6 The IKN Weekly, issue 651 — Nov 15, 2021
The IKN Weekly
Week 651, November 14th 2021
Contents
This Week: In Today’s Edition, Target-rich environment, The second call for Basket Cases, An
alternative take on inflation, Gold remains out of favour on Wall Street.
Fundamental Analysis: New Gold (NGD) 3q21 financials.
Stocks to Follow: Minera Alamos (MAI.v), Rio2 Ltd (RIO.v), Argonaut Gold (AR.to), Great
Bear (GBR.v), Discovery Silver (DSV.v), QC Copper & Gold (QCCU.v), Aldebaran (ALDE.v), Mene
Inc (MENE.v).
Copper Basket: Overview, Solaris Resources (SLS.to).
Producer Basket: Overview, Pretium (PVG), Pan American Silver (PAAS).
Tiny Dogs: Overview, Aston Bay Holdings (BAY.v)
Regional Politics: Argentina and PEDMA: Full pro-mining, Argentina: Chubut, Peru: The
uncertain tax increase, Ecuador: The ball is in Lasso’s court Chile, Sebastian Piñera’s fall from
grace and next weekend’s election, A reminder on Guerrero.
Market Watching: The next takeover, The Mineros SA IPO, The Precious Metals Summit
PMSE(V) this week, Meeting with Palamina Corp (PA.v) at PMSE(V) this week, Harte Gold
(HRT.to) continued volatility, Fortuna Silver (FSM) (FVI.to) EIA permits, part deux, Minera IRL
(MIRL.cse): The ball is in the directors’ court.
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 Edition
This week’s edition underscores your author’s bullish stance toward the metals and
miners. We again use the phrase “target rich environment” in today’s intro, but you
also get a whole bunch of names and ideas to consider.
No need for a long note on New Gold (NGD) in today’s fundamentals section, a brief
overview of the main numbers and a thought or two from the Conference Call is
enough to tell us the company is out of a penalty box of its own making.
Community relations (CSR, ESG) is a growing theme in mining, one that we’ve always
covered closely here at The IKN Weekly. Maybe backers of Fortuna Silver (FSM) and
Solaris Resources (SLS.to) needed to pay more attention, as well.
In Regional Politics, get ready for Argentina’s charm offensive on mining and for
Ecuador’s worsening backdrop for the industry. Also, election news and how Peru is
now a place for your mining dollars. More besides.
We tackle the whole inflation subject in today’s intro and it’s long past time you
stopped listening to the Prophets Of Doom. Gold is going up despite their fantasies, not
due to them.
1
A target-rich environment
There are no new trades this week, neither purchases or sales, but a quick line or three to
underscore and reiterate that what I do with my money shouldn’t be your first concern when
trading the stock market as I consider my portfolio locked and loaded going into a prime period
for share price appreciation. Feel free to criticize my picks and where my money is placed right
now (yes, I’m looking at the lump of cash in Rio2 Ltd and wondering when it’s going to start
getting bigger), but don’t confuse that with the macro call. Also, if you see me trying to pick
holes in the inflation argument, that’s not about refuting the shillers and commentators with
their recent (and very loud) baseline message of higher prices for gold, metals and their miners
because I am fully on board with the practical side of their excitable messages, too (at least for
the near-term, then let’s see). Recent editions have stated we’re in a target-rich environment
and that is the most important message to convey, so as there’s no way I get to pick ‘em all
and ride every rocket ship higher, I’ve made my choices. Some good so far, such as DSV, AR
and reiterating MAI. Some not-so-good so far such as CMMC, APN and reiterating on RIO.v, but
for you out there, holding a different portfolio to mine, the macro call is more important than
any single trade.
Anyone and everyone who follows the mining sector on a long-term basis should be excited
about the present market set-up for junior mining companies. With gold signalling a meaningful
break away from the “Biden U$1,800/oz” level as The Fed shifts its focus from the employment
side of its dual mandate to that of inflation, the turn point fits the larger narrative as well. We
are not predicting what gold will do over the space of a year, the message is that from now
through to early 2022, we should expect higher prices for fungible market commodities in dollar
terms. Bottom line: Be like me and fully long into the New Year.
The second call for Basket Cases (of three)
Thank you for your suggestions as received for the three basket trackers (Copper, Producer,
Tiny Dogs) for 2022. There was a flurry of mails hitting my mailbox between last Monday and
Wednesday and while it wasn’t quite “thick and fast”, on counting this (Saturday) morning I’ve
received suggestions on 23 separate company names, quite a few of them from more than one
person. So sincere thanks but the suggestion box is still open and today, you get the second
call. Expect one more nudge on this subject, but to avoid boring you too much we’ll skip next
weekend and give the final call in IKN653, due out December 5th. From here we copypaste from
last week and pick up the text midway through the intro paragraph:
As usual, I already have long lists of potential companies for all three and also as usual, I’d
greatly appreciate suggestions because you people always come up with a few ideas that are
better than mine. So, here’s the framework and as the baskets are somewhat different in make-
up, first a reminder of what type of company we need in each list:
For The Copper Basket: We look for a group of 15 stocks that as a whole represent the
junior copper mining world. The maximum market cap is $1Bn, but preferably I like
them lower to better reflect our sector of interest. We welcome tinycaps, as a cross
section is required. As we’re not trying to beat the street and want a faithful reflection
of the sector, always happy to include bad copper companies or dog stocks if they bring
something to the table.
For The Producer Basket: There is no upper limit in market cap size, but we do require
a minimum market cap of U$2Bn. For this list, I’m looking for suggestions for precious
metals producers that will out-perform in 2020, because of the less important (except
for my own ego) of trying to beat the GDX benchmark on the year.
For The Tiny Dogs: First and foremost, for this list we require companies with a market
cap of $20m maximum, as The Tiny Dogs tracks market moves of the smallest
companies. However, at this level of market cap there are many broken stocks and
dead companies with projects going nowhere. They are not interesting, as although we
cannot expect operational or managerial perfection at this level the company still needs
to “have a pulse” and be a reasonable trade or speculative alternative.
2
Every year sees me wanting to change between three and five companies on each list. If you
have a good candidate for any of them, perhaps a company you already own, you are welcome
to write in to the usual addresses and nudge me in the right direction.
An alternative take on inflation
When US CPI came in at +6.2% last week, you could hardly open a page dedicated to finances
or investment without hearing about how the inflation cat was out the bag and when it comes
to our sector of focus, the noise was a hundred times louder and goldbug Weimar Death Of
America messages coming at you from all angles. Therefore, two facts:
1) “Inflation talk” is all the rage among the metals and mining commentariat.
2) The metals and mining commentariat collective has a poor track record of predicting
the financial future. In fact and on consideration, the economic model used by
goldbugs and most hard money advocates has over time shown them to be among the
worst forecasters of world macro in the financial world
On that second point I am almost being too kind, these people are awful at calling the markets.
So when your Metal Guru* of choice says inflation is already spinning out of control, it means
you’re going to hear the alternative argument in The IKN Weekly. Being a contrarian investor is
easy, the difficult part is knowing with to be contrarian against, so when a group of people with
a firmly established record of calling the market incorrectly (and then shaking fists at the world
and saying “not fair!” or “b-b-but they cheated!”) get vociferous, it makes choosing an opposing
argument more simple. To begin, the goldbug
touchstone of how the monetary metal flies
when the Dollar “isn’t working” doesn’t fit current
circumstances. Here is gold over the last ten
days (proxy GLD) set against the dollar (DXY
proxy), right:
Both are up. Gold is pigeonholed as the
“AntiDollar”, but as we’ve pointed out over the
years, it ain’t necessarily so and the correlation
of gold to inverse-dollar never has been 1.0.
Though I haven’t checked the updated figure to
see if the last few months have changed the
ratio its beta is historically 0.89X, which means
that while the inverse relationship is the normality and true for the vast majority of market
scenarios, every so often gold and the dollar will move in the same direction at the same time.
So we come to today’s circumstances and, if inflation is the only game in town, how come the
market told us last week that both gold and the US Dollar are good places to hedge against its
effects. What gives?
The IKN Weekly deals in reality and will now attempt an answer. We understand that The Fed
is on a pathway that has induced inflation where it wasn’t wanted. Jay Powell and friends told
us early year that inflation would be a temporary blip and all over in a few months, but the CPI
last week gave lie to that. So the Fed has miscalculated, but instead of stating that and then
jumping to the conclusion that All Is Lost and the USD is destined for the same fate as the
Venezuelan Bolivar Fuerte, we prefer to remember the Fed’s dual mandate still exists. With US
unemployment figures still coming in strongly after the Covid-19 hit, the Fed in 2022 is indeed
likely to change course and tackle its other mandated subject. So, let us assume instead that all
is not lost and what we are now seeing is still an inflationary pulse. A longer one and more
problematic than Jay Powell envisaged, but one caused by an error in a model that didn’t
predict the way the world is coming out of the Covid-19 pandemic slump.
The same way Covid-19 has accelerated a change in both living and working patterns (home
workers, gig economy, everything delivered to your door by a guy on a bicycle), so chains of
logistics have been disrupted around the world. We’ve all seen the queue of ships trying to
3
enter LA Harbour but that isn’t just a physical indication of the rise in demand in The USA, it’s
also a visual aid in understanding how this interconnected world has built inefficiency into the
supply chain. Then there’s “the savings effect” and how Covid-19 has left the industrializewd
world consumer with money to spend on discretionary items (no vacation in 2020 means $5k
per household to spend on “other”). It also stands to reason that we’d see the height of any
inflationary pulse at the time of year when the world’s richest consumer countries (North
America, Western Europe (and as always, we need to throw in Japan) demand most from shops
and stores. We call it Christmas and while we’re a long way from swaddling clothes in a manger
these days, the way we celebrate the arrival of the Saviour of Humanity in our modern world is
by buying expensive alcoholic drinks and plastic things for children. It is the way it is.
With the background in place, we turn our attention to what “an inflationary pulse” is and how
it affects prices (and consumer attitudes). One of the “advantages” (firmly stuck between
inverted commas) of spending spending the last 25 years of one’s life in South America is to
understand the effect of weak currencies on goods and services, so here’s a simplified but
reasonable illustration of what happens over a period of time:
In 2014, you go to a shop and buy a kilo of rice for $2.00
In 2015, you go to a shop and buy a kilo of rice for $2.00
On the same day in 2016, you buy another kilo of rice. It costs you $2.40
On the same day in 2017, you buy another kilo of rice. It costs you $2.50.
What are the inflation rates? In 2014 it’s unknown, because you lived somewhere else in 2013
but in 2015, the inflation rate your kilo of rice is 0%. Then comes the inflationary pulse and
bang, suddenly the shopkeeper demands 20% extra money from you for your kilo of rice and
you are not happy. You’ve just suffered an inflationary pulse of 20% and that makes a
difference. Then comes 2017, same shop and same deal, but you need $2.50 for your kilo of
rice. In 2017 inflation has backed off, but you the consumer are still paying more and $2.50 is a
full 25% more than you were paying two years ago (and your salary hasn’t kept up with that
change), but then you read in the financial paper this headline:
INFLATION DROPS FROM 20% IN 2016 TO JUST 4.2% IN 2017
The government swears blind to you in that article that things are now under control, the
economy is getting better and we all live happily ever after. Except for you, because you can’t
afford as many consumer discretionaries any longer. This is what we are seeing today, and it
doesn’t take much searching to find real world examples of an 2021 inflationary pulse of the
same order and to get to the bottom line, here’s one from the place responsible for the
impending world disaster (1), a report from last week, as the market digested China’s “too big
to be true +13% PPI reading:
The specter of stubbornly high inflation has haunted the markets for months and China’s
latest data added to signs it is not dissipating quickly.
But the latest numbers were exaggerated by low comparative data from last year and
underlying price pressures remain low, Julian Evans-Pritchard of Capital Economics said
in a report.
“We continue to think that consumer price inflation will remain below 2 percent in the
coming quarters and that inflation is unlikely to be a major constraint on the PBOC’s ability
to loosen monetary policy,” he said.
Now, when the Fed moves to “loosen monetary policy” in the same way it’s bound to, this will
benefit gold in the near term and I believe that’s
what we are seeing today, a market that anticipates
the Fed’s taper policy is a crock and that they will
have to go back to ZIRP-level interest rates again.
So yes, we are in for higher gold prices but do not
confuse that with out-of-control inflation, because if
the cat were truly out the bag we’d see it in gold
but also in base metals:
4
Copper was more expensive in May than it is now. What gold moving to U$1,860/oz last week
is telling us is that the Fed plans to wrap up the inflationary pulse in 2021 are delayed, but
hardly dead. Gold is different than other metals, it’s an asset class in itself and its non-alpha
generating nature means it will react to macroeconomic decisions about the Dollar quickly. But
the market isn’t stupid, so while it’s clearly offering indications that inflation is rising there’s not
the same assumption among broad markets that inflation’s genie is out the bottle, the way that
Austrian economic thinking has assumed in the gold world. Austrian economists are naturally
attracted to the gold market, as it’s the place that would first show their economic framework
to be the correct one (and would give lie to MMT or any other orthodox economic theory).
However, and as stated in the first lines of today’s intro op-ed, they are patently awful at
forecasts and The IKN Weekly would ask you to at least entertain the thought that the
Austrians are wrong this time too and we’re not about to slip into the Weimar nightmare they
propound regarding the US Dollar.
Be careful of the tail wagging the dog, the world of the gold advocate is an echo chamber and
as we have seen, people who tell their audience what they want to hear (instead of what they
need to hear) will always make a good living from their corner. There’s no need to be right
when you are catering to ingrained belief systems that will happily ignore reality, After all, when
(not if) the latest round of “Dollar To Zero” Weimar fearmongering goes wrong, they can
always use their joker card, shake their collective fists at the market, shout “unfair!” and
“rigged” because the audience for that message will always exist.
*…is it true? Metal guru, is it you?
Gold remains out of favour on Wall Street
Our tracking charts show GLD added zero tonnes to stock last week, despite witnessing that
quick move to $1,860/oz in the same period of time:
GLD gold holdings, 2016 to date (metric tonnes)
1400
1350
1300
1250
1200
1150
1100
1050
1000
950
900
850
800
750
700
650
600
5
61/4/1 61/61/3 61/62/5 61/8/8 61/81/01 61/92/21 71/41/3 71/42/5 71/4/8 71/61/01 71/72/21 81/21/3 81/22/5 81/2/8 81/21/01 81/42/21 91/8/3 91/02/5 91/13/7 91/01/01 91/02/21 02/5/3 02/51/5 02/82/7 02/7/01 02/71/21 12/3/3 12/11/5 12/22/7 12/1/01
mt
source: SPDR GLD data
8.20 GLD: Inventory/Price Ratio, 2016 to date
8.00
7.80
7.60
7.40
7.20
7.00
6.80
6.60
6.40
6.20
6.00
5.80
5.60
5.40
61/4/1 61/61/3 61/62/5 61/8/8 61/81/01 61/92/21 71/41/3 71/42/5 71/4/8 71/61/01 71/72/21 81/21/3 81/22/5 81/2/8 81/21/01 81/42/21 91/8/3 91/02/5 91/13/7 91/01/01 91/02/21 02/5/3 02/51/5 02/82/7 02/7/01 02/71/21 12/3/3 12/11/5 12/22/7 12/1/01
Source: SPDR data, IKN calcs
What’s more, our inventory/price tracker now marks 5.59X, a long way below what is normally
its baseline and the lowest readng since tracking began, back in 2016. This is the most
unpopular gold rally in US history and again tells us that gold rallied last week for other
reasons, not the ones normally trotted out. Is Bitcoin now diluting gold’s effects? That certainly
is possible, but that doesn’t excuse the way a readily tradable medium is offering great near-
term trading gains and further potential, but still gets the cold shoulder from the biggest of the
big money. When Wall Street’s attitude changes, then gold should move higher but we’re not
about to see the U$5,000 by next year” predictions come true. Leave the financial fantasies to
others and concentrate on making a profit in dollar terms.
Fundamental Analysis of Mining Stocks
New Gold 3q21 financials
Friday saw New Gold (NGD) report its 3q21 financials (2) and we’re going to take a brief look at
the main numbers, then take in the main developments from the subsequent conference call
later that morning (3). As such, this note is as brief as possible, not least because there’s a lot
more to get through today (also, we currently hold no position in NGD). First the numbers and
we begin with production and sales. NGD reports its sales in one way and we prefer to break
them down into their component gold and copper parts so here are the comparatives:
NGD: Gold production vs Sales, Oz per qtr
6
41006 60106 12647 58407 19167 41657 25869 65048 91108 00109 86958 45948 99029 99768 94676 95527 51576 92596 72156 26616 61208 49867 69038 69088 70586 12356 15296 62407 83447 58196
130000
120000
Total Au prod
110000
Total Au sales
100000
90000
80000
70000
60000
50000 40000
30000
20000
10000
0
1q18 2q18 3q18 4q18 1q19 2q19 3q19 4q19 1q20 2q20 3q20 4q20 1q21 2q21 3q21
source: NGD filings, IKN calcs
Total gold production in 3q21 came to 74,438 oz (we include the small silver equivalents as
ever), which was in-line with the reduced expectations in 2021. Salkes were lower than
expected, which means inventory build and the prospect of a Q4 boost. Meanwhile, copper
production and sales from New Afton were low, but we knew that the mine had hit a low grade
zone it needs to work through so again, no surprises.
NGD: New Afton copper production and sales, per qtr
2.22 3.12 4.02 6.91 7.12 5.02 8.02 7.91 5.91 2.02 6.12 3.81 1.02 6.02 3.81 3.71 5.81 7.71 9.61
3.51
2.81 5.71 5.81 5.71
8.31 3.31
2.81 9.61
6.51 41
Mlb Cu
24 Cu prod
22 Cu sales
20
18
16
14
12 10
8
6
4
2
0
1q18 2q18 3q18 4q18 1q19 2q19 3q19 4q19 1q20 2q20 3q20 4q20 1q21 2q21 3q21
source: NGD filings, IKN ests
Despite lower than expected sales, overall revenues came in okay thanks to an average selling
perice for gold of U$1,789/oz and copper at U$4.28/lb, both strong numbers
NGD: Revenues calcs by metal type
7
9.06
0.08
0.75
7.19
7.45
7.09
4.35
6.301
7.15
9.711
4.54
9.011
0.94
2.021
3.14
1.99
3.54
4.101
0.93
4.39
3.25
5.321
1.55
8.341
2.15
6.511
6.76
0.821
9.95
8.321
250
200
150
100
50
0
81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3
U$m
Cu revs
Au revs*
source: NGD filings, IKN calcs *includes minor Rainy River Ag revs
All eyes this quarter were on Rainy River, due to the reported grade issues from the “East Lobe
area that NGD announced back in August that made the stock sink like a stone at the time.
When at-or-around the U$1.00 level, this house made the right call on the stock and said that
fears and the selling were both overblown. That was the right call and now I’m kicking my self
for getting it right and not making any money from the decision.
Moving on to financials, the place to focus is operating profits (rather than net, which gets bent
out of shape by one-time items during this growth phase). That csme in art U$43.6m which is
testament to an improved costs profile, NGD doing a great job in keeping down overall costs to
just U$88.6m
NGD: Quarterly Earnings Overview
4.861
7.49
4.16 3.21
2.931 2.501
4.46
4.03-
3.241
7.98
25 6.0
5.821
2.66
6.04
7.12
7.371
7.68
7.94
3.73
9.891
3.79
8.05
8.05
9.461
9.39
1.54
9.52
2.891
2.59
2.15 8.15
8.971
6.88
1.84
1.34
250
225
200
175
150
125
100
75
50
25
0
-25
-50
91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3
$m
revenues
op-ex
deprec/deplet
Mine Op Earnings
source: company filings
A good enough number reported was better than I expected and showed little sign of the
infamous cost creep moving across the sector. Here are trhe MOE numbers again (left) and the
less important net, the company reporting a $11.3m loss.
NGD: Mine Op. Earnings
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3
$m NGD: Net Earnings 50
40
30
20
10
0
-10
-20
-30
-40
source: company filings, IKN ests -50
91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3
source: company filings
srallod
fo
snoillim
As for balance sheet items, assets look fine and liabilities dropped, including some $20m less
than our model predicts in the currents. That allowed Working Capital to remain at $170m and
the same $20m higher than expected. NGD showed good liquidity in the quarter despite the
lower production and sales.
NGD: Liabilities
2200
2000
1800
1600
1400
1200
1000
800
600
400
200
0
Today’s is the brief report, so the host of other
charts are left for the day we might re-open
coverage and buy again. Instead we move on
from the figures and charts quickly as the
Conference Call was also a useful to consider.
Once the team had finished the formal
presentation, the first questioner Anita Soni of
CIBC World Markets got straight to the point and
asked the two questions we all wantedto know
about (nice job Anita). First up was Rainy River,
the East Lobe issues and how the company saw its
development and production now compared to the
mine plan. CEO Renaud Adams said in reply_
“...we continue to assess and optimize our plan. But if you refer to the 43-101, and
quite frankly, the plan remains like somewhere pretty similar.”
Scratchy grammar aside, he then went on to note that East Lobe supplies around 25% of total
Rainy River ore to mill next year (and into 2023), also that they’d supply formal guidance for
their operations in early 2022 as usual, but we should expect things to work out along the lines
of the current 43-101 and the mine plan. This is good of course, a clear improvement from the
cautiousness over East Lobe earlier this year that first saw the stock price drop hard and then
stymied its rebound.
Ms Soni of CIBC then went on to the other hot button topic and asked about any inflationary
pressures. For the answer, NGD CFO Rob Chausse took over and said they weren’t seeing any
material inflationary pressures on capex items,
mostly because they’d pre-ordered much of the
steel and rebar items and received them before
the inflaitonary pulse. As for opex, they were
seeing some inflation but its effects were
limited, contractors and labor costs mentioned
as rising in a 2% to 3% range. The bottom line
being that its cost effects weren’t that bad and
(to quote CFO Chausse, “...we're not seeing any
material impacts on our business related to
inflation.” Considering the price chart of NGD
and the way it traded on Friday (right)…
8
81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3
NGD: Assets per qtr U$m other LT liabilities
4000 LT debt
3500 current liabilities
3000
2500
2000
1500
1000
500
0
source: company filings
81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3
$m fixed
other current
cash & eq
source: company filings
NGD: Working Capital per qtr
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0
81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 tse12q4
source company filings
srallod
fo
snoillim
...it’s fair to say the ConfCall added to the bullish move in NGD and that was likely the insight
about forward production at Rainy River. The longer-term price chart...
...also tells us that NGD is now out the penalty box, a good rebound from the bad news in
August that fully justified our call at the time. With that, this briefest of overviews is done and
we get on with other things, expect a deeper dive on current open position Argonaut Gold
(AR.to) next weekend.
Stocks to Follow
A good week for the portfolio, which grabbed onto positive sentiment for gold and the new
impetus for M&A activity and pushed plenty of our trades higher, with an emphasis on the
precious metals companies on our list. Of our 15 open positions, ten stocks returned week-
over-week wins so I’m not listing them all, then two were UNCH (RIO.v, CMMC.to) and another
three were losers (QCCU.v, AUL.v, MENE.v). The bigger winners get a mention, however. They
include Discovery Silver (DSV.v up 20.7%), Argonaut Gold (AR.to up 15.0%), Minera Alamos
(MAI.v up 12.5%) and Great Bear (GBR.v up 10.7%), all getting tailwinds from a market
looking around for M&A targets in light of the Newcrest/Pretium deal.
We currently have 15 open positions, our self-imposed maximum of stocks held and covered at
any given time. The headcount hasn’t changed since last week, still nine stocks are in the green
and six in the red.
company Ticker this week Avg Price Reco date Current PPS Gain/Loss% Notes
TOP PICKS
Minera Alamos MAI.v STR BUY C$0.21 13-Oct-19 C$0.63 200.0% $1.14 tgt Aug'20, #1 idea
Rio2 Ltd. RIO.v STR BUY C$0.83 22-Apr-18 C$0.64 -22.9% $1.30 1st tgt, building now
Recommended stocks (In order of preference)
Copper Mountain CMMC.to STR BUY C$3.42 18-Jun-21 C$3.70 8.2% Top value Cu play, overweight
Argonaut Gold AR.to STR BUY C$2.95 25-Jun-21 C$3.83 29.8% Vcheap on Magino,now moving
Discovery Silver DSV.v STR BUY C$1.77 24-Oct-21 C$2.22 25.4% A serious Ag play, big&cheap
Trilogy Metals TMQ BUY U$1.84 15-Sep-19 U$1.94 5.4% Cu for 2021, stalled
QC Copper&Gold QCCU.v BUY C$0.26 25-Apr-21 C$0.345 32.7% Now drilling. Easy hold
Strategic Metals SMD.v BUY C$0.42 31-Jan-21 C$0.34 -19.0% Canadian land bet/Value trap?
Aldebaran Res. ALDE.v SPEC BUY C$0.68 16-May-21 C$0.67 -1.5% Promo begins Q4
Altiplano Metals APN.v BUY C$0.31 17-Sep-21 C$0.30 -3.2% Cheap entry, about to re-rate
Royal Road Min. RYR.v BUY C$0.155 17-Mar-19 C$0.33 112.9% Model paying off in Nica
Great Bear Res GBR.v BUY C$15.83 26-Aug-20 C$22.10 39.6% Barrick now suitor, M&A play
Aurelius Min. AUL.v hold C$0.75 28-Jun-20 C$0.35 -53.3% has until its 43-101 to improve
Minera IRL MIRL.cse hold C$0.195 22-Jul-12 C$0.08 -59.0% CEO change will move stock
Long-term non-mining hold
Mene Inc. MENE.v LT Hold C$0.68 6-Dec-20 C$0.73 7.4% LT bet, adding slowly
9
Closed in 2021 closed close price
Fiore Gold F.v jan'21 C$0.98 21-May-20 C$1.17 19.4% closed as part of rebalance
Norsemont
Mining NOM.cse feb'21 C$1.55 6-Sep-20 C$0.70 -54.8% Cut loser to reduce Au exp.
Element 29 Res ECU.v feb'21 C$0.49 7-Feb-21 C$0.54 10.2% Cut Peru exposure
Kuya Silver KUYA.cse feb'21 C$1.66 8-Nov-20 C$2.51 51.2% Cut Peru exposure
Pucara Gold TORO.v apr'21 C$0.65 4-Oct-20 C$0.26 -60.0% Cut loser, Peru risk call
Copper Mountain CMMC.to apr'21 C$1.40 22-Nov-20 C$4.18 198.6% tgt hit, profit taken
New Gold NGD may'21 U$0.76 9-Feb-20 U$2.14 181.6% Sold to buy AGC, nice win
Orezone Gold ORE.v jun'21 C$0.79 21-Jun-20 C$1.61 103.8% sold on pop, leaky boat
Wolfden Res. WLF.v sep'21 C$0.30 11-Apr-21 C$0.19 -36.7% Failed spec trade, cut loss
Cartier
Resources ECR.v sep'21 C$0.32 21-Mar-21 C$0.235 -26.6% Failed spec trade, cut loss
Amarillo Gold AGC.v sep'21 C$0.31 30-May-21 C$0.30 -3.2% Capex story changed: Out
Excelsior Mining MIN.to oct'21 C$0.93 10-Mar-19 C$0.53 -43.0% May return in 2022
2015 to 2020 annual closed positions in appendices below, 2009 to 2014 closed positions in editions IKN553 or earlier
Now for notes on some of our covered stocks:
Minera Alamos (MAI.v): There was a lot of whooping and cheering online as the big seller
(Osisko Dev) of MAI backed off on Thursday and totally backed off Friday, leaving the price to
run. So, a good percentage win in a week that demands winners but let’s not start running laps
of honour. First up, Roosen may start again next week, it’s not as if we should assume he’s
suddenly repenting from an in-house decision to liquidate. He knows that if you let the foot off
the gas a while and then start selling again, the price deck will be more favourable. Second up,
look me in the eye and tell me you’re happy with with a 63c share price, fellow fully-loaded
long. Those of us not buying any more MAI for whatever reason (e.g. me, I’d love to but my
pocket is not bottomless) are doing a lot of “urging other people into the stock” and that is its
own double-edged sword.
MAI is all about delivery from here and on that, I have the utmost confidence in the team. My
timescale, looking to a year from now, makes this a no-brainer to go higher. However, if the big
seller starts selling again for one thing I won’t be shocked and for another, you’re going to get
a proportion of new longs who’ll start slagging off the company the double they were promised
in six weeks by the Twitter gurus doesn’t materialize.
Rio2 Ltd (RIO.v): Though their performances were very different last week, I still consider
the two house Top Picks in the same boat and count MAI.v as suffering from the same
influences as RIO.v. The outward difference is this...
...the inner ones are fewer. Both are development plays with all the money and time they need
to execute, both are top quality teams doing serious mining, both are still woefully undervalued
10
compared to peers. However, for every mail I receive from subscribers about Minera Alamos I
get 20 on Rio2 and that’s understandable. For one I bought badly at the start of the RIO.v
trade and while averaging down has helped, it’s still a red ink line. For another RIO.v continues
to be stubbornly dead money in my portfolio...at least MAI.v shows a pulse from time to time!
Hoewever, both are Top Pick stocks and both retain my full support as an analyst and as a
shareholder. I can tell you when a company is fundamentally undervalued, I can’t tell you when
that’s going to change and RIO.v with its non-movement and constant seller on top makes for a
test in patience, as much as a test of my fundies analyst abilities. One of these fine days RIO.v
will play catch-up and when it does, that move is likely to be breakneck in speed. Feel free to
send in your mails if it helps, or feel free to sell if you’ve had enough of waiting, but the smart
investor should feel free to load up at anything under a Loonie because this is a fully funded
project, now at the start of its build-out process in the best country to go mining in Latin
America that also happens to be sitting on 6.4m ounces of gold and to anticipate a few mailers
tomorrow, “Sorry, how many ounces did you just say, Mark?”
Five million ounces of M&I resource
One point four million ounces of inferred resource
All pit-constrained using a U$1,500/oz gold price
With an initial mine plan that delivers for under U$150m and yes, with the water it needs to
mine cheaply and efficiently. Enough to attract any major to the table, come the time.
Argonaut Gold (AR.to): AR reports its quarter tomorrow Monday and if the market
jungledrums are anything to go by...
...they are about to post a strong quarter and, as noted on ther blog last week, that Thursday
move was a breakout and five year price highs. Expect a detailed anal ysis in IKN652, next
weekend. This is now my idea of a M&A candidate (see Market Watching) in light of the new
trend in sector consolidation, as is our next company in the notes today...
Great Bear (GBR.v): It is alive. The first piece in the puzzle was seeing Barrick take up its
land position around the Great Bear Dixie
concessions by going JV with the piddly little
neighbour plays. The second piece was the
catalyst provided by the NCM/PVG deal last
week. The result is this (right). The only thing
left to work out is the price, this project will be a
Barrick-owned mine and trade set-up from here
is obvious, a no-brainer. Those are the ones I
like the most, where Warren Buffett isn’t just
shooting fish in barrels, but letting all the water
out first and then using a 12-gauge shotgun.
11
Hold until sale, the end.
Discovery Silver (DSV.v): Another good week for our new silver trade, the stock benefitting
from the silver price rise and also the opening of coverage out of PI Fincorp, with its anal yst
Phil Ker (who I met once on another trip, good with numbers and too nice a person to be a
mining anal yst) starting with a Buy call and a $3.60 target. I have no issue with that call .
As for real news, we understand that the PEA for Cordero is on track for publication and the
best guess for its release is the week of the 29th, though a little earlier is possible. In effect, the
signal is “any day now” so if you want in you should be locked and loaded by the end of this
week, to make sure. I have a one-on-one meeting booked with DSV this week, notes and
thoughts arising on that next weekend for sure.
QC Copper & Gold (QCCU.v): The fruitfly attention span of this market shows clear. Despite
a blowout Maiden Resource for Opemiska recently, the
fact QCCU is now getting down to real work and the next
drill campaign means it won’t provide market moving
news, at least for a while. The result is this:
At least we called the near-term trade top when it
happened and hopefully, readers of The IKN Weekly who
were long QCCU for the near-term flip got out at over 40c,
instead of the new and somewhat disappointing 35c-or-
abouts range. I honestly thought it would settle out
around 50c, but that was wrong and so be it. A very easy
stock to hold into 2022.
Aldebaran (ALDE.v): Please see “Regional Politics piece below, “Argentina and PEDMA: Full
pro-mining” for news on the impending roll-out of Argentina’s PEDMA mining initiative, which is
set to provide reason and motive to move 33 mining projects forward into production over the
next ten years. As one of the chosen projects is ALDE’s Altar, we’re expecting to see new
movement from the stock and if it can bust out from the stubborn and resistant 70c-or-so
ceiling price, this stock may end up running far and fast. If it provides the yearned-for spike,
I’m still keen on transferring the cash in this trade to JOSE.v.
Mene Inc (MENE.v): On pinging CEO Roy Sebag last week, I was told that while MENE has
until November 29th to file its 3q21 we’re likely (but not 100% certain) to see the numbers in
the week of the 22nd, i.e. the week after next. So now you know. In trading, MENE is off the
market radar and small chunks were easier to buy than in previous weeks. I may add another
thousand shares between now and next weekend, as part of my long-term plan.
The Copper Basket
After forty-five weeks of 2021, The Copper Basket shows a gain of 31.22% to level stakes:
12
company ticker price 1/1/21 Shares out Market Cap current pps gain/loss%
1 Solaris Res SLS.to 6.08 107.53 1388.21 12.91 112.3%
2 Copper Mtn CMMC.to 1.81 207.5 767.75 3.70 104.4%
3 Oroco Res OCO.v 1.85 192.584 506.50 2.63 42.2%
4 Marimaca Cop MARI.to 3.25 87.737 360.60 4.11 26.5%
5 Western Copper WRN.to 1.57 135.798 259.37 1.91 21.7%
6 Amerigo Res ARG.to 0.80 181.79 243.60 1.34 67.5%
7 Excelsior Min. MIN.to 1.12 273.585 129.95 0.475 -57.6%
8 Regulus Res. REG.v 1.07 101.85 105.92 1.04 -2.8%
9 Aldebaran Res. ALDE.v 0.455 125.24 83.91 0.67 47.3%
10 C3 Metals CCCM.v 0.115 438.56 83.33 0.190 65.2%
11 Doré Copper DCMC.v 1.00 53.304 48.51 0.91 -9.0%
12 Element 29 Res ECU.v 0.45 68.281 43.02 0.63 40.0%
13 Chakana Cop PERU.v 0.60 111.41 39.55 0.355 -40.8%
14 Chibougamau CBG.v 0.165 53.077 13.27 0.25 51.5%
15 US Copper USCU.v 0.105 87.53 9.19 0.105 0.0%
NB: All stocks in CAD$ Portfolio avg 31.22%
An overall positive week for The Copper Basket, despite the metal not managing to move much
higher and join the gold run. Our average
60% The Copper Basket 2021, weekly evolution
rose by just over 1%, with eight winners 55%
(SLS.to, MARI.to, ARG.to, REG.v, PERU.v, 50%
45%
ALDE.v, DCMC.v, USCU.v), five losers
40%
(OCO.v, MIN.to, WRN.to, CCCM.v, CU,.v) 35%
30%
and two unchanged stocks (CMMC.to,
25%
CBG.v). Our basket was a fair reflection of 20%
the wider market for the miners of this 15%
10%
metal, the other stand-out is how all 5%
moves were small moves, 15 stocks that 0%
are only a couple of percentage points
away from this time last weekend.
That was due to the metal and its comportment, as The Good Doctor Copper tries to make up
her mind. The world is concerned about Chinese demand and figures from recent weeks have
given the bears substance to their argument. On the other hand, inflationary pulses and supply
issues and on that score, the bear
argument looks thin; around the end of
every single year, experts are on hand to
predict a supply surplus and every single
year, it doesn’t transpire.
However, the last trades on Friday give
new cause to the bullish argument.
Something underscored, once again, by
the inventory data we carefully track. On
that subject, this weekend’s curated
comment was an easy choice because
when house mancrush Andy Home of
Reuters entitles his weekly column “Falling
stocks pose problems for London Metal
Exchange”, this desk sits up and take notice (4). Mr. Home’s piece covers all metals at the LME
and not just copper, with plenty of thoughts about Tin, Lead and Alu, but the sections on
copper are 100% on-point and here’s your excerpt (though you’d do well to read all his words):
Fictitious copper stocks were only 28,828 tonnes at the end of September, signifying low
13
ts1
naJ
t01naJ ht71 ht42 ts13 ht7bef ht41 ts12 ht82 ht7ram ht41 ts12 ht82 ht4rpa ht11 ht81 ht52 n2yam ht9 ht61 dr32 ht03 ht6nuj ht31 ht02 ht72 ht4luj ht11 ht81 ht52 ts1gua ht8 ht51 dn22 ht92 ht5pes ht21 ht91 ht62 dr3tco ht01 ht71 ht42 ts13 ht7von ht41
source: IKN calcs
availability of the metal immediately guaranteed before the October tightening.
Additionally, the ability of shorts to more generally deliver metal against the cash premium
has also been constrained by multiple global logistics bottlenecks.
In hindsight. the LME contract was as vulnerable as the tin to massive inventory deletion,
which is why the stock market had to step in and cap lending rates.
These “special measures” remain in place and will do so until the inventory rebuilds to
such an extent that the spread does not immediately become unleashed once the
restrictions are lifted.
There has been a glaring lack of copper inventory cancellation activity since the LME’s
intervention, but at some point someone will need metal from the exchange warehouses
again.
Will there be enough copper at this point to avoid another time crunch? The larger cross-
metals picture of the LME inventory decline suggests not.
We begin to understand why Chamberlain of the LME wonders about the limits of a
market of last resort.
As a long-term Andy Home Watcher and knowing how his policy is to make as balanced an
article as possible, that comment is about as bullish as he gets and the second time in recent
memory he has tipped his hand about a personal opinion of copper. The copper futures market
remains in backwardation and has been that way for so long, people are beginning to consider
it the normality for futures. It isn’t, copper’s natrural state is to be in contango and this lengthy
period in which end users are willing to pay premiums for spot is its own message.
Now for the latest world copper inventory levels, with data as usual from Chile’s Cochilco:
Another big drop in aggregate copper stocks last week, the three official systems losing
a total of 23,301 metric tonnes (mt) to leave the total this weekend at 190,841mt. With
that, we drop under the 200k line and data suggest there’s more to come.
The last couple of weeks have seen the eye of the storm shift away from the Shanghai
SHFE warehouses and for the simplest of reasons; there’s hardly any copper left to
come out. SHFE stocks finished the week up 555mt at 38,037mt as end users looked
elsewhere for supply.
Instead the action was again at the LME, where stocks dropped by 22,300mt as the
arbitrage continued. This weekend, LME stocks are back down at 100,300mt and with
the normal cycle seeing downdrafts this time of year, expect that to drop even further.
We have seen cancelled warrants drop to 50,400mt as Trafigura unwinds its position.
That cancelled warrant total was 100k higher a few weeks ago, so physical deliveries
on LME inventory is still happening but the worst of the squeeze is over.
Comex stocks dropped by 1,554mt to close the week at 38,037mt. No biggie.
Here’s the Shanghai-only inventories chart, last week’s bounce is history and we’re back
marking historic lows:
Shanghai Futures Exchange Warehouse Stocks, 2014 to date
400000
350000
300000
250000
200000
150000
100000
50000
0
14
31'13ceD ht9 ht81 ht72 ht5tco ht41 dn22 dr3yam ht21 ht02 ht92 ht7bef ht71 ht62 ht4peS ht31 ht92 ht9 ht81 ht72 ht5von ht41 ht52 ht01 ht91 ht82 ht6naJ ht71 ht62 ht4gua ht31 dn22 202ts1ram ht01 ht91 ht72 0202ht6ced ht41 ht52 1202ht4luj ht21
Mt Cu
|
source: Cochilco
Now for notes on just one of our basket stocks:
Solaris (SLS.to) and its bad CSR
LatAm environmental news site Mongabay this weekend ran a report on the growing tension
between locals and Solaris Resources (SLS.to) (5), a subject we’ve covered previously on these
pages. The Spanish language article is worth reading from top to bottom, as it does a better job
of going into the nuances of the conflicts that have arisen since SLS started the latest iteration
of Warintza in 2019. Longs without knowledge of Spanish should put the link through Google
Translate and read it all, because excerpts do not do justice. However, I will mention what is
for me the stand-out point, that SLS went into Warintza and is welcome there by the locals in
the direct area of influence around the Warintz community (due to the employment they bring,
as well as them “gifting” some 2,600 hectares of concession land back to the people who didn’t
even realize they lost it). Meanwhile, the larger indigenous Shaur Arutam area’s indigenous
people’s pressure group, PHSA, is ignored because 1) therir numbers are far greater, 2) they do
not want the company there and 3) SLS claims it doesn’t even have to talk with them, because
PHSA is merely a pressure group and not an indigenous culture. It goes on to report how the
company and government ignores claims against them, but during the discourse we reach the
weak link in SLS’s argument. They have indeed come to agreements with two of the local
communities in their Warintza concession zone, but not with two others. Those communities
should have the same claims with the company but SLS didn’t deal with them at the time, now
they are demanding their own consultancy and, according to Ecuador’s law, they must get one.
This explains why both company and government are doing everything they can to ignore the
issue, because once any consultancy is opened everyone knows what will happen. This map,
taken from the Mongabay report, shows the location of mining concessions on Shuar/Arutam
traditional lands and notes the two communities that sit inside the SLS concession (pale yellow)
that have not been consulted.
Be clear, SLS is on shaky legal ground and at a time when environmental activism, ESG, CSR
and all their bedfellows are becoming more important for mining companies in LatAm. Its
current valuation leaves big downside potential if their legal status begins to come under
question (topical example, Fortuna Silver in Mexico) and we know that Ecuador’s political
activism is developed and growing (Yaku Pérez et al). And don’t misplaced the resolve of the
locals either, the association and wider Shuar/Arutam community are organized, ready for the
15
legal battle and even have their own logo:
The “no to mining” is obvious, more interesting is the message around it. The Shuar Arutam
state that they don’t even want their rounds of Prior Consultancy as is their right under Ecuador
law and the constitution, as their people have already decided against hosting mining activity in
their region. An act of rebellion against a law that would in fact help thier cause if a real prior
consultancy process were ever held in the zone (NB: SLS insists that they have run prior
consultancy processes with the two local villages and received approval accordingly, a use of
semantics that leaves a lot to be desired). Therefore and not for the first time on this stock, you
are delivered due warning and no matter how impressive those rocks are (and there’s zero
doubt about that), there’s no way I would expose my cash to this story.
The Producer Basket
After forty-five weeks of 2021, the Producer Basket shows a loss of 2.70% to level stakes:
Mkt Cap
company ticker price 1/1/20 Shares out (U$Bn) current pps gain/loss%
1 Newmont NEM 59.89 805 47.28 58.73 -1.9%
2 Barrick GOLD 22.78 1778.04 36.89 20.75 -8.9%
3 Agnico Eagle AEM 70.51 244.187 13.94 57.07 -19.1%
4 Kirkland Lake KL 41.27 267.056 11.96 44.79 8.5%
5 Kinross Gold KGC 7.34 1261.07 8.75 6.94 -5.4%
6 Endeavour Min EDV.to 29.62 252.568 7.06 33.55 13.3%
7 Pan American PAAS 34.71 210.262 5.83 27.75 -20.1%
8 B2Gold BTG 5.60 1051.697 4.75 4.52 -19.3%
9 Alamos Gold AGI 8.75 392.739 3.41 8.67 -0.9%
10 Pretium Res PVG 11.48 187.833 2.73 14.56 26.8%
Prices in U$ except EDV.to (share price in CAD$ and mkt cap in approx USD) Port. avg -2.70%
As the left-hand of our two tracking charts shows, it’s the first time this year our Producer
Basket has led the GDX benchmark. That’s good I suppose, but ultimately it’s only an ego thing
and hardly the central column of reason for the existence of The IKN Weekly. Also, as both
squiggly lines are still underwater for 2021 YTD, unless things improve futher in the seven
weeks left this year it’s a Pyhrric Victory at best.
The 2021 Producer Basket: Percentage difference between
GDX benchmark and basket (negative = IKN basket ahead)
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
16
ts1
naJ
t01naJ ht71 ht42 ts13 ht7bef ht41 ts12 ht82 ht7ram ht41 ts12 ht82 ht4rpa ht11 ht81 ht52 n2yam ht9 ht61 dr32 ht03 ht6nuj ht31 ht02 ht72 ht4luj ht11 ht81 ht52 ts1gua ht8 ht51 dn22 ht92 ht5pes ht21 ht91 ht62 dr3tcO ht01 ht71 ht42 ts13 ht7voN ht41
The 2021 Producer Basket: Weekly performance and
20%
comparative to GDX control
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
source: IKN calcs, NYSE/Nasdaq/TSX data
ts1
naJ
t01naJ ht71 ht42 ts13 ht7bef ht41 ts12 ht82 ht7ram ht41 ts12 ht82 ht4rpa ht11 ht81 ht52 n2yam ht9 ht61 dr32 ht03 ht6nuj ht31 ht02 ht72 ht4luj ht11 ht81 ht52 ts1gua ht8 ht51 dn22 ht92 ht5pes ht21 ht91 ht62 dr3tcO ht01 ht71 ht42 ts13 ht7voN ht41
ikn
gdx control source: Google, IKN Calcs
Anyway, let’s play at Sesame Street vampires and do The Count, with all ten of our basket
stocks enjoying the sector tailwind and moving higher. The best performance came from
Pretium (PVG up 20.3%...natch), but we also got impressive responses from Special K (KGC up
11.8%), Alamos (AGI up 9.2%) and the majority of others in the 4% to 6.5% range. Staying
with the politically correct kidstalk the only “third winner” was Endeavour Mining (EDV.to), up
just 1.7% on a ho-hum earnings report, but that shouldn’t take away from the fact that EDV
has been one of the best-performing PM stocks in 2021.
Pretium (PVG): The Producer Basket had a good week, driven by the combination of the rise
in precious metals prices and the deal announced on Tuesday (6) between Australia’s cashed-
up and hungry Newcrest (NCM) and our component stock Pretium Resources (PVG), the deal
with a ticket value of U$2.8Bn. Here’s the money talk:
The Offer Consideration comprises cash and Newcrest shares, and Pretivm shareholders
will be able to elect either C$18.50 in cash or 0.80847 Newcrest shares per Pretivm share,
subject to proration and an aggregate cap of 50% cash and 50% Newcrest shares.
Pretivm shareholders who do not elect cash or Newcrest shares (subject to proration) will
receive default consideration of C$9.25 per Pretivm share in cash and 0.4042 Newcrest
shares per Pretivm share.
So, it’s a cash+shares deal with options and alternatives for PVG holders, who can take up to
half in cash or up to 100% in NCM shares. That’s a fair deal and the market reaction...
...suggests it’s going to happen, without any third party trying to come over the top of the
slightly thin premium to VWAP (22% to 24%) or triggering the U$125m break fee to NCM.
Pan American Silver (PAAS): You only needed to read the NR headline out of PAAS on
Tuesday evening to know its 3q21 earnings (7) was a fat miss, the company preferring to point
to the U$157m in cash flow than its EBIT or bottom line net profit (perhaps it thinks it’s a
growth junior?). What really stuck this desk, however, was the breakdown in operating profits
at PAAS:
17
Let’s change the name to Pan American Gold, here’s your bullet point list:
Silver segment Mine Operating Earnings of $28.1m
Gold segment Mine Operating Earnings of $71.3m
Nearly $7.5m in care&maintenance on its problem silver assets, Navidad and Escobal
PAAS spent nearly $12m more on gold segment capex than its silver equivalent
Both results and that capex suggest the current imbalance is here to stay. PAAS leavened the
bad earnings report with news on the highly prospective La Colorada project the next morning,
located next to the Dolores operation in North
Mexico. Still on course to be a large low grade
heap leacher, the revised plan now includes
further drilling to unlock more value in the asset
before pressing the green light and building out
to production. That means adding extra time to
the process.
The five-day chart shows how PAAS gapped up
at the bell Wednesday, only to drop as the day
continued. Overall PAAS did a good job of
damage control and also caught some luck, as
the earnings day coincided with broad support
for precious metals and their mining companies
(PAAS with the gold line...geddit?...compared to GDX and silver miner ETF, SIL above). Today
the market cares less about the colour of metals sold, more about the money made and that’s
fair enough, but if the trend continues as it seems PAAS risks hitting a share price ceiling if
instos, looking for as much silver exposure as possible for their given funds, pay attention to
the discrepancy in its metals mix.
The Tiny Dogs
After forty-five weeks of 2021, the Tiny Dogs show a gain of 7.25% to level stakes:
company ticker price 1/1/21 Shares out Mkt Cap current pps gain/loss%
Antler Gold ANTL.v 0.205 66.365 15.60 0.235 14.6%
Aston Bay BAY.v 0.045 163.975 8.20 0.05 11.1%
Constantine Met CEM.v 0.17 45.4 17.03 0.375 120.6%
Contact Gold C.v 0.115 240.757 13.24 0.055 -52.2%
Golden Pursuit GDP.v 0.22 40 5.80 0.145 -34.2%
Manitou Gold MTU.v 0.045 230.79 13.85 0.06 33.3%
Precipitate Gold PRG.v 0.240 106.241 11.16 0.105 -56.3%
QC Copper QCCU.v 0.315 105 36.23 0.345 9.5%
Red Pine Expl RPX.v 0.400 95.806 54.61 0.57 42.5%
Warrior Gold WAR.v 0.090 91.818 6.89 0.075 -16.7%
Prices in CAD$, data from TSXV basket avg 7.25%
This section attempts to track the tinycap mining sub-sector of the market, our ten companies
chosen under the following criteria to put together a list representing the state of play in the
sub-sector of tinycap exploration company stocks. At least, that’s the plan.
Market capitalization of under $20m. They have to be tiny. In two cases I’ve stretched the window a
little and allowed sub-U$20m market capper in that are just over the C$20m level, but the spirit is unaltered.
A “non broken” stock price and project story. There are literally hundreds of tinycap juniors of the right
size, but it was a particularly depressing exercise to trawl through the whole of the TSXV and find companies
that are small enough, but with life in them. The vast majority of sub-$20m stocks are broken stocks, either
traded to death on the exchange or with projects that are a bust or with entrenched management more
interested in their monthly paycheck than anything else.
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Likelihood of meaningful newsflow in 2020. This connects to the company’s “unbroken” status, as we
want news and potential catalysts from companies with projects that can work.
Decent management if possible. When you are down among the little guys it doesn’t pay to be too
choosy, but still I preferred companies that have teams or people with good peer reputations.
A change in tempo and a positive week for The Tiny Dogs, with eight of the ten basket stocks
returning gains and just two losers (MTYU.v, QCCU.v) to bring headwind. There were large
moves to behold as well, with Aston Bay (BAY.v up 25.0%) and Antler Gold (ANTL.v up 17.5%)
leading the way. Enough positives to see the basket average move up from the UNCH line for
the first time in two months.
Aston Bay (BAY.v): Thomas Ullrich is getting cynical. As we approach the end of another
waste of a year for BAY, the company last week released a Jam Tomorrow NR (8) and told us it
“...is pleased to announce that it has entered into an exploration agreement with a private
landowner for another key parcel of land adjacent to the Company’s Mountain Base Metals
Project (“the Project”) in Central Virginia. In addition, based on encouraging visual results, the
company is expanding the ongoing diamond drill
program at the Project from 1,500 to 2,500
meters.” They haven’t updated their corporate
presentation sicne September, however.
This news is a thin way of asking their long-
suffering shareholders to give them yet another
year to make a decent discovery and what’s more,
his long-term suckers will likely fall for it. If your
idea of speculation in explorecos is sponsoring
science projects and paying self-justifying
geologists more than their results are worth
because they have a family name to reckon with in
their sphere, this is the company for you. For the
rest of us there are real companies to consider and BAY.v lost its charm as a gig with geological
reputation a long time ago. Guilty of being the boy who cried wolf, until it delivers results of
substance it’s one less to worry about.
NB: Please be clear that The Tiny Dogs is NOT a list of recommended tinycap stocks. It is a list of companies with
market caps of under $20m offering a reasonable representation of the wider tinycaps market. It’s possible in the future
I may buy shares in one or several of these stocks, at the moment both my opinion and wallet aretrictly neutral.
Regional politics
Argentina and PEDMA: Full pro-mining
Today Sunday November 14th sees a big and important mid-term election process in Argentina,
the Legaslative Elections for the national parliament. Half the seats in the lower House Chamber
of Deputies and a third of the seats in the upper Senate are up for renewal and the right wing
is expected to make advances against the incumbent left wing Alberto Fernández government.
This election matters for the mining industry, too. The national government, aware that mining
is a net vote loser across the country, has had its plans ready to promote mining and introduce
a range of pro-mine initiatives for a while, but the executive has deliberately delayed the
announcement and roll-out of its plans until after this (slightly delayed due to Covid-19)
electoral process to keep backlash to a minimum. Which means that once this Sunday’s election
results are known, Mining Secretary Alberto Hensel finally gets his place in the sun and will
head up the suite of pro-mining policies that he and his government hope will bring new life
and momemtum to the mining industry in the country. They are likely to work, too, and while
the line item details of the package aren’t known we do know that the plan, called PEDMA (the
official government PEDMA page here (9)), is based on United Nations recommendations and
has a ten year outlook. The country will include 33 mining projects in PEDMA, including:
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Seven copper projects
Fifteen lithium projects
Five gold projects
Four silver projects
One potash project
One uranium project
Of those sub-groups, the most valuable are the copper projects. It’s worth noting as this point
how some of the proposals will be more difficult to move forward than others, for example we
know in the silver category that Pan American Silver’s (PAAS) Navidad project is one of the
chosen few but that will still face stiff opposition in itas Chubut region. However, there are
plenty in the PEDMA long list in miner-friendly areas, such as anything in San Juan and those
include Lundin Group’s Filo de Sol and Josemaria projects, First Quantum’s Taca Taca project
and the Aldebaran Altar project.
In effect, the PEDMA plan and timing is why this desk is long Aldebaran (ALDE,.v) at the
moment. We’re also the first to admit the wrong decision to go with ALDE and not Josemaria
(JOSE.v) as the trade, as least to begin with admit (see last weekend and “Aldebaran (ALDE.v)
vs Josemaria (JOSE.to) isn’t going well for IKN”), but the new government announcement plus
the start of drilling at Altar and its the low market cap compared to the amount of contained
copper will give ALDE a leverage advantage in the weeks ahead. At least, that’s the plan.
Argentina: Chubut
Part of the PEDMA ramp-up will focus on Navidad and Chubut, as not only is that project big,
but it’s ready to roll and would get a quick construction decision if the provincial laws of Chubut
were ever changed to allow mining in a “Zonified” central region. To wit, the (so-far all-
conquering) anti-mining lobby last week denounced the government for bringing impeachment
processes against all the local parliamentarians who voted against Governor Arcioni’s project
earlier this year (10). This type of strong-arm tactic often works in Argentina and represents an
escalation of the government’s effort, at both regional and national level, to get Navidad out of
its Environmental straitjacket and into production.
Peru: The uncertain tax increase
We continue with no solid or detailed news on the proposed increase in State burdens on
mining in Peru, one of the policy points used by President Castillo to win the election this year.
In a presser last week, his FinMin Pedro Franke (left wing, but reasonably orthodox and a smart
economist) tackled the issue and told reporters (11) (quote translated), “we’re going to keep
the same type of taxes that already exist, but we plan to adjust the rates”. Then later, when
the “no new taxes” position of Peru’s chamber of mining was put to him, replied, “I understand
that we can have differences of opinion on this subject, but the advisors from the IMF are the
best source we have to make decisions regarding this.” A measured reply from a technocrat,
but it also shows Francke has decided to go the long route in order to build consensus. Out of
the limelight, Peru’s FinMin has drafted in The IMF to examine the Peru mining sector in order
to get their views on what type of extra burden it would be able to carry. This has slowed down
the process, but it’s all about making a proposal that can get past a belligerent Congress and by
bringing the IMF in, in theory at least he will be able to table a project that’s tougher for knee-
jerk opposition to defeat.
Meanwhile the Pedro Castillo government has started to carve out a little political space for
itself. This weekend’s Presidential approval poll from leading pollster Ipsos (12) put his approval
on 35%, some seven points lower than a month ago, but the weight of Lima is heavy on that
number and in the provinces he’s more accepted (and gets 52% support in the South region of
the country. One well-tested indicator of a government on the correct path is when both
political extremes are unhappy. In Lima, the hard right wing continues to try to unseat the
President and is continuing its campaign, mostly via Congress, to attack individual ministers
appointed by President Castillo. Their strategy is to use their powers to bring them before
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Congress, amke them answer for their decisions and then win a no-confidence vote against the
single minister (instead of the whole Mirtha Vasquez cabinet),. The result is to slow ministerial
work and initiatives to a crawl, which then allows them to tell the world the Castillo government
getrs nothing done. Cute politics, but it also works. Meanwhile to the hard left, the out-and-out
Communist Vladimir Cerrón, head of President Castillo’s Perú Libre party, has branded Castillo a
traitor and a sell-out and makes constant (and increasinly bitter) statements on how the Lima
pseudo left has taken over and sold the country down the river (they use the word “caviar”
here, same implication as “Champagne Socialism” up North). This weekend we got this from
the man (13):
“The Caviarism now controls the Cabinet and (the Ministries of) Economy, Exterior,
Justice, Interior, they now only need Defence and Energy&Mines to consolidate economic,
political, military and energy power. Are we facing a Soft Coup D’Etat against our
grassroots government?”
All that is good news for anyone without extremist political views and once again, points us to a
President Castillo who has decided that he likes his job and is willing to compromise to the
traditional powers in Peru (i.e. the 20 or so families that really run the country) in order to keep
it. The situation is similar to that of the Ollanta Humala government, who won on a left wing
ticket and immediately became a milquetoast mandatory. The upshot is that the worst fears of
many regarding Peru, your author’s very much included at the beginning and mid-points of the
year, have melted away and the country is as good a place for FDI in general and mining FDI in
particular as any other in South America.
There’s macroeconomic substance to that statement, too. The ratified Julio Velarde, head of the
Peru Central Bank and perhaps the cornerstone of the pushback against the hard left, last week
forecast Peru’s 2021 GDP growth at +13.2% compared to 2020, a strong rebound from the
pandemic year that was by no means guaranteed a few months ago.
Ecuador: The ball is in Lasso’s court
Delayed by a day, the meeting on Thursday between President Guillermo Lasso and indigenous
pressure groups and unions led by CONAIE and Leonidas Iza fianlly wemnt ahead and nothing
was achieved. The primary sticking point of higher fuel prices due to the removal of heavy
subsidies saw no relief and the meeting broke up with the Lasso opposition telling press that
“the ball is in his (Lasso’s) court” (14) and unless the President moved to cut fuel prices, he
faced inevitable social protests. Meanwhile, the Pandora Papers mess got a little easier for the
President when right wing opposition politico Jaime Nebot instructed his party to ignore the
commission set up to investigate the President. With just Pachakutik (CONAIE) and the Rafael
Correa party left on the commission, they are not going to get the type of consensus required
to move prosecution proceedings through parliament.
In the draft for this note, written earlier in the week, I wrote, “Lasso’s problems have not gone
away, but he has managed to boot them into the medium-term future and buy some time”,
which was true right up to this weekend (15) when Ecuador suffered another horrendous prison
riot, in which 68 inmates were massacred by others (yes, that says sixty-eight) as part of the
narcotrafficking gang wars that have arisen in recent months. The riot was quelled eventually
and a government spokeman tried to put the best spin on matter, though how he could have
used a phrase like “the situation is under control” after 68 people were massacred is a little
beyond my understanding. This riot heaped additonal pressure on Lasso, who previously
promised better security and safety in the country. The combo of community strife, the end of
fuel subsidies, environmental protests (often connected with mining) and now the latest deaths
from gang wars have him on the ropes, but even so Guillermo Lasso is not the worst affected
mandatory in South America by the massive Pandora Papers leak. That honour goes to...
Chile: Sebastian Piñera’s fall from grace and next weekend’s election
The Pandora Papers revelation on Piñera will cost him his reputation, could see him jailed and
may even shave a few days from his total time as President. Chile’s Congress last week moved
to impeach Piñera for his involvement in the deals around the Dominga mine and will start
21
proceedings in the days ahead, Congress seeingly racing to convict and force him out of the
jobh before his mandate comes to and end.
Meanwhile, we are now just seven days from the round one Presidential election, we fully
expect it to go to a second round run-off between hard Right wing José Antonio Kast and left
wing Gabriel Boric. As we reported on Nicaragua’s fake elections last week in which incumbent
dictator and all-round human trash Daniel Ortega claimed vicory with 74.99% of the vote after
arresting and incarcelating anyone who dared to run against him, Boric once again telegraphed
his move to the centre by contradicting his own party. The PC (Communist Party) executive
congratulated Ortega on his victory, which went down like a lead balloon among the Chilean
populace. In response, Boric went against his own party line and told the world that Ortega’s
win was not free or fair, then “invited his party executive to reconsider its position” in a public
statement that reiterated our note of last week. Boric is moving to the centre to capture enough
of Chile’s voters for the run-off (expect Kast to do the same, but from the right).
A reminder on Guerrero
Do not put your mining equity there and take your cue from Alfredo Phillips Green, who until
very recently was founder and President of the “Guerrero Mining Cluster” and country manager
for Torxex Gold (TXG), the big gold miner in the South Mexico state being wracked by
narcotrafficking violence. It’s not just mining of course, for example Acapulco was once the
jewel in Mexico’s tourism crown but these days is a no-go area for foreign tourists. But mining
has been hit hard and the talent exodus continues. Alfredo Phillips Green last week gave up the
ghost and accepted the position of Country Manager at (my long trade) Argonaut Gold (AR.to),
which is good for me because he’s a top class mining brain but speaks volumes about Guerrero
and its future. When it comes to M&A speculation, leave TXG off your list of potential targets
for majors.
Market Watching
The next takeover
The news of Newcrest’s (NCMBY) decision to buy Pretium Resources (PVG), as announced
Tuesday morning (see Producer Basket) was quickly followed by an uptick in M&A speculation,
with the world and their spouse quick with opinions and views on which companies would be
the next to be gobbled up by a large cashed up Tier 1 (or perhaps Tier 2) precious metals
mining company. Hence this note today and while we are fully aware of the market expression,
“Opinions are like a_sholes; everybody has one and everyone thinks theirs doesn’t stink”, we
pick up from the open blog last week. For those that didn’t read it (and I can’t blame you*), the
buyout news saw a short post put up, then one of the comments left underneath (by long-time
reader Tweetie, who will be reading these words as well) prompted me to write another post
“Tweetie asks on M&A and gets five (six?) ideas” (16). The bracketed sixth idea was more left-
field than the others and not really tradeable, as I have a sneaking suspicion Barrick (GOLD)
covets the 40% of Pueblo Viejo it doesn’t own and would pay Newmont (NEM) if it had the
chance. That aside, I then added five potential companies:
Great Bear Resources (GBR.v)
Ascot Resources (AOT.to)
Argonaut Gold (AR.to)
OceanaGold (OGC.to)
Wesdome (WDO.to)
Commenters were then asked to add their ideas and we got plenty of BTL ideas, including these
that stand up to examination:
NovaGold (NG)
Victoria Gold (VIT.to)
MAG Silver (MAG.to)
22
Marathon Gold (MOZ.to)
Sabina (SBB.to)
Seabridge (SA.to)
There were more, but the most important common trait (aside perhasps OGC is jurisdiction.
This M&A cycle is all about securing assets in safe places and it’s no coincidence to see Kirkland
Lake’s sale followed immmediately by that of Pretium. Therefore, our list of possible possibles is
predicated on the assumption that the next buyout will also happen to a company in a politically
stable and safe place, which is why I like my ideas of Argonaut and Great Bear this weekend.
However, I also know I’m poor at second-guessing M&A activity so if VIT, AOT, SBB or any
other of those companies falls first, I won’t be surprised. Faite vos jeux, mesdames et
messieurs.
*I’ve met the guy who writes it
The Mineros SA IPO
This news hit the wires on Friday evening, post-close:
MEDELLIN, Colombia, Nov. 12, 2021 /CNW/ - Mineros S.A. (MINEROS: CB) ("Mineros" or
the "Company") announced today that it has filed its final prospectus with the securities
regulatory authorities in each of the provinces of Canada, except Quebec, and obtained a
receipt therefor in respect of its initial public offering (the "Canadian Offering") from
treasury of 22,222,223 of its common shares ("Common Shares") at a price of US$0.90
(being C$1.1207) per Common Share (the "Offering Price"), for total gross proceeds of
approximately US$20 million (being approximately C$24,904,000).
This IPO has been in the pipelinbe for years (it was “about to happen” when I attended the first
Colombia Gold Show back in 2018) and has taken what seems like forever to materialize.
Meanwhile, Mineros SA has expanded its asset base by buying into normal hardrock mining
operations in Nicaragua and Argentina. Expect plenty of market trumpeting for this limited IPO
on the TSX, but don’t expect me to buy in to the Sprott spiel. The weak point of Mineros SA is
and will always be its environmental footpriny, being as it is essentially a river dredging mining
operation and you can dress those up in all the words you like and show us the all the
government-emitted health and safety certificates you want to try to prove your point, this type
of precious metals mining is and will always be very damaging to riverr environments. This brief
note, at the start of its Canadian listing, explains why you won’t see me talking about the stock
again. Any insto that considers CSR in its investment decisions will run away from this trade and
as that influence is growing fast, the small size of this offering compared to overall market cap
suggests the company knows that all-too well and is aiming at retail only. I can handle its
sponsorship of house long position Royal Road (RYR.v) via the intermediary, its well-run Hemco
subsidiary in Nica, but that’s my limit, this is an investment for people who don’t give a damn
and if that includes you, hopefully you will be insulted enough to unsubscribe from The IKN
Weekly.
The Precious Metals Summit PMSE(V) this week
Tomorrow and Tuesday marks the latest virtual conference event, the 2021 Precious Metals
Summit Europe (Virtual) (17) (that’s the list of companies appearing) and while the two day
event is on an invitation basis, readers with the inclination to attend can use that link and apply
for a free badge for the presentations. On a personal note, after too many of these gigs in 2012
I’m cutting down on the number of 1-on-1 with companies, a deliberate decision to leave my
agenda open and take in more of the 20 minute presentation slots. I’ve increasingly found
these 15 to 20 minute slots as a useful medium for basic DD, a chance to “get to first base”
(i.e. worthy of further investigation) on multiple company stories in a relatively short time.
Meeting with Palamina Corp (PA.v) at PMSE(V) this week
The above in place, we now consider just one of the companies I am meeting next week, as it
is now on the radar as a potential drillplay trade after years in which IKN called the stock an
avoid (as the chart right shows, a reasonable call).
23
The company is Palamina Corp (PA.v) and its previous coverage on the stock has been confined
to the open blog. For example, here in 2018 (18) noting the company was paying newsletters
to pump the stock so for this also from 2018, (19) explaining how PA.v quietly fired its VP
Exploration and tried not to tell anyone. Or here in 2020 (20), in which we covered the way
PA.v had promoted itself since 2017 on the back of getting drill permits and rigs turning quickly,
but a full three years later had nothing to show. This was predictable (and indeed, predicted by
this desk) due to the bad way the company was going about its CSR with locals at the time. For
your author, thoroughly plugged into the Amazon watershed side of the Puno region of South
Peru in which POA.v operates, it was an easy call. However and quietly, from late 2020 onward
PA.v got its act together and reached social agreements with the key local communities around
its main Coasa project, now re-named Usicayos as part of the better CSR effort with locals.
From there it obtained its drill permits and on September 30th this year announced (21) that
drilling was finally underway. This leaves us in the vespers of real news from the company for
the first time and, corporate weaknesses and failings aside, one thing this desk has never
doubted about PA.v is the prospectivity of its rocks.
Palamina Corp. (PA:TSX.V) has commenced its inaugural diamond drill program at its flagship
Usicayos Gold Project in Peru. No drill holes have ever been completed at Usicayos.
Palamina contracted Energold Drilling Peru S.A.C. for the program. Drilling at Usicayos will consist of
roughly 2,600 metres of drilling in six drill holes with the objective of testing multiple mineralized gold
structures defined at surface in the Veta Zone. To date surface sampling has defined an 800 m by
200 m area with values from chip sampling returning values up to 620 g/t Au and channel sampling
up to 123 g/t over 1 m. Drill holes will test to a maximum vertical depth of 400 metres.
In August and September Palamina entered into discussions to support the Usicayos community with
certain initiatives. On September 17, 2021 an agreement was reached with the community to support
local artisans and provide assistance with certain road improvements.
Expect thoughts on this company next weekend and I’m looking forward to my 1-on-1 with CEO
Andrew Thompson this week.
Harte Gold (HRT.to) continued volatility
The side bet, now nastily underwater, has made a hole in my portfolio but the percentage drop
is scarier than money lost. That’s still measured in the hundreds, rather than thousands, despite
this trainwreck of a chart (I always said it was a small side-bet):
There seems to have been some selling when New Gold (still the most likely eventual buyer)
24
made no mention of HRT or its issues in its 3q21 numbers or Conference Call (see above) but
there’s no reason to give up hope just yet. However, I’m quick to remind myself and others that
hope is not a valid investment thesis. I will hold my shares and see what happens, if only to
have an immediate signal if newsflow becomes more positive and offers a potential fliptrade.
Fortuna Silver (FSM) (FVI.to) EIA permits, part deux
"Well, that escalated quickly,
really that got out of hand fast”
Anchorman: The Legend of Ron Burgundy
The note in IKN650 last weekend was well-timed, as on Friday the news that Mexico’s
SEMARNAT was refusing to renew Fortuna Silver’s (FSM) (FVI.to) EIA permit hit the stock like a
ton of bricks and suddenly, a thousand column inches are being written about the issue
(examples (22) (23) (24)).
Once the problem was aired and the stock dumped, we got the inevitable pushback from the
arrogant end of the mining commentariat, fuelled by the qually arrogant attitude of those at
Fortuna Silver. As mentioned in passing last weekend, there’s no way I ever cover or own this
stock again after what I witnessed many years ago, people who confuse law and justice in ways
that would make Cicero turn in his grave.
Do not confuse the two: Fortuna Silver is in a lot of trouble.
The way forward is already mapped out, with SEMARNAT now moving forward to run a
consultancy period with locals that it says is still pending from 2011 and whose result wil be
legally binding. FSM really has no choice but to accede to this consultancy and it puts the future
of ther mine at risk of being closed down, be clear about that fact (whether you like the idea
and think it “fair” or not). FSM has been on the airwaves doing damage control (check out the
YouTube video done by one Dave Krantzler, I can only assume he has zero Spanish ability and
is being paid by FSM) and has trotted out a range of arguments as to why the SEMARNAT
opposition to the mine will not prosper, but before swallowing the line of reasoning coming
from a company that previously tried everything in its power to keep the subject out of the
limelight, step back and think a little. If you need a little prompting, consider this: For ten years
Fortuna has claimed it has the support of locals around San José de Progreso, despite those
large and often long-term protests at its mine gates, but all that time has refused to submit to a
prior consultancy with the locals. Why? If it has the support it claims, what’s the problem in
putting it to the test?
For the time being, the San José mine remains open while the process runs its course but this
company will have a black cloud over its future until resolution and,if the consultancy goes the
way its anti-mining opponents think it will, the outcome will do more damage to the stock price
than that chart above. You may think “this is cheap”, “the locals are crazy” “the company has
always been a good citizen” or anything else you want, but do not confuse your own biases
with what may “unjustly” happen to this company in 2022 in Oaxaca Mexico, a State with a
traditonally negative view of mining activity (we are not in Zacatecas here, folks). Traders and
technical analysts may see a trade and a bounce in the cards, but your fundies-based author
25
sees risk, risk and more risk and will avoid FSM like the veritable plague. We close with another
quote from a slightly more intellectual source than Ron Burgundy.
“The best books, he perceived, are those
that tell you what you know already.”
1984, George Orwell.’
Minera IRL (MIRL.cse): The ball is in the directors’ court
This week (in fact tomorrow Monday) should see Minera IRL publish its AGM materials and at
that point, we should also know whether the board of directors has decided to double down on
the deception and lies in order to protect its CEO, Diego Benavides. Until the directors show
their position, we have nothing else to add to the information already published. However, if
they decide to add another layer of lies and deception, expect a lot more on MIRL between now
and the AGM, slated for December 14th. The ball is in their court.
Conclusion
IKN650 is done, we end with bullet points:
Minera Alamos (MAI.v) has started to move, about time too. Our other Top Pick, Rio2
Ltd, still continues to lag the market badly however. I allow them both time.
The common trait in recent M&A activity has been low risk jurisdictions. Expect that to
continue and place your bets accordingly. My bet are on GBR.v and AR.to.
Another trend in 2021 is the rising importance of good CSR/ESG in mining companies.
The problem with the bad actors is that they cannot easily undo their poor relationships
of before and despite what you might hear, it’s nearly always the arrogance and
ineptitude of the mining company to blame. Fortuna Silver’s “injustice” will be followed
by others, be in no doubt.
I thank you in advance for any feedback. Our Top Pick stocks are Minera Alamos (MAI.v) and
Rio2 Ltd (RIO.v). Flash updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen.
Best, Mark
Footnotes, appendices, references, disclaimer
(1) https://www.politico.com/news/2021/11/10/world-shares-china-inflation-520573
(2) https://www.newgold.com/investors/news-releases/news-details/2021/New-Gold-Reports-2021-Third-Quarter-
Results/default.aspx
(3) https://www.fool.com/earnings/call-transcripts/2021/11/12/new-gold-ngd-q3-2021-earnings-call-transcript/
(4) https://www.reuters.com/business/energy/falling-stocks-pose-problems-london-metal-exchange-andy-home-2021-
11-12/
(5) https://es.mongabay.com/2021/11/ecuador-el-conflicto-detras-del-ingreso-de-la-minera-lowell-en-territorio-indigena-
shuar-arutam/
(6) https://www.globenewswire.com/news-release/2021/11/08/2329848/0/en/Newcrest-to-Acquire-Pretivm-for-C-18-
50-in-Cash-and-Shares.html
(7) https://www.prnewswire.com/news-releases/pan-american-silver-reports-cash-flow-from-operations-of-157-0-million-
in-q3-2021--301420504.html
(8) https://astonbayholdings.com/news/expands-land-package-and-drill-program-after-discovering-sedex-style-
mineralization-at-its-mountain-base-metals/
(9) https://www.argentina.gob.ar/produccion/plan-estrategico-minero
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(10) https://www.anred.org/2021/11/12/chubut-nueva-persecucion-judicial-contra-ambientalistas/
(11) https://mineriaenlinea.com/2021/11/peru-aun-no-ha-decidido-cuanto-aumentara-los-impuestos-a-las-mineras/
(12) https://elcomercio.pe/politica/gobierno/aprobacion-al-presidente-pedro-castillo-cae-siete-puntos-noticia/
(13) https://www.infobae.com/america/peru/2021/11/13/vladimir-cerron-critica-al-caviarismo-en-la-pcm-acaso-estamos-
frente-a-un-golpe-blando/
(14) https://www.notimerica.com/politica/noticia-sindicalistas-ecuador-advierten-lasso-pelota-cancha-poner-fin-
descontento-popular-20211112043328.html
(15) https://www.efe.com/efe/america/sociedad/al-menos-51-fallecidos-en-nuevos-enfrentamientos-carcel-de-
ecuador/20000013-4675092
(16) https://iknnews.com/tweetie-asks-on-ma-and-gets-five-six-ideas/
(17) https://www.precioussummit.com/event/2021-precious-metals-summit-europe/?section=companies
(18) https://iknnews.com/a-question-for-david-erfle/
(19) https://iknnews.com/palamina-corp-pa-v-and-transparency/
(20) https://iknnews.com/andrew-thomson-of-palamina-corp-pa-v-knows-you-are-stupid-and-now-just-wants-to-confirm-
how-stupid-you-are/
(21) https://www.palamina.com/news/2021/9/30/drilling-underway-at-palaminas-usicayos-gold-project-in-peru
(22) https://mundominero.mx/diputada-intercede-por-mina-san-jose-ante-amenaza-de-cierre/
(23) https://oaxaca.eluniversal.com.mx/estatal/anuncia-semarnat-consulta-zapotecas-de-valles-centrales-de-oaxaca-
sobre-minera-cuzcatlan
(24) https://www.elsoldemexico.com.mx/analisis/momento-corporativo-fortuna-silver-mines-argumentos-mas-que-
solidos-7467565.html
Stocks To Follow Closed Positions 2020
Closed in 2020 closed close price
TMAC Resources TMR.to Jan'20 C$3.41 20-Dec-19 C$3.61 5.9% TLS flip play, sold new year
Regulus Res REG.v Jan'20 C$1.10 20-Dec-19 C$1.30 18.2% TLS flip play, profit taken
Bonterra Res BTR.v Jan'20 C$1.90 9-Dec-19 C$1.66 -12.6% TLS flip play, loss taken
McEwen Mining MUX Jan'20 U$1.12 2-Dec-19 U$1.18 5.4% TLS flip play, profit taken
Core Gold CGLD.v Jan'20 C$0.255 7-Apr-19 C$0.305 19.6% arb trade, profit taken
HudBay Min HBM Jan'20 U$3.56 9-Dec-19 U$3.36 -5.6% TLS flip play, loss taken
Midas Gold MAX.to Feb'20 C$0.71 5-Jan-20 C$0.57 -19.7% sm & silly trade
Warrior Gold WAR.v Feb'20 C$0.08 3-Aug-18 C$0.05 -31.3% clean out non-perf sm stocks
Contact Gold C.v Feb'20 C$0.40 19-Aug-18 C$0.18 -55.0% clean out non-perf sm stocks
Sandstorm Gold SAND Feb'20 U$3.73 17-Apr-16 U$7.21 93.3% Sold during port rebalance
NexGen Energy NXE Feb'20 U$1.20 2-Dec-19 U$1.06 -11.7% TLS flip play, loss taken
MAG Silver MAG Apr'20 U$8.95 1-Mar-20 U$10.07 12.5% Sold to cut silver exposure
Alexco Res AXU Apr'20 U$1.69 7-Sep-17 U$1.69 0.0% sold to close Ag exp. in FY20
Bonterra Res BTR.v Jun'20 C$1.62 2-Feb-20 C$1.10 -32.1% under-performer cash moved
Regulus Res REG.v Jun'20 C$0.64 6-Apr-15 C$0.79 23.4% moved $ TMQ/MIN & Au stocks
Great Panther GPR.to Aug'20 C$0.60 21-Jun-20 C$1.10 83.3% Profit taken, good trade
Jaguar Mining JAG.v Aug'20 C$0.42 21-Jun-20 C$0.65 54.8% Profit taken, good trade
Sandstorm Gold SAND Aug'20 U$7.76 10-May-20 U$9.37 20.7% Profit taken, good trade
Integra Resources ITR.v Aug'20 C$2.23 13-Aug-18 C$5.40 142.2% Profit taken, good trade
Wesdome Gold WDO.to Aug'20 C$2.37 14-Oct-17 C$14.82 525.3% last 1/2 of big win closed
INV Metals INV.to Sep'20 C$0.40 17-May-20 C$0.45 12.5% Cut all Ecuador exposure
Cartier Resources ECR.v Nov'20 C$0.155 3-Aug-18 C$0.25 67.7% Exact close price TBA
Tinka Res TK.v Dec'20 C$0.195 19-Apr-16 C$0.195 0.0% Closed on a round trip fail
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2015 to 2019 annual closed positions in appendices below, 2009 to 2014 closed positions in editions IKN553 or earlier
Stocks To Follow Closed Positions 2019
Closed in 2019 closed close price
Atico Mining ATY.v jan'19 C$0.55 24-Jul-16 C$0.32 41.8% patience ran out, made room
Candente Copper DNT.to jan'19 C$0.075 3-Ago-18 C$0.05 -33.3% tiny trade, made room for new
B2Gold BTO.to feb'19 C$2.11 12-Set-14 C$4.05 91.9% Took 1/2 profits, reduce size
Western Copper WRN.to mar'19 C$0.80 20-Ene-19 C$0.81 1.3% Spec trade that didn't work
B2Gold BTO.to mar'19 C$2.11 12-Set-14 C$4.15 96.7% Took rest of profit.
GT Gold GTT.v mar'19 C$1.17 10-Oct-18 C$0.90 -23.1% Took loss. Story changed
NovaGold NG apr'19 U$3.84 13-Ene-19 U$4.15 -8.1% Short that didn't work, sm loss
Zinc One Z.v jun'19 C$0.47 14-Set-17 C$0.025 -94.7% clearing out dead trade
Amarillo Gold AGC.v jun'19 C$0.24 22-Ago-18 C$0.20 -16.7% clearing out dead trade
New Gold NGD aug'19 U$1.44 31-Jul-19 U$1.23 14.6% ST short win thru Q2 earnings
IMPACT Silver IPT.v aug'19 C$0.39 21-Jul-19 C$0.46 18.0% took a quick profit
Fiore Gold F.v aug'19 C$0.34 26-May-19 C$0.56 64.7% Took profit, 2q19 avg
Chakana Copper PERU.v oct'19 C$0.84 22-Mar-18 C$0.16 -81.0% Exploreco trade fail. Want space
Wesdome Gold WDO.to oct'19 C$2.37 14-Oct-17 C$7.57 219.4% Sold half, profit taking
Superior Gold SGI.v oct'19 C$1.46 8-Abr-18 C$0.47 -67.8% Failed sm spec on Au. Moved on
Amerigo Res ARG.to nov'19 C$0.91 23-Set-18 C$0.50 -45.1% worst trade of year, hefty loss
Guyana Goldfields GUY.to dec'19 C$0.94 14-Abr-19 C$0.56 -40.4% taking the loss, financials weak
Tethyan Res TETH.v dec'19 C$0.30 8-Set-19 C$0.16 -46.7% tiny trade, word of probs in co
Stocks To Follow Closed Positions 2018
Closed in 2018 closed close price
Amarillo Gold AGC.v jan'18 C$0.38 24-Mar-17 C$0.31 -18.4% Cut away losing trade
Riverside Res RRI.v jan'18 C$0.39 27-Jun-16 C$0.31 -20.5% Cut away losing trade
Eros Res ERC.v jan'18 C$0.175 1-Mar-17 C$0.16 -8.6% CEO sudden exit, not good
Excellon Res EXN.to jan'18 C$1.54 9-Oct-16 C$1.66 7.8% 4q17 poor, one too many bad qtrs
Wesdome Gold WDO.to jan'18 C$1.68 15-Dec-17 C$2.06 22.6% Near-term trade block, took profit
Sabina G&S SBB.to apr'18 C$2.06 17-Dec-17 C$1.77 -14.1% Near-term trade, bad timing, small
B2Gold BTO.to May'18 C$2.11 12-Sep-14 C$3.67 73.9% sold 25% to reduce exposure
Lara Expl. LRA.v May'18 C$0.65 11-Feb-18 C$0.58 -13.8% Spec on Brazil didn't work
Solitario XPL June'18 U$0.72 19-Mar-17 U$0.41 -43.1% Failed trade, may return in 4q18
SolGold plc SOLG.to July'18 C$0.475 19-Nov-17 C$0.415 -12.6% cut, trade didn't perform
Pan American PAAS July'18 U$17.90 1-Jun-18 U$16.30 8.9% modest win on short position
NGEx Res NGQ.to Sep'18 C$1.01 22-Oct-17 C$1.00 -1.0% Closed to reduce Argentina exp
Sandstorm Gold SAND Oct'18 U$3.73 17-Apr-16 U$4.13 10.7% partial sale to raise cash for GTT
Aldebaran Res ALDE.v Nov'18 n/a n/a n/a n/a liquidate spin out of REG
Stocks To Follow Closed Positions 2017
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 1-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
Belo Sun BSX.to Mar'17 C$0.90 30-Jan-17 C$0.90 0.0% failed near-term flip trade
Lara Expl. LRA.v Mar'17 C$1.15 8-Apr-12 C$1.05 -8.7% cut to make room for new trade
Rye Patch Gold RPM.v Apr'17 C$0.31 2-Sep-16 C$0.32 3.2% cut for doubts & new stock
Cordoba Min. CDB.v Jun'17 C$0.75 15-Sep-16 C$0.63 -16.0% closed
Constantine Metal CEM.v Aug'17 C$0.135 9-Apr-17 C$0.28 107.4% spec trade closed, good win
Red Eagle Min. R.to Sep'17 C$0.67 13-Dec-16 C$0.27 -59.7% IKN's biggest failure in years
Starcore Intl SAM.to Sep'17 C$0.61 10-Jan-15 C$0.31 -49.2% Patience ran out
B2Gold BTO.to Dec'17 C$2.11 12-Sep-14 C$3.39 60.7% sold small portion for liquidity
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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
Please note that due to space considerations closed positions 2009 to 2014 are now
available on request, or were published in any edition to IKN553 (end 2019).
Important Disclosure
The information and opinions contained within this report reflect the personal views of the author and therefore all
material within should not be construed as accurate or reliable or be utilized as advice for investment or business
purposes. Independent due diligence and discussions with ones own investment and business advisor is strongly
recommended. Accordingly, nothing in this report should be construed as offering a guarantee of the accuracy or
completeness of the information contained herein, as an offer or solicitation with respect to the purchase or sale of any
security or as an endorsement of any product or service. All opinions and estimates included in this report are subject to
change without notice. It is prohibited to copy or redistribute this report to any type of third party without the express
permission of the author.
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