NORTHERN SUN MINING CORP LBEFF

Salman's Take on the Financing

[ExSudburyGuy2]

Here's an excerpt from this morning's note from Salman analyst Patrick Donnelly:

Liberty Mines stated that part of the Cdn$30 million would be used to pay retire the entire Cdn$16.4 million in promissory notes that are due to expire on October 29, 2009 and also the approximately Cdn$10.4 million in accounts payable remaining. Therefore, Liberty Mines should have approximately Cdn$3 million in cash after the above obligations are paid.

As we noted in Monday’s Metals Morning Note, we believe that Liberty Mines would need an additional Cdn$4 million to
Cdn$6 million to be complete the McWatters nickel project and an additional Cdn$19 million to develop the Hart nickel
project which is expected to come on line once the nickel resources at McWatters have been exhausted. If Liberty is not able
to commence production at the McWatters mine it could still restart nickel mining operations at its 200 tonne-per-day (or
approximately 205,000 lbs per month of payable nickel) Redstone mine, with very little start-up costs. We note, however,
that the proceeds from the concentrate revenues would go directly to pay off Liberty Mines’ Cdn$15.0 million credit facility
with Jilin Jien. Also, we expect that nickel production from the Redstone mine would have cash costs of around US$6.00 per
pound of nickel production; therefore, the company would need high nickel prices in order to resume production at the
Redstone mine. Given that we expect nickel prices to continue to lag for the foreseeable future (except maybe a spike in
nickel prices if workers go on strike at Vale Inco’s Sudbury nickel operations in June) we do not believe that Liberty Mines’
operations are to go back into production for at least another year. Therefore, we are not sure that the company is out of the
woods yet.
Given this uncertainty, we are keeping the shares of Liberty Mines UNDER REVIEW.