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Fire River Gold (TSX-V: FAU; Pink Sheets: FVGCF)
Results of Preliminary Economic Assessment for Leaching Historic Tailings at Nixon Fork Gold Mine, Alaska
- September 29, 2010

A $7.7 million net present value at$1,200 gold isn’t going to win you many friends when your marketcapitalization is over $30 million. To be fair, the leaching of historictailings is not the main attraction of the Nixon Fork Gold Mine. As wehave noted in the growing Company Indexarea of our website, the company expects to define a 150,000+ ouncehigh grade underground resource in 2010 to be followed by apreliminary economic assessment. This would be incremental to theleaching of tailings, and would hopefully have a much more substantialnet present value attached. [Zurbo]

St. Eugene Mining (TSX-V: SEM)
Announces Private Placement Offering at C
.12 Per Unit for Gross Proceeds of up to $750,000
- September 29, 2010

This explains why the price rose as muchas 50% the past few days. It is good news that St. Eugene is attemptingto raise some money at C
.12 rather than C
.08, but this is still onlyin the offering stage and would only represent a small slice of theestimated $6 million to bring the small Tartan Lake mine back intoproduction. More information on the company is available at our Company Index page. [Zurbo]

Goldgroup Mining (TSX: GGA; Pink Sheets: GGAZF)
New 18,500 Metre Drilling Program Begins at San José de Gracia
- September 29, 2010

Combined with the recently announced 30,000m drilling and exploration programat its Caballo Blanco project, Goldgroup is heading well the words ofBrad Neely’s comic creation named Baby Cakes, “Be aggressive, b…e…aggressive”. The company is on our radar screen as a well financedjunior gold producer with the right attitude and a will to get thingsdone. [Zurbo]

Capstone Mining (TSX: CS; Pink Sheets: CSFFF)
Reports Exceptionally High grade Copper-Zinc Intercepts from Kutcho Project - September 27, 2010

Without question, the highlight of thisrelease was hold KC10-184, grading 10.3% copper, 19.8% zinc, 2.9 g/tgold, and 666 g/t silver over 11.2 meters. Results from the remaining 17 holeswere reported on September 28, 2010. Although nothing nearly as eyepopping as hole KC10-184, several greater than 10m intercepts of 3-5%copper were reported.

Kutcho is a known high grade copperdeposit, so besides hole KC10-184 and some other highlights from recentdrilling to better define inferred resources, the results aren’tcompletely unexpected. According to our comparative valuation model,Capstone is significantly undervalued but nevertheless not to the sameextent as plenty of other copper producers and developers–see lastweek’s Mining News Reviewwhere we profiled Taseko Mines (TGB) for more details. But if thecompany can successfully upgrade Kutcho’s inferred resources into themine plan and potentially at higher-than-expected grades, Capstone couldeventually move to the front of the pack. [Zurbo]

Baja Mining (TSX: BAJ; Pink Sheets: BAJFF)
Signs $858 Million of Financing Facilities for the Development of Boleo Project
- September 29, 2010

This time it wasn’t just talk. Bajaappears to have finally mustered up the financial means to advance itsBoleo project towards eventual production. But be careful. Beyond theproject’s metallurgical complexities that can only be ultimatelyresolved during production, the project debt will require a significantamount of hedging and is an awfully heavy burden for a sub-$200 millioncompany if things don’t go as smoothly as planned.

Boleo is expected to produce significantamounts of copper, cobalt and lead, with the potential to recovermanganese currently being evaluated. It will be an interesting one towatch as the project is advanced, but we’re comfortable on the sidelinesfor now. [Zurbo]

Quest Rare Minerals (TSX-V: QRM; Pink Sheets: QSURD)
Preliminary Economic Assessment (PEA) of the Strange Lake B-Zone Rare Earth Element Project
- September 27, 2010

In this press release we’re informed thatStrange Lake B-Zone boasts a net present value (NPV) of over $2.3billion using an 8% discount rate, all at a capital cost of under C$600million. If this were a gold or silver project without any significantcaveats we’d be rushing out to buy shares. But this is a rare earthelements project ladies and gentlemen, and with that comes some seriouscaveats.

For starters, rare earths are a highlycomplex market with obscure pricing information. Even Quest admits thedifficulty when disclosing that “pricing used in the study is based on2010 projections reported for a similar Rare Earth project”. Then thereis the small size of the rare earths market. If too many projects aredeveloped, there is a real possibility that without a huge increase indemand, the market for these metals will be overwhelmed with supplycausing a collapse in prices. At the project level there is the questionof where material will be processed. If the company is assuming thatprocessing will take place in China, what will the terms be, and whatabout the possibility that China decides it no longer wants to processmaterial from Strange Lake opting instead for domestic supply? Inconclusion, be careful not to get carried away with the headline NPVfigure at this stage in the game. It shows us that the project is robustif all the other pieces fall into place. Now it’s time tostart paying attention to all those other pieces. If things progress tothe point where we’re comfortable taking a position, then our Subscribers will be the first to know. [Zurbo]

Catalyst Copper (TSX-V: CCY; Pink Sheets: CATXF)
Catalyst hits 0.42% Copper over 634.8 meters - September 29, 2010

The company is currently conducting aprogram to verify the historical results that defined approximately 75million tonnes of 0.7% copper (about 1 billion pounds). Catalyst’s ~$40million fully diluted market cap is probably fairly priced for that sizeof deposit. Upside would come from new discoveries to be targeted insubsequent drilling although apparently the company plans to test,during the current program, an induced polarization anomaly identifiedduring the 125 line kilometers of surveying that has been completed todate. Odds of hitting something major with an initial drill hole areremote but we should review the results for mineralogical or otherindications that a new copper porphyry might have been discovered.[Silverax]

Intrepid Mines (TSX, ASX: IAU)
Maiden Porphyry Copper-Gold Resource Estimate 500 Million Tonnes at 0.4% Copper, 0.5g/t Gold - September 29, 2010

As we noted a couple of weeks ago, thislooks to be a large deposit but very close to shoreline. The resourceestimate includes a high grade zone that only appears reachable by anopen pit whose western lip would extend into the ocean. [Silverax]

Rare Element Resources (AMEX: REE; TSX-V: RES)
Positive Results of Scoping Study on Bear Lodge Rare-Earths Project
- September 28, 2010

From under $2 in July to hitting a highof $9.58 on Tuesday (currently about $8), it has been one heck of a ridefor those lucky enough to be on board. The Bear Lodge project certainlylooks interesting and potentially a cash flow powerhouse not unlikeQuest’s Strange Lake project, but with many of the same caveats.

Of particular interest to us is that thescoping study provides us with some statistics on the size of the rareearth elements (REE) market, compliments of the Industrial MineralsCompany of Australia (IMCOA). Specifically, we are told the following:

[IMCOA] forecasts growth in global demand for REE at a rate of nearly 10% per year until 2020,from approximately 125,000 tonnes in 2010 to 200,000 tonnes by 2015 to280,000 tonnes by 2020, expressed as “TREO” (total rare-earth oxidesor the sum of all 14 REE plus yttrium). During this period, primary supply sources located mainly in China are not expected to increase production significantly, creating a growing supply/demand gap. China has been reducing its exports of rare earths for several years and announced a major reduction in exports in early July 2010.These policies have already caused significant price increases formost REE and created opportunities for new primary suppliers to enterthe market. [emphasis ours]

Based on these demand assumptions, theBear Lodge project would provide about 5% of the world’s supply of TREOat its assumed annual production rate of 11,400 tonnes of REE containedwithin concentrates. Strange Lake is of similar size, so together theywould make up about 10% of projected demand in 2015. Goes to show youjust how small the REE market, and that assumptions like “primary supplysources…in China are not expected to increase production significantly”are extremely important to get right.

Prices of many rare earth metals haverisen exponentially during the past few months, as is shown in REE’sscoping study as well as a composite chart that can be found in a recent article appearing in The Economist.Have we reached a new plateau, or will prices fall back once newsources of supply are developed? In such a small and esoteric market —due to China’s overwhelming and precarious influence, and a rapidlychanging demand landscape — it is difficult to tell.

Certainly some rare metals will befavored over others, and it will take a fair amount of expertise tosuccessfully navigate the investment waters. In the words of John Kaiserof Kaiser Bottom-Fish Online,“the problem of supply is easily solved. It just takes three to fiveyears and billions of dollars.” Which projects will those billions flowto? Time will tell, and hopefully next time a Rare Element Resources istrading at $2 we’ll be brave enough to pull the trigger, knowing thatyou can’t wait until you have all the answers if you want to make moneyriding the waves of sentiment. [Zurbo]

International Minerals Corp. (TSX: IMZ)
Net Income (Before Taxes) of US$15.5 Million for the Fiscal Year EndedJune 30, 2010. Equity Earnings of US$27.5 Million from Pallancata SilverMine, Peru
- September 28, 2010

International Minerals is a mid-tiersilver producer, with a 40% ownership interest in Pallancata, the 5thlargest primary silver mine in the world. Pallancata is expected toproduce 10 million ounces silver and over 30,000 ounces gold in 2010.Assuming current resources are converted to reserves, the mine shouldproduce for at least another 7 years, and there is good potential toexpand the mine life further.

Following its acquisition of Ventura Goldand Metallic Ventures in 2009, IMZ now owns 5 projects besidesPallancata, 4 of which are in the development stage, as well as a 3% NSRon Barrick Gold’s (NYSE: ABX) Ruby Hill mine — providing cash flow of$3+ million per year. A quick overview of IMZ’s development projects isshown below:

(1) Goldfield (100%, Nevada) is expected to produce over 50,000 ounces gold per year beginning in 2013.
(2) Inmaculada (70%, Peru) is expected to produce 114,000 ounces gold and 3.9 million ounces silver per year beginning in 2014.
(3) Rio Blanco (100%, Ecuador) is expected to produce 71,000 ounces gold and 400,000 ounces silver beginning in 2014.
(4) Gaby (60%, Ecuador) has the potential to produce over 300,000 ouncesgold per year beginning as early as 2015. However, Gaby is a marginalproject due to its high capital cost, and therefore significantlyriskier than the other 3 development assets.

Our valuation model estimates fair valueto be about C$8 per share. That’s nothing to write home aboutconsidering that about 70% of the target comes from development projects2+ years away from production. But certainly worth keeping an eye on,especially considering the company’s willingness to pursue M&Aopportunities. Metal Augmentor subscribers know which silver producers we like best, and we’ll be sure to include IMZ in the next version of our Silver Producer Report. [Zurbo]

Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF)
Endeavour Silver (TSX: EDR; AMEX: EXK)
Endeavour Silver To Make All Cash Offer to Acquire Cream Minerals - September 27, 2010

It’s interesting to see the pace ofmergers picking up in the junior space even if this is a case ofunrequited love. Just last week we had the marriage between Silvermex(TSX-V: SMR; Pink Sheets: SLVXF) and Genco (TSX: GGC; Pink Sheets:GGCRF) and we’ll probably see some more soon. Cream’s’ Nuevo Milenioproject is cheap at $10 million but needs some tender care before it isready to be a mine. A company like Endeavour Silver is capable ofproviding the necessary love and Cream management shouldn’t be too quickto straight-arm them unless there are other suitors waiting in thewings. Even then one should consider the competence of the suitor beforegoing with the highest bidder especially if it is a share deal. I wouldguess they eventually agree to a buyout south of 20 cents that is partor all shares. [Silverax]

Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF)
Endeavour Silver
Cream Minerals Responds To Endeavour Silver Announcement - September 28, 2010

Translation: Give us a lot more cash or at least some shares. [Silverax]

Timmins Gold (TSX-V: TMM; Pink Sheets: TMGOF)
Capital Gold (TXS, AMEX: CGC)
Timmins Gold Corp. makes proposal to merge with Capital Gold Corporation - September 27, 2010

Sure enough, the merger mania amongjuniors seems to be on. Hopefully this is not a sign of an intermediatemarket top. In any case, despite the fair price being offered to CapitalGold (Timmins is arguably just as undervalued), this is anotherinstance of unrequited love. The combined company would have a ~C$600market cap producing shy of 200,000 oz. of gold per year but with somegrowth plans. That said, both Timmins and Capital Gold need to expandmine reserves. If they can, the potential is not multi-bagger upside butstill decent. [Silverax]

Timmins Gold (TSX-V: TMM; Pink Sheets: TMGOF)
Capital Gold (TXS, AMEX: CGC)
Capital Gold Responds to Timmins Announcement - September 27, 2010

Translation: We have the Toronto and AMEXlisting and you guys are offering us Venture Exchange paper. We shouldbe acquiring you, not the other way around. [Silverax]

Seabridge Gold (TSX: SEA; AMEX: SA)
Drills Upgrading Large Resource at Seabridge Gold’s Courageous Lake Project - September 27, 2010

This press release makes some confusingstatements about resources and reserves so we’ll correct them. Here isthe main offender:

Seabridge President RudiFronk noted that “our 2008 Preliminary Assessment on Courageous Lakedemonstrated that the FAT deposit has outstanding economic potential atcurrent gold prices. The issue is to upgrade the deposit’s largeinferred resource. We have now drilled 22 consecutive holes this summercontaining significant widths of gold mineralization well above theresource cut-off grade. It is increasingly clear to us that most of theCourageous Lake resource should qualify as reserves in our PreliminaryFeasibility Study scheduled for completion in early 2012.”

What’s missing from the above is thelogical progression that an inferred resource must first be upgraded toindicated or measured before it can be further upgraded to reserves(proven or probable). Confidence level only applies to resources, notreserves, with inferred having the lowest level of confidence followedby indicated and finally measured having the highest level ofconfidence. Meanwhile, reserves have nothing to do with confidence, theyhave to do with the portion of the measured and indicated resourcesthat can be mined for a profit given a feasible mining method andrealistic pricing assumptions. The economic portion of indicatedresources becomes probable reserves and the economic portion of measuredresources becomes proven reserves based on the results of a feasibilitystudy. This isn’t the first time Mr. Fronk has conflated theseconcepts.

The Courageous Lake drill resultsthemselves appear to be quite good but the better grades, with a fewexceptions, seem to be located at depths of 300 meters or deeper. Thisis relevant because a significant portion of the drilling might not bewithin the economic pit limits — in other words, upgrading the resourcefrom inferred to indicated or measured will not automatically result inconversion to reserves upon successful completion of a positivefeasibility study. Neither will finding more mineralization “well abovethe resource cut-off grade”. In any case, the company has a long way togo before a preliminary feasibility study is completed at CourageousLake and meanwhile the best thing the project has going for it is arising gold price (at sustained $1,500 gold and current energy/capitalcosts, a project like this would be worth quite a bit). [Silverax]

U.S. Gold (TSX, AMEX: UXG)
El Gallo Continues to Expand in Multiple Directions. 116.5 gpt Silver over 50.5 m. Updated Resource Estimate Due in 4 Weeks. - September 27, 2010

Frankly these are minor results for acompany that has a market cap of US$600 million. El Gallo is okay as faras Mexican silver-gold projects go but it doesn’t seem particularlyexciting and we aren’t convinced that it is going to be a 5-10 millionounce silver producer (plus gold) in 3 years. Even then, thesilver-dominant El Gallo at this point overshadows U.S. Gold’s Nevadaproperties on the Cortez Trend to such an extent that the company shouldchange its name to “Mexican Silver” instead (conveniently, that name isnow available as a result of a recent merger in which Rio Alto — TSX-V:RIO — was the survivor). In any case, if your idea of a gold company isone where the main pride is the CEO owning 22% of the shares and whosemain goal is to become a member of the S&P500, go for it. For mypart, I am the petulant type, prone to constantly asking “what have youdone for me lately?”. In the case of Rob McEwen, the answer is “not muchsince handing off Goldcorp”. Maybe it’s time for another miracle?[Silverax]

VMS Ventures (TSX-V: VMS; Pink Sheets: VMSTF)
VMSReceives First In-Fill Drill Results From Reed Lake Joint VentureProject-Reports 9.90 Metres of 5.56% Copper and 38.55 Metres of 3.81%Copper; $3 Million Exploration Program Approved - September 27, 2010

VMS Ventures is another Manitobavolcanogenic massive sulfide play similar to Halo Resources (TSX-V: HLO;Pink Sheets: HLOSD.PK), which had exploration news last week. LikeHalo, VMS Ventures has a joint venture with Hudbay on part of its landposition. The initial drill results reported here are quite impressivebut keep in mind these are infill holes intended to support an initialNI43-101 resource estimate. The 20 hole program is being drilled on a40-50 meter grid totaling 250 x 250 meters maximum. Assuming a 10 meterthickness of mineralization, that amounts to about 1 million tonnes. Inother words, these are early days and like Halo we’ll watch the resultswith interest but for now will not be dipping in our toes unless thecompany makes significant new discoveries confirming the presence of alarge VMS field on its properties. [Silverax]

Crowflight Minerals (TSX: CML: Pink Sheets: CMLGF)
Crowflightto Introduce Own Mining Equipment and Mining Team at Bucko Lake Mine;Will Temporarily Suspend Operations to Facilitate Improvements - October 1, 2010

Oh yeah, if you make it to the end of thepress release after all the great news they have for shareholders, youwill find that the Jinchuan offer is effectively terminated. Crowflightis in a death spiral and it looks like Kings Place will get the BuckoMine after all — in bankruptcy. [Silverax]

Gabriel Resources (TSX: GBU; Pink Sheets: GBRRF)
Rosia Montana Project Update - October 1, 2010

Rosia Montana is starting to move throughthe permitting process and so we will look at the project to see if itmeets our criteria for speculative or investment purposes. The shareshave risen steadily for the past year but preliminary back-of-envelopecalculations suggest there is still upside based on comparative value,assuming the project gets permits and construction go-ahead. [Silverax]

Aldridge Minerals (TSX-V: AGM; Pink Sheets: AGMIF)
Aldridge Minerals Announces Extension to Option Agreement with Anatolia - October 1, 2010

We aren’t very familiar with the recenthappenings at Aldridge but our preliminary view is highly favorable. Thegold-rich VMS deposit in Turkey looks like it could become ahighly-profitable, moderate-sized mine with relatively-low capitalcosts. We suspect the preliminary economic assessment due in 4-6 weekswill be quite positive and may drive new investors to the story. Thereare some other prospective projects in the property portfolio as wellbut the near-term focus is Yenipazar VMS project. The shares have beenbeaten up during the past few years, just recently bottoming at 50 cents(now recovered to almost C$1) after managing to stay above C$2 duringthe 2008 financial crisis. The stock has the mark of a large shareholderor group of shareholders dribbling their position into the market over aperiod of many months but that seems to be over now. Perhaps oneuncertainty is management but we can’t fault the current corporatestrategy or the progress made during the past few months. The marketisn’t providing many obvious value plays like Aldridge these days.[Silverax]

Habanero Resources (TSX-V: HAO; Pink Sheets: HBNRF)
Habanero Acquires 5,400 Acres Bordering Beaufield Resources Tortigny Prospect - October 1, 2010

“Closeology” is a special disciplinewithin geology based on the premise that the closer your property is to abona fide discovery the greater the likelihood you will make adiscovery yourself. Closeology also holds that the market will give adamn if you chase rainbows. Habanero Resources is a faithful believer incloseology, but who knows, even faulty theories can sometimes succeedwhen carried to an extreme. [Silverax]

Gammon Gold (NYSE: GRS; TSX: GAM)
Capital Gold
Gammon Gold and Capital Gold Sign Definitive Merger Agreement
-October 1, 2010

Back in March ‘09 Gammon signed a letter of intent to acquire Capital Gold.The price on offer was 0.1028 Gammon shares for each Capital Goldcommon share outstanding, equivalent to about US
.76 per share at thetime. Those merger discussions ended on March 31, 2009. ApparentlyTimmins’ merger proposal announced earlier this month lit a fire underGammon, because now a definitive merger agreement has been signed atabout 6x the price on offer 19 months ago. Whereas previously Gammon wasoffering 0.1028 shares, it is now offering 0.5209 shares plus a cashpayment in the amount of US
.79 per share. Way to call their bluffCapital Gold! [Zurbo]

Looking at the share price performance ofGammon Gold vs. Timmins, it’s possible Capital Gold execs are lookingfor an exit instead of a long-term relationship. Gammon Gold has had the“anti-Midas touch” for a long time now — wherein everything they touchturns from gold to rust. Perhaps this acquisition will mark theturnaround but I’m not holding my breath. [Silverax]

Bullion Monarch Mining (OTCBB: BULM)
Eurasian Minerals
(TSX-V: EMX; Pink Sheets: ESMNF)
Bullion Monarch Receives Acquisition Offer from Eurasian Minerals
& Eurasian Minerals Responds to Bullion Monarch -September 30, 2010

Considering that Eurasian Minerals isprobably mostly interested in Bullion Monarch for its royalty on theLeeville mine, and we calculate fair value on this royalty to be in thearea of C
.90-C$1.00 per share, this sounded like an excellentproposal. After all, 0.44 shares of Eurasian is currently equivalent toabout C$1.14 per share.

But in the press release we are told thatafter receiving the initial proposal on August 4, 2010 and then againverbally on September 14, 2010, Bullion’s board of directors stilldecided this offer was not in the best interest of shareholders. That’sdissappointing news, especially given that it was an all-share proposalby a high quality company that is arguably undervalued itself.

What’s interesting about Eurasian’sresponse is that they say the indicative proposal expired on August 10,2010 and give no mention of a verbal reiteration in September. In theend we’re told that discussions are over, and there is no outstandingoffer after all. Say it ain’t so Bullion Monarch. [Zurbo]

Aluminum Corp of China (NYSE: ACH)
Jiangxi Rare Earth and Rare Metals Tungsten Group

Chinalco to Invest $1.5 Billion in Rare Earths
- September 27, 2010

Aluminum Corp of China, known asChinalco, plans to invest $1.5 billion into Jiangxi over the next 3-5years to help it develop its rare earth projects in southern China andbecome its controlling shareholder as a result of the investment.Chinalco aims to become a leader in the rare earth metals sector, andconsidering the small size of the rare earths market (est. $5 billion insales per year) this is a huge step in the right direction. This ofcourse isn’t good news for juniors trying to develop their own projectsbecause there is the risk that investments like that being made byChinalco will lead to significantly greater production within China tothe extent that exports are freed back up and prices fall back down toearth. But since we’re likely to be several years away from anythinglike that happening the rare earths frenzy could easily continue to bidup share prices in the juniors to far greater heights even despite thereality that even the most advanced  juniors are several years away fromproduction themselves. [Zurbo]

Centerra Gold (TSX: CG; Pink Sheets: CAGDF)
Centerra Gold Kumtor Mine Work Stoppage - October 1, 2010

I suppose when you are operating inKyrgyzstan, a strike at your flagship gold mine is not going to have abig impact on your share price. Still, Centerra’s C$3.5 billion plusmarket cap leaves plenty of room to the downside. We don’t mindgeopolitical risk in our gold or resource stocks but we prefer to ownthem at a big discount so that we have a good balance between risk andreward. Our subscribersknow about a company with substantial geopolitical risk and a similarfuture gold production profile that trades at about 1/20th Centerra’svaluation. [Silverax]

Fission Energy (TSX-V: FIS; Pink Sheets: FSSIF)
FissionSummer Drill Program Successfully Expands J-Zone to ~120m x 50m RemainsOpen in all Directions Hole WAT10-111D Identifies More Off-ScaleRadioactivity - September 27, 2010

Fission is on its way to defining aresource of perhaps 5-10 million pounds of U3O8 based on thecurrently-known extent of its J-Zone at the Waterbury Lake property inSaskatchewan’s Athabasca Basin. The deposit is located right next toHathor’s (TSX-V: HAT; Pink Sheets: HTHXF) Roughrider discovery that alsocontinues to grow. The J-Zone appears to have better continuity becauseit is basically a pancake but so far it is significantly smaller insize compared to the 25 million or more pounds of U3O8 delineated thusfar at Roughrider (including Roughrider East). On a combined basis, theJ-Zone and Roughrider have now approached a size that begins to lookvery interesting to the uranium producers like Cameco, AREVA andDenison, and of course the Korean nuclear utility KEPCO’s involvementwith Fission adds to the possibilities. There will be a deal announcedon these projects at some point in the future and we expect it to be at asignificant premium to the companies’ current share prices. For now, webelieve Hathor is the better value and we do hold a position in theshares but Fission under 60 cents looks pretty good as well. [Silverax]

Santa Fe Gold (OTCBB: SFEG)
Columbus Silver
(TSX-V: CSC; Pink Sheets: CSLVF)
Santa Fe Gold To Acquire Columbus Silver & Columbus Silver To Merge With Santa Fe Gold Corporation - September 27, 2010

Yet another junior merger! ColumbusSilver has had limited success making a significant new discovery at theMogollon (pronounced “muggy-own”) silver project in southwestern NewMexico. There is still some silver there, but it seems to be located inore shoots that have little vertical continuity. In any case, Santa FeGold is looking for additional gold and silver to feed its Lordsburgmill in the longer term, and the Columbus Silver properties representdecent, if uninspiring, exploration targets. The strategy of a centralprocessing location being fed by several nearby mines is similar to thatbeing pursued by Gold Resource Corp (AMEX: GORO) in southern Mexico andBarkerville Gold (TSX-V: BGM; Pink Sheets: BGMZF) in British Columbia.All three are in the start up and/or ramp up stage and all three willneed several quarters of stable operations to establish viability. Ofthe three, Gold Resource has the highest quality project but it alsofaces the greatest risk due to its US$1 billion market cap. That said,production isn’t really the main story at any of these companies, it isactually exploration success, given the relatively short mine lives andlimited resource bases. [Silverax]

Hana Mining (TSX-V: HMG)
Assayresults from RC drilling confirm copper-silver mineralization iscontinuous over entire 64.0 km strike length at the Banana Zone - September 27, 2010

The Ghanzi project in Botswana covers anapparently huge mineralized area but as we understand it the mostprospective ore zones are limited to discreet folds and limbs in thesedimentary package that have brought the primary “redox” horizon nearsurface and where the copper-silver mineralization has been upgradedthrough secondary hydrothermal action. Still, the strike length of theprospective ore zones is impressive and a substantial amount ofhigh-potential ground remains untested. That said, even though thegrades in some zones appear high enough to support underground mining,the apparently-weak hanging wall rocks and moderate pitch of themineralization combine to create an extraction challenge. Therefore thelikely target of a mining effort, at least initially, would be thenear-surface, wider zones where open pit mining might make sense. Futuretest mining could establish an underground extraction method that wouldwork for this type of deposit and that could bring the deepermineralization into play. At such point, extending the mineralized zonesdowndip would make sense and that could result in a major increase inthe potential resource base. We look forward to reviewing upcomingreports on the ongoing technical work (preliminary metallurgy, scoping,etc.) as well as the evaluation of underground extraction methods.[Silverax]

Valdez Gold (TSX-V: VAZ; Pink Sheets: VLDZF)
Valdez Gold Announces Proposed Acquisition of Ryan Gold - September 27, 2010

Well, it turns out the halt had nothingto do with any of Valdez Gold’s current projects but rather a mergerwith Ryan Gold, which is the namesake of Yukon prospector Shawn Ryan,the man responsible for originally staking both Underworld’s (nowKinross — NYSE: KGC) White Gold property and Kaminak’s (TSX-V: KAM; PinkSheets: KMKGF) Coffee property. In any case, this isn’t as much anacquisition of Ryan Gold by Valdez Gold as it is a reverse IPO of RyanGold using Valdez Gold essentially as the shell. Whichever way you lookat it, the property portfolio of the combined company means lots ofexploration possibilities in the Yukon far into the future. Can ShawnRyan perform a hat trick by having a third vended property become amarket darling? The answer is yes, although we must recognize that theman has been quite prolific, vending properties into a multitude ofcompanies and not just Ryan Gold. Most of the properties and most of thecompanies will not have a big gold discovery and our preference withrespect to these Yukon Gold Rush plays is to keep our ears peeled forthe whistle and only board the train as it is leaving the station.[Silverax]

Golden Tag Resources (TSX-V: GOG; Pink Sheets: GTAGF)
Golden Tag Reports Initial Rulings of Arbitration-ECU is Removed as Operator of San Diego Joint Venture - September 27, 2010

Here we have the other side of the storyand sure enough Golden Tag claims that it is “pleased to announce” whatwe must assume are considered positive results by Golden Tag from thearbitration hearing with ECU Silver (TSX: ECU; Pink Sheets: ECUXF). Lastweek, ECU Silver claimed that it considered the arbitration to bepositive for its own position in the litigation but reading over GoldenTag’s perspective on the situation certainly takes the shine off ECU’ssupposed victory. We repeat that until ECU Silver cleans up itsmanagement practices there is little reason to own the shares despitethe potential that a significant mine can be eventually built andprofitably operated at Velardeña. [Silverax]

Advanced Explorations (TSX-V: AXI; Pink Sheets: ADEXF)
Advanced Explorations and XinXing Pipes Group Execute Formal Agreement to Develop Roche Bay Project
- September 27, 2010

Advanced Explorationshas seen its share price rise over 200% since forming a strategicrelationship with XinXing Pipes Group (XXP). Specifically, AdvancedExplorations and XXP have established the basis for collaborativedevelopment of the Roche Bay Project, with XXP able to earn a 50%interest in the project by providing $20M to complete a feasibilitystudy and a further $30M of working capital upon its completion. XXPwould also provide up to $1 billion in financing to build the project.In return, XXP will also have the right to 50% off-take on all ironproducts.

It appears the companynow has about 175 million shares fully diluted, which is stillrelatively cheap given the potential of Roche Bay not to mention a hostof other opportunities that are now likely to be considered withXinXing as a strategic investor in the company.

More generally this news is furtherconfirmation that iron ore juniors and their development projects arein play, and similarly explosive growth is likely to happen more or lessovernight for other explorers in this peer group such as our favorite iron ore playwhich arguably possesses several projects of similar merit as RocheBay. And did we mention that it is debt free and yet it is still tradingfor less than the value of its cash and investments? Seller beware.[Zurbo]

Advanced Explorations (TSX-V: AXI; Pink Sheets: ADEXF)
Expands Development Options through Agreement with Shandong Fulun Steel - September 30, 2010

The deals are coming in rapid firesuccession for Advanced Explorations — this time it’s an agreement with aChinese steel company to co-develop the junior explorer’s secondaryiron ore projects. These are strategic, long term relationships thatclearly demonstrate Chinese appetite for commodities will continue longinto the future. [Silverax]

Dynasty Metals & Mining (TSX: DMM; Pink Sheets:DMMIF)
Completes Additional Shipment of Gold and Comments on Ecuadorian Police Protest
- September 30, 2010

Lots of drama over in Ecuador these pastfew days with a coup attempt by ex-President Lucio Guitierrez. We hadhoped skittish investors would give us more of a buying opportunity, butalas Dynasty has weathered the storm well and continues to ramp upproduction at its flagship Zaruma project. Our thanks go out to Mark of Inka Kola News for his timely updates on the situation. [Zurbo]

China Gold International Resources (TSX: CGG; Pink Sheets: JINFF) - Formerly Jinshan Gold Mines
Support for Purchase of Jiama Mine Recommended by Two Leading Independent Proxy Advisory Firms
- September 30, 2010

On the surface this looks like a wildlyexpensive acquisition, especially considering that the Jiama Mine is apolymetallic operation and typically polymetallic producers trade atsignificantly lower multiples to primary gold producers. Then again,Jinshan already looks overvalued in our model, so the fact that it isattempting to buy the Jiama Mine in an all-share transaction may eventurn out to be accretive. But it is important to recognize that if thetransaction turns out to be accretive under reasonable long term metalprice assumptions because China Gold is buying Jiama with overvaluedcurrency (i.e. China Gold stock), this still doesn’t make China Gold agood value just less bad of one.

Once we have time to crunch the numberson China Gold and its peer group of mid-tier gold producers we’ll beable to make more definitive statements about which gold companiesrepresent the best value. As a subscriber to the Metal Augmentor service you’ll be the first to know. [Zurbo]

Gammon Gold (NYSE: GRS; TSX: GAM)
Capital Gold
Law Offices of Howard G. Smith Announces Investigation On Behalf ofShareholders of Capital Gold Corporation in Connection with the ProposedAcquisition of the Company by Gammon Gold
- October 1, 2010

Looks like not everyone is taking sokindly to the proposed acquisition. We’re not altogether surprised atthe opposition, but considering our base case valuation target forCapital Gold is US$5.36 per share, we think Gammon is making a very fairoffer. Nevertheless, all three of these firms are conducting aninvestigation into alleged breaches of fiduciary duties, with two ofthem referencing unnamed analysts who set price targets for Capital Goldof $9.00 and $12.13. These targets are very rich, andstatements about this offer being unfair because of such targetsexisting removes credibility. Other law firms are also getting into theact:

Levetown & Jenkins, LLP Announces an Investigation of the Acquisition of Capital Gold Corp. by Gammon Gold - October 2, 2010
Shareholder Alert: Faruqi & Faruqi, LLP Announces Investigation Related to the Acquisition of Capital Gold
- October 4, 2010

Our research shows that both Capital Goldand Gammon Gold are about fairly valued based on their currentoperating and development projects. If they merge, a larger company isborn that is still fairly valued. No surprises here. [Zurbo]

Lexam Explorations (TSX-V: LEX; Pink Sheets: LEXEF)
VG Gold
(TSX: VG; Pink Sheets: VGGCF)
VG Gold and Lexam Explorations to Combine
- September 29, 2010

Other than owning a few early-stage oil& gas and uranium projects, Lexam is essentially a shell with $10million cash and 75 million shares of VG Gold. The combination thenisn’t something that’s particularly strategic, just an obvious move toconsolidate. Enough has already been said about the potential of VG Goldin our Mining News Review for the Week of September 13th. [Zurbo]

Typhoon Exploration (TSX-V: TYP; Pink Sheets: TYPFF)
Aurizon Mines
The Typhoon-Aurizon Tandem Intersects 112.5 g/t Au on 6 Meters on Fayolle Project
- September 29, 2010

While impressive, the current drilling program on the Fayolle project is putting holes into an area where an inferred resource has already been defined. What interests us is the fact that Aurizon Mines is interested, having signed a $27 million option agreementback in May 2010. Aurizon wouldn’t be involved if they only thought thearea had the potential for a few hundred thousand ounces of gold.Obviously $27 million is a lot of money, but there is the risk thatAurizon walks away from the project well before that much spending takesplace, and this decision could come suddenly at any time over the nextseveral years.

Typhoon may have less than 20 millionsshares outstanding, but having rallied from C
.50 to C$1.50 over thepast couple months, even with its tight share structure it is startingto look expensive. Perhaps it should consider raising a few thousanddollars at the current price in order to upgrade its website and get a new domain name. Now that would be a good investment. [Zurbo]

Aurcana (TSX-V: AUN; Pink Sheets: AUNFF)
Aurcana Reports Positive Feasibility Study on Shafter Silver Mine - September 30, 2010

We will plug the slightly-revised feasibility numbers into our valuation model in preparation for the updated version of our Silver Producers Reportbut we still feel that a project site visit and detailed review of themine plan with the company’s technical representatives are requiredbefore we can properly evaluate the odds of success. [Silverax]

Sandstorm Resources (TSX-V: SSL; Pink Sheets: SNDXF)
Sandstorm Resources Provides Gold Production Updates - September 30, 2010

Record gold prices are certainly timelyfor Sandstorm, and with the generation of royalty payments at two of thecompany’s projects, we will be entering the details into our Royalty Company Report that we are in the process of updating. [Silverax]

Beaufield Resources (TSX-V: BFD; Pink Sheets: BFDRF)
Beaufield Drills 322.15 Metres of 4.20% Zinc, 2.72% Copper, 72.02 g/t Silver and 0.53 g/t Gold at Tortigny - September 30, 2010

There is really not a lot of newinformation being provided by this drill program that wasn’t alreadyknown more-or-less — the headline assay represents a hole drilled,according to the company’s own statement, parallel to the hinge fold of adeformed massive sulfide (probably VMS) body representing the length ofthe mineralization instead of its width or thickness. It’s stillimpressive but not worth sending the shares 200% higher over the courseof a couple hours. Even a clarification press releaseissued a short while later was able to dampen the enthusiasm only tothe tune of a sustained 100% gain on the day’s trading. So what didBeaufield do? Why, what every good exploration company knows to do:seize the money when it is being handed to you. Thus, a C$3 million flow-through share dealwas put together the very next business day. Despite all the hooplay,Beaufield actually appears to be a decent junior explorer although itwill need to extend the known deposit at Torgigny in order to get muchmore share price follow-through.[Silverax]

Geologix Explorations (TSX: GIX; Pink Sheets: GXEXF)
Tepal Oxide Cap Metallurgical Test Work Delivers 78.4% Gold Recovery - September 30, 2010

Here we have another small gold projectin Mexico that is in early development but appears to have a good chanceof eventually making it. Hard to say what value to assign to somethinglike this at a relatively early stage: a 40,000 oz. gold plus 20 millionpound copper annual production profile with decent exploration upside.An eventual market cap of $100 million or more seems reasonable but howmuch of that would come from share dilution instead of share priceappreciation? It can’t hurt to pick the stock up cheap — a market capcloser to C$10 million rather than C$50 million — because that obviouslygives you the better odds of snagging a 10x gain, which is what you’dwant to have a shot at in order to balance out the risk. [Silverax]

Macusani Yellowcake (TSX-V: YEL; Pink Sheets: MCYWF)
Macusani Yellowcake Announces High Grade Discovery at Kihitian Uranium Property, Peru – September 30, 2010

These are excellent grades for anear-surface, potentially-bulk-mineable uranium deposit. Grades on theMacusani Plateau in Peru can vary but they tend to be quite low onaverage owing to the volcanogenic source of the uranium mineralization.Indeed, the occurrence of U3O8 grades above 3% in a volcanogenic settingis very interesting because such high grades are typically associatedwith intrusive-related mesothermal deposits like those of the AthabascaBasin in Saskatchewan. The company reported adit sampling assays earlierin the year that originally revealed the occurrence of high-gradeuranium at the Chilcuno zone so these drill holes cannot be considered atrue discovery, but whatever you call it, this is one of a fewinteresting uranium exploration stories currently out there. [Silverax]

Goldbrook Ventures (TSX-V:GKB; Pink Sheets: GBKVF)
Jilin Jien Nickel

Jilin Jien Nickel Announces Funding Terms of its Subsidiary, Jien Canada Mining
- September 28, 2010

What a mess. Goldbrook recently statedthat Jien’s attempt to increase its interest from 75% to nearly 96% onthe developing Nunavik Nickel project is not permitted under the jointoperating agreement. Nevertheless Jien is still going ahead with itsplans to raise $122 million and unless Goldbrook can come up with itsfair share of the money within 30 days it faces a David vs. Goliathbattle to avoid near extinction. The real worry is how two companiescould have such a different understanding of a joint operatingagreement. One thinks they are free carried and the other that bothparties are fully responsible for project funding? It seems like thisshould be pretty standard boilerplate language, but it somehow gotmuddled along the way with this one. However this one turns out,relations are going to be strained. [Zurbo]

Disclaimer:  We own shares in several of the companies mentioned in this analysis (Metal Augmentor subscribers know which ones), but no compensation has been received fromany of the companies mentioned. This is not investment advice; shouldyou seek investment advice we recommend you discuss the company with alicensed investment advisor or broker.