Geologix Explorations

Geologix has a large gold-copper deposit in Mexico.

Work is underway to expand and upgrade that resource, and to advance it toward production. A second Mexican project offers discovery potential and the aggressive management team is continuing to seek other projects with potential to add near term shareholder value. The company has several other properties on which other companies are funding work to earn interests. The company has a strong management team with considerable experience in exploration, mine development and finance.

Dunham Craig, CEO, developed two operating mines in a career that includes major companies and smaller producers. Director Randy Smallwood is president of Silver Wheaton, a $7billion company that produces 20 million ounces of silver annually through “streaming” agreements. Other directors include: Eduardo Luna, a director of Silver Wheaton and former executive vice president of Goldcorp; Graham Thody, CEO of UEX Corp; and George Brach, a former managing director of the mining group at Scotia Capital.

Geologix had a previous exploration success, but that project was lost to the global financial crisis. The company optioned a gold-silver exploration project from Silver Standard on the basis of a cash payment due upon exercise of the option, with the payment being an amount per ounce for the gold and silver. Geologix delineated 2.7 million ounces of gold and 85 million ounces of silver, an exceptional success story. As a result of that success, the amount payable to Silver Standard to complete the option agreement was $34 million. Unfortunately, the company was forced to find that money in the aftermath of the global financial crisis. At that time, raising money for any purpose was nearly impossible. With work yet to be done on the project, money was not forthcoming and the
company missed the deadline for the payment and the project was lost.

The company then turned the financial crisis to advantage: They purchased the Tepal gold-coppe rproject in Mexico from a company that is focused on silver and was facing cash payments to maintain the project after the global financial crisis.

Based on the work to date, Tepal hosts a total of 1.15 million ounces of gold and 413 million pounds of copper (indicated resource is 25 million tonnes at a 0.54 grams per tonne gold plus 0.27% copper plus an inferred resource of 55 million tonnes at .405 grams per tonne gold plus 0.219% copper). Based on a gold price of $800 per ounce and a copper price of $2.05 per pound, the metal value at Tepal averages $24 per tonne. That value compares favorably to numerous profitable mines. Surface sampling and geophysical surveys have identified several target areas near the present resource.

Those targets hold the potential to expand the resource by a multiple of the current size. Drilling is presently underway. The first priority is to push out the limits of the current resource. Three other targets just east of the resource area all have footprints in excess of the size of the present resource.Geologix has paid $2.4 million towards the purchase of the deposit. A payment of $1.55 million due next February can be paid one half in shares. A final payment of $2.3 million in June 2011 will give the company complete ownership, subject only to a 2.5% royalty.

Metallurgical test work has returned favourable results, with 87% of the copper and 60% of the gold readily recoverable into a high quality concentrate. The Tepal project is ideally situated for mine development, with modest topography and just 8 km from a town. Metallurgical testing has shown good recoveries.The company is working towards a preliminary economic assessment based on open pit mining and standard processing to produce a copper concentrate. Initial indications point to a low capital expenditure and operating costs, with favorable economics.

The company's second project, La Libertad, is an earlier stage gold-silver exploration project in Sonora,Mexico. The property covers an area of favorable geology, with an intrusive body in close proximity to a shear zone. Gold and silver are hosted in veins and stock works related to the shear. The area is generally gravel covered, but where trenching has exposed outcrop,highly encouraging values of gold and silver have been encountered over substantial widths. The trenching has produced gold and silver values over 1.8 km. Geophysical results over the area suggest a target with considerable size potential.

Initial drilling this year confirms the potential for the system to host a large body of gold-silver mineralization: Assay from the first hole include an intercept of 26 metres of 1.0 grams/tonne gold and 65 g/t silver with the second hole, 100 meters away, showing a wider, but somewhat lower grade interval. The area is flat, with good road access and power lines nearby. The company can earn an 85% interest for $5 million of work and$900,000 of payments over six years.

Geologix also has a dozen other exploration projects, nine of which are presently being funded by joint venture partners under earn-in agreements.

The company would retain interests ranging from 30% to 45% after extensive exploration work is completed.Success on any of those projects would provide another kicker on the share price. The company has about C$5 million of cash, enough to generate substantial news before having to raise further money. From the current share price, shareholders stand to gain from on-going progress at Tepal, with considerable scope for growing the resource. Over the next year, we expect to see a substantially larger deposit, and to see that deposit advancing steadily toward the start of production. La Libertad is already looking like a winner. Further results like those already announced would add considerable value in the near term.