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Gold _ Silver Investment Forum Powered By Docstoc
					                                                               David Stein, CFA, Phone (416) 943-6407; dstein@sprott.ca
                                                               Jed Richardson, Phone (416) 943-6430; jrichard@sprott.ca
                                                        Mike Kozak - Associate, Phone (416) 943-6749; mkozak@sprott.ca




                                         MINING


January 16, 2006                         Gold & Silver Investment Forum
                                         Growing Precious Metals Companies Set To Shine In 2007



♦ During the past twenty-four months,    Gold – Invest In A Secular Trend Pages 1 - 4
Sprott Securities Inc. provided
financial advice to and, either on its   Silver, The ETF And Investment Demand Pages 5 - 7
own or as a syndicate member,
participated in the underwriting
                                         Valuation Of Precious Metals Equities Pages 8 - 11
of securities for these companies        Gold Universe Comparison Chart Page 12
                                         Silver Universe Comparison Chart Page 13
                                         Company Compendium:
 Unless otherwise denoted, all             ♦ Agnico-Eagle   Mines Limited Pages 14 - 16
     figures shown in US$                  ♦ Aquiline Resources Inc. Pages 17 - 20
Where necessary, we are using              ♦ Aurelian Resources Inc. Pages 21 - 24

 a US$0.90 conversion rate                 Bear Creek Mining Corporation Pages 25 - 27
                                           ♦ Eldorado Gold Corp. Pages 28 - 30
                                           ♦ Etruscan Resources Inc. Pages 31 - 34
                                           ♦ First Majestic Silver Corp. Pages 35 - 37
                                           ♦ Fortuna Silver Mines Inc. Pages 38 - 40
                                           ♦ Fronteer Development Group Inc. Pages 41 - 46
                                           ♦ Gabriel Resources Ltd. Pages 47 - 50
                                           ♦ Goldbelt Resources Ltd. Pages 51 - 52
                                           ♦ Guyana Goldfields Inc. Pages 53 - 56
                                           ♦ High River Gold Mines Ltd. Pages 57 - 59

                                           IAMGOLD Corporation Pages 60 - 63
                                           Kinross Gold Corporation Pages 64 - 66
                                           ♦ Linear Gold Corp. Pages 67 - 69

                                           Meridian Gold Inc. Pages 70 - 72
                                           ♦ NovaGold Resources Inc. Pages 73 - 75
                                           ♦ Palmarejo Silver and Gold Corporation Pages 76 - 78
                                           ♦ Silver Wheaton Corp. Pages 79 - 81
                                           ♦ Silvercorp Metals Inc. Pages 82 - 84
                                           ♦ Yamana Gold Inc. Pages 85 - 88

Disclosure statements located            Risks To Target      Pages 89
on the back cover; for disclosure
charts visit www.sprott.ca
JANUARY 16, 2007                                                                                DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                            Gold – Invest In The Secular Trend
                            Since 2001 we have increased our short and long-term gold price assumptions several
                            times, and currently we maintain a $650/oz average price estimate for 2007 and 2008 and
                            a $500/oz long-term price (i.e. 2009 and beyond). The themes or excuses used to justify
                            buying gold and gold stocks have changed over the years. In 2001-2002 it was the
                            heightened geopolitical risk and negative real interest rates causing a move upward off
                            the bottom after being out of favour for so long. In 2003-2004 it was the declining
                            relative value of the US dollar against most other global currencies and in 2005-2006 it
                            was inflation fears that caused gold to rally.
                            But many of the fundamental supports that were present in 2001 remain similar or exactly
                            the same today. New supply of gold from mines is tight and has actually dropped over the
                            last five years, and appears to be stuck for a number of more years. Meanwhile gold
                            continues to attract an increasing share of global investment as an alternative currency.
                            Long-term supply tightness and gold’s growing role as a currency are the main two
                            themes that are driving this secular bull market for gold and should continue to push gold
                            in an upward trend for several more years. The factors that affect demand for gold—the
                            ETFs at one moment…hedge funds and speculators the next—are the symptoms of
                            supply tightness, not the cause of the exceptional demand.
                            As a result we expect the gold price to continue to exhibit a rising trend for several more
                            years, and we recommend investors “invest” with the long-term trend in mind. We can
                            justify significant upside for many of the companies we cover without much, if any, gold
                            price appreciation, and investors can accept any gold price appreciation as a bonus.

Tight Supply Here To Stay   Production in most commodities has tended to rise over the long term, and gold is no
                            exception. When gold started trading freely in the early 70’s, companies rushed new
                            mines into production while exploration groups found new deposits. Two technical
                            breakthroughs in the 80’s—namely oxidation of refractory ores and heap leaching of
                            low-grade ore—helped to fuel an explosion of gold production. The transfer of Western
                            techniques in mining and mineral exploration in the 90’s to emerging markets like Africa,
                            Russia and Asia helped to keep the party going. Even after gold prices collapsed in 1997,
                            production kept growing because projects that were underway continued development.

Figure 1                    Global Gold Production, 1989-2006
                                                  2,800
                                                  2,600
                                                  2,400
                            Production (tonnes)




                                                  2,200
                                                  2,000
                                                  1,800
                                                  1,600
                                                  1,400
                                                  1,200
                                                  1,000
                                                          1989

                                                                 1990

                                                                        1991

                                                                               1992

                                                                                      1993

                                                                                             1994

                                                                                                    1995

                                                                                                           1996

                                                                                                                  1997

                                                                                                                         1998

                                                                                                                                1999

                                                                                                                                       2000

                                                                                                                                              2001

                                                                                                                                                     2002

                                                                                                                                                            2003

                                                                                                                                                                   2004

                                                                                                                                                                          2005

                                                                                                                                                                                 2006




                            Source: World Gold Council




                            SPROTT SECURITIES INC.                                                                                                                                      1
JANUARY 16, 2007                                           DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



                   But that era has ended. Since 2001, global gold production has been on the decline
                   (Figure 1). Low prices through much of the 90’s finally sank into the supply statistics
                   almost 10 years later. And based on the first three quarters of 2006, this past year could
                   be the lowest annual gold production in a decade. For investors used to manufacturing
                   cycles, the mining industry, and the gold sector may seem counterintuitive. With gold
                   prices rising for five consecutive years, how could gold production be falling? The reason
                   is that it is much harder to produce gold than is generally thought. Current producers face
                   significant challenges from cost inflation, foreign currency strength and declining grades.
                   New producers face permitting and financing challenges, and that assumes you are in a
                   stable country.
                   Over the last five years, foreign currency strength and input cost inflation has had a big
                   impact on both capital costs for new mines and operating costs for existing mines. In the
                   short-term, both of these effects are moderating. The US dollar has been relativly strong,
                   and fuel costs, probably the largest cost component of an operating mine, are well down
                   from their highs. One factor that has also hurt industry costs over the last five years and is
                   generally a more long-term and ignored factor is “high-grading” or mining above reserve
                   grade. Sometimes grades bounce around depending on geology and mining sequence, and
                   this cannot be controlled, but more often the mine grade is an economic decision. When
                   companies mine significantly above the mine grade for several years, they leave behind a
                   disproportionate amount of lower grade material, and if the gold price drops or costs
                   increase, this lower grade material may not actually be economic to mine. And if it is, it
                   is likely to cost far more to mine each ounce than it did previously.

Figure 2           High Grading By The Largest Gold Producers And Their Largest Mines*
                                                      2005            2004            2003             2002            2001
                   Newmont                             22%             21%             22%              30%            29%
                    Carlin/Nevada                      65%             60%             57%              75%            34%
                    Yanacocha                         -15%            -22%            -10%             -23%             7%
                   Barrick                             33%              9%             30%              20%            20%
                    Goldstrike                         61%             23%             37%              17%            24%
                    Pierina                           -10%            -23%             56%              57%            83%
                   AngloGold                            6%              6%             12%              21%               **
                    Great Noligwa                      23%             31%             26%              15%               **
                    Mponeng                            31%              0%             10%              14%
                    Tau Tona                           -3%              9%             17%              22%               **
                   Freeport (Grasberg)                 77%            -10%             56%              21%             32%
                   *(Production Grade/Reserve Grade)-1
                   **Data not available
                   Source: Sprott Securities Inc., Company Reports

                   Above we highlight some of the senior gold producers and their biggest mines, not to
                   pick on them specifically, but to show that it is happening at a level that can actually
                   affect the global gold supply. Most gold mining projects are in fact engineered to high-
                   grade the ore deposit to maximize NPV, maximize growth, repay project loans, and
                   justify acquisitions.
                   What the universal high-grading effect means is that global gold production in general
                   has a natural decline rate, and to show meaningful production growth the industry must
                   first replace production from declining or aged mines, and then add production on top of
                   that. So when we look at when the market might see global gold production turning
                   around, we like to look at large mines (i.e. those that could contribute more than 1% of
                   global supply, or 800,000 oz/yr), otherwise production from smaller mines tends to just
                   offset declining production from older mines.




                   SPROTT SECURITIES INC.                                                                                  2
JANUARY 16, 2007                                                    DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 3                          Large Mines Not Likely To Impact Market For Many Years
Project                                               Company         Production          Start Expected                      Status
Pascua-Lama, Chile-Argentina                            Barrick     1.0+ MMoz/yr                    2010                   Permitted
Las Cristinas/Brisas, Venezuela        Crystallex/Gold Reserve      1.0+ MMoz/yr                   2009+           In political limbo
Sukhoi Log, Russia                      Government of Russia        2.0+ MMoz/yr                   2012+           In political limbo
Donlin Creek, USA                            Barrick, NovaGold      1.5+ MMoz/yr                    2013                  Feasibility
Cerro Casale, Chile                        Bema, Arizona Star        1.0 MMoz/yr                   2011+          Awaiting financing
Pueblo Viejo, Domician Rep.                   Barrick, Goldcorp      0.8 MMoz/yr                   2010+                  Feasibility
Source: Sprott Securities Inc.

                                  When we look at the status of the largest gold projects in the world, it is very encouraging
                                  from the point of view of the greater gold market. Only one major project has received
                                  the key approvals (Barrick’s Pascua project) necessary to move forward into
                                  construction. Construction of the large mines typically takes 3+ years, and so even if
                                  some of these other projects are permitted and move towards construction, it will still be
                                  the end of the decade before we are likely to see significant growth in gold production.

Gold Grabbing Its Share Of        But what about Central Banks? While some analysts have been calling for an inevitable
The Inflating Money Supply        flood of gold to come on the market from Central Banks, after 20 years the trend is
                                  moving in the opposite way. The European banks that hold much of the world’s
                                  institutional gold have their selling capped by the Central Bank Gold Agreement, and in
                                  fact did not even come close to selling their quota in 2006—for the first time since the
                                  agreement was struck in 1999. Emerging economies in Asia and resource rich economies
                                  like Russia and the Middle East are slowly accumulating gold, although they seem to be
                                  careful not to drive the price up too quickly. So not only do we see this excess supply
                                  potential as being a moot issue, with the growth in monetary assets around the world,
                                  Central Banks are likely to become sources of demand.
                                  International monetary reserves have grown by a whopping 20% in the last year, with
                                  most of the growth coming from emerging Asia, like China and India, and developing
                                  resource-rich economies like Brazil and Russia. But it is clear that as new economic
                                  growth is rampant in the world, many countries will want places to put their money other
                                  than the US dollar. In some cases it may be a political rejection of the US (e.g. Middle
                                  East, Venezuela), and in other cases, sophisticated central banks, such as China,
                                  recognize the precarious nature of the US dollar and the need to maintain diversification.
                                  While the Euro, Yen and other currencies are likely to continue to see appreciation
                                  relative to the US dollar, we expect that gold will continue to receive a growing piece of
                                  the monetary pie.
                                  Government reserves are just one measurable effect of growing wealth. Individual and
                                  institutional investors in these same countries are getting richer, and are also choosing
                                  gold as an alternative to depreciating currency assets and historically low real interest
                                  rates with inflation continuing to be a factor. Hence the now numerous gold ETF’s listed
                                  around the world, denominated in several currencies, are experiencing steady (but not
                                  explosive) growth, in addition to easing of gold trading restrictions in places like China.




                                  SPROTT SECURITIES INC.                                                                            3
JANUARY 16, 2007                                                DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4           International Monetary Reserves And Gold Reserves By Country/Region
                                        1,200

                                        1,000                                                                       USD




                    Reserves in US$BB
                                         800                                                                        Gold


                                         600

                                         400

                                         200

                                           0
                                                China   Japan          Russia       Middle East     Eurozone          USA
                   Source: World Gold Council

                   The above figure (Fig. 4) could also be titled “where the gold is today, and where the
                   gold is going tomorrow” as it shows the dramatic disparity between global monetary
                   reserves and gold holdings. We expect Europe and possibly the US to be net sellers of
                   gold over the longer term, but the potential demand from China, Japan, Russia and other
                   rising powers could be much, much greater.

Figure 5           Gold ETF Holdings Continue To Grow




                   Source: www.exchangetradedgold.com

                   Investment (and to a lesser extent jewellery) demand growth is likely to be a function of
                   inflating paper wealth around the world—which is reaching unprecedented levels. We do
                   not expect a catastrophe scenario that would cause gold prices to rise dramatically all at
                   once, but more for gold to claim a rising share as an alternative currency.
                   The day-to-day, week-to-week and month-to-month price fluctuations in the gold price
                   are likely to be due to fluctuations in the US currency, economic data (inflationary or
                   recessionary), geopolitical events, etc. In the backdrop is a tight supply situation and
                   gradually rising demand that should sustain this gold bull market for at least three or four
                   more years, and potentially much longer.


                   SPROTT SECURITIES INC.                                                                                       4
JANUARY 16, 2007                                                                                                                                 JED RICHARDSON 416·943·6430




                            Silver, The ETF And Investment Demand
                            The supply and demand story for silver is compelling, however in the near term it is
                            really just a sideshow for the investment demand story that is building in the silver world.
                            Since the inception of the silver ETF in April of 2006, the exchange traded fund has
                            quickly and quietly built up an impressive physical inventory of silver. The ETF now
                            boasts an inventory of 122.1 MMoz of silver, an unbelievable feat in the tiny silver
                            market of just 900 MMoz of silver, 600MMoz of which is derived from mine production
                            the remainder is from recycling and stockpile sales. The silver ETF has very quickly
                            amassed this stockpile with apparent ease and most notably very little impact on the
                            silver price, but that may be about to change.

130 MMoz – Could Mark Key   Aside from the rapid run up to $15.10 per ounce at the time final approval was given for
Inflection                  the ETF, spurred by fund buying, the silver price has moved relatively tamely. For the
                            most part it is trading in step with gold, with the customary greater degree of volatility,
                            but not the strength we would expect from a metal that has seen 20% of mine supply
                            removed from the market. Something we noted at the launch of the ETF was the original
                            prospectus was for 130MMoz, an interesting figure because just prior to final approval
                            Warren Buffet, longtime proponent of higher silver prices, announced at the Berkshire
                            Hathaway Annual General Meeting, that the company no longer held any Silver in
                            inventory. Buffet’s holding coincidently was also 130MMoz. That the two numbers are
                            the same may be purely coincidental and we do not have any evidence that Barclay’s
                            (Custodian for the Silver ETF) purchased its silver directly from Warren Buffet, but we
                            think the sale of this silver inventory may be what has helped the ETF grow as painlessly
                            as it has.

Figure 12                   Silver Market Composition – World Supply & Demand
                                                 $16                                                                                                                        160

                                                 $14                                                                                                                        140




                                                                                                                                                                                  IShares ETF Holding (MM oz)
                                                 $12                                                                                                                        120
                            Silver Price (US$)




                                                 $10                                                                                                                        100

                                                  $8                                                                                                                        80

                                                  $6                                                                                                                        60

                                                  $4                     Total Ounces of Silver in the Trust                                                                40

                                                  $2                     London Silver Market Fix Price                                                                     20

                                                  $0                                                                                                                        0
                                                                         May-05




                                                                                                                               May-06
                                                                Mar-05




                                                                                                    Nov-05




                                                                                                                      Mar-06




                                                                                                                                                          Nov-06
                                                       Jan-05




                                                                                  Jul-05

                                                                                           Sep-05




                                                                                                             Jan-06




                                                                                                                                        Jul-06

                                                                                                                                                 Sep-06




                                                                                                                                                                   Jan-07




                            Source: GFMS and Sprott Securities Inc.

                            In October, Barclay’s filed to enlarge the ETF and filed a secondary prospectus to
                            increase the permitted size of the ETF from 130MMoz to 270MMoz. This cleared the
                            way for the ETF to grow to levels that could seriously impact the world’s supply demand
                            balance for silver. Now in January, we are testing those levels. The ETF is at 122.1MMoz


                            SPROTT SECURITIES INC.                                                                                                                                                              5
 JANUARY 16, 2007                                                                                           JED RICHARDSON 416·943·6430



                                          and is threatening to break through the 130MMoz level. As this story plays out it is
                                          interesting to note the agreement between fundamental and technical analysts that
                                          something big is about to happen in silver.
                                          At the 130MMoz level it does not instantly become impossible to find silver but it is
                                          likely the ETF will have to become more visible as it sources bullion. The most likely
                                          source will be the 100MMoz of silver in the Comex inventories. A visible decline in the
                                          Comex inventories should trigger an uptick in prices.
                                          Interestingly the best advertisement for the ETF may actually be the silver price itself.
                                          Silver is still well below its historic highs ($56/oz 1985), and a sharp upward move in
                                          prices could attract a lot of the capital that has ignored the space until now, spurring an
                                          even greater move.

 Figure 13                                Silver Market Composition – World Supply & Demand
Key                                                                                                                           Key
                                51.0%
YoY % Change                                                                                                         YoY % Change
                               Producer                                                          22.7%
Supply Segment                                                                     -4.0%                        Demand Segment
                               Hedging                                                        Investment
% of Total Demand                                                                  Coins &                      % of Total Demand
                                  2%                                                              5%
                                                                                   Medals
             3.4%                                                                  4%
             Scrap
             21%

                                                                                                                       11.1%
     2.3%                                                                   0.7%                                     Industrial
     Gov't Sales                                                            Jewelry &                                   46%
     7%                                                                     Silverware
                                                                            27%
                                                     3.4%
                                                     Mine                                 -9.0%
                                                     Production                     Photography
                                                     70%                                   18%
Source: GFMS and Sprott Securities Inc.

                                          There is approximately 700MMoz of silver in identifiable above ground inventories, less
                                          than one years demand (900 MMoz). Many industrial applications consume silver, so
                                          unlike gold where almost every ounce mined since dawn of time is accountable above
                                          ground, much of the world’s past silver mine production is consumed. There is a large
                                          amount of silver that is unaccounted for that is held by persons in the form of jewellery
                                          and silverware, that has sentimental, artistic or historical value far greater than the
                                          contained silver.
                                          Silver also lacks the central banks as major players in the determinant of the price. Other
                                          than small holdings, central banks other than China do not hold substantial amounts of
                                          silver, unlike gold where central bank buying or selling has a far greater influence on the
                                          price than mine supply or fabrication demand. This means the silver market is essentially
                                          free of the types of manipulation that can occur in the gold space because the largest
                                          holders do not necessarily have gold’s best interest as a motive behind their trading. In
                                          the silver space this all serves to amplify the role of the ETF.




                                          SPROTT SECURITIES INC.                                                                     6
JANUARY 16, 2007                                                                                             JED RICHARDSON 416·943·6430



Figure 14                    Size Comparison of Silver and Gold Markets
                                                                                             Million of Ounces Millions of Dollars
                             2005 Silver Demand                                                             912            11,765
                             World Identifiable Above Ground Stockpiles                                   635.4             8,197
                             Barclay’s Silver ETF                                                         122.1             1,575
                             Gold ETFs                                                                     17.8            11,173
                             2005 Gold Demand                                                               117            73,441
                             World Official Gold Reserves                                                 994.5           624,248
                             Source: Silver Institute, ExchangeTradedGold.com, World Gold Council and Sprott Securities Inc.


Tiny Silver Market Can Be    At around 122.1 MMoz the silver ETF now holds silver equal to 13% of annual demand
Strongly Influenced by ETF   amassed in just over 7 months since its launch. By comparison the collective gold ETFs
                             around the world hold about 17.8 MMoz of gold equal to 14% of annual gold demand,
                             amassed over 4 years since the launch of the first ETF. When you take into account the
                             relative value of the metals and the size of the markets the comparison gets very
                             interesting. The silver ETF is just $1.5BB in value compared to the $11.2BB in gold
                             ETFs and interestingly almost the entire silver market could fit in the gold ETFs at
                             today’s metal prices. This is just an indication of the potential influence the silver ETF
                             could have as it continues to grow.
                             The fundamental supply-demand story provides a healthy back drop for this drama that is
                             playing out in the financial markets. Silver demand increased 5% year over year in 2005
                             on the back of industrial demand for electronic usage. While demand is expected to
                             remain relatively flat in 2006, the coming battle in micro devices as smartphones, mini-
                             computers and MP3 players grow in complexity and decrease in size require greater
                             amounts of silver for high capacity compact electronics. The cost of silver is really
                             irrelevant to these markets because the alternatives, gold and platinum, are much more
                             expensive and the cost of the device is far greater than the value of the silver contained.
                             We are maintaining our $15/oz forecast for 2007 and 2008, and looking for silver to settle
                             out around $10/oz long term as new production comes to meet demand in 2009 and some
                             of the large scale projects that we are valuing in this report come into production.




                             SPROTT SECURITIES INC.                                                                                   7
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                     Valuation of Precious Metals Equities
                     In the following section, we briefly review the gold companies presenting at our 2007
                     Precious Metals Conference. As with previous years we have structured the reports to
                     cover similar topics, so that one can easily compare the aspects of one company’s with
                     another. This time we feature comments on Production Growth, Exploration Upside,
                     Valuation, and Other Risks/Opportunities. This year there will be a wide array of
                     companies presenting at the conference, from junior exploration companies to mature
                     large-cap producers, so the discussion sections on production growth etc. are not always
                     relevant. For example we omit a Production Growth section from exploration companies,
                     where production may be years away. Likewise the “catch-all” Other Risks/Opportunities
                     section is only included where there is a topic that we feel needs to be addressed but does
                     not fall in any other category.
                     Production growth, exploration upside and basic valuation have emerged as important
                     themes for the gold sector, and based on these one can get a good handle on the return
                     potential going forward. The market has consistently demonstrated a willingness to pay a
                     premium for well-executed growth and meaningful exploration projects. However the
                     market also efficiently discounts base metal cash flow, and high business risks.
                     Ultimately, opportunities in the gold mining sector boil down to valuation, as even the
                     most spectacular growth or highest potential exploration program is not worth buying if
                     you have to pay too much for it.

Production Growth    In terms of valuation, production growth is the most important variable that determines
                     the cash flow (or earnings) multiple at which gold stocks trade, because you can afford to
                     pay more for a company that is growing beyond the forecast horizon, anticipating that
                     cash flows today will be rising in the future (and vice versa). In our experience over the
                     last five years of this gold bull market, growth tends to be underpriced by the market,
                     particularly when there is a lull in the gold price or the equities as a sector may be out of
                     favour. This has resulted in some spectacular opportunities in the past to enjoy high
                     returns with high-quality companies such as Glamis, Eldorado and Goldcorp/Wheaton
                     River. Recently the market has been pricing in growth more accurately; however, we still
                     see some good opportunities from lesser-known growth stories (Meridian, High River,
                     Etruscan etc.) or from companies evolving after significant merger activity (Iamgold).

Exploration Upside   A few years ago, exploration was on the backburner in terms of market focus, and
                     investors primarily sought to capture exposure to production and gain immediate leverage
                     from higher gold prices. Good exploration projects that can meaningfully impact a
                     company's growth, especially for the larger mid-tier and senior producers, are very rare,
                     and valuable. Market participants today are much more willing to put a price tag on an
                     exploration project and pay something for it, even before an official resource is
                     calculated. This tends to be a more speculative component of the analysis, but there is no
                     doubt that a new discovery can add value, almost overnight, and as various companies
                     have demonstrated important exploration success over the past few years, the market
                     seems to have become more and more conscious of the opportunity. We value
                     exploration among the producers we cover by targeting a higher multiple; however,
                     significant discoveries can quickly add value over and above our growth-based targets.




                     SPROTT SECURITIES INC.                                                                            8
JANUARY 16, 2007                                                                               DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 6                 Gold Sector P/CFPS Multiples (2 Quarters Trailing, 2 Quarters Ahead)
                                    25                                                                                                                                            $700

                                    20                                                                                                                                            $600




                                                                                                                                                                                         Price (US$/oz)
                                                                                                                                                                                  $500
                                    15




                         Multiple
                                                                                                                                                                                  $400
                                    10
                                                                                                                                                                                  $300
                                     5                     P/CFPS
                                                                                                                                                                                  $200
                                                           Gold Price
                                     0                                                                                                                                            $100
                                         Jun-92

                                                  Jun-93

                                                           Jun-94

                                                                    Jun-95

                                                                             Jun-96

                                                                                      Jun-97

                                                                                                 Jun-98

                                                                                                          Jun-99

                                                                                                                   Jun-00

                                                                                                                            Jun-01

                                                                                                                                     Jun-02

                                                                                                                                              Jun-03

                                                                                                                                                       Jun-04

                                                                                                                                                                Jun-05

                                                                                                                                                                         Jun-06
                         Source: Sprott Securities Inc.



Valuation                A rapidly growing company or hot exploration prospect is not worth buying if you have
                         to pay too much for it, because these same companies can be among the riskiest.
                         Likewise, a company with no growth may be worth buying at a certain (albeit lower-
                         than-average) valuation. For the producers at the conference, we are rolling forward our
                         P/CFPS multiples to use 2008e CFPS to get our 12-month targets. Based on our historical
                         analysis of the gold sector, we use a 15x multiple as a base case, and then increase or
                         decrease the multiple based on growth (or lack thereof), and other qualitative factors such
                         as exploration potential, geopolitical risk etc. We discuss valuation of gold producers in
                         more detail in our sector report: Gold Over $500/Oz In 2006, December 5, 2005. For the
                         exploration and development (“junior”) stocks, we cannot use 2008E P/CFPS estimates,
                         and so in this case we use a NAV multiple. Over the past year-and-a-half we have seen a
                         number of junior or single-asset deals (or attempted takeovers) take place. Generally
                         these companies are valued at 1.2 – 1.5x P/NAV using a $500/oz long-term gold price.
                         We expect the junior development and exploration companies to trade within a range
                         below 1.5x P/NAV. Some companies that are perceived to have significant obstacles
                         (permitting problems, geopolitical issues etc.) will trade at significant discounts to NAV.

2006: Company Specific   Taking the participants of our 2006 as a representative sample, last year looks like a
Events Fuelled Returns   reasonable year for gold stocks on average, but with company-specific events fuelling the
                         gains (or losses). We lost several companies that presented last year to corporate
                         transactions: Desert Sun (111% return), Glamis Gold (46% return), and Cambior (24%
                         return), that boosted overall returns for investors, but we expect similar activity in 2007.
                         Interestingly few themes consistently emerge from last year’s performance, particularly
                         among the producers—for example, companies involved in significant acquisitions both
                         outperformed (Yamana) and underperformed (Iamgold) the sector. “Growth oriented”
                         companies both outperformed (Agnico-Eagle, Yamana) and underperformed (Eldorado)
                         last year, suggesting that growth is best bought at a discount. The one theme that did
                         dominate last year’s stock price performance was tremendous value that exploration
                         success can create: witness the two top performers last year, Guyana Goldfields and
                         Etruscan Resources. Both companies were involved with highly successful exploration
                         campaigns last year.




                         SPROTT SECURITIES INC.                                                                                                                                                           9
JANUARY 16, 2007                                                                    DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 7                                 Stock Price Returns From 2006 Sprott Conference

Guyana Goldfields
     Etruscan Res.
      Agnico-Eagle
      Yamana Gold
       Gabriel Res.
  Palmarejo Silver
            Kinross
   High River Gold
S&P TSX Gold Idx
     Meridian Gold
           Goldcorp
     Eldorado Gold
            Iamgold
        Linear Gold

                      -40%       -20%       0%        20%         40%       60%       80%       100%       120%        140%     160%       180%        200%

Source: Bloomberg, Sprott Securities



2007: Buy Well-Priced                    In 2007 we expect that companies with a growth and exploration component to their
Growth With Exploration                  story are likely to be among the top performers. Meridian and High River Gold are two
Upside                                   such companies that have significant exploration upside with the potential to report
                                         significant news (drilling results) throughout the year. Our targets and recommendations
                                         are presented below.

Figure 8                                 2007 Target Prices And Recommendations – Gold Producers
                                                                                                  Est. US$
                                                         C$                         Exp.          08E           NAV        P/NAV
Rank                      Recommend.                  Target          Price         Ret.         CFPS                       Mult.        Target Multiple
Mid/Large Tier Producers
1    Meridian Gold            Top Pick                $47.50        $31.40           51%         $2.15        $14.06          1.9x      19.8x 08E CFPS
2    IAMGOLD                      Buy                 $15.50        $10.21           52%         $0.76         $6.99          1.3x      18.3x 08E CFPS
3      Yamana Gold                Buy                 $20.00        $15.01           33%         $1.73         $5.88          2.2x      10.5x 08E CFPS
4    Goldcorp                     Buy                 $39.50        $30.90           28%         $2.19        $12.08          2.2x      19.0x 07E CFPS
5      Agnico-Eagle               Buy                 $57.50        $45.37           27%         $2.41        $15.29          2.6x      21.6x 08E CFPS
6    Bema Gold                 Tender                  $8.00         $6.29           27%           N/A          N/A           N/A        0.4447x Kinross
7    Kinross                      Buy                 $18.00        $14.17           27%         $1.03         $7.49          1.6x      15.0x 08E CFPS
8      Eldorado Gold              Buy                  $8.00         $6.29           27%         $0.49         $2.83          1.9x      14.9x 08E CFPS
Junior Tier Producers
1      High River Gold        Top Pick                  $4.50        $2.05         120%          $0.49         $2.05          0.9x       8.2x 08E CFPS
2      Etruscan Resources      Buy (S)                  $5.10        $3.53          44%          $0.32         $1.96          1.5x      14.2x 08E CFPS
3      Crew Gold               Buy (S)                  $3.60        $2.35          53%          $0.30         $1.69          1.2x      10.6x 07E CFPS
4      Queenstake                 U.R.                   U.R.        $0.23          N.A.          U.R.          U.R.          N.A.        Under Review
 During the past 24 months, Sprott Securities Inc., either on its own or as a syndicate member, participated in the underwriting of these securities
Source: Sprott Securities




                                         SPROTT SECURITIES INC.                                                                                         10
JANUARY 16, 2007                                                                    DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 9                                 Stock Price Returns From 2006 Sprott No Brainers Silver Report (Feb 14, 2006)

Sprott Silver No Brainers
                    Silvercorp                                                                                                    154%
        Bear Creek Mining                                                                                              130%
                First Majestic                                                                   85%
              Fortuna Silver                                                                   81%
                    Palmarejo                                        26%
 Widely Followed Silvers
            Silver Standard                                                                         91%
             Silver Wheaton                                                   45%
                Hecla Mining                                           31%
              Pan American                                            29%
                   Apex Silver            -12%
              Coeur d'Alene          -23%


                          Silver                                            41%

                                 -40%                0%                 40%                80%               120%               160%                   200%
Source: Bloomberg, Sprott Securities



2007: Silver Space Full of               Silver is poised to outperform in 2007 and we continue to see substantial upside in our
Opportunities                            universe of silver names. We have added Aquiline Resources, an exciting exploration and
                                         development story, and Silver Wheaton, a 100% silver large capitalization
                                         mining/financial instrument to our coverage. Despite the extraordinary performance in
                                         our universe last year, many of these names will have key catalyst in 2007 and remain
                                         under-appreciated by the broader silver equity market.

Figure 10                                2007 Target Prices And Recommendations – Silver Companies
                                                                                                 Estimates
                                                         C$                         Exp.        2008E NAV (C$)             P/NAV
Rank                            Recommend.            Target          Price         Ret.        CFPS                        Mult.        Target Multiple
Producers
1     Fortuna Silver                       Buy         $4.00         $2.45           63%         $0.28         $2.32          1.1x 14.0x 07E P/CFPS
2     Silver Wheaton                       Buy        $17.50        $11.75           49%         $0.78         $5.22          2.3x 20.5x 07E P/CFPS
3     Silvercorp Metals (C$)               Buy        $22.00        $16.65           32%         $1.68        $15.34          1.1x 13.1x 07E P/CFPS
4     First Majestic (C$)               Buy (S)        $7.20         $5.52           30%         $0.89         $4.11          1.3x 8.1x 07E P/CFPS
Exploration & Development Companies
1    Bear Creek Mining          Buy                   $14.50         $8.89           63%                      $14.30          0.6x              1.0x NAV
2     Palmarejo                 Buy                   $13.90         $8.60           62%                       $9.27          0.9x              1.5x NAV
3     Aquiline Resources     Buy (S)                  $11.50         $7.74           49%                      $11.54          0.7x              1.0x NAV
 During the past 24 months, Sprott Securities Inc., either on its own or as a syndicate member, participated in the underwriting of these securities
Source: Sprott Securities




                                         SPROTT SECURITIES INC.                                                                                          11
JANUARY 16, 2007                                                                                                                                                                                                                                                                                                                     DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 11                                                   Gold Universe Comparison Chart
                                                                 CAPITALIZATION                                                                                                                                PRODUCTION                                                                  RESERVES & RESOURCES                                                                                                             VALUATION AND TARGET
In US$ unless




                                                                                                                                                                                                                                                                                                                     Resv. + M&I Resc. (MM oz)
otherwise noted




                                                                                                                                                                                                                                                                                                                                                                      EV/Resv + M&I Resc ($/oz)




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Net Asset Val (US$/share)
                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Anticipated Return (1-yr)
                                                                                                                                                                                                                                                                                                                                                                                                                                                  Target Price (US$/share)
                                                                                                                                                                                                                                                                                           Reserves YE/05 (Mln oz)
                                                                                                                                                                                                                                         Prod. CAGR (2006-2010)
                                                                                                                                   Enterprise Value ($ MM)




                                                                                                                                                                                      Cash Cost 2007E ($/oz)
                                                                                                                                                             Gold Prod. 2007E (koz)




                                                                                                                                                                                                                                                                                                                                                                                                                         P/CFPS Multiple 2008E
                                                                    Market Cap. (US$ MM)
Gold Price (Avg.):




                                                                                                                                                                                                                                                                                                                                                                                                  CFPS 2008E ($/share)
                                                                                                                                                                                                                                                                  EV/2007E Prod. ($/oz)
                                                                                                                                                                                                                  Hedged Prod. 2007E
2006E: $600/oz




                                                                                                                                                                                                                                                                                                                                                 EV/Reserves ($/oz)
                                                                                           Cash ($ MM) Q4/05


                                                                                                               Debt ($ MM) Q4/05
                                             Share Price (US$)
2007-8: $650/oz




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     P/NAV Multiple
2009E+: $500/oz               Symbol (TSX)
Discount Rate: 5%+



January 15, 2007

GROUP I: Large-Cap Producers
Barrick                 ABX      $29.25                            25,126 1,430 3,567                                              27,263                    9,300                       290                        0%                  NA                        2,931                   139.0                      194.0                                196                         141         2.52                   11.6x                      NR                            NR   NR                                                NR
Newmont                 NMC      $43.21                            19,445 1,332 1,957                                              20,070                    7,500                       250                        0%                  NA                        2,676                    92.4                      105.7                                217                         190         4.13                   10.5x                      NR                            NR   NR                                                NR
Goldcorp                G        $26.19                             9,986   265 1,700                                              11,422                    2,112                        54                     Unhed.                11%                        5,408                    25.0                       31.8                                456                         359         2.36                   11.1x                   $35.50                          36% 13.75                                              1.9x
Average (Group I)                                                                                                                                                                        198                                            0%                        3,672                                                                                   290                         230                                11.1x
GROUP II: Mid-Cap Producers
Kinross                 K        $12.18                               4,418                    274                 392               4,536                   1,868 334                                           Unhed.                 3% 2,428                                           20.8                                22.5               218                                 202         1.02                   11.9x                   $16.00                          31%  7.49                                             1.6x
Agnico-Eagle            AEM      $38.38                               4,640                    255                 -                 4,385                     242 -602                                          Unhed.                31% 18,143                                          11.8                                14.5               372                                 302         2.41                   15.9x                   $52.00                          35% 15.29                                             2.6x
Meridian                MNG      $27.00                               2,730                    193                 -                 2,537                     322 -123                                          Unhed.                10% 7,879                                            2.1                                 3.1              1208                                 818         2.16                   12.5x                   $42.50                          57% 14.06                                             1.9x
Yamana                  YRI      $12.91                               4,404                    474                 -                 3,931                     641 -182                                          Unhed.                37% 6,129                                            4.9                                 7.0               802                                 562         1.73                    7.5x                   $18.00                          39%  5.88                                             2.2x
Eldorado                ELD       $5.41                               1,845                     81                  51               1,815                     260 239                                           Unhed.                48% 6,980                                            8.7                                18.5               209                                  98         0.49                   11.0x                    $7.25                          34%  2.83                                             1.9x
IAMGOLD                 IMG       $8.78                               2,567                    121                  55               2,500                   1,022 293                                           Unhed.                 3% 2,446                                            6.3                                14.3               397                                 175         0.76                   11.6x                   $14.00                          59%  6.99                                             1.3x
Average (Group II)                                                                                                                                                   30                                                                17% 6,230                                                                                                  455                                 307                                11.7x                                                                                                         1.9x
GROUP III: Small-Cap Producers
High River              HRG       $1.76                                              438         6                 103                                534            266                176                      Unhed.                22%                        2,009                              1.9                                   2.7            281                         198         0.49     3.6x   $4.05 130%                                                                                2.05  0.9x
Crew Gold               CRU       $2.02                                              740       151                 336                                925            290                210                      Unhed.                 N/A                       3,189                              2.3                                   4.1            402                         226         0.16   12.6x    $3.25   61%                                                                               1.98  1.0x
Queenstake              QRL       $0.20                                              115        14                   1                                103            208                364                      Unhed.                 2%                          494                              0.9                                   2.4            114                          43         0.00 N/A      UR      UR                                                                                   UR N/A
Average (Group III)                                                                                                                                                                     250                                            28%                        1,897                                                                                   266                         155                  8.1x                                                                                                   0.9x
GROUP IV: Exploration and Development
NovaGold                NG       $16.11                               1,475                    274                 250               1,451                             0                 N/A                        N/A                  N/A     0                                          5.3                               21.3                        N/A                          68           N/A                           N/A            $17.00                        6%                        11.92                         1.4x
Crystallex              KRY       $3.26                                 673                     89                  97                 681                            40                 350                     Unhed.                723% 17,034                                         12.5                               17.7                         55                          38         -0.09                           N/A             $6.75                      107%                         6.64                         0.5x
Aurelian Res.           ARU      $28.04                                 928                     21                 -                   907                             0                 N/A                     Unhed.                  N/A     0                                          0.0                                0.0                        N/A                         N/A           N/A                           N/A            $44.10                       57%                        44.10                         0.6x
Gabriel                 GBU       $4.15                                 876                     45                 -                   831                             0                 N/A                        N/A                  N/A     0                                         10.1                               14.6                         82                          57           N/A                           N/A             $6.75                       63%                         5.67                         0.7x
Gold Reserve            GRZ       $4.15                                 163                     27                 -                   136                             0                 N/A                        N/A                  N/A     0                                         10.1                               12.4                         13                          11           N/A                           N/A            $12.25                      196%                        13.79                         0.3x
Guyana Goldfields       GUY      $10.00                                 486                      9                 -                   477                             0                 N/A                        N/A                  N/A                                                0.0                                0.0                        N/A                         N/A           N/A                           N/A            $14.40                       44%                        10.02                         1.0x
Etruscan                EET       $3.04                                 306                     27                 -                   279                           187                 221                       15%                 855% 1,496                                           1.3                                3.2                        215                          87          0.32                           0.0x            $4.60                       52%                         1.96                         1.5x
Linear Gold             LRR       $4.18                                  92                     13                 -                    79                             0                 N/A                        N/A                  N/A                                                0.0                                1.0                        N/A                          79           N/A                           N/A            $10.80                      158%                        10.40                         0.4x
North Atlantic Res.     NAC       $1.46                                  28                     10                 -                    18                             0                 N/A                        N/A                  N/A                                                0.0                                0.0                        N/A                         N/A           N/A                           N/A             $3.70                      153%                         2.79                         0.5x
Mundoro                 MUN       $1.60                                  45                      6                 -                    40                             0                 N/A                        N/A                  N/A                                                2.8                                3.8                         14                          10           N/A                           N/A             $5.20                      225%                         5.32                         0.3x
Average (Group IV)                                                                                                                                                                                                                                                                                                                                        197                         114                                                                                                                                              0.7x
Average (All Groups)                                                                                                                                                                     148                                           122%                       4,721                                                                                   295                         182                                10.3x                                                                                                         1.1x
    □ During the past twenty-four months, Sprott Securities Inc. provided financial advice to and, either on its own or as a syndicate member, participated in the underwriting of securities for these companies
   1) Cash cost plus enterprise value per reserve plus measured and indicated resource ounce                                        C$/US$ exchange rate floating (for share price and per share conversions)
Source: Company reports, Sprott Securities estimates



                                                            SPROTT SECURITIES INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                              12
JANUARY 16, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                     JED RICHARDSON 416·943·6430



Figure 15                                                                Silver Universe Comparison Chart
                                                                           CAPITALIZATION                                                                                                           PRODUCTION                                                                                               RESERVES & RESOURCES                                                                                                                   VALUATION AND TARGET
In US$ unless
otherwise noted




                                                                                                                                                                                                                                                                                                                                        Silver Content of Resource




                                                                                                                                                                                                                                                                                                                                                                                          EV/Resv + M&I Resc ($/oz)
                                                                                                                                                                        Silver Prod. 2008E (MMoz)




                                                                                                                                                                                                                             Silver Content of Revenue
Silver Price (Avg.):



                           Symbol (Canadian Ticker)




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Anticipated Return (1-yr)


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            Net Asset Val (C$/share)
                                                                                                                                                                                                                                                                                   Reserves YE/05 (Mln oz)
                                                                                                                                              Enterprise Value ($ MM)




                                                                                                                                                                                                                                                                                                               Total Resource (MM oz)
2006E:$13/oz




                                                                                                                                                                                                    Cash Cost 2008E ($/oz)




                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Target Price (C$/share)
                                                                                                                                                                                                                                                                                                                                                                                                                                             P/CFPS Multiple 2007E
                                                                               Market Cap. (US$ MM)




                                                                                                                                                                                                                                                                                                                                                                                                                      CFPS 2008E ($/share)
                                                                                                                                                                                                                                                           EV/2008E Prod. ($/oz)
2007-08E: $15/oz




                                                                                                                                                                                                                                                                                                                                                                     EV/Reserves ($/oz)
                                                                                                      Cash ($ MM) Q4/05


                                                                                                                          Debt ($ MM) Q4/05
2009E+: $10/oz



                                                      Share Price (C$)
Discount Rate: 5%+




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       P/NAV Multiple
January 15, 2007


GROUP I: Large-Cap Producers
Silver Wheaton         SLW                            $11.42                     2,193                     62                 -               2,131                        16.2                           3.90               100%                                      132          68.1                       250.0                    100%                         31.29                         8.52               0.78                   12.8x                   $17.50                         61%                      5.22                         2.1x
Coeur D'Alene Mines    CDM                             $5.35                     1,235                    365                 180             1,050                        21.6                           3.90                62%                                       49         236.9                       485.4                     72%                          4.43                         2.16               0.38                   11.7x                      NR                           NR                       NR                           NR
Pan American Silver    PAA                            $29.02                     1,922                    181                   0             1,741                        19.5                           3.75                70%                                       89         147.5                       647.3                     56%                         11.81                         2.69               1.68                   15.1x                      NR                           NR                       NR                           NR
Hecla Mining           HL:NYS                          $6.80                       812                     86                 -                 727                         6.0                           5.00                40%                                      121          59.9                        95.8                     40%                         12.13                         7.59               0.87                    7.8x                      NR                           NR                       NR                           NR
Average (Group I)                                                                                                                                                                                         3.85                                                          90                                                                                              16                            4                                      13.2x
GROUP II: Mid-Cap Producers
Silvercorp Metals      SVM                            $16.75                                    701               97              -                           604                      4.3  -2.96                                        45%                            142                  0.0                97.0                            36%                    N/A                 6.23                       1.68                    8.7x                   $22.50                         34%                     15.34                        1.1x
First Majestic         FR                              $5.53                                    215                9               24                         231                      7.1   5.34                                        90%                             32                  5.2                43.5                            80%                  44.36                 5.30                       0.89                    5.4x                    $6.50                         18%                      4.11                        1.3x
Endeavour Silver       EDR                             $4.36                                    160               63              -                            97                      2.2   4.25                                        89%                             44                  0.0                 4.7                            88%                    N/A                20.53                       0.33                   11.5x                      NR                           NR                       NR                          NR
Revett Minerals        RVM                             $1.35                                     84               13               14                          85                      2.2    N/A                                        40%                             39                 39.5               305.4                            57%                   2.16                 0.28                        NR                      NR                       NR                           NR                       NR                          NR
Fortuna Silver         FVI                             $2.44                                     99               19                5                          85                      1.9 -11.50                                        68%                             45                 10.5                27.7                            61%                   8.07                 3.06                       0.28                    7.6x                    $3.80                         56%                      2.32                        1.0x
Average (Group II)                                                                                                                                                                          -1.22                                                                        60                                                                                          18.20                 7.08                                               8.3x                                                                                                       1.1x
GROUP III: Exploration & Development Companies
Western Silver           WTC     $31.65   1,370                                                            56                 -               1,314                                                                                                                                  0.0                       820.6                             52%                         N/A                   1.60                                                                NR                            NR                       NR                          NR
Silver Standard          SSO     $35.50   1,900                                                           240                 -               1,660                                                                                                                                  0.0                       931.6                             66%                         N/A                   1.78                                                                NR                            NR                       NR                          NR
Apex Silver Mines        SIL:AME $15.43     785                                                           429                 437               794                                                                                                                                332.6                       431.1                             27%                        2.39                   1.84                                                                NR                            NR                       NR                          NR
Palmarejo                PJO      $8.60     678                                                            83                 -                 594                                                                                                                                  0.0                       126.8                             59%                         N/A                   4.69                                                              13.90                          62%                      9.27                        0.9x
Minefinders              MFL     $10.81     451                                                            73                 -                 377                                                                                                                                103.7                       152.6                             43%                        3.64                   2.47                                                                NR                            NR                       NR                          NR
Bear Creek Mining        BCM      $8.94     313                                                             9                 -                 304                                                                                                                                  0.0                       224.0                             68%                         N/A                   1.36                                                              14.50                          62%                     14.30                        0.6x
Aquiline Resources       AQI      $7.99     300                                                            15                   1               285                                                                                                                                  0.0                       307.8                             53%                         N/A                   0.93                                                              11.50                          44%                     11.54                        0.7x
MAG Silver               MAG      $7.23     237                                                             0                  28               265                                                                                                                                  0.0                         0.0                              N/A                        N/A                    N/A                                                                NR                            NR                       NR                          NR
Continuum                CNU      $0.34      20                                                             1                 -                  19                                                                                                                                  0.0                         0.0                              N/A                        N/A                    N/A                                                                NR                            NR                       NR                          NR
Average (Group III)                                                                                                                                                                                             N/A                                      N/A                                                                                                                   3                      2                                                    N/A                                                                                           0.7x

Average (All Groups)                                                                                                                                                                                           1.5                                                          77                                                                                       13.37                         4.44                                         10.1                                                                                                        1.1

         During the past 24 months, Sprott Securities Inc., either on its own or as a syndicate member, participated in the underwriting of these securities
          Both IMA and Aquiline claim ownership of the same deposit, currently in legal battle over property              Consensus estimated used for CFPS
        C$/US$ exchange rate      floating (for share price and per share conversions)
Source: Company reports, Sprott Securities estimates




                                                                         SPROTT SECURITIES INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   13
JANUARY 16, 2007                                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                         Agnico-Eagle Mines Limited
                                     (AEM - C$45.37, TSX; AEM - $38.38, NYSE)

Recommendation: BUY                                                                            Target Price: $52.00, C$57.50
Figure 1                                                   Estimates
                                                                          Growth – Production Ramping Up In 2008
YE Dec. 31                         2006E         2007E           2008E
Gold Production (000 oz)            246.3         241.7           474.6   Agnico’s growth profile and strong profitability from
Diluted EPS, adj.                   $1.49         $1.17           $1.39   LaRonde in 2006 helped it to be the best performing stock
Diluted CFPS, adj.                  $2.03         $2.09           $2.41   of the mid/large capitalized stocks from our annual gold
Production Yr/Yr Change               2%            -2%            96%
CFPS Yr/Yr Change                   152%             3%            15%
                                                                          conference one year ago—and that even includes stocks
EV/Production                     $19,764       $20,111         $10,242   that were taken over at significant premiums (Glamis).
EV/Resv. + M&I Res.                  $302                                 Today Agnico has moved from talking about and studying
P/CFPS                              18.9x          18.4x          15.9x   its various growth projects to actually building them—all
Source: Company reports, Sprott Securities estimates                      while successfully operating one of the world’s most
                                                                          profitable gold mines, LaRonde. The combination of
Figure 2                                                Price Chart       moving forward with its well-articulated growth strategy
                                                                          while reaping profits from its “cash cow” mine in Quebec
                                                                          has led to impressive out performance in the gold sector—
                                                                          this despite a large equity financing in 2006. All of
                                                                          Agnico’s new mines are expected to be below industry
                                                                          average cash costs in friendly jurisdictions, so while none
                                                                          of the projects individually are very big, the cumulative
                                                                          effect creates the leader in the mid-tier with a production
                                                                          profile approaching 1,000,000 MMoz/yr by the end of the
                                                                          decade. The market clearly gives Agnico some credit for its
                                                                          growth pipeline, which kicks into gear in mid-2008, and
                                                                          we still expect that as Agnico demonstrates success it
                                                                          should see a continued valuation increase. In addition,
                                                                          because all of its near-term growth projects are pre-
Source: BigCharts (January 15/07) US$ Chart
                                                                          dominantly underground mines, the ramp-up will take
                                                                          more than one year, which means corporately Agnico
Figure 3                                                   Statistics     should see meaningful growth in 2010 and 2011 even after
Shares Outstanding:                                                       production has commenced.
  Basic                                                    120.9 MM
  Fully Diluted                                            124.3 MM       Agnico’s free cash flow from LaRonde and its now much
  Management                                                  2.6 MM      improved valuation gives the Company a somewhat unique
Market Capitalization                                  C$5,485.2 MM       opportunity to grow through acquisitions, which we believe
Market Float                                           C$5,367.3 MM
Cash                                                        $255 MM
                                                                          it needs to do to shore up significant growth beyond 2010,
Total Debt                                                         Nil    otherwise the Company may evolve to be a stagnant play
NAV Per Share                                                C$17.78      on the gold price. On a production basis, Agnico is
Price/NAV                                                        2.6x     similarly priced to Goldcorp on 2010 production, which
Average Daily Trading Volume                                              would be its nearest comparable as a low cost gold-
  TSX                                                         913,812
  NYSE                                                      2,024,448     dominated polymetallic miner, and with much less
High-Low (52 Week)                                                        financial and capital escalation risk. But the relatively
  TSX                                             C$52.03 - C$23.91       small size of Agnico’s new projects makes the Company
  NYSE                                              $45.67 - $20.46       less likely to be acquired by a “senior” producer. Instead,
Reserves                                                11.8 MMoz
Reserves+ M&I Resources                                 14.5 MMoz
                                                                          Agnico has the opportunity to become a small senior and
                                                                          continue a long and strong tradition of mining and
Source: Company reports, Sprott Securities estimates
                                                                          development expertise…something the dozens of juniors
                                                                          almost universally lack.


                                       SPROTT SECURITIES INC.                                                                               14
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4             Gold Production Growth – Company Guidance




                     Source: Agnico-Eagle



Production Growth    Agnico’s growth comes from a big expansion of activities in Val D’Or, Quebec area
                     where the LaRonde mine is located. Agnico is developing two new mines in the area
                     (Lapa and Goldex) that will more than double production from 250,000 oz/yr today to
                     approximately 550,000 oz/yr. LaRonde itself will start to see more gold production in
                     2011 as the deeper “LaRonde II”zone is mined—this zone carries a higher gold grade and
                     lower zinc grade. Outside of Canada, Agnico is developing the Kittila mine in Finland
                     (175,000 oz/yr – 200,000 oz/yr at full production) and Pinos Altos in Mexico, which the
                     Company is now expecting 150,000 oz/yr of production. Pinos Altos could produce
                     approximately 3,000,000 oz/yr of silver as well, which should make it the second-most
                     profitable mine in the portfolio after LaRonde.

Exploration Upside   Agnico has committed to spend an impressive $35 MM on exploration in 2007—a record
                     level but appropriate to the size of the Company. Much of the spending will likely be on
                     existing projects to expand reserves, convert resources into reserves, and drill satellite or
                     nearby targets such as the Bousquet property next to LaRonde, and Iso-Kuotko near the
                     Kittila mine in Finland, where high-grade have been intersected, but so far only over
                     narrow widths of 1-2 m. Agnico also operates early-stage exploration in Nevada and
                     occasionally funds junior companies in exchange for a significant equity position (e.g.
                     Continuum Resources).

Valuation            We are rolling forward our cash flow estimates that we use to value Agnico-Eagle to
                     2008 from 2007. We estimate that CFPS should grow to $2.41 in 2008e from $2.09 in
                     2007e, however some of the growth that we previously accounted for in Agnico’s
                     multiple target will be in production in the second half of 2008. Therefore, we are
                     reducing our growth-based multiple target to 21.5x from 23.8x previously. As a result we
                     are increasing our 12-month target to C$57.50 ($52.00) from C$55.00 previously. Agnico
                     has been a spectacular performer over the past year, particularly given its market
                     capitalization; however the shares have cooled off recently. Therefore, we are
                     comfortable maintaining our BUY recommendation, seeing significant upside potential
                     as the Company executes on its growth projects into 2008.



                     SPROTT SECURITIES INC.                                                                           15
JANUARY 16, 2007                                                            DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               Agnico-Eagle Mines Limited – Canadian GAAP Income Statement
Fiscal YE December 31                                                      2007E
(US$000s)                            2006E              Q1E         Q2E        Q3E            Q4E         2007E         2008E          2009E

Realized Metal Prices
Gold ($/oz)                          $600           $650           $650       $650           $650           $650          $650          $500
Silver ($/oz)                       $13.00         $15.00         $15.00     $15.00        $15.00         $15.00        $15.00        $10.00
Zinc ($/lb)                          $1.05          $1.40          $1.40      $1.40         $1.40          $1.40         $1.00         $0.65
Metal Production
Gold Production (koz)                   246                60         60         60            60            242           475            752
Silver Production (koz)               4,993             1,168      1,168      1,168         1,168          4,673         4,396          6,920
Zinc Production (MMlbs)                 144                41         41         41            41            164           172            171
Cash Cost ($/oz)                     $(411)            $(602)     $(602)     $(602)        $(602)         $(602)         $(74)          $138

FINANCIALS
Revenue                           $472,575      $125,284        $125,284   $125,284     $125,284       $505,135      $580,222       $562,345
On Site Costs                      154,889        49,647          49,647     49,647       49,647        198,588       232,800        286,000
Operating Income                   317,686        75,637          75,637     75,637       75,637        306,547       347,421        276,345
Corporate                           21,677          5,000          5,000      5,000         5,000        20,000         20,000        20,000
Exploration                         36,781          5,000          5,000      5,000         5,000        28,000         28,000        28,000
EBITDA                             259,228         65,637         65,637     65,637        65,637       258,547        299,421       228,345
Depreciation                         23,302          4,834         4,834      4,834         4,834         19,337        36,400         61,965
Provision for Taxes                  86,757        25,621        24,821     24,021         23,221       100,084         95,907         65,233
Interest (Income) / Paid           (19,984)        (5,750)       (3,750)    (1,750)           250       (11,000)      (11,000)       (20,000)
Other                               (3,168)              -             -          -             -              -             -              -
Net Income                        $172,321        $39,331        $38,131    $36,931       $35,731      $150,126      $178,114       $121,147
Cash Flow                         $235,519        $69,787        $67,787    $65,787       $63,787      $267,147      $308,021       $245,945
Shares Outstanding
 Basic                             115,412        120,700        120,700    120,700       120,700       127,856        127,856       127,856
 Fully Diluted                     115,791        127,856        127,856    127,856       127,856       127,856        127,856       127,856
Earnings Per Share
 Basic                                $1.49            $0.33       $0.32      $0.31         $0.30          $1.17         $1.39          $0.95
 Fully Diluted                        $1.49            $0.31       $0.30      $0.29         $0.28          $1.17         $1.39          $0.95
Cash Flow Per Share
 Basic                                $2.04            $0.58       $0.56      $0.55         $0.53          $2.09         $2.41          $1.92
 Fully Diluted                        $2.03            $0.58       $0.56      $0.54         $0.53          $2.09         $2.41          $1.92
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                              16
JANUARY 16, 2007                                                                                               JED RICHARDSON 416·943·6430




                                               Aquiline Resources Inc.
                                                         (AQI - C$7.99, TSXv)

Recommendation: BUY (S)                                                                                  Target Price: C$11.50
Figure 1                                                  Price Chart
                                                                           Smoke Clearing on Silver Mega Project
                                                                           With the July 2006 ruling on Navidad going in Aquiline’s
                                                                           favour, this junior exploration company now lays claim to
                                                                           one of the largest undeveloped silver projects in the world.
                                                                           The project is added to its developing Calcatreu gold-silver
                                                                           project just 11km away. The company still has to fight off
                                                                           an appeal from IMA Exploration to be heard in April 2007,
                                                                           but now work is recommencing on a project with
                                                                           considerable exploration upside.
                                                                           The Navidad project, located in Chubut province,
                                                                           Argentina, has a global resource of 329.4MMoz of silver,
                                                                           3.1BB lbs of lead and 359MM lbs of zinc, at healthy
Source: BigCharts (January 15/07)                                          grades of 98.1g/t silver and 1.35% lead with 0.16% zinc.
                                                                           The project compares well with other South American
Figure 2                                                    Statistics     large-scale silver projects in size, and trumps others in
Shares Outstanding:                                                        silver grade. Apex Silver’s San Cristobal in Bolivia (73%
  Basic                                                       51.8 MM      interest) contains 468 MMoz of silver at 63.1g/t and Bear
  Fully Diluted                                               56.6 MM      Creek’s Corani in Peru (70% interest) contains 318 MMoz
  Management                                                    4.2 MM     at 49g/t silver.
Market Capitalization                                      $355.9 MM
Market Float                                               $327.0 MM       The legal battle for the Navidad deposit has been the heart
Cash                                                        $15.0 MM       of this story for over two years, and even with the
Total Debt                                                           Nil
NAV Per Share                                                 C$11.54      judgement in Aquiline’s favour in July 2006, the threat of
Price/NAV                                                          0.7x    an appeal made this mainly a legal story as opposed to a
Average Daily Trading Volume                                   149,842     mine exploration and development story. For this reason
High-Low (52 Week)                                     C$8.68 - C$1.75     neither Aquiline nor IMA were able to fully realize the
EV/Resv. + M&I Res.                                               $0.87
M&I Resources                                             306.3 MMoz
                                                                           value of their exploration success or the tremendous
Total Resources                                           329.0 MMoz       appreciation in the silver price. In October, an agreement
Source: Company reports, Sprott Securities estimates                       was struck between Aquiline and IMA that would give
                                                                           Aquiline control of the project and allow work to
                                                                           recommence on the property. Though the appeal still
                                                                           looms, the end of the legal battle is in sight and more
                                                                           importantly, now that work has restarted, the focus shifts to
                                                                           the merits of the deposit, which are phenomenal.




                                       SPROTT SECURITIES INC.                                                                          17
JANUARY 16, 2007                                                                        JED RICHARDSON 416·943·6430




Exploration Upside   With already 324MMoz defined, the exploration upside at Navidad is very tangible.
                     There is real potential for this deposit to double in size. The existing resource is really
                     just the beginning of the story; drilling has only been done on a portion of the tremendous
                     anomaly at Navidad. Aquiline may be sitting on one of the largest undeveloped silver
                     deposits in the world. In addition to the targets that have already been outlined by IMA
                     Exploration on the property, Aquiline management are keen to do airborne geophysics
                     and regional exploration of their sizeable land position to determine if similar deposits
                     are elsewhere on the property or elsewhere in the district. Work has, been held up during
                     this period of legal wrangling. On November 27, 2006 Aquiline’s management
                     announced that work was being recommenced.
                     The existing resource is just on three zones of the project, Navidad Hill, Galena Hill and
                     the connector zone. There are notable silver anomalies at surface at Barite Hill, Calcite
                     Hill, the Esperanza Trend and Loma de la Plata on the Argenta Trend. In IMA’s last set
                     of results from the property, the Company reported holes above resource grade at Calcite
                     Hill and Loma de la Plata. The most notable results were 11m of 897 g/t of silver at
                     Loma de la Plata and 124m of 296 g/t of silver at Calcite Hill.

Figure 3             Silver in Soils Map (Defined Resource Area in Red)




                     Source: IMA Exploration Inc.


Valuation            We arrive at a net asset value of C$11.54/sh, driving our target of C$11.50. We
                     recommend Aquiline as a Speculative Buy.
                     In our valuation we have proposed a modest Navidad project that would process 7.5 MM
                     tonnes of ore per year, approximately 21,000tpd built at a capital cost of $350MM. The
                     capital cost we arrive at by scaling down the capital cost at Apex Silver’s San Cristobal
                     mine. Using this mining rate the project has a mine life just short of 13 years, which we
                     think is appropriate, even conservative, given the likelihood that more ore is found at this
                     project. We have used industry norms for mining costs and used above average milling
                     and processing costs under the assumption that there will be complications in processing
                     the ore. We will maintain this conservative assumption until there is some clarity on



                     SPROTT SECURITIES INC.                                                                     18
JANUARY 16, 2007                                                                      JED RICHARDSON 416·943·6430



                   mineral recoveries and processing techniques. We have assumed a 2010 mine start-up
                   and discounted cash flows at 7.5%.
                   The Calcatreu project already has a scoping study and we have used the results from the
                   scoping study with minor adjustments, and the existing resource, discounted at a rate of
                   7.5% from 2009. Adjustments we have made include increasing the capital costs slightly
                   for building the mill further from the mine, and slightly higher mining costs for the longer
                   haul if ore was to be processed at the Navidad plant site 11km away.




                   SPROTT SECURITIES INC.                                                                     19
JANUARY 16, 2007                                                                                                                       JED RICHARDSON 416·943·6430



Figure 4                               Aquiline Resources Inc. – Simplified NPV Model
($000s)                                                   2009      2010      2011      2012     2013      2014       2014     2015          2016          2017
Silver Price                                            $10.00    $10.00    $10.00    $10.00    $10.00    $10.00    $10.00    $10.00        $10.00        $10.00
Gold Price                                             $500.00   $500.00   $500.00   $500.00   $500.00   $500.00   $500.00   $500.00       $500.00       $500.00
Lead Price                                               $0.40     $0.40     $0.40     $0.40     $0.40     $0.40     $0.40     $0.40         $0.40         $0.40
Zinc Price                                               $0.65     $0.65     $0.65     $0.65     $0.65     $0.65     $0.65     $0.65         $0.65         $0.65
Navidad
Mined Tonnes                                                       7,500     7,500     7,500     7,500     7,500     7,500     7,500         7,500         7,500
Tonnes per Day                                                    21,000    21,000    21,000    21,000    21,000    21,000    21,000        21,000        21,000
Payable Metal
 Silver (000 oz)                                                  19,486    19,486    19,486    19,486    19,486    19,486    19,486        19,486        19,486
 Lead (000 lbs)                                                   83,640    83,640    83,640    83,640    83,640    83,640    83,640        83,640        83,640
 Zinc (000 lbs)                                                    1,200     1,200     1,200     1,200     1,200     1,200     1,200         1,200         1,200
Revenue per Ton Milled                                            $33.02    $33.02    $33.02    $33.02    $33.02    $33.02    $33.02        $33.02        $33.02
Total Cost per Ton Milled                                         $12.00    $12.00    $12.00    $12.00    $12.00    $12.00    $12.00        $12.00        $12.00
Cash Cost ($/oz)                                                   $1.91     $1.91     $1.91     $1.91     $1.91     $1.91     $1.91         $1.91         $1.91
Revenue                                                          247,675   247,675   247,675   247,675   247,675   247,675   247,675       247,675       247,675
Operating costs                                                   90,000    90,000    90,000    90,000    90,000    90,000    90,000        90,000        90,000
Operating Profit                                                 157,675   157,675   157,675   157,675   157,675   157,675   157,675       157,675       157,675
Taxes                                                                  -         -         -    41,362    41,362    41,362    41,362        41,362        41,362
CapEx                                                350,000       2,250     2,250     2,250     2,250     2,250     2,250     2,250         2,250         2,250
Free Cash Flow                                     (350,000)     155,425   155,425   155,425   114,062   114,062   114,062   114,062       114,062       114,062
Net Present Value (10%)                              491,451
Calcatreu
Mined Tonnes                                               950       950       950       950       950       950       175
Tonnes per Day                                           2,650     2,650     2,650     2,650     2,650     2,650     2,650
Payable Metal
 Gold (000 oz)                                              97        97        97        97        97        97        18
 Silver (000 oz)                                           771       771       771       771       771       771       142
Revenue per Ton Mined                                   $58.98    $58.98    $58.98    $58.98    $58.98    $58.98    $58.98
Total Cost per Ton Mined                                $22.50    $22.50    $22.50    $22.50    $22.50    $22.50    $22.50
Cash Cost ($/oz)                                       $148.28   $148.28   $148.28   $148.28   $148.28   $148.28   $148.28
Revenue                                                 56,029    56,029    56,029    56,029    56,029    56,029    10,321
Operating costs                                         22,040    22,040    22,040    22,040    22,040    22,040     4,060
Operating Profit                                        33,988    33,988    33,988    33,988    33,988    33,988     6,261
Taxes                                                        -         -         -     6,636     6,636     6,636     1,596
CapEx                                  50,000            1,389     1,389     1,389     1,389     1,389     1,389       256
Free Cash Flow                       (50,000)           32,599    32,599    32,599    25,963    25,963    25,963     4,409         -              -             -
Net Present Value (5%)                                  73,881
Shares Outstanding (000)
 Basic                                 51,664
 Fully Diluted                         56,552
Source: Company reports, Sprott Securities estimates



                                       SPROTT SECURITIES INC.                                                                                                  20
JANUARY 16, 2007                                                               DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                               Aurelian Resources Inc.
                                                         (ARU - C$32.60, TSXv)

Recommendation: BUY (S)                                                                                      Target Price: C$49.00
Figure 1                                                   Price Chart
                                                                            Fruitful Discovery Now Major Gold Project – Still
                                                                            Hitting Gold In Recent Drilling
                                                                            Aurelian Resources has made a major gold discovery in
                                                                            southern Ecuador, Fruta Del Norte (FDN), and now that
                                                                            the initial excitement of the discovery has passed, we see
                                                                            significant unrecognized value at FDN itself, as well as the
                                                                            regional potential on Aurelian’s huge land position. We
                                                                            estimate that Aurelian has already defined 10 MM oz - 11
                                                                            MM oz, with holes already drilled and reported. In late
                                                                            December Aurelian reported several holes stepping out to
                                                                            the south up to 200 m, which seem to be intersecting vein-
                                                                            type economic gold mineralization—high-grades over
                                                                            shorter widths—within a broadly anomalous but
Source: BigCharts (January 15/07)
                                                                            subeconomic zone. Going forward, the focus at FDN will
                                                                            move to delineating the economic extents of the deposit to
Figure 2                                                     Statistics
                                                                            the north and south, and in-fill drilling the massive central
Shares Outstanding:                                                         core zone that contains the bulk of the gold. In addition to
  Basic                                                        33.1 MM
  Fully Diluted                                                35.8 MM
                                                                            the upside at FDN, Aurelian still boasts one of the largest
  Management                                                     6.4 MM     and best-positioned land packages in Ecuador along the
Market Capitalization                                     C$1079.1 MM       intersection of a major gold trend and major porphyry
Market Float                                               C$870.4 MM       copper trend. We would not be surprised to see more
Cash                                                         $20.8 MM
                                                                            discoveries in the longer term from Aurelian’s regional
Total Debt                                                            Nil
NAV Per Share                                                  C$48.95      exploration program, and investors basically gain exposure
Price/NAV                                                           0.6x    to this at no cost right now.
Average Daily Trading Volume                                    283,057
High-Low (52 Week)                                     C$43.00 - C$0.61     FDN is one of the few new discoveries made this cycle that
Reserves                                                                    is controlled by a junior company but big enough to attract
Reserves+ M&I Resources                                                     even the largest gold producers; hence should earn a
Source: Company reports, Sprott Securities estimates                        premium valuation, as the number of ounces are
                                                                            determined. For the time being, the perceived geopolitical
                                                                            risk is preventing Aurelian from realizing this premium
                                                                            valuation. Fruta Del Norte is likely to be a shallow
                                                                            underground mine that utilizes bulk mining methods for
                                                                            extraction. 4 MMtpy in ore processed could result in a
                                                                            production rate of roughly 750,000 oz/yr—almost
                                                                            equivalent to Agnico-Eagle’s potential 2009 production
                                                                            from five different mines (for example)—which garners a
                                                                            market capitalization of approximately C$5 billion. Clearly
                                                                            Aurelian and its investors have a lot to gain from moving
                                                                            this project forward, as well as making new discoveries in
                                                                            the region.




                                       SPROTT SECURITIES INC.                                                                                 21
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Exploration Upside   While the “easy” ounces are probably the north and south extensions to the main FDN
                     zone, we are more excited by the regional exploration potential in the longer-term. Near
                     the FDN deposit, we still believe that there is an excellent geological target—known as
                     the “Western Extension”. This is predicated on the observation that the gold
                     mineralization in the main FDN zone appears to be continuous towards a western fault
                     that bounds the economic gold, and the gold grade appears to increase towards that fault.
                     If this western fault was a late structure, another portion of the high-grade gold
                     mineralization may be offset at depth and laterally. While there is no guarantee that this
                     offset zone actually exists, the possibility is exciting because it could potential be a very
                     large new high-grade zone, with similar characteristics to the main FDN zone.
                     Outside of the immediate FDN area, Aurelian has developed numerous other targets
                     using a range of stream sediment geochemistry, rock chip sampling and geophysics to
                     come up with more than 20 other gold targets. So far access has been limited and that has
                     tended to steer exploration to certain areas, but as Aurelian develops a better road
                     network away from FDN in 2007, more targets can be tested. One target, El Tigre for
                     example, has coarse gold panned abundantly in a nearby stream, but so far the source has
                     not been drill tested. The northern section of Aurelian’s ground surrounds Corriente’s
                     Mirador project and is also highly prospective for copper. In fact, in the Fruta Del Norte
                     area, Aurelian has hit well-mineralized porphryry copper mineralization, but it is too
                     deep to be economically interesting.

Figure 3             Regional Geochemistry Showing Gold Anomalies




                     Source: Aurelian Resources




                     SPROTT SECURITIES INC.                                                                           22
JANUARY 16, 2007                                     DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Other Risks        The easing of geopolitical tension in Ecuador generally could add a lot of value to
                   Aurelian’s stock price in 2007. Recently a left-leaning President, Rafael Correa, was
                   elected over a business-friendly challenger—while mining was never on the political
                   agenda, Correa’s comments about the oil industry and fiscal policy as well as his
                   perceived ties to Venezuela’s Hugo Chavez has resulted in a large geopolitical discount
                   in Aurelian’s stock as a reaction to the uncertainty. In order to win the run-off election
                   against the right-wing candidate who led after the first ballot, Correa eased his left-wing
                   rhetoric—meanwhile a moderate Congress may stand in the way of any dramatic changes
                   of foreign policy. Also late in 2006 neighbour Corriente Resources, permitting a large
                   copper mine, was hit by protests from a anti-mining NGO that temporarily shut down
                   drilling and development work. Ecuador has been very accommodative to the mining
                   industry and to this day maintains a relatively favourable taxation structure. We expect
                   that the geopolitical risk may subside, not completely, but substantially in 2007. As a
                   comparison, if this project were located in Canada (or Mexico or Chile etc.) it probably
                   would trade at C$50/share ($150/ounce).

Valuation          We typically have afforded world-class gold assets a premium valuation to the average
                   peer in terms of using a lower discount rate—this is due to the improved marketability of
                   the rare large projects. As we look forward one year, we expect the Aurelian’s drilling
                   within the known FDN ore body to continue to confirm the grade and tonnage that we
                   have been estimating, and the recent drill results provide one more exhibit of evidence
                   that this is likely to be the case. In addition to the known zone of high-grade
                   mineralization, Aurelian continues to have excellent prospects to dramatically increase
                   the size of the FDN deposit by finding the western extension at depth, and the regional
                   drilling where the Company has identified numerous other gold targets that could turn the
                   isolated FDN discovery into more of a gold camp. At a 5% discount rate, we value
                   Aurelian at C$49.00 per share, which is currently our target price. Said another way, this
                   equates to putting a 1.25x multiple of NAV on our 7.5% discount rate estimate of
                   C$39.00. We continue to recommend Aurelian as a Speculative Buy.




                   SPROTT SECURITIES INC.                                                                           23
JANUARY 16, 2007                                                                                                 DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4                               Aurelian Resources Inc. – Simplified NPV Model
Year                               2009         2010        2011       2012      2013      2014      2015      2016        2017         2018        2019         2020         2021
Mill kt/y                                      4,000       4,000       4,000     4,000     4,000     4,000     4,000      4,000       4,000        4,000        4,000       4,000
Gold Grade                                      6.50        6.50        6.50      6.25      6.25      6.25      6.25       6.25        6.25         6.25         6.25        6.25
Rec                                             93%         93%         93%       93%       93%       93%       93%        93%         93%          93%          93%         93%
Gold Prod. (oz)                              777,492     777,492     777,492   747,588   747,588   747,588   747,588    747,588     747,588      747,588      747,588     747,588
Silver Prod. (oz)                            777,492     777,492     777,492   747,588   747,588   747,588   747,588    747,588     747,588      747,588      747,588     747,588
Gold Price                                      500         500         500       500       500       500       500        500           500        500          500          500
Silver Price                                  $10.00      $10.00      $10.00    $10.00    $10.00    $10.00    $10.00     $10.00       $10.00      $10.00       $10.00       $10.00
Revenue                                      396,521     396,521     396,521   381,270   381,270   381,270   381,270    381,270     381,270      381,270      381,270     381,270
Mining Cost                                        15           15       15        14        14        14        14           14          14           14           14          14
G&A                                                 5            5        5         4         4         4         4            4           4            4            4           4
Processing                                          6            6        6         6         6         6         6            6           6            6            6           6
Cost/T                                             26           26       26        24        24        24        24           24          24           24           24          24
Op Costs                                     123,437     123,437     123,437   114,690   114,690   114,690   114,690    114,690     114,690      114,690      114,690     114,690
Royalty 1%                                     3,965       3,965       3,965     3,813     3,813     3,813     3,813      3,813       3,813        3,813        3,813       3,813
Cash Cost                                    $153.86     $153.86     $153.86   $148.51   $148.51   $148.51   $148.51    $148.51     $148.51      $148.51      $148.51     $148.51
Dep Cost                                      $23.83      $22.25      $83.99    $22.36    $22.36    $22.36    $22.36     $22.36      $22.36       $22.36       $22.36      $22.36
Op Cash Flow                                 273,084     273,084     273,084   266,580   266,580   266,580   266,580    266,580     266,580      266,580      266,580     266,580
CapEx                           250,000         2,000      2,000      50,000     2,000     2,000     2,000     2,000      2,000        2,000       2,000        2,000        2,000
Tax                                                 -     67,771      55,771    66,145    66,145    66,145    66,145     66,145       66,145      66,145       66,145       66,145
Free Cash Flow, 100%          (250,000)      271,084     203,313     167,313   198,435   198,435   198,435   198,435    198,435     198,435      198,435      198,435     198,435
NPV                                       $1,578,075
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                                                   24
JANUARY 16, 2007                                                                                                 JED RICHARDSON 416·943·6430




                                      Bear Creek Mining Corporation
                                                          (BCM - C$8.94, TSXv)

Recommendation: BUY                                                                                       Target Price: C$14.50
Figure 1                                                   Price Chart
                                                                            Corani Moving Forward - Scoping Study
                                                                            With one of the largest undeveloped silver projects in one
                                                                            of South America’s best mining jurisdictions Bear Creek is
                                                                            one of the most investable exploration development stories
                                                                            in the precious metals universe. Add to that a first class
                                                                            management team and a deposit that grew from zero to
                                                                            317MMoz of silver over the course of a year and you have
                                                                            a definite winner
                                                                            Despite the company’s tremendous success last year in
                                                                            both exploration and on the market, we continue to see
                                                                            room for big upside in the coming months. The company
                                                                            will be completing a scoping/prefeasibility study on the
Source: BigCharts (January 15/07)                                           Corani mine that will provide the initial economic
                                                                            guideposts on the project. This will obviously be a key
Figure 2                                                     Statistics     catalyst for the market, which has largely relied on analyst
Shares Outstanding:                                                         expectations to value the project. This study will give the
  Basic                                                        40.4 MM      market some engineered numbers put together using all of
  Fully Diluted                                                46.9 MM      the data to date. A scoping study could also be a key
  Management                                                     3.6 MM     catalyst for potential acquirers, and the study will also give
Market Capitalization                                       $310.6 MM
Market Float                                                $282.9 MM
                                                                            management teams the numbers necessary to justify an
Cash                                                           $8.0 MM      acquisition to their boards and shareholders. A positive
Total Debt                                                            Nil   scoping study could bring a new group of investors and
NAV Per Share                                                  C$14.30      kick off a real takeover battle.
Price/NAV                                                           0.6x
Average Daily Trading Volume                                 1,666,674      Much has been made of Silver Wheaton’s 19.1% interest in
High-Low (52 Week)                                     C$11.45 - C$3.21     Bear Creek as a vote of confidence and as fuel for takeover
EV/Total Resource                                                  $1.37
                                                                            speculation, even negatively as a deterrent for other
M&I Resources                                              194.6 MMoz
Total Resource                                             221.9 MMoz       bidders. It is our opinion that Silver Wheaton is hopeful
Source: Company reports, Sprott Securities estimates                        that it can takeover Bear Creek with the help of a base
                                                                            metal partner that will own and operate the mine, and
                                                                            Silver Wheaton could keep the silver stream. Silver
                                                                            Wheaton in our opinion adds base metal producers to the
                                                                            list of potential suitors. However, we do not see their stake
                                                                            as a deterrent if another silver focused mining company
                                                                            decides to take a run at the project. Companies like Apex
                                                                            Silver, Coeur d’Alene and Pan American Silver that trade
                                                                            at healthy silver multiples and have no need for partners,
                                                                            they could bid for Bear Creek and the best offer will win,
                                                                            even with Silver Wheaton’s sizeable toehold. We have
                                                                            seen numerous transactions where bidders with toeholds
                                                                            have been forced to bow out and tender their shares to
                                                                            opponents.
                                                                            .




                                       SPROTT SECURITIES INC.                                                                            25
JANUARY 16, 2007                                                                              JED RICHARDSON 416·943·6430




Exploration Upside        In the November 15, 2006 exploration results release Bear Creek announced a step out to
                          the southwest of Minas Corani under cover that intercepted 14m of 208g/t silver, 2.6%
                          lead and 2.4% zinc, an outstanding result in an unexpected area of the project. What
                          makes this even more interesting is that 400m west of the hole geologists have
                          discovered a silver anomaly in surface geochemistry. The new zone outcrops over 700m
                          x 300m area and has returned surface samples grading up to 100g/t silver and 0.5g/t gold.
                          Three drills are currently working on the property continuing to expand the resource.
                          Holes are planned in this new zone, north of Minas Corani under cover and in the
                          hanging wall at Main Corani. The fourth drill is still drilling at Santa Ana a 100% owned
                          project that has returned interesting results. Despite the tremendous success Bear Creek
                          has had so far, there is still tremendous opportunity to add silver ounces at Corani and
                          Santa Ana.

South American Politics   In 2006, there were a plethora of elections in Latin America and the mining world was
Tips in BCM’s Favour      shaken up as geopolitics took a co-starring role in valuations alongside geology and cash
                          flow. In 2007, for the most part the dust has settled and investor can see the countries that
                          are going to be difficult and the countries that will be relatively benign, and Peru, despite
                          concerns early in the year, has emerged as a premier locale to do business. President
                          Garcia has worked alongside foreign mining companies to correct taxation issues and
                          maintain Peru as a good place for mining investment. In our opinion, Peru takes it place
                          with Mexico, Chile and Brazil as a preferred mining destination in Latin America given
                          its political environment, mining infrastructure and geological potential.
                          Unfortunately Bolivia has taken a turn for the worse. The government of Evo Morales
                          has aligned itself too closely with Hugo Chavez for investors to rest easy and this could
                          have major ramifications for the silver market. Apex Silver’s San Cristobal Mega-Project
                          in Bolivia is coming to production in late 2007, and while we do not doubt that this mine
                          will come to production, we believe Apex Silver will definitely look to grow outside of
                          Bolivia. Bolivian politics has created a tremendous amount of unwanted volatility for
                          Apex, with $430MM in cash and an alliance with smelter Sumitomo, it is primed to add
                          growth and Bear Creek could make a great fit. Another potential suitor is Coeur d’Alene,
                          which has its main growth project, San Bartholome, in Bolivia, and may be looking to
                          switch gears and avoid the headache of the current administration.

Valuation                 Our Bear Creek target price of C$14.50/sh is based a 1.0x NAV. Our NAV is based on
                          the discounted cash flow of 70% of the Corani project with mine start-up in 2009. In our
                          approximation of the Corani project we model just the high-grade core of the defined
                          resource (183MMoz of silver), and we assume capital expenditure of $350MM to build a
                          mine and mill that processes 30,000tpd of ore mined at a stripping ratio of 1.8. We have
                          also added C$0.70 for 20MMoz at $2/oz for Santa Ana. This project will ultimately be
                          worth a lot more but we cannot ascribe value for silver yet to be discovered, but we
                          believe what has been discovered so far should weigh in on our valuation.




                          SPROTT SECURITIES INC.                                                                      26
JANUARY 16, 2007                                                                                                                         JED RICHARDSON 416·943·6430



Figure 3                               Bear Creek Mining Corporation – Simplified NPV Model
($000s)                                    2007            2008      2009      2010      2011      2012      2013      2014      2015            2016          2017
Silver Price                             $15.00          $15.00     $10.00    $10.00    $10.00    $10.00    $10.00    $10.00    $10.00        $10.00        $10.00
Gold Price                              $650.00         $650.00    $500.00   $500.00   $500.00   $500.00   $500.00   $500.00   $500.00       $500.00       $500.00
Lead Price                                $0.50           $0.53      $0.40     $0.40     $0.40     $0.40     $0.40     $0.40     $0.40         $0.40         $0.40
Zinc Price                                $1.40           $1.00      $0.65     $0.65     $0.65     $0.65     $0.65     $0.65     $0.65         $0.65         $0.65
Corani Mine
Mined Tonnes                                                        16,632    16,632    16,632    16,632    16,632    16,632    16,632         13,905        13,905
Tonnes per Day                                                      27,500    27,500    27,500    27,500    27,500    27,500    27,500         27,500        27,500
Payable Metal
Silver (000 oz)                                                     18,681    18,758    18,873    18,873    18,873    18,873    18,873        15,778        15,778
Lead (000 lbs)                                                     153,599   153,599   153,599   153,599   153,599   153,599   153,599       134,736       134,736
Zinc (000 lbs)                                                     111,280   111,280   111,280    33,384    33,384    33,384    33,384        33,384        33,384
Revenue per Ton Mined                                              $43.01    $43.08    $43.20    $33.36    $33.36    $33.36    $33.36          $29.00       $29.00
Total Cost per Ton Mined                                           $14.02    $14.02    $14.02    $11.93    $11.93    $11.93    $11.93          $11.50       $11.50
Cash Cost ($/oz)                                                   $(4.70)   $(4.68)   $(4.65)   $(0.59)   $(0.59)   $(0.59)   $(0.59)         $(0.19)      $(0.19)
Revenue                                                            425,752   426,521   427,673   330,303   330,303   330,303   330,303       287,092       287,092
Operating costs                                                    151,138   151,151   151,170   130,463   130,463   130,463   130,463       126,239       126,239
Operating Profit                                                   274,614   275,370   276,503   199,840   199,840   199,840   199,840       160,853       160,853
Taxes                                                                    -         -    73,656    49,808    50,657    50,657    50,657        40,354        40,354
CapEx                                                   350,000      2,673     2,673     2,673     2,673     2,673     2,673     2,673         2,673         2,673
Free Cash Flow                                         (350,000)   271,941   272,697   200,174   147,359   146,510   146,510   146,510       117,826       117,826
Net Present Value (5.0%)                                807,196
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                                    27
JANUARY 16, 2007                                                            DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                             Eldorado Gold Corporation
                                       (ELD - C$6.29, TSX; EGO - $5.38, AMEX)

Recommendation: BUY                                                                               Target Price: $7.00, C$8.00
Figure 1                                                   Estimates
                                                                         Commissioning A Mid-Tier Producer
YE Dec. 31                         2006E          2007E         2008E
Gold Production (000 oz)            162.7          260.0         425.3   Eldorado’s share price has been more or less stalled over
Diluted EPS, adj.                   $0.03          $0.17         $0.37   the last year as the market has waited on the completion of
Diluted CFPS, adj.                  $0.07          $0.23         $0.49   its flagship Kisladag project in Turkey, as well as the more
Production Yr/Yr Change             153%            60%           64%
CFPS Yr/Yr Change                   220%           246%          113%
                                                                         recently acquired (a year and a half ago) Tanjianshan
EV/Production                     $12,679         $6,980        $4,267   project in China. However Q3 results suggested progress at
EV/Resv. + M&I Res.                $98.10                                Kisladag, almost completing the phase one start-up, after
P/CFPS                              75.2x          26.7x         10.9x   numerous delays. The first ever new mine in China built by
Source: Company reports, Sprott Securities estimates                     a North American company, Tanjianshan, was cruising
                                                                         along in 2006 before a fire damaged a critical component
Figure 2                                                 Price Chart     of the mill and delayed commissioning by several
                                                                         months—however Eldorado recently announced its first
                                                                         gold pour from the project in Western China. The mine is
                                                                         now commissioning with commercial production expected
                                                                         in Q1 2007 and full production by Q2 2007
                                                                         But there is still some development risk with Eldorado’s
                                                                         growth projects and therefore potential upside to valuation
                                                                         if the market recognizes the reduced risk, as well as the
                                                                         potential to generate much greater cash flow per share as a
                                                                         result of this growth. The main things we, and the market,
                                                                         will be looking for over the next year is the development
                                                                         and expansion at Kisladag, and the commissioning of
                                                                         Tanjianshan, particularly the tricky autoclave circuit. Phase
Source: BigCharts (January 15/07) C$ Chart                               one success of Kisladag is almost a given, however the
                                                                         beginning of the mine is blessed with well-behaved oxide
Figure 3                                                   Statistics    ore to start. Eldorado will be expanding the heap leach
Shares Outstanding:                                                      circuit in 2007, while battling declining recoveries as the
  Basic                                                     341.1 MM     open pit mining goes deeper and recoveries decline. At
  Fully Diluted                                             346.3 MM
  Management                                                  4.5 MM     Tanjianshan, Eldorado is building a combination
Market Capitalization                                   C$2,145.5 MM     conventional CIL circuit with an “optional” autoclave for
Market Float                                            C$2,117.2 MM     refractory ores. While this mill gives Eldorado tremendous
Cash                                                        $81.0 MM     amount of processing flexibility, the autoclave process is
Total Debt                                                  $50.8 MM
NAV Per Share                                                 C$3.29
                                                                         still relatively rare, and typically the realm of “majors”.
Price/NAV                                                        1.9x    That being said Eldorado is one of the few juniors with
Average Daily Trading Volume                                             experience running the autoclave process at its Sao Bento
  TSX                                                       2,989,893    mine in Brazil (now in decommissioning), so it will be
  AMEX                                                      1,067,514    interesting to see whether the Company can transfer that
High-Low (52 Week)
  TSX                                                  C$7.02 - C$4.32   experience to its new mines.
  AMEX                                                   $6.17 - $3.82
Reserves                                                    8.7 MMoz
Reserves+ M&I Resources                                    18.5 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                              28
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth    Eldorado is commissioning its first new mine in about 10 years, while its mainstay Sao
                     Bento mine in Brazil is shutting down. Because of this, we would consider Eldorado to
                     be similar to a “junior” with little or no gold production, but growing rapidly as it
                     completes construction on new mines. This year, the Company’s flagship asset, Kisladag
                     in Turkey, should reach phase one production and then begin an immediate expansion
                     resulting in expected production of 190,000 to 200,000 oz in 2007, growing to 240,000 to
                     250,000 oz in 2008. Tanjianshan (currently the Company’s only significant asset in
                     China) should also be up and running this year producing 120,000 – 130,000 oz. By
                     2009, we expect the Company’s second mine in Turkey to be operating: Efemcukuru
                     should contribute 110,000 – 125,000 oz/yr at a low cost from a shallow underground
                     mine.

Exploration Upside   Eldorado cranked up its exploration in 2006, and while some of the results have been
                     encouraging, it has suffered from slow results as well. The most important exploration
                     project right now is Vila Nova in Northern Brazil, which looks as though it has the
                     potential for at least 1,000,000 oz of resources and the potential to be a small mine in
                     2010 or 2011—and of course since Eldorado is still exploring and delineating the gold
                     mineralization it could potentially be larger. We are currently waiting on results from the
                     fall 2006 drilling program that should determine the next exploration steps and lead into a
                     resource estimation for 2007.
                     Eldorado also has a big 50/50 JV exploration program in Turkey that is on-going. Late in
                     2005, Eldorado released some extremely promising results on a porphyry copper-gold
                     target but was unable to follow up with any size. But, the grass roots program has a lot of
                     potential in the longer-term in our view.

Valuation            Eldorado has typically traded at a relative premium to its peer group because of its well-
                     defined growth projects, as well as a lower-than-average cash cost profile and strong
                     balance sheet. Also, there has been an element, in our opinion, of pricing in good
                     execution, said another way—a management premium. We see no reason for this to
                     change over the near term, and continue to see upside for the shares. Like the other mid-
                     tier producers, we use a CFPS multiple target based on the expected growth modified by
                     gold exposure and other risks. Based on 2008e CFPS of $0.49, we are maintaining our
                     12-month target of C$8.00 ($7.00). Our valuation implies a target multiple of 14.9x,
                     which is in-line with our expected long-term average P/CFPS multiple. Most of
                     Eldorado’s growth will already have taken place by 2008. We have applied an
                     exploration bonus to our valuation (+1 multiple point) to account for the Vila Nova
                     project, which we have not yet put into our growth model.




                     SPROTT SECURITIES INC.                                                                           29
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               Eldorado Gold Corporation – Canadian GAAP Income Statement
Fiscal YE December 31                                                           2007E
(US$000s)                                  2006E          Q1E          Q2E          Q3E           Q4E         2007E        2008E         2009E
Gold Price (US$/oz)                          $600         $650        $650          $650          $650         $650          $650         $500
Realized Gold Price (US$/oz)                 $600         $650        $650          $650          $650         $650          $650         $500
Sao Bento, Brazil
Gold Production (oz)                       65,879               -         -              -            -             -            -             -
Cash Costs (US$/oz)                           472               -         -              -            -             -            -             -
Kisladag, Turkey
Gold Production (oz)                       66,849       32,500       32,500       32,500        32,500      130,000      245,000       245,000
Cash Costs (US$/oz)                           172          232          232          232           232          232          175           235
Efemcukuru, Turkey
Gold Production (oz)                              -             -         -              -            -             -      25,000      117,524
Cash Costs (US$/oz)                               -             -         -              -            -             -         115           98
Tanjianshan, China
Gold Production (oz)                       30,000       32,500       32,500       32,500        32,500      130,000      155,273        97,713
Cash Costs (US$/oz)                           275          245          245          245           245          245          188           221
Total Gold Production                     162,728       65,000       65,000       65,000        65,000      260,000      425,273       460,237
Cash Costs (US$/oz)                         $262         $116         $116         $116          $116         $239         $169           $192
FINANCIALS
Gold Sales                                $91,521      $42,250      $42,250      $42,250      $42,250      $169,000     $276,427     $230,119
Operating Costs                            52,333       15,352       15,352       15,352       15,352        61,407       74,953       90,640
Operating Profit                           39,188       26,898       26,898       26,898       26,898       107,593      201,475      139,479
Corporate                                  10,478        2,250        2,250        2,250         2,250        9,000        9,000         9,000
Exploration                                12,403        3,500        3,500        3,500         3,500       14,000          900           900
EBITDA                                     16,307       21,148       21,148       21,148        21,148       84,593      191,575       129,579
Depreciation                                 6,535       2,470        2,470         2,470        2,470         9,880      20,022        14,942
Net Interest Paid/(Received)               (5,533)       (145)        (176)         (316)        (457)       (1,093)      (1,122)       (5,308)
Taxation                                     4,564       4,141        4,148         4,179        4,210       16,677       36,615        25,917
Other                                          580           -            -             -            -             -        6,242         2,140
Net Income                                $10,161      $14,682      $14,706      $14,816      $14,926       $59,129     $129,817       $91,888
Cash Flow                                 $22,867      $19,797      $19,828      $19,969      $20,110       $79,704     $169,977     $110,065
Shares Outstanding
 Basic                                    339,331      341,738      341,738      341,738      344,949       341,738      341,738       341,738
 Fully Diluted                            343,921      346,329      346,329      346,329      349,540       346,329      346,329       346,329
Earnings Per Share
 Basic                                      $0.03        $0.04        $0.04         $0.04        $0.04         $0.17        $0.38        $0.27
 Fully Diluted                              $0.03        $0.04        $0.04         $0.04        $0.04         $0.17        $0.37        $0.27
Cash Flow Per Share
 Basic                                      $0.07        $0.06        $0.06         $0.06        $0.06         $0.23        $0.50        $0.32
 Fully Diluted                              $0.07        $0.06        $0.06         $0.06        $0.06         $0.23        $0.49        $0.32
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                30
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                               Etruscan Resources Inc.
                                                          (EET - C$3.53, TSX)

Recommendation: BUY (S)                                                                                       Target Price: C$5.10
Figure 1                                                   Estimates
                                                                           Diba Could Transform West African Junior
YE Dec. 31                          2006E         2007E          2008E
Gold Production (000 oz)               50.0        186.8          181.2    There is no question Etruscan has been fielding a world-
Diluted EPS, adj.                   $(0.06)        $0.17          $0.26    class exploration team in West Africa for a long time—
Diluted CFPS, adj.                  $(0.08)        $0.23          $0.32    maybe the best team for a company of its size. But as a
Production Yr/Yr Change                 N/A        274%             -3%
CFPS Yr/Yr Change                     -30%         392%            42%
                                                                           result of bad timing, and probably some bad decisions from
EV/Production                       $6,563        $1,496         $1,541    the head office, Etruscan has really failed to capitalize on
EV/Resv. + M&I Res.                 $87.32                                 its exploration success. The Company discovered the
P/CFPS                               -38.7x        13.2x            9.5x   Samira mine in Niger, but passed off control to a partner
Source: Company reports, Sprott Securities estimates                       and has never really seen any significant return to
                                                                           shareholders for the project. In Mali, Etruscan had early
Figure 2                                                  Price Chart      success on the Finkolo project near the Syama mine, but
                                                                           joint ventured the project with Resolute early on and has
                                                                           given up control again. This is why Diba is so important to
                                                                           the Company. While Etruscan has made some good
                                                                           acquisitions in West Africa over the years and built a
                                                                           production profile with smaller projects like Youga in
                                                                           Burkina Faso and Agbaou in Cote D’Ivoire, Diba has the
                                                                           potential to be a valuable grass roots discovery and has the
                                                                           potential to be a multi-million-ounce project that could
                                                                           really change the Company. And Etruscan is now big
                                                                           enough that it can “hog the puck” with any new discovery,
                                                                           giving investors maximum leverage to its future
                                                                           exploration successes.
Source: BigCharts (January 15/07)                                          Diba is located in Western Mali, 15 km south of the world
                                                                           class Sadiola mine. The discovery was made by
Figure 3                                                    Statistics     investigating a large 2500 m x 1000 m soil anomaly.
Shares Outstanding:                                                        Further investigation using deep auger sampling suggests a
  Basic                                                      100.8 MM
                                                                           intersection of two structures with gold mineralization, one
  Fully Diluted                                              114.9 MM
  Management                                                    4.8 MM     about 2.5 km long and the other, a stronger anomaly, about
Market Capitalization                                       $306.0 MM      1 km in strike length. The thickness of the structures could
Market Float                                                $291.4 MM      be up to 250 m wide and perhaps more at the intersection
Cash                                                         $26.6 MM      zone, but so far drilling has been focused on the
Total Debt                                                           Nil
NAV Per Share                                                   C$2.28     intersection and the smaller NE-SW structure. Initial
Price/NAV                                                          1.5x    results have highlighted what may be a nugget gold system
Average Daily Trading Volume                                   131,616     within a low-grade shell—which could host a large
High-Low (52 Week)                                     C$4.48 – C$1.50     economic gold deposit—but these types of gold deposits
Reserves                                                     1.3 MMoz
                                                                           may not be as easy to sell to the market that is used to
Reserves+ M&I Resources                                      3.2 MMoz
Source: Company reports, Sprott Securities estimates
                                                                           evenly disseminated predictable gold resources.
                                                                           Interestingly Etruscan’s stock performed best when the
                                                                           geochemical and deep auger sampling occurred, and the
                                                                           market has yet to recognize the potential from further
                                                                           drilling.




                                       SPROTT SECURITIES INC.                                                                                31
JANUARY 16, 2007                                     DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth   Etruscan is a 40% minority owner of the Samira mine in Niger, which produces 100,000
                    to 125,000 oz/yr. While this provides some benefit on the income statement, Etruscan
                    receives little to no cash flow from the project because the operator, Semafo, has a
                    preferred payback on the capital. Semafo also hedged about 60% of production (150,000
                    oz is still hedged), which further diminished the return, and then mechanical failures in
                    2006 further rewound the project payback. From the current 40,000 oz/yr of equity
                    production, Etruscan should grow in 2007 with the commissioning of the new Youga
                    mine (90% EET, 10% government) in Burkina Faso. This mine should produce about
                    100,000 oz/yr for at least the next six years. Next, Etruscan is evaluating the Agbaou
                    project in more risky Cote D’Ivoire—currently the project has a 1.1 MMoz) resource and
                    could produce 100,000 oz/yr (85% EET, 15% government) by 2009 or 2010. Beyond
                    Etruscan’s own projects, it has a 40% interest in Resolute’s Finkolo project in Mali,
                    which is now being considered a stand-alone project instead of feed for the Syama mine.
                    There is no resource today, but if drilling is successful this project could contribute to
                    Etruscan’s total production within a few years.

Figure 4            Diba Plan View Showing Geochemical Anomaly and Drill Locations




                    Source: Etruscan Resources




                    SPROTT SECURITIES INC.                                                                          32
JANUARY 16, 2007                                        DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Exploration Upside    The key upside to Etruscan’s share price is the Diba project, which could become the
                      primary focus for investors in the future. While the market has clearly recognized (based
                      on the 2006 stock price performance) the potential of Diba, if Etruscan can prove out a
                      resource through more drilling, the market should be happy. More importantly, Diba has
                      the potential to be much bigger than is currently being priced in, and is one of the few
                      “footprints” we have seen in West Africa that could host a multi-million-ounce deposit.
                      Besides Diba, Etruscan continues to develop its exploration pipeline with several
                      interesting earlier stage projects in several West African countries. The most important of
                      which are the Kobokotossou & Keneibandi, located only 10 and 40 km, respectively,
                      from Diba. These projects have similarly-sized geochemical anomalies in a similar
                      geological setting and are exciting because they are close enough to be grouped in with
                      Diba in terms of any future mining. The other exploration focus right now is in Burkina
                      Faso, on the Banfora belt, almost on the other side of the small country from the Youga
                      mine. Along a 50-km portion of the Banfora trend, Etruscan has identified 8 high-priority
                      targets through geochemical sampling in 2006. We expect drilling to occur early in 2007,
                      which could generate more positive news for the Company.

Other Opportunities   Etruscan owns 51% of Etruscan Diamonds, which owns gravel-alluvial diamond
                      properties in South Africa. In 2005-2006 Etruscan attempted a joint venture with
                      renowned alluvial and off-shore diamond miner Trans Hex Mining. It was not able to
                      make any money on the project despite capital improvements on Etruscan’s small mine
                      and defaulted on the joint venture. Etruscan did a good job at collecting favourable
                      ground in the area, and so should diamond prices go way up, or the Rand devalue
                      significantly, there could be quite a bit of economic potential. We do not currently
                      ascribe any value for this venture, given the low likelihood of success right now, but it
                      should be recognized. Etruscan would probably have to vend in a Black Empowerment
                      partner to any future mining endeavour and hence shareholders’ interest in this project
                      will likely be only 30-35%.

Valuation             We are initiating coverage of Etruscan with a Buy (S) recommendation and C$5.10
                      target. Etruscan has the blend of production growth and exploration upside that we like to
                      see from gold companies, especially junior gold companies that must clamour for shelf
                      space with more than a hundred similar companies. In Etruscan’s case, it is not as cheap
                      as some other juniors we follow on the basis of its production assets alone, and we
                      believe this is because the market is already pricing in some value for the exciting Diba
                      project. Our recommendation requires Diba to continue to develop successfully, which
                      we expect will happen over the next year. Our 12-month target price is derived from a
                      14.2x P/CFPS multiple on Etruscan’s 2008e cash flow. This is a premium multiple
                      relative to other junior producers we follow, but we feel that a significant premium is
                      justified given the potential at Diba and other exploration projects.




                      SPROTT SECURITIES INC.                                                                           33
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               Etruscan Resources Inc. – Canadian GAAP Income Statement
Fiscal YE December 31                                                          2007E
(US$000s)                                 2006E           Q1E          Q2E         Q3E            Q4E        2007E         2008E         2009E
Gold Price (US$/oz)                         $600         $650         $650         $650          $650          $650         $650          $500
Realized Gold Price (US$/oz)                $408         $451         $451         $451          $451          $451         $500          $500
Samira Hill, Niger
Gold Production (oz)                      49,991        34,847       34,847       34,847       34,847       139,389      100,435        88,902
Cash Costs (US$/oz)                          348           200          200          210          205           200          210           221
Youga
Gold Production (oz)                            -           -        11,460       15,801       20,185        47,445       80,740        80,740
Cash Costs (US$/oz)                             -         301           275          275          275           284          275           256
Agbaou
Gold Production (oz)                            -               -         -             -             -            -             -      62,797
Cash Costs (US$/oz)                             -               -         -             -             -            -             -         250
Total Gold Production                     49,991        34,847       46,307       50,648       55,032       186,834      181,174       232,439
Cash Costs (US$/oz)                        $348          $190         $225         $223         $234          $221          $239          $241
FINANCIALS
Gold Revenue                              $8,166        $6,286      $13,735     $16,557       $19,406      $55,984       $72,558       $89,549
Operating Costs                            6,959         2,648        6,237       7,133         8,478       23,162        28,420        39,788
Operating Profit                           1,207         3,638        7,498       9,424        10,928       32,822        44,138        49,761
Corporate                                  6,478         1,090        1,450        1,450        1,450         5,440        5,800         7,750
Exploration                                   35            10           15           15           15            55           60            70
EBITDA                                   (5,305)         2,538        6,033        7,959        9,463        27,327       38,278        41,941
Depreciation                               2,300         1,366        2,377        2,997        3,146          9,886      11,058        15,944
Net Interest Paid/(Received)               (800)         (163)        (163)        (163)        (163)          (652)        (652)         (652)
Non-Controlling Interest                     112             -        (288)        (438)        (559)        (1,284)      (2,236)       (2,236)
Net Income                              $(6,916)        $1,335       $4,107       $5,563       $7,039       $19,378      $30,108       $28,885
Cash Flow                               $(9,056)        $2,651       $6,146       $8,072       $9,576       $26,445      $37,510       $37,510
Shares Outstanding
 Basic                                  100,435        102,100      102,100     102,100       102,100      102,090       110,301       110,301
 Fully Diluted                          116,827        116,884      116,884     116,884       116,884      116,874       116,601       116,601
Earnings Per Share
 Basic                                   $(0.07)         $0.01        $0.04        $0.05         $0.07        $0.19         $0.27        $0.26
 Fully Diluted                           $(0.06)         $0.01        $0.04        $0.05         $0.06        $0.17         $0.26        $0.25
Cash Flow Per Share
 Basic                                   $(0.09)         $0.03        $0.06        $0.08         $0.09        $0.26         $0.34        $0.34
 Fully Diluted                           $(0.08)         $0.02        $0.05        $0.07         $0.08        $0.23         $0.32        $0.32
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                34
JANUARY 17, 2007                                                                                               JED RICHARDSON 416·943·6430




                                                First Majestic Silver Corp.
                                                          (FR - C$5.52, TSXv)

Recommendation: BUY (S)                                                                                    Target Price: C$7.20
Figure 1                                                      Estimates
                                                                           Head Start On Mexican Production Morass
YE Dec. 31                            2006E       2007E           2008E
Gold Production (000 oz)               1,602       5,231           7,122   The meteoric rise of the silver price and the attractive
Diluted EPS                          $(0.11)       $0.34           $0.48   valuations given to major silver producers has attracted a
Diluted CFPS                           $0.05       $0.64           $0.89   plethora of upstart companies producing relatively small
Production Yr/Yr Change                968%        227%             36%
CFPS Yr/Yr Change                        n.a.     1180%             39%
                                                                           amounts of silver from small, mainly Mexican, mines. The
EV/Production                       $159.80       $49.00          $35.94   nature of silver mineralization makes larger mines unusual
EV/Total Resources                     $5.88                               and the larger producing silver companies are made up of
P/CFPS                                 99.3x           7.8x         5.6x   these kinds of smaller operations. First Majestic was one of
Source: Company reports, Sprott Securities estimates                       the first movers in this group of small Mexican producers
                                                                           amassing a number of properties and building an operating
Figure 2                                                  Price Chart      team. Over the past year they have built up the Parrilla
                                                                           mine, merged with First Silver to get the San Martin mine,
                                                                           and used their connections to acquire the Desmin Mining
                                                                           company and the Encantada Mine out of a financial
                                                                           distress situation. This puts First Majestic in a very unique
                                                                           position in the battle to join the major silver focused
                                                                           companies at the top of the heap. They have three
                                                                           operating mines and 5 MMoz of production in 2007. With
                                                                           growth to 7 MMoz in 2008
                                                                           The vast majority of First Majestic’s competitors have one
                                                                           operating mine and a few have two, and all of them require
                                                                           either a new acquisition or significant capital expenditure
                                                                           to reach the 5 MMoz level of production. Most will have
Source: BigCharts (January 15/07)                                          production around the 2MMoz level in 2007.

Figure 3                                                      Statistics   First Majestic is really head and shoulders above its
                                                                           competition, which puts them in a commanding position to
Shares Outstanding:
  Basic                                                       51.6 MM      be the consolidator in the space and garner the valuations
  Fully Diluted                                               63.8 MM      given to the “name brand” silver equities.
  Management                                                    3.0 MM
Market Capitalization                                       $256.3MM       With the disappointment of the Dios Padre project in
Market Float                                                  241.4MM      September now past, and concerns over the ability of the
Cash                                                         $21.4 MM      company allayed with the November financing, First
Total Debt                                                   $24.0 MM      Majestic has proven the naysayers wrong and is in a
NAV Per Share                                                   C$4.11
Price/NAV                                                          1.3x
                                                                           position to dramatically outperform its peers.
Average Daily Trading Volume                                   170,455     First Majestic’s strategy has always been to build the
High-Low (52 Week)                                     C$7.05 – C$2.47
Reserves                                                     5.2 MMoz      company through acquisitions, create a significant silver
Total Resources                                             43.5 MMoz      producing company in Mexico and garner the valuations
Source: Company reports, Sprott Securities estimates                       afforded to its larger silver-producing peers. As First
                                                                           Majestic starts to differentiate itself from the other
                                                                           Mexican small miners, it should begin to be compared with
                                                                           the likes of Pan American, Hecla and Coeur d’Alene.




                                        SPROTT SECURITIES INC.                                                                         35
JANUARY 17, 2007                                                                           JED RICHARDSON 416·943·6430




Production Growth   First Majestic is in the enviable position of having assets with proven production and
                    production goals within reach. Five million ounces of production for 2007 is tremendous
                    growth for a company that will report production of just over 1.5 million ounces in 2006.
                    However, First Majestic has been busy in the acquisition market through the year. In
                    June, it acquired 63% of San Martin and consolidated the ownership with a successful
                    merger in September. The mine produced 2MMoz in 2006 but contributed less than half a
                    year of attributable production to First Majestic. The acquisition of the Desmin
                    Company, and the subsequent consolidation of ownership of the Encantada mine
                    occurred at year-end. The mine produced 800,000oz of silver and contributed nothing to
                    First Majestic in 2006. At Parrilla, this was a year of upgrading underground access and
                    rebuilding the mill, and it is set to produce 2 MMoz in 2007 with no further capital
                    expenditure. When one takes into account the total 2006 production from the three assets
                    First Majestic has for 2007, which was 3.3 MMoz, and given the work that has been done
                    at Parrilla 5 MMoz is well within striking range.

Figure 4            Estimated Silver Production (000s oz)
                    2,000
                    1,800              Encantada
                    1,600
                    1,400              San Martin
                    1,200              La Parrilla
                    1,000
                      800
                      600
                      400
                      200
                        0
                               Q1      Q2      Q3      Q4      Q1          Q2   Q3   Q4   Q1   Q2      Q3      Q4

                                          2006                              2007                  2008
                    Source: Company reports, Sprott Securities estimates


Valuation           We continue to think First Majestic offers good value to shareholders. However we are
                    maintaining the Speculative modifier on our Buy recommendation, because still very
                    little is known about the Encantada mine (Desmin). Management is very excited about
                    prospects at the mine and are confident it will be a growing and strong contributing asset
                    in First Majestic’s portfolio. In late January, Sprott Securities will be visiting all three of
                    First Majestic’s assets and we will have a greater understanding of the Encantada mine at
                    that time. We have rolled our expectations forward to 2008 and expect cash flow of
                    C$0.89/sh. In 2008, First Majestic in our forecast will have realized much of its growth,
                    which counts for a great deal in our multiple scoring system, the company loses points
                    for its balance sheet and the cash costs of it operations but is rewarded for its low
                    geopolitical risk. We arrive at a target multiple of 8.1x cash flow for a target of C$7.20
                    up from $6.50 previously.
                    We maintain First Majestic’s aggressive growth strategy should catapult it into the upper
                    tier of silver producers, and create shareholder value as it grows. Given our current
                    assumptions First Majestic will reach Hecla’s level of production by 2008, and Hecla has
                    a market capitalization of US$700 million.




                    SPROTT SECURITIES INC.                                                                          36
JANUARY 17, 2007                                                                                          JED RICHARDSON 416·943·6430



Figure 5                               First Majestic Silver Corp. – Canadian GAAP Income Statement
Fiscal YE December 31                                                      2007E
(US$000s)                               2006E            Q1E       Q2E         Q3E      Q4E     2007E           2008E         2009E
Silver Price (US$/oz)                    11.58          15.00     15.00      15.00     15.00     15.00           15.00         10.00
Gold Price (US$/oz)                     604.65         650.00    650.00     650.00    650.00    650.00          650.00        500.00
Zinc Price (US$/lb)                       1.47           1.40      1.40       1.40      1.40      1.40            1.00          0.65
Lead Price (US$/lb)                       0.50           0.50      0.50       0.50      0.50      0.50            0.53          0.40
Canadian Dollar (USD/CAD)                 0.83           0.90      0.90       0.90      0.90      0.89            0.90          0.90
La Parilla
Silver Production (000 oz)               648.4          336.8     336.8      371.8     371.8    1,417.2        1,822.6       1,885.2
Gold Production (000 oz)                   0.7            0.4       0.4        0.4       0.4        1.5            1.8           1.8
Zinc Production (000 lbs)                    -              -         -      161.1     161.1      214.8          771.1         963.9
Lead Production (000 lbs)                    -              -         -      106.7     106.7      213.4          766.1         957.6
Cash Costs (US$/oz)                       6.97           6.64      6.64       3.01      3.01       5.15           3.08          4.28
San Martin
Gold Production (oz)                     878.0          687.5     687.5      687.5     687.5    2,750.0        3,500.0       3,500.0
Cash Costs (US$/oz)                       6.00           5.00      5.00       5.00      5.00       5.00           5.00          5.00
Encantada
Silver Production (000 oz)                 76.0         227.9     265.9      265.9     303.9    1,063.5        1,736.3       1,736.3
Cash Costs (US$/oz)                        7.34          7.47      6.54       6.54      5.84       6.54           5.84          5.64
Total Silver Production                1,602.4         1,252.2   1,290.2    1,325.1   1,363.1   5,230.7        7,058.9       7,121.6
Cash Costs (US$/oz)                       6.40            5.88      5.74       4.73      4.63      5.34           4.70          4.96
FINANCIALS
Revenue                                 22,176         18,863    19,404     21,231    21,772    80,619        111,669         75,257
Operating Costs                         12,097          7,542     7,575      7,760     7,794    30,608         39,835         39,781
Operating Profit                        10,079         11,321    11,829     13,471    13,979    50,012         71,835         35,476
Corporate                                3,210            750       750        500       500     2,500           2,500         2,500
Exploration                              3,750          1,000     1,000      1,000     1,000     4,000           8,000         3,000
EBITDA                                   3,119          9,571    10,079     11,971    12,479    43,512          61,335        29,976
Depreciation                                  -              -      369      6,475    16,705    23,512          20,510        20,510
Taxation                                      -              -      (75)       509     6,756    10,524           2,993         3,202
Interest Costs                                -              -         -         -       795     (166)           (393)         (615)
Minority Interest                             -              -         -       685         -         -               -             -
Net Income                              (4,549)         3,633     4,161      5,774     6,275    19,255          27,465         6,865
Cash Flow                                1,925          7,810     8,338      9,950    10,451    35,960          50,977        27,375
Shares Outstanding
 Basic                                  39,806         51,644    51,644     51,644    51,644    51,644          51,644        51,644
 Fully Diluted                          50,168         63,789    63,789     63,789    63,789    63,789          63,789        63,789
Earnings Per Share (C$)
 Basic                                  $(0.14)         $0.08     $0.09      $0.12     $0.14     $0.42           $0.59         $0.15
 Fully Diluted                          $(0.11)         $0.06     $0.07      $0.10     $0.11     $0.34           $0.48         $0.12
Cash Flow Per Share (C$)
 Basic                                   $0.06          $0.17     $0.18      $0.21     $0.22     $0.79           $1.10         $0.59
 Fully Diluted                           $0.05          $0.14     $0.15      $0.17     $0.18     $0.64           $0.89         $0.48
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                     37
JANUARY 17, 2007                                                                                               JED RICHARDSON 416·943·6430




                                              Fortuna Silver Mines Inc.
                                                          (FVI - C$2.44, TSXv)

Recommendation: BUY                                                                                       Target Price: C$4.00
Figure 1                                                    Estimates
                                                                           San Jose Mine – New Project Instant Growth
YE Dec. 31                           2006E        2007E          2008E
Silver Production (000 oz)              121        1,144          2,191    In December 2006, Fortuna announced it was planning to
Diluted EPS                         $(0.05)        $0.16          $0.20    purchase a mill and moving forward on the San Jose
Diluted CFPS                        $(0.02)        $0.19          $0.28    project in Oaxaca Mexico. The decision came on the heels
Production Yr/Yr Change                n.a.        845%            91%
CFPS Yr/Yr Change                      n.a.          n.a.          47%
                                                                           of steady exploration success on the property, and the
EV/Production                        812.40        85.93          44.87    consolidation of the ownership, Fortuna with 76% and
EV/Total Resources                     3.54                                partner Continuum Resources (CNU-TSXv) at 34%. The
P/CFPS                              -104.9x        11.0x            7.5x   Company is evaluating the purchase of a 150tpd mill near
Source: Company reports, Sprott Securities estimates                       the mine that is set to expand to 350tpd, which could give
                                                                           the company limited production from San Jose as soon as
Figure 2                                                  Price Chart      Q1/2007.
                                                                           This immediately adds growth to this emerging story. It
                                                                           was only in October that Fortuna announced commercial
                                                                           production at the Caylloma mine in Peru. This new project
                                                                           gives the company diversified production and operations in
                                                                           the #1 and #2 silver producing countries in the world.
                                                                           The company recently completed a $34MM equity raise
                                                                           that will give them all of the capital required to purchase
                                                                           and upgrade the nearby mill and develop stopes and ramps
                                                                           underground at San Jose to build the mine up to a 2MMoz
                                                                           annual producer. This added to the producing Caylloma
                                                                           mine that is ramping up to 2MMoz of production with
Source: BigCharts (January 15/07)
                                                                           significant by-product zinc and lead, keeping cash cost low
                                                                           and boosting cash flows.
Figure 3                                                    Statistics     With visibility to 4MMoz of annual production this little
Shares Outstanding:                                                        known gem is poised to outperform as it executes its plan
  Basic                                                       64.0 MM      for growth. With assets in Peru and having an essentially
  Fully Diluted                                               97.0 MM      Peruvian management team, Fortuna flew under the radar
  Management                                                    3.9 MM
Market Capitalization                                       $134.3MM
                                                                           during the spring run in the silver price and never garnered
Market Float                                                  126.1MM      the attention that some of its Mexican peers did. Its
Cash                                                         $36.0 MM      addresses in Southern Mexico and Peru could play into its
Total Debt                                                           Nil   favour now, as Pan American, a large player in Peru, has
NAV Per Share                                                   C$2.32     property adjacent to Fortuna in Mexico, and could acquire
Price/NAV                                                          1.1x
Average Daily Trading Volume                                   207,921     Fortuna and have real synergies. Coeur d’Alene, which
High-Low (52 Week)                                     C$2.53 - $C1.12     lacks a presence in both locales, could acquire Fortuna for
Reserves                                                     7.0 MMoz      the properties and the management team, which has the
Total Resources                                            27.7 MMoz       Peruvian connections and know-how a larger company
Source: Company reports, Sprott Securities estimates                       could use to grow in a new jurisdiction.
                                                                           .




                                       SPROTT SECURITIES INC.                                                                          38
JANUARY 16, 2007                                                                       JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407




Exploration Upside   The San Jose property hosts vein style mineralization with a number of identified
                     potential ore shoots. Fortuna has selected two to focus on in this stage of drilling, the
                     Trinidad and San Ignacio shoots, both are areas that have had limited historic production.
                     Fortuna completed 37 holes between January and June 2006, of which 24 holes were
                     drilled in the area of the Trinidad ore shoot and have been released. The remaining 13
                     holes were drilled into the area of the San Ignacio shoot and will be released in the near
                     future.
                     So far the best results were from hole D5, which appears to have intercepted 4
                     mineralized zones over 120m of core, the best being 24.3m of 10.1 g/t gold and 1,005 g/t
                     silver, and that same hole also intersects 17.9m of 2.5 g/t and 298 g/t silver, 4.2m of
                     1.8g/t gold and 261 g/t silver, and 3.0m of 1.5g/t gold with 335 g/t silver. An outstanding
                     hole by any measure and it indicates the great potential for economic mining here and in
                     the district. The next best result came from hole D4 next to hole D5, which also
                     intersected four mineralized zones over 120m, the best intercept being 10.22m of 5.33g/t
                     gold and 347g/t silver. The most compelling thing in these results are the relatively wide
                     intercepts of high grade mineralization. These will lend themselves easily to larger scale
                     modern mining techniques and ensure a high degree of profitability at this operation.
                     The exploration focus for the past year has been on San Jose in Mexico, but work
                     continues at Fortuna’s operating mine Caylloma in Peru. The property is host to
                     numerous veins some are silver dominated and some silver rich base metal veins. Fortuna
                     is steadily working at Caylloma to build out the resources on the veins they delineated
                     and bring known veins into the resource.

Figure 4             Estimated Silver & Silver Equivalents Production (000s oz)
                                                 6000
                                                        San Jose - Silver Eq (Au)
                                                 5000   San Jose - Silver
                      Silver Production (MMoz)




                                                        Caylloma - Silver Eq (Zn,Pb)
                                                 4000
                                                        Caylloma - Silver

                                                 3000

                                                 2000


                                                 1000

                                                    0
                                                        2006            2007             2008               2009               2010
                     Source: Company reports, Sprott Securities estimates



Valuation            Fortuna just completed a $34.2MM financing at very attractive terms for shareholders,
                     and adding 27MM shares fully diluted bring the total number of fully diluted shares to
                     97MM. This financing gives the company more than enough capital to buy and expand
                     the San Jose mine. In our valuation we have added the dilution, cash and cash for warrant
                     to be exercised, and put in our approximation for the San Jose project given company
                     guidance. Our net asset value for the project comes down to C$2.32/sh from C$2.55 and
                     we introduce our 2008 cash flow estimate of $0.28/sh. In the past we used a 10x multiple
                     of 2007 cash flow to derive our target of C$3.80, but given the new growth in the
                     company and the higher silver content of San Jose ore we have increased our multiple
                     from 10x to 14x and our target goes to C$4.00. We maintain our Buy recommendation.


                     SPROTT SECURITIES INC.                                                                                              39
JANUARY 16, 2007                                                                            JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407



Figure 5                               Fortuna Silver Mines Inc. – Canadian GAAP Income Statement
Fiscal YE Dec. 31                                                    2007E
($000s)                                 2006E            Q1E        Q2E        Q3E        Q4E         2007        2008         2009         2010
Silver Price                           $11.58      $15.00         $15.00     $15.00     $15.00      $15.00      $15.00       $10.00      $10.00
Gold Price                            $604.65     $650.00        $650.00    $650.00    $650.00     $650.00     $650.00      $500.00     $500.00
Lead Price                              $0.50       $0.50          $0.50      $0.50      $0.50       $0.50       $0.53        $0.40       $0.40
Zinc Price                              $1.47       $1.40          $1.40      $1.40      $1.40       $1.40       $1.00        $0.65       $0.65
Caylloma Mine
 Silver (000 oz)                           121            241        241        241        241         965       1,045        2,062        2,062
 Lead (000 lbs)                            849          1,697      1,697      1,697      1,697       6,789       7,354        6,779        6,779
 Zinc (000 lbs)                          1,693          3,386      3,386      3,386      3,386      13,544      14,673       11,599       11,599
Revenue per Ton Mined                 $149.04     $160.19        $160.19    $160.19    $160.19    $160.19      $139.65      $127.49     $127.49
Total Cost per Ton Mined               $56.79      $56.79         $56.79     $56.79     $56.79     $56.79       $56.79       $56.79      $56.79
Cash Cost ($/oz)                      $(12.92)    $(12.02)       $(12.02)   $(12.02)   $(12.02)   $(12.02)      $(6.59)       $0.81       $0.81
San Jose Mine
 Silver (000 oz)                                                                 41        138         179        1,146       1,283        1,283
 Gold (000 oz)                                                                   0.4        1.4        1.8         11.4        12.8         12.8
Revenue per Ton Mined                                                       $218.63    $218.63     $218.63     $218.63      $152.51     $152.51
Total Cost per Ton Mined                                                     $65.00     $65.00      $65.00      $65.00       $65.00      $65.00
Cash Cost ($/oz)                                                              $0.73      $0.73       $0.73       $0.73        $2.22       $2.22
Silver Production (oz)*                    121            241        241        282        379       1,144        2,191       3,346        3,346
% Silver By Revenue                       35%            42%        42%        43%        45%         43%          50%         62%          62%
Revenue                                  4,024          8,650      8,650      9,534     11,602      38,437      57,093       49,049       49,049
Operating Costs                          1,533          3,067      3,067      3,363      4,056      13,552      21,529       22,407       22,407
Operating Profit                         2,491          5,584      5,584      6,171      7,546      24,885      35,564       26,642       26,642
Corporate Costs                          1,500            375        375        375        375       1,500       2,000        1,500        1,500
Exploration Costs                        2,000            250        250        250        250       1,000       1,000        1,000        1,000
EBITDA                                 (1,009)          4,959      4,959      5,546      6,921      22,385      32,564       24,142       24,142
Depreciation                             2,133            375        375        447        616       1,813       4,826        5,067        5,067
Taxes                                        71         1,042      1,042      1,145      1,386       4,614       6,148        4,315        4,315
Minority Interest                             -              -          -         99       331         430       2,755        1,486        1,486
Interest costs                             (13)           (65)       (76)       (87)     (100)       (328)       (575)        (781)      (1,012)
Net Income                             (3,201)          3,607      3,618      3,943      4,689      15,856      19,410       14,055      14,286
Operating Cash Flow                    (1,068)          3,982      3,993      4,489      5,636      18,099      26,991       20,608       20,839
Shares Outstanding
 Basic                                 46,000          64,000     64,000     64,000     88,000      88,000      97,000       97,000       97,000
 Fully Diluted                         70,000          97,000     97,000     97,000     97,000      97,000      97,000       97,000       97,000
Earnings Per Share - F/D               $(0.05)          $0.04      $0.04      $0.04      $0.05       $0.16        $0.20       $0.14        $0.15
Cash Flow Per Share - F/D              $(0.02)          $0.04      $0.04      $0.05      $0.06       $0.19        $0.28       $0.21        $0.21
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                 40
JANUARY 16, 2007                                                                         JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407




                                    Fronteer Development Group Inc.
                                           (FRG - C$10.42; FRG - $8.71, AMEX)

Recommendation: BUY (S)                                                                       Target Price: C$13.50, $12.15
Figure 1                                                  Price Chart
                                                                          Exploration Project Generator…With A Rare, Great
                                                                          Track Record
                                                                          Fronteer has emerged from humble roots as a gold explorer
                                                                          to become arguably the most successful exploration project
                                                                          generator in Canada. A number of companies try the
                                                                          project generator model for a public company, and why
                                                                          not? It allows a company to greatly lower the risk of the
                                                                          mining business’ most risky enterprise—early stage
                                                                          exploration. Financing risk can be lowered by entering into
                                                                          joint ventures, and should one project become very
                                                                          successful, the company can sell it or spin in out into
                                                                          another public company to add value for shareholders.
                                                                          Most companies that try this strategy still fail—mainly
Source: BigCharts (January 15/07) US$ Chart
                                                                          because a company can operate five projects or one project
                                                                          and still find nothing of consequence. Investors also
Figure 2                                                    Statistics
                                                                          depend greatly on the bargaining power of management in
Shares Outstanding:                                                       establish joint ventures. There are numerous 90’s-era joint
  Basic                                                       59.9 MM
  Fully Diluted                                               66.5 MM
                                                                          venture deals where the junior partner ended up with
  Management                                                   4.7 MM     nothing after the metals markets cooled off, even though its
Market Capitalization                                       $521.7 MM     exploration efforts were successful. This is why Fronteer’s
Market Float                                                $480.8 MM     track record is so important, and why we are
Cash                                                         $55.4 MM
                                                                          recommending the stock as a lower-risk way to invest in
Total Debt                                                          Nil
NAV Per Share                                                 C$10.90     the mining industry’s most potentially lucrative endeavour-
Price/NAV                                                         0.9x    exploration.
Average Daily Trading Volume
  TSX                                                           272,418   Most of Fronteer’s value today is derived from its 47.2%
  AMEX                                                          627,359   interest in Aurora Energy Resources (AXU-T, Buy (S),
High-Low (52 Week)                                                        C$21.90 target), the spin-off of its impressive uranium
  TSX                                                  C$11.45 - C$3.35   discovery in Labrador, Canada. We also cover Aurora and
  AMEX                                                    $9.91 - $2.90
EV/Resv. + M&I Res.                                             $284.65   we are very bullish on the Company for 2007. Fronteer’s
Reserves+ M&I Resources                                      2.1 MMoz     most advanced exploration project is a gold exploration
Source: Company reports, Sprott Securities estimates                      joint venture with Teck Cominco in Turkey, where already
                                                                          2.1 MMoz have been identified and much more successful
                                                                          drilling has been reported since the resource calculation
                                                                          one year ago. In 2007 Fronteer will drill new prospects in
                                                                          the Yukon Wernecke Mountains regions where IOCG-type
                                                                          copper, gold and uranium targets have been identified.
                                                                          Based on a sum of the parts valuation we are initiating
                                                                          coverage of Fronteer with a BUY (S) recommendation and
                                                                          a C$13.50 target price.
   During the past twenty-four months, Sprott Securities Inc., either on its own or as a syndicate member, participated in
                               the underwriting of securities for Aurora Energy Resources




                                       SPROTT SECURITIES INC.                                                                              41
JANUARY 16, 2007                                                  JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407




Aurora Energy      Fronteer owns 47.2% of Aurora Energy, a publicly traded company that is exploring for
                   uranium in Labrador, Canada. Aurora is Fronteer’s most successful exploration venture
                   to date and an example of how Fronteer can spin-off or sell assets to create real value for
                   shareholders. Because Aurora is the most important component of Fronteer’s valuation,
                   we would not recommend investing in Fronteer without being familiar with Aurora as
                   well. (Sprott Research, AXU A Year in Review, January 5, 2007).
                   In 2006 AXU drilled 119 holes for a total of 45.9M meters. Based upon this work we
                   believe that a new Canadian uranium district has emerged having the potential to host in
                   excess of 150MM lbs of uranium. This year the Company plans on spending $25MM,
                   drilling 100M meters and operating 9 drill rigs defining AXU’s 2007 program as the
                   largest uranium exploration campaign globally. We expected that early in Q1 AXU will
                   release an updated 43-101 resource of approximately 75-90MMlbs for its uranium
                   properties focused on Michelin and Jacques Lake; an increase of over 250% on the
                   35MMlbs resource defined 12 months ago. If anything this expected increase in the
                   Company’s uranium resource is a testament to value creation through the drill bit and
                   underlying principal practised by Fronteer. AXU represents our top exploration pick in
                   the uranium sector for 2007.

Turkey Gold JV     Fronteer explored and developed the Agi Dagi and Kirazli deposits in Western Turkey,
                   and reported a resource of 2.1 MMoz on the two nearby deposits about one year ago.
                   Since then Teck Cominco, Fronteer’s JV partner, exercised its back-in rights and can earn
                   up to a 70% interest. Teck has taken control of the project operation and must spend
                   about $15 MM to earn its interest in Agi Dagi and Kirazli, and another $5 MM to back-in
                   on several other promising earlier-stage projects.
                   The Agi Dagi Gold Property is a large high sulfidation, epithermal gold system with a
                   supergene oxidized and gold mineralized cap rock of silica alteration that measures 4
                   kilometres by 1.5 kilometres in size. Mineralization is hosted in a northeast trending, flat
                   lying sequence of Tertiary volcanic rocks within the Biga Gold Belt. Two main zones of
                   mineralization have been identified on the property at Baba Dagi and Deli Dagi with
                   encouraging results at Ayitepe and Fire Tower. Mineralization at Baba Dagi occurs in
                   north-south and east-west trending tabular bodies that are interpreted to be controlled by
                   the intersection between high-grade feeder structures and the ancient water table.
                   Kirazli is underlain by a sequence of andesitic to dacitic porphyritic coherent and clastic
                   volcanic rocks whose primary textures are largely obscured by a blanket of intense silica
                   and clay alteration. Gold mineralization on the property reflects a high-sulphidation
                   epithermal system. Early-phase alteration resulted in an upper layer of dense silicification
                   overlying argilitized, pyritic alteration. This is cut by a series of fluted phreatic breccias
                   that provide conduits to silica-, sulphide-, gold and silver-bearing fluids that pooled
                   beneath the dense silicified and are haloed by advanced argillic alteration.
                   In an attempt to derive a value of these assets we have modelled Teck-Cominco
                   advancing these assets to production commencing in 2010. We have modelled a 7.5MM
                   tonnes per year operation mining an average grade of 0.97 grams per tonne gold and 5.7
                   grams per tonnes silver having a recovery of 90 and 30% respectively in the oxide and
                   declining later in the mine life. The operation is modelled to produce 210,000 ounces of
                   gold and 411,000 ounces of silver annually at a total cash cost of $178/oz from the oxide
                   zone during the first 6 years of production dropping to 120,000 oz of gold and 272,000 oz
                   of silver for the remaining life of mine as the sulphide zone is exploited and recoveries
                   drop to 50% for gold. A capital cost of $125M has been applied with $2 MM/yr of
                   sustaining capex applied over the estimated 12-year mine life. Our model is based soley
                   on the currently defined resource and material upside exists as The JV continues to



                   SPROTT SECURITIES INC.                                                                           42
JANUARY 16, 2007                                                  JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407



                     expand gold mineralization within the district, which we see as having the potential to
                     host in excess of 4MM ounces.

Figure 3             Estimated Gold Production (000s oz)




                     Source: Fronteer Development


Exploration Upside   Yukon: Fronteer has signed a deal with Newmont Exploration of Canada to acquire their
                     proprietary Geoscience dataset covering a 2,000 sq kilometre region of the northern
                     Yukon known as the Werneke Breccia. This region is under-explored and is prospective
                     for Olympic Dam-style copper-gold-uranium deposits. Fronteer has a strong foothold in
                     this emerging exploration camp controlling 336 square kilometres over the most-
                     prospective geophysical targets in Newmont’s dataset.
                     Following the completion of an airborne gravity survey the Company reported the
                     discovery of a large, drill-ready high-grade gold-uranium-copper zone. This new target,
                     called Thunder-Mountain, is unique in that it has yielded some of the highest grade gold
                     results ever found with uranium in north central Yukon. The mineralization occurs over
                     an interpreted source and are of at least 550 meters by 400 meters. Surface sampling
                     highlights included 99.2 grams per tonne gold, 0.57% U3O8 and 5.1 grams per tonne
                     silver; 95.0 grams per tonne gold, 0.68% U3O8 and 6.7 grams per tonnes silver, and
                     12.65% copper, 12.6 grams per tonne silver and 0.27 grams per tonnes gold all from
                     surficial grab samples interpreted to represent frost-heaved subcrop more or less in place.
                     Fronteer holds an 80% interest in the Wernecke Mountains Project. The project is a joint
                     venture with Rimfire Minerals Coporation, which holds a 20% interest. Newmont
                     Exploration and NVI Mining (Breakwater Resources) holds a combined 2% NSR.
                     Additional targets defined in late December 2006 include the Hail uranium prospect (17
                     boulders sampled averaging 0.15% U3O8), The Hail West copper-gold-silver prospect
                     (surface samples averaging 7.9% copper), the Pagisteel Fault Prospect (samples as high
                     as 5.75% copper and 1.24 grams


                     SPROTT SECURITIES INC.                                                                         43
JANUARY 16, 2007                                                JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407



                   Turkey: In northwestern Turkey, Fronteer has consolidated two new large gold
                   properties named Pirentepe and Halilaga. These properties are situated immediately
                   between Fronteer’s 100% owned Agi Dagi and Kirazli gold projects. These two deposits
                   had never been drill tested but have large geochemical and geophysical signatures that
                   are comparable in size to Agi Dagi. Drill targets on these two properties have been
                   defined and tested by an initial 3000-meter drill program. Initial drilling at Pirentepe
                   intersected 1.79 grams per tonne gold over 46.9 metres starting at 17 meters depth and
                   ended in similar style and grade mineralization. A second hole intersected 1.83 grams per
                   tonnes gold over 38.0 meters at starting at the same depth—both these initial holes are
                   significantly better than the average grade at Kirazli or Agi Dagi.
                   The Pirentepe prospect is located approximately 16 km northwest of Agi Dagi. It is
                   interpreted to be a high sulfidation, epithermal gold system with a supergene oxidized
                   and gold mineralized cap rock of silica alteration, hosted in a system of extrusive
                   volcanics of dacitic composition. Gold mineralization also occurs associated with a zone
                   of silicification, brecciation, oxidation and late chalcedony +/- pyrite overprint within a
                   060-080 trending corridor along the southern margin of the silica cap.
                   The Halilaga property is a linked porphyry copper-gold and high sulphidation gold
                   prospect located approximately 10 kilometres to the west of Agi Dagi. Alteration at
                   Halilaga is zoned about an inferred NW-SW trending structure. A quartz rich copper-gold
                   porphyry intruded sediments and volcanics in the Kestane Zone at the intersection of this
                   structure and an ENE trending graben parallel fault zone. Acidic fluids derived from this
                   porphyry have likely migrated along this NW-SW trending zone resulting in acid altered
                   volcanics and massive silicification along the main ridgeline.
                   In early December Teck-Cominco elected to exercise its right to earn a 60% interest in
                   these properties as a result of Fronteer’s first pass work. Teck must spend 3.5x FRG’s
                   expenditures on the project over the next three years, half of which must be spent in the
                   first year.
                   Mexico: In Mexico, Fronteer has made a significant new silver-gold discovery on a vein
                   system that returned surface values of up to 6.02 ounces per ton silver and 4.9 grams per
                   tonne gold over 7.5 meters. This system measures over two kilometres long, and is an
                   excellent target with no historical drilling. To date 8 widely spaced holes were drilled
                   along the Clara vein system testing approximately 800 meters of its strike length. Five
                   holes intersected mineralization, two of the intersections intersected 10.2 meters of 4.0
                   grams Au equivalent consisting of 189.8 grams per tonne silver and 0.55 grams per tonne
                   gold and the second intersected 2.03 meters of 5.4 grams per tonne gold. At the San
                   Pedro project 8 holes were also drilled to test a series of broad gold-silver soil
                   geochemistry anomalies over a 2000 square meter area. Highlights included 10.15 metres
                   of 0.5 grams per tonnes gold equivalent consisting of 9.7 grams per tonnes silver and 0.3
                   grams of gold including 2.83% zinc and 0.89% lead. A 5000 meter follow-up program is
                   planned for both these properties. Teck retains a similar back-in agreement as the Turkey
                   Gold projects.

Valuation          We use a sum of the parts methodology to value Fronteer, which represents a portfolio of
                   several metal exploration projects.
                   We have modelled Teck optioning to fully back into its 70% stake in the Turkish gold
                   assets and arranging for financing to production. We have modelled production from
                   Turkey beginning in 2010 producing approximately 210,000 ounces of gold and 411M
                   ounces of silver at an estimated cash cost of $180/oz, over a 12 year mine life. We have
                   assumed capex of $125MM spent in 2009 for the operation. Assuming a 5% discount
                   (lower risk because of the Teck partnership) the NPV equates to $$219MM, of which
                   30% ($65.7MM) is valued to FRG. Though this model remains preliminary it provides an


                   SPROTT SECURITIES INC.                                                                         44
JANUARY 16, 2007                                                        JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407



                   estimate of the potential economics of the operation. Our model will be refined as the
                   project moves to feasibility or if significant additions are made to the resource. We see
                   our valuation as being relatively conservative or a “base case” for the Turkey gold
                   projects. If the mine were to produce only 210,000 oz/yr it is questionable whether Teck
                   would pursue it to production, and so Fronteer may end up with a larger stake in the
                   project (up to 100%). What is more likely is that the project grows in size to 3+ MMoz of
                   resources, which we believe is an achievable target for Teck.
                   FRG owns 47.2% of AXU. We currently value AXU at C$21.90/share (see our note from
                   January 5, 2007) of which C$677.7MM is attributable to FRG. In addition, the Company
                   has a 17% stake in Latin American Minerals (C$5MM) in stock and warrants plus
                   C$50MM in cash.
                   Through a sum of the parts analysis we have derived a C$13.53 /share outstanding target
                   for FRG providing no value to the Company’s exploration potential in either Mexico or
                   the Yukon. In our opinion FRG’s Yukon portfolio of projects has significant potential for
                   discovery based upon the geological fundamentals, the methodical exploration approach
                   applied and the drill targets to be tested this year.
                   In 2007 FRG will have 25 rigs turning and exposure to approximately C$50MM in
                   exploration for the cost of about C$7MM as participating partners work to fulfill its claw-
                   back commitments in the projects and attributable ownership in AXU. The Company will
                   generate consistent news flow and asset growth directed by a team that has the ability and
                   intent to move these assets forward quickly.
                   We are initiating coverage on Fronteer Development Corporation with a Buy (S) and
                   $13.50 target derived through our sum of the parts valuation for the Company, which
                   gives Fronteer 1.0x NAV for all its gold, early stage exploration, and cash assets, and a
                   target valuation of Aurora shares that works out to 1.3x NAV, based on expected
                   exploration success in 2007.

Figure 4           Valuation Summary
                                            Asset                                               C$ ($000)
                                            Aurora Energy (target 1.3x NAV)                      $677,739
                                            Turkey Gold, 30%                                      $73,049
                                            Cash                                                  $50,379
                                            Latin American Min shares                              $2,500
                                            Mexico Exploration                                         $0
                                            Yukon Exploration                                          $0
                                            Total                                                $803,668
                                            Basic Shares Outstanding                                59,400
                                            NAV Per Share                                           $10.90
                                            Target (sum-of-the-parts)                               $13.53
                   Source: Sprott Securities

                   While we decided to initiate coverage with a Buy (S) recommendation (the same as our
                   recommendation for Aurora Energy), because of the strong value relationship with
                   Aurora, Fronteer is an inherently less risky exploration vehicle. Because of its exposure
                   to several projects across several different commodities, Fronteer should benefit from
                   diversification. Given the track record of Fronteer’s management over the last four or five
                   years, we think this diversification is worth paying for, making the shares a good
                   investment in our view.




                   SPROTT SECURITIES INC.                                                                                 45
JANUARY 16, 2007                                                                                                                JUSTIN REID 416·943·6729;DAVID STEIN, CFA 416·943·6407



Figure 5                               Fronteer Development Group Inc.. – Turkey Gold JV NAV Model
                                   Oxides                                                            Sulphides
Year                    2009         2010         2011          2012     2013      2014      2015         2016     2017      2018        2019         2020         2021         2022
Mill kt/y                           7,500        7,500       7,500       7,500     7,500     7,500       7,500     7,500     7,500      7,500        7,500        7,500        7,500
Gold Grade                           0.97         0.97        0.97        0.97      0.97      0.97        1.00      1.00      1.00       1.00         1.00         1.00         1.00
Silver Grade                         5.69         5.69        5.69        5.69      5.69      5.69        3.76      3.76      3.76       3.76         3.76         3.76         3.76
Rec - Au                             90%          90%         90%         90%       90%       90%         50%       50%       50%        50%          50%          50%          50%
Rec - Ag                             30%          30%         30%         30%       30%       30%         30%       30%       30%        30%          30%          30%          30%
Gold Prod. (oz)                   210,531      210,531     210,531     210,531   210,531   210,531     120,579   120,579   120,579    120,579      120,579      120,579      120,579
Silver Prod. (oz)                 411,656      411,656     411,656     411,656   411,656   411,656     272,026   272,026   272,026    272,026      272,026      272,026      272,026
Gold Price                           500          500         500         500       500       500         500       500       500        500          500          500          500
Silver Price                       $10.00       $10.00      $10.00      $10.00    $10.00    $10.00      $10.00    $10.00    $10.00     $10.00       $10.00       $10.00       $10.00
Revenue                           109,382      109,382     109,382     109,382   109,382   109,382      63,010    63,010    63,010     63,010       63,010       63,010       63,010
Cost/T                                   5             5           5        5         5         5           5         5          5            5           5            5            5
Op Costs                           37,500       37,500      37,500      37,500    37,500    37,500      37,500    37,500    37,500     40,514       40,514       40,514       40,514
Cash Cost                         $178.12      $178.12     $178.12     $178.12   $178.12   $178.12     $311.00   $311.00   $311.00    $336.00      $336.00      $336.00      $336.00
Dep Cost                           $68.82       $68.82      $68.82      $68.82    $68.82    $68.82      $75.91    $75.91    $75.91     $67.61       $67.61       $67.61       $67.61
Op Cash Flow                       71,882       71,882      71,882      71,882    71,882    71,882      25,510    25,510    25,510     22,495       22,495       22,495       22,495
CapEx                125,000         2,000       2,000       2,000       2,000     2,000     2,000       2,000     2,000     2,000       1,000        1,000       1,000        1,000
Tax                                                  -      20,965      20,965    20,965    20,965       7,053     7,053     7,053       6,449        6,449       6,449        6,449
FCF                 (125,000)      69,882       69,882      48,917      48,917    48,917    48,917      16,457    16,457    16,457     15,047       15,047       15,047       15,047
NPV, 5%             $219,148
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                                                     46
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                                Gabriel Resources Ltd.
                                                          (GBU - C$4.83, TSX)

Recommendation: BUY (S)                                                                                       Target Price: C$7.50
Figure 1                                                  Price Chart
                                                                           Hold-Up At EIA Stage
                                                                           Gabriel has now been waiting for about three months for its
                                                                           EIA questions, the questions received from the public as
                                                                           part of the public consultation process that occurred last
                                                                           August. Apparently the reason for the delay is the
                                                                           government’s lack of personnel sifting through 6,000
                                                                           questions and comments. Once Gabriel receives the
                                                                           compiled list of questions, we expect the Company will be
                                                                           able to turn around the responses within two weeks or so
                                                                           because Gabriel has already been preparing for the
                                                                           expected questions and comments.
                                                                           Gabriel still appears to be close to receiving a long-fought
Source: BigCharts (January 15/07)                                          permit that will take an enormous amount of risk out of its
                                                                           Rosia Montana gold-silver project in Western Romania.
Figure 2                                                    Statistics     Likely to be a critical event for the market, the EIA
                                                                           approval makes the Rosia Montana project a matter of
Shares Outstanding:
  Basic                                                     210.8 MM       “when” instead of “if”. While the path is by no means
  Fully Diluted                                             218.2 MM       clear even with the EIA approval, any further problems
  Management                                                    6.7 MM     will only affect timing and perhaps cost of the project,
Market Capitalization                                      $875.6 MM       whereas right now we would imagine there is still a
Market Float                                               $847.8 MM
Cash                                                        $44.6 MM
                                                                           significant population of investors that doubt the validity of
Total Debt                                                           Nil   Gabriel’s prospects in this developing and somewhat
NAV Per Share                                                   C$6.59     unknown Eastern European nation. Gabriel completed 14
Price/NAV                                                          0.7x    community meetings in July and August across the country
Average Daily Trading Volume                                1,063,973      to allow for widespread public input into what has become
High-Low (52 Week)                                     C$5.45 - C$2.01
Reserves                                                   10.1 MMoz       a somewhat misunderstood and controversial project. After
Reserves+ M&I Resources                                    14.6 MMoz       Gabriel submits its responses as an “Annex” to the EIA,
Source: Company reports, Sprott Securities estimates                       the government committee reviewing the project then has
                                                                           45 business days to review the full EIA submission and
                                                                           issue a decision. Given the technical merits of the project
                                                                           we expect the outcome to be positive—considering
                                                                           Romania’s entry into the European Union as of 2007, the
                                                                           process must be completely transparent. This decision now
                                                                           would be stretched into March 2007, which will allow
                                                                           Gabriel to move forward with land acquisition and
                                                                           financing for start of construction in mid-to-late-2007, and
                                                                           production potentially by 2009.




                                       SPROTT SECURITIES INC.                                                                                47
JANUARY 16, 2007                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth    One of the most impressive aspects of the Rosia Montana project, that is often forgotten
                     given the historical permitting struggles, is the production potential of the project. In the
                     early years of production, based on Gabriel’s current capital plans, the mine should
                     produce between 600,000 and 650,000 oz annually. With a 17-year initial reserve life,
                     and with the gold price much higher than expected a few years ago and good exploration
                     upside, we think Gabriel will be in the position to expand the mine once payback of the
                     initial capital has been established. A larger company with fewer capital constraints could
                     expand the mine sooner. We think the ultimate potential is for 800,000 to 850,000 oz/yr.

Figure 3             Site Plan For Mine – Four Pits Could Be Connected




                     Source: Company reports, Sprott Securities estimates


Exploration Upside   Gabriel has not done much exploration over the past few years, since it really began the
                     permitting process. And, while there is still uncertainty over the permitting process it is
                     unlikely that Gabriel would see and significant value from any new discoveries. In the
                     longer run the exploration potential is excellent. In the immediate Rosia Montana area,
                     significant zones between the four pits have not been drilled so as not to disturb citizens
                     in the village, however it is likely that there will be much additional tonnage available
                     once the town is moved. We estimate that there could be an additional 5-10 MMoz of
                     resources within the current Rosia Montana complex, including between pits and
                     extensions. Gabriel also discovered two small satellite zones that have resources
                     calculated on them: Rodu and Frasin. Rosia Montana is located in a rich gold and copper
                     district and there is excellent potential for more discoveries.




                     SPROTT SECURITIES INC.                                                                                 48
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Other Opportunities   Gabriel’s largest shareholder is Newmont Mining (19%), and many investors,
                      particularly longer-term investors, are comforted by Newmont’s seal of approval. The
                      fact that Newmont has such a large stake, however, makes the Company less marketable
                      to other major gold producers and makes a bidding war unlikely. Gabriel is prepared to
                      develop the project itself, however a takeover by Newmont at some point along the
                      development track is a strong possibility.

Valuation             We are increasing our valuation on Gabriel recognizing that if the project moves forward
                      as expected over the next twelve months the stock should trade at a premium to its NAV.
                      Previously we used a 1.0x NAV multiple, which tends to be the average valuation for
                      development stage projects (larger and/or less risky projects trade at a premium and vice
                      versa). Given that we expect Gabriel to receive its environmental permitting within our
                      12-month target horizon, we are increasing our target valuation to 1.2x NAV, resulting in
                      a target of C$7.50, up from C$6.25. The junior company takeovers that we have tracked
                      over the past 15 months have tended to occur at valuations between 1.2 – 1.5x P/NAV, so
                      our target is towards the lower end of that range. Leading up to production (by 2009)
                      Gabriel should trade at a 12-15x P/CFPS multiple (roughly 2.0x NAV) given the quality
                      of the project and expansion potential, and we should see gradually increases in value as
                      Gabriel reduces the risk in the project. After the environmental permitting is received,
                      completing the land purchases (village relocation) could be another road-block in terms
                      of timing, and this prevents us from applying a more bullish multiple target in the near
                      term.
                      We are concerned with the delay in receiving the questions and comments back from the
                      community consultation meetings that occurred this past August. This was not expected
                      to be a significant item in the permitting process and now has become a bit of a roadblock
                      that is out of the Company’s hands. Given this concern and the increased valuation, we
                      are adding the “speculative” modifier to our Buy recommendation.




                      SPROTT SECURITIES INC.                                                                          49
JANUARY 16, 2007                                                                                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4                               Rosia Montana Project – NAV Model
(US$000s)                          2008         2009        2010         2011       2012       2013       2014       2015        2016        2017         2018         2019      …2031
Metal Prices
 Gold (oz)                                                500.00        500.00     500.00     500.00     500.00     500.00     500.00      500.00       500.00       500.00      500.00
 Silver (oz)                                               10.00         10.00      10.00      10.00      10.00      10.00      10.00       10.00        10.00        10.00       10.00
Metal Produced
 Gold (oz)                                                620,386   644,569   615,865   628,746   628,647   551,643   519,384   524,679   845,977   855,109   629,176
 Silver (oz)                                            2,842,315 2,628,528 2,550,827 2,359,448 1,966,910 2,140,790 2,229,074 2,392,580 3,075,536 2,532,817 1,945,053
FINANCIALS
Revenue
 Gold                                                   $310,193      $322,284   $307,933   $314,373   $314,324   $275,822   $259,692    $262,339     $422,989     $427,555    $314,588
 Silver                                                   28,423        26,285     25,508     23,594     19,669     21,408     22,291      23,926       30,755       25,328      19,451
Op. Cost (incl G&A)                                      106,260       111,418    130,503    133,547    134,854    134,854    130,228     130,227      160,311      160,311     154,409
Royalty (2% Rev.)                                          6,204         6,446      6,159      6,287      6,286      5,516      5,194       5,247        8,460        8,551       6,292
Operating Profit                                         232,356       237,151    202,937    204,421    199,139    162,375    151,755     156,038      293,433      292,572     179,629
Op. Cash Cst ($/oz Net)                                      125           132        170        175        183        206        208         203          153          158         215
Depreciation                                                     56         -          -          -          -          -           -            -           -            -            -
Total Cost                                                      182       188        227        231        239        262         264          259         209          214          271
Capital Expenditure:
Initial                         100,000       250,000    260,000             -          -          -          -          -          -     150,000            -            -            -
Sust.                                 -             -          -        11,076     12,285      6,057      9,078     11,910      9,384       6,541       16,362       14,290        3,000
Working Capital                       -             -     35,000      (35,000)          -          -          -          -          -           -            -            -            -
Total Capex                     100,000       250,000    295,000      (23,924)     12,285      6,057      9,078     11,910      9,384     156,541       16,362       14,290        3,000
Debt                                    -     250,000    295,000             -          -          -          -          -          -
Interest                                -       6,875      8,113        27,999     24,499     20,580     16,206     11,344      5,956             -            -           -            -
Repayment                               -           -          -        97,998    102,898    108,043    113,445    119,117    125,073             -            -           -            -
Balance                                 -     256,875    559,988       489,989    411,591    324,128    226,889    119,117          -             -            -           -            -
Tax (25%)                                                                                                     -          -      2,836        (126)      69,268       69,570      44,157
Project Cash Flow             (100,000)       (6,875)    224,244       135,078     63,255     69,742     60,409     20,004      8,507        (377)     207,803      208,711     132,472
Cash Flow to GBU             $(100,000)       $(6,875) $259,244       $135,078    $63,255    $56,265    $48,328    $16,003     $6,805       $(302)    $166,243     $166,969    $105,977
NPV US to GBU, 5%                           $1,131,974
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                                                         50
JANUARY 16, 2007                                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                               Goldbelt Resources Ltd.
                                                         (GLD - C$1.17, TSXv)

Recommendation: N.A.                                                                                             Target Price: N.A.
Figure 1                                                  Price Chart
                                                                          Junior Producer in’08 With Exploration Potential
                                                                          With an expansive and very prospective land package in
                                                                          northern Burkina Faso, Goldbelt is quickly making a name
                                                                          for themselves as a successful West African exploration
                                                                          and development story. And with a 1.1 MMoz resource
                                                                          already confirmed on its key project, and pre-feasibility
                                                                          study completed, it is likely that it will be one of a new
                                                                          generation of small gold mines in the emerging country
                                                                          (after High River, Etruscan and Semafo), potentially
                                                                          beginning production in mid 2008. Goldbelt’s Belahouro
                                                                          project in Northern Burkina Faso is close to production, yet
                                                                          has a similar exploration footprint to Bissa, with the
                                                                          potential to host more than 2 MMoz. In 2006, Goldbelt’s
Source: BigCharts (January 15/07)
                                                                          focus was on production, and in that respect it completed
                                                                          in-fill drilling on the main Inata deposit, finished a pre-
Figure 2                                                    Statistics
                                                                          feasibility study and secured a used crushing circuit from
Shares Outstanding:                                                       Australia. In 2007, we expect Goldbelt to focus more on
  Basic                                                       59.1 MM
  Fully Diluted                                               67.3 MM
                                                                          exploration while it continues along the development track.
  Management                                                    7.4 MM    The Company recently beefed up its exploration team by
Market Capitalization                                        $59.5 MM     hiring a new VP Exploration, Dr. Peter Turner, and drilling
Market Float                                                 $52.0 MM     in late 2006 turned up some good numbers (e.g. 23m @
Cash                                                          $9.6 MM     15.5 g/t at the BSF 1 target on the Souma Trend). Also we
Total Debt                                                    $0.0 MM
Average Daily Trading Volume                                     46,152   expect a revised “bankable” feasibility study in Q1 to
High-Low (52 Week)                                     C$1.55 – C$0.70    incorporate the used milling equipment resulting in a
Reserves                                                     0.6 MMoz     slightly higher throughput of 120,000/yr compared to the
Reserves+ M&I Resources                                      1.1 MMoz     pre-feasibility study at 106,500 oz/yr.
Source: Company reports, Sprott Securities estimates
                                                                          We visited Goldbelt’s property in October 2006 and were
                                                                          impressed by the scope of the project. While the Inata zone
                                                                          is the anchor to the project with 1.1 MM oz in resources, it
                                                                          is on one of three trends the Company has identified, each
                                                                          with numerous gold showings, and the potential for a string
                                                                          of small deposits.
                                                                          Recently Dundee Precious Metals has taken a controlling
                                                                          stake in the Company (47%) by buying out Resolute
                                                                          Mining’s stake, formerly the largest shareholder. While the
                                                                          stake puts Goldbelt essentially out of reach in any hostile
                                                                          consolidation efforts, it does give the Company access to
                                                                          fairly deep pockets (DPM has a great balance sheet for a
                                                                          junior gold producer), and may support efforts to become a
                                                                          larger or multi-mine West African producer in the longer
                                                                          term.




                                       SPROTT SECURITIES INC.                                                                               51
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth    If permitting and construction goes smoothly, Goldbelt could be in production by mid-
                     2008 at a rate of 105,000 oz/yr – 125,000 oz/yr. Given the numerous satellite zones on
                     the property it is possible that Goldbelt may be able to expand beyond that and we expect
                     that it will build some flexibility into its design.

Exploration Upside   While Goldbelt has moved its main Inata zone to the feasibility stage, we still see the
                     Company in some respects as an exploration Company. The Inata trend has been fairly
                     well explored although there is still upside along the north and south strike extents of the
                     deposit. Goldbelt has two other trends located to the east that could end up as satellite
                     zones for a larger mine. The Souma trend, located about 10 km east of Inata contains the
                     Souma, N’Darga, BSF 1 and BSF 16 prospects. A historical resource (non-43-101
                     compliant) resource of 55,000 oz was calculated by BHP, although this reflects very little
                     work. Some of Goldbelt’s best regional results have recently come from the BSF 1 zone.
                     The other trend, a little further to the east is Fete Kole, where BHP calculated a historical
                     resource of 402,000 oz @ 2.7 g/t, and has good high-grade potential. With Inata as the
                     anchor zone, and more than 10 potential satellite zones, the Belahouro has the potential to
                     evolve into a multi-zone multi-million-ounce deposit like Lefa (Guinea) or Gross Rosebel
                     (Suriname) etc.

Figure 3             Extensive Artisanal Digging On The Belahouro Project




                     Source: Sprott Securities




                     SPROTT SECURITIES INC.                                                                           52
JANUARY 16, 2007                                                               DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                                Guyana Goldfields Inc.
                                                          (GUY - C$11.63, TSX)

Recommendation: BUY (S)                                                                                      Target Price: C$16.00
Figure 1                                                   Price Chart
                                                                            Adding To World-Class Discovery At Depth
                                                                            Guyana Goldfields has made what we believe to be one of
                                                                            the biggest grass roots gold discoveries in this cycle. We
                                                                            already estimate that the Rory’s Knoll zone, which has
                                                                            been drilled to a vertical depth of about 850 m from
                                                                            surface, as well as other nearby zones, should contain a
                                                                            total of 5 MMoz of resources. Currently drilling underway
                                                                            to extend the Rory’s Knoll zone at depth could boost the
                                                                            potential to 6-7 MMoz.
                                                                            Guyana has been successful reporting impressive
                                                                            intersections deeper and deeper below the surface and
                                                                            below any likely open pit. Recent drilling, including the
Source: BigCharts (January 15/07)                                           newly-released hole RKD-60 (Nov. 27, 2006), have
                                                                            established in our opinion that a 3-4 g/t zone extends below
Figure 2                                                     Statistics     300 m, and could be mineable using bulk underground
Shares Outstanding:                                                         mining methods, similar to what Yamana currently does in
  Basic                                                        48.6 MM      Brazil (Brasiliero mine is 2.5 g/t ore and Jacobina is 2.0 g/t
  Fully Diluted                                                49.6 MM      ore right now), and what Agnico-Eagle is planning to do at
  Management                                                     9.1 MM     the Goldex project (2.4 g/t using a hoist and shaft for
Market Capitalization                                       $486.1 MM
Market Float                                                $395.1 MM
                                                                            extraction). RKD-60 reported 231 m @ 3.12 g/t in a hole
Cash                                                           $8.6 MM      that went down to a vertical depth of 857 m, just slightly
Total Debt                                                            Nil   deeper than some of Guyana’s previous drilling. Within
NAV Per Share                                                  C$11.65      that composite interval there is 85 m with an average grade
Price/NAV                                                           1.0x    of 7.03 g/t, and the economics of any deeper underground
Average Daily Trading Volume                                    187,753
High-Low (52 Week)                                     C$12.41 - C$3.20     mining may be significantly enhanced by focusing on the
Reserves                                                                    higher-grade portion that we expect to grade 5-7 g/t. While
Reserves+ M&I Resources                                                     the overall ounces of reserves may not be as high in this
Source: Company reports, Sprott Securities estimates                        case, the cash cost per ounce and capital expenditure per
                                                                            ounce of production should be far less.
                                                                            The next critical piece of news should be assays results
                                                                            from RKD-62 (not released at the time of writing). Based
                                                                            our recent site visit we expect that this hole will
                                                                            demonstrate that economic mineralization continues to a
                                                                            depth of 1200 m, and that the high-grade core zone we
                                                                            observed in #60 extends at depth and remains open. This
                                                                            could immediately grow the size of Rory’s Knoll by 25-
                                                                            50%, which should be well received by the market.




                                       SPROTT SECURITIES INC.                                                                                 53
JANUARY 16, 2007                                      DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 3             Plan Map Showing Targets Immediately Close To Rory’s Knoll




                     Source: Guyana Goldfields



Exploration Upside   As access on the large property improves, so do the prospects for finding new gold
                     deposits. So far Guyana Goldfields has been relatively limited by access from the
                     Cuyuni, as road development away from the river has been relatively slow. The artisanal
                     miners, likewise, are limited by navigable water. So far all of Guyana’s significant gold
                     discoveries (other than Marupa) have been found on artisanal and historic mining sites.
                     Recently, Guyana’s push to the SE from the Aurora camp turned up a new target called
                     Swamp Vein, where large quantities of visible gold were found in a gold vein at surface.
                     Given the extensive artisanal and small-scale mining, it is highly surprising to find
                     abundant gold at surface, although in another sense, this discovery demonstrates the
                     enormous prospectivity of Guyana’s land holdings. Away from the major rivers,
                     Guyana’s ground is virtually unexplored. So far Guyana has been unable to hit the gold
                     vein at depth with limited drilling, but work on the target continues. More importantly,
                     the high-grade vein may be a hint at a larger gold system below, much like the high-grade
                     found near surface at Rory’s Knoll, which was mined at a small scale historically.
                     Another new target we learned about on our trip is located on the north side of the
                     Cuyuni river on strike from Rory’s Knoll (and Swamp Vein for that matter). This as yet
                     unnamed target, known as “Zone 1” also looks promising. Guyana is able to pan
                     abundant gold from a stream, which should lead to drill targets in early 2007.




                     SPROTT SECURITIES INC.                                                                          54
JANUARY 16, 2007                                     DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Valuation          We are strongly convinced that Guyana Goldfields has its hands on a world class gold
                   camp, with Rory’s Knoll as its anchor and several exciting regional targets that could add
                   many more ounces down the road. Our NAVPS estimate at a 7.5% discount rate is
                   C$11.14. We use 5.2 MMoz recovered in our model accounting for higher grade in the
                   underground mine. We assume that the continuation of the zone at depth to 1200 m will
                   increase the overall resource to 7 MMoz, most of which should be mineable. Maintaining
                   a 1.4x multiple to account for the exceptional exploration potential and relatively safe
                   risk profile results in our current C$16.00 target. We believe that the world class size of
                   Rory’s Knoll (6 MMoz), the numerous regional targets and favourable land package
                   justify a premium to NAV. In addition, with Guyana’s back-in right to 50% of the
                   Aranka project (Aranka Gold, ARK-TSXV), the implied value is already worth C$1.60
                   per share to Guyana, and the new JV on the Peters Mine means that this interesting target
                   immediately south of Sacre Coeur’s Million Mountain project will finally see some work
                   in 2007.




                   SPROTT SECURITIES INC.                                                                           55
JANUARY 16, 2007                                                                                                            DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4                               Guyana Goldfields Inc. - NAV Model For Aurora Project
                      Exploration                                           Expansion
Year                   2007 2008           2009         2010      2011      2012     2013       2014      2015      2016         2017       2018       2019       2020       2021       2022
Mill kt/y                                            2,500        2,500     2,500     4,000     4,000     4,000     4,000      4,000       4,000      4,000      4,000      4,000      4,000
Gold Grade                                            3.50         3.25      3.25      3.00      3.00      3.00      3.25       3.75        3.75       3.50       3.50       3.50       3.50
Rec                                                   93%          93%       93%       93%       93%       93%       93%        93%         93%        93%        93%        93%        93%
Gold Prod. (oz)                                    261,656      242,966   242,966   358,842   358,842   358,842   388,746    448,553     448,553    418,650    418,650    418,650    418,650
Gold Price                                               500       500       500       500       500       500       500          500        500        500         500        500        500
Revenue                                            130,828      121,483   121,483   179,421   179,421   179,421   194,373    224,277     224,277    209,325    209,325    209,325    209,325
Cost/T                                                    12        12        12        14        14        14        14           18          18         18         18         18         18
Op Costs                                            36,541       36,074    36,074    64,971    64,971    64,971    65,719     83,214      83,214     82,466     82,466     82,466     82,466
Cash Cost                                          $139.65      $148.47   $148.47   $181.06   $181.06   $181.06   $169.05    $185.52     $185.52    $196.98    $196.98    $196.98    $196.98
Dep Cost                                            $25.93      $106.34   $147.50    $26.81    $26.81    $26.81    $26.60     $26.25      $26.25     $26.41     $26.41     $26.41     $26.41
Op Cash Flow                                           94,287    85,409    85,409   114,450   114,450   114,450   128,654    141,063     141,063    126,859    126,859    126,859    126,859
CapEx                                  125,000           500     20,000    30,000     1,000     1,000     1,000     1,000       1,000      1,000      1,000      1,000      1,000      1,000
Tax                                                                   -    16,623    34,035    34,035    34,035    38,296      42,019     42,019     37,758     37,758     37,758     37,758
FCF                         -       - (125,000)        93,787    65,409    38,786    79,415    79,415    79,415    89,358      98,044     98,044     88,101     88,101     88,101     88,101
NPV, 7.5%          $522,973
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                                                              56
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                          High River Gold Mines Ltd.
                                                          (HRG - C$2.05, TSX)

Recommendation: TOP PICK                                                                                      Target Price: C$4.50
Figure 1                                                      Estimates
                                                                           Finally Seeing Production Growth In 2007
YE Dec. 31                          2006E         2007E           2008E
Gold Production                      138.3         265.6           363.3   High River’s two new mining development projects saw
Diluted EPS, adj.                    $0.09         $0.27           $0.36   significant capital cost increases and construction delays in
Diluted CFPS, adj.                   $0.16         $0.37           $0.49   2006 much like almost every other mining project in the
Production Yr/Yr Change                6%           92%             37%
CFPS Yr/Yr Change                    128%          133%             35%
                                                                           world, but the fact that it is building two mines
EV/Production                       $3,858        $2,009          $1,469   simultaneously made it doubly taxing. This heightened risk
EV/Resv. + M&I Res.                   $198                                 offset significant gains in terms of the Company’s
P/CFPS                               11.0x             4.8x         3.6x   exploration pipeline. High River’s Bissa project in Burkina
Source: Company reports, Sprott Securities estimates                       Faso already has an inferred resource of 1.3 MMoz with
                                                                           another season of the exploration just beginning and the
Figure 2                                                  Price Chart      potential for several new discoveries on the claims. High
                                                                           River’s venture into a Siberian silver project (joint venture)
                                                                           marks a new direction for the Company, but the property
                                                                           seems to have tremendous exploration potential, and a
                                                                           strong possibility of being a large enough project to
                                                                           counter criticism of poor access and infrastructure.
                                                                           Within the year, High River should be operating a total of
                                                                           four mines (3 in Russia, 1 in Burkina Faso), with two
                                                                           marquee exploration projects—both of which could be
                                                                           bigger than anything High River has been involved with to
                                                                           date. It is one of the most solid potential production/growth
                                                                           pipelines that we have seen since Eldorado, and earlier,
                                                                           Glamis. Unlike these stars of the gold sector, High River
Source: BigCharts (January 15/07)                                          may have taken on too much for the size of its balance
                                                                           sheet and professional staff—and the rising costs of its
Figure 3                                                      Statistics   operations in Russia have meant that it could not rely on
Shares Outstanding:                                                        internally generated cash flow to help fund its new
  Basic                                                      248.2 MM      projects.
  Fully Diluted                                              248.2 MM
  Management                                                  12.5 MM      That is the past. While minor delays on the construction of
Market Capitalization                                       $437.5 MM      its projects have pushed back our estimates in 2007, by Q2
Market Float                                                $415.5 MM      the market should see the Taparko mine ramping up
Cash                                                          $6.2 MM
Total Debt                                                    $103 MM      production, and the Berezitovoye project in the
NAV Per Share                                                   C$2.38     commissioning stage. Once the market can sense the
Price/NAV                                                         0.9x     successful start-up of these two projects and the potential
Average Daily Trading Volume                                   587,630     for 350,000 oz of production in calendar 2008, we should
High-Low (52 Week)                                     C$3.18 – C$1.60
Reserves                                                     1.9 MMoz
                                                                           see a significant upward revaluation in the stock.
Reserves+ M&I Resources                                      2.7 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                57
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth    High River should almost triple production by mid-2007 with the addition of two new
                     mines. Taparko should be commissioning by March, and ramping up over Q2 to produce
                     about 110,000 oz/yr in its initial phase. Berezitovy, only a few months behind Taparko,
                     should produce about 100,000 oz/yr. But the growth does not stop there. In 2008 we
                     expect High River to expand the Taparko mine to produce 140,000 oz/yr from increased
                     tonnage, and then Bissa and Prognoz (see exploration section below) could potentially be
                     adding to the production profile between 2009 and 2011. In total we see the production
                     growth from about 120,000 oz/yr net to HRG today to 350,000 oz in 2008, and over
                     500,000 oz/yr with Bissa and Prognoz—and both of those projects could be bigger than
                     we are currently expecting given that both are still in the exploration stage.

Exploration Upside   With more than enough construction on its plate, we were pleased to see High River
                     decide to continue exploration of Bissa, despite a sizable 1.3 MMoz initial resource. Too
                     often junior companies will take a 1 MMoz discovery, move to boring in-fill drilling and
                     feasibility work, only to build a marginal small gold mine. Like High River, we see the
                     potential for a larger discovery at Bissa, and hence expect that 2007’s aggressive drilling
                     program should yield positive results. High River’s 85%-owned Russian subsidiary is
                     also drilling the Prognoz silver deposit with its Russia JV partner (Gazteck). The first
                     goal is to upgrade the historic Russian resource to a 43-101 compliant resource, which
                     has been estimated at 195 MMoz. Then High River will look to explore the two main
                     veins along strike and test 17 other vein targets that have been identified previously.
                     Beyond the two most advanced projects, High River now has a pipeline of earlier stage
                     projects in both Burkina Faso and Russia. The Labola projects in Burkina Faso saw good
                     initial drill results in early 2006 but was put on the back-burner with the recent focus on
                     the Bissa project. Parallel targets have been identified over a strike length of 8 km where
                     intensive artisanal gold digging is currently taking place near surface. In Russia, we
                     expect some work on the Novophirsovskoye project, another earlier-stage gold project
                     with little data in the market place so far.

Valuation            With all of its production currently in Russia, High River trades at a massive discount to
                     most junior and mid-tier gold miners, but as Taparko and Berezitovy come on-line, High
                     River should see its valuation increase significantly. Production of 350,000 oz/yr is
                     expected in calendar 2008 once its new mines are operation, with a growth profile that
                     could see production at 500,000 – 600,000 oz/yr (gold equivalent) by the end of the
                     decade. Rolling forward our estimates to 2008 we estimate that at full production High
                     River should see CFPS of $0.49, up from $0.37 in 2007e. We are lowering our target
                     multiple to 8.2x from 11.2x previously—this is due to the fact that by 2008 much of the
                     Company’s current expected growth will have taken place. Our target therefore remains
                     C$4.50 per share. So far we have been early on our bullish call on High River, but we see
                     the start-up of its two new mines as an undeniable catalyst in 2007, and therefore we are
                     maintaining our Top Pick recommendation.




                     SPROTT SECURITIES INC.                                                                           58
JANUARY 16, 2007                                                           DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               High River Gold Mines Ltd. – Canadian GAAP Income Statement
Fiscal YE Dec. 31                                                          2007E
($000s)                                  2006E            Q1E       Q2E        Q3E            Q4E         2007E         2008E         2009E
Ave. Spot Gold Price ($/oz)               $600           $650      $650        $650          $650          $650          $650          $500
Cdn Dollar                                $1.13          $1.11     $1.11       $1.11         $1.11         $1.11         $1.11        $1.11
Buryatzoloto, Siberia (84.6% interest after Q2 2005)
Gold Prod. / Sales (koz)               138           30              30           30            30          119           123           123
Cash Cost ($/oz)                     $321         $302             $302         $302          $302         $302          $350          $300
Berezitovoye, Siberia
Gold Prod/ / Sales (koz)                      -             -         -           28            28           55           100            98
Cash Cost ($/oz)                             $-            $-        $-         $192          $192         $192          $207          $187
Taparko, Burkino Faso
Gold Production / Sales (koz)                 -             -        30           30            30           91           140           137
Cash Cost ($/oz)                             $-            $-      $233         $233          $233         $233          $260          $257
Gold Production (oz)                       138             30        60           88            88          266           363           357
Cash Cost ($/oz)                          $321           $302      $149         $163          $163         $176          $276          $253
FINANCIALS
Revenue                               $103,143         $27,065   $46,857    $64,732       $64,732      $203,387      $273,760     $207,855
Costs of Sales                          47,579          12,584    18,818     23,037        23,037        77,476       113,074      101,128
Total Income                            55,564          14,481    28,039      41,695        41,695      125,911       160,686       106,727
Corporate                                4,934             950       950        950           950         3,800         3,800         3,800
Exploration                              2,602           1,000     1,000      1,000         1,000         4,000         4,000         4,000
EBITDA                                 $48,028         $12,531   $26,089    $39,745       $39,745      $118,111      $152,886       $98,927
Depreciation                            14,317           3,170     5,911       8,386         8,386       25,853        35,128        39,502
Income Taxes                             4,816           1,194     2,817       4,494         4,494       12,999        13,459         6,459
Interest                                 4,623           1,400     1,400       1,400         1,400        5,600         5,600         5,600
Less: Minority Interest                  4,222           1,042     1,318       1,483         1,483        5,564         6,828         2,914
Net Income                              20,050           5,725    14,643      23,983        23,983       68,095        91,871        44,453
Op. Cash Flow (to HRG)                 $35,231          $8,895   $20,554    $32,369       $32,369       $93,948      $126,999       $83,955
Shares Outstanding
 Basic                                 228,916         247,702   259,587    259,587       259,587       256,616       257,299       257,299
 Fully Diluted                         229,208         247,995   259,880    259,880       259,880       256,623       257,299       257,299
Earnings Per Share
 Basic                                    $0.09          $0.02     $0.06       $0.09         $0.09         $0.27         $0.36        $0.17
 Fully Diluted                            $0.09          $0.02     $0.06       $0.09         $0.09         $0.27         $0.36        $0.17
Cash Flow Per Share
 Basic                                    $0.15          $0.04     $0.08       $0.12         $0.12         $0.37         $0.49        $0.33
 Fully Diluted                            $0.15          $0.04     $0.08       $0.12         $0.12         $0.37         $0.49        $0.33
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                             59
JANUARY 16, 2007                                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                              IAMGOLD Corporation
                                      (IMG - C$10.21, TSX; IAG – $8.60, AMEX)

Recommendation: BUY                                                                            Target Price: $14.00, C$15.50
Figure 1                                                   Estimates
                                                                          Bigger IS Better
YE Dec. 31                          2006E         2007E          2008E
Gold Production                      566.6       1,021.6        1,101.2   With the ink barely dry on the Cambior takeover,
Diluted EPS, adj.                    $0.39         $0.34          $0.40   IAMGOLD is now rationalizing its largest and most
Diluted CFPS, adj.                   $0.57         $0.66          $0.76   ambitious corporate deal ever. The Cambior acquisition
Production Yr/Yr Change               22%           80%             8%
CFPS Yr/Yr Change                    122%           16%            16%
                                                                          adds a marquee mine to the IAMGOLD portfolio, Gross
EV/Production                       $2,246       $2,446         $2,269    Rosebel in Suriname, which should produce over 300,000
EV/Resv. + M&I Res.                   $175                                oz/yr for the next 10 years or more. IAMGOLD will also
P/CFPS                               15.1x         13.0x         11.6x    add production in Canada, albeit high-cost production, and
Source: Company reports, Sprott Securities estimates                      acquire growth projects French Guiana (Camp Caiman)
                                                                          and Peru (La Arena, a copper-gold project). The merger
Figure 2                                               Price Chart        puts IAMGOLD in the league of other larger mid-tier
                                                                          companies such as Kinross, Yamana, Agnico-Eagle,
                                                                          Meridian etc., in terms of market capitalization and
                                                                          production pipeline. Interestingly, Cambior’s flagship
                                                                          Rosebel mine will become the largest producer for the
                                                                          “New” IAMGOLD. IAMGOLD will also continue to
                                                                          operate the Niobec mine in Quebec, which produces
                                                                          ferroniobium and owns a royalty from the Diavik diamond
                                                                          mine in the Northwest Territories.
                                                                          The IAMGOLD-Cambior merger provides the New
                                                                          IAMGOLD with an impressive engineering and technical
                                                                          team—something that IAMGOLD has previously lacked.
                                                                          IAMGOLD’s original business plan of taking minority
Source: BigCharts (January 15/07) C$ Chart                                positions and royalty interests in larger gold assets had
                                                                          probably taken the Company as far as it could go. With the
Figure 3                                                   Statistics     improved asset base and skill set in the Company we see a
Shares Outstanding:                                                       number of ways IAMGOLD could optimize its project
  Basic                                                     292.2 MM      pipeline to lower costs and maximize production. It also
  Fully Diluted                                             311.8 MM      opens up the Company to the possibility of more accretive
  Management                                                   8.1 MM
Market Capitalization                                      $2,513 MM      transactions where it can add value by engineering and
Market Float                                               $2,443 MM      building mines, where a junior company may lack the
Cash                                                        121.2 MM      necessary skills and capital.
Total Debt                                                   55.0 MM
NAV Per Share                                                  C$8.13
Price/NAV                                                         1.3x
Average Daily Trading Volume
  TSX                                                       1,125,121
  AMEX                                                        544,018
High-Low (52 Week)
  TSX                                              C$13.08 – C$8.66
  AMEX                                                $11.83 - $7.75
Reserves                                                  6.3 MMoz
Reserves+ M&I Resources                                  14.3 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                               60
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 3             Gold Production Growth – Company Guidance




                     Source: IAMGOLD



Production Growth    While IAMGOLD gained immediate size from the recent acquisition, meaningful growth
                     will continue to be a challenge because both prior companies have operations that are in
                     decline, and so new mines act more to replace declining production, rather than build a
                     substantial growth profile. This fact, combined with the relatively high average cost of
                     production is likely to keep IAMGOLD’s valuation in-line with its peers, at best. That
                     being said the Company is well funded, with $151 MM in net cash, and with its
                     significant cash flow from more than 1 MM oz/yr of gold production it should be able to
                     fund growth at a measured pace.
                     With the Quimsacocha project currently under development in Ecuador, IAMGOLD is
                     still evaluating underground and open pit options. The underground option seems the
                     most likely at this point; it is easiest to permit, and will involve a much smaller capital
                     expenditure, but results in less annual production and sterilizes much of lower grade
                     resource. If IAMGOLD can figure out the open pit option, the higher capital cost is
                     rewarded with a 40%-50% higher gold production, and could result in annual production
                     of 300,000 oz in the early years. Iamgold recently boosted its long-term projections by
                     incorporating La Arena in 2010, which we believe could produce 150,000 oz/yr as well
                     as significant copper revenue. With Quimsacocha and La Arena, IAMGOLD could see
                     potential production of 1.4 MMoz/yr by 2010 without any new acquisitions. This 25%
                     growth over the next three years is respectable given its already large size, and provides
                     investors with good upside as these development projects progress.

Exploration Upside   Since the discovery of Quimsacocha and moving the project towards feasibility,
                     IAMGOLD has lacked any high-profile exploration. The Cambior acquisition slightly
                     improves the exploration profile in our view, but Cambior’s best exploration targets, like
                     Iamgold, are at existing mines—particularly expansion potential at Rosebel and the
                     Westwood zone in the Doyon camp. IAMGOLD’s other exploration projects are
                     scattered around South America and West Africa, but nothing has hit our radar as being
                     material yet.




                     SPROTT SECURITIES INC.                                                                           61
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Other Opportunities   IAMGOLD recently sold the bauxite business in Guyana that it acquired from Cambior,
                      and while it has not publicly committed, we see the potential to sell the Niobec
                      operations as another opportunity. The ferroniobium (industrial metal) producer is
                      potentially a much more valuable asset ($100 MM+) and the cash could be redeployed to
                      develop existing projects or make a gold-focused acquisition.

Valuation             Recognizing the growth potential in 2009-2010 from both the Quimsacocha and La
                      Arena projects, we target a CFPS multiple of 18.4x on 2008e cash flow of $0.76. This
                      results in an increase of our 12-month target to C$15.50 ($14.00) from C$14.50
                      previously. We are increasing our target multiple from 16.1x previously by incorporating
                      La Arena into the growth profile, although we no longer give IAMGOLD credit for any
                      exploration in our valuation. We had already rolled our estimates forward to 2008 when
                      the merger with Cambior was announced. Given the Company’s recent relative
                      underperformance, we see the potential for very good performance in 2007 relative to its
                      peers, as the Company’s growth projects are developed further.




                      SPROTT SECURITIES INC.                                                                          62
JANUARY 16, 2007                                                               DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               IAMGOLD Corporation – Canadian GAAP Income Statement
Fiscal YE December 31                                                                         2007E
($000s)                                   2005A          2006E          Q1E          Q2E          Q3E           Q4E         2007E        2008E
Realized Gold Price ($/oz)                  $445          $571         $598         $597          $595          $595         $596          $650
Gold Production (000 oz)
Sadiola/Yatela (38%/40% )                    293           319           72            68            56           56           251          133
Tarkwa/Damang (18.9% Int.)                   185           171           39            39            39           39           156          168
Rosebel                                                     41           78            78            78           78           310          310
Mupane                                          -           77           25            25            25           25           100          100
Quebec Operations                               -           24           51            51            51           51           205          215
Buckreef                                        -               -          -             -             -            -             -         140
Camp Caiman                                     -               -          -             -             -            -             -           35
Total Gold Sales (koz)                       478           567          264           260          248           248         1,022        1,101
Average Cash Cost ($/oz)                     264           300          292           293          294           294           293          299
FINANCIALS
Gold Revenue (excl. Tarkwa)            $119,393        $224,333     $135,630    $133,116     $125,608      $125,608      $519,960     $574,690
Cost of Sales (excl. Tarkwa)             79,288         103,597       77,263      76,223       73,103        73,103       299,693      329,708
Operating Profit                         40,105         120,736       58,366      56,892       52,504        52,504       220,267      244,982
Tarkwa Income                            15,467          24,642        4,975       4,917         4,720        4,720        19,332       23,424
Royalties, Niobec                        10,381           6,957        5,585       5,585         5,585        3,725        20,480       18,520
Total Income                            $65,953        $152,335      $68,927     $67,394       $62,809      $60,949      $260,079     $286,925
Corporate                                 9,732           8,846        2,500       2,500         2,500        2,500        10,000       12,500
Exploration                               9,001           5,214        1,500       1,500         1,500        1,500         6,000        7,500
Other                                     (194)          10,020            -           -             -            -             -            -
EBITDA                                  $47,414        $128,255      $64,927     $63,394       $58,809      $56,949      $244,079     $266,925
Depreciation                             26,342         43,088        21,444      21,104        20,084        20,084       82,716        89,123
Net Interest Received / (Paid)           (1,080)        (2,949)        6,000       5,000         4,000         3,000       18,000         2,000
Taxation                                   1,658        15,064        10,113       9,875         9,162         9,162       38,311        51,370
Net Income                              $20,494         $73,052      $27,370     $27,416       $25,564      $24,704      $105,053     $124,432
Cash Flow                               $38,998        $107,581      $53,870     $53,457       $50,228      $49,368      $206,924     $239,240
Shares Outstanding
 Basic                                  147,648         184,371      294,809     294,809       294,809      294,809       295,039       295,039
 Fully Diluted                          149,384         187,960      313,000     313,000       313,000      313,000       313,000       313,000
Earnings Per Share
 Basic                                     $0.14          $0.40        $0.09        $0.09        $0.09         $0.08         $0.36        $0.42
 Fully Diluted                             $0.14          $0.39        $0.09        $0.09        $0.08         $0.08         $0.34        $0.40
Cash Flow Per Share
 Basic                                     $0.26          $0.58        $0.18        $0.18        $0.17         $0.17         $0.70        $0.81
 Fully Diluted                             $0.26          $0.57        $0.17        $0.17        $0.16         $0.16         $0.66        $0.76
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                 63
JANUARY 16, 2007                                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                             Kinross Gold Corporation
                                        (K - C$14.17, TSX; KGC - $12.01, NYSE)

Recommendation: BUY                                                                            Target Price: $15.25, C$18.00
Figure 1                                                    Estimates
                                                                          Large Cap With A Balanced Attack
YE Dec. 31                          2006E         2007E          2008E
Gold Production                      1,440          1,868         2,211   Kinross was previously known for its large, but high-cost,
Diluted EPS, adj.                    $0.35          $0.34         $0.70   production profile, but with a lack of meaningful longer-
Diluted CFPS, adj.                   $0.72          $0.59         $1.03   term growth. This put Kinross into the “gold leverage”
Production Yr/Yr Change               (8%)           30%           18%
CFPS Yr/Yr Change                    102%          (22)%           75%
                                                                          camp of gold investments, few of which have performed
EV/Production                       $4,955        $2,428         $2,051   very well (relative to their peers) over the last three years
EV/Resv. + M&I Res.                   $202                                as costs increased. The Bema acquisition (closing at the
P/CFPS                               17.7x         20.4x          11.7x   end of the month) gives Kinross a more balanced
Source: Company reports, Sprott Securities estimates                      investment profile—the company remains the biggest
                                                                          producer of the North American mid-tier, but now has a
Figure 2                                                  Price Chart     very respectable growth profile thanks mainly to the Kupol
                                                                          project under development in Russia. Now Kinross is
                                                                          expected to grow from just under 1.5 MMoz in 2006e to
                                                                          2.5 MMoz in 2009—and with its 49% interest in Cerro
                                                                          Casale its total production could theoretically grow to 3.0
                                                                          MMoz annually. Bema was one of, if not, the most risky
                                                                          mid-tier gold stocks thanks to the reliance on production
                                                                          from Russia, and the financial risk associated with the
                                                                          mega-cap-ex Casale project. Not only do Kinross’ low risk
                                                                          gold assets, mostly in the USA, Chile and Brazil, offset
                                                                          Bema’s higher risk in Russia, but the financial strength on
                                                                          the combined company will add more flexible options for
                                                                          any large development projects in the future such as Cerro
                                                                          Casale.
Source: BigCharts (January 15/07)
                                                                          Since announcing the Bema merger in November 2006,
Figure 3                                                    Statistics    Kinross and Bema agreed to a slightly better exchange
                                                                          ratio for Bema shareholders (0.4447 K shares per BGO
Shares Outstanding:
  Basic                                                      362.7 MM
                                                                          share + C$0.01 per BGO share instead of 0.441 and no
  Fully Diluted                                              364.4 MM     cash) and Kinross is keeping Bema’s interest in Petrex, its
  Management                                                    0.8 MM    investment in a South African gold producer.
Market Capitalization                                       $4,418 MM
Market Float                                                $4,410 MM     We expect to see Kinross’ multiple expand over the next
Cash                                                        $273.5 MM     year due to the much improved growth profile from Kupol.
Total Debt                                                  $391.5 MM     Kupol should also be among Kinross’ highest margin
NAV Per Share                                                   C$8.71
                                                                          producers of gold thanks to a big silver credit. We expect
Price/NAV                                                          1.6x
Average Daily Trading Volume                                              this multiple expansion will more than offset the temporary
  TSX                                                        3,562,267    dilution to CFPS due the merger.
  NYSE                                                       2,333,794
High-Low (52 Week)
  TSX                                                  C$17.00 - C$9.92
  NYSE                                                   $15.39 - $8.77
Reserves                                                    20.8 MMoz
Reserves+ M&I Resources                                     22.5 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                               64
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth    Kinross’ growth comes from two avenues, kicking into high gear in late 2008 to 2009.
                     First, the Kupol project is expected to add 525,000 oz (net to Kinross). Net cash costs are
                     expected to be well below $100/oz as long as the silver price remains strong. Second,
                     Kinross is expanding the large low-grade Paracatu project in Brazil, and by mid-2009 it is
                     expecting to increase production from about 180,000 oz/yr currently to 577,000 oz/yr.
                     The development of Buckhorn in the USA should add 200,000 oz/yr in 2008 and the
                     prospect of developing Cerro Casale in 2010 or beyond adds further growth.

Exploration Upside   Being such a large producer, it is hard to have a high-impact new exploration program,
                     and as a result we expect much of the exploration budget to go to mine-site projects.
                     Among mine site exploration the most important is probably at Kupol, where Bema was
                     somewhat successful at finding incremental additions to the resources. Any significant
                     discoveries here that could extend mine life would be perceived very positively by the
                     market.

Valuation            We recently updated our valuation for Kinross after the Bema takeover was announced,
                     and we have no reason to change our target at this point. We target a 15.0x multiple on
                     2008e CFPS of $1.03, resulting in a target of C$18.00 ($15.25). Our target multiple,
                     which sits right in the middle of most of the producers we cover, reflects the fact that the
                     improved growth profile is offset by higher risks ofoperating in Russia, as well as
                     financing the Cerro Casale project. We maintain our BUY recommendation




                     SPROTT SECURITIES INC.                                                                           65
JANUARY 16, 2007                                                           DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               Kinross Gold Corporation – Canadian GAAP Income Statement
Fiscal YE December 31                                                      2007E
($000s)                               2006E            Q1E          Q2E        Q3E           Q4E         2007E          2008E         2009E
Spot Price ($/oz)                      $605            $650        $650       $650           $650         $650          $650           $500
Realized Gold Price ($/oz)               599            633         633        633            633           633           641            525
Total Gold Prod. (koz)                 1,440            467         467        467            467         1,868         2,211          2,261
Average Cost ($/oz)                      331            334         334        334            334           334           280            283
FINANCIALS
Revenue                            $865,017       $299,860      $299,860   $299,860     $299,860 $1,199,438 $1,416,297 $1,186,297
Operating Costs                     476,768        160,008       160,008    160,008      160,008    640,033    618,045    640,741
Operating Income                   $388,250       $139,851      $139,851   $139,851     $139,851   $559,405   $798,252   $545,556
General & Administrative             40,400         12,467        12,467     12,467       12,467     49,869     49,197     45,697
Exploration                          30,000          7,799         7,799      7,799        7,799     31,195     18,103     17,103
EBITDA                              317,850        119,585       119,585    119,585      119,585    478,341    730,951    482,755
Depreciation                        128,059         42,265        42,265     42,265       42,265    169,060    148,338    169,668
Tax Paid (Provision)                 33,605         13,425        13,425     13,425       13,425     53,700     71,547     19,191
Interest Expense                      2,568          5,745         5,745      5,745        5,745     22,978     22,978     17,842
Dividends                               800            200           200        200          200        800        800        800
Equity Comp. of Conv. Debt                -              -             -          -            -          -          -          -
Other                                27,500          4,828         4,828      4,828        4,828     19,314     52,536     52,536
Net Earnings                       $125,317        $53,122       $53,122    $53,122      $53,122  $212,489    $434,752   $222,718
Operating Cash Flow                 249,576         91,668        91,668     91,668       91,668    366,674    636,426    445,722
Shares Outstanding
  Basic                             348,358        574,510       574,510    574,510      574,510        574,510       574,510       574,510
  Fully Diluted                     348,358        618,160       618,160    618,160      618,160        618,160       618,160       618,160
Earnings Per Share
  Basic                                $0.35           $0.09       $0.09      $0.09         $0.09         $0.37         $0.76          $0.39
  Fully Diluted                        $0.35           $0.09       $0.09      $0.09         $0.09         $0.34         $0.70          $0.36
Cash Flow Per Share
  Basic                                $0.72           $0.16       $0.16      $0.16         $0.16         $0.64         $1.11          $0.78
  Fully Diluted                        $0.72           $0.15       $0.15      $0.15         $0.15         $0.59         $1.03          $0.72
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                             66
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                                       Linear Gold Corp.
                                                          (LRR - C$4.86, TSX)

Recommendation: BUY                                                                                         Target Price: C$12.00
Figure 1                                                  Price Chart
                                                                           Huge Upside         If   Cerro    La    Mina     Exploration      Is
                                                                           Successful
                                                                           Linear Gold is on the verge of completely changing its fate
                                                                           for the better if it can prove up a significant resource at the
                                                                           Cerro La Mina zone on its Ixhutatan project in Southern
                                                                           Mexico. The fact that Linear already has a significant
                                                                           mineable resource on the property in a relatively safe
                                                                           geopolitical jurisdiction underpins the valuation and makes
                                                                           investing in the stock much less risky. Cerro La Mina
                                                                           could help Linear take its overall gold resource base well
                                                                           over 2 MMoz with ore that has more economic value due
                                                                           to existence of by-products of copper and molybdenum.
Source: BigCharts (January 15/07)                                          Linear Gold generated tremendous excitement for its
                                                                           Campamento deposit in late 2004 and early 2005 as one of
Figure 2                                                    Statistics     the first new grass roots gold discoveries this cycle. After
                                                                           spectacular initial results, once the Company began drilling
Shares Outstanding:
  Basic                                                     21.96 MM
                                                                           the lower grade halo and dreams of 5 MMoz evapourated,
  Fully Diluted                                               23.5 MM      the market lost interest in the stock, and the interest really
  Management                                                    5.1 MM     has yet to return. The Campamento zone, the Company’s
Market Capitalization                                       $91.8 MM       original discovery, has a recorded resource of 1.7 MMoz at
Market Float                                                $70.5 MM       a 0.5 g/t cut-off and 1.2 MMoz at a 1.0 g/t cut-off. The
Cash                                                        $12.6 MM
Total Debt                                                           Nil   zone begins at surface and much of the gold is contained
NAV Per Share                                                 C$12.09      within a high-grade core that extends at least 100 m at
Price/NAV                                                          0.4x    depth. Recently metallurgical test results suggest that parts
Average Daily Trading Volume                                     82,078    of the deposit are semi-refractory. The oxide cap layer
High-Low (52 Week)                                     C$7.76 - C$3.26
EV/Resv. + M&I Res.                                               $79.0
                                                                           leaches with 95% efficiency. The high-grade sulphide zone
Reserves+ M&I Resources                                     1.0 MMoz       leaches at 75% - still not bad. Without any further
Source: Company reports, Sprott Securities estimates
                                                                           discoveries at Ixhuatan, these metallurgical results would
                                                                           steer the Company towards the higher-grade portions of the
                                                                           ore body. However, several new zones have been
                                                                           discovered with the promise of being satellite zones, and
                                                                           beefing up the overall resource base and production profile.
                                                                           So far, the Laguna Chica and Laguna Grande zones have
                                                                           exhibited the best potential to be oxide satellite zones.
                                                                           Cerro La Mina is exciting because at an early stage it
                                                                           exhibits the potential to be a large new zone that could
                                                                           drive the economics of the Ixhuatan project rather than
                                                                           being just a satellite zone. There is an oxide layer to Cerro
                                                                           La Mina containing primarily gold and silver that could be
                                                                           added to the Campamento oxide for processing. Below the
                                                                           oxide layer there is a sulphide zone where gold and silver
                                                                           is joined by copper and molybdenum sulphides could be
                                                                           recovered by flotation.


                                       SPROTT SECURITIES INC.                                                                                67
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 3             Plan View Showing Drilling At Cerro La Mina Zone




                     Source: Linear Gold Corp.


Exploration Upside   Cerro La Mina is the key to this stock in the near term and we see the exploration
                     potential as being excellent. So far Linear has intersected economic grades of gold, silver,
                     copper, and interestingly, molybdenum. With about 8 holes so far, the Company has
                     defined an area of about 200 m by 200 m that is open at depth to the east and to the north.
                     We estimate that Linear has already found 500,000 oz here with significant copper and
                     molybdenum by-products in the sulphide zone (below 50-80 m). In some intersections
                     the copper or molybdenum holds a greater value than the gold grades. The preliminary
                     model for the deposit with the limited drilling so far is a high-sulphidation gold deposit,
                     that is close to a mineralized porphyry. So far, Linear has only drilled the epithermal
                     zone, but there is excellent potential for not only the known near-surface zone to be much
                     larger, but for the Company to find a related porphyry deposit.
                     Linear has had limited success on other zones outside of Campamento. Among them the most
                     promising are Laguna Chica and Laguna Grande. Both zones have several good intersections
                     with near-surface oxide gold mineralization that may be added to Campamento as satellite
                     zones to further enhance the economics of the eventual mining operation.

Valuation            We currently estimate the NPV of just the Campamento zone to be C$7.30/share and the
                     total NAV to be C$8.42 (including fully diluted cash). We previously applied a 1.2x
                     multiple on the gold deposit only to account for our expectation that the region would
                     yield small further discoveries. Indeed the Laguna Chica zone for example looks like it
                     could be a small economic resource. But we believe the recent drilling on Cerro La Mina
                     is much more significant, and hence we are applying a higher multiple (1.5x) to come up
                     with our 12-month target. This results in an increase in our target to C$12.00 from
                     C$10.00. We are maintaining our Buy recommendation. It is worth noting that with
                     Linear’s tight share structure (only 22 MMoz shares outstanding) investors should
                     experience a tremendous amount of leverage to any new discoveries.



                     SPROTT SECURITIES INC.                                                                           68
JANUARY 16, 2007                                                                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4                                Linear Gold Corp. - Ixhuatan Project – Net Asset Value Calculation
Year                             2009            2010           2011      2012      2013        2014        2015          2016            2017           2018            2019
Mill kt/y                                       2,600          2,600     2,600     2,600       2,600       2,600         2,600           2,600          2,600           2,600
Gold Grade                                       2.50           2.50      2.00      2.00         2.00        2.00         2.00             2.00          2.00            2.00
Silver Grade                                    10.25          10.25      7.50      6.00         6.00        6.00         6.00             6.00          6.00            6.00
Rec                                              95%            95%       95%       95%         95%         95%           95%             95%            95%             95%
Gold Prod. (oz)                               198,553        198,553   158,842   158,842     158,842     158,842       158,842         158,842        158,842         158,842
Silver Prod. (oz)                             814,068        814,068   595,659   476,527     476,527     476,527       476,527         476,527        476,527         476,527
Gold Price                                        500            500       500       500         500         500           500             500            500             500
Silver Price                                   $10.00         $10.00    $10.00    $10.00      $10.00      $10.00        $10.00          $10.00         $10.00          $10.00
Revenue                                       107,417        107,417    85,378    84,186      84,186      84,186        84,186          84,186         84,186          84,186
Cost/T                                             13             13        20        20           20          20           20               20            20              20
Op Costs                                       33,800         33,800    52,000    52,000      52,000      52,000        52,000          52,000         52,000          52,000
Cash Cost                                     $129.23        $129.23   $289.87   $297.37     $297.37     $297.37       $297.37         $297.37        $297.37         $297.37
Dep Cost                                       $52.52        $170.88    $54.41    $54.41      $54.41      $54.41        $54.41          $54.41         $54.41          $54.41
Op Cash Flow                                   73,617         73,617    33,378    32,186      32,186      32,186        32,186          32,186         32,186          32,186
CapEx                          75,000           1,500         25,000     1,500     1,500       1,500       1,500         1,500           1,500          1,500           1,500
Tax                                                                -     9,563     9,206       9,206       9,206         9,206           9,206          9,206           9,206
FCF                          (75,000)          72,117         48,617    22,314    21,481      21,481      21,481        21,481          21,481         21,481          21,481
Source: Company reports, Sprott Securities estimates




                                        SPROTT SECURITIES INC.                                                                                                              69
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                                       Meridian Gold Inc.
                                     (MNG - C$31.40, TSX; MDG - $27.00, NYSE)

Recommendation: TOP PICK                                                                        Target Price: $42.50, C$47.50
Figure 1                                                   Estimates
                                                                           Discoveries Become Growth In 2007
YE Dec. 31                          2006E         2007E           2008E
Gold Production                       272.7        321.8           348.7   Of all the mid-tier producers, Meridian has probably been
Diluted EPS, adj.                     $0.89        $1.22           $1.46   the most successful at finding new gold deposits, and has
Diluted CFPS, adj.                    $1.13        $2.07           $2.16   been very aggressive on exploration well before it was
Production Yr/Yr Change              (10%)          18%              8%
CFPS Yr/Yr Change                      68%          83%              5%
                                                                           trendy to do so. Meridian made several significant
EV/Production                       $9,297        $7,879        $7,271.2   discoveries in the last year. The Mercedes gold project in
EV/Resv. + M&I Res.                    $818                                Northern Mexico is a grass roots success story that should
P/CFPS                                23.9x        22.1x          12.5x    hit the books as resources in Q1 2007. In Chile in 2006,
Source: Company reports, Sprott Securities estimates                       Meridian added to the El Penon complex with the
                                                                           discovery of two new veins—including Al Este, which will
Figure 2                                                Price Chart        likely become a major zone in the future. Meridian also
                                                                           extended known mineralization at the Florida mine by
                                                                           discovering several new zones that should allow it to
                                                                           expand the mine in 2007. These new discoveries made in
                                                                           late 2005 and 2006 should become reserves and resources
                                                                           in 2007, and add to the growth profile. Right now we
                                                                           believe there is still a large population of investors that
                                                                           believe that Meridian must move forward with its
                                                                           politically stalled Esquel project in Argentina to
                                                                           demonstrate any significant growth—this is simply not the
                                                                           case. We believe that the market will be surprised by the
                                                                           growth in resources and potential growth in production
                                                                           over the next few years.
Source: BigCharts (January 15/07) US$ Chart                                Officially Meridian’s growth is expected to take it to about
                                                                           400,000 oz/yr by 2008 after a small expansion at the
Figure 3                                                   Statistics      Florida mine and the start-up of Rossi (40% Meridian).
Shares Outstanding:
                                                                           Beyond the obvious growth, we see the opportunity for
  Basic                                                    100.2 MM        further expansions at El Penon and Florida, as well as
  Fully Diluted                                            101.3 MM        production from its new discovery in Mexico, Mercedes,
  Management                                                0.98 MM        and its Jeronimo JV (57% Meridian) by the end of the
Market Capitalization                                   $2,705.8 MM        decade. As reserves and resources hit the books it should
Market Float                                            $2,678.9 MM
Cash                                                        $193 MM        become more and more obvious to investors what kind of
Total Debt                                                        Nil      growth potential Meridian has, and that should be reflected
NAV Per Share                                                C$16.34       in a higher share price in 2007.
Price/NAV                                                       1.9x
Average Daily Trading Volume
  TSX                                                         431,054
  NYSE                                                      1,021,994
High-Low (52 Week)
  TSX                                             C$42.30 - C$25.07
  NYSE                                              $38.31 - $22.12
Reserves                                                  2.1 MMoz
Reserves+ M&I Resources                                   3.1 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                70
JANUARY 16, 2007                                       DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth    Meridian’s planned production growth right now is for about 25% over the next year or
                     so (from 325,000 oz to 400,000 oz) by way of the expansion of Florida and the
                     commencement of the Rossi mine (40% Meridian). In our view what is so attractive
                     about investing in Meridian is the “hidden” growth potential that management does not
                     generally talk about and few investors are aware. Meridian’s first expansion of its
                     flagship El Penon mine was enacted more to maintain production as grades declined, than
                     to actually increase production. Having visited the operations recently we are fairly sure
                     that the only impediment to another expansion is an increased reserve base and
                     management’s vision. And the increased reserve base is coming, with such discoveries as
                     Al Este. Besides El Penon, Meridian may continue to expand Florida if exploration
                     continues to be successful. Finally, Mercedes, and the Jeronimo JV could be in
                     production by the end of the decade, pending drilling and feasibility work. In total, we
                     could see Meridian growing production from the current 325,000 oz to 750,000 –
                     800,000 oz without making any further acquisitions.

Exploration Upside   Overall Meridian is probably the top mid-tier company in terms of exploration success,
                     although you would not know it (yet) based on its share price performance. It is active on
                     four or five projects at any given time, and in late 2005 and early 2006 began to turn up
                     significant results on a number of projects. Mercedes is still an active exploration project
                     with a lot of potential to grow in the near term, although we can estimate how big it is
                     today. The Mercedes vein hosts most of the gold mineralization discovered to date
                     including the Corona de Oro zone, which is a thicker high-grade zone (sometimes called
                     a “clavo” or a “shoot”). We think that there may already be 1,000,000 oz between
                     Mercedes and several other veins that are less explored. There are some similarities to El
                     Penon, with multiple sub-parallel veins hosting high-grade gold and silver mineralization.
                     Besides grass roots projects, Meridian continues to expand its existing mines. We
                     recommend that investors do not underestimate the value of new vein discoveries at the
                     El Penon project. Given the profitability of this mine and its relatively small production
                     base, one million ounces of new resources can add a lot of value, even though it may not
                     be seen as a “new” discovery.

Valuation            We believe that many investors still consider Meridian in the 2002-2003 context where
                     Esquel was the biggest issue in terms of the valuation. Meridian has moved far beyond its
                     history, albeit gradually, first by significantly expanding the resource base of the El
                     Penon mine, then by acquiring the Florida mine, and most recently with the discovery of
                     Mercedes. We have modelled growth to 542,000 oz/yr by 2010 through an expansion of
                     Florida and by adding Mercedes as a fourth producing gold mine. This gives Meridian a
                     moderate growth profile, and probably more growth than most investors expect today.
                     We have not yet modelled any expansion of El Penon or any production from the
                     Jeronimo JV, which could add to the growth profile, target multiple and NAV. We are
                     rolling forward to our 2008e CFPS estimates and we also must adjust our growth-based
                     CFPS target multiple according to growth beyond 2008. We target a 19.8x multiple based
                     on the expected growth and a premium for Meridian's low geopolitical risk, strong
                     balance sheet and low costs. This results in a target of C$47.50 ($42.50) on 2008e CFPS
                     of $2.16.




                     SPROTT SECURITIES INC.                                                                           71
JANUARY 16, 2007                                                           DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               Meridian Gold Inc. – Canadian GAAP Income Statement
Fiscal YE December 31                                                      2007E
(US$000s)                                2006A            Q1E       Q2E        Q3E            Q4E         2007E         2008E         2009E
Realized Gold Price (US$/oz)             $605            $650      $650        $650          $650         $650          $650          $500
Realized Silver Price (US$/oz)          $11.50          $15.00    $15.00      $15.00        $15.00       $15.00        $15.00        $10.00
El Penon
Gold Production (koz)                      236              58        58          58            58           230           230          280
Cash Cost (US$/oz)                        $(76)         $(243)    $(243)      $(243)        $(243)        $(243)        $(233)         $(67)
Alhue
Gold Production (koz)                       37             16        16           16            16           66            80           113
Cash Cost (US$/oz)                        $155           $139      $139         $139          $139         $139          $205          $291
Rossi (40%)
Gold Production (koz)                         -             -         -           23            32           65            97            97
Cash Cost (US$/oz)                           $-            $-        $-         $278          $278         $278          $304          $304
Total Production (koz)                     273              74        74          83            87           322          349           432
Ave. Cash Costs (US$/oz)                  $(44)         $(158)    $(158)      $(109)         $(93)        $(123)         $(73)          $60
FINANCIAL RESULTS
Revenue                               $245,989         $83,880   $83,880    $99,090      $104,940      $377,641      $404,786     $343,401
Operating Costs                         76,969          24,113    24,113     30,613        33,113       111,954       132,436      141,840
Operating Income                      $169,020         $59,767   $59,767    $68,477       $71,827      $265,688      $272,351     $201,561
Corporate                               19,500           3,000     3,000      3,000         3,000        12,000         9,000        9,000
Exploration                             24,250           4,000     4,000      4,000         4,000        16,000         5,000        5,000
EBITDA                                $144,770         $52,767   $52,767    $61,477       $64,827      $249,688      $267,351     $196,561
Depreciation                            26,648           8,245     8,245       8,994         9,282       34,768        27,010        34,909
Taxation                                48,338          19,101   19,158      22,560        23,917        84,736        99,100        67,302
Interest (Income)/Paid                  (6,577)          (957)   (1,094)     (1,231)       (1,401)       (4,683)       (4,612)       (7,591)
Other Expenses/(Income)                 (2,700)              -         -           -             -             -             -             -
Net Income                             $89,980         $26,378   $26,457    $31,154       $33,029      $123,153      $148,056     $105,013
Cash Flow                             $114,410         $46,412   $46,718    $55,736       $60,303      $209,169      $219,131     $162,697
Shares Outstanding
 Basic                                 100,200         100,400   100,400    100,400       100,400       100,200       100,200       100,200
 Fully Diluted                         101,277         101,477   101,477    101,477       101,477       101,277       101,277       101,277
Earnings per Share
 Basic                                    $0.90          $0.26     $0.26       $0.31         $0.33         $1.23         $1.48        $1.05
 Fully Diluted                            $0.89          $0.26     $0.26       $0.31         $0.33         $1.22         $1.46        $1.04
Cash Flow per Share
 Basic                                    $1.14          $0.46     $0.47       $0.56         $0.60         $2.09         $2.19        $1.62
 Fully Diluted                            $1.13          $0.46     $0.46       $0.55         $0.59         $2.07         $2.16        $1.61
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                             72
JANUARY 16, 2007                                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                             NovaGold Resources Inc.
                                                             (NG - C$18.73)

Recommendation: MARKET PERFORM                                                                 Target Price: $18.00, C$20.00
Figure 1                                                   Estimates
                                                                          Gold Leverage Wins Over Barrick
YE Dec. 31                                        2007E          2008E
Gold Production                                                     135   NovaGold spent much of its effort in 2006 defending itself
Diluted EPS, adj.                                                 $0.26   against a hostile takeover bid by Barrick Gold at
Diluted CFPS, adj.                                                $0.37   US$16.00. The initial offer to shareholders was US$14.50
EV/Production                                                   $13,429
EV/Resv. + M&I Res.                               $85.10
                                                                          (cash) in August, and after three months of futilely
P/CFPS                                                            50.3x   extending its offer, Barrick raised it to US$16.00 cash,
Source: Company reports, Sprott Securities estimates
                                                                          before giving up in December, having purchased only
                                                                          about 14% of the stock. Barrick is now NovaGold’s largest
                                                                          shareholder. During the hostile takeover battle, NovaGold
Figure 2                                               Price Chart
                                                                          and Barrick exchanged public shots in press releases.
                                                                          In retrospect the whole takeover attempt was one of the
                                                                          most bizarre stories in the mining industry over the past
                                                                          few years. First Barrick tried to convince investors that
                                                                          NovaGold’s management was incapable, and that the value
                                                                          of its projects was less than generally thought. Then, when
                                                                          its first bid floundered, Barrick raised its bid by $1.50 per
                                                                          share despite the gold price being down $70/oz. Later
                                                                          Barrick removed its minimum bid condition, and finally it
                                                                          purchased 13.6 MM shares or 14.8% of NovaGold’s stock.
                                                                          Barrick was hoping that the withdrawal of its takeover bid
                                                                          would cause the stock price to collapse, but almost the
                                                                          opposite has happened. The fact that Barrick did purchase
Source: BigCharts (January 15/07)
                                                                          $218 MM in stock sends a different message, and we think
                                                                          the $16 offer is now more or less a floor for the stock (as
Figure 3                                                   Statistics     long as the gold price stays >$600/oz).
Shares Outstanding:
  Basic                                                     91.6 MM       Although based on our estimation, Barrick’s bid was fair
  Fully Diluted                                           100.2 MM        on a P/NAV basis (at a $500/oz gold price, in-line with
  Management                                                10.2 MM       similar, albeit smaller, deals that have occurred this cycle),
Market Capitalization                                   $1,475 MM         we can understand why so many shareholders rejected the
Market Float                                            $1,311 MM
Cash                                                    $274.0 MM
                                                                          bid. NovaGold has exposure to a minimum of 27 MMoz of
Total Debt                                               $250.0MM         gold assuming a 30% interest in Donlin Creek, as well as
NAV Per Share                                               C$11.92       Galore Creek and its other Alaska projects. This creates an
Price/NAV                                                       1.4x      almost unique vehicle for gold bulls. Should the long-term
Average Daily Trading Volume                                 365,199      gold price increase, NovaGold’s shares have the potential
High-Low (52 Week)                                C$20.19 - C$11.44
Reserves                                                  5.3 MMoz        to rocket upward.
Reserves+ M&I Resources                                 21.3 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                               73
JANUARY 16, 2007                                        DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Production Growth     NovaGold has a project pipeline that in theory could see it producing well over 1
                      MMoz/yr, but this hinges on two very large projects that are still many years away from
                      production. In the near term, NovaGold is building the Rock Creek mine in Western
                      Alaska. This small project should produce about 130,000 oz/yr beginning in early 2008.
                      During the initial five years of the Galore Creek project, beginning in 2010 or 2011, the
                      mine should produce another 400,000 oz/yr of gold, as well as 430 MMlbs of copper.
                      This assumes that NovaGold retains 100% ownership of Galore Creek, while the
                      company has indicated its willingness to bring in an equity partner to help offset the $2
                      billion capital cost.
                      Finally, NovaGold’s minimum 30% interest in Donlin Creek could see it producing
                      another 570,000 oz/yr. This project has now been pushed out until 2013. This alone
                      would put corporate production to 1.0 – 1.1 MMoz/yr. We expect that by the end of next
                      year NovaGold may challenge Barrick on its earn-in of its additional 40% of the Donlin
                      Creek project. We have not assumed that NovaGold will win this case, but if it does, its
                      attributable production would be around 1.8 MMoz/yr.

Exploration Upside    As NovaGold has pushed forward on its major projects over the last few years, grass
                      roots exploration has given way to resource expansion on known projects. The
                      Company’s track record on expanding known resources is excellent: both Donlin Creek
                      and Galore Creek have seen dramatic expansions of resources since NovaGold took over
                      operation. The remaining project at the exploration stage is the Ambler JV with Rio Tinto
                      (NG=51%). It is a VMS-type target with historical resources of copper, zinc, silver and
                      gold. NovaGold should come out with a modern resource estimate confirming the
                      historical results this year, and continue to explore the district for more zones.

Other Opportunities   The fact that Barrick owns almost 15% of the stock and is looming as a potential acquirer
                      will likely play into the hands of investors, providing a floor for the Company’s shares at
                      $16, while leaving the upside, should gold prices move higher, and projects continue to
                      advance.

Valuation             Previously we have valued NovaGold at 1x NAV given the long timeline until
                      production. However, now that Rock Creek is under development and the Company
                      could see real cash flow in 2008, it should move to trade at a premium. Just how much of
                      a premium is the question. Rock Creek is far less significant than either Galore Creek or
                      its 30% interest in Donlin Creek. The world class size of NovaGold's assets and location
                      in safe jurisdictions is a plus, while the financial risk of the capital costs may result in
                      more shares being issued. We are comfortable seeing NovaGold trade at a 1.5x P/NAV,
                      which is the upper end of recent junior takeovers in the gold sector. Using our $500/oz
                      long-term gold price assumption we estimate a NAV of $11.92 per share and a target of
                      $18.00 or C$20.00, and we are maintaining our Market Perform recommendation. We
                      recognize that when using a higher long-term gold price assumption, NovaGold's NAV
                      demonstrates impressive leverage, and therefore may be a good vehicle to own in the
                      event the gold price rises significantly.




                      SPROTT SECURITIES INC.                                                                           74
JANUARY 16, 2007                                                             DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4                               NovaGold Resources Inc. – Canadian GAAP Income Statement
Fiscal YE December 31                                                        2007E
(US$000s)                                2006E            Q1E        Q2E         Q3E            Q4E         2007E         2008E         2009E
Gold Price (US$/oz)                       $605            $650       $650         $650          $650         $650          $650          $500
Silver Price (US$/oz)                   $11.50          $15.00     $15.00       $15.00        $15.00       $15.00        $15.00        $10.00
Copper Price (US$/lb)                    $2.75           $2.75      $2.75        $2.75         $2.75        $2.75         $2.20         $1.25
Galore Creek
Gold Production (oz)                           -              -          -            -             -             -             -             -
Silver Production (oz)                         -              -          -            -             -             -             -             -
Copper Production (lbs)                        -              -          -            -             -             -             -             -
Cash Costs (US$/oz)                            -              -          -            -             -             -             -             -
Donlin Creek
Gold Production (oz)                           -              -          -            -             -             -             -             -
Cash Costs (US$/oz)                            -              -          -            -             -             -             -             -
Rock Creek
Gold Production (oz)                           -              -          -            -             -             -     135,000       128,000
Cash Costs (US$/oz)                            -              -          -            -             -             -         285           285
FINANCIALS
Gold Sales                                     -              -          -            -             -             -      87,750        64,000
Silver Sales                                   -              -          -            -             -             -           -             -
Copper Sales                                   -              -          -            -             -             -           -             -
Operating Costs                                -              -          -            -             -             -      38,475        36,480
Operating Profit                               -              -          -            -             -             -      49,275        27,520
Corporate                                 7,000           1,750      1,750       1,750         1,750         7,000        7,000         7,000
Exploration                               2,000             500        500         500           500         2,000        2,000         2,000
EBITDA                                  (9,000)         (2,250)    (2,250)     (2,250)       (2,250)       (9,000)       40,275        18,520
Depreciation                                  -               -          -            -             -            -       11,678        11,678
Net Interest Paid/(Received)              (816)            (35)       (35)         (35)          (35)        (141)            -        10,000
Taxation                                    453            113        113          113           113           453          453           500
Foreign Exchange                              -               -          -            -             -            -            -             -
Stock Based Compensation                      -               -          -            -             -            -            -             -
Other                                         -               -          -            -             -            -            -             -
Net Income                             $(8,636)        $(2,328)   $(2,328)    $(2,328)      $(2,328)      $(9,311)      $28,145       $(3,658)
Cash Flow                              $(9,170)        $(2,512)   $(2,512)    $(2,512)      $(2,512)     $(10,047)      $39,822        $8,020
Shares Outstanding
 Basic                                  65,712          98,712     98,712      98,712        98,712        98,712       105,604       106,119
 Fully Diluted                          73,381         107,552    107,552     107,552       107,552       107,552       108,974       109,019
Earnings Per Share
 Basic                                  $(0.13)         $(0.02)    $(0.02)     $(0.02)       $(0.02)       $(0.09)         $0.27       $(0.03)
 Fully Diluted                          $(0.12)         $(0.02)    $(0.02)     $(0.02)       $(0.02)       $(0.09)         $0.26       $(0.03)
Cash Flow Per Share
 Basic                                  $(0.14)         $(0.03)    $(0.03)     $(0.03)       $(0.03)       $(0.10)         $0.38        $0.08
 Fully Diluted                          $(0.12)         $(0.02)    $(0.02)     $(0.02)       $(0.02)       $(0.09)         $0.37        $0.07
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                               75
JANUARY 16, 2007                                                                                             JED RICHARDSON 416·943·6430




                              Palmarejo Silver and Gold Corporation
                                                       (PJO - C$8.60, TSXv)

Recommendation: BUY                                                                                   Target Price: C$13.90
Figure 1                                               Price Chart
                                                                        Guadalupe Exploration – What Lies Beneath
                                                                        In November 2006, Palmarejo released results from two
                                                                        new drill holes at the Guadalupe zone on the Palmarejo-
                                                                        Trogan property. Both of the holes intersected intervals of
                                                                        strong gold silver mineralization. The best hole was 91D,
                                                                        which intercepted two mineralized zones 14.1m of 1.07g/t
                                                                        gold and 109g/t silver and 6m of 54.15 g/t gold and 115g/t
                                                                        silver. The second hole, 96D, hit 33.5m of 1.83g/t gold and
                                                                        160g/t silver. The holes were testing for extensions to the
                                                                        Guadalupe zone at depth and testing a hypothesis that
                                                                        Guadalupe has the potential to have another Palmarejo
                                                                        below it. The result definitely confirms the extension and
                                                                        supports the hypothesis. There is real potential for this
Source: BigCharts (January 15/07)
                                                                        deposit to double in size just based on the Palmarejo and
                                                                        Guadalupe zones, then potential exist for it to continue to
Figure 2                                                  Statistics
                                                                        grow with exploration success on the numerous other gold
Shares Outstanding:                                                     occurrences on the property.
  Basic                                                    90.6 MM
  Fully Diluted                                            94.5 MM      The exploration potential alone is reason to buy Palmarejo,
  Management                                                 5.0 MM     but it is by no means the whole story. Palmarejo is also a
Market Capitalization                                  C$779.2 MM
Market Float                                           C$736.2 MM
                                                                        mine development story, the project is fully permitted,
Cash                                                      $57.7 MM      virtually fully financed and in construction looking to start
Total Debt                                                        Nil   producing in early 2008. The confluence of the exploration
NAV Per Share                                                C$9.27     and mine building story appears to be creating some
Price/NAV                                                       0.9x    confusion in the market and is creating a buying
Average Daily Trading Volume                                  54,126
High-Low (52 Week)                                 C$10.45 – C$6.00     opportunity for astute investors. In the typical life cycle of
EV/Total Resource                                              $5.12    a mining equity there are two periods for extraordinary
M&I Resources                                            89.3 MMoz      returns; the first is during the discovery phase when the
Total Resource                                          126.8 MMoz      deposit is first recognised and each new drill hole is adding
Source: Company reports, Sprott Securities estimates                    ounces, the second is when the mine comes into production
                                                                        and the company begins cash flowing. However, between
                                                                        the two periods infill resource definition and mine building
                                                                        share prices usually sag, as positive newsflow dries up and
                                                                        the type of investors turnover from explorationist to cash
                                                                        flow investors. In the North American market Palmarejo is
                                                                        seen as a mine development story with most of the
                                                                        exploration potential realized, and some investors wrongly
                                                                        believe the story is in that doldrum period before cash flow
                                                                        starts. By buying Palmarejo now you can own an exciting
                                                                        exploration story, supported by coming production that will
                                                                        kick start additional growth in the coming year.
                                                                        .




                                       SPROTT SECURITIES INC.                                                                        76
JANUARY 16, 2007                                                                         JED RICHARDSON 416·943·6430




Exploration Upside     Typical of epithermal mineralization, there is zonation of the deposited minerals based on
                       how far the fluids traveled from the heat source and the temperatures that certain
                       minerals come out of solution. At the top of systems, deposits tend to be silver rich,
                       because it stays in solution longest and travels the furthest from the heat source, then as
                       you go deeper customarily an epithermal deposit will become more gold rich, if there is a
                       significant amount of gold in the system, and deeper still base metals fall out of the
                       system closer to the heat source. In the resource at Guadalupe the gold:silver ratio is
                       1:127 at Palmarejo the resource is 1:94, perhaps equally as important the top of
                       Guadalupe sits 300m above the top of Palmarejo. There is the potential that Guadalupe is
                       a more complete epithermal system and the top has been eroded off of Palmarejo.
                       Currently, about 85% of the resource value on the property is contained in the Palmarejo
                       zone, however, the potential exists for an entire Palmarejo to be under Guadalupe.
                       Looking at the holes drilled they are at a depth that would put them at an elevation equal
                       to the upper portions of the Palmarejo zone, and outside of the very gold-rich high grade
                       shoot, the gold:silver ratio is very close to that of Palmarejo. This suggests that the
                       systems could be parallel and much more of Guadalupe exists at depth and it will carry
                       very profitable gold grades.
                       Now we will have to wait for continued results to determine if the mineralization will be
                       over significant tonnages or if grades will be mineable underground. What is interesting
                       to note is that the clavos at Guadalupe and Las Animas are around 400m wide, at
                       Palmarejo the main clavos are around 100m wide. It is very possible the clavos will
                       narrow at depth but the potential for substantial tonnage is very good.

Australian vs. North   At A$2.85/sh for Bolnisi Gold the Australian market is valuing its 73.8% holding of
American Valuation     Palmarejo, a small amount of cash and some neighbouring properties at C$837 MM. That
                       would value 100% of the project plus the negligible assets in the company at
                       C$1,019MM, which is a $242MM premium to the Canadian market. That translates into
                       a C$2.60 discount on the Canadian stock. In the past Palmarejo shares have traded very
                       close to par with Bolnisi and often at a premium. There is limited liquidity in the
                       Canadian market, and no clear way to realize the arbitrage, but we see no reason for the
                       discount to exist and expect the market will over time correct the discrepancy

Valuation              We have used this opportunity to tweak our Palmarejo model to more appropriately
                       model the project. Our target goes to $13.90, up from $13.35 previously. We have
                       continued to use a 1.5x NAV multiple for our target price. We have staged our model to
                       mine the Palmarejo zone first Measured & Indicated then Inferred before moving to
                       Guadalupe Inferred resource; the end result is to mine high-grade resources first and
                       slightly accelerating pay back. We arrive at an NPV of C$9.27 per share.




                       SPROTT SECURITIES INC.                                                                    77
JANUARY 16, 2007                                                                                           JED RICHARDSON 416·943·6430



Figure 3                               Palmarejo Silver and Gold Corporation - Project Calculation
(US$000)                                   2008           2009         2010        2011        2012       2013         2014          2015         2016       2017       2018
Gold Price                                                 500          500         500         500        500          500              500       500        500        500
Ore (000 t)                                               2,000        2,000       2,000       2,000      2,000       2,000         2,000         2,000      2,000      2,000
Strip Ratio                                                  6.0          6.0         7.5        9.8        9.8          9.8           9.8          9.8         9.8       9.8
Silver Grade (g/t)                                       191.00       191.00      191.00      191.00     191.00      191.00        191.00        138.00     138.00     106.00
Silver Recovery (%)                                        92%          92%         92%         92%        92%         92%           92%           92%        92%        92%
Gold Grade (g/t)                                           2.08         2.08        2.08        2.08       2.08         2.08         2.08          1.31       1.31       0.83
Gold Recovery (%)                                          95%          95%         95%         95%        95%          95%          95%           95%        95%        95%
Silver Production (000 oz)                               11,300       11,300      11,300      11,300     11,300      11,300        11,300         8,165      8,165      6,271
Gold Production (000 oz)                                  127.1        127.1       127.1       127.1      127.1       127.1         127.1          80.0       80.0       50.7
Mining Cost ($/t)                                          1.25         1.25        1.25        1.25       1.25        1.25          1.25          1.25       1.25       1.25
Milling Cost ($/t)                                        12.50        12.50       12.50       12.50      12.50       12.50         12.50         12.50      12.50      12.50
Silver Equiv. Cash Cost ($/oz)                             2.71         2.58        2.79        3.11       3.11         3.11          3.11         4.51       4.51       6.23
Silver Exposure (%)                                      67.2%        64.0%       64.0%       64.0%      64.0%        64.0%         64.0%        67.1%      67.1%      71.2%
Revenue                                                $252,103     $176,540    $176,540    $176,540   $176,540    $176,540     $176,540       $121,662   $121,662    $88,068
Operating Cost                                           42,500       42,500      46,250      51,875     51,875      51,875       51,875         51,875     51,875     51,875
G&A Cost                                                  3,000        3,000       3,000       3,000      3,000       3,000        3,000          3,000      3,000      3,000
Operating Profit                                        206,603      131,040     127,290     121,665    121,665     121,665       121,665        66,787     66,787     33,193
Tax                                                             -           -     15,661      29,916     29,916      29,916        29,916        16,197     16,197      7,798
Capital Cost                             85,000           2,000        2,000       2,000       2,000      2,000       2,000         2,000         2,000      2,000      2,000
Free Cash Flow                        $(85,000)        $204,603     $129,040    $109,629     $89,749    $89,749     $89,749       $89,749       $48,591    $48,591    $23,394
NPV @ 5.0%                              714,200
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                                             78
JANUARY 16, 2007                                                                                              JED RICHARDSON 416·943·6430




                                                 Silvercorp Metals Inc.
                                                       (SVM - C$16.75, TSX)

Recommendation: BUY                                                                          Target Price: $19.80, C$22.00
Figure 1                                                    Estimates
                                                                         2007 Could Be As Big Or Bigger Than 2006
YE Mar. 31                          2006E         2007E         2008E
Silver Production                                  1,612         4,251   2006 was an exciting year for Silvercorp and its
Diluted EPS, adj.                   $(0.15)        $0.51         $1.46   shareholders, the company more than doubled its reserves
Diluted CFPS, adj.                  $(0.06)        $0.63         $1.68   at the Ying Mine growing to 97MMoz of silver, it received
Production Yr/Yr Change                n.a.          n.a.        163%
CFPS Yr/Yr Change                      n.a.          n.a.        166%
                                                                         its operating permit in the Henan Province of China, and
EV/Production                                      $375           $142   started production. The company has reported two quarters
EV/Total resources                    $6.22                              of wildly profitable production and was recently added to
P/CFPS                              -240.1x        22.9x          8.6x   S&P/TSX composite index. The company has really defied
Source: Company reports, Sprott Securities estimates                     expectations, leveraging the strength of a Chinese
                                                                         management team, and negotiating deals that most western
Figure 2                                               Price Chart       companies do not have access to and navigating legal and
                                                                         political pitfalls that claim many western companies
                                                                         attempting to operate in China. So far Silvercorp
                                                                         shareholders have been great beneficiaries of this
                                                                         combination.
                                                                         2007 looks set to be another incredible year for the
                                                                         company, as it continues to knock down milestones and
                                                                         prove the repeatability of its business model and seek new
                                                                         acquisitions. The most important milstone will be the
                                                                         commissioning of its 1000tpd mill at the Ying Mine, which
                                                                         is slated to occur in April 2007, and should mark a
                                                                         significant ramp up in the production at the operation. The
                                                                         company has been using toll mills in the region to process
Source: BigCharts (January 15/07)                                        its ore and hand sorting extremely high-grade material and
                                                                         shipping it directly to smelters. The company has available
Figure 3                                                    Statistics   to it about 700tpd of toll milling capacity, it plans to
                                                                         continue to use these arrangement once it commissions its
Shares Outstanding:
  Basic                                                    48.3 MM
                                                                         own mill and bring its capacity up to 1,700 tpd and produce
  Fully Diluted                                            49.9 MM       in excess of 5MMoz of silver annually. The only stumbling
  Management                                                 1.1 MM      block in Silvercorp’s plan has been mine dilution, which
Market Capitalization                                    $695.8 MM       has had little impact on the profitability of the mine
Market Float                                             $679.9 MM       because of the incredible high grade of the ore, but has
Cash                                                    C$59.8 MM
Total Debt                                                        Nil    tested the limits of mill capacity because the dilution is
NAV Per Share                                              C$15.34       limiting the amount of mineralized material the mills can
Price/NAV                                                       1.1x     access. The company is making strides to correct the
Average Daily Trading Volume                                219,049      problem and is working with contractors to adjust mining
High-Low (52 Week)                                 C$20.95 – C$5.16
Reserves                                                  0.0 MMoz
                                                                         methods to dramatically bring dilution under control. We
Total Resources                                          97.1 MMoz       have left room for a wide margin of error, and have sized
Source: Company reports, Sprott Securities estimates
                                                                         our forecast for higher than anticipated levels of dilution. If
                                                                         Silvercorp is successful in bringing dilution down it could
                                                                         achieve upwards of 7 MMoz attributable given its full
                                                                         milling capacity.




                                       SPROTT SECURITIES INC.                                                                         79
JANUARY 16, 2007                                                                                 JED RICHARDSON 416·943·6430




Exploration                 Something that the market appears to have failed to realize is that exploration still
                            continues at the Ying Mine and Silvercorp is continuing to delineate ounces. In Spring
                            2007, the company plans to make another resource announcement and it could be quite
                            material. In the period from May 1st (when the last resource was calculated) until August
                            15th, Silvercorp completed 41 drill holes and 3.1 km of exploration tunnels. This
                            exploration discovered seven new veins in the area of the Ying Mine, and some infill
                            work has been done to bring some of the inferred resources from May into the measured
                            and indicated category.
                            Silvercorps exploration continues to intercept "super High-Grade" mineralization
                            Some of the best holes were:
                            • 1.31m of 2,986 g/t silver with 51.3% lead and 5.1% zinc
                            • 1.18m of 2,370 g/t silver with 50.2% lead and 4.6 % zinc
                            There were intercepts up to 4,600 g/t silver over shorter widths. The veins that have been
                            discovered are concealed veins adjacent to other known veins. It is clear that the resource
                            at Ying continues to grow at a rapid rate and a lot of potential still exists at this property.
                            The company also is very excited about exploration in a new zone south of Ying called
                            HZG that appears to have similar vein mineralization and numerous ore bearing veins
                            that can be mapped on surface. There is real potential for Silvercorp to materially expand
                            this already large resource.

Opportunities To Surprise   Beyond the exploration announcement that we expect in May, Silvercorp has a couple of
the Market                  opportunities to surprise the market with great news. The company just this week
                            announced government approval for the acquisition of the 60% interest in the HPG
                            operation adjacent to Ying. This is an operating mine that will add cash flow to
                            Silvercorp this quarter now that the transaction can be completed. Silvercorp has been
                            working alongside its joint venture partner at HPG to improve mining practices and
                            improve profitability. It took longer than we expected for this acquisition to close as it
                            was announced last Spring, however, a government shake-up in Henan Province slowed
                            the approval process. Again Silvercorp’s keen understanding of the environment allowed
                            the company to navigate the situation and get the project approved. The company is in
                            the process of assessing other opportunities in China and hopes to use its advantages to
                            create more value for shareholders in its area of expertise.
                            One other possibility for 2007 is the payment of a dividend. The company is quickly
                            growing cash balances and has been in the process of a share buy back program, and once
                            the mill at Ying is up and running and it has acted on the acquisition opportunities it sees,
                            it may elect to pay a dividend from its operating cash flow. The dividend will likely not
                            be an extraordinary yield, but it could do a lot to alleviate the “China Discount”. It would
                            be a first in the mining industry for a company in China to pay dividends to North
                            American shareholders.

Valuation                   In our valuation we have used a 13.1x multiple of fiscal 2008 cash flow to arrive at our
                            target of C$22.00. In our multiple point scale we start with a multiple of 15x then award
                            points for production growth and give the multiple a dramatic cut because of its relatively
                            low silver content by revenue (approximately 48%) then add points for its healthy
                            balance sheet (the company has almost $60MM in cash), and fantastic exploration
                            upside. We are reducing our cash flow estimate to $1.68 from $1.80 to account for
                            additional cost due to dilution, and adjusting our multiple upwards a point to account for
                            the rapidly growing balance sheet strength. Our Net Asset Value is C$15.34/sh.



                            SPROTT SECURITIES INC.                                                                       80
JANUARY 16, 2007                                                                                                 JED RICHARDSON 416·943·6430



Figure 5                               Silvercorp Metals Inc. – Canadian GAAP Income Statement
Fiscal YE Mar. 31                           2007E                                       2008E
(C$000s)                            Q3A        Q4E      2007E        Q1E        Q2E        Q3E        Q4E      2008E      2009E      2010E
Silver Price (US$)               $12.60      $15.00     $12.91     $15.00     $15.00     $15.00     $15.00     $15.00     $11.25     $10.00
Lead Price (US$)                  $0.73       $0.50      $0.50      $0.50      $0.50      $0.50      $0.50      $0.50      $0.40      $0.40
Zinc Price (US$)                  $1.90       $1.40      $1.57      $1.40      $1.40      $1.40      $1.00      $1.30      $0.65      $0.65
Ying Mine (77.5%)
Payable Metal
 Silver (000 oz)                     521        521      1,341        976        976        976        976      3,905      5,177      5,177
 Lead (000 lbs)                    3,859      3,859      9,937      7,011      7,011      7,011      7,011     28,043     28,753     28,753
 Zinc (000 lbs)                      856        856      2,150      1,380      1,380      1,380      1,380      5,518      6,183      6,183
Revenue per Ton Mined           $927.79     $947.88    $915.27    $915.76    $916.00    $916.24    $874.62    $905.66    $729.90    $679.95
Total Cost per Ton Mined         $52.00      $52.00     $52.00     $37.00     $37.00     $37.00     $37.00     $37.00     $37.00     $37.00
Cash Cost ($/oz)                 $(6.10)     $(4.15)    $(5.20)    $(4.64)    $(4.64)    $(4.65)    $(3.66)    $(4.40)    $(5.20)    $(4.40)
HPG Mine (60%)
Payable Metal
 Silver (000 oz)                                                     86.4       86.4       86.4       86.7      345.9      345.6      345.6
 Lead (000 lbs)                                                     2,083      2,083      2,083      2,091      8,339      8,331      8,331
Revenue per Ton Mined                                             $150.51    $150.56    $150.61    $150.67    $150.59    $117.44    $110.29
Total Cost per Ton Mined                                           $50.33     $50.33     $50.33     $50.33     $50.33     $50.33     $50.33
Cash Cost ($/oz)                                                   $(4.40)    $(4.41)    $(4.42)    $(4.43)    $(4.42)    $(2.05)    $(1.87)
Silver Production (oz)*              896         896     1,411     1,577      1,577      1,577      1,577      6,307      8,907      5,523
Cash Cost ($/oz)                 $(3.54)     $(2.41)    $(4.94)   $(3.11)    $(3.12)    $(3.12)    $(2.51)    $(2.96)    $(3.10)    $(4.24)
% Silver By Revenue                 46%         53%        49%       55%        55%        55%        58%        56%       62%         59%
Revenue                         $18,556     $18,958    $47,136    $37,727    $37,738    $37,748    $36,202 $149,415 $156,550 $145,915
Cost of Sales                    $4,629      $5,166     $7,746     $9,268     $9,268     $9,268     $9,273 $36,661 $40,930 $38,146
Gross Profit                    $13,927     $13,792    $39,390    $28,459    $28,469    $28,479    $26,929 $112,753 $115,620 $107,769
Corporate Costs                    $500        $500     $3,319       $500       $500       $500       $500   $2,000   $2,000   $2,000
Exploration Costs                    $-          $-         $-         $-         $-         $-         $-       $-       $-       $-
EBITDA                          $13,427     $13,292    $36,071    $27,959    $27,969    $27,979    $26,429 $110,753 $113,620 $105,769
Depreciation                     $1,270      $1,512     $3,475     $2,937     $2,937     $2,937     $2,937    $11,747    $13,897    $12,398
Taxes                                $-          $-         $-         $-         $-         $-         $-         $-    $19,714    $18,156
Interest income
Minority Interest                $2,999      $3,035     $7,215     $6,639     $6,641     $6,643     $6,295    $26,315    $23,586    $21,756
NET INCOME                       $9,158      $8,745    $25,381    $18,383    $18,391    $18,399    $17,197    $72,691    $56,423    $53,459
Shares Outstanding
 Basic                          $48,028     $48,028    $48,028    $48,028    $48,028    $48,028    $48,028    $48,028    $48,028    $48,028
 Fully Diluted                  $49,935     $49,935    $49,935    $49,935    $49,935    $49,935    $49,935    $49,935    $49,935    $49,935
Operating Cash Flow             $10,428     $10,256    $28,856    $21,320    $21,328    $21,336    $20,134    $84,439    $70,319    $65,857
Earnings Per Share
 Basic                             $0.19      $0.18      $0.53      $0.38      $0.38      $0.38      $0.36      $1.51      $1.17      $1.11
 Fully Diluted                     $0.18      $0.18      $0.51      $0.37      $0.37      $0.37      $0.34      $1.46      $1.13      $1.07
Cash Flow Per Share
 Basic                             $0.22      $0.21      $0.60      $0.44      $0.44      $0.44      $0.42      $1.76      $1.46      $1.37
 Fully Diluted                     $0.21      $0.21      $0.58      $0.43      $0.43      $0.43      $0.40      $1.69      $1.41      $1.32
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                            81
JANUARY 16, 2007                                                                                               JED RICHARDSON 416·943·6430




                                                 Silver Wheaton Corp.
                                      (SLW - C$11.42, TSX; SLW - $9.82, NYSE)

Recommendation: BUY                                                                           Target Price: $15.75, C$17.50
Figure 1                                                   Estimates
                                                                          The Silver Bank
YE Dec. 31                         2006E         2007E           2008E
Silver Production                  13,998        16,267          16,267   Silver Wheaton’s unique strategy of purchasing contracts
Diluted EPS, adj.                   $0.37         $0.66           $0.68   for silver streams from silver by-product producers, is
Diluted CFPS, adj.                  $0.45         $0.76           $0.78   really unlike other silver mining companies and arguably
Production Yr/Yr Change              44%           16%              0%
CFPS Yr/Yr Change                   131%           73%            2.6%
                                                                          not like any other mining companies that we are
EV/Production                     $152.24       $130.98         $131.00   accustomed to valuing. It at once offers on a 100% silver
EV/Resv. + M&I Res.                $14.80                                 production and removes a large part of the operational risk
P/CFPS                              21.8x          12.9x          12.6x   associated with all mining by fixing the cash cost for
Source: Company reports, Sprott Securities estimates                      production and guaranteeing reserves. The structure has
                                                                          almost no overhead and is structured to be tax-free, serving
Figure 2                                                 Price Chart      to further amplify the benefits to this type of business
                                                                          entity.
                                                                          Unlike other mining companies Silver Wheaton provides
                                                                          an opportunity to shareholders that strips out much of the
                                                                          risk associated with mining. For Silver Wheaton’s existing
                                                                          streams contracted silver is fixed at $3.90 per ounce, a cost
                                                                          that does not change over the life of the contract. This
                                                                          means that silver Wheaton has no exposure to rising fuel
                                                                          and power costs, fluctuating currencies, or even rising
                                                                          labour costs. The structure does still have some exposure to
                                                                          near term operational risks, such as strikes or production
                                                                          stoppages due to accidents, but unlike traditional mining
                                                                          companies profitability is guaranteed, regardless of what is
Source: BigCharts (January 15/07) US$ Chart                               going on at the mine. Another risk removed for Silver
                                                                          Wheaton shareholders is mineral reserves, as the contracts
Figure 3                                                   Statistics     have guaranteed delivery amounts with penalties to the
Shares Outstanding:                                                       partners for failure to deliver.
  Basic                                                     220.5 MM
  Fully Diluted                                             259.6 MM      Silver Wheaton fully maximizes the benefits of not
  Management                                                   0.0 MM     operating any mines and transacts its silver sales through
Market Capitalization                                      $2,165 MM      an offshore entity domiciled in a tax-free jurisdiction, and
Market Float                                               $2,165 MM
Cash                                                       $112.0 MM
                                                                          runs a lean ship - the company has a market capitalization
Total Debt                                                  $20.0 MM      of $2.4 billion and G&A of less than $2 million in 2005.
NAV Per Share                                                  C$5.22     Again unmatched in the silver space, Coeur D’Alene G&A
Price/NAV                                                         2.2x    for 2005 was $19MM, on smaller production and
Average Daily Trading Volume                                              capitalization. No taxes and low G&A mean that even
  TSX                                                       1,115,037
  NYSE                                                      1,899,338     beyond the 100% silver production the company passes on
High-Low (52 Week)                                                        a greater amount of its profitability to shareholder’s equity.
  TSX                                                  C$13.74 - $6.43
  NYSE                                                  $12.21 - $5.51
Reserves                                                   84.0 MMoz
Reserves+ M&I Resources                                   144.7 MMoz
Contracted Silver                                         331.0 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                          82
JANUARY 16, 2007                                                                              JED RICHARDSON 416·943·6430




100% Silver – Unnaturally   Geologically speaking a 100% silver mine is near impossible, it is the nature of silver to
Yours                       occur with other metals. It is very rare for silver to occur in large enough concentrations
                            that at even today’s market prices silver makes up the lion share of the valuation of a
                            silver project. Silver Wheaton’s unique structure gives investors exposure to a niche
                            product that does not occur naturally. Silver commonly occurs with gold, sometimes
                            copper and often lead and zinc. For that reason most other “silver mining” companies are
                            only a part silver.

Diversified Products        Silver Wheaton uses the premium the market affords to silver companies to create value
                            for its shareholders and provide solutions for its partners. There are three different
                            contracts that the company has and each of them represent a different product for its
                            partners.
                            The original transaction was the creation of Silver Wheaton. Goldcorp sold its silver
                            stream from the Luisman mine in Mexico into Silver Wheaton for an equity stake, to
                            realize silver valuations for production that was buried in a large gold company. Silver
                            Wheaton subsequently became Goldcorp’s best performing asset since inception.
                            The next transaction was the purchase of the silver stream from Lundin mining’s
                            Zinkruguvan Mine in Sweden. In this instance Lundin needed to finance an expansion,
                            and the silver stream was largely irrelevant to the valuation of the company and the
                            overall profitability of the mine. Silver Wheaton essentially pre-purchased the silver the
                            mine will produce and gave Lundin the cash it needed for the expansion.
                            The most recent transaction was the purchase of a portion Glencore’s silver stream at
                            Yaliyacu in Peru. In this instance Glencore was seeking to forward sell silver production
                            to hedge against downside risk in the price. Silver does not have longterm futures
                            contracts in the way gold does and longterm hedges are near impossible to get. Again,
                            Silver Wheaton was able to provide a solution beneficial to both parties.
                            Silver Wheaton has been very careful to partner with very strong, long mine life
                            operations, in fact each of the mines in the portfolio has 100 years of mining history and
                            long life reserves. The company has also structured the deals to minimize risk to
                            shareholder’s as all of the geopolitical and mine operation risk stays with the mine
                            operators.

Valuation                   We are launching coverage on Silver Wheaton with a Buy recommendation. This
                            company’s creative business structure, strong management team and ultra low risk profile
                            make it a very investable vehicle. In our valuation we have used the same criteria that we
                            have used with our other silver companies, which is a multiple of cash flow, based on
                            historic precious metals cash flow multiples. For Silver Wheaton we started with a base
                            of 15x, and rewarded it for growth, silver content, a stellar balance sheet and ultra low
                            geopolitical risk and arrive at a 20.5x multiple. Based on our diluted cash flow of
                            $0.78/sh we arrive at a target of C$17.50/sh. Historically the business entities that most
                            closely resemble Silver Wheaton’s were the gold royalty companies, which were known
                            to trade at 30x cash flow multiples, so beyond our current valuation there is tremendous
                            upside.




                            SPROTT SECURITIES INC.                                                                    83
JANUARY 16, 2007                                                                                       JED RICHARDSON 416·943·6430



Figure 5                               Silver Wheaton Corp. – Canadian GAAP Income Statement
Fiscal YE December 31                                                      2007E
(US$000s)                               2006E             Q1E       Q2E        Q3E       Q4E      2007E      2008E         2009E
Silver Price (US$/oz)                  $11.58           $15.00    $15.00    $15.00     $15.00     $15.00     $15.00        $10.00
Luisman
Silver Production (MMoz)                8,488            2,378     2,378     2,378      2,378      9,512      9,512        12,936
Cash Costs (US$/oz)                      3.90             3.90      3.90      3.90       3.90       3.90       3.90          3.90
Zinkgruvan
Silver Production (MMoz)                 1,947             487       487       487        487      2,005      2,005         2,062
Cash Costs (US$/oz)                       3.90            3.90      3.90      3.90       3.90       3.90       3.90          3.90
Yauliyacu
Silver Production (MMoz)                3,563            1,250     1,250     1,250      1,000      4,750      4,750         4,750
Cash Costs (US$/oz)                      3.90             3.90      3.90      3.90       3.90       3.90       3.90          3.90
Total Silver Production                13,998            4,115     4,115     4,115      3,865     16,267     16,267        19,748
Cash Costs (US$/oz)                      3.90             3.90      3.90      3.90       3.90       3.90       3.90          3.90
FINANCIALS
Silver Sales                        $161,621           $61,723   $61,723   $61,723    $57,973   $243,140   $243,999     $197,482
Operating Costs                       53,456            16,048    16,048    16,048     15,073     63,216     63,440       77,018
Operating Profit                     108,165            45,675    45,675    45,675     42,900    179,924    180,559      120,464
Corporate                               3,207              750       750       750        750      3,000      3,000        3,000
Project Evaluation                        158               50        50        50         50        200        200          200
EBITDA                                104,800           44,875    44,875    44,875     42,100    176,724    177,359      117,264
Depreciation                           17,108            6,257     6,257      6,257     5,336    24,106      24,404        25,773
Net Interest Paid/(Received)           (3,166)         (1,177)   (1,752)    (2,334)   (2,923)    (8,185)   (11,868)      (19,377)
Interest Expense                         1,087             375       375        375       375      1,500      1,500         1,500
Foreign Exchange                         (409)               -         -          -         -          -          -             -
Stock Based Compensation                 1,538              50        50         50        50        200        200           200
Other                                      615               -         -          -         -          -          -             -
Net Income                            $88,028          $39,370   $39,945   $40,527    $39,262   $159,103   $163,123     $109,168
Cash Flow                           $107,288           $45,676   $46,251   $46,833    $44,648   $183,409   $187,727     $135,141
Shares Outstanding
 Basic                                220,200          220,302   220,302   220,302    220,302    220,200    220,200      251,800
 Fully Diluted                        240,639          240,639   240,639   240,639    240,639    240,639    240,639      252,771
Earnings Per Share
 Basic                                   $0.40           $0.18     $0.18     $0.18      $0.18      $0.72      $0.74         $0.43
 Fully Diluted                           $0.37           $0.16     $0.17     $0.17      $0.16      $0.66      $0.68         $0.43
Cash Flow Per Share
 Basic                                   $0.49           $0.21     $0.21     $0.21      $0.20      $0.83      $0.85         $0.54
 Fully Diluted                           $0.45           $0.19     $0.19     $0.19      $0.19      $0.76      $0.78         $0.53
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                  84
JANUARY 16, 2007                                                               DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




                                                        Yamana Gold Inc.
                                     (YRI - C$15.01, TSX, AUY - $12.64, AMEX)

Recommendation: BUY                                                                              Target Price: $18.00, C$20.00
Figure 1                                                      Estimates
                                                                            Steady Growth Delivers Stock Price Performance
YE Dec. 31                         2006E          2007E           2008E
Gold Production                     299.3          641.4           762.3    In a rising gold price environment, well-timed and
Diluted EPS                         $0.15          $1.13           $1.51    executed acquisitions can go hand in hand with delivering
Diluted CFPS                        $0.23          $1.29           $1.73    growth on a company’s existing projects. Yamana has been
Production Yr/Yr Change             199%           114%             19%
CFPS Yr/Yr Change                   475%           468%             34%
                                                                            a case study of how acquisitions can further enhance share
EV/Production                     $14,624         $6,129          $5,157    price performance. And given the growth from Chapada,
EV/Resv. + M&I Res.                  $562                                   Gualcamayo and several other projects in Brazil, we still
P/CFPS                              44.2x              9.8x          7.3x   expect the Company to perform well in 2007.
Source: Company reports, Sprott Securities estimates
                                                                            While three “small-ish” acquisitions made headlines for
Figure 2                                                  Price Chart       Yamana in 2006, the biggest change to the Company is
                                                                            occurring right now: the start-up of Chapada mine in
                                                                            Central Brazil. Chapada is expected to produce almost
                                                                            200,000 oz and 137 MMlbs of copper, making the mine
                                                                            temporarily Yamana’s largest gold producer as well as its
                                                                            only copper mine. With relatively high gold and copper
                                                                            prices (despite the recent sell-off), Yamana is poised to
                                                                            generate huge cash flow growth in 2007. At first, a
                                                                            significant portion of cash flows will come as a result of
                                                                            copper production from Chapada (40-50% depending on
                                                                            the copper price), but from 2007 onward, the growth will
                                                                            be predominantly gold-only, and so reliance on the copper
                                                                            price should decline significantly by 2009. Yamana’s next
                                                                            projects are: Gualcamayo (2008), Jacobina expansion
Source: BigCharts (January 15/07) US$ Chart                                 (2009), C1 Santa Luz and Sao Vincente (2009 - 2010).
Figure 3                                                      Statistics    With a cash position of $130 MM and the potential for
Shares Outstanding:                                                         $100 MM per quarter in cash flow going forward, Yamana
  Basic                                                        341.2 MM     should be able to build its new mines with internally
  Fully Diluted                                                356.3 MM     generated cash flow resulting in greater CFPS accretion.
  Management                                                    17.1 MM     Yamana trades at a discount to its peers in terms of P/CFP,
Market Capitalization                                         $4,404 MM
Market Float                                                  $4,184 MM
                                                                            and given its growth profile, we believe the Company can
Cash                                                            $474 MM     generate value by proving itself with new mines like
Total Debt                                                            Nil   Chapada. We expect Yamana to continue to be a
NAV Per Share                                                     C$6.84    consolidator in the mid-tier, and it should be able to add
Price/NAV                                                           2.2x    value this way as well.
Average Daily Trading Volume
  TSX                                                          2,522,813
  AMEX                                                         2,871,932
High-Low (52 Week)
  TSX                                                  C$15.70 - C$7.71
  AMEX                                                   $13.81 - $6.80
Reserves                                                     4.9 MMoz
Reserves+ M&I Resources                                      7.0 MMoz
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                 85
JANUARY 16, 2007                                     DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 4             Gold Production Growth Profile – Company Guidance




                     Source: Yamana Gold


Production Growth    Near-term production growth will come from the start-up of the Chapada mine, adding
                     200,000 oz of gold production in 2007 (175,000 oz in 2008). We estimate that Yamana
                     exited 2006 at just under 400,000 oz/yr annualized production. With Chapada and some
                     other improvements we are forecasting 640,000 oz of production in 2007, growing to
                     over 850,000 oz/yr in 2009 with the addition of Gualcamayo (Q4 2008) and the
                     expansion of Jacobina, which should by then be Yamana’s largest single gold operation.
                     After that, Yamana has several other small projects near its existing mines that should
                     contribute even more growth, and help Yamana top 1,000,000 oz/yr. C1 Santa Luz is
                     near Fazenda Brasiliero and Sao Vicente is near Sao Francisco, which should allow the
                     Company to support its growth with its own staff.

Exploration Upside   Yamana’s exploration at the moment is focused around existing mining operations;
                     however the Company has amassed commanding positions in a number of areas. The
                     Santa Elina gold belt (Sao Francisco, Sao Vincente and Ernesto projects), Jacobina gold
                     belt, and Rio Itapicuru greenstone belt (Brasiliero, C1 Santa Luz) all have tremendous
                     potential. So far Yamana has focused on known showings on these large belts, but as
                     more generative work continues it is quite possible that more discoveries will be made,
                     and as such Yamana has a built in growth mechanism with several of its operations.




                     SPROTT SECURITIES INC.                                                                         86
JANUARY 16, 2007                                    DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749




Valuation          Yamana Gold was a Top Pick for much of 2006, and certainly one of the best performing
                   mid-to-large capitalization gold mining companies in the world. If Yamana continues to
                   deliver on its current growth pipeline, particularly a clean start-up of the Chapada mine,
                   which seems likely, we would expect the shares to continue to perform well in 2007. As
                   we roll forward our estimates to 2008e we hit a “peak” year for the Company in terms of
                   CFPS, partially because of a peak in copper production from Chapada, but also due to our
                   metal price forecasts that currently decline significantly in 2009 (we may change this as
                   2009 approaches). To us, this peak in copper production means that the multiple that
                   Yamana is valued at is likely to be lower, both because the production is not likely to be
                   sustained, and because base metal production is discounted in a gold producer. On the
                   other hand the growth profile in terms of gold production beyond 2008 remains strong,
                   and Yamana’s other risks remain low overall. We are lowering our target CFPS multiple
                   to 10.5x from 13.7x previously, and this results in an increase to our 12-month target to
                   C$20.00 from C$19.00. We currently do not account for all of Yamana’s forecasted
                   growth in our model, and so with more certainty we may increase our target slightly (into
                   the low C$20’s). Recently Yamana’s share price has significantly outperformed its peers
                   (as we expected with Chapada coming on-line successfully) and so we are reducing our
                   recommendation to Buy from Top Pick to reflect upside that is more in-line with its
                   peers, although Yamana still ranks among the top gold stocks we cover in terms of
                   potential return




                   SPROTT SECURITIES INC.                                                                          87
JANUARY 16, 2007                                                              DAVID STEIN, CFA 416·943·6407; MIKE KOZAK – ASSOCIATE 416·943·6749



Figure 5                               Yamana Gold Inc. – Canadian GAAP Income Statement
Fiscal YE December 31                                                         2007E
(US$000s)                                2006E             Q1E        Q2E         Q3E            Q4E         2007E        2008E         2009E
Gold Price (US$/oz)                       $605            $650       $650          $650         $650          $650          $650          $500
Fazenda Brasiliero
Gold Production (oz)                    74,280           18,310     18,310       18,310       18,310        74,848        90,585        90,585
Cash Costs (US$/oz)                        342              325        325          325          325           325           300           240
Fazenda Nova
Gold Production (oz)                    33,000            6,500      6,500        6,500         6,500       26,000        26,000               -
Cash Costs (US$/oz)                        306              315        315          315           315          315           315               -
Sao Francisco/Vicente
Gold Production (oz)                    74,352           37,500     37,500       37,500       37,500       150,000       150,000       150,000
Cash Costs (US$/oz)                        267              250        250          250          250           250           250           200
San Andreas
Gold Production (oz)                    53,494           16,250     16,250       16,250       16,250        65,000        65,000        70,000
Cash Costs (US$/oz)                        330              330        330          330          330           330           330           225
Chapada
Gold Production (oz)                           -         35,282     49,257       57,324       57,205       199,068       176,666       129,441
Copper Production (000 lbs)                    -         26,447     35,865       35,184       39,461       136,956       169,138       130,731
Cash Costs (US$/lb Cu)                         -           0.05      (0.02)       (0.14)       (0.08)        (0.04)         0.15          0.27
Jacobina
Gold Production (oz)                    64,154           25,000     25,000       38,000       38,500       126,500       179,000       230,000
Cash Costs ($/oz)                          323              330        330          315          315           323           305           305
Gualcamayo
Gold Production (oz)                           -              -           -            -             -             -      75,000       200,000
Cash Costs ($/oz)                              -              -           -            -             -             -         158           100
Total Gold Production                  299,280          138,843    152,817     173,884       174,265       641,416       762,250       870,025
Cash Costs (US$/oz)                      $308            $(115)     $(228)      $(162)        $(218)        $(182)        $(158)         $110
FINANCIALS
Gold Sales                           $171,942          $161,434   $196,416    $208,237      $220,246      $786,333     $940,550      $598,018
Operating Costs                        92,202            55,527     62,560      67,302        69,298       254,687      303,211       259,108
Operating Profit                       79,740           105,907    133,856     140,935       150,948       531,646      637,339       338,910
Corporate                               18,682            5,000      5,000       5,000         5,000        20,000        20,000        19,433
Exploration                                  -                -          -           -             -             -             -             -
EBITDA                                  61,058          100,907    128,856     135,935       145,948       511,646       617,339       319,477
Depreciation                            23,669           11,387     12,798       15,381       15,437        55,003        78,033        99,637
Net Interest Paid/(Received)            (2,655)               -          -            -            -             -             -             -
Taxation                                (3,808)           5,028      5,028        5,028       38,106        53,188           879        25,320
Foreign Exchange                              -               -          -            -            -             -             -             -
Stock Based Compensation                      -               -          -            -            -             -             -             -
Other                                         -               -          -            -            -             -             -             -
Net Income                             $43,851          $84,493   $111,030    $115,526       $92,405      $403,454     $538,427      $194,520
Cash Flow                              $64,756          $95,880   $123,828    $130,907      $107,843      $458,457     $616,460      $294,157
Shares Outstanding
 Basic                                 277,513          344,400    344,400     344,400       344,400       344,400       344,400       344,400
 Fully Diluted                         286,406          356,257    356,257     356,257       356,257       356,257       356,257       356,257
Earnings Per Share
 Basic                                   $0.16            $0.25      $0.32        $0.34         $0.27         $1.17        $1.56         $0.56
 Fully Diluted                           $0.15            $0.24      $0.31        $0.32         $0.26         $1.13        $1.51         $0.55
Cash Flow Per Share
 Basic                                   $0.23            $0.28      $0.36        $0.38         $0.31         $1.33        $1.79         $0.85
 Fully Diluted                           $0.23            $0.27      $0.35        $0.37         $0.30         $1.29        $1.73         $0.83
Source: Company reports, Sprott Securities estimates




                                       SPROTT SECURITIES INC.                                                                                88
JANUARY 16, 2007             DAVID STEIN, CFA 416·943·6407; JED RICHARDSON 416·943·6430; MIKE KOZAK – ASSOCIATE 416·943·6749




                   Risks To Target
                   The following is a list of the most common risks that apply to the stocks mentioned in
                   this report. Generally, this risk will apply to all companies in varying degrees.
                   Commodity Price Risk: Our short- and long-term commodity price assumptions are
                   made based on detailed research, and viewed to be reasonable based on current
                   information. However, the timing and magnitude of commodity price fluctuations are
                   always a significant risk that, in most cases, strongly affects the value of mining and
                   mineral exploration/development companies focused on a specific commodity. The
                   primary metal exposure of the companies in this report is to gold; however, some may
                   have exposure to other metal products such as silver, copper, zinc and other metals, and
                   the prices of these metals may affect their valuation.
                   Cost Risk: Both capital and operating costs may be affected by changes in input prices
                   (fuel, steel, chemicals, etc.) and also be affected by relative currency changes. Companies
                   may be at risk of unexpected cost escalation as a result of these potential threats.
                   Financing Risk: Companies with large growth plans or exploration companies with no
                   free cash flow may require external capital to continue with exploration programs and
                   develop new mines. In order to finance these endeavours, equity or project dilution may
                   be taken in order to fund the equity portion of the capital costs if the project is to be
                   developed. Shareholders may also be subordinated by lenders in order to finance an
                   exploration project.
                   Geopolitical Risk: This risk deals with policies such as permitting and tax laws, that are
                   managed by governments of a jurisdiction (country, state, province, etc.). While these
                   policies usually affect mining companies more than exploration companies, in some
                   cases, governments may suspend exploration activities as happened to Nevsun Resources
                   and others in Eritrea (2003-2004). Generally, developing countries are seen as being
                   more risky, because of the potential for a quick change in power to drastically change
                   policies. Developed countries have their own geopolitical risk issues, and jurisdictions
                   with powerful environmental lobbies can also make mining or exploration difficult.
                   Technical Risk: Ore reserve and resource risk is a technical risk that is derived from the
                   subjective nature of geological interpretation. Engineering-based forecasts are subject to
                   imprecision, and unexpected risks such as earthquakes and strikes. Such events could
                   materially affect the value of shares.
                   Exploration Risk: In some cases, the market may build in expectations for exploration
                   success before the actual exploration work has taken place. In the event that results do not
                   meet with the market’s expectation, the company’s shares may be negatively affected.




                   SPROTT SECURITIES INC.                                                                                89
JANUARY 16, 2007             DAVID STEIN, CFA 416·943·6407; JED RICHARDSON 416·943·6430; MIKE KOZAK – ASSOCIATE 416·943·6749




Recommendation     Sprott’s recommendation terminology is as follows:
Terminology
                   Top Pick                   our best investment ideas, the greatest potential value appreciation
                   Buy                                                     expected to outperform its peer group
                   Market Perform                                        expected to perform with its peer group
                   Reduce                                               expected to underperform its peer group
                   Our ratings may be followed by "(S)" which denotes that the investment is speculative
                   and has a higher degree of risk associated with it.
                   Additionally, our target prices are based on a 12-month investment horizon.




Disclosure         We, David Stein, Jed Richardson and Mike Kozak, hereby certify that the views
                   expressed in this research report accurately reflect our personal views about the subject
                   company(ies) and its (their) securities. We also certify that we have not been, and will not
                   be receiving direct or indirect compensation in exchange for expressing the specific
                   recommendation(s) in this report.
                   For a complete disclosure of potential conflicts of interest please refer to our website at
                   sprott.ca or call 1-800-461-2275 and ask to speak to the research coordinator.




                   SPROTT SECURITIES INC.                                                                                90
        HEAD OFFICE                                                CALGARY OFFICE                                               MONTREAL OFFICE
Royal Bank Plaza South Tower                                       300 - 5th Avenue SW                                         1800 McGill College Ave
          Suite 2750                                                     Suite 1800                                                    Suite 2104
          Toronto ON                                                     Calgary AB                                                   Montreal PQ
           M5J 2J2                                                        T2P 3C4                                                       H3A 3J6
     Tel: (416) 362-7485                                            Tel: (403) 266-4240                                           Tel: (514) 878-0009
     Fax: (416) 943-6499                                           Fax: (403) 266-4250                                           Fax: (514) 878-1514
  Toll Free: (800) 461-2275                                      Toll Free: (800) 461-9491                                     Toll Free: (800) 699-5946

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posted:7/30/2011
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