Report On Mining Spring 2010

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Approximately half the companies that trade on the TSX are mining companies. There is more money raised for mining companies trading on the TSX than is raised on all the other exchanges in the world combined. Some might say the TSX controls the mineral wealth of the world.

So it’s only fitting that the PDAC held in early March every year in Toronto is always the biggest mining show in the world. This publication is proud to be included in the delegates’ kit for the seventh year in a row.

As the world recovers from the recent economic downturn there can be little doubt that mining companies are going to be front and centre in the positive growth currently occurring in the equities markets. Look for the back room chats between corporate executives attending PDAC to produce deals.

Money is coming off the sidelines. This year, CEOs see opportunity, whereas last year the focus was on survival.

This year’s PDAC should produce lots of news. Keep your ears tuned for opportunity.

Publisher Terry Tremaine

Terry Tremaine Publisher

Associate Publisher & Editor Connie Ekelund Production Manager Christie Smith Contributing Editors Grant Campbell Saly Lawton Elvis Picardo CFA James DiGeorgia Account Managers 1.888.925.0313 Terry Tremaine Maureen O’Brien Marie Richards Randy Chaster Colleen Killorn

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Cover Story Century Mining Corporation

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Prospectors and Developers Association of Canada (PDAC) by Saly Lawton

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Eagle Hill Exploration

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Trelawney Mining and Exploration Inc.

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Lincoln Mining Corporation

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Columbia Yukon Explorations Inc.

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Long-term Outlook for Commodities by Elvis Picardo

Peak Gold by James DiGeorgia

On the cover: Century Mining Corporation

Subscriptions: 1 year $14.95 in Canada (+$8.00 in USA) 2 years $28.00 in Canada (+$16.00 in USA) 1.888.925.0313 x1001 info@ReportOnMining.com www.ReportOnMining.com Free Digital Subscription www.tiny.cc/rom The information in Planning for Profits - Report on Mining has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. www.ReportOnMining.com www.ReportOnMining.com

Century Mining Corporation: starting in Canada, expanding in Peru.

Spring 2010 | Planning for Profits | Report on Mining 3

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entury Mining Corporation is a Canadian-based gold producer positioned for rapid growth through expanding gold production in Canada and Peru. The company also controls a number of late stage development and exploration properties that provide additional upside for resource development. These large and strategic land positions are located in mining friendly jurisdictions in Canada, the United States and Peru. The company offers investors significant upside potential through exploration and development to expand the known gold reserves and resources. Century Mining has established a long-term strategy to increase shareholder value through organic growth of existing operations, exploration and development of current projects, and pursuit of strategic and synergistic gold acquisition opportunities.

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Fully Funded and ready to GO The new decade sees the creation of a “new� Century Mining Corporation headed on a path of growth, with the goal of becoming the next Canadian mid-tier gold producer. The company is now fully funded to achieve all near-term development milestones after the recent completion of $60.75 million in debt and equity financings, which included a new prepaid gold facility through Deutsche Bank, a leader in global banking.

www.ReportOnMining.com

The financing was structured as a strategic step to enable the company to grow and develop its current assets to the midtier producer level. The company now has two significant new strategic investors, Kirkland Intertrade Corp., owned by Maxim Finskiy, CEO of MMC Intergeo Managing Company, the mining and exploration arm of the private Russian conglomerate Onexim Group, and Gravity Ltd., owned

by Fran Scola, who is a partner at LFM Partners which has extensive investments in the natural resource sector.

The new strategic investors now own a combined 35.9% interest in Century Mining. The substantial investment represents a long-term commitment and is a very strong vote of confidence in both the assets and the management of Century Mining Corporation. www.ReportOnMining.com

Photos: Lamaque Mill Facility. Bottom right photo: Lamaque Mine ore sample with visible gold.

In addition to the strategic ownership position, Century Mining entered into a U.S. $33 million prepaid gold forward facility with Deutsche Bank AG. The gold forward facility is structured over a five-year period. A total of 61,183 ounces of gold production will be delivered into this facility.

The future production committed to this forward sale agreement represents less than 3% of the existing reserves and measured and indicated resources at the Lamaque Mine Complex, preserving the upside for shareholders. No interest fees or warrants were paid in connection with this facility and the company enjoys an additional upside revenue spread between U.S. $900 and U.S. $988 per ounce.

Spring 2010 | Planning for Profits | Report on Mining 5

Century Mining Corporation has been able to maintain 100% ownership of world class assets through some very difficult economic times. The timing is right for Century to capitalize on the ownership of these quality gold assets and substantially increase shareholder value. The current position of the company is a testament to the ability of the diverse and experienced management team at Century Mining Corporation.

President and CEO Margaret Kent has extensive experience in the precious metals mining sector, founding, financing and operating three public and four private companies. She has been instrumental in raising over $1.5 billion in equity and debt markets for the development of mining operations in North and Central America. William J.V. Sheridan, Secretary and Director, has been a partner with Lang Michener since 1970 and is an authority on mining law. CFO Hugh Blakely has over 30 years of financial experience, most recently as CFO at Canadian Royalties Inc. VP Legal and Corporate Development Richard Meschke has extensive experience in negotiating large acquisitions and complex contracts with his experience gained through his tenure spent with Amax Inc. VP Operations, Adrian McNutt, brings over 29 years experience in both precious and base metal mining including senior management roles with Newmont and Royal Oak Mines. The company continues to build out their management team to ensure a smooth reopening of the Lamaque gold project.

Century Mining is currently operating the established San Juan Gold Mine in Peru, in which the company controls 100% of the gold production. Century Mining has been utilizing the cash flow and earnings from the San Juan operation to fund the continued development of the Peruvian business unit.

The San Juan Mine produced approximately 17,000 ounces of gold in 2009, and the company expects to increase annual production to 19,000 ounces in 2010, with subsequent annual increases to reach 30,000 ounces per year by 2012.

6 Planning for Profits | Report on Mining | Spring 2010

Top left and center photos: Lamaque Mill Facility Center.

Bottom photos: San Juan Gold Mine Processing Facility, Peru.

www.ReportOnMining.com

The company is forecasting a production cash cost of $550 per ounce, which may decline if an electrical transmission line to the mine and local community can be jointly funded by the government and Century, and subsequently the operation is switched over from the diesel generators. The property contains proven and probable reserves of 186,000 ounces of gold and has an expected mine life in excess of eight years, as further resources are upgraded from inferred to reserves.

The Peruvian property will require further exploration and development to fully capitalize on the potential of this large 220 square kilometre land holding. The property contains 35 known gold bearing veins and numerous additional exploration targets have been identified, offering excellent potential for a significant increase in the size of the resource through exploration of the region. One of the priority targets, known as the Erika Prospect, has been identified as a large copper-gold porphyry system. The prospect, yet to be drilled, could be a very significant and large mineralized system, where initial reconnaissance exploration indicates a potential large resource. Other mining companies have staked to the south and east of Century’s property boundary.

This year gold will once again “Pour from Val d’Or” Century Mining has emerged from the recent global economic turmoil in an excellent position for growth, and was one of the only juniors in these difficult times to be successful in obtaining a senior bank facility. The company has retained 100% ownership of its flagship property, a quality gold asset with significant resources, the Lamaque gold project. This property is located in northwestern Québec, near the town of Val-d’Or. The property is situated in the historic Abitibi Greenstone Belt on the Cadillac Break, a region which has produced over 140 million ounces of gold over its long and storied history.

www.ReportOnMining.com

The Lamaque Mine Complex has all required infrastructure, such as power, water and transportation routes and a qualified work force in place or close by, allowing for a rapid restart of the operation. The Province of Québec is recognized as one of the most mining friendly jurisdictions in the world, with progressive mining regulation and a well established mining infrastructure, including some of the lowest cost electricity in the world.

The property holds an NI 43-101 compliant gold reserve of 1.1 million ounces proven and probable, and gold resources exceeding 1.3 million ounces in the measured and indicated category and 3.1 million ounces in the inferred category. The deposit remains open at depth, which in this region commonly reaches in excess of the 5,000 foot level. Cash flow from future operations will be reinvested in expanding the known reserves and extending the mine life of the project.

The existing infrastructure, workings, and milling equipment are less than ten years old, and will not require an extensive expense to bring into production. Century is in the process of signing a leasing arrangement on mining equipment utilizing the latest mechanized technology with the expectation that the mine life will be extended well beyond the current 11 year estimated mine life. Some of the surplus equipment can be effectively utilized at the San Juan mining operation and will be shipped to Peru.

The recently completed financing positions the company to immediately move forward with the Lamaque Mine restart. January and February will see the power returned to the site and selection of the workforce required to restart the mine. The crushing facility and mine portal/ramp will be upgraded in February, ore will start to be stockpiled in March as mining is restarted, and subsequent gold production will commence in the second quarter of 2010.

Spring 2010 | Planning for Profits | Report on Mining 7

Top photo: San Juan portal entrance.

Right photo: San Juan Facility, Peru.

It is expected that during 2010 the Lamaque operation will produce 45,000 ounces of gold moving to commercial production of 65,000 ounces in 2011 and to full production of 105,000 ounces by 2013. The operation is forecast to have “Life of Mine” cash costs of production of approximately U.S. $450 to U.S. $500 per ounce and an estimated mine life in excess of 11 years.

Century Mining Corporation offers compelling value for investors as the company has 100% ownership of a world class gold project that contains millions of ounces of gold with significant potential to expand the reserves. The management team brings a proven track record of successfully developing and operating precious metal mining operations, and each member of the board of directors has a strong background in the mining business.

The new controlling shareholders are committed to success over the long term and are focused on an aggressive strategy of growth through synergistic gold acquisitions. When compared to many of their peer group, Century Mining’s value becomes even more evident, as a metric such as market capitalization versus gold reserves highlights the relative value of this well-managed, fully funded, growth-oriented Canadian gold producer.

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Century Mining Corporation 441 Peace Portal Drive Blaine, WA, USA 98230 Phone: 1.360.332.4653 Fax: 1.360.332.4652 E-mail: pball@centurymining.com www.centurymining.com TSX.V: CMM Year Hi/Low: 0.445/0.055 www.ReportOnMining.com

TSX-V: CMM www.centurymining.com

An Emerging Mid-tier Gold Producer

Starting up the Lamaque Gold Project Val d’Or, Québec, Canada

Expanding the San Juan Gold Mine Peru

• 2010 guidance: 55,000 to 65,000 oz of gold production at cash cost of $550-$570 /oz (Lamaque production to be capitalized in 2010) • Production growth with Lamaque ramping up to full production of 100,000-110,000 oz/yr; LOM average cash cost $450-$500/oz • • • • • • • •

Proven production record at San Juan gold mine, Peru Well financed for Lamaque production commencing Q2 2010 Proven management team and Board of Directors Significant gold reserves and resources Exploration projects with upside potential Extensive mining and milling infrastructure in place 100% control of projects and located in world-class gold districts Assets located in mining-friendly jurisdictions

Lamaque Mine, Québec

Production Development

San Juan Mine, Peru

For more information please contact:

Peter A. Ball, Director Investor Relations pball@centurymining.com Tel: 360. 332.4653

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wo long-time prospectors head the list of this year’s annual awards winners, announced recently by the Prospectors and Developers Association of Canada (PDAC).

Perry Durning Perry Durning and Bud Hillemeyer will receive the association’s Thayer Lindsley Award that recognizes a recent significant mineral discovery or series of discoveries anywhere in the world.

The two long-time partners are being honoured for their substantial record of gold and silver grassroots discoveries in Mexico. These include, in 1994, the San Sebastian mine with a life-of-mine production over four years of 11.2 million oz. of silver and 155,937 oz. of gold; the San Agustin gold deposit in 1996 (1.6 million oz. indicated, 1.1 million oz. inferred); La Pitarrilla silver deposit in 2002 (91.7 million oz. probable, plus 551.6 million oz. measured and indicated, and one of the most significant silver discoveries in the last decade); and most recently in 2007 the Camino Rojo gold discovery (3.4 million oz. gold and 60.7 million oz. silver).

According to Larry Buchanan, himself a previous PDAC award winner, “…(Perry and Bud) made these discoveries the ‘old-fashioned way,’ by eschewing the comforts of hotels and restaurants, by hiking ungodly amounts of kilometres through rough country, by camping each night wherever sunset found them, and by using geological insights they themselves developed.”

Bud Hillemeyer

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Back row, left to right: Mackenzie Watson, John Harvey, Richard Nemis.

Front row, left to right: Neil Novak, Don Hoy. 10 Planning for Profits | Report on Mining |Spring 2010

he five discoverers of the burgeoning Ring of Fire chromite, copper, and zinc discoveries in the James Bay Lowlands of northern Ontario have won the Bill Dennis Award, given for a Canadian discovery or prospecting success.

Receiving this award will be Richard Nemis and John Harvey, formerly president and exploration manager respectively of Noront Resources Ltd.; Mackenzie Watson, president and CEO, and Don Hoy, exploration manager, of Freewest Resources Canada Inc.; and Neil Novak of Spider Resources Inc. The James Bay region had been identified as an area of possible mineralized greenstone but it was swampy and lacked the outcrops necessary for traditional prospecting.

In spite of these obstacles, the five discoverers were able to lead their exploration teams to success, opening up a previously overlooked area of the country to new exploration activity. www.ReportOnMining.com

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oss J. Beaty, a Vancouver-based geologist and resource company entrepreneur with more than 37 years of experience in the international minerals industry, is the winner of the Viola R. MacMillan Award for company or mine development.

Beaty founded and currently serves as chairman of Pan American Silver Corp., one of the world’s leading silver producers. The company has eight operating mines in Mexico, Peru, Argentina, and Bolivia.

He also established Magma Energy Corp. to focus on international geothermal energy development. Since its start in 2008, the company has built a world-class team, acquired a Nevada operating plant with expansion potential and an extensive portfolio of early and advanced stage exploration properties in North and South America.

Beaty’s philanthropic work is also being recognized. This includes his founding of the Beaty Biodiversity Centre and Beaty Biodiversity Museum at the University of British Columbia and the campaign that he headed to raise $56 million to fund a new geology building at the University of British Columbia.

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second Vancouverite is also on this year’s awards list.

Geologist Nicholas Carter wins a Distinguished Service Award for his significant contributions over the years to exploration and mining and to the mineral industry’s associations and professional societies.

During his 50-year career, Carter has become one of the foremost consultants in property evaluation, exploration and development, producing many technical reports on mature mineral prospects in British Columbia.

He is an expert on porphyry systems in the province, and his careful documentation of findings and willingness to share information with others has enhanced people’s knowledge of the province’s geological make-up.

Carter has held senior positions in a number of professional associations that foster and promote Canada’s mining industry.

He was a PDAC director from 1982 to 1993 and chair of the Geology Division of the Canadian Institute of Mining, Metallurgy and Petroleum in 1985-86. Carter organized field trips and technical meetings in western Canada for the Geological Association of Canada.

Between 1988 and 1990, he was president of the B.C. and Yukon Chamber of Mines (now the Association for Mineral Exploration B.C.) and a member of its executive board for six years. From 1983 to 1989, he served on a committee that established standards for the registration of professional geoscientists in British Columbia. www.ReportOnMining.com

Spring 2010 | Planning for Profits | Report on Mining 11

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he PDAC’s Skookum Jim Award honours aboriginal achievement and excellence in the mineral industry, either by an individual, company or organization.

This year marks the third anniversary of the creation of this award and recognizes the relationships and connections being established between aboriginal communities and the mineral industry.

Willie Keatainak is this year’s winner.

Keatainak is president of Nuvumiut Developments Inc., a company formed in 1996 by Salluit and Kangiqsujuaq, the two Inuit communities closest to the Raglan mine in the Nunavik territory of Quebec.

The company aims to secure economic development opportunities at the mine and is fully owned and operated by the Inuit Landholding Corporations of the two communities. It began with an investment of $160,000 and now has assets in excess of $15 million.

Keatainak has been involved with the mining industry since the early 1960s. He was a key negotiator to the Raglan Agreement in 1995, a landmark agreement that is seen as a model for subsequent agreements. He has since worked to encourage members of the two Inuit communities to take advantage of the opportunities that the mine offers.

Keatainak has been involved with Nuvumiut Developments since its formation, serving as its president for the past five years.

The formation of joint ventures with companies such as Kiewitt, Bradley Brothers, Redpath and Jacques Whitford has added to its success.

PDAC 2010

. March 7-10, 2010 .

Toronto, Canada

www.pdac.ca

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he annual awards are selected by the board of directors of the Prospectors and Developers Association of Canada upon the recommendation of the association’s awards committee. Their presentation will take place at an awards ceremony at the Fairmont Royal York Hotel on Monday, March 8 in Toronto during the annual convention of the association.

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wo companies — one a senior, the other a junior — have been selected to receive the 2010 Environmental and Sustainability Award.

This award is given to either an individual or organization for outstanding initiative, leadership and accomplishment in protecting and preserving the natural environment or in establishing good community relations during an exploration program or operation of a mine.

De Beers Canada receives the award for its commitment to its employees, the environment and the communities located close to its two diamond mines in Canada.

Snap Lake is located in the Northwest Territories and is the company’s first mine outside Africa. Its Victor Mine is the first diamond mine in Ontario. Both mines were opened in 2008.

The company’s first Report to Society, published in 2009, notes that De Beers’ corporate social investment amounted to more than $3.6 million in 2008, including $2.8 million on education, training and youth (literacy). More than 30% of the company’s employees are aboriginal.

Avalon Rare Metals has been a leader in promoting responsible exploration practices, with its emphasis on early engagement and open communication with aboriginal communities in the vicinity of its rare earth project, Nechalacho, in the Northwest Territories.

The company has encouraged skills training and provided employment opportunities for aboriginal people and also offers joint business opportunities.

With its commitment to protecting the fragile environment of the North, Avalon was the first company to adopt the PDAC’s corporate social responsibility program, entitled e3 Plus (excellence in social responsibility; excellence in environmental stewardship; and excellence in health and safety). Company officials have been instrumental in the program’s development and in advancing its use within the exploration industry.

www.ReportOnMining.com

Spring 2010 | Planning for Profits | Report on Mining 13

PEAK GOLD

By James DiGeorgia

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Along with South Africa, the world’s largest producing he mining industry has a dirty little secret. Despite the countries are the U.S., Canada, and Australia. Combined, these best efforts of mining companies, gold production is four nations alone account for 45 percent of global gold mining plunging! Even as gold has quadrupled in price, global production, and all peaked a decade or more ago. production has fallen by 19%. Insiders are panicked, but nobody If gold supply is to recover, other nations must multiply their else knows about this yet. Once the word gets out, we’ll see production. But that won’t happen. gold at $2,000, $3,000, even $5,000.

Of all the nations with significant gold deposits, the top four Are we past “peak gold?” Few investors would even (South Africa, the U.S., Canada, and Australia) are the safest in understand this question, but the shocking truth about global political terms. All the other countries are much riskier places gold reserves will be the shockwave that’s going to hit the to mine for gold. markets once the truth gets out.

Peak Gold That’s one main reason why during the recent boom in “Peak” gold refers to the same phenomenon as oil, applied

By James DiGeorgia commodities, mining companies raked in huge profits from their toThethe yellow metal.

Just like oil, gold is a physical substance mining industry has a dirty little secret. Despite the best efforts of mining companies, gold production is plunging!

Even as gold has quadrupled in price, global production has fallen by international operations: not only in gold, but other precious that must be extracted from the earth. Although the process 19%. Insiders are panicked, but nobody else knows about this yet. Once the word gets out, we’ll and base metals too. Did they deserve these huge windfalls? issee different, the $3,000, exploration/discovery/production cycle is the gold at $2,000, even $5,000.

Absolutely! They took huge risks and invested huge amounts same.

Therefore, a peak will eventually occur.

Are we past “peak gold?” Few investors would even understand this question, but the shocking truth about global reserves will beathe shockwave that’sWe’re going tonot hit the markets once the of capital to find, develop, and extract these natural resources.

Just like oil,gold gold has only finite supply. going truth gets out.

Nevertheless, the nations where their mines were located to run out anytime soon, but once the peak is passed, supply “Peak” gold refers to the same phenomenon as oil, applied to the yellow metal. Just like oil, gold have been outraged by foreign companies profiting from decreases year demand Once that is a physical every substance thatwhile must be extracted increases. from the earth.

Although thepoint process is different, exploration/discovery/production cycle is the same. Therefore, a peak will eventually occur. gold, silver, copper, and so on. So these nations are “their” isthe reached, prices go to the moon.

Just like oil, gold has only a finite supply. We’re not going to run out anytime soon, but once the to “nationalize” these assets. They’re revoking mining Like the rumblings of aevery distant oncoming thunderstorm, peak is passed, supply decreases year while demand increases.

Once that point starting is reached, prices go to the moon. contracts, jacking up license fees, enacting crushing taxes, and there have been many indications of a peak in gold production.

Like the rumblings of a distant oncoming thunderstorm, there have been many indications of a seizing mines outright. Unsurprisingly, this is crippling further Here’s a chart of gold’s global mining supply. peak in gold production. Here’s a chart of gold’s global mining supply. development.

For example, Rio Tinto was in the middle of a $6 billion project in Guinea to develop the world’s largest iron-ore reserve, until the government suddenly stripped away 50 percent of its mining rights. In Russia, the government has threatened to revoke coal mining licenses for ArcelorMittal, which was considering trimming its work force. In China, the government has arrested Rio Tinto employees for “espionage,” placing pressure on the company while it was negotiating iron prices with Chinese steel companies. In Zimbabwe, the government is reviewing all mining contracts with a strict “use it or lose it” deadline for international companies. In Zambia, the government is demanding to double, or in some cases even triple its ownership percentage in foreignrun mines. In South Africa, the country’s largest trade union Gold mining production peaked in 1999. Since then, it has fallen by 19 percent. What we don’t has demanded the government nationalize all mines. There are peakedIt appears in 1999. then,One it has yetGold know ismining whether production this peak is permanent. thatSince way, though. by one, all of the world’s top gold producers have peaked and started to fall. many other examples besides these. fallen by 19 percent. What we don’t yet know is whether this The biggest news here isItSouth Africa.that Thirtyway, yearsthough. ago, this nation As a result, the world’s mining companies are pulling back peak is permanent. appears One supplied by one,74allpercent of the world’s gold all by itself. Today that number has plunged to 13 percent. In absolute terms, its from risky operations. BHP Billiton is cutting its operations ofproduction the world’s top gold producers have peaked and started to fall. is less than one-third of what it used to be. And it shrinks further every year. in Russia and Africa. Xstrata and other gold companies have The biggest news here is South Africa. Thirty years ago, this abandoned their plans to pursue precious metals in Zimbabwe, nation supplied 74 percent of the world’s gold all by itself. Today Tanzania, Madagascar, and other places in Africa. And the list that number has plunged to 13 percent. In absolute terms, its goes on. production is less than one-third of what it used to be. And it shrinks further every year.

14 Planning for Profits | Report on Mining |Spring 2010

www.ReportOnMining.com

Summary: while production in the “safe” countries is This is also true for gold. The previous chart showed how plunging, production elsewhere can’t be boosted to compensate. new discoveries have plummeted. As it turns out, the true Nevertheless, you might be wondering: as gold’s price rises, picture is even worse than the chart shows. The chart shows production should naturally increase. After all, deposits that discoveries as a three-year average. This covers up the fact that are non-economic at lower prices start being worked once the the most recent years have been a disaster. In fact, the report price rises high enough. (which was released in mid-2009) contains a footnote that admits Instead, over the last 10 years, even while exploration has “At the time of writing, no significant gold discoveries could be almost tripled, new gold discoveries have plummeted by 90 attributed to 2008.” percent! This is the classic sign of a peaked commodity. The large, easy-to-find deposits were all discovered long ago. Now A Shrinking Window of Opportunity exploration is getting more and more difficult and expensive, Gold is blasting up to new highs, up above $1,100. It won’t while the size and quality of new finds are dropping exponentially. be too long that $1,100 will be a distant memory. How long We’ve seen this process unfold in a different commodity: before the “peak gold” scenario ignites the gold market? There oil. Let’s compare the two industries are two ways to look at it: from to get some insight about what lies “Gold is blasting up to new highs, up physical reality, or from investor ahead for the gold market. Here are sentiment. the indicators of a peaking commodity, Physically, we can look at the above $1,100. It won’t be too long that as recently demonstrated by both oil ongoing collapse of new gold and gold. discoveries, which started in $1,100 will be a distant memory.“ 2000 and 2001. This is terrible news for future gold production.

Supply no longer responds to price However, there’s roughly a 10increases year delay between a new gold discovery and the first ounce Oil’s price tripled from 2005 to 2008, but production went coming to market. Therefore, the full impact of “no new up less than one percent. Over the last decade, gold’s price discoveries” hasn’t been felt yet. We’re still coasting on the quadrupled, but mining supply fell by 19 percent. momentum of previous discoveries. When will it hit the markets?

About 10 years after it started. In other words, very soon.

Production costs rise Twelve to twenty-four months at the most.

Many new oil discoveries (such as deep-water deposits and Of course, the market won’t necessarily wait for the physical Canadian oil sands) are unprofitable when oil is below $80. reality to manifest. Like any other market, gold’s price can be So why are oil companies looking in such expensive locations? driven up purely by investor sentiment. And once the truth Because all the cheap oil is gone. about peak gold gets out, investors might “buy the rumour” In gold, production costs are soaring as well. The Metals and stampede into gold even before the actual physical impact Economics Group reported this about the largest gold hits. Just think of peak oil. In a short period of time, it went from companies, “The group’s average annual cost of producing being considered a “wacko nutjob” idea to a serious model for and replacing gold, incorporating operating costs, capital costs explaining market behaviour. And oil went up by almost 500 of new mines, sustaining capital costs at existing operations, percent in just four years! and reserves replacement costs more than doubled over the Of course, peak oil is old news now. But peak gold is only past decade. Only a tripling of gold prices from the lows of the understood by industry insiders so far. Once this story breaks early 2000s to an average of $872/oz in 2008 has prevented to the broader market, I think it will light a rocket under gold’s a financial meltdown like that seen in the base metals sector.” price. I expect this to be one of the biggest stories in gold over the next 12-18 months.

Exploration produces diminishing returns Thanks to the peak, most oil exploration efforts lose money today. Energy companies still find new deposits, but most of the ones they find are worth less than the money spent to find them.

That’s why companies like Exxon Mobil are buying back stock and issuing huge dividends to investors instead of using the money to find new deposits. They’re admitting that their core mission (producing and selling energy) is failing. www.ReportOnMining.com

James DiGeorgia is the editor of the Gold & Energy Advisor (www. goldandenergyadvisor.com), and a published author of several books about gold and oil, including his latest release, “The Trader’s Great Gold Rush: Must-Have Methods for Trading and Investing in The Gold Market.” James DiGeorgia has extensive experience in precious metals and the energy markets, and is considered one of the world’s foremost authorities in both. He is frequently quoted as an expert in major newspapers and magazines including The New York Times, USA Today, The Los Angeles Times, Money Magazine, The Chicago Tribune, and Barron’s. He’s also appeared on CNBC, Bloomberg and FOX News.

Spring 2010 | Planning for Profits | Report on Mining 15

Québec’s GOLDEN WINDFALL Eagle Hill Exploration’s Windfall Lake Gold Deposit Shows New Areas of Wide Gold Mineralization

Left to right: Neil Richardson (Murgor Geologist) logging core at Windfall Lake Gold Property, underground ramp at Windfall, aerial view of camp at Windfall Lake.

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agle Hill Exploration Corp. (TSX.V: EAG) is a Canadian junior exploration company focused on the exploration and development of the Windfall Lake Property located in the prolific Abitibi Greenstone Belt of northeast Québec.

The Windfall Lake Property is comprised of 340 contiguous claims (almost 11,000 hectares) and is situated along a 300-kilometre regional fault zone that has produced over 100 million ounces of gold in the past 100 years.

Eagle Hill has made considerable progress in 2009 and 2010, having consolidated ownership of its Windfall Lake Property package in Val-d’Or Québec from Noront Resources Ltd., Murgor Resources Inc. and Freewest Resources Canada Inc. In addition, Eagle Hill secured a $30 million commitment from IBK Capital Corp. (notably, the group that previously raised $92 million for the Windfall Lake Property for Noront).

Data compilation from vast historic information and assay results from previously drilled but unassayed core is complete and Eagle Hill has conducted its first geological model of the property. This model shows that the Windfall Lake gold deposit is comprised of areas of wide gold mineralization that extend from surface to at least 300 metres and potentially deeper.

16 Planning for Profits | Report on Mining | Spring 2010

Prior to Eagle Hill acquiring the property, over $20 million had been spent on data collection, sampling and drilling; the majority focused on expanding known gold zones at Windfall Lake. When Noront switched its mineral focus to another highgrade project, Eagle Hill jumped at the opportunity to take this advanced-stage property under its wing. The acquisition came with over 71 kilometres of drill core, a 1,450 metre underground ramp big enough to drive trucks through, surface samples, geophysics and an extensive infrastructure onsite.

A 49-person camp in addition to a core and splitting shack at the property, have also been acquired by the Company.

Eagle Hill’s exploration focus in 2009 on the Windfall Lake Property was to compile the extensive historic data into one database and then generate a geological model. The exploration team, lead by Murgor Resources, decided that the Company would benefit from the assaying of 8,700 metres of previously drilled, but unsampled, core from the property.

These recent assays returned encouraging results indicating the presence of large mineralized gold zones measuring up to 41.4 metres in width. The results of the first drill holes sampled

by Eagle Hill are highlighted by significant gold grades over wide intervals, such as 2.83 grams per tonne of gold over 41.1 metres and 5.95 grams per tonne of gold over 21.35 metres, as well as narrower intervals with high grade gold values up to 64.2 grams per tonne of gold over 1.0 metre. www.ReportOnMining.com

Photos: Above left, Surface mineralization oxidized at the Windfall Lake Gold Property.

Above right: Visible gold at Windfall Lake Property.

Bottom right: 3D model of the Windfall Lake Property.

In the past, the focus had centered around high grade, discontinuous veins, but Eagle Hill has determined that, in addition to the extremely rich and narrow structures, the gold mineralization at the Windfall Lake Property also occurs in large intervals with fairly consistent gold mineralization.

With the current information, the true widths of the gold mineralized zones are unknown.

These new assay results, combined with the historical results, encouraged Eagle Hill to expand the exploration model and their focus on both the high grade vein deposits and the wide gold intervals at the Windfall Lake Property.

“Eagle Hill believes the true potential of the Windfall Lake Property lies with the wide mineralized gold zones that we have indentified in the model. The focus on the wide zones is an approach that has been overlooked in the past at Windfall,” said Brad Kitchen, President and CEO of Eagle Hill. “This first exploration phase marks a complete shift in focus at Windfall Lake. Instead of chasing narrow and discontinuous high grade veins, Eagle Hill is focusing on the wide, consistently mineralized zones of lower grade material that host these veins.”

Eagle Hill, in keeping with its development as a company, recently announced two significant additions to its board of directors with the nominations of Noront’s former President and Chief Executive Officer, Richard Nemis and Noront’s former Chief Operating Officer, John Harvey.

www.ReportOnMining.com

In 2008, Mr. Nemis was named Chairman Emeritus of Noront for life in recognition of his outstanding pivotal contributions to that company’s success, which included the discovery and consolidation of the Windfall Lake Property and the “Ring of Fire” McFaulds Lake area in northeastern Ontario. Mr. Harvey has spent most of his professional career employed in mineral exploration with Noranda, including positions as President of Hemlo Gold Mines and President of Noranda Exploration, prior to his work for Noront. With more than 90 years of combined mining and exploration experience, their appointments would be a welcome addition to any resource company’s management team.

Spring 2010 | Planning for Profits | Report on Mining 17

QUEBEC’S GOLDEN WINDFALL www.eaglehillexploration.com TSX.V:EAG

F

Eagle Hill Exploration Corporation is a Canadian mineral exploration company focused on the exploration and development of gold and precious metal prospects. The Company is set to become an advanced-stage gold and precious metal exploration company with its acquisition of the Windfall Lake Property gold project, located in Urban Township, Quebec, between Val D’or and Chibougamau.

Advanced stage gold project 3D Geological Model shows areas of wide gold mineralization 2010 Diamond drill program commenced Region produced over 100 million ounces of gold in past 100 years Significant funding committed Successful and experienced exploration and management team

18 Planning for Profits | Report on Mining | Spring 2010

www.ReportOnMining.com

EAGLE HILL EXPLORATION CORPORATION | 999 Canada Place, Suite 750 | Vancouver, B.C. | V6C 3E1 Tel: +1.604.638.8072 | Fax: +1.604.688.9620 | IR Toll Free: +1.888.258.3323 | Web: www.eaglehillexploration.com

Core samples

What makes this announcement even more important for Eagle Hill’s shareholders is that these two gentlemen were the original believers in the Windfall Lake Property and will play a critical role in providing guidance as the company strives to realize their vision of turning Windfall Lake into a mine. They join the current management of Eagle Hill, consisting of: Brad Kitchen, President and Chief Executive Officer; Cale Thomas, Director and Chief Financial Officer; Andre Tessier, Director and Head of Exploration; and Amandeep Rai, Corporate Secretary.

Eagle Hill’s strengths also lie within its strong Exploration Team and Technical Advisory Board, all with extensive experience in gold exploration and mining. The Exploration Team has a solid history of creating value in high-growth junior gold and precious metal companies. It is made up of principals from Murgor Resources: André Tessier (previously mentioned); Dr. Jean-Philippe Desrochers; and, Neil W. Richardson. Its Technical Advisory Board consists of: Mac Watson, Michael McPhie, Wes Roberts, Ian Chisholm, Terry Schorn and Peter Vamos. These groups are then further complemented by Eagle Hill’s financial advisors at IBK Capital Corp. and their technical advisors from the HB Global Group.

www.ReportOnMining.com

Looking to 2010, Eagle Hill has begun a spring exploration program that will continue to expand known gold zones and test exploration targets on the Windfall Lake Property. With the completion of the initial 3D Gemcom model of the property, Eagle Hill has begun to carry out a diamond drilling program of 12,000 metres, of which up to 7,000 metres of drilling will be used to further define the modeled mineralized gold areas. 5,000 metres of drilling will be used to explore identified potential hot spots where geological structure and geophysics converge.

Detailed mineralization surveys and a geophysics program of induced polarization, magnetomer and electromagnetic surveys are planned to coordinate with the drilling program.

This will provide further insight to the structure of the deposit.

Eagle Hill remains dedicated to strategic acquisitions of advanced-stage gold and precious metal properties in Québec and throughout North America. The Company is on its way to becoming a late-stage development company through the acquisition of the Windfall Lake Property and, a strong financial backing and experienced management team, the future looks bright for Eagle Hill.

Eagle Hill Exploration Corporation Contact: Brad Kitchen Suite 750, 999 Canada Place Vancouver, BC, Canada V6C 3E1 Phone: 604.638.8072 Fax: 604.688.9620 Email: info@eaglehillexploration.com www.eaglehillexploration.com TSX.V: EAG Year Hi/Low: $0.215 - 0.06 Spring 2010 | Planning for Profits | Report on Mining 19

• Tyler Culhane, Manager Mining; with 20 years experience specializing in narrow vein mining.

• Dave Reid, Manager IR and Business Development; businessman with over 30 years experience.

• Gary Nassif, P.Geo., Manager Exploration Services; 17 years experience in Canada and French Africa.

• Charlotte May, Corporate Secretary.

Board of Directors Greg Gibson, President & CEO; Tony Makuch, President & CEO Lake Shore Gold; George Cole, former VP Exploration Teck Comico; Chris Irwin, Counsel, President Irwin Professional Corp.; Pat Mohan, President Mohan Group, 30 years business experience; and James Fairbairn, CFO CGX Energy, director and officer of several public companies.

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relawney Mining & Exploration [TSX.V: TRR] is focused on near term gold production and an aggressive exploration program at the Chester Complex, Swayze Greenstone Belt, located approximately 120 kilometres south of Timmins, Ontario. Trelawney has accumulated four gold properties hosting historial resources and existing mine workings. Along with these highly prospective gold projects, Trewlawney has a highly experienced and competent management team and board of directors.

Management Team • Greg Gibson, President and CEO; with 30 years experience primarily in narrow vein mining.

• Andres Tinajero, CMA, MBA, VP Finance and CFO has 15 years experience with public companies.

• David Beilhartz, P.Geo., VP Exploration; former VP Exploration Lake Shore Gold with 25 years experience and was extensively involved with the Timmins West and Thunder Creek discoveries.

Stock Chart 20 Planning for Profits | Report on Mining | Spring 2010

Projects The Chester 1 [Murgor-Chesbar] has a fully developed 1,500 metre ramp to the 500 foot level containing an historic measured resource of 159,000 tons grading 0.43 oz/ton Au [non NI-43-101 compliant] which has been calculated for the western part of the zone.

This should allow Trelawney two years mining at 33,000 oz/yr [250 tons/day] with a projected cash cost of $364/ oz. Trelawney recently drilled four exploration holes which intersected the mineralized structure at a depth of 1,000 feet with mineralization in all four holes which indicate a potential to significantly increase the historic resources. Drilling highlights include 36.67g/t Au over .66 m in Chester 1 Zone.

Drilling also intersected a new zone with 54.05g/t over .43 m to the north of the existing mineralization. [See Trelawney press release dated January 18, 2010.]

The Chester 2 [Young-Shannon] has seen considerable drilling and hosts an historic resource of 220,000 tons grading 0.354 oz/ton Au [non NI-43-101compliant] to a depth of 250 metres. Exploitation of this mineralization is proposed to be accessed via the existing ramp at the Chester 1 property along a 2 kilometre drift.

The Chester 3 [Jack Rabbit-Emerald Isle] covers three known mineralized zones. An historical resource of 342,000 tons grading 0.36 oz/ton [non NI-43-101 compliant] was reported

by Wade Engineering in 1990. Access to this mineralization is also possible from the Chester 1 ramp about 1 km. to the south.

Finances Trelawney raised a total of $13.5 million in 2009 including a $10.4 million dollar financing in December and is fully financed to conduct its planned exploration and development programs. www.ReportOnMining.com

Exploration There are currently two drills on the property.

The first drill is exploring approximately 1 km. to the west of the Chester 2 deposit.

Trelawney recently announced an intersection of 136 metres grading 1.16 g/t Au from this area. Higher grade intervals of up to 90.51 g/t Au over 1.00 m are also included in this intersection. Exploration continues in this area and will define the limits and style of this mineralization.

A second drill is exploring the Chester 3 Zone to confirm the nature and tenor of the historical mineralization reported in this area of the property.

Trelawney has an exploration budget for 2010 of $2.6 million dollars to continue exploring and expanding the mineralization on the property. The project offers potential for expanding historical resources at depth and along strike, and numerous targets are available for further exploration.

Mining The mine development plan is to bring the Chester 1 Zone into production upon regulatory acceptance of the closure plan. The existence of the ramp should allow production to rapidly progress to a mining rate of 250 tpd following the dewatering and ramp inspection and rehabilitation. Exploration and development of the Chester 2 Zone would follow at 250 tpd in the second year and then the Chester 3 Zone at 250 tpd. Estimated rate of production from all three projects would total 750 tpd.

In top circle photo: Greg Gibson, President and CEO, left, and Tyler Culhane, Mining Manager, Bottom circle: Visible gold in core from recent drilling at Chester 2 SW Zone. www.ReportOnMining.com

Preliminary infrastructure work has commenced on the site with the completion of a 12 kilometre all-weather access road and the assembly of offices.

A budget of $6.2 million has been allocated for the development work and will cover the estimated amounts required to advance the Chester 1 Zone into production.

A positive cash flow is projected after month six of mining.

Annualized net operating cash flow is projected to be $17.9 million at a mining rate of 250 tpd from Chester 1 and $34.3 million for a rate of 500 tpd at Year Two with Chester 2 being developed.

Highlights of Trelawney’s Chester Project include low capital costs to get into production with a developed ramp [estimated $25 million development cost] with significant potential for near-term profitable production. The ore is planned to be milled at a metallurgical facility in Northern Ontario for 18 months to two years.

An Exploration Agreement has been negotiated with the Mattagami First Nations and consultations with local communities are ongoing.

Trelawney Mining & Exploration Inc. 130 Adelaide St. West, Suite 2700 Toronto, Ontario M5H 3P5 Phone: 416.363.8567 Fax: 416.364.5400 Email: Info@trelawneymining.com

www.trelawneymining.com TSX.V: TRR Shares Outstanding: 65,358,691 Warrants: 17,276,029 Options: 5,825,000 Total Diluted: 88,459,720

Year Hi/Low: 0.05/0.83 Spring 2010 | Planning for Profits | Report on Mining 21

MININGCORPORATION

WHAT A DIFFERENCE A YEAR MAKES

Above: Paul Saxton, President & CEO, standing on the Wilson deposit at Pine Grove property, with Wheeler deposit in the background.

O

ne year has made a huge difference to Vancouver-based Lincoln Mining Corporation (formerly Lincoln Gold Corporation). Last year at this time, Lincoln Gold, then listed on the OTCBB, was forging ahead with a proposed business combination with LPT Capital Corporation.

The merger concluded successfully in August 2009 and the newly listed TSX Venture Exchange company, Lincoln Mining Corporation (symbol LMG) is now advancing its projects within an aggressive time frame.

Lincoln Mining has a strong portfolio of precious mineral projects. The company has two advanced-stage projects, located in Nevada and California, and one mid-stage project in Chihuahua, Mexico. All of Lincoln’s projects are ideally located in historically mine-friendly districts with political and economic stability and well-developed infrastructure.

Lincoln’s main focus in 2010 will be the Pine Grove property, Nevada. The project’s timeline for production will be challenging as the goal is to achieve production in 2011.

Simultaneously, in Mexico, Lincoln is currently conducting a geophysical program on the large La Bufa silver-gold property.

In southeastern California, the company has initiated a NI 43-101 technical report by Tetra Tech of Golden, Colorado on its newly acquired Oro Cruz gold property located in the Cargo Muchacho Mountains near Yuma, Arizona.

22 Planning for Profits | Report on Mining | Spring 2010

Production at Pine Grove The Pine Grove property is the company’s flagship project.

It lies in the resource-rich state of Nevada, approximately 20 miles south of Yerington in Lyon County. This project has been the focus of company activities since August 2008.

Lincoln plans to quickly advance the project to production and become a North American precious metal producer in 2011.

The core Pine Grove property consists of two sets of leased patented lode claims, three purchased lode claims, and 221 claims staked by the company. Lincoln controls 100% interest in the claims covering the entire mining district, approximately seven square miles.

The patented claims were mined from the late 1800s to 1915. A reported 240,000 ounces of gold were produced over this period. The average grade of the gold ore was 1.36 oz per ton gold with a cutoff of 0.5 ounces per ton gold. Teck Resources controlled the property in the early 1990s and Teck drilled 160 reverse circulation holes totalling 53,000 feet. Drilling was done on 100 to 200 foot centers on the two known gold deposits, the Wheeler and Wilson.

www.ReportOnMining.com

1,500 Elev.in ft.

LA BUFA 1

LINCOLN MINING PROPERTY

N

Oro Cruz Underground Workings 1,000 Elev.in ft.

Oro Cruz Pit

DISTRICT TARGET ZONE 11 kilometers long LA BUFA 2

500 Elev.in ft.

LA BUFA

ROSARIO & NANKING VEINS

Center: Oro Cruz Portal 0 Elev. in ft.

Lincoln Mining Corporation Oro Cruz Project Combined Grade Zones Looking Northward Scale: 1: 300 ft.

LINCOLN MINING DRILLING

Top Right: Vein outcroppings at La Bufa Property, Mexico

GAMMON GOLD DRILLING

-500 Elev.in ft.

GAMMON GOLD

EL CHAPITO CONCESSION

LA BUFA 0

KILOMETERS 1 2

Above: Oro Cruz Pit and underground workings

In January 2009, Lincoln filed a revised NI 43-101 compliant resource calculation compiled by MineFill Services Inc. utilizing the original data produced in October 2007 and new data.

The report shows the Wheeler and Wilson deposits contain an Inferred resource of 6.06 million tons grading 0.053 ounces per ton (opt) at a cutoff grade of 0.010 opt gold (assays capped at 0.500 opt gold) containing approximately 320,000 ounces of gold.

In December 2009, Lincoln began a 50-hole plus drilling program, located on the Wilson and Wheeler deposits, to upgrade the resource categories. An internal pre-feasibility study will be compiled in 2010. The new geological model of the Wilson and Wheeler deposits will be developed and used as a framework for preparing a revised resource estimation for Pine Grove. The company believes the property has the potential to become an open pit mine with heap leach processing. Lincoln has identified five large areas as targets for exploration drilling, which will be undertaken starting 2010.

Management Led by a team of senior-level mining engineers and executives with a proven track record of business, financial, and technical success, the company’s focus is on the acquisition, exploration and development of prospective mineral projects in North America. The company is committed to delivering value to its shareholders through the development of quality precious mineral projects.

Lincoln continues to evaluate new opportunities in North America. The company is led by President & CEO, Paul Saxton, who is a mining engineer with over 40 years experience in developing multiple gold deposits in North America. Jeff Wilson is Vice President Exploration and Chief Operations Officer who brings to Lincoln Mining 35 years of professional exploration experience in the United States, Mexico and Central America with emphasis on gold. www.ReportOnMining.com

Above: La Bufa Property Boundary

Exploration at La Bufa and Oro Cruz In Mexico, Lincoln Gold holds 100% interest in the La Bufa silver-gold property located in the Guadalupe y Calvo district of Chihuahua State, Mexico, and has negotiated a 100% purchase of the property for six million shares of Lincoln and a 3% NSR. The La Bufa property completely surrounds Gammon Gold’s historic El Rosario property and its probable strike extensions. Lincoln is currently carrying out a large geophysical program at La Bufa to identify drill targets for 2010.

In California, the engineering and consulting firm Tetra Tech has been contracted to complete a NI 43-101 technical report on the Oro Cruz gold deposit, including a resource estimate. This report is due in April 2010.

Lincoln Management believes that its recent listing on the TSX Venture Exchange, drilling at Pine Grove, acquisition of the Oro Cruz gold deposit and the strenthening of the gold price, offers an exciting opportunity for its shareholders to capitalize on the company’s future success. Lincoln is very well positioned to advance its projects to production.

Lincoln Mining Corporation Contact: Paul Saxton, President & CEO 350 – 885 Dunsmuir Street Vancouver, BC Canada V6C 1N5 Phone: 604.688.7377 Email: info@lincolnmining.com www.lincolnmining.com TSX.V: LMG Year Hi/Low: 0.32/0.17 Spring 2010 | Planning for Profits | Report on Mining 23

C

olumbia Yukon Explorations Inc. is a Canadian mineral exploration company focused on the development of its Storie Property molybdenum deposit situated about six kilometres southwest of Cassiar, British Columbia.

Highlights of the updated April 2009 NI 43-101 compliant resource estimate on the deposit include the following: • Measured and indicated resource of 139.82 million tonnes grading 0.064% Mo at a cut-off of 0.030% Mo • Inferred resource of 58.39 million tonnes grading 0.059% Mo at a cut-off of 0.030% Mo. Columbia Yukon completed 25,000 metres of drilling in the 2007 season which resulted in the discovery of a higher grade zone in the westerly half of the Storie deposit. A 2008 drill program successfully outlined significant new tonnage of reclassified measured and indicated NI 43-101 resource.

Storie Property Genetic Model

Engineering and development work formed a part of Columbia Yukon’s strategy in 2009. This enabled the company to determine and plan for the placement of various mine items such as waste rock, concentrator (mill), tailings and other mine infrastructure. The resulting information will also be used to advance the company’s upcoming Environmental Assessment (“EA”) submission to the regulatory authorities.

As well, additional in-house non-field work consisted of historical research, regional geochemical analysis and geological modeling.

Columbia Yukon management: (from left) Stefan Wozniak, Ronald Coombes, President.

24 Planning for Profits | Report on Mining | Spring 2010

www.ReportOnMining.com

Columbia Yukon’s 2009 exploration work program also included detailed geological mapping and prospecting of the southern portions of the Storie deposit within the existing pit boundary (see genetic model). The disseminated mineralized zone (purple cross-hatch) occurs along the boundaries of a distinctive quartz feldspar porphyry geologic unit (blue) and may represent the surface occurrence of a potential high grade feeder zone, a vertical stock or pipe located below the current Storie resource (green).

Outcrop has been discovered at a point elevationally well below all mineralization known to date.

This past year Dillon Consulting, the company’s environmental consultant, continued with its fourth year of environmental baseline studies in the area. As well, Dillon Consulting conducted a number of more specialized tasks and tests that are needed for the company’s EA submission (i.e. consisting of wildlife studies, water quality and flow measurements, terrain and eco-system mapping (TEM) mapping, snow surveys, etc.).

In late 2009, Columbia Yukon entered into a Traditional Knowledge Protocol with the Dease River First Nation, Daylu Dena Council, Kwadacha First Nation and Kaska Dena Council (collectively the “BC Kaska”).

This will enable the company to move forward with matters related to the company’s environmental assessment certificate application. We are working with the BC Kaska to conclude a detailed SEPA (Social-Economic Participation Agreement) which we believe will bring economic opportunities to the BC Kaska and to the region generally and provide certainty for the Storie Property molybdenum project.

Community relations is a key component in this project.

From the early stages, we met with all concerned in the community and discussed what our plans were in the region and how it would benefit the area. We have strived to build a very positive relationship with the community.

Overall, the 2009 exploration program has greatly assisted Columbia Yukon in the selection of future drill targets that could yet further enhance the resource size and economics. Taking the next steps in 2010, the company has engaged Amec Americas Limited to conduct a preliminary Economic Assessment Study of the Storie project.

The company’s senior management team is well-versed in financing and exploration activities, and is supported by a well-respected and experienced technical advisory board and a well-funded treasury.

In 2010, the company intends to continue to build relationships with a potential end-user/”financier” and with a focus on securing a roaster facility. As well, Columbia Yukon will continue to advance its planned engineering permitting for environmental application, moving the project forward in a timely and prudent manner towards production.

Columbia Yukon Explorations Inc. Investor Relations Inquiries: Clive Shallow, Shareholder Relations 2489 Bellevue Avenue West Vancouver, BC Canada V7V 1E1 Phone: 604.922.2030 ext. 403 clive@waterfrontgroup.com www.columbiayukon.com TSX.V: CYU

Exploration Manager; Douglas Mason, Chairman;

www.ReportOnMining.com

Spring 2010 | Planning for Profits | Report on Mining 25

LONG-TERM OUTLOOK FOR COMMODITIES REMAINS POSITIVE, BUT PRICE GAINS MAY BE RESTRAINED

By Elvis Picardo, CFA The runaway boom in commodities he 2000-09 decade may have been the “lost decade” for investors in U.S. stocks, but it has been one of discovery for commodity investors. Investors who discovered the virtues of investing in commodities at the beginning of the past decade had plenty of reason to celebrate their astuteness by the end of it, as commodities outperformed most asset classes by a wide margin (Table 1). The substantial weighting of commodities and energy in the TSX Composite Index also enabled it to outperform the S&P 500 by more than 80 percentage points over the decade.

T

Table 1: Asset class performance – 2000 to 2009 Total Returns for the past decade (Jan.2000-Nov.2009) Asset Class Benchmark Stocks TSX Composite S&P 500 Nasdaq Composite Shanghai Stock Exch.Composite Sensex (India) Bonds (Government) Bloomberg US Govt. 10+yr.

Bonds (Corporate) Barclays Corporate Bond index Real Estate Dow Jones US Select REIT Index Commodities CRB Index Crude Oil Gold (Spot) Copper

Total Return Annual Return 72.6% 5.6% -9.1% -1.0% -40.7% -5.1% 175.3% 10.7% 314.4% 15.3% 108.4% 7.6% 86.9% 6.5% 175.6% 10.7% 38.1% 3.3% 210.0% 12.0% 280.9% 14.3% 290.3% 14.6%

Source: Global Securities Research, Bloomberg

Most of the price gains registered by commodities over the past decade were racked up during the boom years from 2003 to early 2008. Average commodity prices doubled in U.S. dollar terms over this period, making it the biggest and longest commodity boom in more than 100 years. The boom was also unparalleled in its breadth, since it encompassed most commodity groups.

The persistence of some of the major drivers that contributed to the surge in commodity prices implies that the long-term outlook for commodities continues to be positive. However, the mitigating influence of other factors may offset some of the drivers propelling commodity prices higher. As a result, I believe commodity price gains over the decade ahead may be restrained in comparison with those made over the past decade.

26 Planning for Profits | Report on Mining |Spring 2010

Figure 1: S&P 500 vs. gold, copper and crude oil (Jan. 2000 – Dec. 2009 monthly)

Source: Bloomberg

Commodity demand and price drivers While booms (and subsequent busts) are not uncommon in commodity markets, the following drivers contributed to the unprecedented boom of 2003-08.

• Developing-country growth: As the World Bank noted in a 2009 report, the strength and duration of the 2003-08 commodity boom was largely a result of resilient economic growth in the developing nations. Thanks to the torrid growth pace in these nations, global economic growth was well above average for a considerably longer period of time than during other periods when commodity prices surged, such as during the 1950s and 1970s.

• Demand growth in China: Due to China’s large manufacturing base and high investment rate, metal intensities (the quantity of metals used per unit of GDP) in China increased the most among all nations during the recent commodity boom.

Chinese metal intensities were as much as 7.5 times higher than in high-income countries, and four times as high as in other developing countries. By 2007, half of Chinese demand for steel and copper was generated by the construction and infrastructure sectors.

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Developing countries

High-income countries

• Investment demand for commodities: While the Mitigating factors price surge in commodities led to rising speculative demand, • Moderating economic growth: While the global investment demand from retail investors also soared due to the economy has rebounded significantly from the 2008-09 emergence of commodity exchange-traded funds. recession, some experts believe that the record wealth • Supply constraints: Low commodity prices through destruction caused by the plunge in asset prices may usher in most of the 1980s and 1990s led to excess capacity, as a result a new era of consumer frugality and hence slower global growth. the commodity sector attracted very little new investment prior • Slower population and income growth: The World 10363_Pg1-14:10363_Pg1-14 11/29/08 6:56 AM Page 5 to the boom. Once demand growth began accelerating, supply Bank forecasts global population growth will decelerate to was unable to keep up, and the consequent demand-supply about 0.8% in the 2015-30 timeframe, compared with 1.2% imbalance led to rising commodity prices. during the 2000s and 1.5% in the 1990s. Growth in per-capita • Favourable monetary and investment conditions: incomes are also projected to slow, primarily because incomes The 2003-08 period was marked by unusually low interest rates in the largest developing nations are forecast to rise less quickly and abundant liquidity, fuelling an investment mentality that than in the past two decades. Slower income and population bordered at times on complacency. “Carry trades”, which involve growth may moderate commodity demand (Figure 3).

O V E R borrowing in low interest currencies and investing the proceeds in higher-yielding instruments and speculative investments, surged Figure 3: Contribution to GDP growth from population during this period. Commodities were undoubtedly one of the and income growth beneficiaries of this inordinate risk appetite. reflecting slower growth, • Decline in the greenback: TheGDP U.S. dollar wasincreased in declinesupFigure O.3 Slower population growth should plies and revised expectations. Because comfor most of the first decade in the new millennium. The traderesult in weaker GDP and commodity demand modity prices reflect forward-looking weighted U.S. Dollar Index (DXY) tumbled 41% from its peak Growth of GDP, annual average (percent) expectations, the sharp slowing of growth that 6 of 121.02 in July 2001 to its low of 70.70 in March 2008 (Figure is expected over the next year has caused 2). With commodityprices pricestogenerally U.S.though dollars, the the un5 decline quoted rapidlyineven Contribution greenback’s depreciation against most currencies meant that derlying supply and demand tensions are little to GDP 4 Contribution growth from real commodity prices in developing countries local currency changed from just a few inmonths ago when to GDP population growth 3 growth terms increased bythese muchprices less than U.S.all-time dollar terms. were inclose highs. The from per capita prices have already fallen to World Bank notes that Some the realmetals U.S. dollar price of internationally 2 incomes pre-boomrose levels thebetween dollar price many traded metals and minerals by and 158% 2000of and 1 internationally traded has terms fallen –back 2007, but by only 78% – or half the gainfoods in U.S.$ in to 0 their 2006 levels.

While much weaker GDP developing nations’ currencies.

1990s 2000s 2015–30 growth is projected to cause commodity prices Source: World Bank LINKAGES model. to easecommodity further in prices the short they should Over the long term, willrun, continue to nevertheless remain higher than they were durbe supported by most of these factors – developing-country ing the 1990s. Real food prices are projected to growth, China demand growth, investment demand and the manufactured goods) has reduced the quantity decline by 26 percent between 2008 and 2010, • of Decline metal intensities: intensities greenback’s decline. metalsinand energy requiredMetal to produce a in China energy prices to fall by 27 percent, and metals are projected to decline over the long term because unit of GDP by an average of 0.9 and 0.8 per-of a lower prices to decline by 32 percent. sharecent of manufacturing and (figure investing in the a year respectively O.4).

TheGDP food mix. The Figure 2: U.S. Dollar Index vs. Gold & CRB Index intensity of GDP has also declined as an inWorld Bank estimates that the share of the manufacturing (Jan. 2000 – Dec.In 2009 monthly) the longer term, growth in the demand creasing share of the world’s population has sector in China’s GDP will decline from about 40% in 2005 for commodities should ease reached income levels where per person deto around 33% in 2030.

In my opinion, the lower contribution The strength, breadth (in terms of the number of mand for basic food commodities is stable. to Chinese GDP may be partly caused by a commodities whose prices have increased), andof manufacturing Beginning in the middle 1990s, the decline duration of the current commodity boom havesubstantial potential revaluation of the Chinese yuan against the in metals intensities began to reverse. That reprompted speculation that the global economyU.S. dollar over this period, as well as growing prosperity which versal is explained almost entirely by increasis moving into a new era characterized by rela-will result in the services sector accounting for a greater share of ing metal intensities in China, which began tive shortage and permanently higher (and even

GDP. In addition, the completion of investment projects will also

permanently rising) commodity prices. cause investing activities to account for a smaller share of GDP. This outcome does not appear likely. Over Figure O.4 forecasts Technological progress has for metals may The World Bank that global demand reduced the quantity of commodities used the next two decades, slower population continue grow more quickly than global GDP, at about 4% pertounit of GDP growth and weaker (though still strong) income 2015, before slowing to 2.5% in the 2015-30 period, Source: Bloomberg growth are projected to cause trend global GDPthroughCommodity intensity of demand index (1971 5 1.00) a slower pace than that of projected GDP growth.

1.10 growth to ease (figure O.3) and, with it, the de1.05 mand for commodities. As discussed later, the www.ReportOnMining.com Spring 2010 | Planning for Profits | Report on Mining 27 1.00 extent to which commodity demand does slow 0.95 and how easily supply is able to keep pace with

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• Relatively unfavourable monetary conditions: With the federal funds rate near zero in the U.S., and still close to record lows in many nations, short term rates may have nowhere to go but up. As the 2007-08 credit crunch and the financial sector meltdown resulted in financial institutions drastically tightening their lending criteria and credit limits, the days of easy credit are long gone. Unfavourable monetary conditions may crimp speculative demand for commodities and cap price gains.

Commodities at an inflection point At the time of writing, commodity prices have recorded their biggest decline in 14 months. The Reuters/CRB index tumbled 6.3% in January, the biggest drop since a 9.8% plunge in November 2008. Zinc and lead tumbled 17.0% in January, while copper fell 8.5% and crude oil declined 7.6% for its first monthly drop since July.

Much of the decline has been attributed to concerns about tighter monetary policy in China, which could slow down growth and affect commodity demand. Concerns about asset price bubbles have led to Chinese regulators imposing restrictions on new loans, while the central bank raised the proportion of deposits that banks must set aside as reserves from January 18.

The importance of the Chinese economy to global commodity demand is underscored yet again by the fact that restocking by Chinese companies and government bodies resulted in strong demand growth in the first half of 2009, effectively supporting global demand. The World Bank estimates that while global demand for aluminum and copper in 2009 declined by 11% and 9% respectively from their 2007 peaks, worldwide demand excluding China was down by more than 20% for both metals.

At present, China’s tightening moves are negating other commodity-positive factors such as stronger global growth and an improving economic environment in the U.S. In its World Economic Outlook Update issued on January 26, the International Monetary Fund (IMF) revised its forecast for global growth in 2010 to 3.9%, an increase of 0.75 percentage points from its October forecast. It also revised its 2011 forecast higher by 0.1 percentage point to 4.3% (Table 2). This represents a very substantial improvement from global growth of -0.8% in 2009, the lowest in the post-WWII period. Growth in emerging and developing nations is expected to continue at a faster pace than in advanced economies, with China forecast to remain the world’s fastest-growing economy, followed by India.

www.ReportOnMining.com

Table 2: IMF’s Growth Projections

World Output Advanced economies U.S. Euro area Japan U.K. Canada Emerging & developing economies China India

2008 3.0 0.5 0.4 0.6 -1.2 0.5 0.4 6.1 9.6 7.3

Year-over-Year change (%) Projections 2009 2010 2011 -0.8 3.9 4.3 -3.2 2.1 2.4 -2.5 2.7 2.4 -3.9 1.0 1.6 -5.3 1.7 2.2 -4.8 1.3 2.7 -2.6 2.6 3.6 2.1 6.0 6.3 8.7 10.0 9.7 5.6 7.7 7.8

Source: IMF World Economic Outlook Update, January 2010

The issue of sovereign-debt risk is another one that has emerged in recent months as a potential negative for commodities for two reasons – one, because it has knocked down the euro, thereby boosting the U.S. dollar; and two, due to concern that the contagion effect from floundering European economies will spread globally and lead to the recovery stalling.

The euro is also being weighed down by speculation that the European Union’s growth rate will lag that of the U.S. and Japan, and that the region’s debt load will not return to pre-crisis levels for at least five years. The European Commission estimates that debt in the EU economies will increase to 84% of GDP in 2010, from 66% in 2007; in comparison, the U.S. Congressional Office forecasts U.S. debt at 60% of GDP this year.

The euro has declined 6.5% versus the greenback over the past three months. The debt problems faced by Greece and a number of other European nations including Spain and Portugal have placed severe strains upon the very fabric of the European Union, calling into question the viability of the euro as an alternative reserve currency to the U.S. dollar. An escalation of concerns surrounding the EU and therefore the euro in the near term may push the currency significantly lower from current levels, thereby leading to U.S. dollar appreciation and further downside in commodity prices.

Overall, though, the current spell of weakness in commodity prices should be viewed as a necessary period of consolidation that is required to digest the outsize gains made from the March 2009 lows. While the long-term outlook for commodities remains positive, in my opinion, price gains over the decade ahead may be restrained in comparison with the spectacular gains made over the past decade.

(Elvis Picardo is Vice President – Research, and a strategist & analyst at Global Securities Corporation in Vancouver. The opinions expressed herein are his own).

Spring 2010 | Planning for Profits | Report on Mining 29

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