4 The IKN weekly issue 389 — Oct 23, 2016
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The IKN Weekly
Week 389, October 23rd 2016
Contents
This Week: Trade heads up, In today’s issue, Your author travels, The hint of bifurcation in
the air, Gold not out of the woods yet, Loonie/Greenback Forex redux.
Fundamental Analysis: Atico Mining (ATY.v) 3q16 production, Avino Silver & Gold (ASM.v)
(ASM) 3q16 production.
Stocks to Follow: Overview, Rye Patch Gold (RPM.v), Excellon Resources (EXN.to), Riverside
Resources (RRI.v), Starcore Intl (SAM.to), Tinka Resources (TK.v), Cordoba Minerals (CDB.v),
B2Gold (BTG) (BTO.to), Wesdome Gold (WDO.to), Atico Mining (ATY.v), Continental Gold
(CNL.to), Regulus Resources (REG.v), Focus Ventures (FCV.v).
Copper Basket: Overview, Revelo Resources (RVL.v), HudBay (HBM.to) (HBM), Amerigo
Resources (ARG.to).
Low Cost Producer Basket: Overview.
Regional Politics: Peru Las Bambas: The problems continue, Ecuador’s big promo week,
Argentina: Chubut considers a referendum.
Market Watching: A word on Filo Mining (FIL.v), The Kirkland Lake mistake, Alex Black’s
reputation, Minera IRL via Lawrie Williams.
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
Trade heads up
It’s going to be a small purchase and I know I’m taking more speculative risk than usual, but a
buy is a buy so it gets advertised here at the top. I’m going to buy a few Avino Silver & Gold
(ASM) (ASM.v) shares next week, probably tomorrow as it’s the only day bar Friday I’ll have full
access to the market accounts.
In today’s issue
• Avino Silver & Gold (ASM) (ASM.v) and Atico Mining (ATY.v) both gave out their Q3
production numbers last week, those are the features in the Fundamentals section
today.
• A good week for the portfolio but there’s a word of warning about the gold price in
today’s intro, curb your enthusiasm.
• Apart from those it’s been a quiet week in the sector and there’s really not that much to
have grabbed my attention, so today’s edition is a bit lighter than the usual. Some
updating on covered stocks, a bit of gossip here and there, we’re done.
Your author travels (and a delay to a future edition of the Weekly)
This week coming I’ll be in Cajamarca Peru, up at the Antakori project owned by Regulus
Resources (REG.v), as well as getting the opportunity to see their working partner’s Coimolache
1
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mine right next door. As I’m back in Lima Friday it means the IKN blog won’t get much content
during the week, but next week’s edition of the Weekly, IKN390, should go out on time.
Then in the week of Monday November 14th to Sunday November 20th I’m in Medellín Colombia,
first to attend the Colombia Gold Symposium (1) being organized by Paul Harris of The
Colombia Gold Letter. Then it’s on to two site visits, namely Cordoba Minerals (CDB.v) at San
Matías and then Red Eagle at San Ramón. IMPORTANTLY, this means the edition of The IKN
Weekly scheduled to come out on Sunday November 20th will be published probably two days
late on Tuesday 22nd (flight schedules mean I don’t get back home until the 21st). Please accept
my apologies in advance for that delay in the pipeline to normal service, though it will be likely
be worth it in the long run.
The hint of bifurcation in the air (a heavily biased rantette)
I sometimes get asked if I could put together a list of companies to avoid, the ones that are
wastes of time, or way overvalued, or overhyped, or badly run, or promoted to within an inch of
death, etc etc. In short, a basket of deplorables (to coin a phrase...now where have I heard
that one used recently...?)
I don’t do lists like that, sorry. It’d take too long, far too many stocks.
But what I will do in a totally unfair and arbitrary way is cherry-pick select a bunch of stocks
that for various reasons I consider dogs today (the list can change, value is alays price-related)
and show you how they’ve got on in the last ten days, since gold put in its (relief?) rally saw
tickers like the GDX jump by 7.04% and GDXJ by 9.79%. All tickers Canadian:
• Great Panther Silver (GPR) up 8%
• First Majestic (FR) up 4%
• Sirios Resources (SOI) up 4%
• Chesapeake Gold (CKG) up 2%
• Largo Resources (LGO) up 1%
• First Mining Finance (FF) unchanged
• Sandspring Resources (SSP) unchanged
• Brazil Resources (BRI) down 1%
• Corvus Gold (KOR) down 3%
So Great Panther just about gets a pass (though check out the news on that one in Market
Watching below) but the rest have underperformed or way under performed the market
benchmarkers. Now for the second part of my wholly unscientific and biased cherry-picking of
stocks, the same ten day period performance of juniors (plus a midcap or two) I consider
strong, value-for-money,well-run, worthy of consideration as investment etc etc whole nine
yards:
• Atico Mining (ATY) up 26%
• B2Gold (BTO) up 25%
• Starcore Intl (SAM) up 22%
• Continental Gold (CNL) up 18%
• Richmont Mines (RIC) up 16%
• Red Eagle (RD) up 15%
• Wesdome Gold (WDO) up 12%
• Sandstorm Gold (SSL) up 10%
Yes, I’m not so pleased with the way Sandstorm hasn’t gone with the flow, but you can’t win
them all. And yes I “forgot” to add Regulus to this list along with several others that would
dilute the argument. Bite me.
And my argument is that stockpicking is back on the table. It could be my own bias
confirmation kicking in of course but I will say, hand on heart, that even though there are
2
,
exceptions to the rule I could have easily added double the number of stocks to both of those
above lists from my normal weekly radar screen of companirs I follow without breaking sweat.
Taken as a whole and with exceptions to prove the rule, it’s looking more like the “all boats rise
on the tide” phase is now behind us and taking care in selecting your vehicle of investment is
becoming far more important. I mused on this idea a couple of editions ago, everything I’ve
seen since then underscores the theory. Bottom line: Balance sheets matter.
Gold not out of the woods yet
Was it for this the clay grew tall?
O what made fatuous sunbeams toil
To break earth's sleep at all?
Futility, Wilfred Owen
Now for another round of the futile game of guessing which way gold jumps next, but this time
it’s of the bucket-of-cold-water variety as Friday saw a sudden and hefty drop in gold
inventories at GLD, our yardstick for trying to guess the way gold’s price is going to jump next.
What that chart shows on the right is
GLD bullion inventories of 970.17 metric
GLD gold holdings, Sept & Oct 2016 (metric tonnes)
tonnes (mt) on Thursday October 20th
1000
but then a drop of 16.61mt on Friday 990
21st with stocks finishing the week at 980
953.56mt. In one day, the inventory 970
build-up of the previous two weeks (that 960
950
got me all hot and sweaty last weekend,
940
you’ll remember) is close to totally
930
wiped out. Call it U$675m worth of 920
liquidation. 910
900
I don’t care how you count your beans
or how bullish you are on a long-term,
medium-term or near-term basis, that
above is a negative signal for the
market. Whether it translates into a lower gold price next week is up for debate, chances are it
will weigh at least a little but it would only take one large macro or geopolitical development to
balance it out. So we’ll see, but those of you trading in flips should beware, I think.
Loonie/Greenback Forex redux
A bit of pre-Halloween spookiness for you. Last week I made mention of the continued
deterioration of the Canadian Dollar
versus the US Dollar and noted that my
current house forex conversion of
CAD$1 = U$0.80 may be getting a little
out of date, it might have to be
dropped to 1/0.75 soon. To be exact, I
said that if it went “...under 0.75 this
time I’ll adjust any future analysis to
that level.”
Well riddle me ree, look what’s
happened just one week later. As this
chart shows, The Loonie/Greenback
pair closed the week just one
hundredth above the 0.75 limit. Which
means that according to my own rules I
can still use 0.8/1, but this week could be the last time.
3
61/1/9 61/2/9 61/6/9 61/7/9 61/8/9 61/9/9 61/21/9 61/31/9 61/41/9 61/51/9 61/61/9 61/91/9 61/02/9 61.9.12 61/22/9 61/32/9 61/62/9 61/72/9 61/82/9 61/92/9 61/03/9 61/3/01 61/4/01 61/5/01 61/6/01 61/7/01 61/01/01 61/11/01 61/21/01 61/31/01 61.01.41 61/71/01 61/81/01 61/91/01 61/02/01 61/12/01
mt
source: SPDR GLD data
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Fundamental Analysis of Mining Stocks
Atico Mining (ATY.v) 3q16 production
On Tuesday Atico Mining (ATY.v) reported its
3q16 production numbers (2) and as this ten
day chart (right) shows, the market approved
of what it saw. Our first job today is to crunch
the numbers given and make a few
adjustments to our previous guesses on what
we can expect from the 3q16 financials, which
should show up around the middle of
November. So on with the show.
First up, here below are the evolutions of
tonnages milled and head grades at the mine
for copper only (recoveries are 94.6% for Q3
and very steady over the quarters)
ATY.v: Tonnages milled
70000
60000 50000
40000
30000
20000
10000
0
The combo of slightly lower throughput and slightly lower head grades results in this below,
slightly lower production in Q3 compared to
2q16. There’s nothing particularly bad about
the result, perfectly acceptable in fact but my
original model did have nearly 5m lbs Cu
slated, so 4.52m lbs produced and 4.31m lbs
payable was just a tad light. For me at least.
As for gold, I’ll quickly cover that one with this
production-only chart (below right) because
you may recall that the real story here at ATY
is copper, with around 85% of revenues from
the base metal and only 15% or so from the
precious metal.
Up to here that’s what we know. Now it’s time
to speculate a little on what may be contained
in the 3q16 financial, out in maybe three
weeks’ time. First and by way of a reminder
here’s the metals inventory chart for ATY that
shows the big spike in 2q16. That was due to
the national transport strike which stopped
shipments from the mine. As that strike
finished in July, the IKN assumption is that
ATY has managed to ship the excess inventory
and things are now back to normal.
4
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
mt/qtr ATY.v: Avg copper head grade (%) per qtr
4.50
3 4 . . 5 0 0 0 3.01 3.07 3.63 3.61 2.91 3.45 3.26 3.34 3.81 3.63 3.48
3.00
2.50
2.00
1.50
1.00
0.50
0.00
source: company filings
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
% Cu
source: company filings
Mlbs Cu ATY: Copper production, per quarter
5
4.5 copper prod Mlbs
4 payable copper Mlbs
3.5
3
2.5
2
1.5
1
0.5
0
3q14 4q14 1q15 2q15 3q15 4q15 1q16 2q16 3q16
ATY: Gold production and sales, per quarter
4000
3500
3000
2500
2000
1500
1000
500
0
41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
Oz Au
source: company filings
,
ATY.v: Inventory
10
9
8
2.5
7
6
5 1.9 2.3 1.6
4 1.2 2.2
3 1.8 2.5 6.2 2.5
1 2 0 1 . . 9 8 3.5 3.6 3.6 4.4 1 0 . . 7 8 2.6 1 0 . . 7 9 3.0 1.6 2.0
0
5
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 tse61q3
$m
other
Metals Conc
source: company filings
If so, 3q16 sales are expected to be a bumper crop, as this chart again for copper (we take our
cue from that metal only) shows. Now I’m
aware that I may be setting myself up for a
fall by assuming all the excess inventory has
been shipped in the quarter because if not,
what follows in the financial model is going to
be overly optimistic. But in the end it will all
wash out and if the excess doesn’t go in Q3 it
will go in Q4. That ATY turns conc into cash is
the main thing.
Therefore we get to this (below right), our
best guess for revenues and the total of
$17.8m is made up of copper sales priced
at a conservative U$2.05/lb (ATY seems to
get slightly under the average spot price
per quarter) and a very conservative
U$600/oz for gold (the type of low number
it’s been getting in recent quarters for the
metal, it pays heavy penalties). And I
repeat, there are all sorts of ways I could
get my revenues estimate wrong here, e.g.
badly assuming the quantity of metal,
getting the received price for copper or
gold wrong, etc. I’ve tried to pitch to the
conservative end of the scale, as usual.
But still that’s $18.08m and that’s good money, as we can gather in this operations overview
chart:
ATY.v: Operations overview
22
20
18
16
14
12
10
8
6
4
2
0
-2 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 tse61q3 tse61q4
Mlbs Cu ATY: Copper production and sales, per quarter
8
7 payable copper Mlbs
copper sold Mlbs
6
5
4
3
2
1
0
3q14 4q14 1q15 2q15 3q15 4q15 1q16 2q16 3q16
ATY.v: Revenue by metal
22
20
18
16
14
12
10
8
6
4
2
0
$m
revenues total cost of sales Income from mine ops
source: ATY filings, IKN ests
41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4
$m
Au rev calc
Cu rev calc
source: company filings, IKN ests
,
With costs adjusted upwards to take into account the cost of shipping the extra tonnage, we
end with income from mining operations of $7.2m. Taking that baton and running further,
here’s how we expect MOI to move through to net earnings:
ATY.v: Earnings
8
7
6
5
4
3
2
1
0
-1
-2
-3
6
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 tse61q3 tse61q4
$m
Income from mine ops
pre-tax earnings
net earnings
source: ATY filings, IKN ests
That’s a net earnings estimate of 3.8m. Note that I’ve included the 4q16 estimate as well,
which shows that when the extra sales in this quarter are backed out things aren’t quite as
good, but we’re still expecting a net profit to be posted.
As for the most reasonable way of gauging ops 0.10 ATY.v: Op.Earnings per share, per qtr
at ATY today, MOI on a per share basis, that 0.09
looks like this (right) I think that if we look back 0.08
0.07
at the last two quarter and then take the next 0.06
two quarters’ worth of estimates, those four 0.05
quarters together give a reasonable snapshot of 0.04
0.03
what ATY is capable of under its new 0.02
throughput rate and at the current low copper 0.01
price. Add’em up and get 14.4c operating 0.00
-0.01
earnings/share, or 4.6X the current share price
of 67c. That’s my idea of cheap.
But at this stage, probably even more
important is that net earnings result we’re
expecting from Q3, the blowout quarter
stuffed with extra sales. That’s because of
this (right), the smoothed-out payback
estimates schedule for ATY as it repays the
Trafigura loan. Note that in Q3 and Q4 is
has double payments to make, but as we’ve
just seen it’s now making more than
enough money to cover its obligations.
Once it’s over the hump to the end of this
year, 2017 becomes much easier to handle
and next year we’ll also finally see the debt
load coming off the current liabilities line
item, thereby putting ATY into solid working cap positive status (at last).
The bottom line to the Q3 numbers is that I was slightly disappointed by them being slightly
light, but the overall story is good and from the way the stock price reacted to the NR, I think
the market is finally seeing that ATY isn’t going to have a problem repaying its debt. I’m a
happy holder of this stock, it fully deserved its re-rating last week and I confirm the IKN Weekly
target price of 90c. Now we await the financials, see if there are any big surprises.
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 tse61q3 tse61q4
source: company filings, IKN ests
ATY: Debt repayments to Trafigura, 2016 and 2017
$m
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2q16 3q16est 4q16est 1q17est 2q17est 3q17est 4q17est
source: IKN calcs from company filings
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Avino Silver & Gold (ASM) (ASM.v) 3q16 production
Back in IKN380 dated August 21st we ran a piece on Avino Silver & Gold Mines Ltd (ASM)
(ASM.v), calling its 2q16 financials interesting and called the company worthy of a closer eye,
as long as it could repeat the type of financial performance it showed in 2q16 in following
quarters. Here’s how that article ended:
“...ASM isn’t my idea of a buy yet, it needs to deliver a decent looking 3q16 before it
interests me enough to bite. The 2q16 numbers mark a potential turning point in ASM
but it’s only that, potential, to much can go wrong with this type of small mining
company to be overly confident of strong future numbers. As things stand today I’m
interested enough to lay out the company and stock for your consideration here, you
may want to take more risk than I and buy a few immediately, you may think I’m mad
for sniffing around this long-term dog all of a sudden, you may think the same way.
Personally, Avino is now on my watching brief after a surprisingly positive 2q16, I
roundly oppose the negative market view of its numbers last week.”
At the time of IKN380, ASM had closed for the weekend at U$2.40. Here’s how it’s got on since
then:
It closed this weekend at U$1.99, which means it’s lost 17.1%. Not a great performance for
sure and I’m sure glad I didn’t rush in on a whm at the time, but context is necessary as silver
the metal dropped 9.8% in the same period and the wind dropped out of the sails of the silver
sub-sector through August and September, so in fact ASM’s record since that time isn’t any
better or worse than your average silver play.
What it might be, however is a
buying opportunity. At the time the
basic message was “that Q2 was
pretty good, but let’s see how Q3
comes in before making any
decision” and sure enough last
week we got the first set of solid
data from the company, its 3q16
production report (which got a
mention on the blog (3) (4) at the
time on Monday morning, too. The
reception to the news was slightly
strange, as mapped out here (right)
in this five day chart comparing
ASM to the gold/silver index (XAU):
7
,
When the news hit on Monday ASM hardly budged an inch, but when gold moved up on
Tuesday and then stepped into overdrive Wednesday, ASM was suddenly flavour of the month
again. From start to finish of last week ASM put on 18c, or 9.9%, and held its own well when
gold’s run faltered Thursday and Friday. So, U$1.99 is plenty down on August, but it’s up from
lows on the Q3 news plus gold’s mini revival, even if it was a bit of a sleeper on the day.
Which brings us to the burning question: What’s to like about Q3 production? The answer is
quite a lot, in fact. First let’s check in on the chart I put up on the blog Monday.
Oz Ag/AgEq ASM: Ag and AgEq produced, per qtr
900000
Other AgEq prod
800000
Ag produced
700000
600000
500000
400000
300000
200000
100000
0
3q14 4q14 1q15 2q15 3q15 4q15 1q16 2q16 3q16
source: company filings
At 410,908oz Ag and another 238,9230z AgEq (the byproduct metals are gold and copper),
ASM’s numbers didn’t match the same quarter of last year but they did beat out 2q16 by a
small amount. The 649,831oz AgEq total was a regular number, the type I expected and that’s
good, as one of the things I was
looking for from this company, that OzAgEq ASM: AgEq production vs sales
was previously a little erratic as its 1000000
mine went through a very extended 900000 Total AgEq prod
800000 Total AgEq sold
ramp-up period, was regularity.
700000
600000
Now let’s move to sales and as you
500000
can see (and may remember) 2q16 400000
was the first quarter in which ASM 300000
declared commercial production at 200000
its Avino mine in Durango State, 100000
0
Mexico. That’s the reason sales
3q14 4q14 1q15 2q15 3q15 4q15 1q16 2q16 3q16
jumped to (almost) match source: company filings, 3q16 sales est IKN
production for the first time and
gave us an honest account of its operational profitability. For Q3, I’m going to take the easy
route and assume sales match production (the financials in November will put me right on the
exact number). From there we can take a stab at what ASM will achieve financially. For sure the
sales = production isn’t the only non-scientific assumption we need to make things such as ...
• ASM silver equivalent sales track the Q3 average price for silver faithfully
• The company pays the same type of deductions on payables that it did in Q2
• Costs come in at the same general level
Et cetera. In other words, I’m using the results ASM gave us in 2q16 for a template of 3q16 and
although a totally reasonable way of doing things, basing forecasts on just one quarter isn’t the
type of stats background I prefer. Anyway, and remembering that ASM reports in Canadian
Dollars (I’m still using 0.8/1) here’s the IKN financial forecast on operations:
8
,
ASM: Operations overview
20
18
16
14
12
10
8
6
4
2
0
9
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 tse61q3
$m
revenues
Cost of Sales
Mine Op Income
source: ASM filings
I’ve added $0.5m onto costs compared to Q2 and that’s just me guessing and wanting to be on
the safe side. But even so, we get revenues at CAD$14.7m, costs at CAD$5.5m and the
resulting Mine Operating Income (MOI) of CAD$5.5m, that’s streets ahead of anything ASM has
posted previously. Here’s how that MOI filters through to the bottom line, according to the
model:
$m ASM: Earnings
5
4.5 Income before other items
4 pre-tax earnings
3.5 net earnings
3
2.5
2
1.5
1
0.5
0
-0.5
-1
1q14 2q14 3q14 4q14 1q15 2q15 3q15 4q15 1q16 2q163q16est
source: ASM filings, IKN ests 3q16.
To put that into perspective, here’s how the operating earnings/income before other items (i.e.
the dark green bars in the above chart) work on a
per-share basis. That’s 10.2c/share and if we use 0.12 ASM: Op.Earnings per share, per qtr
the ASM.v Friday closing price of CAD$2.64 to filter 0.11
0.10
out the forex noise (ASM US listing Friday close was 0.09
0.08
U$1.99) and do an over-simplistic straight line 0.07
forward earnings ratio on that, it’s 6.5X. That makes 0.06
0.05
this a cheap stock. 0.04
0.03
0.02
By the way net earnings, i.e. real EPS, works out at 0.01
0.00
6.5c/share and the real forward P/E ratio would be a
smidgen over 10X. That again is cheap, especially
for a silver miner, but due to the way ASM has only
just gone commercial at Avino it’s not a great way to
gauge its ops at the moment.
Discussion and conclusion
On Monday I plugged the 3q16 numbers into the Excel and started playing with them. I then
spent the rest of the week trying to convince myself not to buy any ASM (which wasn’t helped
by the news (5) on Friday that its other asset, the Bralorne property in Canada currently at
exploration stage, now has an updated 43-101 resource. This is something I’ll go into in
November in a full NOBS report if we get that far, but today let’s say it’s small at 166k oz Au
M+I+I, but decent grade and potentially interesting for this size of company.
Here’s the bottom line: ASM’s numbers for Q3 were good and I think the company is about to
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 tse61q3
source: company filings, IKN ests
,
publish its best ever set of financials, plus a message in the MD&A and accompanying NR that
there’s plenty more quarters like this to come from the mine and the company, not to mention
pipeline upside. However the database is still thin and experience shows that these small
companies occasionally come up with some-or-other extra one-time expense that although
small, can really knocks their profitability and bottom line numbers. I think there’s an
opportunity here and the forecast numbers are close to screaming at me, I don’t think the
wider market has cottoned on to the fact that ASM has turned a significant corner and is
becoming a decent cash generator.
But I’m not sure, so here’s the plan. As I have a bit of cash spare (not much) and that 15th
space on the ‘Stocks to Follow’ list I’m going to buy some ASM this week, almost certainly via
its US listing, most probably tomorrow Monday due to the site visit that starts on Tuesday
morning and will keep me away from a safe and reliable internet connection. This will be a
small, starter position, nothing more nothing less.
Then come the 3q16 financial results (should be mid-November), if they turn out in the way I’m
forecasting I’m going to run a full NOBS report on the company, get serious and maybe
increase the holding. However if the 3q16 numbers aren’t so great I will sell the shares I’m
buying tomorrow. In other words, today I’m going to take a small, speculative punt at an
interesting set of Q3 production numbers and make a firmer decision in a few weeks’ time.
Therefore expect to see ASM on the ‘Stocks to Follow’ list next week, whether it stays there for
more than a month depends on the quality of its cold, hard numbers when the financials come
out. This is a different approach to a new position here at The IKN Weekly, but let’s see how it
develops before making ASM a more permanent part of the portfolio.
Stocks to Follow
Another good week as our portfolio of stocks reacted well to the moderate but very welcome
rebound in the gold price. There was only one week-over-week loser on the list (REG.v, which
lost 8.7%) and another three finished unchanged (CDB.v, TK.v, FCV.v), which means ten of our
fourteen names registered gains. Not going to list them all, but shout-outs for the best
percentage winners are in order and they are Atico Mining (ATY.v up 26.4%), Rye Patch Gold
(RPM.v up 23.1%), B2Gold (BTO.to up 13.5% your author smiles on writing), Lara Exploration
(LRA.v up 9.2%), Riverside Resources (RRI.v up 9.1%), Wesdome (WDO.to up 8.9%) and
Excellon (EXN.to up 8.8%). If only every week were the same...
We currently have 14 open positions on the ‘Stocks to Follow’ list, one below our self-imposed
maximum of fifteen at any given time. Twelve stocks are in the green, one is unchanged from
its cost average, just one is in the red (but it’s very very in the red).
10
,
company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICKS
B2Gold BTO.to STR buy C$2.11 12-sep-14 C$3.69 74.9% tgt $5.30 IKN375
Regulus Res REG.v hold C$0.64 06-apr-15 C$1.15 79.7% LT exploreco top pick
Starcore Intl SAM.to STR buy C$0.61 10-jan-15 C$0.72 18.0% $1.04 tgt, added a few IKN387
Long positions (in current order of preference)
Sandstorm Gold SAND STR buy U$3.80 17-apr-16 U$4.93 29.7% $7 tgt IKN378, still cheap
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.205 5.1% Top value under radar Zn play
Wesdome Gold WDO.to buy C$1.72 22-may-16 C$2.70 57.0% $2.88 tgt IKN381
Cordoba Min. CDB.v buy C$0.73 15-sep-16 C$0.75 2.7% Big copper, $1.50 tgt
Excellon Res EXN.to buy C$1.84 09-oct-16 C$1.97 7.1% New long IKN388/9, $3.13 tgt
Atico Mining ATY.v buy C$0.51 24-jul-16 C$0.67 31.4% bot again IKN382, 90c tgt
Rye Patch Gold RPM.v buy C$0.32 02-sep-16 C$0.32 0.0% 75c tgt, added IKN388
Riverside Res RRI.v buy C$0.39 27-jun-16 C$0.42 7.7% Added IKN380, 60c tgt
Continental Gold CNL.to buy C$2.68 22-may-16 C$3.88 44.8% permit 4q16/1q17, $4.80 tgt
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.31 13.9% solid biz model
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.07 -69.6% refi news good
Short positions
None at present
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
Richmont RIC jun-16 U$7.60 01-may-16 U$9.30 22.4% near-term trade, profit taken
INV Metals INV.to jul-16 C$0.25 03-apr-16 C$0.95 280.0% Trade closed on time
HudBay Min. HBM aug16 U$4.98 09-jun-16 U$4.80 3.6% short trade covered, no big deal
Miranda Gold MAD.v oct-16 C$0.125 03-jul-16 C$0.10 -20.0% tiny spec trade, didn't work
2009, 2010, 2011, 2012, 2013, 2014 and 2015 closed positions in appendices below
Now for some notes on current basket
stocks.
Rye Patch Gold (RPM.v): Added. As
per last week’s note, I added some RPM
and got my cost average down to 32c.
However it wasn’t the perfect trade
because I got a little greedy as I
watched it drop to under 26c on Monday,
the day the 223m shares came out of
lock-up and decided to wait a day or two
and see if we’d get a tsunami of sales to
knock it down even further. As it
happened there volume was strong all
11
,
week but buyers were clearly happy to soak up sales and come the gold rebound Tuesday the
price snapped back. So in the end I missed the cheapest ones, but the shares I snagged are
still dirt cheap compared to where I see this stock early next year and the Friday flourish made
the purchase look even better (got me back to UNCH).
What’s encouraging about last week is how most the the placement shares seem to be in
stronger hands and happy to wait until RPM gets going on production at Florida Canyon.
Excellon Silver (EXN.to): Added. I got some more and averaged up a little on my cost price
(up 3c to $1.84) and almost as soon as I as on, watched EXN pop smartly to over $2. The stock
performed very well compared to silver peers, exactly what I wanted to see. We still don’t have
the 3q16 production NR (the 2q16 one took a full month to appear) and as I’m not expecting a
blowout number from the quarter (see the two-parter NOBS report in IKN387 and IKN388 for
more) it might present another buying opportunity. But more depends on the direction of silver,
of course. A trade that’s started well.
Cordoba Minerals (CDB.v): CDB saw light trading and some selling into the weak copper
price, but it’s not shifted out of its current trading range of “low 70s to low 80s” since we called
buy on the stock in mid-September so there’s nothing to be worried about in this current
sideways pattern.
Regarding the site visit planned for November (see intro), that’s going to happen on the 17th
and I’m looking forward to it, having heard a lot about San Matías/Alacran and its potential
from both company people and others who have visited before me. , I just want to mention
here that normally I’m a stickler for independence and all that but on this occasion CDB is going
to pay my flight in and out of Colombia. Just so you know.
B2Gold (BTG) (BTO.to): BTO traded like the champion it is last week, clawing back a lot of
the drop caused by the gold drop as the metal found bottom, plus of course Filipino news of a
couple of weeks ago as the market now seems to understand that it’s very unlikely to take a
significant hit at Masbate.
In other news, I’m going to break with normal tradition and extensively quote another analyst,
namely Ovais Habib of Scotia who was on the company site visit to Fekola last week and sent
back a two part note/report which got to Scotia’s Mining Scoop daily publication. Here are those
notes as seen in Scoop on Wednesday and Thursday, as they give an abridged way into what
he (they) saw and decent insight into Fekola’s development:
B2Gold: Getting a Feel for Fekola; Day One of Site Tour Indicates that Project is Progressing
Very WellH: Scotiabank Precious Metals Analyst Ovais Habib visited B2Gold's (BTO-CN/BTG-
US, SO, C$4.75, Ovais Habib) Fekola project in Mali (34% of his Asset NAV) on October 19-20,
2016. Overall he was impressed with the local team and the construction progress to date—the
company appears well on track to achieve first gold production there by the end of 2017. Several
key takeaways from Day One are highlighted below. Ovais’ key highlights from Day 1 at Fekola
are belowH.
1) Construction is Running On Time and On Budget (actually to date the project is ~$5M below
budget). All long lead items have been ordered, and ~$290M has been spent or committed to
date. As of Sept 2016, and as noted above, the project is ~34% complete. B2Gold is using the
same engineering, construction and management team to build Fekola that just built B2Gold’s
Otjikoto project in Namibia. Indeed, this same team is optimizing Fekola with the lessons learned
at Otjikoto. Construction is also facilitated by using the same design as Otjikoto, with the
exception of the gravity circuit (not used at Fekola).
2) Two Critical Path Items Were Discussed During the Site Visit. (1) Power plant is on
schedule – B2Gold needs the power plant to be commissioned in June 2017 so the company has
the power to commission the plant in Q3/17; (2) Mining needs to ramp up from the outset (mining
fleet will be sufficient to mine 32Mtpa from day one) in order to generate 1Mt of stockpile material
in order to feed the expanded production rate of 5Mtpa (see #3).
3) Fekola Throughput Increase. B2Gold recently approved an increase in Fekola throughput to
5Mpta (from 4Mtpa) based on the success to date of the ongoing exploration program. With an
additional estimated capex of ~$18M, B2Gold is designing the plant to accommodate the 5Mtpa
12
,
throughput rate from day one with a corresponding increase of up to 20% in gold production in the
early years of the mine life (Ovais has already included the throughput bump into his model). A
new mine plan is expected at Fekola by year-end 2016.
4) Day 2 to Include Fekola Exploration Update: The site visit continues on Oct 20 with a review
of ongoing exploration activities underway at the Fekola site. Scotia Mining Sales has included a
preview slide below from the company’s Fekola site tour presentation.
That was part one, now below find part two:
B2Gold Fekola Throughput Increase Scenario Analysis – What is the Potential Upside?:
Scotiabank Precious Metals Analyst Ovais Habib, fresh off of his B2Gold (BTO-CN/BTG-US, SO,
C$4.75, Ovais Habib) noting that the company’s recent exploration success at the project has the
potential to displace lower-grade material. The original throughput increase to 5Mtpa assumes
processing the lower grade material from day one, however in the event that more near
surface/near-mine material from satellite pits is defined through exploration it will be used to
replace the lower grade material with medium to higher grade (thus low grade material is
stockpiled, to be processed at the end of the mine life). This has the potential to significantly
improve the economics of the project, as outlined below. With the exploration success to date,
Ovais has evaluated three “what if” scenarios below in the event that ongoing exploration
continues to outline additional zones of economic mineralization. Note for reference our current
Fekola project NPV5% is C$1,166M or C$1.17 per share (32% of Ovais’ Asset NAV).
1) Scenario 1 - At 5mtpa throughput, the current average production over the first seven years
is ~386 koz. (This assumes also blending/processing the low grade (0.8-1.1 g/t material)). In the
event that exploration success can improve grade of the first seven years by only 10% (from an
average 2.8 gpt to 3.3 gpt Au) with new ore replacing low grade (ie. ~1.1 gpt Au material), our
project NPV would increase by C$372M (C$0.37/sh) with a corresponding increase of 17% to
average annual production.
2) Scenario 2 - At 5mtpa, years 8-10 average ~240koz Au per year. With exploration success if
B2Gold can increase the grade of years 8-10 by 10% (from 1.65 gpt Au to 1.81 gpt Au), Ovais’
project NPV would increase by C$43M (C$0.04/sh) with a corresponding increase of 10% to
average annual production in these years.
3) Scenario 3 (Ultimate case) - In the event that grades improve in the first 7 years by 10%;
grades in years 8-10 increase by 10% and mine life increases by 3 years, Ovais’ project NPV
would increase by C$563M (C$0.56/sh).
HSo What About a Fekola Exploration Update?
B2Gold recently increased its Mali exploration budget to $11M (from $6.9M previously) and a
98,500m drill program is underway, discussed below.
At Anaconda/Adder (incremental feed or stand-alone project) exploration is underway with drilling
of the saprolite zone ongoing on 40m centres to enable resource evaluation. 55,800m of drilling
has been completed there to date. Met work is also ongoing and B2Gold plans to continue
exploring the area for bedrock-hosted gold. The footprint of the combined Anaconda/Adder zone
extends over 4.5km strike length and up to 500m wide (Anaconda) and 200m wide at Adder.
Mineralization remains open along strike and additional nearby satellite zones have also been
identified with further testing planned.
At Kiwi active exploration program is ongoing (near term, near-surface potential satellite pits or
extension of current pit). Mineralization occurs ~640m north of the proposed Fekola pit limits and
~400m up-dip from Fekola Deeps in what appears to be a separate and distinct mineralized fold.
Recent drilling highlights include 8.15m @ 1.95 g/t Au, 4.6m @ 11.8 g/t Au, and 6.65m @ 4.53 g/t
Au. At the Weaver zone (2.5km north of the Fekola pit), highlight hole FKD_189 intersected
15.5m @ 8.5 g/t Au.
At Fekola Deeps, 2015 drilling confirmed the down plunge continuity of mineralization up to 700m
beyond the limits of the Fekola pit boundary. The deposit remains open along strike to the north
and down plunge.
Wesdome Gold (WDO.to): As noted on the blog on Thursday (6) I picked up a lot of rumour-
talk about WDO last week with the main topic being the the hearsay about results from the
second set of drill holes at Kiena that confirm the high grading discovery zone...if those
rumours are to be believed, anyway. I expect we won’t have to wait long to get solid news from
the company and if the facts turn out to be as bullish as the whispers, expect a price pop that
will take out my current $2.88 target. If and when that happens I’m going to have a hold/sell
decision to make, because it’s been frustrating to see my target price pinged twice and not be
smart enough to take my own advice and take profits, only to see WDO droop away afterwards.
13
,
Continental Gold (CNL.to): Okay, even a near-term trader dummy like me gets one right
from time to time. Here’s the chart featured in IKN387, two weeks ago, that pointed out the
way CNL had bounced off the level it found itself three times already since the end of June.
That was then...
And here’s the same six month chart, updated to this weekend:
...and this is now.
CNL topped out at $3.99 last week, but even if we take the Friday close of $3.88 we’re still
16.2% up from IKN387, two short weeks ago. This is a trade to remember if CNL decides to
fade again (on gold news probably) between now and the end of the year (or 1q16) when the
key EIA permit is due to be awarded, that “$3.25 or thereabouts” level looks like strong
resistance for any future opportunity.
Starcore Intl (SAM.to): The way SAM traded last week was a pleasant surprise. Last
weekend we noted the big pop to 70c but also the thin volume and said that it wouldn’t be a
surprise to see it drop just as quickly if only a little more volume showed. On Monday exactly
that happened and SAM was 10% down at 63c, then a recovery set in that, aided by the gold
price pop of course, saw it finish higher than last weekend’s somewhat artificial looking close.
14
,
Much better than I expected and a decent signal that it’s not just me who thinks this thing is a
drop dead bargain at current levels.
Regulus Resources (REG.v): I received more mails from Weekly subscribers and blog
readers on REG last week than on all other stocks put together. All mails commented on the
drop in the share price, while maybe half of them were “Anything wrong?” while the others
were “Looks like a buying opportunity to me, what do you think?”. So let’s address those two
here as well:
1) No, nothing’s wrong. The company is in good shape and to the best of my
knowledge (which should get better next week) moving forward correctly at Antakori.
There seems to be one medium sized but persistent seller of REG.v stock who was
happy to hit all thin bids from $1.40 all the way down, then when we got down to
$1.15 size started showing up and that price held. I have no idea why they’d want to
sell, often it’s for their own perfectly understandable and legitimate portfolio reasons.
It’s what makes a market after all.
2) Theoretically I must agree that this new price looks like a buying opportunity but I’m
always a bit leery about shouting loud when I’m not going to buy any myself, it smacks
of hypocrisy. First a comment without false modesty that tells it how it is: The IKN
Weekly I was quick off the mark when the REG deal was announced with Coimolache
SA, this publication got to the bottom of the deal and understood how important and
good it was earlier than the rest of the market, I shifted REG to a Top Pick that very
weekend in IKN366 dated May 22nd when the share price was 70c, I proceeded to load
up. Therefore I’m not a buyer or adder today because a) this is a long-term position
that’s going to be counted in years b) as noted last week I’m not a bottomless pit c) I’m
in and at a size that I’m happy about at lower prices.
With all that said, it would be foolish of me not to recognize this weekend’s price as a
bargain for others, especially IKN Weekly readers who may have been looking for just
this type of opportunity to buy or add. REG will need time to mature as a company, it’s
still early days at Antakori and we also need to note the low ebb of the copper price
cycle at the moment. But I find it easy, really very easy to envisage this as a $6 stock a
couple of years from now. This is the right project and the right people, Antakori has
such tremendous potential that it’s only right to give it years, not months or weeks, to
reveal its true value. So yes, this is a great price but the real message here is that this
is a serious junior, not some tradeflip, and as such you shouldn’t be sweating the share
price on a weekly basis anyway. If it goes down further I’m not going to bat an eyelid
or care at all, such is my longer-term confidence about this Top Pick.
As noted at the top of this week’s edition, my week ahead is mainly taken up with the site visit
to Antakori. Expect a lot more on REG in next week’s edition.
15
,
Lara Exploration (LRA.v): I’m thinking about selling this position and while not in any hurry
to do so, I feel that when it comes to project generators there’s more chance of further upside
from my holding in Riverside Resources (RRI.v) from the current price deck than there is here.
The risk is always that three days after one sells, a LRA partner company announces a major
discovery on one of the JV properties and LRA flies as a result, but in this game one must play
the percentages and RRI looks cheap today while LRA, though by no means expensive looks
fully valued to present potential.
I’m in no hurry to make a decision, but if the day comes when I have 15 positions on the list
and the desire to buy into a new stock then this one is probably the one I’ll sacrifice (for both
the cash raised and the position on the table).
The Copper Basket
“Forty-two!" yelled Loonquawl. "Is that all you've got to show for seven and a half million years' work?"
"I checked it very thoroughly," said the computer, "and that quite definitely is the answer. I think the
problem, to be quite honest with you, is that you've never actually known what the question is.”
Douglas Adams, The Hitchhiker's Guide to the Galaxy
After forty-two weeks of 2016, The Copper Basket shows a 86.89% gain to level stakes.
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 Ivanhoe Mines IVN.to 0.61 778.96 1814.98 2.33 282.0%
2 HudBay Min. HBM.to 5.31 235.23 1270.24 5.40 1.7%
3 Reservoir Min. RMC.v 4.08 48.69 449.41 9.23 126.2%
4 Capstone Min. CS.to 0.44 382.04 286.53 0.75 70.5%
5 NGEx Resources NGQ.to 0.65 205.06 254.27 1.24 90.8%
6 Western Copper WRN.to 0.38 94.19 95.13 1.01 165.8%
7 Trilogy Metals TMQ.to 0.395 104.33 77.20 0.74 87.3%
8 Atico Mining ATY.v 0.28 97.59 65.39 0.67 139.3%
9 Cordoba Min. CDB.v 0.16 86.86 65.15 0.75 368.8%
10 Copper Mtn CUM.to 0.445 118.8 53.46 0.45 1.1%
11 Copper Fox CUU.v 0.125 417.64 48.03 0.115 -8.0%
12 Nevada Copper NCU.to 0.66 80.5 47.50 0.59 -10.6%
13 Amerigo Res ARG.to 0.205 173.61 28.65 0.165 -19.5%
14 Hot Chili Ltd HCH.ax 0.09 445.723 17.83 0.04 -55.6%
15 Revelo Res. RVL.v 0.055 128.486 11.56 0.09 63.6%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg 86.89%
A good week for the copper junior complex, managing to rise even as the underlying metal
dragged again. We saw seven weekly winners (HBM.to, CS.to, NGQ.to, TMQ.to, WRN.to, ATY.v,
RVL.v), just three losers (CUM.to, NCU.to,
HCH.ax) and bizarrely a full five unchanged 100% The Copper Basket 2016, weekly evolution
stocks (IVN.to, RMC.v, CUU.v, ARG.to,
80%
CDB.v). Best of the winners were Atico
60%
(ATY.v up 26.4% yay) and Revelo Resources
(RVL.v up 20.0%), worst of the losers was 40%
Hot Chili (HCH.ax down 11.1%). 20%
0%
And all that despite another weak showing
-20%
from copper the metal, which started
Monday at U$2.11/lb spot and ended at
U$2.08/lb or so, with “China Fears!!!” the
cause (as per usual). Maybe the reason that
the copper companies managed to shrug off the metal’s drop is in this chart, I’m featuring the
weekly version this time rather than the normal hourly.
16
dr3naj ht71 ts13 ht41 ht82 ht31 ht72 ht01 ht42 ht8 dn22 ht5nuj ht91 dr3luj ht71 ts13 ht41 ht82 ht11 ht52 ht9 dr32
source: IKN calcs
,
Yes copper is down but 1) it’s still in the trading range we’ve seen all year and 2) if it bounces
from where it is (give or take another penny or two) we’ll still have it moving up from a higher
low, that would be healthy. However, but,
notwithstanding and watch out...if copper
doesn’t reverse and move back up from here all
bet are suddenly off, the chart will get labelled
‘broken’ by people who know about these
things more than I do and copper could go
under $2/lb again.
As things stand, I retain my mild-and-nervy-
semi-bullish-I-suppose position and that’s not
going to change just for a move of a penny or
three, neither will it change if copper challenges
U$2.00/lb in the weeks ahead. Also as things
stand I’m happy enough with my exposure to
the metal via mainly REG.v, then CDB.v, then
the project generators. I wouldn’t sell either
CDB or REG on a copper dumpage, they’re
definitely long-term in aspect and copper will be
fine in 2017 or 2019. But I’m not in a hurry to
add extra exposure and if I need to take a
near-term hit in those main two then so be it.
Moving to macro news, we had another presentation and study last week from Cochilco on cash
costs in the copper sector in Chile. The beancounters took data from all major copper producer
companies that account for 89% of the country’s production and put the results in this PDF (7),
which isn’t difficult reading even if your Spanish isn’t great (lots of numbers and obvious
vocab). Here’s an example plate:
I chose this one because it shows the main finding, plus it has more Spanish than the typical
one and I can walk you through it here. The title is “variation of cash cost (for Cochilco-study
companies) in U$/lb Cu, first six months of 2015 compared with first six months of 2016” (a
mouthful). Then to the left we see the 1h15 average C1 cash cost (i.e. basically “operating cash
cost”, not the more expensive “all in sustaining cash cost AISC”) was U$1.514/lb. In 1h16 at
the bottom, the same C1 cash cost was U$1.27/lb, a 16.1% drop YoY. Then in the line items
we see where the differences showed up. (Flete = Fleet, i.e. transport costs, the rest are fairly
17
,
obvious I think). To the right some notes and they’re worth translating so, from the top to the
bottom:
• Lower average six month price for fuel (-26%)
• Positive impact of better gold and silver production (from sample operations)
• Lower average electricity prices for free clients on contract with SING and SIC electricity
companies (-16%)
• Reduction in drawings/executive pay (-5%) and worker salaries (-11%)
• Reductions maintained in third party service contracts
In other words, the the cost profile of producing copper in Chile, so often a cause of complaint
among major mining companies, is coming down quickly.
Now for the regular weekly copper warehouse inventory bullets:
• Overall world copper inventory levels in the world’s three official systems dropped a
little last week, down 5,054 metric tonnes (mt) (-0.9%) to finish at 529,915mt.
• Shanghai SHFE accounted for most of that small move, stocks there down 3,804mt (-
3.1%) to finish the week at 117,634mt. No biggie this week.
• Following on from the previous week we had another small drop at the LME, down
2,300mt (-0.7%) finish the week at 346,775mt. No biggie here either.
• Comex stocks added again, this time up . Stocks moved up 1,051mt (+1.6%) to finish
Friday at 65,506mt.
Now the Shanghai-only chart, which continues to show the likely bottoming-out pattern.
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
400000
350000
300000
250000
200000
150000
100000
50000
18
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 ht91 ht01 ts13 ts12 ht11 dn2tcO dr32
Mt Cu
source: Cochilco
Now for notes on a couple of the basket component stocks:
Revelo Resources (RVL.v): Right at the very bottom of our market cap table and the
smallest company by far when we started the year, it’s just possible that it could overtake Hot
Chili soon. I’ve mentioned the company on a couple of occasions at this point in the weekly this
year as a potential spec play on copper, with a very large acreage under its control in Chile and
a decent team to work it, plus in the last round of financing I heard there were some larger
serious backers who took large chunks of the placement, the type of player that comes with
strong hands and thinks in the long-term.
So it was interesting to see (8) company Chairman Michael Winn move in and pick up a couple
of decent sized chunks in RVL last week...
,
...which accounted for most of the volume registered on Monday and Tuesday. It clearly didn’t
go un-noticed by the market in general, because the stock held 8.5c and 9c for the rest of the
week. If you’re looking for a high risk/high potential rewards pennycrapper in the copper space,
this one could fit your bill.
HudBay Minerals (HBM.to) (HBM): It’s been notable to see HBM plugged by a couple of
Canadian brokerages as “the laggard” copper play, or “leveraged to...” or “best value” in the
sector. And the pumpo seemed to work too, with the Canadian stock managing to creep back
into the green YTD after moving up 7.8% (another that successfully ignored the soft copper
price). My message on this company is unaltered (even though I haven’t traded it very well)
and is “look at the debt”, because there’s no way HBM can pay off what it owes in the time it
has while copper remains at its current levels.
Amerigo Resources (ARG.to): On Wednesday ARG gave us its 3q16 numbers (9) and at first
sight they didn’t look bad, with higher production and lower costs. But the problem is the thing
I’ve highlighted in red on the production table included in the NR...
...because although that’s better, it isn’t good enough. Consider this:
• In 1q16 the cash cost was $1.82, the average selling price was $2.24/lb, which is a
difference of 42c/lb. But the 1q16 operating loss was $3.57m
• In 2q16 the cash cost was $1.65, the average selling price was $2.10/lb, which is a
difference of 45c/lb. But the 2q16 operating loss: $2.82m
• And now in 3q16 the cash cost is $1.60 and if we estimated estimated average selling
price at $2.10, that’s an estimated difference of 50c/lb. Yes that’s an improvement but
no it’s not going to be enough to turn an operating profit. Put me down for a $1.5m to
$2m operating loss on the quarter, that’s because the debt position at ARG is still
heavy. As at 2q16 total liabilities were $128.8m of which financial debt accounted for
over $70m of the number (and $10.7m of that in current liabilities column). Overall
working capital was negative $4m.
So repeat after me: Atico is a better small copper producer play, Atico is a better small copper
producer play, Atico is a better small copper producer play, Atico is a better small copper
producer play, Atico is a better...
19
,
The Low Cost Producer Basket
After 42 weeks of 2016, the Producer Basket shows a gain of 97.17% to level stakes.
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Barrick ABX 7.38 1165.33 19.72 16.92 129.3%
2 Newmont NEM 17.98 530.595 19.29 36.35 102.2%
3 Goldcorp GG 11.56 832.381 12.91 15.51 34.2%
4 Franco Nevada FNV 45.75 178.01 11.75 66.00 44.3%
5 Agnico Eagle AEM 26.28 223.475 10.96 49.05 86.6%
6 Ang/Ashanti AU 7.10 405.27 5.63 13.88 95.5%
7 Buenaventura BVN 4.28 254.19 3.46 13.62 218.2%
8 Detour Gold DGC.to 14.41 174.06 4.52 25.95 80.1%
9 Sibanye Gold SBGL 6.09 228.71 2.83 12.36 103.0%
10 New Gold NGD 2.32 512.8 2.12 4.14 78.4%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 97.17%
The gold rebound took the fear away and replaced it with greed, buyers got brave again and
the whole complex shot North. All our component companies went up on the week but
interestingly and with only a couple of exceptions they did so on a tide, with 7% to 9.6% the
typical gain and only AngloGold (AU up 3.7%) and the more conservative pick Franco Nevada
(FNV up 4.2%) lagging the field. And for the second week running our bunch did better than
the GDX benchmark and recouped some of the recent lost ground (the double-edged sword of
equal weighting the smaller fry).
The Low Cost Producer Basket: Weekly performance
200% and comparative to GDX control
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
-20%
It’s earnings time for the majors, with most of the big names due to report in the next five
days. As 3q16 saw the best of the gold prices this year (so far) we can expect to read the word
“record” fairly regularly in the upcoming news releases. Whether the share prices move on that
kind of talk is quite another matter.
Regional politics
Peru Las Bambas: The problems continue
Last week we looked at the problems behind the protest against the Las Bambas mine by locals
living up to 50km away that left one person dead and scores injured in clashes (20 of the
injured being police officers, with one apparently having lost an eye in the skirmishes). This
week the fallout has continued with locals demanding a top-level meeting with the President
and cabinet and the PPK administration semi-acceding to the demands and sending Vice-
President (and Minister of Transport) Martín Vizcarra to meet with the protesters (10) (11). The
government is taking this protest very seriously now, and not just because of the loss of life.
The roadblocks are still in place, Las Bambas says that its 5,000 staff are blocked in and that no
supplies are reaching the mine or shipments of concentrate are leaving. The mine says that if
the blockade continues for a few more days it will run out of essential supplies and will have to
20
dr3naj ht71 ts13 ht41 ht82 ht31 ht72 ht01 ht42 ht8 dn22 ht5nuj ht91 dr3luj ht71 ts13 ht41 ht82 ht11 ht52 ht9 dr32
Low Cost Basket: Percentage difference between
basket and GDX control, 2016
5%
0% basket
-5% gdx control
-10%
-15%
-20%
-25%
-30%
source: Google, IKN calcs -35%
-40%
ht01 ht42 ht7bef ts12 ht6 ht02 dr3rpa ht71 ts1yam ht51 ht92 ht21 ht62 ht01 ht42 ht7gua ts12 ht4peS ht81 dn2tco ht61
source: ikn calcs, NYSE/Nasdaq data
,
stop production. Meanwhile, its limited on-site storage capacity of concentrate (47,000mt) is
close to its limit and its main storage facility on the coast of Peru at the port of Matarani is
empty...and that carries up to 100,000mt at any given time. Add in the small factoid that Las
Bambas is calculated to be around 1.2% of national GDP all on its own, it’s no wonder the Veep
is on site this weekend (his message is for a 45 day cooling off period, allow trucks to run and
negotiate...no reply from the locals yet).
As for the causes, yes indeed as speculated last weekend the major complaints are all about
the quantity of trucks going through previously quiet rural zones. Last week we took the Las
Bambas production rates, ran a few calculations and made an educated guess at 3,400 trucks
per month. This week the Veep Vizcarra himself quoted the top brass at Las Bambas saying it’s
around 120 trucks per day (3,600 trucks a month). IKN was definitely on the right track and
speaking of trucks, the straw that broke the camel’s back in the specific zone where the fracas
and death occurred was that the location has no paved roads, it’s pure dirt track and the locals
complain bitterly not just about the noise and the danger, but the amount of dust being
churned up by the incessant traffic. Finally, it was interesting to read the head of owner
company MMG tell the press (12) that the original plan was to build a slurry pipeline to the
Tintaya mine but when the Las Bambas project was sold that became “non-viable”. In other
words, dropped due to expense. Pay now or pay later, the point made about hidden costs last
week is underscored. Incidentally, the Peru Mining Society (SNMPE) has come up with the idea
of extending the railtrack in the South of the country to Las Bambas to alleviate the problem
(13). You have to wonder where these people were and what they were doing four years ago.
The level of improvisation and the lack of foresight at the upper levels of the Peruvian mining
sector beggars belief, these people are as dumb as they come (and if you meet them, arrogant
as hell too).
Ecuador’s big promo week
On October 25th and 26th Quito plays host to “Ecuador Investment Summit 2016” (14) a big
bash affair to which 140 potential investor companies from around the world have been invited.
Although by no means a mining bash alone, as all aspects of Ecuador’s business world are
going to show their wares, one of the highlights of the conference is strongly rumoured to be
the formal signing of the deal between Lundin Gold (LUG.to) and the government of Ecuador on
its Fruta del Norte project, in which the company gets the formal and definitive green light on
mine construction and in return, LUG.to hands over the first of its U$25m “pre-payment royalty”
cheques which then goes to the government in
order to fund civil works project, mainly in the
local population areas around the mine project.
As one sharp-eyed mailer into this desk noted,
this may be the reason behind LUG’s strong
finish to the trading week on Friday.
For the record, I like the project and I think LUG
is going to be successful, but the share price
looks too rich for what it is and the amount of
cash it still needs to raise in order to build its
machine. I’d like to like the share more than I
do, as things stand I see no value and pass.
Argentina: Chubut considers a referendum
It started with the head of the Chubut provincial cabinet of regional ministers, one Victor
Cisterna, saying that the Chubut government was considering holding a referendum on mining
activity in the province. It only took a day before English language headlines were confidently
proclaiming “Chubut To Vote On Open Pit Mining” (15) and the whole message of “hey look,
even Chubut is going to allow mining soon” was in the air, promoted by “Them What Know
Stuff” wearing suits in Toronto and Vancouver.
These people are very stupid (about Argentina). Things to consider:
21
,
1) Whether the referendum will happen at all. After all, Chubut’s government promised
one for September 2015, that got neatly forgotten.
2) When any referendum would happen. If they decide to call such a vote, the obvious
date would be at the same time as the regional mid-term elections of late 2017 (in fact
that date was mentioned by Señor Cisterna as the possible frame).
3) Whether it would be a binding vote. It’s one thing to have a referendum, quite another
to act on its results. And for me, even if the vote goes ahead and Yes wins this is a
classic looking “bicycle” situation (as they say in Argentina), where the slang verb
bicicletear is used to denote indefinite delaying tactics, kicking can down the road etc.
4) What the result would be. As the Chubut constitution clearly states that there can only
be one law for the whole province on any given matter, the people most interested in
the Yes result, those in the Central Meseta region close to Pan American Silver’s
(PAA.to) (PAAS) Navidad project, will have to convince those in the very anti-mining
West Cordillera region and the ambivalent and higher populated East Atlantic coastal
region that mining’s a good thing. And the central population is very sparse.
5) Why governor Mario Das Neves would call such a vote. He’s known as anti-mining, he’s
also under pressure from the national government to show willing for the national
cause. This could be a situation in which he won’t call a referendum unless he feels
confident the result will be a No.
People on the outside looking in seem to be convinced that news of a referendum, even a
possible referendum, in Chubut is a positive development for the mining industry of Argentina
and for the Navidad project (even Yamana’s Suyai at a pinch). They’re wrong. This is just
another layer of bullshit being added to the pile. Forget Chubut as a mining destination, just like
PAAS should have done before buying their white elephant.
Market Watching
A word on Filo Mining (FIL.v)
Reader ‘JV’ asks for a comment on the new Lundin stable spin-out from NGEx Resources
(NGQ.to), Filo Mining FIL.v). With pleasure, JV:
It’s in Argentina.
I remain unconvinced about the country’s
future in mining, it may turn out well for
Macri or it may not, but what I see in the
mining space today is plenty of blissful
ignorance about the risk factors, too much
assumption that “Argentina has changed
(once and for all)”, not enough
understanding of the power behind the PJ
and/or Kirchnerist opposition. I’m also
aware that this chart suggests that I’ve
missed the boat and failed to spot a winner.
Fair enough, I’d be guilty as charged if it’s
framed that way, but for me FIL is simply
one in which remaining neutral means I’ve
neither won nor lost, (just like the vast
majority of other stocks out there. I prefer
to pick my battles carefully, I choose to avoid this one in the same way I choose to avoid
putting U$1,000 on red or black at a casino.
The Kirkland Lake mistake
I think we can now agree that Kirkland Lake (KLG.to) CEO Tony Makuch, egged on by Eric
22
,
Sprott to “Do Something!” and build an empire, paid too much for Newmarket Mining (NMI.to).
Alex Black’s reputation
An interesting little snippet from Peru, as its main business newspaper Gestión last week ran a
“Top 100 Business Leaders” review (16), a peer-selected list of the cream of the crop in the
country’s business sphere. Here’s a screenshot of the report’s main frame from the dead wood
report...
23
,
...and unsurprisingly the top ten include names like Roque Benavides of Buenaventura fame,
the chef Gastón Acurio and other assorted bigwigs from the worlds of Peruvian manufacturing,
banking or civil works construction. But if you look down there at number 90...
...yes it’s our old friend Alex Black, the man who made Rio Alto Mining the roaring success that
it was. And to think I had the chance to get his autograph once. You may also note just above
Alex’s name that of Victor Gobitz, top man at Milpo and a thoroughly good guy too.
Minera IRL via Lawrie Williams
The report in Lawrie on Gold last week (17) on Minera IRL is interesting for several reasons.
Firstly because we get public confirmation that IRL shares are nearly out of the freezer and
about to start trading again in Canada. Here’s how the post begins:
“An email from Frank O’Kelly, Chairman and Interim CEO of Latin American junior gold
miner/developer, Minera IRL suggests that he, and his colleagues, now anticipate that
the Ontario Securities Commission will shortly allow trading to resume in MIRL stock.”
There are other items in the report that confirm information passed on here at the Weekly in
recent weeks, which is also god to see in print. But Williams goes further and publishes on a
subject I’d heard about previously but didn’t pass on, mainly because this type of internal
information is sensitive but also because what with the stock still suspended, it didn’t matter
much to know about it. But the news is now out there so I get to pass it on:
“The company is presently drilling off an already constructed 1.2 km access tunnel with
a target of adding an additional 600,000 ounces to the resource. The down dip
extension which is currently being drilled reports intersections up to 20 m with grades
from the only 3 holes for which so far have assays reporting 5 g/t Au, some 40% better
grade than the main ore body which was delineated with 82,000 m of drilling.”
Yes indeed, numbers from the current drilling program are very good. The area being drilled
isn’t just better grading than the current 43-101 (on which the feas is based) but the location is
easy access from the tunnel and, theoretically at least, could be part of the first years of
production.
Then right at the end, I nice little sign-off on Frank O´Kelly’s vision for the stock price
“His short term target is to get the stock price over CAD $0.30.”
Personally, I think that’s perfectly feasible under the circumstances as we’re staring at a fully
funded project that will produce 100k oz Au/annum and if all goes to plan, carry initial debt on
production day one of U$200m or so. Valuing the equities as stands today at U$68m or so is an
easy reach, in fact O’Kelly’s 30c target looks very much like an interim one to me.
Finally, I couldn’t help but wonder just why O’Kelly sent that mail to Williams and allowed
what’s likely to be sensitive information to get into the public realm. Now I’m just guessing and
don’t think (clears throat...ahem...) I know anything special but there might just be some
internal wrangling at board level and some of the board members might just want to sell the
company right now while others might just want to refuse offers for the Ollachea asset and/or
the whole company because they realize that they are literally sitting on a gold mine that’s not
getting anywhere near the valuation it deserves from potential offers received. In theory, you
understand ☺.
24
,
Conclusion
IKN389 is done, we end with bullet points:
• Just a week after saying that “Excellon Resources (EXN.to) is my silver play”, I’m
adding another. Well, starting small and reserving full judgment until the 3q16 numbers
are known, but Avino (ASM) showed the type of production numbers I was looking for
from Q3 and I’m dipping a toe in this week.
• Also last week during the closing bullets I wrote that, “The gold sell-off looks done to
me”. That worked out quite nicely, but the GLD inventory signal isn’t so positive this
weekend. Let’s see if U$1,265/oz can stick.
• Atico Mining (ATY.v) is finally getting a bit of deserved recognition form the market and
people are realizing that it’s not in financial straits and can pay off its financial debt on
time without tears. All this is good.
• It’ll be quiet on the blog next week, I’ll be traipsing around the hills of Cajamarca.
Looking forward to that, expect a full visit report on REG.v and Antakori next weekend.
I thank you in advance for any feedback. Our Top Pick stocks are Regulus (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://colombiagold.co/en/
(2) http://finance.yahoo.com/news/atico-produces-4-52-million-202951839.html
(3) http://finance.yahoo.com/news/avino-announces-q3-2016-production-120000234.html
(4) http://incakolanews.blogspot.pe/2016/10/avino-asmv-asm-3q16-production.html
(5) http://finance.yahoo.com/news/avino-completes-estimate-bralorne-property-120000896.html
(6) incakolanews.blogspot.com/2016/10/wesdome-wdoto-trading.html
(7) https://www.cochilco.cl/Paginas/Sala-de-Prensa/Noticias.aspx?ID=86
(8) https://www.canadianinsider.com/company?menu_tickersearch=Revelo%20Resources%20Corp.%20%7C%20RVL
(9) http://finance.yahoo.com/news/amerigo-announces-2016-third-quarter-113000957.html
(10) http://gestion.pe/politica/bambas-comision-ejecutivo-liderada-vizcarra-viajo-tambobamba-reanudar-dialogo-
2173036
(11) http://semanaeconomica.com/article/sectores-y-empresas/mineria/203323-las-bambas-si-va/
(12) http://semanaeconomica.com/article/sectores-y-empresas/mineria/203491-mmg-conflicto-en-las-bambas-podria-
afectar-reputacion-de-inversiones-en-el-peru/
(13) http://gestion.pe/economia/snmpe-ampliar-ferrocarril-sur-bambas-solucionaria-transporte-mineral-2173004
(14) http://www.ecuadorinmediato.com/index.php?module=Noticias&func=news_user_view&id=2818810216
(15) http://www.mining-journal.com/financeinvestment/politicstrade/chubut-to-vote-on-openpit-mining-again/
(16) http://gestion.pe/empresas/25-lideres-empresariales-mejor-reputacion-peru-2172825
(17) https://lawrieongold.com/2016/10/21/minera-irl-close-to-re-start-of-canadian-trading/
25
,
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
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
26
,
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
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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