first majestic silver

The Ormetal Report

April 4, 1997

A Crown in Mexico! -

It takes time to build a mining company and the Brock Group has been working on 3 of them since the early 90's: American Bullion, Columbia Gold and Northern Crown Mines (NCW.V) . All 3 of them have been successful so far as they discovered 3 potentially economic deposits. The man responsible is John Brock, a mineral exploration Geologist/Geophysicist with 33 years of experience and President of all 3 companies. I met with John on a few occasions and I am convinced that he will achieve greater successes in the future. John is helped in his work by Wayne J. Roberts, Vice President of Exploration at Northern Crown. Wayne is a professional geologist with 30 years of experience. Both have a lot of credentials of which you may obtain in detail from their information package that the company will gladly send you.

I've been following and investing in NCW since 1993, because that is when they discovered the gold. The 1994-95 correction was much steeper than one would have anticipated and was due to a pause in the company development program. This pause was made necessary in order to complete additional financing and to acquire more properties surrounding the initial discovery named the Zapote zone, where a drill-indicated a resource of 300,000 ounces which was developed in 1993-94. It was only in late 1995 that the additional properties were acquired and that new financing allowed resumption of the exploration program. The 1996 program led to a firming up of the reserves in the Zapote zone as well as the discovery of gold and silver in 4 other new zones. The total drilling indicated resources now more than 500,000 ounces based on 235 drilled holes and the geological resource stands at 1,000,000 ounces and growing. In late 1996, Northern Crown completed a new $5.2 million financing at $1.30 and started a 20,000 meters drill program that should be completed by summer 1997. Excellent results have been announced since early January and there is more to come.

The company has currently 18.1 millions shares outstanding for a total market capitalization of $19.9 million. Fully diluted, there would be some 20.1 million shares outstanding by the end of the year if warrants from the financing are exercised at $1.55. This would bring in additional funds of more than $3 million.

Northern Crown's assets -

The current focus of exploration is the Guadelupe de Los Reyes gold project in northern Sinaloa State, Mexico and the adjoining Mariposa property. Before I describe this project, I think it is important to note that NCW has also one other project to fuel its growth. The Mesa Galindo property in Sonora State, Mexico, is a gold-silver project where Northern Crown drilled a few holes in 1996. They came out with very encouraging first results including a drill hole of some 85 feet grading some 10 ounces of silver per ton. In due time, NCW will get back to this property.

Beside these properties, NCW has approximately C$5 million in cash available for the current exploration program.

The Guadelupe project -

This property and the adjoining Mariposa property acquired in 1996 consist of over 53 square kilometers of prospective ground for epithermal-hosted gold mineralization. The property comprises more than 15,000 hectares and is the site of the former Guadelupe underground mine which produced more than 525,000 ounces of gold and 41 million ounces of silver from 1872 to 1938. The concessions owned by Northern Crown cover over 90 percent of the entire Guadelupe District which includes five major epithermal gold-silver vein-breccia zones totaling 13.7 kilometers of mineralized structure. The area is roughly 4 by 6 kilometers in area. Little exploration was conducted in the 1900's, until NCI acquired the first concessions in 1991. The project is road accessible, four hours' drive from Mazatlan.

The Zapote zone -

The first zone to be explored in the 1993-94 was the Zapote, resulting in a drill-indicated ore reserve of 5.15 million tonnes grading 1.41 grams/ton containing 250,000 minable ounces of gold. The 1996 program increases these reserves further, and we are probably now closer to 300,000 ounces of minable gold. Additional good results from the current program are again expanding the resource further. This should lead to a final proven and probable reserve that will allow the completion this year of the feasibility study for an open pit heap leaching operation on this zone.

It is reasonable to expect a target of 350,000 ounces of gold in the proven and probable category at Zapote.

The Guadelupe mine zone -

The mine zone is probably the one with the largest potential. The gold grade is higher than the Zapote zone and the resource there contains a very interesting silver component. No reserves have been calculated so far on this zone but the drilling seems to indicate that the resource could reach between 400,000 and 800,000 ounces of gold equivalent, if not much more. The program will continue until the summer and we should know more by then.

Best drill holes are:

Drill hole Intercept (m) Gold g/t Silver g/t

The majority of the other holes are very good although the lengths of the intercepts are probably averaging 25-30 meters. The company is building roads on this zone to provide access to favorable drill targets. Drilling should resume soon at the Guadelupe mine zone. It is unclear at this point in time if the Guadelupe zone can be developed by open pit. The geometry of the ground is not as easy as the Zapote zone. More studies will be needed to define what methods will be the best to extract the gold and silver. The company is still confident that the open pit method will be feasible.

The Noche Buena zone -

This zone is 1000 meters long and has seen only limited drilling. Still many cores returned very good values, justifying further exploration. In total, 18 holes have been drilled so far with values averaging approximately 1.5 grams per ton and 35-40 grams silver per ton over 20 meters. The best hole was 27.4 meters of 1.63 g/t gold and 26.8 g/t silver.

The potential for this zone is to come up with 200,000 to 300,000 ounces of gold equivalent.

The Tahonitas zone -

The Tahonitas zone has been drilled with 33 holes and offers the potential for both underground and open pit mining. The average grade is closer to 1 g/t gold but there are a number of high grade narrow sections with grades reaching 3-4 g/t gold and 200-350 g/t silver over intercepts of 3-4 meters. This zone is not the current top priority, and therefore will be explored again in some distant future.

The San Miguel zone -

This newly discovered zone offers a lot of potential. It is part of the concessions acquired in 1996, and measures 1.5 km in length. So far 21 holes have been drilled over the first 250 meters of the zone. Indications are for excellent grades over minable widths. Best drill holes are:

Drill hole Intercept (m) Gold g/t Silver g/t

Consistent high grade surface sampling and strong geochemical responses have been reported for 1.4km along the zone. Potential here could be greater than any of the 4 other zones. The metals in this zone are located approximately 50-75 meters below surface These good results were announced on March 20th and are definitely not reflected in the price of the stock. In my opinion, the San Miguel zone add a new dimension to the Guadelupe project.

Valuation -

When evaluating a mining company for investment purposes, there are 4 criteria that must be considered. Three of these are extremely important, and they are: management, properties and financing. The 4th one is promotion but, although important, it is the only one that is not mandatory to the success of the company. I am convinced that Northern Crown has all four and I suggest you call Bob Swenarchuk who manages investor relations, so he can tell you in his own words why what I am saying is a realistic picture of the potential of this company.

Even if a company is an excellent one, it doesn't mean that its stock is a good investment all the time. If you take a look at the long-term chart, you can obviously conclude that it was not a good time to buy Nothern Crown in the Spring of 1994. So investors must constantly review the situation and compare two things: the price at which the markets' value a company - in other words the company's market capitalization and the probable value of its assets or the intrinsic value of the company.

The first number is very easy to obtain. You need only to multiply the number of shares outstanding by the current price of the stock. This gives us a market capitalization of C$20 million for Northern Crown. Some will compute a fully diluted figure. This means that they will also include in the market cap the shares that are not yet issued, but might be in the future. I rarely do this, unless the options or warrants that might be exercised in the future have an exercise price much lower than the current market price. This would lead to dilution of the current shareholders, and could represent an important factor in our evaluation. In this case, most of the warrants outstanding have an exercise price of $1.55, or some 40% higher than the market price.

Including them in our evaluation would only help our evaluation, so lets be conservative and exclude them.

Northern Crown has roughly $5 million in cash for the current exploration program and other studies. What we want to know is if we are paying too much for the properties, so we must deduct this figure from the market capitalization of $20 million to find out what is the net market cap attributable to the Guadelupe project. I will assume here that the Mesa Galindo project has no value at this point in time, due to the limited amount of work that has been done there. Consequently, we get a figure of C$15 million for our net market cap. Again this is the value the market is giving to NCW's properties.

As we have seen earlier, the Guadelupe project now has a drill-indicated resource that is near 500,000 ounces with the likelihood of reaching 750,000 to 1,000,000 ounces in the months ahead. The almost proven resource of 300,000 ounces in the Zapote zone and the "blue sky" potential of the high grade San Miguel zone alone should indicate to you that the stock is an excellent bargain at these price levels. Northern Crown has clearly the potential to develop between one and two million ounces at Guadelupe, but let's be conservative and use the 300,000 ounces of the Zapote zone, and a very conservative US$35 per ounce of gold in the ground. With these numbers I get a value of C$15 million for the Zapote alone. In other words, you can buy almost 500,000 of gold for FREE!

Most people who evaluate gold exploration companies that are not already producing, use a yardstick number of US$50 per ounce of gold in the ground to reach an approximate target price for the stock.

Let's do this with Crown Mines. Assuming they developed a very conservative resource of 800,000 ounces of minable gold after the money for the current 1997 exploration program is spent. We would end up with a resource that would be valued at least C$55 million or $2.75 per share of Northern Crown. That number is my minimum target for NCW's stock price in 1997 and would provide us with a 150% gain on our investment based on the current price of $1.10. Of course, we are several months away from a positive feasibility study and, although all studies so far have been positive, it is too early to tell how economical will be these deposits. Still I think that the risk/reward ratio of the Guadelupe project is extremely favorable to an investment in Northern Crown. It behooves you call Bob at 800-403-2988 or 604-687-4951 and get the full story first hand.

Northern Crown has a website at:

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