IKN #396Premium

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The IKN Weekly
Week 396, December 18th 2016
Contents
This Week: Trade heads up, In today’s issue, The year-end carnage continues and a buying
opportunity arrives.
Fundamental Analysis: Continental Gold (CNL.to) site visit.
Stocks to Follow: Overview, Starcore Intl (SAM.to), Red Eagle (R.to), Wesdome Gold
(WDO.to), Rye Patch Gold (RPM.v), Sandstorm Gold (SAND) (SSL.to), Cordoba Minerals
(CDB.v), Atico Mining (ATY.v), Excellon Resources (EXN.to).
Copper Basket: Overview, Copper Mountain (CMMC.to), Capstone (CS.to), Hot Chili (HCH.ax).
Low Cost Producer Basket: Overview.
Regional Politics: Ecuador: Anti-miners attack Panantza-San Carlos project, one police officer
dead, Ecuador: Mining as a issue in the Presidential election, Argentina: More mining tax fun,
Argentina: Das Neves spells it out in Chubut, Guatemala: Academia on mining conflicts,
Dominican Republic: Good press for Pueblo Viejo, Colombia: The Ibagué referendum on mining
can now go ahead, Chile: Wage deal between unions and management at Codelco.
Market Watching: Starcore International (SAM.to) 2q17 financials.
I remind subscribers that no part of this newsletter can be copied, reproduced or
given to any third party without the express permission of the author.
This Week
Trade heads up
I’m not going to be in any hurry to do so and will CERTAINLY (big black letters) wait for
better prices to arrive, but the call this week is that I’m selling part of my Starcore International
(SAM.to) position. It’s also losing its Top Pick rating. See Market Watching for more.
In today’s issue
As
• Today’s main event is the Continental Gold (CNL.to) site visit report in Fundies.
• See ‘Market Watching’ for a dissection of the Starcore 2q17 numbers and the reasons
why I’m going to sell part of my position.
• The fun and games continue in Argentina. ‘Regional Politics’ for that.
Christmas schedule
As luck (?) would have it, this year Christmas Day and New Year’s Day fall on a Sunday, the
publication day of The IKN Weekly. As the late days of the year always see action slow to a
crawl in our sector of focus anyway, the combination means that the next two weeks of The
IKN Weekly will be delivered on time but reduced in size. However we do have jobs to do over
the two weeks to come as well, they’re not going to be totally bereft of fun and frolics.
• In IKN397 next week, we’ll run over the new compositions of The Copper Basket and
the Low Cost Producer Basket (which I’m going to re-name to better reflect its
purpose). Expect overviews of the 2017 basket companies with particular emphasis on
1

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any new names.
• In IKN398 on New Year’s Day, expect the regular quarterly Regional Risk Review. Also
it’s when we ger episode nine on the now regular “What I’d Buy Now” feature in
‘Market Watching’.
There will also be all the numbers updated and noted on covered stocks, plus any relevant
regional political events reported of course, but unless something really dramatic happens from
out the blue there won’t be in-depth analysis on any given company or much in the way of op-
ed as the year winds down.
The year-end carnage continues and a buying opportunity arrives
Last week’s thought on the then-upcoming FOMC decision went like this:
“...0.25% may slightly disappoint the Trump Rallyists and seeing gold move up on that
number wouldn’t surprise me. However, as important as any headline number will be
the guidance in the FOMC communique so until we read the words there’s no call
being made here.”
And indeed, Janet & Co shocked nobody by raising 0.25%, but it was the guidance for 2017
which caused gold to dump even further and our main benchmarks to do this:
• GDX down 7.7%
• GDXJ down 12.6%
• GLD down 2.1%
As for GLD gold holdings, down and down they go. We stand this weekend at 836.99 metric
tonnes, the lowest number since May 10th for
our unfashionable precious metal. However
GLD gold holdings, Brexit to date (metric tonnes)
Friday brought some significant buying action 1000
as well, indicative of large money moving into 980
the space left by negative sentiment and the 960
940
end of tax-loss selling. We don’t yet know
920
who exactly waded into stocks such as 900
Fortuna Silver (FVI 8m shares), First Mining 880
Finance (FF.v 57.1m shares very late day) or 860
840
our very own Excellon (EXN up 22.3% on
820
Friday on constant buying) but the rumour 800
picked up by this desk was that at least some
of the volume was from Blackrock via the
Scotia desk, something that happened this
time last year as well (see EXN below for
more)
But in just the same way nothing goes up forever, nothing goes down forever either. The broad
market has been basking in the Trump rally but that’s now looking tired and gold and its
friends, as a result, are now looking very oversold to me. There’s a lot of risk being ignored by
the wider market and we’re now in the Christmas overhang in which nothing much happens
(except for that retail-bait “Santa Rally” thing CNBC likes). In short, it’s time for the miners to
reverse their recent trend and start moving higher, this week looks like the low to me and even
though it may take two or three weeks for mining companies to start rising, there are a lot of
bargains out there now. Which is why I’ve promoted the near-term sentiment on several
covered to Strong Buy below in ‘Stocks to Follow.
Buy low sell high, they say. Well valuations are now low.
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 61/6/21 61/21/21 61/61/21
mt
source: SPDR GLD data

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Fundamental Analysis of Mining Stocks
Continental Gold (CNL.to) site visit
Most of my last week was spent in and around Medellín Colombia and the overriding reason for
that was to visit the Continental Gold (CNL.to) Buriticá gold project. Here follows the site visit
report and it’s going to be set out in the normal IKN Weekly way so expect photos, annoying
narrative and thoughts on what it all means scattered through the note but mainly left to the
end, in the conclusion and discussion section. In other words, the normal way we play such
visits, with part of the task condensing the 500 photos or so taken down to under 20
representative ones so without further ado let’s dive in, but for full disclosure please remember
that a) I have been long CNL stock since early this year (and the position is still snugly
profitable, even after last week’s selling) and b) CNL is covered as one of the ‘Stocks to Follow’.
There is also potential bias in the fact that c) CNL paid for all my transport (air and land), as
well as my hotel and food (except for alcoholic drinks, quite right too). But only potential, I tend
not to be swayed by such matters.
Monday: 05:00 alarm, shower, coffee, taxi, flight to Lima, another flight to Colombia,
immigration queue, car pick-up, Medellín hotel, pre-dinner cocktail with Paul Harris of The
Colombia Gold Letter (also on the trip)
and Ari Sussman (CEO of CNL), dinner
with them plus other analysts on the trip
(Canadian and UK houses, local biz too),
post dinner drinks and chat, bed. Done.
Tuesday: The main day of the trip started
at 06:00am and once we’d all gathered
and had a spot of breakfast, it was time to
head to the downtown airport servicing
local flights (rather than the international
airport some 40 minutes out of town) to
the helicopter company. A smart and
professional service, the party took three
copters out to the project some 30
minutes’ flight away (I was told it’s about
2½ hours by road, which wouldn’t have hurt much either). We got in the choppers, we flew, we
enjoyed a privileged views of the beautiful Colombia landscape outside of Medellín, all rolling
hills and greenery, rivers cutting through valleys and low clouds as contrast. I took dozens of
photos and here’s just one, a shot of the town of Buriticá as we approached the project.
The isolation of the town is made clear from the air and later, we experienced the “one road in
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one road out” nature of its access. The arrow in the photo not only points towards the CNL
project but also the main cluster of the informal and/or illegal
mining operations in the district. As is now known, the large
influx of illegals has been run out of town and their operations
closed down (there may be one or two hanging on, but it’s now
a negligible issue) and those left operating are now small co-
operative concerns with good permits that have their act
together and are now either officially formalized or in the
process of formalization.
We got out our transport. Here’s my flight companion, VP
Exploration Mauricio Castañeda, coming out behind me and
taking care of the things that really matter to any true geologist,
maps and bagged lunches. The group gathers at the helicopter
landing site (also the location for company sleeping quarters
and dorms) and waits for the bus to take us on site. I won’t
embarrass the analysts on the tour
with photos, so here’s CEO Ari
Sussman and COO Donald Gray
along with four-legged friends. COO
Gray came to CNL in February 2015
from Tahoe Resources (TAHO)
(THO.to), after he’d built the
Escobal silver mine in Guatemala. If we don’t concern ourselves
with the wider Guatemala community and political risk and focus on
what COOs do, Escobal is recognized across the industry as a real
Rolls Royce of a mine, a top class operation. That was Gray’s
doing, which means he’s the right person to have on your team for
planning and procurement at a project such as Buriticá at this
stage. Quiet, studious and friendly, he’s the CNL team member that
most impressed me during the visit.
On the drive to the project site we
pass informal and illegal mining
zones. Without exception, the
illegal mining operations have now
been closed down, tunnel
entrances blocked, nothing doing.
Examples of those are in the two
smaller boxes in the photos At the
informal/formalized small
operations with licences there is work happening, such as at
the larger box in photo. I was told that this particular mine has
a good working relationship with CNL and in fact sells its ore
to CNL for processing at its current, small 30tpd processing
facility. The informals here are extracting something in the
region of 1 to 1.5 tonnes of ore per day but as they’re high-
grading the thin veins, rather than working on a mechanized
schedule the way CNL plans, they’re getting averages of
perhaps 50 g/t gold from that ore. Therefore and using
ciggypack estimates, their business is about mining 1.5oz to
2oz gold per day and getting paid at 65% or so spot by selling
it for tolling. On a good day, the team working that mine will
earn U$1,500 between them, on a bad day less than a
thousand. That, ladies and gentlemen, is a hard life of mining.
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We arrive at the main camp. The first item on the agenda is the main presentation, given by
CEO Ari Sussman, President Mateo Restrepo, VP Exploration Mauricio Castañeda and COO Don
Gray. In other words all the main players of this company (bar the board) and as the day
unfolded they were backed up by the contributions from VP Sustainability Julian González and
VP Environment Guillermo Salgado and their respective teams. Having all the company main
players in one place at one time is optimal for a visit such as this, one of the advantages of
having the vast majority of your company based in Colombia around the project, rather than at
a big head office in Canada (where the headcount is as low as eight, I believe). Here’s just one
photo from the whole gig (that ran overtime and took nearly two hours) of CEO Sussman who
was up first and told us many things.
He told us that it was the first full site visit by analysts for 16
months (which surprised me) and that the company was very
pleased with the awarding of the environmental permit (EIA) just
a week and a half before our visit (which is wholly
understandable, it’s a big win moment for the team). He then
went over some of the basic design features of the Buriticá
project and underlying numbers, mostly the stuff known to us all
previously. However the reminder Buriticá works at U$1,000/oz
gold was a timely one (the feasibility study (FS) runs a 23.6%
IRR at that price, the type of strong margin at low prices that a
high grade deposit affords you), what with gold where it is now.
He told us the current 9.5m oz resource “is only the beginning”
for the total ounce count at Buriticá which may be true, but there
was some real arm-waving going on. To be clear on this point,
the current resource count is 4.71m oz Au M&I (at 11.4 g/t avg)
plus another 4.8m oz inferred (at 9.5 g/t avg) and as the
presentation unfolded we heard about the ways which CNL
believes the current resource underestimates the total resource.
This was expanded upon by VP Expl Castañeda and a little by
COO Gray in their respective presentations later on, but there are
three main legs on which this assumption is based.
• Positive grade reconciliation: Results from the test stoping, plus results from other test
areas and samples indicate to the company that the grade they’ll eventually process is
higher than the grade they have as official reserves and resources. The multiple thin
vein nature of the Buriticá deposit (74 identified veins) means the eventual mining will
take rock (typically between the thin veins) not necessarily in the target vein systems,
but results to date indicate they’ve been finding discreet veins, stringer veins,
microveins in that rock and adding “unexpected” grade to the overall ore processed.
• Wider than expected stope widths. One example of this is a zone we eventually visited
in the underground tour, where a vein system was marked at 1.6m for mining but
when the test stoping took place (we trudged over the spot once it had been cut and
filled) the mineralization width was 2.83m. That’s more gold than expected from one
place, a phenomenon that CNL strongly suggests will repeat in other areas. Hmmm...
• Exploration upside. This part was as much CEO Sussman as VP Expl Castañeda’s
ballgame later, but the region is obviously prospective and exploration around the
known deposit (Castañeda has done a lot of bootleather geological mapping of the
area) shows plenty of potential. This type of resource expansion is different from the
first two which are more organic in nature, based on rocks we’ve already heard about.
Further to this point of resource there was quite a lot of talk (and questions from the floor)
about the test stoping, specifically the long-hole trial mining stope in the Yaraguá section of the
deposit (we walked past it in the underground tour later) that took just over 2,000 tonnes out
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and instead of the expected 15.9 g/t gold average, returned a 31.1 g/t grade average and
production of 2,093 oz gold (the silver is and always will be a small kicker at this mine, it’s all
about the gold). Almost the first thing CEO Sussman said about this program was, “The trial
stope was not cherry-picked” and was chosen as a representative area, probably because he’s
already fielded dozens of questions from nosy cynics like your author on this. Or maybe just
defensive. And I’d like to believe it too; it was a logical enough place to take a bulk tonnage
sample, access and general location and all that, but... I can’t help but shake from the mind
that the amount of thin veins in the place they chose plus the level in the deposit were all
conducive to finding unexpected stringer veins between the known mineralization. I suppose
what I’m saying here is that the bulk sample was a valid exercise, but there’s no way I’d start
valuing Buriticá on an assumption of double current 43-101 grades. Or even 50% extra.
He told us about the company’s plans to raise the financing for construction. This is the bit
that most interested your author, because it’s one thing to talk about jam-tomorrow resource
upside (this one was better than many but in the end all companies sitting on exploration stage
projects will claim upside on the known resource), quite another to get down to brass tacks and
explain where the money’s going to come from. Main points of order here.
• The 2017 exploration budget is slated at U$100m, so with an estimated U$20m at bank
come the end of this year CNL clearly needs funds in the near-term to make good.
• The total capex to build out Buriticá and get it to production day one in mid-2020 is
down in the FS at U$389m, including contingency. CEO Sussman told us that the
number in his head, the one that covers all eventualities, is U$425m. That sounds
eminently sensible to me.
• So to the plan: CEO Sussman would like to raise the first U$250m in straight financial
debt. No equity placement, no streaming deals, no hedging program. The plan is to
access the first U$100m of this facility by the end of 1q17, at which time the main
access road now being constructed on-site will be ready for use (it has a $3m total
budget, construction started in September, we saw it from the air with heavy plant
working, it’s about half done and progressing well). This first $100m would fund the
2017 program and then three other tranches of $50m, $50m and $50m would come on
stream in 2018 and beyond at the appropriate time. From there the approximate
$175m gap would be raised depending on market circumstances, though there was no
plan set in stone to date. That’s sounds fair enough and I’d expect the final raise would
be mainly or totally equity-based.
Of all the presentation, this part on the financing plans was the most interesting because for
one thing it presented new information and for another it provided insight on how your author,
retail grunt that he is, can play the stock in the present day and the months to come. More on
that below in the conclusion section.
It was then time for Don Gray to take up the presentation, who noted CNL was still at basic
engineering levels of development and the job today was to identify critical path items and
search for and eventually procure the long-lead time items necessary for mine construction.
The current bottleneck was site access, so the current road building program was a vital step to
get things moving and assuming financing is forthcoming before the end of 1q17, the March
completion date for the new access road would dovetail nicely and let the build begin in
earnest. As for plans the civil works include tunnelling some 17km underground before
production starts, but that’s only the tip of the iceberg because the whole 14 year FS Life of
Mine plan involves over 200km of tunnels. If you do the quickmath, we’re talking about an
average of over 13km per year every year of the Buriticá LoM, the type of figure which makes
one wonder whether the $272m sustaining capex estimate in the FS isn’t cutting things a little
fine. Another point that caught my attention is that around 50% of initial capex is local currency
sensitive (the Colombian Peso, COP) and the current plan is budgeted at U$1 = COP 2,850.
Now that works for me when compared to the COP3,000 or so average we’ve seen since late
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2015, but a look at the longer-term chart suggests that if the dollar starts to weaken against
Colombia’s currency we could be back at the longer-term 2,000 level. The current 2,850
assumption doesn’t leave much wriggle room (Red Eagle uses a U$1 = COP2,100 assumption).
Don Gray also talked about the conservative nature of the FS and the amount of potential
upside there was at Buriticá, but did it in a more sober manner than CEO Sussman. His was the
engineer’s eye, the “We’re happy with the parameters of the FS but if we encounter more when
we start mining then all good, we’ll adapt the plan and add value”. This sounds more sensible
to me than promising too much front end and if your mine plan can deliver strong returns using
conservative parameters all the way through, it fits with the way I like to approach projects and
their valuations.
It was then the turn of Mauricio Castañeda, VP Exploration and head geologist at the project
but as the presentation was already over-running his time was cut down. The main thrust of his
talk was about the potential for exploration upside over the larger concession, with several
examples given but perhaps the most interesting being the way mapping had connected veins
in a seemingly continuous manner between two target sites, namely Pinguro and Obispo, that
lie a full 10km from each other.
And to cut a long story short, that was the presentation. To sum it up in one sentence Ari
Sussman is the marketer, Don Gray is the sensible head on shoulders, Mauricio Castañeda is
the optimistic future vision. In other words, each one is perfectly suited to the respective roles
of CEO, COO and VP Expl ☺. There was a lot of confirmation on matters already known, which
is not a bad thing but doesn’t really add to the story. The best information was about the
financing, the resource upside stuff was a sexy hook, a lot of arm-waving about the future
potential of the mine and concession which can be fairly summed up by on stating that the
current FS is conservative in its pitch (I agree) but it is difficult to quantify the potential upside
and feed it into the stock price targets, especially when the visit was on a tight timeline (and we
were only on site for a day).
It was then time for lunch, which was taken in the town of Buriticá at CNL’s local offices and
under the auspices of the Community Relations (CSR) team. I got to talk to community
members, including one Doña Luceli, a long-standing member of the local community who was
deeply involved with local matters and obviously highly respected by everyone there, be they
part of the company or community. She told me about the changes before during and after the
invasion of the illegal miners and how much things had changed for the better in recent
months, thanks to the government eviction program of illegals and the ongoing presence of
authorities. She was also a fascinating person to talk to about local culture and customs, but
her insight on how the local population “lost their voice” while the illegals were in the area was
particularly sharp; she said it was first due in part to greed as the first influx of illegals brought
financial prosperity to Buriticá and people with shops etc suddenly had better businesses. But
then that greed turned to fear as the illegals influx became literally thousands and drowned out
the town, to the point where locals were afraid to walk their own streets. Money isn’t
everything after all, so now that the townspeople have reclaimed their town everybody is much
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happier. She was strongly approving of the company and its presence, plus its plans for the
future. Doña Luceli is in the centre of this photo, flanked by CEO Sussman and President
Restrepo. Also in this shot is Laura Castaño (far right), the head of the “Plan Buriticá” program
and the main liaison between company, town and government.
While eating we were given a presentation on CSR matters. It was again mainly about the
before/after of the government illegal eviction and it went into some of the current logistics of
the program. At present there are 200 police officers and 200 army personnel in and around
Buriticá to make sure the illegals don’t come back again; the main job is reasonably simple, as
there’s only one road in/out of the town it’s a case of mounting checkpoints at strategic
locations and denying access to those not living or with recognized work in the town (we went
through said checkpoints, men with
uniforms and weapons abound). The
soldiers will stay in the zone to the end of
the CNL Buriticá construction period, i.e.
mid-2020, therefore we can say the State is
fully committed to this project. That’s good.
After the food came a chance to do Q&A
with some of the people CNL has either
hired as CSR people or is sponsoring in
education programs. They included young
women and men training under CNL
scholarships to become community
relations professionals, mine engineers,
machine operators, miners etc. There were
250 applicants for the 60 scholarships
awarded so far (more to be awarded in 2017, also beyond I presume). Most interesting was
hearing from the woman set to become Colombia’s first ever female underground mine worker,
plus the young man who was previously one of the illegal miners in the zone who has decided
to improve his life by becoming a formal miner. A guy making a smart life choice.
By this time we were running against the clock (and as it turned out later the weather, which
for a while threatened to ground the copters) so it was time to go underground. Back from the
town to the camp, change into U/G gear, trundle down to the Yaraguá deposit tunnel. Here’s
the group assembling before going in, a decent headcount between CNL people and invited
guests such as I:
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And here we see the map brought out to help VP Expl
Castañeda explain the visit route and what we’d see, ably
assisted by COO Gray. The visit was on foot and we got
something like 600m into the workings, which was more than
enough to see the previous access tunnel (1.2km total) and a
typical sample of the new development workings this year.
And underground we go. As usual, it’s tough to get a decent
photo of what’s to be seen U/G and there wasn’t much
machinery working in the short period we were there, so the
best to offer are a couple of shots that show the typical vein
structures.
The first shot (below left) is one exposed vein, with a block
notebook for scale. This is chosen as being typical of the 74
known and mapped thin veins in the system at the deposit,
not including the stringers or some of the thinnest veins that
don’t make it inside the 43-101 resource due to location away
from the main zones. We saw (mainly from the maps) how the
veins group together at points, then move away from each
other, sometimes putting a couple of metres between them.
When it comes to the moment of mining this is the type of
ongoing issue the COO will have to tackle; whether to take the
whole zone out and see mine dilution vary, or whether to
chase down individual veins at certain points. One of my
comments to COO Gray at one point is that “You’re going to
have a lot of fun”, because any COO will be challenged on a
daily basis to make smart and efficient decisions on where and
what to main in order to optimize production grade/tonnage.
However, As CNL has started with a baseline of what looks like
a conservative FS from just about all angles, it means
surprises are far more likely to the upside. But it’s one thing to
have all this potential upside staring at you (though for sure it’s going to be one of the ways
CNL attracts serious market attention from potential buyers), quite another to base one’s target
price three and a half years from production day one on such potential bluesky. The fun will be
had by the engineers at the time, we investors should take the sober route.
9

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We moved further into the mine and got to our deepest point, a large central chamber (which
showed the high competency of the host rock, this
is good news for the mining) plus the start points
of a handful of stopes including what you see the
photo above right, a hanging wall which four of
the thin veins group together very closely (when
this rock gets taken out, free cash flow is
guaranteed. I managed to tease out a small piece
of vein rock and here right is a photo taken later
on (Peruvian One Sol coin to scale). This is high-
grading stuff but the shiny bits are pyrite, not
visible gold. A geologist may be able to tell you
what the blue-coloured mineralization is inside the
sample, sadly I’m not one of those and don’t have
a clue.
The final underground photo below shows VP Exploration Castañeda showing off one of the
main veins in the system, named San Antonio. This is one of the main and wider veins that can
be followed the whole 1.2km strike width of Buriticá and though not massively wide at 2m
(compared to other mines’ veins), it comes with accompanying thin veins close on either side
and the high grade makes for easy mining. Around this point was also one of the places where
the FS has the mineable vein width at 1.6m but testing found economic widths to 2.83m.
10

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It was then time to get back overground as word from
the copter pilots was that weather was closing in. Back
we went, changing into civvies quickly, to the transport
that managed to beat the clouds and back we went. By
the time Medellín city came back into view the sky had
changed completely once again (it’s the tail end of the
rainy season there and anything can happen) but as the
final photo below shows (next page) once Medellín was
really in view things were nothing short of lovely. Add
the fact that Medellín is a very attractive city, set in a
natural bowl and surrounded by rolling green hills, and
the view from above really is quite special.
Discussion
A site visit report isn’t the place to run the numbers closely. In the case of CNL we’ve done that
work already and on that score, after seeing what I saw last week I’m still comfortable with my
CAD$4.80 target on CNL, it’s a perfectly reachable number as long as gold can perk up a bit.
What a site visit such as this is more about is impressions, looking for confirmation of previous
assumptions or getting attitudes adjusted as things on the ground don’t quite fit your previous
model. That’s how I’d like to approach these final sections, the ones that most matter today.
The CNL visit last week was particularly useful to me because it crystallized my thinking
towards this stock and what I’m going to do with my personal position. The good news is that
most of the things I saw and experienced were confirmatory:
• It was good to see the rocks up close, even though time was tight and the original site
visit plan was to see core and visit two levels. In the end we didn’t see any core and
only got to one level at Yaraguá, but what was there confirmed previous expectations.
• It was good to have lunch in Buriticá town, see the calm there without the presence of
thousands of illegal miners, go through the well-manned army/police checkpoints, hear
from locals about the positive changes this year. All interesting, happy that the locals
are happy now, but nothing that was truly unexpected.
• All positive to hear about the potential upside to the CNL deposit and how the FS was
pitched conservatively compared to what might come out of the rocks once production
starts. There is plenty of gravy, but above all I like how conservative pitched baseline
numbers work without the positive grade reconciliation the team now seems to expect.
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Medellín from the air, last Tuesday afternoon
12

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But in the end none of these issues affect previous assumptions, they confirm them. That’s not
a bad thing of course and just the act of confirmation is more than enough to justify a site visit
and the DD that goes on but there aren’t any changes there, nothing to shift the dial or change
my target price.
On the other hand, I saw enough to be able to make a firm decision as to what I’m going to do
with my shares.
My original decision to go long CNL in May 2016 was straightforward. To that point I’d assumed
the company would have tremendous trouble getting its environment permit due to the
government permitting system and the community opposition to mining. With the advent of the
government Buriticá clean-up campaign (late April), then word from people close to the
permitting process that CNL had got its act together and he permit was moving forward (mid-
May) I changed my mind on the deal, admitted the error of judgement and went long the stock
at $2.68. The plan was simple; wait for the permit to appear, take profits and walk away and in
fact, if I’d stuck to the letter of that plan I would have sold in the first days of December at
something between $4.20 and $4.50 (never mind the target price). Luck has it that since then,
gold has gone further South and this weekend CNL sits at a far lower $3.55. Fate flutters its
wings, but in recent weeks I’d decided to alter the plan slightly and wait until at least this site
trip and maybe a little longer as the chances of a buyout offer for CNL were growing.
There’s also the back story about how I came to be on the trip in the first place. I’m definitely
not going to name names, but while attending the Colombia Gold Symposium in Medellín in
November I was approached by someone who can fairly be described as a middleman. He
wanted to talk to me about my previous coverage of Ari Sussman on the IKN blog, which as
many of you may know has been...well, let’s call it Rather Strident in its opinion (and most of
you will also get how the blog has a different type of voice than here at the Weekly, so we’ll
leave that there). The main bone of contention on the blog was the mess that Ari Sussman, Vic
Wall and the team at that time made at Colossus Minerals and the Serra Pelada project in
Brazil, a story I covered very closely (and called correctly, for what that’s worth) in the 2009 to
2013 period all through its pump period, through its growing community and project risk
problems right to when the whole story fell apart, by which time backers had lost hundreds of
millions of dollars due to the whole sorry affair. Up to close to the end of the Colossus story the
company was run by Ari Sussman of course and I made it very clear in publications over the
years what I thought of the company and its head man and even when I went long CNL this
year, that position hardly changed at all. And I was right, dammit.
So as stated, last month during my first Medellín visit I was approached by this middleman
person who was keen to get me to hear an alternative view. I of course agreed (free info, never
say no) and over the course of the next half hour or so was given just that, views of what went
wrong from an inside company point of view by a friend of Ari’s. It was all fair enough, certainly
13

,
getting the type of optics that aren’t usually available to a person outside the company was
interesting and at the end of it all, after I’d showed my appreciation for the time middleman
had spent with me in order to give another perspective on many aspects of the Colossus snafu,
I was invited on the Continental Gold trip that happened last week. Which was nice. Nice from a
professional point of view because I get to look closely at a company that I own and
recommend. Nice personally too because it was clear, or at least it seemed clear at the time,
that I’d be able to continue the conversation about all the Colossus mess with the person I’ve
framed as chief culprit, who’d be able to answer any questions I might have. It was also a
person who was, in some way or another, holding out an olive branch.
Cut to last week: I first met up with CEO Sussman on Monday evening pre-dinner. He was
personable and friendly, we chatted about this and that. Nothing about the IKN blog, nothing
about Colossus, nothing about anything controversial and that’s normal enough I suppose, you
hardly want to dive into the heavy stuff the first five minutes. But then the same tack continued
all through the rest of the visit. Tuesday morning pick-up, travel out, site visit, travel back,
evening social meal and it was nothing but superficial pleasantries. Then the rub, because for
some reason or another the CNL people booked me to stay in Medellín Wednesday night and fly
back Thursday lunchtime, even though the site visit program ended on Tuesday evening. I took
it easily enough, there’s plenty to do in a city like that and aside from catching up with a bit of
work, I had a good time Wednesday morning at one of the local museums and as luck would
have it, the CNL Colombia people were having their annual Christmas party that afternoon to
which I was kindly invited (free drinks and nice snacky things). CEO Sussman was also present
but again, no type of engagement on anything controversial such as my publications on him on
the blog or my position on the near-criminal way in which Colossus ripped off a whole range of
market participants, all while Sussman was making inside sales to the tune of just under $4m
net profit between 2009 and 2012 (and after he resigned as chairman in October 2012 there
was no disclosure necessary on the 1.76m shares he owned at the time).
I found the experience weird. It wasn’t for me to go up and say “Hey, let’s talk about Colossus”
and of course it wasn’t the ostensible reason I’d been invited on the trip (I own and cover
CNL.to after all), but it was at least part of the reason I’d received the invitation in the first
place and it was certainly part of my interest. An elephant in the room all week, the CEO of the
company I’m supposed to trust with my money didn’t seem to want to talk about shady past
things or my vehement denouncements of them all. As a trust-building exercise the week did
nothing at all, in fact it adds a new layer of doubt in my mind about the head man at the
company if (as I can only guess) the attittude was to prefer to avoid difficult subjects. I
suppose that in the end I own shares in CNL, not shares in Ari Sussman. Better that way.
Conclusion and trade decision
There’s plenty to like about the Buriticá project. Yes it’s high grading, yes it’s got plenty of
upside potential both inside the current resource tonnage and in exploration and expansion. Yes
the community and political issues have been significantly de-risked, due to first the
government eviction campaign of illegal miners and second to the biggest recent positive, the
award of the EIA permit to CNL. The assembled team (Restrepo, Gray, Castañeda, unfairly
naming but three) is top class and the type you’d want to move the project into production.
This package is enough to get me over my reservations about other matters:
• Ari Sussman. That whole thing was weird, even if he didn’t want to get deep with me I
can’t help but think that he should have at least mentioned something about the abuse
he’d suffered at IKN over the years, hopefully explaining to me why it was unjust. After
all, he and everyone else (on the trip) knew the dynamic. But no, just three days of
pleasantries and chit-chat.
• The open cheque expense account attitude. It’s all good fun, but is it necessary to hire
three helicopters when driving 2 ½ hours was almost as quick (once helicopter
induction courses and travel to and waiting at heliport etc is factored in)? We were put
up in the best hotel in town. We ate at the most expensive eatery. I was appointed a
chauffeur for the three days of the stay, just a phone call away. Doing all this on an IR
14

,
budget is fine for an operator, but this is exploration mining and the cash burn is from
shareholder funds. John-Mark Staude at Riverside could make the amount of cash
spent on IR in those three days last a full year.
• The way in which CSR can change quickly if and when a company is taken over by a
larger mining company. Sadly seen this one before, where the junior’s strong
relationship is ruined as the big company comes in and “knows better”.
I still plan to sell this stock and take profits, please be clear. It’s a strong project and that
combo of high grade, large tonnage and permits in hand means that the balance is very
attractive at this time, but I’m not wedded to this position and it’s one in which I’ll be happy to
sell too early (for the tastes of some) and take profits, potentially leaving cash on the table. If it
weren’t for this late-year macro-market induced price sag I could even sell now, but there’s one
thing that will keep me holding on for another quarter and that’s the plans CNL has for
financing 2017 and then beyond, construction to production. Consider the following:
• There is very little chance of a project moving forward to production under CNL. Look
around you, these type of top-level projects are nearly always bought out and there’s
little doubt about it now, CNL has a package that any Tier 1 or 2 miner worth its salt
would covet (some buyers would be better fits than others though).
• Juniors in this position will always represent they’re going to move to production all by
themselves because they have to, it’s a poker semi-bluff that’s understood in the
sector. And of course, the whole subject of M&A wasn’t even mentioned by company
people last week, not a breath about buyouts or sales which is the way it should be (if
you’re going to position going solo to production then do it, don’t play a half game).
Therefore they assemble a winning team (Don Gray the ace in the hole) and move to
raise the necessary financing alone. Then the offers come in and the bidding starts.
• The awarding of the EIA permit (plus the approval of the work plan recently), plus the
expected start of construction as from end March (when the construction road is in and
working) offer a clear window now for a buyout, before CNL starts doing its thing.
• The financing plans, as laid out by CEO Sussman, are to raise U$100m debt
immediately in a package that comes with tranches that add up to U$250m. Let’s be
clear here, any larger miner looking at CNL now knows there’s a clock ticking. The
larger miner will have access to capital at lower cost than a smaller junior such as CNL.
If Continental signs a debt deal for that $250m package, it will be signing in higher
costs for the eventual buyer and that’s something the big miner won’t want to do.
Now for sure it’s not a nailed-on certainty that a buyout deal of some shape or other will come
in the next quarter, before CNL signs on the dotted line and raises the capital it needs for 2017
to start construction. But it is a natural window of opportunity for a buyout deal, timing that fits
with the typical mining cycle too (deals get done in February). If a group of eight analysts on a
site visit know that CNL is putting together a $250m debt deal with $100m up front, every
single mining company thinking about CNL as their next investment knows it too. Therefore and
despite my original plan to sell on the permit (plus my latent reservations about its CEO) I’m
going to hold for one more quarter. If by the end of 1q17 there’s no buyout offer (or debt deal
in place) I will indeed sell take profits, this isn’t going to be a long-term hold whatever happens.
Until then, and assuming this afternoon’s $3.55 share price is either the bottom or very close to
it, I’m happy to roll the dice a bit further and wait for a potentially larger payoff in early 2017.
Stocks to Follow
Plainly horrible. Just two of our open positions registered gains (REG.v, EXN.to) and one other
15

,
is unchanged from my opening average price (R.to), which leave 12 others hit by the continued
sell-off and a lot of big losers in the bunch, too. In reverse order Continental (CNL.to down
22.3%), Cordoba (CDB.v down 18.8%), Lara (LRA.v down 17.2%), Focus (FCV.v down 16.7%),
Sandstorm (14.6%), Rye Patch (RPM.v down 10.2%) and Atico (ATY.v down 10.1%), those are
just the double figure losers. The only silver lining was the silver stock Excellon (EXN.to up
22.3%) which bucked the sector trend in no uncertain terms.
With the addition of Red Eagle (R.to) (see below) we now have 15 open positions on the
‘Stocks to Follow’ list, our self-imposed maximum number at any given time. Seven of the
positions are in the green, seven in the red, 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$2.89 37.0% tgt $5.30 IKN375, good Q3
Regulus Res REG.v hold C$0.64 06-apr-15 C$1.27 98.4% LT exploreco top pick
Starcore Intl SAM.to part sell C$0.61 10-jan-15 C$0.455 -25.4% dropping from Top Pick list
Long positions (in current order of preference)
Sandstorm Gold SAND STR buy U$3.80 17-apr-16 U$3.28 -13.7% $7 tgt IKN378, v cheap again
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.215 10.3% Under-radar Zn.
Wesdome Gold WDO.to hold C$1.72 22-may-16 C$2.16 25.6% Will sell at $2.88
Cordoba Min. CDB.v STR buy C$0.73 15-sep-16 C$0.65 -11.0% $1.50 tgt sub 70c great price
Excellon Res EXN.to spec buy C$1.71 09-oct-16 C$1.70 -0.6% Hit by Ag sell-off, $3.13 tgt
Atico Mining ATY.v STR buy C$0.51 24-jul-16 C$0.71 39.2% New tgt $1.10, Cu play
Rye Patch Gold RPM.v STR buy C$0.32 02-sep-16 C$0.22 -31.3% 75c tgt, strong value
Riverside Res RRI.v buy C$0.39 27-jun-16 C$0.455 16.7% Added IKN380, 60c tgt
Continental Gold CNL.to STR buy C$2.68 22-may-16 C$3.55 32.5% $4.80 tgt, hold thru 1q17
Red Eagle Min. R.to STR buy C$0.71 13-dec-16 C$0.71 0.0% New long, small starter
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.96 -16.5% solid biz model
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.05 -78.3% needs JV deal
Short positions
None at present
Closed in 2016 closed close price
Phoscan Chem FOS.to jan16 C$0.28 29-mar-15 C$0.265 -5.4% Buyout trade, bot but poor deal
True Gold TGM.v jan16 C$0.18 23-aug-15 C$0.25 38.9% okay trade, sold on pol risk
McEwen Mining MUX jan16 U$1.09 25-jan-15 U$1.20 10.1% sold due to lack of value
Lake Shore Gold LSG.to feb-16 C$1.10 07-apr-15 C$1.69 53.6% bot out, sold early in process
Atacama Pacific ATM.v feb-16 C$0.19 26-apr-15 C$0.40 110.5% sold for a double on big pop
New Gold NGD feb-16 U$2.06 24-jan-16 U$2.96 43.7% closed good near-term trade
Sandspring Res SSP.v mar-16 C$0.195 18-oct-15 C$0.32 64.1% Hit tgt, took profit
Teranga Gold TGZ.to mar-16 C$0.54 15-feb-15 C$0.60 11.1% disappointing trade
B2Gold BTG mar-16 U$0.85 13-jan-16 U$1.30 52.9% Separate trade on B2, hit tgt
Dalradian Res DNA.to mar-16 C$0.67 27-oct-13 C$1.00 49.3% Hit target, sold, good win
HudBay Min. HBM may-16 U$4.10 03-apr-16 U$4.36 -6.3% Short trade, poor timing
Nevada Sunrise NEV.v may-16 C$0.185 28-feb-16 C$0.23 24.3% V. small, no big deal either way
Richmont RIC jun-16 U$7.60 01-may-16 U$9.30 22.4% near-term trade, profit taken
INV Metals INV.to jul-16 C$0.25 03-apr-16 C$0.95 280.0% Trade closed on time
HudBay Min. HBM aug16 U$4.98 09-jun-16 U$4.80 3.6% short trade covered, no big deal
Miranda Gold MAD.v oct-16 C$0.125 03-jul-16 C$0.10 -20.0% tiny spec trade, didn't work
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 just a few of the current basket stocks:
16

,
Starcore Intl (SAM.to): Reducing from Top Pick to Recommend, selling part of
holding. See ‘Market Watching’ for more, but this is a quick line to officially note that as from
next weekend Starcore (SAM.to) will still be one of our ‘Stocks to Follow’ and a personal
holding, but it’s being reduced from ‘Top Pick’ to rank and file ‘Long position’. This also means
that I will be selling some of my shares and reducing my holding, however I urge you to
consider carefully the last part of the analysis on its quarterly financial results below. I won’t be
selling immediately or at any price and reserve the right to sell the portion I plan to sell in small
doses or much later on. I’m not desperate to dump and think the stock’s still worth a lot more
than its current price, no need to sell at the bottom.
Red Eagle (R.to): Position opened. Both my bids filled, first 73c on Tuesday (I found out
Wednesday, was kid of busy) then a slightly larger one at 70c as the stock dumped as low as
65c late week, so it’s booked as a 71c cost average but even though two purchases went
through be clear that this is still a small, starter position until further notice.
Wesdome Gold (WDO.to): Still selling at $2.88. Officially anyway, but the question arises
as to when a sell call becomes a de-facto buy call. As WDO this weekend sits 33.3% under the
price at which I am a seller, we’re darned near a point where a value trade would be to buy
rather than sell, topping up the position and (theoretically at least) taking more sizeable profits
when WDO hits the price in 2017.
Rye Patch Gold (RPM.v), Sandstorm Gold (SAND), Cordoba Minerals (CDB.v), Atico
Mining (ATY.v), B2Gold (BTO.to): All these have been promoted in the near-term sentiment
column to Strong Buy, because last week’s selling looks like last gasp overselling into the tail
end of the tax loss selling period and at the bottom of the gold price sag. Plus ATY and CDB
haven’t been getting the support they deserve as copper plays recently, but still suffered the
type of selling the ones that had popped got.
The Trump euphoria will wear off eventually and Santa Claus rallying aside, it’s all looking a bit
tired now (including the US Dollar which couldn’t hold its highs). I’m expecting a much better
January for our type of stocks and the ones chosen here look particularly cheap.
Excellon (EXN.to): Although with all the travelling and so forth of last week (plus the kids’
last day of the school year on Friday) I wasn’t really paying close attention to the market action,
it would be remiss not to mention the wild and wacky moves in a handful of junior names. We
saw big Friday volumes in stocks such as
Americas Silver, Fortuna and First Mining
Finance and, of course, our position in
Excellon (EXN.to). Word is that most of the
volume flowed through Scotia and as it
happens, this time last year Blackrock was
seen to make the same type of large block
buys in a range of names via Scotia. We won’t
know for sure that this is the situation until
filings go through (potentially this week) but
this weekend, the best guess is that Blackrock
is funding ETF positions of the future right
now, at the end of the tax loss selling period.
However what I do know is that EXN is worth
a lot more than the recent $1.35 and $1.40 prices, so the upmove here is totally justified. I also
know that in the days to come we can expect an update from the company on how the new
pumping equipment installation is going and that the rumour is “slowly but surely”.
The Copper Basket
After fifty weeks of 2016, The Copper Basket shows a 114.41% gain to level stakes.
17

,
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 Ivanhoe Mines IVN.to 0.61 778.96 1978.56 2.54 316.4%
2 HudBay Min. HBM.to 5.31 235.23 1926.53 8.19 54.2%
3 Capstone Min. CS.to 0.44 382.04 473.73 1.24 181.8%
4 Reservoir Min. RMC.v 4.08 48.69 449.41 9.23 126.2%
5 NGEx Resources NGQ.to 0.65 205.06 246.07 1.20 84.6%
6 Western Copper WRN.to 0.38 94.19 131.87 1.40 268.4%
7 Copper Mtn CMMC.to 0.445 118.8 109.30 0.92 106.7%
8 Atico Mining ATY.v 0.28 97.59 69.29 0.71 153.6%
9 Trilogy Metals TMQ.to 0.395 104.33 62.60 0.60 51.9%
10 Amerigo Res ARG.to 0.205 173.61 59.03 0.34 65.9%
11 Nevada Copper NCU.to 0.66 80.5 58.77 0.73 10.6%
12 Cordoba Min. CDB.v 0.16 86.86 56.46 0.65 306.3%
13 Copper Fox CUU.v 0.125 417.64 54.29 0.13 4.0%
14 Hot Chili Ltd HCH.ax 0.09 445.723 16.05 0.036 -60.0%
15 Revelo Res. RVL.v 0.055 128.486 10.28 0.08 45.5%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg 114.41%
Polite reminder: Thanks for the handful of suggestions received in the last few days regarding
the make-up of the 2017 Copper Basket. If
The Copper Basket 2016, weekly evolution
you have an idea and would like to 140%
contribute it’s still not too late, please feel 120%
free to drop me a line with your suggestion. 100%
80%
There was a tide change in mining last week. 60%
Since the election of Trump the pattern has 40%
20%
been base metals up/precious metals down
0%
(or vice versa), the Yin/Yang comment of the
-20%
last couple of editions. But not this time as
they all sunk in unison, copper plays and
gold plays and all sorts of others too. Of our
15 basket stocks just one managed to eke
out a gain on the week (ARG.to) and three others were unchanged (RMC.v, NGQ.to, CUU.v)
which means there were eleven losers and I’m not listing them all, just the double figure
percentage drops led by Revelo Resources (RVL.v down 20.0%) and followed by Cordoba
Minerals (CDB.v down 18.8%), Copper Mountain (CMMC.to down 17.9%), Trilogy (TMQ.to
down 15.5%), HudBay (HBM.to down 12.5%) and Atico
Mining (ATY.v down 10.1%). There wasn’t even any
escape for market darling Ivanhoe (IVN.to) this time,
down 7.3% on the week and wiping out nearly all the
gains on the previous Friday’s coverage (re?)launch by
Bernstein.
It’s the way of these things and the thought floated this
time last week...
“...it all looked a little too much like hot money
arriving late to a party for me, a reflection of the
Trump Bull that’s pushed the Dow close to the
magic 20k number lately. I don’t trust this move in
The Copper Basket.”
...turned out to be pretty close. As for substantive reasons
for the reversal we have those too, primarily in the shape
of a copper price which dropped away sharply. Rather than feature the five day chart here’s
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 ht11
source: IKN calcs

,
how the dailies looks this weekend (above) and the drop away from th U$2.70/lb peak doesn’t
surprise me, it was all getting frothy.
But there was more than just headline trading prices for copper that merited a sector sell-off.
We’ve persisted and trudged through the inventories data here, week in week out, even while it
went through an extended phase when it looked largely (even totally) irrelevant to the macro
direction of the sector, or classic supply/demand questions. But that now looks like changing
and to examine this we move to our next section, the regular weekly copper warehouse
inventory bullets:
• Overall world copper inventory levels made a very large upmove, rising by no less than
107,886 329 metric tonnes (mt) (+25.9%%) to finish the week at 524,987mt. We’d
previously mentioned the 23k drop in inventories the week before could be a significant
bullish number. Forget that totally, all bets on that are now off, this mega jump fuelled
by inflow in all three warehouse systems means we’ve now reached the end of the
Chinese de-stock round and into the re-stock period. It’s arrived early too, pre-
Christmas and almost certainly due to the higher than expected spot prices. The data
this week has put a firm ceiling in the potential for more price rises in the near future,
of that please be very clear.
• The SHFE Shanghai warehouse inventory rose away from the 100k level and it’s not
going to be breached again until late 2017 minimum. We’re now back up at 144,026mt,
some 12,076mt (+9.2%) higher than this time last week. I fully expect that number to
be back over 200k by the end of January and then from there, it will all depend on how
the spot price is holding up.
• However significant the SHFE reversal was, it pales in comparison with the action in the
LME last week. Inventories here rose by 93,750mt (+43.9%), a real live “Holy Crap!”
number that shoots total inventories back up over 300k to 307,075mt. So much for the
“real China strength” I mused upon last week that influx blows it all out the water and
to underscore the significance, in those occasional moment when we get a big upmove
in either SHFE or LME, it’s nearly always an arbitrage gig with previously warehoused
stock moving from one system to the other. Not this time, they both shot higher and
that’s only one thing; producers with nowhere to park excess inventory.
• Comex stocks joined the fun in their own more modest way, too. Stocks here rose by
2,060mt (+2.9%) to finish Friday at 73,886mt. As noted previously, Comex seems to be
building on a base in order to become a more significant player in 2017 and forward.
Here’s the regular Shanghai-only chart and do not be fooled by any of those evangelical Born-
Again-Copper Bulls out there; they may be right in the longer-term (in fact I think we’ll see
U$3/lb copper in 2017), but don’t believe the hype right now, the intermediate top in the
copper price is well and truly in.
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
400000
350000
300000
250000
200000
150000
100000
50000
19
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

,
I’d be very surprised is we saw copper spot breaking U$2.30/lb to the downside again, but
equally I now fully expect to see sub-U$2.50/lb as the market digests the sudden oversupply
data.
Now for notes on a couple of the basket component stocks:
Copper Mountain (CMMC.to): Late to the party money noticed last week? Check.
Script such as...
Hardly the first time a stock pumped by every sellside brokerage boiler room
suddenly gains traction and is suddenly propelled to a massively overvalued
market cap. It won’t be the last, either. Still debt ridden, still barely profitable
even at these copper prices. Avoid.
..in place? Check.
You see, I may become boring and annoying with all this perma-avoid stuff about the dog stock
end of the market and what’s more, I may get to miss some of the real face-rip moves, but it
serves me well on other occasions, too.
Capstone Mining (CS.to): Of all the stocks on the list this is the one that strikes me as the
most obvious short this weekend. There’s a
whole section of market cash that pours into
“the names we know” when things get hot and
CS.to is one of the group. It got pushed
mightily higher, despite CEO Darren Pylot
hedging a significant portion of 2016 and 2017
production in a “costless” collar that’s now
costing the company real money (he may be
lighting a candle to The Market Gods and
asking nicely for copper spot to close under
U$2.54/lb on December 30th). Yup, I’d short
this one if it weren’t so darned tricky for a retail
grunt such as I to get a competitive borrow in a
Canadian stock. Unless copper surprises me
and starts moving back up, we’ll see 90c again in CS.to soon enough.
Hot Chili (HCH.ax): Picked out as a potential catch-up play on the copper move last week, it
managed to do what you can see in this ten day chart here:
20

,
Precisely nothing. And with the change of tide registered in the copper market last week, this is
another bet that’s been called off, even for the potential spec value.
The Low Cost Producer Basket
After 50 weeks of 2016, the Producer Basket shows a gain of 47.35% to level stakes.
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Newmont NEM 17.98 530.595 16.77 31.60 75.8%
2 Barrick ABX 7.38 1165.33 16.64 14.28 93.5%
3 Goldcorp GG 11.56 832.381 10.43 12.53 8.4%
4 Franco Nevada FNV 45.75 178.01 10.06 56.53 23.6%
5 Agnico Eagle AEM 26.28 223.475 8.34 37.34 42.1%
6 Ang/Ashanti AU 7.10 405.27 3.85 9.51 42.1%
7 Buenaventura BVN 4.28 254.19 2.57 10.11 136.2%
8 Detour Gold DGC.to 14.41 174.06 2.74 15.74 9.2%
9 New Gold NGD 2.32 512.8 1.69 3.30 42.2%
10 Sibanye Gold SBGL 6.09 228.71 1.51 6.61 8.5%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 47.35%
Polite reminder: Thanks for the handful of suggestions received in the last few days regarding
the make-up of the 2017 Copper Basket. If you have an idea and would like to contribute it’s
still not too late, please feel free to drop me a line with your suggestion.
Hats off to Franco Nevada (FNV) as last week it somehow, under very difficult market
circumstances managed to return a winning week. Okay, only 14c for a U$56 stock, but we
should all be suitably impressed and look how close it is to overtaking Goldcorp (GG) on the
market cap league table now (how the mighty has fallen under Garofalo). Other market beaters
were Agnico Eagle (AEM) that “only” lost 2.5%, then Newmont’s benchmark beating 3.6% loss
means it’s managed to take over at the very top from Barrick.
The Low Cost Producer Basket: Weekly performance
200% and comparative to GDX control
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
-20%
21
dr3naj ht71 ts13 ht41 ht82 ht31 ht72 ht01 ht42 ht8 dn22 ht5nuj ht91 dr3luj ht71 ts13 ht41 ht82 ht11 ht52 ht9 dr32 ht6von ht72 ht11
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 ht81
source: ikn calcs, NYSE/Nasdaq data

,
So yes, one winner and nine losers on our list and some of the losses at the smaller end of the
table were again very painful, such as Detour Gold (DGC.to down 13.9%), New Gold (NGD
down 13.2%), AngloGold Ashanti (AU down 10.9%) and Buenaventura (BVN down 9.7%). As
for our performance against the GDX benchmark, the continued under-performance of our
lower-cap components keeps dragging the Basket down but the damage was limited to a couple
of tenths, we’re still set fair to beat the Street come the end in two weeks’ time.
Regional politics
Ecuador: Anti-miners attack Panantza-San Carlos project, one police officer dead
In Ecuador it should have been mining party time what with the final signature on the
development of Fruta Del Norte with Lundin Gold (LUG.to) but it was not to be. Instead national
headline news was made by an attack on the camp of the Panantza-San Carlos copper project,
owned by Chinese capitals EXSA, by a group of indigenous Shuar protesters. In the
confrontations that ensued both in the camp and in nearby strategic access areas (the biggest
flashpoint a bridge over the Zamora river near to the camp entrance) on Wednesday, one police
officer was killed, seven others wounded (two seriously) and an unknown number of Shuar
protesters were also injured (including at least two children). Here are a selection of about a
hundred links I could offer (1) (2) (3) (4). After the incident the government of Ecuador
declared a 30 day State of Emergency in the zone and has sent in the army (including tanks) to
maintain law and order. The Shuar’s position was the EXSA was working without their
permission on ancestral lands and had been causing environmental damage. In his regular live
TV weekend show, President Rafael Correa called the attackers “paramilitaries and semi-
criminals” and went on to state that the lands in question were not Shuar lands at all, but lands
officially given over to the State in previous agreements and that EXSA has been operating in
the area 100% legally and correctly.
Ecuador: Mining as a issue in the Presidential election
This uptick in mining controversy is obviously linked to the upcoming Presidential election set
for February 19th 2017 (just two moths away) which the government candidate to replace
Correa, Lenin Moreno, is widely tipped to win. However he is up against opposition trying to
take it to a second round run-off, including a strange quasi-coalition of right wing candidate
Guillermo Lasso being supported by the left wing CONAIE indigenous group. Both sides are
both ostensibly anti-mining, though Lasso is likely being cynical in order to attract indigenous
support.
As for current polling (5) Moreno is out in front with between 39% and 37% depending on
which pollster you prefer, with Lasso normally put in second at between 1/% and 22% and
Cynthia Vitieri in third (or occasionally tied for second) on 14% to 17%. To become President in
Ecuador in the first round, you need either to score 50% +1 vote or 40% with your nearest
opponent 10%+ behind you. Therefore Moreno is close at the moment, but a second round
run-off is in the cards. Under such circumstances, it’s unsurprising the anti-Correa candidates
are pushing hard on the issue of mining in provinces and rural areas.
Argentina: More mining tax fun
With the Sergio Massa led opposition tax reform being voted up by Argentina’s lower house of
Congress ten days ago (see IKN395), Massa himself is now pushing hard for all parties to get
the debate in the Upper House done before the end of the year and from last week’s possible,
it’s now looking probable that the debate and vote happen in 2016 rather than 2017. In his
words (6), “What we want is that before the end of the year there is a law that allows us to
lower taxes next year for millions of Argentine employees, pensioners and independent
workers”. As per this weekend the opposition block is pushing for a vote in the upper Senate
house this Wednesday. This also means there’s a lot of deals getting done or trying to get done
in the proverbial smoke-filled rooms, with the Macri government willing to do deals on certain
items and get earmarks through on others in return for ground given by opposition Senate
members on specific items. One of the items the government is most keen to get rid of is our
22

,
very own item of interest, the 5% export tax on mining produce which the opposition bill is
looking to bring back in, as explained here (7):
“Macri has told (his team) to negotiate on two premises: Not to alter the fiscal deficit
target of 4.2% of GDP for 2017 and to avoid sending negative messages to investors,
as would be the reinstatement of the mining export tax”.
The opposition’s position is that the country has lost ArgP$6,000m (US$400m) in taxes in 2016
due to the scrapping of the tax and that nothing has changed in the mining sector since then.
The government’s position is that the re-imposition of the tax would be a highly negative signal
to Foreign Direct Investment and that the sector needs time to reactivate. This publication
understands the point made by the opposition but is clearly in favour of the logic proposed by
the Macri government, yes indeed it would be a bucket of cold water on the Argentina mining
sector recovery in real terms plus the optics of weak control would be another negative.
Unfortunately we’re talking about Argentina here and not a country that acts logically or in its
own best interest on a world stage.
This weekend the key talks are with going on between the government and the powerful CGT
union and if they prosper, the government would be able to send its own alternative bill to the
lower and then the upper house, allowing Macri to sign down the opposition bill without loss of
face. And apparently the talks have become so bizarre that (8) this report in La Nacion
yesterday Saturday has the government proposing an extra tax on champagne/sparkling wine
sales, worth a calculated ArgP$5,000m to the State per year, if the unions (and therefore the
parliamentarians they control) agree not to reinstate the mining tax. As a side-note away from
the mining tax issue that most concerns these pages, it needs to be said that the main thrust of
the opposition tax reform is about the upping of the minimum level for taxable salaries for
Argentines. On that the government is being flexible (it seems, according to reports) and that
may be enough to get agreement on the alternative bill that goes through without mining
export taxes added. But it’s still very much up for grabs and under negotiation at the moment
and one thing’s for sure, the confidence Macri displayed last weekend about the Senate voting
down the opposition law bill has totally evaporated. The position of the opposition block is best
summed up by these words from Sergio Massa (whose star is once again in the ascendancy in
Peronist ranks) who said to the Macri ranks (translated), “It’s not about whether the
government or opposition wins, but about the middle class Argentine worker who would pay
less taxes. It’s very difficult to explain (to them) that you haven’t lowered their taxes when you
lowered taxes on mining...”.
The Macri government has been rattled into serious negotiations and is going to have to give
way on its very neo-liberal free market policy stance in some way or form. On going to press it’s
still a toss-up as to whether the export tax is reinstated, 50/50 is the best I can do for you, but
as the next note shows we’re also seeing anti-mine opposition emboldened by the new
developments.
Argentina: Das Neves spells it out in Chubut
We’ve followed the declarations of Chubut governor Mario Das Neves on mining quite closely on
these pages, as the province is one of the clear testing grounds of Argentina’s supposed new
attitude towards mining and home to the big Navidad project owned by Pan American Silver
(PAA.to) (PAAS). The national Macri government has aggressively promoted mining in the
region, with its known anti-mining governor Das Neves being guarded up to this point in his
responses. But not any more. While visiting the nation’s capital Buenos Aires on December 13th
last week, Das Neves took the gloves off and spelled it out for all to hear (9) while participating
in a press conference on the opposition tax reforms that were passed by the lower house and
are about to the debated by the Senate of governors (of which he is one). He said (translated),
“In Chubut there isn’t going to be any mining investment because we are going to defend the
environment and the quality of life of our people”. And to make sure the message got through,
on the 14th on his return to Chubut Das Neves said (10) (translated), “In this province we are
not going to allow mining company investments because we want our people to live well and to
23

,
care for the resources of Chubut”.
If we consider these statements in the light of the proposed Federal Mining Agreement (see
IKN394 and IKN395) which needs people such as Das Neves to sign on and is already delayed,
the inertia in mining reform is now palpable. The sooner the North realizes it’s been sold a false
story about the imminent opening of the whole of Argentina to the mining industry, the better.
Guatemala: Academia on mining conflicts
The 32 page paper in question, co-published by Mariel Aguilar-Stoen and Benedicte Bull of the
University of Oslo in Norway (both professors of the Environmental Development department
there) along with members of the University of Costa Rica can be found on this link (11). It was
submitted in May 2016 and accepted in July, but it’s only just come up on my radar this week
when the Spanish language version was published and put in front of me.
It makes for an interesting read as though academic in nature, it covers the Guatemala mining
sector and its controversies very well, with good research on baseline data. Here’s the paper’s
abstract:
Opposition to extractive industries in Guatemala has in general been met with a
violent response from the government and the private companies. Our analysis pays
particular attention to the ways in which the élite operates and builds alliances, and
the resources and means used by the élite to impose, generally with violence, order.
The analysis presented here suggests that the violent response from the government
is the result of what the élite perceives as threats to its hegemony –though that
hegemony is incomplete. The violent response to social protests is backed by a
strategy that results from the material and discursive alliance that links the military, the
economic élite –old and emerging– and the government. We also analyze the
demands from social movements against mining to better understand the power these
movements must confront
From reading that you may think you’d be letting yourself in for a left-wing bias screed but I
was pleasantly surprised by its balanced approach, with insights such as how, “ecological
ideology is the talisman that has replaced Communism” among LatAm left wing adherents of
the policies of Evo Morales, Hugo Chávez etc. It also identifies bodies such as the Norwegian
Embassy, the Swedish Agency for International Development and the Dutch Embassy in
Guatemala as sources of funding for anti-mining NGOs that promote a militant approach to anti-
mining protests. However, it does end on a lefty note by stating that the resources controlled
by members of the Guatemala elite, along with their control of government and media, are a
microcosm of the world balance of power, global security and wider geopolitics. Nothing
shocking there, though. However, the best reason for a practical, non-academic to read the
paper is its well-researched look into the ownership structure of mines and projects in
Guatemala with names and companies named, timelines and deals documented. Good source
material for anyone interested in the country’s mining sector.
Dominican Republic: Good press for Pueblo Viejo
More good press for the Barrick Pueblo Viejo gold mine in the country (60% ABX, 40% GG)
when last week some 800 locals around the mine who had been sponsored on a range of
technical education courses by the company (in conjunction with the relevant government
bureau) graduated and showed off their newly gained certificates to gathered journalists (12).
The initiative, known as The Community Program for Professional Technical Training, offered a
range of vocational courses in subjects such as home electrician, industrial electrician,
carpentry, textile manufacture, business negotiation and development, office IT, computer
repair and even beekeeping are designed as to be as practical as possible and to give locals an
immediate window to higher paying jobs in the community once graduated.
Colombia: The Ibagué referendum on mining can now go ahead
On Friday the State Council of the Cajamarca district in Colombia delivered its verdict (13) on
the referendum set for the town of Ibagué in Tolima province (the region that hosts the
24

,
AngloGold Ashanti ‘La Colosa’ project). The vote had been set to happen on October 30th but
was suspended by this very court action. In the ruling the State Council said the referendum
could go ahead but the wording of the referendum question must be changed because it was
“manifestly capricious and suggestive” (i love the way those judges talk). And that’s a very fair
comment, because the referendum was going to be based on this question (translated*):
“Do you agree, YES or NO, that in the municipality of Cajamarca activities
take place that imply the contamination of the soil, loss or contamination of
water or that affect the traditional agricultural vocation of the municipality, via
projects of a mining nature?”*
It’s now going to be based on this question (translated**):
Do you agree, yes or no, that mining projects and activities take place in the
municipality of Ibagué?
A far more neutral and intelligent way of framing this vote. However I’m sure the anti-miners in
Colombia will be celebrating the verdict all the same, because if the referendum eventually
happens they’ll win it, no matter how boring the question might sound.
*Precise question in Spanish " ¿Está usted de acuerdo SI o NO con que en el Municipio de Cajamarca se ejecuten
actividades que impliquen contaminación del suelo, pérdida o contaminación de las aguas o afectación de la vocación
tradicional agropecuaria del municipio, con motivos de proyectos de naturaleza minera? "
**Precise question in Spanish: ¿Está usted de acuerdo Sí o No que en el municipio de Ibagué se ejecuten proyectos y
actividades mineras?
Chile: Wage deal between unions and management at Codelco
A potentially very significant agreement went through on Friday evening after protracted
negotiations between management and unions at Chuquicamata, the large scale copper mine
owned by the State-run Codelco (the world’s biggest copper producing company). It’s likely to
set a benchmark for other upcoming negotiations at other mines in the months ahead (they’re
typically on a five year cycle, with the last deals reached in 2011 and 2012).
The agreement (14) gives workers a CLP 4,350,000 (approx U$6,600) bonus, as well as further
productivity bonuses of CLP 500,000 (U$760) in 2017 and in 2018 if cash costs are reduced by
7c/lb in 2017 and 8c/lb in 2018. That bonus may sound like a lot, but it’s just 40% of the big
U$19,700 bonus received by workers in the last round of deals in 2012 the deal was passed
61% to 39% in a secret ballot by union members and sets a benchmark for other companies to
work on, with the implication that supply-threatening strikes are now less likely in the months
to come in Chile.
Market Watching
Starcore International (SAM.to) 2q17 financials
NB: Unless otherwise stated, all prices in CAD$
Preamble
I happened to be sitting talking to Alexandra Guáqueta, Global Standards Manager at
Continental Gold (CNL.to) over light refreshments on Wednesday afternoon when the news
release on the Starcore International (SAM.to) 2q17 financials hit the wires (15). I excused
myself from the conversation a few moments and opened the NR with trepidation, because
after the lack of production number NR and general radio silence from the company I was
fearing the worst. In the end the headline numbers weren’t too bad, I breathed a small sigh of
relief and went back to the very interesting conversation with Alex and Mauricio Cárdenas,
25

,
Planning and Projects Manager at CNL Colombia. Later that evening in the hotel it was time to
plug numbers into the spreadsheet and although I already knew the SAM quarter wasn’t a
disaster, it became clear after a few minutes that it wasn’t exactly a sparkler either. It didn’t
take long, perhaps next morning at breakfast to decide to drop SAM from the Top Picks section
and lighten my position. What follows explains why.
Production update
As we weren’t given a production number previously, we get to do that today. As per the 2q17
financials and MD&A (i.e. the quarter
ended October 31st 2017) Starcore SAM.to: Gold produced vs gold sold, per qtr
produced around 4,100 oz of gold and
6000
20,500oz silver. More importantly, sales 5500 4900 5240 4998 4814 4823
came in at 3,895 oz of gold and 22,686 4 5 5 0 0 0 0 0 4100 4315 4174 3992 4100 4000
oz silver. 4000
3301
3500
3000
Looking to the figures behind the 2500
2000
production and sales numbers, tonnes 1500
milled bounced back from the July 1000
500
quarter sag and reached 73,500mt, 0
slightly below the average perhaps but
acceptable all the same.
However head grades came in low at 2.00 g/t Au.
Once again we see no bounce from the high grade
discovery reported by SAM earlier in the year,
which was in turn one of the main reasons I upped my recommendation on the stock to Top
Pick at the time. Last quarter’s 2g/t is a typical
number over the last eight quarters and SAM has
shown it can run a free cash flow positive mine on
that grade but let’s not fool ourselves either, it’s
nothing special and unless the gold price jumps
bigtime, it’s never going to offer up massive
margins.
As for recoveries, at 85.8% they were in line with recent quarters. No problems here.
Revenues improve
So production-wise, SAM’s quarter was lacklustre, no sign of the extra bounce in production
we’d factored in from the high grade discovery. But the quarter was saved by high selling
prices, an average of U$1,309/oz for gold. As costs dropped back to the $50/tonne level at the
26
41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
gold prod
Oz Au gold sold
source: company filings
SAM: tonnes per day throughput
85000
80000
75000
70000
65000
60000
55000
50000
45000
40000
31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco
tpd SAM.to: Avg gold head grade (g/t) per qtr
3.50
3.00 2.812.89
2.50 2.23
2.38 2.55 2.342.422.362.22
2.22 2.17 1.982.00 1.99 2.00
2.00 1.66
1.50
1.00
0.50
0.00
source: company filings
31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco
g/t Au
source: company filings
SAM.to: Gold recovery percentage 100
95
90
8 8 0 5 79.3 84.6 868.89.2 86.3 86 8 .7 3.984.5 85.6 86.9 86.6 84.2 83.5 86.5 85.8
75 78.4
70
65
31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco
source: company filings

,
same same (they’d spiked higher due to the low production tonnage of the previous quarter,
margins got better as seen in the charts below
The metals breakdown confirms that San Martin is very much a gold mine, the silver is
byproduct kicker and nothing more. Also here please note that I’ve added the estimate for our
current quarter ended January 2017, using a best guess 4,000 oz gold sold and a U$1,200/oz
average selling price. That price may turn out to be high or low, of course.
SAM.to: Revenue by metal
10
9
8
7
6
5
4
3
2
1
0
27
21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
$m
silver
gold
source: company filings, IKN ests
Financial results
Which segues us neatly into the quarterly operational results. The first overview chart shows
revs vs COGS and the resulting mine operating earnings (MOI), which came in at $1.269m for
2q17 but due to the drop in gold prices, that looks like being trimmed in the current quarter
(the model goes for $0.9m) using my best-guess 4,000 oz gold in the current quarter at these
lowered gold prices.
SAM.to: Operations overview
9
8
7
6
5
4
3
2
1
0
-1 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
SAM.to: Revenues/tonne vs cash cost/tonne
140
120
100
80
60
40
20
0
$m revenues
COGS
mine op earnings
source: SAM filings, IKN ests
Here’s a closer look at those same MOI results and the best guess for the current quarter. SAM
was promising to launch from this level of earnings earlier in the year, thanks to the higher gold
prices and our forecasts of better production. Neither of those have come to pass.
31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco
$/mt SAM: Gross margin, per qtr
60
revs/tonne 55
cash cost/tonne 50
45
40
35
30
25
20
15
10
5
0
source: company filings, IKN ests
31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco
$m
source: SAM filings, IKN calcs

,
SAM.to: Mine Operating Earnings
1.4 1.269
1.126 1.136 1.148
1.2
1 0.9
0.8 0.67
0.6 0.451 0.374
0.4 0.213
0.2
0
-0.2
-0.4 -0.393 -0.287
28
41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
source: company filings
srallod
fo
snoillim
SAM.to: Earnings
As for lower down the P+L, 2q17 to end
1.5
October 2017 managed to squeak a small pre- 1
tax and net profit for the company but that’s 0.5
0
less likely to happen this quarter. Back when I -0.5
promoted SAM to Top Pick earlier this year I -1
-1.5
expected much more from bottom line results,
-2
one of the things I’ve got wrong about the -2.5
stock. As things are it continues to be the -3
-3.5
marginal, ticking over company that posts
small losses or small gains but nothing that
moves the dial.
Balance sheet items now and these aren’t quite as good as the ops charts.
The two overview assets and liabilities charts don’t show much change at first look, both maybe
slightly lower than before but really, it’s all in line. However a closer look at the liquidity
numbers show some deterioration. To the left below, short-term cash and inventory together
have dropped and are modelled to drop further.
Of more concern is working capital to the right as up to recently this has always been one of
41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
$m pre-tax earnings
net earnings
source: SAM filings
SAM.to: Assets Breakdown per qtr
90
80
70
60
50
40
30
20
10
0
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
$m SAM.to: Liabilities per qtr
45
cash st inv other current fixed
40
35
30
25
20
15
10
5
0
source: company filings, IKN ests
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
source: company filings/IKN ests
srallod
fo
snoillim
LT debt
current debt
SAM: Cash & short-term investments
12
10
8
6
4
2
0
31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
$m SAM.to: Working Capital per qtr
14
cash st inv 12
10
8
6
4
2
0
source: SAM filings, IKN ests
31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
source company filings
srallod
fo
snoillim

,
SAM’s stronger suits, but now it’s down to $4.214m
SAM.to: Shares Out
and that’s likely to drop further. This, plus the fact that
50 (adjusted to 4:1 rollback Dec'2015)
the pending real estate deal set to net the company 45
40
U$7m approx is yet to close, goes a long way to 35
explaining why SAM announced in November (16) it 30
25
was booting forward its financial debt repayment by 20
15
another six months. 10
5
0
With shares out set to stay where they are the eye
moves to the derivative charts and the way in which
the price/book ratio and book value per share have
deteriorated these last few months. P/Bv is back at
0.4X and that’s not only worse than before, that’s now in bargain basement levels
And though the asset book at SAM is one of its strong points with things such as the Creston
assets and Toiyabe carried at a very low level, the way operations are treading water plus the
recent cooling of M&A activity have been bad for the share price.
Discussion and conclusion
As noted in several recent editions, I’ve had plenty of time to regret promoting Starcore Intl
(SAM.to) to Top Pick earlier this year and adding more ot my position. I’ve also been pretty
whussy about putting off any decision on the trade recently and have waited until this set of
financials to make a call, so today’s the day.
I still think SAM is a valid investment at its current share price, there’s a lot of potential upside
if the market turns (as I expect it to do) early next year. But there’s no escaping the fact that
SAM hasn’t seen the type of production improvement I’d looked for from the stock and that’s as
much my mistake as the company’s underperformance. We’ve also seen delays in the real
estate deal that’s set to bring in useful working capital and along with that, there’s a general
lack of transparency in the company that doesn’t encourage deep trust. SAM is a good and
reasonable speculative play on gold and an improvement in the market. If moly pops, if the real
estate deal closes, if people start looking around for deeply discounted assets then SAM can
move up quickly but as things stand today, it’s a small miner treading water and waiting for
things to happen around it. That’s not Top Pick material and with the deterioration in the gold
price since the close of its last quarter its financials aren’t about to improve.
However it’s not all bad news. This weekend its market cap stands at $22.36m, that’s
U$16.75m and that’s not a lot of money for a working gold mine. Then there are all those fixed
assets it holds, they’re going to pay off eventually. And even though its financials aren’t quite as
solid as they were six months ag they’re still solid enough, this company isn’t going anywhere
as a going concern and it only needs to close the real estate deal to cover 42% of that market
cap from out of nowhere. So yes, I’m downgrading my call today and removing SAM from Top
Pick and yes, as a result of that downgrade I’ll be making a partial sell to rebalance my
29
41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco tse71.naj
source: company filings/IKN ests
serahs
fo
snoillim
1.00 SAM.to: Price/Book Ratio
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco WON
SAM.to: share price vs book value/share
(adjusted for Dec'15 reverse split)
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
source: company data, TSX, IKN calcs
11.yluj 11.tco 21.naj 21.rpa 21.yluj 21.tco 31.naj 31.rpa 31.yluj 31.tco 41.naj 41.rpa 41.yluj 41.tco 51.naj 51.rpa 51.yluj 51.tco 61.naj 61.rpa 61.yluj 61.tco WON
pps at qtr end
bv/share
source: company filings, TSX, IKN calcs

,
portfolio, but I’m not in any hurry to make my sales and I’m definitely not going to sell at the
current low prices we’re seeing today. So as from next week SAM will be down among the
recommendeds rather than sitting next to BTO and REG, but I’m going to afford myself all the
patience I need in the partial sales and if it takes weeks, then it takes weeks.
Conclusion
IKN396 is done, we end with bullet points:
• The best thing I got from my trip last week to Continental Gold (CNL.to) was a
crystallization of what exactly I want to do with this position. I could have sold recently,
it’s always been a near-ish term position predicated on the permit award, but the
quarter coming has a shot at the extra bonus of a buyout. It’s by no means certain of
course, no way it is even in the probable column but it’s worth the risk for sure.
• Starcore (SAM.to) has turned out to be a poor pick by yours truly and its time to
throttle back on the position. It’s a decent speculative play on gold and the wider
mining market, but that’s about it.
• The next two weekends will see shortened editions. Merry pre-Christmas to you all.
I thank you in advance for any feedback. Our Top Pick stocks are Regulus Resources (REG.v)
and B2Gold (BTG) (BTO.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.eluniverso.com/noticias/2016/12/16/nota/5957632/ecuador-moviliza-fuerzas-seguridad-tras-incidente-
campamento-minero
(2)
http://ecuadorinmediato.com/index.php?module=Noticias&func=news_user_view&id=2818812917&umt=presidente_cor
rea3a_indigenas_shuar_que_atacaron_campamento_minero_son_22grupos_paramilitares_y_semi_delincuenciales22
(3) http://www.swissinfo.ch/spa/presidente-ecuador-dice-empresa-minera-china-cumple-normas-legales-en-
pol%C3%A9mico-proyecto/42772668
(4) http://kaosenlared.net/ecuador-2-shuar-menores-de-edad-heridos-uno-de-gravedad/
(5) http://www.eleccionesenecuador.com/encuestas-presidenciales-ecuador.php
(6) http://www.lanacion.com.ar/1968008-sergio-massa-presiona-al-gobierno-por-ganancias-antes-de-fin-de-ano-los-
trabajadores-tienen-que-tener-la-ley
(7) https://noticias.terra.com.ar/argentina/ganancias-destapo-todas-las-
internas,0d92b4488d580db607ef65ac2c2537c7q58ii6sl.html
(8) http://www.lanacion.com.ar/1967941-el-gobierno-y-la-cgt-acercaron-posturas-pero-aun-hay-diferencias
(9) http://www.elpatagonico.com/cerro-la-puerta-la-mineria-n1526129
(10) http://lu17.com/chubut/gobernador-realizo-balance-visita-al-congreso
(11) http://revistas.ucr.ac.cr/index.php/anuario/article/view/26932/27111
(12) http://www.entornointeligente.com/articulo/9400096/REPUBLICA-DOMINICANA-Barrick-Pueblo-Viejo-e-INFOTEP-
graduan-a-mas-de-800-comunitarios-de-Sanchez-Ramirez-y-Monsenor-Nouel
30

,
(13) https://mineriaenlinea.com/2016/12/consejo-de-estado-aprobo-la-consulta-popular-minera-de-ibague/
(14) http://www.tvn-2.com/economia/Codelco-acuerdo-huelga-mineros-Chile_0_4645785388.html
(15)http://finance.yahoo.com/news/starcore-reports-q2-2017-results-210700313.html
(16) http://finance.yahoo.com/news/starcore-secures-extension-4-5-220000607.html
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
31

,
IMPACT Silver IPT.v jun'13 C$1.14 13-jan-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-apr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
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
32

,
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
33