Published by: David Morgan Volume 19 - Issue 8 - August 2017

We are in the summer doldrums again and the Commitment of Traders

Despite what you may have read
from other traders, it is not a black-
and-white situation. Just because
the Commercials, the largest
players in the marketplace, have
been buyers does not mean a
market will rally.
report has recently shown a very favorable setup for those wishing to
purchase or go long the precious metals. However, the COT is not as
easy to interpret, as indicated by our quote of a true veteran commodity
trader.
At times the COT will show very favorable conditions and spring up
almost instantly, at other times we will see the COT remain in favorable
conditions for WEEKS before any meaningful activity begins.

This is one reason when we update our premium members that we do

not show the COT every time; we do not want members to focus too
much on this one indicator. Further, this is why we use a breakout and
proof of a trade by the market itself.
Opening Thoughts
During the massive decline that saw silver print in the $14 level for a
Page 1
spike low that took place over a very limited time is a good indicator that
Endeavour Mining - New Addition the control quants were testing the exact floor of the market. This
Page 3 cannot be proven but the fact does remain that the major banks covered
approximately 15,000 contracts in silver and they went on to buy back
Trilogy Metals an additional 25 million ounces. These banks (controllers?) are now in a
Page 9 setup where the market is poised to move higher.

Blockchain Briefs We have had a breakout recently with gold moving above $1250 and
Page 15 silver confirming above $16.50 basis the spot price. This does meet our
conditions, as three consecutive days of trading have occurred above
Company Updates these levels. However, another key is how much volume took place for
Page 16
the breakout level to occur. This is where it can be particularly tricky. At
times such as these most of the upward movement can be produced by
Letters to the Editor
Page 21 short covering (buying) and not new buyers or buyers who are thinking
the metals are due for a bullish move.
Asset Allocation
Page 22 At this time we think both gold and silver will most likely stay range
bound (trading range) and not move significantly higher until later in the
year. We are aware of some well-read technical analysts who make a

Direct ownership of gold and silver provide an absolute and

unique ingredient to diversification strategy which brings financial stability. This is a
program that allows you to start a gold/silver savings program. I use them
personally. To learn more about the
 -2- The Morgan Report
strong case for the precious metals here and now. For
physical purchases we suggest now is a good time as
long as a cost averaging technique is utilized.
For aggressive accounts, being long at the levels we
have indicated are correct, these positions can be held
as long as stops are in place. August is typically the
month for the low in gold and this may again be the
case. We know many are questioning the entire idea of
investing in the precious metals, even some of our
longtime members. We will write more about this in the
Letters section.
Checking back to our earlier work for this year we
anticipated that we would not see a repeat of 2016,
which was a very healthy year for precious metals,
especially for investors who took advantage of our call
to lighten up and take profits in late summer 2016.
Here we are almost a year later and things are about as
frustrating as they possibly can be. Additionally, there
seems to be more banking problems, civil unrest, war
games, and discontent on a global basis, which means
fundamentally the gold and silver complex could be
moving steadily higher.
Bill Gross recently noted that our highly levered
financial system is like a truckload of nitroglycerin on a
bumpy road. This brings to mind something that
happened at the bottom of the financial crisis in 2008.
We took a consulting call and the person asked, Do
you know Bill Gross? We responded that we knew of
him (who does not know the Bond King if you are
involved in finance?). The caller continued, I spent the
whole day will Bill yesterday and today wish to buy
silver! I dont want to touch it, see it, or hold it. It needs
to be held domestically and readily obtainable when or
if I choose to take delivery. The amount was extremely
large and this individual was at the very TOP of one of
the big five banks in the world. The details and
connections were made during the consultation.
The point, it seems, is this banker knows the bond
markets are in trouble, the debt system is a failure, and
he was calling after the collapse! His choice was to buy
physical silver. Yet it is my strong opinion that this was a
quiet, off-the-record personal purchase and his
thoughts on the matter stayed with him and were not
shared within the banking system itself even though he
was very near the top of the structure.
www.TheMorganReport.com
August 2017
At this time we doubt we have much longer to wait. The
main keys are the Bond and Stock Market. The Stock
Market generally has a seasonality of being weak in the
September/October timeframe. The overall market has
been in a distribution pattern for a very long time, which
means the smart money has been booking profits,
selling their overvalued stocks to the public, pensions,
and mutual funds.
Quite often after the distribution has been completed,
some new high takes place, which means the less
sophisticated money thinks they are just such smart and
great investors. This gives the smart money the
opportunity to go short (sell) additional shares they no
longer own by naked shorting (using their cash to short
the market). We do think this is the current situation and
we also note that Trump seems to take credit for a
strong stock market. Big error. The Deep State will
prove him wrong and any member of TMR knows that
the President really has almost nothing to do with
economic conditions.
Further, as stated by us for the past few years, there is a
huge disconnect between a big number for a stock
index and the real physical economy. In a truthful
system the value of a group of stocks would reflect fairly
close to what the actual physical economy was
experiencing. This connection was lost a very long
time ago, just as the word dollar meaning a fixed
weight of silver has lost that meaning as well.
This month we will be adding a company to the
portfolio and will also report on one for you to
determine whether it meets your investment objectives; it
will not be a formal portfolio change.
......................................
Copyright 2017
 -3- The Morgan Report August 2017

as such, 2017 attributable production is forecast to be

By Chris Marchese
Ticker TSX:EDV.TO; OTC:EDVMF
52-Week Range C$17.37-$28.81, US$13.00-$21.89
Shares Out Basic/FD 101.9m/102.4m
Endeavour is one of the premier West African producers
currently trading at a discount relative to both the gold
price and to its peers. This is another company created
by Frank Giustra, who along with Ian Telfer created
Wheaton River (now Goldcorp) and more recently,
Leagold, which is in the TMR portfolio. In 2007, Mr.
Giustras company, Endeavour Financial, bought a
group of underperforming assets from Goldcorp and
subsequently spun-out Endeavour Mining where he
joined the board from 2013 to 2016 (its
transformational years). Endeavour Mining has
successfully employed the same model Mr. Giustra used
to build Wheaton River and is now attempting to build
Leagold with, referred to as the buy and build strategy,
whereby underperforming assets that can identifiably be
turned around are acquired at a cheap price only to see
value created when a given asset is then optimized.
While it is typical for perceived riskiness of West Africa
to be overblown, Endeavours asset diversity among
four different African countries and the number of mines
that are operating and being developed largely negates
this concern. Endeavour Mining possesses several
unique characteristics, most notably that of being an
exceptionally high growth
company. It isnt unusual to find
high-growth companies in the
mining sector but its rare to find
them among producers that are
already producing more than
500k oz. Au per annum. It will
likely become the next senior gold
producer (1m oz. annually) or at
least come very close and do so
with a very tight share structure for
a company of its size (roughly
105m shares F/D). The only real
comparable company in this
regard is Randgold.
530k-540k oz. increasing to 750k oz. +/- in 2018,
880k-920k in 2020, and 1m oz. in 2021, up from
500k oz. +/- in 2016. Due to the low-cost nature of
Endeavours growth assets, companywide AISC will
come down from $880-$900/oz. in 2017 to roughly
$780-$790/oz. in 2019-2020.
Endeavour will see its largest and lowest cost assets
come on-line over the next few years, including what
will become its flagship asset. Following the close of the
pending acquisition of Avnel Gold, companywide gold
reserves will be more than 9m oz., with over 14.5m oz.
of M&I resources and over 3.7m Inferred. While this
isnt exceptionally high for a soon-to-be 900k-oz.
producer, the exploration potential is very substantial
with over 200 prospective exploration targets. Up until
2016, Endeavour limited exploration expenditures due
to the challenging gold price environment and in turn
some of its assets have relatively short mine lives based
on reserves, but this is changing as 2016 was quite
successful and we think Endeavour will maintain an
exploration budget of $35m-$40m+.
Its geographic diversity can be seen below with one
operation (Tabakoto) and one development project
(Kalana) in Mali, one operation (Karma) and one
development project (Hound) in Burkina Faso, two
operations (Ity HL and Agbaou) and one development
project (Ity CIL) in Cote DIvoire, and one operation
(Nzema) in Ghana.

In West Africa, country

governments are given a certain
percentage interest typically
ranging between 10%-20% and

www.TheMorganReport.com Copyright 2017

 -4- The Morgan Report
Endeavour will be able to fund its three primary growth
projects without diluting shareholders, as it can fund
these core assets to production from its cash balance,
$210m undrawn revolving credit facility (which in all
likelihood can be up-sized at competitive rates), and
free cash flow generation. Its soon-to-be largest and
most valuable asset, Hound, is substantially complete
with roughly $65m-$75m left in capital expenditures to
it bring on-line in Q4. Construction at its Ity CIL Project
is slated to begin in the 2H 2017 while construction at
Kalana (pending acquisition close) is slated to begin in
early 2019.
The CEO and president of
London-based Endeavour Mining, he was previously the
chief executive officer of the La Mancha Group since
2012, and under his leadership La Mancha doubled its
production through optimization efforts before
undergoing a portfolio restructuring, which enabled the
Sawiris family to become the main shareholder of
Evolution Mining (a leading Australia gold miner) and
of Endeavour Mining in November 2015. In September
2015, Mr. de Montessus was appointed to the board of
Evolution Mining. Mr. de Montessus was previously a
member of the executive board and group deputy CEO
of AREVA Group (a world leader in nuclear energy) and
CEO of AREVA Mining (uranium). Mr. de Montessus was
a board member of ERAMET, a world leader in alloying
metals, between 2010 and 2012.
Endeavours chief operating officer
since 2012, he is a metallurgical engineer with over 38
years extensive general management experience in the
mining industry, including 34 years with Anglo
American, De Beers and AngloGold, specializing in the
developing, commissioning, expansion, restructuring,
and operating of large-scale mining and processing
operations throughout South Africa and West Africa. Mr.
Roux is responsible for the management of the Groups
mines in West Africa. Prior to that he was general
manager of Adamus Resources and senior vice
president operations at Endeavour Mining. Before
leaving AngloGold, he held the position of divisional
general manager and head of metallurgy.
The chairman and non-executive
director has more than 40 years experience in the
mining sector and he has been involved in the
development of some of the largest gold mines in the
www.TheMorganReport.com
August 2017
world in Africa and Papua New Guinea; iron ore mines
in Western Australia; industrial minerals in the Ukraine,
Russia, and Indonesia; and platinum mines in South
Africa. As a former chair of Ashanti Goldfields Ltd. and
former managing director of Consolidated Gold Fields
plc, Mr. Beckett has extensive knowledge of mining in
Africa. Mr. Beckett is a non-executive director of
International Hotels Investment Ltd., Northam Platinum
Ltd., Orica Ltd., Petroamerica Oil Corporation, and The
Egypt Trust Ltd.
The rest of Endeavours management team also has an
extensive track record in the mining industry and
working in Africa. As a result, this management and
BOD are very well credentialed, and such performance
speaks for itself.
This low-cost open-pit development
project has an initial 10-year mine life based on
reserves and material exploration potential. With first
production scheduled for Q4 2017, Hound will
increase average annual production by 240k-250k oz.
Au over the first four years and 190k oz. over the life of
mine. One of Endeavours priorities is to maintain
production of 240k-250k oz. Au after the fourth year of
operation. Hound will become Endeavours flagship
asset, given its scale and cost structure. Over the first
four years AISC are forecast to be roughly $620/oz.
and $710/oz. over the life of mine. But if Endeavour is
able to maintain production of 220k+ oz. p.a., AISC
over the life of mine will be below $700/oz. The
exploration upside at Hound is very robust with 15
significant targets identified but remaining largely
untested, all of which are located within 20km from the
mill. Further, two of these targets have seen very high
grade intercepts (for an open pit) of 5 and 6 g/t (Bouere
and Kari Pump). Endeavour is targeting the discovery of
2.5m-3.5m oz. over the next five years to extend the
mine life to 15 years, net of depletion.
This is a second development project that will
be considered an anchor or cornerstone asset and the
project has an initial 14-year mine life based on
reserves. This will likely be increased in the near future,
given the inclusion of the recent high-grade Bakatouo
and Colline Sud discoveries and Verse Quest and
additional resource conversion at Daapleu and
Copyright 2017
 -5- The Morgan Report
Mont Ity. Average annual production is forecast to be
215k oz. Au at AISC of $507/oz. over the first six years
and 190k oz. Au at $542/oz. over the first nine years.
The updated feasibility study will likely improve upon
these numbers. Construction is set to begin in the 2H
2017 and scheduled for completion in 1H 2019.
Endeavour regards the greater Ity area as having highly
prospective exploration targets and will spend the most
on exploration over the next five years, relative to any of
its other assets. Just recently, in May, Endeavour
discovered multiple high-grade trends at the Ity Mine.
Longer term, one would expect a material amount of
value is extracted from the Greater Ity area. In fact, just
a couple of weeks ago, Endeavour upgraded its M&I
resource since the start of the year by a whopping 1.5m
oz. Au and as such the on-going optimization study will
now incorporate the use of a plant capable of
processing 4mtpa, up from the initially envisioned
3mtpa.
We will see some of the potential the Ity area has to
offer late in the year as a maiden resource estimate is
published for a resource near the Ity Mine. Several
targets have been identified at the Le Plaque area,
which covers 4km and is located 5km south of the Ity
mining complex. Several high-grade mineralized trends
were identified at the Le Plaque area, the largest being
a 2km-long anomaly. Mineralization at the Le Plaque
trends occur from surface for the main lense and all
trends are open along strike and at depth. Some of the
best diamond drilling and reverse circulation drill holes
to date from the mineralized zones are as follows:
3m @ 36.94 g/t
13m @ 22.36 g/t
5m @ 7.9 g/t
10m @ 3.1 g/t
4m @ 11.87 g/t
8m @ 28.96 g/t
8m @ 11.83 g/t
3m @ 61.23 g/t
7m @ @ 5 g/t
15.9m @ 2.2 g/t
2.8m @ 5.85 g/t
5m @ 4.72 g/t
With the five-year exploration budget planned for the
Greater Ity area, we will likely have continued
www.TheMorganReport.com
August 2017
encouraging exploration results in the near, medium,
and longer term.
This is currently
Endeavours largest and most profitable asset, having
produced 196k oz. Au at AISC of $534/oz. in 2016.
The current mine life is seven years, based on reserves,
with an exploration program underway confirming
mineralization from initial drill results. There are
numerous exploration targets. Production will return to
more normal levels in 2017 and onward of 175k-180k
oz. AISC in 2017 are expected to be elevated ($650-
$700/oz.) before reverting to $575-$650/oz.
Endeavour is targeting the addition of 500k-1.5m oz. in
reserves over the next five years to extend the mine life
to 10 years, net of depletion.
Endeavour has been and
is making the most of this higher-cost asset, having
increased production and lowered cost for three
consecutive years. Endeavour is forecasting production
and AISC of 150k-160k oz. at $950-$900/oz. (first time
AISC will be less than $1,000/oz.) in 2017. The current
mine life is four years based on reserves, but there
remains material exploration upside as current M&I
resources (excluding reserves) stand at 1.2m oz. and
900k oz. of Inferred resources. Due to its short mine
life, Tabakoto is a top exploration priority in the current
year, given the 75 targets identified, seven of which are
high priority for 2017.
Endeavour obtained
this asset through the acquisition of True Gold and it
has already added 2.5 years of mine life in addition to
identifying higher-grade targets in Rambo West and
Yabongso, which will be drilled in 2017. Endeavour is
looking to add 500k-1m oz. of reserves over the next
five years to extend the mine life to 15 years. 2017
production is estimated to be 100k-110k oz. in 2017 at
AISC of $750-$800/oz. Endeavour has identified 45
high-quality targets so substantial upside remains. A
plant optimization is underway that will likely lead to
marginally higher production at AISC of $750/oz. or
lower. Commercial production was reached in 2016, so
this is a new operation.
Once the acquisition of Avnel Gold closes, Endeavour
will re-design the current feasibility study to increase
Copyright 2017
 -6- The Morgan Report August 2017

processing capacity. Based on the current feasibility
study, average annual production will be 101k oz. Au at
AISC of $730/oz. (AISC of $561/oz. for the first five
years) over an 18-year mine life (based on reserves)
with an additional 1.1m oz. in M&I resources.
Endeavours goal is to increase capacity such that
average annual production will increase by at least 50k
oz. at lower AISC. Like so many assets in the portfolio, it
fits Endeavours strategy of acquiring assets with
significant exploration upside. The Kalana Main Deposit
is still fully open at depth and a high-grade satellite
deposit has been identified in the Kalanako Target
(currently hosts an indicated resource estimate of 119k
oz. Au at 3.34 g/t).
Not to be confused
with the Ity Carbon-In-Leach (CIL) development project,
this is a producing heap leach operation and has been
in operation since 1991. Currently the mine life based
on reserves is three years; however, continued
exploration success will prolong the operation and
potentially run concurrently with the Ity CIL Project, at
least for the first few years. This is currently under
review. Endeavour discovered a satellite deposit to the
Ity HL Project in 2016, which could increase the mine
life several additional years if feasible. In 2017,
production is forecast at 75k-80k oz. with AISC of
$740-$780/oz. Endeavour achieved a major milestone
in May 2016 regarding its Ity projects, increasing its
percentage ownership from 55% to 80%.
Endeavours sole
operation in Ghana has a relatively short mine life
based on reserves at four years. 2017 production is
estimated to be 100k oz. Au at AISC of $895-$940/oz.

Endeavour's Production Profile [Koz] & AISC [Right Axis]

1,200

$890
1,000

800
$860

600
$830

400

$800
200

0 $770
2017 2018 2019 2020 2021

Agbaou Tabakoto Ity HL Nzema Karma

Hounde Ity CIL Kalana Ity HL ext Nzema ext

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 -7- The Morgan Report August 2017

Endeavour has implemented an aggressive five-year Endeavour Mining has one of the strongest near- and
exploration budget, spending $35m-$40m annually medium-term growth profiles in the sector, at least
prioritized in the following areas (and the forecast when compared to its peers (those producing over 500k
discovery cost per oz., based on historical costs): oz. but less than 1m oz. annually). While Endeavour has
three solid growth projects to fuel growth over the next
four years, hopefully it continues to implement its buy-
and-build strategy, acquiring advanced-stage
$55 $11/oz. development assets. Because it has one of the strongest
$45 $15/oz. share structures for a company of its size and given its
financial position, its able to acquire small-mid
$30 $15/oz.
companies without having to dilute its shareholder base,
$25 $25/oz. as has been the case with so many other mid-tier
$15 $20/oz. mining companies.
$10 $13/oz.

Hounde (90%) $647,418,364 $6.29 $8.49

Agbaou (85%) $424,985,049 $4.13 $5.57

Ity CIL (80%) $690,608,361 $6.70 $9.05

Kalana (80%) $318,735,201 $3.09 $4.18

Karma (90%) $272,772,260 $2.65 $3.58

Tabakota (85%) $91,912,218 $0.89 $1.20

Ity hp (80%) $36,968,254 $0.36 $0.48

Nzema (90%) $33,385,714 $0.32 $0.44

Other
($60,000,000) ($0.58) ($0.58)
Corporate/Exploration

Net Cash (Debt) $12,000,000 $0.12 $0.12

Shares Out 103,000,000

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 -8- The Morgan Report August 2017

$23.97 5% 6% 7% 8% 9% 10%

$1,100 $16.46 $15.28 $14.21 $13.23 $12.34 $11.53

$1,200 $21.46 $20.01 $18.68 $17.46 $16.35 $15.34

$1,300 $26.47 $24.73 $23.14 $21.69 $20.37 $19.15

$1,400 $31.48 $29.46 $27.61 $25.92 $24.38 $22.96

$1,500 $36.49 $34.18 $32.08 $30.15 $28.39 $26.77

$1,600 $41.50 $38.91 $36.55 $34.38 $32.40 $30.58

$1,700 $46.51 $43.63 $41.01 $38.61 $36.42 $34.39

$1,800 $51.51 $48.36 $45.48 $42.84 $40.43 $38.21

$1,900 $56.52 $53.09 $49.95 $47.08 $44.44 $42.02

$2,000 $61.53 $57.81 $54.41 $51.31 $48.45 $45.83

$32.52 5% 6% 7% 8% 9% 10%

$1,100 $22.38 $20.79 $19.35 $18.03 $16.83 $15.72

$1,200 $29.14 $27.17 $25.38 $23.74 $22.24 $20.87

$1,300 $35.90 $33.55 $31.41 $29.45 $27.66 $26.01

$1,400 $42.66 $39.93 $37.44 $35.16 $33.07 $31.16

$1,500 $49.42 $46.31 $43.47 $40.87 $38.49 $36.31

$1,600 $56.18 $52.69 $49.50 $46.58 $43.91 $41.45

$1,700 $62.94 $59.07 $55.53 $52.29 $49.32 $46.60

$1,800 $69.71 $65.45 $61.56 $58.00 $54.74 $51.74

$1,900 $76.47 $71.83 $67.59 $63.71 $60.16 $56.89

$2,000 $83.23 $78.21 $73.62 $69.43 $65.57 $62.03

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 -9- The Morgan Report
It is rare to find a high-growth mid-tier
producer/emerging senior producer trading below Net
Asset Value, let alone below 0.90x NAV. But this is the
situation presently with Endeavour Mining. The
significant exploration and production upside at so
many of its assets provides a great deal of optionality
going forward. It is likely that once Hound reaches
production (in Q4) and is ramped up to capacity,
Endeavour will seek further acquisitions to add a third
and possibly fourth asset to development pipeline.
Full Disclosure: This analyst (Chris Marchese) does own
shares of Endeavour Mining and Frank Giustras new
company, Leagold.
......................................
By David H. Smith
(formerly NovaCopper)
https://trilogymetals.com
NYSE: TMQ; TSE: TMQ
SO/FD: 105.5m/120m
Shareholder Breakout: Mgmt: 4%; Retail:
16%; Institutional: 80%
Cash: US$14.5 M + US$5.6 M in marketable
securities. Debt: Nil
52 wk. U.S./Canadian:
High:$1.22/C$1.50;Low:$0.45/C$0.57;
Last: $01.20/C$1.38
The three metals used as money in ancient Babylon
were gold, silver . . . and copper. We dont think of
copper as money today, yet it is ubiquitous, indeed
critical, in more applications of modern life than most
people realize. Indeed, as several writers in the resource
space have stated, mined, above-ground gold and
silver are actually forms of stored energyhence,
moneysince they represent the ability to make future
claims on a desired good or service. By this logic,
copper too (still) represents stored energy/money.
The day may come when nanotechnology, asteroid
mining, or a secular commodities bear market cycle
www.TheMorganReport.com
August 2017
take much of the bloom off of metal prices in general,
but for the foreseeable future we can expect enduring
demand for newly-produced metals stocks. By reading
the supply/demand tealeaves, it is not difficult to project
that the secular cycle for a number of commodities in
general, and copper in particular, could have a solid
run into at least the middle of the next decade and
perhaps longer.
It is with this thinking in mind that
has been paying increasing attention to copper
properties that look to have evolving top-tier potential.
Indeed the very week this report was submitted
witnessed a cash copper breakout from the confines of
a 2.5-year head-and-shoulders bottom. (Notice high
volume accompanying the up-move.)
At a recent conference Robert Friedland stated We
need to double the copper price to stimulate new mine
development. To an extent, Friedland may have been
talking his book, given that he has two massive
copper projects in DRC. But the case for copper is easily
strong enough to stand on its own merits. Because it has
the highest conductivity, copper will play an essential
role in the green energy revolution from energy
production, to the need for hybrid and electric cars for
almost twice as much copper, at over 40 kg each, as
one powered by an internal combustion engine.
Virtually every aspect of power generation and
transmission requires copper. As with gold production,
copper grades are declining, and mines like Chiles
and are seeing production
costs increase at a sharp clip.
In late June 2017, this writer visited Trilogy Metals
(a high-grade poly-metallic deposit) and
(a large carbonate replacement deposit) projects,
located in the Ambler Mining District, about 470 km (<
2 hours by small plane) from Fairbanks, Alaska. The
mining district hosts copper, zinc, lead, gold, and silver.
Trilogy, originally a part of Nova Gold, was renamed in
late 2016 from Nova Copper, more accurately
expressing the nature of its poly-metallic properties.
This report is generated for TMR subscribers as an initial
One to Watch company report. Several links are
provided for those readers desiring a more detailed
treatment on the topic.
Copyright 2017
 - 10 - The Morgan Report August 2017

www.TheMorganReport.com Copyright 2017

 - 11 - The Morgan Report
We posted on website for
subscribers, an onsite video interview this writer
conducted with CEO Rick Van Nieuwenhuyse. You can
view it here.
In the process of the site visit, research, and writing,
Trilogys share price, which has been strong on the
charts for some time (see Technical Take below) began
moving up sharply, first slightly ahead of and then
concurrent with the cash copper price movement in the
same direction. Breakouts and/or price behavior
indicating near-term upside potential in the
commodities sector in general as well as a number of
mining company majors share prices moving into new
up-trends hint that, as investors, we should be paying
attention to what Mr. Market is trying to tell us. Should
Copper and Zinctwo primary metals defining much of
Trilogys exploration workcontinue to advance, the
companys share price could benefit substantially, in
addition to helping soften cost estimates in regard to the
potential for building and operating a mine/mill down
the line.
The worlds most
impressive deposit is of little value if production cannot
be transported to market(s). As the map shows, a key
metric in an exploration-to-production project will be to
do the math and then come up with a viable plan, in
order to determine the most reliable and cost-effective
manner of executing the task. This, Trilogy appears to
have accomplished.
Proposal of the key access/transportation
metric.
*Road connecting the Ambler mining district to four
locations (Mackenzie, Anchorage, Seward, and Whittier)
*Cost savings rail option access from Fairbanks to ports.
Why this choice, instead of a port-destination road?
Answer: A much less desirable route would traverse
considerable wetland areas; to a two months/year port
opening; shallow water would necessitate that loading
be lighter for transfer into deeper water/shore ice
issues. In comparison, the proposed 211-mile road
route would connect to the graveled Dalton Hwy, a
State-maintained year-round road.
www.TheMorganReport.com
August 2017
*Alaska Industrial Development & Export Authority
(AIDEA) road permitting process underway (Notice of
Intent filed 2/28/17; permitting timeline, two to three
years). Document has been accepted as complete and
compliant.
*AIDEA to permit and build AMDIAP (similar to Red Dog
road and port DMTS); this initiates the Environmental
Impact Statement (EIS).
*Finance construction costs with low interest bonds, 30
years + payback via tolls, via a State Development
Bank set up to build infrastructure. (State-backed bonds
are sold to groups and private individuals.)
(not an acronym) is a for-profit U.S. regional
Alaska Native corporation, one of 13 regional native
corps created by the 1971 Alaska Native Claims
Settlement Act. (Further information on NANA can be
found here.) Native Corporation support is evidenced
by its longstanding interaction with the Red Dog Mine
(>25 years), one of the worlds largest producers of
zinc concentrate (con). Red Dog stores con on site and
ships annually during a 100-day window during July-
October. Red Dog currently has approximately 15 years
of reserves.
*According to the Alaska Department of Commerce,
economy. (It is this writers opinion that the potential
building of a new mine(s) in the Ambler District would
serve to considerably extend the regional funding flow
if/as Red Dog winds down late in its projected reserves
mine life.)
The Tribal Council (a
political entity); City Council (domestic government);
Elders Council. Trilogys engagement policy is to
communicate transparently, early, and often. Trilogy
meets annually with all villages on the river.
, an Australian-based global diversified
metals/mining company spun off from BHP (2015)
stepped into the copper production/Alaskan assets
space via an option to form a 50/50 joint venture
agreement with Trilogy. (Prior to this agreement,
South32 did not have a presence in North America.)
Their option payments consist of $US10 M/year for up
to three years. South32 can exercise their option to form
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 - 12 - The Morgan Report
the 50/50 JV at anytime during the three years by
paying the Subscription Price of US$150M into the JV. If
so they will be paying a premium of 150% of what
Trilogy has spent to that timearound US$100 M.
: The $10M drill program has been fully
funded by South32.
: (20 miles from Bornite) PEA shows a
potential revenue stream from 60% Copper; 21% Zinc;
9% Silver; 6% Gold; 4% Lead. Updated metallurgy
shows no significant penalty metals in the copper or zinc
concentrates; it assumes 92% Cu and 88% Zn
recoveries; 8:1 strip ratio.
The 2013 Preliminary Economic Assessment (PEA) for
Arctic projected a 12-year mine life at 10,000 tpd.
Projected annual payable metals breakout as follows:
125Mlbs Cu; 152Mlbs Zinc; 24Mlbs Lead; 29,000 oz
Au; 2.5Moz Ag. A planned Pre-Feasibility Study is
targeted for Q1 2018. Currently Trilogys
comprehensive exploration drill season is May to the
end of September; during winter, infill drilling only.
: A statement posted in Trilogys most recent
presentation, under the subhead Exploration Potential,
highlights the upside for both of the companys primary
projects. Ambler Schist Belt Volcanic massive
sulphide mineralization occurs in a series of polymetallic
deposits along the entire 100-kilometer (70-mile) strike
length of this belt.
Bornite Carbonate Sequence Hydrothermal
dolomitization and copper mineralization occur across
the entire width of outcropping carbonates.
: President/CEO of Trilogy
Metals and director of NOVAGOLD. He is founder,
president, and CEO of NOVAGOLD since 1997 and
was vice president of exploration for Placer Dome Inc.
from 1990 to 1997. Rick has managed projects from
grassroots discovery through to advanced feasibility
studies, production, and closure. He holds a
candidature degree in science from the Universit de
Louvain, Belgium, and a masters of science degree in
geology from the University of Arizona. He received the
Thayer Lindsley Award in 2009 for his role in the Donlin
Gold discovery.
www.TheMorganReport.com
August 2017
: Elaine is chief financial officer and
corporate secretary of Trilogy Metals, with more than 20
years of experience in audit, finance, and accounting
with public and private companies, including experience
with numerous financings/acquisitions, and has listed
companies on both the TSX and AMEX. Elaine is
responsible for all aspects of financial services, financial
reporting, and corporate governance. She holds a
bachelor of commerce degree from the University of
Alberta and is a chartered accountant.
: Indicated/Inferred Resource of
8 billion pounds Cu; 3 billion pounds Zn; 1 moz Au-
equivalent PMs. (Full technical study statistics, including
Cash/Capital startup/sustaining costs, as well as a
review of the 2015-16 Work Programs (current July 19,
2017) can be found on the companys website at
https://trilogymetals.com/investor-center/presentations.
In addition, this excellent presentation gives a
comprehensive overview of Copper Supply/Demand,
Chinas copper raw material imports, and the ongoing
global copper stock/zinc stocks retreat.
Technical Take
As noted at the beginning of this report, cash copper
has broken out of a 2.5-year version of what technical
analysts term a head-and-shoulders bottom. Adding
validity to the move is that (as per one of David
Morgans key requirements) it took place on high
volume and has continued to do so. Over the last two
plus years, on the Chicago Mercantile Exchange (CME)
only one instance of higher volume (in November 2016)
has been logged. During the week of July 24, the
Copper Continuous Contract traded in excess of
150,000 contracts on two consecutive days. Should
copper prices continue to consolidate and rise, an
additional tailwind will be provided for companies like
Trilogy Metals, who are developing large-scale copper
projects.
An important price evaluation tool,
which during recent years this writer has come to greatly
appreciate. The technique was developed and
trademarked in the 1980s by technical trader John
Bollinger. With this technique, stock or commodities
prices, at two standard deviations (usable in a variety of
timeframes), are bracketed by an upper and lower
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 - 13 - The Morgan Report
band, the distance of which is measured by a 21-day
moving average.
When the price trades in a relatively narrow sideways
range (also called congestion), which is most of the
time, volatility is low and the moving average, which
Bollinger refers to as a squeeze, is constricted. The
longer this takes place, the more likely it becomes that
the price will at some point break out. BBs (or a
breakout from them) do not by themselves predict the
direction, so it is best to use/add other indicators like
volume analysis, MACDs, etc. The rule of thumb for
any kind of technical analysis is that the more indicators
that align, the greater confidence the trader can have
that his/her analysis may be correct.
Trilogy Metals Daily with Bollinger Bands June 28,
2017
Notice the sideways squeeze that took place from May
to July 2017 (in the chart below), and the eventual
upside breakout, on high volume, adding confirmation
to the validity (and sustainability?) of the new directional
move.
www.TheMorganReport.com
August 2017
Two of the most widely-followed moving averages are
the 50- and 200-day versions. The 50 day is often
shown in blue, and the 200 day usually in red.
Generally speaking, when both averages are moving in
the same direction, whether up or down, this is
presumed to be a validation of the primary trend. When
the faster 50 day crosses over the slower 200 day, even
allowing for the fact that it may be generating a false
signal (whipsaw), this does provide at least a hint that a
potential trend change may be getting underway.
Whether or not a person places much faith in technical
analysis in general, the unavoidable fact is that
many/most individual and institutional traders actually
do, especially in regard to the 50/200-day indicators.
Therefore it behooves us to be aware of this fact and
pay attention accordingly.
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 - 14 - The Morgan Report
In an effort to catch an earlier definition of a trend
change, traders sometimes use a shorter average, e.g.,
the 15 day, looking for the initial crossover. To create a
bit of extra emotionalism, a crossover to the upside is
sometimes referred to as a golden cross, whereas one
to the downside receives the moniker of a death cross.
Even though these crosses can generate false signals,
once they remain in place for awhile, they add
confidence to the belief that the trend for the
stock/commodity has indeed changedperhaps for a
long time to come.
Note the 50/200-day crossover at about 24 April,
confirming the price rise from earlier in the month, as
most of the original upside momentum was maintained;
increased volume both preceded the crossover and
continued for quite awhile thereafter, confirming the
likelihood that higher prices would be sustained.
An unusual pricing situation, which this writer has seldom
run across, took place on a daily basis for about a
month (June-July 2017). Note that on most days,
regardless of where the price opened, the close was at or
very near the top of the daily range. This indicates that
on any intraday weakness, there was always supportive
buying coming in to elevate the price on/near the close.
(A similar setup can be seen during late March-early
www.TheMorganReport.com
August 2017
April 2017.) Accompanied by low volume, it indicates to
this analyst that buying/selling was muted in both
directionsfurther confirmed by the Moving
Average/Bollinger Bands visuals noted above. A potential
buyer might have added confidence in taking a position,
and perhaps be inclined to place a (mental/close only?)
stop below the lower congestion range boundary around
US$0.67.
Interestingly for a Canadian miner, TMQ tends to have
greater volume in the U.S. For example, on July 18,
2017, the volume on the NYSE was 163,200 shares; on
the TSX, 72,800. At 16%, a relatively small public float;
at 80%, a strong institutional showing is demonstrated.
The five sub-categories of a formal NI 43-101 Compliant
Report, in order of presumed economic viability, are
Reserves: Proven and Probable, and Resources:
Measured, Indicated and Inferred. Trilogys Resources
are listed as Indicated and Inferred. Given the size of the
district, the additional unexplored areas within it, and the
substantial grades that have shown via ongoing drilling
programs, it is reasonable to assume that considerable
upside for these categories remains.
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 - 15 - The Morgan Report
At the time of this writing, Technical and Fundamental
analysis supports the belief that considerable upside
remains for both the price of copper and for those
mining exploration companies, such as Trilogy Metals,
who are working effectively to develop projects that can
lead to production. If the metrics by which such a project
is advanced are able to demonstrate viable economics
then the likelihood that mill/mine production and
operation can take place in agreement with the
companys timeline is greatly enhanced.
The complex process of taking a big discovery project
(post-delineation of economic viability) from planning-
feasibility to financing-development to production-
marketing often takes a decade or more, costs hundreds
of millions if not billions of dollars, and still must contend
with the prevailing price of the metal(s) produced, in
order to show a profit.
What follows are some of the elements that this writer
believes indicate that Trilogy Metals is deserving of a
One to Watch Exploration-to-Production Project
classification.
Managements extensive background in the Alaska
mining space
Long-term cohesiveness of the
management/exploration team
Acquisition and continued delineation of highly-
prospective poly-metallic properties
Strong support by local, regional, and state
governing bodies
District largely absent of anadromous fish and
migratory game populations
Construction plan designed to limit mill-mine-tailings
operational footprints
Company Debt Nil; Rational Share Base FD; strong
Institutional share holdings
Long-term developmental plans currently supported
by secular commodities cycle
: This writer, David H. Smith, owns shares in
Trilogy Metals, purchased in the open market.
......................................
www.TheMorganReport.com
August 2017
With the August 2017 issue of , we
introduce a new monthly column,
Each month we will post information that can help our
readers develop a comprehensive understanding of the
rapidly-evolving blockchain/cryptocurrency/alt-coin
space. We will post definitions, breaking news, links to
informative interviews, pronouncements, illuminating
quotations, etc.
The concepts surrounding the blockchain-coin-ICO
token space can be quite intimidating. We dont know
how all of this will shake out, but were pretty certain
that the idea of peer-to-peer exchange without
intermediaries, in a process bestowed with certain
advantages like lower cost, greater security, and
increased privacy, is not going to go away.
Currently, certain inherent disadvantages, such as the
inability to reverse a transaction, the possible loss of
funds (into the ether?) if a lengthy send or receive
address is incorrectly listed, and fraudulent ICOs that
can raise millions of dollars in a few minutes, mean
thatfor the foreseeable futurethis potentially
revolutionary way of conducting business is unlikely to
fully supplant traditional business practices. ICOs, which
can be bought ahead of going public or afterwards in
just about any amount, are like IPOs except without the
middleman (underwriters). Their taxable status is
currently unclear.
What we have learned however, is that for most
mortals, ourselves included, a workable understanding
of this space can only come about through becoming
informed via layers of understanding that each build
upon the preceding one. Youre probably not going to
be able to safely and successfully function in this arena
if you dont know what a blockchain is, that bitcoin and
Ethereum are not both currencies, or that (as some
high-ranking officials have naively stated) We need a
back-door into the blockchain and to the bitcoin!
You may decide never to participate directly in the alt-
coin/ICO side of things or even in what we believe will
be the inevitable appearance and use of precious
metals-backed digital coins and tokensevents well
nevertheless be closely monitoring for our subscribers.
Copyright 2017
 - 16 - The Morgan Report
But at some point, you will be involved in some kind of
blockchain-derived financial transference system, be it
moving legal documents about or buying a cup of
coffee. By keeping abreast of developments and
understanding the language, not only in our Blockchain
Briefs space here, but also on your own, you should be
able to make whatever transitions are required going
forward and hopefully avoid pitfalls that will inevitably
ensnare the majority of people who remain largely
uninformed until they decide or are forced to do
something!
New subscribers (or current ones who desire a review)
are advised to read David Morgans first take on the
subject in an essay titled, My Two Bits About Bitcoin,
March 2014, posted on his blog here and discussed
more recently in a report titled, Gold, Silver, the
Blockchain, and Bitcoin, available on our site in the
June 2017 issue of
We assume a certain knowledge level on this topic,
about which the above-mentioned essays and Internet
subject searches should help readers to easily acquire.
However, if there are aspects or questions youd like us
to cover, dont hesitate to contact us at
support@themorganreport.com.
Fundamentally, Bitcoin is merely software running
across a network of peers that creates and maintains a
shared ledger accounting for holdings of a scarce
token. Bitcoins network software is open source, so it
can be duplicated and modified without seeking a
license from the copyright holder.
( worker dissatisfaction among union employees
, Peter Van
Valkenburgh)
www.TheMorganReport.com
August 2017
On August 1, 2017, a seminal event in the short history
of Bitcoin took place, when a splinter group in the
cryptocurrency community brought about a fork, or
split into two coins. Now we have the original Bitcoin
(BTC) and Bitcoin Cash (BCH). A stated goal was to
create a different protocol (using SegWit) which could
speed up the number of transactions taking place over
a given time span. Holders of BTC (on certain
exchanges who have agreed to honor the split, or who
have secured them onto an offline hard wallet) will be
able to receive one new BCH for each BTC.
As an ABC.com post stated:
Bitcoin transactions, grouped into blocks linked
together in a blockchain have always taken on
average 10 minutes each to process. But as the virtual
currencys popularity has grown, used for everything
from buying pizza to anonymously buying illegal drugs
on online black markets, the transaction network has
started to get bogged down.
At this writing, BTC was trading at around $2,700 and
the new BCH ranged from $300 to $900 apiece. Of
course, Time and Mr. Market will tell us about how all
of this is going to shake out.
......................................
The mining shares have been very weak over the last
couple of months as they correctly predicted (as they
often do) the direction of where metals prices were
headed. It looks as if we have put or will soon put in a
bottom in share prices. While we typically do company
updates one month before quarter end (in this case the
September issue), there are a number of select
company updates worth mentioning this month.
The company is on track to put up
a weak Q2 earnings report resulting from efforts by
unionized workers to illegally disrupt mining activities,
which caused minor stoppages at La Parrilla and Santa
Elena, and a more serious stoppage at its largest
operation, La Encantada. According to First Majestic,
throughout the Mexican mining industry is at the highest
levels witnessed in the companys 15-year history. On
the bright side, First Majestic successfully cleared three
blockades and resumed mining activities, and the
Copyright 2017
 - 17 - The Morgan Report
construction of the new roaster at La Encantada was
unaffected by the work stoppage and remains on
schedule to be completed by early Q1 2018.
Fresnillos next round of growth, which will
last several years, has begun as its reported strong Q2
production results. Silver production was up 11.70%
versus the year-ago period and 7.3% from Q1 at
14.5m oz., bringing the first half total to 28m oz. The
company remains on track to produce 58m-61m oz. Ag
and 870k-900k oz. Au in 2017. Production is weighted
more heavily toward the 2H, the San Julian Phase II is
commissioned, and Phase I is fully ramped up. Phase II
will drive growth in 2018 along with optimization of the
Fresnillo Mine and its pyrites project, growing
production to 65m-70m oz. Growth will continue for
the next two to three years, as in 2019 Juanicipio will
come on-line and the Fresnillo expansion will be
complete, with silver production growing to 70m-75m
oz. in 2019 and 75m-80m oz. in 2020. Excellent drill
results from Juanicipio have led the JV of Fresnillo and
MAG Silver to increase throughput, which is not
included in the numbers mentioned. There is also a
strong likelihood Fresnillo will acquire MAG to
consolidate ownership of what is currently the most
attractive silver development project in the world.
As noted in the Tahoe report, if any
hindrance to mining operations were to occur at
Escobal (one of the largest and most profitable silver
assets in the world), the share price would get
pummeled. Thats exactly what happened the day
following our alert, but those who heeded our advice
and put stop-losses in, saved themselves from greater
potential losses. Given that Escobal employs a lot of
workers in Guatemala and given the fact the lawsuit
isnt against Tahoe, rather against the ministry of
energy and mining, we believe this should be resolved
but could take up to 12+ months. For this reason, we
are lowering our rating on Tahoe to a 1.8. Tahoe isnt
the company it was two years ago as it now has three
gold operations in addition to Escobal. Had it not been
for Tahoe owning such a world-class asset and if it
hadnt had several other gold operations, we likely
would have issued a sell alert.
After opening the year with a
strong Q1, the company set a record quarter yet again
in Q2, producing just over 160k oz. Au, a 24% increase
over Q2 2016 and 23% higher than Q1 2017. This
increase can be attributed to record production from the
www.TheMorganReport.com
August 2017
Fosterville Mine in Australia, being partially offset by
marginally lower production from the Macassa Mine. In
Q2, production from Fosterville was 77k oz. Au, more
than double the production, relative to the year-ago
period attributable to the improvement in the mill grade
to 17.2 g/t (with 94.7 recoveries), compared to 7.5 g/t
(with 90.8% recoveries) in the year-ago period. The
Macassa Mine saw production of 45.7k oz. in Q2. This
production along with contributions from Holt, Taylor,
and Holloway (the latter currently on care and
maintenance), registered 1H 2017 production of
290.5k oz. We continue to be impressed with Kirkland
Lakes ability to execute as it raised production
guidance despite putting Cosmo on care and
maintenance, now with two mining operations currently
on C&M. Beyond that, Kirkland recently came out with
an updated resource estimate for its Fosterville Mine,
which was truly amazing. It increased mineral reserves
by a whopping 110% but more importantly the reserve
grade increased by an astounding 83%, to 17.9 g/t Au!
This essentially means that 2017s greatly increased
production isnt temporary and in fact it should reach
the 250k oz. level for quite some time. The acquisition
of Newmarket Gold last year, which we praised but was
hated by the market, is creating significant shareholder
value.
The company reported its first full quarter
(April 8-June 30) since it acquired the Los Filos
Operation from Goldcorp. Production increased in Q2
to 46k oz. Au from 43.9k oz. in Q1 2017. The
company ended the quarter with $65.4m in cash.
According to the company, While both open-pit and
underground mining activities have shown significant
improvements, gold production in Q2 was affected by
mine planning and heap leach pad management
issues. These issues will continue into Q3. Some
duplication of administrative costs was also incurred
during the transition period, but most administrative
services that were previously carried out by Goldcorps
Mexico City office have now been transferred to the
mine. We have also started two capital investment
projectsrefurbishing and installing an agglomeration
drum at an estimated cost of $1.3m and extending the
conveyors to deliver crushed ore more efficiently to Pad
2 at an estimated cost of $5m. These capital projects
are expected to improve production and cost
performance starting in 2018. Many optimizations
have been identified during the quarter and will be
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 - 18 - The Morgan Report
implemented through the remainder of the year. These
include
To further reduce the
cost of the open-pit operations, several activities were
initiated to improve the utilization rate of the mining
equipment. This included enhanced drill and blasting
sequencing and improved haul truck and loading
equipment maintenance to increase productivity levels.
Average daily truck utilization rates have increased
from approximately 55% to 80%, and further
improvements are expected. The mining fleet
maintenance contract has been renegotiated to be
more effective, thus improving availabilities.
Several
improvements were initiated at both the North (Leagold
operated) and South (contractor operated) Los Filos
Underground mines to increase production and reduce
costs. At the North mine, extensive operator,
maintenance, supervisory, and technical services
training programs have now been implemented.
Additional mining equipment has been purchased for
improved ground support capability, mechanized
loading of explosives, and for mechanized placement
of Cemented Rock Fill (CRF). New infrastructure has
been completed to allow for mechanized preparation
of CRF. CRF results in improved productivity and
ground support and will enable implementation of
underhand cut and fill mining methods. This was based
on a successful underhand cut and fill trial program in
late 2016 /early 2017 that demonstrated improved
safety, less dilution, and improved ore recoveries. Stope
heights have also been increased to 4 meters from 3.5
meters, effectively reducing one access cut per stope
block. Improvements to drill patterns as well as the
explosives loading and blast sequencing have
increased the advance per blast, as well as reduced
dilution and overbreak. Shift times have been changed
to improve productivity. Increased attention is being
given to reducing dilution in the cut and fill mining
operations by strictly controlling the mining drive
widths. These initiatives have increased daily production
since the start of 2017 by 25% to 1,100 tpd, with
further improvements expected during the remainder of
the year.
To improve the gold recovery on the
heap leach pad, several process improvements are
being implemented including increased lift heights,
better control of flow rates, and optimization of cyanide
concentration and pH levels. Additional initiatives that
www.TheMorganReport.com
August 2017
were identified for potential implementation are
modification of the leaching cycle and reducing losses
of carbon fines.
To improve the
agglomeration quality of the crushed ore that is placed
on the heap leach pads, Leagold is refurbishing and
installing an agglomeration drum, one that was already
on site but previously decommissioned, into the
processing circuit. Gold recovery from the heap should
increase due to the improved agglomeration by
increasing the percolation of the leachate solution
through the ore. The agglomeration drum was
removed from the processing circuit several years ago
to de-bottleneck the processing circuit, but given the
current and planned throughput this is no longer a
factor in the Los Filos operating plan. To date, a review
of the mechanical and electrical condition of the
agglomeration drum and equipment and an
assessment of the ground condition for the building
foundation at the proposed location have been
completed. An engineering estimate for construction is
being finalized. Installation of the agglomeration drum
and ancillary structures is currently scheduled for
completion by October 2017 with commissioning and
start-up immediately following.
To reduce the cost of
transportation and eliminate re-handling of crushed ore
onto the Heap Leach Pad 2, a series of new overland
conveyors will be installed to efficiently convey the ore
onto the pad. These new conveyors will replace the
mine fleet trucks and shovels/excavators that are
currently hauling ore to the pad. Final engineering
layouts of the overland conveyors have been
completed, and the detailed design for fabrication has
been initiated. In addition, the agglomeration drum
installation has been incorporated into the design. The
new overland conveyors are scheduled to be fully
operational in Q1 2018.
This should cause increased trading in the
stock as the volume is currently very low. This combined
with the first earnings report and a construction
announcement for the Bermejal Underground
Expansion Project will cause Leagold to undergo a
future revaluation from the severe undervaluation it is
currently trading at.
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 - 19 - The Morgan Report
The company closed what is a
transformational acquisition as it acquired Mariana
Resources. After looking further into the specifics of the
deal, it is effectively already a 30% NPI royalty. NPI
royalties have disadvantages when the asset is higher
cost or even moderate cost; however, per the PEA, Hot
Madens AISC profile dictates it will be less than
$400/oz. due to all the by-product copper credits.
Sandstorm will work with the operator Lidya to convert
it into an official stream and as long as Sandstorm Gold
can obtain a 20%-25% gold stream, this deal will have
been more than worth the risk. Once operating at
capacity, this is expected to increase Sandstorms
attributable production profile from 65k oz. to 130k oz.,
or an increase of 65k oz. The current timeline indicates
first production will be in 2021. Based on this
assumption, Sandstorm Gold has the most attractive
growth profile in this niche (relatively speaking). The
company could complete another transformative
acquisition given its credit facility, on-going cash flow
generation, and value of its debt and equity
investments.
Production Growth Profile
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
www.TheMorganReport.com
August 2017
The company is now in
discussions regarding its Bralorne Gold Mine and the
possibility of re-starting the operation at a higher
mining and milling rate as opposed to the phased
expansion plans we highlighted at the beginning of the
year. The proposed new mine plan contemplates
constructing a new tunnel on the 800-level due to the
age and limiting size of the original main access tunnel,
which also has issues with difficult ground conditions.
The recommended new 800-level tunnel would be for
mechanized equipment (4.5m x 4.5m) versus the
original (2.5m x 2.5m), which was only accessible by
small track equipment. The old tunnel would be made
safe and would still be used for ventilation, secondary
egress, and mine water drainage. The new mine plan
also contemplates testing a different mining method,
sub level long hole retreat mining on veins where the
hanging wall, foot wall, and mineralization are
conducive to this method, which should be safer and
more cost effective than the shrinkage cut and fill
mining methods used in the past. Combined with the
larger new tunnel, the mining operation should be more
mechanized and efficient than in the past. This will likely
Hackett River
Hugo North & Heruga
Hot-Maden
Aurizona
Cerro Morro (AuEq)
Current Operations
Copyright 2017
 - 20 - The Morgan Report
impact near-term production, not only modestly (as the
primary growth driver in 2018 is the expansion of the
Main Avino Mill), but will likely increase medium-term
production beyond what it would have been otherwise.
The company greatly improved its
balance sheet and near-term future operations, as it has
been an exciting time for the company. First, it
consolidated the Veta Grande Project by upping its
interest from 60%/55% to 100% for consideration of
$15.5m paid in installments.
1. US$2,500,000 on or before December 14, 2017
(payment date denoted as the Initial Payment
Date);
2. US$2,500,000 on the 12-month anniversary of the
Initial Payment Date;
3. US$3,000,000 on the 24-month anniversary of the
Initial Payment Date;
4. US$4,000,000 on the 36-month anniversary of the
Initial Payment Date; and
5. US$3,500,000 on the 48-month anniversary of the
Initial Payment Date.
This will greatly augment production as it will be entitled
to 100% of the profits instead of 60% for an initial
period of 30 years. Santacruz also divested its
Gavilanes Property for $3.5m, which makes the
company completely debt free. Due to the consolidation
of the Veta Grande Operation, Santacruz has pushed
back the timing of the mill expansion such that
construction will commence following the initial
payment date.
Currently, the Veta Grande Mill throughput is 430tpd
but it has the equipment on site to increase throughput
capacity to 1,500tpd and it is aiming to install the
equipment during the fourth quarter, with the objective
of having it operational before year end, where it
anticipated an 800tpd run-rate. During 2018, it plans
to ramp up production, reaching 1,250tpd beginning in
Q3 and exiting the year near 1,500tpd.
www.TheMorganReport.com
August 2017
Further, on May 29, 2017, the company acquired a
five-year exclusive right to explore, develop, and mine
the Membrillo Silver-Zinc Vein from Grupo Mexico. It
has already begun contributing mill feed to the Rosario
Mill. Once full mining operations have been achieved
the tonnage from Membrillo and Cinco Estrellas will
total 450-500tpd of mill feed to the Rosario Mill in
addition to 100-150tpd from the Rosario Mill for total
mill throughput of 550-650tpd.
has successfully advanced its project
pipeline obtaining a key license amendment for the
expansion of its Nichols Ranch ISR Project such that it
can extend the project to the Jane Dough wellfields.
More important is the progress it has been making on
its high-grade uranium-copper mine, the Canyon Mine.
As of the end of March, underground development and
core drilling were nearly complete, which means capital
investment spending will tail-off by a material degree.
Further, robust uranium and copper intercepts continue
to be hit, which in all likelihood will translate into a
potentially significant expansion of resources before
yearend.
reported pro-forma second quarter
production, which includes the Rosh Pinah and Perkoa
mines being acquired from Glencore. Payable zinc,
lead, and silver production totaled 101.35m lbs. Zn,
13m lbs. Pb, and 453k oz. Ag, a new record for the
new top-10 zinc producer. The transaction is expected
to close on or before August 31, 2017, as the company
is finalizing the $190m debt component of the
transaction. It continues to consolidate land packages in
the New Brunswick area, as it acquired the Health Steel
Property and just recently acquired the mining rights to
the Restigouche Mine, adjacent to its Caribou
Operation. This will provide Trevali with an additional
500-800tpd of material to augment production at
Caribou. It also provides an additional source of waste
backfill for the Caribou Mines underground workings.
Copyright 2017
 - 21 - The Morgan Report
Hi, David. This month I would like to ask two questions
if I may: The first question is on how best we can
calculate the Intrinsic Value of a mining firm and the
other question is how we establish that we are indeed in
a Bull Market.
After reading (and re-reading) the superb April 2017
TMR (section from Chris M. on valuations), I noted his
comment: The two most important valuation metrics
are arguably Enterprise Value (EV) / Operating Cash
Flow (OCF), which will be done for the years 2017-
2020, and Price (P) / Net Asset Value (NAV) multiple.
My first question is: Which valuation metric do you use
at TMR to simply establish the Intrinsic Value of a
mining firm today? My understanding from reading
people like Ben Graham is that the Intrinsic Value of the
stock should be our first concern (without considering
the unknown, future growth aspects of earnings, etc.)
with the aim of always buying below the Intrinsic Value
if we canin line with Buffetts famous quote acquiring The bottom was in late 2015. Mining Stocks
$1 bills for 40 cents. I am also wondering how and
where the quality of the ore body is considered in both
the equations Chris recommended in his quote and also
when looking at simply the Intrinsic Value of a mining
firm?
Second question is something that has been on my
mind for ages. We hear so much about cyclical bear
inside a secular bull but if we are indeed in a new (or
old!) Bull Market, what are your top parameters for
establishing that we are indeed in a Bull Market and
what would you need to see to establish that we are not
any longer?
Comment
Valuation is an art not a science, so the best we can do
as investors is come up with a number close to what the
company is worth. The market determines prices and as
such value is always subjective. That being said, the way
to come close to calculating the intrinsic value of a
company is its Net Asset Value. We use NAV to establish
the intrinsic value of a company but it is also necessary
to take intangibles into account or where companies
have comparative advantages. The most prominent of
these is the management team. Our goal is to
www.TheMorganReport.com
August 2017
recommend companies that are trading below net asset
value (or close to it, as when the bull market is in full
geari.e., parts of 2016, high-quality companies earn
a P/NAV multiple up to 2x).
A good example of us putting Buffetts quote into
practice is when we added Leagold to the portfolio. It is
still trading at just 0.52x NAV so it has a lot of room to
run. Further to that, it has a top-notch management
team, and on a personal note, Ive been quite
overweight that stock even after the recent run-up.
We could run the numbers all day and on every
company but simply investing in those that appear to be
the cheapest doesnt necessarily mean the return will be
the highest. Some stocks could be cheap for a reason.
Please let me know if I didnt answer any question you
might have had. By the way, for the September issue,
we will be doing the same thing for the mid-tier gold
producers as we did in the April issue.
As for the bottom being in . . .
outperformed from Jan 2016 until I called the top in
later summer 2016. Higher lows for most of the
Precious Metals Complex. The drop-out bottom in Silver
was forced. Continual physical offtake by the East
China, Russia, India. The gold/silver ratio usually hits
around the 80 level and that suggests a significant
bottom. We have not had the third and final leg.
I am attending the Precious Metals Investment
Symposium in Melbourne, Australia, on November 9-
10. And then we will be in San Francisco for the 2017
Silver and Gold Summit on November 20-21.
Until next month, wishing you health above wealth and
wisdom beyond knowledge,
David Morgan
Copyright 2017
 THE MORGAN REPORT ASSET ALLOCATION

This section is for serious money. Our suggestion is for retirees or fund managers to focus on this section;
it could contain up to 90% of the money allocated to precious metals mining stocks. This list changes to the
strongest each month, but once a stock hits this list it remains a HOLD unless we state it is a sell.

These are serious companies with a higher growth rate but more risk than the Top Tier. Our suggestion is
that those working with good incomes focus on this list and own two or three from the Top Tier for safe growth.

High Risk/High Reward, only money you can afford to lose. You MUST put equal dollar amounts
into EVERY suggestion in order to diversify properly. No one can pick only one company and expect consistent
results. Read How to use TMR and set stop losses!

: We added Endeavour Mining to the portfolio. Trilogy is an "honorable mention" which

means it does not qualify for the Asset Allocation Model. Silver Standard has changed their name to SSR MINING
INC. Stock symbol changed to SSRM.

Sell some on up days. Consider buying a small position (accumulate)

Kinross Gold K.TO (KGC) 4/25/2016 ~ C $5.74 -8% 3.5

Royal Gold (RGLD) 2002 ~ C $15.00 614% 3.8
Newmont (NEM) 12/1/2001 ~ C $19.00 90% 3.3
Franco Nevada FNV.TO (FNV) 1/1/2001 ~ C $22.00 320% 3.6
Fresnillo (FNLPF) 9/2/2014 US $15.69 23% 2.9
First Majestic FR.TO (AG) 8/4/2008 US $4.08 93% 3.9
Wheaton Precious Metal (WPM) 10/1/2005 ~ C $5.00 395% 4.4
Gold Corp (GG) 2002 ~ C $13.50 18% 3.9
SSR Mining Inc. (SSRM) 2002 ~ C $2.50 380% 3.5
Pan American Silver (PAAS) 9/1/2001 ~ C $2.50 914% 3.7
Agnico Eagle (AEM) Early 2001 ~ C $10.00 466% 3.4

Endeavour Mining EDV.TO (EDVMF) 8/4/2017 US $17.90 BUY / 4.1

Tahoe Resorces THO.TO (TAHO) 4/3/2017 US $8.01 -35% 2.2
Freehold Royalties FRU.TO (FRHLF) 8/3/2015 US $9.64 15% 3.8
Klondex Mining KDX.TO (KLDX) 3/2/2015 US $2.06 41% 4.3
Kirkland Lake Gold KL.TO (NMKTF) 2/4/2013 C $6.12 108% 3.7
Sandstorm Gold SSL.V (SAND) 6/23/2011 C $5.45 -9% 3.9
Fortuna Silver FVI.TO (FSM) 2/7/2011 C $4.33 28% 3.9
Endeavor Silver EDR.TO (EXK) 7/3/2008 US $3.10 -6% 2.6

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 THE MORGAN REPORT ASSET ALLOCATION

Leagold Mining LMC.V (HTXFF) 4/13/2017 US $2.34 -21% 4.4

Santacruz Silver SCZ.V (SZSMF) 9/2/2016 US $0.37 -61% 3.8
Energy Fuels Inc. (UUUU) 3/7/2016 US $2.96 -41% 3.5
Trevail Mining Corp. TV.TO (TREVF) 10/7/2013 C $0.89 42% 4.0
Avino Silver & Gold ASM.V (ASM) 11/1/2012 US $1.54 39% 4.2
Gold Resources Corp. (GORO) 8/1/2012 US $18.33 -81% 3.7

EnviroLeach Technologies ETI (EVLLF) 6/2/2017 US $.40 0% Buy Limit / 3.5

Minaurum Gold (MMRGF) 3/6/2017 US $.17 31% 3.3
Pershing Gold PGLC.TO (PGLC) 1/3/2017 US $3.25 -10% 3.8
Mineworx Technologies IML (SLDRF) 1/4/2016 US $.046 22% 2.7
Alexco Resources AXR (AXU) 10/3/2011 US $6.10 -72% 3.6
Pretium Resources PVG.TO (PVG) 2/7/2011 C $8.12 39% 4.2
Prophecy Development PCY.V (PRPCF) 11/1/2010 US $80.00 -96% 2.9

-- Please note the following: We use the price of the Friday prior to publication as our
basis. Your basis will vary depending upon market conditions. The trailing stop loss of 15% will be used on this
basis, however we encourage all to use stop loss discipline on their own individual basis.

How To Use The Morgan Report: Review How To Use .

Please keep in that The Morgan Report is published on the first Monday of the month.

Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to
completeness or accuracy. Because individual investment objectives vary, this Summary should not be construed as advice to
meet the particular needs of the reader. Any opinions expressed herein are statements of our judgment as of this date and are
subject to change without notice. Any action taken as a result of reading this independent market research is solely the
responsibility of the reader.

The Morgan Report is not and does not profess to be a professional investment advisor, and strongly encourages all readers to
consult with their own personal financial advisors, attorneys, and accountants before making any investment decision. The
Morgan Report and/or independent consultants or members of their families may have a position in the securities mentioned.
Mr. Morgan does consult on a paid basis both with private investors and various companies. Investing and speculation are
inherently risky and should not be undertaken without professional advice. By your act of reading this independent market
research letter, you fully and explicitly agree that The Morgan Report will not be held liable or responsible for any decisions you
make regarding any information discussed herein.

Direct ownership of gold and silver provide an absolute and unique

ingredient to diversification strategy which brings financial stability. This is a program that
allows you to start a gold/silver savings program. I have used them personally for years
and will assert this program is run with the highest integrity. To learn more about the
or visit

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You may think you've missed the biggest leg up in precious metals
and miners. But you would be wrong.

Did you miss the gold and silver spike runs to $1900 and to $50 in
2011? Did you get in near the top and ride them all the way down
into the December 2015 lows? Or perhaps you didnt buy at all, and
by late 2016, while the most explosive precious metals and mining
stock run-up in decades was taking place, you watched. You may
think youve missed the boat. You may think you missed your second
chance. But you would be wrong.

David Morgans research has shown decisively that as much as 90%

of the profit potential for the metals and miners become available
during the last 10% of the entire bull run. But only if you avoid what
he calls the amateurs mindset.

Second Chance: How to Make and Keep Big Money from the Coming Gold and Silver Shock Wave
empowers you to step onto the investment battlefield and leave it a winner. Many people will make fortunes
during the coming years. On paper. But, when all is said and done, as the great speculator Jesse Livermore
declared, On paper it will remain.

It may seem that precious metals have seen better days. Buying into the metals is never easy. Especially
when selloffs snowball to major levels, theres always a chance they will cascade even lower. So its very
challenging psychologically to fight the thundering herd and buy when everyone else is selling. It feels
terrible buying into capitulation selloffs, almost nauseating. The only way to build the fortitude necessary to
do it is to stay exceptionally informed, which helps frame selloffs in context.

Even after you've done the research and decided to participate, buying into price weakness against the herd
and contrary to your emotions is not an easy thing to do. But time and again, some of the world's most
successful investors have done just that. You might want to consider joining their ranks.

After all, they may just know something you don't!

The biggest concern of all investors is the Debt Bomb! Weve NEVER seen
anything like the dire situation we now face.

After the most vicious debate in the history of our country, Republicans and
Democrats finally agreed on what to do about the debt disaster of our nation:
Absolutely Nothing.

The Silver Manifesto may be the most important "hard money" book to be
published in years. Fortunes have been made by those who bought silver around
the $5.00 level and paid attention to the call of the top at over $48.00 by David
Morgan. Yet the big money lies ahead, according to the authors, as perhaps as
much as 90 percent of the move occurs within the last 10 percent of the time.

In the last bull market, silver gained over 800 percent from January 1979 to
January 1980, dwarfing the gains made from 1964 to 1979. There are factors
that produce immense profits and these occur rarely. Investors stand at a unique
point in monetary history where the death of paper currencies on a global scale is
taking place before their eyes.

Because most are frozen into inside-the-box thinking, few investors will ride the next move as silver (and gold)
skyrocket in the years ahead. In fact the primary purpose of The Silver Manifesto is to educate the reader as to why
there is no way out of the financial morass created by the financial elite. We have reached the point where the savvy
few understand what is happening and take action, while the rest are left watching, thinking the precious metals bull
market was long dead. The authors explore when to expect the next bull market to begin and why, how the 2008
financial crisis has been "papered over" and what to watch for going forward. The real supply and demand looking at
both industrial and monetary demand. Money and Banking -- what fractional reserve banking means to currency and
bullion. The best surest method to stay in the profit zone and not worry about the wild price swings. How to pick a
mining company-this information is priceless. Most who are taught this methodology have a degree in finance, but we
break it down for the average investor. This fantastic book also lays out the silver manipulation story --the facts, more
facts, and the irrefutable facts.

There are factors that produce immense profits and these occur rarely. Investors stand at a unique point in monetary
history where the death of paper currencies on a global scale is taking place before their eyes. Because most are
frozen into inside-the-box thinking, few investors will ride the next move as silver (and gold) skyrocket in the years
ahead.

In fact the primary purpose of this book is to educate the reader as to why there is no way out of the financial morass
by the political class or the financial elite. We have reached the point where the savvy few understand what is
happening and take action, while the rest are left watching, thinking the precious metals bull market
was long dead.