Received this by email from Gryphon so assume okay to reprint:
Weekly Hotline Message (Now in our 25th Year) October 21, 2006
New Buy Recommendation
Gryphon Gold Corporation
Business: Exploration and production of gold
and silver in Nevada
Gold Resource: 2,050,000 oz.
Silver Resource: 29,500,000 oz.
Traded Toronto: GGN
Pink Sheets GYPH
Price 10/20/06: 1.00
Shares Outstanding: 41,373,120
Market Cap: 41,373,120
Fully Diluted: 62.6 million
Cash if Exercised: $22.1 million
Cash in Bank: $6 million
Progress Rating: “B”
Telephone: 888-261-2229
Web Address: www.gryphongold.com
It is never pleasant to watch the value of your long positions decline, but the good thing about declines
such as we have had over the past couple of months in the gold markets is that we have much better
buying bargains now than before the most recent correction.
As the chart above illustrates, Gryphon Gold (Gryphon) is a good example of that. I have been aware of
this company even before its IPO birth back in December 2005, because of its primary project, the
Borealis Gold Mine. That former open-pit, heap-leaching mine was familiar to me because Golden
Phoenix had previously owned it. When Golden Phoenix fell upon hard times, in order to survive and
focus its efforts on its high-grade molybdenum project, it sold this project to Gryphon Gold, which at that
time was still a private company. As it turned out, my goldmine financier friend from Vancouver was
involved in raising the capital for the Gryphon IPO, but with so much going on and with an immediate
pop upward, before I knew what was happening the stock seemed to rise to levels at which I questioned its
attractiveness relative to other opportunities. Now however, we are looking at a stock that is within a
stone’s throw of its IPO price, just as it is now, even though it now has the mine fully permitted and fully
engineered and ready to commence production within seven months of financing. I think at this price level
and given its soon-to-reach-production status combined with multimillion-ounce exploration potential,
this stock represents good value at these price levels. As such, we are including it in our Model Portfolio
starting now.
The Borealis Mine is located in Nevada’s Walker Lane Trend. With a bankable feasibility study at hand
that shows a robust 31% IRR on invested capital at $475 gold and $7.90 silver from an open-pit, heapleach
operation, I understand the company has had indicative financing offers from four banks, two of
which management is still considering. Management expects to borrow approximately $12 million and to
do so it expects to be required by the lender to hedge approximately 40% of production over the next four
years. While we do not like to see our companies give up some of their potential upside in a bull market,
as an ex-banker your editor understands the argument for this requirement by the lender. And given what I
believe is a very considerable exploration potential at the Borealis Property, we are not overly troubled by
bank hedging requirements, especially given the forward markets for gold which are in normal contango
(future prices are higher than spot).
The feasibility study points to the following economics:
· 58,000 ounces of gold and 546,000 ounces of silver production per year
· Six-year mine life
· Initial capital cost of US$15.4 million, of which $9.2 million is comprised of fixed assets and
infrastructure and $4.2 million of bonding and $2 million of working capital
· The crushing plant will have a capacity of three million tonnes per year, and a stripping ratio of
1.4:1 for the life of the six-year mine is factored into the project economics
· Leach grade of ore is 1.0 grams/tonne gold and 18.5 grams/tonne silver
· Measured and indicated resource of 639,500 ounces of gold and 12,163,700 ounces of silver
· Cash operating costs net of silver credits is $264/oz gold. A gold price of $475/oz and a silver
price of $7.90 were used for the feasibility study economics.
· The internal rate of return on invested capital over the initial mine six-year mine life is 31%. That
is based on $475 gold and $7.90 silver.
Based on my discussions with management, the company may expect to gain funding to put its project
into production before the end of this year and then commence production seven months thereafter. This
quick turnaround is possible because basic infrastructure and all permits are already in place to commence
production.
Life beyond Six Years
Not factored into the economics noted above are 356,400 ounces of inferred oxide resources, which
management believes can be moved into the measured and indicated resource categories. If so, then this
surface mineable material could extend the life of this open-pit, leachable mine.
In addition to the leachable oxides, 690,100 ounces of material that would need to be milled also exists on
the property. And another 359,800 ounces of gold exists in the inferred resource category. Some or all of
this material can be mined from the bottom of the open pit and it is also possible that this deeper and
higher-grade material could be mined from open pit as well.
It is possible this material could be custom milled if an insufficient amount of this higher-grade ore is
discovered to justify building a mill. However, there are no fewer than seven other highly prospective
targets that have been outlined by the company, based on prior work of Echo Bay and Cambiar, that are
likely to add to mineable ounces on this project. For example, Cambiar outlined some 875,000 ounces on
one of these targets. Interestingly, Cambiar was very bullish on the Borealis but was forced to sell when
their hedge book blew up a few years ago. What I like about this story is that the company looks like it
should be producing strong cash flows within the next year, and it has considerable exploration potential
that it can fund from cash flow rather than issuing more shares of stock.
MANAGEMENT
Albert J. Matter Chairman, Director – Mr. Matter has 30 years' experience founding, financing and
building private and public companies Most recently, National Gold Corporation, merger partner to
Alamos Gold Inc. He served as Chairman of the Board, Vice President of Corporate Development since
inception in early 2003 and was appointed Executive Chairman on August 10, 2005. From 1999 to
December 2002, he served as President and Chief Executive Officer of National Gold Corporation.
Successful highlights include projects for Consumers Distributing Ltd., CN/CP Telecom, Madison
Ventures Ltd., Rea Gold Corporation, Echo Bay Mines Ltd., Russell Steel Ltd., Blackdome Mining Ltd.,
Southward Energy Ltd., Winspear Resources Ltd. and National Gold Corporation. Mr. Matter holds a
B.A. in Economics from the University of British Columbia
Allen S. Gordon - President and COO, Director – Mr. Gordon is a Mining Engineer and Geologist with
over 30 years’ experience in international mine construction and operation. He has been involved in the
construction of 12 mines with operation of six, including Noranda, Kinross, Western States, Minerals,
Greenstone, National Gold Corporation
Mr. Gordon has served as President and Chief Operating Officer from inception in early 2003 and was
appointed Chief Executive Officer on August 10, 2005. On September 13, 2005 with the focus of bringing
the Borealis Gold Project into production he was again named President and Chief Operating Officer.
During 2002, Mr. Gordon served as Senior Vice President of Mining Operations for National Gold
Corporation, one of the predecessor corporations to Alamos Gold Inc. From 2000 to 2002, he served as
Chief Operating Officer of NRX Global (USA) Corp., a mining software developer. During 2000, Mr.
Gordon also served as interim Chairman of the Board, President and Chief Executive Officer of
Greenstone Resources Ltd.
From 1997 to 2000, he was Managing Director of Union Hill Partners, a private mining investment
adviser. Prior to 1997, he served as Senior Vice President of Technical Services and Project Development
for Kinross Gold Corporation. Mr. Gordon's experience includes international business experience in
North America, Mexico, Central America, Europe, Central Asia and the Russian Far East. Mr. Gordon
received an M.S. in Mining Engineering and a B.S. in Geology from the University of Idaho.
Mike Longinotti - Chief Financial Officer. Mr. Longinotti was the comptroller and Treasurer, at
Cominco Ltd. a multinational mining and smelting corporation with Cdn$ 3 billion in assets. Hew as also
CFO of Silent Witness, a NASDAQ and TSX listed provider of security equipment and network provider.
Mr. Longinotti holds a B.S. in Geology and a B.S. in Environmental Science from Washington State
University and a B.A. in Business Administration from the University of Washington and is a member of
the Washington State Society of Certified Public Accountants.
Steve Craig, Vice President, Exploration- Mr. Craig is well known to your editor from his days at
Golden Phoenix. I have a high regard for him and his work. He has had over 32 years of total
exploration experience in the western United States with 25 years focused in Nevada Credited with
discovery of Midway and Gemfield and participated in early exploration success at Pipeline, Rawhide,
and Lihir Island gold deposits
Mr. Craig has served as Vice President of Exploration since January 5, 2006. He is a highly experienced
exploration geologist with extensive experience in various types of gold systems, copper and molybdenum
intrusives, and base metal deposits. This experience was gained from efforts in generative exploration,
project appraisal and execution, and management of exploration teams.
From 1974 to 1997 Mr. Craig held various positions in Kennecott Exploration (Rio Tinto) and in the
following years he held executive positions with two junior exploration/development companies based in Nevada. Mr. Craig received his M. S. degree in Economic Geology from Colorado State University and a
B. S. degree in Geology from Western State College.
Anthony (Tony) D. J. Ker, Chief Executive Officer, Director – Mr. Ker served as Gryphon Gold’s
Executive VP, Secretary and Treasurer since August 2003. On September 13, 2006 he was appointed
Gryphon’s Chief Executive Office. From 1999 to February 2003, he served as Director, Treasurer,
Secretary and Chief Financial Officer for National Gold Corporation, one of the predecessor corporations
to Alamos Gold Inc. From 1996, and concurrent with the positions at National Gold Corporation, he was
General Manager of the British Columbia division of Transcontinental Printing, Inc., the second largest
printer in Canada. Prior to that Mr. Ker managed a large coastal sawmill for International Forest Products
Limited and Weldwood of Canada Limited in British Columbia. Mr. Ker holds a B.S. degree in Forestry
from the University of British Columbia.
The company has a host of other well-regarded and highly experienced mining professionals whose
background can be reviewed on the company’s web site.
SUMMARY
A substantial reduction in its price even as the company has advanced its Borealis Project to production
makes this a very attractive advanced-stage gold mining stock in my view. A strong management team
combined with stellar exploration potential also gives Gryphon excellent growth potential as well. We
look forward to covering this company and within a year moving it up to our growing number emerging
“A” (producer) companies.
J Taylor’s Gold & Technology Stocks, is published monthly as a copyright publication of Taylor Hard Money
Advisors, Inc. (THMA), Box 770871, Woodside, N.Y. Tel.: (718) 457-1426.|| * Represents companies in which
the editor and/or his family hold a long position. Website: www.miningstocks.com. THMA provides investment
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TAYLOR HARD MONEY ADVISORS, INC. * Box 770871, Woodside, N.Y. 11377. *Tel. (718) 457-1426 * October 21, 2006
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