IKN #357Premium

The IKN Weekly
Week 357, March 13th 2016
Contents
This Week: In today’s issue, Fed week: Small-print rules, We’re all geniuses part 539.
Fundamental Analysis: NOBS report on Lundin Gold (LUG.to).
Stocks to Follow: Overview, Teranga Gold (TGZ.to) (TGZ.ax), Sandspring Resources (SSP.v),
Dalradian Resources (DNA.to) (DALR.L), Nevada Sunrise (NEV.v), B2Gold (BTG) (BTO.to),
Starcore International (SAM.to).
Copper Basket: Overview, Reservoir Minerals (RMC.v), Ivanhoe Mines (IVN.to), HudBay
(HBM), Copper Fox (CUU.v), Nevada Copper (NCU.to), NovaCopper (NCQ.to).
Low Cost Producer Basket: Overview, Goldcorp (GG), Detour Gold (DGC.to).
Regional Politics: A review of Latin America at PDAC 2016, Colombia: Risk of serious conflicts
in the mining sector rising fast, Peru’s farcical election gets even worse, The Peru election front-
runner party on its mining policy, Argentina: Details of the bond holdouts deal to be revealed
this week.
Market Watching: Yamana (AUY) (YRI.to) will announce on Brio Gold this week (repeat),
Silver miners buy gold miners, First Mining Finance (FF.v): Reportedly unshortable.
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
• I mark territory with Lundin Gold (LUG.to).
• The difference between the polished marketing that Latin American states gave their
mining sectors at PDAC and the increasing risk of serious problems on the ground in
the region. Today’s main examples coming from Colombia, Argentina and Peru.
• A preview of what to expect and what to look for from B2Gold’s (BTO.to) (BTG) 4q15
and 2015 year-end financials, MD&A and conference call next week (your author’s main
work event in the days ahead).
• Copper, copper, copper. It remains the single most fascinating part of the mining world.
Lots of words in The Copper Basket section today
• Dalradian (DNA.to) was sold last week for my objective price of a Loonie, I’m now done
with selling. The waiting part for the purchase opportunities may be the boring bit.
Fed week: Small-print rules
I’ve let recent heads-ups on US Jobs and Fed meeting slide in 2016 editions of The IKN Weekly,
but mostly because there hasn’t been much action or anticipation on those numbers so far.
That changes today because the the FOMC meeting of next week may be a big one for the
markets, for gold, for our sub-set of stocks we follow. The Fed pronounces Wednesday 2pm,
with a Janet Yellen presser at 2:30pm that may be equally as important. We know they’re
almost certainly not going to raise rates this time, but the world will be poring over the script
for changes in tone or guidance that will suggest whether two, one or zero raises in 2016 are
signposted, roadmapped, signalled and suggested by Yellen & Co.
1

This, on the back of the surprisingly accommodating position taken by Mario Draghi & Co Over
in the Eurozone last week, could be one of the key Fed announcements of the year. Place your
bets, though you should know by now my position on this; the jawbone away from raises will
begin, the dollar will like the message, things measured in dollars get that bit cheaper. It’s why
I have a stack of dollars this time around. We will see, in the meantime and on Wednesday
make sure you get solid reasoned analysis of the Fed position on your side, rather than
nonsense from us lot the metals mob. In other words, Bill McBride at Calculated Risk (1).
PS: The ides of March is on Tuesday, not Wednesday. When the Fed starts its meeting.
We’re all geniuses part 539
There was a serious point behind the sardonic post on Metanor (MTO.v) last week (2) which is
that stockpicking is all fine and dandy but when it’s the case of the tide rising, they nearly all go
up in style. Metanor (MTO.v) is the stock that Eric Sprott buys for “leverage” and he’s allowed
to was...spend his honestly gotten gains the way he likes, but I don’t take strategy tips from
people who state that ebola would be a catalyst for the silver price.
Meanwhile and in order to feed my own bias confirmation of my call for a near-term dip in the
gold price, the performance of the S&P500 catches the eye. And to be clear, the US broad
market indices are not normally front and centre on my radar. When I tell people what I do for
a living they’ll sometimes ask me by way of a conversation opener, “So where’s the Dow right
now?”, to which I rarely have the right answer. They look at me funnily.
I digress. Here’s a year-to-date chart comparing gold (GLD proxy), the PM miners (GDX and
GDXJ proxies and they’ve been
remarkably in-step so far), plus the
S&P. I’ve marked a couple of places
on the chart, firstly that early
February period when gold broke
up while the s&P broke back down,
reaching -10% for the year at one
point. That was the key moment
for the PM sector, since then it’s
been a decent confirmation of the
move. But thing that caught my
eye is the way in which, quietly and
without making a fuss, the US
markets have dragged themselves
back to UNCH for the year.
Not exactly the right signal for
“gold the safe haven”, as if the tonnes gold GLD: Gold tonnage held as assets
S&P keeps rocking higher (and 820
the Fed announcement 800
780
Wednesday again comes to mind)
760
there may be liquidation of the 740
some the cash that’s been locked 720
700
away in the GLD asset vaults over
680
the last couple of months. 660
640
620
NB: For illustrative purposes, 600
Y-axis does not start at zero
The trend is up in GLD but there’s source: SPDR GLD website
a certain hesitation from the line
at it approaches eight hundred tonnes of gold (we’re at 798.77mt this weekend). Another thing
I see in the GLD figures is that those who got into gold bullion in January have seen real and
2

decent benefits from their play, they were in as GLD showed as a lead indicator. But those in
since then, which means we’re talking about roughly 100 metric tonnes of gold, haven’t seen
much alpha return for their money. That’s the kind of trade that can reverse quickly if the Wall
St. Jocks decide that gold isn’t anywhere near as fashionable and cool as they thought it was
this time last month.
So I’m sticking with my oft-repeated plan and with the last of my sales done (DNA.to, see
below) last week I’m now set for a little bargain hunting. What could possibly go wrong? ☺.
Fundamental Analysis of Mining Stocks
This week we look at Lundin Gold (LUG.to).
NOBS report dated March 13th, 2016
Lundin Gold Inc. (LUG.to)
Company Overview
Lundin Gold Inc. (Canada: LUG.to, Sweden Nasdaq: LUG, USA: FTMNF, Frankfurt F1YN.f) is
an exploration stage junior mining company. Its flagship asset is the Fruta Del Norte (FDN) gold
project in Ecuador. Current share structure is as follows:
Shares out: 101.26m
Options: 3.835m
Warrants: zero
Fully diluted shares: 105.095m
Current share price: C$4.34 (U$3.28)
Market Cap: C$439.5m
Approx working cap per S/O: U$0.10
All prices are in US Dollars unless stated. Forex U$0.80=CAD$1
Today's LUG analysis
This is going to be simple. Not complicated. Straightforward. And it’s going to be brief too (really
honestly for a change I mean it) because I’m not a buyer yet. But as noted a couple of editions
ago I am certainly interested in this stock and today I’d like to expand on that interest and show
you why. There’s three things to cover today:
1) The things I like about LUG the company.
2) An overview of its financials
3) A first pass of a cash flow model to show you why it’s such an interesting project.
We’ll cover things I don’t like so much as well as the unanswered questions around the stock,
too. But as this isn’t a formal buy reco anal ysis and only means to get us into the ballpark, that
will be more than enough for today.
1) Things I like about LUG
Seriously, no joking, going to be as concise as possible today so we’ll do this in bullet-points:
3

• It’s a Lundin company, which brings several advantages. That means it has serious
financial backing from deep-pocketed sponsors who are in for the long-term. It means
it’s run by people who really know how to do mining, instead of faking expertise and
having to BS the world about their chops (we’re immediately ahead of Continental Gold
(CNL.to) here, you’ll note). As a corollary, it’s run by people with a hard-earned
reputation they don’t want to blemish or lose. It means it’s a company that knows how to
operate in some of the more difficult countries of this world (and my stars, Ecuador isn’t
easy on a macro political or micro community level). It also means you get plenty of
radar from the fawning sellside brokerages (the company’s less than 18 months into its
project, doesn’t have a feasibility study yet and there are already eight brokerages
covering the stock).
• It’s doing a great job with its community relations. I’m the first and sometimes the
loudest person to decry poor community relations work by mining companies, therefore
when things are done not just well but impressively well, it’s only right that the company
doing the right thing gets its IKN accolades. I was sceptical about the chances of LUG
making progress at FDN due to this key element but from everything (literally, it’s
difficult to find a bad word said about the company in Ecuador) picked up LUG has done
an exemplary job of work in the communities affected by FDN and the situation is
nothing short of optimum now. That’s quite a thing to say about a rural community in a
country as difficult as Ecuador.
• It’s got the government on its side. On nearly the same subject, LUG has forged a
strong relationship with the Correa government of Ecuador as well (as anyone who saw
the way the company reps and Ecuador’s mining minister Cordova seemed to be joined
at the hip at PDAC will be able to testify. One of the keys (or so I’ve been told) to getting
this fast with the government has been to push the point of how they need “a win” in the
mining sector and LUG, with its acceptation into the local community and a big project
with the ability to make a significant difference to national and local treasury coffers, is
the right company for the job. LUG has taken this mantle away from the still-troubled
and rather delayed Mirador copper project and has made the most of its growing
political capital. Very smart corporate strategy.
• Fruta Del Norte is world-class. Period, no ifs or buts, this is at least 7.3m oz of high
grading gold (and probably a lot more) in relatively easily mineable rock. If a mining
company can’t make a profit on this one, nothing in Ecuador will ever be economic.
That’s the nutshell on why I like the look of LUG, now for some numbers.
2) Financials overview
As this company didn’t really kick into gear until 4q14 when it secured the Fruta Del Norte
project form Kinross, and it has not as yet moved to secure the financing it will need to build its
mine, the financials to date at LUG are straightforward to the point of blindingly obvious and we
don’t need to go veyr deep, but there are still a couple of observations worth making today.
Starting with balance sheet items, here are the charts for the assets and the liabilities:
LUG: assets
350
300
250
200
150
100
50
0
4
41q3 41q4 51q1 51q2 51q3 51q4 tse61q1
$m fixed LUG: Liabilities
other current 20
cash&ST 18
16
14
12
10
8
6
4
2
0
source: company filings
41q3 41q4 51q1 51q2 51q3 51q4 tse61q1
$m
LT debt
current debt
source: company filings, IKN ests

Liabilities couldn’t be simpler, there’s only run-of-company things on the current side and a
small closure bond on the long-term (that will get bigger once we move from the official
exploration period we’re in today to exploitation, coming soon). As for assets, it’s easy to see
when FDN came on board the company structure and we also note that the totals per quarter
are dropping as treasury is burned, that’s because LUG isn’t capitalizing expenditures as yet
(presumably that will begin with the build-out period).
As liabilities are minor and nearly all current
assets at LUG are in the treasury box, we
can get a very good idea of liquidity simply
by checking the working capital chart (right).
And here’s main observation number one:
LUG is running out of cash. We know it
needs to raise a big amount to build its mine,
but this chart makes plain that unless it goes
for a bridge-type financing, the moment of
truth is coming soon and we’ll know how
LUG plans to get the funds together within a
quarter or two.
Moving to the P+L, the main point is to note
just how it’s spending its money. Again note the sudden activation of the stock as from 4q14
when it hired the team to develop FDN, then in 1q15 when exploration began with a vengeance.
LUG was one of the very few juniors that was spending heavily on real live exploration and
development work in 2015, which may have looked a little risky back then as the Serious
Financial People called gold under U$1,000/oz on numerous occasions; It’s looking pretty smart
nowadays.
LUG: Expenditures breakdown
18
16
14
12
10
8
6
4
2
0
5
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 tse61q1
LUG: Working capital
70
60
50
40
30
20
10
0
$m
salaries & benefits
other G&A
professional fees
project evaluation
source: company filings, IKN ests
No surprise to see its net losses columns closely match its expenditures columns, there’s no
financial debt to service and any
difference is mainly currency fluctuations
in the below-the-line items on the P+L.
No biggie, the take-away here is to say
that the cash is being spent on the
ground and on expert brains.
Shares outstanding (next page) have
kept steady since the deal with Kinross
to buy FDN. As part of that deal Kinross
owns 26.156m shares of LUG, to which
we can add the 31.633m held by the two
Lundin family holding companies (Lorito
and Zebra). Then there are around 450k
shares held privately by “Lundin people”
on the board of directors. In other words, 58.2m of the 101.26m shares out (57.5%) are locked
away, firmly out of the float, which is one reason why LUG has to date traded on low volumes.
41q3 41q4 51q1 51q2 51q3 51q4 tse61q1
$m
source: company filings, IKN ests
LUG: Net losses
18
16
14
12
10
8
6
4
2
0
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 tse61q1
$m
source: company filings, IKN ests

I could show you a few other parameters and charts, but they’re not really so important at this
stage. The bottom line to the financials is that
LUG is tightly held, has been spending LUG: Shares outstanding
160
serious money in the last year and a half on
its project and will need to raise at least 140
some cash soon. As the feasibility study is 120
due delivered in 2q16, the deal with the 100
Ecuador government states that it needs to 80
formally move into “exploitation” mode by 60
July 2016 and the company CEO Ron 40
Hochstein has publicly stated that LUG plans 20
to raise its capex cash once the Feas Study 0
is published (and before it needs to write its
first U$25m “Advanced Royalty” cheque, on
the signing date in July), I’d expect that LUG
will move to raise all it needs.
The cash flow model
To do this in a concise way. I’m going to combine a couple of items that normally get their own
discussion section. We’ll start with the current resource count at FDN, which is bound to change
when the Feasibility Study comes out in 2q16 (for one thing, they don’t allow inferred into the
calculations at FS stage so I’d expect a lot of those ounces have been drilled out toe Measured
and Indicated level, we may even get some move to reserve status). Also, it’s cut using
U$1,400/oz gold and a range of cost parameters that would have changed (for the better) since
its publication in October 2014. But this table is as good a place to start as any for our “In The
Ballpark” needs today, so here it is:
In global terms, there’s 9.8m oz of high grading gold in all categories with a useful 15m oz of
silver to help keep cash costs down come the day of the mine.
Next, the parameters of the eventual mine and its cash and profit generating abilities and as I
see things at the moment, here are the main inputs:
• LUG currently says it will run an operation of between 3,000 and 3,500 tonnes per day
(tpd). There’s every reason to suppose, what with the amount of rock they have and the
capex they’re throwing at this project, that they’ll be at the higher end of that range and
as such I’m going to model a 3,500tpd machine. That means it would run at around
1.28m tonnes throughput per year and that in turn gives me the luxury of being able to
completely ignore the inferred category ounces at the moment, stick with the Indicated
and still get a 18+ year mine life using 9.59 g/t gold.
• Total recovery percentages are estimated at between 91% and 94% (with around 30%
producing doré on-site, the rest shipped as concentrate). We’re going for 92% today.
• Capex is going to be steep, with current best guesses among anal ysts starting at
U$700m and Ecuador’s Mining Minister boasting to all and sundry that it will be a
U$1Bn investment, all told. We’ll know a lot more about this input come the FS next
quarter, but I’m going to pitch my best guess at U$750m today.
• As for how that capex is raised, my stars there are options and permutations galore!
However, to keep things simple (and let’s be clear, way too simple) for today I’m
sticking with the path of least resistance and the 100% equity route (at least Lundin
companies have a history of going this way). I’m also tipping my hat to the way the
stock price has been carefully managed around the C$4 level ever since it went public
(reader, mailpal and experienced sector guy ‘MP’ said it best when he wrote to me and
6
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 tse61q1
m S/O
source: company filings/IKN ests

noted LUG seems to trade “by appointment only”) and setting that as the raising price.
Therefore 200m shares sold at C$4 will raise C$800m and if that’s not enough for the
build-out, we’re darned close.
• Therefore, I assume 300m shares out and no debt on production day one. And don’t
say I didn’t warn you this was ballpark simple today. However I will state that this may
come in a lot lower under different financing scenarios, this is one that will see
resolution in the next two quarters and I think it’s one of the key elements to the final
buy/avoid decision on LUG in my future.
• Cash costs are difficult to estimate, but it’s understood they’re going to be low quartile.
The operation is simple (underground bulk mining and much easier to keep to the
mineralization than at Pretium’s Valley of the Kings project), rock is amenable to
standard recovery techniques, much of the overall project cost gets locked up in the
capex hurdle. The latest corporate presentation has consensus guesses at U$510/oz
cash cost and U$593/oz All-In Sustaining Cost (AISC) and that sounds reasonable. I’m
using AISC U$600/oz today (with silver credited against that.
• Then we come to the thorniest problem of all, the State deductions from this project
which have been one of the major stumbling blocks of FDN over the years (it was the
straw that broke Kinross’s back and got them to walk away from their purchase, if you
recall). As things stand there’s a whole list of things Ecuador will charge FDN, including
a 5% royalty, 15% worker participation, 22% corporate tax, then perhaps VAT (which is
scheduled to change and be recoverable as from in 2018, so that’s good) and the much
debated Windfall Tax which is set to a complicated formula now but come the day of
mine opening and assuming gold doesn’t shoot massively higher between now and
then would kick in at a little under U$1,500/oz gold if we ever saw that and take 70% of
the proceeds above that number. However, for our ballpark purposes today there’s a
reasonably simple and useful hack to all that mess. The last charge made by Ecuador is
called the “Sovereign Adjustment”, which is basically an extra charge that will kick in to
make sure FDN pays at least 50% of its operating profits to the State. This exists
because the country’s new Constitution (passed under the Correa government) states
specifically that the State must take at least 50% of all non-renewable natural resource
revenues. Therefore and until we need to get particular and detailed once the FS shows
up, we can do the State burden question the easy way: Take operating profits and split
them 50/50 between company and State. Now I’m the first to admit it’s not going to be
that cut and dried come the time (for one thing LUG will benefit from the clawback of
advanced royalties and VAT), but it puts us in the right place and I’m okay with keeping
things simple today. Therefore the table of the income statement you see below has
zeros where you’d normally see deductions and then 50% lopped from op. profits.
You then put all that together, add in some reasonable guesstimates for deprecation and G&A,
then play with the numbers using four different gold prices to reflect a reasonable base case
(U$1,100/oz), today’s type of numbers (U$1,200/oz and U$1,300/oz) and a blue sky case
(U$1,500/oz), hit the button and tables and estimates come out the other end. Such as this one,
which shows we’d expect an annual average of 362,000 oz gold produced:
FDN Production Estimates
Year U$1,100 U$1,200 U$1,300 U$1,500
process tonnage 1,277,500 1,277,500 1,277,500 1,277,500
Au prod oz 362,415.7 362,415.7 362,415.7 362,415.7
cash cost U$/oz 500 500 500 500
gross profit 187.4 223.7 259.9 332.4
Net income 83.7 101.8 120.0 156.2
EPS (300m S/O) 0.28 0.34 0.40 0.52
source: IKN estimates
And this one, which gives the abridged income statement estimates at the range of gold prices:
7

LUG at FDN: Model Year Income statement items (in U$)
gold price U$1,100 U$1,200 U$1,300 U$1,500
Sales (U$m) 398.7 434.9 471.1 543.6
COGS 181.2 181.2 181.2 181.2
Depreciation 30.0 30.0 30.0 30.0
SGA 20.0 20.0 20.0 20.0
Royalties 0.0 0.0 0.0 0.0
Op income 167.4 203.7 239.9 312.4
Interest 0.0 0.0 0.0 0.0
Workers Part. 0.0 0.0 0.0 0.0
"Tax" (50% to State) 83.7 101.8 120.0 156.2
Net income 83.7 101.8 120.0 156.2
Shares out 300.0 300.0 300.0 300.0
EPS 0.28 0.34 0.40 0.52
Sources: LUG data, IKN estimates
Then finally this one, which uses the CAD$1 = U$0.80 forex and a 10X P/E ratio (which I think
more than reasonable at this stage for what’s set to be a large scale class act gold mine with a
long mine life) to give us a current to point to a current ballpark target of CAD$5.29,
representing a 22% upside to this Friday’s closing price:
Sales and earnings Target price & valuation data for LUG based on
$1,100 $1,200 $1,300 $1,500 U$1,200/oz gold
Sales (U$m) 399 435 471 544 12-month target $5.27 based on 10x FCF
Sales growth 9% 8% 15% Upside to target 22%
EPS 0.28 0.34 0.40 0.52 Mkt cap (CAD$m) $439 Enterprise value $437
FCF 0.38 0.44 0.50 0.62 P/sales ($1,100) 1.01 EV/sales ($1,100) 1.01
P/E ($1,100) 15.6 EV/EBITDA ($1,100) 2.2
P/E ($1,200) 12.8 EV/EBITDA ($1,200) 1.9
P/E ($1,300) 10.9 EV/EBITDA ($1,300) 1.6
And that’s not a massive looking upside to the current share price, is it?
Discussion and conclusion
It’s that very final line that’s kept me from wading into LUG all this time, all through 2015 and
even when I began to realize that the company had been doing an excellent job of its country
and community relations in Ecuador, de-risking a big risk to the project.
As this price chart shows, ever
since it floated on the TSX LUG’s
price has been stuck around the
$4 number, with low volume and
with every signal of being
managed to stay around there.
Yes, that’s a nice way of saying
that I’m pretty sure that to this
point, LUG shares are being
manipulated by somebody
somewhere in order to maintain
the current equity value, all on low
volumes and tacit agreement
between the big players on board.
Hardly a shock, but it also means
that its basic economic
8

parameters to date haven’t been that attractive, at least from where I sit.
However, this may be about to change. The scenario I’ve sketched out above has “THIS IS
BALLPARK” scrawled all over it on several occasions and it’s the type of scenario I’ve been
playing with all through LUG’s short corporate life, but in my view now is the time to get
interested in this stock because the window of opportunity may be upon us soon. With its
upcoming FS, LUG is about to deliver a much better document on FDN and its economic
potential than we’ve had so far. My ballpark above is where I intend to begin, but it’s probably
going to change quite a bit and in this project, the devil will be in the details. I can think of
scenarios in which capex is cut by a $100m and make this stock an immediate buy, just as one
example (of many). Other scenarios bring potential negatives to the economics. There are all
sorts of things that might affect the model. The other big change will be in the timing and way in
which LUG goes about raising its capex. I’ve assumed full equity and 300m shares out come
production day one but it ain’t necessarily so, Joe. The substance and way in which LUG raises
will be vitally important for the eventual decision to buy or avoid LUG shares.
There’s no doubt that LUG to date has done a great job in Ecuador, it’s to the point where I’m
comfortable about buying a miner stock exposed to that Three Ringed Circus of a country. The
basic economics as sketched out today show that the stock may be trading a little too
expensively and what’s certainly true is that expensive compared to the scant knowledge we
have about what FDN will look like once in operation. Therefore for the time being I watch, very
curious as to whether there’s a good trade in the near future for us.
Ok, got it all done in six pages. Acceptable.
End of Report
Stocks to Follow
We have just six open positions left on the ‘Stocks to Follow’ this this weekend, which is a
record low number but it’s not likely to stay that way for long. Of those six, three put in gains
(BTO.to, SAM.to, NEV.v), two were losers on the week (LRA.v, REG.v) and one was unchanged.
The biggest moves in percentage terms were the two losses in Regulus (REG.v down 15.0%)
and Lara (LRA.v down 9.1%) though no real harm was done. And of course B2Gold (BTO.to)
went up which means in my case that the overall portfolio had a winning week, it’s by far my
biggest open position in dollar terms.
There’s a lot of space left to fill on this table and the chances are it’s going to take at least a
couple of weeks before that process begins. It might be a bit boring in March, but come the
right moment I’ll be buzzing and buying and doing active things for a change.
With the sale of Dalradian (DNA.to) we’re at six open stocks, a full nine fewer than our self-
imposed maximum of 15 at any one time. Two positions are in the green, four are in the red,
two of those are legacy big bagholds.
9

company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICK
B2Gold BTO.to STR Buy C$2.11 12-sep-14 C$1.75 -17.1% Overdue rebound continues
Metals Producers (in current order of preference)
Starcore Intl SAM.to spec buy C$0.48 10-jan-15 C$0.445 -7.3% Rapidly improving profile
Land Grab Stocks (in current order of preference)
Lara Expl. LRA.v Buy/Add C$1.15 08-apr-12 C$0.37 -67.8% solid biz model, waking up
Other Recommended Stocks (in current order of preference)
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.065 -71.7% Hit hard by PFS news
Nevada Sunrise NEV.v spec buy C$0.185 28-feb-16 C$0.205 10.8% New Li spec play, small flipper
Regulus Res REG.v hold C$0.30 06-apr-15 C$0.34 16.7% 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
True Gold TGM.v jan16 C$0.18 23-aug-15 C$0.25 38.9% okay trade, sold on pol risk
McEwen Mining MUX jan16 U$1.09 25-jan-15 U$1.20 10.1% sold due to lack of value
Lake Shore Gold LSG.to feb-16 C$1.10 07-apr-15 C$1.69 53.6% bot out, sold early in process
Atacama Pacific ATM.v feb-16 C$0.19 26-apr-15 C$0.40 110.5% sold for a double on big pop
New Gold NGD feb-16 U$2.06 24-jan-16 U$2.96 43.7% closed good near-term trade
Sandspring Res SSP.v mar-16 C$0.195 18-oct-15 C$0.32 64.1% Hit tgt, took profit
Teranga Gold TGZ.to mar-16 C$0.54 15-feb-15 C$0.60 11.1% disappointing trade
B2Gold BTG mar-16 U$0.85 13-jan-16 U$1.30 52.9% Separate trade on B2, hit tgt
Dalradian Res DNA.to mar-16 C$0.67 27-oct-13 C$1.00 49.3% Hit target, sold, good win
2009, 2010, 2011, 2012, 2013, 2014 and 2015 closed positions in appendices below
Now for some notes on current basket stocks.
Dalradian Resources (DNA.to): Position closed. As flagged this time last week, when
C$1.00 became freely available I took it and closed this large-ish trade (that got recently
topped up too, happy about that) for a chunky win in both percentage and absolute cash terms.
Not much more to say at this point, except that I wouldn’t be against buying back into this
company if the opportunity and a value entry point occurs. That and my selling is now done,
the war chest of cash is replete, a question of finding the right places to put it to work. Nine
profitable trades out of ten closed positions so far this year is a nice looking list.
Nevada Sunrise (NEV.v): My small very-spec trade on the lithium craze was rallying nicely
with decent trade at 22c or so when all of the sudden, the biggest risk that a trader of tinycaps
faces slammed the rally. NEV announced Wednesday (3) that it was raising $500,000 via a
placement of 2.5m units at 20c (unit = 1 share + ½ warrant a 32c) and I can’t blame them for
doing so under the circumstances, they guarantee the company’s year (and the director
salaries) this way.
B2Gold (BTO.to) (BTG): Our Top Pick stock is due to report its 4q15 and 2015 year-end
financials pre-open on Wednesday March 16th (i.e. three days from now). We also get a
Conference Call on Thursday 17th and I personally am not going to jump to any conclusions on
just the Financials and the MD&a this time, that CC may be equally as important. Here’s why:
Thanks to its pre-announced production numbers and costs parameters back in mid January (4)
we shouldn’t have too many surprises from the operations numbers.
I’m expecting BTO to take an impairment, as this time last year they dropped their long-term
gold price assumption to U$1,300/oz and the trend in peer companies so far this year is to
10

assume at U$1,200/oz. It will be interesting to see what size and what way B2 goes on the
subject, including their explanations, one of the reasons to tun into the CC.
However impairments (when clearly flagged) aren’t sexy or market moving, so the real interest
in the BTO numbers will be about 2016 and its plans. And the big one is how B2 plans pay for
the Fekola built-out. This is the single biggest weight on the shoulders of the share price and
the biggest incognito. We know they plan to spend U$233m on construction in 2016 alone (for
a late 2017 start-up), we know the current working cap position is in the low $100m range, we
know that BTO won’t get close to filling that shortfall on organic operational profits alone, we
also know that the paperwork is done for the company to raise up to U$300m (in debt or
equity). Every scrap of information on this subject will matter, which is why this Conference Call
is going to be obligatory listening material.
Meanwhile, as forecast production ounces and cash costs for 2016 were pre-announced in the
4q15 production report in January, we may get more on this subject but it’s a lesser animal. I’ll
be looking out for any adjustments to those
numbers, particularly on costs, and as we’re
closing in on the end of Q1 already we may
get guidance on how their plans have
matched the reality of the first period at its
four working mines.
As for last week’s trading, late-day Friday
took the edge off a decent week for BTO as
the stock sold-off into the close by around 5c
(which is understandable, people closing out
positions after PDAC week). As weeks go, I’ll
take it.
Expect a close look at our Top Pick company next week in IKN358, though I will say now that
there seems to be a general market and brokerage consensus built over PDAC week that “BTO
is a hold”, I heard it from several quarters. That’s pretty encouraging for me, low expectations
for this report and 2016 have been built in by the news-chaser brigade, it’s when a company
can make a difference with its pronouncements.
Starcore Intl (SAM.to): Some bizarre but very welcome news from SAM last week, I for one
never had a clue that when I bought this stock I was going into the Mexico real estate business.
On Wednesday morning SAM announced (5) that it had reached agreement to sell its “San
Pedrito” land-holding (part of the land package it bought from Goldcorp (GG) back in 2007) for
approxiately U$7m, after having done the paperwork to convert its designation to residential
and then doing a deal with a property
developer who will build residences on the
package. The NR is worth a complete
read, but it’s notable that SAM has been
working on the conversion of the land for
five years, also that the first deposit on
the sale is already in escrow. Although still
subject to local government compliance
checks it looks like a done deal and if so,
at the end of the approx six month period
SAM will get its gross proceeds of U$7m.
That’s not a small sum and from assets
priced at zero on its books until today,
with just over 45m shares out and even
after the company pays the middle-men
paper-pushers it walks away with 14c/share in cash, assuming the deal closes correctly. From
11

the sounds of that NR they’ve gone about this the right way, taken five ful years to get the
deeds in order and I doubt they’ve left any ownership or rights questions unanswered for the
conveyance process so add in the hefty deposit on the deal and it’s a fair bet this will close
correctly.
But far more important than just 14c/share, this cash more than covers that U$4m loan SAM
took out to get its Altiplano toll milling plant up and running. We’re still exposed to execution
risk there, but the means to pay back the loan in November is a big de-risk to this aspect of
SAM and by the looks of the share price reaction last week, I highly doubt all that is baked into
the share price yet. This is looking very cheap all of a sudden and if it shows the world it can
run the Altiplano operation at a profit, there’s a lot of potential upside. Though be clear that the
risks of non-execution are there to bring you down, too
The Copper Basket
After ten weeks of 2016, The Copper Basket shows a 32.03% gain to level stakes.
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 HudBay Min. HBM.to 0.35 235.23 898.58 3.82 -28.1%
2 Ivanhoe Mines IVN.to 0.61 778.96 677.70 0.87 42.6%
3 Reservoir Min. RMC.v 4.08 48.46 302.39 6.24 52.9%
4 Capstone Min. CS.to 0.44 382.04 206.30 0.54 22.7%
5 NGEx Resources NGQ.to 0.65 201.06 150.80 0.75 15.4%
6 Copper Mtn CUM.to 0.445 118.8 77.58 0.65 41.6%
7 Copper Fox CUU.v 0.125 417.64 73.09 0.175 40.0%
8 Western Copper WRN.to 0.38 94.19 68.76 0.73 92.1%
9 Nevada Copper NCU.to 0.66 80.5 68.43 0.85 28.8%
10 NovaCopper NCQ.to 0.395 104.33 52.17 0.50 26.6%
11 Cordoba Min. CDB.v 0.16 79.45 31.78 0.40 150.0%
12 Atico Mining ATY.v 0.28 97.59 31.23 0.32 14.3%
13 Hot Chili Ltd HCH.ax 0.09 420.12 25.63 0.061 -32.2%
14 Amerigo Res ARG.to 0.205 173.61 24.31 0.14 -31.7%
15 Revelo Res. RVL.v 0.055 99.19 7.94 0.08 45.5%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg 32.03%
Further overall gains for The Copper Basket this week, but it wasn’t just blanket buying of
anything with the name of a metal in its corporate title this time. Six of the components of our
basket posted gains on PDAC week (IVN.to,
RMC.v, NGQ.to, NCU.to, HCH.ax, WRN.to), The Copper Basket 2016, weekly evolution
35%
two were unchanged (CDB.v, RVL.v) and 30%
seven were losers (HBM.to, CS.to, CUM.to, 25%
20%
CUU.v, NCQ.to, ARG.to, ATY.v). So the basic
15%
headcount was even-ish, but the average win 10%
5%
came from some of the big upmoves we saw
0%
including Western Copper & Gold (WRN.to up -5%
32.7%), Reservoir Minerals (RMC.v up 27.6% -10%
-15%
and see below for more), Hot Chili (HCH.ax up -20%
17.3%) and Nevada Copper (NCU.to, they
managed to find some sucker to buy some).
Biggest losers were NovaCopper (NCQ.to
down 16.7%) and the horrid Copper Fox (CUU.v down 10.3%).
As a background to all this, copper the metal stepped back from its challenge to the U$2.30/lb
level, played around at U$2.20/lb midweek, rallied a bit on Friday. Definitely not the type of
rampant bullish action we saw the week before, but I don’t think the bulls will be too concerned
12
dr3naj ht01 ht71 ht42 ts13 ht7bef ht41 ts12 ht82 ht6 ht31
source: IKN calcs

on what they’ll mark down as a consolidation week.
I’m not one of those bulls, not yet anyway. That’s because
although they were lost in the bullish whooping and joy I
still remember the words of the head of Codelco (no less),
who warned copper wasn’t about to shoot higher and end-
user demand was still soft, as reported last week. And I’m
also watching the precipitous rise in warehouse
inventories. Speaking of which, here’s the bullets on our
weekly copper warehouse inventories update:
• Total world copper stocks in the three official
warehouse systems rose by a substantial 25,443
metric tonnes (mt) (+4.6%) to finish Friday at
552,856mt, but the overall picture isn’t the real
news, as you’re about to see.
• Shanghai saw another eye-popping influx of metal and by Friday its stock count was up
by a massive (no other word) 45,032mt (+14.8%) at 350,138mt. See below for more
thoughts on this.
• The trend of SHFE up LME down continued, with LME stocks down 10,725mt (-5.37%)
to finish the week at 175,975mt. Notably, the drops are very similar on a weekly basis
(just 200mt more than the week before). The shift in copper power from West to East
is official and undeniable, but there are still those who stubbornly refuse to
acknowledge anything but the LME numbers and think copper inventory data is
currently bullish. They’re plain wrong.
• Meanwhile at the Comex we had the first real shift in numbers for weeks, with this
system losing 8,864mt (-14.5%) to finish at 52,186mt. Difficult to know what this
means or how important it might be, in global terms the tonnage is minor but it may be
a new trend that mitigates some of the strongly bearish Asia data.
Here's the Shanghai-only chart, which shows the now parabolic rise of stocks in its system and
indicates very weak end-user demand in the world’s biggest market for copper.
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
400000
350000
300000
250000
200000
150000
100000
50000
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 ht42 ht41 ht6ram
Mt Cu
source: Cochilco
Today, in light of this bearish dataset, I want to tackle the whole bullish argument and to do so
I can think of no better way to start than to quote one of the most prolific purveyors of rose-
tinted spectacles on all things mining, the sales desk at Scotia (cue applause). Here’s how they
framed their piece on copper inventories on Friday in their morning mailer to clients:
“...we are not concerned with the recent spike of copper inventory in China – YTD we have
seen a less pronounced spike ahead of global spring demand season. Perhaps this is the reason
why Copper prices haven’t sagged on this data…

SHFE stock levels are expected to decline during Spring demand season. Metals demand in
China has typically picked up after Chinese New Year holidays while factories restart
purchasing activity, with the April-May period usually showing strong demand.
Chart below shows Total global copper inventories normally increase from December to March
and then start falling during the typical April / May peak demand period.
Y2012: Jan to Mar Global Cu Inventory Increase +263kt or +33%
Y2013: Jan to Mar Global Cu Inventory Increase +346kt or +26%
Y2014: Jan to Mar Global Cu Inventory Increase +272kt or +27%
Y2015: Jan to Mar Global Cu Inventory Increase +345kt or +41%
Y2016: Jan to Mar Global Cu Inventory Increase +181kt or +21%
IKN357 back and the big question to answer is, how do they managed to downplay such a
massive move on the SHFE, which is hitting all-time records and jumping by record amounts
per week?
To begin, we of course agree that “the peak” should be soon. As our own data has shown,
week in week out year in year out, Chinese stocks peak around April and then the drawdown
kicks in (or is expected to, at least).
However part one, there’s little point in comparing the Jan-March yearly percentage changes,
the most cursory of examinations blows that one out of the water. For example, 2012 and 2013
were the height years of the Goldman/Morgan/Glencore/Trafigura “rental scam” at LME bonded
warehouses (and non-aligned bonded warehouses) that would let metals in but then trap it and
allow the warehouse owners to benefit from the monthly rentals, all the while opening and
cancelling warrants on the stock to stop it from leaving. It was a perfectly legal scam at the
time but it was a scam all the same and once the LME clamped down on it, the stocks dropped
back. The bottom line is that there’s simply no point in comparing the 1.6mt+ total inventories
at that time to today’s numbers, even less on a percentage change basis
However part two, another thing Scotia does is add in the numbers from those non-aligned
warehouses, the so-called “bonded warehouses” that don’t belong to any of the futures
markets’ own systems. Here below is the chart they used to support their Friday spiel on
copper:
From year one here at The IKN Weekly and while running the coverage on the copper market
over the years, I’ve steered well clear of the non-aligned bonded warehouse data and for good
reason (with the best one being from my LME trader friend who many years ago told me to
avoid it like the plague, as even trying to understand that black box has consistently beaten the
best metals market brains and I’m not one of those). One example of the weakness is scribbled
on that chart, as in the period August to September 2015, stocks in the non-market aligned
bonded warehouses (the green part of the Scotia chart above) dropped from 580,000mt to
14

350,000mt, a very large single month drop that was explained at the time by traders in
Mainland China taking advantage of a big arbitrage between Shanghai prices and inland prices
to move large stocks. It was a temporary state of affairs and it’s notable that since then, non-
aligned bonded warehouse stocks have crept up again.
This is an example of the problems faced when adding in the opaque and largely undisclosed
bonded warehouse stocks into the three (relatively) transparent and market oriented Futures
market warehouses (LME, SHFE, Comex). The bonded warehouses run by another set of rules
and we still don’t know where that large slug of metal went to, with many now assuming the
rumour at that time that the China State Reserve Bureau (SRB), responsible for stockpiling
strategic reserves for the country, was the eventual buyer. That would mean the copper hasn’t
been used and is still sitting somewhere, doing nothing (and maybe turning a bit green). Even
so, what we do know is that the SRB were buyers of copper in December and took perhaps
50,000 (extra?) metric tonnes off the open market.
The bottom line to this (and to cut a long story short, a.k.a “Baby we could talk all night, but
that ain’t getting us nowhere”) is that there are lies, damn lies and statistics and if you want to
make a bullish or bearish case for anything, there’s always going to be a suitable set of
numbers for your cause. In the case of Scotia being unconcerned about the record rises and
absolute record inventories in SHFE, their argument is easy to knock down but you try telling
that to a copper bull. I’m still agnostic on copper, if I saw it obviously going lower I’d short
HudBay (and I’m not there yet), if higher than U$2.30/lb were in the cards some of the
speculative price pops of the last three weeks may be justified (I’m doubtful). I find myself
stuck in the middle, with a better taste for shorting but nothing decided yet.
I’ll wrap this up by quoting the eminently quotable JK Galbraith, dedicated to all metals
permabulls:
“Faced with the choice between changing one's mind and proving there is no
need to do so, almost everyone gets busy on the proof.”
Now for comments on a few of our basket stocks, mostly a redux from last week’s selections:
Reservoir Minerals (RMC.v): I was wrong. Sometimes you just have to hold up your hands
and say it out loud, no ifs or buts, RMC in IKN356 was contained a monumentally bad call made
by me. At this point last week I chewed over the Timok deal between Lundin Mining (LUN.to)
and Freeport (FCX), considered it conceptually positive for RMC but didn’t think it would be a
catalyst for the stock, ending the section with the words, “I wouldn’t be a buyer of RMC today
on this news but if I were a holder I wouldn’t sell, either”. That was stupid and here’s the proof:
Reservoir Minerals (RMC.v) shares got bought up in house-on-fire fashion last week, the deal
15

one of the talks of PDAC, the vibes that the Right of First Refusal may indeed be taken up with
RMC already in active talks with third parties (and at least one thing mentioned was on the
mark, Rio Tinto is the company being most closely connected at the moment).
Ivanhoe Mines (IVN.to): In the end Rick Rule didn’t plump for IVN as one of his Top Picks
during his appearance on BNN’s PDAC Market Call program (though he did get to talk about it
in the usual glowing terms). However the Brent Cook/Joe Mazumdar Exploration Insights
doubleteam did on the Tuesday and that helped IVN along the way for a decent PDAC week.
HudBay (HBM.to): HBM looked overcooked on a short-term basis last weekend, which is one
reason why I was thinking about it as a
potential short play on copper in IKN356.
It turned out to be the right direction
over the five days, but it’s not the end of
the chance to bet on this downside as
near-term is the minor thing. What I’m
really considering here is shorting HBM
on the expectation that copper-the-metal
reverses and moves back down to the
U$2.00/lb level soon. That’s why the
macro copper fundies have so much of
my attention at the moment, it’s a great
big puzzle and fun working it out, plus
get it right and there’s a decent wedge
of profit to be made.
Copper Fox (CUU.v), Nevada Copper (NCU.to). NovaCopper (NCQ.to) redux: Last
week these three were singled out as examples of the animals that Canada shouldn’t feed any
longer, but may decide to buy if style beats out substance (again). Here’s how they got on
during PDAC week:
• Copper Fox (CUU.v) down 10.3%
• NovaCopper (NCQ.to) down 16.7%
• Nevada Copper (NCU.to) up 10.4%
Now don’t be sad, ‘cause two out of three ain’t bad. As for NCU, it rose its 8c on piddly volume
for a PDAC week (average 50k per day) and finished the con job with a 3c tape-painting
exercise late Friday. The only way that one doesn’t drop next week is if copper the metal goes
on a face-ripping rally. Do not feed the animals.
Capstone Mining (CS.to): The hedging program announced by CS.to on Wednesday made
the blog (6) but it was also the logical thing for the company to do; Despite the rise in copper
its financials are still very tight, it still has that
3:1 debt:EBITDA ratio covenant on its debt, it
needs above all to make sure it doesn’t default
and hand over the assets to the Koreans. But the
other point made in my post Wednesday is
equally as valid, where’s the accountability at this
company? Current CEO Darren Pylot is the same
Darren Pylot that steered CS.to into the purchase
of Far West Mining and its Santo Domingo white
elephant in Chile, a purchase that needed to be
funded by debt as CS was too small otherwise, it
was attempting a big leap.
Hindsight shows the mistake that was, a stock
price decimated and now 2016 left out to dry, too. But Pylot still sits happily as the CEO and
16

claims expertise in company direction. Just another thing that’s woefully out of date in the
sector.
In trading, CS remained virtually neutral on the news. Not surprising really, there’s not reason
to either own or sell this stock in 2016 any longer.
The Low Cost Producer Basket
After 10 weeks of 2016, the Low Cost Producer Basket shows a gain of 61.13% to level stakes.
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Barrick ABX 7.38 1164.67 16.24 13.94 88.9%
2 Newmont NEM 17.98 529.12 14.12 26.68 48.4%
3 Goldcorp GG 11.56 830.22 13.59 16.37 41.6%
4 Franco Nevada FNV 45.75 176.298 10.82 61.38 34.2%
5 Agnico Eagle AEM 26.28 217.67 7.78 35.72 35.9%
6 Ang/Ashanti AU 7.10 405.27 5.46 13.47 89.7%
7 Detour Gold DGC.to 14.41 170.85 3.52 20.61 43.0%
8 Sibanye Gold SBGL 6.09 228.71 3.26 14.26 134.2%
9 New Gold NGD 2.32 509.16 1.92 3.78 62.9%
10 Buenaventura BVN 4.28 254.19 1.44 5.67 32.5%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 61.13%
Another strong week for our list, with The Low Cost Producer Basket: Weekly performance
nine winners (not listing them) and just 70% and comparative to GDX control
one loser, the Loonie denominated 60%
Detour (DGC.to). The best performances 50%
in percentage terms came from Goldcorp 40%
(GG up 8.1%) and Franco Nevada (FNV 30%
up 7.2%), which was also interesting. 20%
10%
The bit I like; our list extended its 0%
advantage over the GDX benchmark by -10%
2.75%, we’re nearly 16 points ahead
now. Stockpicking is worth something
after all ☺.
Goldcorp (GG) (G.to): GG bounced well
for a second week, leading our restricted
field and getting plenty of love from the
bigboy end of the investor spectrum
thanks mainly to the New Broom
announcements from its new CEO, David
Garofalo. The centre of the New Broom
move came on Wednesday morning with
the NR (7) that announced a management
shake-up, including both the CFO and the Senior VP Exploraiton “being retired”, with the CFO
replaced by Executive VP Corporate Development Russell Ball (who will still do the corp dev job
on top of singing off on the financials) and the VP Expl job closed down along with his base
office in Reno, with each GG mining unit now responsible for its own exploration fate. This is all
part of a move to decentralize management (and trim head office) and the central political
change brought in by Garofalo, who marks his arrival in no uncertain terms. To quote the NR
17
dr3naj ht01 ht71 ht42 ts13 ht7bef ht41 ts12 ht82 ht6 ht31
basket
gdx control
source: Google Finance, IKN calcs
Low Cost Basket: Percentage difference between
basket and GDX control, 2016
2%
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
-16%
-18%
dr3naj ht01 ht71 ht42 ts13 ht7bef ht41 ts12 ht82 ht6 ht31
source: ikn calcs, NYSE/Nasdaq data

for just one paragraph:
Under the new management structure, mine general managers will be empowered to
act as business owners and will be held accountable for maximizing the return on the
capital invested in, while growing the net asset value of, their businesses. These
operations will be supported by a leaner senior executive team at the company's head
office.
And that’s fair enough. And in fact I’m in full agreement about this strategic shift made by
Garofalo, it makes a lot of sense to decentralize, cut G&A costs, get real decision making at
grassroots level to make it faster and more flexible, the whol nine yards. But I’m also cynical
about the longer term at GG and know, just know, that once the lean times have passed the
first place a company like this will always add “world class staff” is at head office admin level.
I’ll bet dollars to donuts that, for example, if gold goes higher Mr Ball suddenly gets his
workload lightened by the arrival of a new VP Corp Dev (who’ll come with their own office floor
team. Etc etc).
In other news, on Thursday evening (8) Moody’s downgraded GG debt to Baa3, the lowest level
of investment grade and what’s more with a negative outlook (which mans next time around it
might lose investment grade and make its debt book more expensive to service, so watch out
for that little wrinkle. Though I had to laugh about a couple of the assumptions made by
Moody’s in its decision, firstly that it used U$1,100/oz gold as its baseline (at which it assumes
GG to be slightly cash flow positive), and secondly this line, that “...with recent executive
management changes, there is a heightened risk the company could deviate from its
conservative financial policies”. Now I’m no great fan of David Garofalo, noting how fast and
loose he was with the balance sheet at HudBay, but I fail to see how the recently departed
Chuck Jeannes is labelled with “conservative financial after the price he paid for Cerro Negro,
the subsequent massive capex blowout as they built the mine there, then other deals such as
Couchenour and buying Probe Mines. The strong gold price through the Chuck Jeannes era
covered a multitude of sins.
Detour Gold (DGC.to): Why is DGC suddenly underperforming the field? Here’s a chart
showing DGC against out GDX benchmark:
The first place to notice the double-edged sword of forex is in stock prices, they react almost
instantaneously. Later come the effects on operational costs.
Regional politics
A review of Latin America at PDAC 2016
Some snippets and pieces taken away from the regional presence at PDAC:
18

Chile: The central theme of ‘Chile Day’ Wednesday (last day of the conference, perhaps fatigue
and delegate hangovers were kicking in by that point), led by Minister of Energy and Mining
Aurora Williams was the presentation “Chile: Land of Opportunities” in which the segment taken
by Chile’s State-owned exploration/small mining oversight body Enami was the most
interesting. Enami presented six of its exploration stage projects to the audience and it turned
out to be nothing short of a shopping pitch to the large-scale copper mining companies of this
world. In other eras, Enami would have these projects onto Codelco for development and
eventual operation; now Enami was FDI to buy and build. Chile also made great play of its
lithium potential and especially the way in which the Bachelet government has just designated
that sub-sector as a strategic development sector on its own, away from the rest of mining, in
order to give it more importance and promote growth.
Argentina’s game plan was always going to be obvious: The new Macri government makes
Argentina a safer and more friendly place to come mining, as demonstrated already by the
dropping of export taxes on mining produce of all types. Governor Sergio Uñac of San Juan
pitched for the re-opening of Pascua Lama (the Lama bit is in San Juan) and yet again, talk is
of a JV between Barrick and China’s Zijin. If ABX ever gets the Chilean environmental problems
straightened out that’s considered a done deal and by the way, IKN has been on this story since
late 2014 (9). Other parts of the Argentina presentation weren’t so easy to swallow, such as
Mendoza’s secretary of mining telling the audience that the regional government would make
sure that the permitting process for the Rio Colorado potash project in its province would be
efficient and short. No coincidence that Vale wants out of Rio Colorado and needs to sell its
deeds before 2017, when they lapse.
Peru’s pitch at PDAC wasn’t much different from previous years, highlighting all the positives it
has as a place to come mining. The only thing that caught my attention as different was part of
the speech made by Vice-Minister of Mining Guillermo Shinno on Peru Day who wasn’t just
interested in pitching Peru, but pitching it directly against its neighbours. While acknowledging
countries such as Chile, Colombia, Mexico, Argentina and Ecuador had an active presence at
PDAC, he went on to say (10), “However, Peru already has a tradition for mining that’s
recognized by mining investors, as well as having comparative advantages to other countries
such as geological potential, skilled workforce and competitive energy costs”.
Colombia Day was also on March 7th (same as Ecuador Day and the main Argentina
presentation morning, let them fight it out among themselves) and was hosted by the Vice
Minister of Mining Maria Isabel Ulloa as her direct boss, Minister of Energy and Mining Tomás
González was in Bogotá getting fired from his job that very same day (11), because of his bad
handling of the Colombia energy sector that’s resulted in energy deficiency, energy saving
campaigns, importing of electricity from Ecuador and brown-outs/blackouts in cities; no
replacement named as yet.
The thrust of Colombia Day was about the improvement in permitting and general bureaucracy
or mining, the new and more solid mining laws (some still haven’t been passed yet), the desire
for best environmental practices and the opportunities the country has for mining investment.
There was also a round-table discussion which included panel members from Red Eagle (RD.v),
AngloGold Ashanti (AU), Continental Gold (CNL.to) and Eco Oro (EOM.to), that last one despite
recently opening up its lawsuit against the government.
Mexico is the other big regional mining player and it held Mexico Mining Day on Tuesday 8th. It
used the occasion to present its new initiative, the Atlas of Social Impulse in Mining
Zones”(which may be a mouthful in English but in Spanish is “Atlas de impulso social a zonas
mineras” and sounds much more normal to the Hispanic ear), designed to categorize the
development priorities required by local communities. For example, a mining company entering
a new locality will know whether to spend its community budget best on water pipes, sewage,
paving, roads, electricity supply or bridges and will, in conjunction with the community and the
national mining fund (funded by mining company royalties) be able to make most efficient use
19

of the cash at it /their disposal. Although straightforward sounding and no re-invention of the
wheel, this is a very positive development and it’s the type of thing that can make mining
companies’ lives that much easier with locals, so well done Mexico and please take note, other
LatAm countries.
Ecuador: Apart from the popular buffet at its Ecuador Day presentation on Monday, one thing
that many people commented upon was how wherever Mining Minister Javier Cordova went,
the Lundin Gold (LUG.to) went with him. One shadowed the other and LUG was clearly being
used as the bright and optimistic presentation card by the government at the show. Equally, the
tight support that LUG gets from the Correa government was not lost on observers. Cordova
also got to ring the opening bell on the TSX Thursday, just the kind of photo opportunity he
likes. Each to his own, I say.
So with the beautiful happy and perfect scenarios for mining in LatAm laid out for the great and
good of the sector to applaud at PDAC, we now continue today’s Regional Politics section with a
few examples of the reality of the sector in the region.
Argentina: Barrick fined for the Veladero cyanide spill
Back in September when a pipe rupture at Barrick’s (ABX) Veladero mine caused 1.15m litres of
cyanide solution and a series of negligent work practices (including leaving a water diversion
gate open instead of leaving it closed, which would have diverting the accidental flow to the
mine’s tailings facility) to pollute four different local rivers, Miguel Martín, head of
communications at Barrick Argentina stated the following (12):
"They're saying that the local water supply is contaminated but that is
completely false. We don't have any contaminated water anywhere".
Last week when accepting to pay a ArgP$145.7m fine (U$9.3m at current rates) and hours after
nine of its employees were formally charged by the Argentine courts, Barrick Argentina stated
the following (translated) (13):
“We deeply regret this incident and hope, from this point forward, to
reconstruct a pathway of trust with the community, the province of San Juan
and Argentina.”
And people outside of LatAm, while chowing down on the free buffets offered up by country
chambers of mining at suit-filled get-togethers, wonder why these mining companies have such
a bad reputation with local communities.
Colombia: Risk of serious conflicts in the mining sector rising fast
Before getting to the main point of today’s extended piece on Colombia, we must first mention
Colombia’s big national macro political risk issue of the Peace Negotiations and the Will-They-
Won’t-They reach a deal by the March 23rd deadline (Santos again warned the FARC against
delaying and threatened to scupper further extensions to the talks last week, it’s all getting
rarefied). With that said, and it’s necessary because peace talks failure would be bad news for
all business sectors in Colombia including mining, we now turn our attention to specific mining
political risk factors in Colombia that they didn’t want to talk about at PDAC last week.
As noted on the blog last week (14), a big police operation in the Antioquia region of Colombia
on Tuesday ended with the arrest of 15 ringleaders of “illegal” mining, including at Buriticá
where Continental Gold (CNL.to) plies its trade. One of the top guys arrested was Eduardo
Otoya, aka The Doctor, who used to work for CNL and is accused of using the company’s data
to pinpoint the best veins for illegals to mine. The ringleaders have been connected to far-right
wing paramilitary organizations and the government says they’re a key part of the financing
system for these illegal groups.
It sounds very thrusting and decisive on the government’s part, but those on the ground aren’t
20

so impressed. There’s a lot of complications to the narrative, it certainly isn’t as cut and dried as
it’s been made out by the friendly media channels, but we need to get to the grain of the
matter so the main points to consider are:
1) For literally decades, the Colombia government claimed on countless occasions it was
at the tipping point of winning the war against terrorism in the country thanks to some
or other “major operation” which either captures or kills the heads of the organization it
has targetted. Normally its statements were directed at the left wing FARC-EP, but in
recent years the same talk was used against right wing ”Bacrim” organizations as well.
The news looked good, people won medals and Presidents congratulated foot soldiers.
And nothing much changed afterwards.
2) Anyone thinking that the arrest of 15 people will bring the end of the
illegal/informal/artisanal/traditional (pick your preferred word) mining in places like
Marmato, Segovia and Buriticá is living in cloud cuckoo land. There’s way too much
money to be made, cut the head off this particular hydra and two will grow back.
3) The people that the government now calls “illegal miners” call themselves “traditional
miners”, and they’re now particularly unhappy and angry traditionals at that. It’s one
thing to arrest ringleaders, quite another to move into a town or district with the plan
of using force on hundreds/thousands of miners and their families.
And this is apparently the next stage of the plan, according to this report (15) in Colombia
Informa (one of the very few media channels that doesn’t automatically buy into the national
government line). It got access to a National Police Force classified text which outlines its plans
to evict the traditional mining community in that town (home to the Gran Colombia Gold
Marmato project). The plans include declaring a “yellow alert” due to social unrest, which then
allows it to impose a no-alcohol sales law and move in extra forces of order. The document
states it has 500 members of the national Mobile Anti-Disturbance Squadron on standby, with
heavy vehicles and medical staff. The plan is to move in to Marmato, evict the miners working
in co-operative groups that are designated “traditional” but will be labelled “illegal” and close
down the mines.
This is not the first time this type of operation has been mounted against the locals of Marmato
(2011 as the big one, the most recent was 2015) and unsurprisingly, local authorities in
Marmato are kicking up a big fuss about the plans. This report in Colombia’s biggest radio
station website RCN yesterday Saturday (16) March 12th states that Marmato locals are
protesting because the eviction is planned by government and police to take place tomorrow
Monday March 14th. They claim that the company that purports to ownership of the mines,
Gran Colombia Gold (GCM.to), lost property rights because they let them lapse according to the
mining law. Their spokesperson, Dario Arenas, told RCN (translated), “In the mining code and
in the mining law of Colombia you cannot (claim ownership of a mine and then close it for more
than one year); mines are for working and exploring, but one cannot simply close them
because after one year the person who has the title loses it”. He also told RCN that they are
traditional miners working in co-operatives, are there 100% legally and lament the way in which
the government turns a blind eye to the illegalities of foreign companies, only to punish legally
working Colombians. They also stated that tomorrow’s eviction operation would directly affect
70 families but would eventually force 1,000 families out of work.
Peru’s farcical election gets even worse
As noted last week, two of the main candidates, Julio Guzmán and César Acuña, were excluded
by Peru’s electoral oversight body, the Jurado Nacional de Elecciones (JNE), for infractions to
the election rules but had an appeal procedure in place. Those appeals happened last week,
both were denied and they’re now officially out.
Or perhaps not, because both are now appealing the appeal judgment with the JNE (seriously
and Guzmán for one plans to take his case to the International Court of Human Rights to get an
21

international ruling on his barring from the election. Meanwhile, the same sort of giving money
away infraction that saw César Acuña barred has been witnessed at Keiko Fujimori rally
meetings and PKK rally meetings, so they now have open cases against them and if those are
treated in the same way by the JNE the whole election will turn into pure chaos.
It’s all great fun, but as things stand today Keiko is leading and PPK is likely to get second spot
(assuming Guzmán isn’t let back into the race and at this stage, nothing is beyond the realms of
fantasy). The whole show has moved from laughable to just plain embarrassing, but for what
it’s worth here’s how it stands today, with Reuters (17) citing the latest Ipsos poll:
LIMA (Reuters) - Investor-favorite Pedro Pablo Kuczynski jumped back into second in
Peru's presidential race behind longtime frontrunner Keiko Fujimori, after two key rivals
were disqualified from next month's vote, an Ipsos poll showed Sunday.
Kuczynski rose by five percentage points to 14 percent of voter support in the new
electoral scenario, his best showing since December when he peaked at 16 percent,
according to the poll published in the local daily El Comercio.
The full report’s on that link if you care enough.
The Peru election front-runner party on its mining policy
Meanwhile, Friday evening saw Reuters publish this report (18) of an interview with José
Chlimper, the Veep on the Keiko Fujimori presidential ticket and expected to become Peru’s
next Finance Minister if she wins the election (which is looking likely, not certain but likely).
Here’s how it starts, which also has all the points he made about the mining industry:
Peru's Fujimori would not back mines without community support: adviser
Peru's presidential frontrunner Keiko Fujimori would work to push out new mines faster
if elected, but only for companies that have community backing, her economic adviser
said on Friday.
Jose Chlimper, who is also the center-right politician's running mate, said Newmont
Mining Corp (NEM.N) and Southern Copper Corp (SCCO.N) did not do enough to build
local support for their proposed mines Conga and Tia Maria.
The companies, which suspended the projects because of local protests, had revised
their plans to ease worries about environmental impacts and are investing in social
programs.
"They have to look at their community relations plans and win back the legitimacy that
they lack today," Chlimper said in an interview with Reuters.
"We're going to support the effort of serious companies to make big projects viable, but
the ones that have not acted properly will not have our support," he said.
Peru's next president will likely inherit an economic recovery driven by surging copper
output from new mines, but no major projects are set to come on line in coming years.
Chlimper said center-right Fujimori would create a legal framework to help miners turn
local communities into shareholders in their projects - a tool to build support for new
mines that some companies in Peru have already implemented.
There’s some political posturing there (we will support good people and not bad people) and
they haven’t given up on that local community shareholder idea (a la Ollachea), but it’s already
being shuffled back to “create a legal framework” rather than a central policy. But notice once
again how the emphasis is placed on the company to have good community relations, which as
noted last week puts the project at the mercy of local shark politicos. The same story as last
week, there’s a Pandora’s Box or troubles being opened by all candidates with their messages
on mining this election.
Argentina: Details of the bond holdouts deal to be revealed this week
They’ve come at a drip-feed rate from the Macri government and its negotiation team in New
York, we’ve even had the FinMin give a presentation to Argentina’s congress in which some
details were revealed, but then afterwards he admitted “the small print may change” which
stoked the ire of Kirchnerists even higher. But, according to this weekend’s press at least, on
Tuesday we’ll get to find out the nitty-gritty of the deal Argentina has struck with the bond
holdouts/vulture funds, just in time for Barack Obama’s scheduled visit to Argentina on March
22

23rd and 24th (part of his farewell tour of the region that will include the hot ticket date in
Cuba).
Market Watching
Not so much in this section this week, my own enthusiasm for the market has waned at the
current price deck and it’s probably a reflection of that. Want objective reporting, subscribe to
Reuters.
Yamana (AUY) (YRI.to) will announce on Brio Gold this week (repeat)
I said this last week, it didn’t happen, so make it this week. It’s happening very soon though.
Silver miners buy gold miners
Tahoe Resources (TAHO) started life as a silver mine in Guatemala and has now tacked on not
one but two gold operations in the shape of Rio Alto and Lake Shore. Silver Standard (SSO.to,
and the clue in in the corporate title) moves for Claude Resources (CRJ). While both may claim
to be “agnostic about the metal” (Kevin MacArthur dixit) there’s an obvious reason why they’re
moving away from their baseline metal
If it takes the same amount of effort to move a ton of rock with silver in it as it does a tonne of
gold-bearing rock, the last year has made one of those tonnes more economic than the other. A
simple glance at the 12 month gold/silver ratio is all you need, it’s now roughly 10% more
efficient to mine gold than silver and in our current price brackets, that makes the difference
between break-even and profitable operations (or cast your mind back three months for the
difference between loss-making ops and break-even).
As for the future, I hear a lot of people talking up silver’s potential for a rebound, both in
absolute terms (which we’ve seen a bit) and versus gold (which we haven’t, as an 80:1 ratio is
still very high whichever way you cut it). However, they tend to be the same people who were
rah-rahing silver as “great value” this time last year, please check that above chart again. They
tend to be the same ones who’ve been calling uranium as “about to rocket” for the last couple
of years, too. And zinc. Bless ‘em.
Ladies and gentlemen, it may come from the same types of rock and people as arrogant as
MacArthur can be as agnostic as they like, but silver is not gold. Never has been, never will be.
Gold is a true monetary metal, it’s an asset class. Silver is at best partially monetary but really,
23

its demand is largely driven by industrial demand (over 50% of all silver produced goes to
industrial purposes) and its supply is, too (as the majority of silver mined in our present day is
as a by-product of base metals mines (zinc, lead, copper etc).
When I see a real, objective, clear turnaround in the silver market then I’ll be a buyer of the
miners who produce it (if their financials pass muster of course) but up to and including today I
am very comfortable with my established strategic call of greatly preferring gold exposure to
silver exposure in my portfolio and until there is a marked change in trend, I’m with the silver
miners who are buying up goldies.
First Mining Finance (FF.v): Reportedly unshortable
Early in the week I heard from a regular reader (not even initials this time) who told me that
however much he tried, he can’t get a borrow and go short on First Mining Finance (FF.v). That
despite 1) him being in the professional arena for Canadian resource stocks and, from what I
understand, a regular long/short trader on juniors 2) there being daily traded volume for FF.v in
the millions.
That struck me as strange, so just as an experiment I felt out via a couple of avenues to see if I
could find FF.v stock to borrow for shorting. I’ll point out that I wasn’t going to bite for real, my
default position on these sketchy promo vehicles is “avoid” because you never know when
they’re going to pay somebody to pump them to the stupid end of the sector again. But to the
point and indeed, there was nothing available anywhere. Zero zip squat, despite that very liquid
volume and all those recent merger deals (which should have brought on board shortable
material, or you would have thought at least).
Conclusion
IKN357 is done, we end with bullet points:
• A couple of weeks ago I set out my interest in Sandstorm (SAND) (SSL.to) without
buying, today it’s the turn of Lundin Gold (LUG.to). Both are high up on my shopping
list, both can wait for the right window.
• With Dalradian (DNA.to) sold I’m now highly cashed-up, more than I’ve been for quite
a while. Opportunity knocks.
• But the fact is, we can pick stocks until we’re blue in the face in this part of the current
market cycle, what really matters is wether gold goes up or down. On that subject, all
eyes on the Fed announcement and the Yellen presser Wednesday lunch.
• I’ll be all over the results of my biggest personal position (by far) and current Top Pick
B2Gold (BTG) (BTO.to) next week, too. I like the downbeat attitude of “hold” the
market seems to have taken over the last few days, plenty of chance to beat
expectations this way. Fekola financing is the key.
I thank you in advance for any feedback. Our Top Pick stock is B2Gold (BTG) (BTO.to). Flash
updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen.
Otto
24

Footnotes, appendices, references, disclaimer
(1) http://www.calculatedriskblog.com/
(2) http://incakolanews.blogspot.pe/2016/03/and-before-you-get-too-cocky-about-your.html
(3) http://finance.yahoo.com/news/nevada-sunrise-announces-500-000-210000550.html
(4) http://www.b2gold.com/news/display/index.php?news=2017085
(5) http://finance.yahoo.com/news/starcore-enters-sale-agreement-real-134500122.html
(6) http://incakolanews.blogspot.pe/2016/03/capstone-mining-csto-hedges.html
(7) http://finance.yahoo.com/news/goldcorp-announces-senior-management-changes-220000968.html
(8) https://www.moodys.com/research/Moodys-Downgrades-Goldcorps-ratings-to-Baa3-outlook-negative--
PR_345377?WT.mc_id=AM~WWFob29fRmluYW5jZTQyX1NCX1JhdGluZyBOZXdzX0FsbF9Fbmc%3d~20160311_PR
_345377
(9) http://incakolanews.blogspot.pe/2014/11/zijin-mining-and-barrick-abx-are-in-jv.html
(10) http://www.andina.com.pe/agencia/noticia-peru-atrae-interes-inversionistas-canada-australia-y-china-602830.aspx
(11) http://www.elcolombiano.com/colombia/ministro-de-minas-y-energia-renuncio-al-cargo-AB3715222
(12) http://incakolanews.blogspot.pe/2015/09/barrick-abx-broken-pipeline-at-its.html
(13) http://www.jornada.unam.mx/ultimas/2016/03/11/multa-argentina-a-minera-canadiense-por-derrame-de-cianuro-
5196.html
(14) http://incakolanews.blogspot.pe/2016/03/continental-gold-cnlto-police-arrest.html
(15) http://www.colombiainforma.info/mov-sociales/pueblos/3138-exclusivo-policia-nacional-prepara-desalojo-violento-a-
mineros-tradicionales-en-caldas
(16) http://www.rcnradio.com/locales/preocupacion-caldas-inminente-desalojo-minas-marmato/
(17) http://news.yahoo.com/kuczynski-back-second-poll-peru-presidential-elections-173027256--business.html
(18) http://www.reuters.com/article/us-peru-election-mining-idUSKCN0WE02Z
Stocks To Follow Closed Positions 2015
Closed in 2015 closed close price
Argonaut Gold AR.to jan'15 C$1.47 14-dec-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-jan-14 C$0.035 -53.3% sm, sold on Cu downturn
Fortuna Silver FSM mar'15 U$4.12 10-nov-14 U$3.75 9.0% Short used as hedge
GoldQuest Min. GQC.v mar'15 C$0.26 27-oct-13 C$0.085 -67.3% given up ghost
Rio Alto Mining RIO.to apr'15 C$2.30 07-apr-11 C$3.57 55.2% Top pick, bot out, big win
Timmins Gold TGD jun'15 U$0.60 19-apr-15 U$0.62 3.3% near-term trade, out of time
First Majestic AG jul'15 U$10.51 10-aug-14 U$4.55 56.7% horrible failed trade
NovaCopper NCQ.to jul'15 C$1.05 09-apr-14 C$0.50 -52.4% no more Cu exposure, sm sell
McEwen Mining MUX aug'15 U$0.695 21-jul-15 U$0.92 32.4% Closed nearterm flip for win
Midas Gold MAX.to sep'15 C$0.39 21-sep-15 C$0.35 -10.3% Sm. trade idea that didn't work
New Gold NGD oct'15 U$2.18 23-aug-15 U$3.05 39.9% trade closed, profit taken
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
25

Stocks To Follow Closed Positions 2014
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dec-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-apr-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-jan-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-jan-14 C$0.86 -17.3% silver/M&A spec, rel. small
Timmins Gold TGD nov'14 U$1.38 09-apr-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-jan-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-jan-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-apr-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-apr-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-jan-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-apr-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
26

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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