IKN #407Premium

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The IKN Weekly
Week 407, March 5th 2017
Contents
This Week: In today’s issue, US BLS jobs, Gold down miners down, TIPS yields still clearly
indicating gold’s moves.
Fundamental Analysis: NOBS report part one on Minera IRL (MIRL.cse).
Stocks to Follow: Overview, Eros Resource Corp (ERC.v), Atico Mining (ATY.v), Sandstorm
Gold (SAND) (SSL.to), Belo Sun (BSX.to), Riverside Resources (RRI.v), B2Gold (BTO.to) (BTG),
Excellon Resources (EXN.to), Red Eagle Mining (R.to), Rye Patch Gold (RPM.v), Regulus
Resources (REG.v), Cordoba Minerals (CDB.v).
Copper Basket: Overview, Revelo Resources (RVL.v), Amerigo Resources (ARG.to), Trilogy
Metals (TMQ.to).
Producer Basket: Overview, Sibanye Gold (SBGL).
Regional Politics: Ecuador: Three voter intention polls for the Moreno/Lasso run-off, Fraser
Institute ranks Peru as LatAm’s best jurisdiction, Peru: Graña y Montero (GRAM) now deep in
the doo-doo, Chile: La Escondida strike continues, Mexico: 59 mining companies identified as
“presumed tax evaders”, Mexico: A Trump import tax not a problem for mining companies.
Market Watching: Eros Resources Corp (ERC.v): The new ‘Stock to Follow’ position, Zinc
possibly getting new bullish legs, Jujuy to see anti-mine protest with Golden Arrow (GRG.v) the
target, Prospector Resources (PRR.v) puts its team together.
I remind subscribers that no part of this newsletter can be copied, reproduced or
given to any third party without the express permission of the author.
This Week
In today’s issue
• Minera IRL (MIRL.cse) is today’s main event. I spent too much time in Lima last week
(damned hot and sticky) finding out all I could and the first part of a two-parter
extended analysis, in which we examine the new developments in the financing and
project parameters of the all-important Ollachea mine project, is in Fundies below.
• The miners took a pummelling last week, but it looks to me as though the selling is
already overdone. Today’s main intro piece covers that.
• Just for a change I did a bit of buying last week, adding to Atico (ATY.v) and
Sandstorm (SAND) as per the Flash Update (see appendix 1) and also starting a small
position in the interesting and deep value tinycap Eros Resources Corp (ERC.v), the one
highlighted in previous editions as a decent opportunity. The piece on that is in ‘Market
Watching’ below.
US BLS Jobs
A quick reminder of the BLS jobs report on Friday, which could turn out to be one of the more
significant due to its proximity to a FOMC this month that’s now assumed to be a rate raise
event. According to the evergood Bill McBride (1) current market consensus is for +195k non-
farm payroll and the headline unemployment rate to decline to 4.7%. Behind that, McBride
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states that behind the headline numbers “A key will be the change in wages”, quite right too.
We’re now into the maturing period when more subtle changes to the US Jobs data can move
the markets.
Gold down miners down
After that “odd” previous week mused over in IKN406 last Sunday, last week was more of a
classic selling downdraft in the sector with gold down (GLD dropped 1.8%) and the main
benchmark ETFs getting a right royal shafting, with GDX down 8.0% and GDXJ down 11.4%, all
while GLD inventories changed very little (see right). It was one of those weeks in which it
wasn’t easy to rescue any optimism or find a silver lining, ours is a volatile sector and volatile is
as volatile does, Forrest. Yes I did decide to
lighten exposure in the last couple of weeks GLD gold holdings, 2017 to date (metric tonnes)
860
of February and managed to raise some
850
cash, but anything aside from wholesale
840
liquidation before such a downmove is never 830
going to be enough in absolute terms. It’s all 820
about risk management in the end though, 810
selling too much can be just as risky as 800
buying too much. 790
780
770
Thusly, your author and his little portfolio of
760
junior stocks potters on into another week
and with PDAC upon us now, it’s bound to be
an interesting one with plenty of newsflow.
After last week’s selling and with cash in
reserve I do find myself with an itchy trigger finger now. I’ve already added bits to two
positions and there may be a few more purchases to come.
TIPS yields still clearly indicating gold’s moves
The last time I featured this chart of the ten year TIPS yield (2) on these pages was in IKN402,
at which point I expressed a little doubt that the tight relationship between the two (working
inversely with TIPS is leading gold) would continue. Since then I have of course been keeping
an eye on it, looking for clues but until six trading days ago it was still firmly inside the “new
normal” range, here marked as roughly 0.35% to 0.45% and we’ve seen the same type of
minor range-bound moves in gold during that time, as well. But the last week saw things shift
and it’s now worth pulling this chart back up before your eyes and considering the
consequences, because what we saw last week slightly surprised me as it confirmed the tight
relationship between inverse yield and gold continues unabated.
As noted on the blog last week (3) the dive in the TIPS yield coincided with gold’s pop to
U$1,255/oz (last Friday, when the mining stocks notably refused to join in the party) and by the
time the yield had topped out at 0.48% gold found itself under U$1,230/oz. Friday saw that
adjust and from where I’m sitting, it looks like a spike down then equal and opposite overrun as
2
71/3/1 71/5/1 71/9/1 71/11/1 71/31/1 71.81.1 71/02/1 71/42/1 71/62/1 71/03/1 71/1/2 71/3/2 71/7/2 71/9/2 71/31/2 71/51/2 71/71/2 71/22/2 71/42/2 71/82/2 71/2/3
mt
source: SPDR GLD data

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reality bit back quickly. Though it’s probably too soon to draw a solid conclusion, the Friday
move back into the 0.35% to 0.45% channel that’s held all through 2017 so far (apart form
those recent escapes) is my idea of a return to the new normal. Those moves fit with Fed
noises, too. As from the Fed minutes two Wednesdays ago, that nice Mister Market looked at
what the Fed people had been chatting about at the time and cast doubt on the accepted
wisdom that the Few would indeed raise in March. That’s what caused the dump in yield and
the pop in gold. The Fed doesn’t like brusque movements like that, so it was clearly time for
another jawbone to keep us speculator grunts in line so up popped Janet Yellen with a speech
and here’s an extended chunk from this Bloomie piece (4) which reports the event nicely:
In a speech to The Executives’ Club of Chicago, Yellen singled out the danger of the
central bank being too slow in boosting rates.
“We realize that waiting too long to scale back some of our support could potentially
require us to raise rates rapidly sometime down the road, which in turn could risk
disrupting financial markets and pushing the economy into recession,” she said.
Yellen all but declared that the Federal Open Market Committee would increase rates
for the first time this year at its March 14-15 meeting, saying that such a move “would
likely be appropriate” if the economy stays on its current track. She also suggested that
would not be the last increase this year.
Policy makers penciled in three quarter percentage-point rate increases for 2017,
according to the median projection in forecasts released in December.
Subtle Change
In an indication that she thinks it’s possible the Fed may have to raise rates more than
that, Yellen subtly altered her assessment of the current stance of monetary policy,
calling it “moderately accommodative.” That contrasts with the “modestly
accommodative” description she used in her Jan. 19 speech in Stanford, California.
“That’s a biggie,” said veteran Fed watcher Lou Crandall, in commenting on the word
swap by Yellen. “There’s a clear suggestion the Fed may have to step up the pace of
its rate increases,” he added. Crandall is chief economist at Wrightson ICAP LLC in
Jersey City, New Jersey.
So taking those ingredients as a whole and frying them up on a high heat before covering and
allowing to simmer until flavours have infused and the sauce has reduced, I’d say today that:
• The gold price still doesn’t care much about the noises out of the White House.
• The market doesn’t either. What gold and the market really cares about is the Fed and
its decisions.
• The Fed wants things calm and relaxed, it doesn’t want us fools trying to second-guess
its intentions and won’t let us run specs on their positions.
• Janet Yellen is in front of the curve and the market is reacting to her, the Fed is not
reacting to the market.
• This means the steady boat required by the Fed is likely to continue.
• This means we’re not going to get much in the way of sharp moves up or down in gold.
• This means the miners are going to be just fine. In fact, after the shellacking the
mining sector took last week they’re probably oversold right now and due for a rebound
either during or just after PDAC.
With that in mind, the small additions I made to Atico (ATY.v) and Sandstorm (SAND) last week
may be joined by other in the days to come depending on how “PDAC Monday” opens up, one
of the more volatile and pump-related days of the calendar year. I may also give my very-near-
term trade in Belo Sun (BSX.to) one extra week before selling. The plan was always a near-
term fliptrade and that’s not going to change, but I see no reason why I can’t give myself just a
little extra leeway.
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Fundamental Analysis of Mining Stocks
Today, after too much time away, we resume coverage on Minera IRL Ltd (MIRL.cse).
NOBS report dated March 5th, 2017
Minera IRL Ltd. (MIRL.cse)
Company Overview
Minera IRL Ltd. (Canada: MIRL.cse, Peru MIRL) is a producing junior gold mining company
operating in Peru. Although it has an operating gold mine at its Corihuarmi asset, its flagship
asset is the advanced stage ‘Ollachea’ gold mine project in the Puno region of South Peru.
Current share structure is as follows:
Shares out: 231.135m
Options: 2.0m
Warrants: zero
Fully diluted shares: 233.135m
Current share price: C$0.19
Market Cap: C$43.92m
Approx working cap per S/O: C$0.00
All prices are in United State Dollars unless stated. Forex U$0.75=CAD$1
NB: As Minera IRL reports in United State Dollars, it is default currency in this analysis.
Today is part one of two
I’ve done this once before when initiating coverage on Excellon Resources (EXN.to) and after
due consideration I’m going this route again What happens is the following:
• This week we take a close look at the key Ollachea project.
• Next week we run the corporate-level numbers and reach a formal price target.
The reason for this is twofold:
1) I’m lazy.
2) Before anything else happens, we need to get to the bottom of the Ollachea situation
because without that, IRL is worth nothing. It’s the thing we the shareholders want to
know about and as there are several aspects to look into, plus some significant changes
to the plan for the project, all these matters need close inspection and not a limited
amount of space before I start running off into the boring number things
Therefore I’ve decided to take this part one/part two approach and get it done right. The good
news is that what I found out last week about Ollachea wasn’t just positive, it was much better
than even I, the IRL fan, had hoped for. But before diving in to all that we need a necessary
paragraph of words about me.
Caveat: I’m biased
Yes I know that’s true even at the best of times, anyone who investigates a stock, then decides
to buy some of its shares and then sits down to write an analysis on the company is inherently
coming from a positive slant in the first place and I’ve written up no end of stocks on that sort of
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premise (though note I’m always strictly neutral at the beginning of the process and only get
bullish as the story reveals itself to me, be my interpretation right or wrong). But this time it’s
different and I would be a fool to pretend otherwise.
As most of you are aware Minera IRL is not a normal company to cover for me, not at this
stage. As its sorry tale of boardroom battling and nefarious inside dealings progressed over the
last two years I went from simple outside observer to somebody well inside the whole affair.
This publication and probably more the IKN blog became the mouthpiece of what can loosely be
called “the resistance” to what the (expletive deleted) band of criminals in various waves were
trying to do to the company, which was in one simple phrase “steal it from its shareholders”. In
the end we the good guys managed to win out, but it took a lot of time, nearly two years of
efforts, two AGMs and an EGM before IRL was vaccinated against the unspeakable parasites.
The result is that I’m “involved” with IRL these days, not just as a shareholder but as one of the
team. That’s not a good place from which to begin an even-handed an anal ysis and though I’ve
tried hard to be as fair and neutral as possible, I know that deep down I’m rooting for IRL as a
person these days, not just as a shareholder who wants to make some money on a trade.
That doesn’t mean that I wouldn’t sell my shares if it were necessary and as you’re about to
read, there are circumstances under which I’ll sell and walk away (financially) if need be. Also,
I’m definitely not going to underplay some of the risks involved with going and staying long this
stock, IRL is like any other junior with an advanced stage project, not riskless and never will be.
But I recognize that as a person, rather than an anal yst, I can’t help but root for IRL these days,
After all this company has been through and the adverse moments it faced in 2015 and 2016
(and at times it really was a close run thing, people) it would hurt to see it fall at one of or even
the last hurdle. I’m aware of this, I want to you understand it, too.
Today’s part one report
The idea of splitting the IRL NOBS report into two is to be able to concentrate on the Ollachea
project today. Three main issues need to be covered:
1) The bridge loan with Cofide, the due date of June 2017, the chances of entering into
default on the loan. This has been a major concern for many shareholders for quite a
while (your author included) and we can now address the issue with more clarity.
2) The eventual financing for the Ollachea project. Who will finance it, who will build it, how
much will it cost, when will it be completed. There are plenty of changes here, this
section is the main reason I’ve held off from running any initial analyses on IRL until
having the chance to sit down with CEO Diego Benavides and his team for an extended
meeting.
3) The mine plan for the project. This has changed significantly, there are plenty of new
developments to take into consideration and we’re now at the point where some
specifics can be given, at least on a ballpark level..
So let’s get on with it:
Section One: Regarding The Cofide bridge loan
First some background: In June 2015 IRL closed the original deal with Peru’s quasi-State
financing company Compañia Financiero de Desarrollo del Perú, known as Cofide, to provide
up to U$240m in financing via a syndicated debt deal. As part of the deal, Cofide forwarded
U$70m to IRL by way of a bridge loan that had a two year term and would be payable in June
2017. The idea was to forward IRL the money it needed to pay off its financial obligations due at
that time and to move Ollachea forward with the capital for then-necessary expenses. The
bridge loan was pretty specific in its intent, it could pay off the debt carried at the time and then
used on advancing Ollachea, not Corihuarmi or anywhere else. So let’s see how that cash was
deployed:
• $30.3m went to pay off the Macquarie loan
• $12m went to pay Rio Tinto on the remaining option payments for Ollachea.
• IRL saw capitalization on its Ollachea asset of around $6.5m in the period
• As at September 2016, $3.6 m of the loan’s cash was still untapped on the IRL books.
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That little sum adds up to $52.4m. As for the other $17.6m of the original $70m loan, you’re
going to have to the members of the two boards of directors that came before the current one
where that money went.
Enough past history, the issue today is what will happen to IRL about the $70m it owes to
Cofide. In theory at least, come the end of June 2017, that’s to say in less than four months’
time, Cofide can demand on its loan and if Minera IRL doesn’t have the cash Cofide can hit the
Big Red Button and Minera IRL disappears up its own negative working capital. And let us be
absolutely clear on this matter:
• At the moment, Minera IRL does not have the U$70m it needs to pay back Cofide.
• Cofide would be within its legal rights to execute on the loan repayment. As the loan is
secured against the Ollachea project, it would mean that Cofide became the new
owner of the Ollachea project.
• If so, Minera IRL would end up as a 231m S/O company dependent on 5,000 oz per
quarter limited life Corihuarmi. In other words, its share price would be decimated.
That’s the worst case situation of course. The good news is that it’s not going to happen and
this next segment tries to explain why.
Cofide, Graña, Odebrecht and state of play in Peru: This subject is important but it’s kind of
complicated for people who don’t follow day-to-day Peru politics an street level business
happenings, so I’m going to try and take it step by step and then tie up the points so it makes as
much sense as possible at the end. A lot has changed in Peru over the last two years. For one
thing we have a new President in the form of Pedro Pablo Kuczynski and as is normal, a
change in administration means changes at the top of just about all State entities, Cofide is
among those and sure enough, there are new people at the top of Cofide that don’t know much
about Minera IRL, its Ollachea project and just why they loaned this small miner $70m.
But another big change is the political and economic earthquake that’s been set off by the
Odebrecht bribery case and the recent admission by the company that it bribed many hands in
Peru (they’ve admitted to U$29m in bribes, including U$20m to ex-President Toledo) for civil
works contracts including big construction contracts such as the Interoceanic Highway (the
source of the Toledo bribe), a big gas pipeline and the Lima Metro system. Mixed up in this is
local Peru construction company Graña y Montero (GRAM) (see ‘Regional Politics’ today and
other recent issues) which has just lost 70% of its share price and its three top directors
because of its involvement in the bribery scandal in Peru for those projects.
Which brings us to Minera IRL’s original and even recent plans, because up until very recently it
was an open secret that Grala y Montero, via its subsidiary company Stracon, would get the
EPCM “turnkey” contract to build the Ollachea mine for Minera IRL. Stracon is experienced and
very good at this type of project, with recent feathers in its cap such as Aurora (GUY.to) in
Guyana and San Ramon (R.to) in Colombia. They were a good fit for the job, the relationship
with IRL was good even after the latest boardroom spill and change at the top, and importantly
GyM were close with Cofide. In short the deal looked solid but then suddenly the Odebrecht
scandal blew from out of nowhere and changed everything.
Today in Peru, Graña y Montero has seen an enormous change, from one of the most
respected companies in the country to little short of radioactive. It’s not just that nobody wants
to do business with them for fear of getting hit by collateral damage, nobody wants even to be
seen doing business with them on JV contracts signed years before.
And it’s even worse for a quasi-State company such as Cofide, they’re getting it from both ends.
Anything governmental finance is under such a powerful microscope at the moment that they’re
afraid to do anything, the whole public loans system has ground to a halt as witnessed by the
sudden freezing of the big new Cuzco airport project, it takes little more than a evidence-free
accusation from a spleen-ridden opposition politico to get government people running for cover,
no matter how innocent of guilty they may be*. Right now Cofide is paralyzed by this inertia and
what’s more, the last people they want to be seen funding is Graña...or a private gold mining
company...or both!
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Which is where we find ourselves today. Cofide wants to batten down its hatches and withdraw,
which means that in a frictionless world it would execute on the loan repayment, get its $70m
back and walk away. However it simply cannot do that because this isn’t a simple financial
issue, it’s tied closely to many political and social issues.
*The Donald would love it in Peru. Lots of coastline too, Donald!
In practical terms, we know that Cofide will not put any more money forward to finance the
Ollachea project any longer, not even via third parties as the organizer of the syndicated loan.
However it simply cannot demand on its $70m bridge loan and leave IRL in the lurch. There are
several sub-reasons for this, but the real need-to-know comes in two ideas:
Contractual: Part of the terms of the original June 2015 deal was that Cofide is under a
“best efforts” clause to put together the larger $240m maximum loan while it enjoyed
exclusivity (and by the way, that exclusivity lapses next month in April 2017, a point
we’ll return to later). So far at least Cofide hasn’t made any effort at all to organize the
loan (legally very clear to prove) and that means it can’t just stroll up to Minera IRL’s
offices and demand its money back else hit the default button, because it too would be
in breach of contract and one half of all hell would be let loose.
Social: Being a quasi-State entity, Cofide isn’t just a classic hard-nosed financial house.
Part of its mandate is to be actively involved with Peruvian community programs which
provide economic, health, social, educational and sustainable large-scale development.”
Its original involvement with Ollachea was based in part on the opportunity to bring
development to a backwater corner of Peru, so if it were suddenly to go hard-nosed on
all other parties, which includes the town of Ollachea, the other half of all hell would be
let loose. Cofide simply cannot do that because its directors, which include ministers of
State, would be crucified at the political stake.
To sum up then, we know that Cofide is too scared to lend out any more money. We also know
that even if in theory it could demand on its $70m bridge loan and send IRL into default, it’s
practically impossible for it to do so (unless a dose of Peruvian mass political suicide is on the
menu...and it’s not). Therefore all signs point to the same direction. Rollover.
What we’re almost certain to see in the next few weeks (unless Cofide hits the suicide button or
unless IRL obtains financing from another place and pays off the $70m in question) is some or
other type of announcement from IRL, or Cofide, or both that says the loan maturity date is
being extended. It could be by a year, or two years, or whatever. It might come with a small
cost to be added to the principal, it might not. But one thing is for sure, we outside looking in
should not be worried about IRL defaulting in June 2017 and going down the tubes. This is the
point I most quizzed IRL on last week, as well as talking to people connected with the deal
outside of the IRL offices, because even the outside possibility that Cofide got nasty has been
my primary concern for a while and I know (via the mailbox) that other shareholders feel the
same way. What I can say now, with absolute confidence (even though it only really boils down
to “because I say so” because a lot of the details are by necessity off-record) is that a default is
not going to happen. We can breathe easy on this point, IRL will have plenty of time on its side.
Section Two: Financing the Ollachea project
The above conclusion, that Cofide will not demand on its current $70m debt for the foreseeable
future but Cofide is unlikely to fund IRL any further, dovetails into the next important subject
under consideration today, the financing for the Ollachea project. Questions include How much?
Who? When? etc. Sub-categories coming up:
How much: The first thing I asked was about that Peru report quoted on the IKN Blog in mid-
February (5) which had Diego Benavides saying that the capex for Ollachea would be cut to
$30m. Was that right? Did I translate badly? Was it a misquote? The answer is that it’s not right,
I didn’t translate it badly (which I was pretty sure about because I checked with the reporter) and
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CEO Benavides simply said the journalist had got it wrong. Cut by $30m would have been fair,
cut to $30m was simply incorrect. Misquote or reporter boo-boo, it matters not (but I’m glad my
translation was vindicated, I took a bit of flak for that).
So with the estimated cost as at February 14th down by $30m, that suggests a capex cost of
between $130m and $140m (what with the original maximum of the syndicated loan being
$240m including the $70m bridge, plus internal estimates of $160m at the time). In fact things
are now looking better than that and IRL estimates now indicate that it can build Ollachea and
get to production and positive free cash flow (not the same thing, as the IR department of Red
Eagle knows very well) with a capex of $100m. That would suggest a total financing need of
$170m if we include a payback of the Cofide bridge loan.
At this point two things need airing, not just one:
1: I spent time with all the relevant players at IRL going over their figures, assumptions,
estimates and suchlike. I’m at ease with the numbers here, this isn’t pie in sky stuff. If
anything they’re even erring to the cautious side in pitching their capex at $100m
(+$70m) because subsequent conversations they’ve had with suppliers and potential
contractors indicate that some line items will come in cheaper than their budgets. But
this is mining, shit happens and you need to build in buffers into an economic model. As
a matter of fact I’m going to outline their idea to reach production on $100m but when
it’s time for the cash flow model, I’m assuming $110m.
2: The good news (in fact this is better than even I expected). The third party
consultants working with IRL (in fact the supervisors for project construction hired by
and for Cofide) are Mining Plus, they’ve been connected with the project for a long time
and they’re world class engineers, too. It’s not just IRL throwing out any old bunch of
numbers here to make it sound good to the gullible anal yst just in off the street, the
numbers they’re working with are franked and given green lights by Mining Plus, as
reputable a third party as you’d like.
Context in place, here’s how the basic and initial $170m breaks down. There are many possible
variations of the basic story and I’ve tried to add a few of the ideas on those in the brackets next
to each line item to give a feel for each one. However, the important thing right now is to see
how this ballpark model can indeed fit together.
• Cofide repayment: $70m (assuming Cofide requires immediate payment, not
necessarily so)
• Loan commission: $5m (there’s always a vig to pay)
• Royalty buybacks $10.5m (these may come in lower, as there are negotiations going
on with at least one of the NSR holders, but IRL is keen to pay off as much of the
underlying NSR as possible under the contracted terms).
• Plant and tailings: $40m. This is a lot cheaper than originally planned at the capex
stage, because there are changes to the mining model that allow this. We’ll check on
those below.
• Underground mining development: $0m. A big change. The original plan was to go
with owner operator for the U/G operation, the plan has now changed to contract mining
on a drill/metre and extraction/tonne basis. This is a clear saving on capex and makes
the barrier easier and lower.
• Mining equipment: $16m: Part of the U/G equipment will come from the contract
mining deal but some will be bought by IRL (some of this is a remnant of the 30 year
deal with the community, they’re going to get the chance to become third party
contractors in specific areas such as earth movement tasks).
• Power plant and lines: $8m (As Ollachea is right next to main power lines and a large
hydro plant is not that many Km away (and they’re itching to get a deal closed with the
mine too), this number that looks low at first sight is really on the conservative side.But
I’m good with that and if it costs $2m less come the day, the surprise is a good one
• Initial G&A: $2.5m (until the cash starts flowing).
• Initial community payments: $5m (This is close to a worst case number for the
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payments due to the community of Ollachea as the mine ramps up. Many of these may
be deferred, but again it’s good to err on the side of caution).
• Archeology work: $1m (necessary stuff for permit approval)
• Total: U$158m.
This leaves leeway of a $12m buffer, on top of several of the above assumptions that are as
close to worst case as normal logic would allow. Plus repeat I will; these figures got a good
grilling at last week’s meeting so I’m comfortable with each and every one of them. Plus they’re
not just IRL’s office-bound made-up personal corporate fantasy that won’t stand up to reality, all
the above get the seal of approval from the third party, Mining Plus. These are ballpark yes, but
they’re also very much real world assumptions and I’d go as far to say that there are several
places that the IRL/MP team expect to shave off costs as the optimization process gets into
gear.
Who will build it?: On hearing that GyM are now for all intents and purposes out of the picture,
I wasn’t that shocked because that word was more like confirmation of a growing assumption
than news out of the blue. However it does beg the obvious question and a new cause for
concern: Who will build Ollachea? On this point I was very pleasantly surprised to see how
much progress had been made by IRL in 2017 (again, hats off to CEO Benavides for getting
this company into gear after all its woes). I need to be careful not to go into too many details
because there are negotiations in progress this pissant blogger doesn’t want to tread on
people’s toes, but a few bullet points should set the scene and give the main info:
• The fact that the Cofide period of exclusivity in arranging the financing for Ollachea
comes to an end in April is at first sight a problem, as the deal was dependent on them
getting out and doing their thing...which they’re not doing. But it has also opened the
door of opportunity because when the period lapses, IRL is then officially allowed to get
out there and do deals with companies that want a piece of the action and can do so
directly.
• That process has already started. IRL has anticipated the likely scenario in which
Cofide goes no further and has been in talks with several interested financing parties
already. Without naming or numbering, it’s fair to say that IRL has had plenty of interest
from third parties.
• Some of those are straight financial, but the most promising avenues have come from
companies that would like to both finance parts of the project and build those parts
themselves. For example, the likely contract miner hired for the U/G work wouldn’t just
turn up on day one and start shifting soil to the plant, it would be their job to drill, tunnel,
prepare etc during the build-out stage as part of their contractual obligation.
• For another example, there are competing interests (they cannot be true bids until the
exclusivity period with Cofide is lapsed, so words need to be chosen carefully) from
entities to build the production facility and/or the tailing facility, again on a loan and
payback basis. IRL would get he debt on their books, but it would be crediting the
builder of the plant in a “mini-EPCM” style.
• Conceptually, the approach now being taken by IRL is similar to that of Red Eagle
(R.to) and the way it put together its financing package for the San Ramon facility. It’s
not exactly apples-to-apples, for example there’s no GyM this time and also IRL expects
to be able to do this on a 100% debt basis, but the piecemeal way in which it’s looking
to finance the main moving parts of the eventual mine (U/G, process, tailings/waste) is a
close model
And yes indeed, the way in which IRL wants to do this means no placements and no massive
share dilution. On this point CEO Benavides has been very clear and strong, his duty is to the
shareholders (especially after the way they supported him through the 2015 and 2016 mess)
and that means value gets moved down to the equity. There may eventually be some sort of
9

,
capital raising once the whole plan is fully in motion and the market has re-rated the stock after
recognizing the mine is happening and the share is very undervalued, that’s something mooted
for the medium-term future. But first things first and that’s about putting the capex package
together. The game is doing it by debt, preferably with the people who’ll build the machine.
When?: The real question here is how long we have wait before Ollachea is producing. We’0ve
already seen Benavides saying that Ollachea could be in production by July 2018 and that’s
feasible as long as the financing packages gel now-ish. But in reality I think we need to give
some more time, not for the build-out but for making the financing happen and getting a final
green light from the Peru government to start the construction phase. From what I’ve picked up
and by sticking a finger in the air, getting pilot production and a first pour in 2018 in perfectly
possible, but I’m definitely more comfortable about counting 2019 as “year one” on the
production schedule.
On the other hand, now we have the near-certainty that IRL won’t default on the Cofide bridge
loan, time isn’t the massive burden that it used to be. We’ll go into these numbers next week,
but the newly reduced operating and G&A costs at IRL and the continued positive cash flow
form Corihuarmi, though small, means the core of IRL is a self-funding enterprise. Of course it
will be preferable to get going sooner rather than later, but better deals sometimes take a little
more time. Bottom line is that on this subject I’m leery to commit too much to a prediction (unlike
the above factors), but a realistic year one of production in 2019 looks reasonable at least.
Section Three: The mine plan for the project
This is the last part of today’s anal ysis and it’s one that introduces new information, too. It’s
necessarily ballpark at this stage because there are plenty of trade-off and optimization
scenarios to go through, but we’re certainly at the stage where the new information can be
presented as the framework for what we’re likely to see at Ollachea the mine. And once again,
what follows isn’t the random musings of a few company executives built to impress a sucker
like me. I was very impressed by the detail, the progress (and teamwork inside IRL Peru, near
astonishing considering the blown out nature of the company and all the infighting that
culminated just a few short months ago) and conservative nature of the plan. Most importantly
again, this is IRL working with Mining Plus and getting the green lights and stage approvals
from the third party independent with a world class reputation to maintain.
To cut to the chase and make this short, the plan before was based on the known reserve/M+I
resource and went something like this:
• A 3,000tpd production facility
• An approximate 1m oz reserve/resource
• 3.4 g/t mineral at a 2.0g cut-off
• 100,000 oz gold per year production over 10 years
• Gold price assumption of 1,300/oz
• Reasonable IRR and NPV
Well folks, it’s time for the new news. Here’s how the plan for Ollachea is now shaping up and
it’s going to look radically different:
• Year one a 750tpd rate production rate on a 12 hour shift (i.e. 375 real tonnes). Once
running, that moves to 1,500tpd in year two (or perhaps earlier if things go well). Then
year four onward 3,000tpd. This also offers the potential to quickly upscale to double
throughput on a daily basis if two shifts are added.
• This modular approach to production scaling allows for the lower capex for the
production plant and tailings construction (the $40m mentioned above).
• An average head grade of 6 g/t gold (yes, six) using a 3.4 g/t cut-off in the first years. As
the mine matures, head grades drop to 5 g/t but by that time the wh
• Due to the higher grade and cut-off assumptions, the reserve/resource drops to around
770,000 oz as per the current 43-101 complaint resource.
• An assumed gold price of U$1,200/oz.
• Year one production around 20,000 oz gold. Years two and three around 48,000 oz
10

,
gold. Year four and five close to 100k, then as grade drops to 5g/t in year six and
beyond, average annual steadies to 80k(year Production mine life on the current 43-101
reserve/resource drops to just over seven years.
• However, the company is very confident of improving both reserves/resources and mine
life thanks to the results from the 2016 drilling campaign at Minapampa East, recently
published. Although still in a conceptual stage and not 43-101 inferred yet, we should
soon have an inferred model and it will not take much more drilling (perhaps $1m worth)
to move them to M+I level). Minapampa East will more than make up for the “lost”
ounces at the higher cut off and even before more exploration takes place (there are
several more strong targets at the site) mine life is very likely to go beyond 10 years
again.
If I were you I’d let all that sink in for a while, because even though I’d picked up on the
jungledrums that IRL was planning on a new approaching to mining Ollachea, I wasn’t
expecting anything as radical as that and it kind of blew me away in the meeting last week.
Unsurprisingly, the first questions were about the new higher grades (both head at plant and
cut-off) and whether it was practical to do it. What comes to mind are things like continuity, and
how much waste they’d now need to shift, and accessibility etc. On this IRL has been working
closely with Mining Plus and indeed it’s not just feasible, but looks pretty straightforward. A lot of
the high grade mineralization occurs in one target area of the deposit (for evidence, see pages
130 and 131 of the 2012 43-101 study to see how the reserve ounces concentrate around one
area of the Ollachea deposit, a bona fide sweet spot) and they were good enough to go through
the plan step by step (with pretty graphics) to show me how it works. This alone is a real game
changer for the project, because running higher grade turns the project economics from good to
compelling. I also knocks down the one repeated criticism I’ve head form all sides about
Ollachea over the years of covering the stock, that “3.4g is low for an U/G op”. If I’ve heard it
once I’ve heard it a hundred times, but now suddenly the plan is based around 6g material. Yes
for sure the reserve and resource drops under this scenario, but that’s more than made up by
the recent drilling success at Minapampa East.
I’m going to do the hardcore numbernerd stuff in Part Two next week, today’s Part One is all
about presenting the way “New IRL” and “New Ollachea” re shaping up. It’s more conceptual
today, more about presenting the new playing field but before wrapping up, I’d like to put in
visual numerical form some of the above information, show what all these parameters means
and give an idea as to why I’m so excited about the way Ollachea and IRL now looks (it also
makes me spit feathers to think that the ex-directors knew all this and knew what they were
trying to steal from us all). Here are some assumption parameters:
• Tonnes per day as outlined above
• Average head grades as per above
• Recoveries at a set 91% (there’s reason to believe 94% is possible, but pitching lower)
• A constant U$1,200/oz gold price
• Mining cost per tonnes of U$50. That sounds low at first but having quizzed them on
this, the contract mining price plus processing should come in lower than that. Add in a
modest sum for G&A and $50 works, even if it sounds low for an U/G op. However don’t
whack me over the head too much if you don’t agree, we’re trying to get in the ballpark
here and the grade involved will support higher costs
• Development costs rounded to $12m per
year (for U/G tunneling etc) IRL Ollachea: Gold ounces production per year
120000
It’s a pretty simple model for sure, but it’s all in the 100000
realms of reality too. Once you run them, this is the
80000
type of result that spits out. This first one on the
60000
right is projected gold production per year, which
starts low in year one (assumed 270 days of 40000
production, as well as low run rate), moves through 20000
the gears and hits top production in years four and
0
five, just what you want to pay off financial debt.
11
9102 0202 1202 2202 3202 4202 5202 6202 7202 8202 9202 0302 1302
Oz Au
source: IKN ests

,
This next chart below is how the costs profile per year works at that $50/t average, with the
average year coming in at just under $40m:
IRL Ollachea: Cost Profile (USm)
50
40
30
20
10
0
12
9102 0202 1202 2202 3202 4202 5202 6202 7202 8202 9202 0302 1302
U$m
dev costs
op costs
source: IKN ests
When you combine the costs above with revenues built on a straight U$1,200/oz gold price, you
get gross margins like this:
U$m IRL Ollachea: Revenues, total costs and gross margin, per year
140
revenues total costs gross margin
120
100
80
60
40
20
0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
source: IKN ests
And that’s a lot of cash. Now for sure there are other things to come out of that margin,
government royalties to be paid, tax as well (but on that score IRL gets capex breaks for the first
four or five years and will pay nothing). The point here is to show that it’s not going to take
forever to pay back a $170m financing if you’re raking in over $55m in margins in a typical year
and up to $75m in the sweet spot years when you’re looking for capital payback. And in order to
labour the point, if you don’t like my $50/t operating cost price and prefer something far more
(way too) conservative, here are the same blue bars for gross margin featured above and next
to them, margins based on a $70/t op cost:
IRL Ollachea: Margin at $50/t cost (gross margin)
versus margin at $70/t cost (alt gross)
90
80
70
60
50
40
30
20
10
0
-10
9102 0202 1202 2202 3202 4202 5202 6202 7202 8202 9202 0302 1302
U$m
gross margin
alt gross
source: IKN ests
Even in this very-conservative costs case IRL is making $65m in those sweet spot years and
over $45m in the mature years. I would expect IRL to be debt free by the end of year five, that
could be year six in the more conservative costs scenario. No matter, because by then it’s a
company generating perhaps 20c/share per year of cash flow and unencumbered.

,
Conclusion of Part One
Next week we do the number crunching and come out with a new target price for Minera IRL.
Today the job has been to show you how far along the line the company has come since the
bad guys were kicked out and the company has been allowed to work for its shareholders and
advance Ollachea. We can say that:
• The risk of default to the Cofide bridge loan is virtually zero.
• Financing is available to build the project.
• The economics of the new plan aren’t just good, they’re compelling.
In fact, it’s probably due to the compelling nature of the new lower reserve/higher grade mine
plan, plus those all important newly discovered drill ounces, that mining companies and financial
entities are now queuing up to do business with Minera IRL; They know a profitable opportunity
when they see one. I’ll sign off today by saying that whatever the target price might be in next
week’s note you can bet dollars to donuts it’s going to be substantially higher than today’s
CAD$0.19 share price. These share today are a real bargain, they’re baking in risk that’s either
not there or substantially lower than in reality and when the details of what IRL plans to do with
its deposit are better understood, this will no longer be at current price levels. IRL is a buy and it
makes me very happy to say that.
More next week.
End of Report Part One
Stocks to Follow
A rough week to own junior mining companies and if it weren’t for the addition of Minera IRL
(up 1.5c on the week) and Eros Resources Corp (ERC.v was unchanged), the only non-loser on
the week would have been the 3c added by Top Pick Regulus (REG.v). All the others were
losers so I’m not listing them all, let’s just note that the biggest losers included Belo Sun
(BSX.to down 12.1%), Starcore (SAM.to down 10.0%), Excellon (EXN.to down 9.8%), Cordoba
(CDB.v down 8.6%) and Top Pick B2Gold (BTO.to down 8.4%).
In admin news, I’ve done something I should have done several weeks ago and re-sorted the
Long positions list into my current order of preference. Sandstorm stays at the top because it’s
the biggest in cash terms, Cordoba and Atico move up, then generally speaking come the
stocks I most like for current upmoves at the moment. At the bottom of the list come either the
smaller positions or those I’m likely to sell or perhaps lighten soon.
With the addition of the new small position in Eros Resources (ERC.v) and the return of Minera
IRL (MIRL.cse) to active coverage, we now have 15 open positions on the ‘Stocks to Follow’ list,
our self-imposed maximum number at any given time. Eight of the positions are in the green,
one is unchanged and six are in the red.
13

,
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$4.02 90.5% tgt $5.30 Top Pick prod.
Regulus Res REG.v STR buy C$0.64 06-apr-15 C$1.63 154.7% LT exploreco top pick
Long positions (in current order of preference)
Sandstorm Gold SAND STR buy U$3.85 17-apr-16 U$4.20 9.1% $7 tgt, added March'17
Cordoba Min. CDB.v STR buy C$0.73 15-sep-16 C$1.27 90.4% First $1.50 tgt hit
Atico Mining ATY.v buy C$0.54 24-jul-16 C$0.83 53.7% tgt $1.10, Cu play
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.33 69.2% Under-radar Zn.
Excellon Res EXN.to STR buy C$1.71 09-oct-16 C$1.65 -3.5% $3.13 tgt, Ag growth story
Minera IRL MIRL.cse buy C$0.195 22-jul-12 C$0.19 -2.6% re-launching coverage
Red Eagle Min. R.to buy C$0.71 13-dec-16 C$0.81 14.1% Big growth potential
Starcore Intl SAM.to hold C$0.61 10-jan-15 C$0.54 -11.5% ex-Top Pick, holding thru
Rye Patch Gold RPM.v hold C$0.31 02-sep-16 C$0.30 -3.2% 75c tgt, bot more IKN400
Eros Res ERC.v spec buy C$0.18 01-mar-17 C$0.18 0.0% New position, deep value
Riverside Res RRI.v sell at 60c C$0.39 27-jun-16 C$0.53 35.9% Will take profits at 60c tgt
Belo Sun BSX.to SELLING C$0.90 30-jan-17 C$0.87 -3.3% selling this week coming
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$0.98 -14.8% decision post-PDAC
Short positions
None at present
Closed in 2017 closed close price
Continental Gold CNL.to Jan'17 C$2.68 22-may-16 C$4.17 55.6% trade closed, profit taken
Focus Ventures FCV.v Jan'17 C$0.23 01-jul-12 C$0.05 -78.3% Give up, a disaster trade
Wesdome Gold WDO.to Feb'17 C$1.72 28-aug-16 C$3.00 74.4% Target hit, sold, good trade
2009 to 2016 annual closed positions in appendices below
Now for notes on some of the current basket stocks:
Eros Resources (ERC.v): Position opened. See ‘Market Watching’ below for more, but as
part of my shopping last week I bought the small opener in ERC.v I’d talked about a few issues
ago at the price I wanted, 18c.
Atico Mining (ATY.v): Position added. As per the
Flash update of Tuesday morning (see Appendix 1)
when my preferred small copper play Atico Mining
(ATY.v) was trading at the heavily discounted 80c and
81c range, I bought a few more shares of the
company and as a result my cost average has crept up
a bit, to 54c. As it happens I didn’t get the cheapest
shares and paid 83c for mine, but apart from a quick
return on Thursday afternoon that was still the
cheapest price of the week and I’m happy to have
improved the position with value.
Sandstorm Gold (SAND): Position added. Also as per the Flash update of last week (see
Appendix 1), the sub-U$4.00 price did indeed show up in Sandstorm on the back of the
sectorwide selling and I picked up a few more shares, bumping up this one’s cost average too. I
didn’t pick up many (put in two bids, only one filled) but a buy is a buy and that’s good.
14

,
As for the ownership case there’s no need to repeat, nothing has changed since the analysis of
last week. SAND is a fundamentally strong company these days and though it might not be able
to offer the type of amazing zingy gain potential that some people demand from everything
they own in the sector, for me it’s a great stock to have at the core of your juniors portfolio.
Belo Sun (BSX.to): May give it one more week after PDAC. Wholesale selling hit the
sector last week nd the worst affected on our list was BSX. That’s understandable at face value,
it is one if the more volatile stocks out there and recent buyers on the permit approval news are
not (just like me) the strongest of hands. Still I don’t think the 87c close is indicative of the
value here and as gold miner selling looks overdone to me (see today’s intro).
Also as noted above, though it has always been a near-term play with PDAC as the limit date, if
circumstances dictate and the mining sector doesn’t rebound from the overselling of last week
immediately I’ll be okay about giving my BSX position one more week before closing it. No
reason to sell at what looks like a temporary low, then again I’m already resigned to not getting
the type of 20% quick win I was fishing for. I’ll live.
Riverside Resources (RRI.v): Still selling at 60c, even though that number has faded
somewhat from view. In other news, even with the modest drop in the share price this desk
hears the current placement has already filled (in fact RRI could have doubled it and filled it)
and after hearing from one fund that’s
participating, the rare opportunity of owning
warrants in RRI has been a strong positive factor
in marketing the placement. Makes sense.
B2Gold (BTG) (BTO.to): Splat. For the first
time this year BTO had a week in which it
underperformed the benchmarks (here compared
to the XAU index), by around 2%. That’s not
good but I’m more than willing to forgive
considering its year-to-date performance, as
seen on the chart.
Excellon Resources (EXN.to): The EXN rollercoaster last week reminded me how happy I
am to have just one company for silver exposure (I’m all glass-half-full on you today). For
further optimism, look at how buyers showed up on Thursday in that five day chart once the
price had sunk, there are definitely bargain hunters around this stock.
15

,
Red Eagle Mining (R.to): There are a lot of rumours swirling about the market about R.to at
the moment, most of them are negative and all of them have been picked up by this desk so
it’s my job to pass on information to you, fellow (or potential) shareholders in R.to. In the last
seven to ten days I’ve been contacted by five different people with knowledge of either juniors
mining world or the Colombia mining scene or both and told about the apparent bad things that
are happening at the mine and inside the company. Some of them had, on the surface at least,
an air of logic and potential truth about them, others sounded more like character attacks on
key personnel than anything that could substantially affect the running of the company, others
still were outright weird and sounded false from the getgo (especially to a person who has
visited the mine and knows that the physical geographical layout of San Ramon would alone
negate the contents of the badtalk, no matter what else you could say about them.
You might notice that I haven’t mentioned any specific rumour. That’s deliberate because of
two reasons:
1) Some are personally defamatory to people in officer positions at the company and I’m
simply not going there.
2) They are all either 100% bullshit, or bullshit built on false assumptions, or negative
conclusions drawn from events that are way off base.
Here’s what I will say: On hearing the rumours I got in contact with Red Eagle management
and as they came in via separate tranches from separate people, every time a new one was
added I found myself contacting them again. In all I’ve had four conversations with the
management team that must be getting a bit annoyed about having to rebut this stuff on
multiple occasions (fortunately they remained calm and patient with little me). We went into
detail about each one and I’m fully confident that there’s either a) very little or b) nothing at all
behind them all. But what I did find out is that contrary to the rumours, the ramp-up to
commercial production is going on schedule and the company is very happy about how March
has begun. I know these positive snippets:
1) R.to is doing the ramp to the 750tpd commercial production level the right way and
wants to run the plant at that level for one full month before announcing commercial
production.
2) In the first days of March (can’t vouch for today March 5th, but can for the other four)
San Ramon has indeed run at 7540tpd.
3) Grades have been higher than expected, too.
4) If all goes to plan, the company will declare commercial production either on March 31st
on schedule or at the worst “in the first days of April” (they’re giving themselves that
leeway, I think that’s fair).
The market can get antsy about a company and its story at key development moments like this.
Also, and this has to be said, Red Eagle’s success in Colombia has provoked jealousy in certain
16

,
circles and this isn’t the first time I’ve picked up negative scuttlebutt about the company. It’s
unlikely to be the last. However, after talking extensively with management in the last few days
and going over each talking point carefully, I’m confident that my shares and financial exposure
is in good hands. I’m also happy to have got a firm date for a Commercial production
announcement out of them because if we don’t hear anything by April 8th there will be every
reason to bug them again, find out why and if not happy with what’s heard, change opinions.
In more positive news, the 90%+ owned offshoot of R.to, CB Gold, has now be officially re-
named Red Eagle Exploration and has its new ticker, XR.v. You people at PDAC can expect XR
to be marketing at you with a brand new presentation to show off its wares (all that California
Vetas Colombia exposure) and I expect that XR is looking to finance in the near future by way
of a reasonably priced placement. I personally don’t plan to hold XR.v directly at the moment
and want to see how it gets on in its first months before making any firm call. What I do know
is that at this point XR.v has the potential to become a valuable asset for its mothership
company R.to and add value to my held shares. That’s fine by me.
Rye Patch Gold (RPM.v): This situation is different to the above on Red Eagle, as I’m
beginning to get more than a little concerned about how this stock position is developing. On
the one hand you have a share price that, if the RPM plan were going on rails, should be higher
by now (every time it tried to break out of this 30c to 33c range there’s a willing seller dumping
on the bids). For another, we now hear that the
new Florida Canyon pads haven’t made first
pour yet and the first days of March is a long
way from the original plan of 4q16, then the
revised plan of January 2017. They are
apparently still waiting on a final permit which
will allow the liquids to flow from the capture
pond to the CIL works. There are a couple of
other unconfirmed off-record things about their
changing site personnel that are giving the the
“hmmm” moments here.
There’s no doubt that my incursion into RPM so
far has been a disappointment. From the start
it’s been one of “there’s a lot of upside potential
if it executes well”, but the key word there is IF and the tale of the tape is that things are not
optimum. I’ve dropped near-term sentiment on RPM.v to “hold” and let’s see if it starts to catch
a bid through PDAC before making any drastic decisions. Sometimes at the end of ‘Stocks to
Follow’ notes I’ll write the words “happy holder” to underscore my peace of mind. This time I’m
just going to write “holder”, because that’s what I am. For the moment.
Regulus Resources (REG.v): Our only true weekly winner and then it only happened
because somebody stepped up and paid a few pennies extra on late Friday afternoon. As REG is
a quiet trader at the moment on low volumes, it’s not going to go through the same type of
sentiment selling as our other big copper exploreco trade, Cordoba.
Cordoba Minerals (CDB.v): CDB got really beaten
down last week and dipped as low as $1.16 on
Thursday before rallying a little late that day and
sharply on Friday as bargain hunters moved in. Even
though I’m in at better cost average prices and happy
with the the size of my position, I was looking at the
the wider market with buyer’s eyes and was somewhat
tempted by sub-$1.20 price, a real live bargain. But (as
often the case) I was too slow to act and didn’t get any
(no worries, snagged some ATY and SAND).
17

,
But cut it any way you like, CDB has re-traced since its $1.50+ prices that got Friedland to
exercise 2m of his $1.50 warrants. It had a big run, some tiredness isn’t a big shock, I see
nothing to worry about here at all and I’m a strong hand holder, all right. CDB is a likely
candidate for PDAC NR in the next day or two, it’s also one of the “Hot Story” companies that
are likely to get more than its fair share of conference buzz.
The Copper Basket
After nine weeks of 2017, The Copper Basket shows a 23.52% gain to level stakes.
company ticker price 1/1/17 Shares out Market Cap current pps gain/loss%
1 Capstone Min. CS.to 1.26 382.04 653.29 1.71 35.7%
2 Imperial Metals III.to 6.06 93.587 598.96 6.40 5.6%
3 NGEx Resources NGQ.to 1.20 205.06 258.38 1.26 5.0%
4 Western Copper WRN.to 1.86 94.19 181.79 1.93 3.8%
5 Copper Mtn CMMC.to 0.94 118.8 140.18 1.18 25.5%
6 Excelsior Min. MIN.to 0.63 167.364 138.91 0.83 31.7%
7 Amerigo Res ARG.to 0.345 173.61 138.89 0.80 131.9%
8 Cordoba Min. CDB.v 0.73 88.6 112.52 1.27 74.0%
9 Regulus Res. REG.v 1.20 68.368 111.44 1.63 35.8%
10 Atico Mining ATY.v 0.95 97.59 81.00 0.83 -12.6%
11 Coro Mining COP.to 0.15 483.425 77.35 0.16 16.7%
12 Copper Fox CUU.v 0.125 417.64 68.91 0.165 32.0%
13 Trilogy Metals TMQ.to 0.66 104.33 67.81 0.65 -1.5%
14 Nevada Copper NCU.to 0.77 80.5 57.96 0.72 -6.5%
15 Revelo Res. RVL.v 0.070 128.486 7.71 0.06 -14.3%
NB: All stocks priced in CAD$ Portfolio avg 23.52%
The Copper Basket 2017, weekly evolution
The Copper Basket moved up by 2.84% on
the week and it just so happens that 4.7% of 30%
that average basket change was due to the 25%
move in Amerigo (ARG.to). In other words, 20%
without ARG it would have been a losing
15%
week. As it happens there were six weekly
10%
winners (CS.to, REG.v, TMQ.to, ARG.to,
5%
CUU.v, RVL.v) and nine losers (III.to, NGQ.to,
0%
WRN.to, CMMC.to, MIN.to, ATY.v, COP.to,
CDB.v, NCU.to) with no unchanged stocks on
the week. The only double figure percentage
move in either direction was Amerigo
Resources (ARG.to up 42.9%).
I’m featuring the dailies chart of copper rather than
zeroing in on what happened over the last five days
because it’s a similar story to that we’ve seen in recent
weeks. We start at $2.70/lb or so, then the price tries
to rally up to $2.80/lb but peaks and fails midweek, so
by Friday’s close we’re back at $2.70/lb-ish. So rather
than that piece of Groundhog Day action the bigger
picture, which is a more constructive shape for copper
with higher lows the main feature.
As for macro news that can affect copper, that was
split between the usual suspects of supply disruption
news and China. Pushing copper’s price upwards was
the China PMI manufacturing number for February
18
ts1naJ ht8naj ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5
source: IKN calcs

,
came in at 51.6, above the 51.1 market forecast. To the downside came news that FreePort’s
(FCX) Grasberg copper/gold mine was going back to work, which was the main reason for the
4c dump on Thursday and (as posited last week) means the risk to supply disruption news is to
the downside, not the upside. Meanwhile, we’ll see how the markets (copper and other) react
to the news out this Saturday afternoon that the Chinese top brass is now guiding Chinese GDP
to 6.5%, the bottom end of the 6.5% to 7.0% range it set three months ago and slightly lower
than the 6.6% to 6.7% consensus of Chinese economy-watchers.
Back to some trading thoughts: As I was flicking through a few comparative charts thinking
about the way in which copper prices are clearly
being influenced more by the strength in the
broad markets than the general metals sector I
got to this chart of the Copper Futures contract
(HGK7, currently the May’17 futures) versus the
Dow, hitting headline-making news highs on
virtually every day. The correlation is indeed there,
but what really struck me about this chart was the
ramp-up in trading activity all of a sudden. The
last two or three weeks have seen more non-
specialist copper traders move into the trade and
that, for me, is a signal that something’s about to
give. I take this volume ramp as a negative,
knowing how predatory the metals specialists are
in their sector (plus their large intel advantage) because if this amount of activity hasn’t seen
copper prices push a lot higher, there are some serious scale sellers out there.
We move to inventories talk and as it’s the end of another month, here are the longer-term
inventory tracker charts we trot out every four to five weeks:
Copper inventories: percentage held per exchange
80
70
60
50
40
30
20
10
0
19
21.naJ bef ram rpa yam nuj luj gua pes tco von ced 31.naJ bef ram rpa yam nuj luj gua pes tco von ced 41.naj bef ram rpa yam nuj luj gua pes tco von ced 51.naj bef ram rpa yam nuj luj gua pes tco von ced 61.naj bef ram rpa yam nuj luj gua pes tco von ced 71.naj bef
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 71.naj bef
Mt Cu source: Cochilco
LME Shanghai Comex
Right on cue the Shanghai SHFE warehouses have taken over the lion’s share of world
inventories, just the way it happened in 2016 (but it never happened before, of course). But the

,
other interesting development is the rise and rise of COMEX, which now accounts for over 18%
of the world official futures inventory and it’s never been that high. The LME isn’t just under
pressure as the world’s price discovery location from SHFE any longer, the Comex is getting in
on the act too.
We’ve also seen aggregate inventories move up sharply, they’re the highest since 2013 and the
only comparative recent month is March 2015, that’s hardly a bullish signal for copper. Again,
Comex’s rise is the element tipping the balance. We should expect the March figures to be
higher still and SHFE has a shot of getting above 400k for the first time ever.
Now for the regular weekly copper warehouse inventory bullets, rather less interesting than the
longer view this time:
• Total world stocks rose 13,609metric tonnes (mt) (+2.2%) last week, finishing Friday at
625,266mt total.
• SHFE Shanghai stocks rose by 23,974mt (+8.3%) to close at 313,873mt. That’s a big
jump and puts it back on course for new highs in March after last week’s slight blip.
• At the LME warehouses it was another drop, this time by of 14,375mt (-6.8%) to a
close of 196,425t. That looks like arbitrage to the SHFE, same as last year.
• Meanwhile at the increasingly intriguing Comex we saw another add to stocks, we’re
now up to 114,968mt, a rise of 4,010mt (+3.6%) on the week.
Here’s the Shanghai-only chart, with the right hand side moving back up. We didn’t see 400k in
2016, though we got close. The re-stocking season should have three to four weeks to run, let’s
see how high that spike goes (and whether it will drop like a stone as it did last year. A lot of
the bull case for copper relies on the same shape as 2016.
Shanghai Futures Exchange Warehouse Stocks, Dec'13 to date
400000
350000
300000
250000
200000
150000
100000
50000
20
ht5naj ht9 ht61 ht02 ht52 ht92 dr3gua ht7 ht21 ht61 ts12 ht52 ts1ram ht5rpa ht01 ht41 ht91 dr32 ht72 ts1von ht6ced ht01 ht41 ht02 ht42 ht92 dr3luJ t7guA ht11 ht61 ht72 ts1naJ ht5beF
Mt Cu
source: Cochilco
Now for notes on a couple of basket stocks:
Revelo Resources (RVL.v): In the wonderful world of junior mining news releases, nothing
ever goes wrong and Everything Is Awesome. In a Friday post-close NR (augurs badly in itself)
our basket minnow Revelo Resources (RVL.v) gave us the happy headline (6) that it has “Re-
Acquire(d) a 100% Interest in the Montezuma Project in Northern Chile”.
In other words, RVL just lost Newmont (NEM) as its JV partner as the big company handed
back the exploration property to the little company. And no matter how you spin these things,
in this case RVL telling us it will do re-logging and reinterpreting of data and is convinced about
how exciting the property is, the plain fact is that these big big land holdings are too expensive
for a little little exploreco to carry, let alone fund a serious drilling program. And to add to the
fun, today Sunday (a PDAC NR thing) RVL added a second NR and gave long-winded details on

,
why this JV failure is so good for the company (7). In trading RVL finished up half a penny on
the week, but that was before the NEM news had been released. Expect this one lower in
IKN408.
Amerigo Resources (ARG.to): Last week I expressed my surprise in how much ARG has
rallied since the beginning of the year. I just didn’t get it, the fundies don’t justify this price,
there’s a lot of hidden costs, etc etc. I also made it plain that I’d got the call on this stock dead
wrong and if I’d been smarter I would have picked up a few.
Well, last week took me out of surprise and into abject incredulity. ARG went up ANOTHER
42.9% since my last words on the stock and on strong volumes too. Either somebody knows
something locked on, or there’s a heavy duty newsletter pump going on that I haven’t picked
up on, or it’s just a case of momo going haywire but I don’t care how you cut it, almost C$!40m
market cap for a company with its limited potential for cash flow generation or further growth
(plus that debt burden) is plain crazy.
I’m now helping for help, phoning a friend, mulligan or whatever else it’s called. Can somebody
please explain how ARG can command a greater market cap than CDB or REG? 70% higher
than ATY.v? Anyone out there explain to me in words I can understand just why I’m wrong
about ARG and why it’s not an obvious short right now? Thanks in advance.
Trilogy Metals (TMQ.to): This stock, the one mentioned in IKN402 dated January 29th in the
short note that started like this:
“Want a “Trump Play” in copper? Try this one. Northern Dynasty is just a stupid
overcooked pump on a deposit that will never work, permit papers or not. On the
other hand, this one has excellent grade that makes economics on paper sparkle, its
problem is the permitting of a road to join its part of the GWN to the outside world
and that people who live up there oppose the idea of splitting the wilderness in two
with asphalt.”
Since then TMQ.to has dropped a whole penny from 66c to 65c while NDM.to has gone from
CAD$3.92 to CAD$1.91 (-51.3%...ouch), but that’s not really fair because TMQ has been a
strangely quiet trader so far this year. But that quiet period might be coming to an end as word
is that NGQ CEO Rick van Alphabet is on the promotion trail now, starting at PDAC and
suddenly keen on one-on-one meeting with...well, with anyone who’ll listen. What this company
really needs is an injection of volume so if it comes the price could jump quickly. For those of
you risk-tolerant speculators types out there searching for an overlooked copper play (and
there’s other yummy metals in this story too, such as zinc and precious metals) NGQ is my idea
for your shortlist.
The Producer Basket
After 9 weeks of 2017, the Producer Basket shows a gain of 5.98% to level stakes.
company ticker price 1/1/17 Shares out Mkt Cap (Bn) current pps gain/loss%
1 Barrick ABX 15.98 1165.33 21.26 18.24 14.1%
2 Newmont NEM 34.07 530.595 18.08 34.07 0.0%
3 Goldcorp GG 13.60 832.381 12.59 15.12 11.2%
4 Franco Nevada FNV 59.76 178.01 11.14 62.60 4.8%
5 Agnico Eagle AEM 42.00 223.475 9.21 41.23 -1.8%
6 Ang/Ashanti AU 10.51 405.27 4.30 10.60 0.9%
7 Royal Gold RGLD 63.35 65.281 4.27 65.43 3.3%
8 Kinross Gold KGC 3.11 1245 0.00 0.00 8.4%
9 Buenaventura BVN 11.28 254.19 3.07 12.09 7.2%
10 Sibanye Gold SBGL 7.06 228.71 1.81 7.90 11.9%
Prices in U$, NYSE or NASDAQ tickers Portfolio avg 5.98%
21

,
The larger cap precious metals sector took a wholesale whacking last week, with every member
of our particular basket dropping. The worst
affected were Agnico (AEM down 9.0%) and The 2017 Producer Basket: Weekly performance and
comparative to GDX control
Goldcorp (GG), the least worst were these 25%
year’s new picks Kinross (KGC down 1.6%) 20%
and Randgold (RGLD down 4.3%). That’s
probably the reason the basket out-did the 15%
GDX benchmark by 1% and the gap’s down
10%
down virtually nothing now.
5%
Sibanye Gold (SBGL): On Friday SBGL 0%
informed the market (8) that is had head from
the Committee on Foreign Investment in the
United States (“CFIUS”) and that the body,
“...wishes to undertake further investigation of the proposed acquisition of Stillwater, which was
announced on 9 December 2016.”
In other words, the proposed merger has caught the attention of another set of US people
(they cover National Security issues) and is under a review that will take around six weeks.
However we also note that the share price moved lockstep with the market all week including
Friday, so the market seems to think this isn’t going to be an issue for the merger deal with
SWC. As it had already got a green light from the anti-trust people, that’s probably the right
attitude.
Regional politics
Ecuador: Three voter intention polls for the Moreno/Lasso run-off
We now have the first three voter intention polls for the April 2nd run-off between Lenin Moreno
(Alianza Pais party and current government candidate, trying to take over from Rafael Correa)
and Guillermo Lasso (officially the right wing CREO party, but in reality heading up a loose
coalition of “not government” from across the political spectrum). They were taken between
Feb 22nd and Feb 24th, just before the run-off was made official, and score like this (9):
Pollster CIS: Moreno 52.9% Lasso 37.1%
Pollster DIAGNOSTICO: Moreno 50.39% Lasso 41.2%
Pollster CEDATOS: Lasso 44.8% Moreno 41.2%
Of those three CIS is known to be very pro-Correa and its numbers ca)n be discounted as
cherrypicking (to be as generous as possible. DIAGNOSTICO is an unknown entity. The problem
for Moreno and the current government is that CEDATOS called the first round pretty accurately
22
ts1naJ ht8 ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5
basket
gdx control
source: Google, IKN calcs

,
(a Moreno win, 10% in front of Lasso, but not enough valid votes to win) so that third line
above must be a worry to them. It will also come as little surprise to hear that President Rafael
Correa immediately called the CEDATOS poll a fraud and biased; Yup they’re sounding a bit
worried over at the Carondelet Palace. Overall and as things stand today, this second round
really is too close to call and I said as much when interviewed this week on the subject (they
confused me with an expert on mining risk in LatAm).
Meanwhile (and thank you reader ‘MY’ for the link), further to the point made about Lasso’s
links with very-anti-mining Pachakutek last weekend and to illustrate further what that might
mean, here’s an interview with Guillermo Lasso by trade paper ‘Minergia Ecuador’ (10) and
here’s the key passage from the longer note translated:
Guillermo Lasso: “In CREO we recognize the value of responsible and sustainable
mining for the growth of the economy. This sector contributes 5% of GDP, generates
33,000 direct jobs and is a gross capital of some U$170m as at the end of 2015.
However, it is indispensable that this sector and other productive activities that involve
natural resources uphold the highest environmental standards in order to protect water
sources and zones of high biodiversity. Due to this, we cannot permit the exploitation
of mining at altitudes above 2,800 metres above sea level (approx 9,200 feet). We will
support local government in order to recuperate water sources.”
That 2,800m level is very similar to the Colombia “páramo rule” that’s done for Eco Oro in
Colombia, for one example. And to give an example, it’s not going to be a problem for Toachi
(TIM.v) and its main ‘La Plata’ project that’s been picking up momentum recently (max
1,700masl) or SolGold/Cornerstone at Cascabel (max 2,100masl) but it’s obviously a problem
for INV Metals (INV.to) at Loma Larga, what with that project being well above 3,000masl in
most places. This interview segment fits with the type of scenario I’m expecting from Lasso if
he wins (and again, must repeat that I do think this election too close to call at the moment),
one where he’s generally biz-friendly but will concede specific projects to his left-
wing/indigenous coalition partners in order to keep his administration together.
So first in the line of fire if Lasso won would be projects like INV at Loma Larga or Chinese
Junefield at Rio Blanco nearby. We’d have to wait and see how the mood filtered through for
projects such as Cascabel. What I will say here is that in particular I wouldn’t touch INV.to with
a bargepole right now, as the political risk is understated in the share price but not only that, it
has a whole bunch of technical challenges at the project (start with the arsenic content, work
through a list of others) that aren’t getting light shone upon by an all-too enthusiastic market.
Fraser Institute ranks Peru as LatAm’s best jurisdiction
And that’s for the first time ever, beating Chile to its traditional top spot. The results seen in
this chart from their report out last week (coinciding with PDAC, as always) (11):
Fraser Institute 2017 political rankings for LatAm jurisdictions
80 73.47
70
69.6669.2568.9767.0766.86
63.6962.51
59.52
60 55.02 54.8
50
50.3850.3848.7446.2445.5745.2
42.8242.08
40 35.5133.94
31.47
30
27.8626.1324.83
20
10
0
23
ureP elihC )grA(
atlaS
anayuG ocixeM anayuG
.rF
)grA(
nauJ
naS
lizarB aibmoloC augaraciN zurC
atnaS
rodaucE )grA(
acramataC
aiviloB alametauG sarudnoH amanaP .peR
.moD
yaugurU azodneM ajoiR
aL
tubuhC aleuzeneV néuqueN yujuJ
source: Fraser Inst
What you see is the “Investment Attractiveness Index” and to quote The Fraser Institute (TFI),
“In general, French Guyana, Chile, Guyana, Mexico and Peru are the most attractive

,
jurisdictions for investment based solely on the political aspect”. Just to help the eye I’ve
thrown in a bit of extra and non-scientific colour-coding to the Fraser data and please note that,
as normal these last few years, TFI splits Argentina into several different provinces rather than
showing it as a whole country (which I find rather illogical, if they do that for Argentina they
should really do that for Colombia, Mexico and other places).
Overall, the “green” columns are fair enough on the political aspect, but there are three things
to note:
1) Overall macro political risk a mine doth not make alone. The above is only one aspect
of CSR, as Lundin Gold has already shown you can have a solid situation inside an
otherwise risky country, or as Southern Copper at Tia has shown the reverse is also
true.
2) The “Investment Attractiveness Index” is weighted 40% on political matters and 60%
“mining potential” and on that second one, Peru has always scored strongly because
there’s a lot of places to go look for new mines up in the Cordillera there.
3) The situation in Chile is the most interesting, because though Peru has improved
somewhat (28th in the world this year, from 36th last year), the real story is about Chile
that used to be ranked in the world top ten (alongside the best provinces of Canada,
Australia etc) but has continued to lose ground. The results from Chile show that those
mining companies and other mining entities interviewed were most worried about the
growing negatives in permits for protected areas, the Chilean legal system and its
geological database, which hasn’t seen much improvement recently.
Still, those attending Peru Day at PDAC tomorrow are bound to hear a lot about this Fraser
Institute survey because the country has received the results with all pomp and circumstance,
and with plenty of reports in generalist news media you can guarantee they’re really going to
stuff it down the throats of you mining guys.
Peru: Graña y Montero (GRAM) now deep in the doo-doo
Last week saw the top three members of the Graña y Montero (GyM) directorate resign, in
order to stop the slide of its share price (GRAM) on the NYSE. That move worked and the price
has stabilized around the U$3 level (U$2.89 at the close Friday, around 70% off year to date)
but it’s little help to its situation in Peru where the company is now officially radioactive and
Minera IRL (see Fundies section today above) is just one of the companies that must have
nothing to do with GyM directly at the moment.
As a company it’s probably in the Too Big To Fail category for the country of Peru, its activities
are intertwined with many civil works projects (both public and private) as well as in other
sectors such as straight financing (banks, pension funds etc) and other construction activities
such as housing projects of al types. It’s not my idea of a full-scale bankruptcy candidate, but it
does have real large-scale financial problems and some sort of restructuring looks very likely,
be it with the help of the government or done on a market level. That’s unlikely to be good
news for the share price if/when it happens. Meanwhile, reports abound of its direct
construction/civil works competitors moving in on its market and offering their services to those
companies looking to “build something” in Peru.
Chile: La Escondida strike continues
The strike continues, now 25 days and counting and both sides are entrenched in their
positions (and as a couple of mailers have pointed out, as there’s a change in labour rules in
Chile due to come into effect on April 1st that apparently suits the BHP/management side of the
argument, there’s no movement from them at all). What we now have is the Chile government
wringing its hands about the drop in GDP this entails (12), estimated at around 1% of the
national total, as we’re talking about the tap turned off from around 12% of all the copper Chile
produces) and union leaders who are now wrapping themselves in the flag (“we’re Chileans, the
mine is in Chile, they’re just a bunch of foreigners”) and off to meet with the government once
again in Santiago tomorrow Monday where they won’t find Mining Minister Aurora Williams,
24

,
she’ll be sipping something bubbly at PDAC.
For those of you who want deeper details on the subject, this interview (13) with Joaquin
Villarino, president of Chile’s Council of Mining, provides a lot of detail and the potential
repercussions of the issue. It’s long but good and covers all the angles.
Mexico: 59 mining companies identified as “presumed tax evaders”
It’s not just Primero Mining (P.to) (PPP) and Silver Wheaton (SLW) in trouble with the Mexican
tax people, it seems. In this report (14) out this weekend in Mexico has revealed that The office
of the Superior Auditor of Mexico has handed a list of 59 names of mining companies down to
its tax inspectors, due to their being “presumed tax evaders”. Here’s the key paragraph from
the linked report in Mexico’s newspaper “Contralinea” (translated):
The “Report of the Results of the Higher Fiscal of 2015 Public Accounts” indicates that
the Tax Administration Service should instruct the General Administration of Large
Contributors to exercise its revision rights on 59 contributors, “...that have mining
concessions, that are identified as presumed evaders, in order to revise the
compliance of their fiscal obligations due to the non-payment of special, additional or
extraordinary mining rights as featured in the articles 268, 269 and 270 of the Federal
Rights Law.”
The full list if 59 mining companies is available at the end of the report, but there are plenty of
names that will be familiar to this audience. They include (in no particular order and I’ve
probably missed a couple too):
• First Majestic (FR.to) (AG)
• Fortuna Silver (FVI.to) (FSM)
• Panamerican Silver (PAAS)
• Agnico Eagle (AEM)
• Gold Resource Corp (GORO)
• Peñoles
• Grupo Mexico
• Alamos Gold (AGI.to)
• Endeavour Silver (EDR.to) (EXK)
• Primero Mining (PPP) (P.to)
• Goldcorp (GG) (G.to)
We know that Primero Mining (PPP) (P.to) is already under advanced investigation by the
Mexico tax people due to its silver streaming sales to Silver Wheaton (SLW), with the potted
history of that one being how the silver PPP produces at San Dimas is sold at a very low price
to SLW instead of the normal market price, due to the lump sum forwarded by SLW as part of
the deal. Mexico wants the tax on the true value, neither PPP or SLW says they’re liable). From
the shape of this new tax office report on tax contributions to 2015, it would seem the country
is about to turn the screw on a lot more companies.
Mexico: A Trump import tax not a problem for mining companies
In other and better news involving the words “Mexico” and “Tax”, in the last two or three
months I’ve fielded a couple of mails from you nice people out there in which I gave my
personal view that any eventual import tax, 20% or other, imposed by President Trump on the
“Bad Hombres” of Mexico would be very unlikely to affect precious metals miners working in
Mexico. So it was good to see real mining people in Mexico back up my call last week (15) at
the Mexico Mining Forum in Mexico City on Wednesday, Grupo Bal director Jaime Lomelin said
that if such an import tax were effected by Trump, even companies that normally sell their
silver and gold (and other metals) to The USA wouldn’t have much of an issue because the
metals are world fungible commodities and can find other markets. He said, “Although The USA
buys a lot of our silver, there’s also a lot of interest from other places such as Europe. We can
defend ourselves from a trade barrier”. Meanwhile Salvador Garcia, operations manager at First
Majestic (FR.to) (AG) and advisor to Mexico’s Chamber of Mining (Camimex) said that there
25

,
were more important things for mining companies in Mexico to worry about than Donald
Trump, such as mine site insecurity (narco gang assaults, etc) which could have more of a
negative effect on the country’s mining sector.
Market Watching
Eros Resources Corp (ERC.v): The new ‘Stock to Follow’ position
Last week (and without a further Flash update as it wasn’t necessary) I made good on my
threat/promise to open a position in Eros Resources Corp (ERC.v), the deep value tinycap first
identified on these pages in IKN398 dated January 1st 2017 and featured on several other
occasions (e.g. IKN402 nd IKN403). The last time it was mentioned in IKN403 in the piece
entitled “Still fishing for some Eros Resources (ERC.v)” I wrote that I was still after my 18c
entry point price and finished the segment with:
With patience and on a soft day for juniors, I should be able to get my price. When I
do, ERC will join the Stocks to Follow list.
And here we are today. Last week ERC.v finally traded regularly (though still thinly) at that 18c
price and as I was definitely in the buying mood, I picked up that small starter position and as
you see above, ERC is now featured as the 5th name on the list.
We’ve made the case for ownership of ERC in the previous pieces so not much re-hashing here,
just a couple of bullet points to state the main case:
• The new management team, led by the highly regarded Ron Stewart, makes this
company far more attractive.
• The liquid assets held by ERC.v give it compelling deep value compared to its market
cap.
Updating on the second point, here’s the chart that breaks down what we know about those
liquid assets held by ERC. It needs to be said that I’ve heard off-record that ERC.v may well
have liquidated a little and sold some of the shares listed, turning them into hard cash. We’ll
find out more when ERC reports its next quarterly financials but the final totals aren’t likely to
be greatly different in cash terms, so for the moment I’m happy about using these non-updated
holding numbers. What is accurate is the current share prices of each holding, they’re all as per
Friday’s close:
Marketable securities held by ERC.v
ticker company shares held* current pps value C$m
HRT.to Harte Gold 2.12 0.485 1.03
SKE.v Skeena 48.69 0.075 3.65
SBW.v Strongbow Expl 1.60 0.165 0.26
TIM.v Toachi 1.00 0.520 0.52
TKU.v Tarku 3.30 0.050 0.17
WTR.v Westcore 4.00 0.140 0.56
Canamex debent. 0.25
WTR.v Westcore 10% of prod 1.60
Other 0.20
Subtotal C$m 8.24
approx ERC cash C$m 2.20
total liquid assets C$m 10.44
The suite of shares held, plus the new rights on 10% of Westcore (WTR.v) production that gets
a couple of extra lines below, plus the IKN best guess of cash held, add up to an estimated
26

,
CAD$10.44m (which might be a little off, but won’t be by much). In contrast, here’s the current
market cap of ERC.v (the small table we’ve seen before):
ERC valuation data (C$m)
Shares out Share price Market Cap
41.87 0.180 7.54
This weekend ERC.v is valued by the market at CAD$7.54m, despite it having no debt to take
away from those liquid assets. What you have in essence is a company that, even if you price
its current suite of admittedly mediocre fixed mining property assets at zero, is worth
CAD$2.9m more than the market says. That’s some 38.5% higher than today’s market cap and
an implied fair value of around 25c per share.
And in a nutshell that’s why I’m now an owner of ERC.v, but there are three other things to add
to the mix before leaving:
1) I know that both Eros and Skeena (SKE.v), which is the de facto parent company of
ERC.v, are vert keen on the chances of SKE’s main “SNIP” gold project, which they
acquired from Barrick. For me it’s one of those “time will tell” things but as I greatly
respect the geological opinions of CEO Stewart it’s a case of placing some trust in the
people here. One thing is sure, that ERC will not sell any of its SKE share position and
that happens to be the backbone of the whole portfolio.
2) The recent acquisition of 10% of the production revenue of Westcore, an O&G
company with modest producing assets and apparent growth opportunity, is an
interesting move. That’s because at the time of the purchase CEO Stewart told me that
the initial outlay should pay for itself quickly and the plan is that the revenues from this
quasi-stream should be enough to cover ERC’s projected G&A burn in the indefinite
future. The cash won’t be a king’s ransom but as ERC is obviously going to be a tightly-
run ship, the idea of covering expenses like this sounds smart to me (assuming it
works) in order to protect treasury. Also according to CEO Stewart, there are plenty of
years of cash flow from this purchase to look forward to and it will pay for itself many
times over.
3) On the subject of treasury, ERC is looking into the pros and cons of raising a modest
amount of capital via a private placement. No decision has been made on that yet but if
it goes that way, the war chest to go out and buy something more interesting than its
current suite of fixed assets becomes more workable.
I think I’ve snagged some great value in
buying ERC.v at 18c last week as the
liquid assets will protect the company
from downside. If it goes any lower I can
always buy some more and add to this
initial and modest position, in the
meantime, I’ll be on the look-out for its
next set of financials in order to get clues
on the new makeup of its liquid asset
holdings. I’m not expecting the final total
to be greatly different from the above in
absolute cash terms, but the more
accurate the adjustments, the better.
Zinc possibly getting new bullish legs
This article (16) from the highly regarded base metals commentator Andy Home of Reuters is
well worth a full read. It’s unfair to offer up an excerpt because the note touches on several
issues and their all part of the mix, but if we feature this chart from the report...
27

,
...and just the opening, you’ll at least get a flavour.
More than 100,000 tonnes of exchange stocks have been canceled in the space of a
couple of weeks, meaning the metal is no longer available for trading purposes and
can be physically loaded out of warehouses. The remaining "open" tonnage, as it's
termed on the LME, has now fallen to 203,350 tonnes, the lowest since December
2008.
This can be seen as another sign that tightness in the zinc raw materials market is
starting to feed through into the refined metal part of the supply chain.
That's good news for the many zinc bulls out there, who have already seen the price of
London zinc rise from under $1,600 per tonne to $2,860 over the last year.
There are two key questions that need to be answered, though, if the price is to rise
further.
Is this slump in available LME stocks for real or just another false signal emanating
from the smoke-and-mirrors financing trade?
And when will this evolving bull story start affecting China, the world's biggest producer
and consumer of zinc?
The upshot is that the zinc market is showing signs of tightening even further from the start it
got in 2016 and that’s framed as bullish news for the metal price. However please do read it all
because, as usual, Home does the right job of a journalist by collecting information and views
from all sides of the argument, it’s not all cut-and-dried bullish out there.
Jujuy to see anti-mine protest with Golden Arrow (GRG.v) the target
This is one of those pieces that straddles the “Regional Politics” and the “Market Watching”
segments, but I’m going to put it here because ultimately the target of the anti-mine march
isn’t mining in general but is one specific project owned by a company well known for its
market pumping.
There’s an anti-mining protest, including a march and probably roadblock, set for Mid-March in
the Jujuy province of Argentina (17) The protest is specifically aimed at the the governor of the
province, Gerardo Morales, and his new Land Service Law (Ley de Servidumbre) which was
created in order to allow private development of nature reserve land and the main implied
target of the protest is the Chinchillas project owned by Golden Arrow (GRG.v) the Joe Grosso
exploreco which frames itself as the next obvious buyout for Silver Standard (SSRI) in order to
prolong the life of its reasonably nearby Pirquitas mine. The timing of the protest for mid-March
also coincides with the March 30th limit date SSRI has to decide whether to option into the
project.
The Chinchillas project is located inside the “Laguna de Pozuelos” biosphere reserve zone and
28

,
the local population say that if the project ever become a mine it would dry out both local
agricultural and and also the Pozuelos Lake, classified as a national monument. They also say
that the previous studies published by GRG and its 43-101 compilers severely underestimate
ecological impact and were filled with deliberately false information (in order to keep SSRI
onside as the potential buyer of Chinchillas). They also state that they haven’t been given the
opportunity to vote on the legally required (OIT169) prior consultancy by either regional
government or the mining companies, because they all know that opposition to the project is
overwhelming.
Over here in juniorworld, what I
can add is that like just about
every Joe Grosso vehicle I’ve
ever come across, GRG.v is a
heavily promoted company that
uses all means, fair and foul, to
press its case to the naive end of
the resource market. This chart
notes that after paying a lot of
money to arch-pumped Daniel
Ameduri in May 2016, the
company ran a near-$7m
placement before running as
high as $1.40 mid-year. It then
dropped away as “somebody”
took advantage of the inflated
share price and dumped stock. This Friday’s 65c close is lower than the placement price and I
see no reason why it shouldn’t go lower. Another over-hyped Argentina mining accident waiting
to happen.
Prospector Resources (PRR.v) puts its team together
The first heads-up on this was in IKN390 and it got a mention last week because of the closure
of its round of financing and one of the bullet points in last week’s piece was this:
Probably before the AGM we should get an announcement on the appointment of key
management and personnel. I have no confirmation on who they might be, but
strongly suspect that at least some of the “Old Rio Alto” team will get on board.
Sure enough, last week saw a second NR out of PRR that announced just that, the roster of key
personnel joining Alex Black at his new gig (18). What’s notable is that CEO Black is “getting
the gang back together”, with names such as Tim Williams and Ian Dreyer (both known
personally to your author, both quality human beings) who were an integral part of the success
of Rio Alto Mining. To quote the CEO Black blurb in last week’s NR:
We created an enviable business and work culture at Rio Alto Mining Limited that we
intend to replicate at Prospector Resources Corp. and have a number of our old
management team ready to join our company as we advance our business. We are
currently actively reviewing a number of business opportunities that I believe will
form a solid base for a new entrant in the precious metals mining space."
Sounds good to me. Next up here we have an AGM in April that will see the official name
change to Rio2 Mining, also before or after that we should hopefully get news on what new
asset they’re getting on board to turn into their next precious metals mine. I hold no position
yet, but that’s likely to change at some point in 2017.
Conclusion
IKN407 is done, we end with bullet points:
29

,
• It was not a preordained decision. I certainly hoped it might be the case but I was also
well aware that even though the boardroom battles are now behind it, there’s still a
long distance between it and the desired construction and opening of any mine at
Ollachea. However after meeting management last week and going through the details
of the plan I’m more than happy to re-instate Minera IRL as a ‘Stock to Follow’ here at
The IKN Weekly and even happier to call it what it is, an excellent buying opportunity.
This week we concentrated on the all-important company-maker project and its
prospects, next week part two and the corporate view with a formal price target but
don’t fret too much about that precise number, it’s going to be plenty above 20c.
• Our sector of focus took a whacking last week and most everything in the precious
metals space dropped, but the underlying fundies suggest to me that the selling was
overstated and that there’s certainly no need to panic out of positions. Even my very-
near-term trade in Belo Sun (BSX.to) can get one extra week to play out if it needs it.
• And indeed I loosened the purse-strings last week and bought a few things, including
an add to Atico (ATY.v) and Sandstorm (SAND), plus that new position in Eros (ERC.v)
which I waited for patiently at my preferred 18c entry point. I’m glad to say that I have
more cash to play with if circumstances allow, too. Watching.
• Those going to PDAC, enjoy your week. Those not going to PDAC, enjoy your week.
I thank you in advance for any feedback. Our Top Pick stocks are Regulus Resources (REG.v)
and B2Gold (BTG) (BTO.to). Flash updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen. Namaste.
Mark
Footnotes, appendices, references, disclaimer
(1) http://www.calculatedriskblog.com/2017/03/schedule-for-week-of-mar-5-2017.html
(2) https://www.quandl.com/data/USTREASURY/REALYIELD-Treasury-Real-Yield-Curve-Rates
(3) http://incakolanews.blogspot.pe/2017/03/chart-of-day-is_3.html
30

,
(4) https://www.bloomberg.com/news/articles/2017-03-03/yellen-hints-fed-may-need-more-2017-rate-hikes-than-
penciled-in
(5)http://incakolanews.blogspot.pe/2017/02/minera-irl-that-very-interesting-q-with.html
(6) http://www.marketwatch.com/story/revelo-re-acquires-a-100-interest-in-the-montezuma-project-in-northern-chile-
2017-03-03-171604346
(7) http://www.marketwired.com/press-release/revelo-provides-update-on-results-targets-exploration-plans-its-
montezuma-project-northern-2200538.htm
(8) https://thevault.exchange/?get_group_doc=245/1488535103-sby-sens-CFIUS-extension-020317.pdf
(9) http://www.eltiempo.com.ec/noticias/ecuador/4/408614/resultados-de-encuestas-por-la-segunda-vuelta
(10) http://www.minergiaec.com/entrevista-guillermo-lasso/
(11) http://www.elperuano.com.pe/noticia-peru-es-pais-mas-atractivo-para-inversion-minera-51581.aspx
(12) http://elcomercio.pe/economia/mundo/mineros-mantienen-huelga-que-tumba-produccion-cobre-chile-noticia-
1973219
(13) http://www.aminera.com/2017/03/05/joaquin-villarino-presidente-del-consejo-minero-escondida-se-estan-jugando-
lo-seran-las-reglas-del-juego-las-futuras-negociaciones-colectivas/
(14) http://www.contralinea.com.mx/archivo-revista/index.php/2017/03/05/59-mineras-presuntas-evasoras-de-
impuestos-y-obligaciones/
(15) http://www.entornointeligente.com/articulo/9679185/Mineras-blindadas-ante-posible-arancel-de-Trump
(16) http://www.reuters.com/article/us-zinc-stocks-ahome-idUSKBN16853G
(17) http://segundoenfoque.com/pueblos-originarios-de-argentina-se-oponen-a-la-mineria-a-cielo-abierto-42-330053/
(18) https://www.juniorminingnetwork.com/junior-miner-news/press-releases/2074-tsx-venture/prr/29874-prospector-
resources-announces-executive-management-appointments-rsu-issuances-and-stock-option-grant.html
Appendix 1: Flash update dated Tuesday February 28th 2017
Good morning, just before 11:30am local time, two hours into the trading day and pleasantly sunny outside.
This is the shortest of notes to say I'm going to take advantage of this week's discounted Atico Mining (ATY.v) price and
add to my position today, thereby averaging up a little.
Also FWIW I'm still considering an addition to my Sandstorm (SAND) long, but kind of waiting to see whether my sub-
U$4.00 price shows up. If it does in the next couple of days, assume that I'm a buyer with no need for another Flash
update to overstuff your mailbox.
Enjoy your Tuesday.
Stocks To Follow Closed Positions 2016
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-ago-15 C$0.25 38.9% okay trade, sold on pol risk
McEwen Mining MUX jan16 U$1.09 25-ene-15 U$1.20 10.1% sold due to lack of value
Lake Shore Gold LSG.to feb-16 C$1.10 07-abr-15 C$1.69 53.6% bot out, sold early in process
Atacama Pacific ATM.v feb-16 C$0.19 26-abr-15 C$0.40 110.5% sold for a double on big pop
New Gold NGD feb-16 U$2.06 24-ene-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-ene-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-abr-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-abr-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
31

,
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
32

,
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
Pretium Res PVG.to aug'13 C$8.20 11-jun-13 C$10.14 23.7% closed to raise cash
Bear Creek BCM.v sep'13 C$2.06 30-may-13 C$2.20 6.8% sold on pol risk decision
MAG Silver MVG oct'13 U$7.00 12-sep-13 U$5.62 19.6% near-term short
Gold Res Corp GORO oct'13 U$9.52 03-may-13 U$4.98 47.7% short tgt made, covered
AQM Copper AQM.v oct'13 C$0.31 16-oct-11 C$0.125 -59.7% closed failed trade
First Majestic AG nov'13 U$11.51 07-nov-13 U$10.50 8.8% v near term short, closed
Fortuna Silver FSM nov'13 U$4.00 07-nov-13 U$3.68 8.0% v near term short, closed
Primero PPP nov'13 U$5.70 07-nov-13 U$5.75 -0.9% v near term short, closed
Starcore Intl SAM.to nov'13 C$0.235 08-sep-13 C$0.17 -27.7% ST trade didn't work, sm loss
B2Gold BTO.to dec'13 C$2.22 28-nov-12 C$2.16 -2.7% closed ST trade to raise cash
Stocks To Follow Closed Positions, 2012
Closed in 2012 closed close PPS
Soltoro SOL.v jan'12 C$0.87 07-nov-11 C$0.94 8.0% cash moved to BCM.v
Gold-Ore Res GOZ.to feb'12 C$0.84 13-oct-10 C$0.98 16.7% trade closed on ELG.v offer
Minefinders MFN feb'12 U$11.68 17-nov-11 U$14.80 26.7% target made, trade closed
Iron Creek IRN.v mar'12 C$0.58 26-sep-10 C$0.31 -46.6% time up on small bad trade
U.S. Silver USA.to apr'12 C$2.18 15-mar-12 C$1.86 -14.7% ST trade no good, cut loss
Augusta Res. AZC.to may'12 C$3.10 29-jan-12 C$2.07 -33.2% bad mkt, bad trade cut loss
Bellhaven BHV.v may'12 C$0.50 22-sep-10 C$0.28 -44.0% new mgmt not impressive
Zincore Metals ZNC.to may'12 C$0.325 29-jul-11 C$0.17 -47.7% bad mkt, bad trade cut loss
Soltoro SOL.v may'12 C$0.70 18-mar-11 C$0.41 -41.4% bad mkt, bad trade cut loss
U.S. Silver USA.to aug'12 C$1.78 27-jul-12 C$1.36 -23.6% fail ST trade close pre split
Estrella Gold EST.v aug'12 C$0.91 27-mar-11 C$0.14 -84.6% Closed on port realignment
Fortuna Silver FVI.to sep'12 C$1.07 03-may-09 C$5.32 397.2% sell call $6.17/ Mar25
Strait Minerals SRD.v oct'12 C$0.125 09-dec-11 C$0.12 -4.0% closing coverage til FY13
Sunward Res SWD.to oct'12 C$1.47 13-mar-11 C$1.21 -17.7% sold, took loss
Gold Res Corp GORO oct'12 U$21.47 09-sep-12 U$17.40 19.0% Short trade closed
Yellowhead Min. YMI.to nov'12 C$1.00 01-apr-12 C$0.63 -37.0% sold, took loss
Primero Mining PPP nov'12 U$7.26 07-oct-12 U$6.73 7.3% Short trade closed
Bear Creek Min. BCM.v nov'12 C$3.38 07-nov-11 C$3.72 10.1% Took small profit
Vena Resources VEM.to dec'12 C$0.70 31-may-09 C$0.18 -74.3% Failed trade (caps F)
Galway Res GWY.v dec'12 C$2.19 24-nov-12 C$2.30 5.0% closed good ST arb trade
Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
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
33

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