Sean analyzes the volatile action in the gold stocks over the past four years and tells us why we should be positive in 2012. He mentions a few companies near the end.

First lets take a technical look at the juniors. We show ZJG.to and GDXJ in the chart below. ZJG.to is a Canadian junior ETF which is comprised of entirely gold companies while three of the top ten companies in GDXJ are silver companies. ZJG is nearing resistance at 20-21 while GDXJ is nearing resistance at 31-33. More importantly, both markets have broken out of their downtrends against Gold.

Next we show a plot of our junior gold index (call it JGI), GLD and a ratio of JGI against GLD. Note that the ratio, which peaked at 0.7 in 2007, is currently at 0.4. JGI is presently at 66. Should Gold eventually break to new highs and JGI/GLD rise back to 0.7, then junior gold stocks would gain more than 100%. With large producers reporting record cash flow and profits, it is only a matter of time before all gold equities reach higher valuations against Gold itself.

Our Junior Gold index as well as the other junior indices do not include the “true junior” companies which are of the microcap variety. The CDNX is basically an index for these types of companies. Most but not all of the companies within the CDNX are gold and silver related. Thus, in the chart below we decided to compare the CDNX to the CCI (continuous commodity index). The CCI is somewhat close to an all-time high while the ratio of the junior companies to the CCI is close to multi-year lows. With commodities not far off all time highs, one would expect the junior companies to be trading at higher levels.

Lately we’ve been writing about how gold stocks are faring in comparison to previous equity bull markets. The comparison argues that gold stocks should fare well this year and well into 2013. Even though this bull market is in its 12th year, it remains a few years away from the start of a bubble. In a bubble, valuations expand far beyond fundamentals and it continues for several years. In order for this to happen, valuations must be low prior to the start of the bubble.

From early 1992 to 1995 the price to earnings ratio (PE) on the Nasdaq fell from 50 down to 20. Over the next two years, the PE ratio climbed from 20 back to 50. Then in the second half of 1997, the PE ratio surged past 50 and never looked back.

From 1973 to 1983, the PE on the Nikkei (Japan) ranged from mostly 15 to 23. After 1983, the PE ratio surged to new highs and eventually peaked at 70.

It is clear that prior to a market bubble, valuations are compelling. Not stretched or fair, but compelling. After all, a bubble needs time to develop and then have its final blowoff stage. Prior to the start, valuations begin to move from the low side to the high side. Then as the bubble really gets going valuations break to new records and surge to extremes.

Months ago we wrote about how the PE for large cap gold stocks was near a 10 year low. Now we see that the speculative side of the precious metals sector, (the juniors), is trading at near basement valuations. This is 12 years into a bull market. Not five or eight. It will take time for valuations of precious metals companies to move back to the high end of the range. Companies that grow their business and add value could perform fantastically thanks to a likely increase in the valuation of the sector. If you’d like professional guidance in riding this bull market and uncovering the winning companies then learn about our premium service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

The new La Parrilla dual processing plant has a total capacity of 2,000 tonnes per day (1,000 tonnes per day in the flotation circuit and 1,000 tonnes per day in the cyanidation circuit) and is anticipated to be operating at full capacity in February, 2012. Currently the mill is operating at 1,500 tonnes per day (1,000 tonnes per day in flotation and 500 tonnes per day in cyanidation).

The final components of the plant to be installed are the tailings filters, which will allow for the recirculation and recovery of 80 per cent of the water used in the process. These filters are expected to be fully operational by the end of February, 2012. Also, the dust collection system and new induction furnaces are expected to be fully operational by the end of January, 2012.

As previously announced in September, 2011, the flotation circuit has been operating since Sept. 1, 2011, and reached commercial production of 1,000 tonnes per day on Oct. 1, 2011. The new 1,000-tonne-per-day cyanidation circuit was slightly delayed due to the late delivery of components and delays by the Mexican power authorities in hooking up the new 115,000-kilovolt power line which was eventually connected on Jan. 18, 2012. Once completed, annual production is estimated to be approximately 3.0 million ounces of pure silver, 6.0 million pounds of lead and 4.3 million pounds of zinc. The total investment to the end of 2011 was $35.0-million (U.S.) inclusive of mine development. The remaining balance of the $40.5-million (U.S.) budget is being expended in 2012.

This major expansion project was planned not to disrupt silver production during construction. Both circuits for flotation and cyanidation continued to operate during the entire construction process and will continue to operate while the final systems are installed for the new cyanidation circuit.

With this major construction project coming to an end, management can now focus on the many additional objectives planned for 2012 at the La Parrilla complex. The company has budgeted $20-million (U.S.) for the construction of a new 2,000-tonne-per-day shaft at Rosarios, near the mill, and the construction of an underground rail system that will connect the Rosarios, San Marcos, Vacas and Quebradillas mines. Upon completion, all underground mining areas will be connected by a new ore haulage level through an underground train system. The consolidation of the underground operations will significantly improve operating efficiencies and should have a positive impact overall on total cash costs.

In addition, the company’s exploration budget is $6.3-million (U.S.) at La Parrilla, which will include 25,000 metres of drilling. Included in this drilling program will be prospective areas defined by geophysics and geochemistry over the past year but never drilled before. In addition, a very aggressive development program consisting of 20,000 metres, including the new haulage level, is expected to be completed at La Parrilla in 2012. An updated NI 43-101 technical report is also expected to be released by the end of 2012.

Keith Neumeyer, president and chief executive officer, stated: “We are very pleased with the completion of this major new expansion at La Parrilla. Our Mexican construction team should be recognized for their hard work and tireless efforts and should be congratulated for completing the construction while keeping the older mill operating.”

Prior to the inaugural opening ceremony, the company hosted a visit of four mining analysts at the La Encantada silver mine and the Del Toro silver mine. At Del Toro, the analysts witnessed the major earthmoving project under way in advance of foundation laying and they also visited the new underground discovery called San Nicolas, which was discovered in November, 2011, during the construction of a development ramp to access the Persaverancia mine.

The preliminary economic assessment (PEA), planned to be released prior to the end of the first quarter, will include a new reserve and resource estimate and plans to construct a 4,000-tonne-per-day dual circuit mill rather than the previously planned 2,000-tonne-per-day mill. The PEA will outline a phased construction project whereby the new dual-purpose mill will reach 1,000 tonnes per day (500 tonnes per day in flotation and 500 tonnes per day in cyanidation) in the fourth quarter of 2012, 2,000 tonnes per day by the end of 2013, and 4,000 tonnes per day (2,000 tonnes per day in flotation and 2,000 tonnes per day in cyanidation) by the end of 2014. Full financial and production details will be contained in the PEA.

We seek Safe Harbor.

Source

Philip Ker, a mining analyst for Canada-based Union Securities Ltd., says while current market conditions are affecting the junior mining space, they are also helping investors to identify low-risk opportunities and projects that may provide future value growth. In this exclusive interview for The Gold Report, Ker discusses how the industry will need to continue to see positive news, especially from senior and midtier producers, which should trickle down to the juniors.

TICKERS: CUV; PCCRF, MIN, GIX, KSK, KTN, NGC; NGPHF, RVS, TMM

Source: Brian Sylvester of The Gold Report   (1/27/12)

The Gold Report: Philip, welcome. In a recent Union Securities research report, you wrote, “Despite global market volatility and foreign debt issues, we believe market valuations for mining companies, particularly in the precious metals sector, appear to be at incredibly low prices, on level with values seen prior to Q310′s commodity bull run. This is regardless of gold and silver being approximately 30% and 50% higher, respectively.” I agree that current share prices in the junior precious metals space are comparative to that timeframe, but we have been in a risk-off sector investing environment since last July, and you are operating in a high-risk sector. Share prices are low but without investors bidding up prices, how are we going to see a rebound in junior precious metals equities?

Philip Ker: We are seeing current market conditions affect the junior mining space, but also educating investors and helping them identify lower-risk opportunities in projects that are backed by strong management, and ones that can provide value growth in the future. We will need to see continuous positive news, particularly from the senior and midtier producers, at which point it should give more traction toward junior equities. I also expect mergers and acquisitions (M&A) activity to be a key factor for the juniors as a result of the strong balance sheets senior producers continue to build; as they look to replenish diminishing production portfolios they will target junior developers coming online.

TGR: Are you saying to stay on the sidelines at your peril?

PK: Not necessarily. It is more or less identifying the correct opportunity and the projects that are most targeted for growth that would be a good fit for a senior producer in its portfolio.

TGR: One thing, though, with regard to M&A activity, we recently watched Kinross Gold Corp.’s (K:TSX; KGC:NYSE) shares fall about 20% after it announced there were problems with its Tasiast gold mine in Mauritania, which it acquired through the takeover of Red Back Mining Inc. (RBI:TSX) early last year or the year before. Do you think something like that might make the majors think twice about dipping into the sector with some juniors with prospects that look promising?

PK: What was skeptical about that original takeover was that Kinross was stepping outside of the gold space and more into a copper play. Getting that project into development has been a task for Kinross and, as seen recently with the write-down along with the higher-than-anticipated costs, affected them considerably.

TGR: Will that have any trickle-down effect on the sector at large in terms of potential takeovers?

PK: No. There is always going to be M&A. The seniors need to do their due diligence in order to identify the best-fit projects and ones that they can develop or take over at a stage where they can restructure or integrate the management and more efficiently operate the new project.

TGR: You recently made some changes to your outlook for metals within foreign exchange numbers.

PK: For my gold forecast, my long-term price remains the same at $1,000/ounce (oz). The main change has been in the short term where we see average prices being sustained slightly higher over the next one to five years. With respect to gold, we just slightly increased it over the next few years, as we see a higher average price to come. For silver, we were previously using a gold:silver ratio of 42:1. I felt that was a little high, so we are now using a 50:1 ratio going forward. For copper, our long-term price didn’t change. The slight decrease for 2012 was to reflect a pretty strong pullback in prices, but we remain quite bullish, as India and China continue to grow and develop their rapidly expanding economies.

TGR: Can we also have a specific 2012 price for gold, silver and the U.S. dollar?

PK: Sure. 2012 gold: $1,725/oz, silver: $34.50/oz, copper: around $4/pound (lb). Keep in mind that these are average prices over the year. For the U.S. dollar, over most of 2011 it was at par with, or subpar to, the Canadian dollar. What we have seen in the last quarter was the strengthening of the U.S. dollar, so we made adjustments to compensate for these changes within our models and in our target prices.

TGR: Please tell us briefly about your coverage universe.

PK: I am about 50–60% precious metals as well as some bulk materials, including iron ore, potash and coal. I also have a great story on Northern Graphite Corporation (NGC:TSX; NGPHF:OTCQX), which we brought public in April 2011.

TGR: Another company you cover is Geologix Explorations Inc. (GIX:TSX), whose primary project is the Tepal copper-gold porphyry project in Mexico. Despite a downgrade in your outlook for copper prices, your 12-month target price on Geologix did not change. Tell us why you remain bullish on that junior.

PK: The downgrade in the copper price was only affecting models in the short term, whereas Geologix’s target is based on a discounted cash flow for its production scenario. This did not affect the production model using the long-term price for its Tepal project. I’m still quite bullish on Geologix as the economics only become more attractive should copper prices remain above our long-term outlook. The company’s Tepal project in Mexico is an attractive play that has become more appealing on top of its already robust economics. Recent drilling has demonstrated a higher-grade zone below the current pit shell, which is showing two to three times the grades used within the existing resource. It is currently at a valuation suggesting approximately $5/oz gold equivalent (Au eq).

TGR: Recent drill results seem to indicate that the copper-gold mineralization continues at depth. What is the earliest the company could test that theory?

PK: Geologix is testing it now. It has completed a substantial drill program to define the outer limits of the deposit. There are still 96 holes of assays to come from this drill program.

TGR: If you believe that copper and gold prices are going to continue to rise over the medium to long term, this looks like a good bet.

PK: The economics are robust for Tepal and I am astonished at such a low valuation that the market is giving it at this point. My 12-month target is $1.25, and it is currently trading at about $0.25.

TGR: There are certainly some gains to be had there. Another company where changes to your outlook for metal prices did affect the target price was Timmins Gold Corp. (TMM:TSX.V; TMM:NYSE.A). You cut your target price on Timmins to $3.90, which you said reflects “the leverage to the decreased gold price and stronger U.S. dollar outlook in the short term.” You are expecting Timmins to go from earnings per share of $0.02 in Q212 to $0.8 in Q312. What is going to bring about that kind of jump?

PK: I toured this property last August and initiated coverage shortly after. What happened in the previous quarters is the company was struggling with lower-than-expected recoveries, which ultimately resulted in lower-than-expected gold production. The good thing, however, is that it was not a geological or depositional issue, but more of an operating efficiency problem. The company brought in some specialists who recommended adjustments to the leaching cycle at the San Francisco mine. Timmins has now adjusted the flow rates and the irrigation setup and has now shown that it has recovered 30% more gold this quarter than the previous, and increased recoveries from 50% to 65%. As well, it demonstrated recoveries of 76%, ultimately achieving a record 8,500 oz gold production in December.

TGR: What sort of production are you expecting this year?

PK: I’m quite optimistic for Timmins this year and expect around 115,000 oz of production. With the increased recoveries as well as an increase to its throughput expected later this year from the addition of a mobile crusher, Timmins should be able to achieve this target.

TGR: Could a company like Timmins be looking to acquire another mine or project in the vicinity in order to leverage its current cash flow?

PK: It is quite possible because Mexico has great gold and silver deposits. At this point, Timmins is focused on extending the mine life at San Francisco, as well as identifying additional mineralization from La Chicharra to increase reserve life to San Francisco.

TGR: You wrote that you determined the companies on Union Securities’ 2012 Watch List by “strategically selecting precious metals exploration companies in various stages of project development. The general focus is on properties located in prominent regions of hosted gold and silver mineralization.” One company that fits that bill is Kiska Metals Corp. (KSK:TSX.V), whose Whistler gold-silver-copper project is in the same region as Alaska’s Northern Dynasty Minerals Ltd. (NDM:TSX; NAK:NYSE.A) Pebble copper-gold porphyry deposit. Tell us about how Kiska’s ongoing drill efforts at Whistler are growing the project’s gold-equivalent ounces?

PK: Whistler is a huge land package with an abundance of targets. With a limited field season in Alaska to test these targets, Kiska needed to be more efficient with prioritizing the targets, which were generated from geophysics. It has utilized a scout drilling program that allowed it to drill shallow holes around 100 meters (m) deep and allowed it to test multiple targets in the shorter timeframe. This was a successful exercise and demonstrated at its Rainmaker target that the scout drilling extended mineralization 110m along strike. This program also helped show that non-anomalous magnetic signatures do contain mineralization, as scout drilling identified gold-copper mineralization at its Dagwood target and quartz stockwork veining over 138m. These targets will be followed up this year.

TGR: There was also a high-grade intercept on its Island Mountain deposit.

PK: Island Mountain has now been expanded to more than 300m by 300m, and it is particularly open to the north. The high-grade zone that you are speaking of was about 2.2 grams/ton over 100m within the brecchia zone at that porphyry target. What needs to be done now is infill between the north zone and the southern zone to test the continuity between them.

TGR: Those results will not be included in the resource estimate that is due in the second half of 2012, right?

PK: They should be. Toward Q212, I am expecting close to 7 million ounces (Moz) Au eq. Its past resource was 5.4 Moz Au eq.

TGR: That is a significant increase. Will that be a significant catalyst in the share price to get it back up to that $1.50/share level?

PK: It definitely will start to get more traction for Kiska. Its ultimate goal is to get close to 10 Moz. I think this scouting drill program was a good step in the right direction to target certain proprietary targets in order to achieve this goal. Our target is $1.40 and is currently trading around $0.29.

TGR: What are some other junior precious metals companies that could rebound significantly in 2012?

PK: I like Kootenay Gold Inc. (KTN:TSX.V). It has the Promontorio silver deposit down in Mexico and is currently engaged in a 25,000m drill program. It has been successful with extending mineralization outside of the current resource pit, particularly in the northeast and southwest zones. It is aiming for almost five times its current resource, targeting 100 Moz Ag eq.

TGR: What does that tell you about the project and the deposit?

PK: This northeast zone at Promontorio is not a one-hole wonder. It is continuing to intersect this zone along strike as well as along different fence lines within the zone. There definitely seems to be a high-grade area that can add significant resources in the upcoming NI 43-101.

TGR: What are you expecting from that?

PK: It is targeting 100–105 Moz Ag eq. In terms of silver prospects, it is mid to small size, but it is definitely in a good district. Mexico is one of the largest silver producers on the planet.

TGR: If it keeps hitting intercepts like that, it will not be long before that resource doubles. What is your 12-month target price for Kootenay?

PK: $2.50.

TGR: What about some other juniors?

PK: One copper story I cover is Excelsior Mining Corp. (MIN:TSX.V). Its North Star deposit has an in situ resource of close to 5 billion tons copper at about 0.3%. This project in Arizona is targeting an in situ recovery method that would produce 80 million pounds/year. Arizona is a mining friendly state, and copper mining is one of the leading producers toward the state’s gross domestic product. This is more of a permitting and development story that is ultimately going to come into production down the road. Right now, the company is engaged in a feasibility study to better define the metallurgy and engineering needed to increase its overall expected recoveries.

TGR: The key thing with in situ recovery is that it really lowers the cost of mining copper. In this case, you would be able to produce 1 lb copper for under $1, and that’s really good.

PK: That’s right. Excelsior is looking at costs of approximately $0.94/lb and would become significantly lower should it add an onsite acid generation plant. It would bring down its operating costs to about $0.68/lb.

TGR: The preliminary economic assessment done on the North Star project calculated a net present value (NPV) of $480M with an internal rate of return (IRR) of 34%. How does that compare with its peers in the space?

PK: It is quite comparable, particularly to Curis Resources Ltd. (CUV:TSX.V; PCCRF:OTCPK). I do not cover Curis, but Excelsior does have a higher NPV and relatively similar IRR with a shorter payback period. Excelsior is also looking at an annual production rate that is higher than that of Curis. My 12-month target on Excelsior is $1.75, and it is currently trading around $0.57.

TGR: I would like to talk about one more and then move onto Northern Graphite.

PK: One that I do not cover is Riverstone Resources Inc. (RVS:TSX.V) in Burkina Faso. I have this featured on my 2012 Watch List. It has recently expanded its Karma deposit to 2.7 Moz of gold resources across five main targets. This company is moving the project in the right direction as well as within a good jurisdiction for mining. The initiative right now in Burkina Faso is to electrify the country, and the International Finance Corp. is funding two major power lines that will be within close proximity to Riverstone’s Karma asset.

TGR: Right, part of the World Bank.

PK: The big overhang on this right now is the final transaction needed from Golden Star Resources Ltd. (GSC:TSX; GSS:NYSE), for the option agreement to take over 90% of the project. Once that is cleared up, we will be able to see the full direction and the continued growth of the asset.

TGR: Is that 2.7 Moz open-pittable gold?

PK: Yes, and a majority of it is contained within the Indicated category. That material will be easily accessible within an open-pit mine.

TGR: What do you think the upside is on Riverstone in terms of ounces?

PK: The Kao zone is open along strike and down dip particularly to the northeast. Riverstone also has other targets that have yet to be tested on the property that could be other mini-pits to add future throughout in a production scenario. I think a 4 Moz global resource for Karma isn’t out of the question.

TGR: Finally, some graphite. This may be saving the best for last. It is a graphite play, and probably not a four- or five-hour drive from your office in Toronto. The company is named Northern Graphite. A year ago, virtually no one knew about this company, and now it is about to publish a feasibility study on the Bissett Creek graphite project in central Ontario. Tell us why you believe the share price will double this year.

PK: The graphite space is something that we are really bullish on. We brought Northern Graphite public in April 2011 through an IPO. The Bissett Creek graphite project is a large-flake, high-quality, carbon graphite deposit where the large flakes within the deposit are abundant—greater than 50%. Large-flake graphite currently sells for around $2,500/ton (t). The upside for Northern Graphite is that its jumbo-flake graphite will be sold on the market for a substantial premium to $2,500/t. It is on the fast track to production and already has a mine permit plan in place with the Ontario government and can begin construction with permit approval. There should be a feasibility study by the end of Q112, and I expect it to have a strategic offtake partner in place that could emerge right around the time of that feasibility study.

TGR: Is that likely to be a Chinese partner?

PK: It is quite possible as China is the world’s leading producer and consumer of graphite, and has dwindling resources available to meet its growing demands.

TGR: The project is not far from Algonquin Park. Do you expect any issues with regard to bringing a mine into production in a relatively well-traveled part of the province?

PK: No, I don’t. The water drains in the opposite direction of the park from the project site and the tailings are not acid generating so this is a definite positive for Bissett Creek to become a mine.

TGR: As far as an NPV goes, what sort of numbers are we looking at with Northern Graphite?

PK: It depends on which discount rate you use for Bissett Creek; using 10%, I have it at about $125M. The upcoming feasibility study should provide further insight into what to expect from Bissett Creek.

TGR: For how long would that mine be in production?

PK: It could easily expand the existing resources and increase its production scenario, but our model uses a 35-year mine life.

TGR: Any parting thoughts?

PK: I am pretty optimistic that we will see a strong market for 2012 and, particularly, I favor junior advanced exploration and development stories that can either be developed by the existing management groups or ones that would be targeted by a senior midtier company to fit its project portfolio for future production.

Philip Ker is a mining analyst for Union Securities Ltd., a company formed in 1963 that is now one of the largest independent brokerage firms in Canada. The company has offices all across Canada as well as one in London, England. He has field experience as an exploration geologist working across Canada on gold, diamond and base metal projects. He joined Union Securities in June 2011 after completing his Master of Business Administration degree in finance at the University of Alberta. He holds a Bachelor of Science degree in geology. 

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.

DISCLOSURE: 
1) Brian Sylvester of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Northern Graphite Corp., Geologix Explorations Inc., Timmins Gold Corp., Kiska Metals Corp. Streetwise Reports does not accept stock in exchange for services.
3) Philip Ker: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise for participating in this story.

MEADOW BAY GOLD EXTENDS THE ATLANTA SHEAR ZONE TO THE SOUTH AT ITS ATLANTA GOLD MINE PROJECT IN NEVADA

Meadow Bay Gold Corp.’s recent drilling has extended gold and silver mineralization within the Atlanta shear zone to the south of the historic open pit. Assay results from hole DHRC-11-10R intersected 21.34 metres containing 1.75 grams per tonne gold and 11.4 grams per tonne silver. In addition, hole DHRC-11-11R has also intersected breccias along the Atlanta shear zone. Although assays are still pending on hole DHRC-11-11R, the effect is to extend the shear zone 110 metres farther to the south of any previous drilling. This extension remains open both to the south and at depth.

The attached table summarizes the significant drill results from the new drill hole.

Drill hole area       Total depth    From       To    Width     Au     Ag
                               (m)     (m)      (m)      (m)  (g/t)  (g/t)
DHRC-11-10R
Jasperoid breccia
south of pit               144.78  108.23   129.57    21.34   1.75   11.4

Note: True width has not been determined.

The drilling, completed in December, 2011, was part of a 9,150-metre (30,000-foot) program for 2011. A total of 39 core and reverse circulation holes were drilled by Meadow Bay Gold at the Atlanta gold mine project. The goals of the program were threefold:

1. Twinning of drill holes from previous exploration within the Atlanta fault zone;
2. Increasing the drill density in areas of known mineralization;
3. Extending the known mineralization.

Extending the mineralization has largely focused on drilling to the north and at depth although these latest results indicate that there is additional potential to the south as well.

Following the discovery of porphyry-style gold mineralization to the southwest of the historic pit, defining the limits of the intrusive porphyry was added as a fourth goal. Five core holes and six reverse circulation holes have intersected the porphyry and are currently being assayed at the ALS Chemex lab in Elko, Nev. These are in addition to drill holes DHRC-11-04C, DHRC-11-06C and DHRC-11-11C which intersected the porphyry and which results were previously reported.

Thus far, gold mineralization has been traced along the southern margin of the porphyry for over 300 metres in an east-west direction. The widely spaced core and reverse circulation drilling has intersected quartz latite porphyry with similar alteration and sulphide mineralization for over 400 metres along a north-south transect. The northern limit of the porphyry has yet to be defined.

Updated drill hole location maps and a table of results are available on the Meadow Bay Gold website.

Charles (Bill) Reed, a qualified person as defined by National Instrument 43-101 and director of Meadow Bay Gold, has reviewed the contents of this press release. A continuing quality assurance/quality control program is being employed, including blank, duplicate and reference standards, with samples being assayed at the ALS Chemex lab in Elko, Nev., by fire assay with a gravimetric finish. Meadow Bay Gold is focused on developing the former-producing Atlanta gold mine in Nevada.

The chart below shows Gold against the S&P 500. Note the similarity between 2003-2006 action and 2009-2012 action. After surging higher, the ratio retreats quickly but then forms a bottom and builds a base. The ratio has found strong support and won’t be going lower anytime soon. Stocks have had a nice relief rally against Gold but it looks to be all but over.

Turning to Gold Stocks against Stocks, we find this ratio at a confluence of support. Yes, the mining equities had a difficult 2011 but it was nowhere close to their severe under-performance in 2008. Technically, the ratio looks likely to bottom soon and reverse course.

Moving along, we see the S&P 500 closing in on an area of strong resistance. Common stocks remain in a secular bear market and as a result, the market is nearing another sell signal. Conversely, the gold stocks which are in a secular bull market, are digging out a bottom

Investors and traders have to monitor charts and also sentiment which tells us more about fund flows and risk versus reward. Below is a screenshot of a new indicator developed by sentimentrader.com. They are combining put-call ratios, short interest and analyst ratings to develop another indicator for the various sectors. As you can see, every sector is either at or very close to a sell signal while the gold stocks are the only sector on a buy signal.

It may take a few months but common stocks are nearing an important peak. They won’t crash but they will act typical of what we see in the last third of a secular bear market. Doom and gloomers and extreme deflationists ignore the obvious reasons why stocks will begin a mild cyclical bear market and nothing of the sort of the previous two bear markets. At the same time, the precious metals sector is set to emerge from a major bottom and spend 2012 working its way towards the next major breakout that will serve as a catalyst for the beginnings of a bubble. If you’d like professional guidance in riding this bull market and uncovering the winning companies then learn about our premium service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

Vancouver, B.C……..Corvus Gold Inc. (“Corvus” or the “Company”) – (TSX: KOR, OTCQX: CORVF) announces the start of its 2012 exploration drilling program on its 100% controlled North Bullfrog Project near Beatty, Nevada.  This initial phase of drilling will focus on three main objectives: 1) assessing the resource expansion potential of the current deposit; 2) follow-up drilling on encouraging high-grade gold results returned from the 2011 program in the Yellowjacket feeder zone which included 6.1 metres of 11.9 g/t gold and 3) PQ core drilling for additional metallurgical sample materials.  This initial phase, which includes both reverse circulation and diamond drilling, totals approximately 4,000 metres and will aid in directing an aggressive +100 hole follow-up program which is currently being permitted.  A preliminary economic assessment (PEA) based on the current resource and metallurgical results is expected to be completed next month and will outline more specific project economics.

The resource expansion program will focus on major (several hundred metres) step outs from the existing resource area which covers approximately 1.6 km² (Figure 1).  The goal of this phase of the program is to evaluate the potential to increase the current estimated resource of 0.18M ounces of gold in 15 Mt at a grade of 0.37 g/t gold (Indicated) and 1.4M ounces in 156 Mt at a grade of 0.28 g/t gold (Inferred), both at a 0.2 g/t cutoff.

The high-grade exploration program will follow-up on encouraging results in the Yellowjacket feeder system as well as other potential feeders defined in the 2011 exploration program.  The goal of the high-grade program will be to determine the geometry, extent and resource potential of these zones in the District.  High-grade feeder systems formed an extensive part of the historic Bullfrog deposit approximately 10 kilometres to the south that was mined in the 1990’s by Barrick Gold.

The metallurgical sampling program will collect large diameter samples from each of the major resource areas which will be used for additional column leach testing to further enhance and define the Run of Mine leaching potential of the deposit.

Jeff Pontius, CEO of Corvus, stated: “We are excited to open this next chapter of exploration on this new Nevada gold discovery.  The discovery of additional high-grade mineralization in the District could be a transforming catalyst for the project.  In addition, the project continues to provide significant encouragement for growing an already large gold resource as well as positive results from early mining and processing studies.  This phase of work will set the stage for assessing the development potential of the deposit and the direction of Corvus in the future.”

About the North Bullfrog Project, Nevada

Corvus controls 100% of its North Bullfrog Project, which covers approximately 24 square kilometres in southern Nevada just north of the historic Bullfrog gold mine formerly operated by Barrick.  The property package is made up of a number of private mineral leases of patented federal mining claims and 161 federal unpatented mining claims.  The project has excellent infrastructure, being adjacent to a major highway and power corridor.

The project currently includes numerous prospective gold targets with four (Mayflower, Sierra Blanca, Jolly Jane and Connection) containing an NI 43-101 compliant estimated Indicated Resource of 15 Mt at an average grade of 0.37 g/t gold for 182,000 ounces of gold and an Inferred Resource of 156 Mt at 0.28 g/t gold for 1,410,000 ounces of gold (both at a 0.2 g/t cutoff), with appreciable silver credits.  Mineralization occurs in two primary forms: (1) broad stratabound bulk-tonnage gold zones such as the Sierra Blanca and Jolly Jane systems; and (2) moderately thick zones of high-grade gold and silver mineralization hosted by structural zones with breccias and quartz-sulphide vein stockworks such as the Mayflower and Yellowjacket targets.  The Company is actively pursuing both types of mineralization.  A video of the North Bullfrog project showing location, infrastructure access and 2010 winter drilling is available on the Company’s website at http://www.corvusgold.com/investors/video/.

Figure 1: Corvus land position at North Bullfrog showing areas where resources have been defined.
Drill collar locations are shown for reference.

Qualified Person and Quality Control/Quality Assurance

Jeffrey A. Pontius (CPG 11044), a qualified person as defined by National Instrument 43-101, has supervised the preparation of the scientific and technical information (other than the resource estimate) that form the basis for this news release and has approved the disclosure herein.  Mr. Pontius is not independent of Corvus, as he is the CEO and holds common shares and incentive stock options.

Mr. Gary Giroux, M.Sc., P. Eng (B.C.), a consulting geological engineer employed by Giroux Consultants Ltd., has acted as the Qualified Person, as defined in NI 43-101, for the Giroux Consultants Ltd. mineral resource estimate.  He has over 30 years of experience in all stages of mineral exploration, development and production.  Mr. Giroux specializes in computer applications in ore reserve estimation, and has consulted both nationally and internationally in this field.  He has authored many papers on geostatistics and ore reserve estimation and has practiced as a Geological Engineer since 1970 and provided geostatistical services to the industry since 1976.  Both Mr. Giroux and Giroux Consultants Ltd. are independent of the Company under NI 43-101.

The work program at North Bullfrog was designed and supervised by Russell Myers (CPG 11433), President of Corvus, and Mark Reischman, Corvus Nevada Exploration Manager, who are responsible for all aspects of the work, including the quality control/quality assurance program.  On-site personnel at the project log and track all samples prior to sealing and shipping. Quality control is monitored by the insertion of blind certified standard reference materials and blanks into each sample shipment. All resource sample shipments are sealed and shipped to ALS Chemex in Reno, Nevada, for preparation and then on to ALS Chemex in Reno, Nevada, or Vancouver, B.C., for assaying.  ALS Chemex’s quality system complies with the requirements for the International Standards ISO 9001:2000 and ISO 17025:1999.  Analytical accuracy and precision are monitored by the analysis of reagent blanks, reference material and replicate samples. Finally, representative blind duplicate samples are forwarded to ALS Chemex and an ISO compliant third party laboratory for additional quality control. McClelland Laboratories Inc. prepared composites from duplicated RC sample splits collected during drilling. Bulk samples were sealed on site and delivered to McClelland Laboratories Inc. by ALS Chemex or Corvus personnel. All metallurgical testing reported here was conducted or managed by McClelland Laboratories Inc.

About Corvus Gold Inc.

Corvus Gold Inc. is a resource exploration company, focused in Alaska and Nevada, which controls a number of exploration projects representing a spectrum of early-stage to advanced gold projects.  Corvus is committed to building shareholder value through new discoveries and leveraging those discoveries via partner funded exploration work into carried and or royalty interests that provide shareholders with exposure to gold production.

On behalf of
Corvus Gold Inc.

(signed) Jeffrey A. Pontius
Jeffrey A. Pontius,
Chairman and Chief Executive Officer

Contact Information:   Ryan Ko
Investor Relations
Email: info@corvusgold.com
Phone: 1-888-770-7488 (toll free) or (604) 638-3246 / Fax: (604) 408-7499

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable Canadian and US securities legislation.  All statements, other than statements of historical fact, included herein including, without limitation, statements regarding the anticipated content, commencement and cost of exploration programs, anticipated exploration program results, the discovery and delineation of mineral deposits/resources/reserves, the potential for any mining or production at North Bullfrog, the potential for the identification of multiple deposits at North Bullfrog, the potential for a low-cost run-of-mine heap leach operation at North Bullfrog, the potential for there to be a low strip ratio in connection with any mine at North Bullfrog, the potential for the existence or location of additional high-grade veins or zones, the proposed completion of a PEA for the North Bullfrog project, the potential for additional resources to be located between or outside certain of the existing deposits, the potential for the Company to secure or receive any royalties in the future, business and financing plans and business trends, are forward-looking statements.  Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct.  Forward-looking statements are typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events.  The Company cautions investors that any forward-looking statements by the Company are not guarantees of future results or performance, and that actual results may differ materially from those in forward looking statements as a result of various factors, including, but not limited to, variations in the nature, quality and quantity of any mineral deposits that may be located, variations in the market price of any mineral products the Company may produce or plan to produce, the Company’s inability to obtain any necessary permits, consents or authorizations required for its activities, the Company’s inability to produce minerals from its properties successfully or profitably, to continue its projected growth, to raise the necessary capital or to be fully able to implement its business strategies, and other risks and uncertainties disclosed in the Company’s 2011 Annual Information Form and filed with certain securities commissions in Canada.  All of the Company’s Canadian public disclosure filings may be accessed via www.sedar.com and readers are urged to review these materials, including the technical reports filed with respect to the Company’s mineral properties.

Cautionary Note Regarding References to Resources and Reserves

National Instrument 43 101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.  Unless otherwise indicated, all resource estimates contained in or incorporated by reference in this press release have been prepared in accordance with NI 43-101 and the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resource and Mineral Reserves, adopted by the CIM Council on November 14, 2004 (the “CIM Standards”) as they may be amended from time to time by the CIM.

United States shareholders are cautioned that the requirements and terminology of NI 43-101 and the CIM Standards differ significantly from the requirements and terminology of the SEC set forth in the SEC’s Industry Guide 7 (“SEC Industry Guide 7”).  Accordingly, the Company’s disclosures regarding mineralization may not be comparable to similar information disclosed by companies subject to SEC Industry Guide 7.  Without limiting the foregoing, while the terms “mineral resources”, “inferred mineral resources”, “indicated mineral resources” and “measured mineral resources” are recognized and required by NI 43-101 and the CIM Standards, they are not recognized by the SEC and are not permitted to be used in documents filed with the SEC by companies subject to SEC Industry Guide 7.  Mineral resources which are not mineral reserves do not have demonstrated economic viability, and US investors are cautioned not to assume that all or any part of a mineral resource will ever be converted into reserves.  Further, inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically.  It cannot be assumed that all or any part of the inferred resources will ever be upgraded to a higher resource category.  Under Canadian rules, estimates of inferred mineral resources may not form the basis of a feasibility study or prefeasibility study, except in rare cases.  The SEC normally only permits issuers to report mineralization that does not constitute SEC Industry Guide 7 compliant “reserves” as in-place tonnage and grade without reference to unit amounts.  The term “contained ounces” is not permitted under the rules of SEC Industry Guide 7.  In addition, the NI 43-101 and CIM Standards definition of a “reserve” differs from the definition in SEC Industry Guide 7.  In SEC Industry Guide 7, a mineral reserve is defined as a part of a mineral deposit which could be economically and legally extracted or produced at the time the mineral reserve determination is made, and a “final” or “bankable” feasibility study is required to report reserves, the three-year historical price is used in any reserve or cash flow analysis of designated reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.

Caution Regarding Adjacent or Similar Mineral Properties

This news release contains information with respect to adjacent or similar mineral properties in respect of which the Company has no interest or rights to explore or mine.  The Company advises US investors that the mining guidelines of the US Securities and Exchange Commission (the “SEC”) set forth in the SEC’s Industry Guide 7 (“SEC Industry Guide 7”) strictly prohibit information of this type in documents filed with the SEC.  Readers are cautioned that the Company has no interest in or right to acquire any interest in any such properties, and that mineral deposits on adjacent or similar properties are not indicative of mineral deposits on the Company’s properties.

This press release is not, and is not to be construed in any way as, an offer to buy or sell securities in the United States.

Fourth Quarter 2011 Highlights:

• Gold production of 19,700 ounces, 8% increase over Q4 2010
• Record gold ounces sold of approximately 20,500, a 42% increase over Q4 2010
• Tonnes mined increased to greater than 1.8 million tonnes per month, an 11% increase over Q4 2010
• El Castillo eastern processing facility was commissioned and fully operational during Q4
• New resource calculation, production decision and construction commencement for the La Colorada project
• Year-end cash balance of $36 million

 El Castillo Operating Statistics

*All tonnes and ounces rounded to nearest 100

2012 Production Guidance

• El Castillo Expected Production 
• 75,000 to 80,000 ounces of gold
• La Colorada Expected Production 
• 10,000 to 15,000 ounces of gold

Peter Dougherty, President and CEO of Argonaut said:

“We are pleased with the Q4 gold production of 19,700 ounces. It was a very strong ending to a great year, with record gold production (+40% year-over-year).  Argonaut also completed efforts to achieve a significant increase in our resource base, which now exceeds 6 million ounces (+320%) which will enable us to implement further production enhancements”.

Mr. Dougherty added “Through the acquisition of Pediment Gold, the Company not only advanced its exploration programs, but expanded its development pipeline.  We are happy to report that we anticipate production at the La Colorada project in Q2 of this year. Also, the permit application for expanding operations at La Colorada has been submitted. We are also well underway in our process to permit a third mine for production at San Antonio.  These accomplishments have come through the constant efforts of our dedicated teams of professionals at each location. I am proud of their accomplishments and look forward to another strong year as we begin 2012.

All of the aforementioned was rewarded in our share price performance. In a year when the price of gold increased 9%, Argonaut’s shares climbed 50%, from $4.62 per share to $6.95 per share, and our trading volume increased nearly 400%.  As we reflect back on the year, it was one like no other. We are starting to harvest the seeds we had sown earlier, with new projects emerging, and production enhancements taking effect.  We are very thankful for our shareholders who have supported us from the beginning, and our dream of building value beyond gold.”

About Argonaut Gold
Argonaut is a Canadian gold company engaged in exploration, mine development and production activities. Its primary assets are the production-stage El Castillo Mine in the State of Durango, Mexico, the development stage La Colorada project in the State of Sonora, Mexico, the advanced exploration stage San Antonio project in the State of Baja California Sur, Mexico, and several exploration stage projects, all of which are located in Mexico.

Creating Value Beyond Gold

Cautionary Language Regarding Forward-Looking Information
This news release contains and refers to forward-looking information based on current expectations. All other statements other than statements of historical fact included in this release are forward-looking statements (or forward-looking information). The Company’s plans involve various estimates and assumptions and its business and operations are subject to various risks and uncertainties. For more details on these estimates, assumptions, risks and uncertainties, see the Company’s most recent Annual Information Form and most recent Management Discussion and Analysis on file with the Canadian securities regulatory authorities on SEDAR at www.sedar.com. These forward-looking statements are made as of the date hereof and there can be no assurance that such statements will prove to be accurate, such statements are subject to significant risks and uncertainties, and actual results and future events could differ materially from those anticipated in such statements. The Company assumes no obligation to update the forward-looking information contained in this news release.  Accordingly, readers should not place undue reliance on forward-looking statements that are included herein.

For more information, contact:
Argonaut Gold Inc.
Nichole Cowles
Investor Relations Manager
Tel:  (775) 284-4422 x 101
Email: nichole.cowles@argonautgoldinc.com
www.argonautgoldinc.com