Toronto Resource Investment Conference 2012

Toronto, Canada

September 27, 2012

Presented by John Kaiser

Workshop: Navigating the 2012 BottomWorkshop: Navigating the 2012 Bottom--

Fish EditionFish Edition

www.KaiserResearch.com

Kaiser Services

• Kaiser Research Online Membership – US $250 per quarter or $800 per year

• One time one month KRO Trial at $100

www.KaiserResearch.com

New: KRO Search Engine

• Formal recommendations: detailed analysis with targets based on expected milestones, projected fundamental outcomes, and macro assumptions.

• A Buy is a ranking of Good Speculative Value which is Absolute or Relative.

• Absolute: based on published PEA or better numbers that facilitate a DCF (discounted cash flow) based analysis. Independent of peer company valuations.

• Relative: targets based on extrapolation of fundamental data typically at pre PEA stage, or when bubble like market conditions make the peer group overvalued in Absolute terms, and the relative spec value buy is among the least overvalued.

• Good: market is undervaluing potential

• Fair: target achievement linked to achievement of assumptions – a Hold

• Poor: price reflects delivery of assumptions not yet delivered – Avoid or Sell.

• Closed out at yearend with keepers reissued.

Spec Value Hunter Picks

Spec Value Hunter Picks at Conference

Good Relative Spec Value Good Absolute Spec Value

Good Relative Spec Value Good Relative Spec Value

• Bottom-Fish Editions issued every few years based on assessment that a market bottom has arrived or is near.

• Bottom-Fish 2012 Edition was issued with 100 picks on July 13, 2012 and is expected to be closed out at the end of 2013 or 2014.

• New bottom-fish may from time to time be added. Only one added (Bitterroot) since July 13.

• Recommended for accumulation in set price ranges with extreme risk, low, medium and high priority rankings.

• Sell recommendations are not issued though comments explaining developments may be issued. Bottom-fishers are responsible for their buy/sell strategies.

• When the Edition is closed all bottom-fish are a technical closeout.

• A bottom-fish edition is a type of watch list. If a story qualifies for more detailed coverage, a formal Spec Value Hunter recommendation will be made.

Bottom-Fish Recommendations

Bottom-Fish Picks at Conference

MP $0.20-$0.29 XP $below $0.10 MP $0.30-$0.49

LP $0.10-$0.19 MP $1.76-$2.00 TP $0.30-$0.49

Kaiser Portfolio Management Strategy – Part I

• Not counting real estate and business assets, I have my capital in only two asset classes: Cash (including short term T-Bills) and Very High Risk High Reward Speculative Stocks.

• My cash yields next to nothing but that does not matter because my only objective is for it not to disappear. If I became concerned about runaway inflation, I would shift some of the cash into gold. The purpose of the cash is to be there when things go wrong and prices of very high risk speculative stocks are very low.

• I avoid “real” stocks, mutual funds, structured products etc because I do not have the time to understand them and do not trust anybody else does either, they are too vulnerable to catastrophic shocks, and the market is reasonably efficient in pricing them so that returns are pretty much a random walk.

• All my yield comes from a portfolio of 10-20 high risk high reward (HRHR) speculative stocks which I do not trade except to buy and sell in that order.

Kaiser Portfolio Management Strategy- Part II

• The cash component of the portfolio will range for 50% to 100% depending on 3 factors: 1) risk tolerance, 2) time horizon for when cash will be needed for the real things in life, and 3) where we are in the market cycle.

• Assuming moderate risk tolerance and time horizon, cash should not drop below 80%.

• The balance should always be in high risk high reward stocks capable of delivering 500% plus gains within 1-3 year time horizons.

• The sector of the HRHR stocks should be one you understand and are willing to monitor. In my case it is the resource sector.

• I expect that some of the HRHR stocks will be total losses, some a wash, and a few spectacular homeruns.

• Target is to average a 10%-30% return on the total portfolio.

Kaiser Portfolio Management Strategy- Part III

• I will never collect the peak return on individual HRHR stocks because I always sell some too soon and some too late, partly because I am not smart enough to pick the top, partly because I do not want to let the cash component of the portfolio drop below a minimum percentage threshold, and partly because I do not want an individual member of the HRHR component to become a dominant percentage of the portfolio.

• Within my chosen sector, I diversify the 10-20 HRHR stocks among sub-sectors to minimize the impact of catastrophic sectoral failure.

• In addition to meeting key bottom-fish criteria, I develop an expectation set and timeline for each HRHR stock which I monitor. If the expectation set falls apart, I discard the stock and reinvest the proceeds.

• I may add to a position as the speculation cycle linked to the stock’s expectation set evolves, but never once I have started selling. Volatility trading is forbidden.

Kaiser Portfolio Management Strategy- Part IV

• I monitor sectoral trends for rounding tops which encourage liquidation of HRHR stocks in that sub-sector, and if the rounding top is exhibited by multiple sectors, I refrain from reinvestment and allow the cash percentage to float towards 100%.

• I maintain a generally high cash component because I may not recognize a sectoral rounding top, may have flawed macro reasoning as to why this is just a dip within a longer uptrend, and cannot anticipate system shocks like 911.

• When catastrophic failures such as 2008 happen, the HRHR part of the portfolio can suffer up to 90% losses. However, the cash component remains intact, and becomes the source of the capital to rebuild a 10%-20% HRHR portfolio. During such a year my portfolio will suffer losses limited by the cash component.

• I do not begin rebuilding the HRHR portfolio until the market downtrend stabilizes. The unaffected cash component of the portfolio gives me the means to buy HRHR stocks at very distressed prices – bottom-fishing.

Kaiser Portfolio Management Strategy- Part V

• When a market uptrend resumes, I get an abnormal growth spurt in the value of the HRHR component because bottom-fish bought in bear market troughs will undergo 100%-200% “rising tide”gains as the market glass adjusts from half empty to half full.

• I pay attention to the gain-loss balance of the HRHR portfolio and earmark cash for future taxes and make estimated tax payments if required.

• I manage the HRHR portfolio either through a discount brokerage account or a full service broker who understands his/her role islimited to executing my orders.

• While my HRHR portfolio picks are influenced by a variety of sources and ideas, the responsibility for my HRHR portfolio’s return is 100% mine.

• Aside from achieving good average annual returns on my Cash-HRHR portfolio, I reap huge entertainment value keeping track ofthe individual HRHR stories.

• 2008 Crash was very violent but brief

• Bottom-Fishing window was also brief, less than 6 months before a V-shaped recovery got underway

• 2009 Edition issued Dec 24, 2008 underwent 700% peak gain

• Dominated by asset rich juniors

• 2010 Edition issued Dec 31, 2010 had peak gain of 125%

• Dominated by “second string” juniors

• Both peaked in Q1 of 2011

• Both were closed out at the end of 2011

• No open bottom-fish editions from Jan 2012 until July 13, 2012 due to negative outlook for resource sector.

• 2012 Edition issued on July 13, 2012 to hedge against a surprise Q4 2012 rally, but mainly to provide a lengthy bottom-fishing window.

• Currently publishing individual recommendation strategies.

• Chart: does the stock chart have a bottoming pattern?

• People: is the management team full-fledged and does it

have a track record of success?

• Structure: do insiders own enough paper to be motivated

to turn the junior into a success?

• Capital: does the company have enough money to

achieve its goals, especially if we face a prolonged

slump?

• Story: does the company have a project with intriguing

discovery potential, ounces/pounds in the ground that

deserve development, or a security of supply twist?

• Speculative Value: using the rational speculation model,

does the story offer good speculative value?

Bottom-Fish Research Factors

80%

80%

3 Negative Factors weighing on the market

• China Slowdown –leadership transition, falling exports, RMB depreciating again

• Eurozone – impending collapse, austerity fallout

• US election – political gridlock and stuttering economy is key to Republican victory

Equities have anticipated a commodities price crash that has not yet happened.

?

?

• Exponential charts do stop rising in the real world, but reversion to a mean is not always the outcome.

• Too much linkage between gold price and apocalyptic outcomes.

• Narrative captive to right wing ideology.

Gold & Silver plagued by bubble fears

Equities are anticipating a precious metals price crash that has not yet happened.

?

?

4 Types of Bottom-Fish for this Market

• Survivor – cash rich with structure and ideally with strong people – shells or prospect generators.

• Big Sleeper – pounds or ounces in the ground, historically out of the money and requires patience, but today is unusual because macroeconomic worries have priced equities at much lower metal prices than spot prices, risk is that the pessimism becomes reality.

• Security of Supply: pounds or ounces in the ground consisting of “critical” materials with geographically skewed supply structure vulnerable to geopolitical disruptions – rare earths, graphite, tungsten, antimony, platinum group

• Big Anomaly – old fashioned discovery exploration play –very high risk with very high reward potential, out of favoursince the Bre-X Betrayal.

Southeast Cortez “Trend” along which Barrick has found Red Hill & Goldrush (7 M oz & growing with help of 12 rigs in 2012), but beyond which McEwen et al have spent more than $60 million with disappointing results so far.

Southwest Grass Valley “Trend” along which “ignorant juniors” have staked claims and spent little. In 2012 staked 70:30 by McEwen/NGE based on 15 km gold-in-groundwater anomaly. Will $2 million exploration lead to 12 rigs in 2014?

Pediment Deposit

Cortez Hills Deposit – 1.4 million oz produced 2011 Looking South September 2006

Coming Soon: The Return of the Big Anomaly and the Retail Speculator in the Resource Sector

Crash in 2012 or Slump with Inflection as we head into 2013?

www.KaiserResearch.com