San Lorenzo Gold Corp V.SLG.RT

RE: Pescod newsletter today

[minedog2]

We’ve written a lot about the stumble in commodity

prices and resource stocks over the last while and it’s certainly

not as much fun as when the market was so generous

just a few months ago.

We certainly hope Bill Carrigan, who we think is one of

the best technical analysts out there, is right...that it’s time

to buy uranium stocks now and over the next four to six

weeks we will see the bottoming for oil and gold stocks,

emphasis on oil, natural gas and gold, apparently not so

much for copper, silver and a few other things if Carrigan is

right.

But it’s definitely an ugly day for one of our favorite stories,

Sterling Resources. I guess the only person having less

fun today than us would be the good folks at Sprott who

own 28 million shares of Sterling, according to the last report.

But of course, on a day like this it feels like we own

that many as well anyways.

The irony is, on a day like today, one person joked, Sterling

could have drilled into the North Sea and discovered a

gold mine and no one would have cared. In a market like

this, you put out news and its an opportunity to sell.

The results announced today are not quite straightforward

or an announcement you’re used to seeing. As one

follower of the story suggests, the results, if you were a geologist

were a success...if you’re an accountant, it’s a failure.

To us however, while we’re down and out today on this

story, it remains one of the more intriguing ones out there

for their vast array of stories, but the company in the last

few weeks has had a lack of joy. They say things come in

threes, well for them it’s been fours.

First of all, you have the ugly markets in general. Secondly

you have the news that the British government was

going to be looking at increasing taxes, which put the North

Sea under a bit of a cloud. Sterling won’t have to be paying

taxes for many, many, many years, but still there is that

cloud.

Thirdly, was the misadventure in Romania where legal

action is taken to make sure they finally do get to drill offshore

Black Sea.

Sterling Resources

David Pescod T: 780.408.1750 Debbie Lewis T: 780.408.1748 Fax: [phone] Page 2

An area that is truly intriguing because of not one, not two,

not three, but four structures on the way down and all that

production on the Ukrainian side of the Black Sea border suggesting

there could be/might be something significant there.

While it’s an ugly day, the numbers for this story are still

compelling...at least when we get back to more normal times.

Take the Breagh project, which comes on-stream sometime

in the next ten-twelve months. Using 3p numbers, Breagh

could be worth as much as $4 a share, or 2p numbers it could

be worth $3 a share when on production. But until we’re

closer to production, and we all know in oil and gas, anything

that can go wrong could go wrong, it won’t get that credit.

How much is Cladhan worth? Well take a guess. A commonly

used number is 150 million barrels of which Sterling

has 40%. Whether drilling is going to prove that number, or a

lower number or possibly a much higher number. The reason

today’s announcement was a big disappointment was an alluvial

fan could have made the huge jump in resource numbers.

But at 150 million barrels, at $15-$20 value in the ground

(when in production) and they own 40% comes up with a very

tasty number...should be the number that we get to, and once

again that’s the number for down the road.

As for value for Romania or France, still very much open to

debate.

Meanwhile, Cladhan is now two dry holes and four successful

wells, and here are the comments from Kevin Shaw,

who in many ways, has been the lead cheerleader for the Sterling

story and right now is probably not having a lot of joy.

But then in the oil sector in the last two months there as been

no joy. Shaw writes:

• The “Fan System” is still very much ALIVE in terms of

prospectivity...given thick sand packages exist with oil.....the

key is that where this last sidetrack was drilled was in an area

where the oil was not considered moveable....this DOES NOT

mean that there is not commercial oil over other parts of the

fan system (i.e. it is a very large area and the reservoir quality

can change in these types of plays by moving just 500m away)

• Sterling is reprocessing seismic go-forward for the Fan

System and will likely come back later (possible this year) to

drill additional appraisal wells to look for higher quality areas

of the fan system

• A key positive is that the Terrace area is now largely derisked

in-terms of not having water in the system (i.e. oil filled

throughout) given they did not find an oil water contact in this

last fan system appraisal.