Shareholder LetterSHAREHOLDER LETTER
Tuesday, October 28,2008
DearShareholder,
Thebanking and liquidity crisis worldwide has made life very difficult for manypeople and many companies. While all sectors are down, naturalresource indices, funds and big-cap stocks are down 50-70%. Wewant to assure all our shareholders that we recognize that you are disappointedin Halo’s share price and concerned about the future. We too areshareholders and have seen our investments shrink during this bear run,particularly on commodity-based companies such as Halo.
Wehave also experienced previous bear markets and the extremely negative thinkingthat is so prevalent at the front end of a recession, resulting in share pricesbeing depressed well below realistic levels.We all learned fromthe 1980–1982 and the 1990–1991 recessions and down markets.History repeats itself, with the relatively short bear marketcycles of 3 to 30 months and the much longer bull market cycles of 12 to 120months.
Halomade remarkable progress in the last 18 months, completing 28,000 m of drillingin a time of intense competition for equipment and people and recently issuing aNI43-101 compliant resource estimate.A total of 69 millionpounds of copper and 66.5 million pounds of zinc in the Indicatedcategory, and more than twice as much again in the Inferred category, is atremendous increase in the asset base of a junior mining company.These are significant numbers especially when hundreds of junior miningcompanies, competing for limited investment, do not have any resourcesdefined.These resources are the basis of what sets Halo apart anddefines its future.
Haloholds a 100% interest in 85% of the mining claims in the 200 sq. km. SherridonVMS Property.The remaining mineral interests are held in jointventure with Hudson Bay Exploration and Development Company Limited andprimarily cover the lower-grade Park and Jungle deposits.Halo has completed sufficient work to hold the mineral claimsin good standing for up to two years based on regulations, without furtherexpenditures at this time.
Current market conditions no longer seem rational and it is difficultto predict the near-term future.In the longer term, the majorityof the pundits select copper as the metal with the strongest pricesupport.Copper prices held steady until very recently,outperforming the other base metals, and even gold for awhile.There has been muted supply response from producers in the lastfive years and demand is still strong in emerging economies such as Brazil,India and China, two facts that equate to strong and rising prices for copper(to view the graph accompanying this release please click on the following link:https://media3.marketwire.com/docs/halo_graph.pdf).
“Weview this as a correction, albeit a particularly severe one, within a secularbull market…This secular bull market is driven by the urbanization andindustrialization of inparticular, and the growing middle classes from Asia to , whichdemand the products we take for granted. And that requires basic resources…Butsecular bull markets have cyclical cycles within them. During the currentslowdown, there is de-stocking of inventories and a slowdown in new projects. Sowhen demand resumes growth, prices could recover quickly, as firms rush to buildup stocks again.” as reported in Adrian Day's Global Analyst(10/17/2008), just one of the experts predicting metal pricerecoveries.
Thedeposits at Sherridon, unlike elsewhere in the Flin Flon area, are primarilycopper-rich. Halo’s objective is to define sufficient resources toinitiate and maintain mining operations for a minimum of 15 years, a standard inthe industry that is designed to protect the long-term viability of a projectfrom fluctuating metal prices.Projects at the development stageare not based on today’s copper price but on revenue being generated well intothe future.
Halo’s Strategy
Halo’s strategy in the short term is topreserve cash by limiting expenditures at Sherridon to geoscientific studiesthat will optimize the next round of drilling and advancing engineering studies,such as metallurgical test work, in preparation for a scoping study.Joint venture obligations at the expanded property are nominal for theremainder of 2008 and mid-2009 and will be reviewed in the spring.Senior management has agreed to reductions of 25 to 50% in salaries andbonuses.
TheCompany is examining a range of options to advance the Sherridon VMS Property toproduction including joint ventures and Asian interest in metal off-takeagreements.There are no regulatory or joint venture commitmentssetting the agenda at Sherridon and the project will be advanced in a timeframeto best return shareholder value in the current turbulent and volatile financialmarket conditions.Our objective is to maintain ownership of anasset base sufficiently advanced to be in a first-mover position when investorinterest returns.
Advancing the Sherridon VMS Property
TheSherridon VMS Property resource estimate includes 3.1 million tonnes in theIndicated resource category with an overall grade of 1.00% copper, 0.97% zincand precious metal credits and 9.9 million tonnes in the Inferred resourcecategory with an overall grade of 0.9% copper, 1.2% zinc and precious metalcredits, 70% of which are near-surface and amenable to surface miningThe exploration team demonstrated the potential of the 200 sq. km.property by making a new discovery at , returning the highest gradeintersections to date from 2007-2008 drilling, and the new deposit added 2million tonnes to the Inferred resource category.
Asearly as July it was evident that it would be more difficult to fund explorationas aggressively as previously, and the decision was taken to be prudent with thefunds available.Diamond drilling is the single most expensiveactivity for an exploration program representing two-thirds of Halo’sexploration expenditures at Sherridon.Instead of costly drilling,the focus turned to detailed field work at 20 high-priority exploration targetsthat emerged from the comprehensive district compilation, 2,600 km VTEM airbornegeophysical survey and various state-of-the-art geoscience studies.Field examination is the most important stage of evaluating prospects andthe results are being used to further rank the targets for follow-updrilling.
Assays from the portable bedrock drill rig program generatedhigh-priority targets reported in previous press releases.Resultsof 5.1% zinc and 0.48% copper were reported for a bedrock sample at the northernend of a 250 m long trend of elevated zinc and copper values coincident with ageophysical VTEM anomaly (press release August 13, 2008) and expanding thepotential strike of the Lost Lake deposit at least 250 m north of previouslyknown drilling.
Bedrock samples from Target Area 5 (TA5), which has had virtually nohistorical exploration and has never been drill tested, reported anomaloussilver values up to 75 g/t over an area of 200 m by 400 m, and zinc values up to0.37% (press release September 2, 2008). These levels of silverare not common, even in association with known deposits, and are consideredhighly encouraging.
Thesehigh priority targets areas are only two examples of the upside potential at theSherridon VMS Property based on the detailed, systematic scientific evaluationof the consolidated land position that essentially has been dormant for 50years.
ON BEHALF OF THE BOARD
, President and CEO
For further information, pleasecontact:
Lynda Bloom, President & CEO or Marc Cernovitch,Chairman
Halo Resources Ltd.
Tel: 416-368-7045; Fax:416-368-9805
lbloom@halores.com
The TSX Venture Exchange does not accept responsibilityfor the adequacy or accuracy of this release