up. Then consider what MUX might be worth at an even-keel market today. From there an
informed decision on whether there is a trade here can be made. That's way too much passive
voice, let's get on with it starting with the 2q15 numbers.
El Gallo I 2q15 production and revenues estimate
The news out of MUX last week on El Gallo I 2q15 production was better than I'd estimated. As
we also now know that MUX got paid by the insurance company after the end of the period, we
can also make a decent assumption on revenues and how it affects the quarterly profits.
Our previous estimate for 2q15 production and Koz Au
sales was 15,600 oz gold, minus 6,350 oz for
the quantity stolen, therefore 9,250 oz gold Au prod
(recall that silver production at this mine is minor Au sold
and best regarded as a byproduct kicker). What
we got from MUX was, "Record quarterly
production at the El Gallo Mine of 17,325 gold
equivalent ounces", of which 17,208 oz was
pure gold and sales totalled 13,464 oz. That's a
good result. This chart (right) shows the total
production sales and even backing out the lost
sales due to the robbery, that's a stand-up
number on the green bars at the right, could source: company filings
have been a lot lot worse.
I'm not going into every single aspect in this update report today, but one of the production
charts that needs an airing is this one, average
grade at El Gallo I. At 3.7 g/t that's stuck a lot MUX: Average gold head grade, per quarter
higher again. MUX is clearly running its best 4
3.5
mineral through the machine right now and that's
3
likely to continue for the next two quarters at
2.5
least, plus likely thorugh 2016. To date it's kept to 2
its 2015 production guidance of 50,000 oz gold 1.5
for this mine, but I expect that to be beaten by a 1
0.5
wide margin by the end of the year. We're
0
already at 32,451 oz gold in the first two quarters
(not even including the silver) so it could even
make that 50k oz by the end of 3q15. Bottom line
here: El Gallo I is processing some highly
profitable rock, even at today's gold price.
As for revenues estimates, if we use U$1.192/oz
average sales price for gold and U$15.50/oz
silver in the period (both best guesses) here's
what we get (right). That's U$16.2m in revenues
from the mine, hit by the stolen ounces plus the
slight drop in the gold price compared to 1q15.
We're expecting costs to come in roughly equal
to the previous quarter, so here's how that
$16.2m in forecast revenues stands next to total
and all-in cash cost expectations:
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2
g/t Au
source: company filings and guidance for 2015
MUX: El Gallo 1 revenue breakdown
24
19
14
9
4
-1
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3 tse51q4
U$m
Ag calc revs ($m)
Au calc revs ($m)
source: company filings, IKN calcs
MUX: El Gallo 1 Sales versus cash costs
(total and all-in cash costs included)
30.0
27.5
25.0
22.5
20.0
17.5
15.0
12.5
10.0
7.5
5.0
2.5
0.0
5
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3 tse51q4
U$m
reported sales
tot cash cost
All-In cash cost
source: company filings, IKN calcs
Bottom line: profitability is down due to the theft's hit in sales, but at MUX gets $6.4m of that
back in 3q14 it'll wash out okay. Bottom-bottom line, revenues are still projected to beat out all-
in cash costs at El Gallo I by $3.7m which is modest but on the right side of the equation. This
mine has remained free cash flow positive despite the theft in 2q15, it's getting most of that
money back in 3q15, it's all we could have asked for under the circumstances.
San José (MSC) 2q15 production and revenues estimates
One thing we need to be clear about and remind about before going into the San José numbers
is that because it's operated by Hochschild, it's always going to be a bit of a black box. MUX
gets a dividend from San José (assuming a profitable quarter) and it's always a bit of a mystery
how HOC treats the financials. For sure we can make best guesses, but if there's something in
the quarter that HOC prefers to treat in a different way our estimates...which after all are only
guesses and only ever will be...can miss by quite a distance. End of caveat.
We'd previously stuck our IKN forecast (i.e. guess) figures for production at the San José (aka
Minera Santa Cruz or MSC) mine at 23,200 oz gold and 1.582m oz silver on a 100% basis
(MSC is 51% owned by Hochschild (HOC.L), 49% by MUX). What we got last week from MUX
was, "Our attributable production from San José in Q2 2015 was 11,275 gold ounces and
792,344 silver ounces, or 21,839 gold equivalent ounces", which means that on a 100% basis
MSC produced 23,010 oz gold and 1.623m oz silver.
San José (100%): Gold Prod. and 2015 ests
30
25
20
15
10
5
0
In other words, we were damned close. That's good. Meanwhile MUX commented that MSC
met its guidance and that's fair comment. As for a guesstimate on revenues, if we use a
U$1,192/oz average sales price for gold and U$15.50/oz silver in the period (both the same
best guesses as used in the El Gallo I model), plus take the info provided (6) about sales being
slightly higher than production in the quarter (by 600 oz AuEq), then adjusted for the normal
difference between MSC calculated sales and real sales (around 4%) and then stick a finger in
the air, we get this...
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3 tse51q4
Koz Au San José (100%): Silver Prod and 2015 ests
2000
1600
1200
800
400
0
source: MUX/HOC filings (MUX 49% attributable)
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3 tse51q4
Koz Ag
source: HOC/MUX filings (MUX 49% attributable)
U$m San José (100%): Reported sales, per quarter
75 68.50 69.70
70 64.63
65
60 58.69 56.90
53.20
55 51.00
50 43.80 45.89
45
38.30
40
35
30
25
20
15
10
5
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14 1q15 2q15est
source: HOC/MUX filings, IKN ests (MUX 49% attributable)
...a revenues estimate for the mine of U$51m. That beats out 1q15 and its slightly better than I
expected, but we could miss due to bad assumptions of average selling prices (that's all in the
hands of HOC). We'll see when the real numbers come out.
As for costs, that's another big unknown at MSC on a quarter-to-quarter basis (HOC has this
occasional thing about suddenly lumping a one-time expense on us, cute of them) but we need
to make some sort of assumption so I'm going with numbers slightly higher than 1q15:
San José (100%): Total cash cost & all-in cash cost, qtr
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
6
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2
U$m
tot cash cost
All-In cash cost
source: HOC/MUX filings. IKN ests (MUX 49% attributable)
If we then put revenues and costs together and do a bit of math, this chart shows that in 2q15,
given the above assumptions, MSC is expected to make a small profit on the quarter:
San José (100%): Difference between reported sales
and cash costs (total & all-in)
70
60
50
40
30
20
10
0
-10
-20
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2
U$m
Diff rep.sales and tot costs
Diff rep.sales and all-in costs
source: HOC/MUX filings, IKN calcs (MUX 49% attributable)
Again, if so and allowing that HOC might throw in a curveball, that's better than I and my slight
loss on the quarter had forecast previously. We then separate the 49% owned by MUX and
here below is what we expect our focus company to get from its 49% participation in 2q15:
The MUX 49% of San José: Reported sales minus all-in costs
U$m versus reported quarterly income on investment
9 Reported sales minus all-in costs
Divi from MSC
7
5
3
1
-1
-3
-5
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14 1q15 2q15est
source: MUX filings, IKN calcs
A dividend of around $2m for MUX from MSC. If that works out, it's a better job than the $3m to
$4m loss I'd pencilled in previously.
Putting 2q15 together
As usual, to get a handle on a forecast of the 2q15 financials at MUX we need to combine what
we expect from El Gallo I, from MSC, then factor in the corporate expenses. Here's corporate
income versus costs, with revenues made up from the 100% owned El Gallo I plus the small
dividend we expect from MSC
MUX: Total operating income (incl San José) versus
Total operating and exploration costs (minus impairments)
30 27.0
24.7 25 23.2 23.2
20 18.2 18.7 18.2 19.2 19.1 18.0 19.0 19.5
14.0
15
9.7 9.2
10
4.4
5
0
7
31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3
$m
tot op income
Tot op costs & exp
source: company filings, IKN ests and calcs
The main takeaway is that we expect $23.2m in revenues and $19.0m in costs for 2q15, which
means MUX will be profitable for the second quarter running. I've left in the 3q15 projections as
well, which include the +$6.4m from the insurance payout and (maybe rashly) assume gold
averages U$1,200/oz in the current quarter. We'll see how that goes as we move towards and
through September. As for the overall costs, here's how that $19.0m guesstimate is built for
2q15 and how it compares to previous quarters:
MUX: Total operating costs
30
25
20
15
10
5
0
31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3
$m other
G&A
Exp costs
COGS
source: company filings, IKN ests
Which brings us to this, the operating profits in cash dollars:
MUX: op. Profit minus impairments
10
7.5
5
2.5
0
-2.5
-5
-7.5
-10
-12.5
-15
8
31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3
$m
source: company filings, IKN ests
(As a reminder, MUX tends to claim tax breaks and gets tax back on many quarters, so the
better straight line is the operating profits rather
than bottom line net). Here right is how that MUX: operating earnings per share
looks in per-share terms, we expect operating 0.03 (impairments backed out)
income per share at 1.4c for 2q15, rising to 2.5c 0.02
0.01
in 3q15 thanks to the insurance windfall.
0.00
-0.01
The bottom line to the expected 2q15 results is
-0.02
that they're not that bad and shaping up better -0.03
than even your author, MUX long, expected -0.04
from the quarter. For sure 1.4c/share operating -0.05
profit isn't a king's ransom and I'm also quick to
remind at this point that we need to assume a
fairly level playing field from the HOC-operated
MSC in order to return this modest profit and any unexpected drawdown will change the MUX
bottom lines quickly. But assumptions in, MUX is doing a lot better than many small gold
producers out there and the flexibility it has at El Gallo I (i.e. the ability to high-grade its rock for
a year or two) means it's in shape to be and remain profitable. A whole lot of companies out
there cannot boast the same.
So we can expect bullish noises from Rob McEwen and his company when MUX reports its
quarter on August 10th and from the new low stock price, that could make for a decent trade
potential.
An asset-based consideration of today's MUX
However, before making a trade call we also need to consider what kind of underlying value
there is at MUX today before making a call on whether there's a trade, a thought on its asset
"backbone" is necessary. For that we consult balance sheet items, then consider price/book
ratios of differen types, then hazard an
educated guess or two. We start here, with
assets (right). In the operational results we
filtered out the effects of the heavy
impairments MUX took on its Los Azules
copper project and to a lesser extent its 49%
of Minera Santa Cruz (MSC) in 2013 and
2014, but here they show up of course.
These days at around $530m in total assets
MUX is a much leaner vehicle, but still over
$200m of that is the asset value assigned to
its Los Azules copper project in Argentina,
which is debatable to say the least (more
below).
Zooming in on current assets, they look like this:
31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3
cents
source: company financials/IKN ests
MUX: Assets overview
1400
1200
1000
800
600
400
200
0
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3 tse51q4
$m
current
total fixed
source: company filings, IKN ests
MUX: Current Assets
80
70
60
50
40
30
20
10
0
9
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3 tse51q4
$m other current
inventories
IVA tax receivable
cash
source: company filings
Note the green bars that don't improve in 2q15 due to the adjustment from the robbery, but jump
as the money gets deposited in the 3q15 period. so as far as the assets at MUX go, it's still
heavy biased towards its mining properties and projects but the liquidity position looks enough
enough.
As for liabilities, they're nicely under control.
Most of the current total is an approx $50
deferred income tax liability that won't come into
play in real terms, then around $20 is trade
payables which is normal run-of-mine stuff. As
things stand, MUX couldn't have a much better
laibility book in practical terms, it's as close to
optimum as you could wish.
Here below right is how working capital looks
and as we posited in IKN298 when first
analyzing this stock, working cap touched
bottom at the end of 2014 and has risen since
then (and is expected to continue doing so).
This is pretty good, especially when considering
MUX will pay $1.5m out in dividends this
quarter.
With the main cash asset and liability values
now in place, I'm now going to consider MUX
on a per-share valuation basis (to save time
mostly) using the current 300.53m shares out
number as present guide. Here's how its fixed
assets look on a per share basis:
MUX: Carrying value per share of mining assets
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 won
MUX: Liabiltiies Breakdown per qtr
300
250
200
150
100
50
0
$/share
other min.prop per share
Los Azules value per share
Inv in MSC per share
source: company filings, IKN calcs
What we see here is that although dropped in book value Los Azules is still a major part of the
asset value MUX assigns to itself. As it happens, I think it's a horrid crock of an asset and when
putting together previous cash flow based assessments of MUX I've tended to ignore Los
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3 tse51q4
source: company filings
srallod
fo
snoillim
A/Cs payable
LT debt
other current debt
60 MUX: Working Capital per qtr
55
50
45
40
35
30
25
20
15
10
5
0
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 tse51q2 tse51q3 tse51q4
source company filings/IKN ests
srallod
fo
snoillim
Azules completely, but today I'm going to address its place in the company. At 19.7Bn lbs
copper at a 0.63% Cu grade, the 100% owned Los Azules is a big project. It's also in Argentina,
which would drop its value even if we were in a healthy market for copper. But we're not, copper
sucks and so does Argentina as an address. I'm going to best-guess a current asset value on
los Azule in a few lines' time, but first I'd like to show you what happens to the price/book ratio of
MUX if we back out Los Azules:
MUX: Price/Book ratios with and without Los Azules Copper
2.50 P/BV
P/BV without Los Azules
2.00
1.50
1.00
0.50
0.00
1q12 2q12 3q12 4q12 1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14 1q15 2q15 now
source: MUX filings, TSX, IKN calcs
The blue line is how things stand at MUX officially, with the price snapshot taken with the
closing price at end quarter end (plus now). In
red, the same dataset except that we ignore the MUX: Price/Book ratios w-w/o Los Azules Copper
asset value assigned to Los Azules. For me the P/BV
most interesting thing is that only now has that 1.50 1.41 P/BV without Los Azules
1.27
P/BV sans Los Azules finally dropped under 1X
1.25 1.12 1.11
(it's 0.88X exactly this weekend).
1.00 0.88
0.81
0.72
Here right is a closer look at the last five entries 0.75 0.63 0.62
0.49
in that above dataset (precisely the same 0.50
numbers, just a bit easier to see what's going on 0.25
right now). The point here is that even
0.00
discounting Los Azules to zero, the other assets
3q14 4q14 1q15 2q15 now
at MUX (which we've seen make money even at source: MUX filings, TSX, IKN calcs
this low gold price) are being priced under book.
That's my idea of overselling.
An estimate on the true asset value of today's MUX
Look, let's not kid ourselves, any price target is subjective and prone to any number of moving
parts. This one is no different and what you get below is nothing more or less than my best
guess on what MUX is worth right here right now today mid-July 2015.
To reach this estimate (guess) I take into account current market conditions, the nominal prices
put on the assets by MUX, where gold and copper are today, perhaps what I think MUX would
accept from a third party for any of the assets eg1 a bid for Los Azules, eg2 an offer from
Hochschild to buy out the 49% of MSC (though that's unlikely today, as HOC has more than
enough on its plate right now with its own operations in Peru and sub-$15/oz silver). Liabilities
are considered, the value of El Gallo I, the value of its gold development projects (Gallo II, Gold
Bar, Tonkin etc which haven't had much of a mention today). Other things too.
Then after sticking that finger in the air again, here's how I've added them up:
Best Guess at MUX true net asset value today
los azules MSC other net cash total
current value $100m $120m $85m $20m $325m
per share $0.33 $0.40 $0.28 $0.07 $1.08
source: IKN estimates
10
• For Los Azules, I put a price of $100m on the property. It's not worth its current $202m
carrying value but neither is it worth zip on a straight asset basis. I've gone for this
because I think $100m is what Rob McEwen would accept if somebody offered to write him
a cheque tomorrow morning.
• For Minera Santa Cruz (MSC) aka San José, I put its 49% as worth $120m to MUX, which
compares to its investment value as at 1q15 of $177m. With the market where it is it's
tough to value it at its full whack, but as I think we're about to get a better than expected
Q2 from the company (and even if the dividend doesn't come, it's throwing off decent
cashflow on a gross margin level) around 2/3rd book is about where I am.
• For "other", which includes all other fixed assets including El Gallo I and its project book,
I'm good about valuing them at their current carry of $85m. El Gallo I alone probably
justifies all that and if there's other things worth more on top, well that just allows my best
guess here to stay on the conservative side. The way I like them.
• Then net cash is set at $20m, which takes into consideration cash, bullion, working cap
etc. On the conservative side compared to working cap, but that's good too.
When the math is done, my best guess at a "fair value" for MUX today, taking into account what
it has and the way things are out there today, is $325m. That works out at $1.08 per share
That's 32.2 US cents higher than Friday's close of U$0.758 and represents a 42.5% upside
potential. And be clear, that's not some Utopian target number either, the type cooked up by
brokerage analysts to wow you into belief; that one's a reasonable target based on today's MUX
and today's really crappy market. It's a target that has to convince me into buying the stock, not
you. It's a target that only gives leeway when it comes to gold (and silver and copper) by
assuming the metals prices don't go any lower and we move into real ugly mauling bear
territory. This target is: "If it all settles down, that's where MUX will rebound to in the short term".
Conclusion and recommendation
There are three things to consider for anyone thinking about following me into a near-term trade
in MUX. Well that's not true, there are dozens, but three main things. Two of them are positive,
one's a potential negative that could trump them all.
1) MUX looks particularly oversold. A combo of a bad run of news "luck" including the
robbery, the snafu Rob McEwen created by trying to "manage" the news himself, the NYSE de-
list potential announcement and of course the drop in the gold (and silver and copper) price
have weighed heavily, with the company negatives coming at the wrong time.
2) But there's plenty of reason to like this stock still. Its 2q15 production numbers point to a
stock that isn't making oodles of cash but is still profitable, which is better than most expect from
this quarter (and frankly more than I expected before looking at the numbers). Then there's
plenty of asset backbone here, with a strong balance sheet that has little if any liability presure
and more than enough cash to see it through.
3) However the big negative is the potential for downmoves in the gold price. We saw a big sell-
off last week and gold break (what are called or supposed to be) key price levels. There are
going to be a lot of nerves around gold and its miners so if the metal keeps selling off, all bets
on rebounds for its miners are also well and truly off as well.
Therefore be crystal clear: MUX may be heavily oversold and ready to rebound (I believe firmly
that's the case) but if the gold tide goes out further all gold mining boats drop, not just the bad
ones. MUX can and will go lower than Friday's close if gold continues its sell-off. That
clear? Good.
I'm clear about that risk and after due consideration think that the upside potential for MUX is
much greater than the downside risk. Unless gold sells off strongly in the next 24 hours I
will take a near-term trading position in McEwen Mining (MUX) next week, which will
occupy a separate line to the current investment position in the stock and be treated as wholly
separate. In the event of a rally, I'll sell this new position and take profits. I'm not going to set a
11
fixed target on this trade today, as I'll first watch how both gold and MUX trade tomorrow before
making an entry decision. However, I will slate a target of U$1.00 for the stock in the near-term,
which would mean it bouncing back from whence it recently came and approaching the type of
net asset value I believe it can easily justify, even in today's bearish and miserable atmosphere.
End of Report
Stocks to Follow
There were three sets of stock performancein the list this week. There were unchanged small
positions and there were five of those (SAM.to, FOS.to, ATM.v, NCQ.to, FCV.v), which missed
the storm thanks to being mainly small and unpopular tickers. Then there were small losers and
there were just two of those (LSG.to, MUX). They didn't hurt so much, even though a loser is a
loser (plus MUX had already given us the pain of the recent waterfall drop, no need to go
through all that again).
Then there were a whole bunch of big losers, which in order of percentage nastiness were
Legend Gold (LGN..v down 20.0%), Lara Exploration (LRA.v down 18.9%), B2Gold (BTO.to
down 13.0%), Regulus (REG.v down 12.3%), Dalradian Resources (DNA.to down 11.0%),
Minera IRL (IRL.to down 10.0%) and Teranga Gold (TGZ.to down 9.5%). But that's only the
percentage pecking order and some of those hurt a lot more than others. Max pain came from
B2Gold which got hit by the same waterfall drop of nearly all the widely traded producers and
I'll make no bones about it, this one hurt both back pocket and ego after I'd recently upgraded
the position to Top Pick and added plenty more. The other one that hurts a lot is Teranga, as
I'm now kicking myself that I didn't sell at or near its high in June. Depressing stuff.
With the disposal of the failed First Majestic (FR.to) (AG) trade last week (my trade worse than
the company) we now have 14 open positions in our 'Stocks to Follow' list, one less than our
self-imposed maximum number. Four are in positive territory overall, ten are in the red. Nothing
to be proud about there.
12
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$1.67 -23.0% 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$1.18 13.5% Will be bot out, bullish
Teranga Gold TGZ.to hold C$0.55 15-feb-15 C$0.57 14.5% Good prod. 83c tgt
McEwen Mining MUX SPEC BUY U$1.09 25-jan-15 U$0.758 -30.5% Brave/foolhardy trade buy
Starcore Intl SAM.to spec buy C$0.12 10-jan-15 C$0.115 -4.2% Also "land grab", tgt 19c
Land Grab Stocks (in current order of preference)
Phoscan Chem FOS.to hold C$0.28 29-mar-15 C$0.29 3.6% 36c/share of cash, can add
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$0.05 -52.9% Spec buy but v small trade
NovaCopper NCQ.to hold C$1.05 09-apr-14 C$0.52 -50.5% looking to sell, out of Cu exp.
Lara Expl. LRA.v spec buy C$1.15 08-apr-12 C$0.215 -81.3% 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$0.81 26.6% Nov'14 tgt $1.25, top Au expl
Minera IRL IRL.to buy C$0.21 22-jul-12 C$0.09 -57.1% Tgt jun'15 23c, avged down
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.22 -4.3% tgt 50c, 3q15 PEA
Regulus Res REG.v spec buy C$0.30 06-apr-15 C$0.285 -5.0% Bet on 2016 drill prog.
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
Timmins Gold TGD jun'15 U$0.60 19-apr-15 U$0.62 3.3% near-term trade, out of time
First Majestic AG jul'15 U$10.51 10-aug-14 U$4.55 56.7% horrible failed trade
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
Now for some notes on current basket stocks.
First Majestic (AG) (FR.to): Sold. At least I managed to dump the thing at U$4.55 instead
of its new low U$4.22 close on Friday, which is what the prose of a mining commentator
grasping at straws and searching for any sort of silver lining looks like. Goodbye at last.
Minera IRL (IRL.to) (MIRL.L): Added. I'm now at what I consider to be my full position,
the cost average has managed to click down just a little as a result and I'm now strapped in for
whatever might happen. We had news from IRL (7) that confirmed Eric Ostrom as the new
company COO. We also hear from Ollachea that the company's new executive team went for a
town meeting with the locals last week, the first time IRL has been there as a full group since
the untimely passing of Courtney Chamberlain. As for how that meeting went, let's say that
executive chair Darryl Hodges now knows exactly how important his interim-CEO is to the
company and leave it at that. The sooner the "interim" is dropped from his job title, the better
for everyone.
NovaGold (NCQ.to): Likely to sell. I've made enough noises about the idea, copper's
looking worse by the week, the amount of cash involved is small. As it happens I nearly sold my
NCQ last week but didn't (market dried up), however if a chance shows in the days ahead I'm
likely to take it and dump this small loser once and for all. Partly portfolio management and
partly because I'd like an extra space on the max-15 list for the weeks ahead, it's not a big deal
13
(and won't hurt anywhere near as much as First Majestic did) either way.
B2Gold (BTG) (BTO.to): Holy maloney, this hurt a lot. I need to address this drop and will do
so, probably next week (I've been concentrating on MUX) but will say two things today.
• Okay, I added too soon, but this is a strong hold and I see no reason to sell into any panic.
• As I plugged in the end-week numbers into the database, when BTO came around I had
that same feeling I had when Rio Alto dropped through $2 and then under $1.50 in late
2013. That I thought was crazy and stupidly oversold compared to the fundamentals on
offer and though it took a fair time to wash out, the real value eventually shone through.
Here I get the same feeling and yes, BTO could go lower but on sentiment and
momentum only. Under it all is a very strong mining company making good money and
doing things right.
So the quick answer here is that I'll hold through this mess. Longer answer next week if
necessary.
McEwen Mining (MUX) (MUX.to): Plenty on MUX above today. Here we note the five days
of trading and that aside from the early Monday hangover selling after the previous week's
heavy sell-off, Monday through Thursday saw MUX react
well to the news it put out on production and on
insurance cash recovery. It also fought against the
bearish tide over those days and easily outperformed the
norm, which of course could be put down to a reaction
from the overselling of the previous week but still it was
a positive and the type of action you'd want to see at this
time. Then came Friday and MUX couldn't escape from
the wide-ranging sector sell-off, which kind of put a
damper on the recovery week but on the other hand I
was cheering (quietly) because I'd already close-to-
decided to take a trading position tomorrow Monday, so
every seller meant a better entry point for me.
A lot will depend on what the price of gold does, you need to be aware of the greater risk as
much as I am. If gold goes against me I'll sell the new trading portion in a flash and not think
twice about it; it's different from going in with "investment" in mind. but if gold quietens, I fully
expect MUX to put in the same type of rebound as it did in the first four days of last week.
Teranga Gold (TGZ.to) (TGZ.ax): My annoyance about not selling when I could have in the
80s has moved to plain anger. Aargh. Enough, not beating myself up any more.
Lake Shore Gold (LSG.to): Last week's news out of Lake Shore Gold (LSG) (LSG.to) and its
friendly bid for Timmins neighbour Temex was
most interesting. First because it makes sense on
a business level, due to the proximity of Temex's
Whitney gold project to LSG's under-used Bell
Creek mill nearby. Second, because it's not
paying much to get its hands on Temex (roughly
4% of shares out in an all-paper deal) and it's
not going to hurt the bank or the dilution levels
much, thirdly because it's snatching Temex away
from that big "New Oban" multi-company deal
that's being put together by Dundee and fourthly
because Whitney gold and a 60/40 JV between
Temex and Goldcorp (GG), the company most
likely to take a run at LSG (and of course, why I bought this position in April).
14
Here's how I put it to A. Reader when he asked me on Friday morning just why I'd written on
the blog (8) that this deal is another indication that LSG will eventually become part of GG (the
grammar's been brushed up a bit, aside that it's as-is):
All things about G:
• When they bought Probe they made it clear they wanted to buy more in 2015
• They're keen on Timmins region and they like neighbour plays
• One thing they don't advertise is that extending G's mining life in location means they'd
avoid approx $400m closedown costs. In other words, it's cheap for them to expand
rather than deplete there.
• In my opinion they don't want development projects. Buying something that's producing
and making money will be much easier to sell to board/shareholders
• LSG has positive free cash flow and now it's extended projected mine life via
exploration (very successful explorations too, 144 and 144 gap etc)
• Again my opinion, for what it is, LSG is cheap right now
• And Goldcorp just raised a whole bunch of cash. That's not because Chuck likes
looking at ten dollar bills
• And now LSG moves on Temex, where G is a JV partner on development and it's right
next door.
Here's a prediction: Oban won't take up its right-to--match offer and Chuck then owes a
favour to the Dundee crew. As Buzz Lightyear would say, "Synergies. Synergies
everywhere".
We also now know that "New Oban" plans to go ahead with its merger with or without Temex
in the new structure. We don't know whether Oban will exercise its right-to-match option yet, I
don't think it will though. Highly doubt it, in fact. Either way LSG's move isn't a dealbreaker for
New Oban which makes it politically acceptable (take it as read that all ramifications were
considered in them there famous smoke-filled rooms before we mortals got to hear about
them). In trading LSG the stock lost a penny on the week, which was way better than most of
the gold producer plays and its showed obvious assymetric strength. It's not just these pages
that believe a GG deal is close, of that there is no doubt.
Focus Ventures (FCV.v): On Monday FCV at Bayovar 12 got a mention in Peru's national
daily La Republica, in the weekly slot by the widely read and influential business/economics
columnist Humberto Campodonico (9). In the column Campodonico shone light on the whole
phosphates industry in Peru and its potential as one of the next pillars of export growth. It was
a well-researched piece that got all the main points right and it's about the first time I've seen
the phosphate debate opened in the wider business press as well. A welcome development.
Atacama Pacific (ATM.v): Some minor news out of ATM on Thursday (10) when it
announced it was leasing its non-core El
Durazno copper mine for two years to a
small private miner, Los Vilos S.A, which is
owned by ATM chair Albrecht Schneider. So
somewhat incestuous yes, but it takes a
property off the books and is expected to
provide some cash flow from royalties on the
deal once Los Vilos has it operating. That will
help pay for things, but it's likely to be
smallfry cash and not a big deal.
As for trading, it was very light (only two
trades all week) but at bid 18 and ask 19 the
feeling of this current price being a decent
floor level continues. Easy to hold this one, crappy market or not.
15
The Copper Basket
After twenty-nine weeks of 2015 The Copper Basket is showing a 18.59% loss to level stakes.
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 427.78 1.12 -44.8%
2 Reservoir Min. RMC.v 3.96 47.55 198.76 4.18 5.6%
3 NGEx Resources NGQ.to 1.17 187.71 142.66 0.76 -35.0%
4 Nevada Copper NCU.to 1.65 80.5 112.70 1.40 -15.2%
5 Copper Fox CUU.v 0.135 402.96 76.56 0.19 40.7%
6 Amerigo Res ARG.to 0.27 173.65 57.30 0.33 22.2%
7 Western Copper WRN.to 0.68 93.68 46.84 0.50 -26.5%
8 Hot Chili Ltd HCH.ax 0.16 333.11 41.64 0.125 -21.9%
9 NovaCopper NCQ.to 0.58 60.15 31.28 0.52 -10.3%
10 Panoro Minerals PML.v 0.295 220.64 29.79 0.135 -54.2%
11 Regulus Res REG.v 0.35 56.39 16.07 0.285 -18.6%
12 Metminco MNC.ax 0.008 2410.5 10.85 0.0045 -43.8%
13 AQM Copper AQM.v 0.06 141 9.17 0.065 8.3%
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 -18.59%
There were three winners in our Copper Basket list (HCH.ax up 19.1%, MNC.ax up 12.5%,
AQM.v up a hefty 30.0%) and they were all big
percentage wins, too. AQM rose because 4% The Copper Basket 2015, weekly evolution
somebody paid up earlier in the week for 200k
0%
shares and then nothing much else happened,
-4%
while the two Australian listed stocks dodged
the worst of the Friday sell-off thanks mainly to -8%
time zones. Let's see how they adjust on
-12%
Monday.
-16%
There were four other stocks on the list which -20%
remained unchanged (NCU.to, NCQ.to, COP.to,
CCY.v), which also helped take the edge off the
overall losses, but the eight losers were all-but
unavoidable during the liquidity suction events of
Friday with the biggest hit taken by Amerigo
Resources (ARG.to down 21.4%), followed by
Regulus Resources (REG.v down 12.3%).
Moving to copper the metal, that ended the week
back under U$2.50/lb again after trying and failing to
put in a rally. That's not good at all. The weekly chart
below shows the clear price trend that started in May
and hasn't shown a sign of breaking so far.
16
ht4naj ht11 ht81 ht52 ts1bef ht8 ht51 dn22 ts1ram ht8 ht51 dr32 ht92 ht5rpa ht21 ht91 ht62 r3yam ht01 ht71 ht42 ts13 ht7nuj ht41 ts12 ht82 ht5luj ht21 ht91
source: IKN calcs
No long dwelling on copper prices today, it's in a real mess but that's nothing new. We move to
the regular inventory bullet points:
• Total world copper stocks rose for the third week in a row, the re-stock is most
definitely on, it's come in the time window expected and it's going to be a weight on
any potential rally. The overall gain was 21,828 metric tonnes (mt) (+4.7%) to finish
the week at 482,901mt.
• The Shanghai Futures Exchange warehouses saw stocks rise for the first time since the
end of March. Let that sink in. Friday's close at 109,001mt was 7,484mt higher than
this time last week, or 7.4% if you prefer.
• LME warehouse stock also moved up, by 10,600mt (+3.2%) to finish at 340,325mt.
• Comex warehouse stocks joined the fun too, hiking a significant 3,744mt (+12.6%) to
finish the week at 33,575mt. Suddenly there's copper piling up all over the world.
Here's the Shanghai-only chart, which shows that hockey-stick move of the last three weeks. If
2015 follows the pattern of 2014 we'll now bounce around in a 15,000mt or so trading range
for the rest of the year but if stocks suddenly start moving back up to where they were before
2016 arrives, watch out.
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
260000
240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
17
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 ht82 ht21
Mt Cu
source: Cochilco
There are no notes on basket stocks this week, not even on the heavy (and overdue) correction
in Amerigo (ARG.to). That's because this sector is now off-scale untouchable. If you think the
action in gold has been bad, just be happy that you haven't been watching copper closely. It's
ugly as sin out there and while I still think gold can flatten out and find a bid, copper's going
lower and there is no doubt. Avoid everything copper exploreco until further notice.
The Low Cost Producer Basket
After 29 weeks, the 2015 Low Cost Producer Basket is showing a 15.77% loss to level stakes.
company ticker price 1/1/15 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Goldcorp GG 18.52 830 12.19 14.69 -20.7%
2 Newmont NEM 18.90 528.08 10.93 20.70 9.5%
3 Barrick ABX 10.75 1164.67 10.24 8.79 -18.2%
4 Franco Nevada FNV 49.19 156.5 6.72 42.96 -12.7%
5 Silver Wheaton SLW 20.33 403.75 5.53 13.69 -32.7%
6 Agnico Eagle AEM 24.89 214.12 5.39 25.16 1.1%
7 Kinross KGC 2.82 1146.2 2.18 1.90 -32.6%
8 Buenaventura BVN 9.56 254.19 2.18 8.56 -10.5%
9 B2Gold BTG 1.62 921.27 1.18 1.28 -21.0%
10 Pan American PAAS 9.20 151.64 1.12 7.36 -20.0%
all prices in U$, using NYSE ticker prices Portfolio avg -15.77%
All ten of our Basket stocks showed big losses on the week. That shouldn't come as much
surprise but to mark the special occasion, we do visuals ratehr than words. The last times we
did one of these "Oh Look At How
Nasty The Week-Over-Week Moves
Were" chart was on March 8th, the
weekend after PDAC when everything
dropped had like a stone. Here's the
latest iteration and it's every bit as
bad, or even worse if you consider
that the losses come on the back of
several weeks of drip-drip losers,
rather than the HOPE! that the small
rally into PDAC inspired earlier in the
year. So, congratulations to Franco
Nevada (FNV) for 'only' losing 6.0%
on the week. Real blue-chip stuff.
The Low Cost Producer Basket: Weekly performance
Okay, enough. One look at the basket
30% and comparative to GDX control
tracker chart (right) is enough to jolt me
25%
out of my irony defence mechanism, 20%
because the depth of last week's drop plus 15%
10%
its accelerating aspect means it's unlikely to
5%
have been marking a low. Well for sure we 0%
might get an immediate bounce, it's more -5%
dependent on the moves in gold than the -10%
-15%
market's appetite for newly discounted -20%
mining stocks, so the vagaries of the gold
market could turn it around more qucikly
than I imagine. and yes, at some point in
time there's always a collective decision
that a market's been oversold, which invariably results in a snap-back relief rally.
But on balance, the balance of probability strongly favours further downside before the rally or
rebound in mining stocks. Get used to the idea. Our basket was drawn almost back level with
the GDX benchmark on tlast week's big selling, probably because we hold equal-weighted
positions in two of the gold mining setcor's biggest hit names, B2Gold (BTG) and Barrick (ABX).
18
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 ts12 ht82 ht5luj ht21 ht91
Week-Over-Week losses in our ten basket components
0%
-2%
-4%
-6%
-6.0%
-8% -7.0% -6.6%
-10% -8.2%
-12% -10.6% -10.0% -10.0% -9.5%
-14% -13.1%
-16%
-18% -16.9%
-20%
BTG ABX GG KGC AEM SLW NEM PAAS BVN FNV
source: NYSE
basket
gdx control
source: Google Finance, IKN calcs
ssol
ylkeew
%
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%
Goldcorp (GG): The Scotia Mining Scoop is one of my regular morning reads. It's not always
wonderful, I like it because it gives a feel of what the sellside is looking to pump (at us), it
sometimes contains a gem. On Wednesday and Thursday it reported on the "Breakfast Event"
(all the cool kids love those) that Goldcorp's Chuck Jeannes held for anal ysts and assorted
hangers-on in Toronto on Tuesday morning. I thought the Scotia note was pretty interesting
and here are the five key takeaways according to that day's Scoop (i.e. a direct paste):
1) Biggest Opportunity to Add to Near-Term Production Coming from HG Young AND Borden
Lake – Goldcorp remains excited about its HG Young discovery at Red Lake and continues to drill there
with a massive $30M budget in 2015. They’ve hit numerous high-grade intercepts to date and they
continue to define the footprint dimensions of the discovery. Goldcorp CEO Chuck Jeannes also noting
that they are “drilling like heck” at Borden Lake in order to move forward with U/G development there as
quickly as they possibly can in order to ultimately get higher grade feed to Porcupine.
2) Eleonore Ramp-Up Still ~3-6 Months Behind Schedule, but Operation is Expected to Improve
as G Moves Into higher Grades in 2H 2015: Goldcorp started with Horizon 2 (grades in the 3-4 g/t
range) at Eleonore, then moved to Horizon 1 BUT will be moving into Horizon 4 later this year which
means higher grades (couldn’t be quantified at the breakfast) but they remain confident that 2H/15 will look
much better from a grade perspective.
3) Goldcorp Done with Major Capex for Now – Next “Major” Spend Will be Peñasquito Pyrite
Leach: Goldcorp’s Penasquito MEP will likely enhance the overall economics and the mine life at the
asset. The FS is expected to be completed internally in late 2015 and the market will likely see the results
of the study in early 2016. However, the spend will be nothing like we’ve seen in the recent past (as the
company built Eleonore and Cerro Negro) with what will likely be less than $900M split over the 2017-2018
years if the project(s) get the green light (2016 to be used for detailed engineering purposes).
4) Operation for Excellence - Cost Reductions at Cerro Negro Coming from Unlikely Places: The
addition of a lead nitrate circuit at Cerro Negro has increased silver recoveries at the operation
dramatically. Silver recoveries are currently ~88% vs. the ~65% budgeted in the original feasibility study.
This is just one of many smaller initiatives being achieved by Goldcorp so far in an effort to reduce costs
and increase margins.
5) El Morro Will Be Built: Goldcorp has gone back to “Square 1” at El Morro given the permits for the
previous version of the project were lost in a legal dispute. The project is now back at the PFS level as the
company looks at different options for the TSF, and as it works with local stakeholders. Although a very
loose schedule, a FS could be completed by late 2017 meaning the project would come into production in
the 2019 timeframeVThat said, Chuck Jeannes sounding confident this morning that El Morro will
definitely be a mineV
And what did that do to GG's stock? Not a lot in fact, but if we check the trading in GG next to
the precious metals ETF (GDX), the juniors ETC (GDXJ), gold (GLD) but then add in GG's 30%
fully carried partner at El Morro, New Gold (NGD)...
19
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 ts12 ht82 ht5luj ht21 ht91
|
source: ikn calcs, NYSE/Nasdaq data
...we see that Chuck's thoughts had an immediate and positive impact. I, as a potential buyer
of NGD (see last couple of weeks) would gladly trade a chunk four or five year delay to El Morro
for "it will be built", considering the poor state of the market at the moment and the permitting
and community problems the project has hit. Jeannes may have been giving us the confidence
talk that's second nature to CEOs, but I doubt he'd go as far as he did without knowing of
significant progress with communities around the project in Chile.
Barrick Gold (ABX) (ABX.to): On January 8th 2015, Ron Stewart of Macquarie reduced the
house call on Barrick (ABX.to) to sector underperform, avoid (with implicit short for those instos
who are into such things) and put a 12 month target of CAD$11.00 on the CAD$13.15 share
price at the time (the house's previous target on ABX.to was CAD$22.00, to give you an idea of
the size of the shift). It's also worth noting that Stewart's underperform call on ABX came at
what was already a near multi-year low point for the stock, so apparently there wasn't much
trading width to play with. I remember the call distinctly because it was one of the best fundy
analysis notes I'd read in a long time and said as much twice on the open public blog (11) (12).
I also sent the report to all you on the IKN Weekly subscribers' list on January 9th with this as
the cover note:
I've taken plenty of requests for a copy of the Macquarie report on Barrick Gold (ABX) since
mentioning it on the blog yesterday. Therefore I've decided to blanket you all and send out the
report to the whole list, but for more than that single reason. Though IKN gets a small mention,
that's not the reason to read it. The reason is the report's high quality, considered reasoning and
its conclusions drawn. This is the type of fundamental research I'd like to do when I grow up.
It's exactly the type of research I'd like to see from a whole bunch of brokerage analysts who are,
in theory at least, capable of similar work but still, even now and after the market performance
we've seen for the last two or so years, prefer to remain uncontroversial to the point of
sycophantic with the companies they cover. We need to see more reports such as this ABX one
out there, written by people unafraid to speak truth to power. If only for that, I'm keen on this being
read by as many people as possible.
For a while, what with the improvement in gold in
January and February plus the Thornton ex-Goldman
hype, gloss and push on future promises from inside
the company, that ABX call went though a slightly
tough period but as things have turned out the
underperform/short call has turned out to be one hell
of a good one. Or as Bloomberg put it on Friday (13),
"Barrick Gold Corp. tumbled to a 24-year low in
Toronto, leading a rout among bullion miners, after a
selloff in the price of the metal". It's not just that
Stewart was right about ABX, but he called sell on
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one of the biggest and most prolific names in the mining world in a sellside note, amidst
colleagues and peers who wouldn't have the insight and most definitely would not have the
guts to do the same. It may not be the biggest percentage move from end to end during the
period, but calling underperform on ABX from a sellside platform in a Toronto brokerage at the
beginning of the year and being right about it, help from weak gold prices or not, is the single
most impressive piece of mining analysis out of Toronto in 2015. It's good to know that among
all the sycophantic trash there's still some integrity left in the business.
Regional politics
The Pope and mining
Do not underestimate this turn of events. On Friday The Vatican's news service reported (14)
on the first of two three day meetings at the Vatican for communities around the world affected
by mining activity. The " A day of Reflection: united with God, we hear a cry" meeting that runs
through to today July 19th will be followed by another conference in September entitled
“Creating a new future, Reimaging the future of mining”, with this weekend's intended as
preparation for the September conference and both dates attended by people from
communities affected by mining in Asia, Africa and The Americas. The events are being run by
Cardinal Peter Kodwo Appiah Turkson, president of the Pontifical Council “Justice and Peace”.
Here's an extract from his opening speech to those gathered:
“... the Holy Father urges us to 'hear both the cry of the earth and the cry of the
poor'....“Many of us are aware of this harrowing cry from those areas where mineral
extraction is carried out”, he continued. “To give just a few examples: the 'Africa
Progress Report' by the former secretary general of the United Nations, Kofi Annan,
the OECD directives on the issue, the numerous reports on the rights of indigenous
populations, the 'Publish what you pay' initiative, legislation on the traceability of
minerals currently being developed by the European Parliament, in cinema with films
such as 'Blood Diamonds' or 'Avatar', and so on”.
“The Church, on various occasions and for many years, has closely followed mining
activities. At national level, the documents of the Episcopal Conferences which
denounce human rights violations, illegality, violence and the exploitation of deposits
causing pollution and problems for the safety of local produce. L At regional level, it is
considered by the Continental Episcopal Conferences, the Pan-Amazonian Ecclesial
Network, and so on, and at transnational level, by Franciscan networks, the CIDSE
and Caritas. All these voices follow the same direction: faced with these situations, we
cannot allow indifference, cynicism and impunity to continue to prevail. A radical
paradigm change is needed in the interests of the common good, justice, sustainability
and human dignity”.
These two conferences follow on from the "Mining for the common good" meeting in 2013, to
which The Pope invited top level mining executives from all over the world to discuss the
elements of responsible mining. They also come on the heels of Pope Francisco's visit this
month to Ecuador, Bolivia and Paraguay and particularly in Bolivia he heard plenty about the
politics and effects of mining on its citizens.
We're unlikely to get a formal pronouncement on this weekend's seminar before its pair
conference is completed in September. This happens to be around the time The Pope is due to
visit The USA for six days, September 22nd to 27th, a visit which will include a speech at the
UN Headquarters in New York, but that may turn out to be simple coincidence. However, if we
see any formal Catholic Church defence of communities or population groups against social or
environmental damage done by mining companies in the future, it would be pounced upon and
used to great effect by anti-mining organizations in The Americas (at least, I'll stick to my
region on this subject). The influence of The Catholic Church in South and Latin America ranges
but in many places it's very strong (Peru, most of Mexico, Bolivia, Ecuador) and like it or not,
your idea of a "meddling" Pope could make life difficult for environmentally sketchy mining
projects.
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Peru: An early take on the 2016 Presidential election
With the 2016 Presidential (plus Congressional and other regional) elections set for April 2016
and the almost inevitable second round run-off to decide the Big Job from the top two
candidates in June 2016, we're now less than a year away from the name of Peru's next
President. This weekend a reasonably reliable Ipsos/El Comercio survey (15) put Keiko Fujimori
in a clear lead with 33% voter intention. She's followed by Pedro Pablo Kuczynski (PPK) on 15%
and then two-time ex-Pres Alan García of the APRA party on 11%. Behind those come ex-Pres
Alejandro Toledo on 8%, then a gaggle of also-rans that won't make much of an impression on
4% and below. Six things to note at this early stage:
• There will be a second round run-off and it will be between Keiko Fujimori and
A.N. Other. Take that to the bank.
• As things stand today, that key second place spot looks like being a tight fight
between PPK and Alan.
• There is still room for an outsider candidate to surge, but as time clicks on it's
becoming less likely. As things stand I'd be surprised if anyone other than PPK or
Alan gets close to the second spot, give it three months and I'd be astounded.
• You can forget Alejandro Toledo as a serious candidate, his days are most
definitely done.
• Alan García is behind PPK in these early polls, but Alan has the APRA party
behind him which is the only serious, long-standing political party with national
reach in Peru today. His numbers will improve as we get closer to voting day as
the party machine wakes up and gets into gear, be in no doubt.
• The second round run-off will be very close between Keiko and whoever comes
second. It's way too early to call a winner for the big job vote in June.
As for a personal preference, I'd pick PPK as the least worst of the candidates. He'd also be the
most openly neoliberal, free-market proponent. As for the mining industry (our true focus),
none of the main three candidates will be bad for Peru's mining sector, or on foreign and
economic policy for that matter the main lines won't be that different. There will be big
differences in internal political and social matters and those are what will likely make for a
winner, but for those outside looking in (i.e. most of The IKN readership) there's less to fear
from the 2016 edition of Presidentials than there has been in previous years.
What will a Scioli presidency mean for mining in Argentina?
We've talked a lot about how Argentina's current FpV government's candidate Daniel Scioli is
now hot favourite to take over the job from his current boss and President Cristina Fernández
de Kirchner (CFK) when the big election happens in October (with only Mauricio Macri standing
in his way). All polls point to a Scioli win as the most probable outcome at this stage, with some
now showing that he may even win it in the first round of voting. But what we haven't done
much of yet is what it might mean for the mining sector of Argentina (which is our real focus
here at The IKN Weekly). In fact I've been holding off a while and waiting until this weekend to
do just that, because Scioli had a long-standing date on Friday at which he was expected to
make a few formal statements on his position vis-a-vis mining in Argentina. The event went off
as planned, he deliver the soundbites, here we go.
Here's a Youtube (16) of Scioli's press conference at the International Conference for Mining
and Sustainable Development, held in San Juan on Friday July 17th. Those who know their
Argentina political faces will also see that Scioli's Vice-President ticket candidate, Carlos Zannini,
and the powerful current Minister of Planning Julio de Vido, as well as San Juan's outgoing
(retiring) ultra-pro-mining governor Gioja are present at the table. Along with those more
famous faces, also present were either the current sitting and/or incoming governors of the
privinces of Jujuy (Eduardo Fellner), Mendoza (Francisco Pérez), Catamarca (Lucía Corpacci), La
Rioja (Luis Beder Herrera and Sergio Casas), Neuquén, (Jorge Sapag), Río Negro (Alberto
Weretilneck) and Tierra del Fuego (Rosana Bertone), provinces known collectively and loosely
as "the mining provinces" in Argentina. There were a couple of mining provinces missing such
as Salta, but be in no doubt that this was an important and carefully staged event that had
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Scioli and his policies on mining at its very centre. By the way, the whole shebang was
organized by the "Argentine Development Foundation" (Fundación Desarrollo Argentino), which
is headed by one José Scioli...yup you got it, Daniel's brother.
All those mentioned had a go at the microphone so if you want to get the info first-hand have
at that Youtube link (all in Spanish, a chance to brush up on your Castilian with a Southern
Cone lilt) but here are translations of what I consider to be representative quotes for your
viewing pleasure (extra quote sources here (17) (18)):
• Scioli: "Mining is capable of generating U$30Bn (of economic activity in
Argentina) in the next four years, as well as hundred of jobs".
• Scioli: "If I am made President, I will create a great development so that the
millions of dollars that this activity attracts, as well as the great number of jobs it
generates, arrive in Argentina."
• Scioli: "I want you to know that our objective is to bring certainty, security, calm
and prevision to business executives, that in Argentina they will have the
necessary conditions to develop a sustainable mining industry."
• Scioli: "Sustainable mining is part of the main agenda of national development
and a fundamental pillar, the same as energy sovereignty, agriculture, science,
technology and tourism. The great challenge that we have, along with my vice-
presidential candidate, is to develop all the productive federalism (policies) while
permanently looking for the best competitiveness."
• Julio de Vido: "The aim for the year 2025, which we must launch now, is to
double the number of jobs and mineral production in the country. Argentina has
all the conditions needed (for mining) and reaching these goals depends on
political policies to be implemented. For these we fully trust in Daniel Scioli and
Carlos Zannini."
Plenty more like that if you care to listen to the presser. All very pro-mining for sure and I
tacked that Julio de Vido quote on the end because it shows the active backing the present
administration is giving to the Scioli/Zannini ticket. Also note how many times Zannini is
mentioned, as he was handpicked by CFK as Scioli's running mate because of his hardcore
Kirchnerist track record, as some of the true faithful in the FpV camp still do't trust the more
moderate and Chameleon-like Scioli to maintain their preferred harder leftist political line.
As for content, that word "jobs" kept on coming up which is nothing but a reflection of the
political campaign and its mechanisms. So yes, this was a carefully staged and scripted event
but it's also the one where Scioli lays out his political agenda on mining and to be honest, the
industry couldn't have asked for a stronger backing than it got. The keyword "sustainable" (i.e.
environment, green, ecology, agro-fears) was used here and there but not to the extent that
Rafael Correa (to choose just one example) leans on it in his speeches. The thrust was jobs and
money and investment and stability and in my presidency we want mining jobs here in
Argentina and jobs and money and jobs. Et cetera. But as a delegation from several Chambers
of Mining noted in a letter they delivered to the brass at the conference (19) "...In Argentina,
many of the difficulties that the sector faces result from a series of measures adopted by the
State which have undercut the spirit of development and enterprise of the current Law of
Mining Investment", which is a polite way that mining bizpeople have of saying that the
government should stop meddling in the mining sector and sticking its oar in every five
minutes.
At which point we face the practical reality of a future Argentina under President Scioli,
assuming he wins in October (sidebar: from this point onwards and until otherwise mentioned,
that's going to be my 2015 political assumption for the country as it's going to take a very big
23
shift for any other result). The good news is that a Scioli government is making the right official
noises and putting on its pro-mining clothes. It's also much keener in this electoral campaign
season to push the idea of jobs/growth than it is all that tree-hugging enviro protection stuff, as
Scioli's team has done its homework and know where the side net positive vote weighting lays.
The bad news is that the message may come with different words, but its substance is no
different to that of the current CFK administration and we've seen how ineffective the national
pro-mining policies are when they hit the barrier of regional provincial issues, politics and laws.
Under Scioli we may get a feelgood honeymoon period for the mining industry as people talk up
the positive talk from the country's new President and his possible move to a more moderate
stance than CFK, but until/unless things change at a regional level, it's going to be the same
selective mining quagmire as always.
Bottom line: Scioli's words on mining last week are welcome on these pages, he was as positive
as we could have hoped. But regions will unblock Argentina's mining sector, not the national
administration. We need to watch how the regionals unfold, that will be closer to October.
Chile: Economy > Environment
In 2013 Chile signed into law new regulations to clamp down on sulphur dioxide, mercury and
arsenic emissions into the air, which would require industrial complexes and particularly those
companies with metals smelters in Chile to spend on extra equipment, smoke stack filtration
systems and whatnot and have them installed and working by 2018 latest. Pollution captation
systems needed by the four companies with smelters in Chile, namely the privately owned
Glencore and Anglo American, plus the State-owned Codleco and Enami, are estimated at a
ticket price of U$2.4Bn.
However it's now 2015, the mining world is in recession, Chile needs investment dollars and
among its plans wants to build two new smelters to complement current capacity. As such the
new government via the Senate Committee for Mining and Energy now recommends (20) that
the "overly zealous" pollution reduction law be postponed (rather than rescinded, though once
on ice these things tend to go deep-freeze permafrost) in order to allow more space in the
metals and mining sector for investment and growth. Once again showing that the industry's
attitude to the environment as an optional extra that can be accommodated in the good times,
rather than a necessity for all times.
Guatemala: The political scene as the Presidential election approaches
Last week saw a big presentation in Guatemala by CICIG, by the body that's been making all
the waves in the anti-corruption revelations and resulting scandal that has rocked the Otto
Pérez Molina government to its core, seen arrests of politicos and resignations all over the place
and was for a while near to toppling the current President himself. CICIG's presentation
document can be seen on this link (21) and its subject this time isn't the La Linea tax corruption
which is the centre of the storm, but the wider issue of campaign funding and the corrupt roots
of Guatemalan politics. Here's part of how Central American Politics/Insight Crime reported on
the event in English (22):
Insight Crime´s Aaron Dougherty has a good rundown on yesterday´s report from CICIG
on political parties and corruption in Guatemala.
Guatemala's political parties derived around half of their financing through corruption, including 25
percent from wealthy elites and businesses and 25 percent from criminal
organizations,Guatemala's UN-backed anti-impunity body CICIG said in its latest report.
The situation is fostered by Guatemala's costly election campaigns, weak campaign finance
regulation, lack of independent media, and nearly complete impunity regarding political corruption,
the CICIG said.
CICIG then outlines reform measures that it says should be put in place, such as funding
accountability and a limit on campaign funding for elections as the main (and most corrupt)
parties such as LIDER, home to the clear frontrunner for September's election Manuél Baldizón
(23), get to out-spend and drown out the smaller parties very easily. Mike at Central American
24
Politics then goes on to write, "I hope Guatemala embraces these reforms" but I'm forced to
write that I think he's being hopelessly naive about the real situation (Mike's an academic, after
all). With less than two calendar months to go and under a national Congress that's been hit
very hard by this scandal but is still under the shared control of President Otto Pérez Molina's
party (who want him to get to the end of his mandate) and the LIDER party (who fake
opposition but are really in cahoots with the Presidential people and want to get their man
voted in), the chances of anything happening to rock the status quo at this late stage are slim.
So the call at IKN is the pragmatic one; President Otto Pérez Molina will get to hand over the
baton to Manuél Baldizón in January once the latter is voted in come September. And corrupt
political life will go on as normal in Guatemala once the current turmoil is behind us. On the
whole this is probably good for mining companies operating there (step forward Tahoe
Resources (TAHO) (THO.to)) but you still shouldn't be in a rush to buy into the stock, new low
price or not. IKN's prediction aside we're still looking full square into the face of a Central
American country during its Presidential election period. For just one thing, there is a judicial
move to bar any proven corrupt party from running their candidate in September and as the
party's VP has just been arrested as (one of the many) caught in the La Linea scandal, there is
some talk on the streets of Guatemala City that LIDER could be thrown out of the vote. I think
that's unlikely, but I also know that very unlikely things happen in Central American countries
(not least before a big vote). Being wrong about Guatemala is a very easy thing to do.
Bottom line: If you fancy a bet on the result let time be your friend and maybe, repeat maybe
buy some TAHO closer to the day of the vote if it looks as though LIDER's Baldizón will make it
to the finish line and allow the continuation of the country's sordid staus quo. That's on Sunday
September 6th and happens to be the day before Labor Day in the USA, which traditionally
marks the end of summer and "back to serious work" in the North and the markets. I'll make a
point of reminding about a potential trade in TAHO in the Weekly of the weekend before that,
due out August 30th. We can see how the land lies at that point.
Chile: Two desalinization plants planned
The Coquimbo region of Northern Chile, aka Region IV, is one of the main mining regions of the
country (home to Los Pelambres copper mine and the Los Indios gold mine to name but two of
many). Reports last week (24) put Chile's regional and national government as ready to make a
decision on two large water desalinization plant projects for the region at the end August (i.e.
next month). These two somewhat delayed projects are part of the big public works program
on water announced by President Bachelet when she took office last year.
During last week's announcement on the two projects, Chile's Sub-Secretary of Public Works
(i.e vice minister) Sergio Galiliea said that the desal plants would be able to provide water for
various uses (agro, mining, drinking water) but the main thrust is likely to be the desal plants
built by the government that provide water for mining, thereby freeing up the more traditional
water sources (well, rivers etc) for human drinking water and agro use.
Peru: Missing geologists and a journalist
A group of four people, including three geologists hired by the Rio Blanco Copper (ex-Majaz)
company along with one journalist, Aleida Dávila Montes, were reported missing on Friday (25)
evening after receiving no contact from the party since July 11th. The group left on an
extended scouting expedition around the company's property in the Piura region of North Peru.
Under other circumstances I'd be happy to sit and watch this story without raising any
particular alarm, but in this case we're talking about a group attached to a very contentious
project that's been strongly opposed by locals for many years. What's more, the reporter Aleida
Dávila Montes is well known in Northern Peru regions for being strongly pro-mining to the point
where she received death threats from anti-mining protesters due to her coverage of the Congo
disturbances in Cajamarca region when that was the hot story two or three years ago.
One of those stories which I certainly hope comes to nothing and I get to forget about it when
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the party turns up safe and sound after getting lost.
Ecuador thinks Colombia's mining industry is a model for its own development
This link (26) explains how a delegation of Ecuador's government dedicated to the mining
sector last week went on a fact-finding mission to Colombia in order to find out hwo the country
is developing its small mining and artisanal mining businesses. Which is a bit like travelling to
Saudi Arabia to get a cutting edge lead on Women's Rights. Its one thing to cherrypick a visit to
a country's "International Training Centre for Model Artisinal Mining" (Centro de Formación
Internacional para Mineros Artesanales Modelo (ITCAM), as did the group led by Ecuador's
Vice-Minister of Mining María Eugenia Burbano, quite another when it's located in a country
that's seen its mining industry make next to little progress to production in the last five or eight
years due to the lack of reform to its outdated mining laws and rulebook that have left just
about every player in Colombia frustrated to the point of abandoning the country. Ecuador,
itself a bureaucratic wasteland when it comes to these things, should pick Colombia as an
example of what not to do, rather than extol its "model" achievements. The road to hell is again
paved with good intentions.
Market Watching
Primero Mining (P.to) (PPP) and sellside analyst whores
The news post bell Monday (27) from Primero Mining (P.to) (PPP), announcing that it had
problems in delivering silver to Silver Wheaton (SLW) as part of its streaming deal due to the
rescinding of its import and export licences in Mexico, won't affect the company's internal
financials for very long. Nor will it upset SLW, because the larger company won't want to get
litigious over one of its most profitable long-term deals. But as noted on that day over at the
blog (28) the way in which PPP tried to hide this obviously important ruling against the
company for over two months makes them look very slipshod indeed. That post began...
Otto's First Law of Mining News Releases: Considering that anything
contained in a mining news release is presented in the best possible way for the
company in question, any piece of information contained in a NR that comes
across in any way negative means the real news and/or events behind it must be
very, very bad indeed.
...and though I'm still trying to tighten up the wording on that "law" make it a little more
elegant, the basic idea holds true. So to the PPP price chart, as the real the reason why the
company's problems make this weekend's edition are slightly different. Here we compare the
last ten days of PPP (the US listing, to make it fair) with GLD, GDX and GDJX, the usual suspect
benchmarks:
26
• The first thing to note is that the news seems to have leaked out on Friday and there was
some persistent selling that day which took PPP away from the sector median. So whoop-
de-doo, a miner leaks info to its preferred friends, nothing new there but it does suggest
PPP knew just how negative the news would be once disseminated. However, late Friday
and most of Monday saw "value" traders moving in on PPP and buying it back up (got to
wonder how they feel about how last week went).
• Then came the news and the drop, a totally expected reaction but the way in which
sellside reacted to the late-Monday news got my hackles up to the point where it made a
post early Tuesday morning (29). My target was Canaccord, but they were far from the
only culprit.
• And then Friday came, gold had a rough day, holding gold miners became akin to holding
a lump of plutonium in your bare hands, but PPP suffered more than most (as seen)
because of the "excuse to sell" syndrome that kicks in. This is what really irked me about
the Canadian brokerage calls on Primero last week, because it was obvious that the
managerial snafu was more damaging to PPP than its revenue flow delay but they all
ignored the most obvious fact...ignored it willfully, too. But come a day of sectorwide
weakness real money is far, far less forgiving about such incompetence than the
sycophants in cubicles writing this nonsense and PPP got sold off harder than the rest.
Rightly so, too. For the record, Canada's P.to listing finished the week down 16.9% from
the "Thesis unchanged, Maintain Buy, CAD$7.00 target" call out of Canaccord pre-open
Tuesday morning (aka "if you liked it at C$4.79, you just gotta LOVE it at C$3.98!!!").
The moral I'd like to draw from from last week's action in P isn't about that semi-joking 'First
Law', but more about the way sellside coverage is not to be trusted, as by and large they do
not have the interests of the retail shareholder at heart. In the case of companies such as
Primero, built on the backs of "sector stars" and "popular figures" such as Conway, the people
informing you about their actions are way too close to the company and aligned for the
industry's wellbeing and survival, not yours. It was obvious, as in plug-dumb obvious that PPP
was showing a moment of corporate weakness at exactly the wrong time. The licence revoke
episode caught them with their pants down, P was going to be hit hard by the next round of
nervous sellers and on that subject, let's note in passing that companies with full US listings are
far more exposed to the ravages to cruel capaitalism than those ensconsed in the TSX only. Not
only had it made a managerial snafu, but it had kept this material development away from the
wider world (P tried to claim this week it thought the revoking of its licences was non-material,
only the plain stupid could ever believe that) and it was all coming to light at the wrong time in
macro-market terms. They've been punished as a company and rightly so, but they'll survive
this hit and move on. However, the way in which sellside anal ysts such as those at Canaccord
reacted was disgraceful. Or if you prefer, exactly the way they've always reacted.
Belo Sun (BSX.to): Local indigenous call for social consultancy
The Volta Grande project on the Xingu river of Brazil, owned by Belo Sun (BSX.to) has been one
of the most contentious gold mining projects on the continent for several years, its poor
community relations and unclear permitting path is why your author has been calling "avoid" on
the stock for several years (e.g. see IKN vs Canaccord February 2013 (30) when BSX traded
around $1.40 and people didn't like us telling you the truth about its permitting situation).
That call does not change this weekend.
Last Wednesday and Thursday (31), the local "Yudjá" people (literal translation of their tribal
name "owners of the river", to give you an idea of what this all means to them) held a meeting
at which they demanded their right to a social consultancy on the project in the presence of the
province's environmental committee. They also asked that a study period of six years on the
region that's been regulated for the period once the upstream Belo Monte dam goes into
operation also be applied to the Belo Sun Volta Grande project and from the looks of the
27
feedback, that's probably going to happen. IKN's bet: We're about to see BSX.to project go into
a six year deep freeze.
Golden Predator (GPY.v) raises cash at a cost
Last week precisely five IKN readers mailed in to give a headsup on the news out of Golden
Predator (GPY.v) on Thursday (32) which announced it was raising $800,000 via a debentures
offering. What they all (and myself) picked up on were the terms of the deal:
The Debentures will carry a fixed rate of return of 20% (the "ROR"), be
repayable in 12 months (the "Maturity Date") and, following the Maturity
Date, entitle holders to purchase 10% of any physical gold recovered from the
Company's planned bulk sampling program on its 3 Aces Project, Yukon at a
price of C$500 per ounce or receive an equivalent payment in cash in lieu (the
"Participation Right").
The 20% interest over 12 months is bad enough, but the terms of the Participation Right take
the usury to a new level. If that's the future awaiting any exploreco with zero treasury and a
need to keep the lights on, then it's time once again to carefully check the treasury position of
everything in your portfolio.
For background, GPY.v used to be GPR.v and was a $10 stock in 2010 at the height of the
Yukon hype and it was still trading between $1.20 and $2 in late 2012, before the gold waterfall
drop. It's not a company I've ever followed closely but I remember during the hype and promo
period hearing about its then-head Bill Sherriff and his aggressive stance. I also remember how
part of the company was spun out into American Bullion Corp (or something similar, going on
memory alone and not even checking Google for this) which tried to latch onto the nascent
royalties promo in 2013 and didn't come to much. So much for being ultra-bull on Yukon...
Votorantim and Milpo
We saw the closing of a notable deal in mining stocks down this way last week, but it didn't
make much of a splash in the English language trade papers due to its location. Brazil's
Votorantim was already 50.1% owner of Peru's zinc-plus-other metals producer Milpo, but last
week it closed on the offer it made to buy another 10% of the company via its listing in the
Lima stock exchange (BVL), paying 2.85 Soles per share for 130.9m shares of Milpo, which
works out at around U$118m for the new extra 10% chunk of the company (33).
Red Eagle (RD.v) and GyM
Another deal we saw go down in South America was the next stage in the agreement between
Red Eagle (RD.v), the small exploreco now moving forward on its San Ramón mine in Colombia,
and Stacon GyM, subsidiary of Peru's large civil engineering company Graña y Montero, which
has the service contract to build and operate RD.v's mine for eight years (a contract worth
U$155m, not bad) (34). As part of the deal SGyM is due to buy 20% of RD.v shares and they
took the first tranche of those last week (35) and paid $3.5m for the first lot (another to come,
whcih is due to bring their participation up to 19.94%). SGyM joins Liberty Metals and Mining as
the largest shareholders in RD.v (see that NR for more, and the debt deal RD.v has with Orion).
Tinka Resources (TK.v): Trip firming up, but...
I now have a pretty firm date for the site visit to the Ayawilca project of Tinka Resources
(TK.v), I've accepted it and I'm keen to go for all the reasons laid out in previous editions (short
version: it's about the only zinc play that moves my dial). The slight problem is that the window
to visit, August 6th to 8th, means I won't get back to the office until late evening on Saturday
August 8th which means in turn that the edition of The IKN Weekly that weekend may well be
delayed until Monday 10th August, rather than the usual Sunday evening send. However, it's a
nuisance I'm okay about taking on, because Ayawilca could turn out to be worth it.
ELECU and X2: Big money waits
Sometimes what's not in the news is more interesting than what's in it. The IKN Weekly notes
28
how the latest Thomas Kaplan investment vehicle, 'Electrum Special Acquisition Corporation'
(36), has been funded to the tune and U$175m and up and running for over a month but still
hasn't made any big moves on its main area of interest, junior PM mining companies.
Meanwhile Mick Davis and his (now in)famous X2 fund company is still sitting on his reported
U$5.6Bn in capital (37), with Mr. Davis insisting time and again on how he's not going to be
rushed into making the first big move. Meanwhile, the sector's tailspin trading action moves
ahead. Unlikely to be a coincidence.
Slightly OT, in the case of Electrum (ELECU) its post-IPO quiet period is due to lapse on July
21st (i.e. this Tuesday), which means the company will be able to start making public promo
noises and we could also expect the sellside world to start publishing on the company, too. As
for trading so far ELECU hasn't moved from its U$10.00 IPO price much, closing Friday at
U$10.10 on featherlight volume. Perhaps one to keep in mind in the week ahead.
Conclusion
IKN323 is done, we end with bullet points:
• Assuming gold doesn't slip (or look like slipping) much further after watching the
market a while on Monday...perhaps Tuesday as well...I'm a buyer of McEwen Mining
(MUX) (MUX.to) next week and the new chunk will be a separate, near-term flippy-type
trade that's unconnected from the longer term holding. After considering its 2q15
production numbers out last week and making a stab at a real world valuation for its
assets as stand today, MUX looks like a great entry at this level. However be clear, I'll
close this trade and take a loss in a heartbeat if gold collapses around our ears. Or
perhaps that should say "collapses any further".
• Daniel Scioli will be the next President of Argentina and at a national level that will be
okay for the mining sector. Our eyes need to be peeled and watching the regional
election races to know more about the fate of specific projects or mines.
• Primero's (P.to) (PPP) moves last week show that the market is utterly unforgiving of
lax management in bear market situations. Canadian brokerages would have you
believe otherwise.
• Gold is in an iffy position and everyone's nervous. So hold off and watch (like X2 or
Electrum), but whatever you do don't go wading in to copper exposure yet. There be
dragons.
• Goldcorp (GG) (G.to) will buy Lake Shore Gold (LSG.to). When is the only question.
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
29
Footnotes, appendices, references, disclaimer
(1) http://www.washingtonpost.com/business/get-there/the-travels-and-travails-of-the-macro-
tourist/2015/07/16/31eeaf64-2b2d-11e5-a5ea-cf74396e59ec_story.html
(2) http://finance.yahoo.com/news/mcewen-mining-initiates-dividend-distribution-110100893.html
(3) http://finance.yahoo.com/news/mcewen-mining-addresses-york-stock-203000338.html
(4) http://finance.yahoo.com/news/mcewen-mining-announces-record-quarterly-110000611.html
(5) http://finance.yahoo.com/news/mcewen-mining-receives-insurance-proceeds-200000306.html
(6) http://media3.marketwire.com/docs/1017199m.pdf
(7) http://finance.yahoo.com/news/minera-irl-announces-appointment-eric-134216181.html
(8) http://incakolanews.blogspot.com/2015/07/lake-shore-gold-lsgto-and-goldcorp-gg.html
(9) http://larepublica.pe/impresa/opinion/14896-bayovar-roca-fosforica-y-diversificacion-productiva
(10) http://finance.yahoo.com/news/atacama-leases-producing-el-durazno-130000828.html
(11) http://incakolanews.blogspot.com/2015/01/maquarie-publishes-barrick-abx-analysis.html
(12) http://incakolanews.blogspot.com/2015/01/an-update-on-last-weeks-macquarie.html
(13) http://www.bloomberg.com/news/articles/2015-07-17/barrick-gold-drops-to-lowest-since-1991-as-price-of-metal-
falls?cmpid=yhoo
(14) http://www.news.va/en/news/justice-and-peace-speaks-out-for-communities-affec
(15) http://elcomercio.pe/politica/elecciones/keiko-fujimori-lidera-intencion-voto-miras-al-2016-noticia-1826903?flsm=1
(16) https://www.youtube.com/watch?v=vth6MTpRwyg
(17) http://www.telam.com.ar/notas/201507/113163-junto-a-zannini-y-de-vido-scioli-considero-que-la-mineria-generara-
millones-de-dolares-y-trabajo.html
(18) http://www.elsol.com.ar/nota/239930
(19) http://www.lanacion.com.ar/1811503-dura-critica-de-mineros-al-gobierno
(20) http://aminera.com/index.php/component/k2/item/12303-senadores-proponen-retrasar-norma-de-emisiones-para-
fundiciones-mineras.html
(21) https://prezi.com/exleebhn9bu-/financiamiento-de-partidos-politicos/
(22) http://centralamericanpolitics.blogspot.com/2015/07/cicig-adds-fuel-to-fire-in-guatemala.html
(23) https://es.wikipedia.org/wiki/Manuel_Baldiz%C3%B3n
(24) http://aminera.com/index.php/mineria-nacional/item/12297-detalles-de-la-construcci%C3%B3n-de-plantas-
desalinizadoras-se-definir%C3%A1n-en-agosto.html
(25) http://elcomercio.pe/peru/piura/piura-reportan-desaparicion-trabajadores-minera-rio-blanco-noticia-
1826784?ref=portada_home
(26) http://www.portalminero.com/pages/viewpage.action?pageId=99716805
(27) http://finance.yahoo.com/news/primero-advises-delay-silver-revenue-203000113.html
(28) http://incakolanews.blogspot.com/2015/07/primero-mining-pto-ppp-and-ottos-first.html
(29) http://incakolanews.blogspot.com/2015/07/how-canaccord-reacts-when-finding-out.html
(30) http://incakolanews.blogspot.com/2013/02/apparently-canaccord-cares-about-ikns.html
(31) http://www.justicaemfoco.com.br/desc-noticia.php?id=106686
(32) http://finance.yahoo.com/news/golden-predator-announces-convertible-debenture-145500218.html
(33) http://gestion.pe/empresas/brasilena-votorantim-fortalece-su-control-minera-peruana-milpo-compra-10-2137547
30
(34) http://semanaeconomica.com/article/extractivos/mineria/165305-stracon-gym-adquirira-20-de-minera-canadiense/
(35) http://finance.yahoo.com/news/red-eagle-mining-completes-19-090000377.html
(36) http://incakolanews.blogspot.com/2015/06/kaplan-and-electrum-funding-at-bottom.html
(37) http://www.mining.com/mick-davis-first-deal-land-canada-report/
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
31
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
32
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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