The Maven Letter: November 14th, 2018

Metals Investor Forum: Videos, My Outlook, Perspectives from the Panel. Maven Buys: Pure Gold Mining (TSX: PGM). Portfolio Updates: Aloro, Fireweed, GT, Integra, Orezone, Prize, Red Eagle, Troubadour, and Vendetta.

With another Metals Investor Forum in the books, I spend the editorial this week discussing what I said, what I learned, and what a panel of letter writers thought about the pros and cons of exploration versus development versus production (plus their favorite picks right now). Then comes the recommendation I mentioned last week: Pure Gold Mining (TSX: PGM). Pure Gold is about to issue a feasibility study for its Madsen project, which is an infrastructure-rich project in the heart of Red Lake. I’ entering now because I think the study kicks off a six-month window during which the likelihood of a takeout is high. And if no takeout occurs, I’m happy to own this near term, high grade, low capex gold mine. And we have Portfolio Updates from Aloro, Fireweed, GT, Integra, Orezone, Prize, Red Eagle, Troubadour, and Vendetta.

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Videos If you’ like a taste of the Metals Investor Forum, some videos from the event are already available. Specifically, the talks from each newsletter writer have been posted. Click on a name below to listen to his presentation. Eric Coffin of HRA Advisories – Transitions Greg McCoach of The Mining Speculator – Discoveries David Forest of The International Speculator – What to Buy Now in Commodities John Kaiser of Kaiser Research Online – Back to the Homeland or Stay Abroad? Jay Taylor of Jay Taylor’ Gold, Energy & Tech Stocks – 2018 – A Year of Epic Market Disruptions? Jordan Roy-Byrne of The Daily Gold – Gold Bottoms & How to Manage Your Portfolio Into 2019 Keith Schaefer of Oil & Gas Investment Bulletins – 2018 The Year That Nothing Worked

As for me, I gave two talks, which are available here: A Goldilocks Midterm ~ The Best of Both Worlds Taking Stock of Your Metals Portfolio

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My Outlook We just wrapped up another successful Metals Investor Forum. These events are so useful for me – two days jam packed with metals talk and investing ideas – and so once again I want to share with you what went on. My talk focused on the metals outlook in the wake of the US midterm elections. I talked about that here last week, so I’ keep the review brief. 2018 hasn’ played out the way we all envisioned. At the start of the year, an increasingly volatile stock market was encouraging investors to seek security while continued global growth prepped commodities for their late-cycle outperformance. Things looked good. Then two things happened: anxiety over trade wars derailed commodities and the stock market resumed its upward march. Now, with the midterms having put Democrats in control of the House, there’s reason to believe trade wars will ease, rather than worsen, from here. That means commodities can start to respond to fundamentals again, instead of anxieties – and those fundamentals are far stronger now than they were 11 months ago, with stockpiles low, prices oversold, and supply gaps very much still looming. That’s a bullish setup for base metals. On the gold side, the stock market just finished a 10% correction. It bounced quickly, but importantly the tech stocks that have fueled this bull market are lagging. If FAANG stocks lose their magic, a powerful force behind the bull will have evaporated.

2 Because of that, because of rising bond yields, because of general anxiety about overvaluations, because crazy high corporate debt levels look to finally be slowing share buybacks – this bull market is going to get more volatile. It’s already happening. And it’s good for gold.

The chart I used on this slide is from Goldman Sachs’ latest gold report. It shows gold ETFs gaining nicely as VIX, the market ‘fear’ index, jumped. That is a clear safe haven correlation, and is something we very much want to see. Below is the wrap-up slide from my talk.

3 I hate to even say “Now is the time to be positioning!” because we’ve all been doing that for ages…and we’re ready to move on and profit! But I have to say it because I think the commodities argument is back on track, for base metals and for gold. The commodities argument relies on generalist investors rotating into metals and miners for security and value in a broad market that is overvalued and volatile. And while this setup made good sense to me, I have been very heartened in the last week to get some significant validation that generalists are indeed starting to get interested in metals. The Wall Street Journal started the support with an article titled Supply Crunch Looms in Commodities Markets. It started like this: A prolonged period of underinvestment by commodity producers is setting the stage for large price increases in raw-materials markets, say bullish investors who focus on the metals and energy industries. Prices of copper, nickel and aluminum could soar past prior records — more than 40% above current levels — in the coming years, say the portfolio managers. Such a development would likely transform markets marked in recent years by soft prices and tepid investor interest. The Wall Street Journal matters in the investing space, so simply for this article to appear is significant. Then I chatted with executives at the Metals Investor Forum, management folk who have been marketing their stories around North America, and several commented that they had secured meetings with generalist fund managers for the first time in years. At those meetings, these generalist investors commonly said they for the first time in many years were looking to commodities, metals and miners in particular, for value and diversification. That, my friends, is music to my ears. When generalist investors who managed billions of dollars get interested in metals – a drop of interest makes a huge difference. This chart is a touch dated but I love its message:

In the booming gold market of 2009-2011, generalists had roughly 7% allocation to precious metals. Today that’s down to about 1%. When generalists just rotate a few percent of their portfolios towards gold and miners, it makes an immense impact on our small sector. ------

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Perspectives from the Panel The final session of the Metals Investor Forum was a panel discussion, hosted by yours truly. The topic was Exploration, Development, Production – Pros & Cons of Investing in Each Stage (and flavours of the day!) I chose the topic myself because it’s a topic I encounter all the time these days. And the resulting conversation was really interesting, because of course my fellow newsletter writers also wrestle with the pros and cons of investing in each stage of the mining cycle. The panelists were Eric Coffin, Jay Taylor, and Greg McCoach. I started with this question: “Investors obviously love discoveries, but there is both benefit and cost to that. True discovery stories are great for investors and for the sector. However, the fact that discoveries can return such profits means explorers are always trying to suggest that they are the next great discovery – sometimes with merit and sometimes not. On the not side, I’ll mention releasing glowing descriptions of drill cores without assays, something that can often send a stock soaring…only for it to crash when the numbers actually come out. The question is: how do you navigate that minefield? What do you watch for to navigate the risks on the discovery end of the spectrum?” I asked about core photos in particular because there have been several situations over the last two years where excited visual descriptions truly sent stocks soaring, only for assays to come back boring. Eric and I have discussed this topic before so his response was no surprise to me: “I don’t think core descriptions without assays should be allowed. Just show me the assays.” He pointed out that there are some geologies where a good hit is clearly apparent in drill core…but there are lots of situations where something can look good but not run, or can look boring and return great mineralization. He also pointed out the trap of a company re-drilling a hot old hole or punching a hole into the middle of an historic resource – and then releasing the results without making it clear that the hit is not a new discovery. Good teams won’t do that. There are reasons to re-drill old holes, but it’s easy to make clear what you’re doing. Sketchy management teams will arm-wave the hot intercept…and then mention on page four of the news release that it was a twin hole or was collared in the middle of the old known zone. Sigh. Jay and Greg agreed. Neither get excited about core descriptions or even grab samples – they want assays, and ideally assays from several holes so that a sense of scale starts to emerge. I totally agree. If you’re a geologist and you’re excited about a drill core, you are even more excited about the assays. And if you’re a management team with a shred of decency or experience you know the huge risk in promising the moon – this drill core looks amazing! We’re into a new discovery! – and then not delivering. Just wait for the numbers. My two additional cents: assess the quality of the information when it comes out. Drill results should at the very least come with a plan map, which means a basic looking-down-from-above map with drill collars marked, so that you can see how close or far from previous holes the new result sits.

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A plan map looking down on the anomalies and drill holes at GT Gold’s Tatogga project

I personally think that isn’t enough: a drill hole, especially one that’s particularly good or promoted, should also come with a cross section or a modeled view. Cross sections view the earth as if it were cut open and seen from the side. Geologic cross sections are interpretative, showing drill results along the section with geology – rock types, structures, mineralized zones – drawn in. A series of cross sections marching across a zone are essential to figure out whether a mineralized zone is continuous or not.

A cross section cutting through Saddle North southwest to northeast, showing several drill holes

6 A modeled view shows the drill intercept in relation to the geologic model. The model is shown as a 3D blob, often coloured according to high, medium, and low grade zones, and drill holes are shown alongside. This helps one understand how new drilling might influence the resource. If a company does NOT include this information – at least a plan map and hopefully also a cross section or model graphic – my suspicions are immediately raised.  If the company does not have this information, they are terrible geologists  If the company has the information but does not share it – why? What are they hiding? Is the intercept right beside known mineralization? Did a bunch of other drill holes miss, suggesting poor continuity? It also helps to simply watch that the company releases all drill holes. They don’t have to be in perfect order – when there’s more than one drill rig in operation holes often get out of sync – but if a company is suddenly talking about a hit in hole 48 without having reported on holes 29 to 47, I would wonder what happened.

Question 2: the market often gets bored with stories once they get past that discovery stage. Sure, drilling out a deposit isn't as exciting as discovering one and permitting is straight boring. But especially for copper and zinc: the entire bull thesis depends on there being a significant supply gap and there not being projects to fill the supply gap. So the question is: do you think that it's going to be different this time? Will advanced assets get any more love because of take out potential and because of this fundamental supply gap, or is boring is as boring does?

Key points from our collective answers:  Yes, the disconnect between fundamentals and price in the base metals markets right now is bizarre and has to resolve.  The lack of projects does mean that good assets will get taken out BUT you’re got to be very selective when you’re looking at potential takeover targets. Only the top quartile projects get taken out in any cycle. If a project isn’t top quartile – it’s share price is probably going to rise with metal prices but the project itself isn’t really worth anything because only the best get bought.  In a rising metals market, development-stage projects do gain in value. And those gains are more reliable than with a risky development story. So once you have confidence that base metals are moving, it makes good portfolio sense to own some development stories.  The time frame becomes the issue. What is the biggest question about the asset and how long will it take to be answered? For instance, if there are worries about whether a jurisdiction will grant a permit, the upside may be on hold until permitting is complete, which can take years. If there are worries about the deposit’s continuity, upside may wait until the project has been hammered with huge amounts of drilling. If the key questions are well on their way to being answered, upside (from the market or from a takeout) could be close.

Question 3: Do you play producers as well as explorers and developers? Producers do provide leverage to metal price moves and that leverage should be significant if generalist investors do rotate into the mining space, as we all expect (hope!). But even though trading producers seasonally or buying early in a new market – even though these tactics are pretty reliably profitable, do you play producers?

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Greg: “Production is a unique thing; it takes a unique skill set and I don't understand all those things. I've prided myself and I've spent most of my time learning exploration and trying to figure that side of the market out. Production is a different animal – but you can make money on it and I think there's plenty of good producers that are going to be tax-loss sold here in the next few weeks that could be very attractive buys.”

Eric: “I’ve got two or three producers on my list and in all cases they’re companies that were on my list through development. I don’t do that most of the time but if I think it’s a really good project, if it really looks like this is going to be an awesome mine that makes a lot of money, I will hold on. You need patience for those plays, but they definitely exist and work. “The Pierre Lassonde curve – we all focus on the discovery end and then drop things in the boring phase, but we tend to forget that there is actually another end of the curve where it starts going up again. That’s when you’re through the gind of the engineering and permitting and they’ve raised the money – and they’re actually starting to build. If you can identify those really great projects – there is absolutely room for good gains there. “But you need a management group that won’t ** it up, which most exploration groups unquestionably will if they try to put something into production.”

Pierre Lassonde’s graphic (and fairly accurate) representation of the life cycle of a junior exploration company

8 To wrap up, I asked the question every panel always ends with: what stock stands out to you right now? And to be tough, I asked the panelists to name a stock that hadn’t already moved in a major way, but rather one they thought or hoped was poised to make a move.

Eric Coffin:  Development stage: Orezone Gold (TSX: ORE). “This is one of those groups where I have no concerns about their ability to take that thing over the finish line, no two ways about it. They’ve done it before numerous times, very successfully. It’s a great project. They’re doing a bunch of work right now that I think is going to surprise people how much it improves the project. And it’s going to be in production by 2020.”  Exploration: Northern Shield (TSXV: NRN). “I have a real soft spot for people will to try to find stuff that nobody has found before. And Northern Shield – it’s just so cool that these guys have found a new epithermal gold system.” Jay Taylor:  Development stage: Goldsource Mines (TSXV: GXS). “It’s a saprolite project in Guyana and they’re really finding a lot of higher grade material now. They tried to put it into production with just gravity separation but that didn’t work, so now they’re putting a cyanide circuit in. The economics look really good. There’s also a lot of fresh rock underneath that’s very vast, very large, and it’s my understanding that there’s very likely a serious larger player coming into the picture. What they’re building – it’s going to be a modest producer, maybe 70,000 or 80,000 oz. of gold a year. But it’s Eric Fier, it’s the people behind it.” Greg McCoach:  Development stage: Almaden Minerals (TSX: AMM). “That’s an excellent team that knows what it’s doing. The feasibility will be out next year. So if you can buy it on the cheap during this downturn, I think you’re going to get a good 3, 4, 5 when the market turns.”

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Maven Buys: Pure Gold Mining (TSX: PGM)

This is a fitting writeup to follow the above article, as the subject is a development-stage company grinding through the ‘boring’ phase. But with a feasibility study imminent on an advanced asset in a hot district, there’s good reason to believe the market and interested miners will soon turn their attention back to Pure Gold Mining (TSX: PGM). Pure Gold’s Madsen project will be familiar to long-time readers because I visited Madsen in late 2014. I liked many aspects of what I saw but I didn’t invest at the time. The main reason: it was late 2014. The markets were still dead. No one was paying attention to explorers, even those finding new high- grade gold at an historic mine in a prolific district. So even though I really liked what Pure Gold was doing – using reams of historic data to rework the geologic model and uncover new potential at an old mine – I stayed away. In the years since I have continued to follow the story and it has advanced a huge distance. After drilling up some new gold and confirming old gold the company issued a PEA for Madsen to highlight 9 the project’s existing infrastructure. Continued drilling revealed several new discoveries. The sale of non-core assets raised capital, as did several financings led by a savvy team. That capital funded an intensive drill program that outlined confident deposits. They opened the old portal and rehabilitated the ramp, enabling underground mapping and drilling. They increased the resource and re-did the PEA. They started a feasibility study while continuing to test new targets and make new discoveries. And they drove a new underground drift and completed a bulk sample. They tested metallurgy and completed trade off studies and kept drilling. Through all of that work, PGM shares have traded largely sideways. The company has gained in value, its market cap increasing against a steady share price because financings grew the share count, but after a big run-up in early 2016 (when the gold market re-awoke just as PGM reported new discoveries and a good initial PEA) investors haven’t seen much action. So why am I now entering the stock?  Madsen is a strong project being advanced by a very good team. They have ground through the hardest parts – drilling on tight centers to inform a highly confident resource model, getting underground and test mining, running endless metallurgical tests, completing trade-off studies on how to mine and power the operation – and the results have been reliably strong. It all means Madsen looks like it has what it takes to host an economic mine. That is the ‘fall back’ investment plan: if the price action remains limited and no takeout materializes, Pure Gold will own an advanced, high-grade gold asset in one of the most desirable mining jurisdictions in the world. That in itself is valuable, and increasingly so in a rising gold market.  The feasibility study is imminent. I don’t actually expect the market to react much when the news comes out – PGM has been announcing fantastic drill results, some into new discoveries, over the last two years and no one has noticed, so my expectations for this news event are low. However, once the feas is out the story changes. The big change: mining companies interested in Madsen would ideally want to take the asset out before it is saddled with a construction debt package. Construction capex will not be huge – it was $50 million in the PEA and I expect will be slightly higher in the feasibility study – but mining companies prefer to negotiate their own debt packages. But they also prefer to see a feasibility study before making a move. So the study marks the start of a window, perhaps six months long, when the likelihood of a takeout is highest.  The feasibility study will incorporate a resource update. The update might be issued on its own ahead or as part of the study. Either way, the update will capture the very real exploration success that PGM has had over the last two years. The main resource will grow as the satellite resources, which are not yet part of the mine plan but are developing nicely and show clear potential to add to a mining operation down the road. At the end of the day, Pure Gold hasn’t gotten recognition for its very real exploration successes (they’ve gotten lost in the push to feasibility) and the resource estimate might just help the market realize that PGM’s discoveries aren’t that different from Great Bear’s zones.

10 It’s for those reasons that I’m entering now. Also, at a very basic level, Pure Gold is currently trading near the bottom of its 52-week range. A simple seasonal run up to its 52-week high, which is a level it has reached several times over the last two years, would represent a 40% gain ($0.50 to $0.70). That’s a nice back up plan to the back up plan!

Madsen: A near term, high grade project in a mining jurisdiction

The Madsen mine produced 2.45 million oz. gold between 1935 and 1974. It was not a tale of exploration prowess. Miners sunk a shaft straight into a gold-bearing outcrop and then spent forty years chasing the orebody, which plunged down and northeast. With a hungry mill, miners at Madsen had little time for big picture exploration. They had to chase the ore. By the 1970s the mine was 1,275 metres deep and the orebody was almost 2 km away from the shaft. That’s a lot of tunneling. Too much, in fact; the mine shut down. Fast-forward 20 years. Claude Resources (TSX: CRJ) buys Madsen. The shaft is dewatered, rapid- fire drilling indicates gold in two nearby areas, and Claude sees a chance to make some money. The company buys a used mill and installs it at Madsen and then develops a new portal and ramp. In less than a year Claude is ready to produce gold. It costs many millions, but cash flow is coming… Except that eighteen months later the operation is mothballed. The rush to production left Claude mining an orebody it didn’t understand. The result was dilution – instead of the expected 6.5 /t gold, ore coming into the mill averaged just 3.4 g/t gold. Even without Bre-X and the weak gold price (which didn’t help) the mine just could not make money. The problem was not that Red Lake had run out of gold. In fact, at that time new discoveries were cropping up left and right. For decades miners had focused on one major geologic structure – the unconformity between the older Balmer assemblage rocks to the northwest and the younger Confederation assemblage to the southeast – in their search for gold in the area. But in the 1990s explorers developed news ideas about the potential at Red Lake.

11 Geologists started probing other contacts, such as those along ultramafic bodies, and assessing secondary structural controls. The result: a series of impressive discoveries, the most important being the High Grade zone that now anchors Goldcorp’s (TSX: G) Red Lake operation. Those prospects existed at Madsen but Claude didn’t put effort into exploration and so did not make any significant discoveries. Placer Dome optioned the project from 2001 to 2005 and discovered several new targets but left before really getting started. Then Claude took another stab at putting Madsen back into production. It didn’t work that time either. All those mis-fires became Pure Gold’s opportunity.

The Madsen and McVeigh deposits are the cornerstones of the mine plan. And these areas are rich, as the drill intercepts in the slide below suggests.

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Fork and Russell South are satellite deposits that are not part of the mine plan, but their existence – and the existence of a list of targets, some of which are already discoveries – shows the potential for Madsen to be bigger than what PGM is currently planning. The Wedge discovery, for instance, has returned a slew of impressive results including 33.3 g/t gold over 8.3 metres, 21.3 g/t gold over 10.3 metres, 25.2 g/t gold over 2.1 metres and 27.8 g/t gold over 1.4 metres. The pending update will estimate a maiden resource at Wedge. A few more discoveries like that and Madsen could easily be a bigger operation. For now, the focus is on planning a mine at the Madsen deposit. The resource at Madsen will soon change – for the better – but it currently stands at 6.2 million indicated tonnes grading 8.7 g/t gold plus 1.2 million inferred tonnes averaging 7.9 g/t gold. The indicated count contains 1.7 million oz. gold. The PEA was based on that resource. It outlined a mine producing 66,000 oz. gold annually for 14 years from ore averaging 10.3 g/t gold. Those are good numbers but where Madsen really stands out is in the economics. Because the project already has so much infrastructure, the PEA pegged construction capital at just $51 million. Such a low capital hurdle lets the project achieve a 47% after-tax internal rate of return. For context, after-tax IRRs above 20% are considered very good. A PEA is a piece of paper outlining a dream. A feasibility study is an engineered plan backed by tonnes of data. Pure Gold has done the work to move from one to the other, including test mining in McVeigh. So far the structures are showing very good vertical and lateral continuity. Test mining is essential in preparing to develop a mine like this and PGM is getting it done. Access to ore was made easier by all of the underground development that Claude left behind. Pure Gold has added to the underground workings, but they had a good head start. The rest of Claude’s infrastructure is similarly making a huge difference. Madsen has a permitted, functional mill. It has a permitted, built tailings facility. It has a modern shaft. Pure Gold has already rehabilitated the portal and decline. 13 And it’s all located on a provincial highway, connected to the power grid.

I’ve talked about Red Lake a fair bit lately, largely because this is the same area where Great Bear Resources (TSXV: GBR) is making its Dixie Lake discoveries. Dixie is exciting, but one of the main drivers of that excitement is its location. Red Lake has produced more than 29 million ounces of gold to date. It is a richly endowed region and one that actively supports mining. And one where new discoveries continue to unfold. Madsen almost certainly has more discoveries to offer. The idea is to use the known resource, which is a good size and grade, and the existing infrastructure to get Madsen going again. Once it’s operating, mine site exploration can continue for years.

Structure and Price Pure Gold has 256 million shares outstanding. No, it’s not a tight share structure, but it’s impossible to get to this stage with a tight structure. Given how much the company has accomplished, its share structure is just fine. The company currently has $12 million in the bank. That’s clearly enough to finish the feasibility, but moreover it’s enough to keep exploration going and the team working to optimize engineering and secure contractors and wrap up permitting and negotiate debt.

14 Two companies already own positions in PGM: AngloGold Ashanti owns 14.9% and Goldcorp owns 5%. On top of that, Rob McEwen personally owns 7%, which means McEwen Mining also has a foot in the door. Red Lake and Goldcorp are almost synonymous; this is the district that turned G into the major gold miner that it is. Rob McEwen is also a Red Lake veteran and AngloGold has stated an interest in setting up in the area. They all know about each other, so there is already some pressure to make a move sooner rather than later. Goldcorp has visited the site several times recently and the street is full of rumours that they are preparing to make a move. I wouldn’t be surprised if they did. Madsen is in Goldcorp’s backyard and would fit that company perfectly. That said, it would also suit McEwen and could provide a nice entry toehold into Red Lake for AngloGold. There’s no way to know if a takeout will happen. It certainly could, and if it does there’s very good reason to think it will happen in the next six months. That would be great. If it doesn’t happen then investors will own shares in a company building a mine that looks set to be highly economic and scalable via satellite deposits, in one of the most desirably mining jurisdictions in the world. I’m a buyer of PGM stock at the open.

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Portfolio Updates

Aloro Mining (TSXV: AORO) – HOLD; High Risk ($0.125) Work is gearing up at Aloro’s Los Venados property. The company has secured a bulldozer to begin building the road and drill pads for the company’s initial drill program on the project. The 3.63-kilometre access road will allow Aloro to use an RC drill, which has been found to get better recoveries in the area. Management also sees the road construction as an exploration tool, one that will enable it to uncover areas for sampling as the bulldozer plows along. Road building sounds boring, but it’s the essential precursor to the good stuff – drilling – so it’s good to see this get underway.

15 Fireweed Zinc (TSXV: FWZ) – HOLD; High Risk ($0.80) Fireweed released some more good assays from drilling on Macmillan Pass. The highlight holes from this release came from the southern end of the Tom West target. Fireweed has been drilling in the area of historic holes in the hope that modern drilling will allow for better core recoveries and more accurate assays. So far, so good. Hole 12 at Tom West cut 28.2 metres of 8.4% zinc, 3.2% lead and 35 g/t silver, and Hole 14 intersected 12.4 metres of 8.0% zinc, 13.3% lead and 166 g/t silver. Both are better results than historic holes returned. The high-grade nature of these assays could allow Fireweed to outline higher-grade tonnage blocks for this part of Tom West in its next resource estimate. Those higher-grade blocks are important: FWZ’s whole goal this year is to boost grade (not necessarily tonnage) to improve the economics of any mine eventually build at Macmillan Pass. The company has also drilled the End Zone for the first time, an area not included in the most recent resource estimate. The fact that FWZ was so clear about searching for grade combined with the fact that they kept drilling at End Zone has me optimistic that the area worked out well. Those results should be out shortly.

GT Gold (TSXV: GTT) – Recoup initial capital / Hold; High Risk ($1.66) Having wrapped up its 2018 exploration program at Tatogga, GT Gold provided the market with a summary of its efforts this year. The company completed 24,749 metres of diamond drilling, a program that was expanded from 18,000 metres to further test the new discovery at Saddle North. GT Gold now has a nice-sized gold-silver zone outlined at Saddle South and a growing copper-gold porphyry system at Saddle North. Along with the data collected via sampling and mapping this year, management will use the slow season to analyze the data from this year’s drilling and develop a target list for 2019. To be honest, the news release was a bit of a surprise to me. They halted the stock for it, but it was a non event. And while drilling is now wrapped up for the season there are lots of results left pending, so this we’re-all-done release felt misplaced. 16 Anyway, I am keen to see further results from Saddle North. And a reminder: if you haven’t taken your capital off the table you should do. GT can only explore at Tatogga in the summer months so the winter can be a long, dry period during which excitement ebbs and the price slides.

Integra Resources (TSXV: ITR) – HOLD; High Risk ($0.79) Drilling on Integra’s Florida Mountain deposit continues to bear fruit. Last week, the company released the remaining assays from drilling on the target. As expected, those results were a mix of high-grade at depth and mineable grade near surface. Hole 1A cut 5.2 g/t gold-equivalent over 21.3 metres. The hole intercepted the Trade Dollar-Black Jack vein at roughly 200 meters below the current inferred resource. Hole 4, meanwhile, confirmed the existing inferred resource with 46.8 metres of 0.57 g/t gold-equivalent. Next up will be drilling results from the Sullivan Gulch and Sullivan Knob targets at DeLamar. Given the good assays we’ve seen so far from this area of that deposit, I expect the drills to continue to extend DeLamar to the southeast. Thanks to the company’s recent financings, Integra is fully funded for an aggressive 2019 exploration program. The company will keep one drill turning at DeLamar throughout the winter.

Orezone Gold (TSXV: ORE) – BUY; Medium Risk ($0.57) Orezone recently updated the market on its development efforts at Bombore, the company’s gold project in Burkina Faso. This is a project that already offers a very strong feasibility study. Right now the focus is on fine- tuning some of the upside opportunities so that Orezone can decide whether to incorporate each before starting construction, a decision on which is expected soon. The company is investigating increasing the throughput at the mill to be built at Bombore, in the hope of sending some of the lower-grade feed originally slated to be stockpiled directly through the mill. The additional throughput capacity would also allow the company to easily process additional oxide ore from Bombore’s restricted zones, which are now in the permitting process. Orezone is also investigating the possibility of feeding a certain amount of the sulphide resources at Bombore into the mill. None of these sound that exciting but each has the potential to materially enhance a Bombore mine. Orezone will finish answering these questions and then get started building, to stay on track to have Bombore in production by the end of 2020. Orezone shares have slid in recent months. Current levels are very attractive.

Prize Mining (TSXV: PRZ) – HOLD; Medium Risk ($0.06) We got results from the first four holes from Manto Negro today. As one would expect with the style of mineralization Prize is pursuing here – wide, consistent mantos or layers of copper oxide – the assays from both the El Granizo and Pilar Grande targets were fairly uniform. Hole 1 at El Granizo cut 4.4 metres of 1.0% copper and 28 g/t silver while Hole 2 intersected 3.6 metres of 1.7% copper and 28 g/t gold. Hole 1 at Pilar Grande intersected 4.1 metres of 0.9% copper and Hole 2 intersected 3.4 metres of 1.6% copper.

17 In addition, Prize sampled an area 1,600 metres north of Pilar Grande called El Rincon. The seven channel samples taken averaged 2.1% copper and 63 g/t silver over 3.4 metres. With these findings, the company can now trace the mineralization at Pilar Grande intermittently for over four kilometres. It’s very early days for Prize at Manto Negro but the project is returning consistent numbers. That is important. PRZ can track the blue copper oxide layer along the side of the valley for kilometres – there are gaps, but it’s there – so strike isn’t the question. The questions are width – how far into the hillside does the layer extend? – and grade. Drilling is the way to answer both. And if drills continue to return results of several metres grading better than 1% copper, then Prize should be able to define a mid-sized resource in fairly short order. Remember: an open-pittable copper resource grading better than 1% copper that is leachable will stand out in the copper market for its simplicity and grade (most leachable copper resources are a few tenths of a percent copper). I will also comment on Prize’s share price. Needless to say, it has been weak. I see one main reason. A widely read mining blogger based in Peru slammed the company, calling it a scam. I disagree completely with the few points he made. Unfortunately, the post spread and clearly sparked selling. There’s little that can be done about such situations. Time helps, as do good exploration results. Those are starting to come from Manto Negro and will soon also come from Prize’s gold-silver project in BC. I remain keen on this asset and see the share price slide as an early bump in the road.

Red Eagle Mining (TSX: ) – Halted. SELL if ever given the chance This is officially my worst investment ever. I suppose something has to sit on the bottom rung… To summarize a long story, Red Eagle built an underground gold mine in Colombia. The resource there is very real. And it’s good, averaging 4.57 g/t gold. Red Eagle built a mine at Santa Rosa in the bear market. The fact that they were able to raise money and get it done despite terrible investor sentiment attracted attention. They built a modest operation, designed to produce 50,000 oz. gold annually, but that could be scaled up with regional exploration success. And they earned strong community support while they worked. The problem was rock mechanics. The kind of underground mining they planned required reasonably competent (strong) wall rock. And the country rock is very strong. Unfortunately, the shear that hosts the gold was far less stable than expected. As a result, they had to mine far more slowly than expected. Costs were higher because workings needed no much reinforcing. Slow development meant they had far fewer working faces than planned, so the mine had no flexibility in terms of sourcing ore. It just didn’t work. After trying for about nine months the company suspended mining to build a paste backfill plant. The idea is to turn tailings into a cement-like substance and pump it down into old stopes to enhance stability. Seemed like a good plan, enough that investors (including myself) doubled down by investing in a rights offering that raised the needed construction funds. But it just didn’t work. Red Eagle ran out of money – they continued to develop underground workings throughout the mine suspension but the effort bankrupted them. They couldn’t pay the mining contractor. They couldn’t make debt repayments. Red Eagle tried hard to find a way out. The complete financial restructuring they announced a few months ago was impressive, given the situation. They got all those owed money to forgive debts, brought in a significant new investor, and rolled back the share structure. 18 At least, that’s what they announced. Then in a kick-them-while-they’re-down move, the investor backed out. Without the new funds, Red Eagle can’t start mining again. If they can’t start mining, the parties who are owed money can’t see a way to being repaid, so they have issued a default notice. Red Eagle is dead and a receiver will divide its assets up amongst the lenders. One comment from the panel talk at last weekend’s conference that didn’t make it into my earlier article was Greg McCoach saying, “If I had to do it over again I’d go to school to become a mining engineer.” I replied: “ I know. Me too.” There are so many things that can go wrong with a mine and only mining engineers – good ones at that – stand a chance of seeing them. Did Red Eagle hire the wrong engineers? Did engineering advice get ignored? We will never know. The story is that, when they got underground, the rocks were very different than expected and that was the beginning of the end. I want to say that I do not think Red Eagle’s management team are crooks in any way. Clearly mistakes were made. Looking back, the team did not have enough mine building experience (hindsight is 20-20). But this was not a nefarious, screw-the-investor situation. This was a failed mine. I lost a fair bit of money. I am very, very sorry to all those who followed my lead.

Troubadour Resources (TSXV: TR) – HOLD; High Risk ($0.19) Drilling will begin soon on Troubadour’s Amarillo project. Surveying work in 2018 just outlined a new anomaly, dubbed the “Cap Anomaly,” which is located 1.6 kilometres north of the Trench Anomaly. The Cap Anomaly was identified through an induced polarization survey that showed an 800-metre- wide resistivity high capping a 400-metre-wide chargeability core. Combined with an overlapping copper-moly-bismuth-lead-zinc soil anomaly, Cap seems to have all the markings of a metal-rich porphyry system. Drilling this year will largely focus on the Trench Anomaly, which is the most developed target on the project. This is where geochem and chargeability anomalies both line up perfectly with the historic trench that returned 125 metres of 0.89% copper.

19 Drilling will be quick; management expects to be done the initial drill test in a few weeks. If they hit, and report a long, copper-bearing porphyry intercept to a market that seems to really like porphyry discoveries these days, this stock could perform very well.

Vendetta Mining (TSXV: VTT) – HOLD; Medium Risk ($0.15) Vendetta just released the last of the results from its 2018 drilling program at Pegmont. Highlights from the program included two high-grade holes from the New Zone 3 Structure, which is located near but outside the planned open pit on the project. Hole 170 intersected 6 metres of 8.5% lead and 2.9% zinc and Hole 194 cut 9.0 metres of 9.1% lead and 3.8% zinc. Vendetta plans to outline this new structure with 15 holes and 4,400 metres of drilling in order to bring its mineralization into Pegmont’s global resource. The BHZ and Bridge Zone also generated some highlight holes, including Hole 171 (5.3 metres of 6.6% lead and 2.5% zinc) and Hole 191 (4.3 metres of 9.7% lead and 2.2% zinc). Overall, the results demonstrate that Pegmont still has upside left on the exploration side. In the interim, the company is very close to generating a PEA on the project. That report should allow the market – and potential buyers or partners, like the owners of the two adjacent mines that need new ore – to begin the process of valuing Pegmont as it currently stands.

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