IKN #408Premium

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The IKN Weekly
Week 408, March 12th 2017
Contents
This Week: In today’s issue, Wrong again and setting myself up to be wrong tomorrow, On
the subject of failures.
Fundamental Analysis: NOBS report part two on Minera IRL (MIRL.cse).
Stocks to Follow: Overview, Belo Sun (BSX.to), Red Eagle Mining (R.to), Sandstorm Gold
(SAND) (SSL.to), Riverside Resources (RRI.v), B2Gold (BTO.to) (BTG), Eros Resource Corp
(ERC.v), Minera IRL (MIRL.cse), Atico Mining (ATY.v), Rye Patch Gold (RPM.v), Regulus
Resources (REG.v), Cordoba Minerals (CDB.v), Tinka Resources (TK.v).
Copper Basket: Overview, Amerigo Resources (ARG.to), Trilogy Metals (TMQ.to), Western
Copper & Gold (WRN.to).
Producer Basket: Overview, Barrick Gold (ABX)-
Regional Politics: Ecuador: Lasso now favourite to be next President, Latin America at PDAC,
Mexico at PDAC had real news, Argentina: Chubut repeats its anti-mining message, Chile: La
Escondida strike update, Peru: Cerro Verde now on strike.
Market Watching: Tinka Resources (TK.v) wins PDAC.
I remind subscribers that no part of this newsletter can be copied, reproduced or
given to any third party without the express permission of the author.
This Week
In today’s issue
• The main event today is again Minera IRL (MIRL.cse), as we wrap up the (re)opening
coverage on the stock with Part Two of the NOBS report on the company.
• Copper got shafted last week by a bear attack, with large scale copper deliveries to
LME warehouses hitting the market hard. See The Copper Basket below and note that
the market is already seeing signs of the bear attack unwinding.
• I added to the Red Eagle (R.to) position and a few Sandstorm (SAND) shares as well.
In the case of Red Eagle, solid news is better than the unfounded rumours that are
going around and that’s the combination for a rally to come.
• Tinka Resources (TK.v) turned out to be the star of PDAC. The need to know is in
‘Market Watching, but it’s good to see this slow-burn position finally starting to pay off.
Wrong again, and setting myself up to be wrong tomorrow
Last weekend’s ‘Today’s Issue’ bullet points included the gems “it looks to me as though the
selling is already overdone” and “I did a bit of buying last week”, along with other suitably
encouraging things in other places of IKN407. Therefore it’s only right to point out that despite
the reasonably positive end to the week as gold rebounded above the $1.2k line and bargain
hunters moved in on stocks, the fact that GLD is down 2.3% since last weekend, GDX is down
2.1% and GDXJ down 2.4% mean that I got bullish too quickly.
1

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The canary in the coalmine is once again in US interest rates and our house fetish indicator
(from all those available, there are literally hundreds) of the ten year TIPS yield shows the
change last week.
TIPS went on a tear, the ten year hitting 0.6% before trimming the gains slightly on Friday as
the US Dollar got bought by the world in general. The Trump Bull Market is sucking in money
from around the world (with Eurozone GDP growth at a measly 0.4%, The UK in the process of
screwing itself with Brexit and China’s rapid growth showing its own slowdown, who can blame
them?) and with the latest jobs numbers showing no shocks, the Fed is now a lock to raise base
rates at the upcoming FOMC (announcement Wednesday 2pm and we get a Yellen presser at
2:30pm with this one), the world now expecting that 25bp hike. Locked in.
• Though the FOMC has been a near-cert for a while, I wasn’t expecting the dollar
strength or TIPS to run the way they did last week in anticipation. More fool me.
• Equally and connected, I wasn’t expecting more softening in gold either.
• Notably other metals weren’t immune this time. The gold/silver ratio ran back up over
70X, copper was hit hard (though the “hard” bit for its own reasons, see ‘The Copper
Basket’ below) and the other base metals were soft too, even suddenly-sexy-zinc. In
fact and as scribbled on the chart above, under the circumstances gold did quite well to
keep its had above U$1,200/oz as the last time 10 year TIPS popped over the 0.5%
line, gold started at U$1,170/oz and then got as low as U$1,130/oz.
So what’s going on? On Tuesday evening I read a note that Mike Churchill of Churchill Research
(mentioned as a fellow gold/TIPS follower in previous IKN Weekly intros) and it made a lot of
sense. His argument is summed up in the final paragraph of the note and here it is:
Bottom line: Since the election my concern has been that the Trump economic
program would be so pro-growth that it would send the USD on a tear, undermining
returns in various other asset classes. I’m not committed to the idea that that will
happen (and am not investing as if it will), but whenever evidence pops up suggesting
that it might be happening one certainly needs to take notice.
As Churchill called the six week period after GLD gold holdings, 12 months (metric tonnes)
Trump’s election win very well indeed, (big 1000
975
bonds rally, gold’s big drop etc) and he’s
950
seeing the same patterns begin to emerge 925
now, I’m paying attention to this. And also 900
please note that his missive went out on 875
850
Tuesday evening and the dollar-fuelled rates
825
rally only kick into full gear on Thursday, his
800
cautious but correct insight was well timed, 775
too. Evidence was indeed forthcoming. 750
Added to that, check out the GLD inventories
2
61/01/3 61/42/3 61/8/4 61/22/4 61/6/5 61/02/5 61/6/6 61/02/6 61/5/7 61/91/7 61/2/8 61/61/8 61/03/8 61/41/9 61/82/9 61/21/01 61/62/01 61/9/11 61/32/11 61/8/21 61/22/21 71/9/1 71/42/1 71/7/2 71/22/2 71/8/3
mt
source: SPDR GLD data

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holdings, which dropped over 15 metric tonnes on the week to close at 825.22mt (what’s more,
over half that drop came on Friday). Money left gold last week as it moved from safe haven
(gold) to safe haven that pays interest (US bonds of all stripes).
What does all this mean? It means that I’m more bearish about gold’s prospects than I was a
week ago, but that isn’t necessarily a bad thing (my poor prediction record and all that). The
trackers I’ve follow suggest gold is holding onto the U$1,200/oz line by its fingertips and if
there’s further Trump Rally bullishness and inflow into the US Dollar, gold will likely take a drop.
Not great, but I’m not going to set up my trades for a drop in gold price either as for me the
key word in the above is “if”. We’re in strange days at the moment and the confluence of
Trump, the PDAC week, copper’s bear attack that is apparently already unwinding (see Copper
Basket below) and the FOMC next week all meld into an uncertain scenario. In uncertain times
I’ll stick with a long gold position and won’t reverse any shareholdings either, all the while
acknowledging there’s rising risk in owning precious metals miners.
On the subject of failures
To print our poems, the propulsive cause
Is fame - the breath of popular applause
Fame Makes Us Forward, Robert Herrick, 1591-1674
The man himself, Brent Cook was kind enough to send over the screenshot of a comment left
by one of his and Joe Mazumdar’s Exploration Insights subscribers:
It is of course about the big move in Tinka Resources (TK.v) last week (see ‘Market Watching’
for more) and the way IKN was early on the story (if you argued ‘too early’ I’d readily agree).
Brent knew I’d appreciate the humour and the way it damns by faint praise (and though it’s
hardly the first time, a quick plug for Exploration Insights is due; it really is the single best
junior mining newsletter out there, a mile ahead of the field and worth every penny of the
subscription price). It also made me think about why I do this IKN Weekly thing, why I’ve spent
four hundred and eight weekends over the last eight years or so writing it up and publishing it.
• The money helps. Yes, of course I wouldn’t do this if it weren’t a financially beneficial
enterprise. Money is the way of keeping score, but it also does things like put food
inside my children and clothes outside them. If the opportunity cost of working this
newsletter were too high I wouldn’t do it, period.
• The intellectual challenge is the real reason, though. Though it can drive me crazy at
times and though the pressure of a deadline isn’t much fun on others, writing The IKN
Weekly keeps my brain working, brings structure, keeps me focused on a subject in
which I can make profitable investments, keeps me out of mischief, all the above and
more. It’s stimulating
• However the reason I don’t do it is for praise (or criticism) of stock picks. Ultimately,
the fundies analysis that goes on and coverage of the ‘Stocks to Follow’ picks are for
my benefit, not yours. Yup, it’s as blunt as that, the picks and recos have always been
3

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and will always be “what I am doing with my money”, not what you are doing with
yours. Now don’t get me wrong, I hope they’re of use to you (if not, why are you
here?) but there’s a distinct difference between the writer who looks to earn a
reputation as a stockpicker but with no skin in his or her game and the person who can
say “I’m doing this with mine” My reward isn’t the praise (faint or not) of ChicaMocha
or others, it’s green in my trading account and if I weren’t happy with the results of my
investment decisions, I’d be doing something else by now.
Back in the early 17th century Herrick made a great point and yes, the Weekly and the Blog do
indeed pander to the breath of popular applause, it’s fun to add to the conversation out there.
But the great thing about picking stocks like this over a long period is that it’s as capitalist a
profession as there possibly could be, you’re no good at it and you go out of business quickly.
For me, the key to the central part of The IKN Weekly, the investment decisions in junior
mining stocks, is having skin in the game and being able to judge your own results.
Fundamental Analysis of Mining Stocks
Today it’s part two of the re-start in Minera IRL Ltd (MIRL.cse) coverage.
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$0.18
Market Cap: C$41.6m
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 two of two
Due to the size and scope of re-starting coverage in Minera IRL (IRL), in IKN407 last weekend
we focused solely on the company’s flagship Ollachea project in the Puno region of southern
Peru. I tried to cover most aspects of where things stand today, what’s changed, where we can
expect the financing to come from, what we can expect from the project in the next couple of
years as (finally!) it moves to production, et cetera. Ollachea is the key to the whole company
and the reason why its stock is either a buy or a sell, without a workable plan in place there’s no
reason to own this company so the necessary time was spent on catching up and explaining.
4

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Today’s part two is a more classic NOBS format with a structure overview, with necessary
corporate numbers considered and a target price generated, things like that. But there are also
a few loose ends that need clearing up including some commentary on the news release out of
IRL on Friday evening, so let’s start there.
The Friday news release
Post-close last Friday March 10th IRL published a NR (1) with the title line, “COFIDE revokes
Loan Mandate with Minera IRL due to a shift in strategy” and as noted on the blog that evening
(2) the shouty word “revoke” didn’t look very pretty at all. But when we get to the contents of the
NR it really wasn’t that bad because the essence of the information is the same as we
discussed in IKN407 last week. There are reasons to explain the Cofide decision and indeed
they stand up to examination, as point 4 of this (3) Peru government press release dated March
9th explains the shift in policy and how the government will now use its quasi-state investment
bank, Cofide, in the promotion of small businesses by offering them credit on easy terms.
The implication from IRL is, therefore,”nothing to do with us”. Okay fair enough but the result is
the same, Cofide is withdrawing from the funding process and that, ladies and gentlemen, is
what we set out last week. What happens from now is the following:
• Cofide has now given IRL formal notice and at some point in April (I don’t know the
exact date) the Cofide exclusivity period lapses.
• At that point, IRL is free to pursue other avenues of financing for its Ollachea project (as
explained in IKN407 last week).
• However, until the exclusivity period is over IRL can’t say anything out in the open. This
explains the slightly cryptic comment from CEO Benavides in the Friday NR, “We are
confident of being able to obtain the necessary investment to develop Ollachea on
shareholder-friendly terms. We anticipate being able to bring news of further
developments to the market in the near future”. That’s as far as they’re allow to go at
this point, else risk legal issues with Cofide in Peru.
The company is restricted in what it can say, happily I am not and CEO Benavides can feel
confident whereas I am very confident that IRL will be able to secure a deal on shareholder
friendly terms. The company is in discussions with serious financial entities, will be allowed to
talk about them once the Cofide period has definitively finished and though “spoiled for choice”
would probably be too effusive, it certainly has more options than it needs. The one unknown in
the Cofide deal is the fate of the $70m bridge loan, but again, as laid out last week in IKN407,
that whole issue is political rather than strictly financial and the chances of Cofide playing
hardball, demanding on its loan and defaulting the company are vanishingly small (nobody
inside Cofide is about to commit career suicide). Zero worries there too, and of course there’s
every possibility that IRL raises the $70m needed to pay it off before the end of June anyway
(and we know it has the cash to cover the upcoming interest payment due on the loan).
Bottom line: The Cofide news last week was a material event and had to be disclosed by the
company. IRL also had a legal obligation to use that “revoke” word in the title, but the upshot of
the whole thing is a wash, it was anticipated news and doesn’t alter the 2017 plans of the
company one iota.
Management, share structure and listing updates
Moving on, next subject to cover is the company hierarchy, the updated share structure and
how to trade those shares.
As for management I’m not going to go into big detail about the crazy days of 2015 and 2016
again, the board spills and the fractious votes, because today ais what matters and at the
moment there are three directors at IRL, two of them are independents and one is the Director
and CEO, Diego Benavides. So it’s fair to say that CEO Benavides runs the company and is in
full control, but I’ve already noticed how he is respectful of the indy directors’ views and isn’t
running the place like a dictatorship, checks and balances are in place and are being used.
To shares and as seen in the topbox above, there are currently 231m and bits of shares
5

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outstanding. The plan to dilute that via an emission of up to 115m shares was voted down at the
last AGM (along with the schemers behind it) and the corporate laws governing IRL means that
it cannot emit shares in a placement without the express permission of its shareholders.
Alongside that there are 2m in options, but 1.1m of those are priced at GBP0.81 and with an
April 3rd 2017 expiry, so in real terms there are only 900k options outstanding IRL still owes
$2.19m to Rio Tinto as the last tranche of the option payment for Ollachea and, in theory at
least, that may be paid in shares rather than cash. As things stand today the $2.19m os booked
as part of the current financial debt at the company and the most likely resolution is that Rio
Tinto is paid off in cash when the financing deal for Ollachea is finalized, so at the moment I’m
not expecting a new big chunk of shares to be added to the pile.
Share structure bottom line: We’re at 232m shares out and that’s not going to change anytime
soon (or without shareholder permission). This is good.
Moving on to listings, I’ve had plenty of correspondence on this subject from fellow holders so
here’s the need-to-know:
1) The primary listing is now the Peru listing, at the Bolsa de Valores de Lima (BVL). It
happened this way because the unspeakable scoundrel Daryl Hodges and all the scumbags
who sailed with him put in a mountain legal barriers in Canada to stop a direct re-listing there (in
order to help along their plan of a forced sale of the company, they wanted to leave no options).
The BVL listing is set fair and after the initial surge of trading now trades lightly on a near-daily
basis. No problems.
2) The new listing is in Canada on the CSE exchange (MIRL.cse). This is a stepping-stone
move and IRL has every intention of listing on first the TSXV and eventually back to the TSX,
with the move to the TSXV planned for the second half of this year. I’m aware that some of you
have trouble in trading the CSE exchange via your preferred brokerage accounts and IRL is
aware of that, too. It was simply easier to start here and then move back to the TSXV later.
3) Now the news on the London listing. This is an important future event for IRL, as over half the
total share count of IRL is held in accounts via the London AIM exchange. I can confirm that IRL
has every intention of re-listing again on the AIM but for the listing to happen a couple of things
have to drop into place first.
• In order to list on the LSE (or LSE AIM), the company needs a Nominated Advisor,
usually known as a NOMAD. This is almost always a brokerage firm the works the LSE.
• In order for a NOMAD to be appointed, the brokerage has to complete its due diligence
on the company and be satisfied it is qualified to list.
• To cut a long story short, part of the qualification for a mining company such as IRL in
its position today is that a) it has a project of value and b) it has the financial
wherewithal to move it forward.
• In IRL’s case it has the project, but until the upcoming financing deal is complete, it
won’t be able to satisfy a potential NOMAD under the rules of the LSE.
Therefore, the re-listing on the London AIM is another part of the chain of events we can expect
in 2017. In the same way there are informal proposals for financing on the table, there’s also an
informal agreement with a potential NOMAD in place, but until the Cofide exclusivity period
lapses, there can be no formal finance deal. And until there’s a formal financing deal, IRL can’t
start the NOMAD due diligence process. So...
Cofide deal lapses(cid:1)(cid:1)(cid:1)(cid:1) IRL gets financing package for Ollachea(cid:1)(cid:1)(cid:1)(cid:1) IRL gets
NOMAD on board -> NOMAD gives green light (cid:1)(cid:1)(cid:1)(cid:1) IRL relists in London.
As for how long that will take, it’s impossible to give a fixed date because moving parts are out
of the company’s hands but a reasonable expectation is late 3q17 or some time in 4q17. That
sounds about right to me and it means that IRL should get on the TSXV and the LSE at roughly
the same time.
That’s enough background and semi-loose ends, let’s do some numbers.
6

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Financials overview
We could indeed go into every nook and cranny of the IRL financials (happy to say they’re all
filed now and the spreadsheet is up to date), but as things stands today the honest truth is that
there’s not that much in the way of useful deep dive analysis to do. IRL finds itself at a
crossroads and its financial future is all about closing the financing deal for Ollachea, its recent
filings don’t reflect that and can’t help much when it comes to a future valuation or target price.
However, there are a couple of aspects of IRL that
the numbers can shed light upon and by using the
filings to the latest quarter (3q16) without any future
projections we can see what’s happened to the
company recently and get a feel for what it needs to
do as well as the help that its operating (though small
and potentially limited future lifespan) Corihuarmi
mine can do for the overall picture. Let’s start with the
output at the small mine and this chart shows the
story. For what it’s worth, we don’t know the sales
figure for 4q16 yet but we do know the production
number of 6,241 oz because that’s filed onto the
Ministry of Mining website (4), but the overall picture is of a mine that runs at an average of just
under 2,000 oz per month.
This is nobody’s idea of a company-maker, but it’s useful cash flow and as this chart compares
Corihuarmi revenues against its on-site mine costs, under normal circumstances it would be
able to cover office G&A and keep IRL on a financial even keel while we wait for Ollachea to
come together. In fact that was always the company strategy and Courtney Chamberlain (RIP)
and I would often discuss this angle.
IRL: Revenues vs COGS
10
9
8 7.434 7.669 7.839
7.126
7 6.609 6.744
6 5.247 5.99 5.872 5.628 5.362 5.147 5.616
5 4.192
4
3
2
1
0
7
51q1 51q2 51q3 51q4 61q1 61q2 61q3
IRL: Corihuarmi gold sales, per qtr
8000
6987
6 7 0 0 0 0 0 0 6166 5453 6205 5411 5632 5635 5870 6241
5000
4000
3000
2000
1000
0
$m
Revenue
COGS
source: company filings/IKN ests
The problem, or one of them at least, is that
in the near two years of the
Hodges/Pinto/O´Kelly period of boardroom
mayhem, admin costs went crazy. The
combo of normal office G&A, outsized
remunerations to directors who did precious
little for the company (and often nothing) and
non-stop lawyers’ fees (mostly for Daryl
Hodges’ friends at Fasken) shot running
expenses for Minera IRL through the roof for
this size of company and to give some
context for the numbers you see on the right,
this next chart breaks down admin per ounce
of gold sold.
41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 tse61q4
Oz Au
source: IRL data, MEM data
IRL: Admin costs per qtr
$m
4
3.517
3.5
3
2.447 2.5 2.182
2 1.813
1.531
1.5 1.367 1.186
1
0.5
0
1q15 2q15 3q15 4q15 1q16 2q16 3q16
source: company filings

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IRL Corihuarmi: Admin costs/Oz Au sold, per qtr
U$/oz Au
600
550
500
450
400
350
300
250 503
200 394 372
1 1 0 5 0 0 251 283 211 322
50
0
1q15 2q15 3q15 4q15 1q16 2q16 3q16
source: IRL data, IKN calcs
To be clear, I’m the anal yst who gets puzzled if that number moves above U$100/oz, and will
complain loudly at a normal company if it reaches $200/oz. Here at IRL, the lowest has been
$211/oz! This is stupidly expensive, it removed any chance of IRL breaking even operationally
while Ollachea remained on hold, all-too evident if we add together the Corihuarmi mine
operating costs and that admin number on a per ounce basis.
IRL Corihuarmi: COGS and Admin costs per
U$/oz Au ounce gold sold, per qtr
1600 Admin/oz
1400 COGS/oz
1200
1000
800
600
400
200
0
1q15 2q15 3q15 4q15 1q16 2q16 3q16
source: IRL data, IKN calcs
As the costs there come before we deduct for financial expenses (and just the Cofide bridge
loan on its own costs IRL $2.2m per quarter), then niceties such as tax, it’s enough evidence to
understand just why the company cash position has done this over the last four reported
quarters:
IRL: Cash treasury per qtr
20
18
16
14
12
10
8 15.58
6 11.198
4 8.474
5.353
2
0
4q15 1q16 2q16 3q16
source: company filings
8
srallod
fo
snoillim
There is at least some good news on this aspect of IRL now. I’ve spoken with CEO Benavides
on this subject and not only has admin burn dropped considerably since he took over at the end
of the year, but he tells me that IRL has enough to cover its interest payments to Cofide on that
bridge loan due between now and end June. But that drop, over $10m in just four quarters for a
company with a free cash flow positive gold mine that’s admittedly small but runs on rails with a
predictable costs schedule, gives you an idea of how this corporate structure was nearly bled
dry by the utter pieces of excrement in charge who pretended all the time to be acting in the
best interests of their shareholders. I again find myself spitting feathers this weekend.

,
To round off, a quick look at the three main balance sheet charts starting with these two, asset
to the left and liabilities to the right:
The good news: Overall assets are still higher than overall liabilities, this company runs a book
value of just over $75.5m and if you do the math, that works out at a little over CAD$0.40 per
share, which reflects well on the current 18c share price in value terms but a P/BV of under
0.5X also means this is one dysfunctional company (ah, but we knew that already).
The bad news: Nearly all the asset value is locked up in the fixed assets column. And when you
look at the way most of the liabilities are current, it means that at face value there’s a liquidity
problem here. Cue the working cap chart:
IRL: Working Capital per qtr
10
0
-10
-20
-30
-40
-50
-60
-70
-80
-90
4q15 1q16 2q16 3q16
source company filings
9
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fo
snoillim
IRL: Liabilities Breakdown per qtr
100
90
80
70
60
50
40
30
20
10
0
4q15 1q16 2q16 3q16
source: company filings
Ugh. That looks plainly horrible at first sight and I wouldn’t blame any investor from recoiling and
running away if that were the only thing they knew about Minera IRL. But we here know that the
near-$70m working cap deficit is due to the Cofide bridge loan with that June due date. And we
also know that it’s not going to be a problem and this company isn’t going to suddenly run out of
cash and fall to bits. So yes, an ugly chart but as noted at the top of this financials overview it’s
a temporary situation as IRL comes out of its period of turmoil and gets its act together. When
we revisit these chart at the end of 2017 they’ll look a lot healthier.
And that’s as far as I’m going with the financials review. We can sum up by saying:
• Even through all the FY15 and FY16 upsets and even after the scummy directors tried
to con you all and close in down (using over inflated closure costs, guess where the
excess cash would have gone?), Corihuarmi is a nice profitable operation. Yes it’s small
but the cast is useful and I’m also now told it should run to at least 2019. Bonus.
• Corihuarmi under normal circumstances generates enough cash to cover IRL running
costs and would do while Ollachea gets into gear, but the last two years have seen the
company sucked close to dry (by idiots and white-collar thieves).
• Today’s balance sheet makes it clear that without a financing deal of Ollachea, IRL is in
trouble.
• However, we can be confident that IRL will and be able to restructure on shareholder-
friendly terms, so the current state of uncertainty should be short-lived.
• Once on an even financial keel, we should see that Price/Book ratio move back to
srallod
fo
snoillim
20 $ 0 m IRL: Assets f o i t x h e e d r current
cash 180
160
140
120
LT debt
100 current debt
80
60
40
20
0
4q15 1q16 2q16 3q16
source: IRL filings

,
where it reflects a healthier company, at 1.0X or more.
Now it’s time to put the moving parts from last week and this week together into a financial
model for Minera IRL and come up with a target price for the stock.
Valuing Minera IRL
To say I’ve been playing around with the numbers on this model over the last couple of weeks is
an understatement. There are all sorts of ways to cut and dice this model, easy to pitch low but
even easier for somebody like me, openly admitting a bias potential regarding Minera IRL (see
IKN407 part one intro), to pitch too high and get too optimistic and pumpy.
I’ve tried hard to avoid that, ladies and gentlemen. The black art of target generation this time
has been about trying to find a reasonable, path-of-least-resistance. It’s absolutely necessary to
take into account the elevated risk of an investment in Minera IRL today, because for one thing
it’s been a train wreck for two years and cannot demand trust from those who don’t know the
story, it needs to earn that trust. For another, there are still significant hurdles left to overcome,
not least the closure of the financing deal. Therefore by necessity this is a VERY conservatively
pitched model that allows plenty of wriggle room, but the other side of the coin is there too, I
hope to also demonstrate the type of upside potential that the Ollachea mine can unlock for the
company (and be clear, if IRL delivers on its promises what you see below is only the start, it
could go a lot higher than this).
This is a model that will get plenty of refinement in the months to come as more information
comes to light and the path to Ollachea production firms up. That means this first pass makes
several sweeping, ballpark assumptions that could turn out to be wrong, but by pitching them
conservatively if I’m wrong I’m likely wrong to the downside. There are four main assumptions:
1) Corihuarmi is valued at zero. This is the super-conservative route, because I’m pretty sure
the modest positive cash flow from the mine will be very useful and will keep admin burn at net
neutral from now on, it may even contribute to construction costs in a minor way. But overall I’m
going to ignore Corihuarmi, as IRL will sink or swim on Ollachea alone and among other items it
means I model that Ollachea pays all of Ollachea’s G&A, for example.
2) We use the new mine plan capex and production estimates for Ollachea as laid out in
IKN407 last week. The re-worked plan for Ollachea is new, it assumes lower capex, higher
grade and all sorts of other things and I’m not going to repeat it all here, but these two charts
will be a reminder.
IRL Ollachea: Gold ounces production per year
120000
100000
80000
60000
40000
20000
0
3) Minera IRL closes a $170m financing package in the near future which covers all costs
and allows it to pay back Cofide. This is the simplified method, we may see the Cofide $70m
bridge loan simply rolled over and kept on the books as-is, we may see the cash raised
piecemeal, we may eventually see an equity raise that pays down some of the loan. But simple
is necessary at this point and along with that, I assume the eventual total payback of the $170m
loan is $220m to all parties involved, interest expenses and all that. Yes it’s ballpark, but you
have to start somewhere.
10
9102 0202 1202 2202 3202 4202 5202 6202 7202 8202 9202 0302 1302
Oz Au IRL Ollachea: Cost Profile (USm)
50
40
30
20
10
0
source: IKN ests
9102 0202 1202 2202 3202 4202 5202 6202 7202 8202 9202 0302 1302
U$m
dev costs
op costs
source: IKN ests

,
4) We model IRL on its first year of full production at 1,500tpd and my oh my, how I’ve
struggled to reach a balance on this item. I’ve tried all sort of methods, some far more
complicated than others, but in the end and again, for the sake of ballpark-first-pass necessary
simplicity (that can and will become more sophisticated later) I’m going this route. To offset
valuing IRL on production perhaps four years into the future, the price multiple is dropped way
down to 4X EPS. And by the way, that’s a clue as to the type of potential upside to the share
price if all goes well, stick a more normal 8X or 10X there when Ollachea is running and
showing the world what it can do and see what happens to the share price.
Those are the four main parameters but beside those, there are plenty of assumptions to make
about the mine and its ops. Here’s a list of the main ones I’ve plugged into the model, some of
which are repeated from above and given a little more detail:
• The mine runs at 1,500tpd, head grade is 6 g/t, recovery rates at 91%, mine dilution
15%. All those are reasonable and gettable and there’s room from improvement too
(e.g. recoveries of 94% are in reach). In our model year production is slated at around
96,000 oz gold.
• Operating Cash Costs are pinned at U$450/oz. If you think that’s low, let it be known
that IRL (along with technical advisor Mining Plus) expect that cost input at around
U$350/oz. I’m adding a blanket $100 just to play it safer, but I will say that there’s good
reason for them to pitch as low as they’ve done, we went over the numbers carefully
and however quizzed them they had an answer.
• Depreciation at $11m per annum. If (as suspected and expected) the gold resource
gets bigger once the new Minapampa East location gets folded into the 43-101
compliant we already know about, this depreciation will drop on an annual basis as
mine life improves. We go conservative.
• G&A at $4m per annum, which might be $4m too much if Corihuarmi helps out but it’s
pitching to the safe side as always.
• Shares outstanding at 300m on production day one. Although IRL plans to raise all
capex via the financing package it’s currently putting together, at some point when the
plan is in motion and the share price higher I’d expect it to go to market and run a
placement in order to improve its cash position and perhaps pay down some of the
debt. There’s no real way of knowing these things, but how about a guess of 68m
shares sold at 30c apiece to raise CAD$20m early in 2018. Whatever it is, pitching the
share count higher than today’s is another conservative measure in the model.
• The 5% Ollachea town/community participation in the mine modelled a $1m per
annum. This, ladies and gentlemen, is a ballpark guess, but to be fair on myself it’s the
type of number that IRL people are playing with, too.
• Financial interest at $7m per annum. I’ve assumed IRL pays an eventual $50m on
the $170m financing package and split it down into years of mine life, as simple as that.
As you can probably guess, there are literally hundreds of ways I can be wrong here but
the $7m number shouldn’t be too far away on a mine life average level.
• Corporate tax set at zero %. This last one is interesting, as after discussions with the
team it’s clear that Ollachea would receive significant tax breaks on its capex outlay in
the first years of mine life. This is a major boost to the financials, if you like you can
envisage IRL able to pay back the loan from money that would otherwise have gone to
the national coffers.
• Worker participation at 8% (Peru law), government royalties at 2.5%, no other NSRs as
the capex should include the money needed to buy back outstanding royalties, Forex
U$1 = CAD$0.75 = PEN3.30 (all proxies to current forex rates), other small things.
11

,
And as is our normal wont, we than take the parameters and assumptions, throw them into
Excel, then apply four different gold prices to the results. Today’s model uses a low ball
U$1,000/oz assumption to see if the Ollachea mine still works under financial stress, then a
baseline U$1,100/oz which should allow investor returns, not just a mine that stays open, then
the most reasonable U$1,200/oz number that reflects today’s market, then a blue sky
U$1,400/oz gold price to demonstrate the potential of Ollachea in a rising gold price
environment (which, by the way, I fully expect by the time this mine hits production day one).
IRL at Ollachea: Model Year Income statement items (in U$m)
price model U$1,000 U$1,100 U$1,200 U$1,400
Sales (U$m) 96.1 105.7 115.3 134.6
COGS 43.3 43.3 43.3 43.3
Depreciation 11.0 11.0 11.0 11.0
SGA 4.0 4.0 4.0 4.0
Community 0.9 1.0 1.0 1.2
Op income 25.0 33.3 41.6 58.3
Interest 7.0 7.0 7.0 7.0
Workers Part. 1.4 2.1 2.8 4.1
Tax 0.0 0.0 0.0 0.0
Net income 16.5 24.2 31.9 47.2
Shares out 300 300 300 300
EPS 0.06 0.08 0.11 0.16
Sust. Capex 15 15 15 15
FCF 0.14 0.17 0.19 0.24
Sources: IRL data, IKN estimates
The beauty of Ollachea under its new mine plan (which is still on the drawing board of course,
but it’s looking good and is clearly workable) is that the mine becomes a higher grading low
cash cost operation. The key here isn’t to look straight at the Net Income line (e.g. U$31.9m at
U$1,200/oz gold) but the operating income because right there, even when assuming a
conservative U$11m in depreciation that would mostly be non-cash, it throws off over U$40m in
operating profits.
On production day one Minera IRL will be an indebted company, with U$170m in principal to
pay down as well as interest charges. The above table indicates it will be able to be zero debt in
less than five years and if we assume mine life is going to stretch further than the perhaps
eight on the current 43-101 reserve/resource, that means a lot of payola years. Ultimately it’s
the cash generating potential of Ollachea that will attract the financiers and this is why I much
prefer the new mine plan, lower capex, lower initial throughput, higher grade, better margins.
It’s also why IRL has seen renewed interest from many places to finance the gig, they smell
profits to be had (and quite rightly, too).
Therefore, using the U$1,200/oz gold price average assumption and the previously mentioned
4X price multiple, here’s the valuation box:
Sales and earnings Target price & valuation data for IRL based on
$1,000 $1,100 $1,200 $1,400 U$1,200/oz gold
Sales (U$m) 87 95 104 121 12-month target $0.53 based on 4x EPS
Sales growth 10% 9% 17% Upside to target 195% at eventual full capacity
EPS 0.06 0.08 0.11 0.16 Mkt cap (CAD$m) $42 Enterprise value $109
FCF 0.14 0.17 0.19 0.24 P/sales ($1,000) 0.40 EV/sales ($1,000) 1.14
P/E ($1,000) 3.3 EV/EBITDA ($1,000) 3.0
P/E ($1,100) 2.2 EV/EBITDA ($1,100) 2.5
P/E ($1,200) 1.7 EV/EBITDA ($1,200) 2.1
12

,
The only query I have about the above, a 53c price target in Canadian Dollars for the MIRL.cse
stock, is the 12 month timescale which might turn out to be six months too sharp. I’m leaving it
at 12 months because that’s my preferred standard timescale and as this is a ballpark estimate
with many generalized assumptions, it’s the one I’ve plumped for today. However I readily
admit IRL may need to get closer to production day one to reach the target.
Discussion and conclusion
I haven’t tried to cover over the risks involved with ownership of Minera IRL, most of you
reading this anal ysis today will know about its shambles years of 2015 and 2016 and we still
need to see it do some pretty basic things, such as close a financing deal and build a mine,
before it truly bears fruits. But with risk comes reward and even by assuming a whole bunch of
lowball parameters, the potential for stock price appreciation here is compelling. If IRL gets the
next couple of months right, gets the cash it needs and starts the real job of building Ollachea
all on the shareholder-friendly terms promised by its new and very capable CEO Benavides,
today’s 18c price will be left for dust.
However and as you’re almost certainly aware, even though I’d encourage others to consider
the spec flip side of this stock I’m not in IRL as a trade, this is my idea of a longer-term
investment that I intend to hold through for years. For good or bad (and I’m really not sure
which is the right answer there) I have more than just financial capital in this stock and I’m not
ashamed to admit it. That IRL could take the tremendous pummelling it got from the white
collar criminals that tried to strip its assets away from its true owners was quite remarkable and
even though my role in that was small, I have a vested emotional interest in seeing this trade
through and watching IRL succeed.
The IKN Weekly re-starts coverage on Minera IRL Ltd (MIRL.cse) and sets an initial 12 month
share price target of 53c on the stock, representing a 195% upside to this weekend’s price,
because it’s not just emotional attachment after all, there’s more than enough potential reward
to offset the risk here and if IRL delivers it will become a creator of wealth for all its
stakeholders.
End of Report Part Two
Stocks to Follow
It could have been a lot worse, but the Friday relief rally came to shore up the week’s numbers
in our Stocks to Follow list. Of our 15 open positions, only three returned gains over PDAC week
(TK.v, ERC.v, LRA.v) but as one of those was Tinka Resources (TK.v up an impressive 57.6%)
and of the two unchanged stocks one was biggest position B2Gold (the other RPM.v), I
somehow managed to finish with more cash in absolute terms in the portfolio than this time last
week. Yes there were a full ten losers (REG.v, SAND, CDB.v, ATY.v, EXN.to, MIRL.cse, R.to,
SAM.to, RRI.v, BSX.to) but of that little lot, only two broke the double figure percentage loss
barrier (SAM.to down 11.1%, REG.v down 11.0%), the others ended inside recent trading
ranges. As I also managed to snag some bargain shares in both Red Eagle and Sandstorm (see
below) so overall I’d guess my PDAC week of numbers was better than most. A good thing.
We currently have 15 open positions on the ‘Stocks to Follow’ list, our self-imposed maximum
number at any given time but that’s due to drop next week as we wave goodbye to the very-
near-term trade in Belo Sun. Nine of the positions are in the green 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$1.45 126.6% LT exploreco top pick
Long positions (in current order of preference)
Sandstorm Gold SAND STR buy U$3.87 17-apr-16 U$4.15 7.2% $7 tgt, added March'17
Cordoba Min. CDB.v STR buy C$0.73 15-sep-16 C$1.18 61.6% $1.50 tgt hit, buyable again
Atico Mining ATY.v buy C$0.54 24-jul-16 C$0.75 38.9% tgt $1.10, Cu play
Tinka Res TK.v buy C$0.195 19-apr-16 C$0.52 166.7% Under-radar Zn. Moved at last
Excellon Res EXN.to STR buy C$1.71 09-oct-16 C$1.57 -8.2% $3.13 tgt, Ag growth story
Minera IRL MIRL.cse buy C$0.195 22-jul-12 C$0.18 -7.7% tgt 53c, risk + much reward
Red Eagle Min. R.to STR buy C$0.72 13-dec-16 C$0.76 5.6% Ramping up, great March buy
Starcore Intl SAM.to hold C$0.61 10-jan-15 C$0.48 -21.3% ex-Top Pick, reduced, holding
Rye Patch Gold RPM.v hold C$0.31 02-sep-16 C$0.30 -3.2% 75c tgt IKN400, doubts arising
Eros Res ERC.v spec buy C$0.18 01-mar-17 C$0.19 5.6% New position, deep value
Riverside Res RRI.v sell at 60c C$0.39 27-jun-16 C$0.50 28.2% Will take profits at 60c tgt
Belo Sun BSX.to SELLING C$0.90 30-jan-17 C$0.83 -7.8% Time to go, no matter what
Lara Expl. LRA.v hold C$1.15 08-apr-12 C$1.05 -8.7% 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:
Red Eagle Mining (R.to): Position added. As per the Flash update of last week (see
appendix 1) I added to my position in R.to. When the Flash update went out R.to was a 73c
stock, in the end I paid 75c and could have
got cheaper if I’d been either less or more
patient. Ho hum, so be it and as a result
my cost average clicked up a penny to 72c.
In other and positive news, word reaches
this desk that the run to commercial
production status at San Ramón is going
well, this fact countering another round of
negative false rumours that were doing the
rounds last week. If you recall, the R.to
objective is to declare commercial
production once a full month of 750tpd
throughput is completed, no down days in
between. The company prepared for the
run at the big number in February and started the ramping March 1st and for the first eight days
(which is as far as my intel carries me) R.to has indeed hit that 750tpd number, with better
than expected average head grades too. Assuming this carries on, we should get that all-
important declaration either in the last days of this month or the first week of April. I’m
assuming it happens and that’s why I am not only long, but now longer R.to. However I’m also
clear that there’s plenty riding on this month and that eventual declaration and if it doesn’t
come on time, the negative whispers will become full-blown shouting and the stock price is
14

,
likely to take a hit. That’s your next three weeks of risk/reward balance in Red Eagle, faites vos
jeux mesdames et messieurs.
Sandstorm Gold (SAND): Position added. Also featured in the Flash update of last week, I
didn’t get all I wanted because I
used the same strategy as the
other week, some at under 4 and
then more at a U$3.90 bid which
didn’t fill. However that trade
potential is still open so let’s see
what happens in the next five
days, as i would only take the
gold price to drop by ten dollars
or so to see the hotter money run
for the hills. I’ll be fishing again at
U$3.90 this week. In the
meantime, my cost average has
notched up just a tiny bit due to
the ones I snagged last Thursday
and they saw payola almost
immediately, as SAND really got
the wind in its sails in the Friday
relief rally and closed just five cents down on the week.
Not bad for a company run by a CEO with no technical ability, eh Randy?
Belo Sun (BSX.to): Selling this week, no matter what. This is a case of me being strict
with myself. Yes I could wait a while longer and see if bid come back for BSX. Additionally, the
180 day moratorium slapped on development of Volta Grande by a Brazilian judge is more bark
than bite and misunderstood by the market up there, it’s really not that much of a biggie even
though it managed to whack the stock price by 20% or so and turn my positive trade into a
negative.
However, this has always been a very-near-term trade idea and after giving myself one extra
week, I must now draw the line and stay true to the parameters for portfolio management
reasons. Changing the rules as you go along makes for sloppy portfolio management, I’m not
one of those people who ends up with 76 long positions in juniors and can’t remember why I
bought half of them in the first place. Therefore I will sell my BSX at some point in the next five
trading days, not matter whether win/lose/draw and it will no longer be on the ‘Stocks to
Follow’ open list in IKN409 next weekend.
Riverside Resources (RRI.v): Still selling at 60c, just to state for the record that the
position hasn’t changed¿, even though the price is now at 50 rather than 60.
B2Gold (BTG) (BTO.to): If you can keep your
head while all around are losing theirs, you have
B2Gold as your Top Pick. Not only did B2 finish
unchanged on a down week for the sector, but the
buzz picked up from several disparate contacts
who were at PDAC and have been kind enough to
share their views, was unanimous about B2Gold;
this one is in great shape. More than one of them
also noted The Clive was in excellent form and
very confident about the way 2017 is shaping up.
15

,
Your own personal portfolio probably has its own stocks up 100% or more over the last 12
months. You might even have your own Top Pick and/or biggest position up more than mine.
That’s fine by me.
As for news, that’s about to come in the shape of BTO’s 4q16 and year-end financials, and by
way of a reminder, here’s the dates, times and contact info as per the company NR (5):
B2Gold Corp. will release its fourth quarter and year end 2016 results before the North American
markets open on March 16, 2017.
B2Gold executives will host a conference call to discuss the results on Thursday March 16, 2017
at 10:00 am PST/1:00 pm EST. You may access the call by dialing the operator at 416-406-0743
or toll free at 800-806-5484 prior to the scheduled start time or, you may listen to the call via
webcast by clicking http://www.investorcalendar.com/IC/CEPage.asp?ID=175618. A playback
version of the call will be available for one week after the call at 905-694-9451 or toll free at 800-
408-3053 (pass code: 7435166).
March 16th is this Thursday, be there or be square and expect anal ysis and views on the one I
most want you all to own next weekend in IKN409
Eros Resources (ERC.v): A reasonable week for our brand new position, with a weekly gain
that bucked the market trend and a couple of days of 10k+ volume too, a welcome change for
this thinly traded ticker (so far at least).
We went over the backbone of strong asset value that ERC brings to the table last week and
that’s still true today so there’s no need to go over the whole thing again (let’s see how its 4q16
numbers plus subsequents come out before doing a nitty gritty, but seeing all sides is also
important so I’d like to highlight what could be a weak point in the armour of ERC, that being
Skeena (SKE.v). Two reasons for that:
1) SKE.v is the main third party share asset holding at ERC, with (to our latest knowledge)
48.69m shares worth C$3.16m...that’s around 30% of the whole asset book value. This
means that share price fluctuations in SKE are a significant influence on the net value
of ERC and as SKE dropped a full penny last week, from 7.5c to 6.5c, that move alone
took nearly C$0.5m off the asset value total for ERC (or nearly 1.2c/share). Of course
that works the other way too and if SKE starts picking up steam, ERC’s net value
benefits nicely. Since I’ve been watching SKE has managed to reach 9c and if that SNIP
property starts impressing people outside the company as well as inside, there’s more
upside to come for our preferred vehicle ERC.
2) The other potential weakness is that ERC’s SKE position is unlikely to be liquidated. ERC
is in real terms a closely related company to SKE, with Ron Netolitzky the obvious
common denominator but other directors in common, too. That implies it’s really more
of a fixed asset, not one that is going to be changed ito cash anytime soon.
Of course this might not be a problem at all and the ERC position in SKE might turn out to be
its biggest and best thing ever. But there’s quite a bit resting on that share holding and we can
also note that due to the rise in ERC.v last week, plus the drop in SKE, the 38.5% arbitrage to
“fair value” on ERC.v shares has dropped to 24.7%.
Minera IRL (MIRL.cse): All you can eat on MIRL fundies in today’s main NOBS report part
two. Here we throw over a quick note on trading and MIRL.cse stayed in a fairly tight range last
week, with bidders forming a queue at 16.5c and sellers at 18c. When the music stopped on
Friday evening the price was at the top of that range, so be it.
I’ve had some exchanges with a couple of MIRL shareholders this weekend who both expressed
the opinion that the Friday NR (as featured on the blog (6) may cause weakness in the stock
price next week. I doubt it, the news isn’t really that big or negative despite that “revoke” word
in the title line, but if it does get hit I’m going to be newsletter cliché and pathetic on you; Yes,
it would indeed be an excellent buying opportunity.
16

,
Atico Mining (ATY.v): As Hell’s Bells this got cheap! Hey, I’m the one who added in the low
80s the week before last and thought I’d got the bargain, ATY managed to drop to 71c during
the big copper sell-off before buyers showed up and got the week’s close to 75c (and kudos to
subber NA, who got some 71c and 72c shares. Those will pay off very nicely, sir).
We still have a month or so to wait before we
get the 4q16 and year-end financials from Atico
(I’m kind of expecting Wednesday April 12th for
that, we’ll see) and my call on those numbers
to come is already well-documented: I expect
ATY to announce a blowout quarter and put all
minds at rest about its financial position, plus
we’ll get better profits from the higher copper
prices in 1q17 and probably beyond. Copper’s
drop last week saw across-the-board selling in
copper mining names, there were precious few
exceptions and ATY was certainly hit as hard as
anything else out there. This is now a plain
straight bargain price, anything under 80c is a
great trade so take the month to position yourself for that strong financial result to come.
Rye Patch Gold (RPM.v): Fortunately, RPM rallied well in the Friday sectorwide relief rally
and managed to close unchanged on the week at 30c, because for a while back there it wasn’t
looking good at all, having dumped to 27c on both Monday and Thursday.
The latest from RPM is that it’s still waiting on
that cyanide use permit that will allow it to
process the pregnant solution and get a first
pour. The company is now slating the first week
in April for first pour which, to my reckoning,
puts it four months behind its original schedule
and adds yet another month to the last time they
updated their 2017 timeline.
I’ve had more mail exchanges on this stock than
any other this week (yes, including Tinka),
industry people and shareholders alike. As a
couple of them know (Friday afternoon mailers,
hi guys you know who you are) I’m really not far away from pulling the plug on this trade,
selling and taking a small loss if necessary. As at this weekend my personal jury is out, but
don’t be surprised if that call comes. I’m leery here, a ramp to production is allowed to have
teething problems (they all have them) but Florida Canyon under RPM is starting to have too
many and the explanations that come aren’t totally convincing, either.
Therefore you get the same wrap up as last week: Holding. For the moment.
Regulus Resources (REG.v) and Cordoba Minerals (CDB.v): Both got caught up in the
copper sector selling, neither of these stocks are causing me an ounce of worry. In fact, those
of you who didn’t get in the first time and are looking for that entry point into CDB, this sub-
$1.20 looks about as good as you’re going to get.
Tinka Resources (TK.v): Yup, this one had a good week ☺. A gangbusters NR on Monday, a
significant new recommendation from another newsletter, fantastic volume and a price rise of
57.6% on the week, Tinka was the star of PDAC. Rather than take up too much room here, the
longer note on TK.v is below in ‘Market Watching’.
17

,
The Copper Basket
After ten weeks of 2017, The Copper Basket shows a 10.12% gain to level stakes.
company ticker price 1/1/17 Shares out Market Cap current pps gain/loss%
1 Imperial Metals III.to 6.06 93.587 540.93 5.78 -4.6%
2 Capstone Min. CS.to 1.26 382.04 515.75 1.35 7.1%
3 NGEx Resources NGQ.to 1.20 205.06 248.12 1.21 0.8%
4 Western Copper WRN.to 1.86 94.19 160.12 1.70 -8.6%
5 Excelsior Min. MIN.to 0.63 167.364 137.24 0.82 30.2%
6 Copper Mtn CMMC.to 0.94 118.8 121.18 1.02 8.5%
7 Amerigo Res ARG.to 0.345 173.61 105.90 0.61 76.8%
8 Cordoba Min. CDB.v 0.73 88.6 104.55 1.18 61.6%
9 Regulus Res. REG.v 1.20 68.368 99.13 1.45 20.8%
10 Coro Mining COP.to 0.15 483.425 77.35 0.16 20.0%
11 Atico Mining ATY.v 0.95 97.59 73.19 0.75 -21.1%
12 Trilogy Metals TMQ.to 0.66 104.33 63.64 0.61 -7.6%
13 Copper Fox CUU.v 0.125 417.64 62.65 0.15 32.0%
14 Nevada Copper NCU.to 0.77 80.5 55.55 0.69 -10.4%
15 Revelo Res. RVL.v 0.070 128.486 6.42 0.05 -28.6%
NB: All stocks priced in CAD$ Portfolio avg 10.12%
The Copper Basket dumped by a massive 13.4% last week, the true centre of “the Curse of
PDAC”. The carnage was spread all across the
components of our list with just one name, Coro The Copper Basket 2017, weekly evolution
Mining (COP.to) escaping unchanged. The other
30%
14 stocks dropped so not listing them, just the 25%
big droppers and there were several of those. 20%
15%
The worst loser was Amerigo Resources (ARG.to
10%
down 23.8%), closely followed by Capstone
5%
Mining (CS.to down 21.1%), Revelo Resources
0%
(RVL.v down 16.7%), Copper Mountain
(CMMC.to down 13.6%), Western Copper &
Gold (WRN.to down 11.9%), Regulus Resources
(REG.v down 11.0%), Imperial (III.to down
9.7%), Atico Mining (ATY.v down 9.6%) and
Copper Fox (CUU.v down 9.1%). Heavy stuff.
The ostensible reason for this waterfall drop is
easy to find, copper prices took a big lurch
downwards last week. Here’s the five day futures
chart that saw the contract start at $2.69/lb for
the week and drop as low as $2.56/lb on
Thursday morning (-4.8% in just four days)
before staging a bit of a recovery to get to a
$2.60/lb close.
As for the reason behind the price drop, it’s the
reason this publication cares so much about
inventory data and tracks what’s happening in
the world’s copper warehouses on a weekly
basis. A lot of the time it’s a background dataset
but every so often copper inventories come to
the fore and set the market tone. That happened
last week when almost out of the blue, nearly
18
ts1naJ ht8naj ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5 ht21
source: IKN calcs

,
130,000 tonnes of copper inventory was sent to LME warehouses, mostly in Asia. Unsurprisingly
Andy Home of Reuters dedicated his weekly base metals column in Reuters to the event and
called it “A reality check” for copper bulls (7). He goes on to cover the blow-by-blow of what
happens but stops short of speculating on the cause behind it, even though its prime suspect is
fairly obvious:
• The copper was dumped on Asia-based warehouses
• There are very places in the world capable of conjuring up 130,000 tonnes of copper in
a trice.
• We’re in a rising price environment for copper due to perceived supply problems
• End user countries would very much prefer to pay low prices for copper, not high
prices.
In short, the bear attack was almost certainly made in China. The assumption of a hidden
stockpile (probably State-owned) is common to the point of accepted knowledge and using
some of that strategic stockpile of finished copper to drive down prices so that smelters and
refiners can get cheaper concentrate imports (and keep those smelters running) makes sense
(we know concentrate supply is tight because TC/RC charges have dropped to four year lows
(8).
The bear attack caught the market by surprise, but as around 40k of the 130k that landed on
LME last week has apparently already been earmarked for delivery (see the Andy Home piece),
it may turn out to be a short-lived effect. What’s for certain is that there will be a lot of market
eyes on LMA (and SHFE) inventory figures next week and they may set the tone for a copper
sector stock price rally.
Now for the regular weekly copper warehouse inventory bullets, giving the solid numbers
behind the text above:
• Total world stocks shot higher, up an impressive 147,366 metric tonnes (mt) (+23.6%)
to finish Friday at 625,266mt total. This was no ordinary week in the copper market as
the details below will show.
• SHFE Shanghai stocks rose by 12,859mt (+4.1%) to close at 326,732mt. That’s what
we expect in the China re-stocking period and once again indicates that the supposed
supply shortfall from the various copper mine strikes around the world haven’t made
much of a dent in the world’s biggest end user of the metal.
• Meanwhile over at the LME, all hell broke loose. At a time of year when we normally
have an arbitrage play that sees LME stocks dwindle while SHFE stocks rise, the LME
suddenly took delivery of a massive consignment of copper and finished the week up
129,075 mt (+65.7%) with a grand total of 325,500mt in its warehouse system. Wow.
And the influx was spread across its Asia warehouses, with 120k of the 129k difference
going to Singapore (+52,675mt), South Korea (+38,725mt) and Malaysia (+29,450mt)
respectively, according to Cochilco data.
• The Comex system didn’t miss out either, it stuck in another of its regular additions this
time up 5,432mt (+4.7%) on the week to close Friday at 120,400mt. Not quite as
spectacular as the goings on at LME, but the trend is clear here.
Here’s the Shanghai-only chart, with the addition of 13k or so keeping the uptrend intact
(without causing the type of fireworks we saw at the LME). I’m going to guess that whatever
goes on over at LME next week, the rise in the Shanghai stocks will continue unabated.
19

,
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 ht21
Mt Cu
source: Cochilco
Now for notes on a couple of basket stocks:
Amerigo Resources (ARG.to): My semi-obsession with this scratchy copper producer
reaches week three, but only because it did
correct and drop hard after all with the 23.8%
loss the biggest of all our basket components
this week. However, if we take a look at the
10 day chart, you’ll see that even after the
dumpage ARG is still higher than it was two
short weeks (and three IKN editions) ago. And
that big spike in volume on the Friday when it
touched 80c now looks pretty notable,
somebody nailed a great place to unload their
shares.
So yes, it’s down a lot but that won’t stop
ARG.to from dropping even more, in my view
at least. It’s still valued higher than CDB and REG, that’s just weird.
Trilogy Metals (TMQ.to): A piece of feedback from the TMQ note of last week (which I
managed to screw up slightly by using the “NGQ” ticker at the end, silly mistake, sorry) came
from reader AML who asked me to clarify just whether I think there’s a trade here or not. It
was fair comment, as he notelet was a bit confused and I didn’t make my point very well, so
here’s what I wrote back to AML:
To be honest (name), I haven't really figured it out myself. There could be a play here
and I know RVN is a marketer so he wouldn't be against a pump at the right time. I
also know the logjam to higher prices is getting that road permitted, it's not the deposit
itself. But it's not a clear shot and if nothing happens, TMQ will just continue to drift.
In the end, the acid test is that I'm not buying yet. But yes I'm watching it.
I hope that’s a bit clearer. If TMQ starts moving on volume, it’ll grab more of my attention but
for now, watching brief only.
Western Copper & Gold (WRN.to): This one gets a mention because it came up on the Joe
Mazumdar/Brent Cook Market Call appearance on Monday evening. The guys’ view of the
project turns out to be close to my own, the large size is interesting enough but the low overall
grade makes it a marginal deposit and not on they’d go for. Come Tuesday morning and the
reaction to the verdict of the Dynamic Duo was swift, as seen in the five day chart there right.

,
This stock got pumped at the end of last year by Gwen Preston (Resource Maven) as a
potential acquisition for Goldcorp (GG), due to its purchase of the nearby Kaminak and its
Coffee project. It sounded weird then, it sounds weird now, what would GG do with a high
capex low grade copper/gold asset when they’re doing everything possible to eschew marginal
production and improve gold production margins. Still, WRN has its fans (and I’ve even traded
it a couple of times), one of those “optionality on copper” things I suppose. Like NCU.to, or
CUU.v I suppose, hanger-on companies destined to attract pump artists and speculators who
don’t care whether a mine is ever built. WRN looks really expensive now.
The Producer Basket
After 10 weeks of 2017, the Producer Basket shows a gain of 3.32% 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 21.21 18.20 13.9%
2 Newmont NEM 34.07 530.595 17.48 32.94 -3.3%
3 Goldcorp GG 13.60 832.381 12.34 14.82 9.0%
4 Franco Nevada FNV 59.76 178.01 11.08 62.23 4.1%
5 Agnico Eagle AEM 42.00 223.475 9.21 41.20 -1.9%
6 Royal Gold RGLD 63.35 65.281 4.11 62.95 -0.6%
7 Kinross Gold KGC 3.11 1245 4.08 3.28 5.5%
8 Ang/Ashanti AU 10.51 405.27 4.06 10.01 -4.8%
9 Buenaventura BVN 11.28 254.19 3.00 11.81 4.7%
10 Sibanye Gold SBGL 7.06 228.71 1.72 7.53 6.7%
Prices in U$, NYSE or NASDAQ tickers Portfolio avg 3.32%
In line with the market direction, our larger
The 2017 Producer Basket: Weekly performance and
cap basket dropped again last week and all
comparative to GDX control
components lost ground (though AEM and 25%
ABX did well, just 0.1% down and 0.2% 20%
respectively). In fact there weren’t any big big
15%
losers, AngloGold’s (AU) 5.6% loss was the
worst among the ten. 10%
5%
However, we should note the sudden
appearance of red ink on the above table. No 0%
fewer than four of our ten stocks are down
year-to-date, quite a reversal when you
consider the basket average was +20% just
one calendar month ago and seven of our ten were boasting 20%+ gains YTD (Kinross was as
21
ts1naJ ht8 ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5 ht21
basket
gdx control
source: Google, IKN calcs

,
high as +31.5%, in fact).
Barrick Gold (ABX): There’s now no doubt about it, ABX is the star performing large cap
miner of the year (so far) and it just so happens I found myself defending the company and its
leadership during a focus group mail exchange yesterday Saturday. In response to one of the
mailers on the group denigrating cost cutting achievements at ABX over the last couple of
years, I noted a point or two and went a little further:
“I think Thornton gets too much shit from the mining community (that whole
Goldman Sachs "not one of us" thing?), big salary and bonuses or not. He's
done a remarkable job in turning ABX around and it's the best performing Tier
One this year for good reasons.”
Yeah that’s me, grumpy old Otto-IKN person, sticking up for John Thornton, head of the world’s
largest gold producer company and ex-Goldman Sachs top guy. By way of evidence, here’s the
ABX Year End liabilities position, an expansion on the non-current financial debt chart as shown
in IKN405. When you consider that John Thornton became ABX chair in April 2014 and note the
way liabilities, particularly that key non-current financial debt segment, have dropped since then
as the hard-nosed numberguy cleaned u the company balance sheet, it’s a good indication of
the new health at the company in the post-
other non-current
Munk period. And that process is set to U$Bn ABX: Liabilities non-current financial
continue as ABX has already stated its 25 current
intention to get monetary debt down to $5Bn
20
by end 2018 and that could even happen
sooner rather than later. 15
10
Two Fridays ago (and filed last Monday to
SEDAR) Barrick filed the papers (9)
5
necessary to allow them to raise up to U$4Bn
in equity. Though these filings rarely happen 0
immediately before a placement and they 2009 2010 2011 2012 2013 2014 2015 2016
don’t have to cover to the maximum number, source: ABX data
it does set the scene for 2017 and ABX is
setting up to sell shares to the market and I’d expect most (if not all) of such a raise to go to
paying down that financial debt.
Regional politics
Ecuador: Lasso now favourite to be next President
As per the Flash update of last Wednesday (see Appendix 1), last week saw a significant shift in
the Ecuador presidential election. Although I still expect the second round run-off between
government candidate Lenín Moreno and opposition candidate Guillermo Lasso to be close, the
playing field has now tilted in and though he’s not a red-hot favourite or anyone’s idea of a lock
for the job, we should now consider Guillermo Lasso the favourite with just three weeks to go
before Ecuador chooses its next leader.
And the big change; Paco Moncayo now endorses Guillermo Lasso for President (10). Moncayo
is a serious figure in Ecuador politics, he was Mayor of Quito for many years to 2009 and before
that the head of the country’s armed forces. He ran in the presidential election this and came in
fourth place, but all through the process insisted that he wouldn’t form alliances or endorse any
other candidate. That changed on Wednesday when he said that although he wouldn’t be going
out to campaign for him and considers round two the choice between “hepatitis and AIDS”, he
would vote for and back Guillermo Lasso in Round Two as the least worst candidate (on the
radio show on which he announced his decision, he then went on to lay into the Rafael
Correa/Lenin Moreno government in no uncertain terms).
22

,
What that means can be visualized in this table, that shows the results from the round one
election:
• Moreno and Lasso now go into the ballotage on April 2nd
• Moreno should be able to build on his first round score of 39%
• However, Lasso’s 28% is now boosted by the official endorsements of the next three on
the list, with Cynthia Viteri, Moncayo and Abdalá Bucaram all on his side (to be totally
fair I should mention that Bucaram hasn’t officially endorsed Lasso yet but is widely
expected to do so very soon).
Do the math and Lasso’s total tots up to 55.94%, good enough for the win. We can of course
expect some slippage in the endorsement votes, as citizens who backed their preferred
candidate in round one decide not to take their choice’s advice. That might be the enough for
Lenin Moreno to win out, but it’s not an easy path to victory.
Meanwhile, on Thursday Ecuador’s newspaper El Telégrafo published a voter intention survey
taken by polling firm Diagnosticos that put Lenín Moreno way out in front for the run-off vote,
with 48.36% versus Lasso’s 35.7%. However it needs to be said that El Telégrafo is a very pro-
Correa/pro-government newspaper and it makes no sense that Lasso can only pick up another
8% of votes when he’s getting endorsements to the tune of nearly 28%. In short, that poll
looks like BS to me and it doesn’t jive much with a poll taken on February 24th (11) by arguably
Ecuador’s most reliable pollster Cedatos, which put Lasso on 52.1% and Moreno on 47.9%.
The bottom line: It’s going to be noisy, but with the new and unexpected endorsement of Paco
Moncayo last week Guillermo Lasso must fancy his chances to upset the all-powerful AP party
of Rafael Correa and win the vote. Here on the outside we should consider him favourite but by
no means a certainty, put a gun to my head and I’d call it 70/30 right now. And as a reminder,
what that means to us mining investors looking to place FDI is that a Lasso win means 1) a
campaign pledge to stop mining projects above 2,800masl in order to protect water sources
(e.g. INV Metals at Loma Larga) ) and a politically more powerful Pachkutek party, the political
arm of the CONAIE indigenous umbrella group that’s notoriously anti-mining.
When Ecuador’s Minister of Mining Javier Cordova stood up at PDAC last week and told the
assembled audience that he didn’t expect any change to mining policy in Ecuador after the
election is done, that statement should have come with an asterisk: *as long as Moreno wins.
Latin America at PDAC
The Peru delegation went to PDAC and told the conference that Peru was a great place to go
and do responsible mining.
23

,
The Colombia delegation went to PDAC and told the conference that Peru was a great place to
go and do responsible mining.
The Nicaragua delegation went to PDAC and told the conference that Peru was a great place to
go and do responsible mining.
The Argentina delegation went to PDAC and told the conference that Peru was a great place to
go and do responsible mining.
The Ecuador delegation went to PDAC and told the conference that Peru was a great place to
go and do responsible mining.
We could continue.
Mexico at PDAC had real news
On the other hand, at the Mexico Mining Day among the normal platitudes and a few moans
about the security situation (12) due to narco gangs (that centred mostly on the expense of
paying for extra security details) the country brought real news to the ears of mining
companies. The national parliamentarian in charge of mining policy, Susana Corella announced
that Congress was working on an initiative to make expenses on mining exploration tax
deductible. Unsurprisingly this went down well, as it’s been one of the items that the country’s
Chamber of Mining, CAMIMEX, has been lobbying for in the last few years. After noting that the
mining downturn had cost the country around U$2Bn in investments and that the country was
trying to be more FDI-friendly, she said (13) (translated):
“We are also going to revise the tax regimen so that the mining sector is
considered in the same way as that for the oil & gas industry, considering that
both are extraction industries”.
And that means one thing: new tax breaks for Mexican mining companies (that may come too
late for Primero Mining (PPP), but we’ll see).
Argentina: Chubut repeats its anti-mining message
Away from Toronto and out in the real world, Chubut governor Mas Das Neves once again
made his position on mining plain (and like it or not, in Argentine provinces what the governor
says goes). On Friday while inaugurating a dairy production facility he said (14) (translated):
“Apparently, those above us (i.e. the national Macri government) want to impose on us
what we Chubut people should do. We in Chubut chose many decades ago what our
resources were and in fatc we don’t just live on them ourselves, but we’ve also been
generous with the national government in the transfer of those resources.”
That was a very clear message to the Macri government but just in case it wasn’t fully
understood, he ended the factory-opening speeck with “Mining no, agriculture yes”.
Chile: La Escondida strike update
The strike is now 32 days old and the two sides are now entrenched. On the owner’s side,
there’s a plan being floated to renew production or at least do essential care & maintenance
work using third party contractors. Unsurprisingly the striking workers said that wasn’t going to
happen and the 2,500 miners on the picket lines wouldn’t let a single person pass. Adding to
that, union leaders have this weekend refused to return to the negotiation table until the mine
management resolve three points of order that they say need clearing up before the two sides
can even start talking. Unions are demand a 7% pay rise plus a one-off 25m peso bonus
payment (approx U$40,000) per worker. Management led by BHP Billiton have told the press
they have a new offer for the unions, but it all depends on them getting to the table first.
Meanwhile the Chile Central Bank last week made the first official admission that the strike
would affect the country’s macro numbers as a whole. In his monthly press briefing, the
CenBank head said (translated) (15), “The February figure will be affected by the drop in
mining production derived from the strike at Escondida and the effect of the year-over-year
comparison to the February 2016 leap year. This is enough to be able to anticipate a first
24

,
quarter of 2017 that will not be better than the last quarter of 2016”.
It’s estimated that La Escondida alone accounts for around 2.5% of Chile’s GDP and that’s the
type of hit the numbers are going to take in February and March, at the very least. This chart of
monthly copper production from the mine shows that even in the reduced output of the last
couple of year it still typically churns out 80,000 tonnes of copper alone (not to mention the by
products. That’s half a billion dollars’ worth of copper per month.
La Escondida: Copper production per month (in 000s of tonnes)
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
25
01-ene 01-yam 01-pes 11-ene 11-yam 11-pes 21-ene 21-yam 21-pes 31-ene 31-yam 31-pes 41-ene 41-yam 41-pes 51-ene 51-yam 51-pes 61-ene 61-yam 61-pes 71-ene
KT Cu
source: Cochilco
Peru: Cerro Verde now on strike
As from last Friday workers at the Cerro Verde mine just outside Arequipa (not far from this
very desk in fact) went on strike to demand better pay and conditions after rejecting the last
pay offer from management (similar to the Escondida situation). As this mine has recently seen
a throughput upgrade and now runs at nearly 500,000 tonnes of copper production per year,
it’s another significant stoppage and potential supply problem.
In theory at least. In practice, it’s highly likely that the two sides sit down tomorrow Monday
and work out a new deal, this one isn’t going to drag on in the same way as the headline-
making Chilean strike.
Market Watching
Just one item in this section today. But it’s a good one.
Tinka Resources (TK.v) wins PDAC
Here’s a 12 month chart of Tinka Resources, a long position that frustrated your author through
most of 2016 as the stock refused
to budge even as zinc the metal
saw its price improve substantially
and float the boat of many other
zinc exposed junior miners.
So it’s fair to say that 2017 has
been better for the stock ☺. The
move started in January when
news began to flow after its latest
financing round and picked up
when TK finally managed to break
out of the 25c ceiling level it
seemed to have set itself. The
company has offered up news
including the start of the drilling
program at Ayawilca since then and

,
through February TK traded fairly merrily in the 30s on improving volume, too.
And then, last week, the stock went crazy. The main catalyst that set TK zooming (to where it
should have been a while ago) came early Monday morning, when the company announced
(16) the assay results of the first hole in this year’s Ayawilca program. Well in fact it’s not even
the entire hole, they’ve had trouble in drilling and still have another 100m or so to go but the
company did the right thing, it released what it knew already and with perfect timing too, on
PDAC Monday (17). That great news was quickly followed by another strong positive (and as
this is now common knowledge in the sector I’m sure there’s no secrets being given away here.
Jo Mazumdar and Brent Cook of Exploration Insights called buy on the stock Monday pre-open
and once that had filtered into the marketplace, TK stopped taking the stairs up and took the
elevator.
Now Joe, modest as he is, said that the reason for TK’s upmove last week was all about the drill
hole and not about his/their call (Mazumdar was on the recent site visit) and for sure there
cannot be smoke without fire, but it’s certainly not the whole story because of all the things this
top team of writers and analysts do, perhaps their strongest suit of all is recognizing a true
discovery hole and getting in early, then letting the story reveal itself in the course of time. I’ve
seen them do it time after time, with Mirasol and Reservoir two that
come to mind immediately, and I’m not the only one who
recognizes this. The buy call from Exploration Insights last week
couldn’t have existed without that drill hole, but it was a catalyst
that shot the stock higher and brought Tinka to the attention of a
lot more people than little old IKN will ever do.
As for that hole, I strongly encourage you to look at the NR and its
diagrams yourself, but the crux of the matter is in this segment of
one of the NR maps (right).
• The lattice shading is the current 43-101 inferred resource
at Ayawilca
• A17-56 is the drill hole reported on Monday
• Within margins of error, it’s the same mineralization TK.v has found before
• It’s a 400m step-out from the margin of the 43-101 compliant resource
• It’s the first hole of a 10,000m program that promises to drill that “South” area as well
as other promising targets dotted around the known resource.
As for the grade, here’s the relevant section from the Monday NR:
• Key Highlights from drill hole A17-56 (results to 238 metres depth only):
• 62.4 metres grading 5.6 % zinc from 127.5 metres depth, including:
• 17.9 metres at 11.6% zinc from 127.5 metres depth, including:
• 5.8 metres at 22.5 % zinc from 127.5 metres depth; and
• 5.2 metres at 12.9% zinc from 228.5 metres depth;
• All mineralized intercepts are sulphides.
As noted above, that compares to the known resource at Ayawilca, but I want to take a
moment to clear up a repeated query about what TK has here. In the previous coverage of the
stock I ran the numbers to show its theoretical economic viability, but the pushback has often
been “yeah well it’s not as good grade as (deposit X, company XYZ). I’ve even seen a couple of
uniformed newsletters spouting the same sort of thing, so rather than run all the numbers yet
again, here’s a different set of grades from a different place.
26

,
In fact not that different. Further
South from Ayawilca of course,
but the Volcan mines are taking
advantage of the same
mineralized belt in Peru and as
you can see, their mine reserve
runs very similar “between 5%
and 6%” zinc grades, as well as
lead and copper in the same
ranges as Ayawilca. Volcan is
one of the biggest zinc
producers in the world and has
been mining this same stuff for
literally decades (and will
continue to do so).
The fact that TK hit pay dirt on its first hole was impressive and that didn’t go without comment
in the NR either, as part of CEO Carman’s blurb was, “This early success gives the Tinka team a
great deal of confidence that our geological models and targeting methods are working.” Quite
right too and now they are mobilizing a second rig, the news should come faster in 2017.
And semi-related to that subject, a quick word about TK treasury. With an IKN Weekly
estimated CAD$11m at bank at the moment, TK is funded for its 2017 program as planned but
if they start to hit the accelerator pedal, that could burn more quickly. However, that’s unlikely
to be a problem. TK has around 5m options expiring in August 2017 and priced between 30c
and 37c. More interestingly, there are around 12.8m warrants expiring in November 2017 with
a strike of 30c. If those are made whole, TK is set to receive $5m in treasury and that alone
should fund most of 2018, or any 2017 acceleration of exploration year. Decent money there.
Summing up, we were (too) early to this story in April 2016 and though the position rarely
dipper into the red, it was frustrating to see it tread water while many other zinc names moved
up. But 2017 started well and thanks to the type of drill hole we were betting on in the first
place, one that shows the Ayawilca mineralization is almost certainly bigger and potentially
much bigger than the current resource the stock has grown wings, found new fans and started
to move higher. The key word there is “started”. There could be a lot of upside left in the
current move. Hold them all, don’t sell a one.
Conclusion
IKN408 is done, we end with bullet points:
• The economics of Minera IRL’s Ollachea project are compelling. There’s risk involved,
but the potential out-sized reward more than makes up for it. One of the few
undervalued and advanced gold projects out there, don’t fear the debt and own some
of the equities.
• Tinka (TK.v) pays off the patience (and cash) invested, but it’s only just begun.
• I was very impressed with the way B2Gold held its own during a rough trading week
(and check out the volume, one of the best on the whole TSX last week). Next week its
Q4 financials time plus the main Conference Call of the year, expect plenty of coverage
in IKN409 of our Top Pick.
• Signals point to a lower gold price. I hope I’m wrong (I often am).
27

,
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://finance.yahoo.com/news/cofide-revokes-loan-mandate-minera-004136022.html
(2) http://incakolanews.blogspot.pe/2017/03/minera-irl-news.html
(3) https://www.mef.gob.pe/es/noticias/notas-de-prensa-y-comunicados?id=5198
(4) http://www.minem.gob.pe/_estadistica.php?idSector=1&idEstadistica=10749
(5) http://www.b2gold.com/news/index.php?&content_id=334
(6) http://incakolanews.blogspot.pe/2017/03/minera-irl-news.html
(7) http://www.reuters.com/article/us-copper-stocks-ahome-idUSKBN16H298
(8) http://www.reuters.com/article/us-copper-supply-india-idUSKBN16F101
(9) http://incakolanews.blogspot.pe/2017/03/barrick-abx-now-we-know-how-thornton.html
(10) https://twitter.com/pacomoncayo?lang=en
(11) http://www.holaciudad.com/noticias/politica/Encuesta-Moreno-Lasso-comicios-Ecuador_0_1006399554.html
(12) http://telefonorojo.mx/angustia-de-las-mineras-canadienses-por-la-inseguridad-en-mexico/
(13) http://www.critica.com.mx/vernoticias.php?artid=72071&relacion=critica&mas=7
(14) http://www.elpatagonico.com/das-neves-reitero-su-rechazo-la-mineria-n1540774
(15) http://www.eleconomistaamerica.cl/economia-eAm-chile/noticias/8205238/03/17/-Presidente-de-Banco-Central-
anticipa-bajo-crecimiento-por-huelga-en-Escondida-.html
(16) https://www.juniorminingnetwork.com/junior-miner-news/press-releases/799-tsx-venture/tk/30013-tinka-resources-
discovers-new-high-grade-zinc-zone-at-ayawilca.html
(17) http://incakolanews.blogspot.pe/2017/03/best-monday-pdac-news-release-so-far-is.html
Appendix 1: Flash update dated Wednesday March 8th 2017
Good Wednesday morning, just after 9am local time, a few minutes before the opening bell. Kind of cloudy outside here
today. At the risk of catching a falling knife and staring "the curse of PDAC" in the face, the continued slow drop in gold
has seen stock prices drop and may now afford a good buying opportunity. I'm looking to add to two positions:
Red Eagle (R.to): I suspected that the rumourmill might affect R.to this week and it's been that way. Yesterday's close of
74c is a great price, it might get a bit lower today too. I'll add today and watch the first hour to see how it's trading before
putting in a bid. Sandstorm (SAND): The same order as the last couple of weeks, anything under U$4 would be very
attractive. I have room to add. In other news, Guillermo Lasso is now clear favourite for the Ecuador presidential
election run-off vote on April 2nd. In IKN407 i called it too close to call, the playing field has now tipped towards Lasso
as yesterday the influential ex-Mayor of Quito threw his weight behind the challenger. More on this in IKN408 but risk for
mining companies in Ecuador has gone up a notch, particularly high country projects like INV Metals.
28

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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
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
29

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Salazar Res SRL.v hold C$0.28 02-mar-14 C$0.145 -48.2% lost China sponsor
Stocks To Follow Closed Positions 2013
Closed in 2013 closed close price
USA Graphite USGT feb'13 U$0.93 08-jan-13 U$0.17 81.7% short tgt made/trade closed
Lachlan Star LSA.to feb'13 C$1.50 30-sep-12 C$0.95 -36.7% sold to reduce port risk
United Silver USC.to mar'13 C$0.21 28-oct-12 C$0.095 -54.8% small Ag sector trade, failed
Aurcana Corp AUN.v apr'13 C$1.07 11-nov-12 C$0.55 -48.6% closed on poor YE results
Gold Res Corp GORO apr'13 U$14.11 25-jan-13 U$9.38 33.5% short tgt made/trade closed
Marlin Gold MLN.v apr'13 C$0.075 10-feb-13 C$0.065 -13.3% closed trade
Bear Creek BCM.v may'13 C$2.58 01-apr-13 C$2.40 -7.0% near-term, time ran out
Lupaka Gold LPK.to may'13 C$1.12 23-oct-11 C$0.32 -71.4% towel thrown in
Tahoe Resources TAHO may'13 U$18.62 08-apr-13 U$14.70 21.1% took profit on ST short
OceanaGold OGC.to jun'13 C$3.03 16-sep-12 C$1.18 -61.1% sold on gold drop
IMPACT Silver IPT.v jun'13 C$1.14 13-jan-13 C$0.62 -45.6% sold on silver drop
Duran Ventures DRV.v jun'13 C$0.045 10-may-13 C$0.025 -44.4% ST trade never worked
Plata Latina PLA.v jun'13 C$0.79 10-apr-12 C$0.13 -83.5% closed
Bellhaven BHV.v jun'13 C$0.065 03-jun-13 C$0.12 84.6% closed ST trade
B2Gold BTO.to aug'13 C$3.07 28-nov-12 C$3.44 12.1% sold 1/2 to raise cash
Colossus Min. CSI.to aug'13 C$0.72 24-jul-13 C$0.79 9.7% closed thru nerves on future
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
30

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Stocks To Follow Closed Positions, 2011
Closed in 2011 closed close PPS
Sunward Res SWD.v jan'11 C$1.05 21-nov-10 C$1.63 55.2% target made, trade closed
Serengeti Res SIR.v mar'11 C$0.245 05-dec-10 C$0.285 16.3% sold pre-tgt, ST trade fail
Fronteer Gold FRG apr'11 U$2.37 03-may-09 U$15.24 543.0% buyout, trade closed
Minefinders MFN apr'11 U$9.09 07-nov-10 U$16.89 85.8% target made, trade closed
Metalline Min. MMG may'11 U$1.04 26-jan-11 U$0.89 -14.4% exit, resource disappointed
Peregrine Met PGM.to jul'11 C$0.87 06-mar-11 C$2.60 198.9% buyout offer, closed
Dynasty Metals DMM.to jul'11 C$4.20 03-may-09 C$2.85 -32.1% Sold. Fail. Move on.
Aura Silver AUU.v aug'11 C$0.22 13-oct-10 C$0.16 -36.4% Bad pick. Take loss
U.S. Silver USA.v aug'11 C$0.52 26-jan-11 C$0.71 36.5% closed to make room
B2Gold Corp BTO.to sep'11 C$2.80 12-may-11 C$4.27 52.5% target made, trade closed
Bear Creek Min. BCM.v sep'11 C$3.80 27-may-11 C$4.17 9.7% macro sell call victim
Minefinders MFN sep'11 U$14.70 10-aug-11 U$15.15 3.1% macro sell call victim
Great Panther GPR.to sep'11 C$3.03 22-aug-11 C$2.64 -12.9% macro sell call victim
Fortuna Silver FVI.to sep'11 C$1.07 03-may-09 C$5.36 400.9% sold 20%, macro sell call
Focus Ventures FCV.v nov'11 C$0.40 20-apr-10 C$0.20 -50.0% cut losses, bad trade
Regulus Res. REG.v dec'11 C$1.17 14-aug-11 C$0.52 -55.6% cut on news of poor 43-101
2009 and 2010 closed positions in appendices below
Stocks To Follow Closed Positions, 2010
Closed in 2010 closed close PPS
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
31

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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.
32