IKN #390Premium

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The IKN Weekly
Week 390, October 30th 2016
Contents
This Week: In today’s issue, This week’s edition, Spooking the market for Halloween, US Jobs
next week.
Fundamental Analysis: Regulus Resources (REG.v) site visit.
Stocks to Follow: Overview, Avino Silver & Gold (ASM.v) (ASM), Excellon Resources (EXN.to),
Cordoba Minerals (CDB.v), B2Gold (BTG) (BTO.to), Atico Mining (ATY.v), Riverside Resources
(RRI.v), Regulus Resources (REG.v), Lara Exploration (LRA.v), Starcore Intl (SAM.to), Rye Patch
Gold (RPM.v).
Copper Basket: Overview, Ivanhoe (IVN.to), Hot Chili (HCH.ax), Capstone (CS.to).
Low Cost Producer Basket: Overview.
Regional Politics: Peru: The Mining & Investment Latin America Summit 2016, Peru Las
Bambas: Indefinite strike/blockade by locals now in the cards, Nicaragua: Artisanal miners
around Libertad get their own processing facility, Dominican Republic: GoldQuest meets with
the Central Bank, Peru Shahuindo: The strike and blockade threat returns.
Market Watching: Rio2Mining is launched, Excellon Resources 3q16 production, Minera IRL
gets Graña and Montero.
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
• The main gig today is the write-up on last week’s very interesting site visit to the
Regulus Resources (REG.v) Antakori project in Cajamarca, Peru.
• Excellon (EXN.to) reported its production numbers for 3q16 last week and as
suspected, they were light. But there’s no worries about this, the EXN trade is all about
what the company can do in 2017.
• Copper prices rebounded sharply and gave further confirmation of the strong resistance
it has just under U$2.10/lb. My ongoing contention has been that the bottom is in,
though it’s much tougher to call the time when prices break out higher. Last week’s
action gives that theory more substance.
• We’re now into the 10(cid:1)0 countdown days to the US Presidential election. My only firm
prediction is “expect volatility”.
This week’s edition
When on the road it’s often difficult to keep a finger on the pulse of the market, last week was
one of those cases (as the ladies and gentlemen of Regulus kept me very busy, a good thing
too). As such, this weekend’s edition is mainly about the site visit, other sections are either
thinner in content or lacking insight (for my taste, anyway).
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Spooking the market for Halloween
“Where fear is, happiness is not.”
Seneca the Younger
Friday brought empirical proof that
the market fears a Trump victory
over a Clinton victory:
Why that may be so is open to
debate, it’s probably the “market
doesn’t like surprises” thing more
than any particular political stance,
the way the market had already
seemingly adjusted to a likely Hillary
victory on November 8th (typical
forecasts have been around the
85% range for Hillary, the 15%
range for Trump, then 0.1% for
Johnson and 0.0001% for McMuffin
of Utah). Now that Anthony Weiner’s
mail cache has afforded the
opportunity to bring the Hillary e-mail
GLD gold holdings, Sept & Oct 2016 (metric tonnes)
issue back in the front line, the market
1000
got spooked and gold took a pop. 990
980
The fear element is backed up by the 970
market week in the three ETFs we 960
commonly track to gauge the pulse of 950
the miner’s market, as GLD managed to 940
930
close the week 0.6% up, but the
920
precious metals miners’ ETF (GDX) was
910
down 3.3% and the junior PM’s ETF 900
(GDXJ) dropped a full 5.3%. When the
metal goes up but the miners go down,
something spooked the equity holders,
tricked rather than treated we were. And
it’s also interesting to note how gold is up but the GLD physical inventory is down, with nearly
28 tonnes lost from its recent peak as the speculative casino end of the gold market gets its
own bout of nerves.
In mid-August I made a policy decision (1) to stay away from any sort of commentary about
the US Election on the blog and as things have turned out, that’s one of the smarter calls I’ve
made this year (saved a lot of heartache). But I can’t help but consider what Seneca the
Younger would think about the people up for election, with his views such as this:
“Poverty with joy isn't poverty at all. The poor man is not one who has little,
but one who hankers after more.”
I don’t see much stoicism in modern politics, on either side of the political fence.
US Jobs next week
The last set of major US macro stats before the country elects its new leader is the BLS
Employment Report for October, due out this Friday morning. According to the impeccable Bill
McBride at Calculated Risk (2) current consensus for the headline numbers is +178,000 non-
farm payroll jobs and headline unemployment at 4.9%. Those of course may be refined as the
week wears on, also McBride warns in his preview that “A key will be the change in wages”,
which means the underlying figures are going to be in play this time.
2
61/1/9 61/6/9 61/8/9 61/21/9 61/41/9 61/61/9 61/02/9 61/22/9 61/62/9 61/82/9 61/03/9 61/4/01 61/6/01 61/01/01 61/21/01 61.01.41 61/81/01 61/02/01 61/42/01 61/62/01 61/82/01
mt
source: SPDR GLD data

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Fundamental Analysis of Mining Stocks
Regulus Resources (REG.v) site visit
Today’s main event is on what I did last week. I left the house Monday morning, I arrived back
late Friday evening and aside from a couple of bookend lunches, a dinner, a meet-up with a
friend and hanging round a hotel lobby for a couple of hours the week was spent in the
company of Regulus Resources as they kindly showed me round their flagship project and main
reason we have the company as a Top Pick here at the Weekly, AntaKori in Cajamarca Peru.
What follows is a photo-reportage of the trip, the 30 or so images chosen from the literally
hundreds snapped over the main three days that try to tell the chronological story. They’re also
used at times as a starting point for some of the more pertinent information on the company,
its partner and neighbour Coimolache S.A. the Antakori project and the community relations
aspect of the development. After thought, what I’ve decided to do is run longer than I normally
do on this type of thing, keep the photos larger, take up more space and tell as much as
possible of the visit. If it goes on too long and bores you I apologize in advance, but even
what’s coming up is a condensed version of the full visit narrative. Even so, I’ve tried to keep
the corner-cutting to a minimum. Enough blah-blah, on with the show.
Monday: Pre trip.
No photos of this day, just the basics. I got into Lima, had lunch with a pal, dumped my bags at
the hotel for the night, went to another hotel, hung out a while with mining people who were
scheduled at a conference there (see Regional Politics below), Regulus CEO John Black showed
up, we went for dinner, we went back to our hotel, the end. All straightforward and the only
thing I really wanted to do in this short paragraph is disclose that Regulus paid for my hotel
rooms and food on the trip and also paid for my return plane fare Lima – Cajamarca – Lima,
which is standard procedure on a site visit but it’s fair to make that clear. I made my own way
to and from Lima.
Tuesday: Day One
A morning car to the airport for John and I, we meet the other analyst on the visit, Kevin
MacKenzie of Canaccord (just
moved from PI Fincorp) who
turned out to be good company
over the next three days of the
trip; I like meeting people who
are smarter than me. The
Regulus engineer Joe
Fernandez joins the group, we
get on a plane, we fly. As we
make our approach into
Cajamarca an unexpected
bonus happens; the plane gets
buffetted by high winds and
the pilot aborts the approach,
takes a 360° turn around the
city and tries again (second
time they were ready for the
winds). The bonus is that the
plane flew past the Yanacocha
mine
(Newmont/Buenaventura), still
South America’s largest gold
mine after all these years. Planes rarely have a flight path over the mine and I got the unusual
chance of a few photos from the window. It’s very interesting to compare the view of the mine
people get from the ground as they drive past (very neat and orderly front facade) with the
extended mess you see from the air.
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We arrive in Cajamarca city (at a comfortable 2750 metres above sea level, or 9,000 feet in old
money) and Day One begins in earnest. After dumping bags at the hotel (on the main square,
which really is as picture-postcard as this photo I took) and eating a bit of lunch, we went to
and stayed at the company offices and core facility for the afternoon, located on the outskirts of
the city.
At the offices I’m first welcomed by Chester the house dog, and then Chief Geological Officer
& Technical Committee Chairman Kevin B. Heather, B.Sc. (Hons), M.Sc., Ph.D. (if I don’t get his
titles right he’ll just complain) in his usual inimitable style; “Oh God, not you again?”.
They’ve put together an impressive facility for a small company. REG CEO John Black told me
how they’d found the owner of the location who’d previously built a small hotel on his grounds
to cater for mining people at the Conga/La Granja/Michiquillay projects, but as those hit trouble
and went into deep freeze he was stuck with a bit of a white elephant up to the moment REG
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came along. That small hotel is now a new, spacious and well-equipped three storey office with
loads of room for the geologists to do their thing on the second floor (photo above), a main
board room, admin and community departments, storage space, room for people expansion
when the drills start turning, the whole nine yards. Outside REG has turned the large open
space into its main coreshack and, as it’s custom built, they get to do it the way they want. The
first part is already up and will be able to take all the core from the first couple of years of
drilling, after that its designed to be expanded in a simple and modular way to cater for every
metre they drill. It’s an efficient solution, all with the main company office right on site.
We take the tour, the photo above showing the company office building to the right and most
(but by no means all) of the main cast of characters at Regulus Cajamarca:
• Joe Fernandez, highly experienced mine engineer who was on the Antares team. He’s
been brought in earlier in the development program this time to allow the company to
get engineering input as the exploration program progresses.
• Fernando Pickmann, company President and COO. Pickmann was the head of Southern
Legacy, the company that had the Antakori project but was getting nowhere before
REG came along. Pickmann is the architect of the match-winning deal with Antakori
neighbour Tantahuatay (and the separate Gold Fields deal) which has started to unlock
the value of the asset and was the catalyst for our promotion of REG to Top Pick earlier
in the year. Amazingly, for a lawyer he’s also a nice guy.
• Hubert Gamarra, Country Manager Peru who runs the company operations at Antakori
on a day-to-day basis (i.e. the guy who does the real work). Gamarra had the same
role at Antares at its Haquira project, which was sold to First Quantum for $650m
(ticket price, it turned out to be more and we at IKN did well on the deal).
• Stewart Redwood, lurking behind CEO John Black. World-leading geology expert on
skarn-type (Antakori-type) deposits, he played a key role in the resource definition of
the (relatively) nearby world-class Antamina mine in Peru. Now the new recruit at REG.
• John Black, company CEO. The man at the very centre of REG and also of the success
of Antares at Haquira. If John says they’ve got a great project, it’s a great project. He
says Antakori is a great project.
• Kevin Mackenzie, the analyst from Canaccord on the trip with us. Young, handsome,
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intelligent, qualified, highly knowledgeable about his field and genial, easy-going
company to boot. I hate him.
• Kevin Heather: The other half of the Black & Heather double act who also happens to
be the single largest shareholder of Regulus Resources. And joking aside, he is bar
none the best geologist I’ve ever come across (and I’ve had other world-class geol
brains say the same thing to me in quiet moments when nobody else is listening). To
have him slavering at the mouth about Antakori and his obvious enthusiasm for what it
already is and what it might be is really all I personally need to know in order to buy
shares. My job is to try to lay out the story so that you get the same kind of confidence
about this project that I do from Heather.
And if I turn around from where the above photo was taken, this is the view:
The purpose built coreshack Module One, with oodles of space and everything the team of
geols need for logging, analysis and all the other wonderful things they do. A simple, semi-open
but roofed space that could hardly be better. Tour done, it was time for the main presentation
of the day given by Kevin Heather and all in atendance.
This presentation, entitled “The Antakori Cu-Au-Ag Project, Peru: A Monster in the Making?”,
was over 75 slides long, took a long time to get through and some of the slides were granular
technical as well (fortunately coffee was on hand), with explanations of the district scale
geology, the development stages of a skarn deposit and Kevin Heather’s new favourite
“Geological Time-Space Diagram” (gotta love that one) as well as plenty of photos of typical
rock formations and types from
the previous drill programs at
Antakori. But even stripping away
the detailed stuff it’s nearly
impossible to sum up all the main
information here in a simple site
visit report, so I’m not going to
attempt the feat. What I will do is
show you these two slides (right
and below) from near the start of
the presentation without much
further comment, because they do
a good job in bullet-point form of
summing up where REG.v at
Antakori is today.
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Not just during this presentation, but all through the week one of the recurring subjects
discussed was that of Arsenic (As). If you ask around the Peru mining world, you’ll hear three
virtually automatic responses about the Antakori (ex-Sinchao) deposit:
“Great potential”
“Hmm...but it has community issues, too”
“And yeah, but it’s got some heavy arsenic problems there as well, hasn’t it?”
REG is well aware of the problem at Antakori and its reputation as an As–challenged deposit.
What I can say at this point is that the team isn’t going to shirk away from the As issue (in the
same way they’ve tackled and are tackling the community side of things, see below for more)
and at this point they believe Antakori’s bark is worse than its bite. Via better geological
examination and interpretation, initial (and I stress initial) results indicate that As isn’t a
deposit-wide problem, rather it occurs in some specific locations in the mineralization. What the
team plan to do is show more detail, then work up a resource and eventually a mine plan that
controls As and keeps it from being a concentrate penalty (or even a conc-killer that stops any
refinery from accepting it) and they’re quietly confident it can be achieved. It’s early days on
this issue and I don’t want to stress on it too much, but it’s fair to say that REG is way too
serious an outfit to go for a typical “ignore it and it might go away” bullshit that the scammy
end of the junior world might prefer to take. For one thing their exit strategy of “sell to a
major” is crystal clear and those are the people you cannot BS. For another, a guy of the
geological stature of Kevin Heather would not have walked into a project like this without
having his eyes wide open about all potential pros and contras of the rocks, not just the most
obvious one of the lot. In Heather We Trust.
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Here above is another great slide from the presentation, from Google Earth (Pro) dated August
2016 that shows just how the current Tantahuatay gold oxide pit is right up against the
Antakori concession areas these days. You may recall that a minor part of the REG/Coimolache
agreement is to allow Tantahuatay to mine areas inside the REG concessions in return of a 5%
NSR on the gold there. The Google map also shows how close Cerro Corona is to our project.
Moving on slide 68 (below) was also instructive, as it shows how the current Antakori 43-101
resource is made up of two main blocks, but between and around them is concessions owned
by Coimolache. This is one of the reasons the current 2012-dated 43-101 resource at the
project (3.12Bn lbs Cu, 3.4m oz Au) isn’t a true representation of what’s down there. Now that
REG and Coimolache are set to work together and quite literally pool resources, we can expect
the resource update in 2017 to be a far better representation of the mineralization already
discovered at the project.
The last slide I’m going to bore you with from the presentation is this one below, a schematic of
what REG (and its partner) plan for the upcoming drill programs. Stage one is set to begin in
4q16 (though for minor technical reasons if in a less likely situation it doesn’t kick off until early
1q17 none of us should be worried) and is represented by the green dots. These are set to
cover the area already drilled on previous occasions by ex-owners/operators. With those holes
done, around mid-2017, we can expect a first 43-101 compliant resource update from the
company. The next stage will be the yellow dots which start expanding the envelope. That
program is largely agreed upon already, but may of course get fine-tuned by the first round of
exploration. Further out we have the red dots and the plan is clear enough, they’re looking to
expand the envelope futher, though the exact placement of drill pads for that one will depend
greatly on what they’ve learned by then.
As for funding, CEO Black tells me that after the recent raising and having covered a couple of
larger land payments plus recent expenditures on the Tres Mosqueteros reclamation project
(see below) the company currently has $14.1m treasury and as that’s just about 100% working
capital as well (no debt on board, this is a clean balance sheet), REG has enough to get itself
through all of its intensely planned 2017 exploration program if required. That’s good, but
indications picked up along the way last week make it pretty clear REG isn’t going to watch its
treasury position sink to zero before re-fuelling in 2017. I’d expect it to go to market again
around mid-2017 (timed with the 43-101 update?), either in a classic open market placement
as seen the last time or (and some intriguing hints were dropped) via one of those 9.9% block
placements that large mining companies like to take in small mining companies in order to get
their foot in the door. No names no packdrill, but it’s patently obvious that some of the bigger
mining names are already watching REG at Antakori very carefully. Either way, there’s not
going to be a shortage of capital if and when the company decided it needs more cash.
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With the long presentation done night was falling. Back to the hotel, shower, meal, bed, early
start the next day.
Wednesday: Day Two
A bright, early start and a 05:30 breakfast to get us on the road early for the 2½ hour journey
to the Antakori site. Notably, 95% of the trip between Cajamarca city and our destination is on
paved road, electricity runs to site, water is in abundance and there is all the skilled mining
labour you’d ever need within a small catchment area; In short, infrastucture is optimum for
any eventual mine at Antakori. This map below, taken from the presentation given by Heather
the day before, shows the six stops planned once we get to the mine site. We did them all.
Around Antakori is also an established mining zone, of course. Ee know about Tantahuatay,
sitting next door to Antakori and here’s the first view of it as we approached (from Stop One)...
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...but just swing 180° and point the camera down the valley to see this, the Cerro Corona mine
operated by Gold Fields just 6km away.
When people hear the word “Cajamarca” associated with Regulus and state that the region is
anti-mining, it’s worth showing them those two pictures of mines built and put into operation in
the last ten years. As Cerro Corona runs at approximately 160,000oz gold per year (165.5k last
year, to be exact) and comes with a copper kicker, and Tantahuatay is a 150,000oz Au/year,
these are not small-scale operations either.
We move on to Stop Two, a tour of operations at the Coimolache S.A. Tantahuatay mine. To
remind you, Coimolache is a Joint Venture mining company owned by Buenaventura (BVN
40.1%), Southern Copper (SCCO 44.2%) and a local privately held company “Espro S.A.C”
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(15.7%) who were the original owners of the land. It has a large land package in the region
and part of that is the Tantahuatay gold oxide mine, operated by Buenaventura. We talked a lot
about Coimolache in the main IKN367 report on Regulus that promoted the stock to Top Pick so
I direct your eyes there if you want more (for those of you who don’t have a copy of IKN367
and want one, just say the word) but suffice to say here that the main partnership deal
between REG and its neighbours on the development of Antakori and its potential to be Peru’s
next mega copper mine is with Coimolache, so it’s an important part of the mix and visiting its
Tantahuatay operation was one of the key points of my tour.
Before moving on to the sights and smells of Coimolache, a quick word on the status of its deal
with Regulus. As per the binding MOI signed by the two sides they have until just before the
end of December to sign the definitive contract. We’re not there yet, but both sides are
apparently happy with progress made and we’re now at the point where they’re crossing Is and
dotting Ts (dat right?), the fine print details to make sure there are no loopholes. I talked in
some detail with REG President/COO Pickmann on this and although the missing details are
minor, boring and not worth listing here it’s clear the deal is happening and it’s probably going
to happen well before the designated deadline. In other words, we’re all good.
We enter Tantahuatay and the first thing I notice (and keep noticing all the way through the
visit there) is that it’s a highly organized and well-run mining operation. To give a couple of
examples, the day before going up I had to pass a thorough medical examination that included
ECG, then on arriving at the mine we had another medical to pass including BP, heart rate,
oxygen rates and a Q&A session with the resident doctor before he’d sign off and allow us to
visit (part of the fun of being at over 4,000 metres above sea level, but all the same very formal
and correct procedures). And even though we did little else than travel in a 4x4, get out at
viewpoints, walk 50 yards and then get back in the transport we were required to wear full
safety gear and metal-capped boots while inside Tantahuatay, no exceptions.
Here’s a view of the main operating pit at the mine, looking North (behind that ridge is where
the Regulus Antakori project backs on to Tantahuatay). Note the trucks and scoops highlighted
to give an idea of scale, this is no two-bit operation.
This pit, Tantahuatay 2, is getting close to the end of its life but the company plans to open up
new pits to mine more oxide nearby. At present it has a seven year mine plan (to 2023) to
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produce 150,000 ounces of gold per year from the oxides. Grade at the new pits will be lower,
but the plan is to bump up throughput to compensate and keep production ounces steady. It’s
a profitable operation too, at present operating cash costs are around U$350/oz and even if
that creeps up due to the extra throughput required at lower grades, it’s going to remain a
strong free cash flow operation as long as gold doesn’t cave in on us all.
It’s difficult to sum up a visit to a mine with just a couple of photos and couple of paragraphs,
plus this report today is going to be long by nature I need to abridge here and there. But I can
say that Tantahuatay impressed me as a mining operation and it’s the right type of company
with which REG should do business, it passed with flying colours.
We move on to Stop Three, the Antakori drill pad. This sits just behind the pit we’d just visited
on the other side of the ridge, here’s a photo of the stop.
This is a big drill pad and was one of the ones used on previous occasions and drill programs
when Antakori was called Sinchao and under different ownership. It’s also the first time I get
the panoramic sweeping view of the whole concession area held by REG and its partner
neighbours and this is a difficult, nay impossible thing to capture in a Samsung smartphone
photograph, but it’s the first time it completely struck me just how big this project is. This thing
is massive, the size and scale of what’s envisaged as the eventual mine here doesn’t fit into one
shot, staring at a map or a presentation does it no justice whatsoever and as we stood on the
edge of the drill pad and looked across in just one of the directions (below photo 1 CEO John
Black doing the requisite arm-waving, photo 2 Chief Geol Heather explaining details of what we
were looking at on one of his seven thousand maps) it began to sink in. It gave me
goosebumps.
12

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I peeled off from the group, walked a bit and tried to get a representative shot, this below is as
close as I got. To the left side of the valley is the current area of Antakori with the 43-101
resource that dates from 2012 (and will be updated to something far more representative in
2017). The valley floor is part of the partnership deal with Coimolache S.A. and the full project
area stretches over and beyond the diorite ridge to the right of the valley, as well as all the way
down the valley as seen. And behind me and my camera here, too.
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The Toyota Hi-Lux convoy moved on to Stop Four, the Ferrocrete run-off which was highly
impressive for several reasons. For a start it’s beautiful scenery (and by the way, we had
impeccable weather all through the week in Cajamarca, couldn’t have asked for more sun and I
duly burned my nose and ears) and makes for a great photo opportunity. According to Kevin
Heather, a guy who’s seen more than his fair share of high Andean scenery, other Ferrocretes
exist up and down the Cordillera but there are none as large or impressive as this one, it runs
for kilometres down this valley (located on the other side of the Antakori project).
Next, you don’t want to go bathing in that water (or let your cattle drink from it). It’s toxic and
the direct result of acid rock drainage from a large sulphide deposit somewhere up the valley.
In fact its source is exactly where Regulus and Coimolache have their land concessions and plan
to work together on. In other words, this very large Ferrocrete is compelling visual evidence of
what lies below the surface. Not only that, the clincher is that this drainage is 100% natural and
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not due to any mining activity in the area at all. In fact, this Ferrocrete has probably been this
way for at least the last 10,000 years, since the end of the last regional ice age (and it might
even be counted in the millions). That means that when the anti-mining NGOs pipe up about
mining activities causing potential pollution in the area, all REG and its partners need to do is
point to this ferrocrete and say that even if no mine is built, the area is naturally polluted. In
fact, the only practical way of halting or diminishing this large scale (and to repeat, this is the
largest one seen by highly experienced geologists) pollution would be to build a big copper
mine at its head, dig all the sulphide rock out and process it; precisely what REG proposes!
In other words this view of a ferrocrete isn’t just pretty, it’s an important one for the project
and for we investors. It’s a clear indication of the size of the system there is at Antakori and
surroundings and an indication that mining in this location will not have the type of harmful
environmental impact that sees other projects stopped in their tracks by angry and/or politically
motived local populations.
I don’t know what CEO Black is thinking as he stares off into the distance in this photo. Perhaps
“Where there’s muck there’s brass”.
We move on, back round and up the valley of the concession and stop just before formal Stop
Five at the head of the valley where Antakori is located.
Here we see the geology whizzkid duo of Redwood and Heather looking down at where they’ll
soon be drilling, the program’s stage one set to kick off later this quarter and run through 2017.
Although only rough, the red box marks the location of the first holes.
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We make it to Stop Five, the “Tres Mosqueteros”
remediation project and this was one of the big
surprise packages of the whole tour. In other
contacts and meetings REG people had told me
what they were doing at this spot, taking a closed
mine that was a pollution black spot in the locality
and cleaning it up, but until I walked the site I
didn’t really understand how big a deal this was.
Below a photo of one part of the remediation
project. At this spot and another a hundred or so
yards away on the same “Tres Mosqueteros”
property, what REG and the people contracted by
REG to do the clean-up operations were doing was,
to cut a long story short:
• Open up two long-closed underground mine
entrances, owned by long-closed private
mining companies who worked the region,
that have been seeping toxic waste for
decades.
• Remove all the sludge and waste from the
tunnel and the heavily polluted area under
the tunnel mouth.
• Cover the worst of the zone with a) new
soil b) a double geomembrane c) a layer of
limestone and then d) topsoil, that combo to contain the toxicity and keep rainwater
from continuing the leaching and acid run-off process.
• This will eventually allow locals to use the zone as just another area for cattle grazing in
a healthy pasture (all with constant future monitoring to make sure everything remains
under control).
The photo you see above is the second mine tunnel opening with the first geofabric membrane
laid. The whole project has been running for around 18 months (from initial organization and
consultancies with the local population) and the actual site work has been going on since May
this year, we’re now around two weeks from completion.
16

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This next photo below is taken standing on the first other reclamation site at Tres Mosqueteros
(limestone already in), in the mid-distance the other site with the geomembrane and then
beyond I’ve circled several spots along the same sill that are the same type of ecological and
contamination balackspots Tres Mosqueteros once was. The thing is, those centres of nastiness
are nothing to do with REG.v or Antakori, they’re under the auspices of the Peruvian
government via its Activos Mineros arm, the body charged with their clean-up. In other words,
we have REG.v as the pathfinder company in a decades-long-ovedue clean-up operation and
showing both the government (regional and national) and the local population how it’s done.
And here’s the clincher, the thing that made the visit to Tres Mosqueteros so worthwhile. While
on site one of the employees working the remediation asked to say a few words. It turns out he
was a local community leader (he’s running for the presidency of his local community in
November) and he said to all present how impressed he/they were with the efforts made by
REG.v and its team to clean up the old mine and decontaminate the zone. He said that when
the first contact was made by the company he didn’t trust them much, but REG at the time said
that it would be an example of their commitment to the area and he should watch and see
what happens. Now, with just two weeks to go, the atmosphere of cooperation with the local
community and the trust
they’d nutured was
palpable, this clean-up is
a big thing in the eyes of
locals and REG.v has
scored many many
bonus points with the
right people by doing
what they’ve done.
We moved to our final
stop of the day, Stop Six
the Cerro Corona tailings
dam. In fact when the
vehicle I was in stopped
I didn’t really understand
why, my eye was
scanning the horizon
and it was only after a
double-take that I realized half the horizon wasn’t natural but man-made. That, ladies and
gentlemen readers of The IKN Weekly, is one hell of an impressive site from the side of the
road (and please note the dumper on the top for scale). So after a couple of minutes of photos
17

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and “oh wow” noises we drove up to the other side and got the bird’s eye view of the same
tailings dam from the other side, showing what it was holding back. All very interesting and
though neither GFI nor its Cerro Corona mine is part of our investment focus here, it shows the
type of civil works that have and can be achieved in “anti-mining” Cajamarca.
It was time to drive back to the city of Cajamarca and we got back as night was falling, but not
before driving past and through the Yanacocha gold mine. Worth looking at these shots and
then returning to that first photo from the plane window, I think.
Then hotel, shower, out for a decent meal in a
decent restaurant with most of the REG team
present (a table for perhaps 20 or 25, though I
didn’t count) which was fun, a stop for a late night
drink all together, then hotel and bed for me
(though word has it that a few went on to a local
disco and were up to the wee small hours, that’s
not my scene). The next day wasn’t going to start
quite as early, which was a good thing. I slept like
the proverbial baby.
18

,
Thursday: Day three
Up, shower, breakfast and then a quick drive to the REG offices in Cajamarca city for a morning
of checking out the drillcores, then an afternoon of presentations. First the core and that
morning we walked four drill holes, chosen by Kevin Heather and Stewart Redwood as
representative of both the geology at Antakori and for the challenges and opportunities they as
a team have in the upcoming drill program, due to kick off this quarter and run through 2017.
When we got there the REG team had it all set up and ready to go, Kevin Heather took the lead
role in explaining what we were looking at and did a good job of telling the geols present
(Stewart Redwood, Kevin MacKenzie, Hubert Gamarra, John Black) what we were looking at
and why in the language they understand, plus giving the non-geol grunt that is I the layman’s
explanation.
Now, I’m not a geologist, I don’t pretend to be and I know just about enough to be dangerous,
but I still get my value from core walks such as these because:
• I always learn something new (esp with Heather as my temporary mentor)
• Insights about the operation are always forthcoming
• Even a non-geol gets a feel for the rocks and the story they tell (no matter if the
conclusions and obvious inferences have to be rammed down my throat in words of
one or two syllables on occasion).
Here’s an example: As REG hasn’t yet drilled its own holes and the company it took over,
Southern Legacy, did no drilling in its time, it stands to reason that the core held by REG comes
from programs run by previous owners, mainly Misti Gold in the late 1990s and Sinchao/Andean
American in the mid and late 00’s. This is the core we were examining and up to date, REG has
spent a lot of time re-logging and re-interpreting the core to extract more information. As we
got into our stride, two things became patently obvious about the work previously done by Misti
Gold and Andean American.
19

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1) There was a lot of sketchy recoveries at the time, with plenty of metres showing low
percentage total recoveries. Now that might be due to subterrenean conditions, or sub-
standard drilling techniques, or conditions at the time of the drilling, but for whatever
reason there’s a lot missing that’s set to be improved by REG, even in its very first
round of the upcoming drill program that concentrates exclusively on the areas already
drilled. The REG people were reticent to put a figure on it but on doing a little rough
calculation and taking into account what was in the 2012 43-101 and what’s likely to be
added in the same areas in the upcoming drill program, it wouldn’t surprise me at all to
see mineral tonnage increase by as much as 50% and I stress, and that’s without any
sort of step-out drilling or addition of new areas.
2) It became clear that the geological interpretation previously done left a lot to be
desired and a lot of information and data had been left on the table, overlooked or
simply ignored (through ignorance?) by Misti Gold and Sinchao/Andean American. In
the re-logging process Heather and his team have managed to extract a lot more
information from the rocks from a combo of better inspection, more detailed categories
and new, technologically advanced techniques (see below). The re-logging process
hasn’t just been academic either, the REG team have seen new and exciting
possibilities that they’ll chase up (in fact, it was Heather’s first pass at the core before
REG.v got involved that got him all hot and lathered and convinced him that they
needed to get their hands on Antakori).
Here’s the man himself, holding court.
And here’s just one example of what we had to look at, the whole system was intensely altered,
fractured and had been affected by at least three major events over the millions of years of its
20

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development and it showed in all sorts of ways. Though a copper/gold skarn/porphyry target by
nature, seeing zinc returns such as this laying next to strong gold grades wasn’t unusual.
21

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Above is another photo (of dozens) showing a typical intesection from hole 10. And the core
walk went on, hole 10 alone being over 900m. Another beautiful day, but this time I had the
full face-and-neck cap on for protection.
And if you want to know the difference between a geologist and a normal human being, this
photo explains all. Three geologists (Heather, Redwood, MacKenzie) enrapt in a Zen-like state
of mind with hand lenses, rocks and perfect harmony, while an engineer (Jo Fernandez) and a
financial analyst (yours truly) amuse themselves by taking photographs.
22

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What’s clear from the re-logging work done by REG is that there’s a lot more to come from
Antakori, even from the locations that have seen drilling work done. REG has used the core
library to increase its knowledge of what’s going on and design the new drilling program to
(hoperfully) get maximum bang from its truth machine buck. And on that subject, once finished
with the core we went inside for a working lunch and the next presentation, which turned out
to be fascinating.
REG has signed a deal with a company called Corescan to use its hyperspectral equipment on
its drillcore in the months (years) ahead. I’m going to try and keep this section short (it
deserves pages though) so if you want to know more (and you should) I recommend the
Corescan company website (3). However, to condense the masses of information I could throw
at you into as small a space as possible:
• Corescan is an Australian company that provides a state-of-the-art scanning system for
drillcore.
• The technology is complicated, the reality is reasonably simple: Take your box of core,
put it into the machine, the scanner reads what it sees and can provide an absolute
truck-ton of information about the rocks, way more than the simple eye can see and
that includes the most experienced of geologists (e.g. Kevin Heather said on more than
one occasion that he was blown away by the scanner’s capability and results).
• After sitting through the presentation even a geology dumbo like myself can see it’s an
incredibly powerful tool for any company that needs to interpret its drill core results and
for a project as complex as Antakori, it’s not an exaggeration to say that it could
revolutionize its understanding of the deposit. Of any deposit.
About a third of the way through the presentation I asked out loud, “Why have I never heard
about this before?”. It turns out that the company development was sponsored to a large
extent by Newcrest, the Aussie miner that then has had first dibs at its use. Another company
to make a lot of recent use of Corescan is Barrick and as that company’s exploration results are
nearly always for in-house consumption rather than public dissemination, Corescan has gone
unnoticed. But now that’s changing, because Corescan wants to grow into the junior mining
market and has chosen Regulus as its first project to get behind (important: NOT the other way
around) because they have great respect for the REG geology team and think that Antakori is
the right type of project to showcase their technology and business to a wider world.
23

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Above is a photo of one of the intro slides I took while sat down there, it gives a nice list of why
Corescan will be a benefit to a project like Antakori. Notably, one of the big advantages is
downstream from the exploration stage because Corescan collates mountains of geotechnical
data as well, which will be invaluable at the moment of building the mine and then mining it,
years later.
I’m going to cut the section short at this point but anyone into this kind of thing is urged to
check out the website found in today’s appendix. As for the cost, CEO Black tells me there’s a
sliding scale and various stages, but it should work out at around U$25/metre of core. That
means it’s not cheap, but with REG.v budgeting a total cost of U$300/metre for its upcoming
program and basing that estimate on 2011 and 2012 prices in Peru, what with the subsequent
sharp drop in drilling costs in the country (plenty of rigs out there not turning and with owners
semi-desperate for work) the Corescan extra should be easy to cover.
The final presentation of the day and the week was by the Regulus Community Relations team,
which is led up by four qualified and experienced community relations people all from the local
Cajamarca area. They went through their plan and strategy for contact and outreach with the
locals and it was notable to see the amount of thought they’ve already applied to the future of
the company and what they will need to do at specific levels of development of Antakori.
Largely recruited from community teams who worked at the large local mining projects such as
Michiquillay and Yanacocha, they’re young and extremely enthusiastic about the project and
how they can contribute. The presentation was in Spanish, as were the Q&A sessions pre and
post presentation and I’m going to use that as an excuse not to go into deep details (that and
this site visit report is way too long already). However, what struck me was the way they had
obviously gone through the whole Major Mining Company system and had been frustrated by
obvious and avoidable mistakes made by companies such as Rio Tinto, MMG, Yanacocha and
Anglo American at their big mine projects in Cajamarca. Often subject to unanswerable
directives from foreigners in overseas offices who didn’t understand the local dynamics, these
people had moved to REG and were basically being told, “Put together the community relations
program that you always wanted to do”. They get to avoid the major mine clumsiness, they
benefit from the flexibility of being their own section bosses and the junior mining corporate
flexibility and as long as the REG country manager Hubert Gamarra approves of their plans (and
he’s right on hand, speaking the same language and knows the importance of strong
community relations having brought slam-dunk success to Antares at Haquira already) they get
to do it the way it should be done.
As a post-datum to that meeting and presentation, that evening I had dinner with the president
of the local Tingo community (one of the main ones in the Antakori footprint) along with
country manager Gamarra, CEO John Black and two of the heads of the community relations
team. Again I was struck by their knowledge and expertise in relations (as well as the practical
pro-mining stance of the community president who has his eyes wide open about the positives
and negatives that the industry brings with it) and came away from Thursday with absolute
confidence in the REG Comm Rels team. Add the sound work the company has done at Tres
Mosqueteros and any fears about knee-jerk negative reaction to this project from the ooga-
booga-dreaded-Cajamarca locals can and should be removed immediately.
Once the meal with the community president was done it was 9pm. Back to the hotel, shower,
pack and immediate bed because the flight back to Lima was an early one.
Friday
05:15 alarm call, shuttle bus to the airport, 7am flight, and by 09:30 I was in the REG offices in
the centre of Lima. And that was it for the visit, they kindly allowed me to squat in a corner and
use their internet which let me to catch up a little on the market I’d been missing all week
(when you’re away you feel totally out of touch with market rhythm, it takes a while of just
staring at the screen to get it back). Then a nice lunch, back to the airport and the late flight
home. End.
24

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Conclusion and discussion
The most important things are the most basic things:
• Although the definitive agreement with Coimolache isn’t signed and closed yet, it’s only
a matter of time and relations between the partners are optimum.
• Regulus has put together a great team for a great looking project. They’re well
organized and ready to go.
• I was expecting community relations at REG to be better than the typical Cajamarca (or
even Peru) gig, but I didn’t expect them to be this good. The company has done
sterling work on this aspect, starting with President/COO Pickmann and now with the
baton taken up by a highly impressive community relations team.
• We’re ready to start drilling, all items are in place and we’re just waiting on the day the
definitive agreement gets signed. From there, 2017 is set to be an busy time for REG
and newsflow is guaranteed.
• Geologically this is an exciting project, with upside near guaranteed to the area already
under 43-101 compliance (and fear not for the 2012-style price ranges for copper, gold
etc, it’s not going to be a big handicap) and the opportunity to float a pit on the current
resource areas and add tonnes to the mix too. However and be clear, there is
exploration potential in all directions at Antakori.
I went up expecting a well run and prospective looking project because I know what John
Black, Kevin Heather and the rest of the team are like; these are serious people running a
serious junior, they’re not going to mess around with a more-or-less prospect and when people
like this commit fully to a project the way they’ve done, only a fool ignores it. But what I saw
on site was over and above my own expectations. It really is about time I closed this report
down, it’s way too long already so I’ll save my comments on what was learned about REG’s
Argentina end for next week (all good, nothing bad) and wrap up now. Regulus Resources
(REG.v) is the most obvious Top Pick stock you can imagine, I urge you all to get some
in your portfolio and what’s more, don’t sweat the smallstuff and worry whether you’re in at
$1.50, $1.30 or $1.15. This stock’s run has only just begun, expect it higher in 2017 and a lot
higher in years after.
It just remains for me to thank everyone at REG for their hospitality last week, a first class site
visit from beginning to end.
25

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Stocks to Follow
It was nobody’s idea of a good week for our focus section, but with GDXJ down 5.3% I have to
be happy about having two of the three Top Pick choices positive for the week and that among
the whole bunch, the only 10%+ percentage move was the positive one made by Regulus
(REG.v up 13.0%) as its recent seller ran dry and the price rebounded in healthy style. Overall
five of our covered stocks made gains on the week (BTO.to, REG.v, TK.v, ATY.v, LRA.v) and the
other ten showed week over week losses (not listing them all), the worst losers being the 7.5%
drop in Continental Gold (CNL.to) as that one keeps bouncing around, then the 7.1% drop in
Excellon Resources (EXN.to) on a weak 3q16 production report.
With the addition of Avino Silver & Gold (ASM) we now have have 15 open positions on the
‘Stocks to Follow’ list, our self-imposed maximum number at any given time. Ten stocks are in
the green, five are in the red.
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$3.71 75.8% tgt $5.30 IKN375
Regulus Res REG.v hold C$0.64 06-apr-15 C$1.30 103.1% LT exploreco top pick
Starcore Intl SAM.to STR buy C$0.61 10-jan-15 C$0.68 11.5% $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$4.68 23.2% $7 tgt IKN378, still cheap
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.21 7.7% Top value under radar Zn play
Wesdome Gold WDO.to buy C$1.72 22-may-16 C$2.61 51.7% $2.88 tgt IKN381
Cordoba Min. CDB.v buy C$0.73 15-sep-16 C$0.70 -4.1% Big copper, $1.50 tgt
Excellon Res EXN.to buy C$1.84 09-oct-16 C$1.83 -0.1% New long IKN388/9, $3.13 tgt
Atico Mining ATY.v buy C$0.51 24-jul-16 C$0.68 33.3% bot again IKN382, 90c tgt
Rye Patch Gold RPM.v buy C$0.32 02-sep-16 C$0.315 -0.2% 75c tgt, added IKN388
Avino S & G ASM buy U$2.00 21-oct-16 U$1.94 -3.0% New IKN388, small starter
Riverside Res RRI.v buy C$0.39 27-jun-16 C$0.40 2.6% Added IKN380, 60c tgt
Continental Gold CNL.to buy C$2.68 22-may-16 C$3.59 34.0% permit 4q16/1q17, $4.80 tgt
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.35 17.4% solid biz model
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.065 -71.7% 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
26

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Now for some notes on current basket stocks.
Avino Silver & Gold (ASM): Position opened. A quick note to state for the record that this
position is now opened. What with all the travelling and such last week I didn’t complicate my
life, I just stuck in a U$2.00 order for a few shares which promptly filled. So yes I could have
got a little cheaper if I’d been at the desk, but to stress:
• This is a small opening position
• I may or may not add once the 3q16 financials are known
• At present I consider this trade as my second-string silver play behind Excellon (see
below) and ceteris paribus would prefer to add to EXN before ASM.
We can expect ASM to report its quarter in the second week of November. Until then, I’ll just be
watching how this toe-in-the-door trade gets on.
Excellon Silver (EXN.to): Potential buying/addition opportunity this week. We cover
the main points of the 3q16 production NR in ‘Market Watching’ below. Here’s let’s note that
EXN dropped a larger-than-peers
7.1% last week, not helped at all by
the weak looking 3q16 production.
However, last week’s drop has only
brought EXN down close to support
and as posited in Market Watching
below, the 3q16 numbers really aren’t
that important to this company and its
investment potential at this juncture.
EXN announces its 3q16 financials this
Wednesday, November 2nd, before the
open. Any necessary comments from
those numbers will find their way into
IKN391 next Sunday, but again it’s
worth stressing that this soft quarter
was semi-expected and not a reason
to worry if , like me, you own this stock. I’d always had the 3q16 numbers as a potential buy-
on-weakness window of opportunity, let’s see if a bargain price shows up next week because
I’d like to add and average down some.
Cordoba Minerals (CDB.v): Here’s an interesting chart:
CDB has faded to the just-below-70c level three times since July and on the previous occasions
has kicked back higher with new buyers coming in (and for full disclosure, this publication
helped the mid-September kick as that’s when I called buy, though I only got some shares on
27

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the way up and not at the lows). Along with the way copper has popped back up from its lows,
this could make CDB a near-term tradeflip buy for those suitably disposed to that type of thing.
I’ll also remind you that on November 17th CDB is scheduled to give a site visit to its San
Matías/Alacran project for people attending the Colombia Gold Symposium on November 15th
and 16th in Medellín. I’m one of those people and will be on the trip, but I won’t be the only one
and it wouldn’t surprise me in the least to see positive reports and notes on CDB arise from the
visit (I’ve been impressed by the things written by trusted voices about San Matías/Alacran
who’ve been there on previous visits).
B2Gold (BTG) (BTO.to): Here’s a good example of the disadvantages of being on a remote
site visit. B2 again traded well, finished up in a week that saw most of its peers lose ground and
did my personal portfolio a power of good. But as for why I don’t have much idea, there was
little opportunity to follow the market action closely, get the feel or hear the jungledrums, I just
have to take such pleasant moves at face value.
So be it, though we do also know that BTO will report its quarter next week (4) with the 3q16
numbers out pre-bell this Thursday, November 3rd and then the Conference Call at 1pm EDT
the same day (click on this link (5) to listen in via the interwebnetpipes, or check the NR for the
phone numbers). Be sure that I’ll be listening in and as this is a Top Pick at the Weekly and
personally my largest position in any junior (or mid-cap, I suppose it’s better called one of those
these days), expect plenty of numbercrunching on BTO in IKN391 next weekend.
Atico Mining (ATY.v): As you know (or you should by now) I’m not the best interpreter of
charts on the planet, but I can read the
psychology into some of the squiggly
line patterns and this one, the two
month chart of Atico, looks for all the
world like a company consolidating at
its new price level before it gets to
push higher. It’s spent as much time
over 70c as below the line recently,
plus the shift in volume denotes larger
money accumulating. We should expect
a strong financial quarter from ATY I’m
happy about my current 90c target on
the stock, what’s more it could come
sooner rather than later in the newly
optimistic copper atmosphere.
Riverside Resources (RRI.v): On Thursday we finally got confirmation that Antofagasta
(ANTO.L), the JV partner at RRI’s Thor project in Mexico, has started its drill progam on the site
(6). This first stage of drilling is limited (for a copper company like ANTO looking for a major
deposit, at least), with 1,200m of hole spread over three targets. My best guess (and
considering how ANTO approached its JV with Lara exploration on that company’s Sami
property in Peru a couple of years ago), this is a tester program to see whether they think it’s
going to be worth committing the full $5m over four years to earn into 65% of Thor. The way
ANTO has operated before, they may cut the project if they don’t see what they want to see
quickly. Anyway, let’s not jump the gun, drills are turning and that’s a good thing, let’s wait for
results.
Regulus Resources (REG.v): All you can eat on REG in today’s Fundies section, here we note
that the persistent seller of the previous couple of weeks seems to have sold all they wanted to
sell and wasn’t a holder of one of the larger positions, because suddenly the seller went away
and as decent stocks do, REG popped back immediately. I know a couple of readers got shares
around the $1.15 level (because you mailed in and told me). Well done.
28

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Lara Exploration (LRA.v): I crossed paths with Miles Thompson in Lima on Monday evening
and he was all “Hey, why are you thinking about selling LRA?” and I was all “Hey, give me a
decent reason to hold on to LRA” ☺. At least it proves he reads this publication, I suppose. We
didn’t have much time, but on the bright side we also have a meeting slated for the next time
he’s down this way, which knowing him should be soon.
Starcore Intl (SAM.to): On Monday morning we got news from our Top Pick SAM.to on the
first round of drilling results from its Toiyabe project in Nevada USA (7). It was a bit of a
Curate’s Egg, with seven of the 14 holes lost before reaching target due to difficult ground
conditions (or perhaps substandard drilling, we’ll never know) and what remained showed some
reasonable but deep-ish hits of gold mineralization. It was hardly a stellar NR but all the same
the stock managed to move up on that day (though it got moved by the negative tide later in
the week). That positive reaction to what looks
like a “meh” NR didn’t surprise me in the least
and as I wrote to subscriber CM at the time...
The thing with SAM at Toiyabe and its price move
this morning is that
1) they might not have found much
2) the program was difficult (lost holes etc)
3) but they found something
4) and the main point is that up to today the market
has valued the project at zero.
SAM has made no secret of the plan here, show
something and then either get a JV partner in or
sell it. The neighbourhood is a good one, this is
now a prospective project.
..when it comes to Toiyabe, SAM really has very little to lose, this company is being almost
totally valued on its San Martín mine in Mexico, Toiyabe is pure gravy at this point.
Rye Patch Gold (RPM.v): I noticed that Macquarie opened coverage on RPM last week
(which is of course completely and totally unconnected to the way Macquarie provided a debt
facility to RPM and also helped place a large percentage of the recent bigtime share
placement...oh no no no, perish the thought). Anyway, that coincidence aside it’s useful radar
for my newish gold start-up position as Macq starts its coverage with a Spec Buy call and a
$0.65 target (that’s aiming low for me). Here are the first two paragraphs from the note:
We are initiating coverage of Rye Patch Gold (RPM CN) with an Outperform
recommendation and a C$0.65 target. Rye Patch is transforming from an
explorer/royaltyco to a junior 70kozpaAu producer on the back of its July 2016
acquisition of the Florida Canyon mine (“FCM”) heap leach oxide gold asset, Nevada,
USA.
De-risked yet trading at an attractive Explorer Valuation
Rapid path for a significant re-rating & strong gold price leverage. We think the FCM
restart offers investors a key opportunity for high returns given the stock is trading at
~70% discount to junior producer peers. RPM trades at a 0.31x NAV (spot: 0.35x) &
1.7x 2017E CF (spot: 1.9x) despite Au production <3 months away (late 2016) & being
located in the safe jurisdiction of Nevada. RPM has strong leverage to gold prices with
~C$0.10 NAVPS for every $100/ozAu.
If you’d like to read the whole thing, you know my mail address.
The Copper Basket
After forty-three weeks of 2016, The Copper Basket shows a 79.67% gain to level stakes.
29

,
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 Ivanhoe Mines IVN.to 0.61 778.96 1573.50 2.02 231.1%
2 HudBay Min. HBM.to 5.31 235.23 1286.71 5.47 3.0%
3 Reservoir Min. RMC.v 4.08 48.69 449.41 9.23 126.2%
4 Capstone Min. CS.to 0.44 382.04 301.81 0.79 79.5%
5 NGEx Resources NGQ.to 0.65 205.06 248.12 1.21 86.2%
6 Western Copper WRN.to 0.38 94.19 98.90 1.05 176.3%
7 Atico Mining ATY.v 0.28 97.59 66.36 0.68 142.9%
8 Trilogy Metals TMQ.to 0.395 104.33 64.68 0.62 57.0%
9 Cordoba Min. CDB.v 0.16 86.86 60.80 0.70 337.5%
10 Copper Mtn CUM.to 0.445 118.8 51.68 0.435 -2.2%
11 Copper Fox CUU.v 0.125 417.64 48.03 0.115 -8.0%
12 Nevada Copper NCU.to 0.66 80.5 46.69 0.58 -12.1%
13 Amerigo Res ARG.to 0.205 173.61 29.51 0.17 -17.1%
14 Hot Chili Ltd HCH.ax 0.09 445.723 12.48 0.028 -68.9%
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 79.67%
Last week our overall basket average dumped
The Copper Basket 2016, weekly evolution
by 7.22% even as copper the metal rose. There 100%
were five basket stocks that went up (HBM.to,
80%
CS.to, WRN.to, ARG.to, ATY.v) and notably four
60%
of those five are producers. Three others
remained unchanged (RMC.v for obvious 40%
reasons, CUU.v, RVL.v) which means there 20%
were seven losers in total (IVN.to, NGQ.to,
0%
CUM.to, NCU.to, TMQ.to, HCH.ax, CDB.v) and
-20%
inside that list there were three larger losers in
the shape of Hot Chile (HCH.ax down 30.0%),
Trilogy (TMQ.to down 16.2%) and Ivanhoe
(IVN.to down 13.3%).
And while the junior explorecos were sagging under
the weight of negative market sentiment for heavy
things, the price of copper put in a decent rally to
get back to near the top of its recent trading range
on China Love! (the opposite of China Fear!)
sentiment. Here’s one paragraph of Reuters with all
you need to know (8):
Copper prices rose to their highest in more than
a week on Tuesday as the dollar slipped and talk
of further fiscal stimulus by top consumer China
fuelled buying of commodities.
Fair enough. And as for the fundamentals behind
this sentiment change?
"There's some talk of fiscal stimulus in China,
but there's nothing concrete, it's more anecdotal.
There is scope for stimulus given the neutral
numbers last week," said Julius Baer analyst Carsten Menke.
"There has been a jump in commodity prices. This usually happens when there is a
pick up in speculative interest."
Yup, anecdotal. The bears get their week, then the bulls, then the bears, then the bulls, then
30
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

,
(etc). And as for that second paragraph, it just makes me laugh to think that person gets a six
(or seven) figure salary for saying things like that. Perfoming monkeys of the world, unite.
Ir’s the end of another month (bar one trading day) so here are our main overview inventory
charts with their respective updates:
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
31
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua pes tco von ced 61.naj bef ram rpa yam nuj luj gua pes tco
LME Shanghai Comex source: Cochilco
Copper inventories, per month, 2012 to date
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua pes tco von ced 61.naj bef ram rpa yam nuj luj gua pes tco
Mt Cu source: Cochilco
LME Shanghai Comex
The gap has dropped slightly, Shanghai has managed to level out at what looks like its bottom,
and Comex continues on its stealth growth rate. This time next month I’d expect SHFE to be
moving back up. In not so many words, nothing deep to read into this month’s set of figures so
we’ll move on.
Now for the regular weekly copper warehouse inventory bullets:
• Overall world copper inventory levels in the world’s three official systems dropped a
substantial 35,220 metric tonnes (mt) (-6.6%) to finish at 494,695mt.
• In Shanghai, the SHFE stocks dropped by 15,086mt (-12.8%) to finish the week at
102,548mt. That’s a big move and its bullish, SHFE is back challenging the key 100k
level and buyers have moved stock out.
• LME accounted for the other part of the big downmove, with stocks dropping by
20,375mt (-5.9%) finish the week at 326,400mt. There’s clearly no stocks shifted from
one system to another this time for arb purposes, both the main players drop at the
same time and that means demand. Between the LME and the SHFE last week, there’s
ample justification for copper’s price move.
• Comex stocks moved up just a bit, by 241mt to finish Friday at 65,747mt. Same as it
ever was.
Now the Shanghai-only chart, which shows how after trying to hold the line the call of the 100k
level was just too great. We’re unlikely to reach to lows seen in 2014, but I’d be very surprised

,
if we didn’t see the downside of 90k now.
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
400000
350000
300000
250000
200000
150000
100000
50000
32
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:
Ivanhoe Mines (IVN.to): This year’s Friedland high flyer put out two NRs on Tuesday (9)
(10) to state that it had received the
latest $41.2m scheduled stage payment
form Zijin and that it was now open for
business on the US OTC market, but
neither of those stopped the stock from
plummeting (all while copper rallied) to
under $2 before staging a minor
recovery to end the week at $2.02,
down 13.3%. Again one of these
occasions when I miss the reaction of
the market and its vibes due to being
on the road, but the best guess as I
write things up this weekend is that the
stock price was simply ready for a
correction after its stellar recent run
and somebody somewhere took large-scale profits in a chunky position. Can’t blame them for
that, neither is there any judgment being passed on whether the IVN run is over.
Capstone Mining (CS.to): This is one of the few 3q16 financials NRs I got to read when it
came out last week (on the phone over breakfast) and it was surprisingly good, which means
for my money at least CS.to
deserved its rally last week. Capstone Mining: Cash Cost per Lb copper, per qtr
U$/Lb C1 cash cost
I still haven’t taken a proper 3.40 AISC
3.20 All-In Cost
look at the real financial and Fully-loaded all-in cost
3.00
MD&A docs (I’ll get round to 2.80
that this week) but the 2.60
2.40
standout of the NR (11) and
2.20
the scan of the MD&A was the
2.00
cash costs figures, here’s the 1.80
updated chart on that one for 1.60
1.40
its sales (rather than
1.20
production) figures: 1.00
1q14 2q14 3q14 4q14 1q15 2q15 3q15 4q15 1q16 2q16 3q16
What seems to have
source: CS.to filings
happened in Q3 is that CS.to
has cut development costs to the core and doesn’t need to cover interest charges this time
around, that’s what has brought the fully loaded cash cost down to the AISC level. On the other

,
hand cutting costs is what you’re supposed to do in this low copper price environment and
that’s what allows CS.to to post its $11.2m net profit.
A few weeks ago when singling out CS.to as a potential near-term leverage play on copper (at
69c), I thought it could go to 85c if the copper price reached the top of its current channel
(which would be around U$2.23/lb I suppose, give or take). Even that looks lowball after this
quarter, we could see 90c or even a Loonie if copper prices oblige.
Hot Chili (HCH.ax): Down a heavy 30% on the week, HCH saw a determined seller and
nobody on the bid to mop up the shares. Come Thursday and Friday the price deterioration
accelerated into lower shares traded, which suggests we’re at an oversold level this weekend
and HCH could bounce, pricewise at least.
I’m glad I’ve had this one on “avoid like the plague” for quite a while, its main Productora
project gets the full pumpo but a cursory glance of its economics shows it to be marginal at
best and completely unworkable with the copper price where it is today. So yes, I suppose
there is a potential bounce fliptrade possible here but it’s risky as hell and I wouldn’t get
involved with my worst enemy’s cash.
The Low Cost Producer Basket
After 43 weeks of 2016, the Producer Basket shows a gain of 90.15% to level stakes.
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Barrick ABX 7.38 1165.33 19.90 17.08 131.4%
2 Newmont NEM 17.98 530.595 18.77 35.38 96.8%
3 Goldcorp GG 11.56 832.381 12.34 14.82 28.2%
4 Franco Nevada FNV 45.75 178.01 11.43 64.20 40.3%
5 Agnico Eagle AEM 26.28 223.475 11.04 49.40 88.0%
6 Ang/Ashanti AU 7.10 405.27 5.48 13.52 90.4%
7 Buenaventura BVN 4.28 254.19 3.28 12.91 201.6%
8 Detour Gold DGC.to 14.41 174.06 4.30 24.70 71.4%
9 Sibanye Gold SBGL 6.09 228.71 2.51 10.99 80.5%
10 New Gold NGD 2.32 512.8 2.06 4.01 72.8%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 90.15%
Gold managed to eke out a slight gain on the week but the bigcaps couldn’t follow suit. Just
two stocks registered week-over-week improvement (ABX, AEM) and the other eight lost
ground, with the biggest loser by far the 11.1% dump in Sibanye (SBGL), its early year rally
now seemingly a memory. The 5.2% lost by Buenaventura (BVN) was a surprise.
Overall (I’d venture to say because of Sibanye) the IKN basket lost just a little ground on our
GDX benchmarker. It’d take a major shock to lose all of that lead this late in the year, though.
The Low Cost Producer Basket: Weekly performance
200% and comparative to GDX control
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
-20%
33
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
gdx control -5%
-10%
-15%
-20%
-25%
-30%
source: Google, IKN calcs -35%
-40%
ht01 ht42 ht7bef ts12 ht6 ht02 dr3rpa ht71 s1yam ht51 ht92 ht21 ht62 ht01 ht42 ht7gua ts12 t4peS ht81 dn2tco ht61 ht03
source: ikn calcs, NYSE/Nasdaq data

,
Just for something different, and to take advantage of what was in fact a market disdvantage,
here’s a list of my initial reactions on scanning the NRs for the majors’ 3q16 results that I
caught last week. Being on the road allowed me to read the NRs when they hit but I couldn’t
get to SEDAR, see the real reports, crunch any numbers etc. Therefore what’s below are my
seat-of-pants reactions at the time of each (stylized and with the swear words taken out ☺):
• Goldcorp (GG): Poor quarter (again), but aren’t we getting used to that by now? It’s
one of those things where I read the Utopia that new CEO Garofalo believes in via that
excellent GMO interview (12), then see the cold, hard results of his third (not first)
quarter in charge and wonder whether the guy is full of it.
• Barrick (ABX): My initial reaction on the 15c EPS was “mediocre quarter” but the anal
ysts covering the stock seemed to like it and the market rewarded the numbers, which
slightly surprised me. I suppose it was for its improving balance sheet position, though
I’d need to look harder.
• Newmont (NEM): In line. I didn’t catch all that about the “gold linked dividend”
supposed to start next year, but it sounds particularly faddy to me.
• Agnico Eagle (AEM): Boyd can do no wrong, another strong quarter and the best of
the bunch in our list. Up week-over-week and deservedly so.
• Yamana Gold (AUY) (YRI.to): Not a member of our basket this year but it deserves
a special mention. How on earth can an established mining company report a net loss
while selling its gold at an average of U$1,327/oz? It beggars belief how bad this
company is, and that doesn’t even include the permitting problems it has. Yamana is
now competing with IAMGOLD (IAG) (IMG.to) for the title of World’s Worst Run Gold
Miner.
Those are the ones I caught and cared about last week, but I wasn’t paying full attention.
Regional politics
Peru: The Mining & Investment Latin America Summit 2016
This was the conference at which I spent a couple of hours hanging out in the lobby and
chatting to a few mining faces. As for the keynote speech, here’s what Peru’s Ministry of Energy
and Mining website’s report (13) had to say on the event (translated by my hand) and aside
from the way he says four measures then only lists three, please note once again how Ollachea
gets main billing.
The Minister of Energy and Mining, Gozalo Tamayo Flores, announced the
implementation of an integrated program to reactivate mining projects in the country,
using faculties delegated to his ministry by Congress.
“This program is based on four measures; social advanced payment to communities,
the reduction of permitting paperwork and the creation of a program of productive
conversion for companies affected by mining projects”, said Tamayo Flores during the
“Mining & Investment Latin America Summit” that brought together the mining ministers
of Chile, Argentina, Ecuador, Brazil and Peru.
Those present at the event in Lima included Aurora Williams, Minister of Mining of
Chile, Daniel Meilán, secretary of Mining of Argentina, Javier Córdova, Minister of
Mining of Ecuador and Vicente Lobo, secretary of Mining of Brazil. The public servants
of the five countries exchanged experiences in the sector and proposals for
development in the upcoming years.
“It has been a productive meeting. We have covered issues of the utmost importance
for mining in Latin America, where Peru has consolidated itself as the principal
destination for investments”, said Tamayo Flores.
34

,
Finally, the sector head said that mining projects that had been suspended due to the
international ecomomic climate are slowly reactivating in the country. “We have, for
example, the renewal of drilling activity at the Ollachea project (Puno), the construction
of the Marcona (Ica) extension, as well as the Toquepala (Moquegua) growth project
and the new Tambomayo project”, he said.
All very nice and pretty, I’m sure. Now compare the words of cocktailed-up suits in a five star
hotel in Lima to the next story below.
Peru Las Bambas: Indefinite strike/blockade by locals now in the cards
News this weekend (14) is that locals in the Chumbivilcas province of Cusco have announced an
indefinite strike against the Las Bambas mine, said protest (which will almost certainly include
road blockades) set to start on November 7th. This represents a widening and acceleration of
the protests around Las Bambas because up to now it’s been restricted to some specific
municipalities and communities (e.g. Las Bambas trucks have been using alternative routes to
move concentrate, avoiding the protest points). With the whole Chumbivilcas province now set
to join in, that would become impossible.
However it’s not set in stone yet, as the locals have called a meeting with national and mine
authorities in order to thrash out a possible solution on November 3rd and if they can agree to
some sort of framework the strike won’t happen. Here’s a segment from the cited report that
explains the demands of locals:
Guider Puma, from the Defence Front of the Interests of the District of Velille, one of
the eight districts that make up Chumbivilcas, told this newspaper that the locality had
nearly the same demands as the communities adjacent to Las Bambas.
“The dust from the Las Bambas trucks is affecting agriculture in the zone. We want the
State to commit to laying quality asphalt on the near 200km of roads that cover
Chumbivilcas”, he said.
Personally I think that’s reasonable, but knowing the mediocrity in charge at Las Bambas that’s
managed to ignore locals to date you never know if they’ll agree.
Nicaragua: Artisanal miners around Libertad get their own processing facility
Here’s an interesting and positive development for the Nicaragua gold mining sector, as well as
for neighbour B2Gold in both the present and perhaps the future something that will aid its off-
record (but well-sourced) plans to sell its own Libertad asset nearby. This Thursday coming the
government of Nicaragua officially opens a new processing facility in the Libertad/Chontales
area that will service the production of around 1,500 artisanal/informal miners who work the
thin, high grade veins in the area. The ‘Plantel Los Angeles’ processing facility is lauded by the
president of the Nicaragua Chamber of Mining (CAMINIC) Sergio Ríos (15) as a significant step
forward for small scale local producers and will also help the local environment, as it will stop
the need for small miners to use mercury during their very basic refining processes. He also
noted that it was a significant step in the government policy of “Mining For All”, which has the
objective of turning artisanal/informal type mining into a sustainable industry. The plant is set
up to process the approximate 55,000 tonnes of ore mined by locals per year and should
generate around U$600,000 in revenues per month.
Overall a positive initiative for all concerned, as accepting and cleaning up this type of small-
scale (and often highly polluting) mining activity seems to me to be a smarter thing to do than
just ignoring it or trying to close it down by legal force. Neighbours B2Gold should also benefit
from a better and more stable local atmosphere as it goes about its daily work (we remind
readers that an ongoing issue is its failure to reach a deal with locals for access to part of its
high-grading Jabali satellite asset).
Dominican Republic: GoldQuest meets with the Central Bank
The governor of the Central Bank of the Dominican Republic (BCRD), one Héctor Valdez, met in
35

,
his offices last week with representatives of GoldQuest (GQC.v), including local head man at
GWC Julio Espaillat, so that they could explain more about the company’s main Romero mining
project. Interestingly, journalists from Dom Rep’s main newspapers were invited along to take
photos and get quotes (16) which turned it all into a government-sponsored PR exercise for
mining and for what it believes to be the most likely project to become the country’s next gold
mine. Plenty of column inches about how Romero was planned to be an underground mine and
therefore with a low environmental impact footprint (Espaillat “guaranteed that the project will
do no harm to the environment”, so let’s wish him good luck with that), how it would bring
wealth and jobs to the country etc etc. Figures included in the report I chose as representative
on that link include capex of U$150m, taxes to the government of U$25m per year over mine
life, gross revenues of between U$100m and U$120m per year, 300 to 400 direct jobs created
and another 900 indirect jobs.
Peru Shahuindo: The strike and blockade threat returns
It’s not only Las Bambas. A few editions ago we reported on the threat of the local population
around the Shahuindo gold mine owned by Tahoe Resources (TAHO) (THO.to) to go on strike if
the deal previously reached with the company for direct employment at the mine was not
adhered to (in areas such as construction, machine operators, transportation and security
services), then a week later we noted that the situation had been somewhat diffused by the
company sitting down to negotiate with locals.
It would seem that the company didn’t talk enough, as last week the protests and threats of a
strike and road blockade flared up again (17), with locals particularly angry that 1) nothing has
changed and 2) the representative of Peu’s Ministry of Energy and Mines who was sent on a
fact-finding mission (as part of the negotiations to calm nerves) only went to the town of
Cajabamba and not to the ara of direct influence, which is at least 20km away and on the other
side of the river valley. Said the leaders of the local population (translated), “The company is
not in compliance (with the previously agreed deal). It is bringing personnel in from other
regions and doesn’t provide anything for the development of Cajabamba”.
The next step is for representatives of the 14 communities in the area of direct influence
around Shanhuindo to meet and decide on their course of action. That’s expected to happen
soon.
Market Watching
Rio2Mining is launched
The NR dated Thursday (18) and featured on the blog that day announced the launch of the
new Alex Black company, currently named Prospector Resources but soon to be re-named
Rio2Mining, following on from the successful Rio Alto brand. The plan is a classic one, they’re
buying into a shell (PRR.v-H, currently on the NEX list), adding cash by a round one cash
injection and taking it out of the deep freeze and into the TSXV.
I met Alex Black for lunch in Lima on Friday (just off the plane from Cajamarca) and we had a
good long chat about things, as well as his plans for the new vehicle. What we can expect in
the next few weeks is that once the qualifying transaction is complete Rio2 will get rolled out,
more names will be added to the company management and directors roster. From there he
has an active junior into which they plan to add assets and projects if and when any one of a
few specific deals are closed.
It should go without saying on these pages that the eventual Rio2 company is likely to be one
we follow pretty closely. I don’t own any shares in PRR or Rio2 yet, but I know how successful
Rio Alto was (as many of you out there do, it’s safe to say that collectively we did very well by
owning shares in that one) and Alex Black is one of the few true class acts of the junior mining
world, the type of person who should be sponsored by smarter money. Expect more on this
new company as and when the news is rolled out, but be clear right now that it should be front
and centre of your radar screen for what’s left of 2016 as well as 2017 and beyond.
36

,
Excellon Resources 3q16 production
Thursday morning October 27th saw our relatively new long Excellon Resources (EXN.to)
announce (19) its 3q16 production numbers. As EXN is going to report its financial quarter next
week I’m going to keep this to a minimum today, but a few words are required as it wasn’t a
great looking quarter from the company.
To the production numbers and what follows are the charts first used in the NOBS report on
EXN found in IKN387 dated October 9th, but with two distinct differences:
1) The 3q16 numbers are up to date reality, not my guesses
2) I’ve stripped out my forecast numbers for the quarters to come, which leaves us
focussed on the comparative performance of 3q16 to previous quarters, rather than
what we think comes up ahead. If you want to revisit the forecasts go to IKN387, I
stand by the guesses and expect EXN’s production schedule to ramp up significantly
over the next few quarters, but that’s another story.
To get overall metal production you need to consider the sacred triumvirate of throughput X
grade X recovery. Here’s the first one of those, the average daily throughput and as you can
see, 3q16 was lower than the norm. Tonnes produced came in at 11,207mt, tonnes processed
at 12,003mt (hence the 132tpd average you see in the chart) and EXN reported that difficult
mining conditions, due to the exact water problem they’re about to dispense with, was the root
cause.
EXN: Tonnes per day thruput average, per qtr
250 230
225 210 215
200
175 155 154 161 167 162 159
150 127 141 132
125
100
75
50
25
0
37
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
tpd
source: company filings
Next head grades of mineral and here to the left is the main silver component in grams per
tonne, to the right is the combo of lead and zinc grades in percentages
EXN: Average Ag head grade (g/t), per qtr
684
700 614 594 632
600 550 533 547 536
475 483
500 406 427
400
300
200
100
0
In short, grades were down. EXN is currently accessing a slightly lower grading part of the mine
until the better grading stuff can be accessed once the water pumping has ramped up and the
areas are dry enough to mine. EXN also reported it blended in lower grading stockpile material
into the mill mix, which dragged averages lower but on the bright side means that its average
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
EXN: Zn and Pb avg head grades (%), per qtr
11
10 9
8
7
6
5
4
3
2
1
0
source: company filings
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
%
Pb %
Zn %
source: company filings

,
mining cost per tonne produced is going to be
lower.
As for recoveries, this was the best news of the
three because recoveries were very much in line
with the normal. 90.4% for silver was good, lead
and zinc were pretty much in-line too. The least
problematic of the trio.
With the three components in place, here’s how
the overall production table looks:
EXN: Silver and Silver Equivalent production per quarter
38
177832
929951
610191
662951
117771
752701
599151 247041
779101
500000
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
Ozt Ag/AgEq
Other AqEq source: EXN filings
Ag Ozt
Pure silver production came to 153,782 oz in the quarter, much lower than in the last two
quarters. Non-silver equivalent production came to 101,977 oz AgEq (made up of 891,424lb Pb
and 1,169,029 lb Zn) which didn’t make up for the lost pure silver very much.
In other words a weak quarter from EXN. As for what it means to the financials, we’re going to
find out the real numbers next week so I’m going to hold fire on those, but right now I’m
expecting revenues at just over $4m and operating earnings that are for all intents and
purposes breakeven. That indicates a pre-tax loss of around $1.5m, but we’ll see about that
(I’m still early to this EXN story and the feel for its estimates isn’t with me yet, I’m on the
learning curve about the stock as as such prone to misjudgments).
EXN.to: Revenues and operating earnings, per qtr
12
10
8
6
4
2
0
-2
-4
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 tse61q3
EXN: Average metals recoveries/qtr
100
95
90
85
80
75
70
U$m
revenues
Op earnings
source: company filings
But what that quarterly result doesn’t do is change my mind about the quality of EXN as a trade
right now, so if a weak quarter causes selling I’m going to be there trying to add at discounted
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
%
Ag % Pb % Zn %
source: EXN data

,
prices and averaging down. What’s more important about EXN today is its capex program and it
was notable how much time the company gave to that in last week’s NR. I invite you to read
their words, but suffice to say they’re outlook and even the timeline matches our house
estimates reasonably closely, with production improvements expected to begin in 4q16 and
increment as we go through 2017. Another thing that’s more important about EXN today than a
quarterly profit is its cash position, which is at an IKN estimated $12m nd more than enough to
cover the expansion plans and costs while remaining with strong liquidity, one weak quarter
isn’t going to affect that meaningfully.
Bottom line: EXN came up short in 3q16 for understandable reasons, but nothing in last week’s
NR or anything expected in next week’s financials is going to affect the real reason why we’re
long this stock, the near-term production ramp-up and its expected move into strong
profitability next year. If EXN sells off on Wednesday due to negative vibes from its financials,
consider it a buying opportunity.
Minera IRL gets Graña and Montero
The reports in Peru’s major newspapers Gestion and El Comercio last week (20) on Minera IRL
might not have caused much interest up North, but they grabbed the Peruvian mining world’s
attention in no uncertain terms. That’s because IRL revealed (at last) that Peru’s main and most
respected civil works company Graña y Montero (GyM) was set to be the contract constructor of
the Ollachea project as soon as the green lights are given by government and financial backers.
This is no small story in Peru because getting the backing of GyM is a Big Thing, it has given
the project a new air of credence among the country’s mining community and it’s now being
considered “a serious project” once again, about time too after the year and a half wasted by
that idiot Hodges and his ridiculous entourage of white collar criminals who tried to strip the
company into a thousand pieces. Make no mistake, Ollacha and IRL is now being taken very
seriously in Peru once again.
Conclusion
IKN390 is done, we end with bullet points:
• Regulus Resources (REG.v) is a Top Pick. Own some, as although the risk of investing
in exploration-stage juniors is always there, when it comes to upside the sky’s the limit
on this one. A company doing everything the right way.
• My head is exploded from writing up that REG piece today, no more wrap-ups.
• Buy. Hold. Win. On REG.
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
39

,
Footnotes, appendices, references, disclaimer
(1) http://incakolanews.blogspot.pe/2016/08/this-blog-is-us-election-free-zone.html
(2) http://www.calculatedriskblog.com/
(3) http://www.corescan.com.au/
(4) http://www.marketwired.com/press-release/b2gold-corp-third-quarter-and-year-to-date-2016-results-conference-call-
tsx-bto-2170768.htm
(5) http://www.investorcalendar.com/IC/CEPage.asp?ID=175345
(6) http://finance.yahoo.com/news/drilling-commences-riversides-thor-copper-181841982.html
(7) http://finance.yahoo.com/news/exploration-drilling-intersects-40-meters-070500039.html
(8) http://af.reuters.com/article/metalsNews/idAFL4N1CV2ZR?sp=true
(9) https://www.ivanhoemines.com/news/news-releases/ivanhoe-mines-receives-third-of-five-scheduled-uscad41-2-
million-installment-payments-from-zijin-mining-group-as-part-of-zijin-s-uscad412-million-investment-in-the-kamoa-
kakula-copper-project-in-d-r-congo-1
(10) https://www.ivanhoemines.com/news/news-releases/ivanhoe-mines-common-shares-to-begin-trading-on-otcqx-
best-market-in-the-united-states-on-october-26
(11) http://finance.yahoo.com/news/capstone-mining-reports-third-quarter-210500778.html
(12) http://incakolanews.blogspot.pe/2016/10/global-mining-observer-interviews-david.html
(13) http://www.minem.gob.pe/_detallenoticia.php?idSector=1&idTitular=7634
(14) http://elcomercio.pe/sociedad/cusco/bambas-anuncian-paro-indefinido-chumbivilcas-noticia-1942889
(15) http://www.elnuevodiario.com.ni/economia/408697-1-500-mineros-artesanales-tendran-nueva-planta/
(16) http://www.listindiario.com/economia/2016/10/28/440881/gobernador-bc-recibe-ejecutivos-de-goldquest
(17) http://larepublica.pe/impresa/politica/816397-comuneros-amenazan-con-huelga-si-shahuindo-no-cumple-con-
darles-trabajo
(18) http://www.marketwatch.com/story/prospector-announces-conditional-acceptance-of-graduation-from-nex-to-tsx-
venture-exchange-tier-2-proposed-private-placement-and-new-management-team-2016-10-27-161604438
(19) https://www.juniorminingnetwork.com/junior-miner-news/press-releases/506-tsx/exn/26025-excellon-resources-
reports-q3-2016-production-and-exploration-results.html
(20) http://elcomercio.pe/economia/dia-1/minera-irl-y-grana-y-montero-se-unirian-proyecto-ollachea-noticia-
1941781?flsm=1
40

,
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
41

,
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
42

,
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.
43