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Gold/Mining/Energy : Great Basin Gold GBG.VSE (merger of Pacific Sentinel Gold) -- Ignore unavailable to you. Want to Upgrade?

To: ELP who wrote (150)	11/26/2000 3:15:38 PM
From: russwinter	Read Replies (1) \| Respond to of 317

Robert Van Doorn (Loewen, O, and M) write up 11/16: Current mkt cap: 33.2 out @ 1.00 US= US 33 million, US10 million cash= US 23 million enterprise value. Most of dilution from options at higher or near current prices. Company Description Great Basin is an exploration company run by the Hunter Dickinson group. GBG has been successful in outlining bonanza-grade, feeder zones below the extensive low-grade mineralization at the Ivanhoe property in Nevada. We currently calculate a resource of 1 Moz. Continued aggressive drilling is adding further parallel zones and extending the strike length. We believe the property is a must for one of the neighbors. It lies on trend between the Ken Snyder mine and the Goldstrike mining complex. The Ivanhoe property is located along the Carlin Trend between Ken Snyder (35-km northwest) and Meikle mine(20-km southeast). U.S. Steel explored the property in the early 1980’s which was followed by Galactic/Cornucopia and Newmont. Great Basin entered the picture in 1997. Franco Nevada owns a 3-5% NSR. Previous work identified a low-grade resource of 2.8 Moz at 0.034 oz/ton in the Hollister area. GBG interpreted this mineralization as a ‘leakage anomaly’ and started looking for feeder zones. The four vein systems identified to date -from north to south - are Clementine, Gwenivere, South Gwenivere and Rowena North. The mineralization of the high-grade feeder zones begins at a vertical depth of around 100 m and remains unchanged to at least 275 m. Taking a cut-off grade of 8 g/t, and the relevant 53 of the 81 core holes, one gets an average intercept of 1.4 m @ 37 g/t plus substantial silver. The average true width lies closer to 1 m. Using these numbers to estimate a resource, we get a high-grade core of 0.9 Moz: 1830 (strike) x 175 (down dip) x 1 (average width) x 2.3 (density) = 0.7 Mt @ 37 g/t = 0.9 Moz. Assuming 100% dilution with zero grade leaves the 1 Moz intact, but gives an average mining width of 2 m at a grade of 17 g/t. In reality, as the dilution should have some residual grades, we stick to 1 Moz. The discovery has triggered the interest of a number of majors, but in our view of the potential, GBG does not need to do a deal with a major yet. The plan is to drill off the potential of the property as quickly as possible. The focus is to delineate a resource for the feeder zones and extend their strike length to the east towards the Hatter target area. To the west the veins are thinning out. New drilling areas are: 1) further to the north, the “Velvet – Butte” zones; and 2) to the south, the new Rowena North zone and the newly discovered feeder zone for the old Hollister pit and USX pit (Hole 151). Fire fighting (literally) during the summer has delayed the flow of drill-pad permits from the BLM (Bureau of Land Management). This has slowed drilling progress but permits have now been received for Butte-Velvet with 4 drills now in operation on this trend. A geophysical program is following the epithermal system to the Hatter target, 1.5 miles further to the east. To better define the mining method and consequent dilution, GBG either has to go underground or complete surface infill drilling. The company is currently studying both options. It is estimated that underground permits will take at least six months to complete. Preliminary metallurgical studies show that the veins are amenable to standard cyanidation with recoveries of 95-97% for gold and 90-94% for silver. The company has C$15MM in cash. Conclusion and Recommendation This is one of the few projects that should be able to make good money even at the currently depressed gold price. Furthermore, the project is in Nevada, which makes GBG a prime take-over candidate. With a fully diluted market capitalization of US$50MM, the market is discounting a 2.0 Moz discovery if you value the gold in the ground at US$25/oz. We believe the GBG gold is worth more. Even after a 100% dilution, the average grade is 17 g/t which would indicate a cash cost of below US$100/oz. As such, the ounces in the ground should be worth at least US$50/oz, particularly for someone with milling capacity close by, eliminating most of the capital cost. This would more than warrant the current market cap. In addition, we expect the discovery of further parallel veins. This added to an increasing strike length should push the estimated resource to over 3 Moz over the next year and a half. We continue to recommend Great Basin as a BUY.