Sulliden Gold Corporation Ltd T.SUE.WT

Paradigm

[CaitMeig]

He's upbeat about it at least. Don Blyth, Analyst, [phone] 1 Don Maclean, Sr. Analyst, [phone] September 20, 2006 SULLIDEN EXPLORATION INC. (SUE-T $0.89) Shahuindo Claims Registered in Sulliden’s Name Sulliden Should be Active on Project by Year End • After a long battle over the ownership of the Shahuindo property, the claims are now all registered in Sulliden’s name, which means it is the only company recognized to have the right to explore the ground. • It will take a couple of months to get all the paperwork (permits) necessary, but the company expects to be actively drilling on the property by year-end. • We believe these events significantly lower the risk profile of Sulliden, and we are raising our rating to a Speculative Buy (was Hold) and our target price to $1.35 (was $0.80). Shahuindo Claims Now Fully Registered in Sulliden’s Name Sulliden recently reported (Sep 13th) that its wholly-owned Peruvian subsidiary, Minera Sulliden Shahuindo S.A.C. (“Sulliden Peru”) has obtained from the SUNARP (the official Peruvian state registry) office in Trujillo, the notification of registration for 20 of the 26 mining concessions of the Shahuindo gold-silver Property. The six other mining concessions are already registered at the SUNARP’s Lima office. The registration was effected following the Decision of the Arbitration Tribunal dated July 19, 2006 in Sulliden’s favour confirming the validity of the Transfer Contract for the Shahuindo Property and ordering the transfer of the mining concessions into Sulliden’s name, and the subsequent Court injunction obtained by Sulliden from the Civil Court of Lima on August 1, 2006 ordering the parties to comply with the Decision rendered by the Arbitration Tribunal. Therefore, Sulliden (Peru) is the sole and only official owner of the Shahuindo property and according to Peruvian laws is the only entity that can ask and obtain required permitting from the authorities in order to perform any mining related activities on that property. Is the legal battle really, really, really over? Having watched this battle drag out over the last 2-3 years, with more plot twists and turns than your average soap opera, we have to ask ourselves: is this “really” the end? The decision of the Arbitration Tribunal is final and unappealable. There is only one tactic that the counterparty might try, and that is to get the whole process of arbitration declared invalid. And Sulliden’s legal team have advised them that such action is very seldom (<1%) successful. That’s a small risk we are willing to take, on top of the usual risks of an advanced exploration story (e.g. proving project economics, permitting & construction, etc.) Stock Rating: ��Buy (Speculative) 12-month target ��$1.35 Potential ROR 52% Company Profile Sector Gold Ticker SUE - T Shares O/S, basic (m) 70.8 Shares O/S, diluted (m) 72.0 Mkt cap, basic (C$m) $63.0 Mkt cap, FD (C$m) $64.1 Key Metrics Cash/sh (C$) $0.12 Working Cap/sh (C$) $0.11 Debt/sh (C$) $0.00 Per share amounts are per (itm) diluted share Analyst Don Blyth [phone] [e-mail] Sr. Analyst Don MacLean [phone] [e-mail] Sales Toronto [phone] Calgary [phone] Paradigm Capital research is available on First Call, Reuters, or at https://www.paradigmcap.com Refer to last page for official disclaimer Issued by Paradigm Capital Inc. Sulliden 1-Year stock price chart 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 19-Sep-05 19-Oct-05 19-Nov-05 19-Dec-05 19-Jan-06 19-Feb-06 19-Mar-06 19-Apr-06 19-May-06 19-Jun-06 19-Jul-06 19-Aug-06 19-Sep-06 C$ 09/20/06 Rec. and target raised ($1.35) 03/04/06 Initiated coverage ($3.50) Source: Bloomberg Don Blyth, Analyst, [phone] 2 Don Maclean, Sr. Analyst, [phone] September 20, 2006 Next Steps Despite the fact that Sulliden never left the property, it must file with the Ministry of Mines for a new exploration program, and obtain permits for drilling. It must also secure surface rights if it is planning on drilling in areas which it does not already own the rights. Sulliden expects to file the documents in the next couple of weeks, after which permits are usually issued within 60 days. Based on this timeframe, Sulliden believes it should be back on the property with a new drilling campaign by year-end. The company has recently completed a financing, so has roughly $7m in working capital, which will allow this program to begin as soon as the permits and equipment can be secured. Upgrade to Speculative Buy This property already has a 43-101 compliant resource of 1.5 Moz of gold at an average grade of 0.85 g/t Au and 35.2 Moz of silver at an average grade of 19.83 g/t Ag, for a total gold equivalent of 2.1 Moz. We would normally consider US$50/oz a conservative valuation for 43-101 compliant resources-in-the-ground. To be a bit more conservative, we’ll deduct 25% from this to allow for the chance that the counterparty to the legal action dreaming up some challenge we (nor Sulliden’s legal team) haven’t considered. That would suggest a value of US$78.8m or ~C$1.23/sh. To this we add the current working capital of C$0.11/sh, to arrive at a valuation of C$1.34/sh. While there are certainly still risks related to the Shahuindo property, we are pleased to see the risk related to the ownership reduce to close-to-zero (say 1-in-100 that the legal counterparty will regain them). Now the company can get back to worrying about proving up the economics of the resources, converting them into reserves, and figuring out how to develop the property. We are raising our rating to Speculative Buy (was Hold) and our target price to $1.35 (was $0.80). Don Blyth, Analyst, [phone] 3 Don Maclean, Sr. Analyst, [phone] September 20, 2006 Disclaimer Section: 1. Don Blyth does not have an ownership position in Sulliden Exploration (SUE-T). 2. Don MacLean does not have an ownership position in Sulliden Exploration (SUE-T) 3. Paradigm’s disclosure policies and research distribution procedures can be found on our website at www.paradigmcapinc.com. Research Rating System: Paradigm Capital uses the following rating recommendations in its research: Strong Buy – Analysts’ top sector picks, with expected returns of 10% or more over the next 6-12 months. (3% of Paradigm’s coverage list consists of Strong Buy recommendations). Buy – Expected returns of 10% or more over the next 6-12 months. (71% of Paradigm’s coverage list consists of Buy recommendations). Hold – Expected returns of +/-10% over the next 6-12 months. (11% of Paradigm’s coverage list consists of Hold recommendations). Sell – Expected returns of –10% or more over the next 6-12 months. (3% of Paradigm’s coverage list consists of Sell recommendations). Speculative Buy – Expected returns of 10% or more over the next 6-12 months on high-risk development or “pre-revenue” companies, such as junior mining and early stage biotech companies. (12% of Paradigm’s coverage list consists of Speculative Buy recommendations). About Paradigm Capital Inc. 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