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Gold Canyon Resources
Working on a 10M oz Monster in Red Lake

Gold Canyon Resources GCU-V
SP Jan. 25, 2011… $2.15
Shares Out… 89M
Fully Diluted… 117M
Market Cap… $187 million
Insiders and Mgmt own 39%
Mgmt... 6%
Sprott... 20%
Pinetree... 13%
Initial Coverage Aug ’10 @
.41 +$1.69 / 412%
GCU is an early stage gold development story at with 10M oz potential at Springpole, Red Lake
Gold Canyon Resources is a company that has gone on an incredible run since August after announcing initial results of drilling at The Springpole Lake Project in the Red Lake District, Western Ontario. GCU has continued to deliver impressive results throughout the fall season in their initial attempts to define a very large gold zone called The Portage Zone at The Springpole Project. The market has rewarded Gold Canyon shareholders with a 1000% share price increase from trading in the
.20 cent range in early August to the $2 range in December after a drill program that exceeded everyone’s expectations. Gold Canyon is quickly going from explorer of a prospective 1.5M oz historical deposit, to an up & coming development story in Red Lake defining a potential 10M ounce gold deposit that has both open pit and underground mine potential at depth.
Gold Canyon’s name appropriately describes the subterranean view of the Portage Zone as it is a greater than 1km sheared zone of intrusive alkaline porphyry rocks that dip close to near vertical between 70 and 80 degrees and as of yet has untested depth potential below the 400 meter level due to drill rig limitations. Based on the geology of the deposit and the continuity of the mineralization, this deposit is expected to run at least 500 to 600 meters deep with the potential to have a typical depth of other deposits in the area which could be in excess of 1,000 meters.
Springpole was the focus of high grade mineralization typical of Red Lake and past operators outlining a modest high grade historical resource at the north end of the project and the very large Portage Zone to the south. The Main Zone was the focus of drilling last year where GCU outlined 45,000 high grade oz’s M & I and another 197,000 ounces inferred a grade in excess of 16g/t au which was a nice base high grade resource starter pit and work from there. GCU is confident that they can confirm 400,000 ounces of gold in the Main, SPROG and EE zones, in addition to defining the massive Portage Zone that extends underneath Springpole Lake to the southeast from the Main Zone. The majority of the historical resource was in the lower grade Portage Zone at just over 1 g/t so previous operators never gave the Portage Zone more than a passing glance.
Drilling at Portage in 2010 outlined some key findings…
Grades are consistently higher than historical averages at 1.36 g/t gold.
GCU using HQ sized holes which gives a more accurate sample reading with more assay material and is confident testing continuity to surface will yield consistently higher grades than historical averages.
The mineralization is rich with silver credits… so far averaging 5.95 g/t silver.
Drilling has confirmed that all the zones are related. The alkaline porphyry rocks being the intrusion with the high grade core area being the epithermal blowout event.
Considering the upper Portage in the north area pinches near surface it lends credence that this area came under extreme pressure with the Main Zone being the blowout event
Recent holes indicate that Portage opens up underneath the main zone from 53 meter width to 250 meter and most likely dips underneath the Main Zone suggesting the zone may be open to the north as well, certainly at depth.
What makes Gold Canyon’s Springpole Project even more enticing, aside from the potential of Portage hosting a 10 million ounce deposit, is that Gold Canyon has mapped the rock structure containing the Portage Zone another 5km of strike and are extending the zone a further 500 meters this winter along this highly prospective rock structure. The porphyry structure was thought to veer off underneath the main body of the lake but re-interpretation is putting Portage more at SE heading. In addition to such a long continuous, highly prospective rock structure, these rocks have been map on other parts of the property hitting extensive intervals of low grade gold between 0.2 g/t au and 0.3 g/t au confirming the theory that this is not an isolated geological event giving Gold Canyon’s Springpole a very good chance of hosting another very large ‘Portage-like’ gold bearing structure in the area.
Springpole: A Unique Canadian Shield Deposit
Springpole is a unique Canadian deposit in the sense its geology is much more similar to a deposit like Anglo Ashanti’s 30M+ Cripple Creek in Colorado or Barrick’s 28 million ounce Porgera in Indonesia being an alkalic type precious metals deposit with mineralization associated with hydrothermal and epithermal activity. Most Canadian Shield deposits are typicalCanadian Archean Greenstone deposit types where mineralization is hosted in quartz-carbonate veins, especially typical of gold deposits found in Red Lake. These deposits are typically very high grade and run deep.
The Portage Zone mineralization is hosted in a sheared zone of high level potassic stock in an intrusion of alkaline porphyry rocks. This puts Gold Canyon’s Springpole Project under unique classification for an eastern Canadian gold deposit whose mineralization is typical of some of the largest gold systems in the world.
With mineralization that is very consistent and geology that is similar to that of the biggest systems in the world, having drilled the formation over 1km strike and to a depth of close to 400 meters; Gold Canyon may be sitting on a world class deposit at Springpole Lake that could rival a recent Canadian discovery like Osisko’s Malarctic. When comparing an investment type story, GCU is on target to be the next big mine in Ontario and could follow a similar investment type path as an emerging development story similar to Osisko. Once they have added the ounces at Springpole this spring, the investment community will see this as a legitimate contender to being the next big gold mine in Canada. There are not very many stories that have a chance at defining 10M ounces and more and GCU is one of those stories, although it is still in the early innings of this ball game.
Multi-million Ounce World Class Potential
Recent drilling at Springpole’s Portage zone has so far exceeded expectations and is pointing to a world class multi-million ounce deposit in Red Lake with mineralization averaging widths of 90 to 150 meters and certain parts of the zone opening up to as wide as 250 meters at depth at the north part of the zone. So far drilling has suggested a depth of more than 370 meters and the gold zone being traced along a strike of up to 950 meters. GCU has suggest a 3 –5 million ounce gold target within the current defined strike to a depth of 300 meters which is more double the depth of the 1.5M oz historical resource.
Combined with an increased grade from around 1 g/t to 1.36, additional silver credits and an extension of the strike another 250 meters, it is easy to see where GCU is going to attain such a large initial resource for the Portage Zone. In addition to Portage, GCU estimates 400,000 – 500,000 ounces with inclusion of all the work at the Eastern Extension and Camp Zones into the resource. EE drilling hit decent shallow low grade intercepts of 54 meters @ 0.64 in a hole that had an aggregate of 63.4 gram-meters and hit some decent intervals in the camp zone which is a transition zone from the Main to the Portage of 21.5 meters at 1.31 g/t and 41 meters at 1.08 g/t au.
Unlimited depth potential
Recently drilling has confirmed the Portage Zone to a depth of 370 meters at the southern extent and to 300 meters at the north end which more than doubles the open pit depth potential. With the depth being tested in excess of 370 meters and it is safe to assume that Portage Zone extends to depth to at least 400 meters, one can infer the Portage Zone 4M to 5.5M ounce resource. In my conversations with Quinton, the demonstrated continuity of the mineralization and geology of the area infer that the Portage Zone runs to depths in excess of 500 to 600 meters which he estimates would be the maximum open pit depth for a project like Springpole. Quinton believes that the depth of the Portage zone porphyry structure could extend well in excess of 1,000 meters.
GCU will bring in a rig this summer that is capable of testing the depth beyond 400 meters. Another 200 – 300 meters of depth will double the project from the anticipated spring resource calculation.
Virtually Untested Strike
The strike of the zone has also been increased with a greater degree of confidence by more than 30% with some of the best intersections to date coming right at the end of the zone at 950 meters. This winter GCU is testing the strike of the Portage Zone to the southeast another 500 meters where they are confident it extends with a good degree of certainty. Historical estimates had put Portage more to the southwest instead of where it is currently projected to lie a bit more to the southeast, because of this, historical testing of the strike of Portage intersected extensive intervals of 0.6 to 0.7 g/t au which is typical of fringe Portage Zone mineralization. Gold Canyon believes that a couple well placed holes should hit the Portage Zone with the same type of continuity that has been defined to the north.
The furthest hole south hit 225 meters at 1.48 g/t au, which is one of the project’s best right at the south end of the defined strike including a 47 meter zone averaging 3.47 g/t au. This bodes very well for continued expansion of the Portage Zone along strike this winter with mineralization giving no sign of tailing off. The high grade zone continuing to the end indicates the zone will extend further south for a material distance. The grades in this type of orebody will gradually deplete as opposed to abruptly ending.
With the style of mineralization very continuous and likely to give signs that the zone is weakening well in advance with depleting grades, the Portage Zone can conceptually be looked at as being 1,500 meters in strike and persisting to depths of at least 400 meters and beyond. Just by looking at tonnage, it is easy to see how a 1.5M ounce 20Mt – 30Mt project balloons into a massive 8 – 10M ounce 100Mt – 200Mt project at Springpole Lake. Extend the project another 500 meters along strike with comparable grades and widths and the size of GCU’s Portage Zone becomes one of the biggest unmined gold deposits in Ontario.

Springpole Project: A Bulk Tonnage Open Pit Mine
Springpole Lake is showing potential for both a low cost bulk open pit mine and underground mine potential.
If there ever was a guaranteed deposit that will one day become a mine based on geological merits, Springpole is it. It has been thought to have world class potential for decades but because of the atypical style of mineralization when compared to a typical Archean Greenstone deposit, especially those in nearby Red Lake, it was often ignored for more pervasive high grade deposits in the area. If this deposit had been in Quebec along the Golden Highway, it would have been developed years ago. Springpole was always a project that had merit at much lower prices in gold, but since gold prices have risen dramatically over the last decade, a project like Springpole becomes very lucrative with the consistent grade and the shear scale of a project.
Current drilling has revealed a much higher grade than historical at the current 1.36 g/t au vs. historical 1 g/t estimate. (Some historical estimates actually estimated an even lower grade below 1 gram). The higher grade assays is attributed to the fact that Springpole has never been tested with HQ sized drill holes which allows for a much larger sample base and grades can be estimated with much more confidence. GCU has tested for silver and assays an average of 5.95 g/t which provides another 0.10-0.15 g/t credit to the grade of the project and brings Springpole an inferred average grade of around 1.5 g/t gold eq from current drilling program.
In addition to increased grade and silver credits, Springpole’s shear size gives it economies of scale with an eventual +200,000 oz per year producer possible as a future bulk tonnage mine operation with both open pit and underground potential. Even though Portage sits underneath a lake and might be considered more an underground operation like Agnico-Eagle’s Goldex Mine in Quebec, the lake is very shallow at no more than 27 meters depth and narrows at 2 critical points and is not much more than 10 meters deep in these sections. The part of the lake the Portage sits under can easily be dammed and drained into the main body of Springpole Lake further south.
Gold Canyon’s Portage Zone already represents a very large open pit project with the current dimensions of a 950 meter strike and a depth of 300 meters. The total dimension of the project to date is 1350 meters with another potential 500 meters making a massive open pit that could easily include 500 – 600 meter depth with a strike of 1850 meters. If the project continues along strike beyond that then Springpole could end up a mega open pit project like Newmont’s Twin Creeks in Nevada which is a series of massive open pits that follows a +5km mineralized strike. Twin Creeks is currently the largest open pit in Nevada.
The shear size and grade of the project supports building a mill and on site processing instead of shipping ore to Red Lake which will decrease costs at Springpole and every meter of strike and depth added to the deposit further supports this theory with economies of scale and a long mine life. What is also very good is GCU renegotiated the 5% NSR and had it reduced to 3% which can be further reduced to 1%. With the way the mineralization is situated, any open pit would have a very low strip ratio. Gold Canyon is just in the initial stage of metallurgical testing, but the core is often soft and broken and shows qualities of ore that will be very amenable to conventional milling processes. The upcoming prefeasibility study should be very positive.
Initial results at Springpole are very appealing and point to great economics supporting a potential open pit mine with underground development to follow. Current drilling points to a 100,000,000Mt open pit project if conceptualized to a 400 meter deep open pit. The current drill program’s average grade is 1.36 g/t au with additional silver credits averaging 5.95 g/t which indicate $65 to $70 per ton rock at current metal prices which is very nice rock when you have 100Mt’s of it. GCU has also been drilling HQ sized holes which gives plenty of samples for met work which is being completed this year for the prefeasibility study. The continuity of the mineralization is a bonus for mill throughout and with the nature of the mineralization being quite soft and broken, should making milling and recoveries very positive. These are all key points that point to mining at Springpole. Even at much lower prices. Currently Gold Canyon has these targets for Portage…
950m strike * 100-150m width * 300m depth = 3M – 5M oz deposit
1500m strike * 100-150m width * 300m depth – 5M – 6M oz deposit
1500 m strike + Infer depth to 400+ meters… an 8M – >10M oz deposit
Gold Canyon will add material ounces to the upcoming NI43-101 resource calculation of at least 3-5M oz’s. Portage looks more and more like a 10M ounce open pit project if the strike is successfully extended. Springpole grows dramatically at that point if they extend depth and could be well in excess of 10M oz’s if the depth is successfully extended a materially distance.
The Winter Drill Program Set to Add Material Value
For GCU to confidently report a resource for Portage, they need to drill the middle portions of the zone as well as test the zone to surface, which is a major goal for resource definition and a prefeasibility study is soon to follow. GCU will be drilling 10,000 meters this winter and have 3 rigs on the property, 2 rigs are infill drilling the middle portion of Portage and testing the zone to surface while 1 rig tests Portage’s strike up another 500 meters this winter. This program gives GCU a two pronged strategy of growth by developing a very large already identified gold zone as well as stepping out and materially expanding the strike of this zone this winter.
When you have a zone that is 400 meter deep, is 100 to 150 meters, every 50 - 100 meters of successful step holes along strike provides material potential expansion to future calculations to the resource base. In addition to another 500 meters of strike, the long term viability of Portage will be viewed with its depth potential. If Portage keeps continuing to impress at depth, there will be some big buyers who will be very interested and willing to invest in this project having the potential for an extended mine life.
If Gold Canyon defines a gold zone at Portage that extends another 500 meters then that will put GCU’s Springpole Project a close rival to Osisko’s Malartic’s at 9M – 10M oz’s of gold. Obviously that is a big if and an initial resource calculation for Portage is needed to provide a base for future development, but considering the nature of the geology, abrupt changes are not expected and chances are that GCU will successfully step out this winter assuring Springpole of a +5M ounce gold deposit. Springpole is the first Canadian Gold company to come along in a long time to have real 10M ounce discovery potential since Osisko!!! In a proven district like Red Lake, GCU just needs to keep defining this monster gold zone and someone will come knocking.
Demonstrated Substantial resource expansion
The summer and fall drilling programs at Springpole indicating a substantial increase in the resource, much more than historical estimates indicate. Drilling has confirmed historical results, increased the grade, and expanded Portage at depth (double) and along strike (40%) with some of the best holes to date.
Some Springpole Facts
Highly contiguous throughout the entire zone
Consistently higher grades than historical plus silver
Extended the strike to 950 meters
Confirmed depth to 370 vertical meters
Zone width averages 90 – 100 meters
North end of the zone opens up to a 250 meter width at 300 meter depth
Open pit style to potential scale of Newmont’s Twin Creeks in Nevada
Soft and broken nature of mineralization point to good recoveries for milling
Continuous mineralization points to very good throughput
Deposit style points to low strip ratio.
Underground potential similar to that of Agnico Eagle’s low cost Goldex mine in Quebec if mineralization extends to depth.
New Resource Calculation and Feasibility Study
Reasons to invest…
Significant resource increase… 3 to 5M ounces gold upcoming resource calculation
Potential for >10M oz gold resource with Red Lake type depth potential.
Over million shares of insider buys in November / another 500,000+ by Sheldon Inwantesh in December
Winter program will add material value defining and adding ounces
New resource calculation after winter drill program
Pending prefeasibility study
Potential excellent open pit / underground mine potential
Deposit shows excellent continuity
Increased gold grade at depth + silver credits
Geological environment suggests underground depth potential in excess of 500 meters
Geological environment suggests world class potential in the scale of Cripple Creek and Porgera. (30M ounce gold deposits)
Proven mining district in Red Lake / Safe jurisdiction
Project scope suggest dedicated processing facilities
Well financed with a strong shareholder base
Excellent management track with history of managing shareholder value.
Management has a long history with company
Insiders own 39%
Sprott 20%
Pinetree 13%
Management 6%
GoldCanyonRates High as an Early Stage Development Story
When looking at current projects to compare GCU. GCU compares favorably to other early stage development stories including low grade names such as Volta, Trelawney, and even East Asia Minerals when it was still early. Gold Canyon has a chance to rival Osisko’s Malartic in the long run. Gold Canyon has announced some of the best, most continuous results along a 1km strike from surface to depth that rival some of the best early stage low grade development projects in the world and at initial glance looks like it could be a low cost producer from both open pit and underground scenario’s for a years to come. Add the fact that it is in our own backyard in Red Lake, Ontario. This is one of the best development projects to come along in awhile.
Springpole shows the best potential for significant multi-million ounce expansion along strike and at depth because of the continuity of the mineralization and the type of geology demonstrated. Springpole so far is remarkably contiguous and will compare very favorably to these projects as a bulk tonnage open pit mining operation and will easily end up being a +100Mt project containing +5M ounces of gold.
The big prize is that Gold Canyon may be on a 10M oz deposit at depth which would mean Gold Canyon shareholders are sitting on what may be one of the most coveted prizes in the Canadian gold sector since Osisko and Rainy River. Both companies did it on their own because the majors didn’t believe… Will Gold Canyon be another Canadian in-house success story or will the majors wake up and realize the potential of these massive low grade projects?
Either way, Gold Canyon is set to develop one of the biggest gold projects in Canada.
Gold Canyon is rated as a strong buy at $2.15 and I am confident they will continue to deliver on their theories and demonstrate that Portage is indeed a World Class Deposit that will rival some of the best producing mines anywhere in Canada one day.
Christopher Skidmore
Reporter for Beat the Market Stock Picks
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