Dear CIGAs,

I was asked today in a phone conversation today what would bring interest back to the juniors. There are a multitude of possibilities but the most apparent is the decline in gold production and reserves.

When a major acquires other operating companies they add reserves to their balance sheet but do not in any way impact total reserves.

Acquisitions have no impact on overall production, which is trending lower as demand for gold as a currency is rising.

The power problems in the RSA are serious and long term, adding urgency to acquisitions of valuable properties outside of the country.

Having some experience in exploration for resources, I can assure you that as hedge funds depress the holders of juniors; producers are all over anyone with potential deposits in a sound country.

Therefore on one side you have the short selling pools determined to depress interest in junior gold shares while majors, eager to increase their reserves, are interested in the properties of juniors while shielded by confidentiality agreements. This allows them to look over all the information to determine if they wish to deal.

If you consider that a modest (by African terms) 1,000,000 ounce deposit of gold with the market price at $900 per oz, you have a gross deposit worth $900,000,000 less gross cost of extraction and amortization of plant and equipment.

The hedge funds and now depressed shareholders might discount that as in the ground, but the major producers are eager for reserves and willing to pay good prices.

So one inviting answer is, if you discount all other rationale reason why undervaluation will attract buyers, note that as gold rises the majors are already, but will accelerate purchasing every junior with a property of one million ounces or more.

Competition produces better prices. This should be an inducement for any junior with very attractive properties to hold on to them at least until the Godfather makes an offer that in economic terms cannot be refused.

The hedge funds can scare you, but are totally irrelevant to the major producer seeking to expand reserves.

Regards,
Jim