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Gold/Mining/Energy : Naxos Resources (NAXOF)

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To: Randall E. Brubaker who wrote (4461)	10/10/1997 1:16:00 PM
From: Jan A. Van Hummel	of 20681

Naxos' management has taken the most prudent approach in formulating and executing a staged agreement with Johnson & Lett. J&L have little to lose and everything to gain and did get a deal they would not have been able to get from a major. If the assay and recovery method of extraction is validated and economical we will all gain. If that will be the case the terms agreed upon are not excessive if you consider the alternative. Within the scope of the stated agreement Naxos can do due diligence on the process. They did not bet the whole store on the results of what are essentially a limited number of samples only. I think it is most prudent to allow yourself time to seek confirmation of these initial results by going painstakingly through the process of replicating the initial results on a larger number of samples. J&L is assured that if ongoing testing validates their process they will be handsomely rewarded, and rightfully so. The fact they agreed to the staged agreement is an indication they are very confident that the ultimate outcome will be positive. If it does turn out positive we can only be glad that Naxos had the foresight to tie the technology to Naxos. At the same time Naxos has further minimized chances of potentially heavy losses (after all the $5 million is not sitting in their back pocket), should there be an unexpected problem in attaining a viable solution to the complex deposits. Buying the technology outright without further testing would be imprudent to say the least. Frankly, you have to hand it to management. The approach taken is thought through and executed well, unlike what we have seen from management in the past. Give credit where credit is due. Mind you, the word is still out on the COC results, but another (big) hurdle has been taken and taken well. If this is an sign of what's to come we can all get our pom-poms out. JMHO Jan A. Van Hummel

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