IKN #349Premium

The IKN Weekly
Week 349, January 17th 2016
Contents
This Week: In today’s issue, “The best gold article that I’ve read for a long, long time”, Gold
mines are made of colliding neutron stars.
Fundamental Analysis: B2Gold (BTO.to) (BTG) 4q15 and more
Stocks to Follow: Overview, Lake Shore Gold (LSG.to) (LSG), True Gold (TGM.v), Phoscan
(FOS.to), B2Gold (BTG) (BTO.to), Teranga Gold (TGZ.to) (TGZ.ax), Focus Ventures (FCV.v),
McEwen Mining (MUX).
Copper Basket: Overview, HudBay (HBM.to), Capstone (CS.to).
Low Cost Producer Basket: Overview, Buenaventura (BVN), Sibanye (SBGL).
Regional Politics: Peru: Keiko Fujimori proposes The Ollachea Model for mining projects,
Guatemala: Jimmy Morales is President, Argentina: Vulture alert, Argentina: Positive news for
mining from San Juan, Ecuador: Your first 2017 presidential election heads up, Ecuador: Fruta
del Norte State burden contract is still delayed, Chile: More cost cutting measures announced
by Codelco, Chile: Latest investment figures offer a window on the future of copper.
Market Watching: A small thought on Tahoe Resources (TAHO) (THO.to), Chinese GDP is
only growing by 2.5% per annum, Almaden Minerals (AAU) (AMM.to): An interview with Morgan
Poliquin, McEwen Mining (MUX) 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
In today’s issue
A few things in this issue worth highlighting:
• Selling True Gold (TGM.v) on new political risk, plus I was close to selling it anyway.
That’s in ‘Stocks to Follow’.
• A B2Gold (BTO.to) (BTG) analysis, that’s in “Fundamental Analysis”.
• Promoting Lake Shore Gold (LSG.to) (LSG) to Top Pick. That’s in ‘Stocks to Follow’.
• China GDP is only growing by 2.5% per year. That’s in ‘Market Watching’ and it’s the
only closing bullet point, too.
There’s plenty more of course, e.g. I also like the Political Risk section today because it has
different country issues today (and as an entire section has got a little long-form, so just choose
the most interesting ones if you like). Meanwhile, for something better to read than anything in
IKN349 take a look at this next bit.
“The best gold article that I’ve read for a long, long time”
That’s how the article “Paper Gold: Utopia for Alchemists” (1) authored by John Hathaway,
Senior Portfolio Manager and Tocqueville Asset Management was presented to me late last
week in a mail from a highly respected industry player (no names no packdrill) so there was no
1

choice, I had to drop everything and read it all. On finishing the longread article (tech tip: check
out Pocket dot com, wonderful little application for storing articles and then reading them on or
offline that’s perfect for long articles) I’m forced to agree with my correspondent, this is
excellent reading material on the state of the gold market.
The original is dated January 7th so I’m a little late to it and you may have read it before me but
no matter, I strongly urge you to use link 1 below, or perhaps link (2) which is an abridged
version that appeared in Barron’s last Thursday (though it’s still long). To give you the flavour,
here’s how the piece ends:
Much of what passes for financial wealth is in our opinion imprisoned in a matrix from
which there is no easy exit. The return migration of capital to real assets promises to
be disruptive. The misdirection of capital could well cause losses for many but
opportunity for a few. The list of opportunities is short, limited in capacity, possibly
complex, and difficult to access. Among the possible opportunities, gold is accessible
and straightforward. Gold has a history of responding inversely to the direction of
confidence. Gold ETFs, such as GLD, offer the best attributes of self-reflexivity from a
bullish perspective. Outflows from the $3 trillion of equity ETFs seem likely to
exacerbate downside market risk. The opposite is true for gold ETFs, which must
respond to capital inflows by purchasing physical metal. The pool of liquid gold to meet
that need has been severely depleted. We believe that the stage has been set for a
significant repricing of gold in all currencies, including the US dollar. Ownership of
physical gold outside of the financial system seems to make more sense than ever.
Gold-mining equities, which have been severely depressed by the four-year decline in
the gold price, should also participate. We believe that a trend reversal could prove
explosive for the entire precious metals complex.
But please don’t stop there, the whole analysis is top quality. Go read it.
Gold mines are made of colliding neutron stars
Semi-OT and for armchair scientists such as myself, this links (3) to a most interesting article on
the latest theories on how gold (and other heavy elements, anything higher than iron or nickel
on the periodic table) is made by the universe. It appears that your common or garden
supernova explosion just isn’t enough these days (I remember my textbooks), you need to first
get two neutron stars then get them in the same place in the big sky so they smash together
and produce one holy mother of a bang. Which might explain why gold is such a vanishingly
rare thing, even on a very concentrated chunk of universe such as our solid planet. Hey, it
might even explain why it’s shiny.
Fundamental Analysis of Mining Stocks
B2Gold (BTO.to) (BTG) 4q15 production, 2016 guidance, its horrendous trading
action in the first two weeks of 2016 and what I plan to do now
Post-close Thursday B2Gold (BTO.to) (BTG) reported its 4q15 production numbers (4). We also
had a minor level piece of news on B2 in Namibia on Wednesday when Forsys announced (5)
that B2 would be optioning in to up to 100% of its gold property in that country in a standard
looking deal but I’m not going to dwell on that (in one line an interesting approx 0.75 g/t gold
open pit project, needs exploration work done), today’s is about three main things:
• The 4q15 production numbers and 2016 guidance.
• The awful (no other word) share price performance of B2Gold recently, which to my
surprise only accelerated last week instead of levelling out.
2

• What I plan to do about my BTO position
So we’ll do things in that order.
4q15 production
As it turns out B2Gold didn’t make its 2015 guidance number of 500k for the year, even though
it had talked up its confidence of hitting it all through Q4. No bones about it, I find that very
annoying no matter what the logical post facto explanation comes with the news. Here’s the
general overview chart with every BTO quarter since the company began...
BTO: Gold produced, per qtr
160000
140000
120000
100000
80000
60000
40000
20000
0
3
90q2 90q3 90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
OzAu
source: company data
...(we are cursed with a long memory) which shows BTO had its record quarter as expected,
producing 131,469 ounces of gold and giving it chance to stick a pretty headline on its news
release (...Record Fourth Quarter and Full-Year 2015 Gold Production...) but that’s about all.
Here’s the production breakdown table, ripped straight from the NR...
...and here’s the breakdown chart (the one used before):
BTO: gold production by mine
160000
150000
140000
130000
120000
110000
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
oz Au
Otjikoto prod
Masbate prod
Limon prod
Libertad prod
source: company filings
Breaking that down even further and comparing the Q4 result to our expectations...
At Libertad, the Q4 production result of 35,234oz, was just slightly off our forecast of
36,000oz. This is an acceptable one and it’s good to see Libertad back on an even keel after a

rough 2015.
BTO: Libertad gold production, per qtr
45000
40000 38596 37681 36624 36862 35234
35000 31234
30000 27681
25326
25000
20000
15000
10000
5000
0
4
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
Oz Au
source: company filings, IKN ests
However, it’s notable that guidance for 2016 at Libertad isn’t as strong as expected (see
below).
At Limón, the Q4 production result of 8,903oz, was a long way off our forecast of 13,000 oz.
BTO: Limón gold production, per qtr
25000
20000
15686
15131 14517
15000 13158
11122 11970
9822 8903
10000
5000
0
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
Oz Au
source: company filings, IKN ests
BTO blamed the three week strike for that (understandable) plus a couple of operational issues
that slowed production down for a while (one of them may affect 1q15, though not by much).
But even taking into account the strike time this production total was a miss.
At Masbate, the Q4 production result of 47,958oz, slightly above our forecast of 47,000 oz.
BTO: Masbate gold production, per qtr
70000
62972
60000
50000 42576 43746 46241 41236 40368 47958
40000 36901
30000
20000
10000
0
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
Oz Au
source: company filings, IKN ests
We’d expected Masbate to put in a good one and it did, the second best quarter since becoming
a part of B2Gold in 1q13. No complaints.
At Otjikoto, the Q4 production result of 39,374oz, was substantially less than our forecast of
44,000 oz.

BTO: Otjikoto gold production, per qtr
45000
40000 36963 38252 39374
35000 31134
30000
25000
20000
15000
10000
7159
5000
0
5
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
Oz Au
source: company filings, IKN ests
This was a big miss and when putting together that previous 44k forecast number I’d taken my
cues from the BTO position on its newest mine, noting the completed expansion of its
throughput capacity as reported in 3q15 and aiming to the top end of its 140k to 150k annual
production schedule. It was operations like Otjikoto that had to step up in order to make 4q15 a
necessarily very big quarter (not just big) and it didn’t show the necessary results to do so.
Production guidance for 2016
We now move on to where BTO is
pointing us in 2016, but before we get to
those numbers here right is how I’d
assumed future years as per the last
update, that came with the 2q15 results
(i.e. before 3q15 disappointed and
guidance was dropped to 500k for 2015).
The point here is that we’d expected
organic growth at BTO to push over 600k
this year, driven by 1) production reaching
capacity at Otjikoto 2) La Libertad’s Jabali
satellite zone coming on line and
improving head grades 3) tweaking and
improvements at Limón and perhaps even Masbate. The new guidance is quite different:
BTO: annual production and estimates
600
500
400
300
200
100
0
0102 1102 2102 3102 4102 5102 tse6102
PREVIOUSLY ON IKN
BTO: production and IKN forecast production, per annum
700
610
600 520
500
373.4 391.2 400
300
200 144.5 158
108.7
100
0
OzAu
Fekola
Otjikoto
Masbate
Limón
Libertad
source: BTO filings, IKN ests
With 2015 now booked at 493k, this year of 2016 is forecast at a median of 530k oz Au by BTO
as per last week’s news release. Here below is a breakdown of the “that was then” forecast in
mid-2015 and the “this is now” forecast of today
0102 1102 2102 3102 4102 tse5102 tse6102
OzAu
source: BTO data, IKN ests

Oz Au BTO: The changes in 2016 production guidance
700
600
500 200
otjikoto 165
400
180 masbate
300 180
200 60 limon
55
100 170 libertad 130
0
was then is now
source: IKN ests, BTO ests
And here’s the table ripped from the NR
to give you numbers instead of just
coloured charts. Even if I were pitching
too optimistically at over 600k oz
around the time of BTO’s 2q15 results
period in August last year, that’s still a
big drop to what was in the cards and
the reasons seem to be threefold, as
far as I my limited insight takes me
anyway:
1) Otjikoto production is not moving any higher in 2016: BTO made a lot of noise about the
high grading Wolfshag zone, but now that’s not coming online until late 2016 minimum.
2) Libertad not developing Jabali: It’s not clear why BTO hasn’t put Jabali’s rock through its
machine yet, it’s been a potential since the start of 2015 but keeps getting set back. We’re now
at “second half of 2016” and that means forecasts for Libertad production growth are out the
window. What I think is happening is that BTO has social and local community problems and
they’re not letting the company access the outlying Jabali (soft extortion?) as a bargaining chip.
If so, we shouldn’t count on Jabali at any point next year and the new 130,000 oz guidance,
though very lowball compared to the 170k guesstimate of before, is realistic.
3) BTO is going to be more efficient this year. The trend in the industry isn’t just ounces, it’s
profitable ounces and line items such as cash cost per ounce (op, AISC, All-IN, whatever) are
keenly following by both pro and retail. The way in which BTO has cut its cash cost guidance to
under U$600/oz even at the upper scale, with median at U$577.50 (see table above), suggests
they’re not about to chase every ounce in 2016 and want to show people more operating profits
and better cash flows, over mere ounces produced. I approve of this.
The share price action and the price drop: Where we stand today
Here’s the 2016 year-to-date chart of BTO.to, to remind you once again of the severe damage
(if it were necessary). We’ve seen extremely
heavy selling in this name (my Top Pick,
grrrrr...), even more than the industry average
and notably BTO didn’t benefit from the pop that
a lot of names enjoyed in week one of 2016.
Reportedly, the heavy block seller out of New
York that I mentioned last weekend is Van Eck
(with Fidelity aiding and abetting) which probably
means it’s being readied for a dump out of an
ETF come quarter end.
The market was anticipating a miss on Q4, it got
it. I wasn’t expecting a miss and made a mistake
6

by doing so. But what we also saw was a market that sold down BTO to very oversold levels
before the 4q15 production NR hit, then sold it some more when the numbers were known to
the point where I see today’s BTO as extremely cheap, even taking into account the Q4 miss
and lower 2016 guidance.
I’ve been playing around
Price/Book Ratios of BTO and peer group
with all sorts of
(latest share price, latest balance sheet)
comparatives over the 1.60
weekend and here are just 1.40
two representative charts 1.20
from the datasets, because 1.00
0.80
it’s not an exact science and
0.60
subjective opinion will
0.40
always play its part in any
0.20
call of this nature. We’ll start
0.00
with this chart, which
compares price/book ratios
of BTO to a group that I’ve
called peers (all calculations
done in US Dollars, even
companies that report in Loonies like LSG.to):
As you can probably make out, some of these names have roughly equivalent market caps to
that of BTO (Torex (TXG.to), First Majestic (FR.to/AG)), some are lower market caps (Fortuna
(FVI.to/FSM), Lake Shore (LSG.to/LSG), Primero (PPP/P.to)), some are higher (Detour
(DGC.to), Tahoe (THO.to/TAHO) and some are a lot higher (Agnico (AEM), Newmont (NEM)),
but they’re all out there as precious metals producers and operators and they give a fair-ish
cross section of the sector as stands.
• We see that two of them are market darlings. DGC and AEM command approx 1.5X
P/BV because, for their own reasons, they’re loved at the moment which means people
are willing to pay more to own a share than in the other cases (whether that means
those two names are expensive is another debate for another day).
• Then come a gaggle that get around-about 1.0X P/BV, including Torex (can’t fault them
till they produce), Tahoe as a bigger market cap, Fortuna as a smaller and efficient
company.
• From FR.to onwards we’re in real distressed levels (the financial anal ysts’ standard
phrase, “Any company under 1.0X P/BV is dysfunctional”) and down there is BTO,
under NEM and just keeping its head above the FUBAR Kinross as at this weekend.
Now there are never apples-to-apples comparatives, each company has its own set of
circumstances and needs to be judged on those. But when I think of the pros and cons of BTO
(and I say there are more pros than cons, else I wouldn’t own the thing) and stack them
against other pro/con thoughts of the others there, BTO looks very oversold. In my opinion.
One of the main arguments against BTO these days is its debt levels, because not only does it
carry financial debt but it’s going to need more cash to build its new Fekola mine (by the way I
hear BTO is looking for another $100m to $150m, no more than that, so the $300m prospectus
limit looks like overkill). And that could be a reason to run away from BTO today I agree, but
when you stack it up against most of the same peers (THO and FR have negligible financial
debt and get “N/A” against their name on this criterium) and compare the book value of the
stock to the amount of real world financial debt held on the balance sheet (other liabilities, e.g.
closure costs, weigh less heavily on the real world) we get this chart out the other end.
7
ot.CGD MEA ot.GXT MSF/IVF ot.GSL OHT/OHAT GA/ot.RF MEN GTB/OTB ot.P/PPP CGK
source: TSX, SEDAR

Book Value/Financial Debt ratios of BTO and peers
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
8
MSF/IVF ot.P/PPP ot.GSL ot.CGD MEA GTB/OTB CGK MEN ot.GXT
source: TSX, SEDAR
Again in this case, the higher your number the better things are for your vehicle. And again
interpretation is necessary, e.g. Primero scores high for false reason as its financial debt may be
low but it still has its own big weight to carry due to its streaming obligations. The point here is
that at a level similar to that of AEM, and
BTO: Assets
vastly superior to KGC to name but one, BTO
3000
really doesn’t look that bad and a glance to
the previous chart again suggests its price has 2500
been battered too hard in recent days for 2000
what it is. In my opinion. BTO’s score may get
1500
a little worse on the above chart(s) if the
1000
company impairs assets when the financial are
printed, but as they’ve already bitten the 500
bullet on that score I don’t think there’s much 0
more to come this time around. But even if
they do, it’s what we see today that gives the
comparative and the current 0.47X price/book
ratio at BTO, a normally well-run company
with profitable ops and plenty of growth in the pipeline, looks harsh.
Discussion
Back in IKN337 dated October 25th 2015 we discussed the disappointing BTO 3q15 production
numbers and along the way said this:
Production guidance: Q4 must come in substantially better...or else.
In Wednesday’s NR BTO also told us that it was still on track to meet its 2015
production guidance of between 500,000 and 540,000 ounces gold for the
year, but they pointed us to the low end of the range. That was pretty
interesting and it’s the source of the above 4q15 production estimate as well,
because if BTO isn’t BSing us and does indeed managed to make its 2015
guidance number it’s going to have to produce at least 140,000 oz gold in
4q15 (well, in fact 139k, but you get the idea). Check that chart above again,
because 140k would be a real stand-out record quarter.
And that wasn’t the last time BTO reaffirmed its expectation to hit “lower end of guidance” for
2015 either, the same message came through as late as early December in literature, as late as
the last week of the year if you talked to the IR department. Therefore 131,469 oz when we
needed at least eight thousand more than that isn’t good enough. Back in IKN337 I talked
about my Q4 guidance for each mine being strict minimums and finished in as plain language
as I could make it:
As BTO has guided on its Q3 production numbers as being able to make its
guidance range, which is perhaps ten weeks away from closing (no more), it’s
put-up-or-shut-up time at this miner. Or put as simply as possible: Either the
company has just spun us a bunch of total BS, or 4q15 is going to be a lot
better.
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 tse51q4
$m
fixed
other current cash&ST
source: company filings, IKN ests for FY15

I found it worthwhile to revisit my own script in IKN337 this week because although 4q15 was
better, it wasn’t a lot better. Although there’s decent and logical reasons for the 2015 guidance
miss, they guided and guided us again to 500k all during 4q15 but failed to deliver on the
number. In short BTO was BSsing us, me and you, all through 4q15. Instead of saying “well
folks, we may miss” they stuck to promising the lower end of guidance and failed to give us
that, they were not honest and I do not like that one little bit, even from companies with a
strong track record of delivery in previous (better) times. I’d always considered BTO as a cut
above the pack when it came to integrity and honouring its word and that means I’ve made a
mistake. Accuse me of being too trustworthy or overly naive and I will hold my hands up and
say “guilty as charged” on this event.
Which is all cute and pretty in theory, but it’s also caused me (and you if you took my advice
damage) significant financial damage. Let’s be clear
on this, if I’d taken a more cynical view on the
prospects of BTO missing its Q4 and hadn’t
assumed a very strong quarter, it would have been
a lot easier to join in with the crowd and sold into
the weakness that was already evident, but started
to accelerate on the filing of that U$300m financing
prospectus before Christmas:
However, price changes everything. Let me be clear
on this, if BTO were priced around the CAD$1.30 to
$1.40 level this weekend I’d have no hesitation in
downgrading the stock to “recommend” and selling
a portion of my long-term position. However and as noted last weekend, I’m more of a buyer
and less of a seller at today’s levels because it’s been unduly and over-punished for its apparent
sins. Today’s U$0.718 / CAD$1.06 is frankly mind-boggling and unjustified, it represents a P/BV
that suggests bankruptcy is a possibility when it’s not (unless gold goes to $900/oz and stays
there, in which case we’re all in the doo-doo).
On due consideration and sticking a finger in the air, I see no reason why BTO cannot return to
at least a 0.7X price/book ratio on its current circumstances. That kind of ratio is still low, it’s
still a negative signal it’s still saying “dysfunctional” in the classic sense, but it’s still an
improvement from today. And what a 0.7X P/BV would mean is a projected market cap of
U$950m and a “fair value” at today’s levels of U$1.026. Compared to Friday’s close of U$0.718
that indicates a targeted upside of 42.9% from today’s levels so hey, let’s call it 43% potential
upside to “fair value and be done. That’s where I stand this weekend.
Conclusion: How I plan to trade my BTO position
And after all that, we get to the point of this whole exercise. Back in 2015 I said clearly that
BTO would be a sell/downgrade/no longer Top Pick if it missed its Q4. It did just that.
However, the price has dropped so severely that it’s now a bargain, as witnessed by my
decision to BUY some early last week rather than sell.
So how do I reconcile what is in my own mind a hypocritical position? I want to downgrade the
stock from Top Pick, I think it’s a bargain at today’s prices. Answer, here’s what I’m going to do
in a three part process:
1) Today and until it bounces back to a more reasonable level, BTO stays as a Top Pick
2) Even though I paid U$0.85 for shares now worth U$0.718, I think I got a bargain last
week. I’m not selling those.
3) When BTO gives me a profit on the trading block of shares I’m going to sell them , but
I’ll also sell some of the main position holding and that’s when I’ll drop it down from
Top Pick to “recommended”.
It might come over as mental gymnastics and a bit recherché and that’s fair enough. In the end
9

I am only trying to put into words what I’m going to do with my investment in BTO if all goes
well and the above, a near-term/medium-term/longer-term plan if you like, is the way it fits into
what I’ve proposed previously but I’d agree it’s just pretty words and not much else. As for you,
if you’re long BTO today I’d say “Hold for better prices, it’s oversold”. Or if you’re not I’d say
“Buy, these are really cheap, BTO will give you a nice little trading profit in the near-term”. And
I’d be jealous of new money coming in too, because it’s get in at far better prices than my
money has done. More fool me for believing the BTO “we’ll make guidance” spiel late last year.
Stocks to Follow
A round of applause to Starcore Intl (SAM.to) which managed a half cent gain, plus one cheer
for True Gold (TGM.v) which was unchanged on the week.
In other words, last week was a disaster. All other stocks held dropped, including the biggest
losses in Atacama Pacific (ATM.v down 25.0%), the incredibly painful B2Gold (BTO.to down
20.9%), Teranga Gold (TGZ.to down 16.3%), Focus Ventures (FCV.v down 14.3%) and
Sandspring Resources (SSP.v down 11.5%). Post-mortems below.
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 Buy C$2.17 12-sep-14 C$1.06 -51.2% Top Pick, 4q15 prod key
Lake Shore Gold LSG.to STR Buy C$1.07 07-apr-15 C$1.14 6.5% New Top Pick, M+A tgt
Metals Producers (in current order of preference)
B2Gold BTG Buy U$0.85 13-jan-16 U$0.718 -15.5% separate new trading tranche
Teranga Gold TGZ.to STR buy C$0.55 15-feb-15 C$0.435 -20.9% Cheap sub-60c: new momo?
McEwen Mining MUX hold U$1.09 25-jan-15 U$1.06 -2.8% Trading above U$1 (at last)
Starcore Intl SAM.to hold C$0.48 10-jan-15 C$0.27 -43.8% Target under review
Land Grab Stocks (in current order of preference)
Sandspring Res SSP.v hold C$0.195 18-oct-15 C$0.155 -20.5% Risky small play, 30c tgt
Atacama Pacific ATM.v hold C$0.19 26-apr-15 C$0.15 -26.3% Spec buy, cheap adv proj
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.24 -79.1% 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$0.69 7.8% New tgt 95c to $1 Sep 20
True Gold TGM.v sell C$0.18 23-aug-15 C$0.26 44.4% Time to sell
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.06 -73.9% Hit hard by PFS news
Regulus Res REG.v hold C$0.30 06-apr-15 C$0.195 -35.0% Comm. Rels slow progress
Closed in 2016 closed close price
Phoscan Chem FOS.to jan16 C$0.28 29-mar-15 C$0.265 -5.4% Buyout trade, bot but poor deal
2009, 2010, 2011, 2012, 2013, 2014 and 2015 closed positions in appendices below
Now for some notes on current basket stocks.
Lake Shore Gold (LSG.to) (LSG): Promoted to Top Pick. For three reasons:
• Even though the decision is to keep BTO where it is, due to its potential share price
appreciation in the next couple of weeks, I want to spread the financial risk a little
more so some of the cash held in BTO will become new shares in LSG next week.
10

• LSG has traded very solidly in the last few months and has held its own while many
around it, BTO included of course, have wilted. That’s really what we want from a true
Top Pick holding and LSG’s ‘duck in line’ look, weathered and tested, fits the bill.
• I’m convinced that we’re close to a buyout offer on this stock and due to that, I want
more exposure. I’ve mentioned Goldcorp (GG) as a potential suitor more times than I’d
care to remember but I’d be equally relaxed about any other larger operating PM
company making a move on LSG. Not only that, but I’d be surprised if a bidding war
didn’t develop if the eventual offer were too skinny, which means that my current
pencilled-in C$1.50 target on this stock is likely on the conservative side in a M&A
scenario.
Last week’s LSG 4q15 production numbers fit the bill without wowing the audience (see
IKN348) and its growth profile thank to 144 Gap etc is good (and it’s organic). With the firming
conviction that LSG won’t see the end of 2016 in its current corporate structure it’s time to buy
some more and to do that, the only way it can really be recognized correctly in The IKN Weekly
is a promotion to Top Pick status.
True Gold (TGM.v): Selling. I’m selling out of TGM as of tomorrow Monday morning and
won’t be hanging around any longer. As noted last week a possible sale was in the cards if the
market had been nice enough to offer me 28c or so, that didn’t happen and I still own the
shares but the news out of Burkina Faso as of Friday night (post bell) has definitively tipped the
balance. Another Islamic extremists’ attack on luxury hotel catering for foreigners in the capital
(less than three months since the first one), another couple of dozen dead, another round of
world-level headlines and a new President who’s now saying to his people that they should
brace for more attacks (6) and as at Saturday afternoon six of the 28 dead are Canadian
nationals, apparently all from Quebec (7) but we don’t know any more as yet (I understand
Canada’s privacy laws in these cases are far superior to those in other countries). As well as
offering sincere condolences to all loved ones of those affected by these terrorist actions, I
need to put on my business cap and state that for the record that the optics here are abysmal.
I think it likely (if it’s the case, which I certainly hope) that TGM.v tomorrow Monday will come
out with an NR to say that its operations have not been affected, its location is a long way from
the capital Ouagadougou and the trouble, etc. I’ve also exchanged with other industry people
on this and a few comments along the lines of “This is the modern world, it is what it is, we
need to adapt and whatever happens that (name your operation) gold will get mined”.
And I don’t care, I’m still selling. For one it’s been clearly flagged on these pages that I’m close
to selling and taking profits (which I fear may be much less than I’d expected even two or three
days ago), for another it was always framed as a near(ish) term trade and not a long-term
corporate sponsor investment, for another I’m a real know-nothing about Burkina Faso and its
political risk. I don’t pretend to be the font of all wisdom about LatAm either, but in most cases
I do know enough to have personal peace of mind when making an investment in a junior
inside LatAm. I cannot say the same about West Africa and that’s unlikely to change,
unfortunately.
Part of the process of hunkering down when things get tough can be summed up by the phrase
“stick to your own knitting”. Burkina isn’t my bailowick nor my ball of wool and as I was already
considering it as a sale on price alone, it’s an easy one to dump tomorrow.
As a final thought (and copying from my own mail to A. N. Other this weekend) it's also why,
on a conceptual level, I've always avoided going into EDV.to (even though on paper it looks
cheap). That company isn’t just exposed to one West African country (e.g. TGM.v) but four,
any one of which can provide a political risk Black Swan moment at any given moment. This
time it's Burkina, next time it could be another one of those, the type of risk profile I cannot
handle.
11

Phoscan Chemicals (FOS.to): Position closed. As flagged last week I got out early and at
26.5c, not worried about a cent here or a half cent there on a trade that was either going to be
a very minor win or loss whatever price got flagged. A good plan, a reasonable entry point and
the news I’d invested for eventually came, too. The only problem was the bad decision made by
FOS management to move into the O&G space just before crude dived t U$30/bbl. The End.
B2Gold (BTG) (BTO.to): Trading position added. See above in ‘Fundamentals...’ for
today’s thoughts on B2Gold.
Teranga Gold (TGZ.to) (TGZ.ax): Last week I got a couple of dozen mails with “B2Gold” or
“BTO” in the title line but not one that included a reference to Teranga, even though its drop
was almost as scary for me as the one suffered by our house Top Pick, it was still its very own
nightmare for me, though.
Focus Ventures (FCV.v): Simon Ridgway bought 317,000 more shares (8) of his vehicle at 7c
and 6c since the price fell through the floor of the PFS numbers and market reception. In fact it
traded quite solidly on a price level last week, but as unfortunately suspected volumes quickly
dried up again and now that the spree is done is looks as though FCV is going to go quiet on
us. Not good if there are remnant seller out there who’ll eventually dump at any old price.
The good news; I can all-but confirm that FCV isn’t about to fold at the end of September for
lack of a deal on the debt payback, word is that the company’s lines of credit will indeed be
good for a refi at the very least. That option might be more expensive than FCV would like, but
this isn’t a company staring down the barrel of default and liquidation; it’s just priced that way.
McEwen Mining (MUX): Please see ‘Market Watching’ below for a breakdown of the MUX
production numbers for 4q15, as announced last Wednesday. Here we simply note that the
company’s stock price lost 4c on the week, which was far better than many of its peers and a
decent showing under stronger than average volumes, too.
The Copper Basket
After two weeks of 2016, The Copper Basket shows a 19.19% loss to level stakes.
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 HudBay Min. HBM.to 0.35 235.23 691.58 2.94 -44.6%
2 Ivanhoe Mines IVN.to 0.61 778.96 451.80 0.58 -4.9%
3 Reservoir Min. RMC.v 4.08 48.46 176.88 3.65 -10.5%
4 Capstone Min. CS.to 0.44 382.04 118.43 0.31 -29.5%
5 NGEx Resources NGQ.to 0.65 187.71 118.26 0.63 -3.1%
6 Copper Fox CUU.v 0.125 417.64 52.21 0.125 0.0%
7 Copper Mtn CUM.to 0.445 118.8 45.14 0.380 -14.6%
8 Hot Chili Ltd HCH.ax 0.09 420.12 39.91 0.095 5.6%
9 Nevada Copper NCU.to 0.66 80.5 38.64 0.48 -27.3%
10 Western Copper WRN.to 0.38 94.19 29.39 0.312 17.9%
11 NovaCopper NCQ.to 0.395 104.33 27.13 0.26 -34.2%
12 Amerigo Res ARG.to 0.205 173.61 20.83 0.120 -41.5%
13 Atico Mining ATY.v 0.28 97.59 17.08 0.175 -37.5%
14 Cordoba Min. CDB.v 0.16 79.45 10.33 0.13 -18.8%
15 Revelo Res. RVL.v 0.055 99.19 4.96 0.05 -9.1%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg -19.19%
And if you thought the carnage in the precious metals complex was bad last week, just wait
12

until you look at the copper space.
Two of the 15 stocks in our new 2016 basket remained unchanged (NGQ.to, HCH.ax) and there
were no winners at all (which if memory serves is a first
for The Copper Basket over any given week in the last five
years). All the other 13 stocks were losers and although
it’s easier to list the ones that didn’t fall by double
percentage figures than the ones that did, the big losers
will be listed and they start with the eye-popping loss in
HudBay (HBM.to down 36.4%) and are followed by
Amerigo (ARG.to down 31.4%), NovaCopper (NCQ.to
down 30.4%), Atico (ATY.v down 30.0%), Nevada Copper
(NCU.to down 28.4%), Western (WRN.to down 19.0%),
Revelo (RVL.v down 16.7%), Cordoba (CDB.v down
13.3%), Capstone (CS.to down 11.4%) and this time there
wasn’t even any escape for copper sector darling Reservoir
Minerals (RMC.v down 9.9%). That’s quite a list.
The reason, aside from the big drop in equities of all
types, is this. Copper the metal stayed firmly under the
$2.00/lb level all week and its price decayed as the week wore on.
Nothing much else to say aside from “very nasty”, but see below in the piece about the Chilean
development sector for a few more thoughts on where copper and its production mix seems to
be heading.
Now for the regular weekly warehouse comment section:
• Total world copper stocks in the three official warehouse systems came to 481,927
metric tonnes (MT) this weekend, down 5,358mt (-1.1%) on the week.
• Shanghai stocks dropped very slightly, down by 2,340mt (-1.2%) to finish at
186,231mt. No biggie.
• LME stocks lost an near-insignificant 2,050mt (-0.9%) from its warehouses on the week
to finish Friday at 234,1755mt. Movements of physical metals through the LME have
been quiet for a month and are still fast asleep.
• The Comex number dropped by 543mt (-0.9%), to finish at 61,521mt. Small beer.
Here's the Shanghai chart, which shows the continuation of non-movement under 200k.
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
And that’s about all, watching brief only on stocks at the moment, the real action is being

driven by other matters.
Now for comments on a couple of basket stocks:
HudBay (HBM.to) and Capstone (CS.to) (again, but really only HBM): The similarities
between the share price action of Capstone at the beginning of last year 2015 and HudBay at
the beginning of this year 2016 are so numerous they’re a little spooky:
CS.to 2015
• Although it had dropped sharply the year before, Capstone was still a C$1Bn+ market
cap copper miner.
• The market woke up to its very heavy debt position and sold off the stock in the first
half of January 2015
• The IKN Weekly included CS.to on its Copper Basket list to monitor the fate of midcaps
in the copper space; it was soon apparent that things were very bad.
HBM.to 2016
• Although it had dropped sharply the year before, HudBay was still a C$1Bn+ market
cap copper miner.
• The market woke up to its very heavy debt position and sold off the stock in the first
half of January 2016
• The IKN Weekly included HBM.to on its Copper Basket list to monitor the fate of
midcaps in the copper space; it was soon apparent that things were very bad.
It’s worth remembering that HBM spent an approximate $1.9Bn to build its Constancia mine in
South Peru, roughly three times its current market cap that’s already down nearly 45% in this
new year. Not even a relatively upbeat 4q15 production NR from HBM last week (9) could
reverse its trend. It’s the balance sheet, y’see.
14

The Low Cost Producer Basket
After 2 weeks of 2016, the Low Cost Producer Basket shows a gain of 1.80% to level stakes.
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Newmont NEM 17.98 529.12 9.35 17.68 -1.7%
2 Barrick ABX 7.38 1164.67 9.21 7.91 7.2%
3 Goldcorp GG 11.56 830.22 8.57 10.32 -10.7%
4 Franco Nevada FNV 45.75 157.07 7.09 45.11 -1.4%
5 Agnico Eagle AEM 26.28 217.67 6.09 28.00 6.5%
6 Ang/Ashanti AU 7.10 405.27 2.97 7.32 3.1%
7 Detour Gold DGC.to 14.41 170.85 2.78 16.25 12.8%
8 Sibanye Gold SBGL 6.09 228.71 1.78 7.78 27.8%
9 New Gold NGD 2.32 509.16 1.02 2.01 -13.4%
10 Buenaventura BVN 4.28 254.19 0.96 3.76 -12.1%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 1.80%
By minor miracle, our Low Cost Producer Basket managed to side-step some of the carnage in
the mining sector (the GDX benchmark lost 10.28% over five days!) and lost “just” 2.56% on
the week. We even had two winners in the list in Detour and Sibanye, which SBGL managing a
hugely impressive 18.6% gain on the week (thanks to the Rand, see below). But the other
eight names were all losers, including big dumps on the week in Goldcorp (GG down
17.4%...wowsers), New Gold (NGD down 15.6%), Buenaventura (BVN down 11.1%) and a
bunch of other down between 5% and 7%.
Newmont (NEM) did relatively well by only losing 1.8% and thanks to the relative strength is
now at the top of the market cap tree, with Barrick (ABX) second and Goldcorp managing to
drop to third place on the list. Somebody tell Garofalo.
Buenaventura (BVN): As quickly noted on the blog last week, we hear that BVN is close to
closing a new debt deal that should take the pressure off the balance sheet, let them finish the
Tambomayo project and get it producing this year and get the San Gabriel moving again later
without feeling strapped for cash.
Sibanye Gold (SBGL): A most impressive share price performance that bucked the whole
market trend in style. This ten day chart bears witness to the 2016 trend in Sibanye, no arguing
with that one.
But it’s not company-specific, it’s a forex story and that is shown if you stick SBGL up against
other South African precious metals with US ADR listings, such as DRDGold (DRD) or Harmony
15

(HMY).
And it’s all about this, the USD versus the South African Rand (ZAR):
You can pick your own start point on that chart but I’m summing it up as “25% devaluation in
the last couple of months” which makes companies working in ZAR but selling their products in
USD, for example gold miners, an attractive arbitrage option on the world money markets.
Sibanye has been in the right place at the right time for our basket and I may have included it
for other reasons, but even this early in the year it’s helped us with our target for the year of
not just matching the GDX, but beating it. We’re 6.39% ahead of the GDX, which is good.
Regional politics
Peru: Keiko Fujimori proposes The Ollachea Model for mining projects
The first big mining card has been played in the Peru 2016 Presidential election. Keiko Fujimori
(yes, daughter of...) and candidate for Fuerza Popular (aka “los Fujimoristas”) who’s currently
leading the voter intention polls comfortably.
16

That above image is from the latest Ipsos/El Comercio poll out this very Sunday morning (9a)
and she’s on a solid 32% and 33% depending on which pollster you listen to, second and third
place candidates are Cesar Acuña on 13% or 15% and PPK on 13% and 13%). She presented
her party’s 75 page manifesto for government (“Plan Peru”) last week and one of the points is
(10) (quote translated), “We will establish a rule that will allow extraction companies (mining,
O&G) to offer communities participative alternatives in the share of the company”.
That sounds vague and it’s supposed to sound vague in an official government policy plan book
(never get specific in a manifesto, it’s an open invitation to attacks) but what it means is that
Keiko is going to campaign on the idea that mining companies, big medium or small, can (will?)
offer a stake of the company to locals affected by the project. Bullet points to make:
• Yes, that’s exactly the situation in Ollachea with Minera IRL and the Ollachea
community, which was given 5% of the project in return for its approval and a bunch of
guarantees (that worked just fine until Daryl Hodges decided to “improve” things)
• Other part of the Fuerza Popular manifesto make it plain that “Los Fujis” aren’t going to
surprise anyone in this campaign, it’s going to be a very populist campaign message on
many fronts (be that good or bad) and this proposal is exactly that.
• It’s an idea that began in Ollachea and Minera IRL, but was also co-opted and put on
the debate agenda by Peruvian economist Hernando de Soto last year (11) which has
apparently been debated seriously inside the current Humala government
• It’s been getting push back ever since then from the ‘establishment’ mining world. For
example Roque Benavides who calls it “a crazy idea” (12) or last week one Veljko Brcic,
quoted in El Comercio (13) and framed as “specialist in mining issues” who said
(translated) “...that this means it makes communities participant of the risk, the mining
market is very volatile and over the long-term it will not help resolve conflicts. “This
proposal opens a Pandora’s Box””.
As for my personal view, in short I think the idea that communities become shareholders in
mining companies/projects can work well, but only in specific situations. An example of where it
works well is Ollachea and that’s basically because of its geographic location. Ollachea is a
separate and separated community, it’s surrounded by peaks and in a deep valley with one way
in and one way out, everyone in the region understands where “the locality that is Ollachea”
starts and where its area of influence finishes.
And that points directly to the big weakness of a community participation model if its scaled-up
to a national level. For an example, move away from a small-scale underground gold mine
project next to a geographically isolated community and imagine yourself at a large-scale open
pit bigboy copper-plus-byproduct porphyry that’s in one of the open-space Andean highland
areas with literally dozens of villages dotted around the area, a provincial HQ town maybe 30km
away then the regional capital at 100km, one of the major civil works that could cost U$5Bn to
build. The question is, who gets a piece of the shareholder pie? You might say the villages
“directly influenced” by the project, but where are you going to draw the line? If you draw it at
5km, the villages at 6km or 7km will kick up no end of fuss, if you draw it at 10km, those at
15km (etc). Then the provincial municipality will see a small enclave of its territory getting
inordinately rich due to luck and will (to be utterly cynical, via the nature of provincial
corruption in Peru) want its share. Then the region will have its own fir of pique. That’s a
scenario that’s all too easy to envisage so in a nutshell, that comment above about Pandora’s
Box is on the money.
The bottom line is that I expect Keiko to campaign on this proposal, but come the day she
takes office it’s going to be a tough one to enact and make workable in Peru. There’s also the
potential that another one of the candidates (major or minor) jumps on this bandwagon and
offers their own version of The Ollachea Model. So I expect that this issue will get plenty of
coverage in the next four or five month in the chattering classes and mining trade papers,
creating something of a false polemic. It may move the Peru mining political risk dial a little too,
but overall it’s not one I’m going to lose sleep over and it’s not going to affect Peru’s overall
17

pro-mining image in the long-term, neither pro nor contra.
One short extra on the Peru election polls. There’s suddenly a lot of talk in political circles about
one Julio Guzmán, who was until recently one of the also-ran candidates (there are 19 people
officially standing for the job) but due to an effective social media campaign (Facebook Twitter
etc) mainly in the Lima area has surged to 5% and is now in 5th spot, ahead of Alejandro
Toledo and behind Alan García. Here’s the link to an interesting article on just where this
outsider has come from (14), which can be summed up as “not-old, talented but unknown
economist with a taste for politics but zero experience starts his own political party two years
ago and suddenly gets traction among young voters in working class Lima”. In short, one eye is
now kept on Guzmán who’s a potential wild card in the 2016 scene.
Guatemala: Jimmy Morales is President
Thursday saw the inauguration of Jimmy Morales, outsider candidate turned President of
Guatemala (15). His inaugural speech centred on his election campaign motto of “not a thief,
nor corrupt with plenty of mentions on how he plans to combat institutionalized corruption.
Soundbites included “the dusk of corruption and the dawn of transparency”, promising to fight
corruption “from day one” of his mandate and aiming at those who “get rich by dividing the
Guatemalan people”. All enthusiaatically received by a most friendly audience, foreign
dignitaries and all.
Then came the naming of his cabinet of ministers, 14 in all and done at what was basically the
very last minute (the country has been demanding names from him since his election victory, to
no avail. The ones that we, the mining focussed people, need to care about are:
• Minister of the Economy Rubén Morales, who was also the Economy Minister
in the Álvaro Colom government (pre-Otto Pérez Molina). He’s also one of the
main negotiators in the Free Trade Agreement processes that Guatemala has
conducted over the last 15 years. In short, this guy is an orthodox FinMin.
• Minister of Energy and Mines José Pelayo. He’s an oil man rather than a hard
rock mines man. He’s been the head of Guatemala for Venezuela’s PDVSA
(previously CITGO) since 2002, which makes him an interesting potential
lefty-influence.
• Environment Minister Sydney Samuels: An academic environmentalist and
university professor who has also been involved in State environmental affairs
and as an advisor to the control of the national nature reserves.
Those and other appointments (eg the defence minister is the same one who sent in troops to
San Rafael las Flores (THO) that kicked butts under Otto Pérez Molina) point to a real mixed
bag of a cabinet.
Bottom line: It’s now honeymoon period time for Morales, but it’s anyone’s guess as to how
long that will last (local commentators are calling it as very short). It remains to be seen what
the new President does about corruption, business communities and his direct opinions on the
mining scene. My best guess is that the status quo will reign for the time being, but there are
so many potential Black Swan events that the mind starts boggling. The final call is still the
same “watch don’t touch” on Guatemala, too much could go wrong.
A strange sidebar to this story: President Enrique Peña Nieto of Mexico was confirmed as one of
the guests of honour at the inauguration but at the very last minute, i.e. the day of his
scheduled flight on the 13th, he cancelled his trip. This didn’t stop him from arranging an eight
day State visit to the Arabian peninsula at the last minute either (after which he moves on to
the Davos shindig) (16). Neither EPN nor his entourage has given any reason for this abrupt
change of plan. Even if oil is suddenly more pressing than Central American political affairs,
there seems to be little reason why Peña Nieto would cancel at such short notice and it looks
18

like a pretty sharp political snub from the region’s large power country.
Argentina: Vulture alert
Following on from last week’s note on the potential length or otherwise of the Macri
government honeymoon, last week his Finance Minister Alfonso Prat-Gay (I don’t make these
names up) reported that the country was going to make an offer for a deal with the “bond
holdouts”/”vulture funds” on January 25th. Here’s how the English language Buenos Aires
Herald reported it (17) (excerpted):
Finance Secretary Luis Caputo met in New York with court-appointed mediator Daniel
Pollack and representatives from the “vulture” funds, alongside Lee Buchehit, a lawyer
at Cleary, Gottlieb, Steen & Hamilton, the firm that will represent Argentina at the talks
until the country hires new representation.
“Argentina committed to issuing a proposal by January 25 in order to resolve the
judicial dispute, hoping the holdouts will put forward their own proposal,” the Finance
Ministry said in a brief press release after the meeting.
Speaking outside Pollack’s office, Caputo said the leading holdouts, including NML and
Elliott, were part of one meeting and he held a separate sit-down with the so-called
“me-too” bondholders. The offer to be issued on January 25 will include all the
creditors to try to put a final end to the issue, he said, without going into details.
“If we add up the original ruling plus the me-too bondholders, that leads to a debt of
US$2.9 billion. Nevertheless, the figure rose to US$9.8 billion after the last ruling.
That’s the cost of failing to do anything about the issue over the last 10 years,” Finance
Minister Alfonso Prat-Gay said during a press conference earlier in the day. “We want
to solve the issue. It has been extremely expensive for the country.”
Unsurprisingly, the Kirchnerists were quick to voice their dissent, with CFK herself leading the
charge via her first Tweets (her favourite medium of communication) in 2016 and the ex-
Finance Minister Axel Kicillof making the case against any sort of agreement or deal with the
holdouts/vultures in a note that CFK added to her personal website (18), saying all the things
you’d expect it to say and noting how Prat-Gay has flagged a new bonds issue, potentially with
the IMF, in order to pay the debt. You can already feel the Macri government opposition (start
with CFK) circling their quarry and waiting for the right moment to attack. That’s now likely to
be January 25th and onwards.
Argentina: Positive news for mining from San Juan
Over the course of the last decade, San Juan has become the flag-bearing province in Argentina
for pro-mining policies and attitudes. This looks likely to continue. On Thursday Argentina’s new
Minister of Energy and Mining, Juan José Aranguren, travelled to San Juan province to meet
with the new governor of San Juan Sergio Uñac (who is from the same party as and took over
from ex-governor, the pro-mining José Luis Gioja). Uñac told a presser afterwards (19) that
Aranguren had committed to the elimination of all export taxes on mining produce. So far only
the 5% tax on precious metals exports has been confirmed as eliminated, which leaves the
main export tax of 10% on base metals concentrates in place.
Uñac also mentioned (20) that he would be travelling to PDAC in Toronto in March,
accompanied by the National Undersecretary of Mining Mario Capello and a suitable group of
country dignitaries. His words on this trip also made it clear he’d be as strong a supporter of the
mining sector in his province as Gioja was before him. He said, “Although the price of metals
continues to be low in the international market, the elimination of taxes and the decision to let
the Peso float freely against the dollar favours the mining sector and this will generate better
conditions (for investment)” He continued with, ”The province offers seriousness and judicial
security, not just now but for the last 12 years and this is an advantage when we consider
ourselves as a potential centre for investment”.
Ecuador: Your first 2017 presidential election heads up
Before we plough into the next piece on Fruta del Norte, a quick heads up on an issue that
starts to loom. The next Presidential election in Ecuador is scheduled for February 2017, i.e.
just one year and one month from now (they creep up on you like that) and one thing we
19

definitely know is that current President Rafael Correa is not going to run for re-election (he’s
barred by law and unlike Evo Morales in Bolivia he’s already stated very clearly that he’s not
going to try to change the rules).
From the ranks of the current government, names as potential candidates include current Veep
Lenín Moreno, Jorge Glas, Ricardo Patiño and José Serrano. As for opposition candidates, the
two most likely are Guillermo Lasso, head of the main CREO opposition party and Abdalá
Bucaram son of the ex-President.
Ecuador: Fruta del Norte State burden contract is still delayed
Another IKN349 note following on from one last week, the one in which we reported that the
contract between the government of Ecuador and Lundin Gold (LUG.to) hadn’t been closed.
And like it or not that’s still true, despite the agreement that was announced on Thursday (21)
because it isn’t a done deal yet, it’s an agreement to do a deal by July 17th when the LUG
exploration contract expires and they either have to write a cheque for the first U$25m of
advanced royalties or walk away. If we then take into account the projected in-company
timeline for the project that starts to look a little on the tight side, as noted in the interview
with company head Ron Hochstein that we pasted out in the appendix last weekend. Here’s a
relevant excerpt from that (but it’s worth going back and reading it all):
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.
Regarding the Windfall Tax (WFT), here’s what Hochstein had to say about it in the same
interview last October:
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 E 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.
As per Thursday’s announcement that WoodMac formula is what’s been kept in place, to the
20

letter, so clearly those negotiations didn’t go the way of the company. As for the other contents
of the NR Thursday, I have two main takeaways to make about the proposed agreement:
1) On Thursday afternoon I saw one Canadian brokerage analyst tell its clientele that
according to his house calculations, if the 70% WFT were applicable today it would
kick in at U$1,575/oz gold. For one thing that sounds suspiciously as thought the
“house calculations” are based on exactly what LUG people told him on the phone. So
yes, perhaps it would be around U$1575/oz now (perhaps, haven't done a detailed
crunch but it sounds about right) but for one thing the WFT doesn’t apply before capital
costs are recovered, so let’s call that five years minimum (we’ll know more when the
Feasibility Study arrives in 2q15). For another it’s calculated on a ten year trailing
number, so what happens as gold's average price drifts lower and the SD is
compacted? The answer is that in a flat gold price environment (let’s say U$1,200/oz
average) maybe seven years from now when the WFT is a real shadow on potential
blue-sky at the company, the standard deviation would also flatten out and any spike
above U$1,400/oz would be taxed hard.
2) The "annual sovereign adjustment" looks like the major element, because it means
LUG at FDN will never be able to get away with paying less than 50% + one dollar to
the government. This 50% minimum is part of the country’s constitution (as re-written
by President Correa’s government) so its inclusion makes a clear statement, not only to
Lundin Gold but all other players in Ecuador; the constitution will be respected and you
all will pay. There’s no chance of “civil works for taxes” type deals, as in Peru or Chile,
you know exactly what the minimum burden will be when you work in Ecuador, and it’s
uncompetitive compared to all States in South America, even the ones with history and
tradition as pro-mining jurisdictions. Now in theory at least I'd expect FDN, being the
special high grade deposit and mine that it is shaping to be, to be able to support that
50% overall burden. But what about the other projects held by other juniors in
Ecuador? Through its position and particularly via the catch-all look of the Annual
Sovereign Adjustment, government has made a very clear statement in this deal with
LUG.to and that’s not going to change when the next deal negotiation comes around.
As for LUG.to the company and its potential for investment, last week was a step forward but it
wasn’t a big one and certainly not as big as the company, the country and the brokerages keen
to promote this Lundin vehicle (pays to keep in with the powerful, they say) would have you
believe. As alluded in that Hochstein interview and LUG.to corporate guidances, the key period
for the company will be the publication of its Feas Study (FS) due “in the second quarter”,
which then lets it go talk to banks and financial instos regarding financing, which will then give
us a better idea of the price potential for this, to date, relatively thinly-traded and closely-held
stock (not the first time that the price discovery angle on LUG has been mentioned on these
pages). But to add to that we now have a soft deadline in place of July 17th, the date on which
LUG has to stump up the first $25m of its advanced royalty payments, which indicates that the
company is going to have a pretty busy couple of months around the middle of this year. For
sure the $25m payment and any finalized deal on the financing of FDN aren’t obligatorily tied
together, but the inference is strong as of last week.
The bottom line: Last week wasn’t a de-risking event, it was the putting in place of a framework
that may allow a de-risking event to occur later in the year. We should recognize it as a
positive, but not as a reason to buy this stock. Let’s talk further on LUG.to after July 17th.
PS: One final thing: If you talked to the company in 2015, Fruta Del Norte was framed as a
U$750m capex project with a mine life of 15 years. You also read numbers that are either those
or very close to those in anal yst coverage of the company (I noted a couple last week as they
shot out news of the deal). But times change and last week at the presentation, Ecuador’s
Minister of Mines Javier Córdova told his country (22) that FDN would run for between 18 and
25 years and would (quote translated) “...require a total investment of around U$1,000m (i.e.
one billion dollars) to 2018”. Then this weekend Ron Hochstein also talked about a U$1Bn price
21

tag for the project in the Ecuador press (23), with the U$65m in advanced royalties separate
from that. He also said the company was aiming for first production at the end of 2019.
Chile: More cost cutting measures announced by Codelco
Thursday saw Chile’s State run Codelco, the biggest single copper production company in the
world, announce a new and deeper range of operations cost-cutting measures for 2016 that are
planned to trim an extra U$574m from company costs this year. Added to the previously
announced cuts, Codelco has now cut its spending budget for 2016 by U$1.203Bn compared to
the previously approved budget, bringing the absolute number down to U$4.636Bn. This link
(24) has a video of the press conference on Thursday, hosted by company president Nelson
Pizarro, who said that direct (C1) costs were now projected at U$1.25/lb, down from the
previously projected U$1.38/lb. And now for more Codelco news.
Chile: Latest investment figures offer a window on the future of copper
Some interesting figures out of the Chilean cabinet ministry last week regarding the change in
investment dollars in its mining industry. The main point picked up by the local media (25)
offers few surprises, that the amount of investment dollars in mining projects in the country has
dropped considerably in the last four months, but the details offer more.
According to the data-filled report, in December 2015 mining projects under development in
Chile were worth a total of U$15.122Bn, down 29% from the U$21.347Bn registered in its last
beancount in August. The drop is due to three projects being shelved (the on-off-on-off
Antucoya owned by Antofagasta Minerals (ANTO.L) and Actualización Esperanza, also ANTO.L),
plus the BHP Billiton OGP1 project, as well as other projects moving from development into
production and therefore off this count’s radar.
So far so normal, but when we look at what’s left it becomes more interesting. Of the eight
major works projects left on the list (that U$15.122Bn total), four of them are Codelco projects
worth a total of U$10.531Bn. Add in the only other big ticket project, that of BHP’s
desalinization plant for La Escondida and there’s little else happening in Chile.
Put simply—> If it weren’t for the State-run Codelco, which has a business and economic
agenda which is wholly different from the normal capitalist-profit-only focus of a privately
owned multinational and often works its investments to a counter-cyclical economic clock for
national GDP reasons, plus a desal project that’s a no-brainer build for La Escondida (it pays for
itself a dozen times over even if copper drops to $1.50/lb and stays there forever), there would
be precious little growth in the world’s biggest copper producing nation right now.
It also has me thinking about bigger things, such as the way on which the copper production
market is concentrating to the mega-players and away from the small and medium scale
operations. I believe the Codelco policy of investment now is the right one, as it would be very
difficult for a big mining company to convince its shareholders to keep the investment spigot
running but for the nationalized, Pride-Of-Chile Codelco keen on keeping its world number one
status (11% of world copper comes from them) it’s an easy sell which will give it the upper
hand in the world market come the day that copper moves back up on its cycle. But aside from
Codleco, it’s a window on how difficult it’s going to be for smaller entities to keep competitive
(look at the enormous debt troubles of The IKN Weeky’s three touchstone stocks HudBay,
Capstone, Copper Mountain, for an obvious example) or even for junior explorecos looking for
the Next Big Porphyry in the Andes (or anywhere else) to compete efficiently. It’s by far the
first time I’ve mentioned this but it bears repeating (for one thing I’m seeing a new batch of
commentaries from higher profile anal ysts saying roughly the same thing): Copper is going the
way of iron ore, where three players (BHP, RTZ, Vale) hold the market by its throat and can kill
off competition in good old-fashioned oligarchy theory style.
22

Market Watching
A small thought on Tahoe Resources (TAHO) (THO.to)
Just a quick note to report that Tahoe Resources (TAHO) is really upset about the coverage it’s
been getting on the blog recently. Which just goes to show that 1) they have a leaky HQ in
Reno, 2) they have no idea how to run a tight ship in this modern information age and 3) they
need to tighten up their corporate governance quickly before they start losing really sensitive
information, instead of just a photo or two or hearing about worker deaths they are trying to
keep away from the public. If a humble blogger is hearing about these things, be sure that
people who move markets are hearing too.
China’s GDP is only growing by 2.5% per annum
This is one of those pieces that could be part of the “politics” section above, but in the end I’ve
plumped on putting it here. But no matter where it goes, it’s interesting and has the potential to
affect a lot of mining issues, so get ready for this message to gain greater traction.
Professor Xavier Sala i Martin (a Catalan last name, for what it’s worth) of Columbia University
is no lightweight and he’s about to get a platform on the world stage, being as he is co-author
of “The Global Competitiveness Report 2015-2016” published by the World Economic Forum
(Davos shindig coming very soon).
He’s been warming up for Davos by touring South America this week and the message he’s
offering is a simple one: China isn’t growing its GDP by a 6.5% or 7% rate as per the official
figures, it’s more akin to 2.5%
“China data are the type that mathematicians would call “complex numbers”, that’s to say half
real and half imaginary” he says, as quoted by the media in Chile, a country that really cares
about the China growth number due to its dependence on copper exports and its relatively
serious nature on finance and economy. The report on his presentation continues in this way
(translated) (26):
According to the economist, there are two measurements that show Chinese GDP
growth is less than that announced by Beijing. The first is called the Li Keqiang Index,
named in honour of the current Prime Minister. This indicator is the one the
government follows in order to make decisions on macroeconomic policy, includes
measurements on the movement of containers on trains/through ports etc, electrical
consumption and financial credit/debt figures. According to this index the country is
growing by 2.5%.
The second measurement is a study that Mr. Sala i Martin made that will appear in the
February edition of the Quarterly Journal of Economics (hey coincidence, just in time
for Davos). The expert analyzed NASA satellite photographs and measured the
quantity of light in each pixel, with each one equivalent to 1km2 on the ground. Each
square has 63 different light intensities, which is “perfectly” correlated to GDP. “Today,
if you calculate the luminosity that comes from the NASA satellites, China is also
growing at 2.5%”, he said.
Almaden Minerals (AAU) (AMM.to): An interview with Morgan Poliquin
The Gold Report (TGR) on Friday ran an interview (one of its paid-for series, it seems) with
Almaden CEO Morgan Poliquin (27) (MP). It gives a decent overview of the company from the
officers’ point of view and as you’re aware that I’ve been sniffing round this one as a possible
purchase (still too chicken and the lowball price I’d like hasn’t shown up yet) it got my
attention. Here’s a short excerpt:
TGR: Is the spinout of Almadex part of a positioning of Almaden for sale?
MP: If we were going to build the Ixtaca deposit ourselves, that would involve dilution of some sort
to finance building a mine. Our job is to derisk the project as we are doing and position the
company to take advantage of the full range of opportunities that might be there. That includes
the possibility of building a production team and talking to potential partners or buyers. I think by
separating the two business entities, we give our shareholders the best opportunities.
23

The rest is on that link above.
McEwen Mining (MUX) 4q15 production numbers
On Wednesday MUX reported (28) its 4q15 production numbers plus 2016 guidance. This isn’t
going to be a long analysis, that can wait for the year-end results (if we’re still holding the stock
by then), but we can cover the four main areas which are:
• Production at the 100% owned El Gallo 1 mine in Mexico
• Production at the 49% owned San José (aka Minera Santa Cruz) mine in Argentina
• Company production guidance for 2016
• A best-guess on the 4q15 financial results (not easy, but ballpark is fair)
El Gallo 1: MUX saw production of 11,092 oz gold equivalent (nearly all that is gold, silver is a
small by-product) which puts our pure gold production at 10,900 oz and looks like this
according to IKN estimates:
MUX: El Gallo 1, gold production vs sales
25
20
15
10
5
0
24
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 tse51q4
Koz Au
Au prod
Au sold
source: company filing, est sales 4q15
That’s a disappointing quarter from the main MUX revenues generator, which the company
addressed by saying in the NR that, “Production in Q4 was deliberately slowed as part of the
optimized mine plan”. We’re assuming sales come in at the same level as production for
revenues estimates later on and if we do that, then make another best guess at a U$1,100/oz
average selling price for gold in the quarter, here right is what the sales chart looks like.
We’ve seen some outsized sales numbers in 2015 from
MUX, this one is going to be a step down (unless
they’ve held back some gold from Q3 and surprise me
with a larger sales number). That’s something we’ll
need to keep in mind as we approach the quarterly
and year-end financials reporting date.
San José: There was better news from the 49% MUX
owned (Hochschild (HOC.L) 51% owner and operator)
mine in Santa Cruz Argentina. As these charts show,
the quarter was strong.
San José (100%): Gold Production
35
30
25
20
15
10
5
0
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
Koz Au San José (100%): Silver Production
2000
1600
1200
800
400
0
source: MUX/HOC filings (MUX 49% attributable)
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4
$m MUX: El Gallo Sales
25
20
15
10 22.88 22.50
16.16
5 10.25 11.13 11.64 8.85 13.68 12.50
0
4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q154q15est
source: company filings
Koz Ag
source: HOC/MUX filings (MUX 49% attributable)

The charts show the consolidated production at San José (aka MSC), with MUX’s 49% worth
14,424 oz Au and 976,879 oz Ag; not an all-time record quarter (they came back further back
in the years) but it’s certainly recent multi-year quarterly best, as seen. This result should help
bail out the lacklustre quarter at El Gallo 1.
Revenues forecast: It’s always tough to call tightly financial results numbers from just the
production schedule of small mines on a quarterly basis, just a few thousand ounces added on
or left off from a quarter can throw out predictions on either side. But going for a ballpark
number is fair game so if we 1) add our assumed U$12.5m in sales from El Gallo to 2) a best
guess U$5m dividend for MUX from its 49% in San José and 3) reasonable guestimates on
costs that fit with previous quarters plus a slightly cheaper world of costs, here’s what we get:
MUX: Total operating income (incl San José) versus
$m Total operating and exploration costs (minus impairments)
30
tot op income
25 Tot op costs & exp 24.7 23.2
20.9
20 18.218.7 18.2 19.2 19.1 18.0 19.0 17.517.0
15 14.0 13.5 14.6
10 9.7 9.2
4.4
5
0
4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15 4q15est
source: company filings, IKN ests and calcs
I’m calling revenues at $17.5m to come in just higher than the $17m total costs guesstimate,
which means ladies and gentlemen that once the financials are done MUX is either a breakeven
operation or lost a little bit of money in Q4; nothing to fret over, but nothing big.
2016 Guidance: Here are a couple of charts to map out what MUX gives as guidance
compared to previous years:
MUX: Consolidated gold prod, 2012-15 & 2016 guidance MUX: Consolidated silver prod, 2012-15 & 2016 guidance
Ozt Au (El Gallo commercial production, plus 49% of San José) M Oz Ag (El Gallo commercial production, plus 49% of San José)
120000 110253 3.5 3.135 3.196 3.32 3.3
1 1 0 1 0 0 0 0 0 0 0 0 96500 3 2.921
90000 79274 84351 2.5
80000
70000 2
60000 49003
50000 1.5
40000 1
30000
20000 0.5
10000
0 0
2012 2013 2014 2015 2016e 2012 2013 2014 2015 2016e
source: company filings source: company filings
The first thing you notice is that MUX isn’t forecasting its mines to beat 2015 production levels.
That would be the first time ever (especially in terms of pure gold ounces, the metal that
provides between 70% and 75% of revenues). In 2015, MUX produced around 62,900 oz gold
at El Gallo 1 and 47,353 oz gold at its 49% of San José, for a total of 108,253 oz. For 2016 it’s
marking at 96,500 oz gold with 52k oz of those from El Gallo 1 and 45k oz from San José (silver
remains virtually unchanged at 3.3m oz, it’s nearly all San José anyway and in effect MUX is
calling “as you were” there.
However, it’s quite likely MUX is playing UPOD (under-promie, over-deliver) on us as it also
forecast a total gold ounce production of 96,500 for 2015 this time last year, then going on to
beat it very handily. Taking all things into consideration, I think MUX will beat its own guidance
(McEwen likes doing that, room to crow afterwards) but it won’t match the 2015 numbers.
25

There’s concern about MUX high-grading at El Gallo 1 in 2015, which isn’t sustainable. That and
efficiency will be the key this year, rather than ounces at any cost.
Discussion and conclusion: It wasn’t a great quarter from MUX, at El Gallo 1 but it should be
able to get away with it due to a bonanza quarter at San José, the overall financial results look
set to bea wash. Meanwhile, the 2016 guidance isn’t one that catches my eye or gets me
excited to be an owner of this stock, especially now it’s managed to run back up and over U$1
to get me to breakeven (ish) again after a long time where it looked sorely undervalued.
MUX enjoys an owner premium, Rob McEwen has his following and rightly so, he’s a very
successful miner. As a result I’d expect MUX to be able to hold at its current U$1+ level for the
next few weeks and it will probably stick in a spike or two along the way, there’s every reason
to see it above U$1.20 again I believe. If we do see that kind of level in the near-ish future I’m
a likely seller in order to take modest profits and to be out of the stock before it reports its
financials, which are likely to be lacklustre for a few quarters unless gold prices run up and save
all our days. For now MUX is a hold, but I’m not a strong hand holder any longer.
Conclusion
IKN349 is done, we end a long edition with just one bullet point. Get the point.
• I’m buying more Lake Shore Goild (LSG.to) (LSG) and making it a new Top
Pick. I think it’s getting bought out soon. Buy low sell high, folks.
I thank you in advance for any feedback. Our Top Pick stocks are B2Gold (BTG) (BTO.to) and
Lake Shore Gold (LSG.to) (LSG). Flash updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen.
Otto
Footnotes, appendices, references, disclaimer
(1) http://www.tocqueville.com/insights/paper-gold-utopia-alchemists
(2) http://www.barrons.com/article_email/an-acute-shortage-in-gold-can-boost-prices-1452805246-
lMyQjA1MTI2MjEyNjAxOTYxWj
(3) http://www.theguardian.com/science/life-and-physics/2016/jan/16/the-ultra-violent-origins-of-gold
(4) http://finance.yahoo.com/news/b2gold-corp-reports-record-fourth-211500942.html
(5) http://finance.yahoo.com/news/forsys-signs-earn-agreement-b2gold-120000329.html
(6) http://www.africanews.com/2016/01/16/brace-for-more-islamic-attacks-burkina-president-warns/
(7) http://www.cbc.ca/news/world/burkina-faso-hotel-attack-1.3407326
(8) https://www.canadianinsider.com/company?menu_tickersearch=Focus%20Ventures%20Ltd.%20|%20FCV
(9) http://finance.yahoo.com/news/hudbay-announces-2016-production-guidance-215742308.html
(9a)http://elcomercio.pe/politica/elecciones/ppk-y-cesar-acuna-empatados-segundo-lugar-13-noticia-1871652?flsm=1
26

(10) http://gestion.pe/politica/keiko-fujimori-propone-hacer-accionistas-comunidades-vecinas-proyectos-mineros-
2152549
(11) http://gestion.pe/politica/hernando-soto-propone-hacer-comunidades-accionistas-mineras-2136954
(12) http://gestion.pe/economia/hacer-socias-comunidades-propuesta-jalada-cabellos-2140076
(13) http://elcomercio.pe/politica/elecciones/keiko-fujimori-especialistas-critican-su-plan-gobierno-noticia-
1871528?flsm=1
(14) http://elcomercio.pe/politica/elecciones/julio-guzman-que-dificil-outsider-carlos-melendez-noticia-
1871533?ref=portada_home
(15) https://www.larepublica.net/app/cms/www/index.php?pk_articulo=533337294
(16) http://www.alcaldesdemexico.com/notas-principales/pena-nieto-cancela-viaje-a-guatemala-y-visitara-peninsula-
arabiga/
(17) http://www.buenosairesherald.com/article/206699/gov%E2%80%99t-to-make-offer-to-
%E2%80%98vultures%E2%80%99-on-jan-25
(18) http://www.cfkargentina.com/los-verdaderos-anuncios-del-ministro-prat-gay-pagarle-a-los-buitres-con-mas-ajuste-
de-la-economia-y-con-techo-a-los-aumentos-salariales/
(19) http://www.portalminero.com/pages/viewpage.action?pageId=106435040
(20) http://www.diariodecuyo.com.ar/home/new_noticia.php?noticia_id=700020
(21) http://finance.yahoo.com/news/lundin-gold-inc-announces-agreement-160400909.html
(22) http://www.20minutos.com/noticia/33533/0/ecuador-minera-canadiense-firma-contrato-para-explotar-oro/#xtor=AD-
1&xts=513357
(23) http://mineriaenlinea.com/2016/01/vimos-cambio-del-gobierno-sobre-mineria-dice-el-presidente-de-lundin-gold/
(24) http://elcomercio.pe/economia/negocios/codelco-se-ajusta-cinturon-caida-cobre-video-noticia-
1871266?ref=portada_home
(25) http://aminera.com/index.php/component/k2/item/15690-proyectos-mineros-en-ejecuci%C3%B3n-disminuyen-en-
us$-6225-millones.html
(26) http://aminera.com/index.php/mineria-nacional/item/15689-los-cinco-mitos-de-la-econom%C3%ADa-china-
seg%C3%BAn-mckinsey-xavier-sala-i-martin-china-no-est%C3%A1-creciendo-65-sino-25.html
(27) http://www.streetwisereports.com/pub/na/veteran-explorers-at-almaden-add-value-for-pennies-on-the-dollar
(28) http://finance.yahoo.com/news/mcewen-mining-reports-record-production-110000581.html
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
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Stocks To Follow Closed Positions 2014
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dic-13 C$3.19 13.9% small ST trade closed
Rio Alto Mining RIO.to jan'14 C$2.06 07-jun-13 C$2.30 11.7% trading position finally closed
Network Expl. NET.v feb'14 C$0.01 22-jul-12 C$0.005 -50.0% position closed, did nothing
Tahoe Resources TAHO feb'14 U$13.10 08-abr-13 U$21.72 -65.8% short closed due to reality
Darwin Res DAR.v mar'14 C$0.10 14-jul-12 C$0.045 -55.0% tiny risk play dropped
B2Gold BTO.to mar'14 C$3.07 28-nov-12 C$3.35 9.1% closed to free up capital
Pretium Res PVG mar'14 U$5.38 22-nov-13 U$6.50 -20.8% short closed as port longer
Gold Res Corp GORO may'14 U$5.07 26-ene-14 U$4.12 16.7% took profit
Bear Creek Min BCM.v may'14 C$1.63 23-mar-14 C$2.05 25.8% Took profit, sm near-term win
Eco Oro Min. EOM.to aug'14 C$0.48 22-sep-13 C$0.26 -45.8% sold small loser to make room
True Gold TGM.v sep'14 C$0.395 02-feb-14 C$0.41 3.8% M&A won't happen, sold
Santacruz Silver SCZ.v sep'14 C$1.04 26-ene-14 C$0.86 -17.3% silver/M&A spec, rel. small
Timmins Gold TGD nov'14 U$1.38 09-abr-14 U$0.99 -28.3% failed trade, sell, raise cash
Kinross Gold KGC nov'14 U$2.90 20-oct-14 U$2.15 -25.9% V small trade, didn't work, chau
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-ene-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-ene-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-abr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-abr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-ene-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-abr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
28

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