6 The IKN Weekly, issue 731 — May 22, 2023
The IKN Weekly
Week 731, May 21st 2023
Contents
This Week: In Today’s Edition, May Two Four, We need to mention the US debt ceiling.
Fundamental Analysis: Contango Ore (CTGO): Modelling the financing.
Stocks to Follow: Equinox Gold (EQX), Amerigo Resources (ARG.to), Faraday Copper
(FDY.to), Orecap Invest Corp (OCI.v), Western Exploration (WEX.v), Minera Alamos (MAI.v), QC
Copper & Gold (QCCU.v), Newcore Gold (NCAU.v).
Copper Basket: Overview, Solaris (SLS.to), Marimaca (MARI.to).
Producer Basket: Overview, Newmont and Newcrest (NEM) (NCM), Hecla (HL), Wesdome
Gold (WDOFF).
TinyCaps Basket: Overview, Palamina (PA.v).
Regional Politics: Ecuador: Crossfire and a volatile 2023 to come, Argentina presidential
election update, Peru: More pro-mining news coming soon, Chile: The mining royalty law
passes.
Market Watching: Deferred.
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
The main event today runs the ruler over Contango ORE Inc (CGTO), the development
gold company working Alaska under the steady direction of company president and
CEO, Rick Van Nieuwenhuyse (aka Rick Van Alphabet). The closure of its financing
package for the Manh Choh project in Alaska means it’s time to build a financial model
and see if there’s a trade in the offing for us retail grunts.
We predicted fun and games in Ecuador last week, fun and game we got. President
Guillermo Lasso invoked the “Muerte Cruzada” (crossfire death) clause of the country’s
Constitution, dissolved parliament and put his own job up for grabs, with an election
now slated for August. We go over what it all means in the top story in ‘Regional
Politics’, below.
I used to be indecisive, now I’m not so sure. Procrastination is never boring, as there
are always a lot of things you should be doing. Etc. Though copper failed to rally last
week and flirted with dropping further, I’m still on the fence about cutting exposure
and lightening some positions. We essay to eschew obfuscation on this in The Copper
Basket.
As for potential trades, please see today’s Stocks to Follow as I’m considering the sale
of a small portion of my large Amerigo Resources (ARG.to) position in order to fund a
starter in Equinox Gold (EQX). That’s mainly because of the other set of political fun
and games last week, as seen the USA and its Debt Ceiling talks and for that, we
begrudgingly dedicate a few lines in today’s main Intro piece.
Other things, too. There are always other things.
1
May Two Four
Otherwise known as the Victoria Day public holiday is always a Monday and this year falls on
the 22nd, i.e. tomorrow. Please note that Canadian markets will be closed for business until
Tuesday. Also and if memory serves, on Friday USA markets open at the normal time but close
early for Memorial Day.
We need to mention the US debt ceiling
I’ve been putting this off, not something I wanted to cover in a publication with a focus on
(mostly) junior mining stocks in (mostly) Latin America and certainly not a subject for someone
who knows enough to be dangerous about US politics, but here we are. But I do remember the
Tea Party and its conflict with the then-Obama presidency on this same issue so, when we add
in the weaponizing of political positions we’ve seen since those simpler times, the US domestic
political, fiscal and (yes, even) monetary battle now coming to a head around the US Debt
Ceiling needs addressing. However, the political aspect how we got to this point is of less
importance, not least because I have no dog in the game (I wouldn’t vote for either party
involved in this stupidity to run any country, let alone the world’s most important one), which
allows me cut to the chase and what this political fight means for the money. Other people can
take sides, you can get your political analysis from somewhere else, what we care about is the
potential effects of this brinkmanship and not its causes. And that’s mainly because of gold. And
that’s because of this (1):
It’s not going to come as a shock to this esteemed audience to know that gold has been
earmarked by all and sundry as the place to hide if The USA decides to commit budgetary
suicide. For sure, not the most scientific of surveys and with 637 respondents divided between
professional and retail investment sectors, not the deepest pool either. But Bloomie has at least
some standards to maintain and, as long as the question was posed neutrally, the SD math
states its margin of error isn’t going to be over 8% in either direction which is well inside the
boundaries set by the favoured response. So yes, this weird political stand-off may be the
tipping point that gold has been looking for, as it brings the two key ingredients required for the
monetary metal, it brings 1) the Fear Trade when 2) money doesn’t run to the US Dollar and its
usual safe havens when waters get choppy.
And you can tell this is a Real Thing, because it’s getting the same billing on gold market wire
reports as the other Big Thing that’s moving all markets at all times in 2023, the Fed and its
interminable debate over which base rate will allow us a soft landing. A Friday headline (2):
2
“Gold rebounds on Powell Pause hopes and Debt-Limit Roadblock”
The market sat down, listened intently to erstwhile and current Fed Heads Bernanke and
Powell, decided that they weren’t joking about “higher for longer” after all (for more on that,
the minutes of the last FOMC are released this coming Wednesday) and that’s good for gold.
But the US Debt Limit is now making the same headlines and if the newsflow this weekend is
anything to go by (3)(4)(5)(6)(7)…
“Yellen says June 1 is 'hard deadline' for raising debt ceiling”
“White House economists claim 8 MILLION jobs will be lost and the stock market
will drop by 45% if there is a default on $31trillion debt - while Republicans wait for
Biden to finally start talks”
“Debt limit talks start, stop as Republicans, White House face ‘serious differences’”
“McCarthy: Republicans aren’t moving goalposts in debt negotiations”
“Janet Yellen says odds U.S. can pay its bills by mid-June ‘quite low’ as fears of
catastrophic default grow”
…that’s about to flip totally. Those five links supplied from a thousand offers and you may
notice I’ve tried to sample the sober end of the news media, with The Hill, Fortune, Reuters, AP
chosen for those examples (it only takes a couple of minutes of searching to dive straight into
political La-La-Land, either side of the fence). Therefore, we can assume the market will
become interested in owning more gold bullion in the days to come and after that, we’ll find out
whether it drops on a last-minute deal between Dems and Reps, or whether the political asylum
running The United States of America will prefer to burn the whole thing down because if it
does, the type of daily gains goldbugs dream about could materialize.
And at the risk of repeating myself for the thousandth time, there’s a lot of room for Wall St to
start buying bullion, too. Our GLD inventory tracker charts tell you all you need to know on that
and while the ETF has had a positive May, there’s still an awful lot of slack to take up if the Big
Money so desires. GLD has added 16.5 metric tonnes to its vaults in May to date and 5.2mt of
that was added last week, so please note the way physical gold flowed into GLD vaults in a
week that saw its ETF price drop by 1.7%. The Friday close total was 942.74 metric tonnes
(below left) and as the ratio chart (below right) indicates, we’re off the worst of the lows but
we’re still firmly in the sentiment trough. There’s plenty of width available but above all, our
sentiment tracker chart is a fair indication on how light Wall St is with gold ownership at the
moment. We know the bullion has been finding buyers in the last six months, but they’ve been
mostly Central Banks (and wiser retail). If the suited and booted money guys decide gold is a
trade, they could push it higher very quickly and with Capitol Hill and the White House
combining to give them reason to do so, we could be in for that long-overdue rally and true
USD-denominated rally in the barbarous relic.
GLD gold holdings, 2022 to date (metric tonnes)
1120
1100
1080
1060
1040
1020
1000
980
960
940
920
900
880
860
3
12/21/13 22/1/41 22/1/82 22/2/11 22/2/52 22/3/11 22/3/52 22/4/8 22/4/22 22/5/6 22/5/02 22/6/3 22/6/71 22/7/1 22/7/51 22/7/92 22/8/21 22/8/62 22/9/9 22/9/32 22/01/7 22/01/12 22/11/4 22/11/81 22/21/2 22/21/61 22/21/03 32/1/31 32/1/72 32/2/01 32/2/42 32/3/01 32/3/42 32/4/7 32/4/12 32/5/5 32/5/91
mt 6.80 GLD: Inventory/Price Ratio, 2022 to date
6.60
source: SPDR GLD data
6.40
6.20
6.00
5.80
5.60
5.40
5.20
5.00
4.80
12/21/13 22/1/41 22/1/82 22/2/11 22/2/52 22/3/11 22/3/52 22/4/8 22/4/22 22/5/6 22/5/02 22/6/3 22/6/71 22/7/1 22/7/51 22/7/92 22/8/21 22/8/62 22/9/9 22/9/32 22/01/7 22/01/12 22/11/4 22/11/81 22/21/2 22/21/61 22/21/03 32/1/31 32/1/72 32/2/01 32/2/42 32/3/01 32/3/42 32/4/7 32/4/12 32/5/5 32/5/91
Source: SPDR data, IKN calcs
Fundamental Analysis of Mining Stocks
Contango ORE Inc (CTGO): Modelling the financing
Thursday morning pre-open saw the news we’ve been waiting patiently for from the gold
developer that’s been on our Watch List for some time, Contango ORE Inc (CTGO), as it
announced the closure of its Secured Loan Facility (Loan) that will fully fund its 30% pro rata
part of the Manh Choh project in Alaska USA (8). The NR came with good news on permitting,
as well as enough baseline information to put together a reasonable ballpark financial model for
the company at Manh Choh, something we’ve been waiting to do for a while as, from this point,
we’ll have a line on its share price and whether or not CTGO represents a bargain price (and if
not, what price represents value).
We’re going to go through the salient points of the NR, then consider the company’s financials
and once those are done, put together a model of what we can expect from its financials during
the six years or so that Manh Choh is set to be a major driver of the company, including the
year and a bit from now until the mine starts operations, and the currently projected 4.5 year
mine life. Once that’s done, we can sit back, suck our teeth and consider its trade potential but
before any of that, the first job is to present a couple of share price charts:
Above left is the two-year chart that, for my money, shows three interesting things:
1) CTGO has been heading in the right direction over the longer-term. This is good.
2) It’s prone to sharp moves up that then plateau for a while before dropping back to the
U$22 to U$24 range. If history repeats (or at least rhymes), the very recent selling that
has taken it down from above/at U$30 to this weekend’s U$28.065 is the start of a
similar correction.
3) Traded volume has always been an issue at the company, with CTGO trading by
appointment for much of that two year chart period (and previous to that, as well). In
the bottom-right of the visual we have a new flurry of action and that seems to indicate
things are getting better, but if you now cast your eyes on the two-month price chart
above right, you’ll see it’s still difficult to call CTGO a liquid and easily traded stock.
True that at $25 or $30 per share, 10,000 shares represents more money than you’ll
see running through a 20c stock that does a million shares per day, but the lack of
liquidity is something the retail investor (you, me) should bear in mind when
considering CTGO as a trade option.
That’s the price chart comment done, we now move to the contents of last week’s NR and I’d
like to start with the executive comment (nearly all of it) because not only does president and
CEO Rick Van Nieuwenhuyse outline the timeline to production, but he saves me a job by
noting that the key permitsfor the build-out are now awarded and they can get to work on this
immediately. Take it away, RVN:
"We are very pleased to have finalized the up to $70 million credit facility with two of
the mining industry’s leading financial institutions. Building upon the relationship with
these two institutions will be a key part of growing the Company going forward. I am
also very excited to announce that the Waste Management Plan, Plan of Operations,
4
and Reclamation and Closure Plan has been approved by the State of Alaska
Departments of Environmental Conservation and Natural Resources. On behalf of
Contango’s Board and shareholders, we thank all those involved for their efforts. With
these approvals, PGJV is now able to start mine site facility construction. Kiewit was
hired as the mining constructor and is responsible for preparing the Manh Choh site for
all mining-related activities, which will start immediately. Other major contracts have
been signed with Black Gold Transport, a local Alaska contractor based in North Pole,
Alaska to transport the run-of-mine ore to the Fort Knox Facility and a Tolling
Agreement has been signed with Fort Knox Mine to process the PGJV ores.
"Now that the major contracts are signed, and financing and permitting are concluded,
all the elements are in place to bring our 30% interest in Manh Choh into production.
With a gold price hovering around $2,000, the high-grade nature of the Manh Choh
deposit will ensure solid cash flows for the Company and its shareholders. We look
forward to keeping our investors up to date with construction and mining progress as
we approach that momentous occasion in 2024 when we have our first gold pour.
All good and for more CEO comment, let’s put this link here and get it done (9). It takes you to
the register page for the webinar scheduled for May 30th 1pm ET (nine days from now, here’s
the blurb that will meet you:
Join our President & CEO, Rick Van Nieuwenhuyse, for an in-depth discussion
regarding the news-heavy month we've had! Participate live and ask questions while
he details all our latest results and what they mean for Contango ORE going forward!
We’re sure to get more on the project and details, but thanks to the NR we have a good
outlines of the debt package, we have a useful bullet point list in the NR which is again copy-
pasted directly, for your consideration:
Up to $70 million of availability, of which $65 million is committed in the form of a term
loan facility and $5 million is uncommitted in the form of a discretionary liquidity buffer
facility.
$10 million has been drawn on the term loan facility at the initial closing, with additional
draws subject to certain final conditions being met.
Outstanding amounts under the facility will bear interest based on the 3-month
adjusted term Secured Overnight Financing Rate ("SOFR") plus (i) 6.00% per annum
prior to the completion date for the Manh Choh gold project and (ii) 5.00% thereafter,
which will be payable quarterly.
The facility will mature on December 31, 2026 and will be repaid via quarterly
repayments over the life of the loan.
The facility has an upfront fee of 2.85% and a production linked arrangement fee of
$5.00 times the projected total production of gold ounces in the base case financial
model delivered on the closing date, payable quarterly based on attributable
production, with any balance due upon the maturity or termination of the facility.
The facility is secured by all the assets and properties of the Company and its
subsidiaries, including the Company’s 30% interest in PGJV but excluding the equity
interests of Alaska Gold Torrent, LLC in respect of the Lucky Shot Mine.
As a condition precedent to the second borrowing, the Company is required to hedge
approximately 125koz of its attributable gold production from Manh Choh. The hedges
will be provided by ING, Macquarie or their affiliates.
Those provide enough outlines for our purposes today and we incorporate all those, plus
information we already know or have gleaned
CTGO: Shares out (m) about the company and its project, into the model
below. But before that, we run our usual suspect
financials overview charts. We’re less interested in
expenses to date, what matters to us is the
financial well-being of CTGO so we’re going to
stick with the main balanced sheet items, but the
first chart is that of shares outstanding (right).
5
18.6 57.6 77.6 87.6 01.7 13.7 26.7 26.7 26.7 26.7 36.7
10
9
8
7
6
5
4
3
2
1
0
12_ced 22_ram 22_nuj 22_pes 22_ced 32_ram tse32_nuj tse32_pes tse32_ced tse42_ram tse42_nuj
source: company filings, IKN ests
One of the stand-out features of CTGO is its low and tight share count, with just 7.307m shares
out as at the end of the last quarter, March’23 (also filed last week). We know that’s moved up
to around 7.62m today, as a few warrants were made whole by backers and they added around
$6.9m to treasury. We’re unlikely to see a large share placement in the future, what with all the
money now secured to build Manh Choh, with the only scheduled additions being the 3.5k or so
shares CTGO pays per quarter to convertible debt holder Queen’s Road Capital (QRC.to), as 2%
of its 8% quarterly interest service (the other 6% is paid in cash).
We move to the main overview assets and liabilities charts and the job in all these is to show
the recent past, then how we model the U$65m in debt funds will enter the company between
now and project completion, scheduled for end 2q24.
CTGO: Assets, per qtr
100
90
80
70
60
50
40
30
20
10
0
Starting with assets (above left), we know the first $10m of the $65m baseline facility has been
released, we also know that treasury to this week stood
at around $9m thanks to the recent warrants exercised.
We also know the first payment came added the 2.85%
upfront fee to the lenders, so we presume CTGO adds a
total of $11.9m to its liabilities ledger for the cost of
$10m to assets. After that and without knowing the
exact timing or amounts, we presume the package is
delivered to CTGO in regular $15m tranches as
required, with a final $8m to bring the total to $65m
borrowed (see chart right). This is best-gueswork
rather than scientific accuracy, but we’re not going to
be far out ands in this way, we can model the type of
(non-compounded) interest servicing payments we
expect CTGO to pay as the build-out and eventual commissioning takes place. Moving to
liabilities, this is the only balance sheet chart that I’ve modelled into the longer-term future, in
order to get a handle on how much CTGO will take in debt onto its books and what we believe
is a reasonable schedule in which it can pay back the facility, interest and all. Financial debt
peaks (as you’d imagine) at the end of the construction stage and before the cash starts
flowing. We’re modelling a reasonably smooth ramp-up phase and that might not be the case,
but we have to start somewhere and if so, debt should come out in regular payments of
principal and interest until the major facility is fully paid, on schedule 4q26. Also at that point,
the QRC.to convertible debt becomes due and we assume it indeed becomes equity, bringing
the shares out total to around 8m and leaving CTGO essentially debt free.
6
12_nuj 12_pes 12_ced 22_ram 22_nuj 22_pes 22_ced 32_ram tse32_nuj tse32_pes tse32_ced tse42_ram tse42_nuj
U$m
fixed
other current
cash
source: company filings/IKN ests
CTGO: assumed debt drawdowns
9.11
1.51 0.51 0.51
0.8
CTGO: Liabilities, per qtr
100
90
80
70
60
50
40
30
20
10
0
U$m
16
14
12
10
8
6
4
2
0
jun.23 sep.23 dec.23 mar.24 jun.24
source: CTGO data, IKN ests
12_ced 22_ram 22_nuj 22_pes 22_ced 32_ram tse32_nuj tse32_pes tse32_ced tse42_ram tse42_nuj 42.pes 42.ced 52.ram 52.nuj 52.pes 52.ced 62.ram 62.nuj 62.pes 62.ced
U$m
LT liabs
current liabs
source: CTGO filings/IKN ests
CTGO: Working Capital per qtr
909.61
157.8
472.22
661.61
704.8
545.3
2.31 2.51
7.61
7.31 2.11
24
22
20
18 16
14
12
10 8
6
4
2 0
12_ced 22_ram 22_nuj 22_pes 22_ced 32_ram tse32_nuj tse32_pes tse32_ced tse42_ram tse42_nuj
U$m
26 CTGO: Cash treasury per qtr
24
22
20 18
16
14
12 10
8
6
4 2
0
source company filings/IKN ests
12_ced 22_ram 22_nuj 22_pes 22_ced 32_ram tse32_nuj tse32_pes tse32_ced tse42_ram tse42_nuj
source: company filings/IKN ests
srallod
fo
snoillim
We’ll take a closer look at those scheduled payments in a moment, first let’s wrap up the
quick’n’dirty on balance sheet items by considering working capital and cash treasury (charts
above). The objective CTGO will have in the next year and a half is to maintain liquidity and
keep their payments on schedule and, according to our model, they should be able to do that
just fine. We’re presuming CTGO doesn’t use the $5m overrun option on the debt package and
takes just the mina $65m, that might not be the case because RVN has previously mentioned to
this desk and to others that there will be a payment lag as the first gold is produced and sent to
customers, one that may required a little stop-gap cash to fill in before cash flow gets regular.
These model charts rely on the regular appearance of the debt cash (or course) but if so, we
forecast that CTGO gets to first production with enough treasury on hand to go do what it
wants at its other properties (Lucky Strike etc) in the meantime without concern.
As for operations we know that CTGO, via its 30% ownership of the Peak Gold LLC JV vehicle
(the 70% being Kinross), expects to get 67,500 oz GEO (nearly all gold, with some minor silver
credits) as its pro-rata attributable share of production and that production to set to run for 4.5
years. These two charts model that production on a quarterly basis to 2026 (below left) and an
annual basis over life on mine plan to end 2028 (below right).
Again, you the reader must be clear that a financial model is only an approximation of the real
world and results are bound to differ from this flat-type production assumption. But that’s fine,
our job is to get in the ballpark and to do so, we assume Manh Choh takes 2024 to get up to
full production speed and in its first year, produces 23,000 of attributable GEO for CTGO. Then
2025 to 2028 it runs at exactly 16,875 GEO per quarter, or 67,500 GEO for CTGO and its 30%
(obviously Kinross and its 70% gets the lion’s share of the grand total, we are ignoring those
numbers completely and only worried about what CTGO gets).
This next chart shows the quarterly revenues we forecast from those ounces in three different
gold price environments, using U$1,800/oz gold for our base case, then U$2,000/oz gold and
U$2,200/oz for an upper case. The calculation takes into account that according to the terms fo
the debt deal, CTGO must hedge 125,000 of its total attributable production and we assume
that happens via a costless collar based at U$2,000/oz:
CTGO: Model gross revs at three gold prices, per qtr
7
7.3 0.4 3.4
9.41 0.61 1.71
3.42 0.62 7.72
5.13 8.33
0.63
5.13 8.33
0.63
5.13 8.33
0.63
5.13 8.33
0.63
5.13 8.33
0.63
5.13 8.33
0.63
5.13 8.33
0.63
5.13 8.33
0.63
40
35
30
25
20
15
10
5
0
42.nuj 42.pes 42.ced 52.ram 52.nuj 52.pes 52.ced 62.ram 62.nuj 62.pes 62.ced
CTGO: Model attributable GEO production, per qtr
U$m
at $1,800
at $2,000
at $2,200
source: IKN calcs from CTGO data
0002 0008 00031
57861 57861 57861 57861 57861 57861 57861 57861
20000
18000
16000
14000
12000
10000
8000 6000 4000
2000
0
42.nuj 42.pes 42.ced 52.ram 52.nuj 52.pes 52.ced 62.ram 62.nuj 62.pes 62.ced
Oz Au CTGO: Model attributable GEO prod, per annum
source: IKN ests from CTGO data
00032
00576 00576 00576 00576
Oz Au
80000
70000
60000
50000
40000 30000
20000
10000
0
2023 2024 2025 2026 2027 2028
source: IKN ests from CTGO data
Therefore and as an example, once Manh Choh reaches steady-state operations we calculate
that at U$2,200/oz gold, the company receives gross revenues of just over U$36m, or an
average of U$2,133/oz. On the other hand, CTGO benefits from hedging around a third of its
total production at $2k/oz if gold prices drop and in our example, at a spot average of U$1,800
per GEO it receives U$1,867/oz.
As for costs, we already know that the original projected AISC of U$900/oz is now too
optimistic, in these inflationary days. Major partner Kinross benefits from the ownership of the
processing facility for this ore (Fort Knox) and is currently projecting an AISC of U$1,000 per
GEO for its portion. On consulting with CTGO CEO RVN (lots of letters there), he thinks an AISC
of U$1,100/oz is a fair and reasonable estimate at this time for his company’s 30% of the
production. So we’re using that and as a result, can do this:
CTGO: Net revenues at three Au prices, per qtr
11
10
9
8
7
6
5
4
3
2
1
0
-1
8
42.nuj 42.pes 42.ced 52.ram 52.nuj 52.pes 52.ced 62.ram 62.nuj 62.pes 62.ced
U$m
at $1800
at $2000
at $2200
source: IKN calcs from CTGO data
Why do those lines increase gradually as time goes by, even while gold prices and Manh Choh
production are both assumed steady-state? That’s because of this:
CTGO: Total debt principal, per qtr
There are three elements to the debt and interest payments CTGO needs to cover until end
2026. The main one is the principal and the chart to the right shows how it first accumulates on
the balance sheet, then is modelled to drop as CTGO makes its scheduled quarterly payments
(that we suppose to be as regular in size as possible…again, for modelling purposes). Then
above left we see those regular quarterly principal payments in light blue, with the darker blue
the quarterly interest due on the outstanding total. Finally, we add the 6% cash service CTGO
pays to QRC.to for its convertible debt facility.
Note that both these debt facilities mature end
2026, which means that in 2027 CTGO has no
more debt payments to cover and will benefit
according from the free cash flow. But first let’s
wrap up what it means to the quarters to end
2026 and this chart (right) shows the modelled
post AISC revenues on a per share basis. IWe
include the 2023 quarters to show how the
construction period will drain cash, but once the
72 24
75 56 16 65
94 24 53 82 12 41
7 0
70
60
50
40
30
20 10
0
32.pes 32.ced 42.ram 42.nuj 42.pes 42.ced 52.ram 52.nuj 52.pes 52.ced 62.ram 62.nuj 62.pes 62.ced
CTGO: Estimated debt repayment schedule, per qtr
U$m
10
9
8
7
6
5
4
3 2 1
0
source: CTGO data, IKN ests
32.pes 32.ced 42.ram 42.nuj 42.pes 42.ced 52.ram 52.nuj 52.pes 52.ced 62.ram 62.nuj 62.pes 62.ced
U$m
QRC cash int
new service payment
new principal payment
source: IKN estimates from CTGO data
1.60 CTGO: Model net revs per share, per qtr
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
-0.40
32.nuj 32.pes 32.ced 42.ram 42.nuj 42.pes 42.ced 52.ram 52.nuj 52.pes 52.ced 62.ram 62.nuj 62.pes
at $1800
at $2000
at $2200
source: IKN calcs from CTGO data
mine is at full tilt this will be a real money spinner. Even at U$2,000/oz gold and an AISC of
U$1,100/oz, some $200/oz higher than original projections when the project got off the ground,
CTGO can pull in U$1 per quarter for its share even as it pays off debt.
Now let’s do the same for the entire 4.5 year mine life. This chart shows the gross revenues,
with between U$126m and U$144m for the full year at full production:
CTGO: Model gross revs at three gold prices, per annum
9
9.24 0.64 1.94
0.621 0.531 0.441 0.621 0.531 0.441 0.621 0.531 0.441 0.621 0.531 0.441
160
140
120
100
80
60
40
20
0
3202 4202 5202 6202 7202 8202
U$m
at $1,800
at $2,000
at $2,200
source: IKN calcs from CTGO data
Then we apply AISC of U$1,100/oz and once the debt servicing is done, Manh Choh’s earnings
for CTGO rocket. The charts show both absolute and on a per-share basis, with the final years
assuming 8m shares out once the QRC debt is converted.
CTGO: Model net revs per share, per annum
If we include the negative periods from this year and the first part of 2024 before the gold and
cash starts flowing, the total attributed revenue per share of our model at our three example
gold prices are
At U$1,800/oz gold: U$17.83 per share
At U$2,000/oz gold: U$22.80 per share
At U$2,200/oz gold: U$27.78 per share
As at this weekend, this compares to the U$28.06 share price for CTGO. At first sight, this may
make the company look overvalued as, once it’s mined and processed and sold its 30%, even at
U$2,200/oz it won’t get back the current equity price of the stock. However, there are several
other elements that CTGO brings to the table:
Potential for extended mine life: The mine plan put together by the 70/30 partners Kinross and
CTGO is predicated on a 4.5 year mine life and on the high grade ore known to be there (it
needs to be of a certain grade to make the long haul to the mill cost effective). However, we all
know that mines, once underway, find ways of squeezing more years of operation out and with
Manh Choh making extensive use of ore sorting at the mine site already, it may well be able to
extend life using lower tonnages and/ore lower grades that get upgraded for the trip. Please
note that any year of operation after the expected end in 2028 would be free of debt servicing
payments for CTGO and thereby reducing its overall costs.
The extended land package around Manh Choh: Mostly 100% owned by CTGO, CEO RVN has
made no secret of the area’s prospectivity and, once a mine is up and running, it becomes a lot
83.0- 83.0- 83.0- 71.0 85.0 89.0 34.2 16.3 08.4 86.2 18.3 49.4 64.6
95.7 27.8
64.6
95.7 27.8
U$m CTGO: Net revenues at three Au prices, per annum 11
90 10
9 at $1800
80
8 at $2000
6 7 0 0 a a a t t t $ $ $ 1 2 2 8 0 2 0 0 0 0 0 0 6 6 0 9 . . 8 8 6 6 0 9 . . 8 8 6 7 at $2200
50 51.7 51.7 5
4 40 36.7 39.5 3 30 27.7 30.5 2
20 18.6 21.4 1
10
0 ---222...999 1
47
.
..
3
45
-
0
1
-10 2023 2024 2025 2026 2027 2028 2023 2024 2025 2026 2027 2028
source: IKN calcs from CTGO data source: IKN calcs from CTGO data
easier to go exploring for new sources of feed that could extend operation life.
Lucky Strike: Also 100% owned, this historic mine just North of Alaska’s capital Anchorage
already has a low tonnage, high grade resource as per this corporate literature:
CTGO has big plans for Lucky Strike and while it will take a few years to get to the point of a
construction/production decision, the team has already improved strike and depth of the main
through the drill bit and with a modern, systematic drill program is highly confident of reach at
least 500,000 oz of high-grade gold.
Early-stage exploration projects: As we’re making a list of CTGO things, let’s add that it also
owns three early stage properties also in the Alaska region, namely Shamrock, Eagle-Hona and
Triple Z.
Discussion and conclusion
This project and company makes all the sense in the world. It has a low-risk, low capex, quick
start-up project on its books in the shape on Manh Choh that has the permits, the cash and the
expertise in a large JV partner, everything you could wish for and a package that lowers the risk
for CTGO considerably, especially compared with similar staged junior developer companies. It
also makes all the sense in the world for financial backers, e.g. the debt providers and the
previous convertible debt held by QRC, as they get solid returns at low comparative risk in one
of the best and safest mining jurisdictions in the world (once you have your papers, which
Manh Choh now has). The financing package is a reasonable one, the timeline to production is
short and once in operation , CTGO will rake in the cash.
However, it’s not a stock I’d buy at any price and today’s it’s too expensive.
Considering the financial model for Manh Choh based on what we’ve been told by CTGO and its
bigger partner Kinross, we can just about justify this share price at its current levels but that’s
not why I buy stocks in junior miners. The small retail speculator must have a different mindset
than that of the company or its main financial backers and at current prices, there’s not enough
left on the bone to assume there’s a massive amount of upside left. That said, we’re still going
to track CTGO on our Stocks to Follow list and it will remain on the Watch List because, now we
have our valuation framework in place, there may come a time when CTGO shares drop low
enough to justify a speculative purchase. That may be on timing, it may be due to a rise in the
price of gold, or it may be because CTGO delivers market-changing news from once of its other
assets, or that Manh Choh’s mine life suddenly doubles and we can expect four more years of
Ducktales levels of revenue that would make an expensive stock look like a sudden bargain.
What CTGO has with Manh Choh and its now fully financed project is the most solid of valuation
baselines that, all things considered, I’d bottom like at U$22/share considering the expected
margins m the current gold price and the secondary assets CTGO brings to the table. Therefore
this weekend’s U$28 is too expensive for my taste, but if it drops to U$20 it’s a stock we could
buy without a moment’s hesitation, its fundamental baseline will make sure it doesn’t drop any
further. And that’s how you write seven pages on a junior miner and decide not to buy its stock
on the open market. An excellent company, a top quality project and as close to guaranteed fat
profits as you can get in this weird and wonderful sector. It’s just the share price, there’s not
enough left for us retail at its current levels.
10
Stocks to Follow
The beatings will continue until morale improves. Another negative week for the Stocks To
Follow list and there wasn’t ever going to be much escape when gold drops 1.7% and copper
fails to rebound from its dump of the week before, while lost GDXJ 4.2% and GDXJ lost 4.3%
week over week to underscore the weakness in equities. Somehow we managed to gather
seven winners (WEX.v, NCAU.v, RIO.v, OCI.v, ATC.v, RUG.v, MENE.v) from the 17 stocks on
our list this time last week, but most of them were at the smaller end of the list and there was
more harm done to the portfolio than good, due to the ten losers including the chunky losses
seen in main reco stocks Faraday (FDY.to down 9.4%), SolGold (SOLG.to down 9.3%) and
AbraSilver (ABRA.v down 7.7%). To the upside, Orecap is the new name for Orefinders (OCI.v)
and moved up 42.9% on the name change news and other moves in our favour include
rebounds in Mene Inc (MENE.v up 15.0%), Newcore (NCAU.v up 9.7% and Rio2 Ltd (RIO.v up
7.7%), though all of those didn’t do anything outside recently established but rather loose
trading ranges.
With the addition of Equinox Gold (EQX) (EQX.to) to the Watch List as planned, we now have
18 open positions with 13 of them owned personally, two below the self-imposed maximum.
Nine are in the green, nine are 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$0.35 66.7% $0.75 first tgt, #1 idea
RECOMMENDED STOCKS
Amerigo Res ARG.to STR BUY C$1.36 12-Dec-21 C$1.51 11.0% Main Cu trade, top fundies
SolGold SOLG.to STR BUY C$0.265 19-Feb-23 C$0.27 1.9% Cu in Ecuador, M&A tgt
QC Copper&Gold QCCU.v SPEC BUY C$0.265 25-Apr-21 C$0.15 -43.4% MRE due June 23
Faraday Copper FDY.to BUY C$0.79 26-Mar-23 C$0.77 -2.5% Latest Cu exploreco, IKN723
AbraSilver Res. ABRA.v BUY C$0.36 4-Dec-22 C$0.32 -11.1% added for last time Mar'23
Western Explor. WEX.v BUY C$1.87 9-Apr-23 C$1.70 -9.1% Au spec in NV USA
Newcore Gold NCAU.v BUY C$0.205 23-Oct-22 C$0.17 -17.1% MRE better than it looked.
Rio2 Ltd. RIO.v SPEC BUY C$0.83 22-Apr-18 C$0.21 -74.7% Cheap on permit probs, appeal
SPECULATIVE TRADES
Orecap inv OCI.v SPEC BUY C$0.04 20-Nov-22 C$0.05 25.0% corp revamp, new strategy
Aldebaran Res. ALDE.v BUY C$0.72 16-May-21 C$0.73 1.4% drill assays now coming
Minera IRL MIRL.cse avoid C$0.195 22-Jul-12 C$0.035 -82.1% run into ground byCEO, AVOID
A WATCHLIST OF POTENTIAL TRADES. NB: I DO NOT OWN
Equinox Gold EQX WATCH U$5.34 15-May-23 U$4.90 -8.2% Likely purchase soon
ATAC Res ATC.v WATCH C$0.095 11-Sep-22 C$0.14 47.4% now under offer, will not trade
Rugby Resources RUG.v WATCH C$0.06 26-Mar-23 C$0.065 8.3% new on watchlist, Cu in Col
Goldshore Res GSHR.v WATCH C$0.165 26-Mar-23 C$0.225 36.4% return to list, possible flip
Contango Ore CTGO WATCH U$23.25 2-Dec-22 U$28.065 20.7% Manh Choh finance now closed
LONG-TERM NON-MINING HOLD
Mene Inc. MENE.v adding C$0.63 6-Dec-20 C$0.345 -45.2% LT bet, adding slowly
CLOSED TRADES IN 2023 date closed close price
Altiplano Metals APN.v jan'23 C$0.31 17-Sep-21 C$0.17 -45.2% delayed and will dilute soon
Western Copper WRN.to mar'23 C$2.02 13-Nov-22 C$2.32 14.9% sold on reduced M&A prob.
Chesapeake Gold CKG.v may'23 C$3.07 20-Feb-22 C$1.75 -43.0% Closing on legal action news
2015 to 2022 annual closed positions in appendices below, 2009 to 2014 closed positions in editions IKN553 or earlier
Now for notes on some of the covered companies:
Equinox Gold (EQX): ADDED TO WATCH LIST, MAY BUY THIS WEEK. As per the
11
decision last weekend, EQX makes its debut on the ‘Stocks to Follow’ list and as the week
turned out, I was right not to open my personal position immediately. However and as the
column note above states, I have every intention of making this next/one of my next
purchases, all we need is a conducive gold price and the right entry point. The latter may be
with us already, as the dive under U$5.00 on volume as gold moved away from the U$2,000/oz
line last week makes this an interesting place if gold rebounds.
I therefore reserve the right to purchase in the days ahead and announce the open trade next
weekend, if and only if the market circumstances warrant the move. This would be my “Debt
Ceiling Trade” as, market nerves increase around the state of the US economy as its politicos
squabble the country to death, gold is likely to spike higher and with its size, trade volume,
market position and high cash cost regime making better leverage to gold than the average
miner, EQX fits the bill. All that and as seen last week, it’s in good financial position to get to
the other side of the Greenstone build-out and “transform the company”, as they tend to say.
No final decision yet, though. It all depends on the entry price offered, market sentiment and
what gold does as the USA decides on whether to bankrupt itself or not. As for the means to
support a new purchase in EQX, see below.
Amerigo Resources (ARG.to): MAY SELL A FEW THIS WEEK. Down just 1c on the week,
our biggest copper holding is also the most defensive and that showed in its price action last
week, with its market probably propped by the corporate buyback program that’s been going
on and putting a floor in the price. A satisfying result to see the stock perform in the way it
should, however I am thinking of raising some capital by selling some shares. This is my
biggest copper position by far. Last week I wrote that I could sell up to 50% without much
heartache, but on mulling it over during the week (especially on the copper down days), an
alternative of selling a minor 20% and remaining clearly long and strong started to sound like a
better course of action.
As for the reason for selling, that’s simple. It would be for pure personal portfolio
management reasons only and not a reflection on ARG or its prospects (underlined
and bold-types for a reason). I’d still be clearly long the stock and willing it higher, but I’m thin
on cash and thinking about trading in the gold sector if this Debt Ceiling malarkey offers an
opportunity, for that I need funds. I
could sell 20% of this and raise enough
cash for a modest but meaningful
starter position in EQX. Again, it all
depends and if IKN732 shows up next
weekend with no changes at all to the
table above, don’t be shocked.
As for the strategic decision to swap
out copper exposure for gold exposure,
the Gold/Copper ratio chart (right)
shows that in times of financial stress,
gold can quickly out-perform the
industrial metal complex. It’s up to you
to stare at the six month period before
the Covid spike and decide whether
that little pattern has just repeated in
late 2022 and early 2023.
Faraday Copper (FDY.to): Down
9.4% on the week despite some good
drill results that cut a high grade assay at a relatively low depth in an area that would be
amenable to the eventual open pit mine plan at the Mammoth zone (10), the headline “45.89
Metres at 1.68% Copper, 0.33 g/t Gold and 5.55 g/t Silver” (quote/unquote) another strong
12
assay. Though this intersect wasn’t the deeper cut we’ve been waiting for, it was a salient
reminder that the recent PEA is but a “snapshot in time” (as the cliché goes) and that Copper
Creek’s resource and economics are set to improve significantly as the 2023 drill results are
factored into the resource and an eventual mine plan.
FDY annoyed even further with a soft finish on Friday that went against the small relief rally in
copper and in copper stocks. It’s also the stock that I said I’d sell before other in IKN730 last
weekend (or perhaps it’s now possibly first sell, see Amerigo above) so I was watching its
performance closely and the Friday sag pulled it too low for my taste. In fact and fwiw,
anything under 90c looks too cheap and I’d rather wait for the rebound than follow the herd
out the door, so it stays on watching brief but if copper cannot hold and recover, I’ll need to
hold my nose and liquidate. I really don’t want to sell, though.
Orecap Invest Corp (OCI.v): The transformation is complete at our minnow value trade
Orefinders (ex-ORX), which last week announced this (11):
TORONTO, May 16, 2023 - Orefinders Resources Inc. (TSXV: ORX) (the “Company”)
is pleased to announce that the Company will change its name to “Orecap Invest
Corp.” effective May 18, 2023. Subject to final approval of the TSX Venture Exchange,
it is anticipated that the common shares of the Company will commence trading under
the new name on the TSX Venture Exchange with the new trading symbol “OCI” at
market open on May 18, 2023. There is no consolidation or change in the share
capital. The new name and branding are appropriate for the future direction of the
Company after updating its listing status from a mining issuer to an investment and
mining issuer pursuant to the policies of the TSX Venture Exchange.
So from this point, it’s OCI.v and not ORX.v. The stock improved by a cool 42.9% on the news
of this corporate face-lift, which in real terms means a return to 5c however, volumes were very
low. But I’m not going to be cynical or snippy about this news or the minor stock price
improvement, as this strategic change is one of the reasons we bought into ORX-now-OCI in
the first place. It is now positioning itself as a “hub company” of the Stewart Family’s Ore Group
company stable and that makes a lot of sense, it would be great to see new investment money
flow through OCI and into the spokes of its other companies. For example, QCCU.
Western Exploration (WEX.v): Always a good sign to see positive market action and net
buying while a financing is open, even better to see it while the sector faces general headwinds.
We await the closing of the placement and the start of the real marketing push.
Minera Alamos (MAI.v): MAI returned to
its recent low price of 33.5c on Thursday,
which would have been far more depressing
if it weren’t for the reaction. For a moment it
looked like putting in a real rally but even so,
it’s doing nothing more or less than the
market median these last two weeks. MAI is
scheduled to deliver its 1q23 financials by
the end of this month, we’ll be looking for
extra information of 2023 guidance in that
document.
QC Copper & Gold (QCCU.v): Ticking off
the days before we get the long-awaited resource update and as the stock continues to trade
flat at this low level, it’s tough to read too much into the sentiment.
Newcore Gold (NCAU.v): Its chart was “truly horrid” this time last week so the small relief
rally that popped NCAU by nearly 10% this week was welcome, even if volume remains thin.
13
The Copper Basket
After twenty weeks of 2023, The Copper Basket shows a loss of 3.63% to level stakes:
company ticker price 1/1/23 Shares out Market Cap current pps gain/loss%
1 Solaris Res SLS.to 6.44 114.56 695.38 6.07 -5.7%
2 Marimaca Cop MARI.to 3.22 88.028 352.11 4.00 24.2%
3 Western Copper WRN.to 2.41 151.597 338.06 2.23 -7.5%
4 Arizona Sonoran ASCU.to 1.92 105.96 182.25 1.72 -10.4%
5 Oroco Res OCO.v 0.91 213.438 168.62 0.79 -13.2%
6 Faraday Copper FDY.to 0.54 175.2 134.90 0.77 42.6%
7 Aldebaran Res. ALDE.v 0.78 153.96 112.39 0.73 -6.4%
8 Hot Chili HCH.v 0.78 119.455 109.90 0.92 17.9%
9 Regulus Res. REG.v 1.10 124.509 98.36 0.79 -28.2%
10 Pan Global Res PGZ.v 0.46 212.145 74.25 0.35 -23.9%
11 Kodiak Copper KDK.v 1.12 56.2 41.59 0.74 -33.9%
12 QC Copper QCCU.v 0.165 162.815 24.42 0.15 -9.1%
13 Element 29 Res ECU.v 0.16 86.966 16.52 0.19 18.8%
14 Libero Copper LBC.v 0.155 93.869 10.79 0.115 -25.8%
15 Atacama Copper ACOP.v 0.16 34.373 5.84 0.17 6.3%
NB: All stocks in CAD$ Portfolio avg -3.63%
The basket average lost just under a percentage point and the eight losers (SLS.to, WRN.to,
OCO.v, ALDE.v, REG.v, FDY.to, QCCU.v, ECU.v)
The Copper Basket 2023, weekly evolution
out-numbered the six winners (MARI.to, 14%
ASCU.to, HCH.v, PGZ.v, LBC.v, ACOP.v) with just 12%
10%
one unchanged stock (KDK.v). So a net negative 8%
week but on compiling the data on Friday 6%
4%
evening and sitting back once the XLS was
2%
updated, I couldn’t help but think that it could 0%
have been a lot worse. The moves on the week -2%
-4%
tended to be small, with no double figure -6%
percentage moves in either direction and a whole
bunch of stocks just moving one penny or one
percent, up or down. The biggest win was for
Pan Global (PGZ.v up 7.7%), the biggest loser Faraday (FDY.to down 9.4%, which sucks).
14
ts1naJ ht8naJ ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5raM ht21 ht91 ht62 dn2rpA ht9 ht61 dr32 ht03 ht7yam ht41 ts12
source: IKN calcs
The driver of all this was once again the copper price and your author was watching this
particular squiggly line closely all week (even
using the realtime charts for once, it got a
little obsessive). If it weren’t for the rally on
Friday and the lift of the most widely traded
Comex futures contract back over U$3.70/lb
I’d have resigned myself to selling and
lightening some positions, as sketched out
last weekend in “The portfolio exposure to
copper”. I’ve been agonizing over that
“proactive decision” I said I’d make last
weekend and, if copper had stayed under
$3.70, or remained lifeless, the decision to
trim would have been easier. But the way
the market panned out, with that welcome
little rally on Friday, is enough to keep me in
for at least this weekend. Please note that above in Stocks to Follow I’ve laid out a scenario in
which I may (as in may) sell some of my largest position, that of Amerigo, in order to fund a
trade in Equinox Gold (EQX). That’s only semi-related to the machinations on whether to lighten
on copper via sales in Faraday, Aldebaran etc as they are more dependent on what the price of
copper does in the days ahead.
I do feel as though I’m dicking my paying audience around a little and it’s unfair to
procrastinate this way, but ultimately The IKN Weekly is predicated on what I do with my own
portfolio and as such, I can only be true to my own calls. On the other hands, I have no
problem in laying out the thought process behind it so that hopefully you’ll at least understand
where I’m coming from, even if you disagree with the position or method. It can be summed up
in four brief bullet points:
I am loathe to sell copper positions at these prices and I’m looking for excuses not to.
At some point, I’ll need to put portfolio management before theoretical price targets.
Last week got close to that, but there was just enough relief to keep me from pulling
the trigger
Above all, be clear that I’m coward.
But I’m also a value investor, that DNA makes one tough out rough periods and hold through
downdrafts as the greater, longer-term prize is sought. So the bottom line is that I’ll rough
it out for one more week and look for continued improvement in the price of copper
but, if the downdraft starts again, I will cut losses in IKN732.
We move to our regular weekly segment on copper inventories, data from Cochilco:
The aggregate for world copper stocks in the three official system is up 2,044 metric
tonnes (mt) on the week, with a total of 222,133mt held under roof. The main story is
one of simple arbitrage.
The seasonal drawdown at the SHFE accelerated again, with 15,872mt leaving and the
total dropping under 100k for the first time since the early days of January. The total is
now 91,975mt and in a normal year, we’d now be at some sort of baseline. This is
unlikely to be a normal year.
Meanwhile, the tonnage lost by SHFE was added to LME in what looks like straight
arbitrage action, as copper held as trade looks for the bets near-term storage pricings.
The LME added 15,300mt to close Friday at 91,975mt and cancelled warrants remain
extremely low, at just 125mt scheduled to leave. Notable also was the first significant
stocks arriving in Rotterdam LME for many weeks, which saw inflows of 6,950mt.
Comex copper stocks have risen again and are up to 27,647mt, with over half that total
in New Orleans and another 12k in its Salt Lake City warehouses. Those are a long way
15
from China and in real terms, represent more copper that’s essentially off grid.
The dedicated SHFE charts
Shanghai Futures Exchange Warehouse Stocks, 2014 to date
400000
350000
300000
250000
200000
150000
100000
50000
0
16
31'13ceD dr32 ht51 ht7 ht03 dn22 ht71 ht9 ts1von ht42 ht71 ht01 dn2tcO 7102ts1naJ ht62 ht81 ht01 dr3ced ht52 102ht72rpa ht91 ht11 9102
dr3bef
102ht82rpa ts12 ht31 0202ht5naj 202ht92ram ts12 ht31 0202ht6ced ht82 dr32 ht51 ht7 202ht03naj ht42 ht71 ht9 3202
naJ
ht62
Mt Cu
|
source: Cochilco
SHFE copper inventory levels, 2018 to 2023
400000
350000
300000
250000
200000
150000
100000
50000
0
1 2 3 4 5 6 7 8 9 01 11 21 31 41 51 61 71 81 91 02 12 22 32 42 52 62 72 82 92 03 13 23 33 43 53 63 73 83 93 04 14 24 34 44 54 64 74 84 94 05 15 25
MT Cu 2023
2022
2021
2020
2019
2018
source: Cochilco data
Now for a few notes on basket stocks:
Solaris Resources (SLS.to): Hit by the continued political uncertainty in Ecuador and now
negative 2023 YTD, SLS at Warintza is one of the most
vulnerable projects to indigenous/CONAIE protests as its
local community outreach program has been one of the
most criticized by the regional peoples. SLS has used the
strategy of division, offering plenty to the small community
in its immediate vicinity and ignoring the regional people
who have continued to apply political and social pressure
to stop the project going forward. This allows the
company to publish its touchy-feely NRs from time to time,
but they studiously ignore those bodies and groups with
real political, cultural and social power in the
region…because they don’t want you to hear about the
opposition. This short-sighted approach to ESG is about to bite the company and when the
moratorium comes, they’ll only have themselves to blame (but they won’t, of course).
Marimaca Copper (MARI.to): I was going to do a note on MARI and its updated 43-101
compliant resource this week. I’ll do it for next week and I’ll tell you why, even though it’s
personal. We’ve all been down with a cough and sore throat and while the grown-ups in the
house can handle it well enough, the near 15-month old has had difficulty in sleeping and that,
in turn, has made this into long weekend. He’s been reasonably chipper and in good form in the
day, but at night once horizontal the dry cough comes back and a vicious circle of coughing
affecting his sleep, which in-turn dries his throat and irritates the problem further, starts. Adults
can understand and can take more liquids than they’d normally drink. Adults also worry more.
Therefore, MARI’s numbers get a good review next weekend, not this.
The Producer Basket
After 20 weeks of 2023, the Producer Basket shows a gain of 11.99% to level stakes:
company ticker price 1/1/23 Shares out MktCap(U$Bn) current pps gain/loss%
1 Newmont NEM 47.20 799 34.88 43.66 -7.5%
2 Barrick GOLD 17.18 1761.54 31.46 17.86 4.0%
3 Agnico Eagle AEM 51.99 488.9 26.42 54.03 3.9%
4 Wheaton PM WPM 39.08 451.963 21.73 48.08 23.0%
5 Kinross Gold KGC 4.09 1256.1 6.47 5.15 25.9%
6 Alamos Gold AGI 10.11 393.1 5.00 12.71 25.7%
7 B2Gold BTG 3.57 1074.567 4.18 3.89 9.0%
8 Hecla Mining GFI 5.56 610.491 3.25 5.33 -4.1%
9 Eldorado Gold EGO 8.36 185.73 1.93 10.41 24.5%
10 Wesdome Gold WDOFF 5.53 147.526 0.94 6.39 15.6%
All prices and stock quotes in U$ Port. avg 11.99%
Despite the PM headwinds, a GDX that dropped 4.3% and a sector that saw losses headed by
weakness in the largest caps as the Newmont (NEM) Newcrest (NCM) deal became Full Greek
Cheese*, it wasn’t a total washout as Hecla (HL) remained unchanged to the penny since last
weekend. But most others dropped and around the median of the GDX loss and nine out of ten
loser on our list is bad enough.
The 2023 Producer Basket: Weekly performance and
comparative to GDX control
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
We performed very much in-line with the market, losing a sliver but no big deal, we’re in better
shape in our semi-serious race than at the start of the year.
*Feta Complete
Newmont and Newcrest (NEM) (NCM)
Episode 712: We mentioned it in the stop-
press last week and the news late Sunday that
Newcrest had formally accepted Newmont’s
formal offer for the company caused a 24 hour
hurrah in the pair’s prices on Monday. But
that’s all, this one has been baked in already.
Hecla (HL): We rounded off the run through
the HL operations tracking charts by noted that
the stock remains “One to watch for value
(which is why it made the 2023 Producer Basket, after all).” The improvement performance this
week, UNCH while all around faded, is testament to that opinion.
17
ts1naJ ht8naJ ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5raM ht21 ht91 ht62 dn2rpA ht9 ht61 dr32 ht03 ht7yam ht41 ts12
The 2023 Producer Basket: Percentage difference
between GDX benchmark & basket (negative = IKN ahead)
4.0%
3.5%
ikn 3.0%
gdx control 2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
source: NYSE, IKN calcs ts1naJ ht8naJ ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5raM ht21 ht91 ht62 dn2rpA ht9 ht61 dr32 ht03 ht7yam ht41 ts12
source: IKN calcs, NYSE data
Wesdome Gold (WDOFF): Last weekend I ended the short review of WDO by saying that “I
like EQX more”, so a few words to explain why
compared to this price chart (right). Not only
has WDO out-performed EQX recently, but it
continues to beat the GDX median and being
down just 4% over two tough trading weeks
when the benchmark is down 9% and EQX
nearly 14% is no mean achievement. WDO
continues to attract attention as a possible
buyout candidate as long as Kiena gets up and
running, plus its latest financials as featured
last weekend in IKN730 show a marked
improvement in its recent weak spot, its
balance sheet. With WDO staying away from
the ATM share sale button and not diluting its
share count as much as I (and many others)
expected to date, it has managed to put in a decent relief rally and more power to the
company.
However, the reason to like EQX at this point is precisely because of its higher quartile cash
cost set-up that will always make it more volatile and prone to steeper corrections when gold
takes the type of step back we’ve seen in the past two weeks. So as volatility is a double-edged
sword, the decent rally we saw in gold on Friday and the prospects of further Fear Trade buying
as we approach that cockamamie US Debt Ceiling and the potential for its government to run
out of money and start to close down State funded bureaux of all types means EQX may be set
to play a quick and interesting round of catch-up. So yeah, even with WDO out-doing EQX in
the last couple of weeks I’ll still take EQX as the one to watch if/when gold rallies above $2k.
The TinyCaps List
After 20 weeks of 2023, the TinyCaps show a gain of 21.02% to level stakes:
company ticker price 1/1/23 Shares out Mkt Cap current pps gain/loss%
Aurelius Min AUL.v 0.07 49.787 1.00 0.02 -71.4%
Coast Copper COCO.v 0.045 64.001 3.20 0.05 11.1%
District Metals DMX.v 0.075 86.891 8.69 0.10 33.3%
Latin Metals LMS.v 0.13 69.962 11.19 0.16 23.1%
Manitou Gold MTU.v 0.02 344.568 20.67 0.06 200.0%
Nine Mile Metals NINE.cse 0.29 57.025 13.69 0.24 -17.2%
Palamina Corp PA.v 0.08 65.285 6.85 0.105 75.0%
Precipitate Gold PRG.v 0.075 130.367 7.17 0.055 -26.7%
South Star STS.v 0.55 32.755 17.69 0.54 -1.8%
Viva Gold VAU.v 0.14 91.608 16.49 0.18 28.6%
Prices in CAD$, data from TSXV basket avg 21.02%
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.
Likelihood of meaningful newsflow in 2023. This connects to the company’s “unbroken” status, as we
want news and potential catalysts from companies with projects that can work.
18
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.
Just one of our ten basket stocks had a winning week, the 11.1% added by Coast Copper
sounding a lot more impressive than the reality…up half
TinyCaps, 2023 weekly tracker
a cent on low volumes. Two others were unchanged 50%
(AUL.v, MTU.v) and as one of those is under CTO, it’s 45%
40%
only really Manitou that held its own. That leaves seven 35%
losers on the week (DMX.v, LMS.v, NINE.cse, PA.v, 30%
25%
PRG.v, STS.v, VAU.v) and most were small moves with 20%
only Palamina (PA.v down 25.0%) having an outsized 15%
10%
drop on the week. 5%
0%
Overall, the tinycaps sector is suffering from inertia and
a singular lack of interest in the investment community.
Its across-the-board drop is not good news and in these
small, illiquid stocks, it wouldn’t take much more than a couple of dedicated sellers to sink any
given name, no matter how well their projects are being run.
Palamina Corp (PA.v): Not too difficult to work out where the weakness began. This from
Monday, May 15th (12):
Palamina Corp. (“Palamina” or the “Company”) will conduct a non-brokered private
placement offering (the “Offering”) of up to 6,000,000 units (“Units”) at a purchase
price of $0.125 per Unit, for aggregate gross proceeds of up to $750,000. Each Unit
consists of one common share (“Common Share”) and one warrant (a “Warrant”).
Each whole Warrant is exercisable to acquire one Common Share at a price of $0.25
for a period of 24 months from the closing date.
The near-term chart only shows a continuation of the selling
that began two weeks ago, this YTD chart gives a better
idea of what’s been going on.
The run started in early April when, after much delay, PA
received its permits to drill the two of the most interesting
targets at its large Usicayos gold project in South Peru,
namely the Sol de Oro and Cayos zones. Then came the
selling and now the placement, so assuming they hit
something we’ll get a lather/rinse/repeat.
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 are strictly neutral.
Regional politics
Ecuador: Crossfire and a volatile 2023 to come
Last weekend we were expecting fun and games from Ecuador this week, fun and game we
got. As this news got plenty of English language newswire coverage, particularly on
Wednesday, let’s cover the basics with a copy-paste and rather than lean on Reuters every
single time, here’s AP (13):
(Quito, Ecuador) — President Guillermo Lasso escalated Ecuador’s political crisis
Wednesday by dissolving the National Assembly just as it was forging ahead with
impeachment proceedings to remove him from office on embezzlement allegations.
In disbanding the assembly, Lasso made first use of the Ecuador presidency’s
nuclear option under the constitution in conflicts with the legislative branch, turning
his country into the latest in Latin America where rival constitutional powers come to
a head.
The conservative president, who has denied wrongdoing, can now govern for up to
19
ts1naJ ht8naJ ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5raM ht21 ht91 ht62 dn2rpA ht9 ht61 dr32 ht03 ht7yam ht41 ts12
source: IKN calcs, TSX data
six months by decree under the oversight of Ecuador’s top court. While Lasso
appeared to have the support of the country’s armed forces, his move swiftly drew
pushback from critics who said his ouster had been imminent.
In a televised message, Lasso accused the National Assembly of focusing “on
destabilizing the government.” He called his move “democratic” and described it as a
way to give Ecuadorians “the power to decide their future in the next elections.”
“This is the best possible decision,” he said.
We also had newspapers and wires around the world all finding their own ways to translated
“Muerte Cruzada”, the colloquial name for the clause in the Constitution which allows Lasso to
dissolve Parliament and rule by decree for up to six months, as long as new Presidential
elections happen within one year. “Cross Death” or a literal “Crossed Death” were common
though I’m still happy with my own gist translation of “Crossfire Death.” Since the big news on
Wednesday we’ve seen things evolving quickly in Ecuador and it’s been mostly calm, too:
The country’s electoral body, the CNE, has seven days to declare a date for the news
Presidential and Congressional elections. That’s still not official, but vox populi is that the
vote is slated for August (perhaps Aug 20th) with any eventual second round run-off in
October. The news that the country wouldn’t have to wait the full period for the next
election has helped calm the atmosphere and was a good decision, probably made between
Lasso and the CNE.
Guillermo Lasso gave an interview with the Wall St Journal in which he said that his main
objective was to stop Rafael Correa from returning (both to power and to Ecuador, as he’s
currently facing arrest for corruption and remains in his adoptive second country of
Belgium). His sworn political enemy, Lasso’s poor performance as President is the main
reason Correa has returned to central political influence in Ecuador…and he probably cannot
stand the thought of that. They both accuse each other of being corrupt as the day is long
and in the view of this desk, on that they are both probably right.
In the same interview, Lasso also said he would not run again and his CREO party would put
forward a different candidate. However, he’s tried to walk back that in the last couple of
days and there’s not clarity on whether he’ll run again or not (we know he’d like to on a
personal level).
The government has moved to push forward several law reforms using its “by decree”
executive powers, but the first one was halted by the country’s Constitutional Court (which
has power to do so under the rules of “Crossfire Death). We expect several other law
projects to be promoted next week, including healthcare reforms, tax-free business zones
and labour reform laws (that would allow the introduction of zero hours contracts in the
country).
The Lasso strategy is to get at least some of these laws passed during his executive power
period and then show Ecuador that his changes are for the good, the only reason they were
stopped is due to his enemies in Congress all this time. From there, he hopes to gain
momentum for him/his party and win the upcoming election. As for the reaction to the news,
this report (14) from Spain’s El Pais (generally regarded as the Spanish language newspaper of
record) does a good job in summing things up so far, repeat so far, note please so far with its
title “Why the dissolution of Ecuador’s National Assembly has kept everyone happy” and text
that follows. Though further down the report it has this which gives a better angle and why I
repeated those two words above:
“In Ecuador, there are two forces that bring people out to the streets: Correísmo and
the indigenous community. While Correísmo appears to be appeased by the fact
elections will be held soon, given it is leading in the polls, there was doubt over how
the Confederation of Indigenous Nationalities of Ecuador (CONAIE) would respond. It
had previously said that it would call protests if Lasso invoked the “crossed death,” but
in a statement on Wednesday, it said that it would remain alert and mobilize if Lasso
abused his power to pass legislation by decree. For now, it has ruled out
demonstrations.”
That’s right. Regarding Rafael Correa, his UNES party is in pole position to win any Presidencial
20
election considering the strong performance it gave in the recent municipal and mayoral
elections, on the same day that Lasso’s referendum questions were unexpectedly voted down.
He’s been very active on social media and giving TV interviews this week on a multitude of
subjects but perhaps his most telling comment was on Thursday, when he wrote on Twitter,
“You know what? Aside from his lies and contradictions Lasso is right, we are living an internal
conflict (in Ecuador). Let’s go to the elections and clean up in the voting booths.” The other
thing that Correa has done is to make eyes at Leonidas Iza, head of CONAIE. They were sworn
enemies back in the day, but Correa recognizes that Iza has grown in political stature and these
days, has kingmaker potential. A pact between his part and CONAIE, however loose, would
cement his/his party’s leadership position and more importantly, provide a mandate to govern
post-election. Correa has said this week that Iza impresses him, is a smart leader and he’d like
to sit down to talks with him if possible, a clearer case of political boot-licking is impossible to
imagine.
As for Iza, he knows his position clearly and knows he has political leverage, which is probably
why his large and often militant grouping hasn’t hit the streets yet. CONAIE is boxing clever and
is watching the Lasso government for any signs of excess in using its executive power, but it
makes more political sense to wait (just a while) for the democratic vote. CONAIE (or its party
political arm, Pachakutik) does not have enough national reach to run and win with its own
candidate, but they control most of the Eastern jungle/rural area and that will allow Iza the
space to demand the concessions that CONAIE most care about. And yes, those include a
moratorium on mining activity in sensitive zones or in places where it has been unwelcome.
Therefore in return for any eventual support CONAIE gives to the Correa candidate, be it Correa
himself of a dauphin(e), one of the likely stipulations demanded by Iza will be to curb mining
activity in Ecuador in some way shape or form. So get used to the idea. (As a sidebar, the
relationship between Iza and the Pachkutik Congress members has been somewhat fractious
recently and there’s a whole sub-story there, but it’s not why we’re here and perhaps a subject
for another day…how far do you wasn’t to go into the Ecuadorian political weeds, after all?)
The subject of CONAIE and community/local acceptance of mines and/or projects is the one
I’ve been asked about the most by IKN readership. No surprise there so to cut to the chase,
here are the names I’ve fielded so far:
Lundin Gold Fruta del Norte: Not bad
SolGold Alpala/Cascabel: Not bad
Other SolGold properties: Problems
Solaris Warintza: Problems
Adventus/Salazar El Domo: Problems
Dundee Loma Larga: Problems
Atico La Plata: Problems
Lumina Congrejos: Problems
Aurelius at all Project zones: Problems
If you have a specific concern about a company or project not on the list, feel free to ask. Long
story short, I bought into SOLG.l because its community situation, though not perfect, is
reasonable and unlikely to stop the mine from being built. More importantly, it’s very unlikely to
cause a sticking point in my personal exit strategy, that of a Team Mather/Maxit sale to Chinese
capitals. As for Lundin Gold (LUG.to) at Fruta del Norte, they benefit from two key matters, 1)
they have been exemplary corporate citizens and treat both locals and the local environment
well and 2) the local communities have benefited economically from FDN and are now
dependent on the wealth created by the mine. However and aside those (or any small mining
concern in the traditional mining zones of Ecuador, such as La Loja or El Oro), the default
position should be “problems”, with the common trait being antipathy of locals toward their
presence. I personally would not put a dollar of my money into any of the “problems” projects
or companies.
Finally and regarding the upcoming Presidential and Congressional election to come, things are
still in very early stages and many of the moving parts are unknown at this point. We’ll keep an
21
eye on things as they develop in the weeks to come, but we do know that it’s Rafael Correa’s
election to lose. He cannot run himself (prohibited from holding office in Ecuador for eight years
as part of his sentence for corruption, charges he denies vehemently to this day as part of a
political witch hunt) but his UNES party is best positioned to capitalize from the fall of Lasso
(which is why they aren’t flooding the streets, of course). Also, he expects all 47 of his current
members of Congress to run again for their posts and said this week that “he is proud of them
all.” For what it’s worth, the most obvious scenario for Correa is that 1) his party win this
election in 2023, then 2) they move quickly to overturn his ban and then 3) in 2025 when the
current presidential term is up, they hold another election in which Correa completes his
phoenix-like return from exile to assume the seat he firmly believes belongs to him.
At this time, the Presidential candidate from his UNES party is unknown but it may turn out to
be Fernando Villavicencio, member of Congress and head of one of the main oversight
committees that helped bring Lasso down, but whoever runs will be seen as a front for Correa
himself. To the right wing, the main PSC party will likely run its head, Jaime Nebot. His party
lost significant political capital in the regional elections, but may benefit from the collapse of the
equally right wing Lasso and his government. And as for the current government CREO party,
Lasso kind-of-tried-to walk back his statement about not running himself, but without any idea
of the exact name it’s most likely its candidate comes from the 12 seat CREO congressional
bloc. To the left, Pachakutik’s Marlon Santi is a likely candidate, we’ll also get some sort of
alliance between the minor left wing parties and Yaku Pérez the close third placed candidate in
the last election.
There’s going to be plenty of jockeying for position in the next few days.
UPDATE Sunday evening: Indeed, that jockeying has begun as this Sunday afternoon, one Jan
Topic, a “businessman and expert in security issues” from the ranks of the Nebot PSC party
announced (15) he would run for President and a little while later, his party said (in so many
words) that they would support him as their candidate. That’s our first small surprise of this
election season, as it implies Jaime Nebot will not run himself. We also heard from Andrés
Arauz, the candidate for President from Rafael Correa’s UNES party beaten in the run-off by
Lasso in the last election, who said that “it was not his personal priority to repeat as a
candidate” so it’s fair to say that UNES is going to find a new face. We also heard from Rafa
himself, who confirmed he wouldn’t even try to run but said his party would put forward a
strong candidate and he expected to win (16).
Argentina presidential election update
Two things to cover today. First, it’s still early for the process and the race will only hot up on
the other side of the PASO “primary style” votes mid-year, but a couple of voter intention
surveys are out this week (17) that, together, show the tight race developing between the right
wing alliance “Juntos por el Cambio”, the government alliance “Frente de Todos” and the
independent libertarian/populist right wing candidate Javier Milei (officially his party is “Espacios
Libertarios”, or “Libertarian Spaces”). Here you go:
The pollster “Opinaia” puts it at:
Juntos por el Cambio (righties): 27%
Javier Miles (libertarian independent): 26%
Frente de Todos (curent government lefties): 23%
The pollster “Opinaia” puts it at:
Javier Milei: 29.3%
Frente de Todos: 26.1%
Juntos por el Cambio: 24.6%
That’s as close to a three-way tie as you can get at this point. That means we’re almost
certainly heading for a round two run-off between the top two and there’s no good way of
predicting which of the three gets left behind yet. Also, it’s going to be tough to predict a
22
winner until we know who makes it to the run-off. All in all, it’s going to be tight.
Second, there’s not much noise outside of Argentina yet but I have spotted a few early op-eds
about the election in English and so far, they’ve centred on the “radical wild card” Javier Milei,
with a clear inference in the opinions that he may cause major damage to Argentina’s economy
and/or standing in the international community. The opinions have picked up on his wilder ways
and viewpoints (and yes, he has both) but also his plan to dollarize the economy. The financial
world is worried about that, considering a) it didn’t work before and b) they make money off
Argentina by selling it debt in USD, it’s wouldn’t do to help them re-pay easily . So you too
may start seeing negative script on Milei but if I were you, I wouldn’t be concerned because:
Argentina has done enough damage to its own economy without him, it’s not as if he’d
replace paragons of fiscal austerity or capitalist choirboys.
Equally, its standing in the international community is mainly delusions held by Argentines.
Nobody outside of the Southern Cone cares much about the country, as long as the soybean
crop doesn’t fail.
He’d be happy to see the mining industry grow. In fact, that’s the main reason we mining
nuts need not worry too much about this Argentina 2023 presidential election as whoever
wins will want mining to expand. There will be details and differences in policy, but
Argentina’s new-found reputation as a decent jurisdiction to go mining (as long as you’re in
the right province) will not be affected.
Other elections matter to mining in LatAm, for example last week’s presidential in Colombia
(which is about to bear its negative fruits for mining), the recent results out of Chile (which
have turned the country back toward the pro-mining course of old) and the upcoming election
in Ecuador (which is going to be bad news for our sector). But in this case and for once, we
mining FDI people can sit back and relax…a little. Whoever wins wants to see our dollars after.
Peru: More pro-mining news coming soon
As noted last weekend, the Teck Zafranal copper project has been awarded its and while that
project still has hoops to jump through on a local and regional level (see IKN730), it does show
that Peru at a national level under the new and right-wing Boluarte government is looking to
move its key mining industry forward. We’re about to get some more, as per this translated
headline (18) from Peru’s national daily, La Republica:
“Toromocho Mining Project Is In Its Final Stage, according to MINEM”
The reporter and the sub-ed that wrote the headline get a little confused, as this refers to the
Chinalco (Chinese capitals) Toromocho Amplification Project rather than any new mine. Also, its
“final stage” is the final round of questions asked by Peru’s mining ministry (MINEM) that the
company has now formally replied. From here MUNEM has 90 days to decide on whether to
award the EIA and allow Chinalco to green light its investment project but, as the government
also said last week it would give its verdict in 30 days maximum, this one is about to get a
rubber stamp be in no doubt. The investment is a big one, calculated at just under U$2.9Bn
and would expand production at the mine, as well as its footprint in Central upland Peru
(anyone who’s been up the Carretera Central and crested the high point then comes across the
mine soon after, one of a bunch on the high plateau).
A U$2.9Bn project that gets permit approval and then moves quickly into action will make a
splash, both locally (for obvious reasons) nationally (Boluarte can consider it a feather in her
cap and will go down well with the Lima business community) and internationally, in a world
looking around and wondering where all the copper is going to come from to feed the EV
appetite.
Chile: The mining royalty law passes
We’ve followed the progress of this law project since it was first proposed, nearly two years ago
to the day. Back then, when it passed the lower house of deputies in a flash and was delayed
by the upper Senate until the Presidential elections delayed it further, the mining world was up
in arms about the draconian terms of the deal which would have raised much larger royalties on
23
metals mining companies across the board and also at a gross metals value level. At the time
we predicted that the royalty would eventually water down and so it became, as last week the
law passed its final Senate vote by 101 votes to 24 (19).
The full royalty is applied to large-scale copper mines producing more than 80,000
tonnes of copper metal per year (i.e. 80,000 tonnes of concentrate is not enough).
There is also an lesser, ad valorem tax on production of between 50,000t and 80,000t
per year
The royalty is on a sliding scale that depends on the copper price and runs between 8%
and 26%
Importantly, the maximum State burden that can be levied is 47%
Also importantly, the State burden is levied on corporate EBIT and not gross metal
value. This means operational costs are discounted, as well as corporate costs and
depreciation.
In sum, this royalty matters to the biggest mines in Chile, rather than those we cover (e.,
Amerigo Resources will not pay a penny extra). If you’d like more on the deal, a good place for
Spanish speakers is this interview (20) given by Mining Minister Marcela Hernando gave to
Chile’s #1 dedicated mining TV program, Reporte Minero, on the evening the law was passed.
In her words, the deal is good news for Chile as a country that will enjoy the extra tax dollars,
it’s also good news for the privately owned copper mining companies working the country as,
after nearly two years of uncertainty, this law that is far friendlier in reality than it was during
its passage or when first proposed and “…will unblock a series of projects that were waiting on
this royalty (law).”
Market Watching
Deferred
Same reason as MARI. In fact, the note would have been here.
Conclusion
IKN731 is done, we end with bullet points:
I really like the way Contango (CTGO) has gone about its business and now, with the
financing package fully in place and all the permits they need to build, the company is
about to move into the ranks of the gold producers, all on the coattails of the mine
operator and 70% owner Kinross. All CTGO has to do is enjoy the ride and with its
drum-tight share count and guaranteed strong cash flow, its early backers and
financiers will do great business. However, the only true measuring stick for us retail is
the share price and as things stand today, there’s not enough potential upside to justify
a purchase. If the price comes down enough I’m a buyer, that’s for sure.
Last week was uncomfortable for an avowed copper bull, even though recent editions
bear testimony to our thoughts that the near-term may be soft for the metal. That has
come to pass and if copper drops any further, I’ll need to take action. It’s not often that
I’ll cheer on the market rah-rah style, but that’s where I am with copper in the days to
come.
Depending on how the week pans out (Debt Ceiling and all that), this time next
weekend I may be an owner of EQX and lighter in ARG. Or not, as the case may be.
Ecuador is a mess. Colombia is a mess. But the bad press gets stuck on the two
countries bouncing back from their dalliances with anti-mining policies, Chile and Peru.
I thank you in advance for any feedback. Our Top Pick stock is Minera Alamos (MAI.v). Flash
updates will be sent if required by events.
I wish you good trading fortune, ladies and gentlemen.
Best wishes, Mark
24
Footnotes, appendices, references, disclaimer
(1) https://twitter.com/WinfieldSmart/status/1659885591054675969?t=kduYqo0_sQJeMv_gIPtKgA&s=03
(2) https://www.marketpulse.com/newsfeed/gold-rebounds-on-powell-pause-hopes-and-debt-limit-roadblock/emoya
(3) https://www.reuters.com/world/us/yellen-says-june-1-is-hard-deadline-raising-debt-ceiling-2023-05-21/
(4) https://www.dailymail.co.uk/news/article-12045099/White-House-economists-claim-8-MILLION-jobs-lost-stocks-drop-
45-default.html
(5) https://apnews.com/article/debt-limit-mccarthy-biden-default-negotiations-1b97de28d26b85da268cfd1c1e4a986a
(6) https://thehill.com/homenews/house/4014445-mccarthy-republicans-arent-moving-goalposts-in-debt-negotiations/
(7) https://fortune.com/2023/05/21/janet-yellen-odds-us-can-pay-bills-by-mid-june-quite-low-debt-limit-fight/
(8) https://www.contangoore.com/press-release/contango-ore-closes-its-secured-credit-facility-with-ing-and-macquarie-
to-fund-the-construction-of-the-manh-choh-gold-project
(9) https://6ix.com/event/contango-ore-corporate-update-3/
(10) https://finance.yahoo.com/news/faraday-copper-intersects-45-89-100500499.html
(11) https://orecap.ca/news/orefinders-announces-name-change-to-orecap-invest-corp/
(12) https://www.palamina.com/news/2023/5/15/palamina-announces-private-placement
(13) https://time.com/6280648/ecuador-president-dissolves-national-assembly/
(14) https://english.elpais.com/international/2023-05-18/why-the-dissolution-of-ecuadors-national-assembly-has-kept-
everyone-happy.html
(15) https://www.eluniverso.com/noticias/politica/el-empresario-jan-topic-anuncio-su-postulacion-a-la-presidencia-de-la-
republica-nota/
(16) https://www.clarin.com/mundo/rafael-correa-puedo-candidato-movimiento-ganara-elecciones-ecuador-
_0_DZMiBbzOSu.html
(17) https://www.perfil.com/noticias/politica/dos-encuestas-muestran-un-triple-empate-en-la-primera-vuelta.phtml
(18) https://larepublica.pe/economia/2023/05/18/proyecto-minero-toromocho-se-encuentra-en-su-etapa-final-segun-el-
minem-1199250
(19) https://mineriaydesarrollo.com/2023/05/19/chile-tiene-nuevo-regimen-de-regalias-desde-2024-las-empresas-
mineras-pagaran-mas-impuestos/
(20) https://www.youtube.com/watch?v=AxOy_3-u-iw
Stocks To Follow Closed Positions 2022
Closed in 2022 date closed close price
Great Bear Res GBR.v Jan'22 C$15.83 26-Aug-20 C$28.58 80.5% Bought out by Kinross, print
Copper Mountain CMMC.to Jan'22 C$3.40 18-Jun-21 C$3.78 15.9% Sold 1/2 position in rebalance
Copper Mountain CMMC.to Feb'22 C$3.40 18-Jun-21 C$3.70 8.8% Sold rest on FY22 guidance
Trilogy Metals TMQ Mar'22 U$1.84 15-Sep-19 U$1.04 -41.3% killed by US permit reversal
McEwen Mining MUX Apr'22 U$0.89 2-Jan-22 U$0.82 -7.9% No 2022 turnaround, cut loss
Abrasilver Res. ABRA.v May'22 C$0.42 24-Apr-22 C$0.33 -21.4% sold to reduce Ag exposure
Strategic Metals SMD.v May'22 C$0.42 31-Jan-21 C$0.30 -28.6% trade flatlined 1.5 years
Discovery Silver DSV.v Jun'22 C$1.77 24-Oct-21 C$1.39 -21.5% Cutting Ag exp.& raising cash
Element 29 ECU.v Jul'22 C$0.58 6-Mar-22 C$0.30 -48.3% sold to cut Cu exposure
Superior Gold SGI.v Oct'22 C$0.95 3-Apr-22 C$0.24 -74.7% Q3 prod fail was last straw
Goldshore Res GSHR.v Nov'22 C$0.18 23-Oct-22 C$0.34 88.9% Quick profit taken
Palamina Corp PA.v Dec'22 C$0.295 21-Nov-21 C$0.08 -72.9% Clear-out of underperformer
Pure Gold PGM.h Dec'22 C$0.14 26-Sep-22 C$0.015 -89.3% tiny trade on vh risk, went Ch11
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Stocks To Follow Closed Positions 2021
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 Min NOM.cse feb'21 C$1.55 6-Set-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 Res 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
Royal Road Min. RYR.v nov'21 C$0.155 17-Mar-19 C$0.275 77.4% Closed on Nica pol risk
Aurelius Min. AUL.v dec'21 C$0.75 28-Jun-20 0.24 -68.0% cut end 2021, failed trade
Argonaut Gold AR.to dec'21 C$2.95 25-Jun-21 C$2.15 -27.1% cut on capex blowout
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
2015 to 2019 annual closed positions in appendices below, 2009 to 2014 closed positions in editions IKN553 or earlier
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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-Aug-18 C$0.05 -33.3% tiny trade, made room for new
B2Gold BTO.to feb'19 C$2.11 12-Sep-14 C$4.05 91.9% Took 1/2 profits, reduce size
Western Copper WRN.to mar'19 C$0.80 20-Jan-19 C$0.81 1.3% Spec trade that didn't work
B2Gold BTO.to mar'19 C$2.11 12-Sep-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-Jan-19 U$4.15 -8.1% Short that didn't work, sm loss
Zinc One Z.v jun'19 C$0.47 14-Sep-17 C$0.025 -94.7% clearing out dead trade
Amarillo Gold AGC.v jun'19 C$0.24 22-Aug-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-Apr-18 C$0.47 -67.8% Failed sm spec on Au. Moved on
Amerigo Res ARG.to nov'19 C$0.91 23-Sep-18 C$0.50 -45.1% worst trade of year, hefty loss
Guyana Goldfields GUY.to dec'19 C$0.94 14-Apr-19 C$0.56 -40.4% taking the loss, financials weak
Tethyan Res TETH.v dec'19 C$0.30 8-Sep-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-aug-15 C$0.25 38.9% okay trade, sold on pol risk
McEwen Mining MUX jan16 U$1.09 25-jan-15 U$1.20 10.1% sold due to lack of value
Lake Shore Gold LSG.to feb-16 C$1.10 07-apr-15 C$1.69 53.6% bot out, sold early in process
Atacama Pacific ATM.v feb-16 C$0.19 26-apr-15 C$0.40 110.5% sold for a double on big pop
New Gold NGD feb-16 U$2.06 24-jan-16 U$2.96 43.7% closed good near-term trade
Sandspring Res SSP.v mar-16 C$0.195 18-oct-15 C$0.32 64.1% Hit tgt, took profit
Teranga Gold TGZ.to mar-16 C$0.54 15-feb-15 C$0.60 11.1% disappointing trade
B2Gold BTG mar-16 U$0.85 13-jan-16 U$1.30 52.9% Separate trade on B2, hit tgt
Dalradian Res DNA.to mar-16 C$0.67 27-oct-13 C$1.00 49.3% Hit target, sold, good win
HudBay Min. HBM may-16 U$4.10 03-apr-16 U$4.36 -6.3% Short trade, poor timing
Nevada Sunrise NEV.v may-16 C$0.185 28-feb-16 C$0.23 24.3% V. small, no big deal either way
Richmont RIC jun-16 U$7.60 01-may-16 U$9.30 22.4% near-term trade, profit taken
INV Metals INV.to jul-16 C$0.25 03-apr-16 C$0.95 280.0% Trade closed on time
HudBay Min. HBM aug16 U$4.98 09-jun-16 U$4.80 3.6% short trade covered, no big deal
Miranda Gold MAD.v oct-16 C$0.125 03-jul-16 C$0.10 -20.0% tiny spec trade, didn't work
Avino G & S ASM nov-16 U$2.00 21-oct-16 U$1.40 -30.0% Abandon trade on bad bot deal
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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