IKN #398Premium

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The IKN Weekly
Week 398, January 1st 2017
Contents
This Week: Happy New Year and market matters, In today’s issue, The end of the year and
the end of the Trump Rally.
Fundamental Analysis: The new Copper Basket, The new Producer Basket.
Stocks to Follow: Overview, Rye Patch Gold (RPM.v), Sandstorm Gold (SAND), Cordoba
Minerals (CDB.v), Atico Mining (ATY.v), B2Gold (BTO.to), Starcore Intl (SAM.to), Excellon
Resources (EXN.to), Continental Gold (CNL.to), Regulus Resources (REG.v), Riverside
Resources (RRI.v).
Copper Basket: Overview, Western Copper & Gold (WRN.to).
Low Cost Producer Basket: Overview.
Regional Politics: Regional Risk Review.
Market Watching: Minera IRL: Moving forward, Four speculative tinycap plays for 2017
(ANG.v, RYR.v, CXB.v, ERC.v), Episode nine of “What I’d buy now”.
I remind subscribers that no part of this newsletter can be copied, reproduced or
given to any third party without the express permission of the author.
This Week
Happy New Year and market matters
Please accept my best wishes for 2017, health and happiness to you all and if it’s possible, a
little financial gain in the year wouldn’t go amiss either. As for the week to come, a reminder
that tomorrow January 2nd most markets are closed for business, then later on Friday we get
the first major macro news of 2017 as the US BLS publishes its jobs report for December 2016.
Consensus headline numbers at this time are +175,000 NFP and headline unemployment of
4.7%, though keep an eye on Bill McBride’s Calculated Risk site or your own preferred reliable
medium of US macro as those numbers may be adjusted.
In today’s issue
Plenty to get through today as we wrap up 2016 and unfold 2017:
• We cover the new integrants of The Copper Basket and The Producer Basket. That’s
your offering in the Fundies section today
• It’s time for the regular quarterly Regional Risk Review as we tour LatAm and consider
the state of play in the main mining countries. Found in Regional Politics.
• The intro section is dedicated to the reasons why I think gold has more upside in the
next couple of weeks. If that recovery goes to plan we can consider the rest of 2017
another day.
• Market Watching has plenty to offer with positive signals from Minera IRL, my four best
ideas for tinycap specs (including a new one in Eros Resources (ERC.v) that I’m really
keen at this price) and the latest edition of “What I’d buy now”.
• We’ll try not to bask too much in the late-year rebound last week, but it was a real fillip
to both portfolio and spirits. More, please.
1

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The end of the year, the end of the Trump Rally
It was a good way to end the year, especially after the beating taken since the result of the US
election. In a week where all three of our main benchmark tickers were up (week-over-week
GDX up 8.2%, GDXJ up 10.2% and GLD up 1.6%) you’d expect strong numbers from a
publication such as The IKN Weekly and I’m glad to say that no fewer than nine components of
our 15 stock team delivered double figure percentage gains (and Atico deserved every penny of
its move and more beside, bless its heart). But more important than a week’s worth of relief,
we’re also seeing the end of the Trump Rally. We’ve noted and closely followed the Gold/TIPS
relationship on these pages and it made the blog last week with this chart (1) that illustrates
both the normal tight correlation and the
recent gap that’s opened up between the
two. What’s particularly good about the
gold/TIPS thing at the moment is how
the whole Trump Rally has been fuelled
by US Bonds liquidation and as a result
the dynamic is very much US-monetary
and other influences on the price of gold
(China/Asia/Europe/wherever) are taking
a minor, bit-part role.
On publication of this chart (right) early
Thursday morning, the 10 year TIPS
yield was at 0.52% and gold at
U$1,143/oz and just a couple of hours
later the gap did indeed begin to fill as
gold popped to U$1,160/oz. But then the gap re-opened on Friday and gold closed the week at
U$1,150/oz while TIPS dropped a little further, to 0.50%.
For a little extra illustration on the subject, let zoom in to the 10 year TIPS yield line on its own
for a little more clarity (2). Here it is (six month version) with five notes on recent gold action:
The first move (point 1 to point 2) was the big one, as bonds positions were liquidated by the
big money applauding the Trump win (read my lips, no new taxes) and put to work in US
equities, providing a rally that took the Dow to within a spit of 20k. Then between points 3 and
4 we got the (near inevitable) overshoot of sentiment, the period that saw the Fed raise rates
(a move already clearly flagged before The Donald won the big prize), gold drop to its recent
lows and those loveable gold permabears coming out of their caves to predict sub-$1k prices
...again (sidebar: gold is gold, it just sits there and doesn’t care what neuroses we pour over its
head, anyone who can see no good in the element is just as bad as a rah-rah permabull who
see no bad there). But cut to today here we are at point 5, the TIPS yield has already fallen,
people get that Trump does not automatically mean financial heaven for us all by next
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Thursday afternoon and a bit of reality has set in. So what can we expect from the TIPS/Gold
relationship in the next few days? Here’s my framework, tell me why I’m wrong:
1) The way in which the dollar is the only game in town right now means this correlation
will remain tight.
2) Even if the TIPS yield doesn’t drop further, gold has room to run from its U$1,150/oz
this weekend. Point 3) above may suggest U$1,160/oz as the number by at that point
gold was already being oversold by US instos (GLD dumpage was in full swing) which is
why I mentioned the U$1,180/oz number on the blog last Thursday as the near-term
target (and January 7th is the cut-off date, if you care enough about birthdays).
3) However, the type of spike-and-drop we see in that chart is one that most probably has
more to unwind. I certainly agree that we’re unlikely to reach the point 1) pre-election
level in the near-term, but a further retreat to the point 2) level looks likely. That would
imply a gold price that floats back above the U$1,200/oz level and if it does, the relief
felt by the precious metals miners’ sector will be palpable.
Overall I believe we’ll see gold at U$1,180/oz in quick order and back above U$1,200/oz soon.
Don’t ask me exactly what “soon” is, but what is clear is how the Trump Rally is getting tired.
As an example, note how consumer confidence came in higher than expected on December 27th
at 113.7 (forecast for 109) (3) and how a certain President Elect claimed personal victory.
Well yeah Donald, maybe Donald, but a look at the longer-term chart shows that a) the
November and December numbers are part of a longer line of improvements from the 2008
lows and b) it’s typical (though not certa ) to see year-end sentiment bounces which then
correct in the first months of the New Year (just think about the typical household financial
cycle in The USA to work out why that might be).
A rally on something perceived to be new and bright and optimistic by the markets is all well
and good, I have no issue with the Trump Rally but as day follows night, these jawboned,
emotive, non-data driven effects are always transitory. Always. Hard financial data shows the
rally is now tired, we also see the same Trump chatter Twitter that did wonders in early
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December failing to get the same effect in the last few days. We can consider the bigger picture
and how I believe the upcoming Trump administration will ultimately be dollar bearish for
another day, this weekend is about re-adjustment after a mini-bubble rally and a return to more
sustainable levels all sorts of market issues. Those gave reason for the first stage of the gold
bounce (1130 to 1150) last week and, as long as the Gold/TIPS relatinship holds, there’s
perhaps $30/oz to $50/oz to come according to my Casio. More than enough to ensure a
positive start to 2017 for percious metals mining stocks.
Fundamental Analysis of Mining Stocks
The 2017 Copper Basket
Nicely timed for the very first day of the year, the moment comes to roll out the 2017 Copper
Basket, its sixth annual incarnation (how time flies). So on with the show but please remember
that the Copper Basket is NOT a list of recommended stocks. Here’s the list, notes below:
company ticker price 1/1/17 Shares out Market Cap current pps gain/loss%
1 Imperial Metals III.to 6.06 93.587 567.14 6.06 0.0%
2 Capstone Min. CS.to 1.26 382.04 481.37 1.26 0.0%
3 NGEx Resources NGQ.to 1.20 205.06 246.07 1.20 0.0%
4 Western Copper WRN.to 1.86 94.19 175.19 1.86 0.0%
5 Copper Mtn CMMC.to 0.94 118.8 111.67 0.94 0.0%
6 Excelsior Min. MIN.v 0.63 167.364 105.44 0.63 0.0%
7 Atico Mining ATY.v 0.95 97.59 92.71 0.95 0.0%
8 Regulus Res. REG.v 1.20 68.368 82.04 1.20 0.0%
9 Coro Mining COP.to 0.15 483.425 72.51 0.15 0.0%
10 Trilogy Metals TMQ.to 0.66 104.33 68.86 0.66 0.0%
11 Cordoba Min. CDB.v 0.73 86.86 63.41 0.73 0.0%
12 Nevada Copper NCU.to 0.77 80.5 61.99 0.77 0.0%
13 Amerigo Res ARG.to 0.345 173.61 59.90 0.345 0.0%
14 Copper Fox CUU.v 0.125 417.64 52.21 0.125 0.0%
15 Revelo Res. RVL.v 0.070 128.486 8.99 0.070 0.0%
NB: All stocks priced in CAD$ Portfolio avg 0.00%
This year I’ve made four changes to the list. Out go Ivanhoe, HudBay, Reservoir and Hot Chili,
in come Imperial Metals (III.to), Excelsior Mining (MIN.v), Regulus Resources (REG.v) and Coro
Mining (COP.to). This means that the list is now comprised of six copper producing companies
(III.to, CS.to, CMMC.to, ATY.v, COP.to, ARG.to) and nine pure exploration stage companies
(the others). First, a couple of lines to explain why I dropped the four that I dropped.
• Ivanhoe and HudBay have gone for a simple reason; they’ve got too big for the
purposes of this Copper Basket. The original concept was to follow exploration stage
companies only, but in the last couple of years a handful of producers have made it in
as well. Even so, the focus has always been on the smaller cap end of the market to
better suit the overall strategy of The IKN Weekly coverage. Last year I went with HBM
and IVN because a) pickings were very thin in the copper space this time last year b)
both were under U$1Bn market cap (which stretched my normal limit but I gave myself
wiggle room and c) I was particularly interested in following more closely the way in
which IVN was marketed by Robert Friedland (answer; amazingly well). But now we’re
here in 2017, for one thing the market is much healthier and there are more reasonably
traded names to choose from, for another thing HBM and IVN are just too big. Bye.
• Reservoir Resources is also gone for a simple reason, it was bought out. I carefully
considered the idea of including its now owner Nevsun this year as a Basket component
but in the end decided against it, mainly again due to its larger market cap size
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(C$1.25Bn approx). Finding alternatives for 2017 was much easier than last year.
• Finally, Hot Chili has been removed because it’s a broken stock. These Aussie
companies and their massive share dilutions are all well and good if they have some
money and a decent property but HCH has failed too long, has little in the way of cash
and is in the vicious downward spiral of Pacific Ocean share dilution, with more
inevitably to come. I’ve afforded the company plenty of patience and a four year run in
the basket, but no more. I never liked the name of the company either, far too cute.
Now for a few lines on the replacements for those four. I’m not going into the biogs of the
other eleven stocks, today we concentrate on introductions of the new guys at the party but as
per every year I would like to make it clear, to new and old readers alike, that The Copper
Basket is NOT a list of recommended stocks. The 15 components are chosen as a general
cross section of the junior copper sector, some are large (e.g. III.to) and some are small (e.g.
RVL.v), some I like (even to the point of ownership, e.g. REG.v), some I consider personally to
be total dogs and untouchable (e.g. CUU.v). The idea is to be representative of what’s out
there, no more no less. Please don’t get confusd about this point, particularly as I roll out the
first new name this year.
1) Regulus Resources (REG.v): And indeed this introduction will be really brief because it’s
one of the closest followed stocks here at The IKN Weekly and a Top Pick selection, as well as a
large personal holding. REG used to be on the Copper Basket but I dropped it last year as it had
been doing nothing (even though I held my original shares) but finally the company got its JV-
esque deal done with its neighbours and as such, 2017 promises to be a busy year with plenty
of newsflow for REG. As you’re aware, I think this one is second to none in the copper
exploreco world and therefore it’s a great re-addition to the basket.
2) Coro Mining (COP.to): Here’s another company that used to be a Copper Basket
component but got dropped. It’s back again
because finally the company has made
progress at its main properties in Chile and is
even producing a small amount of copper at
its Berta mine and plant. COP is an interesting
one to include because it’s also been diluted
heavily (on its way to raising capital) and has
a 54% owner in the shape of Greenstone
Resources, a fund that’s been investing
heavily in base and industrial metals stories
recently, so at 15c it might look cheap, but
that 483m+ share count (plus a whole bunch
of derivs) makes it a $72m market capper and
not so much of a bargain. On the other hand
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it’s kept its balance sheet reasonably clean and if it can execute on the strategy and keep
further dilution to a minimum going forward and get first Berta cash flow positive and then
develop its larger Marimaca complex, there could be value here. I want to keep a closer eye on
this stock in 2017 (a bit like IVN last year) so it gets the nod and one of the spaces.
3) Imperial Metals (III.to): The producer stock chosen to replace the big HudBay is the
medium-sized Imperial. This is a most interesting case study of a mine and probably well
known to any reader living in BC Canada (and further afield for that matter), its two producing
assets Red Chris and Mount Polley, plus its other assets are located in BC. Most of you wil also
know about its ongoing tribulations at Mount Polley, which suffered that tailings dam failure and
has been a veritable money pit ever since. But the Red Chris mine economics also suffered
through the copper downturn, so with copper now showing signs of real life it may be the right
time to follow III more closely (not to mention its 50% ownership of Huckleberry, put on Care
& Maintenance in August last year due to low copper prices...that one may be a booster too.
With roughly 2/3rd of III’s revenue currently coming from copper and the other third from gold,
this company qualifies nicely for its berth. And the other thing I particularly like about III is the
dog’s breakfast that is its balance sheet (though hasten to say I only use “like” because I don’t
own any shares). Up to 3q16 it was running a negative $49m working cap and though the
company has papered over that particular
crack via its recently closed $65m placement
(company controller Murray Edwards taking
the lion’s share and getting his stack up to
36.2%, with number two holder Fairholme
joining the fun and getting its holding to
23.6%), it’s still up to its gills in long-term
debt and reminds me of a mini-HudBay in
this respect.
The interest here, apart from swapping out a
too-large company and getting a smaller
producer in, is to see what kind of share
price reaction III get from a rising (or falling)
copper price. My inner financial wonk cannot
resist having this one in (and it got suggested by two of you as well), so here we are.
4) Excelsior Mining Corp (MIN.v): Last but not least, this was the most suggested company
name from IKN Weekly subscribers since I asked for ideas for the 2017 basket, mentioned quite
literally by a dozen of you. MIN.v is the owner of the Gunnison copper project in Arizona, one of
those in-situ leach projects that work by injecting dilute H2SO4 underground, collecting it via
another tube once it’s had time to dissolve some of the copper in the orebody and processing it
to collect the copper. As you’ll see from the chart at the end of this note MIN.v stock has been
on a bit of a tear recently, up 50% since the end of November on strong volumes that have
something to do with the rise in the price of copper, something to do with the recent permitting
success of the Florence Copper project not so far away, owned by Taseko and using the same
type of in-situ plan, plus something to do with a big promotional campaign by a whole bunch of
usual suspect Canadian newsletter writers and purveyors of absolutely cannot lose no-lose
listen to me and get rich ideas. You know the ones.
Me personally, I have my reservations about MIN.v and Gunnison so I’ve never taken the
plunge (more fool me after that run-up, you could say). But I recognize a popular copper play
when I see one and if the company’s claims pan out to the letter it will be in production in early
2018 and running at a 40% IRR assuming U$2.75/lb copper, all of which is a bit too good to
believe from where I’m sitting, especially as this thing is in Arizona and may have a tougher
time to get its permits than many imagine. Speculative yes, high risk yes, but there’s potentially
high reward here too and I never mind being wrong about a stock. Therefore and by popular
demand, it has its place this year.
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And that wraps up the overview of the new 2017 Copper Basket, with special love and attention
devoted to the new names on the list. Let’s see how things develop.
The 2017 Producer Basket
The other bit of housekeping we need to do this weekend is to adjust and update the Producer
Basket for the year, the section that allows us to keep tabs on what the Big Boys are doing and
how they’re getting on compared to our normal focus stocks, the junior (precious metals) plays.
First up, this year I’ve decided to drop a couple of words from the title line and just go for
“Producer Basket”, that’s enough to define things though I’m still very much concentrated and
interested in those larger mining companies with low cash cost profiles, rather than the
leverage-to-gold-price types finding it tough to stay free cash flow positive if gold takes a dive.
So now for the new basket and this year there are two companies out, two new companies in.
Table here, notes on contents below:
company ticker price 1/1/17 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Barrick ABX 15.98 1165.33 18.62 15.98 0.0%
2 Newmont NEM 34.07 530.595 18.08 34.07 0.0%
3 Goldcorp GG 13.60 832.381 11.32 13.60 0.0%
4 Franco Nevada FNV 59.76 178.01 10.64 59.76 0.0%
5 Agnico Eagle AEM 42.00 223.475 9.39 42.00 0.0%
6 Ang/Ashanti AU 10.51 405.27 4.26 10.51 0.0%
7 Royal Gold RGLD 63.35 65.281 4.14 63.35 0.0%
8 Kinross Gold KGC 3.11 1245 3.87 3.11 0.0%
9 Buenaventura BVN 11.28 254.19 2.87 11.28 0.0%
10 Sibanye Gold SBGL 7.06 228.71 1.61 7.06 0.0%
Prices in U$, NYSE or NASDAQ tickers Portfolio avg 0.00%
First up a reminder to anyone new round these parts that there’s a slight difference to the
thinking behind the Producer Basket compared to The Copper Basket. Although we mainly use
this basket to compare to how things are going in the juniors, I also like to add a bit of
competition and as from last year the idea is to try and beat the GDX benchmark ETF
performance. We managed to do that to the tune of just under 10% in 2016 (though the
winning margin was cut down hard in the last quarter) and with that in mind, the two
adjustments are made.
The two cut components are Detour Gold (DGC.to) and New Gold (NGD) and I’ve cut them both
because they were rather disappointing at the business end of matters last year. The problem
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with DGC is that its margins really aren’t that great; it’s all about shifting large quantities of low
grade dirt and as it didn’t manage to do that according to its own plan in 2016, as well as
cutting guidance for 2017, it’s not going to be low-cost enough for my taste. Meanwhile New
Gold gets the chop because of the ongoing glitches, delays and cost overruns at its Rainy River
build-out. Without this project NGD is not going to be able to step up a league but so far at
least it’s been a bit of a White Elephant (Oliphant?) up to the point last month when its COO
abruptly departed. If I’m going to try to beat the GDX I just don’t want this kind of ticking
timebomb among the components because it may just turn out to be all right, but if Rainy River
hits a big problem it could sink the whole portfolio.
Therefore two names are culled from the list and now for a few lines on their replacements:
Kinross Gold (KGC) (K.to): A gold mining name that needs no introduction, Special K gets a
place in my basket this year because I think it’s in the right place financially and operationally to
spring forward and beat the market average. I could have gone for the similarly sized B2Gold
here as a component (as I think it will do very well in 2017, it wouldn’t be my Top Pick
otherwise) but I really wanted to stay away from my own stocks in this list and besides, KGC
adds a bit more to the risk/reward danger. Of course it produces plenty of gold per year (the
rhythm around 2.7m AuEq oz) and its
production costs are acceptable
(U$719/oz in Q3, the latest reported
quarter), but it has a real mess of a
balance sheet to pay down with debt
overhang and all sorts of other wonders
that really drag on its free cash flow
and make it tough for Special K to
deliver meaningful bottom line profits.
At this gold price anyway, which is why
I’ve gone for KGC in my basket this
year. I’m looking to outperform the
GDX and I’m looking for gold to move
up nicely during the year ahead (I
firmly believe that folks, and you know
better than to mess with somebody’s religion*) so adding in Kinross fits my bill.
Royal Gold (NGD): It’s been a bit of a quandry. I really wanted to add another
royalty/streamer play to the basket to play wingman to Franco Nevada, but at the same time I
was looking for the type of potential leverage upside that you don’t normally associate with the
conservative-end play that is the streamer/royalty company. Acandidate was Sandstorm but
that got rejected quickly, partly for the
same reasons as BTO above (that I
own it), but also because SAND isn’t
really big enough for this list, I want
them at U$1Bn or above. On the other
hand, the other obvious choice Silver
Wheaton looks expensive today for
what it is (and it would be too much
like putting in a FNV clone and playing
too safe).
I considered dropping the idea of a
second streamer/royalty company as
well, but after a while convinced myself
that Royal Gold (RGLD) is a good
enough fit to satisfy the space I wanted
8

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filled and it got the nod. The market cap, around U$4Bn is the right size. Its margins are as
strong as they come, with the last quarter’s AISC at just U$352/oz. Plus there’s the outside
chance that if consolidation starts to happen in the streamer/royalty space, this merges with a
like-sized company or gets bought out by a bigger one. That’s the thinking here, the combo of
strong financials and better upside potential than first meets the eyes, despite its high
multiples.
And that’s about it really, I could spin out the chatter more but there’s a lot to get through
today and we have all year to look at the Producer Basket components closely. With that I’ll
wrap it up, expect the new basket to swing into action as from next weekend.
*Yes, it was a joke.
Stocks to Follow
A very pleasant way to end the year. Just one weekly loser in Excellon (EXN.to) as somebody
liquidated shares late Friday, but all the others were weekly winners and a lot of those were
very chunky wins, led by Atico (ATY.v up 26.7%) and ably supported by Rye Patch (RPM.v up
24.0%), Lara (LRA.v up 23.0%), Continental (CNL.to up 19.2%), Riverside (RRI.v up 15.0%),
Red Eagle (R.to up 13.6%), Sandstorm (SAND up 12.1%), B2Gold (BTO.to up 11.5%) and
Focus Ventures (FCV.v up 10.0%), no fewer than nine double figure percentage winners.
Cannot complain.
As from next week’s edition, the closed positions you see in the table below will be move to the
Appendix with the other year’s closed positions.
We currently have 15 open positions on the ‘Stocks to Follow’ list, our self-imposed maximum
number at any given time. Nine of the positions are in the green, one is unchanged, five are in
the red.
company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICKS
B2Gold BTO.to STR buy C$2.11 12-sep-14 C$3.19 51.2% tgt $5.30 IKN375, good Q3
Regulus Res REG.v hold C$0.64 06-apr-15 C$1.20 87.5% LT exploreco top pick
Long positions (in current order of preference)
Sandstorm Gold SAND STR buy U$3.80 17-apr-16 U$3.90 2.6% $7 tgt IKN378, v cheap again
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.225 15.4% Under-radar Zn.
Wesdome Gold WDO.to hold C$1.72 22-may-16 C$2.09 21.5% Will sell at $2.88
Cordoba Min. CDB.v STR buy C$0.73 15-sep-16 C$0.73 0.0% $1.50 tgt sub 70c great price
Starcore Intl SAM.to part sell C$0.61 10-jan-15 C$0.56 -8.2% ex-Top Pick, reducing position
Excellon Res EXN.to spec buy C$1.71 09-oct-16 C$1.64 -4.1% Hit by Ag sell-off, $3.13 tgt
Atico Mining ATY.v STR buy C$0.51 24-jul-16 C$0.95 86.3% New tgt $1.10, Cu play
Rye Patch Gold RPM.v STR buy C$0.32 02-sep-16 C$0.31 -3.1% 75c tgt, strong value
Riverside Res RRI.v buy C$0.39 27-jun-16 C$0.46 17.9% Added IKN380, 60c tgt
Continental Gold CNL.to STR buy C$2.68 22-may-16 C$4.40 64.2% $4.80 tgt, hold thru 1q17
Red Eagle Min. R.to buy C$0.71 13-dec-16 C$0.75 5.6% New long, small starter
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.07 -7.0% solid biz model
Focus Ventures FCV.v hold C$0.23 01-jul-12 C$0.055 -76.1% needs JV deal
Short positions
None at present
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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 notes on some of the current basket stocks:
Rye Patch Gold (RPM.v), Sandstorm Gold (SAND), Cordoba Minerals (CDB.v), Atico
Mining (ATY.v), B2Gold (BTO.to): Along with Continental Gold (CNL.to) which we dealt with
separately (due to the site visit and the update report) these are the five stocks that I’ve had
on “Strong Buy” near-sentiment in the last couple of weeks and lumped together in this notes
section. The happy news is that with the exception of Cordoba which added just 3c, all the
Strong Buy picks returned double figure percentage gains last week. That’s good. And by the
way, CDB.v is now looking very cheap compared to peers and I think it’s ready to start moving
again. There are several mediocre copper juniors (that we avoid) but there really aren’t many
top class large scale copper projects in the hands of this size of company; this is one of them.
Starcore Intl (SAM.to): SAM did better than I expected frankly, holding onto to its zoom-up
gains and even managing to add a penny come the end of play. The most interesting
development came on Friday, last day of the trading year, when the stock opened with a
900,000+ share block trade. On seeing that I expected weakness to follow but it didn’t come,
reminding me that even though I’m looking to sell a portion of my personal holding it’s still at a
level that’s a little too cheap to unload. Given a little luck in running on gold (and I’m expecting
last week’s move in gold to follow through in the next couple of weeks, see the intro above)
there’s every reason to expect SAM back in the 60s
levels. Once it is, I’ll find it easier to reduce.
Excellon Resources (EXN.to): EXN was another
one that hit a big trade on the open Friday, this 10
day chart bearing witness to the 4m share block that
went through. But unlike SAM it performed in a more
classic manner afterwards and got sold down,
thereby erasing just about all the gains of the last 10
days. Yet another reminder (if you ever needed one)
about the inherent volatility of these junior stocks of
ours and the way in which they can be affected by
just one buyer or seller.
Continental Gold (CNL.to): Last week the stock suddenly woke up, shot back over $4 where
it damned well belongs and stayed there. It’s as if the world has suddenly worked out that CNL
is 1) fully permitted and 2) a likely takeover target, both of which come as no shock to readers
10

,
of these pages. Gold’s move up to U$1,150/oz and U$1,160/oz helped light the fuse here of
course, but there’s a difference in this run in CNL and the three other occasions we’ve seen the
stock spike higher in 2016. This chart illustrates
the point and as you can see, in the first two
occasions CNL ran to $4.50-or-so, the spot price
of gold was significantly higher than it was on
Friday. The third occasion was similar, but CNL
was enjoying its post-permit run and even then
gold at U$1,171/oz was in a better place than
the U$1,150/oz this weekend.
This week’s run on CNL wasn’t just strong, but it
came just eight days after and exceptionally
heavy 6m share volume day (at $3.55) and on
higher than average three month volumes too,
something you wouldn’t normally expect in the
Xmas-to-New Year lull. It felt different too and where it stopped was right on what I consider
the M&A bid floor ($4.50 + 30% bid premium = nearly $6, my idea of what CNL will go for in a
buyout). All in all I’m happy about giving this stock 1q17 before closing the near-term trade
because that buyout might just turn up after all.
Regulus Resources (REG.v): You may have noticed that the definitive agreement between
Regulus and Coimolache SA was due to be signed and closed in December 2016. You may also
have noticed that today is January 2017 and we still haven’t heard from REG about the deal
closure. Yes me too, so on Saturday I got into contact with John Black who me in on a situation
which can be summed up in four words: “Peruvian lawyers are dicks” (my words not his).
Nearly everything is good news: The relationship between REG and Coimolache is getting better
by the week, the two companies are working well together on site (where it really matters),
plans are moving forward and details are being arranged for the drill plan in 2017 (and
beyond), the drill contractors, even the delivery of the CoreScan unit is now arranged and due
for January. At an executive level REG and Buenaventura (BVN being the operators at
Coimolache SA) is strong and there have been plenty of productive meetings. Both sides are
happy with the terms of the MOU and are waiting to sign on the dotted line.
The problem is the assembled banks of lawyers, particularly those inside BVN, who have slowed
the pace of the definitive deal to a snail’s pace due to a whole range of reasons between petty
and extremely petty (CEO Black and I spent a good half hour on the phone, you really don’t
want to know how maddening these people have become) The result is a situation in which
both sides, BVN and REG, are happy with the deal and keen to get it signed off but haven’t
managed to get it done in time “because Peru”. Frustrating for sure, but there’s nothing at all to
worry about on a deal level and we’ll probably get some sort of “we’re extending the deadline”
type of announcement in the next few days to give all sides some more time (and allow the
board of directors at BVN the opportunity to send a few rockets up the backsides of their in-
house legal team). It’s potentially due to the lack of a definitive deal announcement that REG
has been trading quietly in recent days (weeks?), but one important factor has been a lack of
volume and that implies that the bigger cash behind the project (and there’s plenty of that) is
relaxed about the slight delay to the deal closure. Therefore if you’re one of those people
interested in opening or adding to a REG position, I’d opine that right now is about the best
price you’re going to get (and it’s been bouncing off $1.15 or so quite regularly, there’s a floor
right there). Any nerves about the lack of a deal announcement may shake loose a few more
cheap share sin the days ahead but the window of opportunity is not going to last long.
Signature delay aside, REG is in good shape and 2017 promises much from our Top Pick stock.
Riverside Resources (RRI.v): Even though it reacted well at the end of last week (and
year), RRI hasn’t managed to break out of the 50c or so recent ceiling yet. Last week saw it
catching up to where it was, nothing more and volumes weren’t that great either.
11

,
The Copper Basket
After fifty-two weeks of 2016, The Copper Basket shows a 131.29% gain to level stakes.
company ticker price 1/1/16 Shares out Market Cap current pps gain/loss%
1 Ivanhoe Mines IVN.to 0.61 778.96 1978.56 2.54 316.4%
2 HudBay Min. HBM.to 5.31 235.23 1806.57 7.68 44.6%
3 Capstone Min. CS.to 0.44 382.04 481.37 1.26 186.4%
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 94.19 175.19 1.86 389.5%
7 Copper Mtn CMMC.to 0.445 118.8 111.67 0.94 111.2%
8 Atico Mining ATY.v 0.28 97.59 92.71 0.95 239.3%
9 Trilogy Metals TMQ.to 0.395 104.33 68.86 0.66 67.1%
10 Cordoba Min. CDB.v 0.16 86.86 63.41 0.73 356.3%
11 Nevada Copper NCU.to 0.66 80.5 61.99 0.77 16.7%
12 Amerigo Res ARG.to 0.205 173.61 59.90 0.345 68.3%
13 Copper Fox CUU.v 0.125 417.64 52.21 0.125 0.0%
14 Hot Chili Ltd HCH.ax 0.09 445.723 14.26 0.032 -64.4%
15 Revelo Res. RVL.v 0.055 128.486 8.99 0.07 27.3%
NB: HCH.ax priced in AUD$, rest CAD$ Portfolio avg 131.29%
NB: Please see above in ‘Fundamentals’ for the new composition of The Copper
Basket, which will begin next weekend.
The copper complex showed no Yin/Ying dynamic with its precious metal cousin this time, our
basket average shot up nearly 16% as base metals names joined in the rebound. Just two of
the basket stocks gave weekly losses (CUU.v,
HCH.ax) and two others were unchanged
(RMC.v for obvious reasons, then NGQ.to)
which means we had eleven week-over-week
winners to round out the year. Though most of
the gains were modest and certainly not as
strong as the rises in precious metals stocks
across the board, the two biggest movers in
Atico (ATY.v up 26.7%) and Western Copper &
Gold (WRN.to up 17.0%) were impressive by
any standards.
And that wraps it up for the year so let’s check
in on the comparative performances of our basket stock components. Here’s the updated chart
which marks relative levels at 13, 26, 39 and now the end total 52 weeks of 2016:
The 2016 Copper Basket Components after 52 weeks
500%
450%
400%
350%
300%
250%
200%
150%
100%
50%
0%
-50%
-100%
12
ot.NRW v.BDC ot.NVI v.YTA ot.SC v.CMR ot.MUC ot.QGN ot.GRA ot.QMT ot.MBH v.LVR ot.UCN v.UUC xa.HCH
The Copper Basket 2016, weekly evolution
140%
120%
100%
80%
60%
40%
20%
0%
-20%
13 wks
26 wks
39wks
52wks
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 ht52
source: IKN calcs

,
And the winner is...Western Copper & Gold (WRN.to), which has come up on the rails in the last
few weeks and flown past the other massive winners for the year, Cordoba and Ivanhoe.
Others that made big strides in Q4 are Atico (happy
about that) and Capstone (CS.to). Overall it’s telling
how well the producer stocks (ATY, CS,
CMMC/CUM, ARG., HBM) did in the last quarter of
the year and sprung hard on the copper price
rebound.
As for the copper price, that wasn’t the real driver
behind last week’s strong equities performances as
trading was light and price fluctuations minimal.
Copper-the-metal is finishing the year with a
U$2.50/lb tag, right on the button of my prediction
for 2016 (toot toot) so a repeat performance and
copper moving up to my U$3.10/lb forecast for the
year would suit just fine. However it must be said
that I’m opposing most of the copper experts in
Chile on that bullish call, as according to the survey
done by the Antofagasta Mercury (4) consensus for
copper price in 2017 is between U$2.30/lb and
U$2.40/lb, with a low of U$2.28/lb and a high call
of U$2.75/lb. Most of the industry experts consulted
expect copper to hit a strong dollar headwind in the next 12 months. I’m happy to oppose.
As well as it being the end of the year it’s also the end of the month and that means an update
on our long-term inventory trend charts, so here they are:
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
13
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua pes tco von ced 61.naj bef ram rpa yam nuj luj gua pes tco von ced
LME Shanghai Comex source: Cochilco
Copper inventories, per month, 2012 to date
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua pes tco von ced 61.naj bef ram rpa yam nuj luj gua pes tco von ced
Mt Cu source: Cochilco
LME Shanghai Comex
December saw an uptick in inventories with most moving into the LME system. It’s not easy to
predict the next couple of months with accuracy, but we do know that an influx of inventory
into SHFE is the norm and by looking at the high level at which the LME finds stocks this

,
December, we may be in for a 2013-type situation where these warehouses of last resort soak
up a lot of excess copper to market. If so, the copper pice hike will almost certainly take a
breather and the next upmove (which I do expect in 2017) won’t happen until later in the year.
Now for the regular weekly copper warehouse inventory bullets:
• Overall world copper inventory levels rose again but this time the overall aggregate was
slight, up just 2,120 metric tonnes (mt) (+0.4%) to close Friday at 548,002mt. The
uptrend is therefor intact, but it was on light Christmas trading an no biggie of a week.
• There was movement inside the overall total, mind you. The SHFE Shanghai warehouse
inventores rose sharply, up 12,221mt (+9.1%) to finish the week at 146,598mt as the
expected post-Christmas/pre-Chinese New Year influx begins (Chinese New Year falls
fairly early this time on January 28th, for what that’s worth).
• Meanwhile LME inventories dropped by a near-mirror image 12,600mt (-3.8%) and
closed the week at 322,225mt. Still doesn’t take much out of the big recent imports.
• Comex stocks added more in what’s becoming less of a commentary and more of a
tradition. Friday’s close saw its stocks at 79,179mt, up 2,499mt (+3.3%) from this time
last week.
Here’s the regular Shanghai-only chart that shows the consolidation of current levels in very
much the same way as we saw this time last year. That was of course followed by a record
spike in stocks.
Shanghai Futures Exchange Warehouse Stocks, 2014-2016
400000
350000
300000
250000
200000
150000
100000
50000
14
ht5naj ht61 ht03 ht11 dn22 dr3gua ht41 ht62 ht7ced ht81 ts1ram ht21 ht42 ht5luj ht61 ht72 ht8 ht02 ts13 ht31 ht42 ht5nuJ ht71 ht82 ht9 ht72
Mt Cu
source: Cochilco
Now for notes on a couple of the basket component stocks:
Western Copper & Gold (WRN.to): This stock has been on an absolute tear in December
and has nearly doubled from levels that I thought
were fairly expensive in the first place. This isn’t the
first time we’ve seen WRN move higher quickly, for
example your author remembers a fast spike at the
end of 2012 to from the same kind of start level to
$2 or abouts (a move that quickly reversed) and
this whole thing looks suspiciously like a BS pump
job to me. I’m not against WRN or its Casino
project but it’s hardly a fault-free company and its
combination of high capex, low grade and with a
royalty already around its neck isn’t my idea of an
M&A target, no matter how much Goldcorp may be
warming to this particular neck of the woods. This
move looks forced, way too much like lemmings
jumping on a trend, I prefer to pass on this “opportunity”.

,
The Low Cost Producer Basket
After 52 weeks of 2016, the Producer Basket shows a gain of 61.94% to level stakes.
company ticker price 1/1/16 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Barrick ABX 7.38 1165.33 18.62 15.98 116.5%
2 Newmont NEM 17.98 530.595 18.08 34.07 89.5%
3 Goldcorp GG 11.56 832.381 11.32 13.60 17.6%
4 Franco Nevada FNV 45.75 178.01 10.64 59.76 30.6%
5 Agnico Eagle AEM 26.28 223.475 9.39 42.00 59.8%
6 Ang/Ashanti AU 7.10 405.27 4.26 10.51 39.2%
7 Buenaventura BVN 4.28 254.19 2.87 11.28 163.6%
8 Detour Gold DGC.to 14.41 174.06 3.18 18.29 26.9%
9 New Gold NGD 2.32 512.8 1.79 3.50 50.9%
10 Sibanye Gold SBGL 6.09 228.71 1.61 7.06 15.9%
Prices in U$/NYSE tickers, except DGC.to (CAD$) Portfolio avg 61.94%
NB: Please see above in ‘Fundamentals’ for the new composition of The Producer
Basket, which will begin next weekend.
The year ends with a flourish, the basket added 11.9% in the last week of trading and notably,
volumes were better than the normal “quiet” adjective we use for the post-Christmas week. All
our basket components registed gains with the best moves made by stocks hit most keenly in
December, Detour (DGC.to up 14.3%) and New Gold (NGD up 10.8%). Following those, the
9.8% added by Barrick (ABX) was enough for it to close out the year at the very top of the tree,
beating out Newmont by about half a billion dollars.
More good news is that our basket closed the year 9.46% in front of our benchmark, the
precious metals miners’ ETF (GDX). Our ten picks suffered from having the ultimately
disappointing Detour (that couldn’t live up to its production billing) and “The Africans”
AngloGold and Sibanye (that got hit hard by the forex double whammy in Q4), but managed to
beat the street thanks to equal weight picks in Buenaventura, Barrick and even Newmont. As
the basket was chosen this time last year to try and beat GDX rather than just match it (as per
years previously, I’m glad it managed to hang on to a near 10% comparative win.
The Low Cost Producer Basket: Weekly performance
200% and comparative to GDX control
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
-20%
Regional politics
Regional Risk Review
It’s the end of a quarter as well as the end of a year and that means it’s time our regular review
of Latin America regional political risk for junior mining companies. This is the 15th edition of the
revised format, the latest having come in IKN386. The standard reminder of how the categories
are considered with their score out of ten: The six categories are:
15
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 ht52
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 13ceD
source: ikn calcs, NYSE/Nasdaq data

,
a) National Government Miner Friendly: The country on its national stance towards
mining activity.
b) Community/Social Miner Friendly: The overall attitude of locals towards mining,
either in specific zones or in country regions.
c) Foreign Direct Investment (FDI) Friendly: The openness towards FDI and the
safeguards it gives to foreign capital looking for a home.
d) Mining Culture: Countries or regions with generational traditions in mining are easier
places in which to operate than those which have little previous exposure to formal
mining operations.
e) Geopolitical Optics: The way in which the outside world sees this country, an
important factor, no matter if the perception be right or wrong.
f) Internal/National Political Stability: A gauge of how stable the place is politically.
As usual we concentrate on the nine countries with the best potential to host companies, rather
than try to offer a comprehensive LatAm-wide view that takes in countries with little or no
appeal for investment or speculation in juniors. Here’s this quarter’s table, below the country-
specific notes.
December 2016 Latin American Country Risk For Foreign Mining Companies
Nat. Govt Community/Social Geopolitical Internal Nat.
Country FDI Friendly Mining Culture Total
Miner Friendly Miner Friendly Optics Political Stability
LatAm countries under active consideration for junior mining project location
Chile 9 7 8 10 8 8 50
Peru 9 7 9 9 7 7 48
Mexico 8 6 8 9 6 6 43
Nicaragua 8 5 7 7 7 6 40
Brazil 7 5 6 8 6 7 39
Dom Rep 8 5 7 6 5 7 38
Guyana 7 7 7 6 6 5 38
Colombia 7 5 8 6 6 6 38
Argentina 8 5 7 6 6 5 37
Potentially relevant LatAm countries for junior mining
Ecuador 7 6 6 5 8 5 37
Panama 6 5 9 5 7 5 37
Guatemala 6 4 4 5 4 6 29
Countries of little or no interest for junior mining exposure
Bolivia 4 6 2 9 5 8 34
Uruguay 4 4 7 3 6 7 31
Paraguay 7 5 6 3 4 6 31
Honduras 7 3 4 5 3 3 25
Costa Rica 1 1 5 1 6 7 21
Haiti 6 3 4 1 3 4 21
El Salvador 1 1 4 1 6 4 17
Venezuela 3 5 1 3 1 2 15
source: The IKN Weekly house estimates
Chile: Geopolitical optics up 1 point
Chile is normally the one that sits at the top with an unchanged rating, but not this week as the
good thing in LatAm mining got just a point better. The reason to add a pip to the geopolitical
optics of Chile isn’t really about the country and more about its main product of copper, as you
need no reminder of the boost the red metal got in price terms during Q4. That’s a direct
benefit to the country, it takes fiscal and political pressure off the Bachelet government
(Codelco’s thin treasury position and upcoming investment needs suddenly become a lot easier
16

,
to manage) as well as elevating Chile in the eyes of FDI cash. The relative calm in its political
scene, plus the way in which lithium investment is still being talked up by the government (and
is likely to get State funding) also help the mix.
Peru: Unchanged
Not an easy call on Peru, as the copper price boost also helps this country and the most recent
development in the small mining scene is a long-overdue re-vamp of the formalization process
which means that of of February this year it’s going to be a lot simpler and cheaper for
illegal/informal miners to get on the right side of the law (5), but overall I’ve decided not to add
a point to the Peru score in the same way as Chile because there’s still a lot of underlying
grievances in the country on mining matters and bureaucracy has even managed to be slower
in the first five months of the PPK administration than it was in the Ollanta government. Peru’s
been busy slapping itself on the back about its big copper production increases in 2016
(Toromocho, Constancia, Cerro Verde expansion) but there’s precious little left in the pipeline
now, barring smaller projects such as Milpo’s Magistral (which must be a marginal project, as
40% of revenues depend on moly), BVN’s Tambomayo (first pour declared this weekend) or
Minera IRL’s Ollachea, now on the verge of securing financing. Meanwhile on the political scene
PPK’s honeymoon period is well and truly over and the majority Fujimorista controlled Congress
is already up to no good and causing disruptive problems. That was something I was expecting,
but not this soon and it doesn’t bode well for the next three years of government.
Mexico: Internal National Political Stability up 1 point
Trumps’s big beautiful wall and the way it’s affected Mexico’s macroeconomic outlook has been
the major talking point of the last quarter in the country, but the reacton inside the country has
been quite the opposite and there’s now a
sense of national solidarity rising up which can
only help this besieged Peña Nieto (or any
other) government’s cause. That and the silver
lining to the Peso weakness against the dollar is
one that really benefits our focus sector; yes
indeed, it’s just got that much cheaper to
operate a mine or to go exploring in Mexico in
US Dollar terms.
The other positive is the way Mexico is now
talking about rescinding the current 7% (plus
1/2% extra for precious metals) EBIT-deducted
royalty on mining operations. No firm decision
or serious push through Congress yet but if it
comes to pass Mexico will get more points added. As such, the combo of the above is enough
to see Mexico’s score rise a notch this quarter.
Nicaragua: Unchanged
The quasi-rigged Presidential election that saw Daniel Ortega re-elected for his third term of
office in November (as made his wife Vice-Prez, just to add a new layer of fun) came and went
and assuming he sees out this term it will mean 15 years at the top (nothing to say he won’t rig
it all again in 2021, either). International outcry over the unlevel playing field election was
muted because Ortega has settled into a benign dictator role and is also overseing decent
economic growth in the country (when the North can turn a buck it’s amazing how ideology
suddenly takes a back seat).
Meanwhile in mining, gold production has started to creep up again after a couple of stagnant
years, thanks to the better numbers out of the Bonanza (Mineros SA of Colombia) and Libertad
(BTO of Canada) rather than the bringing on line of any new mining operations. That’s what
Nica really needs to move ahead and though welcome enough so far, the explorecos haven’t
had a big hit raging success yet. Maybe Royal Road or Orla can turn that around (see Market
Watching below). Overall, a business as usual no-news-good-news quarter. Score unchanged.
17

,
Brazil: Geopolitical optics up 1 point, Internal National Political Stability up 1 point
Last time in IKN386 we started the Brazil note with the words “Brazil is still in a mess...”, but
raised the score by a point all the same, because newly inaugurated President Temer had
brought a bit of stability to the country. That process continued in Q4 and though it’s been a
rough period without doubts (i.e Brazil is still a mess), not least the fallout from the Lavo Jato
corruption scandal which is now spreading to other regional countries, the economy seems to
be past its low point and I’ve noticed plenty of bonds/equities players looking at Brazil as a
good place to park cash. The Real has been fairly steady at just over 3 to the US Dollar (and
even better, it weakened vs the Greenback on news of the Trump win just like every other
regional currency but soon snapped back from whence it came) and bargain hunters like the
look of things.
Mining in the country has been lifted sharply by the bounce in iron ore prices (as well as copper
I suppose) and as the Samarco mess is now largely contained in political terms at least, it’s not
going to be a big brake on new investment.
Dominican Republic: Internal National Political Stability down 1 point
The aforementioned Lava Jato corruption scandal threatens to de-stabilize Dom Rep, because it
was one of the chief destinations for bribes out of Brazil’s civil works company Odebrecht
according to the official admission of guilt filed by Odebrecht with the US SEC. The chances that
high ranking politicos in the country took large bribes in exchange for juicy contracts. Hence the
point docked and if things unravel , there amy be more points lost in Q1.
Meanwhile in mining, Dom Rep continues to make all the right noises and its government is
keen to promote the benefits of the industry to its population and attract new FDI. GoldQuest
seems to be in the front rank of preferred projects and with the government seal of approval,
so my personal pass call on the company may ultimately be a mistake.
Guyana: Unchanged
It was quiet news-wise out of Guyana this quarter, both politically and in the mining scene
where Aurora has consolidated its production rhythm and seems to be doing well enough, but
outside that success story there’s little movement. Therefore I pass on any changes to the
score this quarter, but I also have a creeping sensation that the country is losing some of its
positive mining momentum and due just to that, may need to be downgraded in the next
quarter or two. Jury’s out, no need for a snap decision.
Argentina: Geopolitical optics down 1 point.
The continent’s prime basket case country has finally seen a little of the Brave New World
marketing gloss chipped from its facade. This was the quarter when it began to occur to those
outside watching that Macri’s austerity measures weren’t producing the desired results or
dragging the country out of recession as quickly as he and his team (he’ll blame his team) had
promised. It was when the provinces, particularly those annoying anti-mining provinces and
enclaves, started flexing their msuces and showing people the the real power lies at the
regional governmental level in Argentina and that all the new news or agreements don’t mean a
thing if you don’t have practical support at a local level. It was also the quarter in which, quietly
and without trying to make a fuss about it, Argentina’s private and public sectors gave out the
same high percentage salary increases to employees, the type enjoyed in the CFK years that
kept personal pocket inflation under control. This was a large step back from the hardline
orthodox economic policy Macri wants to impose and in the end, the friction caused the sacking
of his FinMin (somebody has to take the blame and Prat-Gay was never one of Macri’s inner
circle guys.
Mining Secretarys Meilan’s Federal Mining Agreement was supposed to be signed by all 23
provincial governors by now, but they’re now talking about “end Q1” for the signatures and
only then can it go to Congress as a baseline for new national laws. Even that sounds optimistic
in light of the newly vociferous Mario Das Neves of Chubut who had been biding his time before
making his “never going to happen here” speech the other day. We’ve also seen a delay in the
18

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construction decision for the Lama project (the Argentina side of Pascua Lama is now envisaged
as a smaller stand-alone underground operation) in San Juan province, which was supposed to
happen in December but has been put back until end February. Add in the near-miss of the
opposition’s plans to reintroduce the mining export tax, negotiated away by he government in
return for a better increase in minimal taxable salary levels for workers and it’s been a negative
one for Argentina in the eyes of the world.
Colombia: Geopolitical optics up 1 point, Internal National Political Stability up 1
point
I’m turning into a bit of a Colombia mining fanboy, that I don’t mind admitting and let’s start by
noting that the two points lost in the previous edition are added back again. We’ve seen the
Peace Deal go through (at a second attempt) and we’ve seen the mining scene get a boost
from the way the Continental Gold EIA was expedited in good time and as a cherry on top
we’ve seen Red Eagle start up its San Ramón mine.
As you know, I went to the Colombia Gold Symposium in Medellín in November and came away
more positive about the country than I thought I’d be. I also had three site visits (first CDB.v
and R.to, then CNL.to in December) which all went well. It’s clear that Colombia as a nation is
getting its act together about mining at long last and the “geologist’s dream” terrain is now
opening up for serious FDI cash on a greater scale than before. So for the record and to be
crystal clear, I’m becoming bullish about the country and its investment opportunities for junior
mining companies but before we get too carried away, what I want to do is lay out the
negatives because they still exist:
1) Colombia is still limited geographically for mining projects. Ideally I want to be in the
Middle Cauca belt, that’s where serious mining can happen. There are potential new
regions opening up, but on the other hand there are a LOT of places (e.g. Chocó, far
South, far South-East, Wester border with Venezuela that are still very much off limits
and risky jurisdictions in which to operate and even inside the Cauca belt there are
places you simply don’t want to be. Anyone considering a Colombia exploreco trade
must do careful DD on project location and community/political risk.
2) I am unimpressed with the legal representatives there. At the conference they
considered themselves the key aspect to any mining project and without them miners
can’t exist. The condescending attitude and superiority complexes were impresive even
for laywers, they seem to think they were doing foreign miners a favour by letting them
in their precious country. I’d heard horror stories about the difficulties of getting papers
done in Colombia before from other mining people, after seeing this group of vultures
in action I came away confirmed in the view that any company taking on Colombia
must have strong experience in working the corporate side of the country, else face a
mountain of extra expenses and delays.
3) The advances made by the national government are still fragile and if opposition kicks
up a fuss, we’ve seen how initiatives quickly grind to a halt. The legacy of poor
community relations from previous years (look no further than AngloGold Ashanti at La
Colosa for a great example) still hangs over the country and there’s a lot of entrenched
opposition to mining at local levels in specific cases that’s going to be very difficult to
turn around. The government is getting the mining laws into shape at last, but what
they really need is a big win (such as Buriticá) to show the rest of the country the
financial beneifts of mining to fellow countrymen.
In sum, I’m not giving Colombia a carte Blanche green light and alling it the new mining
Nirvana. It is an improving country to go and play at mining, no doubts there, and I’m already
exposed to the country via positions in CNL.to, R.to and CDB.v, plus I’m sizing up the idea of
going more speculative with ANG.v as well. All those fit my bill, they’re people who know how
to work the country (or at worst have been through the tough stuff and are now in the clear).
But just like Peru, Mexico or any other country that gets branded with “Miner Friendly”, you
can’t apply that to every single square mile of the region.
19

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Potentially relevant countries
Ecuador: FDI Friendly up 1 point, Mining Culture up 1 point, Internal National
Political Stability down 1 point
Two points up and it’s only because we’re within two months of the big Presidential election
that there’s a point docked in another place. The election may be going to a second round run-
off and that’s not good news for stability in Ecuador (nor for current Prez Correa), there’s the
point lost. But the rest is good, up to and including the recent regional dust-up between locals
and Chinese at the Panantza copper project, because Correa has brought in the hard line,
arrested leaders implicated in the death of the police officer when it all went bad and is now
demanding that the NGO behind the protests be banned from the country (6). In other news,
the flagship project that Lundin Gold’s (LUG.to) Fruta del Norte has progressed as if on rails, all
major permits and agreements are in place and all that’s left to do is build the thing. It’s exactly
what Ecuador wanted, a good example of mining done well that will benefit all stakeholders
(thanks to the grade). Mirador is still dragging its heels, there’s this new Toachi VMS thing that
could be a good one, INV Metals at Loma Larga is making all the right sounds but failing to
convince its toughest audience, the locals. All in all Ecuador is looking a lot better, but it strikes
me as a mini-Peru now and there are going to be projects with vehement opposition, as well as
those that progress smoothly and become exemplary mines.
Panama: Geopolitical optics down 1 point, Internal National Political Stability down
1 point
This is another place that’s likely to see problems from the widening of the Lava Jato/Odebrecht
corruption scandal, with a lot of the bribery cash having flowed to Panama.
Guatemala: Unchanged
I’ve been pretty harsh of Guatemala’s ratings recently, it’s time to give the country a break.
Conclusion
That wraps up this quarter, the main stories are the improvement in scores in Brazil and
Colombia, with Ecuador coming up on the rails. It may be time to promote Ecuador into the
main category, instead of considering it as merely a potential place to go mining, but let’s wait
and see how the February election coms out before deciding.
Market Watching
Minera IRL: Moving forward
A most interesting development at Minera IRL last week, as on December 29th the company
made a whole bunch of financial re-filings to the Lima Stock
Exchange (BVL) (7), filings that now carry the signature of Diego
Benavides as CEO (see right). It also re-filed its latest quarter on
SEDAR (8) and here’s the cover note on that filing, a message
almost identical to the BVL re-filings but as it happens to be in
English it’s better material for here:
“At the request of the Peruvian Superintendencia del Mercado de Valores
del Perú, the Company is refiling its Interim Financial Statements for the
Third Quarter ended 30 September 2016 in order to include additional
disclosure in Note 1 (Going Concern), concerning its Ollachea project, in
Note 15 (Royalty Buyback Liabilities) to provide additional clarity and Note
20 (Related Parties) to include additional information. The disclosure in these Interim Financial
Statements and corresponding Notes has not been updated to include any information arising
subsequent to 14 November 2016, when these financial statements were originally filed.”
These filings contained no changes in the financials, the only additions were found in the three
notes as expained above and each were at the request of the BVL authorities in order to comply
with their preferred disclosure. This is a very good signal because, although there’s nothing
published by the BVL yet it’s exactly the type of filing they demand at the end of a listing
20

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process, a dotting-i/crossing-t exercise that suggests the end of the bureaucracy needed on
order to re-list is nigh. It also jives with off-record word I’ve picked up from inside IRL in the
days since the last of the bad guys were kicked off the board (by you people, once again I
thank al shareholders sincerely) and Benavides installed at the top. Word has been that IRL has
been making great strides in the re-listing process and doing all the things that the ineffectual
two-faced directors didn’t do for months on end. If my hunch is right we’ll get news from the
company soon, but I must stress once again that it’s the BVL in charge of the re-listing process
and they set the agenda, IRL is behest to their timeline at the moment.
Four speculative tinycap plays for 2017
Though not always my wont, this year I’m going to bow to a bit of cliché year-end tradition and
name a handful companies that are, in my opinion at least, worthy of serious consideration at
the tinycap end of the market. Three of them have been outlined in recent editions and are
mentioned here as reminders, but the fourth is a new name and at the current price deck,
perhaps it’s the most interesting of the lot. They are...
• Angel Gold (ANG.v)
• Royal Road (RYR.v)
• Calibre Mining (CXB.v)
• Eros Resources Corp (ERC.v)
....and now for a few lines on each one.
Angel Gold (ANG.v): The main IKN write-up of Angel Gold is in IKN393 dated November 27th
and I urge you to re-read that piece for more details, but by way of a reminder here are the
pros and cons bullet points that wrapped up the note that day:
Pros
• Good people running a tightly run company
• A very cheap share price
• A large land package in Colombia, a place they know how to work efficiently
• Inside that land package, some very prospective looking targets
Cons
• Potential headwind from warrant overhang
• Cash at very low levels and the current placement is needed to get them moving
• Still early stage exploration
The other thing we need to mention about ANG is its share structure, which officially at present
is 49.29m (giving the company a market cap of C$4.19m this weekend, what with the share
pice back at 8.5c) but as ANG currently has an equity financing open, if they manage to fill the
book here’s how the structure would look:
• Pro-forma shares out: 80.54m
• Pro-forma warrants: 35.94m
• Options: 4.89m
• Pro-forma fully Diluted: 121.37m
We discussed the placement, its structure and the potential positives and negatives in some
detail in IKN393 so go there for more. But we can update here that on Fridat ANG announced
the placement opening would run for another month, to end January 2017. This of course
implies that the company is having trouble drumming up interest and filling its book. As the
company engaged Peru’s Kallpa Securities in mid-December (9) and it’s now offering finder’s
fees on the placement of 6%, we can assume ANG is looking to get Peruvian money in via
Kallpa during January (and no, this is nothing to do with me, I’m not into finder’s fees action
and never will be). In the meantime ANG has moved back to the 8c and 9c trading range,
matching the 8c placement price closely (though that comes with a half warrant).
21

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My interest in ANG is simple enough: I don’t care about its near-term machinations, this is the
type of company that would benefit from new interest in Colombia in 2017 as it has large land
holdings with some very prospective targets inside those concessions (again, IKN393 for more).
This is a spec land play on Colombia, run by serious people who aren’t into ripping off
shareholders. It goes without saying (or should do among this audience) that we’re talking
about a high risk/high reward high-speculative play but it’s one I like and if I’m right about
Colombia’s prospects in 2017 and things start pointing the right direction, it could get some
minor money in my portfolio.
Royal Road (RYR.v): This stock and its potential was discussed in IKN395 dated December
11th so again please check out that edition for more details. The premise is pretty simple, as
RYR has large land holdings in Colombia but is also in the process of merging Caza Gold (CZY.v)
into its structure in an all-share deal that also involves a placement once it’s done, has the
blessing of main CZY holder Polygon (which
will be a 19.9% holder of he mergeco) and
assuming all goes smoothly we’ll end up with
a company with 120m shares out, $4m in
treasury to go play at exploration and a top
brains trust headed up be Tim Coughlin and
Peter Mullens.
I’ve been looking for a decent Nicaragua play
for a long time and this one might turn out
to be it. Not a stock you NEED to own
immediately, apart from a set of early stage
drill assays due from its Colombia properties
I’d expect it will go quiet-ish once the merger
is complete until such point when New-RYR
has results from baseline exploration from Nicaragua. The trade here would be to quietly
accumulate at-or-around its current share price (8.5c, giving the pro-forma mergeco a $10.2m
market cap) and then ride it up on the revaluation of prospective land holdings, plus results
from strictly geological exploration news (don’t expect Coughlin to promo pump this thing to
death, he’s too good for that).
Calibre Mining (CXB.v): This stock and its prospects were also discussed in detail in IKN395
dated December 11th. It’s also a Nicaragua play, but that’s were most of the similarities end
because CXB is my idea of a near-term play and a M&A target, because it’s ust the kind of thing
I think the new and aggressive Orla Mining (OLA.v) will go for. Again for all details check
IKN395, but we can report that since that edition CXB has moved up on reasonable buying
interest from 10.5c to 14c (+33.3%) so it has indeed been attracting some speculative cash.
22

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Second-guessing M&A action is always extremely hard and as such, the risk here is also very
high. The potential is for a near-term reward on takeover action.
Eros Resources (ERC.v) (NB all prices in Canadian Dollars unless otherwise stated): The last
name featured today as a spec prospect for 2017 at the tinycap end is the one we haven’t
mentioned before. It’s also the one that strikes me as the most compelling at current share
prices. Eros Resources (ERC.v) is a company that’s been through a lot of corporate changes in
2015 and 2016, having risen from the ashes of failed energy company Boss Power and gone
through a whole bunch of legal beagling to get its structure straightened out. In short, the end
of 2015 and the first half of 2016 was a write-off for the company but in the second half of
2016 it’s got straight, got itself a clean structure and managed to attract a top class new CEO.
The first thing to note about ERC’s trade potential is the asymmetric risk/reward balance that
greatly favours an entry into this speculative trade at its current share price. Here’s a little table
that lays out the current share structure, the share price and the ensuing market capitalization
as at this weekend:
ERC valuation data (C$m)
Shares out Share price Market Cap
41.87 0.15 6.28
After going through its corporate restructuration, today’s ERC has tight share structure of just
under 42m shares (fully diluted is tight too, less than 46m) and its share price of 15c implies a
market cap of C$6.28m. Which brings up the first interesting thing about ERC. If you check out
its latest financials (3q16) you’ll see, like me, that it has cash at bank of $4.73m. That’s a nice
chunk of treasury and as sundry current assets are small along with current liabilities on the
other side (and no long term debt), its working capital is basically its cash position. But that’s
not all, not by a long chalk, because further down the balance sheet and held as fixed asset are
ERC’s ‘Marketable Securities’, which turn out to be a minor treasure chest of nice things. Here’s
a chart:
Marketable securities held by ERC.v
ticker company shares held* current pps value C$m
HRT.to Harte Gold 2.12 0.30 0.64
SKE.v Skeena 48.69 0.08 3.65
SBW.v Strongbow Expl 1.60 0.15 0.24
TIM.v Toachi 1.00 0.36 0.36
Canamex debent. 0.25
Other 0.70
Subtotal C$m 5.83
approx ERC cash C$m 4.40
total liquid assets C$m 10.23
ERC has a whole bunch of shares in other companies as assets, chiefly a 48.69m share position
23

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in what can fairly be called its parent company Skeena (SKE.v), but topped up by 2.12m shares
of Harte Gold (HRT.to), 1m shares of new Ecuador VMA plan Toachi (TIM.v), 1.6m shares of
Strongbow (SBW.v) as well as a debenture position in Canamex worth $0.25m and a bunch of
other minor shareholdings that ERC combines as “other” and as at 3q16 was valued at $0.77m.
The above chart takes those share holdings, factors in the current share prices of each
company, assumes those Canamex warrants are indeed worth $250,000 and then rounds down
the “other” item to $700k, just in case.
The result: ERC holds $5.83m worth of shares. We then add that to an IKN estimated $4.4m
cash treasury at the end of 4q16 (we assume ERC has burned $230k in Q4, as background burn
rate is low and they haven’t been doing much this last quarter) and we end up with a grand
total of $10.23m in liquid assets. So check that market cap again, $6.28m, which means that as
at this weekend and according to the above calculations ERC has $3.95m less market cap that
the value of its liquid assets or put another way, if the full fair value were factored into its share
price it would be a 24.5c stock, 63% higher than today.
Now for sure that’s not the be-all-and-end-all of these matters. For one thing ERC is going to
burn cash as it goes about its business in 2017. For another those marketable securities are
held in the fixed assets section of the balance sheet for a good reason, ERC has no intention of
liquidating the shares and taking the money. However, this kind of real tangible asset value is a
very strong backstop to its current share price, that one is undeniable and it makes for a
situation where there’s little potential downside to the current share price while allowing for
plenty of potential upside (if things start going well). There’s no such thing as a no-lose
proposition in junior mining, especially exploration stage companies, but the scenario currently
offered at ERC is as close to one as they come.
The second aspct of ERC is its new management. Up to recently it’s been run by Skeena top
man Ron Netolitzky, but in November ERC announced Ron Stewart as its new CEO. Stewart was
attracted into ERC by his friend Netolizky as it offers a clean slate type of company with cash
and a structure into which Stewart will be able to add a project or projects of his choosing and
move them forward. For more on CEO Stewart check out the website and/or his CV, but I’ll
state here that I have the highest regard for him as a person and a professional, cares deepy
about protecting shareholders, hates the rip-off merchants with the same type of vengeance I
do, but more than that he’s one of the top brains in the mining business and in ERC in 2017, I
fully expect he’ll have the chance to prove his worth.
Summing up, what we have in ERC is a “clean slate” type of company (its present land asset
book isn’t much kop, I’m told) and with a new CEO about to take it in a new direction. But on
top, there’s a lot of insurance at its current share price due to the way it holds over $10m in
cash and shares of other companies, but is valued at $6.3m by the market. It’s not a
Guaranteed Win company because those don’t exist, neither is it a guaranteed no-lose
proposition either. What it is however is a
cashed-up exploreco with one of the smartest
and straightest shooting mining guys at its
helm which offers an excellent risk/reward
balance at current prices. If the market offers
the chance at or around its current 16c share
price I may well buy shares of ERC in the next
four trading days and if I do, the position will
be added to the ‘Stocks to Follow’ list (and I’ll
work out that “15 positions maximum” thing
later) next weekend. Of couse this is a
speculation and it’s one whose fate will be
decided by the things ERC first acquires and
then develops in the year to come, but it’s one
in which the dice are loaded in the favour of the player and that’s a situation that doesn’t come
around too often.
24

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Episode nine of “What I’d buy now”
Our regular segment is at edition number nine and those of you who’ve been around for a while
should know the drill by now. First we note the results of our picks and weightings in IKN394,
then we move to the new choices for the next four weeks. Just in case, for those just joining us
here are the rules (copypasted from before):
The feature conveys “what I like now” in my own portfolio considering the state of the market,
the company particulars and their shares prices right here and now. It has been, is and forever
will be more of a thought experiment than a map of how I’m trading the market (because I
tend not to day-trade very much). The rules are these:
1) You give me $50,000. We assume flat forex during the time period.
2) You tell me I have to invest every dollar in currently open IKN Weekly stock picks.
3) I’m allowed to allot different dollar amounts to different stocks, from zero on up.
4) I base my decisions, choices and dollar amounts on what I think today about the
company, the stock price and the current underlying micro and macro fundamentals.
5) You know that I like all the stocks because you know I already own them, we both
understand these answers are about how I feel today about the open stock positions
for the next four weeks, no more or less.
We’ve had eight episode periods so far (IKN369 to IKN372) (IKN372 to IKN375) (IKN375 to
IKN379) (IKN279 to IKN383) (IKN383 to IKN387) (IKN387 to IKN391) (IKN391 to IKN394) and
now this one, 394 to 398. Here’s how the result of the last batch came out:
Mark spends $50,000 in IKN394 Mark's $50k in IKN398
company ticker previous PPS amount I'd invest today PPS today position value
Cordoba Min CDB.v C$0.75 7000 $0.73 6813
Rye Patch Gold RPM.v C$0.25 6000 $0.31 7440
Sandstorm Gold SAND U$3.92 6000 $3.90 5969
Atico Mining ATY.v C$0.83 6000 $0.95 6867
B2Gold BTO.to C$3.27 5000 $3.19 4878
Tinka Res TK.v C$0.235 4000 $0.225 3830
Continental Gold CNL.to C$4.44 4000 $4.40 3964
Starcore Intl SAM.to C$0.48 3000 $0.56 3500
Excellon EXN.to C$1.42 3000 $1.64 3465
Regulus Res REG.v C$1.35 2000 $1.20 1778
Riverside Res RRI.v C$0.47 2000 $0.46 1957
Wesdome WDO.to C$2.48 1000 $2.09 843
Lara Expl. LRA.v C$1.15 1000 $1.07 930
Focus Ventures FCV.v C$0.06 0 $0.055 0
Total 50000 NEW TOTAL--> 52235
Let’s not pretend otherwise, the last week of the period saved my hide. December up to
Christmans was rotten with gold dropping as low as U$1,130/oz on the Trump Honeymoon rally
plus tax loss selling hitting juniors harder than I’d previously imagined. But relief came just in
time, those 10% and 20% week-over-week wins we saw last week (see ‘Stocks to Follow’
above) came in time and what’s more, I managed to snag some bigger winners on higher
weighted stocks (e.g. Rye Patch, Atico) and avoid bigger losses by giving a few strategic losers
low weightings (e.g. Wesdome, Lara, Regulus). So that helped too and overall, we post a
$2,235 nominal win. On that subject, here is the running results table with the performances of
all episode periods to date:
25

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period final total profit/loss to $50k
IKN369 to IKN372 $58,003 $8,003
IKN372 to IKN375 $53,274 $3,274
IKN375 to IKN379 $49,853 $-147
IKN379 to IKN383 $55,918 $5,918
IKN383 to IKN 387 $44,597 $-5,403
IKN387 to IKN391 $58,210 $8,210
IKN391 to IKN394 $44,651 $-5,349
IKN394 to IKN398 $52,235 $2,235
And indeed the recent pattern has held again, with the last five periods returning big
win/loss/win/loss/win. I therefore need to believe we can snap that streak in the four weeks to
come and give up another win in the period that covers most of January 2017.
For what it’s worth, we’re in the plus column to the tune of $16,741 so far. We can run a bit of
math from that and hypothesize that having started with $50k back in IKN369 (and that $50k
has been recycled since then, no extra capital gone in) that theoretical profit represents a
return of 33.5% in 30 weeks (IKN393 covered two weeks), which extrapolates to a 58%
annualized return on investment. That’s a pretty juicy return but I’d warn you that number is
VERY artificial and unlikely to show the same in a real world portfolio situation.
Enough about the past, time to get forward-looking and roll out the new list and weightings for
the period from today to the publication of IKN401. Here’s how I’m playing it:
Mark spends $50,000 in IKN398
company ticker current PPS amount I'd invest today
Cordoba Min CDB.v C$0.73 7000
B2Gold BTO.to C$3.19 7000
Continental Gold CNL.to C$4.40 5000
Excellon EXN.to C$1.64 5000
Wesdome WDO.to C$2.09 5000
Rye Patch Gold RPM.v C$0.31 4000
Sandstorm Gold SAND U$3.90 4000
Riverside Res RRI.v C$0.46 4000
Tinka Res TK.v C$0.225 3000
Starcore Intl SAM.to C$0.56 2000
Atico Mining ATY.v C$0.95 2000
Regulus Res REG.v C$1.20 1000
Lara Expl. LRA.v C$1.07 1000
Focus Ventures FCV.v C$0.055 0
Total 50000
The main changes this time are the upping of weightings in B2Gold, Wesdome, Excellon,
Continental and Riverside, with BTO now getting equal top weighting and a $7k, along with
Cordoba which stays at the top of the tree. On the flipside, Atico made a big move and may not
be able to follow through so that one gets some weighting sacrifice. However there are several
names I’d like to give more than I do, such as Tinka and Sandstorm, but the $50k cap needs to
be respected. You’ll also note that even though Regulus is a Top Pick of mine, there’s a distinct
attitude difference between what I think that position is capable of returning in the next four
years compared to the next four weeks. And that wraps it up for this edition of our new regular
piece. We’ll catch up on the results of this batch in IKN401 and here’s hoping the
win/lose/win/lose pattern is broken.
Conclusion
IKN398 is done, we end with bullet points:
26

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• The end-year edition of the Weekly almost always turns out to be of this housekeeping
variety, as we tie up loose ends from the eyar just departed and set ourselves for the
12 months to come (in the Baskets at least).
• That said, I’ve tried to throw in a few trade ideas as well and even though I wasn’t
planning to change my own portfolio, the value embedded in Eros Resources (ERC.v) at
the moment at these share prices looks compelling. Along with the new and top class
brain brought in to run the company, if the market allows me in at 15c or maybe even
16c, it’s a real bargain that has hard cash on its books to prevent downside pain. It’s
the type of dice-loaded play I like and I may just buy some and stretch the Stocks to
Follow list to 16...for a while at least.
• I’m optimistic about the year ahead, but first let’s see if the modest rebound in gold
continues in the days ahead, as I’m expecting. Baby steps.
• But try as I might, I can’t look past B2Gold as the best single thing to own in the junior
(mid-cap) space today. It’s not Top Pick round here for nothing and 2017 promises to
be the year when it really delivers on its growth plans.
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://incakolanews.blogspot.pe/2016/12/gold-will-rally-into-new-year.html
(2) https://www.quandl.com/data/USTREASURY/REALYIELD-Treasury-Real-Yield-Curve-Rates
(3) http://www.investing.com/economic-calendar/cb-consumer-confidence-48
(4) http://www.aminera.com/2016/12/30/expertos-proyectan-importante-repunte-la-cotizacion-del-cobre-2017/
(5) http://busquedas.elperuano.com.pe/normaslegales/decreto-legislativo-que-declara-de-interes-nacional-la-forma-
decreto-legislativo-n-1293-1468957-2/
(6) https://mundo.sputniknews.com/americalatina/201612311065963566-policia-mineros-ecuador/
(7) http://www.bvl.com.pe/inf_hhii0B1HN_TUlSTA.html
(8) http://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00029807
(9) http://www.angelgoldcorp.com/2016/12/20/angel-gold-engages-kallpa-securities-as-advisor/
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Stocks To Follow Closed Positions 2015
Closed in 2015 closed close price
Argonaut Gold AR.to jan'15 C$1.47 14-dec-14 C$2.53 72.1% Big gain small time, profit taken
Amerigo Res ARG.to jan'15 C$0.405 20-jul-14 C$0.285 -29.6% Given up on weak Cu prices
Reservoir Min. RMC.v jan'15 C$6.05 18-jun-14 C$4.12 -31.9% sold on Cu downturn
Coro Mining COP.to jan'15 C$0.075 26-jan-14 C$0.035 -53.3% sm, sold on Cu downturn
Fortuna Silver FSM mar'15 U$4.12 10-nov-14 U$3.75 9.0% Short used as hedge
GoldQuest Min. GQC.v mar'15 C$0.26 27-oct-13 C$0.085 -67.3% given up ghost
Rio Alto Mining RIO.to apr'15 C$2.30 07-apr-11 C$3.57 55.2% Top pick, bot out, big win
Timmins Gold TGD jun'15 U$0.60 19-apr-15 U$0.62 3.3% near-term trade, out of time
First Majestic AG jul'15 U$10.51 10-aug-14 U$4.55 56.7% horrible failed trade
NovaCopper NCQ.to jul'15 C$1.05 09-apr-14 C$0.50 -52.4% no more Cu exposure, sm sell
McEwen Mining MUX aug'15 U$0.695 21-jul-15 U$0.92 32.4% Closed nearterm flip for win
Midas Gold MAX.to sep'15 C$0.39 21-sep-15 C$0.35 -10.3% Sm. trade idea that didn't work
New Gold NGD oct'15 U$2.18 23-aug-15 U$3.05 39.9% trade closed, profit taken
Legend Gold LGN.v nov'15 C$0.085 01-mar-15 C$0.035 -58.8% tiny "land grab" idea, failed
Timmins Gold TGD nov'15 U$0.245 20-sep-15 U$0.15 -38.8% small near-term loser
Stocks To Follow Closed Positions 2014
Closed in 2014 closed close price
Fortuna Silver FVI.to jan'14 C$2.80 23-dec-13 C$3.19 13.9% small ST trade closed
Rio Alto Mining RIO.to jan'14 C$2.06 07-jun-13 C$2.30 11.7% trading position finally closed
Network Expl. NET.v feb'14 C$0.01 22-jul-12 C$0.005 -50.0% position closed, did nothing
Tahoe Resources TAHO feb'14 U$13.10 08-apr-13 U$21.72 -65.8% short closed due to reality
Darwin Res DAR.v mar'14 C$0.10 14-jul-12 C$0.045 -55.0% tiny risk play dropped
B2Gold BTO.to mar'14 C$3.07 28-nov-12 C$3.35 9.1% closed to free up capital
Pretium Res PVG mar'14 U$5.38 22-nov-13 U$6.50 -20.8% short closed as port longer
Gold Res Corp GORO may'14 U$5.07 26-jan-14 U$4.12 16.7% took profit
Bear Creek Min BCM.v may'14 C$1.63 23-mar-14 C$2.05 25.8% Took profit, sm near-term win
Eco Oro Min. EOM.to aug'14 C$0.48 22-sep-13 C$0.26 -45.8% sold small loser to make room
True Gold TGM.v sep'14 C$0.395 02-feb-14 C$0.41 3.8% M&A won't happen, sold
Santacruz Silver SCZ.v sep'14 C$1.04 26-jan-14 C$0.86 -17.3% silver/M&A spec, rel. small
Timmins Gold TGD nov'14 U$1.38 09-apr-14 U$0.99 -28.3% failed trade, sell, raise cash
Kinross Gold KGC nov'14 U$2.90 20-oct-14 U$2.15 -25.9% V small trade, didn't work, chau
Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-jan-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-jan-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-apr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-apr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-jan-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-apr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
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Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-apr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
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B2Gold Corp BTO.to Jan'10 C$0.88 08-nov-09 C$1.49 68.2% target made, trade closed
Radius Gold RDU.v Jan'10 C$0.18 23-aug-09 C$0.40 122.2% target made, trade closed
MAG Silver MVG mar'10 U$5.60 23-nov-09 U$7.28 30.0% closed in pdac week
Riverside Res RRI.v mar'10 C$0.435 20-sep-09 C$0.60 37.9% closed in pdac week
Amarillo Gold AGC.v mar'10 C$0.81 31-may-09 C$0.70 -13.6% closed in pdac week
B2Gold Corp BTO.to apr'10 C$1.24 18-feb-10 C$1.50 21.0% target made, trade closed
Lumina Copper LCC.v apr'10 C$0.84 14-jun-09 C$1.55 51.2% total position now sold
Troy Resources TRY.to may'10 C$1.10 03-may-09 C$2.25 104.5% sold on negative results
AuEx Ventures XAU.to may'10 C$2.51 24-may-09 C$3.38 34.7% trade closed
Nevada Copper NCU.to jun'10 C$3.27 14-mar-10 C$2.03 -37.9% need to lower Cu exposure
Carpathian Gold CPN.to jun'10 C$0.39 14-mar-10 C$0.35 -10.3% too exposed to cap raising
Amerix PM Corp APM.v jun'10 C$0.065 08-nov-09 C$0.05 -23.1% victim of macro bear
Antares Minerals ANM.v jun'10 C$1.42 06-dec-09 C$2.10 47.9% sold half
Vena Resources VEM.to jun'10 C$0.37 31-may-09 C$0.23 -37.8% sold half
Minera Andes MAI.to sep'10 C$0.75 28-jul-10 C$0.95 26.7% ST trade closed
Gold-Ore Res GOZ.to sep'10 C$0.52 01-aug-10 C$0.75 44.2% target made, trade closed
B2Gold Corp BTO.to sep'10 C$1.45 25-may-10 C$2.01 34.5% target made, trade closed
Blue Sky Uran BSK.v oct'10 C$0.41 19-may-10 C$0.22 -46.3% v small v bad trade closed
Dia Bras Expl DIB.v oct'10 C$0.14 30-aug-09 C$0.35 150.0% target made, trade closed
S. Amer. Silver SAC.to nov'10 C$1.38 24-oct-10 C$1.60 -15.9% loss on short, small fail
Ventana Gold VEN.to nov'10 C$7.92 27-jun-10 C$13.51 70.6% trade closed on buyout
Lumina Copper LCC.v nov'10 C$1.42 11-aug-10 C$3.65 157.0% trade closed
Antares Minerals ANM.v dec'10 C$1.42 06-dec-09 C$8.40 491.5% trade closed
Rio Alto Mining RIO.v dec'10 C$0.69 23-mar-10 C$2.16 213.0% trade closed
Coro Mining COP.to dec'10 C$0.585 03-oct-10 C$1.24 112.0% target made, trade closed
Stocks To Follow Closed Positions, 2009
Closed positions closed closing PPS
Cardero Res CDY/CDU.to May'09 U$1.20 03-May-09 U$0.87 -27.5% sold on negative news
Eastmain Res. ER.to May'09 C$1.04 06-May-09 C$1.315 26.4% trade closed
Radius Gold RDU.v May'09 C$0.165 03-May-09 C$0.235 42.4% trade closed
Latin Amer Min. LAT.v May'09 C$0.12 03-May-09 C$0.158 29.2% trade closed
Aquiline Res. AQI.to July'09 C$2.03 16-Jun-09 C$1.68 -17.2% took loss, bad timing
Chariot Resources CHD.to Aug'09 C$0.20 12-Jul-09 C$0.415 107.5% trade closed
Castle Gold CSG.v Sep'09 C$0.64 02-Aug-09 C$0.60 -6.3% ST trade didn't work out
Guyana Goldfields GUY.to Sep'09 C$2.30 12-May-09 C$4.50 95.7% profit taken
Los Andes Copper LA.v Sep'09 C$0.09 21-Jun-09 C$0.09 0% trade closed
Pediment Gold PEZ.to Oct'09 C$0.80 09-Aug-09 C$1.00 25.0% trade closed
Minera Andes MAI.to Oct'09 C$0.68 03-May-09 C$0.71 4.4% too much bad news
Dynasty Metals DMM.to Nov'09 C$4.18 03-May-09 C$6.01 43.8% half sold
Rusoro Mining RML.v Nov'09 C$0.55 03-May-09 C$0.57 3.6% underperformed
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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