RE: Not all assays created equal.THE STRETCH ASSAY (here's the report from attachment...go to pg 3,"how a junior captures mkt attention")
• There is nothing better for a junior exploration company than to pull a highgrade
drill assay over a wide intercept, in our opinion. It is one sure way of
gaining market attention, which is critical in differentiating one company
from the mass of others. Unfortunately, not all drill intercepts are created
equally and we continue to discover company-reporting tactics that, in our
opinion, stretch the geological boundaries.
• Exploration updates:
Capella Resources Ltd. (KPS : TSX-V : C
.23 | Not rated)
UEX Corporation (UEX : TSX : C
.78 | Not rated)
Uranium Energy Corp. (UEC : TSX : US$3.30 | Not rated)
• Site visit notes:
US Gold Corporation (UXG : TSX : C$2.61 | Not rated)
Figure 1: Gold price versus average value US$/oz in situ
20
30
40
50
60
70
80
90
100
110
120
Jul-07
Aug-07
Sep-07
Nov-07
Dec-07
Jan-08
Mar-08
Apr-08
Jun-08
Jul-08
Aug-08
Oct-08
Nov-08
Jan-09
Feb-09
Apr-09
May-09
Jun-09
Aug-09
Sep-09
Oct-09
Dec-09
Jan-10
Mar-10
Avvvverrrrage Vallllue US$////ozzzz iiiin ssssiiiittttu
600
700
800
900
1000
1100
1200
Golllld Prrrriiiice ((((US$))))
Average Value US$/oz in situ Gold Price
C$/US$ 0.98.
Ag:Au ratio 65:1.
Source: Canaccord Adams, Capital IQ
Current value: US$86.05/oz ?
Junior Mining Weekly | 2
23 March 2010
Figure 2: Junior market and commodities snapshot
In Situ Value % Change TSX Venture Daily Volume for the week
EV/attrib. lb eq.or oz or
Mkt. cap/oz or lb eq. 19 Mar/10 YTD WoW Date Date Volume
CA GOLD In Situ (US$/oz) 86.05 -0.1% 1.5% Monday 15-Mar-10 258,981,485
CA SILVER In Situ (US$/oz) 0.65 -1.5% -1.5% Tuesday 16-Mar-10 244,987,209
CA PGM In Situ (US$/oz) 14.85 13.6% -4.7% Wednesday 17-Mar-10 320,373,772
CA URANIUM In Situ (US$/lb) 3.04 -13.1% -4.1% Thursday 18-Mar-10 240,648,647
19 Mar/10 YTD WoW Friday 19-Mar-10 254,436,210
CA COPPER In Situ (cents Cdn/lb) 4.25 2.4% -0.5%
CA NICKEL In Situ (cents Cdn/lb) 15.02 -3.5% 1.4%
CA ZINC In Situ (cents Cdn/lb) 2.11 15.9% -2.3% Total 1,319,427,323
CA MOLY In Situ (cents Cdn/lb) 19.07 8.0% -3.1% Average. Daily Volume 263,885,465
Value % Change S&P/TSX Venture Composite Index Volume and Value
Index 19 Mar/10 YTD WoW Jan 07- 19 Mar 2010
S&P/TSX Venture Composite Index 1,564 2.8% -0.3%
S&P/TSX Composite Index 11,948 1.7% -0.5%
S&P/TSX Global Gold Index 323 -3.4% 0.6%
S&P/TSX Div. Metals & Mining 1077 7.2% -1.8%
(SPDR) Streettracks Gold Trust 108.28 0.9% 0.3%
IShares Comex Gold Trust 108.36 0.9% 0.3%
AMEX Gold Bugs 417 -3.1% 0.0%
S&P/TSX Venture Composite Index
Selected companies Price
Highly active by % ?
(15-19 March 2010) Symbol 19 Mar/10 %?
Strike Minerals, Inc. STK
.08 114%
2-hole, 490m drill program commenced March 15 at claim near historic
Edwards mine, ON.
SearchGold Resources Inc. RSG
.07 100%
1.69 g/t Au over 50m at Arae-Gassel gold property (35%), Burkina Faso.
400
800
1,200
1,600
2,000
2,400
2,800
3,200
Jan-07
Jan-07
Mar-07
Mar-07
May-07
May-07
Jun-07
Jul-07
Aug-07
Oct-07
Oct-07
Nov-07
Jan-08
Jan-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Jul-08
Sep-08
Oct-08
Oct-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
S&P/TSX Venture Index
70
145
220
295
370
TSX Venture Volume (M)
TSX-Venture Daily Trading Volume S&P/TSX Venture Index
CA commodity price and currency forecasts Value % Change
2009 2010E 2011E Long Term 19 Mar/10 YTD WoW
Aluminum US$/lb 0.73 0.80 0.80 0.85 1.01 1.0% 0.0%
Copper US$/lb 2.28 2.75 3.00 2.00 3.35 0.6% -0.3%
Nickel US$/lb 6.59 7.50 7.50 7.00 10.16 21.4% 3.4%
Zinc US$/lb 0.71 0.90 1.00 0.80 1.03 -10.5% -1.9%
Lead US$/lb 0.75 0.90 0.80 0.50 0.98 -10.1% -3.9%
Uranium US$/lb 46.7 52.5 60.0 70.0 41.25 -8.3% 1.2%
Molybdenum US$/lb 12.1 15.0 15.0 12.5 17.75 56.0% -2.1%
Cobalt US$/lb 17.2 17.5 15.0 12.5 21.75 6.1% 7.4%
Gold US$/oz 976.00 1,250.00 1,100.00 850.00 1,107.00 0.9% 0.5%
Silver US$/oz 14.76 20.50 18.50 15.50 16.99 0.7% -0.5%
Platinum US$/oz 1,197 1,425 1,475 1,500 1,606.75 9.6% 0.0%
Palladium US$/oz 253 300 300 250 467.00 14.5% 1.0%
C$/US$ 0.88 0.95 0.95 0.90 0.98 3.4% 0.2%
A$/US$ 0.78 0.90 0.90 0.80 0.92 2.0% 0.0%
US$/Euro 1.40 1.50 1.50 1.50 1.35 -5.5% -1.7%
Rand/US$ 8.43 7.38 8.00 8.00 7.34 -0.9% -0.8%
WoW (week over week).
CA - Canaccord Adams.
The CA commodity price and currency forecasts – updated values published January 2010.
In Situs: The basket of companies might vary quarterly.
Past performance is not indicative of future results.
Source: Canaccord Adams, Capital IQ, Bloomberg, TSX DataGroup
Junior Mining Weekly | 3
23 March 2010
THE STRETCH ASSAY
One excellent way for a junior exploration company to capture market attention is to
release an impressive exploration drill hole result. Investors tend to speculate on the
potential of a “new discovery” and in the right market, this can lead to a company’s
share price gapping up to higher levels.
Unfortunately, not all drill intercepts are created equally and we continue to discover
company-reporting tactics that, in our opinion, stretch the geological boundaries. What
we are referring to is the “Stretch Assay”. This tactic is based on companies using one or
a series of narrow, high grade intercepts and spreading the results over a wider interval
in order to improve the outlook of the mineralized zone. For example a drill intercept of
1 metre grading 109.0 g/t Au might be reported as 10 metres grading 10.9 g/t Au or 100
metres grading 1.09 g/t Au, giving the impression of a larger and wider interval of
mineralization. In many cases this can be justified, but it is important that the
mineralized interval has geological characteristics matching how the assays are
reported.
As an example, a narrow vein, where Au mineralization is geologically constrained to the
vein only, should not be “stretched” beyond the vein boundaries in order to make the
intercept appear larger. Several veins in an interval with surrounding lower-grade
mineralization might justify the composite interval, based on the assumption that future
exploitation of the wider composite may be realistic.
Individual high-grade intervals are often statistical outliners that are eventually top-cut to
lower grades. Including small zones of high-grade mineralization based on an
assumption these zones will translate over a larger area of influence, is often statically
unrealistic.
There is no perfect template when determining whether to combine a series of
mineralized zones into a composite assay, but common sense usually prevails. Highgrade,
narrow, geologically-constrained intervals, conveyed as a low-grade, wider zone
of mineralization, might fit best with an old Sesame Street game called “one of these
things is not like the other” and… may just not belong.
Junior Mining Weekly | 4
23 March 2010
Watch List update
In the December 23, 2009 edition of the Junior Mining Weekly we provided an overview
of the small-cap mining sector and our year-end list of exploration, development and
mining companies that we believed could provide above-average speculative potential in
2010. In this week’s issue, we have tabled the Watch List’s performance over the last three
months. On average, companies on our December 2009 Watch List were up 25.5%, versus
the TSX Venture Index benchmark up 9.4% over the same period.
Figure 3: 2010 Watch List – three-month performance
Price C$ % Change
Co Name Ticker Exchange 18-Dec-09 18-Mar-10 Price
Anfield Nickel Corp. ANF TSX-V $2.90 $2.75 -5.2%
Banro Corporation BAA TSX $2.11 $2.01 -4.7%
Blue Sky Uranium Corp. BSK TSX-V
.58
.76 31.0%
Canaco Resources Inc. CAN TSX-V
.52
.38 -26.9%
Capella Resources Ltd. KPS TSX-V
.46
.25 -45.7%
Carpathian Gold Inc. CPN TSX
.32
.45 42.9%
Corex Gold Corp. CGE TSX-V
.79
.70 -11.4%
First Point Minerals Corp. FPX TSX-V
.29
.54 89.5%
Focus Ventures Ltd. FCV TSX-V $1.08 $1.11 2.8%
Hudson Resources Inc. HUD TSX-V
.65
.82 26.2%
Intercitic Minerals Inc. ICI TSX
.92
.96 4.3%
Kaminak Gold Corp. KAM TSX-V
.76 $1.10 44.7%
Kiska Metals Corp. KSK TSX-V
.95
.86 -9.5%
Levon Resources Ltd. LVN TSX-V
.38
.92 142.1%
PC Gold Inc. PKL TSX
.60
.71 18.3%
Richfield Ventures Corp. RVC TSX-V $1.20 $2.20 83.3%
Rio Alto Exploration Ltd. RIO TSX-V
.37
.72 94.6%
Rodinia Minerals RM TSX-V
.40
.54 35.0%
Sandstorm Resources Ltd. SSL TSX-V
.52
.77 48.1%
Uracan Resources Ltd. URC TSX-V
.31
.18 -41.9%
US Gold Corp. UXG TSX $2.45 $2.87 17.1%
Average 25.5%
S&P/TSX Venture Index 1430 1564 9.4%
S&P/TSX Composite Index 11463 11948 4.2%
S&P/TSX Global Gold Index 335 323 -3.7%
S&P/TSX Div. Metals & Mining Index 987 1077 9.1%
Source: Canaccord Adams, Capital IQ
Junior Mining Weekly | 5
23 March 2010
OTHER NEWS
• The M&A trend continues: Brett Resources (BBR : TSX-V : C$2.09 | SPECULATIVE
BUY)* announced over the weekend it has entered into a definitive support
agreement with Osisko Mining (OSK : TSX : C$8.59 | SPECULATIVE BUY) whereby
Osisko will purchase all its outstanding shares. Osisko will offer 0.34 of a common
share, which at the time of the offer implied a price of $2.92/BBR share. Two-thirds
approval is required from BBR shareholders. BBR has approximately 120 million
shares fully diluted, at $2.92. This offer values BBR at approximately $350.7 million.
Based on the current mineral resource (July 2009) of 6.7 million oz Au at 0.80 g/t Au
(0.3 g/t Au cut-off), the offer implies a purchase price US$52/oz Au (C$:US$ 0.91:1).
Based on OSK’s Malartic project hosting a resource of 10.77 million oz (8.97 million
Reserve @1.13 g/t Au), OSK was trading at an in-situ value of about US$255/oz upon
amendment.
*Recommendation for Brett Resources (BBR : TSX-V) is now a HOLD and a price of
C$2.82 as of Monday, March 23, 2010*
• Potential gold developer takeout list:
o Andina Minerals (ADM : TSX-V : C$1.27 | SPECULATIVE BUY) also
Maricunga, Chile.
o Avion Gold (AVR : TSX-V : C
.71 | SPECULATIVE BUY). Ramping
production and excellent exploration potential in neighbourhood (Mali)
updated by aggressive majors.
o Colossus Minerals (CSI : TSX : C$6.64 | SPECULATIVE BUY) High-grade in
Brazil.
o Exeter Resources (XRC : TSX : C$7.30 | SPECULATIVE BUY) 30+ million oz
AuEq in Maricunga. Goldcorp (GG : NYSE : G : TSX : US$38.87 | BUY),
Kinross (KGC : NYSE : K : TSX : US$17.89 | BUY) and Barrick Gold (ABX :
NYSE : ABX : TSX : US$39.42 | BUY) – three large players in the district.
o Grayd Resources (GYD : TSX-V : C
.75 | SPECULATIVE BUY) 750k oz
Mexico, next to Alamos Gold’s Mulatos mine.
o Greystar Resources (GSL : TSX : C$6.27 | SPECULATIVE BUY). Largest,
most-advanced undeveloped gold project in Columbia.
o International Tower Hill (ITH : TSX : C$6.00 | RESTRICTED), 12+ million oz
gold in Alaska: Kinross, AngloGold have an interest in the area.
o Keegan Resources (KGN : TSX : C$5.81 | SPECULATIVE BUY) West African
resource growth. Red Back (RBI : TSX : C$20.84 | HOLD), Randgold (GOLD :
NASDAQ : US$72.67 | HOLD), IAMGOLD (IAG : NYSE : IMG : TSX :
US$14.34 | BUY) all in area.
o Rainy River (RR : TSX-V : C$5.07 | SPECULATIVE BUY), 5 million oz gold in
NW Ontario.
o Timmins Gold (TMM : TSX-V : C$1.33 | SPECULATIVE BUY). Junior gold
producer in Mexico. Potential tag-on acquisition.
Junior Mining Weekly | 6
23 March 2010
• Uranium market: The spot price of uranium rose again this week to $41.25/lb U3O8,
up
.50/lb from the week before and
.75/lb higher than its lowest point year-todate,
according to Ux Consulting. We note that on a year-to-date basis, by March 19,
2009, there were 3.4 million lbs of U3O8 traded over 18 deals with U3O8 prices
hovering near $42.50/lb, whereas thus far in 2010, a total of 7.5 million lbs of U3O8
traded over 38 deals recorded by Ux Consulting. One difference between then and
now is the absence of utility buying for consumption in today’s spot market; the
majority of spot transactions this year have been discretionary purchases. Indeed,
since discretionary buying has made up the bulk of purchases since August of last
year, we continue to wait for utility buying to show up in the market, which was
partially responsible for the spike in prices between April and June of 2009.
Junior Mining Weekly | 7
23 March 2010
EXPLORATION UPDATES
Junior Mining Weekly | 8
23 March 2010
CAPELLA RESOURCES LTD.
(KPS : TSX-V : C
.23 | NOT RATED)
Wendell Zerb, P. Geol 1.604.643.7485
Adam Melnyk 1.604.643.1655
Figure 4: KPS : TSX-V Figure 5: KPS : TSX-V
Shares O/S (M): 24.3
Shares FD (M): 41.9
Working Cap. (M): C$4.0
Market Cap. (M): C$5.6
Co. Website: www.capellaresources.com
Past 12 months – purchased: $66,215
Past 12 months – sold: Nil
Since Feb. 11/10 – acquisitions or dispositions: Nil
Source: Company reports, StockCharts.com Source: INK Research
Capella Resources is a small-cap exploration and mineral development company with a portfolio of projects focused on
precious and base metals in Chile. Capella controls the Nevada and Lajitas projects in the Maricunga district of Chile, with
a combined land holding of 3,500 hectares. The company is led by Richard Bachman, President and CEO.
• Last week, KPS released results from its ongoing drill program at Lajitas. Results were from holes drilled stepping out at
the Santa Fe gold zone from drill hole LJ10015r, which was released January 28, 2010 and intersected 318 metres of
oxide mineralization grading 0.68 g/t Au over the entire length of the drill hole. Results reported last week included 92
metres grading 0.74 g/t Au and 142 metres grading 0.57 g/t Au in step-outs along a fence approximately 200 metres to
the west of hole 15 and 156 metres grading 0.55 g/t Au in a 100-metre NE step-out from hole 15. Both a 900-metre stepout
to the south and a 150-metre north step out from hole 15 returned no significant mineralization. The company
indicates that the Santa Fe zone remains open to the east, west, south, and at depth.
• The Lajitas project totals 1,600 hectares of mineral claims and is located 12 kilometres southeast of the Marte-Lobe gold
deposit, lying 18 kilometres east of Andina’s Volcan gold deposit. Mineralization is hosted in oxidized andesitic volcanoclastic
and dacitic intrusive rocks. Lajitas is subject to a 5% net smelter return royalty (the company has the option to purchase
3% of the 5% for US$3 million). Lajitas hosts a non-NI 43-101 compliant resource estimate (1997) of 348,000 oz Au.
• Also in the Maricunga, Capella controls 100% of the 1,900 hectare Nevada project (subject to a 5% NSR, which can also
be reduced to 2% through a US$3 million cash payment), located five kilometres north of Exeter’s (XRC : TSX : C$6.91 |
SPECULATIVE BUY) Caspiche project. A 2009 drill program at Nevada (900 metres) intersected weakly mineralized
rock, which the company interprets to potentially be porphyry wall rock. Historical work at Nevada includes three RC
holes totalling 486 metres, the best intercept being 10 metres grading 1.57 g/t Au and 62 g/t Ag.
• Capella has 7,200 metres ($3 million) of drilling planned for the 2009/2010 drill season with one RC rig, initially
focused on Lajitas. Drilling at Lajitas is investigating a target defined by surface sampling, located 400 metres east of
the original 1997 Lajitas discovery, which Capella indicates has defined an anomaly 350 metres in length (north to
south) defined by gold values ranging from 0.1 to 0.35 g/t Au. This anomaly lies on the eastern edge of the 1.2-
kilometre-diameter circular magnetic high that defines the main Lajitas target.
• Capella Resources is a Canaccord Adams 2010 Watch List company. For more information, please see our Junior
Mining Weekly published December 23, 2009.
An analyst has not visited Capella Resources Ltd.’s material operations.
Investment risks
The commercialization risks associated with mineral exploration and development are high; thus, investment in the shares
of Capella Resources Ltd. is for risk accounts only.
Junior Mining Weekly | 9
23 March 2010
UEX CORPORATION
(UEX : TSX : C
.78 | NOT RATED)
Eric Zaunscherb, CFA 1.604.699.0829
Gabriel Gonzalez 1.604.643.7529
Figure 6: UEX: TSX Figure 7: UEX: TSX
Shares O/S (M): 197.2
Shares FD (M): 211.8
Working Cap. (M): C$14.1
Market Cap. (M): C$153.8
Co. Website: www.uex-corporation.com
Past 12 months – purchased: $12,520
Past 12 months – sold: Nil
Since Sep. 11/09 – acquisitions or dispositions: Nil
Source: Company reports, StockCharts.com Source: INK Research
UEX is a Vancouver-based exploration and development company advancing an extensive portfolio of uranium projects in
the Athabasca Basin, Saskatchewan. The Athabasca Basin yields approximately one-quarter of global mine supply of U3O8
annually. The company provided an exploration update on drilling work at Shea Creek, a joint venture project 49% owned
by UEX, and operated by AREVA Resources Canada Inc. with 51% ownership.
• UEX reported drilling results from two directional cuts from pilot hole SHE-133, located in the Shea Creek Area 58B.
Area 58B lies between the Kianna and Colette Deposits (Figure 8) along a one-kilometre section of the Shea Creek
trend, and is named for Hole SHE-58B, which in 2007, intersected basement-hosted mineralization grading 2.21%
U3O8 over 2.6 metres. This area had been the subject of only sparse drilling objective, and the result of the current
drilling establishes the continuity of unconformity and basement mineralization previously outlined at the Kianna,
Anne and Colette Deposits.
• Drill hole SHE-133-3, the third directional cut and the first for the 2010 drill program, intersected the unconformity at
a depth of 725.2 metres. The majority of the mineralization was associated with breccias at the unconformity from
718.2 metres depth, grading 1.81% U3O8 over 7.6 metres. Basement-hosted mineralization occurs in narrow
pitchblende-rich veins between 744.6 and 758.5 metres, with 1.1 metres from 744.6 metres depth grading 1.02%
U3O8, and 0.9 metres from 757.6 metres depth grading 4.8% U3O8. Similarly, drill hole SHE-133-4 intersected
unconformity-related mineralization in breccias at a depth of 714.2 metres, grading 6.55% U3O8 over 2.4 metres, and
basement-hosted mineralization between 742.0 and 785.4 metres, with 1.6 metres from 742 metres depth grading
1.05% U3O8, and 1.3 metres from 784.1 metres depth grading 1.21%.
• No historical or current NI 43-101 resources are available for the Shea Creek deposits, although the current drilling
program is intended to advance the deposits towards this objective. Given the depth at which mineralization is typically
encountered at Shea Creek; however, a longer-term timeline is to be expected before an NI 43-101 resource or
development plans for the area can be established. Nonetheless, because Shea Creek exploration is driven by AREVA,
we expect drilling and exploration work to steadily continue on the property.
An analyst has not visited UEX Corporation’s material operations.
Investment risks
The commercialization risks associated with mineral exploration and development are high; thus, investment in the shares
of UEX Corporation is for risk accounts only.
Junior Mining Weekly | 10
23 March 2010
Figure 8: UEX Corporation - Shea Creek deposits
Source: Company reports
Junior Mining Weekly | 11
23 March 2010
URANIUM ENERGY CORPORATION
(UEC : AMEX : US$3.30 | NOT RATED)
Eric Zaunscherb, CFA 1.604.699.0829
Gabriel Gonzalez 1.604.643.7529
Figure 9: UEC : AMEX Figure 10: UEC : AMEX
N/A
Shares O/S (M): 59.9
Shares FD (M): 75.3
Working Cap. (M): US$17.2
Market Cap. (M): US$197.7
Co. Website: www.uraniumenergy.com
Past 12 months – acquisitions or dispositions: Nil
Source: Company reports, StockCharts.com Source: INK Research
Uranium Energy Corp. is a US-based exploration and development company with a portfolio of prospective uranium in-situ
recovery (ISR) properties throughout the US midwest. The company’s combined NI 43-101 compliant resources total 20.5
million lbs U3O8 across four properties in Texas and New Mexico, and another 23 million lbs of historical (non-NI 43-101
compliant) resources. The company is led by mining entrepreneur Amir Adnani, CEO and Director, and Harry Anthony,
COO and Director, a professional engineer with over 30 years of experience in the uranium industry.
• UEC recently announced exploration results from its 100%-owned Palangana ISR project in south Texas (Figure 11).
The results are part of the company’s 215-hole drilling program on six exploration zones, intended to further define
and expand its previously reported Inferred resources. Selected result from drilling on the Brine Trend included Hole
2707 which returned 5.6 metres of 0.636% U3O8 at 113.7 metres downhole, and Hole 2703 which returned 3.2 metres
of 0.848% U3O8 at 112.5 metres downhole. Results from the Jemison Fence Trend included highlighted Hole 2685,
which returned 7.5 metres of 0.341% U3O8 at 104.4 metres downhole.
• Drilling work also included exploratory drilling on past-producing Union-Carbide ISR wells located on Palangana. The
drilling was designed to test historic well field recovery and to evaluate remaining mineralization. According to the
company’s press release, results indicate that that a significant amount of uranium could still remain in the well fields.
• To date, 87 holes of the 215 hole drill program have been completed, and UEC expects to produce a resource estimate
update at the conclusion of the current drill program. Palangana currently hosts an NI 43-101 compliant mineral
resource of 1.05 million lbs of U3O8 in the Measured & Indicated category, and 1.15 million lbs of U3O8 in the Inferred
category.
• The company states that Palangana is permitted for production, with near-term plans to produce and ship uraniumbearing
resins from Palangana to the company’s fully licensed Hobson processing plant, located approximately 161
kilometres from Palagana.
An analyst has not visited the properties held by Uranium Energy Corp.
Investment risks
The commercialization risks associated with mineral exploration and development are high; thus, investment in the shares
of Uranium Energy Corp. is for risk accounts only.
Junior Mining Weekly | 12
23 March 2010
Figure 11: Uranium Energy Corp Texas
Source: Uranium Energy Corporation
Junior Mining Weekly | 13
23 March 2010
SITE VISIT NOTES
Junior Mining Weekly | 14
23 March 2010
US GOLD CORPORATION
(UXG : TSX : C$2.80 | NOT RATED)
Eric Zaunscherb, CFA 1.604.699.0829
Gabriel Gonzalez 1.604.643.7529
Figure 12: UXG : TSX Figure 13: UXG : TSX
Shares O/S (M): 121.9
Shares FD (M): 134.0
Working Cap. (M): US$42.5
Market Cap. (M): C$341.3
Co. Website: www.usgold.com
Past 12 months – acquisitions or dispositions: Nil
Source: Company reports, StockCharts.com Source: INK Research
EL GALLO SILVER-GOLD PROJECT
Sinaloa, Mexico,
March 15-16, 2010
Introduction and history
Recently we had the opportunity to visit El Gallo, a wholly-owned silver-gold project of
US Gold Corporation in Sinaloa state, Mexico (Figure14). The analyst tour was conducted
by Rob McEwen, Chairman and CEO, Ian Ball, Vice President Mexico, and Stefan Spears,
Vice President Projects.
US Gold was organized under the laws of the State of Colorado in July 1979. In July
2005, Robert McEwen, founder and former CEO of Goldcorp (GG : NYSE : US$38.87 |
BUY), became the largest shareholder, Chairman and CEO, and the company entered a
new phase. In 2006, the company began consolidating the Cortez Hills trend immediately
south of Barrick Gold’s (ABX : NYSE : US$39.42 | BUY) Cortez mining operation in
Nevada; Cortez is expected to produce 1.08 to 1.12 million ounces gold in 2010 at total
cash costs of $295 to $315 per ounce. In July 2007, US Gold completed the acquisition of
a number of companies including Nevada Pacific Gold Ltd. As part of the Nevada Pacific
Gold acquisition, US Gold gained a wholly-owned Mexican subsidiary with a large,
prospective land position encompassing historic gold and silver production.
With the purchase of Nevada Pacific and subsequent land acquisitions, US Gold’s land
position in the Magistral district in Sinaloa State (Figure A) amounts to approximately
215,000 hectares. The package is located approximately 100 kilometres northwest of the
state capital, Culiacan, and 20 kilometres from the regional centre of Mocorito. Access is
excellent with paved roads and power nearby. The district has hosted mining activities
since the 1500s. Community relations appear to be good with interactions predominantly
at community and private-land ownership levels as opposed to with Ejidos (agricultural
co-operatives).
Junior Mining Weekly | 15
23 March 2010
In early 2008, US Gold began exploration activities seeking to expand on the former
Magistral gold operation (70,000 ounces gold produced from 2002 to 2004) and the
historic Palmarito silver mine (15.3 million ounces silver and 49,250 ounces silver to
closure in 1950). By the end of the year, US Gold’s geologists had successfully discovered
silver and gold mineralization at El Gallo (Figure 15). Since then, the company has
completed extensive soil and rock chip sampling and 20,000 metres of core drilling in
125 holes.
Figure 14: Magistral District (El Gallo) location map, Sinaloa State, Mexico
Source: US Gold Corporation presentation, March 2010
Figure 15: Magistral District land position, Sinaloa State, Mexico
Source: US Gold Corporation presentation, March 2010
Junior Mining Weekly | 16
23 March 2010
Figure 16: Former Palmarito silver-gold mine, view south
Source: Canaccord Adams, March 2010
Geology
The Magistral District property is situated in the Pie de la Sierra physiographic province
of the Sierra Madre Occidental Range. Upper (mid-Tertiary) and lower (late-Cretaceous to
early-Tertiary) volcanic packages overly older basement rocks. The pause in deposition
between the upper and lower volcanic packages was marked by a period of uplift,
faulting, and intrusion by dikes, stocks, and batholiths. Faulted and sheared lower
volcanic rocks are common hosts for mineralization in the region, as well as underlying
granitic stocks.
Junior Mining Weekly | 17
23 March 2010
At Palmarito (Figures 15 and 16), production dating back to the 1500s and continuing to
closure in 1950, amounted to an estimated 15.3 million ounces silver and 49,250 ounces
gold. Andesitic-dacitic volcanic rocks of the lower volcanic package have been intruded
by a hypabyssal rhyolite. Mineralization is predominantly hosted in a horseshoe-shaped
breccia body associated with the faulted and sheared northeast contact between the
intrusion and surrounding volcanic host rocks. Strongly silicified stockwork-veined
andesite above and below the breccia may also be mineralized. Palmarito is a lowsulphide
epithermal deposit with argentite (Ag2S) and native silver the main ore minerals
while pyrite, sphalerite, galena, and chalcopyrite are also present. In December 2008,
measured and indicated resources were estimated of 3.8 million tonnes grading 70 g/t
silver and 0.14 g/t gold for 8.5 million ounces of silver and 16,500 ounce of gold plus 1.6
million tonnes inferred grading 65.5 g/t silver and 0.11 g/t gold for 3.3 million ounces of
silver and 5,800 ounce of gold.
Mineral deposits at Magistral (Figures 15 and 17) are of intermediate-sulphide
epithermal classification. Fine native gold and electrum are found in quartz in
stockwork, breccias and veins within mineralized pods hosted in structural zones. The
primary structural trend is northwest, but significant mineralization is also found in a
cross-cutting northeast trend; some structures flatten at depth. Mineralization may also
be associated with contacts between lower volcanic rocks and intruding granodiorite and
rhyolite porphyry bodies. A June 2009 resource estimate amounted to 10.4 million
tonnes measured and indicated grading 1.50 g/t gold for 502,466 ounces contained gold
plus 0.2 million tonnes inferred grading 1.14 g/t for 8,167 ounces of contained gold.
From 2002 to 2005 Magistral was operated as an open-pit heap leach operation. Over
that period, the mine produced approximately 70,000 ounces of gold, achieving a
recovery rate estimated at 65.1%. Since 2005, the mine has been on care-andmaintenance
but equipment remains on site and the mine permit is intact.
Figure 17: Magistral gold mine, view west
Source: Canaccord Adams, March 2010
Junior Mining Weekly | 18
23 March 2010
Figure 18: El Gallo silver in soil geochemistry – note that soil anomalies are limited by the
presence of farmers’ fields
Source: US Gold Corporation presentation, March 2010
Figure 19: El Gallo mineralized breccia
Source: Canaccord Adams, March 2010
Junior Mining Weekly | 19
23 March 2010
In November 2008, US Gold announced the discovery of silver and gold mineralization at
El Gallo (Figure 15) based on mapping and prospecting. Soil geochemical surveying and
rock-chip sampling were quickly deployed to ascertain the extent of the new discovery
(Figure 18). It is important to note that geochemical surveys were limited by the presence
of tilled farmers’ fields. US Gold also deployed an ingenious tool in the form of a
modified, tracked air blast rig, normally used for in-pit grade control and blasting, to
conduct shallow reconnaissance drilling. Coupled with the operating mine-site assay lab,
US Gold is able to rapidly sample and assay bedrock at a fraction of the cost of normal
RC or core drilling. Although unusable for resource estimation, the data acquired has
been instrumental in US Gold’s rapid and effective exploration of El Gallo.
Since El Gallo’s discovery, US Gold has completed extensive soil and rock-chip sampling
and over 20,000 metres of core drilling in 125 holes; assays from 73 holes have been
reported to date. A US$17.7 million budget has been allocated for 2010 exploration, of
which the lion’s share is targeted at El Gallo drilling of up to 100,000 metres. Geologists
are gaining an understanding of the controls on mineralization. Drilling has encountered
multiple zones of low-sulphide epithermal high-grade silver mineralization with sporadic
high-grade gold values (except in a distinct gold zone). Argentite with attendant
sphalerite and chalcopyrite and galena is found in breccias (Figure F) and stockwork
predominantly within andesite volcanic rocks beginning at or near surface down to an
underlying quartz monzonite porphyry intrusive body. Brecciation and mineralization
occurred over multiple pulses. Northeast and northwest trending structures appear to be
important in localizing mineralization, but excellent core recovery suggests excellent
ground conditions for mining purposes.
Figure 20: El Gallo cross-section, east area
Source: US Gold Corporation presentation, March 2010
Junior Mining Weekly | 20
23 March 2010
Reviewing the intersections in 73 holes to date, we note multiple intersections of zones
with varying orientations (Figure 20). The zones begin at, or near surface and
intersections to date average 249 g/t silver on a core length-weighted basis. On this
basis, we conservatively estimate a conceptual resource at this time of 30 million ounces
silver with a potential for more than 100 million ounces conceivable given the known
zones and multiple targets yet to be tested. Due to the shallow nature of El Gallo and the
excellent ground conditions, US Gold is rapidly developing a database on 30 to 50 metre
centres. This will facilitate an initial resource estimate in early Q2/10 with a high
proportion in the measured and indicated categories.
Initial metallurgical studies are encouraging to date. Phase I bottle roll leaching on
samples averaging 390 g/t silver returned average recovery rates of 90.4% and 78.1% for
silver and gold, respectively. Phase II bottle roll leaching on samples averaging 1604 g/t
silver returned an average silver recovery rate of 86.3%. Cyanide and lime consumptions
were reasonable. In leach column tests of low grade (average 71 g/t silver) currently
ongoing, initial results suggest an average silver recovery rate of 51.0% after only 110
days; this would extrapolate to an estimated 65% to 75% over a full leach cycle.
Summary and catalysts
US Gold’s management and exploration team have done a superb job at El Gallo, in our
opinion. This is an important new silver discovery in an excellent jurisdiction, with
attractive metallurgy and considerable exploration potential yet to be tapped. The
aggressive exploration program should continue to yield news flow. In addition, we
expect the following potentially catalytic events:
• Imminent updated resource and preliminary economic assessment for Gold Bar
project in Nevada,
• Early Q2/10 El Gallo resource estimate, and
• Q1/11 updated El Gallo resource and preliminary economic assessment.
US Gold Corporation is a Canaccord Adams 2010 Watch List company. For more
information, please see our Junior Mining Weekly published December 23, 2009.
An analyst has visited US Gold Corporation’s material operations in Mexico. Partial
payment or reimbursement was received from the issuer for the related travel costs.
Investment risks
The commercialization risks associated with mineral exploration and development are
high; thus, investment in the shares of US Gold Corporation is for risk accounts only.
Junior Mining Weekly | 21
23 March 2010
DRILL BITZ
The Drill Bitz section is designed to provide the reader with a very quick overview of
juniors that have announced drill programs in the past week. The intent of this data is to
identify those juniors that may provide news in the near future and also to allow us to
track turn-around time from the initiation of drilling to first results. The old adage that
good news travels fast will be under the microscope. The layout of Drill Bitz will remain
constant. We will provide a short one- to two-line description of the program planned as
well as the company ticker, shares issued, market capitalization and the name and
location of the project.
Figure 21: Drill Bitz for 15-22 March 2010
Sh o/s Price $ Mkt. Cap.
Co name Ticker Exch. M 19 Mar/10 $M Project Description
American Manganese Inc. AMY TSX-V 51.2
.40 $20.5 Manganese Project/Mohave
County/Arizona
Drilling commenced. Second drill will
be added to the property.
Antooquia Gold Inc. AGD TSX-V 59.4
.35 $20.8 Cisneros Project/Colombia Begun Phase 2 of drilling; 10,000
metres. A second drill rig will be added.
Artha Resources
Corporation
AHC TSX-V 11.3
.14 $1.6 Pirquitas and Vallecito
Properties/Northwest Argentina
Commencing exploration.
Benton Resources Corp. BTC TSX-V 74.0
.52 $38.5 Copper Hill Block Property/SW
Kirkland Lake, Ontario
Phase 3 of diamond drilling initiated.
Three Bluffs Au
Deposit/Committee bay
Greenstone Belt, NE Baker Lake,
Nunavut
Commencing 2010 exploration
program. Four drill rigs at site; 20,000
metre drill program planned.
CBR Gold Corp. CBG TSX-V 29.2
.72 $21.0
Niblack Project/Alaska JV with partner Heatherdale Resources
Ltd. (HTR : TSX-V : C$1.38 | Not rated).
Ongoing drill program; Two drill rigs at
site.
Detour Gold Corporation DGC TSX 49.7 $18.37 $912.6 Detour Lake Project/Ontario 2010 drilling campaign underway with
over 32,000 metres completed to date.
Eagle Hill Exploration
Corporation
EAG TSX-V 23.9
.40 $9.6 Windfall Lake Property/Quebec Ongoing 10,000 metres drill program.
Goldeye Explorations
Limited
GGY TSX-V 99.3
.11 $10.9 Tyrell Au Project/Northeastern
Ontario
Ongoing drilling. Second drill rig added
at site. Current drill program up to
6,000 metres.
First Gold Exploration Inc. EFG TSX-V 49.0
.36 $17.4 Lac Pivert-Rose Property/Quebec Drill program underway. 25 holes
planned, two holes completed to date.
NioGold Mining
Corporation
NOX TSX-V 64.0
.28 $17.9 Malartic Au Camp/Abitibi, Quebec Ongoing drilling; 20,000 metres of
drilling planned for 2010.
Stellar Pacific Ventures
Inc.
SPX TSX-V 24.9
.07 $1.7 Lake Urban Property/East of town
of Lebel Sur, NW Quebec
2010 drill plans are being prepared.
Tinka Resources Limited TK TSX-V 26.0
.30 $7.8 Colquipucro Cu Project/Peru 50 diamond drill holes planned for the
Zone 1 (Ayawilca zone). Permits for
additional eight holes have been
received.
Source: Canaccord Adams, Marketwire, Capital IQ
Source: www.Forsur-tools.com
Junior Mining Weekly | 22
23 March 2010
GOLD IN SITU SPREADSHEET
Figure 22: Canaccord Adams gold in situ valuation spreadsheet
Sh o/s Price C$ Mkt. Cap Sum Oz Sum Oz Sum Oz Mkt Cap/oz Mkt Cap/oz EV/oz EV/oz
Company Sym Exch M 19 Mar/10 $M Au /co (M) Ag /co (M) AuEq /co (M) AuEq C$ AuEq US$ AuEq C$ AuEq US$
Alexis Minerals Corp. AMC TSX 147.7
.38 $55.4 0.59 0.14 0.60 92.87 91.25 86.31 84.80
American Bonanza Gold Corp BZA TSX 118.2
.18 $21.3 1.46 0.00 1.46 14.62 14.36 11.78 11.58
Anatolia Minerals Development Ltd. ANO TSX 137.9 $4.50 $620.6 6.50 15.38 6.74 92.05 90.44 84.06 82.59
Andean Resources Ltd. AND TSX 465.2 $2.55 $1,186.3 2.58 23.16 2.94 403.84 396.77 376.88 370.28
Andina Minerals, Inc. ADM TSXV 105.0 $1.27 $133.3 11.09 0.00 11.09 12.01 11.80 7.74 7.60
ATNA Resources Ltd. ATN TSX 83.3
.60 $50.0 3.53 5.19 3.61 13.86 13.61 13.40 13.17
Axmin Inc. AXM TSXV 310.1
.07 $21.7 5.06 0.00 5.06 4.29 4.21 4.14 4.07
Brett Resources Inc. BBR TSXV 103.7 $2.09 $216.8 5.18 0.00 5.18 41.84 41.10 32.19 31.62
Canarc Resource Corp. CCM TSX 81.8
.12 $9.4 1.27 0.00 1.27 7.43 7.30 6.96 6.84
Comaplex Minerals Corp. CMF TSX 71.3 $7.78 $554.4 2.66 0.00 2.66 208.38 204.74 198.14 194.67
CBR Gold Corp CBG TSXV 33.2
.73 $24.2 0.90 2.23 0.94 25.84 25.38 20.62 20.25
Detour Gold Corporation DGC TSX 69.0 $18.74 $1,292.6 25.52 0.00 25.52 50.65 49.77 37.43 36.78
Etruscan Resources Inc. EET TSX 338.4
.41 $138.7 2.61 0.00 2.61 53.10 52.17 66.41 65.25
Gabriel Resources, Ltd. GBU TSX 339.2 $4.54 $1,540.0 13.80 59.38 14.71 104.68 102.84 94.57 92.91
Golden Queen Mining Co. Ltd. GQM TSX 88.2
.91 $80.2 2.68 48.88 3.43 23.40 22.99 22.50 22.11
Gold Reserve Inc. GRZ TSX 58.2 $1.06 $61.7 14.13 0.00 14.13 4.36 4.29 6.72 6.61
Grayd Resource Corp. GYD TSXV 73.7
.75 $55.3 1.72 30.70 2.19 25.23 24.79 23.60 23.19
Great Basin Gold Ltd. GBG TSX 333.7 $1.84 $614.0 15.92 12.36 16.11 38.11 37.44 39.20 38.51
Greystar Resources Ltd. GSL TSX 70.8 $6.27 $444.1 15.07 81.35 16.32 27.21 26.73 22.29 21.90
Guyana Goldfields Inc. GUY TSX 65.8 $7.00 $460.3 4.55 0.00 4.55 101.26 99.49 96.39 94.70
International Tower Hill Mines Ltd. ITH TSX 58.3 $6.00 $349.7 17.96 0.36 17.96 19.47 19.13 18.40 18.07
Intrepid Mines Limited IAU TSX 427.9
.33 $139.1 0.92 28.84 1.36 102.16 100.38 73.46 72.17
Keegan Resources Inc. KGN TSX 44.4 $5.81 $258.1 3.14 0.00 3.14 82.11 80.67 65.53 64.38
Kirkland Lake Gold Inc. KGI TSX 63.4 $8.50 $538.7 3.28 0.00 3.28 164.30 161.42 150.41 147.78
Klondex Mines Ltd. KDX TSX 31.0 $1.45 $44.9 2.15 0.00 2.15 20.90 20.54 19.13 18.79
Kimber Resources Inc. KBR TSX 62.1 $1.01 $62.7 1.28 57.11 2.16 29.05 28.54 28.61 28.11
Lake Shore Gold Corp. LSG TSX 347.6 $2.65 $921.2 2.59 0.00 2.59 356.09 349.86 297.64 292.43
Luna Gold Corp. LGC TSXV 358.0
.70 $250.6 1.31 0.00 1.31 190.75 187.41 163.88 161.02
Nevsun Resources Ltd. NSU TSX 139.5 $3.05 $425.5 1.30 37.11 1.87 227.49 223.51 230.99 226.95
NovaGold Resources Inc. NG TSX 187.1 $7.56 $1,414.7 28.98 105.46 30.60 46.23 45.43 49.29 48.43
Osisko Mining Corporation OSK TSX 328.3 $8.59 $2,820.1 11.65 0.00 11.65 242.02 237.79 186.31 183.05
Pacific Rim Mining Corporation PMU TSX 118.1
.19 $22.4 1.55 11.40 1.73 13.00 12.77 12.90 12.68
Premier Gold Mines Limited PG TSX 92.4 $3.98 $367.6 1.36 0.00 1.36 270.44 265.71 229.33 225.31
Rainy River Resources Ltd. RR TSXV 71.3 $5.07 $361.7 4.03 7.93 4.15 87.16 85.63 69.20 67.99
Seabridge Gold, Inc. SEA TSX 37.6 $22.31 $838.8 64.54 0.00 64.54 13.00 12.77 12.80 12.57
Tyhee Development Corp. TDC TSXV 196.8
.20 $39.4 2.12 0.00 2.12 18.59 18.27 17.87 17.55
US Gold Corporation UXG TSX 121.9 $2.80 $341.3 3.42 11.78 3.61 94.67 93.01 81.06 79.65
Vista Gold Corp. VGZ TSX 44.6 $2.29 $102.1 17.51 17.74 17.78 5.74 5.64 5.18 5.09
Arithmetic Average 87.58 86.05 77.98 76.62
Weighted Average 53.68 52.74 47.68 46.85
C$/US$ : 0.98.
Au:Ag = 65:1.
Source: Canaccord Adams, company reports, Capital IQ.
Junior Mining Weekly | 23
23 March 2010
SILVER IN SITU CHART
Figure 23: Canaccord Adams silver in situ valuation spreadsheet
.00
.20
.40
.60
.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
Jan-08
Feb-08
Feb-08
Mar-08
Apr-08
Apr-08
May-08
Jun-08
Jun-08
Jul-08
Aug-08
Sep-08
Sep-08
Oct-08
Nov-08
Nov-08
Dec-08
Jan-09
Jan-09
Feb-09
Mar-09
Mar-09
Mar-09
Apr-09
May-09
May-09
Jun-09
Jul-09
Jul-09
Aug-09
Sep-09
Oct-09
Oct-09
Nov-09
Dec-09
Dec-09
Jan-10
Feb-10
Mar-10
Average In Situ EV US$/lb
$5
$10
$15
$20
$25
London Silver Fix (US$/oz)
EV Ag (US$/oz) EV AgEq (US$/oz) Price (US$/oz)
Source: Canaccord Adams, company reports, Capital IQ.
Junior Mining Weekly | 24
23 March 2010
SILVER IN SITU SPREADSHEET
Figure 24: Canaccord Adams silver in situ valuation spreadsheet
PricPrice
Shares
(Basic) MC (2)
WC
(3) EV (4) Project
Global Resource
(5) (Moz)
Silver
Purity MC/oz EV/oz
Implied
AgEq Mkt.
Company Ticker (1) (M) (C$M) (C$M) (C$M) Location(s) Ag
Ag Eq
(6) (%) Ag Ag Eq Ag Ag Eq (7) (Moz) ? (8)
Alexco TSX:AXR $3.45 53.1 $183.2 $13.9 $169.3 Yukon 18 35 50% $10.44 $5.27 $9.64 $4.87 272 681%
Argentex TSXV:ATX
.74 43.9 $32.5
.1 $32.5 Argentina 33 153 22%
.98
.21
.98
.21 52 -66%
Arian AIM:AGQ
.06 235.4 $13.6 -$1.2 $14.8 Mexico 43 221 19%
.32
.06
.34
.07 24 -89%
Aurcana TSXV:AUN
.29 120.7 $35.0 -
.5 $46.7 Texas 48 50 96%
.73
.70
.97
.93 75 50%
Bear Creek TSXV:BCM $3.81 68.4 $260.6 $3.6 $292.0 Peru 482 989 49%
.54
.26
.61
.30 469 -53%
ECU TSX:ECU
.62 307.3 $190.5 -$5.5 $216.8 Mexico 152 286 53% $1.26
.67 $1.43
.76 348 22%
Esperanza TSXV:EPZ $1.30 52.4 $68.2 $6.7 $61.5 Peru, Mexico 8 79 11% $8.14
.86 $7.34
.78 99 25%
Golden Minerals GDMN $9.00 4.5 $40.3 $10.5 $29.8 Peru, Mexico 44 44 100%
.93
.93
.68
.68 48 10%
Kimber TSX:KBR $1.01 65.6 $66.2 $1.0 $65.3 Mexico 57 141 41% $1.16
.47 $1.14
.46 105 -26%
MAG Silver TSX:MAG $7.40 49.8 $368.6 $31.9 $336.7 Mexico 83 132 63% $4.42 $2.80 $4.04 $2.56 541 311%
Minco Silver TSX:MSV $1.99 39.4 $78.5 -$1.9 $80.4 China 141 180 78%
.56
.44
.57
.45 129 -28%
Oremex TSXV:ORM
.15 72.9 $10.9
.3 $10.6 Mexico 49 51 95%
.22
.21
.22
.21 17 -67%
Orko TSXV:OK $1.50 115.0 $172.5 $2.1 $170.3 Mexico 135 148 92% $1.28 $1.17 $1.26 $1.15 274 85%
Sabina TSX:SBB $1.27 114.1 $144.9 $32.3 $112.6 Nunavut 265 798 33%
.55
.18
.43
.14 181 -77%
Silvercrest TSXV:SVL
.94 59.4 $55.9
.5 $55.3 Mex., El Salvador 62 110 56%
.91
.51
.90
.50 89 -19%
Silvermex TSXV:SMR
.45 58.3 $26.2 -
.3 $26.5 Mexico 27 35 77%
.97
.74
.98
.75 43 20%
SNS Silver TSXV:SNS
.15 40.7 $5.9 $3.8 $2.1 Idaho 10 10 100%
.58
.58
.21
.21 3 -67%
South American TSX:SAC
.41 61.0 $25.0 $5.3 $19.7 Bolivia 322 376 86%
.08
.07
.06
.05 32 -92%
Sulliden TSX:SUE
.68 132.7 $90.2 $6.8 $84.7 Peru 35 134 26% $2.56
.68 $2.41
.63 136 2%
Trevali OTCPK:TREV.F $1.38 34.6 $47.7 -
.7 $49.0 Peru 8 50 16% $6.14
.96 $6.31
.99 79 58%
Zazu TSX:ZAZ
.21 30.7 $6.4 $3.2 $3.2 Alaska 33 311 11%
.19
.02
.10
.01 5 -98%
Mean (C$) $2.04
.85 $1.93
.80
Mean (US$) $2.01
.83 $1.91
.78
Mean (Less outliers, C$) $1.71
.66 $1.63
.62
Mean (Less outliers, US$) $CADUSD $1.01 $1.68
.65 $1.60
.61
1. Priced in local currency.
2. Market Capitalization.
3. Working Capital.
4. Enterprise Value = MC + LT Debt - WC.
5. Global resource includes 43-101 compliant Measured, Indicated and Inferred resources.
6. Silver equivalent on a gross basis (no recovery factors) using current spot metal prices.
7. Implied resource is a conceptual resource indicated by the company’s EV at the mean peer EV/oz Ag Eq multiple.
8. The percentage difference between the implied resource and the global resource.
Source: Canaccord Adams, Company reports, Capital IQ.
Junior Mining Weekly | 25
23 March 2010
PGM IN SITU CHART
Figure 25: Canaccord Adams PGM in situ chart
$10
$20
$30
$40
$50
$60
Jan-08
Feb-08
Feb-08
Mar-08
Apr-08
Apr-08
May-08
Jun-08
Jun-08
Jul-08
Aug-08
Sep-08
Sep-08
Oct-08
Nov-08
Nov-08
Dec-08
Jan-09
Jan-09
Feb-09
Mar-09
Mar-09
Mar-09
Apr-09
May-09
May-09
Jun-09
Jul-09
Jul-09
Aug-09
Sep-09
Oct-09
Oct-09
Nov-09
Dec-09
Dec-09
Jan-10
Feb-10
Mar-10
Average In Situ EV US$/lb
$500
$1,000
$1,500
$2,000
$2,500
London PM Platinum Fix (US$/oz)
EV 4E (US$/oz) EV PtEq (US$/oz) Price (US$/oz)
Source: Canaccord Adams, company news releases, Capital IQ, Kitco
Junior Mining Weekly | 26
23 March 2010
PGM IN SITU SPREADSHEET
Figure 26: Canaccord Adams PGM in situ valuation spreadsheet
PricPrice Shares MC (2) WC (3) L-T EV (4) Project Global Resource (5) (Moz) Pt/PtEq (6) Pd/Pt EV/oz Implied PtEq Market
Company Ticker (1) (Basic) (M) (C$M) (C$M) Debt (C$M) Location(s) 4E PtEq (6) (%) (x) 4E PtEq (7) (Moz) D (8)
Duluth Metals TSX:DM $2.17 88.3 $191.6 $5.1
.0 $186.5 Minnesota 17.7 60.4 8% 2.2 $10.54 $3.09 12 -80%
Franconia Minerals TSX:FRA
.68 59.1 $40.2
.5 $1.7 $41.4 Minnesota 5.1 11.8 12% 2.2 $8.20 $3.51 3 -77%
Goldbrook Ventures TSXV:GBK
.35 180.8 $63.3 $3.6
.0 $59.7 Quebec 0.6 1.6 7% 4.0 $96.83 $37.85 4 151%
Magma Metals ASX:MMW
.74 186.1 $137.7 $19.2
.0 $82.5 Ontario 0.6 0.8 42% 0.9 $131.86 $107.21 5 612%
Marathon PGM TSX:MAR $1.13 31.3 $35.3 $11.6
.0 $23.8 Ontario, Manitoba 3.7 3.4 23% 3.4 $6.36 $7.04 2 -53%
Mustang Minerals TSXV:MUM
.14 94.5 $12.8
.7
.0 $12.1 Manitoba 0.2 1.0 3% 3.5 $75.86 $11.66 1 -23%
Platinum Group Metals TSX:PTM $1.99 93.9 $186.9 $35.4
.0 $151.6 South Africa 7.2 6.3 66% 0.6 $20.91 $24.17 10 60%
Polymet Mining TSX:POM $2.25 149.0 $335.2 -$2.7 $36.3 $374.2 Minnesota 9.1 24.2 7% 3.6 $41.31 $15.49 25 3%
Starfield Resources TSX:SRU
.10 521.9 $49.6 $1.2
.0 $48.4 Nunavut 2.8 8.4 5% 6.1 $17.08 $5.75 3 -62%
Mean (C$) $45.44 $23.97
Mean (US$) $44.78 $23.62
Mean (Less outliers, C$) $38.68 $15.07
Mean (Less outliers, US$) $CADUSD $1.01 $38.11 $14.85
1. Priced in Canadian dollars.
2. Market Capitalization.
3. Working Capital.
4. Enterprise Value = MC + LT Debt - WC.
5. Global resource includes 43-101 compliant Measured, Indicated and Inferred resources.4E includes: Platinum, Palladium, Rhodium and Gold.
6. Platinum equivalent on a gross basis (no recovery factors) using current spot metal prices.
7. Implied resource is a conceptual resource indicated by the company’s EV at the mean peer EV/oz PtEq multiple.
8. The percentage difference between the implied resource and the global resource.
Source: Canaccord Adams, Companies news releases, Capital IQ, Kitco
Junior Mining Weekly | 27
23 March 2010
URANIUM IN SITU CHART
Figure 27: Canaccord Adams uranium in situ chart
.00
.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Sep/08
Sep/08
Oct/08
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Average In Situ Value US$/lb
$10
$20
$30
$40
$50
$60
$70
$80
$90
Uranium Price Indicator (UxC)
MC/lb EV/lb Spot U3O8 Long-Term
.
Source: Canaccord Adams, Company reports, Capital IQ.