6 The IKN Weekly, issue 738 — Jul 10, 2023
The IKN Weekly
Week 738, July 9th 2023
Contents
This Week: In Today’s Edition, The fading memory of CPI.
Fundamental Analysis: Why Fortuna Silver (FSM) (FVI.to) may finally be a buy.
Stocks to Follow: Libero Copper (LBC.v): The Copper Stocks on the Watch List, Newcore Gold
(NCAU.v), Western Exploration (WEX.v), Minera Alamos (MAI.v), Rio2 Ltd (RIO.v), Contango
ORE (CTGO).
Copper Basket: Overview, Solaris Resources (SLS.to), Oroco Resources (OCO.v).
Producer Basket: Overview, Eldorado (EGO), Kinross (KGC), Newmont (NEM).
TinyCaps Basket: Overview, District Metals (DMX.v), South Star (STS.v).
Regional Politics: More on Argentina’s mining exploration boom, The Argentina Presidential
election: We’re down to four, Ecuador Presidential election: Luisa leads, Mexico: The first official
judicial ruling against the AMLO Mining Law reform.
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
Today’s main event goes number crunching on Fortuna Silver (FSM) (FVI.to), a
company I once owned many moons ago and successfully, too. I’ve never regretted
selling the stock either and in recent years, the company has been focused more on
making its insiders rich than doing well for its share price. However, it may be time to
reconsider FSM as a viable investment option as its newsflow is looking more positive
and its share price particularly cheap. Today’s main fundies section for all that and a lot
of very, but VERY long term fundies charts for necessary context.
We’re collecting copper companies quickly in the Stocks to Follow list, with the addition
of Libero Copper (LBC.v) to the Watch List being the most recent. However, Oroco
(OCO.v) still doesn’t appeal and the explanation to that is in The Copper Basket.
In Regional Politics this week we expand on the reasons why Libero is now a potential
drill permit trade by focusing in on the Argentina scene. One note on the expansion of
mining exploreco investment, the other on the latest moves in the all-important
Presidential election coming in Q4. San Juan’s result last week helped the Macri
candidate, whoever that turns out to be.
The fading memory of CPI
It’s notable how quickly US inflation has dropped down the league table of Very Important
Things, something we anticipated in the intro sections of April and May. For example, this from
IKN729 dated May 7th:
“…we saw CPI take over at least temporarily as the most important dataset in the US
macro calendar month but that’s likely to revert back and from here on in, the Jobs
Report will return to the top of the pile.”
Sure enough, we’re just days from the next US CPI reading set for Wednesday morning but
1
unlike late ’22 and early ’23, there’s very little chatter on the airwaves about US inflation and its
consequences this weekend. Probably because the world thinks it’s coming under control.
However, that may be a hasty conclusion and for that, here’s how Bill McBride at Calculated
Risk is framing this week’s main US macro event (1):
8:30 AM: The Consumer Price Index for June from the BLS. The consensus is for a
0.2% increase in CPI, and a 0.3% increase in core CPI. The consensus is for CPI to
be up 3.0% year-over-year and core CPI to be up 5.0% YoY.
That looks like this on our CPI tracking chart:
US Consumer Price Inflation (CPI)
2
4.1 7.1
6.2
2.4 0.5 4.5 4.5 3.5 4.5 2.6 8.6 0.7 5.7 9.7 5.8 3.8 6.8 1.9 5.8 3.8 2.8 7.7 1.7 5.6 4.6 0.6 0.5 9.4 9.4
0.5
5.3
10.0
9.0
8.0
7.0
6.0
5.0 4.0 3.0 2.0
1.0
0.0
12'naj bef ram rpa yam nuj luj gua pes tco von ced 22'naj bef ram rpa yam nuj luj gua pes tco von ced 32'naj bef ram rpa yam nuj luj gua pes tco von ced
source: U.S. BLS
Not only is the drop in inflation forecast to stagnate this week, but a simple glance at that chart
shows that from now, The USA’s monthly year-over-year inflation readings for the rest of 2023
are not going to be compared to a rising rate in 2022, instead and as from next month they’ll
be competing against a dropping rate. That will make any incremental falls in the headline rate
more difficult to achieve and as a result, the mainstream media headlines about “the Fed losing
its grip on the fight against the dreaded and nasty and horrible etc etc” are not diffuclt to
imagine.
In fact, a little inertia in the “War On Inflation” wouldn’t be must of a surprise and we should
remember that the Fed is giving itself until 2025 to get it back to 2%. The sharp drops in the
headline rate we witnessed in 4q22 and 1q23 were never going to last. However, we’re also
seeing bonds yields rise sharply and even the Ten Year Treasury offers above 4% annual
interest, a data point that shows how long-term inflation gets baked into a macro economy.
All this suggests that the Fed is about to get back to hiking its base rates in order to dampen
down the economy even further (a nice way of saying “drag its country into recession”) and
according to last year’s playbook, that’s bad for gold. That’s another subject we touched upon
in IKN729 and we set it out in an easy-read bullet point style, too:
“…as regards gold, we’re on the same playbook as before.
Higher inflation than expected = rates higher for longer = gold negative
Lower inflation than expected = Fed pivot more likely sooner = gold positive
Sounds reasonable enough and it might still be the case, but this desk believes the playing field
has changed. For one, if stubbornly high inflation becomes the norm, it will start to float all
boats and that includes gold (inflation, after all, is all about the weakening of a currency and
nothing about the change in any asset). But more importantly, the single biggest driver of the
gold price is The Fear Trade and if the market starts to get really worried about Jay Powell
dragging The USA into a deliberate and sharp economic downturn, “no matter what”, in order
to tame inflation that may cause an exit from the US Dollar and those juicy looking bonds.
That’s where the charms of gold would come to the fore.
Therefore, it’s not so difficult to see gold rallying into a higher inflation or even the dreaded
stagflation scenario. However, we owners of bullion should always remember the real reason to
have gold as your portfolio foundations: It’s not there to make you rich, it’s there to stop you
from becoming poor.
Fundamental Analysis of Mining Stocks
Fortuna Silver (FSM) (FVI.to) may at last be a buy
“If you know your history,
Then you would know
where you coming from.”
Buffalo Soldier, Bob Marley & The Wailers, 1980
This isn’t going to be a long and detailed look at Fortuna Silver (FSM) (FVI.to), there are no
close analyses of its four operating mines, its fifth now coming on line, the asset they are in the
process of buying or even its pipeline of early stage projects, mostly located near to its current
operations. It’s not going to be a glowing tribute to the company and its management and
board, either, as quite frankly I don’t like how FSM goes about its business and I speak as
someone who was up close and personal with the company for many of its formative years. Be
clear that I don’t like its underhand methods of paying for misleading promotion, I don’t like its
poor record of delivery, I don’t like the self-serving Empire Builder attitude that comes from the
people at the centre of the company and I certainly do not like its H&S record, as FSM has a
nasty habit of seeing workplace fatalities happen either at its operations (Caylloma, Lindero) or
around it and among people who protest against its presence (San José).
Instead, today’s main Fundies note is all about the numbers and will attempt to lay out why,
after many years of disappointing share price action, FSM looks set to rally and out-perform its
peers in the madcap precious metals space. So let’s start with the visual that matters:
This ten-year chart (as the company reports in US Dollars, we will use its US ticker FSM by
default in today’s note and keep things as simple as possible) shows how FSM has flatlined over
the long-term, but not without some sharp moves higher along the way (that would have been
profitable places to sell shares, of course). Arguably there are worse share price charts out
there and if we look at the comparative chart of FSM versus the main precious metals ETF GDX
as a benchmark…
…it’s only just lower than the average (and those spikes provided great leverage as well).
However, it’s the last five years that most concerns this desk, as it’s the period which coincides
3
with FSM’s rapid expansion, from a two mine operation that was mostly silver to a company
now spanning the continents that relies on gold for the lion’s share of its revenue. And the five
year chart…
…is an absolute mess compared to GDX, no matter how you look at it. The expansion of
production base, asset value and market cap has done nothing for the investor holding shares
and while FSM has arguably been unlucky with timing through Covid and in metals prices, it’s
scored several own-goals without any help from the outside world:
At San José in Mexico, its operations continue to be affected by bad blood with local
residents and in recent times, the company has had to use the courtrooms to maintain
its operating permits.
At Lindero in Argentina, FSM failed to deliver its mine on time or budget, with its
timeline stretched and the capex blowout hurting the balance sheet at a bad time.
At Yaramoko in Burkina Faso, FSM overpaid for a mediocre asset by buying out Roxgold
and has suffered the consequences of that decision for nigh on two years.
In this desk’s considered opinion, shareholders would have far better served by a company that
didn’t try to expand in the way FSM did and remained with its admittedly small but consistently
profitable silver/base metals Bateas operation in Caylloma, Peru (or arguably with the Strong
margins thrown off by the San José silver/gold mine in Mexico, as long as CSR were better
managed). However, the officers and board members would not have been able to hike their
salaries and bonuses the way they have over the years if they’d remained small and
concentrated on getting the share price higher, instead they decided to build their Empire to
suit their needs and to the detriment of their sponsors.
The plan to expand the balance sheet and grow via M&A and mine-building was fine on paper,
but its poor execution is what put paid to the share price (see those spikes above) and there is
no better illustration of this than this table, included in the 2022 Year End financials literature:
When your business model is all about asset-based growth and relies on the expertise of the
team to choose and build the right mines in the right way, taking large impairments on your
purchases and build-outs is…well, it’s embarrassing.
It’s also the baseline reason behind FSM’s share price underperformance because, put simply,
the company hasn’t made enough money to justify its capital outlays. Not yet anyway, but
today’s analysis seeks to put forward the thesis that FSM is now at an inflexion point in its
development and, with the advent of its new Séguéla mine in Côte d’Ivoire now coming online
as well as expected improvements to its Yaramoko operations and its key Lindero mine now
producing at a steady state, FSM will now move out of its growth phase and begin to harvest
monetary profits and deliver better quarterly operational results, the type that bolster treasury
4
and justify the book value of what they own. As we’ll see as we run through the fundies charts
below, that final point is all FSM needs to do to improve its equity price substantially at this
stage and therefore deliver a trading win to anyone holding shares, even if gold and silver
remain flat.
We begin the proprietary chartfest with one of our Usual Suspect charts, that of the quarterly
earnings overview that pits revenues against COGS and shows the resulting Mining Operating
Income, but this time it’s a difficult chart to decipher at first view:
FVI.to: Quarterly Earnings overview
220
200
180
160
140
120
100
80
60
40
20
0
5
21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
U$m
revenues COGS Mine Op. Inc
source: company filings
That’s deliberate. It also explains why I quoted Bob Marley at the start of this analysis, as on
due consideration I believe the key to understanding today’s FSM is to look at its long-term
history. Therefore, plenty of the charts today go back a decade or even more, as the plan is to
show you what the previously efficient FSM was like before it got expansive and what its recent
costly purchases have done to its financial results and structure. The above chart shows sales
and costs since 2012 and while it’s a VERY busy chart, it’s possible to see the phases of its sales
and revenue growth:
Once upon a time, FSM was just Caylloma in Peru
Then San José in Mexico came online
Then after delays and cost overruns, Lindero’s heap leach gold operation joined the
production mix and sales began to ramp up in 2020 and 2021
Then in 2q21 FSM announced the acquisition of Roxgold’s Yaramoko, a purchase that
added significant new gold production to its metals mix.
The hike in sales is clear to see on the above chart, the problem has been profit margins. It’s
not easy to see the small Mine Operating Income columns above, so here’s the same dataset
stripped out:
FSM: Mine Operating Income per qtr
80
70
60
50
40
30
20
10
0
01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
U$m
source: FVI filings
For a while in 2020 and 2021, operating income began to improve but then problems arrived
and FSM slumped back to the same type of cash margins it enjoyed when a far smaller and
leaner company. We also need to consider the effect of the acquisitions and expansions have
had on its share count…
FSM: Shares Out
350
325
300
275
250
225
200
175
150
125
100
75
50
25
0
6
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1 tse32q2 tse32q3 tse32q4
source: company filings
serahs
fo
snoillim
…because with a pro-forma shares out total of 306m shares due to the impending closure of
the Chesser Resources purchase, FSM is not the same animal is was even five years ago.
Therefore, when working the Mine Operating Income on a per-share basis, things look even
more lackluster than in straight cash:
FSM: Mine Operating Income per share, per qtr
0.30
0.25
0.20
0.15
0.10
0.05
0.00
01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
U$/share
source: company filings, IKN calcs
Be clear that these charts focus on straight Mine Operating Income, rather than overall
Operating Income that takes into account G&A as well as those expensive write-downs of asset
value. Using Mine Operating Income as our measure is more generous toward the company and
offers us a better idea of what the company is capable of achieving once it has its mines
straightened out. The period including and around 2021 saw reasonable returns for a period,
but they didn’t last and as a result FSM’s share price slumped with its performance. It’s not all
about the vagaries of the metals market and its prices, either, as a look at the balance sheet
charts and their derivatives will illustrate:
FSM: Assets Breakdown per qtr
2200
2000
1800
1600
1400
1200
1000
800
600
400
200
0
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
U$m
fixed
other current
cash&ST
source: company filings
The expansion of the asset book is remarkable, with the two recent growth phases coming as
1) FSM bought Lindero (Mansfield) and built its mine, then in 3q21 it near-doubled its asset
book with the purchase of Roxgold.
FSM: Liabilities Breakdown per qtr
800
700
600
500
400
300
200
100
0
7
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
U$m
LT liab
current liab
source: company filings
Equally, the liabilities ledger has expanded with first Lindero and then the debt that came as
part of ROXG. That jump from 3q21 looks heavy, but to FSM’s constant credit…
FSM: Working Capital per qtr
240
220
200
180
160
140
120
100
80
60
40
20
0
-20
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
source company filings
srallod
fo
snoillim
…the company has always maintained a healthy cash and working capital balance, with this
working cap chart the best way of showing how liquidity is kept to specific and optimum levels.
It’s all about the deep history of this company today and the long-term balance sheet charts at
FSM show how the company has grown and expanded. However, when we combine the
balance sheet growth with the lackluster results, we also see how its recent big moves have
done nothing to add to shareholder value. On the contrary, the dilution becomes evident:
FSM: Equity/Mine Operating Income Ratio
100
90
80
70
60
50
40
30
20
10
0
01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
source: IKN calcs from FSM filings
It took a while to decide how to frame this in visual form, but on due consideration I’ve gone
with a ratio of equity (i.e. total assets minus total liabilities) over the aforementioned Mine
Operating Income (i.e. revenues minus COGS). The result is a chart with columns you’d like as
low as possible, as the better gross earnings run the more it can divide the numerator. As a
simple example, consider what happened during the Covid crisis quarters of 1q20 and 2q20. In
those quarters, the company’s balance sheet remained largely unchanged but operating margin
was cut hard by a lack of production, as operations were suspended and workers sent home to
isolate. The result is what you see above, with 1q20’s ratio at 84X and 2q20 at 50X.
That gives a reasonable frame of reference for what happened to FSM in 2022. As you can see,
the ratio spiked again to between 44X and 58x for three quarters as the operational issues at
Yaramoko became apparent and the world caught on to the fact that FSM has greatly overpaid
to buy out ROXG. The ratio dropped back to around 30X in the most recent 1q23 quarter, but
only because by that time FSM had taken $184m of impairments, with Yaramoko (around
$100m) and Lindero (around $70m) accounting for most of those losses. The above chart also
shows why I was keen to compare “old Fortuna” with the entity we have today, as for many
years the company ratio stayed low and mostly under 20X, in other words it provided plenty of
operating profit compared to the carrying value of the Caylloma and San José mines. Once
upon a time it was lean and mean, but along the way and due to 1) Lindero’s cost overrun and
slow ramp up and 2) the Yaramoko purchase), FSM got flabby and inefficient.
Indeed, that shows in this next visual (below) which combines two datasets to show the Empire
Building aspect of today’s company. FSM was all for adding assets and the money ploughed into
the Lindero build and then the Roxgold buyout became fixed asset values on the balance sheet.
The nominal book value per share soared, because FSM assigned values to its assets that the
results could not justify. The company’s share count expanded, from the 129m or yore, to the
160m or so in the period before Lindero began, to 290m when ROXG was bought and then to
the 300m+ of today, but FSM management tried to justify that by insisting that the purchases
and expansions were accretive and Book Value per share (red line) rose from $22.00 to above
$5.00 and even today, with the new share count on the Chesser Resources assumed close and
the impairments taken at the end of 2022, BV/share remains over $4.50.
FSM: BV/share and PPS/BV ratio
6.00
5.50
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
8
90q4 01q1 01q2 01q3 01q4 11q1 11q2 11q3 11q4 21q1 21q2 21q3 21q4 31q1 31q2 31q3 31q4 41q1 41q2 41q3 41q4 51q1 51q2 51q3 51q4 61q1 61q2 61q3 61q4 71q1 71q2 71q3 71q4 81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
BV/share
PPS/BV ratio
source: company filings. IKN calcs
However, the market simply does not agree with FSM’s self-justified valuation and we see that
in the blue line. If the assets had been accretive in the way FSM insisted, those lines would
have risen together and the current share price would be at least a double, maybe triple its
current U$3.14. But taking an end-quarter snapshot reading of the FSM share price and dividing
it by the company’s declared book (equity) value,
we see how the ratio has dropped away. The inset FSM:Price/Equity Ratio 2018 to date
2.20
chart (right) is the same dataset of the last five 2.00
years and shows the ratio planted firmly under 1X, 1.80
1.60
not where a normal and healthy company should 1.40
1.20
be trading. We can also see its latest spike higher,
1.00
with the peak reached in 4q20 on the back of the 0.80
0.60
rising gold price at that time and in the period
0.40
before the unfortunate purchase of ROXG 0.20
0.00
occurred.
That’s a lot of backward looking charts so far and
most of them looking far back into the future,
what we now need to consider is what might happen to change FSM’s financial course and for
that, we will consider its production profile to a certain extent. To begin we set the scene with
this chart that shows how FSM’s production mix these days is mostly gold. You don’t need to go
back to the days of “Caylloma-Only” production to see where the corporate title came from, as
81q1 81q2 81q3 81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
source: IKN calcs from FSM data
late as 2020 gold was around 25% of its revenues mix, with silver normally accounting for more
than 50% of earnings (the rest covered by the zinc and lead base metals credits, mostly from
Caylloma). These days Gold is the main payable at FSM and by quite a distance, covering
between 65% and 70% of top line income for the last seven quarters.
FSM: Sales breakdown by metal, per qtr
220
200
180
160
140
120
100
80
60
40
20
0
9
81q4 91q1 91q2 91q3 91q4 02q1 02q2 02q3 02q4 12q1 12q2 12q3 12q4 22q1 22q2 22q3 22q4 32q1
U$m
Zn sales
Pb sales
Au sales
Ag sales
source: FSM filings
That heavy bias toward gold is only going to get greater, as the all gold Séguéla mine in Côte
d’Ivoire poured its first ounces in May this year and is now ramping into commercial production,
with nameplate production levels expected by the end of the current quarter.
These next three charts lay out what we expect from FSM. You get the sales for gold (in oz),
silver in Moz) and for combined base metals (Zn and Pb in Mlbs) since 2017, as well as
forecasts for 2023 and 2024 based squarely on company guidance.
Silver sales (Moz)
We assume a flat production/sales regime for silver,
zinc and lead, while gold sales are set to increase as
Séguéla reaches commercial production status later this
year, then puts in its first full calendar year of
75k/annum production in 2024.
As for sales in US Dollar terms, by assuming all-but flat
prices for all metals compared to today as well as the
standard discounts FSM pays its middlemen purchasers
(we assume a net received price of U$22.73/oz silver,
then U$1,900/oz gold in 2023 and U$1,920/oz in 2024),
we get this sales forecast chart:
24.8 38.8 08.8
91.7 25.7 29.6 06.6 06.6
10
9
8
7
6
5
4
3
2
1
0
7102 8102 9102 0202 1202 2202 tse3202 tse4202
Moz Ag Gold sales (Oz)
source: FSM filings, IKN ests
29555 89435 47305 57335 292202 313952 000003 000073
500000
400000
300000
200000
100000
0
7102 8102 9102 0202 1202 2202 tse3202 tse4202
Oz Au
source: FSM filings, IKN ests
FSM: Pb and Zn sales (Mlbs)
100
90
80
70
60
50
40
30
20
10
0
7102 8102 9102 0202 1202 2202 tse3202 tse4202
Mlbs
Zn sales
Pb sales
source: FSM filings, IKN ests
U$m FSM: Annual sales and forecasts by metal (U$m)
1000
900
800 Zn sales
700 Pb sales
600 Au sales
500
Ag sales
400
300
200
100
0
2017 2018 2019 2020 2021 2022 2023est 2024est
source: FSM filings, IKN calcs and ests
Sales are forecast to hit U$805m total in 2023 and U$945m in 2024. That leaves the issue of
costs and while Yaramoko’s AISC is guided to remain above U$1,700/oz this year, that’s due to
sustaining capital works that will not repeat and should improve the cost basis for operations in
subsequent years (they have mistakes to rectify and to FSM’s credit, they are investing in order
to fix things). The big advantage is Séguéla, which is forecast to run an operating cash cost of
around U$600/oz once at full operational tilt and while AISC will come in above U$1,000/oz in
2023, that’s bound to drop next year as long as the mine works in good style.
Discussion and conclusion
Fortuna Silver’s (FSM) (FVI.to) recent poor share price action is partly due to the poor macro
market conditions, but mostly due to its failure in execution and delivery of two key expansion
projects. Firstly, Lindero came in over-budget and late. Secondly, the Roxgold purchase to bring
in Yaramoko was overly expensive and the mine has under-performed since being bought (a
nice way of saying they were had). Add in the permit issues and negative optics at its San José
operation and the combined effect can be seen in the current share price. However, there are a
number of factors now playing in FSM’s favour:
First and foremost, the Séguéla build-out seems to have gone smoothly. We’ll find that
out for certain in a couple of months but all signs and comments have been positive to
date.
FSM is addressing its issues at Yaramoko and after taking the necessary impairment
and eating a slice of humble pie, they are investing around $30m this year to correct
the problems and get the mine back on track
Lindero in Argentina may have been expensive and late, but it’s now working and the
costs embedded. It’s now turning into a good margin operation.
San Jose continues to run on rails and make money, the same on a smaller scale can
be said of Caylloma in Peru.
These segment net post-tax earnings charts for each of the four operating mines to date show
that FSM still knows how to run a profitable operation. We see the effects of those large
impairments at Lindero and Yaramoko in 4q22, but aside those things aren’t bad and 1q23 was
an improved quarter across the board.
U$m Lindero: Segment post-tax income, per qtr U$m San José: Segment post-tax income, per qtr
40 20
20 15
0
10
-20
5
-40
-60 0
-80 -5
1q21 2q21 3q21 4q21 1q22 2q22 3q22 4q22 1q23 1q21 2q21 3q21 4q21 1q22 2q22 3q22 4q22 1q23
source: company filings source: company filings
U$m Caylloma: Segment post-tax income, per qtr U$m Yaramoko: Segment post-tax income, per qtr
8 20
7
0
6
-20
5
4 -40
3
-60
2
-80
1
0 -100
1q21 2q21 3q21 4q21 1q22 2q22 3q22 4q22 1q23 1q21 2q21 3q21 4q21 1q22 2q22 3q22 4q22 1q23
source: company filings source: company filings
10
Costs will remain higher than the company would like this year as necessary capital works take
place, but with Séguéla now joining as its fifth operating mine and with reasonable expectations
of better things from Yaramoko, there’s reason to believe FSM has turned a corner and is ready
to show that its operational margins can flow through the books and show as real and robust
operating and net margins. Its current price/book ratio of around 0.7X will improve rapidly if the
company shows the type of financial improvement we think it capable of at this level and seeing
that double, to around 1.4X or 1.5X isn’t a difficult mental exercise. That also implies a near-
double to its current share price and the potential of the prize on offer here.
It wouldn’t be the first time FSM has spiked higher on great expectations of things to come,
only to disappoint with lacklustre results later. However, in Séguéla FSM is adding what looks to
be a high margin gold operation that will bring down its overall cash cost substantially. Lindero
seems to be working well now and all it needs to get back some of its lost charm is a set of
turnaround results from Yaramoko.
All in all, if FSM delivers on its promise after a couple of years of glitches and expensive errors,
it’s easy to see its share price rallying and
regaining levels of old. Those of you willing
to take on extra risk may consider
purchasing at these current beaten down
levels and second-guessing this 2q23
production numbers and eventual financial
report and guidance. For others (e.g. me)
watch for a more upbeat guidance from
whatever future quarter before taking the
plunge. It’s still early days at Séguéla and
“fixing Yaramoko” doesn’t mean it’s fixed,
so there’s still risk in the share price today.
However and on balance, it’s looking
particularly cheap next to its peers.
Stocks to Follow
I’ve caused myself a problem by somewhere capriciously adding Libero Copper (LBC.v) to the
Watch List. I’m good about having it there, as any drill permit news out of San Juan Argentina
would make it an interesting potential flip, but once the dust had settled last week I couldn’t
think of a stock to dump and leave its space. Therefore we’re going to break my rule for a week
(or two?) and ride with 21 names on the list.
As for last week, it wasn’t that bad because sisx of the 12 losing stocks are in that Watch List
and I don’t own any shares. We also got six week-over-week winners (MAI.v, SOLG.to, EQX,
ABRA.v, WEX.v, MIRL.cse) and while there weren’t any big percentage winners of note, that’s
not a bad haul for a negative week in the mining space. Three others were unchanged
(QCCU.v, NCAU.v, MENE.v) and that wraps up the blurb for today.
With the addition of Libero Copper (LBC.v) to the Watch List we’re up to 21 stocks in our table,
one over our self-imposed maximum number of covered stocks and 13 of them owned
personally. That’s a problem. Seven stocks are in the green, one is UNCH, twelve are in the red.
11
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$0.315 50.0% $0.75 first tgt, #1 idea
RECOMMENDED STOCKS
Amerigo Res ARG.to STR BUY C$1.36 12-Dec-21 C$1.53 12.5% Main Cu trade, top fundies
SolGold SOLG.to STR BUY C$0.265 19-Feb-23 C$0.275 3.8% Cu in Ecuador, M&A tgt
QC Copper&Gold QCCU.v BUY C$0.265 25-Apr-21 C$0.15 -43.4% delayed MRE now due end Q3
Equinox Gold EQX SPEC BUY U$4.46 30-May-23 U$4.72 5.8% Au leverage trade, trading well
Faraday Copper FDY.to BUY C$0.79 26-Mar-23 C$0.72 -8.9% Latest Cu exploreco, IKN723
AbraSilver Res. ABRA.v BUY C$0.36 4-Dec-22 C$0.29 -19.4% added for last time Mar'23
Western Explor. WEX.v BUY C$1.87 9-Apr-23 C$1.24 -33.7% Au spec in NV USA
Newcore Gold NCAU.v SPEC BUY C$0.205 23-Oct-22 C$0.145 -29.3% Financing closed, bottom in
Rio2 Ltd. RIO.v BUY C$0.83 22-Apr-18 C$0.27 -67.5% Cheap on permit probs, appeal
SPECULATIVE TRADES
Orecap inv OCI.v SPEC BUY C$0.04 20-Nov-22 C$0.035 -12.5% corp revamp, new strategy
Aldebaran Res. ALDE.v SPEC BUY C$0.72 16-May-21 C$0.85 18.1% now in drill assay season
Minera IRL MIRL.cse avoid C$0.195 22-Jul-12 C$0.03 -84.6% run into ground byCEO, AVOID
A WATCHLIST OF POTENTIAL TRADES. NB: I DO NOT OWN
Marimaca Copper MARI.to WATCH C$3.65 26-May-23 C$4.09 12.1% Likely buy, want cheap entry
Latin Metals LMS.v WATCH C$0.15 11-Sep-22 C$0.14 -6.6% Peru&Arg prospect generator
Surge Copper SURG.v WATCH C$0.11 18-Jun-23 C$0.095 -13.6% tinycap Cu in BC Canada
Libero Copper LBC.v WATCH C$0.065 2-Jul-23 C$0.065 0.0% Watching for Arg drill permit
Rugby Resources RUG.v WATCH C$0.06 26-Mar-23 C$0.04 -33.3% tinycap Cu in Colombia
Goldshore Res GSHR.v WATCH C$0.165 26-Mar-23 C$0.17 3.0% back at basline price again
Contango Ore CTGO WATCH U$23.25 2-Dec-22 U$23.08 -0.7% Manh Choh asset backbone
LONG-TERM NON-MINING HOLD
Mene Inc. MENE.v adding C$0.63 6-Dec-20 C$0.30 -52.4% 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
Amerigo Res ARG.to may'23 C$1.36 12-Dec-21 C$1.48 8.8% sold 20% to raise cash
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:
Libero Copper (LBC.v): ADDED TO WATCH LIST. As per “Libero Copper (LBC.v) has a
trade set up on the San Juan election result” in IKN737 last weekend, LBC is now part of the
Watch List and while it blipped briefly to 7c last week, there was all you could eat at 6.5c.
The rationale for adding LBC to the Watch List was laid out last weekend and there’s no point in
going over it all again, here I simply want to underscore that I won’t be a buyer of the stock
personally and it’s on the list for your consideration. We’re still in the hangover period from last
week’s very pro-mining election result and also celebrations for Argentina’s Independence Day
(today July 9th) are taken seriously in San Juan, so no surprise that we’ve heard nothing about
permits so far. LBC’s specific situation and reason for making it to the Watch List is somewhat
different from the other copper trades in the same place on the table, but there’s enough in
common to consider them as a group these days as well. So on that score…
The Copper Stocks on the Watch List: The reason we now have a whole pile of copper
exploreco trades in the Watch List section of the table above is simple, the sub-sector is starting
to look very cheap. Of the seven under watch, a full five…
12
Marimaca Copper (MARI.to)
Latin Metals (LMS.v)
Surge Copper (SURG.v)
Libero Resources (LBC.v)
Rugby Resources (RUG.v)
...are copper and of those, four strictly copper. While Latin Metals (LMS.v) has gold projects on
its books, the real reason to like it at this point is the access it gives potential JV partner to add
Peruvian copper concessions and targets. We should also say a separate word about Marimaca
(MARI.to), as that one is far more advanced than the others and with a 20X market cap to
boot. However the other three RUG, LBC, SURG, have plenty of points in common:
Early stage exploreco
Copper main target metal
Beaten down share price
Waiting on news catalysts
All can provide strong beta to copper is the metal rises sharply
As long as copper remains stubborn and under U$4.00/lb the tinycaps (and Marimaca) aren’t
likely to catch much of a bid. For sure each stock has its own story, e.g. Libero (LBC.v) is on the
Watch List for its own permitting reasons and the recent improvement in its chances of getting
a drill permit for Esperanza, but it too needs a copper rally to add back the value it has lost ver
the last year or two. But leaving details and differences aside, we have a group that you may
want to consider while the copper exploreco sector remains off the boil, because these
pennycrappers are the type of high risk alternative that can improve by multiples if copper
becomes hot again. I’d even say “when copper becomes hot again”, but that’s just me.
Newcore Gold (NCAU.v): We learned Friday via its SEDAR filing that Franklin Templeton took
5,000,001 units of the recent 33,333,333 unit placement and moved its holding in the company
to 16,133,334 shares, or 9.39% of shares out. The reason Franklin Templeton filed is that it
also holds 1,666,667 warrants and if exercised, would bring its holding to 10.27% and thereby
triggering the regulatory filing.
NCAU boasts significant insto level backers and Franklin is just one of them. We also know that
the recent placement was fully filled the day after the announcement and the company could
have upsized and sold more shares at this price. I’m glad they didn’t, this is too cheap and the
dilution is best avoided.
Western Exploration (WEX.v): There’s no hiding or denying the rough start this new
exploreco trade has gone through, but…
…there now seems to be a bottom formed, which is a good thing. What’s missing is newsflow
and as we’re now into the fourth week since the closing of the funding placement, that should
be soon.
Minera Alamos (MAI.v): Thursday morning saw MAI company President Doug Ramshaw
appear in a one hour webinar Town Hall style presentation and you can check out the recording
13
of the event on this link (2) and it’s well worth doing so, too. For this desk, the important
takeaways are:
Ramshaw is taking a vacation this July with his family, the first for four years. Good.
He’s not in a position to 100% confirm (predicting the weather is a fool’s errand), but
it’s fairly obvious that the worst of the water issues at Santana are behind the
company.
We shouldn’t expect a blow out Q2 from Santana (but we knew that) and it’s likely to
come in around the same as Q1, which means the company remains at more-or-less
financial breakeven.
However, the work being put into Santana now plus the expansion of contractor
workers means Q3 and beyond will begin to ramp up, basically as per the original plan
but three quarters behind schedule.
Come Q4 and beyond, Santana should run at 5k to 6k oz per quarter.
Meanwhile, exploration drills are turning and we should get results back in the near
future on the first zones tested
As for Cerro de Oro, the funding package is to his living (this desk agrees) and
permitting is on track.
In trading, MAI continued to bounce around this low 30s level and that’s still my idea of a
screaming bargain. Own this one at this price.
Rio2 Ltd (RIO.v): The wait for the Chilean ministers and their appeal hearing goes on.
Meanwhile on Friday, Rio2 announced (3) its second quarterly shares-for-salaries payment to
officers, emitting 372,974 at a deemed price of 27c (a nominal C$100,703). The previous
payment was in April (on receiving regulatory approval for this quarterly mechanism) when Rio2
emitted 736,151 shares at a deemed price of C$0.15 (a nominal C$110,423) and the difference
of around $10k is no biggie, probably due to its voluntary status among officers. For what it’s
worth, I confirmed with management that non of the officers or insiders who have received
shares in this program have sold any into the market (and they have no plans to do so).
In trading, RIO.v shares have found a new trading level in the upper 20s, which ties in closely
with this desk’s supposition that on receiving a permit green light we’ll see 40c or thereabouts.
Contango ORE (CTGO): It traded as low as U$22.50 on Thursday before getting bought up
slightly, but all on a return to low volumes after its
recent spurt of market interest.
With this we’re back down to the long-term hard
floor level of somewhere around U$22 or U$23. I
expect it to hold and as CTGO is looking to raise
around U$10m in working capital to move forward
on Lucky Shot while Manh Choh gets built out (by
majority partner Kinross), it would make sense to
see the raising happen at or around this level.
Personally, I’m looking for the deep bargain to
tempt me in and will wait on the sidelines to see if
that strong floor price gets busted.
The Copper Basket
After twenty-seven weeks of 2023, The Copper Basket shows a loss of 8.97% to level stakes:
14
company ticker price 1/1/23 Shares out Market Cap current pps gain/loss%
1 Solaris Res SLS.to 6.44 146.599 847.34 5.78 -10.2%
2 Marimaca Cop MARI.to 3.22 88.226 360.84 4.09 27.0%
3 Western Copper WRN.to 2.41 151.597 304.71 2.01 -16.6%
4 Arizona Sonoran ASCU.to 1.92 105.96 173.77 1.64 -14.6%
5 Oroco Res OCO.v 0.91 213.438 145.14 0.68 -25.3%
6 Aldebaran Res. ALDE.v 0.78 153.96 130.87 0.85 9.0%
7 Faraday Copper FDY.to 0.54 175.2 126.14 0.72 33.3%
8 Hot Chili HCH.v 0.78 119.455 119.46 1.00 28.2%
9 Regulus Res. REG.v 1.10 124.509 105.83 0.85 -22.7%
10 Pan Global Res PGZ.v 0.46 212.145 67.89 0.32 -30.4%
11 Kodiak Copper KDK.v 1.12 56.2 44.40 0.79 -29.5%
12 QC Copper QCCU.v 0.165 162.815 24.42 0.15 -9.1%
13 Element 29 Res ECU.v 0.16 86.966 14.35 0.165 3.1%
14 Libero Copper LBC.v 0.155 93.869 6.10 0.065 -58.1%
15 Atacama Copper ACOP.v 0.16 35.94 4.67 0.13 -18.8%
NB: All stocks in CAD$ Portfolio avg -8.97%
New lows for our Copper Basket this weekend,
with just two of our fifteen component stocvks The Copper Basket 2023, weekly evolution
12%
managing to put in a win (HCH.v, KDK.v) and 10%
8%
another three remaining unchanged (QCCU.v,
6%
LBC.v, ACOP.v), all of them at the minnow end of 4%
2%
the range. That leaves ten losers and while that’s
0%
a lot, only one broached the double figure loss -2%
-4%
level. That was Element 29 (ECU.v down 10.8%, -6%
or two cents in real money) and most of the losers -8%
-10%
were out on the general tide, down somewhere
between 2% and 4%.
As the tracking charts shows, the selling in copper
junior stories has been near-incessant since the middle of April and those highs, the basket
average’s swing now over 20% top to bottom. That’s a big move for an aggregate tracker in
less than three months.
The apathetic sentiment for copper stocks isn’t being helped by copper-the-metal, as it
continues to drift on low volumes traded under the U$3.80/lb. Since breaking under at the end
of last month, U$3.80/lb has turned into a tough nut to crack and it’s the new battle line
between bears and bulls. Buyers
are ready to snap up bargain
prices, but neither do they pile in
for any old price even as stocks
dwindle at both LME and SHFE
(see below). Copper bulls (and
I’m one of those) will tell you that
something has to give and once
the Chinese factory re-stocking
cycle kicks back in around Q4
(Chinese factories tend to want to
close out the year with all supplies
covered), we’ll get definition on
price direction. But the summer
months? Less likely and we may
well see this drift continue.
15
ts1naJ ht8naJ ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5raM ht21 ht91 ht62 dn2rpA ht9 ht61 dr32 ht03 ht7yam ht41 ts12 ht82 ht4nuj ht11 ht81 ht52 dn2yluj ht9
source: IKN calcs
Our macro copper commentary of the week comes from the murky world of TC/RC price
setting, a strange tango danced by smelting companies and mining companies every year that
looks to set the prices charged and paid for treatment and refining of the raw concentrate sent
to smelters by the miners. We begin with this from Reuters (4) and here’s the top part of the
report:
China’s top copper smelters agreed on third-quarter guidance for copper concentrate
processing treatment and refining charges (TC/RCs) of $95 per metric ton and 9.5
cents per pound, two sources with knowledge of the matter said on Thursday.
The rates, the highest since the fourth quarter of 2017, according to Reuters’ records,
were decided at a meeting of the China Smelters Purchase Team (CSPT) held on
Thursday, the sources said.
Miners pay TC/RCs to smelters to process copper concentrate into refined metal,
offsetting the cost of the ore. The charges tend to fall when supply tightens and rise
when more concentrate is available.
“There is a consensus on ample supply and limited demand in the market,” said one of
the sources.
I made sure the copy-paste included that last quote, because it’s a clear indication of sentiment
at the moment. However, these agreed prices to charge mining companies are for spot sales
only and a lot of the material sent to smelters is on annual contract deals. For example with
Chile’s Antofagasta (ANTO.L) the London quoted copper miner located near the eponymous
town in Chile. That company reportedly struck a deal with its regular Chinese smelter partner of
U$88/mt treatment and 8.8c/lb refining last week, those price the same as they are paying this
year. The price reported by Reuters last week is less important than these long-term deals and
when we know what the big boys, e.g. Freeport or Codelco, are getting by way of TC/RC deals
we’ll have a better benchmark for the sector in 2024.
We move to our regular weekly look at copper inventories, data from Chile’s Cochilco:
The aggregate of the world three official stocks systems dropped by 2,027 metric
tonnes (mt) last week, closing Friday at a near-record low of close at 170,041mt.
For the second week running, Shanghai’s SHFE warehouses added inventory and that’s
about right for this time of year, a slack buying period in the cycle. SHFE stocks rose by
6,325mt to close at 74,638mt and we may have found a bottom until Q4.
However, LME action more than made up for that, as exactly 10,000mt left its
warehouses leaving just 62,975mt in stock. That’s a new modern-day record low for the
LME and copper so expect the
trade press to start talking up the LME: 12 months of Cu tonnage under cancelled warrant
100000
deficit in the days ahead. We 90000
80000
again point to the New Orleans
70000
depot, holding 25,400mt of the 60000
50000
total and unlikely to move much
40000
of that to where it’s needed most, 30000
20000
i.e. China. Meanwhile the 10000
cancelled warrants total dropped 0
sharply to 23,475mt but that’s still
a fair whack of what’s left in
stock. All in all, a very bullish
underpinning signal to the current market.
The Comex did its new normal thing and added 1,648mt to stocks, closing at 32,428mt.
This isn’t much, but it’s now nearly 20% of the world aggregate.
The dedicated SHFE charts suggest we’ve found a level. But whatever happens during the Dog
Days of summer, Dr. Copper will probably need to get past Labor Day and into Q4 before s/he
reveals the reality of Chinese demand.
16
ht42 ht8 dn22 ht5nuj ht91 dr3yluj ht71 ts13 ht41 ht82 ht11 ht52 ht9 dr32 ht6von ht02 ht4ced ht81 3202
naJ
ht51 02ts1naJ ht21 ht62 ht21 ht62 ht9 dr32 ht7yaM ts12 ht4nuJ ht81 dn2luJ
mt Cu
source: LME/Cochilco
SHFE copper inventory levels, 2018 to 2023
400000
350000
300000
250000
200000
150000
100000
50000
0
17
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
Shanghai Futures Exchange Warehouse Stocks, 2014 to date
400000
350000
300000
250000
200000
150000
100000
50000
0
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 ht81
Mt Cu
|
source: Cochilco
Now for notes on a couple of basket stocks.
Solaris Resources (SLS.to): Much depends on
the outcome of the August election for this
company and the market’s apathy toward its stock
has grown in recent months, too. The equity shows
all the signs of being propped and those buyers
who bottom feed at the tough levels under C$5.50
have made money buying the dips, but if the
election ends up imposing the moratorium that local
indigenous communities seek for Warintza, I doubt
$5 will hold.
Oroco Resources (OCO.v): The 68c close for
OCO on Friday isn’t quite a 52 week low as that
came in July last year, but it’s the new 2023 low and as the chart (right) shows, it’s been
downhill all the way since its MRE was announced in early May. Back then we commented on
the release in IKN729 dated May 7th, used words like “average” and “reasonable” to describe
the contents and what OCO was compared to its share price, so clearly the value is “even more
reasonable” now (to stretch a phrase) but in the same way there wasn’t much need to own the
stock a couple of months ago, there’s no real need now. I’m going to quote myself, so here’s
how that IKN729 note ended:
“We’re now on course for a PEA and after that, OCO will need to raise money and do
at least a year of heavy lifting to get as much of those inferred lbs into M+I so that
they make the PFS. And let’s be clear, even if we’re generous and call the likely
margins Santo Tomas runs as “average” it’s going to take at least a PFS to find a
buyer to develop this deposit, a PEA using optimized criteria isn’t going to cut the
mustard.”
The latest corporate information tells us the PEA should come next month, so presumably OCO
is looking to get it in front of (potential) sponsors’ eyeballs by Labor Day and the classic
financing window period. They need working cap, after all.
Santo Tomas has around 8.5Bn lbs copper in all
categories and the PEA can include the inferred but a
PFS cannot, of course. That means once the PEA is
out the company goes through the heavy lifting
period, with infill drilling and technical work to
upgrade the PEA into something that could entice an
eventual buyer. On that subject and to finish on OCO
this weekend, we’re bound to get another round of
buyout rumours around this stock when the PEA
drops because for one reason or another (mostly
over-enthusiastic YouTube promoters and their flocks), OCO has a core of true believer
shareholders who seem to think a sale and a massive payout is imminent or could happen at
any time. Be clear, sales of this type of project on the back of a PEA only are very rare and
there’s no reason to suppose Santo Tomas should be an exception to the rule.
Is there a buy rumour/sell news moment coming for OCO? I suppose a lot depends on what the
price of copper does, but the chart also shows how OCO spikes quickly from time to time and a
run from this weekend back up to a reasonably attainable 90c would be a +30% flip. But there
I go with the word “reasonable” again, it seems to suit OCO. It’s not outstanding, neither is it a
complete waste of time or money. It’s reasonable.
The Producer Basket
After 27 weeks of 2023, the Producer Basket shows a gain of 1.10% to level stakes:
company ticker price 1/1/23 Shares out MktCap(U$Bn) current pps gain/loss%
1 Newmont NEM 47.20 799 33.75 42.24 -10.5%
2 Barrick GOLD 17.18 1761.54 28.78 16.34 -4.9%
3 Agnico Eagle AEM 51.99 488.9 23.66 48.39 -6.9%
4 Wheaton PM WPM 39.08 451.963 18.79 41.57 6.4%
5 Kinross Gold KGC 4.09 1256.1 5.77 4.59 12.2%
6 Alamos Gold AGI 10.11 393.1 4.56 11.61 14.8%
7 B2Gold BTG 3.57 1074.567 3.75 3.49 -2.2%
8 Hecla Mining GFI 5.56 610.491 3.12 5.11 -8.1%
9 Eldorado Gold EGO 8.36 185.73 1.85 9.94 18.9%
10 Wesdome Gold WDOFF 5.53 147.526 0.75 5.05 -8.7%
All prices and stock quotes in U$ Port. avg 1.10%
All ten of our component stocks lost ground on the week but none of them lost much, with the
worst loss -3.8% (WPM and KGC). As the GDX also dropped by the same median of 2.2%, it
was one of those weeks when all stock move on the same tide, that of top-down money
entering/leaving the widest doorway. In our case this week, leaving. Uniform moves of this ilk
are another indication of how the driving force of mining stocks is the macro backdrop, rather
than anything pertaining directly to the metals or the miners.
The 2023 Producer Basket: Weekly performance and
comparative to GDX control
30%
25%
20%
15%
10%
5%
0%
-5%
18
-10%
ts1naJ ht8naJ ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5raM ht21 ht91 ht62 dn2rpA ht9 ht61 dr32 ht03 ht7yam ht41 ts12 ht82 ht4nuj ht11 ht81 ht52 dn2yluj ht9
The 2023 Producer Basket: Percentage difference
between GDX benchmark & basket (negative = IKN ahead)
ikn 4.0%
gdx control 3.5%
3.0%
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 ht82 ht4nuj ht11 ht81 ht52 dn2yluj ht9
source: IKN calcs, NYSE data
Eldorado Gold (EGO): In its NR Friday (5) “Eldorado Gold Provides Update on Tax Impacts in
Turkiye Related to the Weakening Lira; and Provides Conference Call Details”, EGO told us that
it would report its 2q23 on July 27th (ConfCall 28th) but before getting to that, warned that due
to its exposure to Turkey its quickly weakening currency, it would take an unexpected hit on tax
“In the second quarter, the Company expects the Turkish current income tax expense
on mining profits to be higher by $5.5 to $6.5 million. This increase is expected to
be primarily related to the weakening of the Lira in the quarter and the resulting
generation of taxable unrealized foreign exchange gains, partly offset by reductions
related to the investment tax credit relating to Kisladag and Efemcukuru.”
The share price took the news in its stride and there was no extra selling Friday. In fact, it
probably came as a reminder that EGO’s Turkish operations should see costs drop in USD terms
due to the sharp drop in the Lira.
Kinross (KGC): In IKN737, we weren’t impressed by the “scoop” revealed by Bloomberg last
week that Endeaavour Mining (EDV.to) had been kicking its tires in early 2023 and sure
enough…
…it’s now literally last week’s news. Another temporary effect, another Bloomie reporter who
gets a bonus thanks to their “market moving headline.”
Newmont (NEM): Another “least worst” week for the #1 market capper that’s about to get
even bigger, dropping just 1% when others did worse. NEM was hit hard during the courtship
process for Newcrest (NCM) but since the deal was agreed in mid-May, NEM has enjoyed a rally
and as seen in this chart, has beaten the street in the last month and a half quite readily:
So another good week for NEM, despite the continued strike at its Peñasquito mine in Mexico,
the country’s biggest gold mining operation, that passed the one-month milestone on Friday.
The lockout remains strong, with union members voting 99% in favour of continuing the strike
late in June and not much movement since then.
The local economy in the Peñasquito zone has duly suffered and that may become a key factor
in reaching an agreement. Local newspaper El Sol De Zacatecas reported last week (6) that the
19
town most local to Peñasquito, Mazapil, was in bad economic shape due to the strike and the
local mayor was now asking union representatives to, “…be more measured in their demands,
so that they can reach an agreement.” On that score, the report noted that the two sides met
on July 3rd and the union offered to accept an increase in worker profit bonus of 16%, instead
of the 20% they originally demanded. Newmont currently pays a 10% worker profit bonus, as
per the national law, and refused the lowered offer saying that “For the company this continues
to be an unreasonable demand.”
At some point, the strike is likely to drag on the NEM share price and that moment may come if
the strike continues into its Q2 earnings report, set for eleven days’ time on July 20th (7).
The TinyCaps List
After 27 weeks of 2023, the TinyCaps show a gain of 12.21% 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 2.88 0.045 0.0%
District Metals DMX.v 0.075 86.891 10.86 0.125 66.7%
Latin Metals LMS.v 0.13 69.962 9.79 0.14 7.7%
Manitou Gold MTU.v 0.02 344.568 18.95 0.055 175.0%
Nine Mile Metals NINE.cse 0.29 57.025 6.56 0.115 -60.3%
Palamina Corp PA.v 0.08 65.285 5.88 0.09 12.5%
Precipitate Gold PRG.v 0.075 130.367 8.47 0.065 -13.3%
South Star STS.v 0.55 32.755 17.69 0.54 -1.8%
Viva Gold VAU.v 0.14 106.721 16.01 0.15 7.1%
Prices in CAD$, data from TSXV basket avg 12.21%
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.
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.
TinyCaps, 2023 weekly tracker
50%
The TinyCaps list saw another small improvement on its 45%
average on the back of just three winners (DMX.v, 40%
35%
NINE.cse, PRG.v) because two of those three were big 30%
moves, namely District Metals (DMX.v up 38.9%) and 25%
20%
Nine Mile Metals (NINE.cse up 35.3%). Three were 15%
unchanged (AUL.v, COCO.v, MTU.v) and the other four 10%
5%
were losers (LMS.v, PA.v, STS.v, VAU.v), with Latin 0%
Metals (LMS.v down 17.7%) the biggest drop.
District Metals (DMX.v): One of several smallcaps
and tinycaps that got bid up Friday for no particular reason, though supporters will probably
point to the NR the previous day entitled (8), “District Receives Approval of the Ardnasvarre
Mineral License Application in Northern Sweden and Notes Recent Media Report Regarding
Support for Uranium Mining and Exploration in Sweden.” Feel free to swallow that line about
20
ts1naJ ht8naJ ht51 dn22 ht92 ht5bef ht21 ht91 ht62 ht5raM ht21 ht91 ht62 dn2rpA ht9 ht61 dr32 ht03 ht7yam ht41 ts12 ht82 ht4nuj ht11 ht81 ht52 dn2yluj ht9
source: IKN calcs, TSX data
things about to get better for U in Sweden, this desk remembers how this very company talked
up the potential for its U mining moratorium to be lifted
by parliament early in the year, only to see the vote go
against the idea by a very large majority.
Junior mining executives are some of the only people in
the world that can make a soufflé rise twice.
South Star (STS.v): This is the type of thing that
gives juniors a bad name. We’ve been told on no end of
occasions that the company is “fully funded to
production” at its Santa Cruz graphite project, Brazil,
with the company even mentioning the fact in the
“about” section of the NR on Wednesday (9) that
announced, yes you guessed it, a C$4m non-brokered
private placement priced at 53c per unit (unit = share
plus full warrant priced at $1.25, but with a five year
(!!) expiry period). Put that 53c price line on the 2023
YTD chart (right) and you’ll see that all but the value
buyers of March and early April have been hosed by this
news.
It’s one thing to raise money when your company is
running on treasury fumes, but when you repeatedly
remind the market that you don’t need any money and
then go ahead and raise some anyway, it leaves that
sour taste in the mouth.
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 $20m offering a reasonable representation of the wider tinycaps market. It’s possible in the future
I may buy shares in one or several of these stocks, at the moment both my opinion and wallet are strictly neutral.
Regional politics
More on Argentina’s mining exploration boom
In IKN734 dated June 11th, we first reported on the hard data underscoring the boom in
exploration stage activity in Argentina in the note “Argentina’s mining exploration boom has
numbers”. Last week we got more as on Thursday, Argentina’s Secretary (i.e. Ministry) of
Mining published its report on the 2022 mining exploration scene in the country (10), with data
as in every year compiled in conjunction with Standard & Poor’s (to give the numbers
credibility). Here’s a chart:
Exploration stage expenditures in Argentina, 2015 to 2022
21
421
151
902
142 042
7.451
8.622
073
U$m
400
350
300
250
200
150
100
50
0
2015 2016 2017 2018 2019 2020 2021 2022
source: S&P, Arg Sec. Mining
We saw a big jump in exploration spending in Argentina last year with the preliminary total
expenditure of U$370m (compared to the previously reported budget for exploration of
U$385m, as seen in IKN734), the highest since 2012 and there’s no need to go back that far on
the chart to make the obvious point. As regards target metals, the Secretary of Mining/S&P
reported that gold was still the most sought-after metal in the country with U$173.6m
dedicated to searching for it (a lot of that in current operations or brownfields). Second came
copper, with U$81.8m worth of exploration and up an impressive 62% on 2021. In third spot
came lithium with U$72.3m worth of exploration dollars in 2022, also up 31% on the 2021 total.
Those three cover U$327.7m of the grand total, or just under 90% of all exploration dollars
spent so presumably AbraSilver at Los Diablillos was a healthy chunk of the remainder.
Among other data offered at the presentation:
Argentina has 161 mining projects registered on its books
Of which 92 are under active exploration work, and..
21 are in production
Of the 92, 80 are located in just four provinces, i.e. Rio Negro (24), San Juan (23),
Salta (20) and Santa Cruz (13).
The U$370m total puts Argentina in third spot in South America for mine exploration,
behind Chile (U$713.2m) and Peru (U$533m) but in front of Brazil (U$339.9m) and
others.
For more details, download your copy of the official 39 page Spanish language report from (11)
below.
The Argentina Presidential election: We’re down to four
With the decision by the ruling Peronist party to go with its consensus strategy, nominate only
Sergio Massa into the PASO (primaries) vote in August and remove all doubt as to who will be
their candidate, it means we’re now down to four potential Presidents for the next term:
Sergio Massa (Unión por la Patria) (current govt)
Javier Milei (Independent/Libertarian) (the wild card)
Horacio Larreta (Juntos por el Cambio) (right wing)
Patricia Bullrich (Juntos por el Cambio) (right wing)
There are other minor parties scrapping at the bottom, but the only real race in the PASO on
August 13th is decide the candidate from the Right and Mauricio Macri’s Juntos por el Cambio
(Together for Change) party, either Patricia Bullrich or Horacio Larreta and while most polls give
Bullrich an advantage at the moment, mainly because Macri himself prefers her to Larreta,
there’s no real way of knowing who will get the nod.
As for polling, the result in San Juan last weekend (see IKN737) that has brought Libero Copper
(LBC.v) onto our Watch List also implies there’s better support for the right wing than the polls
suggest. That, along with the poor showing from the candidate in the Javier Milei camp (who
was not an official part of his party and in fact disowned by Milei on the eve of the vote, as he
saw the writing on the wall and wanted to put distance between his national campaign and that
regional vote) means that whoever gets the nod between Larreta and Bullrich in the PASO vote
next month will start favourite for the big prize in November.
We’ve heard a lot about the rise of Milei in the press and now English language channels have
picked up on “Argentina’s Trump” (he’s not, but people like pigeonholing people) and I’ve even
seen financial analysts telling their Engish Language audience that Milei is favourite or “will win”
to bring in radical change. This desk begs to differ, as his support in urban zones means he
gets plenty of coverage and he also has an undoubted hardcore support, but there are two keys
to winning a national Presidential election in Argentina:
Your party wins Buenos Aires Province
Your party does well in the provinces
That’s a problem for Milei. He has a reasonable shot at BsAs Province (not to be confused with
the Buenos Aires City (pop approx 2m) or Gran Buenos Aires conurbation (pop approx 13m),
but he doesn’t have the reach or party apparatus to mount a sustained campaign in the 23
22
provinces of the country. That doesn’t mean he cannot re-write the rulebook and win, however
it does mean he’s up against the type of handicap that the casual outside observer doesn’t
capture at this time.
Bottom Line; It’s still early days and as it’s Argentina, anything can happen. That said, the
orthodox right wing “Juntos por el Cambio” party of Mauricio Macri is likely to field the early
favourite for the election, be it Bullrich or Larreta. The government has done the best thing for
its cause and chosen the “consensus candidate” in Sergio Massa, who is centre-left at very
worst (he and Cristina Kirchner have a long history of political tussles and don’t like each other
very much). As for the wild card Javier Milei and guaranteed candidate, we’ll only really get a
true gauge for his support once the campaign proper begins in September. This election will be
all about getting one of the two places for the second round run-off and effectively, there are
three players going for those two seats. Once we know who’s in the second round we’ll be able
to make a clear call on the next President of Argentina but as things stand, today Patricia
Bullrich is my tentative pick as she’s in the right political party at the right time and seems to
enjoy the advantage of Macri’s sponsorship as we move into the PASO vote next month.
Ecuador Presidential election: Luisa leads
With a bunch of new voter intention polls published in Ecuador last week, we take the
temperature at this early stage of what will be a brief campaign period with this table, from
here (12) and a little translation and red ink added:
Two notes:
1) The Citizen’s Revolution Party (i.e. Rafael Correa’s crew) candidate Luisa González is in
a clear lead, and we even have one recent polls hinting that she could garner enough
support to win in the first round. That’s still unlikely, but she’s now a near certainty for
one of the two run-off places.
2) The all-important second spot is up for grabs, with the five indicated candidate fighting
for the spot. It’s way too tough to call who’ll get there at this stage and after due
consideration, I cannot even hazard a best-guess as yet.
On the mining front, one item that was going to make last weekend’s edition but didn’t is how
the mining world in Ecuador is now taking the Chocó Andino referendum on mining activity in
its region very seriously indeed. Much delayed by authorities that didn’t want people to use this
mechanism in the Constitution and now confirmed by the electoral authority as happening in
conjunction with the Presidential and Congressional elections on August 20th, the 3m or so
inhabitants in and around the capital Quito get to decision on whether they want to prohibit
mining in the region in a legally binding vote. It doesn’t apply to other regions of Ecuador, but a
vote against mining will set a clear and highly negative precedent for mining activity and is
bound to spur other zones on to go the same route and ban mining. The CNE has recognized
ten groups as official campaigners in the referendum, eight anti-mining groups including
CONAIE and two pro-mining, including the Ecuador Chamber of Mining whose president, Maria
Silva, has already been hitting the airwaves in the campaign to show the benefits of mining and
explain it’s not a simple choice of “mining or water”, as people can have both.
23
Mexico: The first official judicial ruling against the AMLO Mining Law reform
We followed the surprisingly fast progress of the President AMLO-backed Mining Law reform
through Congress, we expected legal challenges at the time and since then in this section,
we’ve noted three challenges made to the law reform by the mining sector; one from AMLO’s
Congressional opposition, one for First Majestic Silver and one from the Invecture Group’s
privately run copper mine, Cobre del Mayo.
Sure enough last week saw Cobre del Mayo win a significant battle in the courts when its
temporary injunction against the effects of the new law was upheld and a judge ruled that the
company did not have to adhere to the new payments demanded of it by the law, this time
officially (13). This is far from the end of the story in this case, of course, as it is bound to be
appealed by the government’s lawyers and therefore move up through the country’s judicial
system, with a likely final destination its Supreme Court who will decide once and for all
whether the reform is anti-constitutional. However that process can take literally years and with
the current ruling in hand, Cobre del Mayo doesn’t have to pay anything extra. This is, of
course, an important precedent for other mining companies in Mexico and you can be sure its
courts will now be swamped with similar petitions from other mining companies. All this means
that though the law has not been struck down, its effects are now suspended.
Bottom line: The law as passed earlier this year is effectively toothless until further notice and it
may take years for the country to get any extra payments from the mining sector, if at all.
Market Watching
Deferred
Quiet week
Conclusion
IKN738 is done, we end with bullet points:
It doesn’t matter if I’m a fan of Fortuna Silver (FSM) (FVI.to). It doesn’t matter how
poor the Roxgold deal was, it’s now baked into the price. Ditto Lindero. What matters
now is the future and there’s reason to believe the company is going to have a better
time of it now that it’s Ivory Coast gig is up and running. The stock price looks cheap,
that’s for sure.
Another stock looking mightily cheap is Top Pick Minera Alamos (MAI.v) and I strongly
encourage you to check out that Town Hall webinar from company President Doug
Ramshaw last week. The type of company I’m happy to sponsor with my own cash.
Dear David. I’m happy you’ve arrive in the UK and didn’t have to stay too long in
Colombia. Now do the same with your cash and avoid Colombian mining company
exposure completely.
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://www.calculatedriskblog.com/2023/07/schedule-for-week-of-july-9-2023.html
(2) https://www.youtube.com/watch?v=jGDfD2yNz04
(3) https://www.rio2.com/post/rio2-limited-issues-shares-in-lieu-of-salaries-1
(4) https://www.hellenicshippingnews.com/china-smelter-group-raises-q3-copper-tc-rc-guidance-to-6-year-high-sources/
(5) https://www.eldoradogold.com/news-and-media/news-releases/press-release-details/2023/Eldorado-Gold-Provides-
Update-on-Tax-Impacts-in-Turkiye-Related-to-the-Weakening-Lira-and-Provides-Conference-Call-Details/default.aspx
(6) https://www.elsoldezacatecas.com.mx/finanzas/mazapil-enfrenta-dificultades-a-un-mes-de-huelga-de-penasquito-
10335322.html
(7) https://www.newmont.com/investors/news-release/news-details/2023/Newmont-Announces-Second-Quarter-2023-
Earnings-Call/default.aspx
(8) https://districtmetals.com/news/district-receives-approval-of-the-ardnasvarre-mineral-license-application-in-northern-
sweden-and-notes-recent-media-report-regarding-support-for-uranium-mining-and-exploration-in-sweden-
(9) https://www.accesswire.com/765573/South-Star-Battery-Metals-Announces-Non-Brokered-Private-Placement
(10) https://www.diarioelzondasj.com.ar/293091-la-inversion-en-mineria-en-2022-alcanza-un-alza-del-68-con-relacion-a-
2021
(11)
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwj5nN_Ysvv_A
hUzB7kGHVvdDH4QFnoECBoQAQ&url=https%3A%2F%2Fwww.argentina.gob.ar%2Fsites%2Fdefault%2Ffiles%2Finfor
me_de_exploracion_en_argentina_2023_1.pdf&usg=AOvVaw0Vz0wBGxGVblhrYo_LiNgz&opi=89978449
(12) https://es.wikipedia.org/wiki/Elecciones_presidenciales_de_Ecuador_de_2023
(13) https://www.jornada.com.mx/notas/2023/07/03/sociedad/otorgan-suspension-definitiva-a-cobre-del-mayo-contra-
ley-minera/
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
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
25
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
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
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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
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
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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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