LOMIKO MAKES MAJOR GRAPHITE DISCOVERY

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Lomiko Metals: MAJOR Graphite Discovery at Quatre Milles



Lomiko Metals LMR-V $0.045


Shares Outstanding… 66.4M
Warrants… 10.8M @ $0.148
Options… 4.9M
Fully Diluted… 82.2M


Market Cap… $2.99 million
Cash… ~$300k







Discovers large zones of graphite similar to Bisset Creek

The results of Lomiko’s phase 1 drill program at Quatre Milles are in.  In spite a share price that speaks to the contrary, everything initially believed about The Quatre Milles Graphite Project has been confirmed…AND THEN SOME. 

Lomiko confirmed several near surface high grade zones on the property initially discovered by Graphicor in 1990.  This is a high value combination of high grade and mineralization starting right at surface, it certainly confirmed everything we thought about Quatre Milles, that it had the potential to host a small to medium sized graphite operation and high grade deposit of around 5Mt-10Mt.  Comparable at the upper end of that range would have been a project such as Flinders Resource’s Kringel, a 500tpd to 700tpd 8% mine slated for production by 2013/2014 at a rate of about 7,000 tonnes of graphite per year. 

What came as a big surprise to most… in addition to the extensive high grade graphite zones found at surface extending over an impressive 1,100 meter strike length… Lomiko discovered that each hole contained broad zones of disseminated (Bisset Creek) style mineralization.  

This is something that was completely unexpected and has materially changed the game for Lomiko and The Quatre Milles Graphite Project.  QM will now be evaluated as a mining project with 5 to 10 times the scale of the original mine plan.   The scope of Quatre Milles has gone from a 5Mt - 10Mt (6% to 8%) project to a 50Mt - 100Mt (2% to 3%) graphite project similar in tonnage and scale to Bisset Creek.   What I don’t understand is why Lomiko, valued at a $3M market cap can still be trading at $0.045 with better results on the first 23 holes at Quatre Milles than Northern Graphite’s 2010 drill program at Bisset Creek.  Yes, I said so far, better results than Bisset Creek.

We are not talking about just beating Bisset Creek’s results.  We are talking about results that compare close to a factor of 2 to the Bisset Creek 2010 drill program.  A 20% increase in average grade, zones that are almost double the size at Bisset Creek, and mineralization that starts right at surface. 

For all you naysayers out there… Paul Gill stepped up to the plate and delivered when many packed it in and refused to even drill another hole after financing dried up this summer for every exploration company.  Lomiko forged on with their program and delivered impressive results.  The price Lomiko is trading at after phase 1 results is just downright silly. Lomiko’s peers are trading between $30M to $50M market caps while LMR-V trades at $3M. 

From 500tpd to 2,500tpd to maybe even 5,000tpd

What was initially envisioned as a high grade 500tpd to 700tpd open pit mine running 6% to 7% head grade through the mill has suddenly expanded in scope and scale to a 2,500tpd project virtually identical to Northern Graphite’s Bisset Creek in almost every way.  Not only did they confirm Graphicor’s discovery, but Lomiko discovered wide zones of mineralization nearly identical to Bisset Creek.  So Quatre Milles has a good ‘ol Canadian Double Double with tonnage and the high grade component to the story.  Everything just got that much bigger and that much better with a world class deposit that has the ability to be scaled up to a 5,000tpd mining operation.   Quatre Milles could host an additional 50Mt to 100Mt of this mineralization in addition to the high grade.  The mine plan at Quatre Milles went from 500tpd @ 6% for 10 to 20 years to 2,500tpd at 2.5% for 25 to 50 years and still oodles of ore left over for future expansion if needed.  

Typical Graphite Operation	500tpd @ 6% 15 year mine	2,500tpd @3% 25 year mine	5,000tpd 2.4% 40 year mine
Cost Assumptions	$40/t op costs $60M capex	$20/t op costs $100M capex	$15/t op cost $200M capex
Annual Graphite Production	10,000 tonnes	25,000 tonnes	40,000 tonnes
Annual Cash Flow @ $1,500 / $2,100 / $2,500	$8M  / $14M / $18M	$20M / $35M / $45M	$34M / $58M / $74M
NPV @ $1,500 / 8%	$8M	$104M	$200M
NPV@  $2,100 / 8%	$55M	$252M	$475M
NPV @ $2,500 / 8%	$87M	$350M	$625M

From 5Mt-10MT to 50Mt to 100Mt

Quatre Milles does not have enough holes to establish a resource yet because the information from Graphicor’s drill program cannot be used.  Lomiko cannot locate the old drill cores and must be drilled again.  But loaded with this new information about the broad zones of graphite, it is clear that Graphicor only analyzed the high grade zones visually estimated above 4% or 5%.  In the map below I have outlined a Central Pit Location which would overlay perfectly onto the proposed Bisset Creek Mine Plan.  If you infer Lomiko’s early results across the rest of the property, Quatre Milles starts to become a very impressive graphite deposit with tonnage nearly identical to Bisset Creek.  Maybe even more.

Quatre Milles… A Bisset Creek Clone, but better

As much as Quatre Milles grew in significance with the scope and scale of the operation, no matter how you cut up LMR’s 2012 results… when you compare them to NGC’s 50 hole drill program at Bisset Creek, the Quatre Milles results compare better on every level.   The zones are wider, the overall grade is higher and it is a lot closer to surface than Bisset Creek.  In mining… those are the three biggest factors that affect a project’s mining costs.  In comparison to Bisset Creek, Quatre Milles wins out on every level.  The one thing that still is a mystery is metallurgy, but with pretty much everything else being identical, I doubt metallurgy results will be much different.  How is that for an unexpected turn of events?  Tiny little Lomiko’s project has the potential to make a lot more money than Bisset Creek.     

It’s got the big 3 mining variables on its side… 

QM is higher grade

QM is closer to surface

QM mineralized zones are wider

QUATRE MILLES IS HIGHER GRADE.

Lomiko has confirmed several at surface high grade zones of graphite which will translate into higher than average returns for a disseminated graphite deposit like Kearney, Eagle or Bisset Creek.   Quatre Milles is indicating the highest grades of any of this style of deposit in Canada.  Northern Graphite’s Bisset Creak lacks any high grade mineralization over 3%, let alone that grade over 10% C that start at surface.  Lack of high grade will translate into lack of a flexible mine plan being able to blend grades when prices are high or source from high grade zones when prices are low.  When you blend Lomiko’s high grade with the low grade you end up with a project that still has the scope of a large 2,500tpd operation like Bisset Creek, but also the potential to mine grades averaging over 3%.  In the early years when it really counts, the difference between 2% and 3% in a cash flow statement is enormous.  Cash flows are not discounted as much, the project gets paid back faster which makes financing the project that much more flexible and the project has the ability to survive sudden prices fluctuations such as the recent drop in graphite prices. 

Variable	2% MINE	3% MINE
Mining Rate	2,500tpd	2,500tpd
Capital Cost	$102M	$102M
LOM	20 years	20 years
Risk Rate	8%	8%
Graphite Price	$2,100	$2,100
Cash Flow	$19M	$36M
NPV	$77M	$235M

QM is CLOSER TO SURFACE.  NO OVERBURDEN.  NO STRIP.

Of all the graphite discoveries, Quatre Milles is the closest to surface.   The central part of the deposit is nearly identical to the Bisset Creek mine plan overly in the feasibility study.  When you take into account Bisset Creek is one of the lowest cost producers on a cost per tonne of ore mined with an extremely low strip ratio, Quatre Milles has Bisset Creek beaten in those factors and promises to be just as low cost.  If not even lower.  If you exclude 4 holes to the north where the ore body dips which is outside the scope of a pit design, the project averages less than 4 meters to surface.   Bisset Creek’s average depth is more than 17 meters from an analysis of the 2010 drill program. 

THE MINERALIZED ZONES ARE WIDER.

 As much as Bisset Creek promises to be a low cost mining operation with $18.34/t all in, Quatre Milles should easily beat this number considering the strip ratio on an open pit mine at Quatre Milles would be near zero.  It will also have a lower strip throughout the life of the project because the zones are also almost twice the size.  Not only is there less rock to move above the deposit at QM… THERE IS MORE MATERIAL per area when they are mining.  Throughout the life of a mine at Quatre Milles… the strip will be close to zero and most stripping will be to stockpile lower grade ore in favor of high grade material.  Mining costs at Bisset Creek are a third the overall $18 cost per tonne. Considering a third of the Northern Graphite’s open pit mine is waste, Quatre Milles promises to beat even this extremely low strip ratio.

Mining Analysis (BC2010 vs QM 2012)	Bisset Creek – Pit Shell	Quatre Milles – Central Pit location
Area	750m * 500m	500m * 500m
Holes	51	15
Average Depth	17.42 meters	2.78 meters
Average mining width (individual horizons)	16.4 meters	29.55 meters
Average aggregate width (stacked zones)	25.1 meters	47.28 meters
Average Rating Per Zone	33	71
Average Rating Per Hole	50	114
Average Grade of Drill Programs	2.00%	2.42%
Probable Mine Reserves	18.8Mt @ 1.89%	N/A
In Pit Shell Measured and Indicated – No cut-off	22.1Mt @ 1.78%	N/A
My rough estimate based on drill programs	24.5Mt @ 2.00%	30.7Mt @ 2.42%

Quatre Milles: EVERYTHING Bisset Creek HAS… AND THEN SOME

Obviously Bisset Creek is a lot further advanced than Lomiko’s Quatre Milles having a feasibility study released this summer.  No one is debating that. Lomiko is still waiting for initial met results for Quatre Milles.  But when you look at what is shaping up under the drill bit at Quatre Milles, it is easy to see EXTREME VALUE in a company that is trading at a tenth the price of Northern Graphite.  Given the discovery at Quatre Milles and the proximity of the mineralization to surface, it is easy to see this project being fast tracked to production b/c of the minimal mining costs, the extensive near surface high grade mineralization and its proximity to the North American auto hub and other strategic graphite suppliers like Asbury or Timcal.  Quatre Milles is an easy deposit to put in production with high grade zones that will maximize mining returns. 

Near surface high grade to maximize returns…? WOW!

 What makes Quatre Milles an exciting opportunity is the fact that there is a significant near surface high grade zone.  The numbers look great when you imagine a 25 year mine averaging close to 2.5% between $2,000 and $3,000 graphite, but when you can mine a grades ranging from 4% to 10% in the early years of the mine, it means your costs are going to be very low and your output is going to be very high. In the end, the NPV increases substantially because there is more revenue in the early years. It also makes your lenders very happy too when the payback of your project promises actually pay back and is less than 1/2 the time it will take payback the same amount of capital invested in Bisset Creek.  While Bisset Creek is mining 2.22% the first 5 years, Quatre Milles may see a head grade between 4% and 6%.  The difference in cash flows between 2% and 6% is huge, an $18M to $88M spread. 

So what do you want? 

Roughly $250M to $400M in cash flow for the first 5 years at Quatre Milles…

OR

Less than a $100M in cash flow from Bisset Creek

This is not rocket science people

NEAR SURFACE HIGH GRADE, YOU CAN’T ASK FOR ANYTHING MORE

If Quatre Milles went into production the same time as Bisset Creek producing 95%C large flake with prices at the current $1,500.  Who is laughing?  Lomiko mining Quatre Milles at grades between 4% to 10%; or Northern Graphite, who is squeaking by at just over a 2% grade over the first 5 years?

What would you rather have?  

1.     A 60Mt deposit at 2% and no high grade  OR

2.      A 50Mt deposit at 2.5% AND a 5Mt -10Mt zone grading 6% - 7%?

 It certainly gives the operator of the mine a lot more mining options at different graphite prices than Bisset Creek has.  Quatre Milles could survive a price drop to $1000 per tonne where Bisset Creek could not afford a price drop of that magnitude.  

Lomiko’s shallow high grade results include…

• 8.68m @ 6.18% starting at 4.5 meters
• 4.13m @ 7.28% starting at 9.25 meters
• 5.4m @ 4.53% starting at 5.0 meters
• 2.9m @ 9.87% starting at 2.0 meters
• 4.77m @ 10.8% starting at 1.35 meters
• 9.9m @ 8.81% starting at 11.95 meters
• 13.3m @ 5.15% starting at 6.9 meters

Lomiko’s shallow high grade results extend the shallow high grade zone originally discovered by Graphicor in 1990 in the Central Pit Zone to the SE by a 100 meter width and along a strike length of 500 meters.   Within the Central Pit Zone most of Graphicor’s results came from the NW section of the Central Pit Zone which remains untested by Lomiko.  

Graphicor’s near surface high grade results with the Central Pit Zone include…

•  28.6m @ 8.07% starting at 3.94 meters
• 3.44m @ 8.79% between 1.54 and 8.05 meters (two horizons)
• 2.09m @ 9.66% between 2.05 and 6.8 meters
• 4.7m @ 3.95% starting at 9.4 meters
• 7.75m @ 9.17% between 2.14 and 15.46 meters (5 horizons)
• 7.59m @ 8.6% starting at 0.94 meters
• 9.59m @ 4.64% starting at 0.69 meters
• 3.38m @ 9.76% starting at 2.21 meters

The average width of all the shallow results is 7.75 meters.  This number is skewed a bit as Graphicor’s results only picked the highest grade parts of the core.  I expect the zone to broader when Lomiko drills over that section albeit, the grade a bit lower.  Between the 2 drill programs, 70% of the drill holes hit near surface high grade graphitic zones.   It certainly gives credence to the target of at least 3Mt-5Mt high grading material between 6% and 8% that averages less than 5 meters from surface.  

A Wheel Barrow, a Bucket and a Shovel

All you need to mine high grade graphite at Quatre Milles is a wheel barrow, a bucket and a shovel.  As ridiculous as this may sound, it is true.  Average mineralization is 2.78 meter depth and there is extensive high grade at surface.  I cannot stress enough how valuable high grade right at surface is.  One of the biggest advantages about a mine at Quatre Milles is that fact that ore being run for through the mill for the first few years will average at least 4%.  A wheel barrow, a bucket and a shovel gets you mining graphite at Quatre Milles.  LMR is a $3M market cap company?  More like $30M in my books.  No matter where graphite prices run to over the next little while, there is such a pricing discrepancy between LMR and the rest of its peer group…there is no other EXTREME VALUE BUY ON THE MARKET.  Not mismatched in price like Lomiko is.

A series of holes approximately 100 meters wide and along a strike length of 500 meters consistently tested near surface high grade zones.  Only one hole out of the 12 did not hit a high grade zone, and that hole, QM-12-04 graded 2.17%Cg over 70.0 meters.  This zone is extensive.

There were tons of these mismatched priced value type of investment opportunities in the GOLD SECTOR LAST APRIL/MAY.  Calvista Gold who recently agreed to a takeover bid by AUX at $1.10 WAS TRADING UNDER $0.20…  THOSE TRADES ARE LONG GONE. EVEN THE CREAM OF THE CROP COPPER STOCKS HAVE BOUNCED OFF THE BOTTOM.  RIGHT NOW, THE EXTREME VALUE HIGH LEVERAGE OPPORTUNITY IS RIGHT HERE WITH LOMIKO. 

Wait…!!! That is not the end of the high grade

 There is a second high grade zone that you can infer similar tonnage and grade which averages a 40 meter depth.   The grade is not quite as high as the near surface zone but will still average close to 6% and make up another 3Mt to 6Mt zone over the entire property.   Let me put Quatre Milles in perspective, while Zenyatta is still digging through overburden at 40 meter depth, Lomiko is already into their second high grade zone.  Most of these intersections are closer to surface than Mason Graphite’s shallowest hole and Lac Gueret’s rich zones begin at over a 100 meter depth.

The deeper high grade intersections include …

• 19.52m @ 6.23% starting at 31.48 meters
• 6.53m @ 6.57% starting at 31.2 meters
• 2.6m @ 6.69% starting at 44.2 meters
• 6.0m @ 5.84% starting at 33.5 meters
• 11.9m @ 6.31% starting at 31.2 meters
• 3.35m @ 8.0% starting at 37.5 meters
• 5.3m @ 4.53% starting at 38.0 meters
• 7.54m @ 6.72% starting at 57.82 meters
• 5.46m @ 8.02% starting at 64.67 meters

THE CHEAPEST GRAPHITE STOCK WITH CONFIRMED MINING POTENTIAL

Graphite prices may be in the dumpster recently with prices for large flake falling off a cliff this fall having tanked in the last 6 weeks to $1,400 (94%) - $1,800 (97%) for large flake.  This after a dreadful summer sent graphite stocks into free fall with fears that prices are going back down to $1000 per tonne.  It has graphite investors running for the hills, but you know the saying… ‘when the blood is in the streets… that is when you want to be buying.’  Nothing about the graphite story has changed.  In fact it has gotten better.  Tesla’s Model S was recently named ‘Car of the Year’ and Tesla unveiled new super quick  charging technology that will make consumers feel they won’t be left out in the cold stranded for hours waiting for the cars to charge up. 

In addition, discoveries such as Mason Graphite’s 20% Lac Gueret, Standard Graphite’s Mousseau and Zenyatta’s Albany deposit have all put the pressure on the companies that lead the charge out of the gate like Northern Graphite and Focus Metals.   None of that should matter to Lomiko though, the company is so cheap and the phase one results so promising… RISK/REWARD heavily favors someone with money identifying Quatre Milles promise.  The game has changed so much for this $3M market cap company that there is no other company on the exchange that is as undervalued as Lomiko currently is. 

Certainly not in the graphite sector!!!

The game has changed.  No one has figured it out.  The potential of Lomiko has grown from maybe a $100M market cap mine into a half a billion market cap mine.  The discovery of wide zones of mineralization similar to Bisset Creek in addition to the near surface high grade has increased the potential of Quatre Milles by at least a factor of 5.

Given the scale and scope of this discovery at Quatre Milles, Lomiko should be named in the same breath as the companies like Northern Graphite, Focus Metals, Zenyatta, Energizer Resources, Flinders and Mason Graphite. The deposit and results should speak for themselves.  Lomiko has the grade for high returns in the early years plus they clearly have demonstrated significant tonnage with long intervals of disseminated graphite across the entire property. Best of all, there is no other project in Canada with results like Lomiko’s that start right at surface.  The Quatre Milles deposit is flat lying, at surface with a gentle dip which is the ideal situation for low cost mining just like Northern Graphite’s Bisset Creek.  

When you have an ore body that is amenable to low cost open pit mining with costs virtually guaranteed to come in under $20/t of ore mined, it makes you competitive against companies with deeper but higher grading ore bodies.  These companies will have mining costs 3 to 5 times that of Quatre Milles of even Northern Graphite.  A great example is how both low grade copper porphyries and high grade VMS projects are both sought out to mine.  VMS projects typically grade up to times that over their porphyry cousins but also have tougher metallurgy, are often underground mines and lack the tonnage to be a significant producer or have the longevity.   The same principles apply in the graphite sector.  Just because a deposit has grades 10 times that of the low grade disseminated deposits does not mean it will produce ten times the profits.  For example Mason’s exceptional intercept of 88.5m grading 21% graphite at Lac Gueret starts at a 144 meter downhole depth.  QM has the best of both worlds and something that none of these other guys have…

SHALLOW HIGH GRADE GRAPHITE

Typically these differences tend to even out and why Bisset Creek back in 1989 was up for consideration as a mine.  Certainly when comparing Bisset Creek studies to Lac Knife studies and their comparable cash flow statements and mine lives, the similar pre-tax NPV’s tend to back things up.   Although what you should note when comparing the two is that Bisset Creek is a real mining study with a mine plan while Focus Graphite released a PEA.  The difference in confidence is immense.  For example while Bisset Creek does not take into account any value added process or sales from upgrading to spherical graphite and only assumes a basic mining situation, the Focus Graphite PEA includes contracting out for spherical graphite as well as prices of $10,000 a tonne for their 99.95% spherical graphite.  A price in my opinion is ludicrous for the long term.  It may hit that price in times of very high demand, but for the industry to get batteries down to a manageable cost, especially vehicles $5,000-$6,000 seems like a much more suitable price for everyone involved.  

Certainly if Northern Graphite’s estimates of about $1,000 per tonne all in upgrading costs are accurate, $10,000 is way too high and everyone and their monkey would be trying to find battery grade graphite if you could upgrade it for only $1,000 per tonne.

What blows my mind is no one has caught on to the significance of Quatre Milles.  Not one.  Not when Lomiko stock is trading at $0.045.  Paul stepped up to the plate when many packed it in this summer and delivered a home run for shareholders.  When it comes to the actual deposit and how it rates versus company valuation, hands down if you want to make 200% to 1000% on your investment….

LOMIKO IS A TOP 10 PENNY STOCK CANDIDATE FOR 2013 ACROSS ALL SECTORS

So while LMR sits at $0.045 and a $3M market cap and their peers trade 10 to 20 times the value of Lomiko, it is like taking candy from a baby buying the stock at these prices. 

Quatre Milles, what more do you want? 

Near surface high grade zones

Tonnage to compete with the big boys like Bisset Creek and Kearney and Eagle

Tonnage for longevity and the grade for sustainability

LOMIKO IS A TENTH THE VALUE OF NORTHERN GRAPHITE…

… AND SITTING ON WHAT SOME MIGHT SAY IS A BETTER PROJECT. 

Metallurgy results are still forth coming, but deposits in the Grenville Province are known for high purity and large flake.  Bisset Creek and Quatre Milles are in the some group of rocks and are both disseminated graphite deposits.  I doubt there will be much difference between the two.  When I initially saw the first pictures of Quatre Milles samples, my first reaction was the samples looked almost identical to the Bisset Creek samples I handled at the Gold Show last January.  I am betting that initial met results will come in at greater than 90% just like Bisset Creek and Green Giant initial results did.  The market has missed the mark on Lomiko, at a current $3M value; the high leverage investment potential is second to none in the graphite peer group.   No other graphite company trading at the current price has the potential to give you 1000% like Lomiko. 

Paul Gill took a company from discovery to takeout once before, it looks like he just might do it again.  I am still here holding strong for the big ride.  Pennies can be like roll coasters and can sometimes make you sick to your stomach with the volatility, but if you buy at the right time (like now), the can make you oodles and oodles of fast cash AND BIG MONEY… WHEN YOU HIT THE GRAND SLAM.

Graphite companies with legitimate projects

Company	Ticker	Project	Scope/Scale	Best Intercept	Market Cap
Focus Metals	FMS-V	Lac Knife	8Mt – 10Mt @ 15%	-	$53M
Energizer Resources	EGZ-T	Green Giant	>100Mt @ ~6%	421.3m @ 6.12%	$47M
Flinders Resources	FDR-V	Kringel	10Mt @ ~8%	16.3m @ 12%	$44M
Mason Graphite	LLG-V	Lac Gueret	10Mt to 20Mt @ 20%	88.5m @ 21%	$36M
Northern Graphite	NGC-V	Bisset Creek	100Mt @ 1.5%	38.7m @ 2.49%	$33M
Zenyatta Ventures	ZEN-V	Asbury	40Mt @ 3%-5% to 200m depth	170m @ 6.6%	$27M
Graphite One	GPH-V	Graphite Creek	100Mt @ 4%-5%	173m @ 5.39%	$11M
Standard Graphite	SGH-V	Mousseau East	10Mt to 15Mt @ 8% - 10%	70m @ 2.17%	$5M
Lomiko Metals	LMR-V	Quatre Milles	50Mt to 100Mt @ 2% - 3%	93.8m @ 2.11%	$3M

 

Happy Trading J

Christopher Skidmore                                                                            Beat the Market Stock Picks 

Biggest Discovery in the Yukon Since UW's Golden Saddle

Biggest Discovery in the Yukon since Underworld Resources 1.4M oz Golden Saddle

Comstock Minerals CSL.V

Shares Out: 63.9M
Recent PP: 10.7M units
Warrants: 15.4M
Options: 2.43M
Fully Diluted: 92.43M

Before I say anything… I just want to go on the record that CSL is on to something EPIC.

AND what looks like to be the gold discovery of the year in the Yukon.  

I haven’t been this excited about the Yukon since Underworld Resources 1.5M oz Golden Saddle Deposit which was bought out by Kinross for $140M dollars in spring of 2010.  Ever since, the Yukon has given gold discovery after gold discovery to gold explorers and their investors who staked a claim in their companies.   So far there have been three major discoveries in the Yukon with ATAC’s Carlin Trend Style Discovery, Kaminak’s Coffee Project and the original Golden Saddle Discovery which lead to a massive staking rush in the Yukon.



CSL is looking to be sitting on the 4^th… although CSL’s QV project is thought to be the northern extension of Kinross’ Golden Saddle so it’s kinda like Golden Saddle, Part Deux.  If this discovery is anything like Golden Saddle, expect a quick buyout by Kinross as the synergies of two high grade pits would to make gold mining in the Yukon quite lucrative.

MASSIVE TRENCH HIT!!!  3.31 g/t Au over 95 meters!!!

CSL’s work program this summer has yielded a discovery that may be similar to Kinross’ Golden Saddle.  It is within a projected trend to the north of golden saddle and it covers a large area similar in size to Golden Saddle giving a very large exploration target, and potentially multimillion ounce gold deposit with grade.  Comstock Metals has already defined gold mineralization over a strike length of approximately 400 meters at surface.   With grades typically ranging between 1 g/t and 4 g/t Au over trenches widths between 45 and 95 meters wide… you know this is going to be quite a significant discovery even before this virgin property has been drilled.   If it is anything like Golden Saddle, we will get our 100 meter to 150 meters of continuous mineralization to depth.

In fact what looks like a 1.5km to 2km potential strike length of the deposit which could be in excess of 2 to 3 million ounces if continuous, the company has already shown the potential to define at least a half a million ounces within this small area trenched to a 100 meter depth.  That is of course dependent that the zone widths and grade remain consistent to depth.

Trench results…

• 3.31 g/t Au over 95 meters
• 2.18 g/t Au over 85 meters
• 3.77 g/t Au over 45 meters
• 1.63 g/t Au over 95 meters
• 1.07 g/t Au over 55 meters
• 0.81 g/t Au over 65 meters
• 0.31 g/t Au over 55 meters

This stock is set to EXPLODE; has just started its run to $1

CSL announced that they would be drilling the discovery this fall and it has lit a fire under the stock going from a $0.25 low last week to a $0.44 high today and as the word gets out... EXPECT THE SPECULATION ABOUT QV TO INCREASE.  The drill program won't be very large as winter will shut them down sometime in October, but we should get some juicy results over the winter to FEED THE SPECULATION FIRE next summer.



This is undeniably the one stock you do not want to miss out on. This is your lottery ticket to the help attain some of those dreams.  Not to often do you get stocks liek this just waiting to bust up.  Seriously... I am not joking. Exploration always has its risks... but this is a sure a thing as it gets.  Last company that had trenches on a high grade vein was NTR-v which went to $1 on speculation.  CSL results are much more indicative of what is underneath than anything Norhtern Tiger had.  At $0.40 I still think this company is cheap considering you can expect a simialr buyout to Golden Saddle, maybe even more.

There has not been a more successful initial trenching program in the Yukon.

Since yesterday is already over... the time to buy was is now.




Yukon  Gold Celebrities Shawn Ryan and Rob Mcloed Leading Exploration

What is even more important here is that you pretty much have the original Golden Saddle crew at it again on the QV Project.  I usually don’t trumpet mgmt because gold exploration is the one industry that has a huge element of luck involved to it.  Routinely the sector makes asses out of the best and all stars out of the worst that the industry has to offer.  In the case of CSL it is worth mentioning that re-known White Gold prospector Shawn Ryan is on the technical advisory team and designed the exploration program this summer and the subsequent drill program about to confirm this intriguing discovery that many believe is the extension of the Golden Saddle Deposit.

After the team made the discovery this summer, CSL advisory board grew even more attracting ex VP of exploration from Underworld Resources, Rob Mcloed.  Rob has responsible for the on the ground discovery and subsequent of Golden Saddle.  His expertise on Golden Saddle is invaluable, especially if these deposits are similar, having the experience and expertise of someone who not only worked first hand on the golden Saddle, but designed the entire program is second to none as an intangible asset.

What speaks even more to the quality of this discovery is that this summer’s trench results have attracted the best in the business when it comes to creating value and finding gold in the Yukon.   In fact, even the kingpin of the precious metals investing sector himself wanted a share and was willing to pay a premium at $0.25 just a few weeks after a $0.15 PP closed.

Who am I talking about? 

Well Eric Sprott of course.  CSL did the good thing for all shareholders and cancelled the PP on Sprott not wanting to give away this discovery to someone who already has everything.  Especially after the second set of results came in.  Sprott already has too much anyway… let another guy have some fun and let Sportt but the market.  We need guys like him to move the SP.  If everyone guys the PP then who is going to buy the market in the absence of retail?

 I can’t say too many bad things about Sprott since he pumped GLN-T to the moon and made my family much wealthier after mismanging Speedy Autoglass into the ground.  In a roundabout way… have him to thank for the place I live and the life I enjoy.

I have been harping to Premium subscribers about CSL for the last 3 weeks first at $0.17.  I don’t usually give out premium stocks… but when you are on to something this good.

You just can’t keep it a secret.

Draghi's OMT Plan Paves Way For Euro Bonds

Draghi’s Outright Monetary Transactions Pave the Way for Euro Bonds

After further analysis of Draghi’s speech outling Outright Monetary Transactions (OMT's) and the new word of the day, sterilisation… it is clear to me the statements made by Draghi directly pave the way for Euro Bonds. 

Key ideas like defending the Euro at all costs, incomplete fiscal policies and working towards solidarity and European institution building is laying the ground work for Euro Bonds and a much more consolidated Europe where individual governments are losing complete fiscal authority.

What is good for financial markets is a step towards a fascist regime in Europe where votes for local governments become a vote to represent you to a higher non democratic authority created and run by the Germans and a small select group of pro-European people.  Who is really in charge?  Most likely a small group of European elite who appoint the players at the ECB and other Euro institutions… the people you see in the headlines and even the actual votes on the ECB… just the foot soldiers.  

Do you see how financial Blitzkreig is working in the 21^st century? Currently if you want a vote in Europe you need to be a citizen of Germany or one of her war hounds, Italy or France.  The Axis of Evil has emerged and won again, Germany, Italy and France dominating Europe once again.  This is the emergence of a new era, a European Era for sure… but in reality… just another German Era… and this time Germany didn’t fire up one tank.  Wow.

So why do I see Euro Bonds on the horizon without any such wording?  Well it is a common sense prediction in reality.  Like saying you are going to butter your toast or put milk on your cereal.  But more than that the big word of the day… STERILISATION finally hit home in my head.  When it is a one word ambiguous line put in a statement regarding OMT’s it sounds pretty ridiculous that the word sterilisation is used and not explained.  But it makes perfect sense.  Sterilisation is what you do to instruments before use them in surgery.  So in fact, sterilisation meant for most that these bonds wouldn’t be covered by direct increasing M3 rates/monetization; which in fact they won’t be… but that is not to say that down the road these assets won’t be covered.  In practice you sterilise and then cut.. or in financial terms, convert. To what you may ask...?  No one has answered this question but I am sure that these will be the first bonds converted to Euro Bonds.

And of course the ECB will have a mandate to print Euro’s against Euro Bonds.  But that is an FX related card that the Germas don't want to play yet.

QE3 announced this Thursday?  I don’t think so

If you are short the American markets for a 3 to 6 week downside move… I think you are right b/c I doubt you see Ben Bernanke announce QE3 this Thursday or even outline a timeline.  Although if you are short... you are probably early... wait until tommorrow to short.  Although my short agreement is only for a trade.  I a m generally very bullish equtiies since my theory about 'All roads leading to monetaization' seems to be holding true.

Ben’s waiting for the Chinese and a $130B spending plan on infrastructure is great… but not the program that I would expect out the Chinese.  I am expecting anywhere from a $500B to $1 trillion dollar program although the wording out of the Chinese today does not hint at anything major yet... especially when the Chinese are indicating that everything is as expected.  At the very least you won’t see and move until the new regime comes in and that is still not for another 6 weeks or so.  I have said it before and I will say it again, I doubt ay QE stimulus initiatives from anyone until the New Year so I think the markets are leading themselves up to a big disappointment this week.

A big thing why they don’t announce Euro bonds or direct monetization is it gives the Germans an FX card to play at a later date to depress the Euro after jubilation has spiked the Euro up.  Also when we are on the eve of major stimulus plans by the American’s and the Chinese… it is wise to let the other guy blink first and design something to react, especially when the Germans seem to be very dependent on a cheap Euro.  At this point in time it is who is going to blink first because the guy the goes first most likely has the least effect on downside in currency and from my vantage point that is obviously the Chinese.  The Chinese want a low currency, but on the other hand creating policies towards stronger dollar helps the Chinese internal economy which will eventually create much more wealth for Chinese than cheap manufacturer exports.



Analysis on part of Draghi’s Speech regarding Outright Monetary Transactions…

"A renewed intensification of financial market tensions would have the potential to affect the balance of risks for both growth and inflation. "

"It is against this background that the Governing Council today decided on the modalities for undertaking Outright Monetary Transactions (OMTs) in secondary markets for sovereign bonds in the euro area."

"As we said a month ago, we need to be in the position to safeguard the monetary policy transmission mechanism in all countries of the euro area."

This statement is vital to the rest of the case because it is realisation that the Euro creates huge discrepancies between Euro Zone countries. 

"We aim to preserve the singleness of our monetary policy and to ensure the proper transmission of our policy stance to the real economy throughout the area.
OMTs will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro."

I kinda agree… fears are unfounded about the Euro unless policy makers can agree and it is clear everyone is looking to Germany and German style policies to bail them out. No one wants to leave when Germany says “Hey, I will be your SUGGA DADDY.”  For some of these countries, it will be doing a deal with the devil.  Like Spain where ideologies are completely different.  Ouch.

"Hence, under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area."

Anyone short the Euro after this statement is crazy.

Let me repeat what I said last month: we act strictly within our mandate to maintain price stability over the medium term; we act independently in determining monetary policy; and the euro is irreversible.

Again let’s hammer it home.

In order to restore confidence, policy-makers in the euro area need to push ahead with great determination with fiscal consolidation, structural reforms to enhance competitiveness and European institution-building.

This is another key statement as it is ultimately saying how they are going to get it done.  Guess what guys?!?!?! You are losing your fiscal autonomy. Someone else now creates the rules for you.  But on the positive side… we are buying all your crap for you. 

"At the same time, governments must stand ready to activate the EFSF/ESM in the bond market when exceptional financial market circumstances and risks to financial stability exist – with strict and effective conditionality in line with the established guidelines."

But now no more crap b/c someone else makes the rules and you have to obey.

"The adherence of governments to their commitments and the fulfilment by the EFSF/ESM of their role are necessary conditions for our outright transactions to be conducted and to be effective. "

"Again adherence of governments says it all. Govt’s have lost their autonomy to a central power.  The ECB.  Controlled by guess who? No not the Guess Who, The axis of Evil.  Made up pretty much by Germans, Italians and French, although the French are in the doghouse since that brain dead socialist Hollande gained power.  "

$TSE... Technical Break Out

Toronto Stock Exchange – Technical Break Out

Last Thursday we got our answer that risk on is back on, at least temporarily.  All indications are that risk assets are going to start to move up after an extremely sharp consolidation this spring.  It has been a very long 18 months since the TSX topped out with Fukushima and we are still in a bear market on the TSX, but at least timing, valuation, and technical setup are coming together to show a rally in some extremely oversold stocks which represent some of the best deals since 2008/2009 in the materials sector.  It feels like we are somewhere in the middle of a similar type consolidation without the drastic move to the downside that followed the summer of 2008.  Although in 2008, also an election year the rally failed in September and the market headed towards an ultimate bottom in 2009.



One very BIG difference between this year and last is sentiment.  Despite all of the bearish economic commentary, the absence of Chicken Little himself from the crowd shows that there is much less risk to the downside than in 2008.

Even though there was very little volume associated with this breakout, I am a believer in price action much more than volume and after a very sharp correction for many Canadian listed companies in May and June, all signs are pointing to a late summer / early fall rally for the oversold Toronto and Venture Stock Exchanges.  I would be less enthusiastic about American stocks considering you are dependent on momentum to make money whereas a TSX company represents good value and much less ‘risk’ considering many companies are still trading close to their 52 week lows while many US stocks are trading at their 52 week highs.

TSX Lags… but shows the best value

The last 10 weeks the TSX has been in a bottoming process.  Any attempt at a rally was snuffed out at clear resistance around the 11,900 and could not break out.  In spite all this gloom and doom the $SPX is near record highs and does not look to be slowing down.    So with all this gloom and doom sentiment, why are American markets breaking out and why is the TSX lagging?  2 years ago the TSX had a 1,000 point premium to the DOW.  That premium has turned into a 1,000 point deficit as the Canadian markets lag.  As far as I am concerned… record low prices, means record low gains.

3 factors have come together to make the TSX a bargain making it is debatable if stocks will get much cheaper.    Certainly if you have a medium term outlook, the world should return to growth by the second half of 2013; especially if the stimulus that is planned around the globe is implemented.

1) American economy shows its resilience.  Over the last 2 years the American markets have performed much stronger than many expected.  American economy is characterized by low unemployment when considering most other countries.  Yes people 8% unemployment is low and there is not much difference between 7% and 8%.  If the US thinks 8% is high, they should really try Spanish unemployment rates. The housing market has bottomed and is another area that could help propel the consumer/retail economy with increasing equity in many consumer household balances.  

2) Chinese economy slowing faster than expected.   The world’s great new economic engine is not as strong as everyone thought.  Chinese growth is slowing faster than expected as their internal economy has not developed enough that it can assume the slack in European trade. If China is slowing, don’t expect that premium to comeback until global and developing market growth comes back. Chinese is really the engine that drives the Canadian stock market.  Don’t be illusioned by anything else.  Yes the USA drives the Canadian economy, but when it comes to the capital markets, the engine that drives the TSX and TSXV is clearly the Big Red Machine.  Contagion from deleveraging and the Euro debt crisis has hit China very hard.  So while the Canadian economy putts along at a decent pace because US growth has not slowed, Chinese slowing growth is clearly seen in our struggling capital markets.

3) The European Debt Crisis.  Every time this slow moving train wreck looks like it is about to derail risk appetite completely disappears and everyone buys US treasuries.  In reality nothing can be more risky than buying government debt and buying a stock that owns a large gold deposit is not at all risky.  Why would you say?  Those ounces in the ground have value.  The gold won’t ever disappear and eventually if the world wants to continue to mine gold; that deposit will be on the production list eventually.  The government can do whatever they want and nothing will ever change the gold in the ground.  On the other hand, all it takes is one swipe of the pen to take away your entire government debt investment portfolio away.  Obviously these are two extreme viewpoints but hopefully it highlight’s the worlds skewed view of risk.  One day this cycle won’t happen like this and investors will flee to other assets if US debt gets out of control, but until then; it is the status quo.  Any time risk enters the horizon, the companies that get hit the most are the companies that I write about.   So ya it sucks and the last 18 months the companies that have performed well have been few and far between.  The good thing is that when times get good again.  There is no category that performs better.  This won’t always be the case as the commodities cycle will eventually run its course eventually, but until 2030 or so when the Chinese economy overtakes the USA economy as the largest economy in the world… there is still a lot of growth left in China with at least one more leg up to go.   

TSX technical buy… Global stimulus on the horizon

With a clear break in downtrend including a break through resistance at 12,000 and the 200MA it looks like a very solid buy signal for materials.  At least for a late summer early fall run.  If you take into account the US elections you should see a selloff in US stocks before the fall and then an end of year rally well into 2013.  That is my prediction anyway.  If stimulus goes ahead… 2013 will be a banner year.  The catalyst that seems to be technically moving the TSX into a rally mode seems to be strong sentiment that the entire globe is ready to monetize and stimulate and avoid a 2008/2009 type stock market crash again.  If we are about to enter another round of global stimulus then you could see some sector rotation into materials / hard asset type stocks.  At current prices, value screams at you to buy.  Seasonality is screaming hey fool… BUY.  Even the bears have one toe in this market.

Global stimulus plans includes the Chinese, the Brazilians, the Americans and the even the Europeans err I mean the Germans.  The rumors are that even though the Germans will be dragged into the pot of stimulus kicking and screaming in protest, but yes they will eventually buy Spanish bonds.  It certainly won’t spur European growth, but at least we may be able to avoid the headlines from Europe and stem the dramatic drop in trade between China and Europe.   As predicted, the Germans save the day… but wouldn’t you when you can borrow at 0% and then slap that money down and make 6% on the spread?

I know I would.

Stimulus in 2013...   It is going to happen soon and 2013 is only a mere 4 months away!!! 

• The USA needs to stimulate real estate to firm up the bottom
• The Brazilians have 4 years of spending ahead for the World Cup and the Olympics
• The Chinese need to dramatically increase the internal monetary supply in their economy
• The Europeans… well you know, they have to save Europe… and their 3 month vacations too!!!

The global economy is on the verge of another round of stimulus which will be implemented sometime over the next 6 to 12 months.  It seems that Jackson Hole this year might be a much bigger event than last year which was a non-event with traders running the market on false rumors about QE3.  This year the market, especially gold is much more wary about Jackson Hole, but this year of all years you might see some major policy decisions at least debated earnestly and outlined casually.  Many people are not expecting much, but if we get the right policies discussed and some mutual agreement among Central bankers, then Jackson could be a major catalyst to the markets.  Note I say ‘could be’, but without some sort of solution in Europe, it is clear the China will continue to slow and we will continue to slide into a global recession.

Thoughts on Gold

I really believe that gold is on the verge of a $100 rally, but this time no one wants to commit until after Jackson Hole.  At current prices gold is really easy to trade; $1620 was denoting a very bullish signal to at least make a $20 move to $1640.  At time of publishing this move in gold happened this morning so now $1640 is the major mark to watch for momo and continuation.  $1640 is ultimate resistance for a momentum move to $1700 or so.  If you get a daily close above $1640 you can enter this market hand over fist for a very good move.  If $1640 fails, depending on the macro/news factors not supporting the run gold could be a short term short or another buy at lower levels.  The sentiment again is that the globe is getting nearer to a stimulus event and even if short term headlines push gold lower there is underlying sentiment that will keep a floor under gold and move it up as we get ever so closer to a global stimulus event.

Unless Harry Dent’s world becomes a reality over the next 6 to 9 months; I am a believer that the gold price has bottomed.

For most gold stocks they will continue to shine… they bottomed in June and it looks like continuation in this sector.  Some companies companies like Calvista CVZ-TO have already doubled and a better relative buy is a company like Tembo Gold  TEM-V which has just started to move off its bottom at $0.50.  With a $2 plus high in the spring; TEM will have a much easier time breaking the $1 barrier and turning it into support.  TEM in my opinion looks like a much better buy if you are looking at early international exploration with the right address.  Considering there was a lot of hype about Tembo’s Gold Project in Tanzania and the share price was trading above $2 in the spring, TEM-V represents a well-financed oversold dog that still has a long way to run to get back to relative value.  They news flow out of Tembo has also been very encouraging this spring / summer with consistent hits like I predicted when I initially wrote them up, but nothing that traders will speculate and drive a stock up 10 fold for.

Barkerville Issues Amateur NI43-101 Resource Report

Last Monday evening right in the final hour Barkerville released the 43-101 resource report supporting their announcement on June 28^th.   In my wildest imagination, never would have thought anyone could release such a crappy report even to my amateur eye.  Normally a resource calculation is supported by pages and pages of statistical charts plotting samples.  If you want to see a very detailed and well thought out report I encourage you to take a look at Guyana Goldfields 43-101 and feasibility study released on April 9^th.  There is no comparison and when going from one to the other you can tell that the one report by P George had about 10 hours of thought put into it.

All the data that was not in BGM’s report was needed because it supports several critical assumptions an estimator has to make regarding the estimate.  If these assumptions are off dealing with cut-off, high grade intervals, waste rock, strip ratio, costs and so on... then the estimate can be so far off it cannot be trusted.  The best example is the Barkerville report itself.  By changing the variables slightly, the resource drops from the original indicated amount of 10.6M ounces at >5g/t au to 4.25M ounces at 2.33 g/t au.  Hello?!?!?!

  If that indicated number stand, it is still $120 per tonne rock on average, but a far cry from the $250/tonne rock that Barkerville was proclaiming and extremely hard to come up with any type of mine plan with that type of variability.  The conclusion that I made is that you cannot trust any of George’s assumptions.  I really hope Barkerville sues P George’s ass off because it is obvious from the absolute incompetent report laid out to the public last week that P. George has rammed straight up Barkerville’s you know what and giving it to Frank C hard.  What is unfortunate is that someone at BGM should have checked George’s work before making the statement they did that fateful June 28^th. 

MY BIG QUESTION IS WHY THE HELL TO YOU JUMP UP AND DOWN SHOUTING OUT NUMBERS OFF AN INCOMPLETE REPORT?  Would you not have the report in hand before making such statements?  I don’t get this part.  I don’t see an orebody modeled, no dip, no strike, no 3D program plotting values.  Seriously… this is no joke… give me AMINE and I would have put together a more credible report than P. George.  I am not kidding.

Here are some of the issues I have with the report.  I am not a techie so I can’t argue things from a geological or reporting perspective, but what I can do is point out a cause and effect relationship of the things that P George did and how it would affect the resource calculation.

1) There was only one extremely simple table trying to define economic grade vs. POG that has nothing to do with any specific mine and is a crude estimation.   It made no sense.  To define an economic grade you need to look at the micro.  The individual deposits and calculation of costs for mining and processing etc. before you can establish a cut-off grade.  None of this was done.  At best, the 43-101 was incomplete and that is being very generous to Peter George. 

2) Not capping argument has no merit especially considering he had no data supporting his argument other than a one paragraph and one chart that did not even plot in a straight line like P George argued.  Data that supports the need for capping is the simple argument that the inferred grade on the high grade bench 3950 is almost double that of the indicated at over 1 oz per ton vs just over half an ounce per tonne indicated.  Simple stats like that show that with more drilling the grade comes down because of the nugget effect.  Even the capped grade for inferred is 8.43 g/t vs. 6.13 g/t.  I don’t care what P. George argues; just how the estimates reads off his own report, it is clear to me that there is significant nugget effect in the deposit.

3) No cut-off grade applied.  If you applied a cut-off and took out all the 0 grade samples which is almost half the samples, the grade would increase significantly and the tonnage would decrease.  What I find very peculiar is that what he did would skew the stats to make an open pit look much more favorable than it would be normally significantly decreasing the waste rock and strip ratios of the individual benches.   If calculated right you would find that a 300 meter open pit is not feasible on Cow Mountain.   The author’s argument is based on the fact that you have to move the same volume of rock in an open pit regardless if there is a cut-off.  Wrong.  Yes you have to move the same volume of rock for sure, but the estimate needs to deal with how much ore is economic among all that rock.  Sure you are going to have two piles of rock, waste and ore that goes to the mill that will add up to what is mined.  But determining what is economic and what will go to waste will greatly increase or decrease the economics of the project.   Seriously… without knowing how much rock I have to put through the mill and at what grade and how much rock goes to waste, I cannot produce a cash flow statement.  These are simple basics that one cannot ignore.  I may not know much about geologic reporting or stats or really anything to do with reporting a gold resource.  What I do know is that I don’t have enough information to produce a cash flow statement.  Considering that half the samples had a zero value, things like a higher gold price would have no effect on the including more tonnage by lowering the cut-off so what it does do is make an open pit look more ideal than usually it is because P George is directly manipulating one the biggest factors in cost of mining.  The strip ratio.  Did I mention after all that manipulation of the strip ratios, P George did not provide even 1 strip ratio?

4) I understand what George is trying to convey in his geological potential argument.  Certainly the best historic mine was operated on Island Mountain for nearly 40 years.  Hello?  The gold is there and it is pretty easy to see that there is a system extending onto all three mountains.  What is not clear is if it is continuous and unless you at least put in a few widely spaced shallow holes along the trend to confirm that there is indeed mineralization similar to Cow Mountain.  It is a bunch a crap.  Island Mountain finished up in 1967 after 34 years in operation mining over half an ounce of gold.  If the Island Mountain was at all continuous at that grade do you not think that mine would still be going today?  You are talking about half an ounce a tonne which is on par with some of the highest grading mines in Canada like Rubicon’s Phoenix and Pretvim’s Valley of the Kings.

So let’s make sense of what BGM does have with the information that we do have, even though it is incomplete at best.  Since the company wants to promote the merits of an open pit, fine, let’s evaluate it as an open pit.  First things first, I do not even consider Cow Mountain as a 300 meter open pit.  No one is fooling me there.  If a 300 meter pit is feasible after a re-calculation, I say prove it.  So we will evaluate the project at 91 meters, 182 meters and finally to include the 213 meter depth bench.  After bench 3950 which is 213 meter total depth the grade drops significantly and the merits of an underground operation might be considered at that point.

Bench	Capped Indicated	Grade g/t	Capped Inferred	Global Resource	Pit Depth
4550	113,400		31,500
4450	352,600		107,900
4350	730,900		126,900
Subtotal	1,196,900	1.77 g/t au	266,300	1,463,200	91 meters
4250	530,900		250,900
4150	452,100		347,200
4050	693,900		293,600
Subtotal	2,870,000	2.46 g/t au	1,158,000	4,031,300	182 meters
3950	894,900		837,000
Total	3,768,200	3.33 g/t au	1,995,000	5,763,200	213 meters

213 Meter Open Pit… Much More Believable

As you can see even when you cut 400 feet off the open pit and use the capped numbers, there is still a very large potential resource at Cow Mountain in almost 6M ounces.  It is a number that in my opinion is much more realistic than P George’s 300 meter pit.  Especially after 3950 the grade drops dramatically making a 213 meter open pit ideal from the information that is provided.  Certainly a 90 meter pit is feasible.  If you dig another 90 meters you scope in another 2.5M ounces at ~3 g/t which is double the grade of the first 90 meters.  You then have a final 30 meters grading >6 g/t to a 213 total pit depth at an average grade of 3.33 g/t over those 213 meters.  These are much more believable numbers but still only manipulating what P. George has provided.  Which I might add you can put zero confidence in.  A 200 meter pit is feasible as long as the strip ratio is not much more than 10:1.  You might be able to get away with a higher strip ratio because of the grade, but after 10:1… that is an awful lot of rock to move and underground mining might be more appropriate.   In SRK’ evaluation of Guyana Goldfield’s Aurora; a 20:1 strip was used as a cut-off and the overall strip of the open pit was 9:1.  In Barkerville’s Cow Mountain, after 200 meters the grade diminishes and deepening a pit beyond that would be highly unlikely from the numbers presented in the 43-101.

Barkerville Cow Mountain similar to Guyana’s Aurora

The best comparable that I have in my spreadsheet is another undervalued company.  Guyana Goldfields GUY-T which has 8.3M oz’s of gold at around 3.3 g/t au in a combined open pit underground mining situation.    The grade and size of the resource is similar and both potential mines will have similar open pit/underground mining evaluations.   Other than that the similarities end with Barkerville’s resource being defined much more along strike and not to depth like Guyana’s Aurora Project.  With more potential to scope in more open pit ounces and still un-explored depth potential.  It could also provide a better mining scenario than Guyana’s Aurora.  At any rate, technical reports and feasibility studies will tell you that, unfortunately for Barkerville, after how many long years, we are still in the dark.  Sort of.

I have full confidence that Barkerville has the goods, but there is really no idea to know how much gold Barkerville has and any report with P. George name on it will not be accepted by anyone in the public as credible.  BGM I have full confidence will be bought out for much higher price than it got suspended last week b/c the gold is there.  Undoubtedly the drill results do not lie.  But in my opinion that 12M ounce number is more likely half and the open pit depth is beyond what I could ever imagine at Cow Mountain.  There are certainly smarter men out there than me when it comes to analyzing Barkerville’s amateur resource report… but I am confident that they will be mining there for quite some time.   Eventually.

Another thing I am also confident on is that if Frank continues to run the show, Barkerville is going to continue to spin its wheeIs.   A competent CEO would have evaluated the open pit potential of a 7km to 10km gold trend in an area that is extremely accessible in 18 to 24 months… not 20 years!!!  I would have 6 RC rigs set up and have the top 200 meters on all three systems drilled out in 18 months.   There you go, another 12 to 18 months for a production decision and if a no go we use the rigs and start a drilling company or at least muscle in on another deal with our rigs.   Seriously.  It’s not that hard a job. How Frank has managed to turn this into a 20 year affair…?  That is only a question a stock promoter can answer.

I am still long Barkerville Gold Mines in spite of the Larry, Moe and Curly show. 

Who ever said gold investing was dull?

Bad Gold Company in the News

Canamex CSQ-V released assay results from follow up holes and they failed to duplicate results released in mid-July.  One thing that holds true is that assays when delayed, results are usually poor.  My last letter I backtracked a bit on CSQ specifically because the company stated in the initial press release that assays would be released approximately a week per hole.   That made me nervous when results did not come out in the following two weeks.  Considering that we are 5 weeks away and we got 5 holes it is pretty much spot on for timing and this company is typical of psychology that makes the saying that late news is always bad news very true.  If the next assay is not great, the company will sit hoping that the next hole is good.  If that one isn’t good then the company will continue to sit.  In CSQ’s case, none of the following 5 holes were that good at all.  Here is another red flag.  In the original press release the company stated that the 6 holes were drilled 100 feet apart designed to test the heart of the mineralization.  In the news release updating the holes the company does a complete 180 by stating that the following 5 holes were drilled in another target and only kissed the zone and the holes were drilled before the results of hole one came back.  Sure.  You can kiss this one goodbye.  Speculating in gold stocks is hard enough without companies contradicting themselves in public within a month.  

http://www.marketwire.com/press-release/canamex-updates-bruner-gold-project-nye-county-nevada-tsx-venture-csq-1691193.htm

Nowhere like Columbia for high grade exploration… Except the Yukon

I am tired of talking about California and Vetas and pretty much everything else in Columbia.  Earlier this year an outspoken priest in the Marmato region where Gran Columbia’s mine is planned was murdered.   Even if the company denies any wrong doing in the incident, it is something that has really put a stain on the company for me.  Bad Karma. Columbia is great and a exploration spec portfolio would include both GWY and CVZ and could be anchored with CNL and GCM at current prices.
I think it’s time the Yukon came back to life and with CSL and GSR leading the way with high grade discoveries this year… the Yukon hasn’t been this primed for a run since the original UW-V discovery at Golden Saddle.

GoldStrike Resources assays 12.4 g/t au over 2.4 meters in trench at plateau

It seems like we have been waiting on GSR news forever, but it is the Yukon and everything happens up there in slow motion.  That is the one problem with the Yukon.  If miners are ever going to get serious about the Yukon, someone better figure out how to work in the winter.  That being said, because of the remoteness of the place, it is one of the last underexplored regions in the world.  GSR in my opinion is the cream of the crop in exploration.  CSL is great and they have what looks like a shared deposit with Kinross similar to ECC/KAM, but GSR is the cream of the crop, and nothing will put cream in my pants more than a Carlin Trend type discovery similar to Atac’s Rackla Trend.  What the team is doing at Plateau has got me very excited for end of summer exploration results.  Especially after assaying 12.4 g/t over 2.4 meters in a trench.   So far they have uncovered a 12km long Gold Rush Zone on the Northern Part of the Property while a 25km trend has been staked called the Yellow Giant Trend that has had rock samples as high as 4.65 oz’s per tonne.   Expect some initial diamond drilling results sometime this summer which could kick off a discovery at Goldstrike’s flagship Plateau Property.

http://www.marketwire.com/press-release/goldstrike-cuts-1425-gpt-gold-over-24-metres-with-visible-gold-drilling-under-way-tsx-venture-gsr-1692254.htm

Underworld VP of exploration Rob Mcleod Joins Comstock’s Advisory Board

All you gotta do is follow your nose to sniff out the good ones.  When the original guy from the Golden Saddle discovery wants in on a potential discovery like Comstock’s QV Property which is the better half of a former UW property to begin with... then you know they could be on to something very good.  With one of the very best trenches in the Yukon discovered to date… you have to speculate with the very best.  Just follow the people who did it before.  Certainly this news confirms that CSL is on to a legitimate gold discovery.

http://www.marketwire.com/press-release/comstock-metals-acquire-controlling-interest-walhalla-property-white-gold-district-yukon-tsx-venture-csl-1688173.htm

Northern Tiger Channel Samples 132.91 g/t over 6.9 meters

If you still got more of another hankering for Gold in the Yukon this summer...  Northern Tiger seems to be back in play again with another high grade vein discovery with a highlight 132 grams per tonne over 6.9 meters along a 25 meter exposed vein.   The problem that ended Northern Tiger’s party last time is that none of the veins tested to date extend to depth.   Will it be any different this time?  It’s one to watch as a sleeper.

BRIXTON BRIXTON BRIXTON!!!

The company completes follow up drill program to the massive intercepts announced last winter.  The trade couldn’t be better to buy into before a potential major news headline this September.  Do not forget about BBB the company drilled fan around the discovery hole which should mean that company should hit some decent intervals and grades.   Keep your fingers crossed.

Selected Canadian High Grade Gold Deposits

Company	Project	Location	M & I	Grade	Inferred	Grade	Total	Market Cap
Pretvim Resources PVG-T	Valley of the Kings	Stewart, BC	4,900,000	17.3 g/t	10,400,000	25.5 g/t	15,300,000	$1.4B
Barkerville Gold Mines BGM-V	Cow Mountain	Wells, BC	4,251,000	2.33 g/t	3,205,200	3.33 g/t	7,456,200	$132M
Sabina Gold & Silver SBB-T	Black River	Nunavut	4,155,000	5.56 g/t	1,683,000	5.61 g/t	5,838,000	$464M
Premier Gold Mines PG-T	Hardrock	Ontario	2,491,000	3.73 g/t	1,122,700	5.13 g/t	3,614,500	$610M
Rubicon Minerals RMX-T	Phoenix	Red Lake, Ontario	477,000	14.5 g/t	2,317,000	17.0 g/t	2,794,000	$897M
Mega Precious Metals MGP-V	Monument Bay	Manitoba	1,046,010	2.5 g/t	1,726,674	3.78 g/t	2,772,684	$38M
Eastmain Resources ER-T	Clearwater	Quebec	632,000	5.86 g/t	1,037,000	6.06 g/t	1,669,000	$87M
North Country Gold NCG-V	Three Bluffs	Nunavut	678,000	4.9 g/t	829,000	5.69 g/t	1,507,000	$28M
Eagle Hill Exploration Corp EAG-V	Windfall Lake	Quebec	538,000	10.1	822,000	8.76 g/t	1,360,000	$25M
Maudore Minerals MAO-V	Comtois	Quebec	-	-	1,200,000	4.6 g/t	1,200,000	$71M

Christopher Skidmore

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