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Gold/Mining/Energy : Cross Lake Minerals CRN -- Ignore unavailable to you. Want to Upgrade?

To: Ed Pakstas who wrote (1012)	12/29/1997 9:48:00 PM
From: dave brown	Read Replies (1) \| Respond to of 3650

Any thoughts, trends or analysis on Golden Knight?

To: Ed Pakstas who wrote (1012)	1/2/1998 7:26:00 PM
From: dean poets	Read Replies (2) \| Respond to of 3650

Hi guys, here's an interesting article about Net Smelter Returns, written by Robert McAllister of investorsfirst.com. Special Report: BASE METAL PROPERTIES Cross Lake Minerals has sparked some much needed enthusiasm in the junior metals sector. However, few people understand how to evaluate a base metal property. Even most junior mining companies report their findings in gold equivalent terms. This term is very misleading and should not be used in determining the true value of a base metal deposit. The reason for this is simple. Recovery rates for the mined concentrate shipped to the smelter typically run 75% to 90% depending on the base metal and associated minerals. After this the net smelter return varies from 35% for Lead, 40% - 45% for Zinc, 40% - 60% for Copper, 90% for Silver and 80% - 90% for Gold. The copper ( NSR ) Net Smelter Return will vary from 40% in high grade, greater than 10% zinc and lead deposits to 60% in Nickel and platinum group deposits. In some cases high levels of arsenic can make a base metal deposit worthless. Most people look only at the grades of the drill hole and use that for their economic evaluation of the property. In evaluating base metal properties one must look at several factors. 1) Potential size of deposit: Small < 5 million tons. Medium < 15 million tons Large > 30 million tons 2) Grade of Base and Precious Metals: Cu > 1% Zn > 3% Pb > 3% Ag > 30g Au > .5g 3) Open pit or Underground Mining Cost Open Pit approx $10.00 US per ton to mine. Underground approx $ 20.00 US per ton to mine. Using the above guidelines two companies, Cross Lake Minerals and Manhattan Minerals, will be looked at. Cross Lake Minerals had created much excitement until the latest drill results were released. The reason for the excitement had been a drill inferred 20 million tons at a grade of 3.5% Zn, 2oz Ag and 1% Pb. With a high grade zone of 18% Zn and 10oz Ag. The gross metal value which most people focused on was $55.00 US per ton. Using a median recovery rate of 85% and a NSR of 35% for Pb, 45% for Zn and 90% for Ag. The realized recovery is .30% for Pb, 1.34% for Zn and 1.53oz for Ag. This works out to a net value of $25.18 per ton of rock. With the deposit below 200m in depth, underground mining would be the best way to mine the deposit. This would indicate mining costs of $20.00 per ton leaving a gross profit of $5.18 per ton. From this transportation costs and capital requirements for the mine would take another $1.00 to $1.50 per ton off, leaving the net per ton at $3.58 to $4.08 per ton of rock. Using a 20 million ton cut off the deposit could be worth $ 80 million net. The recent drill results seem to show that the deposit will not be much larger than this number. With 28 million shares outstanding this works out to $2.85 per share in future earnings. Manhattan Minerals has a 75% interest in the Tambo Grande Massive Sulfide deposit in Peru. To date 42 million tons has been inferred by drilling 21 holes. The deposit grades 2% Cu, 1.47% Zn, 37g Ag and .36%Pb. This results in a gross value of $61.07 per ton. Using a median recovery rate of 85% and a NSR of 60% Cu due to low Zinc content, 45% Zn, 90% Ag and 35% Pb the net NSR works out to $32.00 US per ton. This deposit starts at a depth of 30m and would be open pitable. Mining costs for this deposit could run $10.00 per ton and allowing for transportation and capital expenditures of $2.00 per ton the net could be $20.00 per ton. Manhattans share is 30 million tons at $20.00 net, this works out to $600 million. With 20 million shares outstanding this works out to $30.00 per share in future earnings. The Tambo deposit is open in all directions. From these two examples it's easy to see how gross metal values can be very misleading. By using the NSR one can see the true potential of a deposit and then decide if investing in the company is justified or not. -------------------------------------------------------------------------------- I hope this posting isn't taken as an insult, I personally thought people on this thread would want to see this information. Dean