Noront Resources

Well, SG, there is no right way to assess the value of a deposit, nor one way to assign value to the potential ore it contains. I tend not to spend much time on these analyses, both because others are more willing to do so, and because the market values things automatically. That said, there are some tests one can reasonably apply to the methods of others. The assumptions being used to select constants being used in an equation, for example, can be independently compared to standard industry practise, to help you to determine if the result of the equation is a value in which you might have some confidence.

Obviously, one of the critical variables is the in situ percentage value of a deposit. In situ is Latin for 'in place', i.e. as is, where is. Different deposits, different types of mineralization, different metals, different countries, each attract different in situ percentage values.

I got huge grief for trying to show, through thorough due diligence and reporting of same, that the Freewest Ring of Fire chromites would likely attract an in situ valuation of significantly less than 1 percent, which I reported well before Cliffs made their move. I then estimated Cliffs first offer at about .2 percent of in situ value, which is .002 times the contained metal value as chromite ore (two notes: 1. not compared to ferrochrome value, but to the ore value itself; 2. SG, you earlier had half a percent shown as .05; that is five percent, whereas half a percent is .005). My DD predicted the in situ ratio for the chromite, because I used standard chromite industry valuation metrics.

In contrast, gold or base metal deposits often attract in situ values between 2 to 10 percent, sometimes even more. But I know of a huge proven gold deposit (rights held by Crystallex in Venezuela) which the market is valuing at a tiny fraction of 1% (due to country risk), whereas gold in Quebec might attract closer to the 10% rate when the majors are being acquisitive. Because of the critical importance of selecting a reasonable in situ percentage value, I question the reasonableness of that selection before I can even consider the calculated value. That value depends on the in situ ratio.

Some really critical factors influencing the Ring of Fire in situ percentage valuations are: lack of infrastructure; remoteness (not literally the same thing); being in Ontario; world reserves of that metal type; grade; tonnage; if the deposit remains open; metallurgical recovery; smelter availability; power availability; other bids.....I could go on and on.

In real estate, picking a comparable property (better if that is plural) in order to set a market valuation on a specific property is as much art as it is science. And so is determining the in situ value of a mineral deposit. Even if a 43-101 compliant Technical Report is filed, you still need to read it with a critical eye. All those assumptions.....

My best advice for anyone is to try and thoroughly read a 43-101 compliant Technical Report, particularly one with an economic analysis of the potential orebody. Some of it won't make a whit of sense to you, but you'll be exposing yourself to the arguments used to determine the value of the resource. The next one you read will make more sense than the first. And so on. A resource becomes a reserve when it can be shown to be very likely that it can be economically mined and processed, and yield a reasonable return on the investment beyond that.

Noront Resources happens to have published more than one Technical Report on the Eagle 1 deposit. The final one, posted to SEDAR in December 2008, omits some information and arguments that were raised in the earlier version (they're assuming you'd just go back and read the earlier one, for the details), so it makes sense to read both of them. And look at the economic assumptions, and how they're applied to this ore deposit that you know so well. Use your familiarity with the deposit to your advantage.

Packsackman criticized the costing for the infrastructure that was included in the Dec. 2008 Technical Report as being under-estimated, but I never take those numbers at face value in any case. If the TR says infrastructure will cost $300 million, I assume $600-750 million right away, at the minimum. How often do you see a project like that come in on budget at the cost of the preliminary (pre-engineering) estimate? What would be the effect on cost of a delay in obtaining First Nations approvals, for example? I'm hearing that the FNs are already very upset that Cliffs staked a rail route without consulting them on their own transportation requirements, and any cultural values attributed to those places that were staked. The FNs want all-weather roads. A side road off a rail line is nearly pointless, and a train once a week or once a day is not convenient to the needs of communities. Can you say timeline increase? (Noront is way ahead of Cliffs on the First Nations negotiation situation, IMHO. Years ahead, but that's just my opinion.)

All these immense numbers of variables.....And I just shy away from them. Too complex.

But, if you use the metrics in the Eagle 1 financial analysis in the 43-101 Technical Report, and update those numbers based on reasonable increases in mineral resources from the deeper drilling, and perhaps adjust the market values of the contained metals, and apply a conservative in situ ratio (3%??), see what you get. I get a mine. That's what I get. I don't need numbers to conclude that. (Fooled ya!) We're well past "it can be done for a profit" or "it's worth moving ahead with it", IMHO, but it's the lead time (a decade to mine commissioning??) that is the economic/valuation impediment. Again all IMHO.

Lar