first majestic silver

A Legendary Gold and Silver Mine in Resurrection

April 1, 2004

Business Summary Gammon Lake Resources is a public company that is growing rapidly -- now moving into significant gold production while continuing to develop a second major resource to the multimillion-ounce status. Gammon commences its first gold production in the first quarter of 2004.

With its Ocampo open-pit partnership with Bolnisi Gold NL, Gammon anticipates realizing revenues from 40,000 to 50,000 ounces of gold production annually - with no capital cost, nor capital cost payback.

Second, the company is rapidly expanding a major gold/silver resource at its 100%-owned northeast Ocampo project based on consistent, high-grade drilling results.

Gammon is running four drill rigs around-the-clock. Based on this growth, the company is now targeting a total resource on its 100%-controlled section of Ocampo of 5 million gold-equivalent ounces. Much of this resource expansion will come in 2003.

These two projects work together and contribute strongly to a multi-year strategy for consistent increases in shareholder value.

Gammon Lake's 100%-Owned Open-Pit Project at Ocampo, Recent Buy-Out of Bolnisi Interest and New Deep Drilling Program Targeted to Increase Gold/Silver Resource Potential

In December of 2003 Gammon acquired all of Bolnisi Gold's interest in the Ocampo Open-Pit Project area. Previous to this, under a 60% earn-in agreement, Bolnisi had completed advanced feasibility and some additional deep exploration drilling. Under its final feasibility program, Bolnisi completed in excess of 12,500-meters of drilling in more than 120 drill holes. This drilling is in addition to a previous 30,000-meters and 200 drill holes completed by Gammon Lake. Bolnisi also reported that the average gold and silver grades of the master metallurgical testwork composite samples and the Ocampo deposits at the Open-Pit area are approximately 2.6 g/t gold and 90 g/t silver.

The weighted average recoveries for gold and silver are reported as 96.6% and 95.4% respectively, for flotation/cyanide leaching. Independent resource and preliminary scoping studies commissioned by Gammon in 2001 and 2002 pegged the advanced-stage, near-surface resource at the Open-Pit Project area at 1.6-million gold-equivalent ounces in all categories at a half-gram gold-equivalent cut-off - with the potential to at the immediate open-pit resource area were estimated at $ 146 per gold-equivalent ounce at grades estimated as averaging 1.81 grams per ton gold and 87 grams per ton silver.

Gammon has also recently announced its plans to embark on an additional 30,000-meter drill program beneath the limits of the proposed open-pits at the Ocampo Open-Pit Project area. After review of the results of deep drilling completed by Bolnisi beneath the limits of the open-pits, Gammon Lake's management feel that there is potential for as much or more high-grade underground gold/silver resource below the proposed open-pit area as that found in the Northeast Underground Project area.

In turning over 100% control of the Ocampo Open-Pit area, Bolnisi provided Gammon Lake with all final feasibility data for this project. Gammon is currently reviewing this data and will incorporate it into a feasibility study on the entire Ocampo District (former Gammon-Bolnisi Open-Pit area and Northeast Underground area combined).

The reconsolidation of the project provides the opportunity to realize synergies arising from the integration of the Northeast Underground area with the Open-Pit area into a single mining and processing complex (See consolidated project area in figure in right margin). A combined underground and open-pit mine and processing facility is expected to significantly reduce overall capital and operating costs and raise total production levels. Based on the work completed by Bolnisi and the recent scoping study by Kapps, Cassidy & Associates, Gammon will target an initial production level approaching 300,000 ounces gold equivalent per annum in the combined project feasibility study.

The total property-wide resource (Open-Pit and Northeast Underground Project areas combined) as of May 2003 was approximately 4.4-million gold-equivalent ounces in all categories. The company is targeting a total property-wide resource of up to 8-million gold-equivalent ounces and plans to complete a new property-wide resource study by mid-2004.


Gammon Lake Resources Inc. has released the results from 22 new step-out and in-fill drill holes at its 100%-owned Ocampo Gold-Silver Project. The results are from the fourth round of surface drilling and underground drilling from ramp development as part of the company's 65,000-meter drilling and development program at the Northeast Ocampo Underground Project Area. The 22 holes reported produced 26 intercepts above underground cut-off grade of 3 g/t gold-equivalent.

Drilling results to date continue to demonstrate an expansion of the high-grade underground resource, showing the presence of high-grade mineralization well below the limits of historic mining, as well as in areas not previously mined where high-grade ore has been discovered. These include newly released hole OU-34 grading 84.0 g/t gold and 6,650 g/t silver, for a gold-equivalent grade of 186.3 grams per ton over 1.0-meter. This was contained in a larger interval of 4.0-meters grading 24.28 grams per ton gold and 1,780 grams per ton silver, for a grade of 51.7 grams per ton gold-equivalent. The results of the fourth round of drilling from the 65,000-meter drill program at the Northeast Underground Project Area can be found in the following table.

Fundamental Considerations

Gammon's objective is to double Ocampo resources to 8 million ounces gold equivalent.

Gammon has outstanding 59 million fully diluted shares. Assuming that Gammon can achieve its objective of doubling its resources to 8 million ounces, we would arrive at $ 58 of reserves per share, which would put Gammon's share price at a still very undervalued level, even after the spectacular surge in the share price since our last up-date.

Technical Considerations

"The gold price remains in a solid up-trend. A price target of $ 380 to $ 420 over the next six months seems to be attainable. Strong resistance exists around $ 400 - $ 425 but will eventually be overcome.", is what we wrote on September 12. On January 14, we confirmed : "While the above comments are still valid of course, any consolidation of the quick surge above the $ 400 level should not come as a surprise and would even be a healthy development."

In the meantime, we of course know that the consolidation down to $ 387.50 has taken place and that the gold price has pushed back to a level slightly below the high reached at the beginning of January.

While another set-back of course may be possible, we are nevertheless confident that the up-trend is solidly in place. 4

While the share price is up more than 500% since our first recommendation, many would advise that it is high time to cash in the profit. We argue in favor of buying more rather than pulling-back as the best may yet lie in the future.

Our recommendation: BUY ON PULL-BACKS!


Peter Zihlmann

[email protected]

[email protected]

March 31, 2004

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