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Gold/Mining/Energy : Naxos Resources (NAXOF)

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To: ShoppinTheNet who wrote (14090)	7/8/1998 9:02:00 PM
From: Henry Volquardsen	of 20681

Question one! What institutions have stated this? Any institution investigating Naxos would not want it's identity to become common knowledge for obvious reason. So you need to judge this statement on the credibility of CPM. They are the company's agent dealing with institutional investors and they have said that these investors will not look at black box technologies. If CPM is credible then their contention that investors will not look at black box technologies is believable. If you doubt CPM it is fair to doubt that statement. FWIW I have mentioned before that I do a lot of private placement equity deals. I do not give a second look at any 'new' technologies unless there is significant verification. BTW it is fair to ask, if I use such strict criteria for private deals why did I become involved in Naxos before even Dr Johnson was on the scene? As I have indicated in the past it was a major brain cramp and I've learned a lot from it. Question two! If it is explained scientifically is it black box? The use of the term 'black box' is probably wrong. To most of us I assume black box means an unexplained closed box system. However in this case I believe CPM is using black box more to refer to an untested and unverified process. Of course J/L will be able to be explained scientifically. What CPM is indicating, I believe, is that until a process has been used for assaying and been confirmed by full production it is still a big question mark. An established firm can get away with using such a process because they have already established their credentials. However a junior is a different question. You are generally dealing with an unknown entity with no established credentials. If such an unknown entity comes along and says to the investor community 'guess what guys we have found this great new process that no one else has developed' they will be skeptical. It is important to remember that junior mining companies have a real cowboy image and large investors are suspicious by nature. Many of them have a saying that a mine is a hole in the ground with a liar at the top. They have a high standard of proof. Question three! If other labs can not replicate the Norton / Ledoux SFA is it a black box as well? In reality a complex question. First it is not unusual for a lead lab to have some initial difficulties in getting other labs up to speed on their process. Ledoux is working hard with the other labs so that they will be able to verify. But it is important in this regard to remember that Ledoux is a respected referee lab. They have clearly stated that the assay they are using is standard assay under accepted industry terms. Ledoux's reputation is such that their statement will be accepted by investors and the process will not be viewed of as a black box. If however they were unable to get verification from other labs it would still be a serious problem. But it would be much more of a problem for Ledoux as it would seriously call into question their reputation. This is not to say that it wouldn't be a big problem for Naxos. But it would not be an issue of Ledoux's process being a black box.

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