IKN #394Premium

,
The IKN Weekly
Week 394, December 4th 2016
Contents
This Week: (Non) trade heads up, In today’s issue, The low ebb, GLD inventory thoughts, Tax
loss selling.
Fundamental Analysis: NOBS report on Red Eagle Mining (R.to).
Stocks to Follow: Overview, Avino Silver & Gold (ASM) (ASM.v), Wesdome Gold (WDO.to),
Atico Mining (ATY.v), Tinka Resources (TK.v), Starcore Intl (SAM.to), Lara Exploration (LRA.v),
Continental Gold (CNL.to), Rye Patch Gold (RPM.v), Sandstorm Gold (SAND) (SSL.to), B2Gold
(BTO.to) (BTG), Cordoba Minerals (CDB.v), Focus Ventures (FCV.v).
Copper Basket: Overview, Ivanhoe Mines (IVN.to), Copper Mountain (CUM.to).
Low Cost Producer Basket: Overview.
Regional Politics: Argentina: Provincial agreement update, Pacific Alliance on mining,
Guatemala: Another district votes against mining, Peru to make mining exploration easier.
Market Watching: Angel Gold (ANG.v) Redux, Minera IRL: The vote goes the right way,
Episode eight of “What I’d buy now”.
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
(Non)trade heads up
A slight variant on the occasional top-of-shop paragraph. I’ve been asked by several of you
whether I’m a seller of Continental Gold (CNL.to), as the plan was always to ride it to the EIA
permit approval and then sell. But although we did indeed see the permit awarded to CNL last
week, I’m going to hold fire on the sale a while longer. See ‘Stocks to Follow’ for the two main
reasons. I’m also a buyer of Red Eagle (R.to) at the right price. See Fundies for that, of course.
In today’s issue
• The main event is a numbercrunch on Red Eagle (R.to). It’s a better company than
many of you think (because I used to think that way, too).
• Copper stocks take a breather, precious metals stocks rebound. Yin/Yang.
• The Continental Gold trade is working out. No need to sell immediately though.
• The latest events at Ivanhoe Mines (IVN.to) remind me to stick to LatAm as much as
possible. Having at least some idea about political risk is one less thing to worry about.
The low ebb
I got a stern talking to by a handful of you for all my hand-wringing of last weekend and to
name just one, reader GP reminded me that almost a year ago I promised not to suggest
unsubbing as an option to this readership ever again. That’s true, it slipped my mind last
weekend, you’re right GP. But it was also a case of calling things the way I was seeing them
and last weekend it was all a bit too depressing. However there may be a reason for that
because between then and now we’ve seen precious metals mining stocks rally despite a
further small drop in the price of gold. To wheel out the benchmarks the precious metals ETF,
GDX, was up 3.7% week-over week. The juniors ETF, GDXJ, was up 4.9% in the same period
1

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and provided us with decent a marker for the IKN Weekly picks. All that while the main gold
bullion ETF, GLD, went down 0.4% week-over-week. So with the benefit of a little bit of
hindsight maybe my bummed out attitude was due to the miners being heavily oversold at that
point, the reasonable relief rally since then giving us the re-adjust.
GLD inventory thoughts
To every thing there is a season, and a time to every purpose under the heaven:
A time to be born, and a time to die; a time to plant, and a time to pluck up that which is planted;
A time to kill, and a time to heal; a time to break down, and a time to build up;
A time to weep, and a time to laugh; a time to mourn, and a time to dance;
A time to cast away stones, and a time to gather stones together; a time to embrace, and a time to refrain from
embracing;
A time to get, and a time to lose; a time to keep, and a time to cast away;
A time to rend, and a time to sew; a time to keep silence, and a time to speak;
A time to love, and a time to hate; a time of war, and a time of peace.
Ecclesiastes 3, 1-8, King James Bible version
After all the travelling and suchlike, on catching up with one of the datasets we follow closely
there’s a real sea-change in what it’s doing. Here’s the chart tracking the bullion inventories at
the world’s biggest gold ETF, GLD, with
data from here (1) and as is plain, the
drop in bullion holdings since Donald
Trump won the US Presidential election
has been sharp.
Now that’s interesting (or at least I
think so), we’re down at 870 metric
tonnes physical inventory, the lowest
since May and over 110 tonnes lower
than the post-Brexit peak. As 110mt
gold is worth around four point two
billion dollars of metal at current prices,
I’d safely say that’s a very lot of money
even in the rarefied world of world
forex movements. And then it occurred
to me that the price of GLD dropped by 0.4% last week but the inventory held by GLD dropped
by 1.7% net, which got me thinking about my own entrenched view and how I favoured this
pet measure of mine and maybe, just maybe, it’s not the cats’s whiskers I thought it was. From
there it took about five minutes to put this chart together:
GLD: Inventory/Price Ratio, Brexit to date
8.2
8.0
7.8
7.6
7.4
7.2
7.0
2
61/22/6 61/82/6 61/5/7 61/11/7 61/51/7 61/12/7 61/72/7 61/2/8 61/8/8 61/21/8 61/81/8 61/42/8 61/03/8 61/6/9 61/21/9 61/61/9 61/22/9 61/82/9 61/4/01 61/01/01 61.01.41 61/02/01 61/62/01 61/1/11 61/7/11 61/11/11 61/71/11 61/32/11 61/03/11
GLD gold holdings, Brexit to date (metric tonnes)
1000
980
960
940
920
900
880
860
840
820
800
Source: SPDR data
What you see here is the tonnage of gold inventory at GLD divided by the GLD price and if you
think about it you’ll get that the higher the ratio goes the less effect changes in bullion holding
at GLD has on the overall market price of gold. And as you can see, the ratio took a hike in
early October and has stayed up there (it dropped in the middle but was re-booted by the
61/22/6 61/82/6 61/5/7 61/11/7 61/51/7 61/12/7 61/72/7 61/2/8 61/8/8 61/21/8 61/81/8 61/42/8 61/03/8 61/6/9 61/21/9 61/61/9 61/22/9 61/82/9 61/4/01 61/01/01 61.01.41 61/02/01 61/62/01 61/1/11 61/7/11 61/11/11 61/71/11 61/32/11 61/03/11
mt
source: SPDR GLD data

,
Trump election win). In other words the direct influence of GLD, the preferred method of
casino-playing the metal in The USA by the large instos, has been dropping recently. But that’s
not all, because if we pull out the timeline and take in the whole of 2016 to date the pattern is
confirmed:
GLD: Inventory/Price Ratio, 2016 to date
8.4
8.2
8.0
7.8
7.6
7.4
7.2
7.0
6.8
6.6
6.4
6.2
6.0
5.8
3
61/4/1 61/41/1 61/72/1 61/8/2 61/91/2 61/2/3 61/41/3 61/42/3 61/6/4 61/81/4 61/82/4 61/01/5 61/02/5 61/2/6 61.6.41 61/42/6 61/7/7 61/91/7 61/92/7 61/01/8 61/22/8 61/1/9 61/41/9 61/62/9 61/6/01 61/81/01 61/82/01 61/9/11 61/12/11 61/2/21
Source: SPDR data
Indeed, back in February and March when I formed my entrenched view on the influence of
GLD inventory on the world gold price, the ratio was much lower and its effect more direct. But
it’s been decadence all year and although I can’t know it, I’d guess that’s because The USA isn’t
as big an influence on the price of gold these days than other world locations, such as China or
India. Or even Europe.
Does all this mean I have a positive message for you about the price of gold in the near future?
No, sorry, doensn’t work like that. It does however lend to the bullish case for gold in the
medium-term (my preferred timescale, 12 months and all that) and it may also mean that when
the appetite for gold returns to the US markets, we’re in for upside leverage. And that’s “when”,
not “if”, there’s a time for everything.
Tax loss selling
Although unlikely to be as severe as anything we saw in the years 2013 to 2015 we’re now
close to the peak of tax-loss selling season in Canada, something you may want to keep in mind
at the moment of trade decisions. Traditionally, the strongest effect of tax-loss selling is felt
around the end of December week two and and the start of December week three (though of
course that’s an average, it can affect individual stocks in different ways and at different times).
Fundamental Analysis of Mining Stocks
Today we look at Red Eagle Mining (R.to).
NOBS report dated December 4th, 2016
Red Eagle Mining Corp (R.to)

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Company Overview
Red Eagle Mining Corporation (Canada: R.to, USA OTC:RDEMF, Frankfurt R6E.f) is a junior
mining company operating in Colombia. Its flagship is the San Ramón gold mine operation that
has just entered into initial production. Current share structure is as follows:
Shares out: 240.92m
Options: 15.905m
Warrants: 5.0m
Fully diluted shares: 261.825m
Current share price: C$0.80
Market Cap: C$192.74m
Approx cash treasury per S/O: 3c
All prices are in United States Dollars unless stated. Forex U$0.80=CAD$1
Overview
Last week in IKN393 we covered a lot of Red Eagle Mining (R.to) via the site visit report, so this
NOBS report doesn’t have to cover so much of the background and narrative stuff that normally
comes included. We know where the San Ramón mine is, what it looks like, who runs it, who
built it, how it’s organized and all that jazz. This is good because it lets me zero in on what really
matters in this fundies analysis, the numbers behind the company and whether R.to is a decent
investment proposition.
Still, there are plenty of nooks and crannies we need to cover including most recent newsflow
so without further ado I’m just going to dive in, present the various moving parts as they occur
and try to keep it all as logical as possible. Not easy for a scatterbrain like me.
Management and main shareholders
Last week I heavily kissed the butt of COO Bob Bell and the impressive way he’s running the
San Ramón operation, so enough about him because when it comes to the corporate side and
numbers CEO and Chairman Ian Slater is the man. His background is as a financier and
accountant with a focus on the mining sector and though he comes off as relaxed and genial
when you meet and chat with him, he’s razor sharp with numbers and will be able to spot any of
my bad estimates or poor assumptions from a mile away. Even if he weren’t the head of R.to
he’d know 10X as much about the contents of this analysis than I do, but add in his current job
and I’m in real trouble here, folks. Also, among the board of directors he’s the largest
shareholder of R.to with 3.1m shares, so there’s skin in this game.
As for main shareholders here’s a list of bang up to date numbers, all thanks to R.to VP
Corporate Development Patrick Balit:
• Liberty Metals owns 43.123m shares, that’s 18% of total shares out.
• Stracon GyM owns 33.539m shares, that’s 13.9% of total shares out.
• Orion Fund owns 25.0m shares, that’s 10.4% of total shares out. They also own the 5m
warrants still left out at a strike of 27.5c
• Ross Beaty owns 10.5m shares, that’s 4.4% of total shares out.
• Collectively, company directors own around 10.8m shares (including Chair/CEO Ian
Slater with his 3.1m), that’s 4.5% of total shares out.
Those are good people to have as large shareholders. Most of them are the type of tight-hand
long-termers you’d pick as sponsors in an ideal world, but aside from that a special mention
needs to be made about Stracon/Graña y Montero. GyM got those shares as part of its deal to
build the mine at San Ramón and I know (because I was told at the time) that the GyM plan was
to sell the shares at the first oportunity and cash out. But somewhere along the line that plan
changed, because since the block came out of escrow (many months ago now) GyM hasn’t sold
a single share. I’d eventually expect GyM to liquidate at least some of the holding, but the
change of strategy we’ve seen so far is a strong vote of confidence about R.to the company and
GyM obviously doesn’t want to leave money on the table for somebody else.
Anyway, add that little lot up and even if we ignore those 5m warrants held by Orion that are
4

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bound become whole of fine day, these five groups cover 51.2% of the current shares
outstanding. That’s a lot of float, we like this.
Assets
Red Eagle owns two main things:
1) The Santa Rosa concession North of Medellín in Colombia, a large land package and
location of its San Ramón mine.
2) Its 92% holding in CB Gold (CBJ.v) which has its own projects and properties in the
Bucaramanga region of Colombia, namely Vetas (gold) and Santa Rosa (silver). Also,
we note that Ian Slater is CEO/Chair of CBJ and it’s run by many of the same people as
at R.to.
The main point about owning R.to is Santa Rosa/San Ramón and that’s what most of today’s
anal ysis is about, but we need a few words on CBJ too. To cut a long story short, Red Eagle
got control of CBJ after a protracted and tight battle last year. It was a tight thing but win it did
and since then, the losers in the battle have handed over their shares and R.to now owns 92%
of the company.
I learned during my recent Colombia trip that the basic corporate plan for CBJ is to be the
development and exploration arm of R.to. We can consider R.to as the mothership, CBJ will be
the entity that goes out, develops its assets already under ownership and potentially adds new
projects to its books, all inside Colombia. To do this CBJ will raise working capital via share
placements and mothership R.to will not participate in those financing rounds, so the plan is to
dilute its position away from the current 92% by adding in Other People’s Money, but R.to also
plans to keep corporate control of CBJ and won’t dilute itself under 51%.
All this works for me. For one thing, I was happy to learn that R.to the corporation wasn’t going
to add more money into its smaller offspring, CBJ isn’t going to become a place where profits
from its operations disappear. For another, it means R.to already has a significant asset on its
books and given luck in exploration etc that asset may grow in value over the years. As things
stand today it’s still worth money and when it comes to the final valuation and target price of
R.to further down this note it needs to be taken into account. With 359.82m shares out and a
stock price this weekend of C$0.12, CBJ has a market cap of C$43.18m and as R.to owns 92%
of that, that’s worth around C$39.72m to Red Eagle today (or C$16.5c per R.to share). And
that’s how I intend to account for R.to’s side business at this time; rather than go into deep
detail about its assets and potential future Red Eagle’s holding in CBJ gets a fixed value we add
onto our valuation of San Ramón/Santa Rosa.
That done, from this point onwards this anal ysis focuses on San Ramón/Santa Rosa, which I’ll
refer to as San Ramón because that’s where the mine and processing facility are located but we
need to take into account the greater geographical area because of the exploration and growth
potential offered. But before we go any further, a little aside on some topical news
The Red Eagle financing prospectus
Just two days ago on Friday December 2nd R.to announced (2):
“...it has filed a shelf prospectus (the “Prospectus”) for up to $100,000,000 with the securities
regulatory authorities in each of the provinces of Canada, other than Quebec.
The Prospectus will allow Red Eagle Mining to offer up to an aggregate initial offering price of
$100,000,000 of certain common shares, convertible securities or combination of such securities
(collectively, the “Securities”) in amounts, at prices and on terms to be determined based on
market conditions over the 25-month period following the date Red Eagle Mining obtains
regulatory approval for the Prospectus. The net proceeds from the sale of any Securities will be
used for purposes as set out in the applicable Prospectus supplement.”
The NR continues, but that’s the main story and between then and now I’ve exchanged with
CEO Slater on the plans. He told me that first and foremost there are no plans to go to market
and raise cash immediately. The filing of the short-form is all about getting the paperwork out
the way in order to be flexible in 2017. CEO Slater says the company is good for cash as things
stand today (we look at the numbers on below, I agree) and needs no extra working capital
before getting to commercial production and free cash flow positive status, which as stated last
5

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week is set for 1q17 (and probably the early end of the quarter).
The prospectus is all about refinancing its debt position and strengthening the balance sheet
once the mine is commercial. When R.to put together its capital package in 2015 it was a much
smaller company by market cap (around the $30m mark) so its costs of capital to raise for a
U$74m capex build-out were naturally high. Cut to today and R.to has plenty on its liabilities but
the main block is the $65m debt which demands 8.5% interest and in the words of Slater (the
finance brain and Chartered Accountant running the show), “That rate eats at me”. So their plan
is to use the new higher valuation of R.to the company to refinance most of the debt at a lower
rate and probably pay off some of the debt via an equity placement once the mine had a quarter
of commercial production under its belt. This plan makes a lot of sense and I really like the way
the company is focused on its major weak point, that of the balance sheet (too many mining
companies wouldn’t care). So taking CEO Slater’s general plan into account and sticking a
finger in the air, I’m going to assume the following ballpark scenario:
• The re-financing happens at the end of 2q17.
• R.to goes for $45m debt refi and gets the interest rate down to 5% (i.e. traditional bank
debt, rather than the current exotic mix of things)
• R.to sells around $20m of new shares at market to pay down currently held debt. Now if
the share price is up to $1.00 by then that’s 20m shares of course, but I’m going to
assume the conservative end of things and add another 25m shares to the count at that
point. It could turn out to be less, but whatever happens it’s a non-dilutive placement for
the company and will take the pressure of the finances at the right time.
Bottom line: Even though the market may react negatively to last Friday’s post-close NR
tomorrow and think R.to “is in trouble”, Friday’s NR doesn’t mean R.to needs cash right now. It’s
also unlikely they’ll use the whole $100m. The plan they have is to refi in order to ease the
financing costs they’re under, on the back of a working and profitable mine. In the whole
strategy, you can see the mind of Slater’s sharp financial brain at work and it all makes a lot of
sense. What could possibly go wrong? ☺.
Review of financials to date
One of the key things to understand about R.to today is how it’s on the cusp of the big change,
from exploration/developer to operator and commercial miner. Due to that I’m going to split up
the main numbercrunch into two parts, the first one looking back to see how R.to got to where it
is today and then a second part which projects forward on its financials and also takes a stab at
modelling what we can expect from the San Ramón mine in 2017 and beyond. Obviously the
future of R.to is the most important bit and is what will determine its share price and investment
potential, but the review is also a useful exercise because the charts give a visual indication of
just how much R.to the company has changed in the last couple of years (and how they did it).
Final point before we dive in, please remember that R.to reports in Canadian Dollars.
We start with the balance sheet and the two main items, overall assets and liabilities.
R.to: Assets
180
160
140
120
100
80
60
40
20
0
If I told you that Red Eagle borrowed a lot of money to build its main fixed asset, would you
believe me? ☺. The growth in numbers on both sides of the balance sheet has been impressive
6
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
R.to: Liabilities Breakdown per qtr
C$m 110
fixed 100
90
other current 80
cash & eq 70
60
50
40
30
20
10
0
source: R.to filings
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
C$m
LT liab
current liab
source: company filings

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in such a short space of time and as things stand, here below is how the difference between the
two sides looks, on an absolute and per-share basis:
R.to: Book Value
60
51.1
50 44.4
40
29.0 30.4
30
20 13.5
10 2.3 2.1
0
-10 -1.6
It goes without saying that the 22c BV/share number is a long way below the current 80c share
price and therein lies the risk involved with investing in R.to today. This company has built its
mine, is ready to go and in a few short weeks is due to go free cash flow positive, be in
commerical production and to start running out the profits. But even if we add in the difference
between the CB Gold market cap and its lower carry on the R.to books, we’re still only around
30c/share and that means the San Ramón has to deliver as from 2017 in order for R.to to justify
its current share price. The risk at R.to today is one of execution; just like any start-up mine it’s
allowed to have its teething problems but they need to be sorted out in the next month or two
before the scheduled move up to profitable mining happens; if the mine doesn’t perform to
expectations, there’s a big gap between asset value and equity value that will close and yes,
that means the share price could drop bigtime.
This next table (right) gives an idea of where that
money was (and is being) spent. It’s not easy to
get an accurate handle on the capex spend at a
build-out and the exact rhythm of expenditures,
but a reasonable proxy is found on the statement
of cash flows sheet and the “purchase of
equipment and capitalized costs” line item, which
looks like this (including my best guess for the
current quarter and a little remnant spending for
1q17 as well, all in Canadian Dollars of course).
This chart also fits reasonably with the total
U$74m capex spend as noted by R.to in its latest
corporate presentation dated December 2016 (have a look at that here (3), it’s worth your time if
you are considering or already have a position in R.to).
As a slight sidebar, because R.to has the head of Stracon GyM
on its board as a director, the company has to declare payments
to that company for its work on the mine construction. This small
chart (right) shows cash paid to Stracon GyM and is included in
the previous chart’s total, but it gives an idea of how much a
world-class engineering company charges for its services and it
also gives an idea of the ratio of spending between machinery
and labour at San Ramón. This isn’t essential information for the
purposes of valuing R.to shares today, but I thought it was
interesting enough to include in the piece.
7
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
R.to: Book Value per share
$m
0.32
0.28
0.24
0.20
0.16
0.12
0.08
0.04
0.00
-0.04
source: company filings
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
P/BV
source: TSX, R.to filings
R.to: Purchase of Equipment
and Capitalized Costs, per qtr
30
24.50
25
20 18.23
15.45
14.00
15
10.51
10
4.97
5 3.00
0.02
0
51q2 51q3 51q4 61q1 61q2 61q3 tse61q4 tse71q1
$m
source: company filings, IKN est for 4q16
$m Payments to Stracon GyM
6 5.292
5 4.476
4 3.424
3
2 1.676
1
0
all 2015 1q16 2q16 3q16
source: R.to filings

,
$m R.to: Financial debt to total liabilities
120
100
other liabilties
80
total financial debt
60
40
20
0
4q14 1q15 2q15 3q15 4q15 1q16 2q16 3q16
source: company filings
Back to balance sheet items and a closer look at that large liabilities position, the thing that
should most concern the potential investor. This chart above breaks things down into “other
liabilities”, which include the mundane things such as accounts payable, property obligations,
reclamation provisions etc and the total amount of pure cash money financial debt on the books.
The main chunk of the red column is the $65m debt position previously mentioned and with total
liabilities now topping out at over $100m it gives a clear visual on why CEO Slater is keen on
running a refi and easing the burden come 2q17.
Meanwhile, on the other side of the balance sheet we check out the liquidity position via
cash&eq treasury and working capital:
20 R.to: Working Capital per qtr
18
16
14
12
10
8
6 4
2
0
-2
-4
The picture is clear here, as even though working cap doesn’t look great (due to the ever
increasing current liabilities at this late stage of the build-out) R.to has done the most important
thing and kept itself liquid thanks to a healthy cash position. Note that in the chart right I’ve
included a 4q16 number of $8m because R.to just declared that in the latest corporate
presentation. We’ll see more on the datasets and more pan out in a moment, when we do the
forecasts for 2017.
As for the P+L, I’m not really that
interested in that part of R.to for the
moment because up to this point it’s
been a money–spender, not a money-
maker. That changes now the mine is
underway of course but I will include
just one chart from the spreadsheet, the
breakdown of operating costs to date,
because it shows you the minor
amounts that have left the company via
operations compared to the capex
spend you see above. Even the
expansion in G&A due to the
accelaration of the company and its day-to-day business hasn’t moved the dial much, we’re
typically in the $1.5m to $2.5m per quarter range here, which compares to the $15m and $25m
per quarter spends on fixed assets as the mine was put together.
8
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
source company filings
srallod
fo
snoillim
R.to: Cash treasury per qtr 40
35
30
25
20
15
10
5
0
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4
source: company filings/IKN ests
srallod
fo
snoillim
R.to: Operating costs overview
3
2.5
2
1.5
1
0.5
0
41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3
$m
Min.Prop.Exp. Salaries
IR/biz dev G&A
prof. Fees
Source: R.to filings, IKN ests

,
And that’s enough of looking backwards. R.to has got where it’s got by using debt and spending
it well, but as we’re now at that crucial moment when the mine starts working and the payback
begins (in theory at least) it’s time to consider just what the asset is capable of achieving and
whether, by logical conclusion, it’s worth being a shareholder of this company.
A cash flow forecast for San Ramón
These things are impossible to predict, let’s start right there. To begin with, let’s consider this
chart that compares the production figures for San Ramón as contained in the 43-101 compliant
feasibility study (on which the whole enterprise was pinned and funded) and the type of
potential upside in production that R.to could deliver if everything goes well:
R.to: Annual gold production forecasts
160
potential addition
140 FS schedule
120
100 98
25 70 95 114 120 118
80 2
60
40 68 75
20 50 45 52 36 30 32
0
2017 2018 2019 2020 2021 2022 2023 2024
source: R.to data, FS, IKN ests
And please be clear, that says “potential”, that says “could”, I am NOT making any sort of firm
prediction on the upside growth potential of San Ramón. Or let’s put it another way; if what VP
Expl Toohey told me a couple of weeks ago pans out to perfection and R.to discovers a whole
bunch of new gold resources as they explore the greater Santa Rosa concession, then if what
COO Bell told me a couple of weeks ago works to perfection and the processing facility doubles
its output potential and starts churning out an indefinite number of 150k oz gold years at an
AISC of under U$600/oz, then this is the no-brainer stock purchase of the year. Do the math:
U$600/oz EBIT margin X 150,000 oz = U$90m per year.
Year in, year out for a decade or maybe 15 years.
For what is now a U$145m market cap company.
Buy. Duh.
You don’t need me for that kind of financial analysis but all the same sorry folks, it just doesn’t
work like that. What we do need however is some sort of reasonable model on which we can
base the potential of R.to at San Ramón without falling for hyperbole nor underestimating what
is clearly an operation with more potential than the current 43-101 gives credit. If you ask
around the marketplace about San Ramón you’ll often here “Ah yeah, 50k/year operation” and
that’s almost certainly pitching low these days. To begin, the internal company projections are
for 70,000 oz in 2017 and 100,000 oz in 2018 just by tweaking things here and there, no extra
capex needed. From that point and if, repeat IF they find the type of additional resource they
expect at one or more of the prospective targets on the concession (see IKN393 for more) the
company would invest another $22m or so in plant upgrades and new mine accesses in order to
double throughput and raise production up to that projected 150,000 oz.
In other words, on the one hand 50k and 70k estimates for the years to come are in my
considered opinion, too low. There’s more to come here, that’s screamingly obvious from having
visiting the site (albeit briefly). On the other hand I’m not going to become a pumphouse
merchant and presume a best case so some kind of happy medium is required. Therefore on
balance I’ve decided to use the 2018 projection of 100k oz from San Ramón as my model year,
as it’s almost certainly going to happen, it’ll be a bigger number than most people in the market
expect in the last month of 2016, it gives a taste of the positive future without going whacko.
9

,
Another important input is estimating shares out.
Again this is going to depend on what happens R.to: Shares Out
300
during the refi stage in mid 2017, but if we take the
250
current 241m shares out total as our starting point
and assume R.to is going to raise at least some 200
cash with an equity component, the best fit estimate 150
for a 2018 share count is, for my money at least,
100
265m. Here right is a chart on that.
50
0
So there are the first couple of assumptions in place
but there are a whole lot more needed to build a
reasonable best-guess model, so here we go:
• Estimates set at 100,000 oz gold production for 2018, as noted above.
• Shares out at 265m, as noted above.
• Operating cash costs of U$525/oz, which is in-line with the current company estimate of
an AISC of U$600/oz. In the Feas Study AISC was slated at U$671/oz but that’s almost
certainly too high now, one thing due to the expected higher production rates and for
another the Colombian Peso (COP) has devalued significantly against the US Dollar,
thereby cutting in-country operating costs. Please note that my cash cost estimate also
includes the U$30/oz R.to must pay to Orion on the first 400,000 oz of production at
San Ramón (part of the financing deal).
• A TC/RC assumption of 10%. Educated guess, we’ll know more by 2q17 on this.
• Colombia country royalty of 3.2%.
• The 3% NSR on San Ramón held by Liberty Metals.
• Finance costs that average U$10m per year. This is very difficult to estimate at the
moment, because any 2018 below-the-line item of this sort will depend greatly o the
type of refi deal R.to does in mid-2016. What I’ve gone for here is a ballpark figure that
covers any interest servicing and an estimate of pirinciple payback averages. This one’s
a guess folks, I make no bones about it and I will happily receive all comments and crits
but I’ve tried to pitch it to the conservative side of reality, as well as choosing a number
that should be comfortable enough for R.to to service.
• A minor by-product credit of nearly 75,000 oz silver per annum, bringing in an estimated
U$1.3m revenue. This is a minor cash stream but as silver is not included in the Feas
Study and is going to be a payable metal at San Ramón, it gets a line of
acknowledgment here.
• Depreciation costs of $7.5m per year. That might turn out to be too high, especially if
R.to adds quickly to the current resource count, but I’ll pitch it there to be conservative.
• G&A of $3m per year, in line with recent burn rates.
• Exploration budget of U$5m, sustaining capital budget of U$6m
• A forex rate of CAD$1 = U$0.75.
• Corporate tax rate of 25%. I’ve consulted with R.to on matters of tax and they expect
their overall effective rate to be between 32% and 34% over the first key years of the
mine BUT the big thing here is that they’re not likely to pay much tax anyway, thanks to
a whole bunch of accrued credits they’ve picked up in the exploration and development
stage. This is one of the reasons why, for the eventual price target, I’m not basing
things on bottom line EPS but rather a lower multiple on operating earnings.
• Other minor line items.
Okay, that’s a whole lot of assumptions in the model and hopefully a bad assumption on on side
of the line will get cancelled out by another bad guess and once it’s all done, we get close. It’s
now time to mix thoroughly and place in a hot oven for 40 minutes. They’re then applied to four
different gold prices for our 100k production model year and here’s how the sales numbers
come out at the other end:
10
31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4 tse71q1 tse71q2 tse71q3 tse71q4
source: company filings
serahs
fo
snoillim

,
Red Eagle: Model year revenues by metal type (U$m)
item U$1,100oz U$1,200oz U$1,300oz U$1,400oz
Gold prod. (Koz) 100 100 100 100
U$/oz 1,100 1,200 1,300 1,400
Au revs (U$m) 110 120 130 140
Ag revs (U$m) 1.26 1.33 1.48 1.48
Gross revs (U$m) 111.26 121.33 131.48 141.48
TC/RC (U$m) (11.1) (12.1) (13.1) (14.1)
Net sales(U$m) $97 $106 $115 $124
Sources: R.to data, IKN calcs and ests
As you can see from the colour codiing, I’m going for U$1,200/oz as my baseline case for gold
pricing but the others are there for your consideration, too. The upshot from all this
numbercrunch is that I expect R.to to get just under U$106m in net sales in a year of 100k
production. From there we can move on, add in the other line item assumptions and get a
condensed income statement table, still using the four gold price assumptions:
Red Eagle: Condensed income statement (U$m)
U$1,100oz U$1,200oz U$1,300oz U$1,400oz
Sales (U$m) 97.1 105.9 114.8 123.5
Cash COGS 52.5 52.5 52.5 52.5
Depreciation 7.5 7.5 7.5 7.5
G&A 3.0 3.0 3.0 3.0
Fin. costs 10.0 10.0 10.0 10.0
NSR 3.0 3.3 3.6 3.8
Op income 21.1 29.6 38.2 46.7
Exploration 5.0 5.0 5.0 5.0
Govt royalty 0.5 0.8 1.1 1.3
Tax (25%) 3.9 6.0 8.0 10.1
Net income 11.7 17.9 24.1 30.3
Shares (f/d) 265.0 265.0 265.0 265.0
EPS 0.04 0.07 0.09 0.11
Sust. capex 6 6 6 6
FCF 0.10 0.12 0.14 0.17
Sources: R.to data, IKN estimates
Sticking with the preferred U$1,200/oz gold column, you’ll note that the model offers up a net
income and net EPS number but really matters, for me at least, is that operating income number
of nearly U$30m. That’s very good money, even after assuming the financing cost guesstimate
and that’s the type of profit margin that will allow R.to to pay down its debt quickly, both before
and after the planned refinancing. And it goes without saying that if better gold prices come
down the line it’s all gravy (check the U$1,400/oz column for numberporn).
A return to the balance sheet items
Now that I’ve mapped out how I think the mine revenues numbers work and before moving to a
final target prices, it’s time to make a slight return to the balance sheet items charts we looked
at before and do the important thing, project into the next few quarters instead of looking
backwards. In a case such as R.to this is key to the whole thing, because what this company
needs to do more than anything else is to show it has its financial obligations covered, that it’s
mine will make (more than) enough to pay back the money it borrows to build the machine.
11

,
The above cash flow model was necesarily built on my model year of 100k oz gold production
as it gives a reasonable case idea of what San Ramón is capable of doing (particularly in the
model year 2018). But below we’re using the projected 70,000 oz of gold production for 2017,
assuming a U$1,200/oz average gold price and cutting things down into quarters again. What
matters here isn’t whether I’m right or wrong to within a million either side, what really matters is
the shape of each graph, it’s akin the the way people read bonds yield curves. It is quite literally
the shape of things to come that will determine the markets positive or negtive attitude towards
R.to so to begin with we re-present the assets and liabilities charts with projections for the next
four quarters added in:
R.to: Assets
200
180
160
140
120
100
80
60
40
20
0
The key here is liabilities (right), which are expected to peak in our current quarter (or perhaps
1q17, I’ll leave myself wriggle room there and it all depends on exactly when R.to declares
commercial production). Then we assume R.to does its refi and that closes exactly on June 30th
2017. And then 3q17 liabilities show another marked drop as the cash flow from the mine starts
paying down debt. Meanwhile over at the assets chart (left), cash gets to its low point in 1q17
and then improves, sending up the overall company value. Next up we return to the two liquidity
charts, working capital (left) and cash&eq (right):
The evolution of the working cap chart is why I didn’t want to add any future estimates to the
previous chart, it’s going to look a bit scary in the first part of 2017 until the mine is throwing off
free cash flow and that refinancing happens. But again the important thing is the shape that the
bars make, we’re going to hit some sort of low point but even aiming the model using
U$1,200/oz gold and 70k oz production sees it coming out of the tunnel quickly.
In sum, what the forecast balance sheets charts indicate is that R.to is in good shape, as long
as the mine performs as expected in 2017 (that’s the execution risk thing again). Even at a
reasonable U$1,200/oz gold and the lower 70k oz we’re looking for in 2017, the finances of R.to
will improve and the debt load relieved. Plus the smart refi idea will stick that process into turbo
boost.
A target price
With all that done, it’s time to nail a target price to the wall. Here’s the box:
12
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4 tse71q1 tse71q2 tse71q3
C$m R.to: Liabilities Breakdown per qtr
110
100
fixed 90
other current 80
70
cash & eq
60
50
40
30
20
10
0
source: R.to filings
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4 tse71q1 tse71q2 tse71q3
C$m
LT liab
current liab
source: company filings
20 R.to: Working Capital per qtr
15
10
5
0
-5
-10
-15
-20
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4 tse71q1 tse71q2 tse71q3
source company filings
srallod
fo
snoillim
R.to: Cash treasury per qtr 40
35
30
25
20
15
10
5
0
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4 tse71q1 tse71q2 tse71q3
source: company filings/IKN ests
srallod
fo
snoillim

,
Sales & earnings model U$/oz Au prices Target price & valuation data for R.to based on
$1.1k/oz $1.2k/oz $1.3k/oz $1.4k/oz 100k/annum model year economics
Sale (U$m) 97.1 105.9 114.8 123.5 12-month target C$1.10 based on 6x FCF of 100k Au
Upside to target 37% prod year + 15c/sh for CBJ
EPS 0.04 0.07 0.09 0.11 Mkt cap (CAD$m) $193 Enterprise value $275
FCF 0.10 0.12 0.14 0.17 P/sales ($1.1k/oz) 1.82 EV/sales ($1.1k/oz) 2.59
P/E ($1.1k/oz) 18.1 EV/EBITDA ($1.1k/oz) 9.6
P/E ($1.2k/oz) 11.8 EV/EBITDA ($1.2k/oz) 7.4
P/E ($1.3k/oz) 8.8 EV/EBITDA ($1.3k/oz) 6.0
To get to the headline the target price of C$1.10 you see above I’ve used:
• The Free Cash Flow per share estimate from U$1,200/oz gold average as generated by
the above model
• A 6X multiple that’s pretty low, but takes into account that 1) we’re not talking net
earnings and 2) the model is based on 2018 production, which is still a time away.
• An assumption that its holding in CB Gold (CBJ.v) is worth 15c/share, slightly lower
than the strict 16.5c of this weekend.
This is one of those target prices that could be pitched a lot higher if I felt like it. There are a lot
of moving parts in this model and most of my assumptions, aside from expecting 100k oz from
the year, are between reasonably conservative and very conservative. That continues with the
modest 6X multiple which applies if it’s an eight year mine life as per the FS, but real world says
that as long as just one of the exploration targets deliver (not least San Ramón at depth or on
strike to East), it’s going to be in production a lot longer than that.
So I consider CAD$1.10 to be a reachable, first stage target that R.to should be able to take out
as long as a) it delivers on its plan in the next three to four quarters and b) the price of gold
doesn’t cave in on us completely. But the real beauty about an investment in R.to is its growth
potential at this mine and as a corporation in general. Years down the line it would be no
surprise to see this company morphed into something quite different and altogether bigger, but
when it comes to financial anal yses such as this one you have to start somewhere. What R.to
offers is a company that will improve its financial position quickly and be able to answer all its
critics, as long as it executes on plan and so far in the last three years it’s done just that, not
many explorecos reach this stage of development so quickly, on time and on budget. It reminds
me a lot about the way Alex Black and his team created Rio Alto.
Discussion and conclusion
All that said I’ve chosen a modest CAD$1.10 price target for a stock already at 80c for a good
reason. I don’t want to get ahead of myself and at the moment (end year tax loss selling) and in
this current market atmosphere for juniors (gold’s inertia) I think there’s a decent chance of
picking this stock up at a cheaper price than it stands this weekend. The target set offers a 37%
upside over 12 months and that’s not really a wowsers number for a junior over a year, but if
you can pick the stock up for 75c it’s a moe interesting 46.7% upside, or 70c would offer a
57.1% upside...the type of gain that really catches my attention.
We’re into the last month of the year, the market is slack and the prospectus news R.to
delivered to market on Friday might get a few weaker hands (perhaps those Lima holders with
their newly free trading stock) to liquidate. In other words, I think there’s a good opportunity to
buy more cheaply than at this weekend’s price and I’m going to act accordingly. I’m not going to
wade in and buy R.to tomorrow, nor any day next week until I see a price of 75c or under. At
that point I’m a buyer of a small(ish) initial position and Red Eagle will become a member of the
‘Stocks to Follow’ list, but not before. Then come 2017 we’re going to get a whole set of clear
markers on how it’s developing as a company. We’ll be able to watch the production schedule,
any new resource discoveries and perhaps most important for me, just how the development of
its financial position compares the the model I’ve laid out today. As I plan a smallish initial
position, it leaves me plenty of room to add to holdings if R.to hits the markers and matches or
13

,
beats out my model. I see no reason to wade in and buy a massive position immediately, but if
Ian Slater and his team can deliver from
the excellent start they’ve shown, this
company could start moving up in dollars
in a few years’ time.
For today, early December 2016, I’m a
buyer of an initial position if the price is
right, 75c or below. I’m sure that just a
little patience will be enough for me to get
my value start in R.to.
End of Report
Stocks to Follow
A rebound week. By some small miracle there wasn’t a single losing stock on a week-over-week
basis on our watchlist, with four open list stocks remaining unchanged (WDO.to, CDB.v, RPM.v,
FCV.v) and all the others going up. Not listing them all, but special rounds of applause go to
Continental Gold (CNL.to up 21.0%), Tinka (TK.v up 14.6%), Lara (LRA.v up 11.7%) and aside
those, another five beat out the GDXJ gain quite handily and outperformed the average.
With the planned sale of Avino Silver & Gold (ASM) going through last week we’re back down to
14 open positions on the ‘Stocks to Follow’ list, one less than our self-imposed maximum
number at any given time. The green/red count has improved slightly, with nine open positions
in positive territory and four negative, one unchanged.
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$3.27 55.0% tgt $5.30 IKN375, good Q3
Regulus Res REG.v hold C$0.64 06-apr-15 C$1.35 110.9% LT exploreco top pick
Starcore Intl SAM.to buy C$0.61 10-jan-15 C$0.48 -21.3% $1.04 tgt, very poor Nov'16
Long positions (in current order of preference)
Sandstorm Gold SAND STR buy U$3.80 17-apr-16 U$3.92 3.2% $7 tgt IKN378, cheap
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.235 20.5% Under-radar Zn, annoying
Wesdome Gold WDO.to selling C$1.72 22-may-16 C$2.48 44.2% Will sell at $2.88
Cordoba Min. CDB.v buy C$0.73 15-sep-16 C$0.75 2.7% $1.50 tgt added IKN392
Excellon Res EXN.to buy C$1.71 09-oct-16 C$1.42 -20.4% Hit by Ag sell-off, $3.13 tgt
Atico Mining ATY.v STR buy C$0.51 24-jul-16 C$0.83 62.7% New tgt $1.36, Cu play
Rye Patch Gold RPM.v buy C$0.32 02-sep-16 C$0.25 -21.9% 75c tgt, added IKN388
Riverside Res RRI.v buy C$0.39 27-jun-16 C$0.47 20.5% Added IKN380, 60c tgt
Continental Gold CNL.to hold C$2.68 22-may-16 C$4.44 65.7% permit arrived, site visit next
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.03 0.0% solid biz model
Focus Ventures FCV.v spec buy C$0.23 01-jul-12 C$0.06 -73.9% refi news good
Short positions
None at present
14

,
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
Avino G & S ASM nov-16 U$2.00 21-oct-16 U$1.40 -30.0% Abandon trade on bad bot deal
2009, 2010, 2011, 2012, 2013, 2014 and 2015 closed positions in appendices below
Now for some notes on current basket stocks:
Avino Silver & Gold (ASM) (ASM.v): Position closed. As noted last week, I sold and took
my loss on ASM. Can’t win ‘em all.
Wesdome Gold (WDO.to): Still selling at $2.88. This one stays near the top of comments
because I’m not changing the “sell at $2.88” message in any way, shape or form.
Atico Mining (ATY.v): Atico did well last week, it almost did very well having traded as high
as 88c on Thursday but a big block sale of
around 2.5m shares at 81c on Friday took
the gloss off the best numbers. Still, the six
month chart shows a hugely constructive
pattern and for my money (quite literally) it’s
a case of when it breaks 90c, not if.
One reader mailed in with concerns about
the insider sales filed by Jorge Ganoza on
ATY (4) last week, there were about 200,000
shares sold by the man. I tried to be as
concerned and couldn’t quite make it,
Ganoza (this one being the head of FVI) is a
serial share seller in FVI too and dumps as
often at the wrong moment than at the right.
The guys wants some Christmas money I suppose.
Tinka Resources (TK.v): All it took was for me to moan and gripe for Tinka for the stock to
show a bit of life? In that case I’ll kvetch more often, thanks. TK rose nicely and finally...finally
started showing a bit of life compared to its main underlying metal, zinc. And as the chart
below shows, all TK really needs is a bit of buying interest because the move happened on
volume. We like those because they indicate underlying corporate health and more to come if
people start paying attention.
15

,
However it’s important not to run before you can walk and despite the decent percentage move
last week, we’re still firmly fixed inside the 20c to 25c range that, with very few exceptions on
either side of the channel, has been in place since late April. If 25 gets broken in style we’ll
have something more optimistic and real to consider.
In fundies news this desk hears from inside TK that the drill campaign, now fully permitted and
so forth, will kick off a little later than planned in January rather than in Q4. As we’re now on
the fringes of Christmas and considering the way Peru (especially provincial Peru) all-but closes
down for two festive weeks that’s a sensible and cost-effective decision in my opinion. The
rocks will still be there in 2017.
Starcore (SAM.to): Still no news on the quarterly production numbers. They’re now late and
that’s not a good thing. There’s a final bullet point on SAM at the bottom of the letter today.
Lara Exploration (LRA.v): LRA finally started to move back up after the shellacking it took
from the mouthbreather end of the market and as luck would have it, the stock is now UNCH
since inception on our list (though holding a stock this length of time for no return is not an
achievement to crow about).
Continental Gold (CNL.to): The news Wednesday afternoon November 30th (5) that CNL has
received its key environmental impact permit (EIA) from the country’s ANLA environmental
bureau was big news in the juniors world, but it wasn’t confined to trade papers or even the
English language as these reports out of
serious Colombia media channels testify (6)
(7). The news is good of course, it’s why
your author reco’d and bought the stock in
the first place back in May and to my slight
surprise, the market decided that the news
wasn’t very baked into the price deck and
the stock promptly rallied through Thusday
and continued to power higher on Friday too.
A big weekly win booked, amen.
The next step (apart from the largely
technical permits CNL still needs, the EIA
was the big hurdle) is to watch as CNL
represents moving into the construction and
production stages all on its own without any help, a phase that’s already started according to
the NR last week...
“With project permitting now in place, the Company advises that a project debt facility
arrangement is nearing completion.”
16

,
...as CNL makes noises about securing the necessary capital to construct. This is all semi-bluff
fakery of course, there’s no way Buriticá will be built by CNL as stands, the exit strategy for the
company is obviously being bought out (and as I’ve mentioned on a few occasions both here
and on the blog, McEwen Mining (MUX) is one of the leaders to bag the M&A deal) so even if a
debt or equity deal is reached in principle, the buyout is the print.
Which leads us to my personal position on CNL. My plan was always to buy CNL low (I got my
$2.68 average, happy with my width there too) and sell once the EIA was awarded but as of
today I’m going to change that plan at least slightly, perhaps more significantly. First, as I’m on
the site visit to Buriticá from December 12th to 15th it’s tantamount to stupidity to bail on a stock
before getting the chance to see its major asset up close and personal so I am not a seller in
the next few days at least, any “immediate” sale can wait a few days. Secondly and more
importantly, as we may be close to a buyout deal that pushes CNL even higher it’s logical to
wait a few weeks and see if that happens (and I’ve pencilled in something around CAD$6 for
the stock if MUX or another wants to be successful). I haven’t decided on that yet, I may sell in
December and take profits after all, but if I alter the plan a little and go for the buyout trade I’d
be willing to hold until around PDAC-time, what with February a typical happy hunting month
for mergers and acquisitions. So, bottom line, I will hold for at least a few days more in order to
make a more informed decision after the site visit is done, I may hold into the first quarter of
2017 to see if any buyout deal is forthcoming. However, I’m not expecting much more than the
current $4.50-or-so from this latest price move, we’re now in “30% bonus and $6” territory for
a deal and that sounds about right to me.
Rye Patch Gold (RPM.v) and Sandstorm Gold (SAND): I picked these out of the list last
week as the relatively cheapest looking stocks we have here, but of the two only SAND
managed to rally (+6.8%) and even then it still only managed to brush U$4 before falling back
again. The same message this week too, both these are bargain prices.
B2Gold (BTO.to) (BTG): BTO performed to market peer average, which is good when we
consider that it out-performed the market
Cordoba Minerals (CDB.v): It continues to be a quietly traded stock, which is a bit surprising
to me after the Colombia exposure and so forth of the last four weeks. We’re waiting on the
next set of drill assay results of course, that might be damping down enthusiasm.
Focus Ventures (FCV.v): Reader CM pointed this to me last week:
Do you know what the longest time was that FCV did not release a single news
release? 4 months and counting. Just longing for a reason for patience...
Very true and this extended radio silence might just jive with a rumour I picked up a couple of
weeks ago from another place and a reliable voice who told me that FCV was until recently in
deal and/or partnership talks with three different companies, but one of them recently dropped
out. I’m not holding my breath about FCV nailing down its deal on Bayovar12 and I strongly
suggest that you don’t trade the stock on the words here, but the potential of a deal with talks
that have been going on since July would be a logical reason for the silence at FCV, whether or
not anything closes successfully.
The Copper Basket
After forty-eight weeks of 2016, The Copper Basket shows a 112.37% gain to level stakes.
17

,
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 HudBay Min. HBM.to 5.31 235.23 2133.54 9.07 70.8%
2 Ivanhoe Mines IVN.to 0.61 778.96 1768.24 2.27 272.1%
3 Reservoir Min. RMC.v 4.08 48.69 449.41 9.23 126.2%
4 Capstone Min. CS.to 0.44 382.04 389.68 1.02 131.8%
5 NGEx Resources NGQ.to 0.65 205.06 248.12 1.21 86.2%
6 Western Copper WRN.to 0.38 94.19 112.09 1.19 213.2%
7 Copper Mtn CUM.to 0.445 118.8 93.85 0.79 77.5%
8 Atico Mining ATY.v 0.28 97.59 81.00 0.83 196.4%
9 Trilogy Metals TMQ.to 0.395 104.33 73.03 0.70 77.2%
10 Cordoba Min. CDB.v 0.16 86.86 65.15 0.75 368.8%
11 Nevada Copper NCU.to 0.66 80.5 57.16 0.71 7.6%
12 Copper Fox CUU.v 0.125 417.64 52.21 0.125 0.0%
13 Amerigo Res ARG.to 0.205 173.61 51.21 0.295 43.9%
14 Hot Chili Ltd HCH.ax 0.09 445.723 16.49 0.037 -58.9%
15 Revelo Res. RVL.v 0.055 128.486 12.21 0.095 72.7%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg 112.37%
Copper juniors are the Yang to the precious
The Copper Basket 2016, weekly evolution
metals juniors Yin at the moment, one sector 120%
up and the other down vice versa etc etc. Just 100%
two of our 15 basket stocks produced gains last 80%
week (ATY.v, WRN.to) and another three were
60%
unchanged (RMC.v, TMQ.to, CDB.v) which
40%
means there were a big ten losers, biggest of
20%
which were Nevada Copper (NCU.to down
0%
11.3%), Copper Mountain (CUM.to down
-20%
9.2%), Amerigo Resources (ARG.to down
7.8%), Hot Chili (HCH.ax down 7.5%) and
Ivanhoe Mines (IVN.to down 7.4%). In this way
the sector rested.
A retrace of copper prices was the force behind the
correction, but it was hardly a massive dumpage nor is
there any sign of this newly established price deck
dissolving away. We saw a brief spike low price of $2.54/lb
on the futures contract Tuesday, but most trading was
based firmly around the $2.60/lb or $2.62/lb range. Just for
one example that makes Atico very profitable, thanks for
asking. As for expert opinion from people who are never
ever wrong about anything, how about this quote from this
Reuters piece late last week (8)?:
"The market is fundamentally better than a lot of people
thought, in terms of Chinese growth, but the massive
speculative buying in China may start to dissipate and hit
prices," Citi strategist David Wilson said.
"The $5,000 to $5,500 mark is a fair value for copper, it just seems a little overpriced right now."
Fair enough. It’s the end of another calendar month and time for the long-term inventory
tracking charts updated for November. The drop in inventories is clear here and it’s been driven
by the exodus of metal from LME warehouses.
18
dr3naj ht71 ts13 ht41 ht82 ht31 ht72 ht01 ht42 ht8 dn22 ht5nuj ht91 dr3luj ht71 ts13 ht41 ht82 ht11 ht52 ht9 dr32 ht6von ht72
source: IKN calcs

,
Copper inventories, per month, 2012 to date
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
19
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 von
Mt Cu source: Cochilco
LME Shanghai Comex
The LME and SHFE playing scissors movements for over a year and it looks as though it’s about
to happen again as tonnages arb from one system to another for financial fun, profit, gain and
so forth. Meanwhile, we again note the slow and steady rise of the Comex inventory level, now
nearing 17% of the world total. Earlier this year Comex announced it would be adding
warehouse space to try and compete against the established world order and though there
hasn’t been a rush to them, there has been a steady drip by the looks of things.
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
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 von
LME Shanghai Comex source: Cochilco
Now for the regular weekly copper warehouse inventory bullets:
• Overall world copper inventory levels dropped slight last week, down 8,593 metric
tonnes (mt) (-2.0%) added to finish at 440,430mt. No biggie.
• Inside the main number SHFE stocks in Shanghai dropped by 8,700mt (-6.0%) and
finished Friday at 135,363mt, which is down some but still a healthy distance from the
100k level. No biggie.
• That’s true for the LME too, where stocks dropped by a small 3,175mt (-1.3%) finish
the week at 234,025mt. No biggie.
• Wrapping up, Comex stocks made it over 70k for the first time in a long time, up
2,187mt (+3.2%) to finish Friday at 71,042mt. Slow and steady might win this race.
Here below the regular Shanghai-only chart, which shows the knee-jerk away from 100k that
now looks like sticking. We’re into December and next month is the start of the period when,
traditionally, stocks rise in SHFE warehouses towards the Chinese New Year.

,
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
400000
350000
300000
250000
200000
150000
100000
50000
20
ht5naj ht61 ht03 ht11 dn22 dr3gua ht41 ht62 ht7ced ht81 ts1ram ht21 ht42 ht5luj ht61 ht72 ht8 ht02 ts13 ht31 ht42 ht5nuJ ht71 ht82 ht9 ht72
Mt Cu
source: Cochilco
Now for notes on a couple of the basket component stocks:
Ivanhoe Mines (IVN.to): Once again this Friedland company is making the biggest news
splashes in the exploration copper sector, but this time for a deal that can easily be called
controversial. I’m a little late to this due to the travels and that, but I’d like to say something
today because this issue got a few of our juices flowing last week. I shall explain.
On November 18th IVN announced (9) that it and its partner Zijin were giving an extra 15% of
the Kamoa-Kakula copper project to the host country, the Democratic Republic of Congo (DRC)
(insert irony joke), bringing its participation to 20% (with Zijin and IVN on 40% each, give or
take a tenth or so). This report (10) in Mining Journal gives the Robert Friedland polished quote
space
“This is a historically significant event for the people of the Democratic
Republic of Congo,” he said.
“We now are united as partners committed to working closely together toward
our shared objective of ensuring that the major copper discoveries we have
made at Kamoa and Kakula during the past eight years can be predictably,
efficiently and expeditiously developed into a world-scale mining venture with
a lifespan of multiple generations.”
But the grumblings and rumblings got louder, so on Monday November 28th (i.e. last week) IVN
held a Conference Call (11) to explain about recent company developments and it was one of
the phrases used by the company in the CC, about
how the deal to hand over this large slug of
Kamoa-Kakula would “safeguard” its future, that
got the hackles up of certain people a little group
to which your humble scribe belongs, a bunch of
five or six reprobates who can collectively be
called “mining professionals” (even I just about
scrape in on that qualification these days). It
started with one of them sending a group mail
entitled “DRC Rolls Friedland”, it continued after
November 28th with another asking the difference
between this deal and a bribe (e.g. “no 20%, no
permits”), then IVN was semi-defended by a
couple of others on the string. I’m not in a
position to quote any of my friends but I can reproduce here my additions to the debate. Here’s
the first (grammar brushed up very slightly)
“Aside from any precedent set, this deal doesn't safeguard a thing inside IVN's
suite of assets in DRC, including the one that's just been safeguarded.

,
There is a difference between a bribe for a specific permit or "consultancy fee"
and this, because the DRC "safeguard" is legal, but only because the country
makes the laws! [Name] is 100% correct, this is a shakedown, extortion,
blackmail, call it what you will. And if there's one constant about blackmailers
over the course of history, it's that they'll never just shake you down once; when
on the hook the victim will pay, pay and pay again.”
In other words, I too believe DRC is taking “Resource Nationalism” to a whole new level. The
subject then turned to the difference between “legal” and “illegal” bribery, for example the US
lobbying system in which it’s perfectly legal to give a large sum of money to a politician and in
return expect tacit support for your cause. The thing is, what’s going on in DRC now isn’t mere
bribery, it is in my opinion blackmail and I tried to make the distinction in a later mail to the
group:
“I absolutely agree with your lobby group argument. However, there is a
difference between common or garden corruption be it illegal (a million in
banknotes for a permit) or legal (election campaign donation from NRA) and
outright blackmail be it illegal ($20,000 or I tell your wife) or legal (DRC
"safeguard"). The premise of blackmail is different, it's the threat of removing
the asset from your life permanently (wife, copper project) if you don't do as I
say. It's very different.”
Now be clear, mine is just one opinion and the others in the experienced groupette of mining
people either agree with all, some or none of my position depending on their taste. But the
episode recently recorded by IVN in DRC, and then watching the way it got spun by IVN to
make it sound like a wonderful step forward instead of what it truly is, legalized theft, is
another in the set of reasons why I prefer not to be exposed to that country.
Copper Mountain (CUM.to): The news Friday evening (12) that CUM.to would be no more
and as from Tuesday December 6th Copper Mountain’s ticker will be CMMC.to caused a round of
giggles at IKN nerve centre. For sure I haven’t
been the only one to latch onto the stupid and
puerile jokes around its ticker (and I make no
apology either, when the Higher Powers hand
you a comic device say thank you) but it’s clear
that the constant ribbing the company took
about its ticker symbol got too much for them
and it was time to do something about it.
When it came to the IKN series of posts it didn’t
help that the company is a total dog either, but
there is a serious message behind my
schoolboyness. People will tell you that having an
”unfortunate” ticker symbol doesn’t matter, I
disagree. This is another part of corporate image and you have to get that right these days,
don’t leave room for a dumbo like me to poke fun at your company. And what’s more, if ticker
symbols were purely neutral devices companies wouldn’t go to the effort of getting tickers like
WOOF or DUST to bring positive connections.
So yes, having a symbol like CUM was negatively affecting Copper Mountain the company and
as such, they are right to change it to CMMC. Though I may go with “The Company Formerly
Known As CUM” for the next post on them ☺.
The Low Cost Producer Basket
After 48 weeks of 2016, the Producer Basket shows a gain of 64.96% to level stakes.
21

,
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Barrick ABX 7.38 1165.33 18.25 15.66 112.2%
2 Newmont NEM 17.98 530.595 17.82 33.58 86.8%
3 Goldcorp GG 11.56 832.381 11.29 13.56 17.3%
4 Franco Nevada FNV 45.75 178.01 10.39 58.35 27.5%
5 Agnico Eagle AEM 26.28 223.475 9.18 41.10 56.4%
6 Ang/Ashanti AU 7.10 405.27 4.64 11.45 61.3%
7 Buenaventura BVN 4.28 254.19 2.91 11.46 167.8%
8 Detour Gold DGC.to 14.41 174.06 3.13 17.99 24.8%
9 Sibanye Gold SBGL 6.09 228.71 1.94 8.47 39.1%
10 New Gold NGD 2.32 512.8 1.86 3.63 56.5%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 64.96%
This time last week I wrote that “...(t)he waterfall selling seems to be coming to an end in the
Tier One stocks at least” and the action we saw since then backs up that hunch. Of our ten
basket stocks, nine registered gains and just one lost on the week, our second smallest market
capper Sibanye (SBGL down 2.6%). We also note that the smallest of the lot, New Gold (NGD)
only added a single penny on the week. Meanwhile up at the big boys end of the list Barrick
(ABX up 6.4%) and Newmont (NEM up 5.9%) did well and even Goldcorp (GG up 3.6%) did
okay I suppose, but the biggest weekly winner was the 9.6% added by Detour Gold (DGC.to),
the one that was most remorselessly beaten up by Mr. Market in November.
Our basket average managed to out-perform the GDX benchmark by a few tenths too, the first
time in a while that that’s happened but the lead is stil less than 10%. Unless there’s a punctual
blow-up in a specific basket stock we should hold on for the annual win now, one month to go
and all that.
The Low Cost Producer Basket: Weekly performance
200% and comparative to GDX control
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
-20%
Regional politics
Argentina: Provincial agreement update
You may remember that the man in charge of the mining industry in the Marci government,
Sectretary of Mining Daniel Meilán (reporting to a Minister of Energy and Mining who is all
hydrocarbons and no hard rock), has a big plan to get the country’s mining industry moving.
It’s called the Federal Mining Agreement (acuerdo federal minero) and the idea is to get the
governors of all 23 Argentine provinces to agree on a framework for the mining industry in all
regions, then present the document as a law project to the national congress (lower and upper
houses) in order to turn it into law. The plan was (13) to get all governors to sign onto the deal
by the end of this year and get it in front of Congress at the start of 2017. The way the Macri
government sees it, this would remove a lot of the veto power currently held by regional
governors and open the whole country up to more mining investment, rather than seeing the
industry limited to those provinces understood to be miner-friendly such as San Juan or Salta.
22
dr3naj ht71 ts13 ht41 ht82 ht31 ht72 ht01 ht42 ht8 dn22 ht5nuj ht91 dr3luj ht71 ts13 ht41 ht82 ht11 ht52 ht9 dr32 ht6von ht72
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 ht31 ht4ced
source: ikn calcs, NYSE/Nasdaq data

,
Well, the timeline isn’t going to plan. Shocking surprise, no? In fact it’s been difficult to hear
anything said in public about the Federal Mining Agreement, so when a very pro-mining voice
mentioned it last week and even they admitted that the plan was suffering some delays, Otto’s
First Law Of Mining News Releases (14) came immediately to mind:
Otto's First Law of Mining News Releases: Considering that anything contained in a
mining news release is presented in the best possible way for the company in
question, any piece of information contained in a NR that comes across in any way
negative means the real news and/or events behind it must be very, very bad indeed.
Sr. Néstor Álvarez is president of the Chamber of Mining Companies of Chubut, the province
trying and failing to push mining development past its apparently anti-mining governor Mario
Das Neves. Álvarez was interviewed by a local Chubut radio station last week (15) and after
waxing lyrical about the benefits of the Federal Mining Agreement for the country, admitted
that the objective to have a draft agreement in place by the end of 2016 hadn’t been achieved
and that they were now aiming for “the first months of 2017” to have that draft agreement in a
form that would be acceptable for all regional and provincial governors. In other words, instead
of a signed and sealed document by December 2016, they’re now aiming for a draft document
in the first months of 2017 (which technically includes May, of course) which would then do the
rounds of the provinces and aims to get all 23 provincial governors on board to the same rules
and regulations for mining activity, including all seven of the provinces that current either
severely control or outright ban mining, run by anti-mining governors who will be asked sign
away the power to stop mining on their territories. I’m sorry folks, I’m not feeling this one.
Meanwhile, the main emerging opposition to the Macri Podemos Alliance party, the “Frente
Renovador” arm of the PJ Peronist party led by Sergio Massa (who ran for President last year
and came in a de-facto third), caused a stir last week by saying that the export tax on mining
products, scrapped by Macri, should be put back in place in order to bring an extra $5Bn into
the State coffers. This is the type of issue that gets its quasi-referendum in the Congressional
mid-term election in late 2017. Macri has to get the country moving economically before then,
else suffer the consequences.
Peru to make mining exploration easier
Meanwhile, in a country that does understand mining it looks as though the mining law is going
to get a re-vamp in order to make mining and particularly mining exploration easier and less
bound up by red tape. I’m a little late to this one and really should have included it last week,
but Peru’s Minister of Energy and Mining, Gonzalo Tamayo, announced in late November that
(16), with a slated in date of February next year, the PPK government would send a bill to
congress that would make permitting for both hard rock and hydrocarbons exploration easier,
cut out unnecessary red-tape and make the country more attractive for exploration activities in
general (while still protecting rights of communities and environment).
I get to catch up on the above story because it ties in with a speech given by Minister Tamayo
on Friday at the big CADE event, Peru’s annual businesspeople’s bash that gets all the (self)
important people of the country in one room. At that event Tamayo gave a keynote speech
about what he calls “The New Mining Industry”. Here’s an extract (translated):
“This new mining industry is modern, environmentally and socially sustainable, but also
allows us to raise the level of well-being of our citizens inside the logic of better
economic development. This is the challenge we have, to build a national consensus
about the economic importance of the sector”.
Nice to be a politician, isn’t it? And we all lived happily ever after.
Pacific Alliance on mining
Last week the Ministers of Mining (and Energy) of the four Pacific Alliance countries, Chile,
Peru, Colombia and Mexico (South to North order) met in Santiago de Chile in order to work on
agreements that would help mining develop in their respective nations. Chile’s Mining Minister
23

,
Aurora Williams led the presser after the meeting and said (17) (translated) “We must attempt
to learn institutional lessons about the technical, social, and environmental characteristics (of
mining) that allow a harmonious future between the mining industry and our citizens” and that
“The Pacific Alliance must aid regional integration, promote high standards and seek new
markets together”. Which is a coded way of saying that Chile wants in on the action in Peru,
Colombia and Mexico, backed up by her statements later that said how Chile had hundreds of
years of mining experience, the most advanced mining technology in the region and was
“willing to share” with its Pacific Alliance partners.
Guatemala: Another district votes against mining
Last Sunday November 27th, the approximate 7,000 residents of the municipality of San Carlos
Alzatate in the Jalapa region of Guatemala voted on whether to allow metals mining to happen
in their territory. The vote was overseen by neutral observers and deemed to have happened in
a free and fair manner, even though it will not officially recognized by the national government.
The result (18) was 5,972 votes against mining, 72 votes for mining, 135 null/voided votes. In
other words, “No Mining” won 98.81% of votes.
Market Watching
Angel Gold (ANG.v) Redux
One of the worst habits in this Canadian juniors market is this thing about pumping stocks for
no reason and getting their stock prices to zoom “because somebody said something”. The
person or persons who shifted Angel Gold up by over 50% on the back of these simple lines
written by my hand on Sunday November 20th...
“Those of you who are more risk-tolerant should take a look at Angel Gold
(ANG.v), the surprise package of the conference. I'll talk more about this one
next weekend, too.”
...may or may not be new round here. They may have a far higher risk tolerance than even I
suspect. They might not think $60,000 is much money. I honestly don’t know, but what I do
know is that it’s a waste of time to pump these things, even something as small as ANG.
The person or persons who bought over 600,000 shares of ANG.v on Monday and Tuesday on
the back of that one simple line in the cover mail the previous Sunday evening would have been
much better off buying into the 8c/unit placement that’s currently running at the company. In
fact, the company would be better off, too.
To be clear: I like ANG the company, I don’t own any stock yet but I’m thinking about it. The
reasons why I like the stock as a concept on playing higher gold prices was laid out last
weekend (so no need to go over the same ground). But I’m also clear that by its very definition,
a stock selling for around 10c is going to be an imperfect one and have issues or negatives that
need to be considered carefully before making any investment decision. Reading two lines in a
Flash update and just pressing the buy button “because other people read Otto too” is not the
24

,
road to wealth and leisure, ladies and gentlemen. Don’t do this again, please.
Minera IRL: The vote goes the right way
Fellow shareholders, thank you for helping clean up Minera IRL. As you are no doubt aware, the
AGM on Wednesday took place and the result was that Gerardo Perez was left as the only
director (Frank O’Kelly was voted down, the other three decided to take the exit door reserved
for cowards and resigned before the AGM started). The vote totals have not been disclosed but
you can safely assume that the count was heavily in favour of us and the Peru dissident
shareholder plan. You can also safely assume that Rio Tinto abstained from all resolutions.
What happens now is that very soon we will get news from “New IRL” about the make-up of its
new board (Perez has to nominate two other people to reconstitute it to its minimum
headcount) and then the plans of the new board will be rolled out. Expect positive steps to be
taken in the very near future and when they do happen, ladies and gentlemen, you’ll be able to
compare what the previous board wanted to do and how slowly they were going about things
to the shareholder-friendly strategies and progress we’ll get in 2017.
Episode eight of “What I’d buy now”
Our regular segment reaches its eighth incarnation with the results of our picks and weightings
in IKN391 and the new choices for the next four weeks. Most of you should know the story by
now but for those just joining us, here are the rules (copypasted from before):
The feature conveys “what I like now” in my own portfolio considering the state of the market,
the company particulars and their shares prices right here and now. It has been, is and forever
will be more of a thought experiment than a map of how I’m trading the market (because I
tend not to day-trade very much). The rules are these:
1) You give me $50,000. We assume flat forex during the time period.
2) You tell me I have to invest every dollar in currently open IKN Weekly stock picks.
3) I’m allowed to allot different dollar amounts to different stock, from zero on up.
4) I base my decisions, choices and dollar amounts on what I think today about the
company, the stock price and the current underlying micro and macro fundamentals.
5) You know that I like all the stocks because you know I already own them, we both
understand these answers are about how I feel today about the open stock positions
for the next four weeks, no more or less.
We’ve had seven episode periods so far (IKN369 to IKN372) (IKN372 to IKN375) (IKN375 to
IKN379) (IKN279 to IKN383) (IKN383 to IKN387) (IKN387 to IKN391), now this one, 391 to
394 (with 393 covering two weeks). Here’s how our new result looks:
Mark spends $50,000 in IKN391 Mark's $50k in IKN394
company ticker current PPS amount I'd invest today PPS today position value
Cordoba Min CDB.v C$0.73 7000 $0.75 7192
Rye Patch Gold RPM.v C$0.32 6000 $0.25 4688
B2Gold BTO.to C$3.86 5000 $3.27 4236
Continental Gold CNL.to C$4.02 5000 $4.44 5522
Starcore Intl SAM.to C$0.65 5000 $0.48 3692
Excellon EXN.to C$1.94 5000 $1.42 3660
Sandstorm Gold SAND U$4.88 4000 $3.92 3213
Atico Mining ATY.v C$0.80 3000 $0.83 3113
Regulus Res REG.v C$1.40 3000 $1.35 2893
Tinka Res TK.v C$0.20 2000 $0.235 2350
Riverside Res RRI.v C$0.46 2000 $0.47 2043
Avino S&G ASM US2.35 2000 $1.40 1191
Lara Expl. LRA.v C$1.34 1000 $1.15 858
Focus Ventures FCV.v C$0.07 0 $0.06 0
Total 50000 NEW TOTAL--> 44651
25

,
Ugh, horrible. November smacked my picks and weighting around the parking lot and back
again and if it weren’t for the base metals plays (CDB, ATY, TK) and the late rush in CNL it
would have been a lot worse. The biggest holes were made by high-end weightings in the small
goldis SAM.to and RPM.v, along with the kicking taken by the silver picks (EXN and ASM). All in
all it’s not a performance to be proud of. Anyway, here is the running results table with the
performances of all episode periods to date:
period final total profit/loss to $50k
IKN369 to IKN372 $58,003 $8,003
IKN372 to IKN375 $53,274 $3,274
IKN375 to IKN379 $49,853 $-147
IKN379 to IKN383 $55,918 $5,918
IKN383 to IKN 387 $44,597 $-5,403
IKN387 to IKN391 $58,210 $8,210
IKN391 to IKN394 $44,651 $-5,349
Hey, hope that recent pattern holds, with the last four returning big win/loss/win/loss in turn. If
so we’re setting up for an end-year flourish and to that end, it’s time to sweep my recent past
under the proverbial carpet and roll out the new picks and weightings, set to run as from now
to IKN398- Here’s how I’m playing it:
Mark spends $50,000 in IKN394
company ticker current PPS amount I'd invest today
Cordoba Min CDB.v C$0.75 7000
Rye Patch Gold RPM.v C$0.25 6000
Sandstorm Gold SAND U$3.92 6000
Atico Mining ATY.v C$0.83 6000
B2Gold BTO.to C$3.27 5000
Tinka Res TK.v C$0.235 4000
Continental Gold CNL.to C$4.44 4000
Starcore Intl SAM.to C$0.48 3000
Excellon EXN.to C$1.42 3000
Regulus Res REG.v C$1.35 2000
Riverside Res RRI.v C$0.47 2000
Wesdome WDO.to C$2.48 1000
Lara Expl. LRA.v C$1.15 1000
Focus Ventures FCV.v C$0.06 0
Total 50000
Cordoba and Rye Patch stay at the top (stubborn? Moi? Mais non!), then come the main
weightings changes for this episode because I think Sandstorm and Atico are the right places to
bet larger. I’ve dropped Continental by a thousand because I think the main move is now in
(unless MUX steps up quickly) and Starcore and Excellon are downgraded by $2k apiece
because I don’t want to be beaten up like that again. I may be a contrarian, but masochism
isn’t my thing. We’ll catch up on the results of this batch in IKN398.
Conclusion
IKN394 is done, we end with bullet points:
• Last week’s narrative on the Red Eagle (R.to) site visit allowed more room for the
numbercrunch side of the company this week. I like R.to a lot, more than I thought I
would and the clincher was seeing how well-run and professional the company is, for
that one is happy to pay a little extra. As long as it executes R.to has a bright future
and is a buy here, but the state of the market means that I think I can pick up my
26

,
starter position more cheaply than 80c. I hope to have the line open on the ‘Stocks to
Follow’ list as of next weekend. From there, plenty of potential to add as 2017 unfolds.
• I don’t care what anyone says about Friedland, his marketing genius and the rock porn
deposits owned by IVN.to in the country. It’s DRC, I’m happier without exposure there.
• The Continental Gold (CNL.to) news last week was very positive and with the upcoming
site visit to Buriticá I have a lot to think about. But whatever they might represent in
the near future a buyout is still by far the most likely exit strategy for the company.
• I still need to make a decision about Starcore Intl (SAM.to), whether to leave it as a
Top Pick or demote it t the ranks and sell a portion of my holding. I’m putting it off,
frankly, I want to see the quarterly production numbers for one thing and the news of
the closing of the real estate deal would be another fillip.
I thank you in advance for any feedback. Our Top Pick stocks are Regulus (REG.v), B2Gold
(BTG) (BTO.to) and Starcore Intl (SAM.to). Flash updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen. Namaste.
Mark
Footnotes, appendices, references, disclaimer
(1) http://www.spdrgoldshares.com/usa/historical-data/
(2) http://www.redeaglemining.com/news/details/index.php?&content_id=336
(3) http://www.redeaglemining.com/_resources/presentations/corporate-presentation.pdf
(4) https://www.canadianinsider.com/company?menu_tickersearch=Atico%20Mining%20Corporation%20%7C%20ATY
(5) http://finance.yahoo.com/news/continental-gold-receives-environmental-permit-205010912.html
(6) http://www.elcolombiano.com/negocios/oro-en-buritica-licencia-a-continental-gold-DC5488849
(7) http://www.eltiempo.com/estilo-de-vida/ciencia/anla-dio-licencia-a-una-de-las-minas-de-oro-mas-grandes-del-
pais/16764814
(8) http://www.dailymail.co.uk/wires/reuters/article-3989864/LME-copper-retreats-weaker-investor-appetite.html
(9) http://finance.yahoo.com/news/ivanhoe-mines-zijin-mining-sign-080000982.html
(10) http://www.mining-journal.com/financeinvestment/companies/ivanhoe-gives-up-more-of-kamoa/
(11) http://finance.yahoo.com/news/ivanhoe-mines-conference-call-november-123000450.html
(12) http://finance.yahoo.com/news/copper-mountain-changes-ticker-symbol-182000564.html
(13) http://www.americaeconomia.com/negocios-industrias/argentina-busca-acuerdo-entre-sus-provincias-para-
impulsar-esperadas-inversiones
(14) http://incakolanews.blogspot.pe/2015/07/primero-mining-pto-ppp-and-ottos-first.html
(15) http://eldiariodemadryn.com/2016/12/el-acuerdo-federal-minero-se-firmaria-en-los-primeros-meses-de-2017/
(16) http://elcomercio.pe/economia/peru/mineria-mem-evalua-cambios-reglamento-exploracion-noticia-1949210
(17) https://www.elsoldemexico.com.mx/finanzas/536432-alianza-del-pacifico-apuesta-por-intensificar-la-integracion-en-
la-mineria
(18) http://www.noalamina.org/latinoamerica/guatemala/item/16605-san-carlos-alzatate-dijo-no-a-la-mineria-en-
consulta-municipal
27

,
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
28

,
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
29

,
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.
30