Financial Sense University ~ The Cortez Story, Part 3 by Bill Fox 04.01.2005

THE CORTEZ STORY:
Right Trend, Right State, Right Country, Right time?
Part 1 l Part 2 l Part 3 l Part 4 l Part 5
by Bill Fox
April 1, 2005

To a large extent Newmont Mining Corporation and Placer Dome drive the Cortez Trend development. They do this in two ways. First, through their development of low cost processing infrastructure in the area, they increase the profitability of mining low grade ore and thereby increase the number of economically viable prospective targets. Secondly, they hold the largest land positions on the Cortez Trend. They understand the geology better than most anyone else, and have the strongest vested interests in making the trend play successful. Third, they have been the most active major mining companies in regard to arranging joint venture deals with junior mining companies. They help play the bank to finance exploration drilling.

Placer Dome and Newmont have a reputation for being top mining firms with outstanding exploration departments that make sound business decisions. Every week, junior mining companies bring them more deals and ideas than they know what to do with. They have the staff resources to analyze every deal in extreme detail before making a move. When they select a particular property for a JV, that is usually a very good indicator. Therefore, it can pay for investors to look very closely at Newmont and Placer Dome first and what they are doing. In my discussion of junior mining companies in Part Four, I highlight in red joint venture activity with major companies.

Before profiling Newmont and Placer Dome, I would like to review some lists. Please note from the map of the Carlin Trend at the beginning of Part One of this article and also in Part Five how the trend seems to have "passed over" certain areas. Therefore, there is always a risk that if you invest in a single land position, you can find yourself empty-handed even in a hot trend area. In addition, it is important to understand the basic geological premises behind your investment to avoid buying a company whose properties might reflect what John Kaiser quaintly refers to as "Moose Pasture Closeology." Lastly, Paul van Eden commented at Al Korelin's round table at the Nov 28th-29th San Francisco Gold Show, "Don't think of buying exploration stocks as investing under any circumstances, because it is not. It is pure speculation. If you do not have money to speculate with, don't."

As of Jan 3, 2005, John Kaiser's "Bottom-Fish Standings" list included Levon Resources (H, LVN,), NDT Ventures (TSX-V, NDE), and White Knight Resources (TSX-V, WKR). Levon and NDT Ventures were listed on 3 Jan 2005 as being within the bottom fish price zone, whereas White Knight had moved above the price placed when last reviewed 5 Jan 2000 and was now rated a "Speculative Cycle Hold 100%." (100% means he has not recommended selling any shares yet to take profits). As far as personal disclosure, John Kaiser has stated that he owns shares of Miranda Gold.

The "X-Report" published 23 June 2004 by Haywood Securities of Canada, highlighted the following companies based on the theory that the best action will run from NW to SE along the Cortez Fault area and not significantly involve side areas: Victoria Resources Corp. (TSX-V, VIT), White Knight Resources (TSX-V, WKR), Coral Gold Corp. (TSX-V, CLH), Miranda Gold Corp. (TSX-V, MAD), J-Pacific Gold (TSX-V, JPN), Levon Resources (TSX-V, LVNH), NDT Ventures (TSX-V, NDE), and Nevada Pacific Gold (TSX-V, NPG).

In its Daily Letter dated September 15, 2004, Canaccord Capital of Canada focused in alphabetical order on the following companies: American Bonanza (TSX-V, BZA), BacTech Mining Corporation (TSX-V, BM), Coral Gold Resources (TSX-V, CGR), Greencastle Resources (TSX-V, VGN), J-Pacific Gold (TSX-V, JPN), Klondex Mines (TSX-V, KDX), Miranda Gold (TSX-V, MAD), Nevada Pacific Gold (TSX-V, NPG), NDT Ventures (TSX-V, NDE), Victoria Resource (TSX-V, VIT), and White Knight Resources (TSX-V, WKR).

The aforementioned lists do not necessarily reflect my own views or the position of my broker-dealer Sammons Securities.

This alphabetical list below is based on companies that have visible holdings on the Mineral Information Maps produced by Intierra Resource Intelligence portrayed at the beginning of Part 5.

Agnico Eagle
(www.agnico-eagle.com) NYSE symbol: AEM.
Has operatorship and an earn-in deal for roughly 60% of the NDT Ventures property on the southern border of the main Cortez Joint Venture area. Agnico Eagle also has an earn-in deal through a subsidiary on the Norma Sass property of Coral Gold.

BacTech Mining Corp
(www.bactech.com) TSX-V symbol BM.
Owns a property just south of the Cortez Joint Venture area and operates bioleaching facilities.

Barrick Gold
(www.barrick.com) NYSE symbol ABX.
Major player on the Carlin Trend. Once operated five historic mines near each other by the town of Eureka on the SE end of the Cortez Trend. They are the Archimedes Mine, Bullwhacker Mine, TL Mine, Richmond Mine, and Ruby Hill Mine. May reactivate the Archimedes mine. Barrick has a 33% interest in the Marigold mine NW of the town of Battle Mountain.

Columbus Gold Corp.
Currently privately held. Has a property just west of the Gold Acres deposit, not yet listed on the Part Five property map. 9.9% owned by Rick Rule of Global Resource Investments, a U.S.-based leader in private placements and IPOs for junior mining companies.

Glamis Gold
(www.glamis.com) NYSE: symbol GLG.
Glamis operates the Marigold mine at the NW end of the Intierra Mineral Information Map, has made an offer to take over Goldcorp, who has in turn obtained a 10% position in White Knight.

Great American Minerals
According to David Mathewson who runs Tone Resources, GAM's property is partnered with or controlled by Placer Dome. It is located next to Tone's property (marked with an "S") and Nevada Pacific's largest holding on Intierra's Mineral Information Map.

Idaho Mining Corporation
Is partnered with Placer Dome on a few properties adjacent to the Cortez Joint Venture area.

Kennecott (Australia)
Subsidiary of Rio Tinto. (Symbol RTP)
Joint venture partner with Placer Dome for 40% of Cortez Mine and the overall Cortez Joint Venture properties, which include Cortez Hills properties.

Newmont Mining
(www.newmont.com) NYSE symbol NEM.
Has major land exposure to Cortez area, particularly on the northern end. Joint venture partner with Victoria Resources and other juniors. Actively looking at joint venture deals.

Placer Dome
(www.placerdome.com) NYSE symbol PDG
Along with Newmont, the largest landholder in the Cortez Trend area. Major joint venture partner with many junior mining companies.

Rio Tinto
(www.riotinto.com) NYSE symbol RTP
Parent of Kennecott Australia, which owns 40% of the Cortez Joint Venture. Headquartered in London, Rio Tinto is a world leader in mining a wide variety of natural resources in addition to precious metals.

Teck Cominco
(www.teckcominco.com) TSX-V, symbol TEKMVA
A joint venture partner with White Knight. Actively looking at deals in the Cortez Trend area.

Tone Resources
(www.toneresources.com) TSX-V, symbol TNS
Controls properties marked on Intierra's Mineral Information Map as "Nevada Gold Ventures."

X-Cal Resources Ltd
(www.x-cal.com) TSX-V, symbol XCL
X-Cal's crown jewel is the Sleeper Gold Mine in the northern Battle Mountain Eureka Trend area (well north of Interstate 80 on the other side of the Cortez Trend). Staff members Larry Kornze (a finder of Barrick's prolific Betze mine), Dr. Ken Snyder (finder of the prolific Midas/Ken Snyder mine), and Win Rowe (another respected mine finder) have all voiced strongly positive opinions about Sleeper's potential as a multi-vein system.

For the uninitiated, Newmont Mining, headquartered in Denver, Co, is the largest gold mining company in the world. Newmont controls sixty million acres, land roughly the size of the United Kingdom, and is one of the best run and lowest cost major producers in the industry (so is Placer Dome, incidentally). It's President, Pierre Lassonde, and Chairman, Seymour Schulich, became industry legends for their remarkable performance running Franco-Nevada, which later merged with Newmont. A number of industry insiders who have known Mr. Lassonde have told me that he is a "professional's professional," both a very shrewd deal-maker and a very ethical individual, which can be a rare combination. In recent months Newmont's stock has traded at roughly twice its net asset value per share, and a liquidation value (suggested by fund manager Bill Fleckenstein's analysis) that anticipates roughly a $50 rise in the gold price from where gold has been recently fluctuating in the low to mid-$400's. Newmont has become a bellwether of the precious metals sector reminiscent of Intel for semiconductors in the 1990's. The firm also played a leadership role to help eliminate the aggressive hedging among major gold mining companies that I discuss in Part One that drove the price of gold down to ruinous prices for half the mining industry in the late 1990s.

As I also mentioned at the beginning of Part One, no one needs to lecture Newmont about finding Carlin-type deposits. It was Newmont mining geologist John Livermore who found the original Carlin deposit after reading an article and hearing a lecture by Dr. Ralph Roberts. However, there was so little exploration in the late 1990's on account of depressed gold prices that it created roughly a five year gap in the exploration pipeline across the gold mining industry. Because of the long lead-lag times required to find resources and put them into production, gold mining industry analysts predict a steady decline in gold production for the next five years even if gold prices zoom. I go into this and other factors in more detail in my article "Back of the Envelope Analysis for $1,000 Gold in Five Years."

The period of industry consolidation that accompanied severely depressed gold prices in the late 1990's -the same period in which the exploration pipeline shriveled up --all of this had the paradoxical effect of increasing the need by majors to find ever more reserves to maintain their higher post-consolidation production levels.

Generally, major gold mining companies are not as good at exploration as the juniors, yet they are not replacing their reserves at the same multi-million ounce rate per year that they are producing them. This means they will likely to feel even more pressure to engage in joint ventures or acquire juniors in the years ahead, putting even more upward pressure on junior mining company stock prices.

Size of Cortez land position: This is difficult to calculate, particularly since many of the former Santa Fe railroad "checkerboard" parcels in the northern area are unmarked on the property map in Part Five. Also, the northern and southern borders of the Cortez Trend are not precisely defined. My very intuitive guess is that Newmont is probably the largest landholder in the area, except that the company controls the tail ends of the Cortez Trend play. Newmont does not appear to have proven deposits on the Cortez Fault system itself, whereas the Cortez Joint Venture area (60% Placer Dome, 40% Kennecott) holds the "center" and has proven mega deposits within the Cortez Joint Venture area on the fault system. Placer Dome has actively explored the Cortez Trend area much longer than Newmont, and has probably has a first mover advantage in staking the most prospective parcels.

Cortez Trend Properties:
1) Newmont has huge land holdings on former Santa Fe railroad land that encompass most of the northern end of the Cortez Trend. The lands encompass the Mule Canyon Mine, the Lone Tree Mine, and the Phoenix Deposit. Please refer to the top section of the Battle Mountain - Eureka Trend map provided by Mineral Information Maps contained in Part Five. Victoria Resources, White Knight, and Klondex occupy the yellow, red, and orange colored checkerboard square properties. Newmont has most of the unmarked light green checkerboard squares in between.

Newmont is operationally active in the area. According to Newmont: "In 2001, Newmont acquired Battle Mountain Gold Company, giving Newmont ownership of the Phoenix property, south of Lone Tree, where historic mining has left a halo of lower-grade gold and copper reserves... Construction of a new 37,000 ton-per-day mill and other facilities is scheduled to begin in early 2005, with production beginning in 2006. Nevada management is working to ensure a smooth transition between the scheduled cessation of mining at Lone Tree and the startup at Phoenix."

A Newmont spokesperson told me that recent drilling has now proven up 6.2 million ounces of gold and 420 million ounces of copper at the Phoenix Mine. However, I was informed by another source that from a technical geological viewpoint, Phoenix does not involve a sedimentary Carlin-type deposit, but rather involves the product of a granitic intrusive.

Newmont's holdings are marked in yellow.
They lie at the very northern end of the Cortez Trend. Source: Newmont Mining

2) Victoria Resources' Mill Canyon and Hilltop-Slaven properties: Newmont has 51% back end rights, announced 30 June 2004 by Victoria Resources. Newmont also holds 100% of the alternative checkerboard properties at Victoria Resource's Hilltop-Slaven properties. The same holds for Victoria's Preble-Pinson properties which are north of the Cortez Trend and Interstate 80 but still within the Battle Mountain-Eureka Trend.
3) Southern Cortez Trend. Newmont also has two substantial land holdings towards the southern end of the Cortez Trend, as noted in the Mineral Information Map provided at the beginning of Part Five.
4) Miranda' Red Canyon project. Miranda's Oct 19, 2004 news release stated: "Newmont can earn a 60% interest in the Red Canyon property by spending $2.5 million in exploration expenditures."
Active mines in Cortez area:
Currently Newmont is not mining of Carlin-type deposits in the Cortez Trend area. The Phoenix mine, with 6.2 million proven and probable gold reserves, will start up in eighteen months at about the same time that the Lone Tree mine retires. (Lone Tree is located NW of the town of Battle Mountain). Geologically it is a skarn and granitic intrusive. Moving further east, Newmont's Mule Canyon Mine is an area with small pits, but there is no mining there now. Mule Canyon is a volcanic creature of the Northern Nevada Rift dated about 16 million years ago and is not a Carlin-style deposit dated 38 million years ago either.
Amount of proven reserves in the broader Cortez area. Newmont has 6.2 million ounces at the Phoenix mine. True, Phoenix does not appear to involve a Carlin-style deposit, nor does it appear to be on the main Cortez fault system; however, it is south of the city of Battle Mountain and I-80. It may be too early to rule out the possibility that it involves a cross rift structure that is related to or has interacted with the main Cortez fault system.
Other projects outside of the broader Cortez area: Newmont is the key player on the Carlin Trend and has projects around the world.
Exposure to Cortez The Phoenix Mine reserves comprise about 7% of Newmont's 2003 reserves.
Total gold reserves in company. 91.3 million ounces @$325 proven and probable (2003 data). 2004 data will come out in February 2005.
Total production 7.38 million ounces in 2003 at $203 cash cost per ounce.
Total Company revenues: $475 million in 2003.
Fully diluted shares: 433.4 million shares
Working capital: In its June 30, 2004 quarterly report, Newmont had $1.67 billion in cash, cash-equivalents, marketable securities, and other short term investments.
Outside ownership/largest shareholders. Newmont is widely held by the public and institutional investors.
Management/Strategy: Newmont remains focused on Nevada and also faces a problem with rising costs, as noted in the Aug 3, 2004 Raymond James research report on Victoria Resources by analysts Eric Zaunscherb and Bart Jaworkski:

Newmont is the largest player in northern Nevada, operating 12 open pit mines and five underground mines. As of February 2004, Newmont's reserves in Nevada totaled 33.7 million equity ounces, or 37% of its total 91.3 million equity ounces in reserves. In 2004, Newmont expects its equity gold sales from Nevada operations to total 2.60 million ounces of gold (versus 2.49 million ounces in 2003), or approximately 36% of its total production. This makes the Nevada operations Newmont's second largest gold producing area after Yanacocha, Peru, which produced 2.85 million ounces in 2003.

A key issue to highlight, however, is that despite Newmont's increases in production, costs are going up. In 2004, Newmont's total cash costs in Nevada are expected to be $250 per ounce, compared to $235 per ounce in 2003, $225 per ounce in 2002 and $222 per ounce in 2001. Increasing cash costs are likely due to increasing amounts of refractory ore and underground mining. Refractory ore accounted for 71% of Newmont's Nevada gold sales in 2003, compared with 66% in 2002, 65% in 2001 and 35% in 1997. Newmont states that over the next several years, the percentage of production from refractory treatment facilities is expected to increase (refractory ores require more expensive processing methods than those required for oxide ore). Newmont's underground mining accounted for 36% of Nevada sales in 2002 compared to 16% in 1997. One should note that Placer Dome's Cortez Hills discovery is predominantly oxidized and significantly open-pitable.

Oxidized ores, as the term implies, are typically located near the surface and have been exposed to various forms of aeration and other forms of "weathering," whereas refractory ores are typically found at deeper levels, and have higher sulfide levels (and correspondingly lower oxide levels) that make them more expensive to process. However, a saving grace is that as one goes deeper, the grade (concentration of gold in the ore) tends to increase, so there is an economic trade-off here between the higher gold grade and the increased processing expense from the higher sulfur grade.

The cheapest process involves the heap leach method, in which mining companies dump huge mounds of ore on giant pads and slowly drip a cyanide solution through the ore to leach out the gold. To get the gold out of higher sulfide ores, mining companies have to put the ore through more exotic and expensive treatment processes, that typically involve giant roasters and big pressure-oxidation vats. More recently certain companies have pioneered an environmentally friendly approach of using tanks that have sulfide-eating bacteria (please note my discussion of BacTech in Part Four). Newmont has pioneered a hybridized process where it uses bacteria to munch on sulfidized ore in open air heap mounds.

Rick Redfern, head geologist for Senator Minerals, told me that the Elko, NV area alone has over $3 billion dollars of processing infrastructure run by majors such as Newmont and Barrick. Some roasters and autoclaves cost $200 - $300 million apiece. Obviously with so much processing capacity on hand, if Newmont wants to avoid laying off workers and closing down plants, or avoid disappointing shareholders with dramatically declining production curves, Newmont must do one or more of the following:: a) learn how to dig deeper cheaper b) make its lean and mean processing capacity even leaner and meaner to profitably process lower grades and c) find more gold --a lot more gold-- in its northern Nevada neighborhood.

1) Cortez Joint Venture land package. Approximately 400,000 acres or 625 square miles. Placer Dome has the largest land position in the middle of the Cortez Trend in an assemblage of properties called the Cortez Joint Venture (CJV). Placer Dome has a 60% interest in the CJV, and Kennecott, a subsidiary of Rio Tinto (one of the world's largest mining companies), has 40%. On some contiguous properties, the CJV is partnered with Coral Gold and Idaho Mining Corporation. Placer Dome is the lead explorationist and operator of these properties.

The enormous mining infrastructure and reserves on the CJV properties did not appear over night. The old Cortez Mine located a few kilometers from the Cortez Hills discovery area operated as a modest open pit operation from 1969 until it was retired in the early 1990's. The adjacent mill continued at 2,000 tonnes per day, processing ore for Horse Canyon, Gap, Gold Acres, and later Pipeline (its last two years) until it shut down in October 1999.

In March 1991, Placer Dome discovered the Pipeline ore body about 500 to 600 feet below the surface, followed by the South Pipeline discovery in November 1991. The Crescent Pit, a shallow portion of the South Pipeline deposit, began excavation in 1994. From 1996-97 Placer Dome built and put into operation a new processing plant. Placer Dome made its Cortez Pediment Deposit discovery in 1998, followed by its South Pipeline Extension Deposit Extension discovery in 2000. It made its major Cortez Hills discovery in April 2003. Currently Placer Dome operates three mines in the Cortez Joint Venture area, which consist of the Gold Acres, Pipeline, and Pipeline South Mines. The last two mines are almost continuous, and are hence referred to as the "Pipeline Complex.". The other mines depicted in the Cortez Joint Venture Part Five map are "historical" (inactive). They include the Hilltop Mine, Horse Canyon Mine, Toiyabe Mine, and aforementioned Cortez Mine. Placer Dome has already mined 8.3 million ounces out of the Cortez Joint Venture area from the time period between 1991 and June 2004..

The following resource and reserve data for the Cortez Joint Venture area were taken from page 17.46 of the September 2004 Placer Dome Technical Report:

.	Location ...	......g/ton. grade	..proven & probable
	.
1)	Pipeline .	.1.23	2,045,000
2)	South Pipeline	1.23	3,583,000
3)	Gap	0.67	420,000
4)	Pediment	1.11	1,216,000
5)	Cortez Hills	5.40	7,454,000
6)	Stockpiles	3.99	348,000
	Total Proven & Probable	1.94	15,065,000

1)	Pipeline	1.22	626,000
2)	South Pipeline	0.69	1,099,000
3)	Gap	0.67	435,000
4)	Crossroads	1.51	3,109,000
5)	Pediment	0.69	101,000
6)	Cortez Hills	3.75	240,000
7)	Cortez NW Deep	1.65	243,000
8)	Hilltop	0.65	2,290,000
	Total Measured & Indicated	0.94	8,145,000

	Proven/Probable/Measured/Indicated		..............23,210,000

The above figures do not include the ET Blue discovery, nor do they include Placer Dome's discovery described in Part One involving 500 feet at .7 ounce or 410 feet at over an ounce.

Alphabetized list of joint venture partners and ownership positions:

2) Bravo Venture Group's Three Bar Prospect (3.86 sq miles), South Lone Mountain (2.99 sq. miles), and South Gold Bar property (2.02 sq. miles) In regard to the latter, according to the Oct 21, 2004 Bravo Venture Press Release, "[Placer Dome can elect] to enter into a joint venture agreement on such project to earn a 51 percent interest upon total expenditure of $1.0 million.
3) Coral Gold's Robertson-Excluded property (2.82 sq. miles). Placer Dome/Kennecott has 61%, Coral Gold has the other 39%.
4) Miranda's Red Hill property. Miranda's Oct 28, 2004 news release: "[Placer Dome] PDUS can earn a 60% interest in the property by spending $2.0 million in exploration expenditures over four years."
5). Nevada Pacific's Keystone property . Placer Dome has the right to earn a 60% interest in the Keystone project by spending $5,000,000 on exploration over a five-year period. BMX property. 20 sq miles, Placer Dome has right to earn in 60% with $4 million.
6 ) White Knight's Indian Ranch (75% owned by White Knight) 17 sq. miles. "Placer Dome U.S. Inc. has the right to earn a 60% interest for US $2.0 million in expenditures over 4 years and may earn an additional 15% by financing a feasibility study."
7) U.S. Gold Corp's share of Tonkin Springs Property. Placer Dome is a large shareholder of US Gold, which owns 45% of Tonkin Springs. BacTech owns the other 55%.

Mining and Exploration Concept of Operations in Cortez Joint Venture Area:
Placer Dome currently runs a high volume, highly efficient, capital intensive mining operation. The Pipeline Complex has helped Placer Dome become one of the world's lowest cost gold producers.

According to Placer Dome. "During 2003, Cortez [Joint Venture area] produced 1,065,402 ounces of gold (61% mill, 31% heap leach and 8% carbonaceous ore sale). Placer Dome’s share of production was 639,241 ounces at an average cash and total cost of $135 and $172 per ounce, respectively...Cortez's updated forecast for 2004 calls for an increase in Placer Dome's share of production to 630,000 ounces...Its cash and total costs per ounce forecast remains at $160 and $200, respectively...It won the Mining Operation of the Year award at the Mining Journal's Outstanding Achievement Awards..."

"Capital expenditures of approximately $91 million (Placer Dome’s share $55 million) are planned in 2004. The capital investment includes $47 million for mobile mining equipment and $28 million for tailings and heap leach construction...The net book value of Placer Dome’s share of property plant and equipment and deferred stripping is $72 million at December 31, 2003."

As mentioned in my discussion of Newmont Mining above, generally the pattern in the Carlin and Cortez Trend areas is that one finds "spotty" gold deposits down to about the first 1,000 to 1,500 feet of depth that are "oxidized" in their molecular bonding and hence lend themselves to milling processes. Going deeper, the gold often gets denser, but it tends to become bound up in sulfide's, meaning that instead of milling, it requires more expensive processes that include roasting, pressure oxidation, and bioleaching to get the gold out of the ore.

Placer Dome is about a year and a half away from mining out its shallower oxide ores at its Pipeline Complex, and hopes to commence open pit operations at its Cortez Hills deposit within that time so that it can keep feeding its mills the shallow oxide ores. Page 19-1 of Placer Dome's Sept 2004 Technical Report describes the following mining development projects: a) Pipeline pit, containing the Pipeline and South Pipeline ore bodies b) Gap pit c) Pediment pit, containing the Pediment ore body and d) Cortez Hills pit, containing the Cortez Hills ore body.
Other projects outside of Cortez: Placer Dome operates elsewhere in Nevada and in a total of seventeen mines in seven countries.
Exposure to Cortez: Placer Dome's 60% share comes to 9 million ounces of the Cortez JV 15 million proven and probable total, amounting to 15% of Placer Domes total 2003 reserves.
Total gold reserves in company. 60.55 million oz @ $325 proven and probable for 2003
Total production In 2003: 3.861 million oz at $218 cash cost, plus 425 mil lbs Cu at .52 cash (source: Gold Stock Analyst).
Total Company revenues: In 2003 revenues were $1.763 billion, net earnings $229 million (double the previous year). .
Fully diluted shares: 432 million (Sept 2004 data)
Working capital: On September 30, 2004, consolidated cash and short-term investments, not including restricted cash of $90 million, amounted to $655 million
Outside ownership/largest shareholders. Widely held. No one has over 10%.
Management/Strategy: Oct 2004 statement: regarding the corporate "grand strategy:" a) Establish large land positions in major gold belts 1) Extensive presence in Nevada, Eastern Canada, and Western Australia...b) Explore aggressively near existing mine sites, 1) $75 million exploration investment in 2004, 2) Two-thirds of exploration budget invested at existing mine sites, c) Invest in high-return projects..."

The Aug 3, 2004 Raymond James research report on Victoria Resources notes that Placer Dome has a very similar strategic problem as Newmont in terms of replacing the high rate of production of reserve ounces. It states, "Based on Placer Dome's 2004 forecasts, we estimate the company's total cash costs in Nevada will increase approximately 18% on decreasing production. Increasing average costs of production in the Carlin area are important from an investment perspective because they underline the critical importance and strategic worth of new discoveries in the region."

Cortez Exploration Strategy: Depleting the shallower oxidized gold-bearing zones does not necessarily mean that the Pipeline Complex area is going to run out of gold. Please note on the White Knight Fault Map near the beginning of Part Five, the Cortez Fault seems to displace and pivot in the Cortez Joint Venture area. Both the Pipeline Complex and Cortez Hills deposit may be sitting on the pivot points at different ends of the Cortez Fault system. This is significant for at least two reasons. The sides of the fault system seem to show controlling structures running in parallel that hold gold deposits. Secondly, the fault system itself may have lots of gold deposits deep inside it. The Cortez Fault system probably goes down over 20 kilometers through the earth's crust to magma, which in Nevada happens to be half as thick as the crust found most everywhere else in North America. In Part Five I address the issue whether the Cortez Fault system may in fact surpass the Carlin Trend.

In the Cortez Hills for sure, and to a lesser extent at the Pipeline Complex, geologists see the 38 million year old dikes with Carlin-style gold deposits that are a common characteristic on the Carlin Trend. The gold-bearing zone in the Cortez Hills area seems to be about 200 meters wide. Placer Dome has drilled down 2,500 feet without finding a bottom yet. The depth of oxidized gold is about 1,500 feet. Beyond that, one finds sulfidized gold.

A difference between Cortez Hills deposit and the Meikle Mine on the Carlin Trend as a possible comparable is that the Meikle Mine has more sulfides at shallower depths and an average grade of .8 ounces per tonne, whereas the Cortez Hills weigh in around .4 ounces per ton and have more oxidized gold at shallow depths. As explained near the beginning of Part Five, the major gold deposits in Carlin tend to be within a couple of miles of one of the north-south faults that define the trend (Post-Genesis, Leeville, and Good Hope faults). They also tend to be close to a cross fault. There is nothing yet to contradict this basic pattern in the Cortez Trend area.

The next big question is where does the Cortez Fault system lead to running south from Cortez Hills, and north from the Pipeline Complex? The Cortez Fault system does not reveal itself on the surface like the San Andreas Fault in California, but rather it has been completely covered over by recent geological activity. White Knight has been more explicit than most companies about making public its theories regarding the location of the Cortez Fault system and its methods for finding it.

Placer Dome plans to more than double its exploration expenditures in the Cortez Joint Venture area in 2005 compared to 2004, which amounted to $6 million. A spokesperson for Placer Dome denied a rumor in a phone conversation with me that Placer Dome is planning to drill 900,000 feet in the Cortez area in 2005. He observed that rig capacity has grown too tight in Nevada to do this amount of saturation drilling, and that furthermore it would reflect an unrealistic 20 fold increase compared to 2004.

Looking south from Cortez Hills, there is a chance that the Cortez Fault system pivots and shifts again around the southern Tonkin Springs area, where it may be intersected by a SW-NE trending Tonkin Summit Fault Zone. I talk about the importance of cross faults and describe this phenomenon in greater depth in my "Northeast School" section in Part Five. White Knight has run gravity map studies in such a way that it thinks the northern edge of a possible crisscrossing fault in the Tonkin Summit Fault Zone might run from Nevada Pacific's Keystone property, through the Tonkin Springs Mine area, and through the southern part of White Knight's Indian Ranch property. Placer Dome apparently sees something here as well. Placer has already arranged JVs with Nevada Pacific and White Knight on their respective properties in this area.

Looking northward above the Pipleline Complex, according to one source, Placer Dome has staked land just to the north and south of White Knight's Slaven Canyon project. Unless this is a "shot gun" or "fake-out" move by Placer, this suggests that the company's explorationists can envision the Cortez Fault system heading directly north through the Robertson-excluded area, where Placer Dome has a joint venture with Coral Gold, through the "checker board" properties held by Newmont and Victoria Resources, and up through Slaven Canyon where White Knight wants to start drilling several deep holes in April 2005.

CONTACT INFORMATION
Bill Fox, VP
America First Trust Financial Services
P.O. Box 820669
Vancouver, WA 98682
Phone: 360-882-5369
Toll Free: 866-945-5369 (866-WILL FOX)
Email | Website

DISCLAIMER: This report is for research/informational purposes only, and should not be construed as a recommendation of any security. Information contained herein has been compiled from sources believed to be reliable. There is however, no guarantee of its accuracy or completeness.