Gold Stock Analyst

							                               STOCK                                    Mid-Month Update:
   GOLD                       ANALYST                                  March 19, 2009
                                www.goldstockanalyst.com

Speaking schedule: GSA’s Editor next speaks at the two day New York Gold Show, Monday & Tuesday,
May 11 & 12, held every year at the Marriott Marquis in Times Square: http://www.hardassetsny.com/
   This is one of the best Gold shows and because Editor is given a place to meet with subscribers (Table
T-1), there’s plenty of opportunity for interaction. The Main Hall speaking schedule is not yet known, but
when not speaking or visiting with attending companies, Editor will usually be found at T-1. If you’re in
the NYC area be sure to stop by. It’s free.

Reflation: Fed decided on March 18 to aggressively reflate the economy, in part saying:
  “To provide greater support to mortgage lending and housing markets, the Committee decided today to
increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750
billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25
trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of
up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided
to purchase up to $300 billion of longer-term Treasury securities over the next six months.”
  Missing from the statement were these words in the Jan 28 statement: “The Committee anticipates that a
gradual recovery in economic activity will begin later this year....” The apparently reduced expectations
for the economy in 2010 brought the March 18 action.
  In the morning Gold had traded down to $883/oz, but immediately bounced higher after the announce-
ment and closed the day in NY at $942/oz, up $27 for the day and up $59/oz from the day’s bottom.
GSA’s Top 10 Stocks responded as well, with 6 of the 10 up more than 10% for the day.
  Bernanke, student of the Great Depression, knows mistakes the Fed made than and will not repeat.
March 18 showed how aggressive he and the Fed can be, and we don’t see this as their final action.
  Lower rates are usually bad for currencies. But since the US Dollar Index bottomed at 70.70 in March
2008, its 22% rise to the 86.00 range gave Bernanke the room to broadly lower interest rates beyond just
Treasuries to reflate the economy and ultimately incomes to lower debt’s burden. If you have a mortgage,
now’s the time to refinance.

AIG: It turns out the big insurer was the key structural support               Main Street
to the US and world economies. It had to be saved lest the en-
tire economic pyramid collapse.
   AIG, with a AAA credit rating, was able to insure every fi-
nancial instrument Wall Street could dream up and sell to
banks, pension funds and other investors. Because AIG was                   Wall Street & Banks
rated AAA, every piece of junk it insured magically became
AAA, despite whatever might have been in the actual instru-
ment. And because of its own AAA rating, AIG did not need
to set aside reserves on these insurance liabilities and booked
the entire premium to profits.                                                      AIG
   Unlike a life insurance policy, where they know the insured
will ultimately die, AIG assumed there was no risk to the financial instruments and derivatives (credit de-
faults) they insured. The stock was a high-flier, trading in the $70’s as late as May 2007 on these false
profits. When the sub-prime market collapsed, AIG was called on by the insureds to make good on the
policies written. When AIG ran out of money, US taxpayers had to put up $170 billion (to date) to keep
the pyramid from collapsing.
Gold Stock Analyst       www.goldstockanalyst.com         March 2009       Mid-month update         Page 2
  What to do? First, the rating companies, Moodys, S&P, etc., must not be paid by the issuers the financial
instruments; there’s too much incentive to “go easy” on those paying the bill. The Moody’s, et al, should
be paid by investors, those that are using the ratings to invest. It’s exactly the reason why a “Chinese
Wall” was (theoretically) instituted at brokerage firms to separate investment bankers from stock analysts.
It’s why investment newsletters have to disclose (even if in tiny print) that they are being compensated by
the company in the report. And it’s exactly why GSA has always been 100% subscriber supported, so we
can be totally objective in what we write.
  Second, there’s still almost a total lack of regulation of the derivatives market. All calls for regulation
since the late 1990s were ultimately defeated by industry lobbyists. Wall Street has been among the big
donors to both parties and GSA believes that so long as US elections are privately funded, our elected offi-
cials will cow-tow to big donors’ wishes. TV stations and networks got their airwaves for free; they should
give free time to candidates.

Gold Stocks in the News: We don’t usually comment on non-Top 10 stocks, but we certainly keep up
with their activities as at different prices they might become Top 10. The last couple of days saw three of
the largest Gold miners in the news, and generated a few subscribers emails. We can’t possibly comment
in full to emails, but here’s what we would have said:
AngloGold: Made headlines as hedge fund Paulson & Co, famous for making billions by betting the sub-
prime mortgage market would collapse in 2007-08, bought 11.3% directly from AU’s former parent Anglo
-American to end the two Anglo’s association. Paulson paid US$1.3 bil for 39.9 mil shrs and said AU was
“undervalued… we look forward to the implementation of their global expansion strategy”. GSA does too,
as to date AU has been looking inwards, selling its 33% of Boddington mine in Australia to Newmont and
reducing its hedgebook by 50%, to 5.3 mil oz at end-08.
   On Market Caps/oz and Operating Cash Flow Multiple, AU is undervalued vs the industry averages, see
pages 4-5 of March issue. But, this is due to several reasons: 1) No defined growth; 2) Negative mark-to-
market value of remaining gold hedges of -$2.9 bil on 2/06/09 at $914/oz gold; 3) Deep South African
mines with falling grades accounting for over 40% of production.
   GSA sees AU rising with Gold’s price, but not much on its own. In our opinion, Paulson bought because
it was an opportunity to get a big equity position without roiling the Market… in fact at $32/shr he got a
5% discount. The Market was worried about the share overhang as Anglo-American was known wanting
to sell, now, since Paulson is not a buy-and-hold guy, the Market soon be concerned with his plans to sell.
On the other hand, it’s good to see more big investors come to Gold and we were glad to read press reports
that Paulson also owns 4.1% of Kinross.
Goldfields: As planned, gave 50.0 mil shares (worth ~$600 mil) to black empowerment group, Mvela, for
the 15% interest it held in GFI’s South African mines. Mvela is thought a seller to pay down its ~$250 mil
debt and fund development of a platinum/palladium site in South Africa. Despite its right-of-first refusal,
GSA does not see GFI as a buyer due to its already strained balance sheet (see report Feb-09 issue), so the
question is: “Who will buy? Paulson?”
Barrick: Gold’s largest miner made the news as it agreed on 3/16/09 to pay investors $24 mil to settle a
lawsuit from 2002, in which investors claimed to be misled by Company statements that its hedging pro-
gram did not hurt profits as gold price rose.
  ABX, as many know, discontinued adding to its hedge program in 2004 and has reduced it to 9.5 mil oz
that it keeps to back project loans to build Pueblo Viejo (now in construction) and Pasqua Lama (still de-
layed by tax and permit issues). Since ending its Corporate hedges, ABX seems to have convinced many
investors that it’s actually unhedged, but this is not the fact. The current 9.5 mil oz hedges have an average
delivery price under $400/oz and at today’s $955/oz Gold they represent approximately $5 billion in lost
profits if they were delivered into Co’s 7.4 mil oz production forecast for 2009.

PDAC Report: Mining’s largest convention, this year it ran from March 1-4, and featured a trade show,
Gold Stock Analyst       www.goldstockanalyst.com        March 2009       Mid-month update        Page 3
peer to peer presentations, and an Investors Exchange open to the general public. At the latter, over 500
public companies exhibited, mostly precious metals oriented.
  Compared to 2008, when Gold was also above $900/oz and base metals at comparable levels, the attitude
was much less frothy. Approximately two dozen booths had been paid for, but the occupants no-showed,
perhaps unable to afford to air fare and hotel to attend.
  The air was filled with talk of deals. Non-producers can’t get money to explore/build projects and the
larger miners, with shares at more reasonable valuations, are ready to deal. In the two weeks post-PDAC,
all-stock deals (cash is too precious to use) were announced affecting 5 GSA covered stocks: Silver Whea-
ton will buy Silverstone (more below), New Gold will buy Western Goldfields, and Gammon will buy
Capital Gold.

Top 10 Stocks: Attending:
Yamana: At AUY’s booth, Editor talked w/its #2 Exploration man, who’s focused on El Penon. Here Co
says it believes 600K oz/yr of Gold Equiv is possible, but 500K seems a more comfortable operating level
for the mine and Mill. Editor had an early January lunch w/CEO Marrone and was left with the sense that
some of Co’s smaller, non-core mines might be dealt off or spun out, but there would need to be a replace-
ment acquisition to maintain Co’s growth to its 2.0 mil oz/yr rate goal for 2012. Editor tested this thought
on the Exploration guy, who would likely be involved in reviewing any acquisition targets and got no
pushback… he’s been busy.
  AUY reported 2008 financial results just after the PDAC ended on March 5. There were no surprises as
the 983K oz of Au Eqv at $136/oz cash cost, net of by-prods, was already known. But, we found further
confirmation of our divest and acquire thesis in the results presentation. This grouped all producing mines
into Core (Chapada, El Penon, Jacobina and Gualcamayo), Principal (Florida and Brasileiro), and Other
mines (San Andreas, Sao Francisco, Sao Vicente).
  A few days after the Conference, Marrone told Reuters that he likes Mexico. Co’s Mercedes project, 200
km south of Tucson, is a potential 100K+/yr mine. But as Yamana has no other Mexican properties of sig-
nificance, what else might make sense? Checking the map, Minefinders’ Dolores is 150 air miles south-
west from Mercedes. We think acquiring MFN, with full production of 190K oz in 2010, makes sense due:
1) Stock is cheap, selling at less than 50% of AUY’s Market Caps/oz (see Pgs 4&5 March issue)
2) Dolores has a big silver component, ~4 mil oz/ in 2010; AUY gets 12 mil oz/yr from its El Penon.
3) Marrone likes dealing with entrepreneur/founder led companies. In the past acquired Bharti’s Desert
    Sun, Downey’s Viceroy; and Cohen’s Northern Orion.
4) MFN is lead by founder Bailey, who tried to sell Co/mine before building Dolores; with no strong next
    mine in its pipeline, a sale again makes sense.
Northgate: GSA chatted with several execs at NXG’s booth, including the one in charge of delivering the
Young-Davidson pre-feasibility by 6/30/09. The initial 2008 scoping study for Y-D was “gold plated” and
in GSA’s opinion sacred investors with its $300 mil capex. NXG sees the new iteration NXG coming in
below $200 mil as will: 1) use existing shaft and ramps to 1,600’ for first 5 years production, 2) use some
Kemess equipment, 3) get lower equipment costs due to world mine construction slowdown, 4) benefit
from 20% lower Canadian Dollar. In Co’s 4Q08 report delivered on 3/4/09, NXG estimated would exit
2009, at current Au/Cu prices, with $160 mil cash, which means should be able to build Y-D from cash
and debt if needed.
  Co’s end-08 report makes it clear, but investors continue to not recognize, that the Aussie mines acquired
Feb-08 have been fixed, with more improvements to come. 4Q08, Fosterville produced 26K oz at $500
cash and Stawell 31K oz at $383 cash/oz. Kemess will mine thru 2010, (2009 fcst: 173K oz Au and 54
mil lbs Cu) and possibly into 2011 based on prices. Co forecasts 2009 production at 392K oz Au at $461
cash/oz net of 54 mil lbs Cu at $1.40/lb.
  With mines in low political risk areas, Canada and Australia, stock sells at 2X Operating Cash Flow, vs
industry average of 9X. GSA expects release of Young-Davidson pre-feasibility by end 2Q09 will begin to
show all investors the value we see here.
Gold Stock Analyst       www.goldstockanalyst.com         March 2009       Mid-month update        Page 4
Minefinders: Editor didn’t get to hear President Mark Bailey’s presentation due to leading heading the 3+
hour Silver Forum, but booth talks indicated production continues to ramp up well and Commercial Pro-
duction should be declared in 2Q09.
  March 12, Co said had achieved positive cash flow in Feb from production of 5K oz Au and 111K oz Ag
ahead of plan. Crushing is expected to average 18K tonnes/day in March, which is one of the milestones
for commercial production. More in Yamana above.
Silver Wheaton: Editor chaired the 3+ hour Silver Panel which saw 10 companies present. Take-aways
from SLW’s presentation:
1) Growth from ~16 mil oz/yr in 2009 to 30 mil/yr in 2013 comes with no further investment.
2) Fixed cash cost of ~$4/oz gives great leverage to higher silver price.
3) Seeing better deals now due: a) low base metal prices, which makes miners more interested in selling a
    silver stream to offset, and b) financial crisis makes it difficult to fund projects.
  The difficulty in financing growth probably contributed to Silverstone agreeing to be bought for ~$150
mil in SLW shares on March 12. This is a great deal for SLW as SST trades at 4.2X Net Royalty Reve-
nues for 2009 and SLW at ~14.0X. Simple rerating of SST’s $36 mil forecast 2009 Net Royals at SLW’s
14X rate should add $360 mil to SLW’s Market Cap (~$1.12/share). Once the deal is done in May, the
combined $164 mil in Net Royals valued at the 20X GSA sees for royalty earners yields $10.55/shr, so
we’re raising our target to $11/share.
Goldcorp: Nothing new to report since Co released end-08 re-
sults mid-Feb. To GSA, this graphic tells the GG story: Growth
from existing mines and those in construction from 2.3 mil oz
in 2008/2009 to 3.5 mil oz in 2013. Plus, six more projects
(grey arrows) could add up to 1.0 mil oz/yr if advanced into
production. Great growth at low cash cost/oz equals a winning
story, thinks GSA.



European Goldfields: Continues advancing permits for its Certej project in Romania and Skouries and
Olympias projects in Greece.
  March 18 release of 2008 results saw production tonnage up 27% from its Stratoni (Greece) base metal
mine; Zinc production increased to 49 mil lbs, Lead to 31 mil lbs, but Silver was down slightly to 1.1 mil
oz due mining from a lower grade Ag zone. On the related conference call/webcast, Co updated projects:
  Certej: Permits in final phases, w/no opposition at this prior mined site in Romania. Constr seen begin-
ning Oct-09, w/prod start 2H11 at avg 155K oz Au and 800K oz Ag at $370 cash/oz Au, net the Ag by-
product at $7.50/oz. Co sees financing project’s $175 mil capex w/o using its own cash, which was $170
mil on 12/31/08. Sources include $36 mil development grant available, project debt from banks of $100
mil to $120 mil, and possible sale of silver stream; GSA ests 800K Ag oz/yr might raise $40 mil.
  Olympias: Permits seen by early 4Q09 to restart mining 1H10 and produce “con” equivalent to that now
being sold from stockpiles. Forecast 100K tonnes sold from stockpiles in 2009 should net Co ~$25 mil.
When begins actual mining in 2010, the initial planned rate of 200K t/yr at the 0.33 oz/t grade calculates to
~65K oz/yr, w/ultimate expans to 900K t/yr, or over 200K oz/yr.
  Skouries: Long-lead Mill items built or in construction; permits expected 4Q09 for 220K oz Au w/95 mil
lbs/yr Cu by-prod, w/production start 2H11.
  W/10 mil oz P+P and potential 580K oz/yr from 3 new mines in 2012, all likely financed from cash on
hand and project debt (so no equity sale), EGU w/current $500 mil market cap sells at ~$50/oz P+P (~20%
of industry average) and under $1,000/oz of 2012 Production. Chairman recently bought additional 5+ mil
shares in market. GSA’s target is a double to $6.00, but it could double again to $12 if its ounces are
rerated to industry average Mkt Caps/oz (data on pages 4-6 every Issue).
Gold Stock Analyst      www.goldstockanalyst.com        March 2009       Mid-month update       Page 5
Top 10: Not Exhibiting (Royal Gold, Golden Star, Golden Queen)
Franco Nevada: While not exhibiting, FNV President/CEO David Harquail came by to visit after Editor’s
Sunday speech. David hadn’t yet read GSA’s take in the February Update on Newmont’s plan to speed up
work on West Wall of Gold Quarry site where FNV recently bought a 7.3% royalty for $104 mil cash.
But, he agreed our estimate of $36 mil/yr royalty at $1,000/oz Gold was reasonable based on 500K oz/yr
production from West Wall area. If this GSA’s estimates prove true, the royalty purchase will have a 3
year payback, pre-tax.
  David remined GSA to keep in mind that FNV is now the largest Gold royalty company, in terms of an-
nual income from Gold, plus it offers good participation in Oil & Gas and Platinum/Palladium. “That’s
why FNV is Top 10”, said Editor.

Former Top 10:
Claude: Had a piece of the drill core from the Madsen #8 high grade zone at its booth, with gold specks
readily visible. While Seabee mine looks to be finally self-supporting, CGR’s future depends on Madsen
drill results. Results from the second hole into #8 zone should be released any day and the 3rd hole of 20
hole program is now being drilled.
  Co expects a 43-101 resource report in 2Q09 on Madsen’s ~500K historic underground mineralization
grading a very mineable 0.3 oz/ton. If can combine these oz, with #8 zone ounces and those from open-
pittable zones on Madsen property to equal 1.0 mil oz, that would be enough to restart the existing 500 t/
day Mill and the Shaft to 4,100’. All this could save over $100 mil capex and quickly bring production at
100K/yr, perhaps starting end-10, assuming continued good results from #8 zone.