The Anatomy and Dissection of a REE Junior: An Analyst’s View

The Mercenary Geologist’s REE Review:
February 7, 2011
Contact@MercenaryGeologist.com
In previous musings (REE Reviews: August 22, 2010; October 4, 2010), I assessed challenges the layman experiences in attempting to understand the technical information contained in news releases. I critiqued examples from Canadian and Australian-listed juniors that I felt were extremely misleading for the average investor.

I now dissect a rare earth element junior where in my view speculators are not doing proper due diligence. From the website:

Stans Energy Corp (RUU.V), with a strange symbol and an even stranger choice of countries in which to work in (Kyrgyz Republic), has been very busy of late promoting a former rare earth element mine that was operated by the Russians “
Back in the USSR” target=”_blank”>Back in the USSR

” days. My perusal of the company website raised several red flags aside from the once ubiquitous hammer and sickle that ruled this part of the Eastern Hemisphere from 1936 to 1991. Based on what is left unsaid, it appears this company has adopted an iron-curtain disclosure policy.
The website gives no indication that management has junior resource company experience or any experience in rare earth elements. But they do have Russian connections.

Nowhere could I find the company’s share structure. I had to go to SEDAR.com and the latest MD&A to find that it has 132.7 million shares outstanding and 148.1 million shares fully diluted. Yikes, that’s well on the way to a terminal case of Aus disease. I guess that’s why they want to stay quiet on the subject.

There is no mention of the recent geopolitical upheaval in the Kyrgyz Republic including the April coup that overthrew the President, subsequent rioting, and ethnic violence against the Uzbek minority in the south that continued into June. Kyrgyzstan is rated as one of the ten most corrupt countries in the world.

I did not find a corporate power point presentation anywhere on the company website.

In December 2009 the company announced that a 43-101 resource estimate was to be commissioned on the Kutessay II deposit in Kyrgyzstan. There has been no mention of this study in the intervening 13 months.

In early March a press release stated that Kutessay II was undergoing a JORC resource estimate.

For the uninitiated, a JORC (Joint Ore Reserves Committee) estimate is the Australian equivalent of a 43-101 resource estimate. Why would a Toronto Venture Exchange company with no listing or physical presence in Australia choose to commission a JORC resource? It is now nearly 10 months later and no resource estimate has been produced.
In February 2010, RUU took a 12 month option on an old Soviet metallurgical and chemical complex that concentrated, extracted, processed, and produced a wide variety of rare earth element products during the life of the mine. The option requires agreement on a purchase price, financing, and acquisition by February 2011. Stans recently announced a purchase price of $5.5 million for the complex and a rail head terminal and an inventory study and appraisal of the four plants. Financing and acquisition remain to be completed.

In a September press release, Stans Energy announced a relationship with a Russian state-owned institute to jointly pursue rare earth acquisitions in Russia. Recent investor relations material stated: “The two organizations are teaming up to jointly pursue rare earth acquisitions in Russia, marking the first time a state owned institute will pursue direct ownership in the development of rare earth properties.” Note that foreign investment in strategic resources in Russia is currently illegal. It also begs the question: Is a partnership with the Russian government a good thing for a public company?

Now let’s now dissect RUU’s website information about the Kutessay II flagship project and its latest press release:
On December 14 Stans Energy reported results from a channel sampling program in an adit to validate old assay data from the Soviets. Although individual results varied widely, statistical analysis indicated that the means of the Soviet and RUU data were equal for a group of 170 samples. I examined the report and it appears methodically done in a workmanlike manner. The mean of these samples is 0.35% TREOindicating low grade rare earth mineralization but no average grade was given.

Historic mining occurred in an open pit from 19581991. 5.45 million tonnes grading 0.41% REE were mined and 22,109 tonnes of REE were produced. The exact startup and end of mining are equivocal as other information on the website indicates1966 and 1995 respectively.

Concentration and recovery were low at 6.2% and 64.5% REM (rare earth metals) respectively. That means that 0.26% REMs were recovered from the metallurgical process.

The deposit was enriched in HREEs with an average 47.2% with 26.7% of that as yttrium. The ore had significant quantities of currently high priced and scarce elements including neodymium, dysprosium, europium, and terbium.

Note that 0.41% REE mined and 0.26% recovered is very low grade and would have been well-below economic grades using Western World standards of profitability.

But it gets worse: In 1996 using substandard Soviet reserve categories, the Kyrgyz State Reserve Committee calculated 20.2 million tonnes of mineralized material remained at depth below the pit grading 0.22-0.27% rare earth metals using a 0.07% cutoff.

Folks, that’s so low grade it’s little more than a geochemical anomaly!

It appears to me that Stans Energy Corp’s performance in 2010 is a classic case of rare earth hype and an overpromise and under deliver modus operandi.

There are now more than 200 public junior companies worldwide that have rare earth element projects (Source: Intierra Mapping). I estimate 95% of companies in this space are merely mining the stock market. In a speculative commodity or area play, the informed and diligent investor quickly can separate the few contenders from the many pretenders.

In my view, Stans Energy is a share-challenged issuer with management inexperienced in the junior resource sector and rare earth elements, holds a low grade, likely subeconomic REE deposit, and operates in a geopolitically unstable and corrupt country. I do not think the company’s current share price of $3.00 and market capitalization of nearly $400 million are justified or deserved for the current level of development and past execution. It appears to be carried along in the speculative rare earth bubble. My concern is that promotional stories with no clear substance could do significant damage to the entire sector.

I solicit a response to my pointed opinions presented herein from Stans Energy Corp personnel, analysts, newsletter writers, and/or the Toronto-based promoters who have been pumping this stock via email blasts in early and late November, the end of December, mid-January, and early February (see correlative stock price and volume spikes below). Those promotional letters motivated me to investigate the company and write this missive.

I am not long or short Stans Energy; this is simply my view as an independent analyst. I will not predict an up or down side to the stock as it may continue to get swept along in the rare earth element craze by Molycorp, as one of the ever-growing legion of minions (REE Review, September 28, 2010). However, its fundamentals do not meet my investment criteria so I will just stay away.

Never fail to do your own due diligence, inversionistas!

Ciao for now,

Mickey Fulp
Mercenary Geologist

The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia.
Mickey has worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia.
Mickey is well-known throughout the mining and exploration community due to his ongoing work as an analyst, writer, and speaker.
Contact: Contact@MercenaryGeologist.com
Disclaimer: I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.com LLC.
Copyright © 2011 MercenaryGeologist.com. LLC All Rights Reserved.

Eurasian Minerals Inc: Shaken and Not Stirred

A Monday Morning Musing from Mickey the Mercenary Geologist
Contact@MercenaryGeologist.com
March 22, 2010
My chosen profession, economic geologist, can be an exciting, adventurous, dynamic and sometimes dangerous avocation. The junior resource sector operates with venture capital that comes from financial centers thru out the world to Toronto or Vancouver and then flows to where risk is lowest and reward is highest. That often involves projects in emerging market countries.

I wrote previously about assessing geopolitical risk and geological reward in these emerging environments (International Mining, August 2009). A particularly successful junior that works in these challenging regions is one of my favorite companies, Eurasian Minerals Inc (EMX.V). I first reported on it early last summer (Mercenary Musing, June 15, 2009).

The previous exploration boom in the early to mid 1990s took geologists to many unexplored areas and resulted in discoveries of world class nickel, diamond, and gold mines by junior resource companies. That boom ended abruptly in 1997-1998 because of three concurrent factors: Falling metals prices, the Bre-X scandal, and failed globalization spawned by Thailand’s currency failure.

However, the net result was that many frontier exploration regions on the Earth in the ‘90s were no longer frontiers in the ‘00s.

Giant ore deposits are most likely to be discovered where geologists have not trod every kilometer of ground before. In the 21st Century, these prospective regions are remote, inaccessible, dangerous, and/or high risk.
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In the current exploration boom, now approaching its seventh year, geologists have gone farther afield and worked in areas where geopolitical risk was unacceptable 15 or 20 years ago. Previously off-limit countries now included on our target lists are located in Central and South America, the former Soviet Union, sub-Sahara Africa, and eastern Asia.

In addition, giant ore deposits are usually located on major crustal discontinuities, i.e., along plate tectonic boundaries.

In lay terms, giant cracks in the Earth’s crust penetrate down to the upper mantle and provide the plumbing for molten rock containing or encountering metal-bearing hot waters to rise, concentrate, and solidify into giant mineral deposits.

There is always an element of danger involved in frontier areas, be it climatic, cultural, or political. As exploration geologists, we choose to work in high risk geopolitical environments because of potentially high geological rewards.

But how many junior resource companies and geologists actually consider the real risk of catastrophic geological events in the areas we explore?

It’s really rather simple: We work on plate tectonic boundaries and the major faults associated with them. These faults are the loci of the Earth’s largest earthquakes and active volcanoes. Most of us in the field tend to ignore these risks.

I’ll admit to not seriously considering geo-hazards despite working in places such as the Callejon de Huaylas in Peru where 30,000 people were buried by an earthquake-caused avalanche in 1971. That’s despite the fact that I have been within 100 km of two major earthquakes that killed people: In Chile in October, 1997 and in Peru in June, 2001.

A recent geological event really hit home on January 12, 2010:

The massive 7.3 magnitude earthquake that struck Port-au-Prince, Haiti was one of the most devastating in our Earth’s recorded history. Current estimates of the total dead are over 150,000 with millions injured and homeless. Large areas of the capital city were leveled and rich and poor alike have been affected.

If you are a dedicated reader, you know that I visited Haiti in May 2009 and spent three memorable hours negotiating my way around the Port-au-Prince airport arranging passage to the northern port of Cap Haitien (Mercenary Musing, June 15, 2009). After a trying 24 hours of improvised travel, I was reunited with my party in time to examine two of Eurasian Minerals projects located in the Massif du Nord that parallels the northern coast:

Eurasian Minerals’ Concessions in Haiti
There is little doubt that Eurasian Minerals was severely impacted by the earthquake. On that particular day, there was no one in the field in northern Haiti or in Cap Haitien. Ironically, the entire in-country professional staffs of EMX and its joint venture partner Newmont Mining Corporation were in Port-au-Prince for a health, safety, and loss control course. Eurasian’s two guest houses in the city were destroyed, its office was damaged beyond use, and two geologists were injured. The very good news is there were no fatalities among the staff or their families.

Eurasian immediately went into action, suspended all exploration activities in the country, marshaled its considerable financial resources, personnel forces, and in-country contacts, initiated emergency response procedures, provided for staff and families, and flew in rescue and relief supplies to help the people of Haiti. EMX and Newmont delivered freight containers of medical supplies, food, and water, and provided local transportation of people and supplies.

Once the rescue and relief situation was stabilized, Eurasian’s next task at hand was to relocate all its operations to Cap Haitien. This northern coastal city is easily reached by commercial plane from several Caribbean cities other than Port-au-Prince. Eurasian Minerals expects to be exploring again by the first of April. I am duly impressed by how quickly the company has recovered.

Given its strong commitment to investment in the mineral deposits and business development of Haiti, EMX continues to assist in recovery operations with its in-country assets and will contribute to future rebuilding efforts.

Much like a James Bond martini, Eurasian Minerals Inc. was shaken and not stirred.

The company’s share structure, people, and projects were detailed in my previous musing and will not be reviewed here, only updated.

Since my last report nine months ago, several positive events have occurred for EMX:

� Newmont selected the Treuil and La Mine concessions as a designated project area and can earn 65% interest by spending $20 million on exploration and development or delivering a feasibility study.

� Asian-Pacific and Scandinavian exploration and acquisition programs were established.

� Bronco Creek Exploration, a private US company was acquired. Included are 14 copper and gold projects in Arizona, Nevada, and Wyoming with nine currently funded by joint venture partners, and a staff of experienced geologists in Tucson, Arizona.

� Results from the initial round of drilling on Grand Bois’ oxide gold cap were released. Highlights of the 2200 m program include these intercepts starting at or very near the surface: 21 m of 1.2 g/t Au, 12 m of 4.3 g/t Au, 30 m of 6.8 g/t Au, 20 m of 3.2 g/t Au, 28 m of 20. 5 g/t Au, and 21 m of 10.2 g/t Au.

� A $5 million private placement was completed at $2.06 with the International Financing Corporation, financing arm of the World Bank. The IFC now owns 7.5% of Eurasian’s outstanding stock.

With the Bronco Creek acquisition and IFC financing, Eurasian Minerals has 34.2 million shares outstanding and 40.8 million fully diluted. There are 1.3 million warrants at $2.50 expiring in late April, 1.1 million at $2.00 expiring in January 2012, and 2.0 million at $2.88 expiring in April 2015. 2.3 million options are set at 80 cents to $1.81 with expiries ranging from December 2010 to February 2015. The share structure remains tightly held at 39% insiders, including major holders the Rule Family Trust, International Finance Corporation, Newmont Mining, Lundin Mining, Barrick, and David Cole. Various institutional funds control at least 14% and an estimated eight million shares are in the public float. Current market capitalization is about $70 million with working capital of cash and marketable securities at $14.0 million.

Eurasian Minerals’ burn rate is not low. But it has a worldwide reach and joint venture partners explore its properties to the company’s benefit. The company expects to spend about $3.0 to 3.5 million in 2010 to support seven offices and conduct grassroots exploration developing projects available for joint venture. EMX’ partners will spend over $10 million to earn-in to its properties this year.

The company has traded markedly higher than the $1.35 when my initial musing was released on June 15.

Last summer was a little off-kilter with the usual summer doldrums occurring in June then an overall rally during the typical low season of mid July to early September. EMX followed that general trend reaching lows of about $1.15 in late July followed by a general uptick into late November at $1.80. Initial drill results with a bonanza gold intercept on a twinned hole boosted the stock briefly to $2.80 in early December.

Eurasian was trading at $2.20 when the earthquake struck and a significant sell off took the stock down to the $1.70 range. Until recently, the price was flat with a steep rally commencing in early March and driven by mention on Business News Network, positive drill results at Grand Bois, a booth at the PDAC, and closing of the IFC financing. It has recently traded at or above $2.00. The 52 week high/low is $2.80 to 94 cents and the 30 day is $2.17 to $1.67.

In my opinion, Eurasian Minerals is a well-run junior resource company with the requisite share structure, people, and projects to reward its shareholders. It is one of the most aggressive prospect generators in our business and has been called “a junior with a major’s portfolio”. Although its most attractive flagship projects are in Haiti, Eurasian has joint venture projects in the Western United States, Turkey, and the Kyrgyz Republic, and active reconnaissance exploration programs in Scandinavia, Eastern Europe, and the Asia Pacific regions:

Eurasian Minerals’ Worldwide Project Portfolio

I think that positive news will continue to emulate from Haiti during the spring and summer. In addition, we can expect drill results during the summer and fall from various joint ventured Bronco Creek properties.

Assuming the gold price remains strong and stable and the junior resource stock market continues to be robust, catalysts such as these make me bullish on the long term future of Eurasian Minerals.
As always, I am a shareholder of Eurasian Minerals, it pays a fee as a sponsor of my website, and my opinions about the company are financially compromised. But folks, you know that I only invest in and write about companies that I think are winners. I put my Mercenary money where my mouth is.

I trust this update allows you to be better informed about a stable, disciplined, and successful prospect generator in the junior resource sector. Do your own due diligence and decide if it meets your investment criteria.

And stay tuned; given luck with the drill bit, the returns could be seismic.

Ciao for now,

Mickey Fulp
Mercenary Geologist

P.S. It has been little over two months since the massive earthquake devastated Port-au-Prince, Haiti. Yet I have seen nothing on mainstream American news about this horrible event for nearly a month. The infrastructure, economic, and political situation in Haiti is still grim and the people of Haiti continue to need our generous help. Please, as I have done once again today, consider a donation to a legitimate Haitian relief organization. My personal choice is the American Red Cross Haiti Relief Fund.
The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia.
Mickey has worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia.
Mickey is well-known throughout the mining and exploration community due to his ongoing work as an analyst, newsletter writer, and speaker.
Contact: Contact@MercenaryGeologist.com
Disclaimer: I am a shareholder of the company and it is a paying sponsor of my website. I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.
Copyright � 2010 Mercenary Geologist. All Rights Reserved.

Eurasian Minerals: The Early Bird Once Again Gets the Worm

A Monday Morning Musing from Mickey the Mercenary Geologist
Mickey@MercenaryGeologist.com
June 15, 2009
Three weeks ago, I posted a Mercenary Musing detailing the risks and rewards of exploration in emerging environments. I explained the qualifying criteria a company must use to make sound investment decisions in emerging market countries, and the advantages of exploring in frontier geological settings.

This is the second of a series of musings on select companies operating in emerging countries. The first was posted three months ago on Lydian International Ltd (LYD.T) and discussed its exploration success in Armenia and how quickly that success occurred (Mercenary Musing, February 23, 2009). Not all companies will get that lucky that fast, but you know the old saying about making your own luck. Lydian positioned itself as the first mover in a previously unexplored geological environment and was rewarded.

A favorite old saying of mine is the early bird gets the worm. Once again that has proven true, and I now give you another junior explorer who was “first in”. They have the best available ground in one of the world’s most recent emerging markets.

The company is Eurasian Minerals Inc. (EMX.V) and it is led by my friend and colleague Dave Cole. Dave is a geologist who worked briefly with me as a young pup some 21 years ago. I was consulting to Newmont Exploration out of Elko, Nevada and Dave was a Newmont junior geologist fresh out of college with a degree in geology and a minor in skiing. It didn’t take me very long to realize that he was smart, energetic, and enthusiastic and someday would make his mark in the exploration and mining business.

It was simply a matter of when and where.

After a recent field visit, I’m convinced that the “where” is Haiti. Only time will tell about the “when” part of this emerging environment equation.

Eurasian Minerals has been on my watch list for over a year and a half after I saw some gaudy copper-silver samples at its trade show booth. Since then, Dave Cole and I have reviewed the company’s progress every few months. This spring EMX developed their Haiti prospects to the point where they were ready for an initial analyst tour.

We scheduled a field trip in early May, and I flew out of Albuquerque for a long Sunday of travel thru Dallas and Miami with a final destination of Providenciales, Turks and Caicos. I was to meet the EMX crew and a couple of other analysts there on Sunday night.

Unfortunately, my plane was an hour late out of DFW and the connection to T and C was scheduled 40 minutes after an on-time arrival. My best option was then a mid-morning Monday flight from Miami to Port-au-Prince. I booked that flight with American Airlines, got a whopping $15 voucher for dinner and breakfast, and waited nearly an hour for the hotel pickup. Jeez the hotel couldn’t even give me a tube of toothpaste until the next morning, and then sent the airport shuttle off five minutes early without me. Despite this, I made my flight on time and things were looking better.

But the EMX crew was now in Cap Haitien. Arrangements had been made for someone to meet me upon arrival in the Haitian capital. But there were problems at the airport: I was delayed at customs because no one told me where we were staying in Cap Haitien. Worse yet, I was there but my bags weren’t. By the time I made it thru customs, baggage carousel, lost baggage service, and immigration, the guy waiting to meet me was long gone.

I also was informed before leaving Miami that morning there would be a helicopter to meet me at the domestic airport and fly me to Cap Haitien. So I hired a taxi driver with rudimentary English and we went on a lark from the international airport to the domestic airport to the UN military base and back to the domestic airport with no sign of a helicopter anywhere and no report of anyone seeing one. Finally the driver grew tired of this wild goose chase, and dumped me off with only briefcase in hand.

Another snafu: My cell phone didn’t work in Haiti. And I could tell by whimsical looks from the locals when I picked up a couple of pay phones that they never worked either so me, myself, and I had a serious debate amongst ourselves as to what to do next.

Since I knew the crew was basing out of Cap Haitien, I bought a one-way ticket in a small plane to that town on the north-central coast. While doing this, I spied a friendly-looking fellow with a British passport, a Chicago accent, and an ability to speak French doing the same thing so I struck up a conversation. Pretty soon Dan Phillips and I were pals and he graciously lent me his Haitian-based cell phone to call the travel agent in Denver. I was hoping she knew where the crew was staying in Cap Haitien. But she didn’t have a clue either.

The next step in my journey was the flight to Cap Haitien, a check in my new found friend’s Lonely Planet Guidebook, and a compromise with Dan to stay in the second best hotel in town. We not-so-easily negotiated a taxi and the driver got lost twice, but we eventually found the place. By this time, I was on my third call to the aforementioned travel agent and I finally convinced her to call Russell, Dave Cole’s extremely efficient assistant in EMX’s Littleton office. I was confident that Russell would solve my dilemma. After 30 hours of travel, I checked in and immediately jumped into a meager shower that was interrupted by a welcome phone call. It was from Dave Cole, he had spoken to Russell, the group was back early from the heli tour because of high winds, and I was found.

Within an hour, Dave was there to pick me up and take me to the Mont Joli, the best hotel in town, complete with cold beers at the swimming pool and a gorgeous view of the sea. All that was lost was half of the project tour, my bags, and a few hundred dollars in expenses for an unscheduled plane flight, a couple of taxis, three meals, and an extra hotel room for that night.

Even at the time, it seemed a small price for the self-satisfaction of once again proving that I can find my way to where I’m supposed to be despite the curves that are thrown in the third world.
I’m glad you’ve indulged my storytelling. But you aren’t reading this to learn about travel logistics and difficulties. To this end, let’s briefly review the history, geographical, and environmental settings of the country of Haiti:

Columbus landed on the island of Hispaniola in present day Haiti in 1492. The Spanish exploited the country for gold and the native population was decimated by rebellion, slavery, and disease by the early 1500s. They began importing African slaves and French pirates settled the western part of the island in the 16th century. In the 1660’s, Spain conquered the French. However, French farmers continued to settle in the west and established tobacco, sugar, and indigo plantations. After years of conflict, the Spanish and French finally divided the island in 1697.

A series of slave rebellions beginning in 1791 and sporadic attempts by France to re-conquer the island eventually led to independence in 1804 making Haiti the only country in the world born of a slave rebellion. During the 19th century, the country was plagued by a series of coups as the military, the elite French class, and commercial interests fought for control of the island and its people.

The United States occupied the island from 1915-1934 to protect its economic investments. From 1957-1986, the country was under control of the brutal dictatorship of the Duvalier family leading to emigration and large Haitian communities in the U.S. eastern seaboard and Quebec. The period of 1990-2004 was marked by free but disputed elections, turmoil and chaos, corruption, and coups supported by France, Canada, and the United States. A 26 nation United Nations peace-keeping force was established in 2004 and the current president was elected in 2006.

Haiti occupies the western one-third of Hispaniola and is a mountainous country about the size of Maryland. In the north there is a narrow coastal plain and the west-northwest-trending Massif du Nord which marks a plate tectonic boundary. The majority of prospective mineral deposits are located in this belt. The central region consists of two mountain ranges and two plains areas. In the south is the nation’s highest mountain range forming a long west-trending peninsula and there is an arid plain with salt lakes in the southeast.

Haiti on the Western Side of the Island of Hispaniola
Haiti is the poorest country in the Americas with average GDP of less than $800. Eighty per cent of the 9.0 million people live in poverty and 54% in abject poverty, with two-thirds subsisting as farmers. The population is 95% black and 80% Catholic with an estimated 50% practicing voodoo. It is burdened by rapid population growth of over 2%. The official language is French, Haitian Creole is the generally spoken language, many in the eastern border region speak Spanish, and English often is spoken by those with business interests. The literacy rate is 53% with essentially no public school system.

Haiti suffers from high inflation, limited infrastructure, a lack of private investment because of security issues, and a severe trade deficit. There is a large Haitian diaspora: 25% of GDP is from foreign remittances and these are double the total exports. There is little industrial development other than a small but growing textile manufacturing industry supported by the United States that comprises 50% of total export value. Agricultural exports consisting of mangoes, coffee, and cocoa comprise the rest. Foreign aid contributes 30-40 % to the government budget.

Massive deforestation plagued Haiti in the 20th century with only 2% of virgin forest remaining due to the burning of wood and charcoal for fuel. Deforestation has led to desertification and subsequent severe erosion as the island is subject to periodic hurricanes and massive flooding most recently in late summer of 2008. Since it is on a plate tectonic boundary, it is in a tectonically active area.

In a recent editorial in the Globe and Mail, Canada’s equivalent of US Today, Paul Collier, Professor at Oxford University and author of “The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It” makes a compelling case for increased foreign aid to Haiti. He notes that Haiti has stabilized and is occupied by a UN peacekeeping force including 9000 Brazilians, the USA has provided Haitian exporters with privileged market access, and Canada is the second largest aid donor to the country. According to Collier, lack of infrastructure is inhibiting economic growth and he makes the case that should be addressed with foreign aid. Once infrastructure is funded and built by foreign governments and world financial institutions, risk is mitigated by their guarantees and private capital investment will follow. This government and private funding combination is the model that is presently being implemented in Haiti.

From this review, it is obvious there is substantial geopolitical risk in Haiti. But the geology is just so damn good. I’ll have more on that later but first let’s take a closer look at Eurasian Minerals Inc:

Eurasian Minerals was founded in November 2003 with the reverse takeover of a former Alberta Stock Exchange shell. It is a prospect generator that follows the joint venture model by turning its early reconnaissance exploration successes to partner companies at the initial or early drill stage. EMX originally was focused on properties in Serbia and Turkey, soon added Kyrgyzstan to the list, and later became involved in Haiti.

Since founding Eurasian has successfully monetized properties in Serbia and Turkey that no longer remain core assets in the exploration portfolio:

In late 2006 EMX sold its Serbian interests to a start-up junior for a combination of cash, shares, work commitment, and NSR. In Turkey, it had a JV deal with Barrick Gold in the past and currently has a property ventured to Chesser Resources, a royalty agreement with a small Turkish miner on two base metal properties, and a joint venture on three properties with Centerra Gold, a mid-tier gold producer.

In Kyrgyzstan EMX has drilled 11 core holes on its Orgatash project with encouraging results including 42 m of 1.48 g/t Au and 45 m of 1.18 g/t Au. It currently is assessing strategies for continuing exploration. The company recently acquired a past producing gold mine in the historic, giant Golden Quadrilateral district of Romania with an estimated 50 million ounces of production since Roman times.

EMX’s foray into Haiti is led by Keith Laskowski, geologist and country manager. For years, I’ve heard many good things about him. In fact, I worked with his younger brother Randy at Newmont 21 years ago when I met Dave Cole. But Keith and I had never crossed paths until a month ago.

Keith Laskowski headed Newmont’s effort in the region as Caribbean Exploration Manager in the mid-1990’s. When Haiti once again went to hell-in-a-hand-basket, Newmont pulled the plug. But like all good geologists, Keith recognized the geological potential and knew all the best prospects. After years of political turmoil, a multi-nation UN peace-keeping force was embedded in Haiti in mid-2004, a free election was held in 2006, and foreign investment has started making its way back into the country.

Keith contacted Dave about making a run at Haiti in early 2006. Dave in his usual enthusiastic manner said, “Go for it!” They made the necessary political and business connections, acquired the best ground in stages from 2006 to 2009, and entered into a strategic alliance Newmont last year.

Eurasian Minerals has made a major exploration play in Haiti controlling mineral rights on 30 concessions, roughly 282,000 ha: That’s over 10% of the country’s land mass. They presently have three flagship properties in the country: La Miel, Treuil, and Grand Bois.

The Newmont strategic alliance required that they buy 1.7 million EMX units for $3.5 million, and they initially contribute $750,000 and EMX $250,000 for regional exploration. Once Eurasian Minerals spends $200,000 exploring a concession, it can be offered to Newmont as a designated project. NEM has 120 days to accept or decline. If they decline, Eurasian owns the property 100% and can advance or deal it with no further interest on Newmont’s part. If they accept, NEM must spend $10 million over the next six years to earn a 70% interest. Once earned, EMX has three options: Fund their 30% interest; be carried to production with a 25% interest; or withdraw with a retained 3.5% NSR. Prior to this strategic alliance, La Miel and La Mine projects were joint ventured to Newmont with the same basic agreements and options but on 65-35% bases with $30 million and $20 million work commitments respectively and feasibility study requirements.

In addition to its projects, Eurasian’s share structure grabs my attention. For a six year old company, it has a low number of outstanding shares at 28.5 million and fully diluted at 34.7 million. Included are 2.1 million warrants currently out of the money at $2.00 expiring in October of this year, 1.3 million warrants at $2.50 expiring in April 2010, and 2.8 million options at $1.00-1.81 with expiries from August 2009 to May 2014. Insider and tightly held shares comprise 54% with the four largest shareholders the Rule Family Trust, Newmont Mining, the Lundin Family, and Dave Cole. Institutional funds hold about 14%. Public stock float is estimated to be nine million shares or about 32% of total outstanding.

The two year chart shows the company has traded in a range from about $2.25-$2.50 cents during the peak of the market in mid-2007 and in February and March of 2008 to a low of 51c during tax loss selling and the bottom of the junior resource market in mid- November to mid-December 2008. Starting in January, it has rallied along with most other juniors focused on advanced gold projects and has built a very strong chart in the past six months. In the past 30 days the stock has run from a low of $1.09 to as high as $1.74 which matches the 52 week high. Current trading is in the $1.35 – $1.50 range. The company has a market capitalization of about $40 million, current working capital of $8 million, and $1.5 million in marketable securities.

Two Year Chart for Eurasian Minerals (EMX.V)

The people at Eurasian Minerals are top-notch. I mentioned CEO Dave Cole, and Haiti Country Manager Keith Laskowski. The Board of Directors includes Michael Winn, a geologist and analyst with a track record of success in the junior resource sector, Brian Bayley, the CEO of Quest Capital, and recent addition Steve Enders, an experienced geologist who was President of Phelps Dodge Exploration and VP-Worldwide Exploration for Newmont Mining. Other names of note are major investors Rick Rule and Lukas Lundin.

The technical teams must be given all credit for EMX’ success with respected regional exploration managers in Haiti, Kyrgyzstan, Turkey, and Eastern Europe supervising native geologists, geotechnicians, and local labor. I have seen first-hand that they have a crack field team in Haiti led by Keith and Dr. Dominique Boisson.

Now let’s delve into the geological setting of Haiti and what makes it a favorable location for major ore deposits:

Northern Haiti is located on the boundary between the Caribbean and North American tectonic plates. In the neighboring country of the Dominican Republic, that same tectonic boundary hosts the Pueblo Viejo deposit with over 20 million ounces of gold reserves and significant copper and silver. The Massif du Nord of Haiti is highly prospective for copper-gold porphyry-skarn, volcanogenic massive sulfide, epithermal gold, and metamorphic copper-silver-gold veins. The country hosts past-producing bauxite, copper and limestone deposits but currently has no mining industry.

Eurasian Minerals Landholdings in the Massif du Nord Metallogenic Belt
From 1972 to 1985, the United Nations Development Program conducted regional geological studies and exploration programs in order to assist Haiti’s economy. The UN discovered and documented many gold and copper occurrences, including gold mineralization at EMX’s La Mine, Gran Savanne, and Gran Bois properties, and copper-silver mineralization at Treuil.

I missed the first day of the tour to one of the flagship projects, La Miel, because of the aforementioned travel (mis-)adventures. However, I got a project review from Keith Laskowski and an assessment from fellow geo-analyst Brent Cook.
La Miel is located on the border with the D.R. and with similar geology and alteration to Pueblo Viejo. It is a high sulfidation epitermal system covering 325 sq km with silicified, brecciated felsic tuffs and shallow intrusives and gold-copper-silver-barite mineralization.
There are four main target areas: Savanne La Place, Grand Savanne, La Croix, and Morne Bazile. Seven trenches at the Savane La Place main zone all ran ore-grade gold over impressive widths with the best at 243 m of 1.71 g/t gold. Newmont has established a field camp there and will start drilling soon.

EMX’ Discovery Team: Savane La Place, La Miel Designated Project Keith Laskowski and Dr. Dominique Boisson: Standing, First and Third from Left

I joined the team for the second day of helicopter touring. We flew to the Treuil project west of Cap Haitien for an office session with EMX geologists Peter Mitchell and Freddy Marino. They are working on target scale mapping and sampling out of a remote, mobile tent camp with local support. Although the terrain is difficult, logistics are not particularly so with road access within ten kilometers.
EMX controls 88 sq km of highly prospective copper-bornite-silver mineralization. Host rocks are strongly deformed andesite phyllites with low metamorphic grade albite-chlorite-epidote alteration. Mineralization occurs in relatively narrow veins within a six by three kilometer zone and the geology closely resembles the famous Kennicott district of Alaska. For those unfamiliar, this is the mining camp where mighty Kennecott Mining, now part of mining giant Rio Tinto, got its start.

Unfortunately we were unable to land on the prospects themselves because of pilot inexperience. At present, three main zones have been discovered with the most advanced being the Champagne prospect. Sampling and trench results are shown below:

Treuil Project: Champagne Prospect Trench Results

To the north of Treuil is the La Mine project which has gold-copper-silver prospects, Colombo with known gold occurrences, and La Porte, a porphyry copper-gold target. EMX recently has offered La Mine, Treuil, and Colombo to Newmont as designated projects.
After a detour back to the Cap Haitien airport to re-fuel, we flew to the third of EMX’ current Haiti flagships, Grand Bois. It covers an area of 50 sq km and is located 28 kilometers southwest of the port adjacent to National Highway #1 that connects Cap Haitien and the capital city of Port-au-Prince.

Grand Bois is the most advanced of Eurasian’s projects with 88 historic drill holes by Kennecott, Penarroya, the United Nations, and KWG Resources from 1975-1997. The United Nations defined a historic resource of 4.3 million tonnes averaging 2.24 g/t Au and 14.92 g/t Ag at a 0.5 g/t Au cut-off. The deposit is a tabular body mineralized, oxidized volcanic rock and is roughly circular in outline with current dimensions of 300 m x 350 m x 20 m.

It is a high sulfidation epithermal deposit that occupies a prominent ridgeline so a potential open pit would have low strip ratio. Preliminary metallurgical tests indicate high recoveries can be expected in a typical heap leach process. There is ample room for expansion of gold ounces by using a lower cut-off grade, a higher rock density due to the barite content of the deposit, and with successful exploration outside the current resource. Joint venture partner Newmont is currently laying out delineation and exploration drill holes.

Grand Boix Designated Project: Drilling and Historic Resource
I’ve briefly covered Eurasian’s three flagship properties but suffice to say, other reconnaissance exploration successes are likely to follow with 27 other projects and the best of the best in country. Recently they acquired another potential flagship project, the past producing La Meme copper-gold mine in NW Haiti with production of two million tonnes grading 2.0% Cu and a UN historic resource of 1.5 million tonnes grading 2.0% copper and 2.0 g/t Au. That, my friends, is high-grade and every good geologist knows that grade is king.

Eurasian Minerals Inc is a high risk speculative stock play. The share structure, people, and projects all meet my Mercenary criteria for investment. There is ample cash in the bank and the company follows the prospect generator-joint venture model so burn rate is relatively low. The wild card in this deck is the country of Haiti with a traumatic and unstable past for centuries and continuing into the past few years. Now there is a concerted effort by the international community on the military, social, and economic fronts to stabilize and develop a modern economy in the country.

But as I said earlier: The geology is just so damn good. Eurasian Minerals and Newmont have assessed the risks and the rewards and made the decision to invest in Haiti. I did the same, became a shareholder of the company, and am biased. You must do your own due diligence and make your own investment decisions.

After a long day in the helicopter, we made the usual third world congested and tortuous drive from the airport thru “downtown” Cap Haitien, over hill and dale, and down to our resort hotel on a gorgeous beach west of the city. Fresh lobster was eaten that evening, the 15 year old Barbancourt Reserve served over ice and lime flowed for hours, and the midnight swim included a brief torrential rainstorm. Dave doesn’t remember much of the evening, but I will attest a good time was had by all.

Too early the next morning, we backtracked to the airport, and caught a brief flight north to the resort capital of Providenciales in Turks and Caicos. My bags, now missing for three days, awaited me at the ticket counter, and with clean socks and underwear, it was all good. A relaxing day on the beach and at the bar allowed me to collect my thoughts, review the projects with Dave Cole and Scott Close, EMX’ IR director, and organize this report.

The next morning we were off on a successful charter fishing boat for small (well that’s what we caught) yellowfin tuna:

Gwen Preston of the Northern Miner and Yours Truly Display: “What’s for Dinner”.

And on the very next, I flew to New York, exchanged field gear and beach attire for a business suit, and prepared for two days examining prospective companies at the New York Hard Assets Investment Conference.

Such is a life of travel for The Mercenary Geologist. Hey, sometimes I must remind myself that I actually get paid to go on adventures and work in the outback parts of the world. All in all, it’s pretty hard to beat.

At the show in NYC, I found an exciting company which you will hear about in the coming weeks. Does this theme sound familiar: Advanced exploration of a high sulfidation gold deposit in an emerging environment?

Stay tuned.

Ciao for now,

Mickey Fulp
Mercenary Geologist

The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has over 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, coal, uranium, and water in North and South America and China.
Mickey has worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia.
Mickey is well-known throughout the mining and exploration community due to his ongoing work as an analyst for public and private companies, investment funds, newsletter and website writers, private investors, and investment brokers.
Contact: Mickey@MercenaryGeologist.com

Disclaimer: I am a shareholder of Eurasian Minerals Inc. and the company is a sponsor of my website. I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a technical report, commentary, this website, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a technical report, commentary, this website, and other content is subject to change without notice, may become outdated, and will not be updated. A technical report, commentary, this website, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, technical report, commentary, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.
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