IKN #330Premium

The IKN Weekly
Week 330, September 6th 2015
Contents
This Week: IRL obsession feedback, Gold drops 1.1% world ends.
Fundamental Analysis: NOBS update report on New Gold (NGD) (NGD.to).
Stocks to Follow: Overview, Lake Shore Gold (LSG.to) (LSG), Teranga Gold (TGZ.to)
(TGZ.ax), Midas Gold (MAX.to), True Gold (TGM.v), B2Gold (BTO.to) (BTG), Focus Ventures
(FCV.v), Dalradian Resources (DNA.to), Regulus Resources (REG.v).
Copper Basket: Overview.
Low Cost Producer Basket: Overview.
Regional Politics: Guatemala kicks out its President and votes for the next one, Peru Tia
Maria: The near-obvious result of last week's hearts and minds move, Mexico's mining sector
plunge, Venezuela and China, Argentina: Tucumán gives a preview of right wing dirty tricks,
Chile: Investment book in copper shrinking.
Market Watching: Deferred again.
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
IRL obsession feedback
Last week included another big chunk on Minera IRL (MIRL.L) (IRL.to), plus the admission that
I've been getting rather obsessive over the story to the potential detriment of other issues and
a note to say that I wasn't going to heavy on the subject this weekend in IKN330. As you'll see,
this week's edition is true to that pledge but I also want to share a further thought or three
after getting feedback from several of you (thanks all).
First, even though the stock has dropped in price and volume has slackened, I want to reaffirm
my position that I think IRL is a knockdown bargain at these levels, though obviously it comes
with the risks any penny-level stock comes with.
Second, just about all the feedback received was of the same thrust (not directly quoting any of
you this weekend, paraphrasing will be enough). You told me to keep digging, to find out more
and to learn as much as possible about the situation. Several of you said that you agree with
me, there's a chance of a real and significant alpha advantage via DD on this story and you
want to know as much as possible. Well folks, so do I ☺.
Third, there's bound to be more on this story soon. In fact I know there will be and if it's time-
sensitive it will come in the form of a Flash update. But to reiterate, I firmly believe that the
stock is way undervalued at any price under 10c (that says ten, not twenty…ugh I still feel bad
about that) and the impression it gives of off-scale risk and a boardroom spat that could go
either way is not the reality of today's IRL. This is one with a happy ending in sight. more next
weekend (at the latest).
Gold drops 1.1% world ends
1

Last week saw gold drop by 1.1% (using GLD as the proxy in line with NYSE market hours) and
as this dailies chart shows, challenge the lower levels seen late August. But the way in which
the market reacted to this modest, trading range adjustment that showed decent resistance
when sub-U$1,120/oz numbers showed up
was way out of kilter. Bearing witness to the
heavy selling is 'The Low Cost Producer
Basket' below which contains several gold
and PM stocks done for 8%+ moves and the
way in which the broader and "wiser" market
participants faintly or outright ridicule
brethren who were stupid enough to go long
anything gold must be an influencing factor.
In other words, we're still in the irrational
stage that I expect previews a move upward
in gold. There's always an excuse around to
be nervous about moving into the sector
(ridicule of "experts" aside), with Friday's
BLS jobs report an example. The upcoming
Fed FOMC meeting is bound to be another
(it's already being framed as "crucial" due to
the chances Ms Yellen will decide to raise
base rates) and after that there will be more,
there always are.
But I return to the company fundamentals and the clear indications that there are a lot of
mining stocks that now make mining work at U$1,100/oz or above and that's what's going to
drive their valuations higher. The broader markets and casual observers haven't realized yet
that we're in a new phase where mining companies are now being "run like real businesses" (at
last). Valuations will move with the underlying commodity, but the erroneous attitude of "gold
down therefore mining companies are going bankrupt soon" will eventually get phased out, at
least among the decent sector operators. The market hasn't clicked to the new reality yet and
as such, decent miners that aren't going anywhere are being priced too low. It's part of the
irrational mentioned in this space last week so my call is to keep embracing that irrational,
because when logic outs (and it will) the gains to your portfolio will be nigh-on automatic. Yup,
I'm that bullish right now.
Fundamental Analysis of Mining Stocks
This week we update on the new holding, New Gold (NGD) (NGD.to).
NOBS updated report dated September 6th, 2015
New Gold Inc. (NGD) (NGD.to)
2

Company Overview
New Gold Inc. (Canada: NGD.to, USA: NGD, Frankfurt 32N.f) is a mid-tier producing gold
mining company operating in several countries. It has four mines currently in production, plus a
pipeline of advanced-stage development projects. Current share structure is as follows:
Shares out: 509.08m
Options: 14.63m
Warrants: 27.25m
Fully diluted shares: 550.96m
Current share price: U$2.31
Market Cap: U$1.18Bn
Approx working cap per S/O: $1.00
All prices are in US Dollars unless stated. Forex U$0.80=CAD$1
NB: As NGD 1) reports in US Dollars, 2) mines things that are sold in US Dollars and 3) its USA ticker does
more volume than its Canadian ticker, unless other stated all prices are un US Dollars in today's analysis.
Today's update
This report picks up from the work done in IKN321 dated July 5th; that day we took an overview
"80/20 type" look at NGD, considered the main moving parts, its present and future strategy and
moneymaking potential and came to conclusion that it's a likeable stock, but I didn't buy any and
I didn't put a price target on the stock, either. Back then, just two calendar months ago, NGD
was priced at U$2.69. Now it's U$2.31 and to add a small cherry to the top of the cake I bought
some recently at a cost average of U$2.18. Fair to say that waiting a while was the right call.
Since then we've had some decent news flow form NGD as well. First on July 20th came the
news (1) that NGD had signed a $175m streaming deal on the silver production at Rainy river
with Royal Gold (RGLD). The deal allows NGD to tap $100m now and the other $75m when
construction/permit milestones are reached on the mine, with RGLD getting this (pasted from
the NR)@
• New Gold to deliver 6.50% of the Project's gold production up to a total of 230,000 ounces of gold,
and 3.25% of the Project's gold production thereafter
• New Gold to deliver 60% of the Project's silver production up to a total of 3.1 million ounces of silver,
and 30% of the Project's silver production thereafter
@ as its reward. It looks a reasonable deal for both sides.
Then came the 2q15 financials from NGD on July 27th (2), which came in very much as
expected (and the way we modelled them, more or less). Those have been incorporated into
the model below.
The third and last piece of significant news came August 28th when NGD announced (3) it had
sold its 30% of the El Morro project in Chile to Goldcorp (GG) for $90m in cash plus a 4% NSR
on gold production. I like this deal a lot, it monetizes something that was going to take at least
ten years to show fruit (if it ever does) and the NSR means NGD has an asset it can either keep
or sell on to one of those royalty companies that like them so much.
However, now we're caught up with the news (a little) I want to get back on track. Today's report
is not a detailed overview of operations, nor is it a closer look at the project economics of Rainy
River (that's a big separate thing and we can do it another day). We're not going to go over all
the same points and information as in IKN321 (if you're new round here and want a copy of that
edition, just ask and I'll send by return), today's report is all about setting a price target for NGD
for this year, 2015, considering what we know about the company and the market. It's been my
contention for a while that NGD is "cheap for what it is", the job is to put some numbers on the
back of that opinion. Today is financials, crunch numbers, consider what's reasonable and
possible. And the easy way I've found to explain the financial maze is to consider what I
thought, in IKN328, was perhaps the weakest link in the NGD story today, its reliance on
revenues from copper.
3

Revenues, costs and the influence of copper
Top of the list is to take a closer look the near/intermediate term weakness in NGD's make-up
identified in IKN328, its exposure to copper.
NGD: Consolidated Metals revenue mix
Back in that edition I used this chart to point to
2013 and 2014 aggregate
the problem and noted that with the recent
nasty drop in copper prices, revenues from its
Ag, 4.10%
main credit metal will drag on the top line.
Au, 61.10%
Cu, 34.70%
Therefore a closer look is necessary. As things
stand at NGD, the company has always guided
for stronger production in the second half of
2015 than for the first half. For example, after
consolidated gold production (pure gold, not
AuEq) of 181,419 oz Au, in the 2q15 MD&A
NGD reaffirmed its full year guidance of
between 390k and 430k oz Au.
Oz Au NGD: Consolidated quarterly gold production
120000 New Afton Mesquite Peak Mines C/San Pedro
110000
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14 1q15 2q15
source: company filings
With regard to copper, in the same document NGD aimed us at the lower end of its 100Mlb -
112Mlb range, but as that compares to 46.5Mlb produced in the first half of 2015 it means
copper production's set to rise (if NGD is as good as its word on this reiterated guidance, at
least).
All that brings us to the main point:
• We know copper prices have dropped
• We know copper production at NGD is set to rise
• Does one offset the other?
Here's a small table to show that indeed, the positives of the higher expected production will
outweigh the negatives of lower price. You see consolidated copper production at the NGD
mines (New Afton is the main copper producer, Peak Mines makes up the rest) for 1q15 and
1q15, then quarterly revenues and average received copper price pre Lb for those quarters.
NGD: Copper production and revenues
Qtr Cu Prod (Mlbs) Cu Revs ($m) Avg Cu/Lb
1q15 22.9 $53.1 $2.32
2q15 23.6 $58.9 $2.50
3q15est 28 $64.4 $2.30
source: NGD data, IKN ests for 3q15
For our 3q15 estimate, we bump up production to 28 Mlbs (the type of average NGD will need
in the second half of 2015 in order to make lower end guidance) and use a best-guess
U$2.30/lb copper price. The result is $5.5m more in copper revenues compared to the previous
4

quarter, even with the lower assumed price.
Here's a second table to show how that fits into a revenues forecast for the next couple of
quarters (or better said, a quarterly average for the next two quarters). Here the production
assumptions are for an average of 105,000 oz gold and 28Mlbs copper, then applied to different
gold and copper prices. For the silver credit we use a fixed estimate of $6m in revenues (it
might turn out to be a million higher or lower, $6m is a best fit for this simplified model):
New Gold (NGD): Estimated revenues sensitivity for next two quarters
assumptions: gold production 105,000 oz/qtr, copper production 28M lbs/qtr, flat $6m for silver revs
Gold Price Copper Price (U$/lb)
(US/oz) 2.00 2.20 2.40 2.60 2.80 3.00
1000 167.0 172.6 178.2 183.8 189.4 195.0
1050 172.3 177.9 183.5 189.1 194.7 200.3
1100 177.5 183.1 188.7 194.3 199.9 205.5
1150 182.8 188.4 194.0 199.6 205.2 210.8
1200 188.0 193.6 199.2 204.8 210.4 216.0
1250 193.3 198.9 204.5 210.1 215.7 221.3
1300 198.5 204.1 209.7 215.3 220.9 226.5
source: IKN estimates from NGD guidance
You see I've highlighted the box for the combo result of U$1,100/oz average gold and U$2.40/lb
average copper. For 3q15 that copper price assumption may turn out to be a bit high, but the
gold assumption may be a little low so on the whole, a reasonable guesstimate methinks.
This chart for NGD consolidated revenues gives an idea of how that would compare to recent
quarters (and please note the cut-down Y-axis in this chart, cone to see the comparatives more
easily):
NGD: Revenues, per quarter
210
200
190
180
170
160
150
140
130
120
110
100
5
31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3 tse51q4
U$m
source: company filings
NB: please note cut down Y-axis
If 3q15 comes in right on my U$188.7m estimate (it won't) it'll be the best quarter for revenues
since 1q14. Also, I'm modelling slightly higher for 4q15 as I think gold has more upside to come
(bite me).
The flipside to revenues is, as always, costs and I'll make no bones about it, they're very tricky
to model in the next couple of quarters. The three main variables are:
The positive influence of a stronger US dollar, pushing down op-ex in local currency terms
The negative influence of higher throughput, as NGD is guiding higher because it knows it's
going to mine and process more rock.
The unknown of Cerro San Pedro, its mine in Mexico which is winding down and now in its last
couple of quarters of full production. The wind-down process may make for a swan-song of fat
margins in the last couple of quarters due to suddenly lowered costs, disposal sales, lowered
depreciation/depletion etc. Or it may not.
As this one's not easy, I'm modelling to the conservative side and here's a chart on that.

NGD: Mine Op. Earnings, per qtr
45
40
35
30
25
20
15
10
5
0
6
31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3 tse51q4
$m
source: company filings, IKN ests
NGD: Assets
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3
$m fixed NGD: Liabilities per qtr
other current 2000
cash & eq
1800
1600
1400
1200
1000
800
600
400
200
0
source: company filings
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3
source: company filings
srallod
fo
snoillim
NGD Costs (op-ex + depreciation/depletion), per qtr
200
180
160
140
120
100
80
60
40
20
0
other LT liabilities
LT debt
current liabilities
31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3 tse51q4
$m
deprec/deplet
op-ex
source: company filings, IKN ests
Mine operating earnings at NGD is derived from revenues minus (op-ex + deprec/deplet), which
is simple enough. For 3q15, I'm assuming a slight rise in costs compared to the previous
quarter. For 4q15 we follow the pattern of
one-time costs spikes taken by NGD in the
end year quarter. I stress that costs may
turn out to be lower than those forecasts
and I'm trying to be cautious here, but even
so when the Mine Operating Earnings chart
is generated (right), the news is good. I'm
expecting NGD to come out with a near
$30m operating profit (which isn't net profit
of course, there are financial items and tax
to consider afterwards) and that’s going to
compare very well with recent quarters. As it
happens, the 4q15 number looks softer but
as that's quite a way into the future (and
anything could happen between now and February/March 2016 when those numbers come out)
I'm more interested in the potential momentum and touchy-feely good time positives NGD can
get from the 3q15 figures thanks to its sycophantic brokerage following.
Balance sheet: Fixed assets are NGD's true worth, liquidity its state of health
Moving to balance sheet matters, the influence of the El Morro sale, plus the expected free cash
flow from operations, will show up as better looking numbers. Assets and liabilities are still
dominated by the fixed and long-term parts of this company@
@but strip away those (and I'm also assuming the Royal Gold royalty stream cash remains
untapped for the moment and is a wholly neutral factor on the balance until used) and the
underlying liquidity looks good:

NGD: Cash treasury per qtr
500
450
400
350
300
250
200 414 438 414 416 415
371 366
150 327
100
50
0
7
31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3
source: company filings
srallod
fo
snoillim
800 NGD: Working Capital per qtr
700
600
500
400
300
200
100
0
31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3
source company filings/IKN ests
srallod
fo
snoillim
The working capital figure is particularly interesting, because $550m (and again sans the RGLD
stream cash) is the number NGD needs to build out Rainy River, as long as they stick to the
plan at least. This is another reason why I believe the message that will come from NGD from
its 3q15 results will be strong; it's going to be "Look people, we make a profit even in this metals
market and we've got our company-maker mine's capex covered".
The bottom line from considering both the operational financials and the asset/liability financials
is that NGD looks ready to pleasantly surprise the market. Production volume will outweigh the
negatives from metals prices (copper) and as long as I've made a reasonable assumption on a
tricky costs estimate, earnings from operations will show a chunky increase compared to 2q15.
Meanwhile, at the same 3q15 earnings conference call Mr. Randall Oliphant and his friends will
be able to announce that the company has all the cash it needs to build Rainy River and it's
going to do just that. The chances of momentum building at the end of the year are good.
What's NGD worth today?
And we get to the main event. I've already bought and in IKN298 I hinted at the type of price
target range I thought reasonable and possible. Today we add quantification.
With the current situation at NGD one of a company building for its future at Rainy River, the
most we can take away from NGD's ongoing operations results is that the modest profitability is
welcome, but it's no way to value the company. although my personal preference for valuations
will always be on cash flow models (Rule One in Business: Make a Profit) there's not much
chance of getting to a reasonable estimate and price target in this case.
Instead we need to value NGD on its asset value and that's always a subjective route. It's very
easy to Make Sh*t Up on a NAV-based target and I see far too much reverse engineering of
price targets from brokerages using this very method than I can stomach easily. So be clear,
there's no sleight of hand going on in this note today either, what you get from now in are your
author's best guesses, against which you can stack up the guesses of whoever else (yourself
included). Trying to get in the ballpark here.

Kicking off with the relationship between NGD's book value (total assets minus total liabilities)
and market cap, here's the updated chart:
NGD: Market cap versus book value
4000
3500
3000
2500
2000
1500
1000
500
0
8
31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 tse51q3
U$m
mkt cap at qtr end
book value
source: company filings, NYSE data
We see that until this year NGD was being valued pretty much at a 1X ratio, give or take, but as
we noted in IKN321 things have gone downhill
fast in 2015. Here's the price/book value ratio 2 NGD: Price/Book ratio
chart and as at this weekend, that's at 0.534X. 1.75
That's low, no ifs or buts, for a gold miner of this 1.5
size and it suggests that either the company is 1.25
non-performing and in serious danger of going 1
under (it's not) or its assets as bean-counted by 0.75
its own people are considered to be worth a lot 0.5
less by the market. On that I fully agree, so to get 0.25
a better handle on what NGD is worth today (I 0
nearly used speech marks to make that sound
ironic, this chart breaks down NGD's asset value
(done on a net book basis for each asset).
• The first column has the NGD official valuations as at year-end 2014.
• The second column shows my idea of the value for each component.
• The third column is basically empty, but the current market cap is there to compare.
Notes underneath:
NGD: Net Book Value (U$m)
Asset End 2014 IKN Estimate Current mkt cap
New Afton 1043.2 1000
Mesquite 341.5 300
Peak 211.5 200
C/San Pedro 87.3 0
Rainy River 431.4 600
Blackwater 489.2 100
El Morro 191.3 150
Net other -524.2 -790
Total 2271.2 1560 1180
source: company filings, IKN ests
• For New Afton, I have no particular problem with NGD's $1Bn net book on the asset. It's a
fine operation, long life profitable and with expansion potential.
• For Mesquite and Peak, they're decent mines and worth their salt but in the current price
climate they're doing little more than running to stand still. I've adjusted considering relative
forex changes since the end of the year, too
• Cerro San Pedro is about to go on care & maintenance. There's always an arguable
residual value, but my estimates are real-world based and there's even a case for giving it
a negative net value (somebody has to be paid to care and maintain it), but we're going the
easy route. It's worth zero going forward.
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 WON
source: company data, NYSE, IKN calcs

• The $600m valuation I've place on Rainy River is more subjective. We need to take into
account its slight overvaluation (for my taste) at year end 2014, then the cash NGD is
ploughing into the project, plus the adjustment of market valuations for these projects in
the light of lower gold prices. After sticking a thumb in the air, $600m is my best fit.
• Blackwater is overvalued by NGD, period. They stupidly paid over half a billion for this
marginal dog when buying out Richfield and have dragged their heels on the inevitable
large percentage write-down that needs to happen. I'm going for a $100m valuation and
may be generous at that.
• El Morro's adjustment is easier, as we now know for a fact it's worth $90m plus a 4% NSR
on the eventual gold production as that's what NGD sold it to GG for just a few days ago.
I'm valuing that NSR at $60m, so $150m it is.
• Then comes "Net Other", which includes all financial considerations (cash, debt etc) on the
books. As the $90m from El Morro is itemed to that line (not double-counted) the negative
change is all about the cash burn as Rainy River gets built.
The bottom line to this asset valuation breakdown is:
• NGD might think its company is worth $2.27Bn@
• But I think it's only worth $1.56m as things stand today.
• The good news: I think it's worth more than the market thinks (the $1.18Bn mkt cap)
And that's where the investment thesis kicks in. In a normal world, you'd want a P/BV for any
given company (mining or any other) to be above or plenty above 1X, which would be an
indication of macro and micro confidence in what it does, its profitability, financial well-being,
future prospects etc. The threshold at 1.0X is where performing asset become officially and
mathematically under or non performing, so any reading under 1X isn't good news at all. We
know there are plenty of mining companies in that position today and NGD is very much one of
the group at 0.54X, but it looks as though there are two reasons for its valuation woes
1) The overpricing of assets by the company, compared to the current reality (e.g. Blackwater)
2) The market is under-pricing what's left.
I'm not saying NGD is in tip-top financial shape, I am saying that it's nowhere near as bad as the
market is making out. The company's ops are profitable, it's able to raise cash to build its
projects, the high-end cash cost Cerro San Pedro is about to be phased out and although that
will hit production, profitability will remain the same because that mine is/was breakeven at best.
What will be left is the excellent New Afton plus a reasonable supporting cast that will as a
group really enjoy any gold upmoves.
By adjusting NGD's asset value to what I think it's worth today (U$1.56Bn) what I'm doing in
effect is asking myself what my idea of a reasonable performing NGD will be@or in numerical
terms, I'm trying to value it at 1.0X P/BV. What that implies for a share price target is in this
table:
NGD: An asset-based price target estimate (U$)
Share price Market Cap P/BV ratio IKN adjusted P/BV
U$2.00 $1,020m 0.46 0.65
U$2.25 $1,148m 0.52 0.74
U$2.50 $1,275m 0.58 0.82
U$2.75 $1,403m 0.64 0.90
U$3.00 $1,530m 0.70 0.98
U$3.25 $1,658m 0.75 1.06
U$3.50 $1,785m 0.81 1.14
U$3.75 $1,913m 0.87 1.23
U$4.00 $2,040m 0.93 1.31
source: IKN calcs
9

If NGD doesn't take any more impairments in the near future, under current market
circumstances I think it can reasonably command a 0.7X or 0.75X price book ratio on what it's
got. Once those numbers are considered in light of my downwards adjustments, that would be
0.98X to 1.06X, right in the range of where I want to be. And if we use 510m shares out as our
baseline, that implies a U$3.00 to U$3.25 price range for the stock as a target.
Conclusion and recommendation
I've stuck with the numbers today, because much of the background work was done in IKN321,
as of a couple of weeks ago I'm long this stock already and the job in hand was to get to a
reasonable and playable price target for NGD in this current market. Main conclusions:
• The hit NGD will take from the weakened copper price isn't as bad as I expected and is
more than cancelled out by the expected rise in production of both copper and gold that's
been flagged on several occasions by the company.
• My estimates on costs are a bit sketchy today, but even after taking a conservative route
(as usual) the model points to a good set of figures in 3q15, our current quarter. NGD isn't
going to make a king's ransom in bottom line profits, but it will be able to point to a
profitable operation and modest profits. This is likely to go down well in the market and
bring a long-overdue positive catalyst to the share price.
• As for a target, being reasonable about NGD's true asset value points us to a range
between U$3 and U$3.25, which represents an upside of between 29.9% and 40.7% as at
this weekend. That's not bad at all considering the company and that we wouldn't be
looking for any great improvement in the gold price to get there.
Having already bought at U$2.18 a couple of weeks ago the recommendation is already clear,
but today The IKN Weekly sets a target price of U$3.00 on NGD, representing a 29.9% upside
to this weekend and a 37.6% upside to my own buy price.
End of Report
Stocks to Follow
A mixed bag. In a week where the large cap precious metals miners were hit hard (see "Low
Cost Basket" below), the IKN 'Stocks to Follow' list fared rather better, in comparative terms at
least. It wasn't immune to damage, with the main pain taken by Lake Shore Gold (LSG.to down
8.8%) and Teranga Gold (TGZ.to down 11.3%), as well as the reversion of Minera IRL (IRL.to
10

down 22.2%) after the fun and games of the week before last.
But of the 16 stocks, we managed to eke out six winners (BTO.to, NGD, DNA.to, LGN.v,
MAX.to, FCV.v) with another three remaining unchanged (ATM.v, TGM.v, REG.v), while seven
were losses for the week (LSG.to, TGZ.to, MUX, SAM.to, FOS.to, LRA.v, IRL.to). The best
percentage win was Legend Gold (LGN.v up 16.7%) but that one really doesn't matter; the
most pleasing move by some distance was a 4.3% added by B2Gold (BTO.to), Top Pick and
biggest holding. While most in the gold producer space suffered, there was clear accumulation
of B2 going on. About time it showed some gumption.
We currently have 16 open positions in our 'Stocks to Follow' list, one more than my usual self-
imposed maximum number and a temporary state of affairs (MAX.to just for one won't see
October on the list). Just two stocks show an overall profit since inception and cost average
adjustments, which is a bummer. Another is UNCH. The rest are red. Their time will come.
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$1.69 -22.1% Top Pick, 1st tgt $2.70
Metals Producers (in current order of preference)
Lake Shore Gold LSG.to buy C$1.07 07-apr-15 C$1.04 -2.8% Added Aug, M&A tgt
Teranga Gold TGZ.to str buy C$0.57 15-feb-15 C$0.55 -3.5% Added Aug, 83c tgt v cheap
McEwen Mining MUX hold U$1.09 25-jan-15 U$0.835 -23.4% Recovering from lows
New Gold NGD buy U$2.18 23-aug-15 U$2.31 6.0% Price tgt set Sep 6
Starcore Intl SAM.to spec buy C$0.12 10-jan-15 C$0.095 -20.8% 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$0.265 -5.4% 36c/share of cash, can add
Atacama Pacific ATM.v hold C$0.19 26-apr-15 C$0.145 -23.7% Spec buy, cheap adv proj
Legend Gold LGN.v hold C$0.085 01-mar-15 C$0.035 -58.8% Spec buy, v small, not working
Lara Expl. LRA.v spec buy C$1.15 08-apr-12 C$0.225 -80.4% solid biz model, LT hold
Other Recommended Stocks (in current order of preference)
Dalradian Res DNA.to hold C$0.64 27-oct-13 C$0.87 35.9% Nov'14 tgt $1.25, top Au expl
Minera IRL IRL.to BUY C$0.195 22-jul-12 C$0.07 -64.1% VERY cheap today
Midas Gold MAX.to spec buy C$0.39 23-aug-15 C$0.38 -2.6% new near-term trade flip
True Gold TGM.v spec buy C$0.18 23-aug-15 C$0.18 0.0% improved pol risk, sm trade
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.20 -13.0% tgt 50c, 3q15 PEA
Regulus Res REG.v hold C$0.30 06-apr-15 C$0.27 -10.0% Comm. Rels slow progress
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
NovaCopper NCQ.to jul'15 C$1.05 09-apr-14 C$0.50 -52.4% no more Cu exposure, sm sell
McEwen Mining MUX aug'15 U$0.695 21-jul-15 U$0.92 32.4% Closed nearterm flip for win
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
Now for some notes on current basket stocks.
11

Lake Shore Gold (LSG.to) and Teranga Gold (TGZ.to): The bummers of the week. Just
after adding to both positions and averaging up, my "special" market timing once again comes
into play and shows that if I'd waited just a week, I could have averaged down instead. In truth
the hits taken by TGZ and LSG weren't out of the ordinary for miners last week, this chart that
sits both stocks against GDXJ shows that clearly enough.
But both have lost a bit of gloss of outperformer they had a few weeks ago and I'm more
annoyed than I should be that TGZ couldn't hang on to the spike a couple of Fridays ago.
Midas Gold (MAX.to): On the bright side, MAX.to has made it to the 38c/40c level and has
consolidated, so the fact that it closed a penny in
the red to my own buy price is neither here nor
there. My concern is that for a stock that I think is
going to get da pump, its volumes have been
dropping off and finished the week a largely
ignored stock.
It may be a small bet and a near-term play, but
it's a bet all the same and I'll need to see some
sort of confirmation in the four days post-Labor
Day that I'm on the right track. Folding early
without having gained or last is a valid option for
this trade. We'll see what happens this week.
True Gold (TGM.v): Whisper it quietly, I think I've got the entry point right on this trade.
Whether of not it breaks out and springs back into my targeted 25c/30c range is another
12

question, it could end up hanging round at 18c for a long and boring time. But without any
further community shocks (and that's looking cautiously good) I can't see 18c being broken
seriously. Buying right is one element of a good trade and even though I say so myself, TGM at
18c in late 2015 fits the bill.
B2Gold (BTG) (BTO.to): Traded like a champ. As you see in this first chart, B2 is back at the
levels of two weekends ago when the world had decided to fall in love with gold stocks again,
only to see their impulsive behaviour punished in the days that followed.
This second chart gives us a comparative differences over two weeks and includes a red line
stuck where Monday ends and Tuesday begins. That's the moment BTO decoupled from the
market trends and began doing its own thing. The other impressive part is how the climb was
steady all the way through to Friday. The only downside is a drop-off in traded volumes, as it's
normally a volume-monster stock that needs above average trading to make a move.
This final chart underscores why I'm giving B2 the "this time it's different" spiel. This year-to-
date shows how The IKN Weekly Top Pick has tracked GDX more or less faithfully all year and
even where there has been some discrepancy, rare indeed are the moments when one zigs
while the other zags.
13

That's what makes the last four days' worth of trading in BTO stand out and flash a signal.
Somebody out there has decided to accumulate BTO and is taking a large position.
Focus Ventures (FCV.v): FCV continues to plough is own furrow. Volumes have been even
lighter than the light normal in this stock for the last couple of weeks, the news on the resource
and then the incorporation of Bert Quin on the team causing hardly a ripple. FCV has "hold" as
its near-term sentiment call in the above table because it's a bit of a lone wolf story at this
time.
Dalradian Resources (DNA.to): The most interesting part of the DNA NR on Thursday
September 3rd (4) was the market's reaction to it. Or non-reaction in fact, because a big
corporate shake-up in which company President Tim Warman leaves, along with VP Project
Development Ruth Ives, plus the announcement to move the head office to cheaper digs in
order to save money, didn't rock any big boats and in fact got tacit approval from the market
(up 3 on the week, not shabby). In another time, losing the company president to cost-cutting
would come over as a weak excuse, in 2015 it's worthy of applause. DNA said the measures
would cut 20% from annual G&A once in place and as long as we assume they're talking about
most of the operating expenses (they bill executive salaries outside of straight "office") that
would mean roughly half a million dollars a year lopped from running costs. So yes, I like that,
more money to be put into the ground at Curraghinalt but it's not going to change to overall
treasury imbalance that we noted a three weeks ago and the way in which DNA will need to
raise more cash in order to finish its current track to the feasibility study late next year.
Regulus Resources (REG.v): I met with one of the REG.v team last week, who gave me an
overview of how things are going at the Antakori project. The skinny is that they're going, but
at a slower pace than the company would like and it's all about (surprise surprise) the
community relations aspect. The REG team has enjoyed good and open dialogue with the key
communities and their leaders, doors are open and things are amicable, but there's still no
agreement in the offing and it's not been easy to translate the good informal relationship into
the type of necessary formal deal REG wants in order to move forward on its drilling and
development plans for 2016.
One complication is that because REG wants to permit a big, extensive drill program for 2016
they need what's called a "detallado" (detailed) permit, rather than the type of permits granted
in Peru for smaller drill campaigns. The problem here is of the chicken/egg variety, because one
thing demanded by a detallado permit is a formal agreement in place and signed with the
affected communities. Which means in effect that REG.v hasn't been able to submit its permit
application yet, because the communities are dragging their heels on that deal.
Antakori was never going to be an easy community nut to crack and by the looks of things,
even the relaxed "we have 2015" timeline slated by the company is looking too tight. But the
14

rocks aren't going away and REG.v isn't about to run out of cash (it sips at its cash treasury)
and with the rotten state of the junior copper sector, there's hardly a rush for production on
this one. It's dropped to sub-30c recently and stayed
there quite stubbornly, overall it's an understandable
price range today. The thing that will change the
company's fortunes is a community deal, signed and
sealed, that allows them to explore in the way they
want to explore so until that comes around REG is
looking like dead money.
And as for when that might be, it's difficult to say
with any great certainty but with the Peruvian
Presidential and regional elections up in less than a
year, we're already seeing politicians and hopefuls
using any/all local issues to make their case. Antakori
is going to be one too, so frankly I can see the current wait extended well into 2016 at a worse
case (the best case is a deal announced tomorrow morning).
The Copper Basket
After thirty-six weeks of 2015 The Copper Basket is showing a 29.52% loss to level stakes.
company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 232.99 0.61 -70.0%
2 Reservoir Min. RMC.v 3.96 47.55 194.96 4.10 3.5%
3 NGEx Resources NGQ.to 1.17 187.71 108.87 0.58 -50.4%
4 Nevada Copper NCU.to 1.65 80.5 90.97 1.13 -31.5%
5 Copper Fox CUU.v 0.135 402.96 68.50 0.17 25.9%
6 Amerigo Res ARG.to 0.27 173.65 43.41 0.25 -7.4%
7 Western Copper WRN.to 0.68 93.68 39.35 0.42 -38.2%
8 NovaCopper NCQ.to 0.58 60.15 38.50 0.64 10.3%
9 Hot Chili Ltd HCH.ax 0.16 333.11 33.31 0.10 -37.5%
10 Panoro Minerals PML.v 0.295 220.64 25.37 0.115 -61.0%
11 Regulus Res REG.v 0.35 56.39 15.23 0.27 -22.9%
12 Metminco MNC.ax 0.008 2650 10.60 0.004 -50.0%
13 AQM Copper AQM.v 0.06 141 6.35 0.045 -25.0%
14 Catalyst Copper CCY.v 0.305 31.41 5.34 0.17 -44.3%
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 -29.52%
The overall basket managed to squeak a slight gain, though the explorecos couldn't take
advantage of the rebound in the price of
copper. Five stocks moved up (RMC.v, 5% The Copper Basket 2015, weekly evolution
NCU.to, CUU.v, AQM.v, CCY.v), six stayed 0%
unchanged (PML.v, WRN.to, ARG.to, HCH.ax, -5%
REG.v, COP.to) and four dropped (CS.to, -10%
NGQ.to, NCQ.to, MNC.ax), with the biggest -15%
percentage upmove in Catalyst Copper -20%
(CCY.v up 25.9%) a pure technical rebound -25%
on wafer thin volume and largely cancelled -30%
out by the drop in Metminco (MNC.ax down -35%
20.0%), also feather light stuff.
15
ht4naj ht81 ts1bef ht51 ts1ram ht51 ht92 ht21 ht62 ht01 ht42 ht7nuj ts12 ht5luj ht91 dn2gua ht61 ht03
source: IKN calcs

The real takeaway in the sector is the utter apathy the market has for these stocks.
To the copper metal price action and the story of the week was the action (and lack of follow
through) in copper on Thursday. For a few minutes
copper futures managed to spike over U$2.40/on
Thursday, with the commentary that followed all
talking about a short-covering event based in China.
But Friday's trading couldn't support the new level
and the drop to (just over) $2.30/lb is again ominous
for the metal's trading health.
Labor Day is now upon us and so the theory goes,
we get resolution on the matters of real supply and
demand and a better idea of what's in store as the
year winds down. This time next week I hope I'll
have more to say, I've been letting the copper basket
section of the Weekly drift through the summer
weeks and haven't given it the attention it better
deserves.
Now for the regular weekly inventory bullet points:
• Total world copper stocks dropped, a modest move of 7,805 metric tonnes (mt) (-
1.5%) to finish the week at 519,252mt.
• However the Shanghai Futures Exchange stocks moved up, not down, finishing the
week +5,664mt (+4.6%) at 128,887mt. What I think of that is scribbled above the
Shanghai dedicated chart below.
• Meanwhile, the reason for the overall worldwide aggregate drop is to be found at the
LME, where stocks fell by 15,400mt (-4.1%) to finish the week at 355,850mt. That just
about fully cancelled out the upmove we saw last week and it may turn out to be an
anomalous spike. Not reading much into this one, the trend at Shanghai is clearer and
more concerning.
• Comex warehouses moved up 1,931mt (+5.9 %) to 34,515mt. This is the minor family
member and it's something I mainly cover to keep the overall world stocks number
correct, but it's starting to gain enough relative size to perhaps take more seriously as
an indicator. One eye now on this dataset.
Here's the key Shanghai-only tracker chart, with the creeping up of stocks (when they shouldn't
be creeping up) now an evident trend. Seriously folks, this isn't good.
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
260000
240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
16
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 ht62 ht9 dr32 ht6pes
Mt Cu
source: Cochilco
As for the basket stocks, the only ones of any interest are the larger cap ones such as Capstone
(CS.to) which continues on its slow decline in the Long Dark Tea Time of the Soul, or Reservoir
(RMC.v) which remains resolutely bought at $4. Conjuring up interest in anything being done by
the small cap end of the market is difficult.

The Low Cost Producer Basket
After 36 weeks, the 2015 Low Cost Producer Basket is showing a 27.73% 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 11.08 13.35 -27.9%
2 Newmont NEM 18.90 528.08 8.30 15.72 -16.8%
3 Barrick ABX 10.75 1164.67 7.47 6.41 -40.4%
4 Franco Nevada FNV 49.19 156.5 6.64 42.46 -13.7%
5 Agnico Eagle AEM 24.89 214.12 4.88 22.81 -8.4%
6 Silver Wheaton SLW 20.33 403.75 4.60 11.40 -43.9%
7 Kinross KGC 2.82 1146.2 1.90 1.66 -41.1%
8 Buenaventura BVN 9.56 254.19 1.56 6.12 -36.0%
9 B2Gold BTG 1.62 926.68 1.19 1.28 -21.0%
10 Pan American PAAS 9.20 151.64 1.00 6.61 -26.8%
all prices in U$, using NYSE ticker prices Portfolio avg -27.73%
The confirmation of a nasty reversal for the big cap miners, last week saw the August spec cash
leaving in droves. My idea of a buy signal. Nine stocks lost ground (not listing them all) but a
cheer is due to B2Gold (BTG) which bucked the trend and put in a very decent performance
(and yeah, of course I'm pleased about that). The biggest losers were Barrick (ABX down
10.1%), Kinross (KGC down 9.3%), Newmont (NEM down 8.4%) and Silver Wheaton (SLW
down 8.0%), all those are certifiably heavy losses.
Stat of the week: There was nearly six billion dollars difference in the market caps of Barrick
and Franco Nevada at the start of the year, now there's less than a billion.
The Low Cost Producer Basket: Weekly performance
30% and comparative to GDX control
20%
10%
0%
-10%
-20%
-30%
-40%
17
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 ht62 dn2gua ht9 ht61 dr32 ht03 ht6peS
basket
gdx control
source: Google Finance, IKN calcs
Low Cost Basket: Percentage difference between
3.0% basket and GDX control, 2014
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
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 ht62 dn2gua ht9 ht61 dr32 ht03 ht6peS
|
source: ikn calcs, NYSE/Nasdaq data

Regional politics
Guatemala kicks out its President and votes for the next one
Quite a week for Guatemala and nowadays it's not just backwater places such as The IKN
Weekly bringing you news on Otto Pérez Molina, the world's newswires are trained on the story.
As you'll surely know by now (to the point where I don't even need to offer links this week, just
stick "Guatemala President" or some-such into Google), after losing a key parliamentary vote
that stripped him of immunity from prosecution, Otto Pérez Molina (OPM) resigned as the
country's President and the next day was charged with corruption and moved to jail ("for his
own protection", they said). The country's recently appointed Vice President, now President
Alejandro Maldonado Aguirre, has taken over on an interim level to see the State through to
January when the next elected President is sworn in.
All heady stuff for sure and on a political level it's rocked the country sideways. On the news
our Guatemala target stock Tahoe Resources (THO.to) (TAHO) even felt the need to issue its
own news release on OPM's resignation Thursday (5), a presser than emphasized the continuity
of the veep and the way in which its operations had no been affected by the upheavals.
Not yet anyway. Today Sunday sees the first round of the Presidential election and if the latest
polls are to be believed (6) (and you may have news of this before these words reach your
eyes), the independent Jimmy Morales looks set to make it to round two and maybe even as
the best supported candidate in the first round of voting. He's likely to be joined by LIDER party
head Manuel Baldizón and as we noted in the main overview piece a couple of weeks ago, the
top two candidates then go to a run-off to decide the next President in a vote in November. The
other candidate vying for a spot in the two person run-off is Sandra Torres, ex-wife of ex-
President Alvaro Colom and like Baldizón, very much a part of the samo-samo Guatemala
political furniture.
There's a ton of script out there for any of you that want to read more (unlike a couple of
weeks ago) so I'm going to keep this section short and sweet this week, cutting straight to the
chase:
OPM's resignation isn't going to change Guatemala on a day-to-day basis for miners (TAHO et
al), at least not until the next President takes office in January.
The election underway as I write these words is far more important to the fate of companies
working there. If LIDER's Baldizón prevails, the whole corruption scandal will slowly die a death
and the corrupt political class that survives the bloodletting will be joined by a new batch of
career parasite politicos and life will go on as before. But if Jimmy Morales wins the future is
murkier and more difficult to predict. While both frontrunners have jumped on the hot political
issue and have pledged no more corruption and a deep cleaning of Guatemala's politics,
Morales is more likely to tackle the matter with gusto if elected. It's by no means certain and
there's plenty of cynicism growing about Morales' real agenda (if he uses the word "consensus"
it'll mean nothing will change much under his eventual presidency either) but there would be
more chance of Morales doing some deep cleaning in the country and weeding out the real
corrupt, which probably wouldn't be good for a lot of politicians or businesses who are "used to
the way business is done in the country".
However we need to focus on practicalities in The IKN Weekly, we're not a political journal and
it's actionables we require. Today in Guatemala there is no actionable in sight because
whatever happens in today's vote the chances of an outright winner (50% + 1 vote) are
vanishingly slim and there isn't going to be any resolution on who gets the job until November.
We currently have an "avoid" on exposure to Guatemala, that won't change in the days ahead.
Peru Tia Maria: The near-obvious result of last week's hearts and minds move
Last week we noted the new initiative by Southern Copper (SCCO) to win over the locals of the
18

Tambo Valley in coastal Arequipa and get their Tia Maria project moving again. This week we
report that the door-to-door socialization campaign has met with resistance from locals as well
as raise the hackles of local community committees who've demanded to know why SCCO has
decided to go behind their backs instead of engaging with democratically elected bodies.
Frankly, they have a good point.
As this report notes (7), locals are now so distrusting of the position of current Peru President
Ollanta Humala that they say there won't be any sort of dialogue or progress until he leaves
office and the new President is sworn in (whoever she or he may be). It also states that the
active protests in the Tambo Valley are close to being reactivated again and they regard the
social liaison workers hired by SCCO to go door-to-door as intruders.
Meanwhile, a big march and protest in the city of Arequipa by Tambo Valley locals is now
planned to coincide with the big Perumin mining conference later this month. Locals want to
march right by the front entrance to the Perumin conference and it may turn out to be a fun
photo opportunity if they're allowed to…or even worse if they're not.
Mexico's mining sector plunge
This is a story we've covered a couple of times in the last couple of months, but now with the
official six month figures out of Mexico's stats people INEGI, it's been getting attention in-
country in general release media. Mexico's mining GDP (i.e. the component of the national GDP
made up by the mining industry, which for the record is 1.5% of the country whole) dropped by
6.6% in the first six months of 2015 compared with the same period in 2014 (8). Value of
product came to U$55.7Bn in the half year period, which represents the single biggest drop
since 1994 and that's a significant date, because it's before all the mining law and property
reforms came into operation that fully opened Mexico's mining concessions up to foreign
investment for the first time in real terms.
Venezuela and China
This was one of my "Ten Random Predictions for 2015" (9) dated December 29th 2014:
6) Venezuela's government to be bailed out by China. It's no secret that
Venezuela's finances are under severe pressure due to the drop in oil prices, but it's
not going to lead to a fall in the government in 2015 (sorry haters, it's the way it is).
China wants crude oil and has dollars, Venezuela wants dollars and has crude oil, the
two countries get along just fine, the synergies are obvious. The question is how much
Venezuela will have to cede for the bailout.
Last week Venezuela's President Nicolas Maduro went to Beijing a little cash-strapped due to
the precipitous drop in the price of oil and came away with a virtually-no-strings-attached
U$5Bn top up on the loan agreement his country already has in place with China. In the words
of The Washington Post (10), " The re-up looked as easy as a swipe at a drive-thru ATM."
People, considering that you're subscribers to an investment service that's capitalist at heart
you are unlikely to be wild fans of the Venezuelan PSUV (Chávez/Maduro( government, its ways
and policies. Hell, I'm no fan of Maduro's either (did have a soft spot for Hugo though) and I
think Venezuela's situation is rotten compared to the rest of the region. But I'm also way more
realist about the country than the majority of people who write words in English about it and if
there's one thing that's been constant about that coverage, it's the way English language
journalism will tell you that Venezuela's about to explode, or implode or fall to bits or collapse
any minute now. I've been reading the same predictions every single year since 2005, this year
is no different and I bet from the start of it that the calls for country collapse wouldn't even be
close. Right again, and as last week's loan news shows I'm right for the right reason (which
makes a pleasant change). Just a pity my "Barrick to merge with Newmont" prediction in the
same post hasn't worked as well
Argentina: Tucumán gives a preview of right wing dirty tricks
This wasn't going to be a subject that I'd bring up on the blog or the Weekly, but as things
19

have turned out there's insight into the October Presidential election available from the election
for the province of Tucumán in North-Western Argentina. In a nutshell (and using bullet points
to make it as palatable as possible) what's happened is this:
1) Two Sundays ago we had the lection in Tucumán to decide who'd be the governor of the
province. It was a straight fight vote between Juan Manzur of the Cristina FpV party (the
current national government) and José Cano of "all the opposition" (all other parties had joined
together behind Cano in order to give him a shot at winning)
2) When the fast count result was know that evening, Manzur (FpV) was declared the winner
by 54% to 40%.
3) The opposition cried foul, corruption, rigged election, the whole nine yards. Some 42 ballot
boxes (of the rough 3,000) has been burned by protesters, the losers shouted foul play,
demanded justice and all sorts. Thousands of people turned up night after night in front of
Tucuman's government HQ to protest.
4) The winners agreed to a re-count, with every vote laboriously counted by hand, That process
is still going on.
5) When the first ballot boxes were re-opened and counted (the ones form Tucumán city centre
where the anti-FpV/Cristina sentiment is strongest, the opposition candidate José Cano took an
early lead of up to ten points. The protesters screamed blue murder at this point, with the main
national level media (e.g. Clarín and La Nación, who both despise Cristina) filling the airwaves
with polemic headlines and accusations of proven fraud etc etc.
6) But once the ballot boxes from outside the city began to get incorporated into the count,
things changed rapidly. As of this weekend and still with just 30% of the votes hand-counted,
the government FpV candidate Manzur is eight percentage points ahead of the opposition
candidate Cano and stretching his lead with every new day. In short, the Manzur fast-count win
is now on the way to being confirmed (11) and even opposition people are beginning to admit
defeat.
7) What's more, it's now emerged (12) that the ballot boxes burned on election night came
from places where the FpV have always enjoyed big majorities, or in other words it was the
opposition trying to disrupt the election and then crying foul about it.
All this might not sound too dramatic, but for a while a week or so ago it was getting very ugly
indeed, with media channels up and down the country making false accusations of government
vote-rigging and assuring the country that the same would happen on October 25th. What's
more, presidential candidate Mauricio Macri, second in the polls behind Daniel Scioli, led a lot of
the polemic and whipped up public opinion to near-violent levels.
This does not bode well for the electoral process in Argentina and one can only hope that the
dirty tricks tactics of claiming fraud when beaten soundly aren't repeated in October. You may
have a dim or positive view of the CFK government, but the type of media onslaught we've
seen in the last few days is less democratic than anything the last 12 years of Kirchnerism has
tied.
The other thing it does is point once again to what's now becoming increasingly obvious; Daniel
Scioli hold a winning lead into October. The opposition may have decided that it cannot win by
fair means, so it's now trying the foul.
Chile: Investment book in copper shrinking
Here's one I meant to include last week, but it straight slipped my mind. On August 21st Chile's
mining people, headed by Mining Minister Aurora Williams and the Director of Studies and
Public Policy for Cochilco Jorge Cantallopts (yup, long job title = lesser importance) presented
20

the updated investment mining investment book for the years 2015 to 2024. Then on August
26th the main report was filed to Cochilco (13) (which is the bit that slipped my mind last
weekend). This one is in Spanish only and there's plenty of script to digest, but if you're versed
in the language and into copper, it's a strongly recommended read.
I want to highlight what I think are the tow main takeaways from this updated investment book
(last done in 2014):
1) The amount of projects considered as real and live by Chile has dropped by an impressive
U$28m in the space of just one year. It's not easy to get a straight read on this figure, because
Chile classifies the projects inside its territory into "base" (i.e. going to happen), "probable"
(pretty obvious terminology), "possible" (ditto) and "potential" (the marginal projects, if you
like), but by grouping together the "base" and "probable" projects then comparing those with
last year's numbers, the country's project pipeline has lost ten projects worth U$28.2Bn. Today,
"base + probable" contains 31 copper projects valued at U$67Bn and 11 other mineral projects
(mostly gold) valued at U$10.2Bn.
2) This table below, taken from the main report, does a god job of showing how Chile's copper
production outlook is forecast to 2024. The main takeaway is that if Chile develops just the
"base + probable" projects (and manages to do on time), country production is going to drop.
For example taking the longest view dataset at 2026, if only "base + probable" become reality
country production drops to 5.384 million tonnes, That compares to the 6.34 million tonnes
forecast production for this year 2015.
In other words, in order for Chile's copper production base to expand it needs at least the
"possibles" and likely some of the "potentials" to make it into reality. And that, of course, is al
about the market price for copper.
Market Watching
Nothing again this week. With my recent purchases now in play and the run-up to Labor Day
tomorrow having been quiet on a mining fundies level (unlike the broader market), I still don't
have much to share with you in this section. Don't worry, we'll be back to form soon.
21

Conclusion
IKN330 is done, we end with bullet points:
• I'm still cautious about New Gold (NGD.to) (NGD) even though I'm now a holder,
because it's still very much a 'leverage play' on gold and a relapse in the metal's price
would see its fundies and moneymaking ability deteriorate. But as things stand today
it's clear that reward potential heavily outweighs the risk and as a bonus, the projected
strong numbers it's to post in 3q15 are just the type of solid, meaningful catalyst the
market would look for form its comeback kid mining stocks.
• The week ahead should see more to report on the Minera IRL story. I will report it, via
the blog or the Weekly next weekend. but if something actionable happens, it'll be in a
Flash update first.
• Labor Day is with us, North America takes Monday off (quite right too) before the
serious action begins. I can feel matters coming to a head now and during August have
positioned more cash due to that. Should be an interesting week.
• Guatemala in the last couple of weeks is a prime example of why I largely avoid the
TPLAC states (tin pot lil africa/america country) and stick to the stable established
jurisdictions for mining activity. These places make Argentina look like Norway.
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
Footnotes, appendices, references, disclaimer
(1) http://finance.yahoo.com/news/gold-further-enhances-financial-flexibility-120000367.html
(2) http://finance.yahoo.com/news/gold-announces-second-quarter-results-212200870.html
(3) http://finance.yahoo.com/news/goldcorp-buy-golds-interest-el-174505225.html
(4) http://finance.yahoo.com/news/dalradian-announces-cost-saving-corporate-060000059.html
(5) http://finance.yahoo.com/news/tahoe-releases-statement-regarding-guatemala-173500091.html
(6) http://incakolanews.blogspot.pe/2015/09/but-real-story-in-guatemala-this-week.html
(7) http://www.snmpe.org.pe/prensa-y-multimedia-snmpe/sintesis-de-noticias/mineria/tambo-cree-que-pr%C3%B3ximo-
gobierno-debe-solucionar-conflicto-por-t%C3%ADa-mar%C3%ADa.html
(8) http://www.cpampa.com/web/mpa/2015/09/el-pib-minero-mexicano-sufre-su-peor-baja-desde-1994/
(9) http://incakolanews.blogspot.pe/2014/12/ten-ikn-random-predictions-for-2015.html
(10) https://www.washingtonpost.com/news/worldviews/wp/2015/09/03/china-strengthens-ties-to-cash-strapped-
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venezuela-with-5-billion-loan/
(11) http://www.telam.com.ar/notas/201509/118661-geronimo-vargas-aignasse-triunfo-manzur-tucuman.php
(12) http://www.lanacion.com.ar/1822488-urnas-quemadas-como-salio-la-votacion-en-las-paso
(13)
http://www.cochilco.cl/Archivos/destacados/20150826124238_2015%2008%2024%20INVERSIONES_MIN_2015%20v
FINAL.pdf
Stocks To Follow Closed Positions 2014
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dic-13 C$3.19 13.9% small ST trade closed
Rio Alto Mining RIO.to jan'14 C$2.06 07-jun-13 C$2.30 11.7% trading position finally closed
Network Expl. NET.v feb'14 C$0.01 22-jul-12 C$0.005 -50.0% position closed, did nothing
Tahoe Resources TAHO feb'14 U$13.10 08-abr-13 U$21.72 -65.8% short closed due to reality
Darwin Res DAR.v mar'14 C$0.10 14-jul-12 C$0.045 -55.0% tiny risk play dropped
B2Gold BTO.to mar'14 C$3.07 28-nov-12 C$3.35 9.1% closed to free up capital
Pretium Res PVG mar'14 U$5.38 22-nov-13 U$6.50 -20.8% short closed as port longer
Gold Res Corp GORO may'14 U$5.07 26-ene-14 U$4.12 16.7% took profit
Bear Creek Min BCM.v may'14 C$1.63 23-mar-14 C$2.05 25.8% Took profit, sm near-term win
Eco Oro Min. EOM.to aug'14 C$0.48 22-sep-13 C$0.26 -45.8% sold small loser to make room
True Gold TGM.v sep'14 C$0.395 02-feb-14 C$0.41 3.8% M&A won't happen, sold
Santacruz Silver SCZ.v sep'14 C$1.04 26-ene-14 C$0.86 -17.3% silver/M&A spec, rel. small
Timmins Gold TGD nov'14 U$1.38 09-abr-14 U$0.99 -28.3% failed trade, sell, raise cash
Kinross Gold KGC nov'14 U$2.90 20-oct-14 U$2.15 -25.9% V small trade, didn't work, chau
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-ene-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-ene-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-abr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-abr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-ene-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-abr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
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Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-apr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
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Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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