IKN #348Premium

The IKN Weekly
Week 348, January 10th 2016
Contents
This Week: Definitely selling one and maybe selling another and adding another, Gold; the
novel, fashionable safe haven, Optimistic? Yes (guilty as charged).
Fundamental Analysis: Adding some B2Gold (BTO.to) (BTG) as a separate trade, the Focus
Ventures (FCV.v) pre-feas and subsequent fall-out.
Stocks to Follow: Overview, Phoscan (FOS.to), True Gold (TGM.v), B2Gold (BTG) (BTO.to),
McEwen Mining (MUX), Teranga Gold (TGZ.to) (TGZ.ax), Lake Shore Gold (LSG.to) (LSG).
Copper Basket: Overview, Capstone (CS.to), HudBay (HBM.to), Copper Mountain (CUM.to).
Low Cost Producer Basket: Overview, Barrick (ABX), Buenaventura (BVN), Agnico (AEM).
Regional Politics: Argentina: Be careful what you wish for Mr. McEwen, Ecuador: Fruta del
Norte State burden contract delay, Nicaragua: A positive for the business sector, Chile: Copper
export value drops hard in 2015.
Market Watching: Continental Gold (CNL.to) loses a director, Sunridge Gold (SGC.v) side bet
update, Lake Shore Gold (LSG.to) 4q15 production numbers.
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
Definitely selling one and maybe selling another and adding another
The usual top-of-shop notice of changes to the Stocks to Follow list:
• Selling Phoscan (FOS.to): This first one is neither a shocker nor one most
of you will care about. As flagged in the past couple of editions I’m going to
exit my position in Phoscan (FOS.to) next week, which will probably involve
taking a small overall loss on the deal.
• Potentially selling True Gold (TGM.v): Thanks to the rally last week it’s
now in my “25c to 30c” sell zone. See below for more, but suffice to say here
that I’ll watch the price action carefully and will probably take 28c if I see it.
• Adding to B2Gold (BTO.to) (BTG) as a separate near-term fliptrade. The
reasons behind this one are in the ‘Fundamentals...” section, but in short this
price is irresistible.
Heads-up completed, details below.
Gold; the novel, fashionable safe haven
Gold had a good first week of 2016, here’s a chart of three ETFs (GLD for gold bullion, GDX for
1

the PM stocks, GDXJ for the juniors) that bears witness:
As far as I can see there were three influences that caused the moves in gold last week:
1) ChinaFear! This time the stock market and the losses that have accelerated on the now
common assumption that the People’s Bank of China is about to print its way out of trouble.
The situation is far more nuanced than a pesky junior miner writer can explain in a short
paragraph, but the concept is one that we’ve witnessed many times and is easy enough to
frame. A relatively puny (oh our modern world) U$3 trillion (with a T) was thrown at the Yuan
(RMB) by the PboC, the market swallowed belched and screamed “MORE!”, we’ve now set a
course to further RMB creation. That in turn means a whole lot of Chinese people are moving
out of their home currency and into things that will store value in volatile times. With the dollar
unable to rally from its already strong currency position and a country with a long tradition of
holding value in shiny objects in the mix, step forward gold. Once upon a time, before being a
barbarous relic gold was a store of value and there’s plenty of reasons to suppose that a new
generation of financial whizzkids are about to make that earth-shattering discovery all by
themselves all over again.
2) US Jobs. To temper the gold fun, Friday’s BLS US jobs report (which I forgot to flag last
weekend, head still in vacation mode and the Weekly in short form) came in strongly, but as
Dundee’s gold guy Martin Murenbeeld, put it in his weekly report (ty reader R for that forward):
The US employment report this morning has raised the probability that the Fed will hike
again in March; but we are not so sure. It was pointed out on CNBC this morning that
of the 485,000 jobs created (household data – not establishment data) 64% came in
the age categories 16-19 and 55-over. Only 16,000 jobs were created in the 25- 54
age bracket!? This seems suspicious. Regardless, the headline data were positive and
will not change any FOMC member’s intended vote on rates.
Before Christmas on these pages, I’d already floated the idea that the market baking four raises
in 2016 into its base rate assumptions looks sketchy. Therefore Murenbeeld’s words sit easily
with my own biases (confirmed?) and his forecast that the Fed will raise just once more this
year works for me, too.
But whatever he and I might think, the US Jerbs report knocked the rally in gold stocks firmly
on the head (see above chart), though it’s interesting to note that gold, at that point 3% up
over four days, only lost half a percentage point of those gains and traded steadily as well. This
suggests that the China situation is far more important to the metal than the US data.
3) Geopolitics. The final influence last week is the easiest to discount, that of geopolitical
moves. Places like Zerohedge will breathlessly tell you that the execution of a Shia cleric or a
bomb in North Korea (fusion or fission, take your pick) are reasons for immediate flights to
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quality/safety/prepper’s home-made nuclear bunker. However recent history has amply
demonstrated that geopolitical influences on the price of gold are short-lived and you can pick a
whole bunch of examples on that, from terrorist attacks to MENA sabre-rattling to impending
European Union disintegration to name but three categories. So yes there may have been a blip
when Iran and Saudi Arabia decided to hate each other openly (for a change, they usually
seethe at each other in silence) but this is the cause that will fade most quickly.
Optimistic? Yes, guilty as charged
Summing up, gold had a good week and what’s more there are hints hither and thither (1)...
"Yesterday saw purchases of 4.166 tonnes into the SPDR gold ETF and a relatively massive
purchase of 3.87 tonnes into the Gold Trust. The holdings of the SPDR gold ETF are now at
645.131 tonnes and at 156.42 tonnes in the Gold Trust. These two purchases confirm a change
in attitude towards gold by U.S. investors."
...that the tide is changing for the metal, after close to three years of bearish doldrums. Now
for sure it’s not a good idea to get too excited about the future of the mining industry’s key
metal on just one week’s worth of positive action and as the Copper Basket’s results on the
week amply show (see below) it’s not a sentiment that’s positive for all mining companies
either. But as I sit here on Saturday lunchtime and digest the market I’ve witnessed over the
past five days I can’t help but feel a little more optimistic about the near-term future of the
companies we cover and hold here at The IKN Weekly. Although my moving out of most major
base metals and silver exposure was a correct move in 2015 (one of the few macro strategies
that worked last year on these pages) it’s been difficult, to the point of outright painful, to hold
onto the gold juniors, producers and explorecos, through all the slow drudge of the last few
months.
Fundamental Analysis of Mining Stocks
The two stocks featured in today’s Fundamentals section are Focus Ventures (FCV.v) and
B2Gold (BTO.to) (BTG) and they have three things in common, 1) they they both had a bad
week at the market, 2) they were the subject matter of more title lines in mails I received from
readers than all other companies put together, 3) I own decent sized slugs in both of them (and
that hurts).
I believe that neither of the sell-offs are justified and that both stocks should recover their lost
ground. There are different reasons for that and they’re outlined in the sections below, but
there’s one major difference in my attitudes towards both stocks this weekend: Next week I’m a
buyer of BTO and will add to my position, but I’m not buying any more FCV.
However, the way things have turned out (after a mental block or two, some heavy editing on
one of the pieces and a full re-write on the other), even though I framed this as the main piece
in a short post last week (2) and still consider it to be exactly that, it’s turned out much shorter
than I’d expected it to be (and the “other stuff” mentioned in that short post has turned into
the major volume of IKN348). That’s because at first I tried and failed to wrap these opinion
pieces up in a bunch of quantatives, with fancy charts and mathematical conclusions, when the
reality is that they’0re both seat-of-pants subjective calls that don’t add up to much else then
“own these stocks because I say so”. After trying to fool myself and failing to do so, I’m not
going to subject you people to that type of guff and nonsense either. What we have today are
two subjective calls on stocks that are in their own holes of trouble but I think have been
oversold and don’t deserve the punished that’s been meted out to them. And that’s about it, so
what follows are two mainly narrative explanations behind those opinions.
Anyway, let’s get to the two case studies.
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B2Gold (BTO.to) (BTG) sells off hard before its Q4 production release
The TL:DR to this segment is that I’ve decided to add a slug of BTO to my portfolio next week.
It will be a separate trading position, it won’t be added into the Top Pick numbers in order to
average down and I’m looking to make it a near-term flip play, predicated on my assertion that
1) the Q4 numbers are going to come in just fine and 2) the selling is way overdone and has
already baked in the worst case.
As you are aware, my plan for several weeks has been to decide on BTO’s future as a Top Pick
based on the 4q15 numbers, which the company will HAVE to hit in order to maintain my
confidence in its word. Without being 100% sure today I’m reasonably confident they’re going
to do just that but more important now is the share price, which at under U$1 (and under 90c
on Friday) is a knockdown bargain that supposes all bad news, no good. The risk I run is that
either 1) BTO does indeed miss or 2) there’s another slug of bad news waiting in the wings, but
unlesz it’s catastrophic I don’t think there’s big downside risk any longer. By taking an extra
position going into the production NR (likely next week or the week after) I realize that risk, but
consider that too much bad news is already baked in and the potential surprise is much more
likely to the upside.
Now for some details.
1) Vibes are okay on Q4 production. According to the IR department of BTO on Thursday
January 7th, although the final numbers from all operations weren’t in at that point they were
“still tracking the lower end of production” guidance (ty reader TB). As this is my major concern
on the quarter, that’s about as reassuring as an anal yst can get pre-announcement. The IR
department also said that they’ll probably publish the production number this coming week,
slightly earlier in the month than previous quarters.
On the other hand, one contact heard from his own “A.N. Other” who told him that the word
was BTO had missed on its numbers. It sounds a little sketchy, if only for the fact that the
company’s own IR department had said as late as Thursday that the final numbers weren’t in
yet, but it’s fair to report all sides of intel received. But overall (and assuming no duplicity in
contacts, four people including the IR department itself made positive noises about 4q15, only
one made negatives that passed this desk.
2) Weakness is over a month, not a week. Yes for sure BTO was a poor performer last
week and the acceleration of selling Friday wasn’t particularly unpleasant, but from what I see
the origins of this stock weakness are now nearly one month old. This chart pinpoints the date
at which BTO (via its US ticker) broke
away from the GDXJ (as benchmark)
and underperformed, which is the day
on which BTO filed its U$300m
preliminary base shelf prospectus.
On one level the weakness is
understandable because a company
this size looking to raise $300m is
never going to be a net positive on its
equity price. But on other levels it’s
weird, because for one thing BTO in
its prospectus doesn’t state in which
way it plans to raise the cash (it
requires to build Fekola), this is more
a case of getting necessary paperwork
out the way, Also, here in the real world we’ve known for many moons that BTO would need to
raise in order to build its to-be-flagship mine, but it seems as if the act of making the formal
filing has attracted attention that perhaps hasn’t been following the stock quite as closely as
others, but has sniffed at weakness and is now attacking.
4

3) The big seller is New York based. On Wednesday, Thursday (a little, I was busy at a
birthday party) and Friday I picked up several pieces of anecdotal info and off-record talk from
desks and contacts who all pointed to the same cause for the weakness; A single large seller
(still unknown to me) running stock through the New York ticker (BTG), hitting the bids and
almost certainly the source of the weakness I have no problem about a seller selling, but the
incessant action really weighed down BTO and Friday’s big droop had the hallmarks of a “okay,
let’s see just how low this seller will go”, with the reply that they simply wanted out, no price
unacceptable. Even for a volume monster like B2Gold, 25m shares on a single day is big
movement with a lot of them running through House 1 (anonymous) in Canada.
The pattern seems less about the
B2Gold traded volume last week (Jan 4th to 8th)
fundamentals of the company and more
30
closely connected to the needs and wants
25 of the insto that’s selling. Unless there’s
some catastrophic news about to come out 20
of BTO (Clive Johnson retiring, a massive 15
law suit, etc) that I don’t know about it all
10
seems overcooked.
5
Discussion and conclusion 0
This piece on BTO is more strategic and Mon Tues Wed Thurs Fri
source: Yahoo! finance
subjective because in essence, I’m making
a bet on the company rather than an
investment based on its fundamentals. We’ll know more about those next week (or week after)
when the production numbers hit but until then, the discount available to shares smack of
having just about all reasonable bad news now baked in. There is of course the risk of exposure
to “unreasonable” bad news, a.k.a. Black Swan or some other epithet, but I’m going to take
that chance.
The share price weakness caught headlines and market eyeballs last week, but its origins seem
to be from the decision to file to raise U$300m. At some point BTO will indeed need to raise
cash in order to build its new Fekola mine but this pressure isn’t warranted on the back of a
regulatory filing. If, for example, BTO cuts one of those new-fangled streamer deals that the
market decides is a win-win (e.g. the one Teranga did which allowed it to raise needed cash
without the stream being heavy on the books). The point here is that everyone’s worried about
the Q4 production number and they’re not looking at the probable cause behind this selling,
even if you agree with it or not. Add in the vibes about the Q4 numbers which “at low end of
guidance” at this late stage should be good enough for the right result and the stage is set for a
rally, not a further dump.
I understand it’s a near-term trade and my own judgment call. I also know that recent portfolio
results point to my judgment being erroneous. But taking all sides into consideration and
weighing the risk against the reward, I think this is a good opportunity to make a little side
money on a company that’s been discounted way too deeply for what it is and will be. I plan to
buy a separate trading portion of BTO shares (probably BTG this time, slightly easier for me at
the moment) and run a parallel near-term trade on the stock as we move through the 4q15
production results period.
Focus Ventures (FCV.v) sell off hard on its Pre-Feasibility new release
Just one day after writing in IKN347 that “We mortals will find out its contents as soon as the
company has sifted and arranged the numbers for NR-type consumption and I suppose we’ll
get the full document once the 45 days are up on SEDAR”, FCV offered up the News Release
with details on its 43-101 compliant pre-feasibility (PFS) that was delivered to the company
(and therefore its partners) just before the penalty dated of December 31st, also as per IKN347.
The NR (3) has plenty of substance and if you’re a holder of this stock and haven’t given it a
5
serahs
fo
snoillim
yad
rep
dedart
BTG New York
BTO Toronto

good look yet I urge you to do so, but for our purposes here’s the bullet point list of key
findings from the document:
• Production of 18.5 Mt of Reactive Phosphate Rock ("RPR") concentrate from
52.3 Mt of ore over a 20 year mine life
• Two RPR product lines producing +24% and +28% P2O5 concentrate by a
simple, proven beneficiation process
• Post-Tax Internal Rate of Return ("IRR") of 17.2% and Net Present Value
("NPV") of $252.9 million at a 7.5% Discount Rate
• After-tax cash flow of $847 million over the mine life
• Payback of 6.6 years
• Proven and Probable open-pittable Reserves of 54.7 Mt of ROM ("Run-of-
Mine") ore (dry basis)
• Substantial mineral resources remain in inventory to extend mine life
• Initial capital costs of $127 million including pre-production stripping, process
plant, tailings storage, water pipeline and powerline, owner's costs and
contingency
• Several opportunities identified to improve project economics via optimization
studies including review of mine schedule, infrastructure requirements and
extension of mine life
And along with the other information in the NR came this chart, obviously ripped from the full
43-101 report (that we get to see within 39
days and counting on SEDAR), that outlines
the basic cost sensitivities of the project. I
stuck that one on the blog that morning and
as is clear, a lot of this game will be about the
final selling price of the phosphate product.
So to the reaction to the news and as this 10
day price chart shows, it was pretty horrid.
FCV dropped to 9c on early trading, but then
things went from bad to worse when Brent
Cook called an alert sell on the stock (he’s
been in the play for quite a while and decided
to bug out). I didn’t say anything to anybody
about his call that day because any sell call to subscribers must be respected, but his subbers’
simultaneous selling was clearly the reason behind the acceleration in volume and the drop
down though 7c and 6c. The other thing about Brent Cook’s call is that, even though on many
occasions he and I will see eye to eye on any given
company, we do have our differences (it’s what makes
a market after all) and on FCV last week that came
into play. I don’t think he’s reading FCV right here and
I think he sold too quickly.
As the day and then the week wore on I exchanged a
few times with FCV company President David Cass.
Several subjects were broached but on reflection the
ones that really mattered were the following.
My Question: My concerns about the selling price of
reactive phosphate rock (RPR). My memory was of a
price that floated around the U$110/U$120 per tonne area, FCV was using prices of
US$145/tonne and US$185/tonne (dry) for 24% and 28% P2O5 respectively.
The Answer: I was confusing the projected Bayovar12 product, RPR or DAPR (the “organic”
type of phosphate), with phosrock for acidulation (e.g. the processed product that comes out of
6

the nearby Miski Mayo mine). In fact according to FCV and president Cass (and I shall quote
his written answer on this, “DAPR prices are the bottom end for 24% reactive rock sold last few
years, it usually goes for $160 - $190. The 28% is discounted to price of SSP, its main
competitor, although our product is much better...”
In other words, the numbers FCV is using in its pre-feas seem to be pretty conservative and it’s
not difficult to add around 10% to their assumption prices and stay within the realms of the
reasonable. Another look at that above price sensitivity chart shows what that might mean to
project economics, but what that also suggests is that FCV wasn’t out to wow you with wild and
flashy numbers that wouldn’t stand up to the cold light of the real world further down the line.
No good deed goes unpunished they say...
My Question: The trade-off between what seemed like a low capex number ($127m, I was
expecting more for s fully fledged mining operation there rather than the previously mooted
“modular” approach) against a high opex number (around $75/tonne when I was expecting
around $60/tonne.
The Answer: According to the first explanation received on this, the company tried to keep
capex costs as low as possible (that barrier to entry thing) and that meant some of the “initial
costs” of the mine plan have been pushed into inital production years, which means some of
the pure capex has magically become sustaining capital. That benefits the capex number but
puts strain on the operating economics, with one direct result being a lowered IRR (at 17.4% it
wasn’t bad, but the world now seems to demand 20%+ from this line item and I was expecting
a better IRR number from this 43-101 too).
But then president Cass came out with a telling remark (and I’ll quote him again):
“...what really drives the project are haulage distances - had we had more
time to look at the scheduling we might have decided to do the mine plan a
slightly differently, go deeper quicker in the initial pre strip to expose more of
the beds to allow both lines to achieve capacity quicker and minimize the
waste haulage distances accordingly by a more regular pit design and use of
backfill earlier.”
In other words, FCV just told me that the 43-101 was so rushed, in order to get it done by the
December 31st deadline and not incur a $500k penalty, that they had to discard some pretty
specific trade-off possibles that could have improved the project numbers.
My Question: There’s obvious concern about the company’s balance sheet. At present the
approx $1.5m in treasury is about enough to pay for “tick over” in 2016, but that doesn’t
include any acceleration of development if FCV is true to its word about moving on the
feasibility study stage in the near future. More importantly it still owes $3.5m to Sprott Lending
(a.k.a. Rick “Pound Of Flesh” Rule’s end of the Sprott empire) and that’s due paid on
September 30th so in order to get its house in order FCV has less than three quarters to raise
what looks like a pretty hefty (under current market circumstances) $3.5m just to get to neutral
on the balance sheet by the end of the year.
The Answer: FCV can’t start saying “we’re going to raise cash like this” or “we’re 10%
confident of that” (and I press Cass on a couple of occasions last week for more details, to no
avail) but from what I was told I think FCV has a few options on the table as regards the debt
position. One of the things about Rick Rule is that he’s normally pretty accommodating when it
comes to good working partnerships, as long as he gets his. I could imagine that even in a
worst case situation where FCV can’t find another sponsor (large or small) in time, as long as
Sprott gets a payola the debt can be rolled over to a date in the future. What FCV did say on
this is that once they’d done a “review of the PFS” (his words not mine) they’d be in a better
position to shop for funds. I think that’s fair enough.
7

Discussion and conclusion
As at this weekend FCV has a market cap of $8.16m. For that money to the downside you get a
company that is around $3.5m in the hole with a pretty aggressive (though reasonable if
offered a sweet deal) lender, plus the owner of a phosphate project that has a 43-101 PFS that
offers okay-without-being-wowsers economics, according to the document in question.
It’s also a company that’s suffered from a combination of hasty decisions.
The main driving force of the hasty decisions was the December 31st deadline for PFS delivery,
as FCV obviously didn’t want to hand over $500k of much-needed treasury if it could be helped.
All fine and they delivered a PFS, but what becomes crystal clear after a few back-and-forths
with company is that didn’t get close to delivering THE PFS. What we have is A PFS document
that manages to comply, it has okay numbers but it’s not optimized in any way, shape or form.
FCV was all-but forced to leave a whole bunch of variables off the table because it wanted to
complete in time, which they might now regret in hindsight (sidebar philosophy question; is the
loss of $500k in cash worth more or less to FCV than the week-over-week loss of $52.4m in
market cap?) but it’s the way they played the cards at the time. And that’s fair enough.
To give but one example of a decision that looks to me to have been made with far too much
haste, I think FCV has made a fundamental error in shifting some of the capex number over to
sustaining capital during early stage operations. Yes this means the capex number is lower but
you’re not comparing this project to a 50,000 ounce gold project, this is a phosphate project
that stacks up against projects and operations such as Miski Mayo (cost around $600m, done
and paid for and in very profitable production) or Fospac’s (Hochschild HOC.L) phosphate
project with a ticket for development also of around $600m. I don’t see why FCV decided to
keep their plan under $200m (to pick one number out the air) in order to defer some pre-strip
capitalization costs, all to the detriment of an IRR that would have been comfortably over 20%
and far more attractive to the market.
Another example is the operating costs based aoround a tailings facility that is probably just as
easily located close to the mine site and would mean far lower fuel and transport costs. Another
is the use of a 3.0/1 forex rate on the Peruvian Sol to the US Dollar, when the current forex is
3.42/1 and the Sol is forecast by most local commentators to devalue further against the
greenback in 2016 (3.60 is a typical guesstimate bandied around).
All these and more. And while we’re on the subject of hasty decisions, Brent Cook moves
markets and when he calls sell on a thinly traded stock, it’s going to be hammered whatever
happens. I think he should have investigated a little further before making that call...but hey,
that’s just me ☺.
From my conversations and exchanges with FCV this week, it’s clear that the PFS in hand is no
sort of a decision document (and truly no PFS ever is, it’s only a step along the way to a final
decision) and we could even expect an “optimized PFS” in the next couple of months once FCV,
with more time on its hands, can work through more detailed and better scenarios for the
project.
The main risk to the FCV share price today is the debt position and the latent risk of default on
a $3.5m loan due in less than three quarters’ time. I agree there’s risk here, but to date FCV
has managed to keep its funding position solid enough and it would be a(n unfortunate) first if
they dropped the ball this time around. Also and without trying to make it sound too confident,
I think they have several options and strings to their bow on this score, even without having to
go cap in hand to Rick Rule for a potentially expensive extension. Paying Rule for more time
would be a “reasonable worst case scenario”, but even that doesn’t justify the massive hit taken
to the equity price last week; FCV is now trading at around 4.6% of Bayovar12’s NPV and that
places it in the Moose Pasture category and against a bunch of projects that don’t have a hope
in hell of becoming real mines. That’s far from the case here.
8

As for a trading decision, I’m not adding any more and will stick with adding to the far more
tradable and liquid B2Gold next week. The problem with FCV is that it will suddenly go cold on
us, volumes and trading-wise, and that’s not what I want from a potential trade at the moment.
It’s a Catch 22 situation of course because the stock is certainly cheap, but it’s cheap because
nobody wants it even though it’s cheap and I’d buy some if other people bought some but
nobody else is buying so it does little volume so it’s cheap (etc etc). But my portfolio has its
own rules to obey, plus i own enough FCV already, so I won’t be adding.
However, I think it’s been very unfairly treated in the last few days by a market that hasn’t
appreciated that the current PFS doesn’t represent the true value that’s out there to be
unlocked at Bayovar12. And because of that, debt risk or not, I’m a solid holder of Focus
Ventures. Come the “updated” or “optimized” PFA in a few months’ time, I’d like to see more
capex, less opex per tonne, cheap transport and earth-moving logistics and, above al, a flashier
IRR. All those are well within our grasp as the project gets better developed and understood.
Stocks to Follow
Of our 13 open positions on the ‘Stocks to Follow’ list, seven made gains (LSG.to, TGZ.to, MUX,
SAM.to, SSP.v, ATM.v, TGM.v), two were unchanged (LRA.v, REG.v) and four made losses
(BTO.to, FOS.to, DNA.to, FCV.v). The biggest winners in percentage terms were Atacama
Pacific (ATM.v up 29.0%) Sandspring Resources (SSP.v up 20.7%), True Gold (TGM.v up
10.9%) and an honourable mention goes to Lake Shore Gold (LSG.to up 8.9%). The biggest
loser in percentage terms, and by quite a margin, was Focus Ventures (FCV.v down 39.1%),
but the real concern was the six cent hit taken by Top Pick B2Gold (BTO.to), which lost ground
while its peers rallied. That’s not good at all and I’m taking the over on that stock next week
(see above).
There are currently 13 open positions in the list, two below our self-imposed 15 name
maximum. This time next week there will be at least one other space left to fill, maybe two.
Five of our open trades are in the green, eight are in the red.
company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICK
B2Gold BTO.to STR Buy C$2.17 12-sep-14 C$1.34 -38.2% Top Pick, 4q15 prod key
Metals Producers (in current order of preference)
Lake Shore Gold LSG.to Buy C$1.07 07-apr-15 C$1.22 14.0% M&A tgt 1.50 tgt
Teranga Gold TGZ.to STR buy C$0.55 15-feb-15 C$0.52 -5.5% Cheap sub-60c: new momo?
McEwen Mining MUX hold U$1.09 25-jan-15 U$1.10 0.1% Trading above U$1 (at last)
Starcore Intl SAM.to spec buy C$0.48 10-jan-15 C$0.265 -44.8% Target under review
Land Grab Stocks (in current order of preference)
Phoscan Chem FOS.to Selling C$0.28 29-mar-15 C$0.27 -3.6% Time to eject
Sandspring Res SSP.v hold C$0.195 18-oct-15 C$0.175 -10.3% Risky small play, 30c tgt
Atacama Pacific ATM.v hold C$0.19 26-apr-15 C$0.20 5.3% Spec buy, cheap adv proj
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.25 -78.3% solid biz model, LT hold
Other Recommended Stocks (in current order of preference)
Dalradian Res DNA.to Buy C$0.64 27-oct-13 C$0.74 15.6% New tgt 95c to $1 Sep 20
True Gold TGM.v Hold/sell? C$0.18 23-aug-15 C$0.26 44.4% Now in 25c to 30c sell zone
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.07 -69.6% Hit hard by PFS news
Regulus Res REG.v hold C$0.30 06-apr-15 C$0.205 -31.7% Comm. Rels slow progress
Closed in 2016 closed close price
none as yet
2009, 2010, 2011, 2012, 2013, 2014 and 2015 closed positions in appendices below
9

Now for some notes on current basket stocks.
Phoscan Chemicals (FOS.to): Selling. I’ve flagged this sale for a few weeks and this
weekend was mooted as the one in which I’d make a final decision. That’s come to pass and it’s
time to sell this trade. Here we have one of those “wrong for the right reasons” situations as I’d
bought in on the likelihood that FOS and its big cash pile (still worth at least seven cents per
share more than today’s market price, and that’s net/net) would get a deal done in order to
unlock value. And yes, after a protracted few months it has indeed got its deal done and no, it’s
a mediocre one that hasn’t added a single scrap of value to this company. There seems to be
little or no opposition from shareholders for the deal (likely to have been brokered by the Sprott
team) which means the obvious alternative, liquidation and distribution (in the style of SGC.v,
see below) isn’t in the cards.
Add in the fact that this was never a big deal trade for me personally and it’s time to dump and
move on. As things stand I’m likely to take a small loss (1c/share gross?) but even if I get lucky
next week and get out at breakeven or even at a minor win, it makes little difference, this has
been a disappointing trade with no biggie at the end of it. Time to move on.
True Gold (TGM.v): Possible sale this week. This small trade was never going to be a
longer term investment on my belief that its Karma project is the Next Big Thing, it’s always
been a reasonavly strict, reasonably near-ish term trade idea with a price window for eventual
sale of between 25c and 30c. That’s where we find ourselves this weekend after a decent little
rally in the stock last week as TGM finally broke through stiff looking resistance at
25c...hopefully that will now become a floor price.
Be clear that I’m not a definite seller in the days to come, I’m going to watch and see how it
trades first and if memory serves, I’ve seen it pop on decent volume on Mondays after it gets
talked up in newsletters over weekends and included in sellside brokerage alert literature when
weeks begin. No guarantees and we’ll see about that, but if I’m lucky enough to see 28c
printed next week I’ll probably take it.
B2Gold (BTG) (BTO.to): Adding. See above for more. In trading, the Friday dumpage was
very heavy and saw the stock trade briefly below U$0.90, which either means there’s something
seriously amiss at the company or that it was mightily
oversold and ready for a rebound after some fund or
other decided to hit the big sell button. I’m betting on
the second of those options, also as noted above.
McEwen Mining (MUX): Check out ‘Regional Politics’
below for more words of wisdom from Rob McEwen,
who’s really hitting the media at the moment and
pushing the company cause. In trading, although MUX
dropped a long way from the midweek highs it still
managed to sneak in a weekly win and the stock’s being
nicely managed at over U$1 now, the floor looks in
(unless gold drops hard).
Teranga Gold (TGZ.to) (TGZ.ax): A better week, as
TGZ finally broke back over the stubborn and boring 50c
ceiling and started back up, with plenty of help from the
big volume day on Wednesday, obvious on this chart.
My rose-tinted specs view is that TGZ has been through
its Doldrums period and is beginning to wake up I like
that fact that new volume has arrived just before its
expected production results number for 4q15 too, as
guidance for 2016 is also likely in that NR. My talk of (yet
10

another personal) value trap from the other week aside, the basic story at TGZ hasn’t changed
and what you get today, with gold at U$1,100/oz, is...
• A profitable mining company
• With plenty of mine life and exploration upside
• A solid balance sheet position with no liquidity worries
• Producing 200k+ oz gold per year
• And trading at a CAD$200m market cap
It’s worth more than this price, even if gold doesn’t bother to trade higher. We await Q4
production numbers and guidance, but even if TGZ runs higher on that NR I’m no seller at
these levels.
Lake Shore Gold (LSG.to) (LSG): We take a closer look at the 4q15 production numbers as
reported by LSG in ‘Market Watching’ below (so as not to clog up the ‘Stocks to Follow’
comments section too much). Here we note that on Friday the stock traded down on the news,
which was probably the right answer from Mr. Market, but more interesting was the trading
action midweek which saw LSG.to (the Toronto ticker) trade over 9.3m shares Wednesday, a
multi-year volume high for the stock and all the evidence you need that the bigger boys are
interested.
As for price action, LSG has a ceiling in at CAD41.35 and that didn’t get broken last week, with
best trade at 34 (I think). Come the day Goldcorp makes its offer, that will be smashed and
$1.50 will be a starting point. Good to own a fashionable stock for a change.
The Copper Basket
After one week of 2016, The Copper Basket shows a 4.25% loss to level stakes.
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 HudBay Min. HBM.to 0.35 235.23 1086.76 4.62 -13.0%
2 Ivanhoe Mines IVN.to 0.61 778.96 475.17 0.61 0.0%
3 Reservoir Min. RMC.v 4.08 48.46 196.26 4.05 -0.7%
4 Capstone Min. CS.to 0.44 382.04 133.71 0.35 -20.5%
5 NGEx Resources NGQ.to 0.65 187.71 118.26 0.63 -3.1%
6 Copper Fox CUU.v 0.125 417.64 54.29 0.13 4.0%
7 Nevada Copper NCU.to 0.66 80.5 53.94 0.67 1.5%
8 Copper Mtn CUM.to 0.445 118.8 46.93 0.395 -11.2%
9 Hot Chili Ltd HCH.ax 0.09 420.12 39.91 0.095 5.6%
10 NovaCopper NCQ.to 0.395 104.33 39.12 0.375 -5.1%
11 Western Copper WRN.to 0.38 94.19 36.26 0.385 1.3%
12 Amerigo Res ARG.to 0.205 173.61 30.38 0.175 -14.6%
13 Atico Mining ATY.v 0.28 97.59 24.40 0.25 -10.7%
14 Cordoba Min. CDB.v 0.16 79.45 11.92 0.15 -6.3%
15 Revelo Res. RVL.v 0.055 99.19 5.95 0.06 9.1%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -4.25%
The first week of the new-composition Copper Basket is all the evidence you need that the rally
in precious metals mining stocks didn’t carry over to the whole sector. For sure it wasn’t all
negative with five winners (CUU.v, NCU.to, HCH.ax, WRN.to, RVL.to) and one unchanged
(IVN.to) on the week, but the gains were mostly in the smaller market cap stocks and were also
mostly modest. The negatives were heavier, with nine losers (HBM.to, RMC.v, CS.to, CUM.to,
NCQ.to, ARG.to, ATY.v, CDB.v) and five of those double-figure percentage losses and
11

concentrated on producer companies. Biggest loser was Capstone (CS.to down 20.5%),
Amerigo (ARG.to down 14.6%), then biggest market capper HudBay (HBM.to down 13.0%),
Copper Mountain (CUM.to down 11.2%) and Atico (ATY.v down 10.7%), which means five out
of our five producer stocks got hit hard.
And the reason for the pain is here, price charts for copper the metal which saw it drop from
the U$2.10/range down to U$2.03/lb and briefly dip under U$2/lb for the first time since early
2009. To the left the hourly chart of last week’s action, to the right the monthly that goes...
back) .
...way back to when Lehman was still a
powerful force on the market and the world of finances had just about decided not to come to
an abrupt end. The reason behind the drop is the ChinaFear! we noted in today’s intro, which
isn’t just about real world business and production any longer but also about a deteriorating
local currency and a loss of wealth on the country’s main markets (Shanghai, Hong Kong).
Bakc to lact week. The airwaves were full of “Copper sells off due to Chinese (etc)” headlines,
but we also saw the country make a Keynesian move with talk about the State Reserves Bureau
either having just bought or in the process of buying up (4) 150,000 tonnes of copper
(depending on which report you read, there’s just one of them) in order to spirit it away from
the open market and prop up the price. As with the recent Chinese centralized policies to try to
support its stock market last this one looks too small to change the trend and destines to fail
(or at least be of virtually no influence on a copper price which will do its own thing). We’ve
called for copper to go under U$2/lb on several occasions in recent weeks, the chances of that
becoming a reality are now very high indeed, it’d be a brave market player that bets against it
now. Pencil me in for U$1.80/lb, though I note that Gary Tanashian over at Biiwii/NFTRH has
been calling a $1.50/lb target on the metal for quite a while. I have great respect for his
technical analysis abilities, you should have that too.
Copper inventories, per month, 2012 to date
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
12
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua pes tco von ced
Mt Cu Copper inventories: percentage held per exchange
LME Shanghai Comex 80
70
60
50
40
30
20
10
0
source: Cochilco
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua pes tco von ced
LME Shanghai Comex
source: Cochilco

We move to our inventories tracking and this deferred from last weekend’s bare bones edition,
the monthly charts of world stocks of copper. There wasn’t much change in the absolute sizes
or ratios in December when compared to November, with once again a nod to the newly
interesting size of the stocks in the Comex warehouses, now 13% or so of the whole deal. But
overall we’re simply marking numbers this month, not much to report.
Now for the regular weekly warehouse comment section:
• Total world copper stocks in the three official warehouse systems came to 487,285
metric tonnes (MT) this weekend, up 9,023mt (+1.9%) on the 2015 year end total.
• Shanghai stocks gave us the only significant movement, rising by 10,717mt (+%) to
finish at 188,571mt. This move is largely as expected, with the SHFE system likely to
add more stocks as we run up and through the Chinese New Year period (for the
record, this year the New Year falls on Monday February 8th). As noted on previous
occasions, I think there’s a shot at seeing 300k in this warehouse system before the
end of the quarter.
• LME stocks gained a very small 425mt (+0.2%) to finish at 236,225mt. The LME
system has been asleep since before Christmas, but we may start seeing movements as
from now.
• The Comex number dropped by 2,119mt (-3.3%), to finish at 62,064mt. Comex stocks
have dropped a bit from their 66k highs in mid-December, but we’re still running at
high numbers compared to the last couple of years and it’s going to be interesting to
see which way this one breaks. If we start seeing numbers over 70k it would be a big
bearish signal for the metal.
Here's the Shanghai chart, which clicked up a bit after its Christmas lull. If previous years are a
reliable guide, we should see modest gains in stocks during January 2016, a sharp rise early
February and a peak around March or April. Time will tell, with the State Reserve Bureau’s
supposed purchase another potential factor.
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
260000
240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
13
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 dn22 ht31 dr3naj
Mt Cu
source: Cochilco
Overall, when it comes to warehouse stocks I think it’s worth reiterating that at the moment, I
don’t think the data it provides is a reliable indicator for future movements in the price of
copper.
Now for a comment or two on a couple of basket stocks:
Capstone (CS.to), HudBay (HBM.to), Copper Mountain (CUM.to): We could include the
smaller producers Amerigo and Atico, but the acid test here are the three bigger producers
(two of which new to the list in 2016. I put them in to add a different flavour to this year’s
basket, but these three as a group as also a case study for the year ahead and how equities

may or may not be swamped by welter debt burdens. Here’s a quick line or three on each stock
to outline the debt problems each one has and how it’s been weighing on the stock price (those
very low price/book ratios speak volumes of the ill health), with data correct as per the last
company filings of 3q15.
HudBay: Book Value per share $8.60, price book ratio 0.39X and a liabilities sheet that
includes U$1.3Bn in financial debt (mostly senior unsecured notes and a number that doesn’t
even include the streaming deferred revenue position). Currently making zero from operations
(3q15, likely to get worse with copper’s continued decline).
Capstone: BV/share $2.70, price/book ratio 0.13X and a liabilities sheet that includes $329m
in financial debt (on a revolver). Currently making a loss on operations, though it has reportedly
been mining a higher grade zone at its main Minto mine and could see some modest free cash
flow this quarter, despite the copper price drop. Another downer is that it’s close to defaulting
on the covenants attached to the long-term loan requirements, though the company has said
that at above $2/lb copper it should be okay in 2016.
Copper Mountain: BV/share $1.87, price/book ratio 0.21X and a liabilities sheet that includes
$393m in financial debt (term loan, senior debt). Currently making a loss on operations and
even when it makes an operating profit, the debt servicing (plus debt taken out in US Dollars
but company accounts in Canadian Dollars) squashes any chance of returning a net profit.
With debt on board, these companies don’t have the luxury of time and each one desperately
needs a pick-up in the price of copper in order to get more cash flowing through the books and
covering debts. All three represent serious risk of default on loans and subsequent receivership,
which means all three are potentials to see their equity value crushed to precisely zero dollars
and zero cents before any restructuring happens. Which is why they’re so very sensitive to the
price of copper so with the arrows pointing lower in the near-term, don’t be fooled into thinking
these things are at rock bottom prices already. They can go a whole lot lower and will if copper
goes South.
Which is why they’re fascinating case studies and key members of this years Copper Basket,
because the opposite is also true and if copper kicks back up, there’s the potential for some
really outsized gains on these highly leveraged vehicles. We shall wait and watch closely, but
for the time being I see no trade in any of these stocks, strictly sidelines please.
The Low Cost Producer Basket
After 1 week of 2016, the Low Cost Producer Basket shows a gain of 7.37% to level stakes.
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Goldcorp GG 11.56 830.22 10.38 12.50 8.1%
2 Barrick ABX 7.38 1164.67 9.79 8.41 14.0%
3 Newmont NEM 17.98 529.12 9.53 18.01 0.2%
4 Franco Nevada FNV 45.75 157.07 7.67 48.83 6.7%
5 Agnico Eagle AEM 26.28 217.67 6.43 29.56 12.5%
6 Ang/Ashanti AU 7.10 405.27 3.20 7.90 11.3%
7 Detour Gold DGC.to 14.41 170.85 2.75 16.12 11.9%
8 Sibanye Gold SBGL 6.09 228.71 1.50 6.56 7.7%
9 New Gold NGD 2.32 509.16 1.21 2.38 2.6%
10 Buenaventura BVN 4.28 254.19 1.08 4.23 -1.2%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 7.37%
A fine start to the year for the larger precious metals stocks and our Basket too, which rose
7.37% as an average even with a loser in among the field. It also beat out the GDX benchmark
14

(though no tracking chart yet, we’ll gather a few weeks of data before that shows up again)
which rose by 5.7%, thanks to the strong double figure percentage gains in Barrick (ABX up
14.0%), Agnico Eagle (AEM up 12.5%), Detour (DGC.to up 11.9%) and AngloGold Ashanti (AU
up 11.3%) as well as the others. To the downside was Buenaventura (BVN down 1.2%) which
was a rare loser among the producer field (along wit B2Gold of course, but that’s not part of
this basket this year). A mention of Newmont (NEM) is needed too, as it only managed to add
0.2% on the week and under-performed peers significantly. In fact NEM was overtaken in
market cap terms by ABX last week; just a few weeks ago it was more valuable than Goldcorp
and sitting at the very top of the pile.
But the main observation from this week’s basket result is that the majors as a group did better
from last week’s pop in gold than the smaller companies or plays. That’s the type of result
you’d expect from a rally that attracts new money into the mining sector, as big money will
invariably enter via big stocks, only then rotating into smaller names. In other words, healthy
action to report here even though my own portfolio couldn’t keep up with the ABX’s or AEMs of
this world.
Barrick (ABX): This weekend sees the conclusion of the rounds community meetings at ABX’s
still rather mysterious Misha project (see IKN
345 dated December 20th for what we know
so far) and approval and the so-called ‘social
licence’ from the local community is fully
expected to be awarded. Here’s ABX versus
GDX since the Misha report and as you can
see, last week in trading ABX did very well,
which matches my “the one I’d most like to
own” thought last week when putting together
the new list. My, aren’t we all geniuses all of a
sudden?
Buenaventura (BVN): Back in IKN344 dated December 13th we reported on the community
relations mess BVN had made for itself at its San Gabriel (ex-Chucapaca) project in the
Moquegua region of South Peru. If you recall, before Christmas the company was supposed to
run its prior consultancy main meeting with the local community at the town of Ichuña, but
before the meeting started the local bigwigs kicked up a fuss, the parties started accusing each
other of this-and-that and the whole situation deteriorated rapidly to the point where the
meeting was called off. Here’s how that piece in Ikn344 ended, by way of a reminder:
“The upshot is that BVN, once again, has a community problem on its hands
that could be serious enough to block a key development project. The share
price drop of Friday probably doesn’t reflect all of that yet. I still like the idea
of buying into BVN due to its leverage to
gold, but I’m also glad that I haven’t bit at it
yet.”
And sure enough, we saw weakness in BVN after
that and the stock reached a sub-$4 low point that
was on the (apparently) unrelated news that BVN
had its credit rating cut by Moody’s (see IKN345).
San Gabriel is a key project for the future of BVN and
as the stock is still under pressure and close to all-
time lows, it could provide a trade. That’s because
even though the intel is still only anecdotal (I have
15

no link) there’s better news to report from the Ichuña area. Apparently tempers have calmed
since that fractious meeting in early December and both sides are keen on getting the meeting
scheduled again. Local authorities, representatives of the Ichuña locals and representatives of
BVN have formed a commission in order to air their views on the project, to offer more
information and to allow an informal outlet for locals’ concerns which the company can then
address (apparently water use is a major concern and locals want more than the single
reservoir that BVN has offered to build). It seems BVN has climbed down from its rather
arrogant position and has agreed to provide more information and community support to locals
in order that they might understand the project better, which can’t be a bad thing and once the
process is done (which should take a few weeks) the prior consultancy meeting, a key part of
the permitting process BVN has with the Peruvian government, can go ahead.
Agnico Eagle (AEM): Company head Sean Boyd missed out on some of the very decent rally
in his stock by selling 21,000 of his shares on Monday at an average price of CAD$37.56 for
gross proceeds of CAD$788,802 (5). With the stock closing the week at CAD$41.82 in Toronto,
it means he left CAD$89,418 on the table. But I don’t think he’ll be sweating that too hard.
In more serious news AEM is still the market darling gold stock and carried on from where it left
off 2015 by adding to annual gains (a rare bird indeed). It looks expensive to me, particularly
when stacked against peers, but there’s no doubt Boyd has steered his charge very well on the
last couple of years and the key ingredient has been keeping large scale debt of its books.
Regional politics
Argentina: Be careful what you wish for, Rob McEwen
Two things to cover on Argentina this week, first an interview with Rob McEwen in the trade
press last week in which he encapsulates the pro-country push inside mining for Argentina.
Then (and by request) a little expansion on the notes in last week’s edition on the Regional Risk
Review for the country.
First things first and new year, new hope, new optimism all round and the time of the annual
cycle when people make their cases for the Next Big Thing. That’s fair enough and as an
example MUX chief Rob McEwen gets interviewed on the subject of the new Macri government
in this Northern Miner article (6). His replies cover the consensus on how the mining industry,
as well as the foreign investment chattersphere in general, is talking up the country’s prospects
in 2016 in classic new year style. It’s worth reading it all but here’s how the piece ends:
TNM: Overall, are you optimistic about the new government ... and the likelihood of
change in the mining sector there?
McEwen: I think it’s going to take a while to change, but if they can come to terms with
the U.S. bondholders, which will open up capital markets to the country, and if they can
keep making steps to show they’re serious about treating foreign investors fairly, and
holding to the laws they put in place that attracted miners to the country in the first
place, rather than arbitrarily changing them, then it has a great chance to become a
destination for mining capital investment.
TNM: There were rumors two or three years ago that McEwen Mining was so fed up
with trying to operate in Argentina that it was considering selling its assets there. Is that
true?
McEwen: We have our San Jose mine and large Los Azules copper project. We did
market Los Azules two years ago, with the objective of raising funds to financing our
gold projects. Unfortunately, falling metal prices and terrible government policies killed
that effort. The offers we saw were unimpressive and our balance sheet improved to
the point there was no pressure or need to sell. Today, I see Argentina becoming one
of the best turnaround stories in 2016. So companies with assets down there, such as
ours, will likely see their share price appreciate, as the new president continues to
enact more legislation that is foreign investor friendly. I understand that Argentina is
planning to send a large delegation of senior officials to the PDAC this year to highlight
how serious they are about protecting the rights of foreign investors.
So that’s the first part of today’s Argentina comment covered, the pro-mining case as laid out
16

by somebody who deserves more respect than I. The second part is the flipside and by request
from a couple of readers (who obviously bothered to read last week’s short edition carefully,
which is kind of them) and expansion on the last sentence in the Argentina commentary of the
Regional Risk Review. Here’s what that said, by way of a reminder:
But one point is lost from the “internal national political stability” score due to
the “be careful what you wish for” theory.
In hindsight, it was a little facetious and/or arrogant of me to stick a dry comment like that
without explanation. The point here is that:
• Argentina has just voted in a non-Peronist President and government. Macri is as
“standard right wing” as they come and particularly on economic matters will try
everything to steer the country away from its heterodox macroeconomic traditions and
policies.
• Like it or not, the country has a deep-rooted and extremely loyal band of people called
“Peronists”. We’re not going into an examination of what that party is or what it
adheres to (life’s too short, so is this resumé, check Wiki or somewhere for an
overview). Today we’re staying practical and stating that Peronism is happy to pick
fights with its own people, because as an umbrella group it covers a lot of the political
spectrum (back in the good ol’ days, they used to kill each other in terrorist attacks
because “my Peronism is bigger than your Peronism” etc etc). We’ve seen that in
recent times too, as “traditional” Peronist and “progressive” Peronist factions split away
from the Cristina FpV version (aka Kirchnerism). Another example is the late-era
Menem government that way way too neoliberal for the hardcore’s tastes.
• However, those fights pale into insignificance to the type of display they’ll put up
against a non-Peronist government. I’ll offer the De La Rua government as first
example, but those with longer memories of LatAm politics will remember the decay
and death spiral of the Alfonsin administration in the late 80s, too.
And with those items in place, we get to the point of this explainer: Anyone who thinks
Peronism has just been dealt a mortal blow via the election of Mauricio Macri and
believes that Argentina is about to change its course of history in some immediate and
definitive manner in order to join the club of “acceptable developing nations” (or whatever else
you’d like to label them) is in for a rude awakening.
For sure we’ll get a Macri honeymoon period in just the same way as any other new
government in any other democratically run country. Some are longer than others, but when
this one in Argentina comes to an end the backlash will be bigtime. Argentina is set for a rough
ride at best in 2016 and 2017, a VERY rough ride most likely. I believe Macri is sincere with his
desire to drag Argentina kicking and screaming into the 21st century and that he also firmly
believes he’ll be doing right by his country to enact the type of policies to do that. Of course
he’s part of the very rich elite and a central figure in the Club Of Business People, but he’s not a
corrupt guy either and I do wish him the best, if only for the good of a country which has a
special place in my heart. But I’m under no illusions either, it’s going to be rough and when it
comes right down to it, his win at les than 52%/48% difference was by no means a landslide
(against a candidate in Scioli who ran a poor campaign and couldn’t unite the Kirchnerist base
anywhere as well as Cristina).
It’s not easy to pinpoint the moment at which the honeymoon period might end, but one of the
more obvious ones at this point will be the eventual deal struck between the “bond holdouts” (if
you feel generous) , a.k.a. “vulture funds” (if you don’t) led by Paul Singer and Elliott
Associates. I’d guess a deal gets done at some point this year and if it does, Macri can try to
frame it any way he likes but it’s going to go down like a lead balloon with Argentina’s rank and
file. It could be that one but as admitted it’s a really obvious call, so it might turn out to be
17

another matter such as the recent devaluation spinning inflation further out of control, or the
general macro downturn for commodity producing countries, or
law and order matters. Another factor will be Cristina Fernández
de Kirchner herself, who’s obviously in kickback mode at this
point but another foolhardy thing to do by any political analyst is
to write her off or consider her a spent force. As things stand
today she’s still the best political animal in Argentina (and I’d call
that by quite a distance), plus her desire to set up a family
dynasty (son Maximo, sister-in-law Alicia) is well set.
Summing up, nobody expects a smooth ride for Macri but this
one it’s going to be merely bumpy either. He’s up against a
political institution that runs the country and any attempt to
snatch the feeding bottle away from the State employed masses
(and horrors, get them to work for a living) will meet with
extremely stiff resistance. Or if you like, here right is a little visual
I stuck on the blog a couple of years ago and is valid today, as
Argentine culture doesn’t change just because some new guy is
working at the Casa Rosada:
Or even this one below, mining specific, which I first ran on the
blog in June 2012 (7). Three and a half years later and still 100%
valid until otherwise demonstrated.
Right now Rob McEwen and others want you to be at seven or eight o’clock, best guess.
Ecuador: Fruta del Norte State burden contract delay
We’ve seen this story before, when Kinross owned Fruta del Norte and the deal between the
government of Ecuador and the company on its State burdens was delayed before eventually
falling apart (and Kinross walked away). This time it’s Lundin Gold (LUG.to) and all during 2015
both sides made noises firstly about getting the deal to fix State burdens (e.g. corporate tax,
royalties, worker benefits, community obligations, windfall tax etc) by the end of 2015, then
18

“December or January” and more recently “in the first quarter of 2016”. For example in this
interview with Northern Miner in October (8) Ecuador’s mines minister Javier Cordova was
quoted this way:
“I feel that investors in the mining industry are looking closely at Fruta del
Norte — they want to know if that’s a project that we can make happen,”
Cordova says. “It’s going to show that you can do mining in Ecuador, and of
course, if we fail, that will be a negative signal. But we are positive. We’re
working closely with Lundin, and we’re 100% confident that we will (agree to
fiscal terms) by December.”
Cut to last week when Cordova stated (9) that (translated), “...the economic evaluation of the
deposit is being completed, and that they hoped to sign a contract with the trans-national
company next June”. For the record, June isn’t a month in the first quarter of 2016. Also, none
of the above comes as much surprise to your author (10). For those of you who want more on
this subject, it’s not the first time I’ve pointed a finger towards the piece but please see
appendix 1 for an interview done with Ron Hochstein of Lundin Gold (LUG.to) back in October.
It’s not one that can be excerpted easily because it goes into a lot of the details about the fiscal
issues between mining companies and Ecuador and shows how complex the situation is. Rather
than fill up the Weekly proper, I’ve pasted out the full interview in the appendix below.
Nicaragua: A positive for the business sector
This isn’t something restricted to the mining industry, but it’s still worthy of mention on these
pages today. A report dated Friday January 8th (11) in Nicaragua’s newspaper El Nuevo Diario
has the Daniel Ortega government working with the country’s private business sector in order
to speed up and reduce the amount of bureaucracy and paperwork needed to export from
Nicaragua, as well as another study that looks to do the same for permits in the country’s
construction industry. According to José Adán Aguerri, president of Nica’s important chamber of
commerce body “The Superior Council of Private Enterprise” (Consejo Superior de la Empresa
Privada (Cosep)) (translated), “...Cosep has been offering advice (to the government).
Meanwhile, the government will announce on these (new) measures in the next 15 days, which
will have an enormous impact in time and costs for businesses in the country”.
According to Nicaragua’s Minister of Taxation and Public Credit, Iván Acosta (translated), “We
are specifically talking about reducing the processes (i.e. red tape), the time needed, the days
(of paperwork). Often the case is that there’s no need to invest a lot of money, but what’s
needed is to re-organize the processes and make the government institutions more efficient in
order to export more, produce more and to mobilize more resources so that the country grows.
Chile: Copper export value drops hard in 2015
No surprises in that title, but thanks to the Chilean Central Bank and its preliminary figures out
last week (12) (13) we get to quantify it. Chile exported U$31.123Bn in copper (cathode,
concentrate, other) in 2015, a 17.8% drop in dollar terms on 2014. Here’s a chart with numbers
for the annual totals:
Chile: Annual Copper Exports by USD value, 2009 to 2015
U$Bn
50
44.67
41.36 41.95 40.02
40 37.87
29.70 31.12
30
20
10
0
2009 2010 2011 2012 2013 2014 2015
source: Chile CenBank
19

For those of you who care enough, here’s a monthly totals chart (from the same databank as
the above) which shows the decadent trend:
Chile: Monthly Copper exports value
6
5
4
3
2
1
0
20
9002.raM 9002.nuJ 9002.peS 9002.ciD 0102.raM 0102.nuJ 0102.peS 0102.ciD 1102.raM 1102.nuJ 1102.peS 1102.ciD 2102.raM 2102.nuJ 2102.peS 2102.ciD 3102.raM 3102.nuJ 3102.peS 3102.ciD 4102.raM 4102.nuJ 4102.peS 4102.ciD 5102.raM 5102.nuJ 5102.peS 5102.ciD
U$Bn/month
source: Chile CenBank
The main reason for the drop is of course the market price for copper (duh) but last week
Chilean copper people Cochilco dropped estimates for sales volumes of copper from Chile to
5.68 million tonnes. As Chile is generally understood to be a 6m tonne/year producer, that’s a
significant drop and tied to the lower production levels of late 2015 due to uneconomic
operations being mothballed. Cochilco now has its 2016 production estimate at 5.9m tonnes,
with the difference made up by new mines coming online.
Market Watching
Continental Gold (CNL.to) loses a director
There’s a sign on the wall
But she wants to be sure
‘Cause you know sometimes words have two meanings
Stairway, Zep, 70s
It’s the right moment for a little overview of the political and permitting risk news out of
Colombia recently that’s been attributed (both rightly and wrongly) as an effect on the share
price of Continental Gold (CNL.to), a stock that for me always has been and will continue to be
an off-scale risk and basically untouchable as an investment. Here’s a rundown, bullet point
style.
1) In IKN343 dated December 6th we featured the decently positive news about the
environmental impact permit (EIA) awarded to the Gramalote project (AU/BTO) in Colombia.
2) Then in IKN344 the next week another quick mention was made, though this time to wonder
just why the permit award wasn’t making much news. That short piece finished with:
“...I’m still somewhat mystified as to why this hasn’t made bigger news in the mining trade
papers. One of the big red crosses against Colombia’s name as a mining jurisdiction has always
been the quagmire bureaucracy, here we have an example of a successful permitting process
which counters that accusation with hard facts, but nobody’s talking about it. Go figure.”
3) Then on December 17th the company announced a batch of drilling results as well as
guidance for the publication of its updated Feasibility Study (14) which according to the NR,
“...is considerably ahead of schedule and is now anticipated to be released in the second half of
Q1 2016 versus prior guidance of late Q2 2016.” So far so fair enough and here’s how that FS
NR affected the stock (decent volume the next day, as seen).

4) Though along with the NR, brokerage analysis of the stock started to make mention of the
Gramalote permit award as a potential positive for the stock (apparently, brokerage anal ysts
had been on the phone that day and the CNL IR department made plenty of mention of the
Gramalote permit award, being a project on the same PINE(S) permitting track as CNL at
Buriticá). There are seven Canadian houses currently covering CNL with price targets that start
at $3.50 (nearly a double) and go as high at $7.20 (though one has to wonder why they
bother), with the typical in the $4 to $5 range...plenty of optimism there, I’d vouch).
5) Next bit: On January 4th in his monthly newsletter “The Colombia Gold Letter”, author Paul
Harris reported that the mayor of the local town of Buriticá had been arrested on corruption
charges, with accusations including the extortion of money form local informal and collective
mining groups. This was immediately picked up by the brokerage community and used as a
potential reason to explain the contentious permitting track switch. Here for example is the note
TD Sec sent to its clients (pretty typical):
• This morning, Paul Harris' excellent Colombia Gold Letter reported that the mayor of
Buritica, Carlos Mario Varela Ramirez, has been arrested on charges of bribery and
extortion and ties to Los Urabenos, reportedly the largest criminal collective in
Colombia.
• The Prosecutor General's office alleged that Varela: (1) demanded money from
artisanal and small-scale miners in the municipality for permission to mine without
licenses and (2) obstructed the small-scale mining collectives that Continental had
helped to formalize (i.e., license, organize, etc.) as part of its CSR program.
• The news may help to explain the company's unorthodox change in permitting strategy
(withdrawing from the department-level process and re-submitting its permitting
application at the National level through the PINES process) that surprised the market
in September.
• The company previously indicated that it plans to file an EIA amendment application
with the Autoridad Nacional de Licencias Ambientales in January. Approval is expected
by the company in Q2/16.
• We note that in November AngloGold and B2Gold's Gramalote project was awarded its
permit, the first largescale gold project to have been permitted through the PINES
process. From its initial application in February, the process took approximately nine
months.
As you’ll note on the above chart, that January 4th piece of news coincides with the latest near-
term low for the stock, on the 4th and the 5th.
6) Which also the day I ran a couple of posts on the blog. First this one (15) that reported on
an interview with the president of the previous environmental permitting body that was working
at Buriticá, the regional Corantioquia, which said that CNL’s application had been denied
(something that CNL has tried very hard to cover up). Second this one (16), that pointed out
the permit denial came on September 11th, four days before CNL said they’d “withdrawn” their
EIA permit application with Corantioquia. In other words, all that “permit elevated” talk from
21

CNL was just so much guff and nonsense, as there’s no way they would have changed the
permitting track if their original modification plan had been approved.
Now, for sure the Buriticá mayor’s arrest is newsworthy (and yes, Paul Harris’s Colombia Gold
Letter is good and does provide good English language scoops and insight on the sector like
that one) but there are two things to note here. First, “corrupt local politico” is hardly an earth-
shattering piece of news in any Latin American state and in this case, with so much black
market slush-ype money rolling around the illegal/informal gold mining trade in Buriticá it’s not
a surprise to hear of a local dignitary getting his payola. Secondly, it was impressive to see how
the Canadian sellside community jumped at the news, made their quick mental leaps and
scrolled out the company-positive conjecture...i’s almost as if the CNL IR department had egged
them on a bit...
7) The final piece of recent news of interest from CNL came on Friday afternoon just before the
close, when CNL announced (17), “...the resignation of Gustavo Koch as Executive Vice-
President of the Company and as a member of its Board of Directors, effective immediately”,
which is an interesting development. If we check the NR back in 2010 (18) which announced
his appointment as a director, Koch’s role at the company as a lawyer by education and
experience was explained clearly:
“Gustavo will give oversight to general administration for the Medellin office, provide
management of operational activities in Colombia and continue to act as liaison
between the Colombian and Canadian offices. We are fortunate to benefit from
Gustavo´s expansive knowledge of Colombian law and specific knowledge of
Colombia mining law."
That NR went on to note that he had been living and working in Colombia for more than two
decades, most of that time with CNL, its previous private iteration and previously to that for
Grupo Bullet, the people who sold Buriticá to CNL. We are then supposed to believe that this
member of CNL, as both a key officer and director who is deep in the legal side of the company
and a specialist of Colombian mining law, has decided to move back to Argentina after over two
decades in the company at this late and critical stage of company permitting and de-risking
simply because he wants to spend more time with his family. Even in a company with a
squeaky-clean reputation and not run by people with a long track record of obfuscation and
mis-statements (that nice way of calling people bare-faced liars) this would be a bit of an ask.
CNL.to does not have a squeaky-clean track record, not by a long chalk.
Discussion and conclusion: To sum up, we have a company that hides the fact its EIA permit
application was denied but now swears blind that evrythin’ gonna be alright, a sellside
brokerage world that’s keen as mustard to promote this stock using any sort of conjecture it
can lay its hands on (but neatly ignores passing on hard facts when they’re negative to the
storyline) and then just after Corantioquia gives its side of the story to the press and directly
contradicts the neat CNL narrative a key member of the permitting and legal team who bails at
an optically awful moment, citing a weak reason for the decision (effective immediately).
And on tip of all that, this is the company run by the very same team that blew up hundreds of
millions of dollars in the Colossus (ex-CSI) debacle at Serra Pelada in Brazil, in which everyone
(including the main and bigtime insto investors such as ARC Fund and Sandstorm) was kept
totally in the dark about the massive and very fatal flaws in the project until it was way too late
to do anything about it.
I continue to marvel at the way in which the world of mining will believe anything told to them
by anyone, just as long as there’s some shiny metal dangled as the prize at the end of the
narrative. CNL.to isn’t an investment opportunity, it’s roulette. Whether it’s the traditional casino
or Russian version is up to you to decide.
Sunridge Gold (SGC.v) side bet update
Since taking a small arbitrage-play position in Sunridge Gold (SGC.v) in mi-November (see IKN
22

Weeklies passim) I’ve been slightly surprised by the lack of upside in the stock to date, even
though the EGM is now drawing closer and its management insists that the stock’s liquidation
and distribution will be worth “at least 35c”. Last week’s
action wa again thin and mostly around the 26c and
26.5c levels, which may be as much about opportunity
cost as anything else. I suspect people are liquidating
this “boring” position in order to go play at momo while
gold pops, though I don’t see anything particularly
boring about a very safe 20% upside in a matter of a
few weeks with heaps of downside protection on the
bet.
That said, I do have some value already having bought
for under 25c, so even though it hasn’t been as peppy
as I imagined it would, it’s hardly a failed trade.
We’re now just two weeks away from the EGM (to be held on January 22nd) and I see no
problem in holding through to that date at current prices, as my pencilled in 30c number will
show sooner or later once the deal is approved. Slow and steady wins the race, sometimes.
Lake Shore Gold (LSG.to) 4q15 production numbers
Friday morning pre-open brought LSG’s 4q15 production numbers (19) and here’s a slight
expansion on my “they’re slightly low but fine and we’re okay with these numbers” initial
thoughts, as seen on the blog that morning (20). We start with the main event chart,
production and sales of gold at LSG over the quarters and that looks like this:
Lake Shore Gold: Gold production vs sales, per qtr
60000
55000
50000
45000
40000
35000
30000
25000
20000
23
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
oz Au
Au prod
Au sold
source: company filings
We did this little comparative table of IKN Guesses versus LSG results for the 2q15 numbers
and it’s a useful shorthand, so here it is again:
LSG 4q15: Theory and practice
item IKN model LSG Result difference
Tonnes milled 325000 355600 30600
Au grade g/t 4.3 3.9 0.4
avg recoveries 96.7 96.4 0.3
Au production 43452 42800 652
Au sold 43000 42000 1000
avg price U$ 1100 1100 0
avg price CAD$ 1470 1473 -3
op costs C$/oz 670 ??? ???
calc revs CAD 63.2 61.74* 1.46
source: LSG filings, IKN ests
*revised estimate, not LSG result

As you can see, some of the IKN guesses were pretty good (not that tough to get close on
average gold selling prices, just need to keep an eye on the markets) while others were out
(LSG milled more rock at a lower grade than I’d forecast). The main takeaway is that LSG
mostly managed to offset the lower than expected average grade, which it addressed in its NR
and was apparently due to “...the underperformance of a large stope mined during the
quarter”, by upping throughput. As this chart details, Q4 rock processed was a new quarterly
record:
Lake Shore Gold (LSG.to): Tonnage milled
400000
350000
300000
250000
200000
150000
100000
50000
0
24
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
tonnes/qtr
source: company data
We’d expect the average grade to pop back soon and re-gain its median:
Lake Shore Gold (LSG.to): Au grade (g/t)
6 5.2 5.1 5.4 5.7
5 4.7 4.6
4.2 3.8 4.3 4.2 4.2 4 3.9
4
3
2
1
0
21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
g/t
source: company data
As for forecast earnings, the newly revised CAD$61.74m revenues estimate (which will be close,
LSG always flags its number clearly in the production NR), plus standard forecasts for costs and
A+D+D gives a gross profit estimate of $9.74m...let’s call it ten.
LSG.to: Quarterly Earnings Overview
90
80
70
60
50
40
30
20
10
0
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 tse51q4
$m
revenues Prod Costs
deplet/deprec gross profit
source: company filings/IKN ests
That’s modest compared to other quarters and it points to a breakeven net/net result once
corporate costs are extracted below the fold on the P+L. And that’s right in line with
expectations.
As for the 2016 guidance, the company is basically telling us “more of the same” from its
current operations, but also offers the new production upside from 144 by the end of the year.

• Costs: Same as 2015, near as dammit.
• Production: 160k to 170k from current operations, which compared to just under 179k
in 2015 and smacks of a company that’s playing a little bit of UPOD (under-promise,
over-deliver).
• New production: Somewhere between 10k and 20k oz of non-commercial production as
144 Gap starts delivering gold in 4q16.
The overall impression of 4q15, plus the 2016 guidance, is one of “not broken, don’t fix it” and
that’s fine by me. LSG has consolidated itself as a profitable growth story in 2015 with
exploration upside, which is the bottom line reason as to why I own some. My only real criticism
is the weak-ish average grade number and I’ll be keen on seeing that rebound in 1q16. Aside
from that, we simply wait for Chuck Jeannes to make his move.
Conclusion
IKN348 is done, we end with a few bullet points:
• I’m a buyer of B2Gold (BTO.to) (BTG) next week, before the production numbers come
out, because when it’s all weighed up I think they’re going to make the guidance,
they’re going to raise the cash in a friendlier way than New York assumes, I think way
too much bad news is baked into a sub-U$1 share price and I think it’s high time BTO
bounced. I want some of these cheap shares and I’ll sell them back to the market as a
separate trade as soon as I’ve made a juicy difference. It shouldn’t take long, though
I’m aware of the risks too.
• Focus Ventures (FCV.v) looks hard done by on last week’s selling too, but it’s a tougher
call to add today as the trading liquidity doesn’t appeal (and I own enough already).
And in the end, don’t be too fooled by the long-winded narratives on both FCV and BTO
today, all anal ysis calls are subjective no matter who makes them, the bottom line to
anyone’s buy/hold/sell opinion is always going to be “because I said so”. It’s just that
some people get paid more because their track record of because-I-said-sos is better
than the rest.
• There are several stocks that look cheap this weekend, to me with the optimist’s view
on the gold. Sunridge, Buenaventura, Teranga come to mind for different reasons,
though last week’s thought on Barrick’ is now defunct, it’s already popped a move.
• You’ll notice I haven’t written anything about Minera IRL these last few weeks. Yes, I’m
enjoying the break but chances are that the soap opera will move into its next chapter
in a couple of weeks’ time. You’ll get the necessary coverage when material matters
begin.
• It’s time to sell Phoscan (FOS.to) because it’s going nowhere fast, and price will
determine whether I take profits on True Gold (TGM.v) next week (my greed glands are
swelling, not a good sign). Meanwhile avoid Continental Gold (CNL.to), though I might
have mentioned that before.
• Lake Shore Gold’s (LSG.to) quarter came in just fine. Happy holder.
I thank you in advance for any feedback. Our Top Pick stock is B2Gold (BTG) (BTO.to). Flash
updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen.
Otto
25

Footnotes, appendices, references, disclaimer
(1) http://incakolanews.blogspot.pe/2016/01/gold-lawrence-williams-may-have-point.html
(2) http://incakolanews.blogspot.pe/2016/01/in-ikn348-on-sunday.html
(3) http://finance.yahoo.com/news/focus-announces-positive-prefeasibility-study-133000662.html
(4) http://www.thenews.com.pk/print/88931-Stockpiler-begins-copper-purchases
(5) http://www.emqtv.com/sean-boyd-sells-21000-shares-of-agnico-eagle-mines-ltd-aem-stock/106441/
(6) http://www.northernminer.com/news/new-argentine-government-a-positive-step-says-mcewen/1003745113/
(7) http://incakolanews.blogspot.pe/2012/06/junior-mining-investing-in-argentina.html
(8) http://www.northernminer.com/news/exclusive-interview-ecuador-govt-lundin-gold-close-to-fruta-del-norte-
development-deal/1003715742/
(9) http://www.revistatecnicosmineros.com/ecuador-espera-inversiones-por-600-millones-de-dolares-en-mineria/
(10) http://incakolanews.blogspot.pe/2015/12/ecuadors-mining-minister-javier-cordova.html
(11)
http://www.centralamericadata.com/es/article/main/Facilitacin_de_trmites_en_Nicaragua?u=cceac143115e9505d8aba5
c37bdacb65&s=n&e=2&mid=[MESSAGEID]
(12) http://si3.bcentral.cl/Siete/secure/cuadros/arboles.aspx
(13) http://www.americaeconomia.com/negocios-industrias/valor-de-exportaciones-de-cobre-en-chile-cae-178-en-2015
(14) http://finance.yahoo.com/news/continental-gold-provides-feasibility-study-113000267.html
(15) http://incakolanews.blogspot.pe/2016/01/continental-cnlto-errrno-daniel.html
(16) http://incakolanews.blogspot.pe/2016/01/continental-gold-cnlto-scratching-itch.html
(17) http://finance.yahoo.com/news/continental-gold-announces-resignation-gustavo-200416178.html
(18) http://www.continentalgold.com/English/investors/news/news-details/2010/Continental-Gold-Expands-Senior-
Management-Team-and-Appoints-Executive-Vice-President/default.aspx
(19) http://finance.yahoo.com/news/lake-shore-gold-reports-full-110000714.html
(20) http://incakolanews.blogspot.pe/2016/01/lake-shore-gold-lsgto-lsg-doing-volume.html
(21) http://www.northernminer.com/news/interview-lundin-gold-ceo-bullish-on-fruta-del-nortes-prospects/1003716215/
Appendix 1: October 2015 interview (8) with Ron Hochstein of LUG.to
Interview: Lundin Gold CEO bullish on Fruta del Norte
Negotiations still ongoing over complex Ecuadorian tax regime
By: Trish Saywell
2015-10-28
QUITO, ECUADOR — Lundin Gold’s (TSX: LUG; US-OTC: FTMNF) president and CEO Ron Hochstein sat down with
The Northern Miner to discuss how he sees the prized Fruta del Norte gold project in Ecuador advancing in the months
and years ahead.
The Northern Miner: Ecuador’s Mines Minister, Javier Cordova, says Fruta del Norte will be in production in 2018. Do
you agree with that estimate?
Ron Hochstein: No. We’ve been saying 2019 X as we’re going through the feasibility study, we’re working through
more of the mine development schedules ... there are some things that we could do in 2016 if the markets improved —
26

we could do what we call “early works,” which could push us through to early 2019.
But in terms of mine development, we don’t see production until 2019.
TNM: The minister also hinted you’re close to signing a stability agreement, and that it might be in December.
RH: Again, it’s a nuance there. What we’re saying is we’re going to agree to fiscal terms by December. We can’t actually
sign the agreement because once we sign it, it triggers a bunch of other things in Ecuadorian law. Also there are two
components to the exploitation agreement: there is the fiscal language — in terms of royalties and advanced royalty
payments, that type of thing — and there is all the technical, which is the work plan, and what the mine is going to look
like.
The work plan we can’t do until we complete the feasibility study, which isn’t going to be until early second-quarter
2016. We’re going to negotiate the fiscal side of things, and largely the agreement, subject to tacking on the technical.
TNM: Would you agree that the fiscal terms will be agreed upon by December?
RH: That’s what we’re all working towards — to have that done by year-end. That enables us to go out and start working
on the financing side of things, because the fiscal is known. That’s step one. Step two will be completing the feasibility
study, which allows us to file our exploitation application. But we can work with the banks and everything with the fiscal
terms first defined, and the feasibility study completed.
TNM: The minister said there were other things that needed to be negotiated besides the royalties. For large-scale
mining, royalties are between 5% and 8%. What other things need to be negotiated?
RH: There is the magnitude of advanced royalties. In Ecuador they have money put upfront — some of it is paid upon
signing an exploitation agreement, and there are some other permits that are required.
All that money goes into local infrastructure and local economies, and we get a credit when we pay royalties on
production. It’s a way to help prepare the local communities for eventual mine construction and operation ... the
advanced royalties are payable early on. That’s the intent ... to help prepare the communities for all the employees.
TNM: And that goes into a common pool, and the government decides where the money goes.
RH: Yes.
TNM: The taxation in Ecuador is quite complicated. Can you explain what the main components are?
RH: It is not an easy thing to do. Value added tax (VAT) is still an issue.
The VAT is 12%, and Ecuador is one of the few countries in the world that doesn’t reimburse VAT for companies that
export ... there are still some things that we have to work on with the government, but the process is open, and
negotiations are going well.
TNM: What are the tax incentives?
RH: The corporate income tax rate is 22%, which is lower. There is some work being done on relaxing duties for
bringing in mining equipment that can’t be built here in Ecuador. They are still looking at the capital outflow tax ... going
back outside for interest payments, and things like that. There are different things they are looking at.
I don’t look at it as much as incentives, as I look at trying to develop a fiscal regime that is competitive with other mining
regimes in Latin America. They’re looking at it as giving us some incentives, we’re looking at it as: “We need this in
order for Ecuador to have a competitive fiscal regime going forward.”
TNM: Minister Cordova said the taxation rate is 27%, which he said compares favourably with the regional average.
RH: That’s a number they have calculated that the Chamber of Mines has a real issue with. When you compare all the
taxes — because there are multiple levels of taxes, there’s profit sharing as well, part of that goes back to the
government — it’s much closer to 50%. When you do a similar analysis for Chile and Peru, you’re looking at 42–48%.
Ontario I think is 52%.
TNM: Total all-in taxes are close to 50%?
RH: Yes, total all-in sustaining taxes at the end of the day ... that’s all going to government. The 27% — we’re not sure
actually where that number comes from.
TNM: The minister said they hired Wood Mackenzie to look at Ecuador’s policies, and said the conclusion was that
taxes were too high — so they lowered them to 27%, from 35%.
RH: That’s the income tax rate, but they’re not taking into account royalties that you are paying. A 5% net smelter return
royalty is not uncompetitive, but it’s not low. And then you look at profit sharing, and profit sharing is 15% of your before-
tax earnings. Three percent goes to employees and 12% goes to the government, but again, that’s going back into local
governments.
If you’re not helping to fund local governments, the federal government has to fund local governments. You have to look
at it as payments to government.
TNM: So you don’t think a 50% tax rate is all that bad?
RH: I don’t think it’s unrealistic. Yes, there are jurisdictions that are lower, but at the end of the day, if you are essentially
sharing the wealth of the natural resource development, that’s a pretty good position to be in.
TNM: The tax burden isn’t prohibiting you from going forward with this project?
RH: No. And what we are cognizant of is that Fruta del Norte is one of the best undeveloped gold deposits in the world.
When we’re talking to government, we have to think about what’s competitive for the mining industry, not Fruta del
Norte. Because it is a rich deposit.
There are other potential projects here. There’s Mirador to the north, which is a large copper porphyry; there is a
company called Odin Mining here, which is exploring X so we have to work with the government to make sure that we
are creating a long-term, sustainable fiscal regime.
TNM: The stability agreement is good for an initial 15 years, and can be renewed for another 15 years?
RH: We’re negotiating for a 25-year term that can be extended for another 25 years.
TNM: The goal posts seem to change depending on who you talk to.
RH: It’s new, so it’s at times challenging. But it’s rewarding as well to be first.
TNM: The minister said Ecuador should sign this deal soon to prove that its mining sector is open for business.
RH: Yes, we were at a meeting here recently with some other mining companies, and they said Lundin Gold is the one.
It’s important because of the profile of the project and the profile of the company. The Lundins have a following [in the
industry], so there’s one thing, I don’t want to sound arrogant about the family, but look at what they did in the Congo,
what they did in Argentina ... what they’ve done in oil and gas in some parts of the world. They have been successful
working with governments.
If they’re not successful here, it’s not just another mining company that was unsuccessful, it was the Lundin family that
was unsuccessful. So it really is putting on a lot of pressure — and not only pressure internally, but also pressure from
outside.
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TNM: You have your hands full with Fruta del Norte, but would you look at acquiring more ground in the country?
RH: No, we acquired a fairly large land package from Kinross. The Fruta del Norte project is 50 sq. km and there were
860 sq. km in total, and Kinross had done a lot of work on some of those, so we’re looking at that, but our focus is on
the fiscal and regulatory regime, environmental permitting and feasibility study. We have done exploration work, but
we’re putting that on hold until we get some of the key things done ... that’s probably the latter half of next year.
TNM: All of the environmental applications submitted so far have been approved?
RH: So far, and some are in progress, but we have worked with them. One of the things we’re working on with the
Lundin Foundation is training of Ministry of Environment personnel, because a lot of them don’t understand mining.
They understand oil and gas, but oil and gas and mining are not the same, and that’s part of the education we have to
do here as well X but they are quick studies, and with the right people in the room, you can make things happen.
TNM: The mines minister was quite critical of Kinross for abandoning the project, and Lundin paid just US$240 million
for it. That was quite a good deal.
RH: If you look at the market, yes, we got it for a pretty good deal. Kinross still owns 22% of the company, so they can
still participate in the upside if we’re successful. They still have the potential to earn a lot more.
The main thing that people forget is timing. When Kinross was here, oil was high. This country was awash in fiscal
inputs into the country. The gross domestic product was growing like crazy, and you had a good, solid leader — and you
still do — who was putting money back into the country, so the country was really growing. You had countries all over
the world — Australia, Mongolia, Chile — who were talking about windfall profit taxes. So what [President Rafael
Correa] put in wasn’t all that unheard of. It was a combination of things, but most of it was timing.
If you look at the environment we’re in today, it’s US$40 to US$50 per barrel of oil. I was in Guatemala last week to tour
Escobal’s operations just as a benchmark, and they’re also nervous because El Niño this year has got a lot of people on
this coast very concerned.
They’ve looked at what else they can do to push the economy other than oil and gas. They’ve put a big push on tourism.
Tourism has grown, but as we know, tourism is not big dollars. They realize mining is the only thing that they can really
do here that can help backfill oil and gas.
TNM: The minister said so far this year Ecuador has lost US$7 billion in revenue from the oil and gas sector, and
pointed out there is no leverage, because the currency is tied to the U.S. dollar.
RH: [Yes.] That’s the other aspect, the strong U.S. dollar.
TNM: Can you explain the windfall profits tax?
RH: There are two big things that have changed since Kinross was here.
The first is that now you can recover all your capital before it kicks in. So that’s big.
The other is that they have set the price on the Wood Mackenzie formula, which is a 10-year average, plus one
standard deviation, and brought to today’s dollars. So you have inflation working for you. A lot of the modelling we have
done would not have an impact.
If you have, say, a gold company that is operating in Canada or Chile, or any place else, and you’ve got us that has this
windfall profits tax, it puts us at a disadvantage, because the potential upside is limited ... the modelling we’ve done,
you’d need a rapid spike in gold for it to kick in.
Nevertheless, when investors look at it, they see a potential ceiling. So we continue to discuss this with the government.
We’ve got bigger and more important things right now X but we continue to raise it.
There is only one other country that has a windfall profits tax that I’m aware of, and it’s Bolivia. A lot of the countries
walked away from it. Mongolia walked away from it. Australia walked away from it. As far as I can tell, it’s Bolivia and
Ecuador that are left.
Again, what we’re trying to do — not just Lundin Gold, but the government — is create a competitive, sustainable fiscal
regime in the country.
Stocks To Follow Closed Positions 2015
Closed in 2015 closed close price
Argonaut Gold AR.to jan'15 C$1.47 14-dic-14 C$2.53 72.1% Big gain small time, profit taken
Amerigo Res ARG.to jan'15 C$0.405 20-jul-14 C$0.285 -29.6% Given up on weak Cu prices
Reservoir Min. RMC.v jan'15 C$6.05 18-jun-14 C$4.12 -31.9% sold on Cu downturn
Coro Mining COP.to jan'15 C$0.075 26-ene-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-abr-11 C$3.57 55.2% Top pick, bot out, big win
Timmins Gold TGD jun'15 U$0.60 19-abr-15 U$0.62 3.3% near-term trade, out of time
First Majestic AG jul'15 U$10.51 10-ago-14 U$4.55 56.7% horrible failed trade
NovaCopper NCQ.to jul'15 C$1.05 09-abr-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-ago-15 U$3.05 39.9% trade closed, profit taken
Legend Gold LGN.v nov'15 C$0.085 01-mar-15 C$0.035 -58.8% tiny "land grab" idea, failed
Timmins Gold TGD nov'15 U$0.245 20-sep-15 U$0.15 -38.8% small near-term loser
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
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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
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
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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
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
30

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.
31