Newmont Equity Research Report by qrw11107


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									                  ONYX EQUITY RESEARCH

                            RECOMMENDATION – BUY – Price Target $2.00

                                    For Research Disclosures – See Page 12

           Recent Statistical Data              GOLD ISLAND - INDEPENDENCE MINE IS
 Shares outstanding              72.0 million   SURROUNDED BY NEWMONT PHOENIX PROPERTY
 Float                           30.9 million
                                          General Metals Corporation (“GNLM” or the “Company”) has
 Market Capitalization          $30.9 million
                                          mining and mineral rights to a property (The Independence Mine) in
 Avg. Daily Volume (10 days)         375,000
                                          Battle Mountain, NV that is surrounded by Newmont Mining’s
 52-Week High                          $0.89
                                          (NYSE:NEM) Phoenix mine. In 2001, Newmont acquired Battle
 52 Week Low                           $0.06
 1 E. Liberty St. Suite 6000              Mountain Gold Company, giving Newmont ownership of the
 Reno, NV 89501                           Phoenix property where historic mining has left a halo of lower-
 775-686-6078                             grade gold and copper reserves. Gold and copper production began       at Phoenix in 2006 after Newmont has spent more than $3.0 billion
                                          to develop the site into the largest gold mine in the United States.
Newmont has been mining gold in Nevada since 1965 and sold 2.4 million ounces from its Nevada properties in

The Independence mine has been a producing mine in the past, leaving a well defined geology record and readily
accessible amounts of surface minerals that can accelerate operations. The facility operated intermittently between
1938 and 1987, producing a significant amount of silver and 11,000 ounces of gold. The mine was closed in 1987
due to the low price of silver. With gold at over $650 per ounce and silver at $13.50 per ounce the surface
mineralized material left from previous activity offers a short term revenue opportunity while the deeper deposits
offer an additional potential 2,000,000 ounces of gold and substantial silver recovery.

According to the Carrington Report (dating October 28, 2004), the Wilson Independence Property covers a
mineralized zone on strike with the World Class, Fortitude / Phoenix Gold Skarn Deposit (Past Production +
Reserves exceed 7 million ounces). The property has potential to develop a 2 to 5 million ounce high grade
underground resource in the Antler Sequence, together with a smaller surface / near surface resource in the
overlying Pumpernickel Formation. Situated at the intersection of the Battle Mountain-Eureka Gold Trend and the
Northern Nevada Rift (Twin Creeks-McCoy lineament), the Independence Project, like Fortitude and Cove Mcoy,
is one of a number of Gold Skarns, which occur along the Battle Mountain – Eureka and Northern Nevada Rift
Zone mineral lineaments.

When the Independence Mine was closed in 1987, tailings were left from previously mined material that may
include as much as 4,000 ounces of gold and 250,000 ounces of silver. From shallow pit mining the property is
estimated to have approximately 235,000 ounces of gold and 2.5 million ounces of silver. There is also a relatively
intact mill with 50 – 75 tons per day of process capability on the site. The process mill uses a Counter – Current
Decantation cyanide process that could be restarted upon placement of new leeching pads and receiving permits.
Deep drilling on the site has identified approximately 1.4 million ounces of gold, with geological potential for an
additional 2 to 5 million ounces of gold on the property.


GNLM has recent accomplished a funding that can permit the initiation of drilling on the Independence site. This
drilling will be done in three stages and serve to update and define the mineralized deposits, setting the stage for
financing of mining and processing operations. The drilling plan in elaborated on page 2.

General Metals is engaged in the acquisition, mining and exploration of gold, silver and other precious metal
properties. General Metals Corporation (OTC BB: GNLM) was organized in the State of New Jersey on March 4,
1994 and reincorporated in the State of Delaware on September 13, 1995 as Interactive Multimedia Network, Inc.
On March 29, 2005 the Company changed its name to RECOV Energy Corp. and then on January 12, 2006
changed its name to General Metals Corporation. General Metals Corp. acquired General Gold Corp. in January
2006 and entered into the metals exploration and mining sector.


The Independence Mine forms an island within the boundaries of Newmont’s Phoenix Mine in Nevada. Newmont
has just completed spending in excess of $3 billion dollars to develop the Phoenix Mine into the largest operating
gold mine in the U. S. Any ore recovered from the Independence property should be suitable to process by tolling
through the Phoenix plant.

General Metals intends to conduct a three-phased drill program on the Wilson-Independence project in order to
convert the mineralized areas to resource/reserve categories for near term production. A deep drilling program will
be carried out on the Wilson-Independence Deep target to confirm continuity and facilitate resource estimation.

Phase I drilling will consist of 15 to 20 reverse circulation drill holes of 500 feet or less to establish continuity of
the near surface mineralization and two reverse circulation drill holes to 1,000 feet on the Independence target to
test vertical location and continuity of mineralized structures. An additional five to ten shallow reverse circulation
drill holes will be drilled in the North target to test continuity and potential for higher-grade gold values.

Phase II drilling will consist of 20 reverse circulation drill holes of 500 feet or less in the Independence target for
resource delineation and conversion.

Phase III drilling will consist of five 3,000 feet reverse circulation pre-collar/core finish drill holes in the Wilson-
Independence Deep target to confirm continuity of the gold mineralization and facilitate resource estimate.
In a recent geologist report, Robert Carrington, Geologist, and President of Gold Range, LLC stated that “the
Independence property covers a mineralized zone on strike with the World Class, Fortitude/Phoenix Gold Skarn
Deposit”, which is the description for the adjacent Newmont Phoenix property.

The operating plan for the shallow target is designed to bring the known mineralized materials into a resource
category, according to SEC Industry Guide 7. The development program will involve the permitting and
construction of a cyanide heap leach pad that will accommodate 5-6 million tons of mineralized material. The gold
and silver will be recovered by a Merrill Crowe processing system, with precipitate being smelted on site and
shipped to the a refinery as gold and silver bars. Management has recently constructed and operated a similar
project for another company in Nevada's Comstock Lode.

This deep target is estimated to have the immediate potential to develop 1.4 to 2 million ounces of contained gold.
Northern Dynasty Minerals reported an estimated resource of 818,000 ounces of contained gold, with an average
grade of 0.27 ounces per ton (“opt”) gold and Noranda Exploration, in an interoffice memo estimated 2 million
ounces. Approximately 25,000 feet of drill core from Noranda’s drilling campaign is on site and has been relogged.

All infrastructure necessary for the exploration, development and operation of the Independence mine is readily
available. The property is accessed via federal, state and county maintained all weather paved and gravel roads
from the nearby Town of Battle Mountain. A well-trained work force is available from Battle Mountain, situated 30
miles north of the property. Adequate ground water is available for diversion for mining operations which enjoy
special treatment as temporary or interim uses under Nevada water laws. Electrical power has recently been
extended to within one mile of the project to service the Phoenix project, and the trans-continental natural gas line
passes within 1.5 miles of the property.

The property has been the site of intermittent historic exploration and mining activities since the late 1920s. Past
mining operations extracted 65,000 tons of high grade gold and silver ores from the property. The bulk of this
activity occurred during two periods, the first from high grade ores shipped for direct smelting during the late 1940s
and early 1950s, and a second from 1975 to 1983 when a significant amount of underground development took
place, and a mill erected on the property. A relatively intact 50 to 75 ton per day Counter Current – Decantation
cyanide mill is situated on the property. The present condition of the jaw crusher, cone crusher and ball mill are
uncertain but could possibly be returned to serviceable condition. A complete set of new rubber liners for the ball
mill are on site. The mill is housed in a metal clad building erected in 1987.

Ore production grades have historically been high, with individual samples from stopes reported to contain up to
19,000 ounces of silver, and 64 ounces of gold. During its peak period of production in 1976 the mine shipped up to
1 ton of gold and silver bullion per month.

The Independence mine property consists of 14 whole and fractional unpatented lode mining claims, which cover
approximately 240 acres.


Management has indicated its near-term intent to develop the “North Target’ indicated on the graphic below, which
includes the tailings left from previous mining and to do open-pit mining on the remaining surface mineralized
material that could extend to an approximate 250 foot depth. Processing of this material will be done through a
cyanide heap leach pad that will accommodate 5-6 million tons of mineralized material. The gold and silver will be
recovered by a Merrill Crowe processing system, with precipitate being smelted on site and shipped to the a
refinery as gold and silver bars.


Prior drilling activity has given the Company reasonable estimates of the concentrations of both gold and silver in
the overall property. These concentrations for the near surface near surface mineralized materials are shown on the
table below.

While the surface mineralization provides a short term operational opportunity, a significant amount of gold exists
in the Wilson Deep Target. Definition of this target comes from eight deep holes drilled since 1985. Gold
mineralization in the deep area occurs between depths of 2,000 and 3,340 ft. Average gold concentrations range
from .073 opt to 0.431 opt; or some ten to forty times the concentrations in the shallow target. This mineralization
concentration is reflected on the drilling results table shown on the next page.

Management estimates the cost to develop the Wilson Deep Target to be in excess of $100 million. However, the
return, given the mineralization concentrations shown, could be significant, and could go beyond the area defined
by past drilling. The Company’s plan for these deep mineralization deposits is to enlist a partner with greater
financial capacity than the Company to do further drilling to define the continuity of the mineralization, to develop
a deep mining plan and to execute that plan. Using the data in the Exploration Plan and current prices and mining
costs for the area, our estimates for the Wilson Deep Target, based on an initial expenditure of $120 million and ten
year operation plan would provide an IRR in excess of 50%, or a net present value of existing GNLM shares of
approximately $2.00 per share.

The table below illustrates the estimated concentration of gold deposits in the deep target area.


Mining in Nevada has established the presence of mineral deposits that are worth going after.

Newmont has been mining gold in Nevada since 1965. Nevada operations include Carlin, located west of the city
of Elko on the geologic feature known as the Carlin Trend, the Twin Creeks mine approximately 15 miles north of
Golconda, the Lone Tree Complex near the town of Valmy, and the Midas mine near the town of the same name.
Newmont also participates in the Turquoise Ridge joint venture with Barrick, which utilizes mill capacity at Twin
Creeks. The Phoenix gold/copper project, located 10 miles south of Battle Mountain, has just been completed. The
Leeville underground project, located on the Carlin Trend northwest of the Carlin East underground mine, is under
construction, with completion scheduled for late 2006.

Newmont’s Gold sales from Nevada totaled approximately 2.4 million ounces in 2005 with ore mined from 13
open pit mines and four underground mines. At year-end 2005, Newmont reported 33.3 million equity ounces of
gold reserves in Nevada, with 83% at open pit mines and 17% in underground mines.

Nearby is the Cortez Joint Venture managed by Barrick Gold. The Cortez gold mine is located 100 kilometers
southwest of Elko, Nevada in Lander County. Barrick is the owner of a 60% joint venture interest and is the
operator; the remaining 40% interest is held by Kennecott Explorations (Australia) Ltd. The Pipeline property is 11
kilometers northwest and the Cortez Pediment property (which includes the Cortez Hills deposit) is 4 kilometers
southeast of the original Cortez milling complex.

In 2006, Barrick’s share (60%) of Cortez’s production totaled 253,000 ounces of gold at total cash costs of $405 per
ounce. For 2007, equity production is expected to be 295,000-305,000 ounces at total cash costs of $440-$455 per

ounce. The company’s share of proven and probable mineral reserves as of December 31, 2006 is estimated at 6.7
million ounces of gold.

                                 GOLD SUPPLY/DEMAND AND PRICING

Since the beginning of civilization, gold has played a starring role in mankind's evolution, admired for both its
beauty and flexibility. To the Romans, gold was known as "shining dawn," while through the centuries it has acted
as the primary means of exchange. From 1500 B.C., when the two-thirds gold Shekel was an accepted unit of
measure throughout the Middle East, to the Gold Standard of the 20th Century, gold has transcended boundaries by
representing a uniform value.

Today, though mostly used for jewelry and investment, gold continues to factor prominently in our world, in
unexpected ways. Gold is at work saving and improving lives through its role in medical innovations, space
exploration and new means of high-tech communications.

The use of gold in the 21st Century includes a variety of applications and industries. For medical purposes the non-
toxic and biologically benign metal is used by modern medicine to help us lead longer, healthier lives.

    •   Focused lasers: With gold-plated interiors, lasers give off a more focused beam, helping save the lives of
        heart patients suffering from once-inoperable heart conditions and tumors.
    •   Accurate thermometers: Gold-plated thermometers give accurate body temperatures of newborns and
        unconscious patients.
    •   Life-saving medicines: Biochemists use gold to bond with complex and compound materials, such as
        proteins, to create needed drugs.
    •   Genetic research: Researchers place gold on DNA strands to study the hybrid genetic material of cells.

Outside the world of medicine, gold is at work, usually unseen, helping make people's lives safer.

    •   In cars, airbags depend on gold-coated contacts and electronic sensors for reliability, saving hundreds of
        thousands of lives in the past 15 years.
    •   In the air, commercial airplanes rely on gold-bonded compressor vanes to cool their turbines from exhaust
        that can reach up to 1150 degrees Fahrenheit.
    •   At work, gold-coated infrared equipment is used to detect a dangerous build-up of carbon monoxide and
        other air pollutants.
    •   Below ground, miners rely on gold-activated sensors to warn of low levels of oxygen and trigger an
        automatic replenishment in seconds.

This myriad of applications has had a dramatic effect on the price of gold, recently reaching over $690 per ounce.
In early 2006 the price of gold was over $720 per ounce. The volatility of gold has caused it to be a favorite of
financial speculators and investors, creating additional demand and volatility in the price of the metal.

The chart below reflects the last twelve month price fluctuation for gold.

The limited supply of gold, and growing usage of the metal as a monetary store of value, shows every indication
that these prices will be maintained, or continue to increase. Comparative demand and supply of gold on the
following table reflects the substantial impact of a new class of owners; exchange traded funds (“ETFs”). ETFs
increased their purchases, in tonnage amounts by 57% from 2004 to 2005 and by another 23% from the first quarter
of 2005 to the first quarter of 2006.

Source: World Gold Council –

The other significant driver that is again making gold a monetary asset and store of value is the inflation that is
being driven by commodity prices in the oil, coal, iron ore, copper, tin and other metal markets as well as the
political instability in the Middle East and Latin America.

The booming economy of China and the growth in India and other developing countries has created not only a
record current trade deficit for the United States. Gold prices have historically reacted to these trade deficits as
individuals and governments have sought this base metal to protect against inflation or devaluation of currencies.
A recent chart presented by Bloomberg shows the correlation of gold prices to the trade deficit.

The expectation of continued increases in gold prices due to political instability around the world and inflation of
commodity prices as well as additional monetary demand was demonstrated by the prediction of gold prices made
by Citigroup analyst John J. Hill on June 4, 2006. Mr. Hill estimated that gold prices are likely to rise again by the
end of 2006. He expects average prices to be $700 per ounce in 2007 and $750 in 2008. His comment was
“global political instability, the ballooning U. S. trade deficit and rising demand for gold is Asia could send gold
as high as $850 per ounce.”


Stephen B. Parent- President and CEO: Mr. Parent joined the Company as Chief Operating Officer in November
2005 and was appointed President and Chief Executive Officer in May 2006. Mr. Parent has worked in the mining
industry for 25 years and has managed the exploration and development operations of several junior public mining
companies in the United States and Canada.

Mr. Parent is the Founder and previous Chief Executive Officer and Chairman of GoldSpring, Inc., a publicly
traded precious metals mining company that operates the Plum Mine located in Nevada’s Comstock Lode region
near Virginia City. Plum Mine is a cyanide heap leach operation currently producing gold and silver.

Mr. Parent has been responsible for evaluation, acquisition and development of mining projects and served as CEO
of Ecovery, Inc. a private company with two significant mining projects: The Big Mike Copper Project and the
GoldSpring Placer Project both now owned by GoldSpring. He is also Founder and President and CEO of Aztech
Environmental Industries, Inc.

David J. Salari, COO: Mr. Salari has served as a Director of General Gold Corporation since November 17, 2004
and was appointed Chief Operating Officer in May 2006. Mr. Salari is a Professional Engineer who over the past 20
years, has been involved in the design, supply, and commissioning of mining and mineral processing systems
throughout the world for gold and silver, base metals, and industrial minerals. Since 2004 Mr. Salari has been the
President of D.E.N.M. Engineering, a company engaged in the engineering, design and installation of mineral
processing equipment and systems.

From 1986 to 2004 Mr. Salari was the Vice President of MPE International Inc. where he managed the engineering
and design of metallurgical processing equipment for precious, base, and industrial minerals. From 1980 to 1986
Mr. Salari worked with Placer Development Ltd. in various metallurgist and engineering capacities.

More recently, he spearheaded as Process Manager the construction and start-up of a 4000 TPD heap leach
operation at the Plum Mine in the Comstock Lode region of Nevada. His duties included heap pad construction,
recovery plant, and dealing with The Nevada Division of Environmental Protection in permit related issues. Mr.
Salari is a graduate of the University of Toronto (1980) with a BASC degree in Metallurgical Engineering.

Daniel J Forbush, CFO: Mr. Forbush, a Certified Public Accountant, brings over 25 years of mining industry
experience at such Fortune 500 firms as Glamis Gold, Ltd., AMOCO, TENNECO and Arthur Andersen &
Company. He was initially recruited as Controller for Glamis Gold, Inc., the U.S. operating entity of Glamis Gold,
Ltd., serving therein from 1988 to 1997, and Chief Financial Officer and Treasurer from 1997 to 1999, for Glamis
Gold, Ltd., directing all aspects of financial, administrative and operations management for this $200MM NYSE-
listed, multi-national corporation. Beginning in 1999, Mr. Forbush focused on start-up opportunities, including the
building of a public accounting firm (Forbush and Associates) and a business consulting firm (Core Business
Builders Inc.). Since January of 2004, he has functioned as Chief Financial Officer and Treasurer for a $25 million
residential development and building contractor and a number of other smaller enterprises. Prior experience
includes Corporate Director of Managerial Accounting, Echo Bay Mines, Ltd., 1986-1987; Nevada Operations
Controller for Tenneco Minerals, prior to its acquisition by Echo Bay Lines; General Accounting Supervisor for
AMOCO; Assistant Controller for Cyprus Industrial Metals Company; and Senior Auditor for Arthur Andersen &


The Company is in the exploration stage and has not yet realized any revenues from its planned operations. It is
primarily engaged in the acquisition and exploration of mining properties. Mineral property acquisition costs are
capitalized. Exploration and Development costs are expensed as incurred. When it has been determined that a
mineral property can be economically developed as a result of establishing proven and probable reserves, the costs
incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production
method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or

impaired, any capitalized costs will be charged to operations. The company expects to incur further losses in the
development of the Independence Mining Project, all of which casts substantial doubt about the company's ability
to continue as a going concern.


Valuation is problematic for a development company, since timing of achievement of expected prospects is
unknown and the level of funding and operations may be uncertain.
Comparable public company valuations are not as meaningful as an assessment of the future value of the
prospective cash flows from operations our valuation calculation is primarily based on such an approach.

Net Present Value: For a net present value calculation for the Wilson Deep Target we established a capital
requirement of $120 million and a two year construction period to achieve the “deep” target level of operation in
year three. At a 20% discount rate, and ten year operation that would deplete the deep target minerals, the net
present value calculation provided an estimate of approximately $2.00 per share.

                                       Twelve-Month price target = $2.00

                                            INVESTMENT RISKS

Gold Prices: The recent realized prices of gold, and the prices used in our estimate of operating prospects may not
be realized. Gold prices have been volatile over the past three years, but have also been volatile in prior years. To
the degree that these prices are not realized, the price paid for the Company’s shares will be directly affected.

Funding: Critical to the achievement of operations for the Company will be funding to develop the reserves of the
Company and to compete the processing facilities. To the degree that funding is not available, or may require more
shares than is used in our view of operating prospects, the earnings per share or share valuation in our price target
may not be realized.

Management: As a development Company, General Metals will need to attract and retain experienced management
that can execute its business plan. Current management appears to be experienced in developing companies and
working together. Other management personnel will be required to fully develop the operating prospects of the

Reserve Availability: Current geological reports are inadequate to establish firm valuations for the Company’s
reserves. There may not be the amount or quality of gold and silver available for processing and sale that is
indicated in the current geological reports.


Onyx Equity Research (“ONYX”)is an independent research firm specializing small cap and micro cap companies.
ONYX has no investment banking conflicts thereby minimizing the inherent conflicts of interest between the
research analyst and the companies they cover. ONYX is not a registered investment advisor or broker dealer. No
information in this report should be construed as a recommendation to buy or sell any securities mentioned in this
report. The analyst(s) who prepared this report rely on publicly available information which neither the analyst nor
ONYX can guarantee to be error-free or factually accurate. All conclusions in this report are deemed reasonable
and appropriate by the author. The Private Securities Litigation Reform Act of 1995 provides investors a “safe
harbor” in regard to forward looking statements. To fully comply with the requirements of this law, ONYX
cautions all investors that such forward-looking statements are not guarantees of future performance. Unknown
risk, uncertainties, as well as other uncontrollable or unknown factors may cause actual results to materially differ
from the results, performance or expectations expressed or implied by such forward looking statements. Investors
should exercise good judgment and perform adequate due-diligence prior to making any investment. Ratings and
price targets in this report should not be construed as recommendations to buy a security or as a predictor of stock
price performance. Readers of this report are urged to perform their own due diligence in any purchase of
securities listed herein. Readers should consult the Company’s SEC filings to better understand the inherent risks
associated with this security.

All opinions and recommendations herein are made solely by the analyst and independent of outside parties or

Analyst Certification:
I, Stanley Moss, the author of this report, certify that the material and views presented herein represent my personal
opinion regarding the content and securities included in this report. In no way has my opinion been influenced by
outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security
listed. I certify that I do not currently own any shares or securities in any of the companies featured in this report.

Stanley Moss, MBA – Research Analyst
Mr. Moss is an independent research contractor to Onyx Equity Research. He has over 20 years experience in
equity research and large company financial analysis. Mr. Ross has worked as sell-side analyst for a regional
investment banking concern and as a buy-side analyst for a hedge fund. He has also done substantial research and
financial analyst for a Fortune 500 company for evaluation of acquisition prospects, major capital expenditure
decisions and subsidiary spinouts and divestments.


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