IKN #339Premium

The IKN Weekly
Week 339, November 8th 2015
Contents
This Week: Three trades, Shoot first ask questions later, Gambler or saver?
Fundamental Analysis: McEwen Mining (MUX) 3q15 financials, Timmins Gold (TMM.to) (TGD)
3q15 financials, Guest Article by reader BW: “Lifting the Dress on All In Sustaining Costs”.
Stocks to Follow: Overview, Timmins Gold (TMM.to) (TGD), Legend Gold (LGN.v), Teranga
Gold (TGZ.to) (TGZ.ax), True Gold (TGM.v), Sandspring Resources (SSP.v), McEwen Mining
(MUX), B2Gold (BTG) (BTO.to), Lake Shore Gold (LSG.to) (LSG), Dalradian Resources (DNA.to),
Starcore Intl (SAM.to).
Copper Basket: Overview, Capstone Mining (CS.to), Western Copper & Gold (WRN.to).
Low Cost Producer Basket: Overview and commentary.
Regional Politics: Brazil: The tailings dam failure at the BHP/Vale Samarco iron ore mine,
Peru: Las Bambas to start up 1q16, Argentina: Thoughts on the second round vote, Argentina:
The head of the Barrick (ABX) Veladero mine resigns, Segovia and Gran Colombia Gold
(GCM.to): Trouble brewing, Mexico: The “I Love Mining” initiative in Zacatecas, Torex Gold
(TXG.to) getting good press in Mexico.
Market Watching: Sunridge Gold (SGC.v): A takeover a pop but a good arbitrage deal is still
available, Minera IRL (MIRL.L) (IRL.to): Gloves off, Continental Gold (CNL.to) seven weeks on,
Still watching Buenaventura (BVN) and New Gold (NGD).
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
Three trades
The normal top-of-shop heads up on portfolio adjustments here at The IKN Weekly. I plan to
sell Timmins Gold (TGD) (TMM.to) and Legend Gold (LGN.v) next week (though only time will
tell if I manage to exit the thinly traded LGN). Meanwhile I plan to add to my Teranga Gold
(TGZ.to) (TGZ.ax) position. Details below.
Shoot first ask questions later
When this sector sells off, it doesn’t mess around. You could almost
hear the gurgling sound as plugs were pulled on precious metals and
PM mining positions last week, a process that only accelerated when the
US jobs report hit the wires. And yes it sucks, I wasn’t expecting this
and I certainly hadn’t planned my trades around it, but here we are
back under U$1,100/oz for gold thanks to a +271k number, a headline
5.0% unemployment rate in the world’s leading economy and
importantly clear signals of wage growth at 0.4% for the month (or if
you prefer YoY nominal at +2.5%, which still beats out CPI and
suggests real wage growth). That’s the one that will give Janet and her
1

friends at the Fed the all-clear to do what they’ve been champing at the bit to do all year. Yes,
December will see the start of the tightening
cycle and the 0.25% base rate back in play. As a
result, gold suffered for the third week running
(here’s GLD, we’re back to where we were at the
beginning of August when the rally took hold)
and the miners followed suit. But I have to say
that even I, cynical towards the quantity of
conspiracy theories available, find the selling all
too convenient this time.
For one, aside from the hardcore types we all
knew the Fed would start the tightening cucle at
some point for the simple reason that they
always do. Every time. It’s not called a cycle for
nothing and The USA is not Japan. Here at the Weekly it’s always been “when”, not “if”. For
another, even by adding a full point to the base rate (which they’ll eventualy do, not just the
0.25% in December) we’ll still be in a negative real interest rate scenario and that’s always
been historically supportive for gold. For a third, there’s an increasingly convincing case to me
made as to how the USA only controls the currency marker for gold prices these days (i.e. the
US Dollar) and not the price of gold in itself. We know about China’s appetite, we factor in the
strength of India’s monsoon season, those that swear by supply and demand as the main driver
of the gold price (leave me out of that group) know that gold is leaving the West and going to
the East in ever larger quantities. The hot money went into GLD and then it left and it didn’t
come back; that was Wall St’s active influence on the price of gold and it’s now a shadow of
itself. That Tinfoil Hat enough for you? Yup, even IKN sees too much manipulation to ignore it
on occasion. And all that is aside from the incredibly annoying jawboning that accompanies the
manip, because although Friday was a long day at the screen for me (or at least felt like it) I’m
more relaxed about the type of immediate reaction gold suffers on a day like last Friday than I
am about people extrapolating that move and calling for the end of the metal amen shalom
salaam chau adios and goodnight. It’s asinine, gold’s going nowhere folks. It’s gold and it’ll be
around and shiny and valuable long after this author and all his audience have shuffled off this
mortal coil.
Gambler or saver?
Cullen Roche over at Pragmatic Capitalist (not the usual junior mining turf here, but it’s on my
personal RSS) last week stuck up a post (1) on Valeant and the travails currently going around
that stock (the new Enron?). However, Roche used the current situation there as a chance to
riff on gambling versus investing (in fact he used ‘saving’, but same thing in the long term) as
well as warning on the risks that stock pickers take. Here’s an extract:
Gambling isn’t what people should do with their savings. And that’s part of what
makes stock picking so risky at times. You’re dealing with complex components of a
complex system where you can’t possibly know the possible outcomes at times. So
ask yourself – are you a saver or a gambler? I don’t know what your answer is, but in
either case you can probably calculate the simple odds about what my concluding
thoughts here would be.
Roche is talking his book here, as his financial services company specializes in low-cost indexing
products (i.e. the opposite of individual stock picking), but that’s fine, it’s his website and even
with that said he makes good points. And as I’m a stock picker at heart it pays to listen to the
criticism of the exercise (from time to time, anyway).
And this week’s been a tough one, with real losses taken on the portfolio in real dollar terms.
Again.
So it got me thinking about what The IKN Weekly does and, considering the focus of this
2

publication, what you the likely speculator in junior mining companies should do with the
information because even though I try to create an air of insouance around me, even though
I’m quick to say things like “you are not me, I am not you” and tell you the portfolio moves are
about what I’m doing with a part of mine, even though there are disclaimers scattered about
the pages and the usual sellside guff to keep you from suing me if you lose your house and car
and farm, I still worry about you all out there. It’s not an easy market, we’ve all taken losses in
juniors these last couple of years and when a reversal like we’ve just experiences hits, it can
sap us all.
So I’ll just say this once and simply: Don’t bet the farm on these stocks, be smart about what
you risk in junior miners and make sure you have your financial house well in order before
trying to parlay a slice of your NAV into untold riches by buying these pennyplay things so loved
by The IKN Weekly. Make sure your food’s covered, make sure your house is covered, make
sure your loved ones are covered. Then play to your heart’s content. That’s all.
Fundamental Analysis of Mining Stocks
McEwen Mining (MUX) 3q15 financials
We’ve done a lot on MUX recently, so this isn’t going to be a long piece with deep coverage of
the 3q15 results announced on Thursday November 5th (2). Instead I’m picking out what I
consider the main points from the company’s report via the house generated charts, and
running some abridged commentary on just the interesting bits. In arm-waving terms there are
three things to cover:
1) Things about the 49% owned San José (aka Minera Santa Cruz, MSC) mine
performance.
2) Things about the 100% owned El Gallo 1 mine performance.
3) Things of note about the consolidated corporate numbers.
San José/MSC
We start with the gold and silver production charts for the 49% owned Minera Santa Cruz mine
(51% owned and operated by Hochschild (HOC.L)). Gold production was 24.9k oz (gold sold
22.9k oz, so maybe saving some pennies for Christmas), silver production was 1.78m oz (silver
sold 1.62m oz, so ditto).
San José (100%): Gold Prod. and 2015 ests
30
25
20
15
10
5
0
Compared to my model, San José returned slightly lower than expected gold production and
slightly higher than expected silver production, which is perfectly understandable on an ongoing
operations basis (sometimes the rock has more of one than another and in this game, you
process what you mine) and basically a wash. Bottom line here, San José’s production numbers
were in-line.
Moving to revenues, $45.36m was lower than expected and on looking through the data the
blame can be set on the lower than expected average realized prices for gold and silver. At
3
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 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 51q3 tse51q4
Koz Ag
source: HOC/MUX filings (MUX 49% attributable)

U$1,076/oz and U$14.05/oz respectively they paid a heavy penalty to spot averages for the
quarter (potentially Argentine government related). That and the lower sales to production
numbers did for the top line.
U$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 49.86
50 43.80 45.89 45.36
45
38.30
40
35
30
25
20
15
10
5
0
1q13 2q13 3q13 4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15
source: HOC/MUX filings, IKN ests (MUX 49% attributable)
So to costs, which were reasonable under the circumstances. Total cash cost of $38.94m was
nearly $4m lower than Q2, all in costs of $50.41m were a $5.2m improvement on the previous
period as well.
U$m San José (100%): Total cash cost & all-in cash cost, qtr
80
tot cash cost
67.77
70 59.59 All-In cash cost
60 55.22 55.63
53.74 50.41
50 46.80 45.08 43.39
40
30
20
10
0
3q13 4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15
source: HOC/MUX filings. IKN ests (MUX 49% attributable)
However, rocket scientists are not needed for the next section of this analysis because just by
comparing these last two charts the problem at San José is obvious. All-in cash costs have
dropped from the Q2 number, but at $50.41m they’re still higher than reported sales. And this
makes San José a Rule One* failure for businesses.
Here we present that information in a different way, by using MUX’s 49% pro-rata then
comparing it against the dividend distributed to MUX. These two datasets are normally fairly
close to each other (as you’d expect) and there’s no change this time around, either. The 49%
ownership of San José cost MUX $1.641m in 3q15 on a corporate level.
The MUX 49% of San José: Reported sales minus all-in costs
U$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 2q15 3q15
source: MUX filings, IKN calcs
4

*make a profit
The bottom line to San José is that it cost MUX money to own its share in Q3, which isn’t a
good thing but it was also expected. We’d budgeted for breakeven for the quarter, the lower
realized prices saw the final result a little lower but no real panic. San José doesn’t make a
profit at sub-U$1,100/oz gold, it will at $1,200/oz gold, these things we knew already. Howver,
on the production front it seems to be setting itself up for a decent final flourish in 4q15, so
there’s a ray of light.
El Gallo 1
As El Gallo 1 is the only wholly-owned mine at MUX and San José corporate contribution comes
as a simple dividend (be it positive or
negative) we can cover the important bits of
the financial performance at El Gallo 1 in the
consolidated financials section below (like I
say, we’re keeping it tight today). So just
production stuff here and while San José
flounders, El Gallo 1 continues to pump out
very decent numbers.
Just under 20k oz produced and just over
20k oz sold is a record for the mine. Though
notably tonnage shifted was down:
MUX: El Gallo 1 tonnage mined
600
500
400
300
200
100
0
5
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 tse51q4
MUX: El Gallo 1, gold production vs sales
25
20
15
10
5
0
000s mt
source: company filings, IKN ests for 4q15
With the way MUX (i.e. Rob McEwen) operates there may be a big blowout quarter in the cards
for Q4, he sure likes making a splash that way. And on that subject, let’s note that even if we
leave the very minor silver production to one side the company only needs to produce 10k oz
Au in 4q15 in order to make its recently revised guidance figure of 62,000 oz AuEq for 2015. I’d
be highly surprised if it came in that low for Q4 and even my 17k oz estimate for the period
may turn out to be underestimating things. We know McEwen likes to under-promise and over-
deliver (UPOD), that’s a good thing in my
books and as such, the current guidance
looks very light.
Before leaving and going to the consolidated
corporate numbers, here (right) is a chart
that sticks revenues for El Gallo 1 only
against its mine cash cost totals. With all-in
costs at $11.42m, that’s a lot of room for
profit and a near-50% margin. Not shabby.
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
Koz Au
Au prod
Au sold
source: company filings
U$m MUX: El Gallo 1 Sales versus cash costs
25.0 (total and all-in cash costs included)
22.5 reported sales
20.0 tot cash cost
17.5 All-In cash cost
15.0
12.5
10.0
7.5
5.0
2.5
0.0
3q13 1q14 3q14 1q15 3q15est
source: company filings, IKN calcs

MUX Corporate results
This first chart is my favourite one for the financials. It takes total income for MUX (which
includes El Gallo 1 revenues and then adds or subtracts the San José dividend) and sticks it
next to total costs (backing out impairments). As San José was a $1.641m drag on operating
income, we end up with $20.9m in the plus column and $19.0m in the minus column.
MUX: Total operating income (incl San José) versus
$m Total operating and exploration costs (minus impairments)
30
tot op income
25 Tot op costs & exp 24.7 23.2
20.9
20 18.2 18.7 18.2 19.2 19.1 18.0 19.0
15 14.0 13.5 14.6
10 9.7 9.2
4.4
5
0
4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15
source: company filings, IKN ests and calcs
In other words, the money made by El Gallo 1 is more than enough to cover the corporate
expenses at MUX as well as the loss incurred from it 49% of San José. The resulting $1.9m
might not be a king’s ransom, but it means MUX as a company fulfills Rule One* and once a
few below the line financials are played through (including the ongoing tax credits enjoyed by
MUX, we have a net profit to report:
MUX: op. Profit minus impairments
7.5
5
2.5
0
-2.5
-5
-7.5
-10
-12.5
-15
Yes, it’s only 0.6c/share (which MUX cutely
rounded up to a penny per share in its NR and
literature) but that’s better than nothing and we
should see an improvement on that in Q4 as
well.
Here right is a costs breakdown (apologies for
the negative “other” in 2q15, it all works out
numerically on the sheet even though it’s
visually clumsy)
We saw a little overall creep, mostly due to “other”,
though it’s worth mentioning that MUX has clamped
down on G&A and exploration compared to Q2:
That’s a decent effort at costs trimming.
6
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
$m MUX: operating earnings per share
0.03 (impairments backed out)
0.02
0.01
0.00
-0.01
-0.02
-0.03
-0.04
-0.05
source: company filings, IKN ests
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
cents
source: company financials/IKN ests
MUX: G&A plus Exploration expenses
8
6
4
2
0
31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
$m MUX: Total operating costs other
30 G&A
Exp costs
25 COGS
20
15
10
5
0
-5 4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15
source: company filings, IKN ests
$m
Exp costs G&A
source: MUX filings

Over at the balance sheet, the only charts I want to put in front of you are the current assets
breakdown and working capital. Here’s the current assets and the big change is cash, which
expanded to $30.9m thanks to the insurance payout on the gold stolen in Q2.
MUX: Current Assets
80
70
60
50
40
30
20
10
0
7
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 tse51q4
$m other current
inventories
IVA tax receivable
cash
source: company filings
Cash at $30.9m is nicely up, but overall current assets haven’t changed a great deal. However
working capital did improve slightly and there’s nothing wrong with that.
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 51q2 51q3 tse51q4
source company filings/IKN ests
srallod
fo
snoillim
For my final chart in this potted check-up of the MUX numbers, here’s book value per share.
MUX: Price/Book Value ratio, per quarter end share
price and filings
1.50
1.25
1.00
0.75
0.50
0.25
0.00
31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 won
P/BV
source: NYSE, Company, IKN calcs
With BV at U$1.45/share, we got down to 0.5X during 3q15 and that’s certainly too low, even
taking into account the White Elephant on its books that is the Los Azules copper project. If you
back out the asset value of Los Azules, the BV/Share ratio moves to 0.96X and that sounds
about right. Or if you like, if MUX sold Los Azules for $100m it would add 33c cash to the share
price (Rob Mac can believe it’s worth over $200m if he likes, it’s what makes a market after all).
Summing up, MUX gave us a largely in-line quarter which might now have wowed the market,
but it’s more than enough to keep me in as a holder. I can’t help thinking the company is
setting itself up for a very strong Q4, as well. But when it comes right down to it, MUX will rise
and fall on the tide of the gold price, no more no less. A decent way to play the metal, but only
one of many. Holding.

Timmins Gold (TMM.to) (TGD) 3q15 financials
Today marks the day I call SELL on my Timmins Gold (TM.to) (TGD) trade and take the loss,
but before we get stuck in a few words about strategy. He’s by no means the only person with
this good habit, but one of the things I admire about Brent Cook is the way he sells losers when
they go against him. If there’s bad new or negative market vibes about one of his holdings he
doesn’t think twice, it’s BLAM , sell, take the loss (or reduced profit), cauterize, move on.
And though I’m not going to use it as a mitigating factor, please be clear that The IKN Weekly
is ultimately about what I’m doing with my junior mining cash. It therefore follows that what I
do is sometimes different to what I signal and what I’ve been signalling for the previous two or
three weeks is that TMM the stock was under a lot of pressure. That I myself decide to hold
through until the financials are filed is my decision, it’s also my error, it’s an indication of a
wekaness in my fundies-based approach to invetsing in this most volatile of sectors. I just hope
you took the hint and got out before I did.
Timmins Gold (TMM.to) (TGD) reported its 3q15 numbers on schedule last week (3) and as I
feared (see last two or three week’s worth of IKN Weekly pathetic handwringing on the stock’s
performance) the numbers were horrid.
The expected impairment was struck at
$226m (Bruce Bragagnolo’s legacy) and
that may have been the reason it dumped
hard at the open Wednesday, but the
weakness continued all week and frnakly, I
have no agument against that market
reaction. Here we look at the reasons why
the asset impairment taken by TMM is the
least of its troubles.
I’m going to start with balance sheet items,
if only to show you the damage to both
current and long-term numbers and get
perspective. Assets look like this and the absence of $226m in
property values is clear as a bell. But also buried in there is the
way inventories value (part of the current) dropped from
$46.7m to $10.5m...ouch. That line item is charted here right.
We’ve talked about the fakey nature of this number at TMM
before, but with the firing of ex-boss Bruce Bragagnolo and
the arrival of the interim CEO Mark Brackens TMM has come
clean on this part of its over-inflated book value too.
Liabilities saw a big drop in the long-term part, thanks to the
$50m tax write-off that came with the impairment (thereby reducing its net influence to around
$180m). But curent liabilities are as before...
TMM.to/TGD: Liabilities Breakdown per qtr
120
110
100
90
80
70
60
50
40
30
20
10
0
8
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
source: company filings, IKN ests
srallod
fo
snoillim
TMM.to/TGD: Inventories
50
40
30
20
10
0
LT debt
current debt
31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
TMM.to/TGD: Assets Breakdown per qtr
500
450
400 350
300
250
200
150
100
50
0
source: company filings
11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
source: company filings
srallod
fo
snoillim
Trade/Rec
Inventory
fixed other current
cash&ST

....so once you factor in the sudden lack of liquidity at TMM...
TMM.to/TGD: Cash and ST
60
50
40
30
20
10
0
9
11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
source: company filings, IKN ests for FY15
...and get to working capital, it becomes achingly apparent just why TMM was so keen to get
Goldcorp (GG) on board at a cut price for 10% of the company.
80 TMM.to/TGD: Working Capital per qtr
70 67.3 68.2 64.9
60 52.1
47.9 50
40.0
40 35.1
29.3
30
20
10
0
-10
-6.1
31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
source company filings, IKN ests
srallod
fo
snoillim
This is a company facing a serious cash crunch and with just three quarters of production left at
its mine until it goes on care & maintenance (unlss gold pops higher of course) and there’s
precious little time to turn this around and get some see-through treasury on board.
Particularly when you consider that the company can’t even make a gross profit on operations:
TMM.to/TGD: baseline mine financials, 2013-2015
U$m 3q15 impairment backed out
50
45 revenues COGS Gross profit op profit
40
35
30
25
20
15
10
5
0
-5 source: TMM data
3q13 4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15
That’s not good. Although its reasonable to expect an improvement in the next couple of
quarters as TMM concentrates its operations on the small part of its overall mineralization it
now considers economic (grades should go higher in 4q15 and 1q16, for one thing), if TMM
can’t make a gross profit it’s unlikely to be able to fill its coffers in the months ahead, either.
Here’s operating profit isolated, but with that big impairment backed out so that the chart
makes sense:

TMM.to/TGD: operating profit
(3q15 impairment backed out)
15
12.861
9.261 9.245
10
7.246
5 3.382 3.914
0
-0.222
-1.854 -1.859
-5 -3.733
10
31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
U$m
source: company filings
A $3.733m loss on the quarter, without the impairmant, is a bad deal for any company, never
mind one that needs to cover a $40m current liabilities position before its producion runs out in
mid-2015. And before we go, just for illustration’s sake here just one chart (of many) to show
what a $226.51m impairment looks on the comparative P+L evolution charts without being
backed out.
TMM.to/TGD: Costs breakdown
300
275
250
225
200
175
150
125
100
75
50
25
0
11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3
U$m
other
impairment
G&A
COGS
source: company data, IKN ests
So yeah, that’s why I’m backing out its influence.
Discussion and conclusion
This will be brief, it’s something I should have done a few weeks ago, I pay the price for not
doing so. There is at least a tenuous case for holding on to TMM at these beaten-to-death
levels because at a U$48m market cap you could (theoretically at least) buy the thing if you
liked the Ana Paula property enough and just throw the rest away. However, I don’t like Ana
Paula (refractory, in hotspot Guerrero) and if I stay in now I’m either betting on a Goldcorp Hail
Mary or I’m betting on a company that’s changing its story (aside from FCV.v, a very special
case, those are the ones to run away from).
TMM is probably now at disposal-level valuation but I’m not wedded to the stock and I’m not
betting on Hope, not with this fubar company. The combo of its lack of profitability, the
shortened life of its only working asset and the newly negative working capital situation is all
you really need to know about TMM today. I took a risk on a small, near-term trade which
failed, I now take my loss. Selling and leaving you with a little bit of Bard:
Thus conscience does make cowards of us all,
And thus the native hue of resolution
Is sicklied o'er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.

Guest Article by reader BW: “Lifting the Dress on All In Sustaining Costs”
(Alt. title “How things can grow out of virtually nothing when you run a blog”)
First a little background: In the last couple of weeks over at the blog, both myself and
reader ‘BW’ have been playing on the theme of All In Sustaining Costs (AISC). It’s one of those
subjects that’s itched at me for a while, because it doesn’t need much numbercrunching to see
that AISC is a neat new way of spinning costs figures, rather than a useful metric that applies
to all mining companies equally. Thing is, I haven’t really got round to throwing darts at AISC
(even after being egged on by a couple of friends on more than one occasion) but then a
couple of weeks ago I broke the ice with a very simple post and observation, it turned out to be
the way in.
It all started on October 28th and my post (4) “Understanding "All In Sustaining Costs", Detour
Gold (DGC.to) edition”, which as a missive was simplicity itself and to shed light on the
“virtually nothing” sub-header above I’ll even tell you how it all happened. That day I was about
30 minutes early for an appointment in Lima and feeling a little drained after a long day, so I
decided to pause for a coffee in a nearby Starbucks. While there it just so happened that the
DGC 3q15 financials NR was published, I picked up the corporate NR on my (rather basic HP)
tablet and, amused at the spin they gave the numbers, tapped out the straightforward post
seen that day on the virtual keyboard. I didn’t look at the SEDAR filings at all, it took about 15
minutes start to finish, I hit Send, finished my latte and went to the meeting. By way of a
reminder, here’s the main numbery bit of that post:
Detour Gold (DGC.to) just reported its 3q15 and here's my favourite bit:
Gold sold: 126,241 oz
Average realized price per Oz Au: U$1,164
All In Sustaining Cost per Oz Au: U$1,071
Difference between two: U$93/oz
Total revenue difference: + U$11.74m
Net loss: US$44.3m
Adjusted net loss:U$13.3m
Hey, d'ya think that All In Sustaining Cost might not mean what you thought it meant?
Perhaps?
It was meant as a quick snark-shot and I thought nothing else of it until a couple of days later
when ‘BW’ (whose ID will remain out the public eye but I will say he’s an excellent financials
person who’s modest to a fault about his undoubted ability) wrote in with the mail that became
this post (5) “Great feedback on the Detour Gold (DGC.to)” which took my basic idea on DGC
and ran a lot further with it (it was very well done too, I recommend a (re) read).
From there and with all thanks to BW, the idea was lodged in my mind and last week I ran a
couple of posts, the first one called (6) “More "All In Sustaining Costs" baloney, Primero Mining
(P.to) (PPP) edition” which was basically the same as the DGC idea but applied to Primero, then
finally on November 4th there was the post “Having your cake and eating it” (7) which covered
in conceptual style the reason why Deprecation Depletion and Amortization (DD&A) is important
to include in operating costs models.
Now for the good news: Due to those last two amateurish efforts on my part, ‘BW’ wrote in
again late last week and expanded a little on his original comments about Detour Gold
(DGC.to), but this time taking Primero Mining (PPP) (P.to) as his example (and quarry). While
his mail was obviously meant for my eyes and education, it was so good I asked him on Friday
evening if he would let me run his mail as a Guest Article in this Sunday’s edition of The IKN
Weekly. He kindly agreed and here we are, though he did insist that I add that his piece is a
simple proxy for other metrics, e.g. EBITDA. The purpose behind his mail was to get ME (not
anyone else) to apply it to show the true production costs of any given miner (not just his
11

example of Primero) from the data published in an income statement. But me, I’m keen to let
as many people as possible benefit from BW’s smarts on this subject which is why I asked BW if
he’d let me run it here (some very slight editing and formatting done, but it’s really as-is).
Therefore without further ado here’s BW:
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Lifting The Dress on All In Sustaining Costs
By ‘BW’
Prompted by your piece on Primero as well as your response to a reader’s question
regarding the “importance” of considering DD&A, you have provoked me to offer you
consolidation of my thoughts regarding AISC and its noble goal to offer transparency,
a.k.a. eloquent obfuscation, to the market (excerpt below from my database). Well,
lifting up that dress a bit more, we could consider AIC, but taxes, debt service, and
dividends are not included there. It baffles the mind why these items are not
considered a part of a company’s sustainability. I reckon we don’t want to pull that
dress up any higher for fear of what is beneath!
Since you are one of the few who unabashedly exposes the BS out there concerning
the mining industry, at the risk of being presumptuous, below I offer some suggestions
as well as make some other observations.
In the case of Primero, for Q3, sales were 71,417AuEq oz for which revenues were
$1,109/AuEq oz (low because they have 2 streaming deals, which can’t be
conveniently buried somewhere)
1. AISC = $775/AuEq oz (includes $87/AuEq oz for G&A, marginally high at 11%)
2. Finance charges = $43/AuEqoz
3. Other (assumed not in AISC) = $75/AuEqoz
4. Taxes = $243/AuEqoz
Subtotal: $1,136/AuEq oz (i.e. cash outlays)
5. DD&A = $273/AuEq oz
Subtotal: $1,409/AuEqoz (i.e. cash outlays + past cash outlays, of which only some
sustaining capital was accounted for previously)
6. 5.75% Debenture = $82/AuEq oz ($75M over 38 months, so $5.921M/Q) – 38
months is earliest redemption date, which can occur up to 62 months
Subtotal: $1,491/AuEq oz (i.e. cash outlays + past cash outlays, of which only some
sustaining capital was accounted for previously + future outlays)
7. Mark-to-Market = negative $126/AuEq oz (if debenture is amortized and applied
to cost, which is only fair to include)
Final total $1,365/AuEq oz (i.e. what it really costs Primero to produce an ounce of
gold or gold equivalent).
They also have some equipment leases, but appear to add only incremental cost on a
per-Q basis and therefore not included.
12

They have $43.1M in cash, but $30.4M in payables – net cash = $12.7M.
They must pay off $49.684M for 6.75% Brigus debenture by March, 2016, which I
suspect that they will do with shares.
But no worries – they have a $75M credit line. (otto note: I laughed hard at BW’s dry
sense of humour here).
Finally, another note on Cash Flow Models (CFM) as applied to new projects and
acquisitions. Once the project starts construction and/or is acquired, the investor
focuses on margins, i.e., FCF; the NPV becomes irrelevant, but investors want to see
the “profit” earned from the outlays. The CFMs are not updated for any financing for
public purview; I have never seen a “forensic” pre-project/acquisition review available
to the public. If there is debt on the project, this review essentially occurs every quarter
in order to determine compliance with regard to covenants, but only general statements
are made to the public regarding covenant compliance. This only points out that there
is no “means test” in the public domain for the copious use of the word “accretive”.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
IKN339 back and sincere thanks again to BW for first taking the time and effort to write to me,
then allowing me to publish his musings to a wider audience. I’m fully aware that he considers
them basic and ballpark (especially compared to what he usually does) but I also know that this
type of insight is greatly appreciated by at least some of the IKN audience.
As well as BW’s model on Primero, which shows just why the company recorded a net loss of
3c/share despite claiming to have an AISC of $775/oz, I liked the last paragraph which looks at
the question reader ‘DB’ asked me in the have-cake-eat-it post from a different and better
angle. Again, if any given company had no debt (in real terms, we shouldn’t fret too much
about payables as long as there are receiveable and/or cash to cover them) and had already
raised all its required capex from the sale of equities (placements etc), fundies theory states
that the company’s operational profitability, not just its net profitability will reflect directly in its
share price. But when debt gets in the way it needs to be
serviced from somewhere, then eventually principle needs to
be paid off from somewhere and that doesn’t just happen from
money creadted out of thin air.
When you (the investor) buy a share, you buy a part of the
equity of the company in question. The definition of “equity” is
straightforward, it’s “assets minus liabilities”. Therefore if your
company’s main fixed asset is non-renewable, e.g. a mine with
valuable rock that you pound into bits for its metal content,
when the metal’s gone so is all the fixed asset value. The only
thing you’re going to have left is he cash you generated from
all that mining activity, minus any debt on the books.
Therefore it stands to reason that if you use all (or even most)
of the cash you generate to pay off the debt holders, there’s
going to be precious little left for the people holding the shares
at the end. No distributions, no dividends, no soup for you.
Which is why I love this cartoon so very much and use it on
the blog when given a legitimate opportunity.
13

Stocks to Follow
The only respite to the IKN ‘Stocks to Follow’ portfolio came from the two weekly winners
(ATM.v, LGN.v) and the two unchanged stocks (LRA.v, IRL.to suspended). The only REAL
respite was that B2Gold (BTO.to) “only” lost four cents on the week, because those two
winners are both tiny holdings in cash terms and a veritable drop in the bucket compared to the
losses taken in the larger positions. Those 12 losers (not listing them all) include bigger drops in
Timmins Gold (TMM.to down 23.7%), True Gold (TGM.v down an annoying 18.8%), Lake Shore
Gold (LSG.to down 10.3% and back to the drawing board) and Starcore Intl (SAM.to down
10.0%). All in all a horrid week for the portfolio. I also picked the wrong week to start a (long
overdue, 10kg to shed) diet because there’s no alcohol in my life and as I write these words on
Friday evening I feel like a shot of something strong.
We currently have 16 open positions in our 'Stocks to Follow' list, one above our normal 15
name maximum. And now just two stocks are left in the green, the others are red.
company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICK
B2Gold BTO.to buy C$2.17 12-sep-14 C$1.37 -38.9% 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 ADDING C$0.57 15-feb-15 C$0.50 -12.3% Adding again to avg down
McEwen Mining MUX hold U$1.09 25-jan-15 U$0.82 -24.8% looking cheap again
Timmins Gold TGD selling U$0.245 20-sep-15 U$0.158 -35.5% time to give up ghost
Starcore Intl SAM.to hold C$0.12 10-jan-15 C$0.09 -25.0% 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$0.275 -1.8% 36c/share of cash
Sandspring Res SSP.v spec buy C$0.195 18-oct-15 C$0.175 -10.3% New buy, 30c 1st tgt
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 selling C$0.085 01-mar-15 C$0.035 -58.8% time to dump, failed
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.235 -79.6% 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$0.71 10.9% New tgt 95c to $1 Sep 20
Minera IRL IRL.to Susp. C$0.195 22-jul-12 C$0.075 -61.5% Trading suspended
True Gold TGM.v spec buy C$0.18 23-aug-15 C$0.195 8.3% 25c to 30c sell price tgt
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.115 -50.0% tgt 50c, phosphate great value
Regulus Res REG.v hold C$0.30 06-apr-15 C$0.20 -33.3% 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
Midas Gold MAX.to sep'15 C$0.39 21-sep-15 C$0.35 -10.3% Sm. trade idea that didn't work
New Gold NGD oct'15 U$2.18 23-aug-15 U$.3.05 39.9% trade closed, profit taken
2009, 2010, 2011, 2012, 2013 and 2014 closed positions in appendices below
14

Now for some notes on current basket stocks.
Timmins Gold (TMM.to) (TGD): Selling. Enough is enough, if I miss a dead cat bounce so
be it, time to put this bad trade out of its misery (in fact it was time to do that a couple of
weeks ago, it’s now past time). Details in ‘Fundies...’ above, confirmation here. Not my
proudest moment as a trader for sure, at least the cash amounts in play were never heavy.
Legend Gold (LGN.v): Selling. It’s a tiny position and it’s not going to be easy to sell, but it’s
high time I officially pulled the plug on this loser and took the hit (by way of a red blob in the
closed positions more than anything else). As mentioned last week, along with TMM it’s the one
I’m not proud of owning and that alone is enough to let it go in this current market. It won’t be
part of the list next week
Teranga Gold (TGZ.to) (TGZ.ax): Adding. If you liked it at 54c you’ll love it at 50c (and I’ll
refrain from adding four exclamation marks to that sentence, because some of you may
become offended by what’s meant as pure self-effacing irony and unsubscribe). Still, I got close
to adding some last week but held off, even when reader ‘NA’, a guy with excellent timing
normally, told me on Thursday evening he’d bought a handful that day. It was TGZ I had in
mind when I wrote...
“Gold dumped to previous resistance as a result and today may turn out to be a good
day to buy a few things.”
...on the blog Friday morning (8) and though I held off that day to watch gold (and lick my
wounds on other long positions) the chance to average down, perhaps back down to my
original 55c number, isn’t going to escape me next week. With the TGZ Q4 shaping the way I’m
confident it’s shaping, the only latent misgiving is wading in now when there’s a potentially
heavy tax loss selling season to get through in December. Still, the value is obvious and I’m
going to deploy the NGD cash here.
I wrapped up last week’s note on TGZ with this paragraph:
If it weren’t for my latent concerns about being so positive about a company
in the West Africa region (even one that’s accepted and in a very stable place
like TGZ) I’d make TGZ my Top Pick as from today because its 4q15 is going
to be somewhere between very good and blowout. That’s not even
mentioning 2016, in which TGZ should beat its 2015 performance handily
thanks to new higher grading feed and planned production upgrades. Above
all here it’s the price, under 60c for this just screams at me.
Nothing has changed in a week (apart from the gold price and that won’t be for long). Be long
TGZ, I’m going to be longer this time next weekend.
True Gold (TGM.v): One the one hand an annoying Friday drop, because I for one have all I
want of this stock and don’t plan to add at the new 19.5c. On the other hand, what we see on
that chart is a classic case of “when one person sells”, the junior exploreco melts down quickly
15

and though perhaps a few others joined in the rush for the door, I’m reliably informed the
selling that took TGM down from 23c to 19.5c
in the space of a day (after showing three
weeks of strong resistance) was caused by one
single desk hitting the panic button at the
behets of one specific client.
Hey ho, so be it. However it does afford the
opportunity to anyone out there to get their
bite at this particular cherry. You need to
consider the community and wider political risks
of the Karma project and location (though as
noted last week I think TGM has done a good
remedial job and the situation has improved no
end in the last six months). You also need to
“believe in gold” (ugh...did I just say that?) and bet on the U$1,080/oz (or so) line holding, the
way it did in late July/early August.
Sandspring Resources (SSP.v): Until the fundies news starts flowing around SSP (and it
will) the only thing I really care about, apart from whether the stock price truly collapses
because if it does I’ll pick up some more, is the traded volumes in the stock. Last week was
again quiet and though it opened and traded every day, only Friday saw numbers go above
100k on the day.
McEwen Mining (MUX): MUX reported its quarter November 5th and we look at the main
points in ‘Fundamentals...’ above. Here’s a
quick note on the price action and as is clear,
the 3q15 report didn’t change the trend in the
slightest. Then MUX got hit on Friday in the
same way as most things out there. Not much
to tell from its price action last week, except for
the way the stock has failed to hold the
McEwenDesire U$1.00 level and now has
basically two months to get its act together or
face potential de-listing from its US ticker.
Late in the week MUX announced (9) it has a
new interim CFO in the shape of....Rob
McEwen. The name rings a bell. No delegation
problems or control freak issues at MUX, not at all.
B2Gold (BTG) (BTO.to): For once, BTO did better than the rest and “only” dropped 2%.
16

That’s likely to be because it was already sold down hard in the previous couple of weeks, but
hey, I’ll take it and the US listed BTG managed to keep its head above U$1.00 as well. We
wouldn’t want this one to fall into the same boat as MUX.
Lake Shore Gold (LSG.to) (LSG): Rather than the 10 day chart (common today) here’s the
2105 year-to-date on LSG, because even my untrained and TA-cynical eye can see that where
we are today with LSG’s share price looks like a key resistance level. If LSG can revert the
losses of last week here and stick in a higher low, you people you trade the charts will like what
they see and perhaps even buy a few.
Dalradian Resources (DNA.to): Very little to report out of DNA apart from the volume bars
for Friday on this 10 day chart, as even this one was subject to the type of toilet-flush selling
seen in the high-trafffic stocks on US jobs day. When they want to sell PM miners, they don’t
mess around.
Starcore Intl (SAM.to): As planned I took a belated but closer look at the SAM quarter
during the week and without doing the fundies and charts here (TMM and MUX are more
pressing, SAM doesn’t trade much and I’m not looking to add) it was a reasonably in-line
report. We’re now out the other end of its corporate changes, the new assets are in the
structure and it’s now such an asset-rich company compared to its small (though still profitable)
San Martin mine production that the only chsnge I’m considering is to move its classification to
“land grab”, rather than officially a producer.
In trading, things were quiet and it’s still bouncing around the 10c range on low volumes. No
biggie and easy enough to hold, but no reason to add as yet.
The Copper Basket
After forty-five weeks of 2015, The Copper Basket is showing a 33.41% loss to level stakes.
17

company ticker price 1/1/15 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 2.03 381.95 221.53 0.58 -71.4%
2 Reservoir Min. RMC.v 3.96 47.55 206.84 4.35 9.8%
3 NGEx Resources NGQ.to 1.17 187.71 93.86 0.50 -57.3%
4 Nevada Copper NCU.to 1.65 80.5 72.45 0.90 -45.5%
5 Copper Fox CUU.v 0.135 402.96 62.46 0.155 14.8%
6 Amerigo Res ARG.to 0.27 173.65 53.83 0.31 14.8%
7 Hot Chili Ltd HCH.ax 0.16 333.11 39.97 0.12 -25.0%
8 Western Copper WRN.to 0.68 93.68 34.66 0.37 -45.6%
9 NovaCopper NCQ.to 0.58 60.15 30.68 0.51 -12.1%
10 Panoro Minerals PML.v 0.295 220.64 22.06 0.10 -66.1%
11 Regulus Res REG.v 0.35 56.39 11.28 0.20 -42.9%
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 3.19 0.02 -55.6%
NB: HCH.ax & MNC.ax priced in AUD$, rest CAD$ Portfolio avg -33.41%
The overall basket average dropped again and although we’re not at the year’s low yet, we’re
getting close again. Four stocks stuck in weekly gains (ARG.to, NCQ.to, QM.v, CCY.v), three
5% The Copper Basket 2015, weekly evolution
were unchanged (NGQ.to, CUU.v, COP.to) and the other eight were losers, including the
0%
biggest losses in Metminco (MNC.ax down 20.0%), Capstone (CS.to down 13.4%) and Hot Chili
-5%
(HCH.ax down 11.1%). The Aussies couldn’t keep those prices up. Best winner was AQM
-10%
Copper (AQM.v up 12.5%) but in reality that was just half a cent being added.
-15%
-20%
-25%
Copper the metal slumped badly, back under
-30%
the U$2.30/lb level on the futures contract
-35%
and the reason is the latest round of China
Fear (TM), so no surprises there. Two copper
price charts for you this time, with the left
side showing what happened to the metal on
the week and the right side the dailies, that show how the current level looks technically critical.
18
ht4naj ht81 ts1bef ht51 ts1ram ht51 ht92 ht21 ht62 ht01 ht42 ht7nuj ts12 ht5luj ht91 dn2gua ht61 ht03 ht31 ht72 ht11 ht52 ht8
source: IKN calcs

As for the cause of China Fear (TM) this time around, we have a new round of “where’s the
beef?” talk on the Chinese macro stimuli that are already in place and the lack of apparent
results. The general line is 1) the People’s Bank (PBOC) cut interest rates again last month but
2) before that they’d already cut five times since November 2014 so 3) this policy isn’t showing
fruits therefore 4) we all need to run away fast before the world collapses and we all die etc.
There’s no doubt that despite those macroeconomic moves China’s copper demand has been
lacking in 2015, with unwrought copper imports down 5.5% YoY to September (and imports are
one of the datasets the PBOC can’t fudge easily). Couple that with the newly hawkish Fed and
Friday’s jobs number which is now widely interpreted as the last piece in the “Fed’s gonna
raise” puzzle and the result is more pressure on copper (and other industrial metals) prices.
We can now expect a round of “Oh don’t worry, China will pick up in 2016 and so will copper
demand”. Because blind optimism is always the easier sell.
Now our regular weekly warehouse comment section:
• Total world copper stocks rose by big by 28,641 metric tonnes (mt) (-5.9%) to finish
at 486,027mt. Back above 500k and the bad news continues for bulls in the next lines.
• Shanghai stocks moved up sharply and at 197,767mt added 17,610mt (+9.8%) and is
now close to the psychologically important 200k barrier. WE’ve seen Shanghai stocks
over 200k in the new year, but early November is way too early to be healthy.
• The LME saw its stock rise too, the first time in a while that both SHFE and LME saw
net inflows in the same week. So much for the arbitrage play. LME stock rose by
8,325mt (+3.2%) to finish the week at 266,100mt.
• And Comex rose too, now at 50,801mt after adding 7,047mt. That’s a lot of copper for
the smallest of the three and points to weakness in the US market, too.
Here's the Shanghai-only tracker chart, now brushing at 200k, which is part of the obvious bear
message being flashed by the hikes in copper inventories this week. Beware.
Shanghai Futures Exchange Warehouse Stocks, 2014/2015
260000
240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
19
31'13ceD ht91 ht9 dn2ram dr32 ht31 ht4yam ht52 ht51 ht6yluj ht72 ht71 ht7 ht82 ht91 ht9 ht03 ts12 ht11 ts1bef dn22 ht51 ht5rpa ht62 ht71 ht7nuj ht82 ht91 ht9 ht03 ht02 ht11 ts1von
Mt Cu
source: Cochilco
Now for comments on a couple of our basket stocks.
Capstone Mining (CS.to): It looks as though the relief rally is fading. One of the few left on
the 2015 list worth caring about (because it still does volume), CS.to rallied in October with
copper and then grabbed the bull by the horns in its 3q15 financials by stating that it expects to
remain in adherence with the terms of its debt facility (i.e. not go into default) as long as
copper remains aboce $2.00/lb (or $2.30/lb, depending on the quarter). The market hypesters
took this as an opportunity to promote the “torque CS offers to copper” (cute, usually they use
“leverage” but that one’s getting a bad rep all of a sudden, so now it’s “torque”) and that
managed to keep the stock price above 60c until later last week. Now CS is showing weakness
once again and I for one, not a fan of this stock in the slightest, expect it will see a lot more

pressure if copper doesn’t rebound quickly. This is a stock that could go to zero in 2016,
seriously.
Western Copper & Gold (WRN.to): An interesting and apparently negative development for
WRN and its Casino project made it The Muck Pile last week, one of my very fave blogs on
mining matters. Here’s the relevant snippet from the post (10):
Kaminak decides on a road to Coffee. [Whitehorse Star (11)] They will take the
northern route through Dawson. Upsides: only 30 km of new road to build. This will
also please the locals in Dawson and the Band; traffic = money somehow and an
improved road will help the placer miners. Downsides: The existing road is no hell (lots
of upgrading) and there are two rivers to cross.
This also might not please Western Copper. Kaminak may have decided that Casino
has a snowball’s chance in hell getting developed (at least this decade) and that they
can’t afford to wait around for the long-promised construction of the Casino Trail. It
was a big topic 25 years ago and still is. Local environmentalists see roads as one of
the attendant horrors of mining in the Yukon and they sure aren’t keen about Casino.
The prospect of a road loop from Dawson to Coffee / Casino and thence to Carmacks
will thrill them:
Although it’s never been a red hot top-of-my-list stock, WRN.to is one I’ve followed a little more
closely than others due mainly to its reasonable (on site only?) project economics for the very
big Casino project, plus its supposed optionality on copper the metal (a word probably even
worse than torque or leverage, so shoot me). I’ve even traded the stock (on a flippers’ basis,
nothing long-term) and it didn’t hurt. I’ve always had “Well if the world thinks Copper Fox
Schaft Creek has a chance, this one has three
chances” in my head. This story last week, along with
comments from a friend in Whitehorse a couple of
weeks ago that Casino is considered a white elephant
round his way, has dampened my limited enthusiasm
for WRN. I didn’t like the way it’s gone for “sponsored
coverage” at places like Visual Capitalist, either. If a
project’s good enough, it doesn’t need to be peddled
to us retailers.
To the upside, this weekend’s share price is again at
the level from which WRN regularly bounces. If you’re
a technical analyst player, this chart should give you at
least some food for thought. Personally I’m not going to dabble this time around, as copper the
metal suddenly looks very weak and if the bearish projections for U$2/lb copper become reality,
they’re all going to have a hard time and break resistance levels.
20

The Low Cost Producer Basket
After 45 weeks, the 2015 Low Cost Producer Basket is showing a 26.18% 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 9.58 11.54 -37.7%
2 Newmont NEM 18.90 528.08 9.26 17.53 -7.2%
3 Barrick ABX 10.75 1164.67 8.22 7.06 -34.3%
4 Franco Nevada FNV 49.19 156.5 7.25 46.33 -5.8%
5 Agnico Eagle AEM 24.89 214.12 5.38 25.13 1.0%
6 Silver Wheaton SLW 20.33 403.75 5.06 12.53 -38.4%
7 Kinross KGC 2.82 1146.2 2.04 1.78 -36.9%
8 Buenaventura BVN 9.56 254.19 1.42 5.57 -41.7%
9 Pan American PAAS 9.20 151.64 1.05 6.91 -24.9%
10 B2Gold BTG 1.62 926.68 0.96 1.04 -35.8%
all prices in U$, using NYSE ticker prices Portfolio avg -26.18%
And futher down we go, with once again all ten of our stocks registering a weekly loss (though
impressively, even our basket’s 7.58% loss on the week was significantly less than the GDX
benchmark dumpage). And once again some big percentage losers to report to you which,
once again, are led by the totally friendless Buenaventura (BVN down 13.1%), along with
Kinross (KGC down 11.4%), Agnico Eagle (AEM down 11.2%), Goldcorp (GG down 9.98%
precisely), Newmont (NEM down 9.9%) and other types of nasty too, the selling was truly
across the board. Therefore B2Gold (BTG) “only” losing 2.8% can almost be classed as a
success. Almost.
The Low Cost Producer Basket: Weekly performance
30% and comparative to GDX control
20%
10%
0%
-10%
-20%
-30%
-40%
21
ts13ceD ht11 ht52 ht8 dr42 ht8 dr32 ht5rpa ht91 dr3yam ht71 ts13 ht41 ht82 ht21 ht62 ht9 dr32 ht6peS ht02 ht4tco ht81 ts1von
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 ht11 ht52 ht8 dr42 ht8 dr32 ht5rpa ht91 dr3yam ht71 ts13 ht41 ht82 ht21 ht62 ht9 dr32 ht6peS ht02 ht4tco ht81 ts1von
|
source: ikn calcs, NYSE/Nasdaq data
I’ve been wondering what I can write about this-or-that individual stock on our list this
weekend, what with this section’s content being a lttle on the thin side in most of the last
month. The problem is that what we’re seeing in this downturn has very littl to do with the
individual performances of company X versus company Y (I’m back to “stock picker vs indexing

again) and everything to do with the tide of gold prices. All boats are dropping on this tide,
perhaps some more than others and at different times and rates. For sure some have held up
better than others over 2015 and a qucik glance at the percentage colum in the above chart
tells that story. On one side you have Kinross, Goldcorp, Barrick, Silver Wheaton, B2Gold down
in roughly the same percentage amounts, on the other there are Newmont, Franco Nevada and
Agnico Eagle that have swum well against the tide. It’s also notable that NEM is again snapping
at the heels of Goldcorp to be the bull goose market capper (for the record, China’s gold and
other metal producer Zijin is larger than either but it’s not a “world stock” and we can argue
about its relative status to the ABX GG NEM of this world another day).
Still, the way in which they nearly all dropped, previous saints and sinners alike, by big
percentage amounts is truly indicative of non-specialist money that had perhaps spotted what it
considered an opportunity (in September/October?) but now feels burned and runs away
quickly instead of working on the potential value propositions of profitable gold miners at
U$1,100/oz or abouts gold.
Therefore once again no individual stock coverage here (though ABX gets a mention below in ‘
Regional Politics’). I like this section and it’s grown on me these last couple of years; even
though its very close realtive performance to the GDX benchmark makes it somewhat
redundant, what it achieves for me is that it keeps at least one of my eyes fixed on what’s
happening in the bigger-boy mining world and that’s a good, because myopia on juniors-and-
only-juniors can become a weakness. This section will continue in 2016.
Regional politics
Brazil: The tailings dam failure at the BHP/Vale Samarco iron ore mine
I’m surprised at the lack of coverage of this story in the English language press so far, because
it has all the makings of a big story and one that could affect the regional mining sector.
Despite the lack of general news coverage, the tailings dam failures at the BHP/Vale 50/50
owned Samarco iron ore mine in Minas Gerais, Brazil has been easily the main talking point
inside the South American mining community this weekend. That’s because they already
understand the seriousness of the incident and its ramifications. Two dams broke at the big
Samarco mine (production around 30 million tonnes iron ore per year) with one holding back
seven million cubic metres of tailings and waste, the other a cool 55 million cubic metres. As of
this Saturday the death toll is officially at 16 (edit: now 17 Sunday morning) with one on-site
worker dead and 15 people from the local settlement (as seen in the photo and video in the
IKN post Friday (12)). But dozens more are missing from the small town (approx population
600, up until last week at least) and the death toll looks certain to rise, as the wall of water that
hit it destroyed 80% of the town according to all reports (13) (it’s far and away the headline
news with real-time coverage on Google Brasil). And to give an idea of the “unprecedented
scale” of the disaster, this report tells of a hydroelectric power station being knocked out 100km
away from the mine site (14). We’ve also heard this weekend that at least one of the dams was
undergoing amplification works, which may well be a clue as the the cause of the disaster.
In early statements, the CEO of Samarco said that the failure may have been due to a small
earth tremor felt nearby around the same time but the jungledrums this weekend, coming from
IKN sources in the engineering and tailings world, is that the JV has known for some time that
there were structural problems with the Samarco dams. According to reports in Brazil
(Portuguese language news coverage has been very extensive) there were four low grade
seismic events in the locality a little before the failures that registered between 2.2 and 2.6 on
the mag scale. These aren’t big events and extremely unlikely to have been the principle cause
of the failures. But the mine chief told the press he immediately sent out teams to check the
dams after the tremors. At that time they were visually sound then according to the head of he
mine, a little while later they failed.
This plays into the scenario that there were already concerns about these dams. Low grade
22

seismics happen but there's no reason to send team out quickly and urgently to check over
your tailings facilities, unless of course you were worried about your tailings facilities in the first
place. We also know the 55m m3 wall had a design capacity of 60m m3 and was being
upgraded at the time of the failure, which means that a) it was getting close to full capacity and
b) those “improvements” may turn out to be repairs. We’ll find out all that in the future, though
we also need to say that in July 2015 the dams were inspected by the relevant Brazilian
government authorities (Superintendência Regional de Regularização Ambiental, or Supram)
and given a clean bill of health. That visit may have been conducted by government people who
are suddenly very worried about their career prospects.
This story will run and run and it may become a large shadow over mining in South America, let
alone Brazil. The political heavyweights in Brazil are already on board (Dilma downwards) and
the way in which the disaster struck along with its scale, with things such as no warning sirens
for locals, or the way in which the surge knocked out a hydroelectric power station 100 km
from the scene (yes that says one hundred kilometres), have captured the one thing that all
mining companies fear; the public eye and imagination. The fall-out from this story may be far
larger than the share price losses taken by VALE and BHP at the end of last week.
Peru: Las Bambas to start up 1q16
There’s a lot riding in Peru on Las Bambas, not least politically (2016 is an election year with
the vote in April), so the announcement last week (15) by Peru’s Environment Minister Manuel
Pulgar-Vidal that the Chinese-owned Las Bambas will start up and begin production “on
schedule” between January and March of 2016 was news welcomed by all quarters. It’s not a
riskless call, nor is it one immune from criticism because “begin production” in politico-speak
can (and usually does) means something different from the normal industry standard phases of
commissioning or commercial production. It’s also debatable as to whether Las Bambas is “on
schedule”, but these are perhaps minor matters for such a big project.
Argentina: Thoughts on the second round vote
As noted quickly last weekend (it was a very hectic two days, I’ll tell you all about it later), the
shock result in the Argentine elections when Mauricio Macri got to withing two percentage
points of government candidate Daniel Scioli was still reverberating. It’s one of the political calls
I’ve got most wrong during the years doing he South America watch, even though the real
change was perhaps four to six points, each and every one of them is vitally important for the
second round run-off due on November 22nd, just two weeks from now. I do however take
some solace form charts such as this one, the “poll of polls” at the Andy Tow blog (Argentina’s
Nate Silver) which shows that it wasn’t just me who got it wrong (16):
23

As you can see, every single poll from mid-August onwards underestimated Macri’s final score,
plus most (and certainly the average) overestimated Scioli’s tally. As for indications for the
second round, to date (Saturday) there have been three polls published all of which give Macri
a lead in the run-off vote (17) of between 4.5% and 12% (though that 12% one was taken just
after the shock rsult of last week and may have some bubble-fatcor built in).That’s not a
surprise, because it’s understood that those who voted for third placed Sergio Massa will move
in slight majority towards the Macri end of the scale than the Scioli end, which now makes
Massa something of a kingmaker even though he says he’s not going to back either of the
candidates in round two. It’s also why Scioli is openly wooing (18) the people who voted Massa
in round one (around 20% of the voters, or 5m people) and making public peace noises to his
erstwhile adversary. As in any presidential run-off vote, the game is to capture the centre.
It’s still fair to say at this point that Macri is favourite but it’s also fair to say that Scioli, backed
by President Cristina Fernandez de Kirchner and her government team, is by no means out of
this and the last two weeks of this campaign is going to be the most fun a political watcher can
have in South America with his clothes on. It’s also a very important election for the region,
because a Macri win would represent a significant shift to the right for the whole of South
America at a time when other centre-left incumbents such as Dilma in Brazil and Bachelet in
Chile are under increasing pressure.
Argentina: The head of the Barrick (ABX) Veladero mine resigns
New this weekend is that the head of the Barrick (ABX) Veladero gold mine in Argentina,
Guillermo Caló, has handed in his resignation and will leave his job on December 31st 2015. This
news has circulated around the San Juan province press (19) and in-country the sources are
considered rock solid, but as yet ABX has not confirmed or dnied it.
Veladero is of course the mine that saw a big leak of cyanide infused water recently, pollution
that reached a local river and caused a lot of worry among local communities. Last Thursday
the judge covering the case announced they had found raised levels of some contaminants in
the area and downstream of the spill, which ABX attributed to “local seasonal and weather
conditions”. The same Thursday the judge also ordered Veladero to “return to (environmental)
practices as stipulated in its Environmental Impact Permit within ten days”, which sounds pretty
ominous to me. Added to the sudden resignation of the head of the mine, there could be
another big problem for ABX here.
Segovia and Gran Colombia Gold (GCM.to): Trouble brewing
This is a story I’ve kept one eye on for a number of weeks, but as the situation is now
accelerating reapidly (deteriorating, in fact) it’s time for a heads up here. Gran Colombia Gold
(GCM.to) is the failure of a gold mining company in Colombia headed up by Serafino Iacono
24

and as well as its Marmato project (hotly opposed by locals) it has its own production via
wholly-owned and third party mining in the town of Segovia. This year there’s a been a legal
battle between GCM and the local artisanal-type miners over ownership of some of the mines in
Segovia which has culminated in the last two weeks with local independent/artisanal miners and
co-operatives being blocked from entering the mines they’ve used for many years due to a legal
decision that GCM owns the mines, a call that’s backed by the local municipal mayor as well.
What we now have is a strike by locals who are stopping production from any mine, including
the wholly-owned GCM mines, as a protest against the decisions and implementation of the
legal judgment (20). This strike started last week and both sides are already accusing the other
of violent behaviour. As Segovia is hardly the most peaceful of towns to begin with and you
have foreign company up against (what they say are) hard done-by locals (who own a lot of
dynamite sticks), tensions are high.
As one co-operative miner and spokesperson in support of the strike action (21), “Segovia is a
traditional mining territory that’s historically recognized in all Colombia and they are violating
our basic human rights, labour rights and rights to a minimum wage.” He noted that many
people who work the mines to which they have been blocked have been doing so for over 30
years and many families depend on the income to survive.
What we on the outside looking in are not worried about is GCM.to, as the stock is dead
anyway, weighed down by bad managerial decisions and a welter burden of debt. It’s not and
never will be a potential investment (as people like Frank Holmes, who ploughed a great deal of
Other People’s Mony into GCM, have found to their regret). We on the outside should now be
actively concerned that the Segovia situation doesn’t race out of control, because the
implementation of the court orders and the resulting protest strike has created a tinderbox
atmosphere in the town. It wouldn’t take much to see it descend into real violence and
bloodshed from where we are today, something that would again stain the Colombian mining
industry as it tries (and largely fails) to move forward and attract FDI.
Mexico: The “I Love Mining” initiative in Zacatecas
You know by now that I’m a ornery curmudgeon by nature, so featuring this little snippet may
come as a surprise but in fact I think this type of initiative is the way forward for mining in the
region (and hey, the world, why not?). And in the end I’m a pro-mining person, so intelligent
methods of promoting the industry are good in my book.
The Zacatecas Education Secretariat (Seduzac) (22) has launched an “I Love Mining” (Yo amo
la minería) project aimed at 37 primary schools in both urban and rural areas of the State. The
initiative is to show children the link between modern mining operations, environmental welfare
and social responsibility. The program consists of talks to the school-aged children by specialists
who show the social and environmental impact of mining when it’s done in the right way, as
well as opening doors to mining companies (via site visits, etc).
More things like this please, mining industry. And not just in Mexico.
Torex Gold (TXG.to) getting good press in Mexico
This is one of those pieces that could be “Regional Politics” or could be “Market Watching”,
because it’s about a regional political event but it also gets us focused on a specific stock. So it
goes here, end of this section and just before the next.
On Thursday at a get-together called “The Regional Committee for the Development For Mining
Zones in Guerrero” (though bit of a mouthful in English it’s normal to see a gathering named
like that in Spanish), (23) a lot of good and positive things were said about the industry to the
gathered press and dignitiaries (who included the regional Governor and the national Minister of
Agro, Territorial and Urban Development). The main message was that mining could help drag
Guerrero State out of poverty, its benefits largely stay inside the region (plenty of stats on offer
to show how the wealth creation works) and that the region mining sector was still
25

underdeveloped, with just 3% of the national production coming from the State.
The conference also faced up to the main threat to mining of narcoterrorism, the narco gangs
who de-facto run certain areas of Guerrero and how to tackle the problem.
In among all this, Torex Gold (TXG.to) at its new Media Luna mine project was held up as an
example of how mining and communities could work together in order to overcome problems
and bring about economic development. On the subject of security against the narc-gang
threat, the TXG incidents early this year and the way in which community, national forces of
order and the mining company was highlighted. To quote the presentation given (translated):
“(The Media Luna project) is a project that has managed to obtain the support of the Federal
government via the Gendarmerie Police force, the army, the marines and the State Police
force.” They went on the talk about the
inclusive community relations program
conducted by the company, saying, “There
must be conversations and sincere
communication between the landowners and
representatives of organizations that oppose
economic development, because there are
indeed beenefits that are worth the trouble.”
Very interesting stuff and after noting the
recent Torex Gold news release that came
along with its quarterlies and highlighted the
progress made towards commissioning and
first pour (8), it’s again one I’m interested in
buying (if the right price shows again. As you
may remember, I was fishing a couple of months ago without managing to snag the entry price
I wanted at the time. You may also remember I was very critical of the company’s community
relations and investor relations strategies early year, but also wamred to them as they threw
out the wrong methods and started doing things the right way. Having missed the original buy
window, my best guess is that TXG could be a very interesting re-rating play early next year
when news of first production comes through.
Market Watching
Sunridge Gold (SGC.v): A takeover, a pop, but a good arb deal is still available
First up, full congratulations to reader “J.A.N.” and anyone else you was smarter than your
author and owned Sunridge Gold (SGC.v) (JAN has them at 15c, nice trade). The NR from SGC
on Friday (24) started this way:
VANCOUVER, BC / ACCESSWIRE / November 6, 2015 / Sunridge Gold Corp. (the
"Company" or "Sunridge") (SGC: TSX.V/SGCNF: OTCQX) has executed a share
purchase agreement ("SPA") to sell its 60% interest in the Asmara Mining Share
Company ("AMSC"), holder of the Asmara Project in Eritrea, to Sichuan Road & Bridge
Mining Investment Development Corp. Ltd. ("SRBM") for an upfront purchase price of
US$65 million cash (at current exchange rates approximately C$85 million). In
addition, SRBM has assumed the obligation to pay Sunridge the remaining principal of
the deferred payment of US$13.33 million (approximately C$17.4 million) owed to the
Company by Eritrean National Mining Corporation ("ENAMCO"). The obligations of the
parties to complete the transaction are subject to conditions described below being
satisfied or waived prior to closing. Once the final cash payment from SRBM is
received by Sunridge and all transaction costs and other obligations of the Company
have been settled, the Company currently anticipates a cash distribution by way of
return of capital to shareholders.
What this boils down to is a company selling its asset, getting the cash and paying its
26

shareholders, just like they used to do in the old days when capitalism worked for everybody.
Certainly a refreshing turn of events in this poor market, so what can shareholders expect from
the deal. With SGC currently running just under 210m shares out, another 12m or so of the
warrants/options in play at these price levels, a property valued at $24m on its books that it’s
selling for around CAD$85m (pre commissions charges, lawyers scrapings etc) and a balance
sheet that’s basically neutral, if we get to the shareholders’ meeting in January and the decision
is indeed to distribut,e the IKN conservative estimate is a treasury pool that pays out a
minimum of 35c per share (it could easily be 38c, I’m pitching low). And here’s the price chart:
At Friday’s close of 24c, SGC looks cheap on the potential arbitrage and those with a penchant
for these deals would do very well to look at it. I expect that retail players in Canada would also
need to check their tax positions with regard to receiving a distribution in 2016 so be careful
about thinking gross profit = net on any trade (be clear, I have no idea on the tax situation for
Canadian readers on a trade like that, check with your friendly book-keeper up there). Still,
that’s a gaping avenue on the arb here, the deal looks serious and solid (even if the
counterparty is Chinese and that country’s reputation for considering deal contracts the
beginning of negotiations rather than the end) and I fully expect SGC to climb higher between
now and January.
Finally, I’d like to say that reader J.A.N. has been hot on this stock for a long time and strongly
encouraged me to take a close look at it. I did so and although I liked the look of the numbers,
its exposure to Eritrea, which isn’t just Africa but nasty human rights abusive Africa, put me off.
It’s the same reason I have always rejected Nevsun as a possible investment, even though
those numbers always stand out as well. The bottom line here is that even though I do own
bits and pieces of Africa exposure these days (TGZ, TGM, a part of BTO) I’m not and never will
be your point person to that continent. I have enough on my plate with LatAm, thanks.
Minera IRL (MIRL.L) (IRL.to): Gloves off
I’ve been waiting patiently for Team Benavides to start telling the world what’s really been
going on inside the company since Daryl Hodges and his crew rolled out their power grab. If
what I’ve picked up on the jungledrums is true, that time is next week and at long last,
Benavides is going on the offensive instead of soaking up the lies and skewed versions out of
Team Hodges. The Friday news release out of Team Hodges IRL (25) has apparently spurred
them into action at last. The gloves are coming and defence turns to attack.
In the meantime I urge you to read the analyses out of London last Friday from brokerages
Shore Capital (available here (26)) and SP Angel (avaialble here (27)), two firms that cover the
company and have taken an interest in the stock’s soap-opera story in the last few weeks. Good
thing, too. And of course the magnificent interview that Global Mining Observer did with Diego
Benavides (28) which does a great job of capturing not only the current situation, but
Benavides the man. As I know Diego Benavides personally it wa impressive to see how Alex
Williams had nailed him and his ways down so well.
Continental Gold (CNL.to) seven weeks on
27

The last time Ari Sussman’s Continental Gold (CNL.to) was mentioned on these pages was
seven weeks ago in IKN332 dated September 20th, just after the company “voluntarily” changed
the regional Antioquia body (Corantioquia) that was going to do its EIA permitting and brought
in the national enviro people instead. Here’s how the piece in that edition of the weekly ended:
“We on the outside don't know the exact circumstances of the problems found by
Corantioquia in the CNL Buritica EIA permitting track. What we do know is that the
people running CNL have a long and proven history of obfuscation and failure when it
comes to mining projects in the Americas and you only need to look at the complete
mess Ari Sussman made of Colossus at Serra Pelada for proof. It came as no surprise
to me that once again, a whole bunch of people in Canada have been burned by this
snake oil salesman.”
Cut to this weekend and things have gone from bad to worse for holders of CNL.to. The stock
which was at $2-or-thereabouts that weekend is now down at $1.31 and even compared to the
nosedive machine that is the GDXJ index...
...it’s in rough shape for the period. And be clear that the drop you see in that chart above is
after the big waterfall of mid-September on that permitting news, not before.
Conclusion
IKN339 is done, we end with bullet points:
• Do not underestimate the severity and potential ramifications of the Brazil tailings dams
failure. Its potential to cause seven types of misery for the mining industry in South
America is high and just because it’s being largely ignored by the English language
press doesn’t mean it suddenly goes away. The biggest story of the week down this
neck of the woods and by a long distance.
• Sunridge Gold (SGC.v) is a sit-up-and-beg arbitrage opportunity, in my view.
• McEwen Mining (MUX) looks in fair shape and I’d back it to rebound to the U$1 level, or
perhaps just under it. In fact I am bakcing it to do just that becuase I’m a happy holder
of my position. Worth recalling that MUX has a share buyback program in place now
and this 80c-ish level will probably appeal to its boss (the CFO now, of course).
• Goodbye Timmins Gold (TGD) (TMM.to), a reasonable but risky idea that looked on the
right track for a while (we saw 30c show but not my pencilled in 35c target) but
ultimately has collapsed as the true nastiness of its financial position has been revealed.
Those who stay in will pin their hopes on a Goldcorp bailout of shape shape or form
(they grab Ana Paula on the cheap?). But I need to be practical, call this losing trade
for what it is and cut it from the list. And goodbye Legend Gold (LGN.v), a tiny trade
that never got off the ground.
28

• I hope you enjoy BW’s guest article as much as I have.
• Expect fireworks in the Minera IRL (MIRL.L) (IRL.to) next week. WE’ll have a lot more
on the subject in IKN340, next Sunday.
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://www.pragcap.com/valeant-and-the-gamblers-dilemma/
(2) http://finance.yahoo.com/news/mcewen-mining-q3-2015-operating-110000106.html
(3) http://finance.yahoo.com/news/timmins-gold-reports-2015-third-042619875.html
(4) http://incakolanews.blogspot.pe/2015/10/understanding-all-in-sustaining-costs.html
(5) http://incakolanews.blogspot.pe/2015/10/great-feedback-on-detour-gold-dgcto-post.html
(6) http://incakolanews.blogspot.pe/2015/11/more-all-in-sustaining-costs-baloney.html
(7) http://incakolanews.blogspot.pe/2015/11/having-your-cake-and-eating-it.html
(8) http://incakolanews.blogspot.pe/2015/11/the-fed-december-hike-now-baked-in.html
(9) http://finance.yahoo.com/news/mcewen-mining-appoints-interim-cfo-145403124.html
(10) http://yukonprospectors.ca/Wordpress/?p=1401
(11) http://www.whitehorsestar.com/News/road-s-rerouting-called-a-boon-for-mining
(12) http://incakolanews.blogspot.pe/2015/11/brazil-bhp-dam-failure.html
(13) https://news.google.com.pe/news/rtc?ncl=dG3feNkGFo8YngMnkLNC2E28HXCiM&authuser=0&ned=pt-
BR_br&hl=pt&topic=h
(14) http://g1.globo.com/minas-gerais/noticia/2015/11/hidreletrica-100-km-e-afetada-por-lama-do-rompimento-de-
barragens.html
(15) http://www.losandes.com.pe/Economia/20151014/92050.html
(16) http://andytow.com/blog/borra/index.php?compe=Presidente%201ra%20Vuelta&pop=Nacional&from=2015-08-09
(17) http://www.diariosobrediarios.com.ar/dsd/notas/11/81-macri-se-mantiene-por-encima-de-scioli-en-tres-
encuestas.php
(18) http://www.lanacion.com.ar/1843314-scioli-y-un-video-de-campana-que-apunta-a-los-electores-de-massa
(19) http://aminera.com/index.php/mineria-internacional/item/14521-argentina-renuncia-director-ejecutivo-de-la-minera-
barrick-gold-en-argentina.html
(20) http://www.wradio.com.co/noticias/regionales/segovia-gran-colombia-gold-denuncia-intimidaciones-a-trabajadores-
que-no-apoyan-el-paro/20151105/nota/2990993.aspx
(21) http://www.entornointeligente.com/articulo/7268216/COLOMBIA-Trabajadores-en-Segovia-Antioquia-iraacute;n-a-
paro-por-cierre-de-minas
(22) http://elhorizonte.mx/mexico/estados/609607/en-zacatecas-promueven-la-mineria-en-escuelas
(23) http://bajopalabra.mx/mineria-sacara-de-la-pobreza-a-guerrero-segun-desarrollo-economico/
(24) http://finance.yahoo.com/news/sunridge-agrees-sell-60-interest-140100002.html
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(25) http://incakolanews.blogspot.pe/2015/11/minera-irl-irlto-mirll-lawyers-try-again.html
(26) http://incakolanews.blogspot.pe/2015/11/minera-irl-irlto-mirll-lawyers-try-again.html
(27) http://incakolanews.blogspot.pe/2015/11/sp-angel-on-minera-irl-today.html
(28)
static1.squarespace.com/static/52483801e4b0cd3b08465542/t/563b6f9ce4b0796851577f5a/1446735772148/Issue+14
4.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
30

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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