Winston's Growth Stock Report

Your Source for High Potential Stocks

Issue 29 July 8, 2010

Now that we are well into July, we are in the midst of our accustomed summer doldrums in the junior resource market. So don’t expect any excitement with our stock picks until the fall. Now however is a great time to bottom fish some prospective stocks which could net us a nice 50% – 100% return over the coming months ahead.

One stock I particularly like right now is Orsu Metals (OSU, TSXV) which is trading 36 % below a recent private placement price of 25 cents where a number of pro-investors recently acquired the stock. Frankly I didn’t think the share price would get below 25 cents. The stock had already gone through a 10:1 rollback and with the recent financing which raised C$28 million, Orsu is well positioned to advance their two main assets, Karchiga and Taldybulak-Talas.

I expect Karchiga to be the source of regular news flow going forward and this September when investors turn their radar back on Orsu should start to move up.

Karchiga Copper Deposit – Fast Tracked Toward Full Feasibility

I believe the most excitement for Orsu in the months ahead will be from the Karchiga property. A scoping study outlined that there is a potential here for a 29 Mlb per annum open pit mine that could produce copper at US$1.13/lb over 10 years.

14,000 meters of drilling culminated in a NI 43-101 report that projected that the total copper resource was 437 million pounds grading 1.81% copper and using a 0.3% cutoff.

The scoping study estimated that the net revenue would be US $765 million with an IRR of 40.5%.

Going forward one would expect a further resource upgrade and better mine economics given more data to work with. Also Karchiga’s location next to the Chinese border opens up the possibility of off-taking ore to Chinese smelters and Chinese financing. The next catalyst will be the completion of a Definitive Feasibility Study which is expected to be done by Q1 of 2011 at which time an environmental study is expected to be completed. Based on the outcome of the DFS, a decision to start construction and to look at financing options would begin in Q1 – Q2 of 2011. Optimistically production would start by mid-2013.

Given that scenario, Orsu could very well become a 10 bagger from today’s miniscule price of 16 cents.

Taldybulak-Talas Project

Orsu owns 40% of the Taldybulak-Talas gold-copper-molybdenum project in Kyrgyzstan which also had a NI 43-101 update in March. Total gold resources came in at 6.2 million ounces at 0.66 grams per ton with 1,033 million pounds of copper with a grade of 0.16%. This is one of the world’s largest copper-gold porphyry projects yet few people seem to know about it.

Gold Fields Ltd is the operator of the project and they recently completed a scoping study with the results pending anytime now. The word on the street is that this should be a large scale, low grade open pit mine.

One potential setback for this project is the civil unrest which was in the news earlier this year. With the situation seeming calmer now, we can anticipate more drilling in the fall.

The Copper Market

According to a BMO report the copper supply will be relatively tight over the next decade. Any new mining projects coming on-stream will be offset by mine closures and declining grades. Canaccord’s long-term copper price is set at US $2.25 per pound.

This bodes well for the future of Orsu’s copper production not to mention Catalyst Copper and other developing copper miners.

Management and Major Investors

Investors should keep in mind that this isn’t the first rodeo that Orsu management has been involved with.

Company Executive Chairman, Dr Sergey V Kurzin has an impressive track record. Dr Kurzin is a Russian-born research engineer who moved to the United Kingdom in 1990 and has since played a key role in initiatives to acquire and progress several important Former Soviet Union mining assets. These include Julietta (a high grade gold deposit in Magadan, Russia, with Bema Gold), Kupol (a high grade epithermal gold deposit in Chukotka, Russia, also with with Bema Gold), the Varvarinskoye copper and gold skarn deposit in Kazakhstan with European Minerals Corporation. He has also played a key role in establishing UrAsia Energy Ltd, a uranium producer with mining operations in the Republic of Kazakhstan and he founded Oriel Resources- two companies where we made excellent triple digit returns. He also holds the position of Executive Chairman of Everfor Resources Plc.

The company also has the backing of some major shareholders including JP Morgan, Endeavour Financial, Charlemagne Capital, Roytor and Company, Bay Pond Partners, and Canaccord Capital.

Given the current low share price, this is a good opportunity for retail investors to take positions at prices usually only obtainable for pro-investors who in this case have paid substantially more.

In summary, a great management team, solid financial backing and two very prospective properties.

Donner Metals (DON, TSXV)

We are still awaiting word from Xstrata on how they plan to move forward with the Bracemac-McLeod deposit which they have joint ventured with Donner. We’ll know sometime this month they say.