IKN #370Premium

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The IKN Weekly
Week 370, June 12th 2016
Contents
This Week: In today’s issue, Update on Brexit (and gold’s Brexit moves), A clockwork orange.
Fundamental Analysis: Shorting HudBay Minerals (HBM.to) (HBM).
Stocks to Follow: Overview, HudBay Minerals (HBM.to), Richmont Mines (RIC) (RIC.to),
(HBM), Sandstorm (SAND) (SSL.to), Regulus Resources (REG.v), Starcore Intl (SAM.to),
Continental Gold (CNL.to), INV Metals (INV.to), Tinka Resources (TK.v).
Copper Basket: Overview, Western Copper & Gold (WRN.to), Revelo Resources (RVL.v),
Cordoba Minerals (CDB.v).
Low Cost Producer Basket: Overview.
Regional Politics: Ecuador’s Central Bank buying gold from small producers, Colombia: A
major protest march against La Colosa, Peru: PPK wins, Guatemala: Anti-mining goes for the kill
at El Tambor, Colombia: A new Vice-Minister of Mining, The Fraser Institute on political risk for
mining.
Market Watching: Lundin Gold (LUG.to): Tax and economics, Minera IRL: A big step forward,
Think more zinc.
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
• We short HudBay (HBM) and explain why. And when you’re done reading the note on
HBM check out ‘The Copper Basket’ that looks at the suddenly bearish backdrop for the
metal.
• We don’t trust anybody with our money and extract a quote from Anthony Burgess’s
masterpiece to get the point across.
• The “gold’s quiet summer” theory continues and as a result, I’m prepared to sell my
RIC position if gold makes it to U$1,300/oz.
• Lundin Gold (LUN.to) delivers a lacklustre feasibility study on Fruta del Norte and we
check and adjust some of the economic numbers. It’ll be a mine, but for my money it’s
not a stock to buy at these prices.
• Minera IRL took a big step in its healing process last week and it’s time we
acknowledged what Diego Benaives has done for us shareholders. Without his
resistance we’d be holding nothing, as it is there’s now real reason to expect this to be
the phoenix of the year.
Update on Brexit (and gold’s Brexit moves)
The UK (i.e. England, Scotland, Wales and Northern Ireland) will not vote to leave the European
Union on June 23rd, not matter what an easily fixed poll might have told you to the contrary this
1

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weekend. Take that to the bank and if you want my best guesstimate call, I’ll stick my neck out
and say 55% of valid votes will be for ‘Remain’, 45% for ‘Leave’. Stop the stupid.
Related, a lot of the recent rise in gold has been attributed to the growing fear that The UK will
vote for Brexit and if that’s the case, expect gold to correct downwards on Monday June 24th
when he referendum result is known. As a sidebar for those who care the Pound Sterling (GBP)
should also rally a little, but only as hedges are left uncashed.
However, there is one issue on which I fully agree with the Leave campaign upper echelon;
Current Prime Minister David Cameron should resign his post once this referendum is done and
dusted, as his reckless misjudgment of the whole issue has put undue risk on his country, on
the EU and on the world economy as a whole. It was his policy decision to take The UK to a
referendum and he did so in order to win the most recent general election. With that
cornerstone taken away and his Conservative party split down the middle, his mandate has
effectively disappeared. But that’s for another day, let’s get the Remain decision done first.
A clockwork orange
“By definition, a human being is endowed with free will. He can use this to choose between good and evil. If he can only
perform good or only perform evil, then he is a clockwork orange - meaning that he has the appearance of an organism
lovely with colour and juice but is in fact only a clockwork toy to be wound up by God or the Devil or (since this is
increasingly replacing both) the Almighty State. It is as inhuman to be totally good as it is to be totally evil. The important
thing is moral choice. Evil has to exist along with good in order that moral choice may operate. Life is sustained by the
grinding opposition of moral entities.”
A Clockwork Orange, Anthony Burgess
Regular IKN blog reader and fairly recently subscribed to The IKN Weekly, reader JL sent over a
short mail on Thursday that said a few nice things (ty sir) and then got to the point of the
missive:
“...do you have any of the mining promoter crowd that you think is
"honest" and actually has its shareholders´ best interest?”
Yeah, let’s do this one. First and foremost, “we the crowd” mentioned all have our own agendas
and note the use of the word “we”, I very much include myself in the bunch. This is not charity
or even philanthropy, we are not in a place where some overriding religious urge of self-
sacrifice is the paramount driver of action. This is mining and digging things out the ground and
then selling what they found to somebody else, one of the most capitalist things a human being
can do and no one is innocent. With that in place, we can now tackle the real-world question
posed by JL. I don’t have the answer for you, because if you think about it long enough you
find it’s a question of personal morality, i.e. what you consider to be good, bad or in the grey
area between. Clockwork orange. But I have answers for myself and though a lot come from
hard-won experience that can be termed “the BS meter” and are difficult to explin, I’m going to
mention just one of the ways I categorize the voices that exhort me to buy this-or-that stock.
JL talks of the “mining promoter crowd” in his question, a broad church that covers plenty of
different people and jobs, from company investor relations personnel, analysts paid to give
recommendations, people paid to attract attention to a company, people paid to coerce you into
buying shares, people wanting to sell their recently bought shares to somebody else at a higher
price, plenty more besides. A crowded room, we need to differentiate at some level or another.
This is a big subject and too much for one brief intro to a weekly, but one of the ways I filter
through the noise is to ask myself who is paying for the opinion I’m currently hearing.
Here are the three possible answers, plus extra notes and thoughts on each one.
1) Mining Company pays for voice: This can be the IR person on the payroll, it can be
sponsored coverage where a miner pays for a report or article to be published in the name of a
third party, it can be a company advertising campaign, it can be the hiring of an IR company, it
can be shares for column inches, all sorts of variations are possible. Without exception these
2

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voices will be biased towards the company story, however and with exceptions to prove the
rule, I find that the ones with the most transparent and openly disclosed connection are the
ones you can most rely upon. People such as Investor Relations execs for example, who will
say, “Look, I get my monthly salary from XYZ Resources, I’m going to tell you why I think it’s a
great story...etc”. They’re also nearly always the most knowledgeable too, after all they spend
every immersed in their company’s minutae. Meanwhile over on the other side of the coin, read
that big long glowing report and then spend 15 minutes wading through tinyprint disclosures
found via using tiny links to separate web pages and discover that the person who wrote the
report was paid $20k by the compny itself and...welcome to Metanor Resources, Liberty Silver
and all the others. Another pet hate in the ‘sponsored coverage’ world are those people who
will assure you that even though they’re getting paid by the company, they wouldn’t have taken
on the account if they weren’t comfortable about the story involved. That’s utter BS and I’ll let
Lord Beaverbook explain why in this often-quoted exchange (1) sometimes attributed to other
famous people:
“They are telling this of Lord Beaverbrook and a visiting Yankee actress. In a game of
hypothetical questions, Beaverbrook asked the lady: ‘Would you live with a stranger if he paid you
one million pounds?’ She said she would. ‘And if he paid you five pounds?’ The irate lady fumed:
‘Five pounds. What do you think I am?’ Beaverbrook replied: ‘We’ve already established that.
Now we are trying to determine the degree.”
Bottom line: When the person is being paid to put a name in front of you they need to tell you
that before anything else, the you can apply your own caveat emptor filter more efficiently.
Voices in this category are naturally biased, they’re not necessarily dishonest, but pinches of
salt and thorough DD on your part later are not optional extras.
2) Clients (i.e. you) pay for voice: This can be a sellside brokerage analyst (who wants
commission on trades), a newsletter such as this one (who wants you to send U$XX per
month), a friend that wants you in the stock because he thinks is a great opportunity (because
he loves you), this can be a person looking to make their name by publishing free advice in
exchange for a growing reputation (if they turn out to be good at it), a hundred different
flavours to boot. In theory these are more reliable because they’re “in it with you”, in practice
they can be even more deceitful than the “paid for” people because a) the letter writer may be
in cahoots with the company via access to sweet and undisclosed options deals (one of the
reasons I’ll never recommend Fortuna Silver again, for just one example) or b) the sellside
brokerage has just “coincidentally” closed a juicy placement with the company or is fishing for a
slice of the next bought deal. A couple of scenarios there, dozens more to choose from.
Bottom line: If you are paying for the voice you’re not buying a company, you’re buying a story,
more no less. I treat these voices in exactly the same way as I treat the (junior mining)
company itself, by using a) healthy skepticism to begin with and b) on the lookout for any lies,
convenient omissions of key facts, evasiveness, etc. I have a (well-documented) low threshold
for BS and it takes just one active deception for a story to fall apart and any nascent trust to be
destroyed. If a mining company BSses you about one thing, it’ll BS you about dozens. The same
goes for apparently independent voices who are trying to get you to buy Stock ABC for their
own reasons. Trust takes time with “you pay” voices, respect is earned not imposed, therefore
healthy doses of your own DD are also necessary here. If you get to a place where you can
trust a third party’s opinion it sure saves a lot of time on your DD load, however even your
most trusted sources will make mistakes so that DD of yours isn’t suddenly unnecessary, there’s
ultimately no substitute for your own efforts.
3) It’s totally free, nobody pays for voice: If the voice you’re listening to claims they’re not
benefitting in any way, they’re lying. Ain’t no free lunches in capitalism, we’re all in it for some
reason or other and if they’re claiming altriusm it’s just a big red flag.
Bottom line of bottom lines. The thing that most concerned me about JL’s question was how it
can be misinterpreted and that’s why I decided to answer it, using just one aspect of a bigger
subject to illustrate, the “who pays the voice” angle. Yes there are plenty of people who are
3

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paid in one way or another to get you into stock X or stock Y. Yes there are people who are
"honest" and actually have “shareholders’ best interests at heart”. Yes there are a whole posse
of crooks, schools of sharks and roomfuls of liars waiting for you in miningworld, trained and
prepared in the fine art of separating you from your net wealth. The above covers just one way
of considering the issue but hopefully you’ve spotted the main point already, the one that
counts for all aspects: No matter what method you use to separate wheat from chaff:
Trust nobody.
Don’t trust me with your cash, don’t trust her or him or them or those. Even people you trust
can and will make mistakes and you cannot take even your favourites for granted. Use their
opinions as short-cuts for sure, but Do Your Own DD. When it comes right down to it, JL and
others, it doesn’t matter one jot whether all, some or none of the mining promoter crowd is
honest and has shareholder interest at heart. It’s your money, it’s your mistake to make, it’s
your profit to enjoy, it’s your loss to suffer.
Fundamental Analysis of Mining Stocks
Shorting HudBay Minerals (HBM) (HBM.to)
Once more unto the breach, dear friends, once more;
Or close the wall up with our English dead.
In peace there's nothing so becomes a man
As modest stillness and humility;
But when the blast of war blows in our ears,
Then imitate the action of the tiger.
Henry V, Act 3, Sc1, LL1–6, Bill the Quiill
As per the Flash update of Thursday morning June 9th (see Appendix 1) your author has gone
back to the short trade in HudBay Minerals (HBM) (HBM.to). We’re not going to cover all the
points made in the original short theory analysis found in IKN360 dated April 3rd, nor will we
cover all the points then made in the post-mortem to the failed trade and decision to cover the
short made in IKN364 dated May 1st (the main use there is the updated charts that add the
1q16 results information). I suggest you check back on those reports if you care about this
short trade potential as much as I do. And I do, because I’m already short this position.
Let’s start by expanding
slightly on a point made in the
Flash update Thursday and to
do that, this chart is more
eloquent than I (right):
Admitting one’s errors is part
of this crazy game and the big
one I made in my first short
attempt at HBM in April was
to have bought badly. All the
theory in the world about a
weak company quarter counts
for naught if you don’t get the
macro call right and I got
caught by copper’s rebound
and resistance in the
U$2.10/lb to U$2.30/lb range.
With copper now doing this...
4

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...the timing looks much smarter for a trade in HBM, not least because the stock has moved up
while the copper price has moved down. That’s at first sight an opportunity, but it also needs
examination because there must be a good reason as to why HBM has suddenly become a hot
buy in June (up nearly 16% this week alone) while its main payable metal sinks nastily:
And the reason for that sudden price spike in HBM back to U$5 is almost certainly this:
HBM: Constancia monthly copper production
16000
14050 13733 14377
14000 13124 12856
12000 11146
997910476 1067910604
10000 8965
7849 7843
8000
6000
4000
2488
2000
683 714
0
5
51.naJ bef ram rpa yam nuj luj gua pes tco von ced 61.naJ 61.beF 61.raM 61.rpA
mt Cu
source: MINEM Peru
Thanks to Peru’s national disclosure laws we know how its key Constancia asset in Cusco region
performed in the month of April. We know from the company’s 1q16 financial and MD&A
reports that the scheduled repair work was done before the end of March and that the mine
was back at full tilt production by the start of April. But thanks to the April production numbers
that were published on June 2nd, the mine’s strong production schedule has been confirmed.
We don’t get grade/tonnage/recovery numbers from Peru’s mining ministry, just the straight

,
production tonnages but the 14,377 metric tonnes (mt) works out at 31.7m lbs copper and
that’s a quarterly record for the mine. Also note that the rally from under U$4 to approx U$5 in
HBM shares began on the day those numbers hit the wires.
Therefore the rally in HBM while the price of copper drops is justified, at face value anyway.
The market is assuming that the new high production rate will drop cash costs and improve
margins to the point where Constancia becomes a lean, mean moneymaking machine even at
the current low price for copper and relieves the pressure from the company’s creaking balance
sheet. And that’s where I disagree with the newly-minted market optimism for HBM
and it’s why I think the current price spike is an excellent opportunity to short an
overpriced equity. The rest of today’s note is about that bold-typed statement.
Rationale behind shorting HBM today
As in the original anal ysis on HBM in April, we need to make a few assumptions on the
corporate whole that is HBM. Here (edited) is how I put those assumptions in IKN360:
• HudBay company specifics: It’s all about Constancia
• No Rosemont. We ignore the effect of the delayed Augusta/Rosemont project.
• No Manitoba. We also largely ignore its Manitoba operations because Manitoba can be
summed up in three words “breakeven at best”.
Those are reasonable for today too, but I need to update the assumptions and add one more:
• Rosemont is still a non-issue due to its indefinitely delayed status due to copper
prices and strong anti-mine opposition. This hasn’t changed.
• Manitoba has changed slightly and may be able to offer a small operating profit
thanks to the improvement in the price of zinc. I’ve adjusted 2q16 accordingly (see
chart below) but overall the corporate financial performance is only modestly better. On
the whole I’m still good about considering HBM’s Manitoba operations as a wash,
neither positive nor negative to the PPS.
• Yes it’s really is still all about Constancia. The welter burden of debt taken out by
HBM to build its mine still weighs heavily and the principle payback dates that begin in
2019 and get very busy in 2020 aren’t so far away, in corporate terms at least (and in
convenant terms for sure). Therefore Constancia has to perform and make money for
the company, it can’t afford a running-to-stand-still scenario because debt will
eventualy crush the company, of that be in no doubt.
• But Constancia is now producing more copper and that has changed from the
previous analyses. This is the new assumption today, we need to up our presumed
production rates for the mine in light of the new information (that got the market
bullish on the story) and consider its effects.
In IKN360 (and confirmed in IKN364) I really wasn’t that far away on the forecast numbers for
the HBM 1q16 period and overall, the company-specific call was right.
HBM Manitoba Division: Operations overview per qtr
160
140
120
100
80
60
40
20
0
-20 1q15 2q15 3q15 4q15 1q16 2q16est
Source: company filings, IKN ests for 2q16
6
ni
m$DAC
morf
jda(
m$U
)1/8.0
ta
51q2
dna
51q1
HBM Peru Division: Operations overview per qtr
Revenues Costs DD&A Gross Profit 250
200
150
100
50
0
1q15 2q15 3q15 4q15 1q16 2q16est
Source: company filings, IKN ests for 2q16
ni
m$DAC
morf
jda(
m$U
)1/8.0
ta
51q2
Revenues Costs DD&A Gross Profit

,
Here above in chart form are the recent divisional breakdowns for operations and profits at
both Manitoba (left) and Peru (right) per qtr, showing the “breakeven at best” Canada (plus a
little extra for 2q16 as zinc prices improve a little), then the decent gross profits starting to get
thrown off by Peru (i.e. Constancia). For the record, gross profits at Constancia have come in at
U$37.3m in 3q15, U$59m in 4q15, U$25m in 1q16 and I’m now expecting U$47m for 2q16.
What screwed me and my previous short trade wasn’t the HBM quarter call, but the macro
backdrop and copper’s price moves because they turned out to be a far stronger influence on
the share price than any single-quarter weakness. That’s fair enough and that was my major
mistake, so the job today is to tackle that question and get to a place where we can gauge the
influence of the copper price on HBM’s profitability. To do that, we search for the breakeven
level of HBM the company at its new rate of production at Constancia. Here’s how we do that,
starting with the assumptions that stand
• We assume that Manitoba has little effect on overall profits and is in effect still a wash.
• We assume as before that Rosemont also has no effect on the share price in 2016.
• We therefore assume, as in the previous anal ysis, that Constancia carries the HBM
corporate entity and will decide whether the company is ultimately profitable or not.
Now for the changes.
• To achieve the objective of getting a breakeven level for HBM as regards its major
product of copper, we use a range of copper prices from U$1.70/lb to U$2.60/lb.
• Revenues and costs numbers are adjusted for by-product credits and charges.
• We assume the new and more efficient Constancia settles into a new, higher rate of
production of 40,000 tonnes per quarter. I want to offer Constancia an optimistic
production case that assumes plenty of bullish sentiment gets baked in, but it’s still
slightly lower than the implied rate of 43kt from the April numbers. I assume there that
we’re seeing a slight rebound factor from the March slump numbers as the production
facility plays catch-up. Also, 40k/qtr is more than enough to easily beat the 130,000
tonnes top-end guidance for the year (we’d almost get 150k).
• We assume mine costs of U$88m for Constancia, an IKN house guesstimate built on
cost parameters from previous quarters and assumes efficiencies of scale as HBM
benefits from higher throughputs. But this is a guesstimate, be in no doubt.
• We best-guess U$45m for depreciation and amortization (DD&A). That should be close.
• We then assume the corporate G&A and other expenses to the Constancia revenues.
• We assume the corporate level financial expenses (mainly interest service charges), the
BTL numbers, to the Constancia revenues.
• This gives us a pre-tax profit number and our best gauge to the potential of HBM.
And the table looks like this:
HudBay Minerals (HBM): Estimated corporate breakeven level at differing copper prices
Constancia only in U$m (by product adj) Corporate in U$m
Cu U$/lb Cu revs at 40ktpq Mine costs DD&A G&A + exps Financial exp Pre-tax profit
1.70 149.9 88 48 14 30 -30.06
1.80 158.8 88 48 14 30 -21.24
1.90 167.6 88 48 14 30 -12.42
2.00 176.4 88 48 14 30 -3.6
2.04 179.9 88 48 14 30 -0.072
2.10 185.2 88 48 14 30 5.22
2.20 194.0 88 48 14 30 14.04
2.30 202.9 88 48 14 30 22.86
2.40 211.7 88 48 14 30 31.68
2.50 220.5 88 48 14 30 40.5
2.60 229.3 88 48 14 30 49.32
source: IKN calcs from HBM data
7

,
HBM may get some slight help from the Manitoba zinc revenues and it may be able to reel in
costs a little more. On the other other, its well-documented logistics problems at Constancia
mean it may have to pay up to move its concentrate this year. My parameters are ballpark, but
I think they’re close enough to give us a decent idea and as you can see, I’ve shaded in the
area between U$2.00/lb and U$2.10/lb (with an extra line for U$2.04/lb) because according to
our ballpark, that’s the place where HBM isn’t much more or less than a breakeven entity on a
corporate scale. And if you’re like me and prefer easy visuals, here left is the sensitivity chart
for the pre-tax profits compared to the average copper price and as you can make out,
U$2.04/lb Cu is the price that provides the hinge. If not, it’s darned close to that number.
HBM: Profit sensitivity to copper spot price To sum up, even by taking into account the
60
impressive production growth at Constancia in
50
April and assuming it can keep things going
40
30 close to that level in 2q16 and beyond, HBM is
20 slave to the price of copper. It’s one thing to
10 be able to boast of better free cash flow and
0 nice numbers “before changes in non-cash
-10
working capital” (sorry guys, depreciation is
-20
going to happen if you like it or not, it’s a
-30
non-renewable resource), quite another to
-40
make enough money to service its corporate
1.70 1.80 1.90 2.00 2.04 2.10 2.20 2.30 2.40 2.50 2.60
Source: IKN calcs from HBM data structure and that welter debt burden (which
cost over U$31m in servicing alone in
U$m HBM: Operations breakdown
1q16 and is set to continue at that pace
350 Revenue Mine Op Costs Deprec/Amort gross profit
for every quarter to come). We see that
300
here in the consolidated operations
250 numbers chart (left).
200
Example one: In 1q16 HBM revenues
150
were a market-pleasing U$253.63 and
100 once mine operating costs and DD&A
50 were subtracted, gross profit stood at
U$27.9m. The problem is that once
0
“office” and “finance” charges were
1q15 2q15 3q15 4q15 1q16 2q16est
source: Company filings, IKN ests taken away, that supposed profit had
turned into a U$16.89m pre-tax loss.
Example two: Our forecast for 2q16 is a record revenues figure of U$307m and a gross profit of
U$54m. But once again expenses and financials will take their toll and when done, HBM is
forecast to be left with a $9m pre-tax profit. Which is a profit all the same but when your
company is looking down the barrel of a debt gun...
U$m other LT HBM: Liabilities Breakdown U$m HBM: Isolated Long-term financial debt
3500 LT fin. debt 1400 (red bars in chart left)
Other current
3000 Trade & Pay 1200
2500 1000
2000 800
1500
600
1000
400
500
200
0
0
4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15 4q15 1q16
4q13 1q14 2q14 3q14 4q14 1q15 2q15 3q15 4q15 1q16
source: company filings source: HBM filings, IKN adjusts to U$
...and is watching copper prices sink again to (and we’ll see, but I’m betting on below)
8
tiforp
xat-erp
rtq/m$U

,
U$2.00/lb and below the all-important breakeven level, the clock starts to tick loudly.
Discussion and conclusion
I’m re-shorting HBM after the first failed attempt in April (closed early May) and here’s a list of
reasons:
• The U$5-ish entry point is a far easier place from which to begin. Simple and true, last
time I screwed up because I bought badly.
• The copper price is the main driver of HBM’s share price and that’s been particularly
bearish in the last week. With signals that it’s going lower and prepared to break
U$2.00/lb to the downside (see ‘The Copper Basket’ for more macro background on
that), timing looks good.
• However, HBM has recently zigged while copper has zagged and that’s almost certainly
due to the strong April production number out of Constancia. The market is betting on
a Constancia (and therefore HudBay) that can withstand the lower price deck due to
better production numbers.
• We acknowledge the good production figures but our numbercrunch indicates that even
with the new higher production numbers at its key asset, HBM is going to struggle to
make anything like a significant net profit with copper under U$2.20/lb and at current
spot it’s a breakeven company at best. With copper looking to go lower, we expect the
market to be disappointed by the financial results even after the better production
numbers are taken into account.
• With a welter burden of debt on its books that’s not going away anytime soon, the
clock is ticking ever more loudly at HBM. Copper under $2 would show how leverage
works both ways when prices are at key hinge levels.
In the end, my short on HBM is essentially a short on copper. But it’s one with leverage and
one that is taking advantage of what I believe to be a large overestimation of the positive
effects of the April production numbers out of Constancia. HBM rallied nearly 30% from June
2nd, that’s a lot of bang for what’s essentially small bucks compared the to true influence on
revenues at this company, the copper price.
The IKN Weekly goes short HBM and although I’d like this to be a near-term trade, this time
will give the position time to mature if necessary. It’s more about the copper price and less
about HBM’s own performance, so all eyes on the spot price charts and if Dr. Copper does what
I think it’s about to do HBM will quickly return to the U$3.50 price level and when it does, I’ll
take my profits. That’s the price target.
Stocks to Follow
Another good week for the portfolio, with eight winners (not listing them all), one UNCH
(FCV.v) and just two losers (INV.to, LRA.v). All the bigger positions registered gains, with the
best percentage wins from Regulus (REG.v up 42.1% and flying fast), Tinka (TK.v up 13.6%)
and Starcore (SAM.to up 7.5%).
With the GDXJ up by 5.1% it was interesting to see three IKN Weekly stocks that can be
classed as “well known juniors” move in the same way, namely Continental (CNL.to up 5.7%),
Sandstorm (SAND up 5.5%) and Richmont (RIC up 5.6%). There’s a tidal thing going on. Of the
“well-knowns” B2Gold was the underperformer, managing to add just a penny on the week.
With the addition of the HBM short there are now eleven open positions on the list, four fewer
than our self-imposed maximum of fifteen at any given time. Nine are in the green, two are in
the red, that’s not bad.
9

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company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICKS
B2Gold BTO.to buy C$2.11 12-sep-14 C$2.65 25.6% New tgt C$2.96
Regulus Res REG.v buy C$0.64 06-apr-15 C$1.35 110.9% Long-term exploreco top pick
Starcore Intl SAM.to STR buy C$0.59 10-jan-15 C$0.86 45.8% Top Pick 2016, $1.26 tgt
Long positions (in current order of preference)
Sandstorm Gold SAND STR buy U$3.80 17-apr-16 U$4.21 10.8% A buy on FY16 re-rating
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.25 28.2% Top value Zn/Sn/Ag stock
Richmont RIC buy U$7.60 01-may-16 U$8.64 13.7% right for wrong reasons
Continental Gold CNL.to buy C$2.68 22-may-16 C$2.76 3.4% new near-term trade $4.80 tgt
INV Metals INV.to hold C$0.25 03-apr-16 C$0.59 136.0% rallied again, close to exit
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.87 -24.3% solid biz model
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.085 -63.0% financing sept next hurdle
Short positions
HudBay Min. HBM short U$4.98 09-jun-16 U$4.88 2.0% re-shorting, near-term trade
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
HudBay Min. HBM may-16 U$4.10 03-apr-16 U$4.36 -6.3% Short trade, poor timing
Nevada Sunrise NEV.v may-16 C$0.185 28-feb-16 C$0.23 24.3% V. small, no big deal either way
2009, 2010, 2011, 2012, 2013, 2014 and 2015 closed positions in appendices below
Now for some notes on current basket stocks.
HudBay Minerals (HBM) (HBM.to): Short position opened. A quick line to officially call
the new trade. For the rest, see the Fundies section above.
Richmont Mines (RIC): Selling if gold goes above U$1,300/oz. Last week came the
news of the successful closure of its recent defensive financing round, with as expected the full
overallotment taken and C$31m of gross proceeds (bar a sniff) raised. All as per, nothing that
wasn’t baked into the PPS already.
As noted a couple of weeks ago, my dilemma in holding RIC goes something like this:
1) I’m admittedly late into this trade, not one of the guys who bought in at $3 or $5.
2) I bought in for M&A expectations in the near-term
3) They’ve obviously faded now (in short, TAHO failed to get them to the altar)
4) But the stock is performing well, rising with the tide and showing a modest but useful
profit.
5) And due to that, there’s no reason to sell.
On thinking about it further, it seems that RIC is now in a position where I can make a more
active call on how I see the current market for gold. With the M&A potential now back to latent,
RIC is trading on gold’s moves and the U$60/oz added in the last week and a half has reflected
in its share price very clearly.
10

,
I have no great loyalty to RIC and recognize that so far at least, I’ve been right for the wrong
reasons. A good buy, but the M&A potential has diminished and it’s just trading on gold.
Therefore, as I expect gold to stay rangebound for the months to come, this is the place I can
use to trade that call so if gold touches the upper-end U$1,300/oz in the days or weeks to
come, I will sell this position and take profits. If gold subsequently corrects (and what could
possibly go wrong?) it’s one I’d readily buy back and trade again. There’s the plan, don’t expect
a flash update with the sell call if gold dings 1.3k, assume I sell there.
Sandstorm Gold (SAND) (SSL.to): Just last week I mentioned that SAND was onto a winner
in Hot Maden, this week it got pride of
place in its update NR (2) out on
Wednesday. Well, aside from the news
that it had tweaked its debt deal to allow
more room on the covenant, which may
mean it’s about to buy something with
part of that facility’s cash.
As for Hot Maden, SAND took the
opportunity to talk about the latest high
grade drill hits and remind people about
its 2% NSR on the project. I’ll add here
that the 89.3m shares of Mariana
(MARL.L) that SAND took in its latest
placement, paying U$2.34m are now
worth U$4.78m at current forex and that’s
not even including the 44.65m warrants it now owns that have a strike of 2.5p and are in net
profit to the tune of U$0.82m. In other words, SAND is U$3.26m up on a deal that cost
U$2.34m in five weeks. Not bad.
Trading was sprightly in SAND all week and for a moment on Friday (before what looked like
sector-wide profit-taking kicked in) the stock looked ready to slip away from the current range
and move up towards U$5. It wouldn’t take much more than a new buyer recognizing the value
here to get it moving fast.
Regulus Resources (REG.v): Mixed feelings about the continuation of the big moves in REG,
as I do have a substantially larger position than
just four weeks ago thanks to the decision to
move it up to Top Pick in IKN367 and it’s good
to own a double on the new average so quickly
(which would be a 350% winner if I’d just kept
to the original 30c cost and played to the
crowd...just sayin’ ☺). But I wasn’t expecting
such a violent move so quickly and for a guy
looking to add on weakness, there’s precious
little weakness in a chart like this one. Not only
that but aside from Friday’s 39k, it’s a stock
that now does 100k+ volume every day and
nobody’s selling into the bid; for the last week if
you’ve wanted in you’ve had to pay up, period.
It can’t go on in this vertical manner forever though and I’d be interested to see whether the
REG team decided that a small placement now weren’t such a bad idea; I’d bet dollars to
donuts they’ve been hearing offers already.
A final note: I’ve been getting mails from a few of you asking whether it’s too late to get on
REG and sorry people, but I deliberately didn’t answer those mails. These are the questions I
cannot possibly answer unless I know a lot more about your investment make-up and even
11

,
then I’m not your investment advisor (and never will be). I can only speak for myself and use
this best-fit-though-imperfect system of telling you what I do with mine at any given moment. I
will say here that if you’re considering REG for the same long-term investment that I am, you
might want to start by paying up now because it doesn’t really matter if your next purchase is
at $1.40 or $2.00 or $0.70, if things go the way I think they’re going to go all those shares will
be worth $6 a few years down the line. But if you’re like me and “in but want more”, my best
call is to wait a while because the share pattern looks too parabolic for comfortable additions.
These are tough questions to answer though, I deliberately sit on the fence and make noises on
both sides of the argument...so that you get even more annoyed with me.
Starcore Intl (SAM.to): Am I concerned about the lack of news out of SAM about any follow-
up to its May 11th NR (3) that announced the high-grade ‘Manto’ drill hit and got me to up my
target and make the stock a new Top Pick? Well yes, just a little as it has been a month now
but that’s probably my own pathetic neuroses kicking in, it takes time to investigate these
things correctly. As for trading, SAM saw light-ish volumes, but the lack of sellers saw the stock
close up. It’s not out of its recent trading range though, for that we’ll probably need a catalyst.
Continental Gold (CNL.to): Friday saw a reversal in the one-track good news about the
eviction operation of illegal/informal/artisanal (choose your preferred) miners from the town of
Buriticá, as according to your preferrred news site (4) some 1,000 or over 2,000 informal
miners marched on the town to protest the heavy-handed evictions they’ve suffered, claim
small victories regarding what they say are informal mines that were closed down by the police
operation but have now been re-opened (though authorities deny this and say new court orders
have confirmed their actions as legal), as well as demand that authorities make good on their
promises for social services and jobs in the formal mining sector. The protesters also said that
they’d continue to march on Buriticá on other days until their demands were met.
INV Metals (INV.to): When the LUG Feas hit on Monday evening and I saw how mediocre its
project economics were (due to country, not company or project, see below for more) I was
tempted to call sell on this stock, but in the end decided against the idea. Reasons:
1) The plan is to sell on the INV updated pre-feas that should provide the necessary
liquidity to exit cleanly. If I sold now (and let’s face it, call sell and see a few of you
lead me in) it might cave in the price.
2) On asking second opinions with a couple of trusted voices, they said that most people
wouldn’t make the same connection.
3) INV at Loma Larga (ex-Quimsacocha) deserves its chance to deliver its own 43-101
technical report, they’re not necessarily joined at the hip.
However, it’s telling that this was one of only two losers on the list last week so it’s logical to
say (20/20 hindsight and all that) it took a richochet hit from the LUG feas study news and that
stock’s lacklustre subsequent price action.
Tinka Resources (TK.v): We like the
continued strong volumes, as TK did 100k+
every day last week once again and over
500k on Monday alone. We like the 13.6%
price increase, but we don’t like the way it’s
again stalled at the top of what looks like
its 22c 25c trading range again (TK tried
and failed to get past 27c on Friday). We
like the way TK is beginning to get included
in the Zn potentials as the metal continues
its rise (see ‘Market Watching’). We also
like the feedback from a couple of
brokerages in Canada, who hosted Graham
Carman as he marketed TK to instos and by
12

,
all accounts the presentations were received positively. What we need now is more investor
awareness at our level to drive share sales, while Tinka gets on with its development plans at
Ayawilca. Getting the share price higher now means a better place from which to run its
necessary placement.
The Copper Basket
After twenty-three weeks of 2016, The Copper Basket shows a 57.92% gain to level stakes.
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 HudBay Min. HBM.to 5.31 235.23 1467.84 6.24 17.5%
2 Ivanhoe Mines IVN.to 0.61 778.96 755.59 0.97 59.0%
3 Reservoir Min. RMC.v 4.08 48.69 419.22 8.61 111.0%
4 Capstone Min. CS.to 0.44 382.04 259.79 0.68 54.5%
5 NGEx Resources NGQ.to 0.65 205.06 211.21 1.03 58.5%
6 Western Copper WRN.to 0.38 94.19 84.77 0.90 136.8%
7 NovaCopper NCQ.to 0.395 104.33 64.68 0.62 57.0%
8 Copper Mtn CUM.to 0.445 118.8 56.43 0.475 6.7%
9 Cordoba Min. CDB.v 0.16 86.86 53.85 0.62 287.5%
10 Nevada Copper NCU.to 0.66 80.5 50.72 0.63 -4.5%
11 Copper Fox CUU.v 0.125 417.64 50.12 0.12 -4.0%
12 Atico Mining ATY.v 0.28 97.59 43.43 0.445 58.9%
13 Hot Chili Ltd HCH.ax 0.09 445.723 28.08 0.063 -30.0%
14 Amerigo Res ARG.to 0.205 173.61 27.78 0.16 -22.0%
15 Revelo Res. RVL.v 0.055 99.19 9.92 0.10 81.8%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg 57.92%
The basket average added under a point as the The Copper Basket 2016, weekly evolution
100%
five winners (HBM.to, WRN.to, ARG.to, ATY.v,
80%
RVL.v) managed to outweigh the nine losers
(IVN.to, RMC.v, NGQ.to, CUM.to, NCU.to, 60%
NCQ.to, HCH.ax, CDB.v) along with one 40%
unchanged stock (CS.to), thanks to the number
20%
of big percentage wins they managed between
0%
them in Revelo (RVL.v up 17.7%), HudBay
(HBM.to up 15.8%), Amerigo (ARG.to up -20%
14.3%) and Western (WRN.to up 9.8%). To the
downside were Hot Chili (HCH.ax down 21.3%)
and Nevada Copper (NCU.to down 11.3%), but
we’re used to those dogs being beaten up anyway.
Over in the copper trading pit, the metal had a big
moving week and those movements were generally
down, with prices moving from the U$2.13/lb to
U$2.15/lb of last weekend to U$2.03/lb at the close
Friday and just missing out on going under that $2/lb
barrier level. Time will tell as to whether that level
holds next week, I wouldn’t be at all surprised to see
further losses in copper and in my HBM short, I’ve
made precisely that bet.
The hourly chart here shows the story and the reason
behind it all is apparent soft demand in China now
showing up on fundamentals. Many places, including
the IKN blog, reported last week the massive influx of
copper into LME Asia warehouses which was taken as
13
dr3naj ht01 ht71 ht42 ts13 t7bef ht41 ts12 ht82 ht6 ht31 ht02 ht72 r3rpa ht01 ht71 ht42 1yam ht8 ht51 dn22 ht92 ht5nuj ht21
source: IKN calcs

,
an indication copper delivered to mainland China wasn’t finding end-user buyers and was now
returning. That’s as bear as signal as you can imagine and the price drop did it justice.
But then the second level of analysis started making the rounds which talked not just of
physical end user demand, but fun and games at the price discovery level in the LME. As usual
we can rely on the excellent Andy Home of Reuters for a succinct report of events and this note
out Friday (5) does the job nicely. I strongly advise that you read it all, but I’m going to go for
a couple of extracts to give the flavour. In this first part, Home has already laid out the strong
argument that some player or players wanting to see copper’s price drop had “flooded the
market” with physical metal.
“To understand why someone may have wanted to flood the London market with copper, you
need look no further than the LME's market positioning reports.
What the exchange terms a dominant long position emerged on the copper market last week.
This player controlled 50-80 percent of all LME open stocks, excluding metal earmarked for
physical load-out, and had bulked this up with cash positions to the point that its overall position
represented in excess of 90 percent of all available stocks.
That position was being rolled forward daily, forcing shorts to pay the backwardation price as they
too rolled their positions.
The cash premium over three-month metal, the backwardation, had flexed out as wide as $27.75
per ton the previous week as the long tightened its grip on the London market's nearby date
structure.
Someone, it seems, was not prepared to pay the roll price and decided to deliver physical metal
against their position.
And they did so in a way to generate the maximum bang for their buck.
Now there’s nothing illegal going on here, in fact the short attack is probably a better indication
of the real price of a metal that was being held artificially high by the dominant position. As to
“who” is on either side, LME rules are clear on
this and players remain anonymous, but we can LME inventories, per month
at least hypothesize that the size of these 400000
transactions mean it’s probably real market
producers and consumers of the metal who are 300000
moving the price discovery process and it
stands to simple reason that higher copper 200000
prices would benefit mining companies, while
lower prices would benefit end-users. That
100000
“producers” would want to prop the price and
“consumers” see it fall is no surprise to anyone.
0
Andy Home then goes on to explain how the
physical metal was quietly accumulated “off
book” by the market player looking to break the strangehold of the dominant position player
(the “consumer”), then by putting it “on warrant” it suddenly appeared all at once at the LME
registered warehouses. The result was 57,000 metric tonnes of copper added to LME
inventories in just four days, including record delivery days of 22k mt and 21mt as noted on the
blog (6) last week. Home wrapped up his Reuters piece with these words:
“...if this week's events have taught us anything, it is that there is evidently still a lot of
free metal available for LME delivery.
Whether it gets delivered in such quantities as just seen is going to depend on whether
the two parties involved in this week's battle of the LME spreads resume hostilities in
the coming weeks.”
Very true. It also points to the position taken by the bearish Goldman Sachs in its note last
week, which is more face-value but cannot be dismissed. The large dump on the LME
inventories position may have been dramatic and done in such a way as to light up the alarm
signals, but it’s also a clear sign of physical metal that’s not finding an inland China buyer, else
it wouldn’t have been available for the bear attack. The way copper has been resisting at the
U$2.10/lb (ish) level in recent weeks has had the look of a market trying hard to prop the price.
The short side ran out of patience last week and has gone on the attack in order, I strongly
14
51.naj bef ram rpa yam nuj luj gua pes tco von ced 61.naj bef ram rpa yam WON
Mt Cu
source: Cochilco

,
suspect, to bring new realism to the price of copper. We shall see, but sub-$2 now looks ready
to happen. It also means LME is back as top
dog inventory holder and on that score, even
thought we’ve covered the story in the price
talk above let’s get the weekly copper
warehouse inventory bullet points done:
• Total world copper stocks in the three
official warehouse systems moved up
last week by an aggregate of 27,693
metric tonnes (mt) (+6.6%), with a big
sea change in stocks registered. The
world total stands at 446,905mt.
• Shanghai saw another big drop, down 28,657mt (-13.6%) to close out Friday at
182,338mt and smash through the 200k level. SHFE stocks continue to drop like the
veritable stone but even so, the world total increased last week and that news is
coming up below.
• LME stocks rocketed higher in what is a major trend change moment for the copper
market (and the reason we pay such close attention to the world stocks data). Stocks
rose 57,000mt (+37.1%) to finish the week at 210,675mt and all of a sudden the LME
is back as the biggest game in town.
• Comex stocks dropped by 650mt (-1.2%) to finish the week at 53,892mt number.
Another in-line week.
Here’s the Shanghai-only chart, which shows the steep drop in numbers continuing unabated.
However this time it was more than coverd by the LME influx and that’s a new development.
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
400000
350000
300000
250000
200000
150000
100000
50000
15
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 ht72 ht71 ht8 ht92
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
Mt Cu
source: Cochilco
Now for notes on a couple of basket stocks.
Western Copper & Gold (WRN.to): Word from The GWN is that Western and its Casino
project is getting a Coffee Perk, thanks to its proximity to the Kaminak (KAM.v) project that’s
just been bought by Goldcorp (GG). Just a few extra clicks away, the theory goes that with
bigboy GG now in town the regional politicos will quickly approve the access road upgrade and
Casino will be a beneficiary of that call, bringing down project costs and improving economics of
its large, but low grading deposit. Makes sense to me and I’ve always had a quiet thing for this
one without ever being openly bullish (you may even remember I even had a small sidebet
trade going in it last year).
Revelo Resources (RVL.v): One I forgot to mention last week is the RVL NR of June 2nd (7)
announcing a $1.5m placement of 20m units at 7.5c apiece (1 unit = 1 share + ½ warrant at
bef ram rpa yam nuj luj gua pes tco von ced 61.naj bef ram rpa yam WON
LME Shanghai Comex

,
11c strike). That looks quite the bargain compared to the 10c close this weekend, but as
volume was very light all last week the move looks artificial and I’d expect it to drop back under
the weight of the open placement.
Cordoba Minerals (CDB.v): Since
peaking and dropping, CDB has suddenly
turned into a wild ride as it seeks to
consolidate a new bottom in the stock,
which seems to be somewhere around the
60c mark but as the action on Tuesday and
Wednesday show could be higher or lower
than that; we’re getting 20% swings in the
stock in just half a days’ worth of trading.
By the way, the Chinese character for
“crisis” is NOT the same as the one for
“opportunity”. A urban legend that needs to
be stamped on immediately.
The Low Cost Producer Basket
After 23 weeks of 2016, the Producer Basket shows a gain of 106.69% 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 22.84 19.61 165.7%
2 Newmont NEM 17.98 529.12 18.94 35.79 99.1%
3 Goldcorp GG 11.56 830.22 14.99 18.06 56.2%
4 Franco Nevada FNV 45.75 176.298 12.51 70.95 55.1%
5 Agnico Eagle AEM 26.28 217.67 11.01 50.59 92.5%
6 Ang/Ashanti AU 7.10 405.27 6.75 16.66 134.6%
7 Detour Gold DGC.to 14.41 170.85 5.37 31.42 118.0%
8 Sibanye Gold SBGL 6.09 228.71 2.88 12.59 106.7%
9 Buenaventura BVN 4.28 254.19 2.82 11.09 159.1%
10 New Gold NGD 2.32 509.89 2.13 4.17 79.7%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 106.69%
A split decision on the week, with seven winners (ABX, NEM, FNV, AEM, AU, DGC.to, NGD),
three losers (GG, SBGL, BVN) and overall
a consolidation period after the rebound
The Low Cost Producer Basket: Weekly performance
and two weeks of strong returns. Best 130% and comparative to GDX control
performances came from Detour Gold
110%
(DGC.to up 5.8%) and AngloGold Ashanti
90% (AU up 4.6%) which reflects the double
leverage those foreign currency exposed 70%
stocks got from the rise in gold and drop 50%
in the US Dollar. Notable how Goldcorp 30%
(GG) continues to lag its tier one peers, 10%
worth noting that it started the year as -10%
the world’s top dog gold mining company
(by public market cap) and may now find
itself under pressure for third spot by the
seeingly inexorable rise of Franco Nevada (FNV).
It was also a week when the smaller companies out-performed the bigger ones, which suggests
rotation of profits from the main names into the riskier levels. GLD went up 2.4%, GDX went up
16
dr3naj ht01 ht71 ht42 ts13 t7bef ht41 ts12 ht82 ht6 ht31 ht02 ht72 r3rpa ht01 ht71 ht42 1yam ht8 ht51 dn22 ht92 ht5nuj ht21
basket
gdx control
source: Google, IKN calcs

,
2.5%, GDXJ went up by 5.1%. A good signal for our main concern, the juniors.
Low Cost Basket: Percentage difference between
basket and GDX control, 2016
5%
0%
-5%
-10%
-15%
-20%
-25%
17
ht01 ht71 ht42 ts13 ht7bef ht41 ts12 ht82 ht6 ht31 ht02 ht72 dr3rpa ht01 ht71 ht42 ts1yam ht8 ht51 dn22 ht92 ht5nuj ht21
source: ikn calcs, NYSE/Nasdaq data
There’s a 17.48% gap between us and our GDX benchmark for the year, a gap that has
remained fairly steady since perhaps April. Winning.
Regional politics
Ecuador’s Central Bank buying gold from small producers
An interesting national-level development, although small-scale stuff and unlikely to make much
of a splash on the world level. In the last few years Ecuador has had a mechanism by which its
State controlled mining company Enami has bought around U$12m of gold from registered
small mining companies in the country, but this week the Ecuador Central Bank (BCE)
announced (8) it would start buying gold directly from small producers in order to add to its
country reserves. The plan will begin with around U$10m in purchases this year and is expected
to continue at the same pace in 2017 and beyond, with the BCE purchases at a “fair price”
which will cut out middlemen charges from the small producers.
As at the latest May 2016 data (9) Ecuador has U$2.081Bn in International Reserves, a small
number compared to South America peer countries that’s down from the U$6.689Bn of
September 2014 (it’s that oil price revenues crash that done them in). However it’s interesting
to note that U$478m of current reserves (23%) is held by the Central Bank in gold bullion and
that’s now going to start rising.
Colombia: A major protest march against La Colosa
Scene from last weekend’s march
Last weekend Tolima region’s capital of Ibagué was the host to the ”Eighth Grand Carnaval
March” which on this occasion went under the sub-title of “For Water And Against Mega-Mining”
with its target the La Colosa gold mining project owned and being developed by AngloGold
Ashanti in the region. According to reports (10) around 100,000 locals took to the streets and
joined the march. Plenty of photos on that link too, difficult to say whether there were 100k but
it was definitely very well attended and that’s probably why you up there didn’t hear anything

,
about it. At the gig most participants signed a petition to get an official, nationally recognized
referendum on the mine project sanctioned. The anti-mine people in Ibagué need 150,000
signatures for the city to get its referendum and say they’re close to that.
Peru: PPK wins
It was close (50.12% vs 49.88%) but the result is now official and the losing candidate Keiko
Fujimori has accepted defeat. PPK is President-Elect of Peru and will take over from Ollanta
Humala in the standard ceremony at the end of next month, July 2016.
Attention now turns to the transition period and the make-up of the new ministerial cabinet. We
don’t have word on the new Minister of Energy and Mining yet and PPK has six weeks or so to
make picks for all jobs, but in the macroeconomic field we already know that 1) the highly-
regarded Julio Velarde will stay on as head of the Peru Central Bank, which means he’s held the
job through three Presidents (if you know your Peru politics you’ll realize what an incredible
achievement that is) and 2) Alfredo Thorne will be the country’s Minister of Economy and
Finances (FinMin). The Velarde news is no news, which is good news. Regarding Thorne,
there’s no surprise in this appointment as he was PPK’s economic advisor during the whole of
his campaign. He’s also an economist (with Oxford Doctorate) who was Latin America analyst
for JP Morgan for 15 years and then Senior Economist at the World Bank for eight years. In
other words, expect orthodox economic policy from a man with an armful of the right
qualifications.
As for the government to come, PPK has no choice but to lead a government of consensus
because Keiko Fujimori’s “Fuerza Popular” party holds an absolute majority in the new
parliament and any new law needs to get past that powerful block of votes. If PPK wants to get
any major reforms through he’ll have to be sharp and get them done in the first year because
once the honeymoon period is done and the normal cynicism settles on Congress, things are
likely to become Dead Duck pretty quickly.
Guatemala: Anti-mining goes for the kill at El Tambor
The El Tambor (aka La Puya) gold mine in Guatemala owned by Kappes Cassiday (KCA) (with a
royalty payment agreement for Radius Gold (RDU.v)) already has its licence to operate
suspended. Now the anti-mining group CALAS has moved to get the courts to permanently
revoke the licence (11) on the grounds that it was illegally awarded and also that KCA ignored
the suspension of the licence and just carried on mining when it should have stopped work.
This will be an interesting test-case, as it might open the door to a legal precedent that makes
other licence revoking suits stick more easily. Guatemala remains a high risk place for exposure
to mining, even with a new President in Jimmy Morales who’s trying to keep his paymasters
happy.
Colombia: A new Vice-Minister of Mining
The joint number two spot in Colombia’s Ministry of Energy of Mining and the number one
dedicated to hard rock mining is the Vice-Minister of Mines and we had a change in the job last
week (13) as María Isabel Ulloa was replaced by Carlos Andrés Cante. I’ve tried hard to find an
interesting angle to this change at the top of the Colombia mining world but there really isn’t
that much to say; Ulloa is a career public servant who specializes in industrial posts and got the
job a year and a half ago when her boss was moved on, she’s peformed her tasks adequately
enough without being a massive motor for change. Her replacement, Señor Cante, has a
background in mining but is also very much the government functionary, having come through
environmental and mining positions at a regional and national level. His latest job was to push
through reforms in the small mining sector to help crack down on illegal mining and this looks
like a promotion due to a good job done more than anything else.
The Fraser Institute on political risk for mining
Last week saw The Fraser Institute publish its annual survey on country (and region) political
risk for mining companies. You get get your free copy of the report on this link (12) and do so,
18

,
there’s plenty of extra information waiting for you, but this is the main ranking list chart from
the report:
Western Australia comes out top, then follow Saskatchewan, Nevada, Ireland (really??) and
then a bunch of usual suspects, all good and fine places to go digging. Check it out yourself but
as The IKN Weekly is about LatAm risk matters, from here we go specialist on the listings.
When it comes to LatAm, with 109 countries/regions covered it’s still a rather strange system as
for example they split down a country like Argentina into provincial-sized packages and award
greatly differing scores for the parts (e.g. Salta is position 71, La Rioja gets to be position 109
out of 109 worldwide and the worst place on the planet for mining according to Fraser). But
then Fraser doesn’t do the same for place such as Mexico or Peru, where attitudes towards
mining are enormously different depending on the country region (for more, just compare
Chiapas to Zacatecas in Mexico, or Cerro de Pasco to Loreto in Peru).
Anyway, no system is perfect I suppose, here’s how Latin America stacks up this year:
19

,
The Fraser Institute 2015 year ratings for LatAm regions
country/region region rating region score world rating (from 109)
Chile 1 79.81 11
Peru 2 69.26 36
Mexico 3 68.93 37
Colombia 4 62.75 55
Brazil 5 61.45 56
Nicaragua 6 58.38 65
Arg. Salta 7 56.69 71
Panama 8 55.09 74
Arg. San Juan 9 54.97 75
Dom.Rep. 10 52.89 81
Guyana 11 50.91 82
Arg. Jujuy 12 49.57 86
French Guiana 13 46.67 89
Ecuador 14 45.36 92
Arg. Neuquen 15 45.17 93
Bolivia 16 44.56 94
Arg. Santa Cruz 17 42.59 95
Catamarca 18 42.29 96
Guatemala 19 41.77 97
Uruguay 20 39.39 99
Arg. Rio Negro 21 38.75 100
Arg. Mendoza 22 38.51 101
Arg. Chubut 23 37.75 104
Honduras 24 35.36 107
Venezuela 25 31.88 108
Arg. La Rioja 26 28.86 109
I did the subjective colour code myself to guide the eye on the acceptable, the more-or-less
and the high risk reigonal zones. The top five won’t cause much controversy, except for
perhaps Colombia which is better for mining if you including the coal/non-metallic sectors. The
second section are those that score at least over half-marks 50 and include just two of the
Argentina (Arg.) regions, Salta and San Juan. Then comes the red zone and try as I might, I
cannot find a single argument against any of those scores, they are without exception very
tough pol-risk places to go mining.
The bottom line: I’d warn you against considering Colombia as so high up on the list when it
comes to FDI for juniors in metals mining, but aside from that one it’s a fair guide to the
region’s risk in general terms. I’d like to see more inter-country breakdown from Fraser for
countries such as Mexico and Peru in the same way as they do for Argentina, but that’s a gripe
more than a serious complaint.
For more regional political risk thoughts, we’ll be running our regular quarterly review soon
enough, as the count goes it’ll probably be the July 3rd edition of The IKN Weekly.
Market Watching
Lundin Gold (LUG.to): Tax and economics
Post-close Monday saw the arrival (14) of the much-anticipated Feasibility Study (FS) from
Lundin Gold (LUG.to) for its Fruta del Norte (FDN) gold project in Ecuador. We tracked reaction
to this big U$750m capex project on the blog quite closely during the week but to sum it up,
this ten day chart does the picture-worth-thousand-words job well enough:
20

,
It didn’t get the reception LUG longs were looking for and that’s mainly because of the project
economics that offer up a thin looking 15.7% IRR at the standard case U$1,250/oz gold used
by LUG (well, third party 43-101 compiler Amec Foster Wheeler, but you know what I mean).
The main criticism levelled at the LUG FS NR has been the 5% NPV discount used in the study,
which for most people’s blood (you truly included) looks far too low for a place as hairy as
Ecuador. As one IKN correspondent extremely well-versed in the ways of industry finances
observed, the likely cost of development capital is a net 14%, which would bring some $55m
off the NPV and that doesn’t even include acquisition cost or any capitalized G&A during the
build-out period. He went on to note the way Bay St likes to use its “new math”, an educated
and diplomatic phrase that makes the point clear enough. Also, although very difficult to
corroborate, other anecdotal sources close to the company mention the FS process saw costs
cut as low as possible and there’s precious little cost optimization left on the bone.
Meanwhile and as mentioned on the blog last week, your author noted the apparent difference
between LUG CEO Ron Hochstein’s assertion (15) during a BNN TV interview that the effective
life of mine (LoM) tax burden for FDN would be around 29%, while Ecuador’s constitution
states that 51% of revenues from any non-renewable resource investment, mining included,
must go the the State. This constitutional change was enacted by President Rafael Correa and
was one of the key pieces of the referendum he won, so it’s not going to go away.
I considered that weird and for once, along with the help of a couple of kind readers who
volunteered information, I decided to get busy and to the bottom of the story. To cut a long
story short, though CEO Hochstein may be somewhat over-optimistic about that 29% he’s not
going to be far out and my previous assumption that LUG would pay 51% to Ecuador is not
correct in real terms. In previous assumptions I made one smaller mistake and one bigger
mistake about the tax burden LUG faces in Ecuador and to go about correcting that, here’s a
line item review of the total burden and how it will (likely) be imposed:
• Mining Royalty: 5% as-is. This is a fixed amount, simple and understood. No changes
from previous assumptions.
• VAT/Sales tax (IVA): This is refundable as from 2018, which means LUG will need to
21

,
pay IVA during its build-out period but will then get it back as a rebate. This will mostly
help during the construction period, but once in operation its modest influence on cash
flows won’t make or break matters.
• Direct employee profit sharing: 3% as-is. Part of the deal and legislation, no changes
here either.
• State (or "indirect") employee profit sharing: 12%, as-is but see the next line item as
there is a new wrinkle here.
• Ecuador corporate tax rate, 22%. Here is my first error, as apparently you can offset at
least some of the worker profit sharing against national income tax payments. I don't
fully understand the formula and I’m not going to pretend otherwise, it’s best classed
under "it's complicated", but in real terms LUG looks good for a 10% offset over the
full life of mine (i.e. getting 22% + 3% + 12% = 37% down to a total burden of 27%
average).
• Windfall Tax (WFT): this is the controversial part which takes a large 70% from the
excess price of gold if it shoots higher. It works on a sliding scale and the bar is
expected to go lower as the years roll on, but at the moment we can expect the WFT to
kick in if gold makes it above U$1,480/oz. Now you may be more bullish than I and
expect that kind of number from gold soon, but even if you do it’s not a factor in a
sober anal ysis of LUG.to today because if it’s a thing, LUG would already be assumiing
U$1,400/oz gold prices and its PPS would be higher than today, period. For our
purposes, the near-term and its capex raise is the one that matters not the long-term
and the price at which FDN eventually sells its gold. Nothing to see here, move along.
• "Sovereign Adjustment": Here's my big mistake. This is the adjustment that, in theory
at least, gets total Ecuador tax burden up to 51% to comply with the national
constitution. It’s true and exists too, but in practice looks unworkable and much less of
a factor for a large capex ticket project such as FDN. My mistake was to ignore the fact
that the Sovereign Adjustment is calculated on what Ecuador calls “Cumulative Cash
Flow”, which is then offset by all other taxes paid (those taxes are adjusted for
inflation). Once cumulative cash flow is larger than all taxes paid to that date, this tax
swings into play. However, the terms of Cumulative Cash Flow include “everything the
company pays”, not just from its operations. It includes operating costs of course but
also includes the project purchase price, the capex bill, sustaining capital and any G&A
spent inside Ecuador. As FDN is a big-ticket project, it's going to take a long time
before all that tax credit on this line item is used up. In practical terms, this means the
sovereign adjustment isn’t going to be charged to LUG for years minimum and may
never be charged at all. In other words, this is a non-issue for share buyers today and
much less of a problem for the mine than I thought it would be.
The bottom line, after having done some real investigation into the subject rather than
guesstimating, I’m still left with having to make some educated guesses but we can say that
the 29% effective rate over LOM mentoned by CEO Hochstein may turn out to be somewhat
optimistic, but it's not going to be far out. If I had to bet (and I don’t) I’d be careful about
making too many offset assumptions about the profit sharing to corporate tax, then not assume
that IVA rebates will be in the post quickly, but there’s every reason to believe LUG in Ecuador
will have an effective tax rate in the low 30s %. That’s pretty competitive to peer countries and
if Ecuador can offer the stability and long-term miner-friendliness that President Correa
espouses, they’ll be fine.
However, it doesn’t take away from the fact that even with this lower rate of tax in real terms,
LUG.to at FDN has just offered up to the market a project with economics that don’t sparkle.
And this after Ecuador reportedly made plenty of concessions to LUG during negotiations and is
taking a much softer stance towards FDI projects such as this, which underscores just why
22

,
Kinross decided to walk away in its time at FDN when Correa was playing hardball.
When I ran the numbers earlier this year in the NOBS report of IKN357 dated March 13th, I
couldn’t help but come to the
conclusion that under the
circumstances, with a key Feas
Study in the works and then the
hunt for capital to build its mine
afterwards, LUG.to shares looked
expensive for what they were.
Since then we’ve seen gold
jump, the bull market for mining
companies take off, LUG got a
positive price jolt when Porter
Stansberry pumped the stock to
his big list of investors and now
the FS is here. Next we have the
capex raise which, if you believe
the press will start at U$820m,
may be a lot higher (16) and
come in two phases, first U$120m to U$140m round of equity, then at U$700m commercial
(probably debt) facility. That’s a lot of raise for a U$445m market cap company to support and
the way in which the FS assumed a 5% discount rate isn’t helping the optics of the raise and its
real burden on the project. What we do know for sure is that LUG is currently running on fumes
and will HAVE to raise its cash soon, because for one thing it’s part of the terms of agreement
with the government of Ecuador and for another, they’ve just taken out a $5m bridge loan with
main sponsors the Lundins to tide treasury over. And $5m isn’t going to last very long here.
This weekend’s CAD$5.62 share price for 101.3m shares (and that new small bridge loan) still
looks expensive, sorry and all that, it’s not for us smallfry retailers until we know how much the
bigboy financiers are going to extract for their kind patronage. I expect the share price to
continue weakening and $5.25, even under $5, looks in the cards. End.
Minera IRL: A big step forward
I cannot overstate the importance of the news release out of Minera IRL last week (17). There
was good news all round, including confirmation of the filing of its delayed quarterlies and
updates on the re-listing efforts, but the most important by far was this paragraph:
The findings of the forensic investigations of whistle blower accusations
by Baker Tilly (Peru) delivered on May 24th disclosed there was no
credible evidence of wrong doing or criminal misconduct by Mr. Diego
Benavides or other members of the management team. Accordingly his
authority to manage the affairs of the Company in Peru has been fully
reinstated.
Before anything else, let it be known that Baker Tilly is no fly-by-night organization, it’s one of
the world’s top ten auditing firms with a high reputation to keep intact and this audit at IRL has
been exhaustive, leaving no stone unturned. I have known for a long time to my own
satisfaction, having checked and cross-checked information to the Nth degree, that the people
behind the lies and misrepresentations investigated by Baker Tilly were (and still are) extremely
annoyed that IRL cut a good and fair deal with Cofide for financing, because it meant they
missed out on multi-million commissions they would have pocketed by raising the financing
from their own source. Their plan was to roll back the Cofide deal and get their own done which
would have been very shareholder unfriendly but they didn’t care, they were all about asset
stripping and getting their payout at the expense of you. When Courtney Chamberlain passed,
the plan concocted by the “Team Hodges” side of Minera IRL at that time was to use any and
every dirty tactic necessary to get rid of anyone who didn’t fall into line and their main target
23

,
was Diego Benavides, head of the Peru subsidiaries. As long as Benavides held out they
couldn’t do a thing so instead they fabricated a whole story of corrupt activity by him and
proceeded to try and get him fired. All through 2015 and 2016 to date Benavides has been
under extreme pressure to capitulate to these thieves and liars but to his great credit (and ours
the shareholders too) he’s withstood and fought back at every turn. With the publication of the
third party auditor report that confirms all the anonymous accusations made on the
“whistleblower hotline”, specially created by Daryl Hodges to accuse Benavides and his team of
a whole raft of corrupt activities, were nothing but a bunch of lies, the tables are now turned.
Diego Benavides still heads up Minera IRL in Peru, but disgraced CEO Daryl Hodges has gone
(thanks to the AGM vote of last year), disgraced President Jaime Pinto has gone (thanks to the
EGM vote of last year) and although there’s still work to do and hurdles to cross, the new board
continues to clean-up the mess and is getting IRL back on track to be listed, to raise its capex
and to build its mine at Ollachea. It’s been a horrible year for the company and a disaster of a
story to watch unfold before my eyes, but the unfettered greed of those who would have
stripped the company bare has been largely defeated. Last week’s news is the most important
and the best of the year, it unties many knots and will allow the next set of reforms to happen.
Think more zinc
I spent a small section of last week’s edition exhorting you to think zinc and saying things such
as, “The market for zinc is starting to look
conducive for higher spot metals prices”.
This time last wek zinc spot prices had just
sneaked above U$0.90/lb, this weekend
we’re four cents higher at U$0.94/lb and the
buzz is growing as Zn reaches towards what
now looks like the inevitable breach of the
dollar line.
Momentum is with the metal, but we’d be
remiss not to point to a potential emerging
weakness in the argument. Inventory stocks,
used as the basis for the recent bull calls on
the metals from all and sundry (your author
included) have stalled at 380,000 tons in
June to date, after dropping steadily for
months and months. Years, in fact.
That’s worth considering. Zinc supply has the
ability to ratchet up quickly as smaller sized
mines across the world, from Australia to
Peru to China, come out of mothballs quickly
as the economics suddenly turn favourable.
It’s the big headwind zinc faces, so keep a
close eye on the inventories barometer
because if it starts moving back up, it means
there’s suddenly a lot of new supply for real
end users and the rally will dissipate.
Conclusion
IKN370 is done, we end with bullet points:
24

,
• The HBM short is already off and running and we’re slightly in the green. That’s good,
but I want to pull at least 30% from this trade before covering it.
• Tinka (TK.v) won’t need much from here to see it catch light the way Regulus (REG.v)
has done these last couple of weeks. Think zinc.
• The sooner this Brexit noise is done with and the inevitable “Remain” decision is
known, the better. It’s going to be boring filtering out the nonsense, but at least it
gives the chance to trade through gold. With luck I get to sell Richmont (RIC) at a nice
price and then buy it back later...perchance to dream, now there’s the rub.
• This is a bull market. Buy. Hold. Win.
I thank you in advance for any feedback. Our Top Pick stocks are Regulus Resources (REG.v),
B2Gold (BTG) (BTO.to) and Starcore Intl (SAM.to). Flash updates will be sent if required by
events.
I wish you good trading fortune, ladies and gentlemen. Namaste.
Mark
Footnotes, appendices, references, disclaimer
(1) http://quoteinvestigator.com/2012/03/07/haggling/
(2) http://finance.yahoo.com/news/sandstorm-gold-provides-corporate-203000775.html
(3) http://finance.yahoo.com/news/starcore-drills-10-25-metres-150000996.html
(4) http://www.elcolombiano.com/antioquia/mineros-marcharon-hacia-buritica-DM4358261
(5) http://www.reuters.com/article/us-copper-market-ahome-idUSKCN0YW22L
(6)http://incakolanews.blogspot.pe/2016/06/vampire-squid-calling-bear-on-copper.html
(7) http://finance.yahoo.com/news/revelo-announces-private-placement-124500358.html
(8) http://www.eluniverso.com/noticias/2016/06/10/nota/5625939/bce-comprara-oro-10-millones
(9) https://www.bce.fin.ec/index.php/component/k2/item/761
(10) https://www.desdeabajo.info/colombia/item/28982-8-gran-marcha-carnaval-por-el-agua-y-contra-la-mega-
mineria.html
(11) http://elperiodico.com.gt/2016/06/10/economia/nuevas-acciones-legales-contra-proyectos-mineros/
(12) https://www.fraserinstitute.org/sites/default/files/survey-of-mining-companies-2015.pdf
(13) http://www.portafolio.co/economia/gobierno/ministerio-minas-releva-viceministerio-carlos-andres-cante-llega-cargo-
497213
(14) http://finance.yahoo.com/news/lundin-gold-announces-positive-feasibility-210000300.html
(15) http://incakolanews.blogspot.pe/2016/06/ron-hochstein-of-lundon-gold-lugto-mine.html
(16) http://www.bloomberg.com/news/articles/2016-06-06/lundin-seeks-up-to-940-million-for-ecuador-mine-as-gold-
rises?cmpid=yhoo.headline
(17) http://www.marketwatch.com/story/minera-irl-limited-updates-recent-corporate-developments-2016-06-07-7160121
Appendix 1: Flash update dated Thursday June 9th
Good Thursday morning, an hour and 40 minutes after the opening bell, grey and miserable outside, your author happy
with a coffee at hand.
Shorting HudBay Minerals (HBM) (HBM.to)
A quick heads-up on the second bite at this apple, I'm re-opening my short position in HBM after the aborted effort of a
few weeks ago.
25

,
The main problem last time was bad timing and shorting in the mid U$3.50s. This time, with HBM close to U$5 and
copper sinking fast on bearish demand data out of China, the trade looks much easier. Opening the short today, full
details in IKN370 on Sunday. Enjoy your Thursday. Best, Mark
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
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
26

,
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
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
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Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
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
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permission of the author.
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