Team:

Ultimately, a few years from now, when we look back at how far up this gold bull market did go from where we are looking at it now, I believe many of us will be amazed at how cheaply we were able to get in on a quality property like Kimber owns. Many of you, I'm sure, have already seen the recent drill results. If you don't know how to read them that is not a big deal. It takes some imagination and comparison to other studies to understand their relative meaning and value, but I will give you a brief tutorial in my own style quickly right here:

You should know first of all how the drills function to delineate an ore body. Imagine an apple hidden behind a piece of cloth that you cannot readily see through. If you poke some long needle-like probes into that apple through the cloth and have a way to measure at what distances you hit the apple and leave the apple with the needle-probes, you can generate a data set that will allow you to create a three dimensional image of the apple behind the piece of cloth without ever having to see the apple. Of course the simplest thing to do would be just to remove the cloth and look at the apple. The problem in mining is that the cloth is the surface of the earth and the apple is the ore body beneath it.

Once an ore body is delineated, of importance is the grade of ore it holds. Such needle-like probes do not only measure distances, but carry back samples of "apple," i.e. ore, that they find at certain distances. The most recent drill results for Kimber have been hitting some very high-grade golden apple. Of course "high-grade" is a relative term. I can tell you this, however, gold ore grades at 1.0 grams per ton are being mined for a profit right now in Mexico, with gold at around $800 an ounce, and Kimber's grades are much higher than that.

Kimber looks good on its own, but that is not what makes it the investment opportunity it is. Gold and silver mining is not an easy business. What makes mining a great business right now is not a recent fundamental change in the business of mining itself, although technological advances continue in this area as in all areas of endeavor. What makes this market very attractive right now are the macroeconomic conditions involving gold and silver investing at this point in history.

Many of you know that I am a big believer that we are in the midst of an historical precious metals bull market. The rapid rise of precious metals over the past eight years, in my view, is not a fluke and neither is it unprecedented. It signals the return of inflation and an oncoming destruction of credit markets that have facilitated the magnificent rise in paper assets over the past twenty-five years.

All financial markets are cyclical. They have functioned in this manner for six thousand years of recorded history, and believe me, there is nothing special about our markets in the good ol' U.S. of A. that makes them or us any different. We are coming to the end of a long period of profligate spending of borrowed funds and are about to enter a severe financial downturn, perhaps, I believe, even a depression.

The signs are all around us: Massive bailouts of Bear-Sterns, Fannie Mae and Freddie Mac, with more to come I’m sure; the collapse of such venerable investment firms as Lehman Brothers and Merrill Lynch, rapidly rising inflation, unchecked government and consumer spending, real estate prices falling rapidly in many markets; and all the while, the gold price quietly rising, signaling as it has for every previous cycle, that the end this period of rapid growth of financial assets is near.

Some of you may know that I am 100% invested in precious metals and mining stocks right now. I don't advise you to do this unless you can believe in what I am saying. You won't sleep well, and you won't know why you are doing what you are doing. I can tell you this, however, most of your paper assets will fall close to zero within the next 5-7 years, and your investments in precious metals will be what save you and preserve your wealth and your family's wealth. In other words, this small investment in Kimber will carry you a long way in a broad-scale economic downturn.

To clarify, by paper assets I mean all the things that you have been trained over the past decades to assume will always go up based on what they have done for the past seventy years or so, i.e. mutual funds, growth stocks, etc. Most of your investments in these areas are about to basically disappear. I don't feel any misgivings in telling you this, dire as it may sound, because when these things start to happen, your investment in Kimber will save you by countering that fall with an exponential rise, as have gold and gold mining stocks throughout similar times in history, most notably for us as Americans, the Great Depression, when Homestake Mining rose greater than 30% a year from 1929-1936 as the Dow Jones Industrial Average lost close to 80% of its value.

I do believe we are quite possibly on the verge of a major economic depression. It will most likely begin with rapid inflation, but ultimately it will end as all periods of expanding credit and reckless spending have, with a deflationary depression when all debt will have to be "cleansed" from the system. Essentially a "rebooting" of the economic cycle will have to occur. This period could last for quite some time, probably years. Hopefully not decades.

Sounds gloomy, I know, but I am not in this game to make you smile, I am in this game to win. And I intend to win, and help you win also. When this all comes about, fortunes will be lost, but fortunes will also be made. I intend for you and I to be in the more auspicious category.

As far as Kimber's plan to succeed: Two points.

Kimber owns a very valuable resource. It is spending its money right now delineating as much of that resource as it can. The plan right now, as I understand it, is not to mine the resource, but to "prove it up" as the industry lingo goes, i.e. demonstrate as many in-ground ounces as possible. Why? The answer is simple. Why pull something out of the ground and sell it for $800 an ounce when two years from now you will be able to sell it at $1,500 or $2,000 an ounce or more? Gold and silver are not corn. They are not going to spoil. They are just sitting there, getting more valuable by the minute.

Actually, that assessment of a value increase is not entirely proper. Gold's value remains constant throughout human history. It has been a store of value, a means of exchange for a long time, in all cultures, in all parts of the word. For how long? Gold is mentioned 13 times in the book of Genesis and Silver is mentioned 22 times. How many times is the dollar mentioned in the Book of Genesis?

So in reality, what is actually happening is that the dollars we buy gold with are getting less and less valuable over time. The more the government "prints money" to bailout banks and other failed financial institutions, the less the dollars already out there are worth. This reality is not debatable. It is an example of simple mathematics. It is just like a company doubling its stock shares outstanding. The remaining shares halve in value. The dollar is the stock certificate for the U.S. Government. No one can create money or anything out of nothing. It would be nice for a company if it could just print more shares of its stock and have the remaining shares on the market keep their same values, but this is not a reality for any company nor, as our leaders will eventually painfully realize, is it a reality for any government.

So ultimately, as gold goes higher, which it must, Kimber will become a more valuable resource. The plan right now is not to build a mine, although that is a possibility in the future. The plan is to set the company up for sale to a larger company for the in-ground resource. And the timetable for that to occur has basically been moved up, in my mind, to perhaps within the next 18-24 months.

My feeling coming away from the Denver Gold Show last week was that most of the people in the gold mining industry don't really understand the significance of what is happening in the economy right now involving paper currency and gold. Gold mining has always been a tough and often disappointing business for them, so they have figuratively “grown up” in this business environment learning to expect more of the same, i.e. ordeals and disappointments. This is understandable; we are all conditioned to a large extent by our past experiences. Very few of these geologists and miners have the historical perspective to understand where gold is set to go in the coming years due to the economics of inflation and government-sponsored abuse of the money supply.

But as gold starts rising, believe me, these same miners will start to catch on to what a great industry gold and silver mining is shaping up into in our times. When the profits really start coming in in earnest and they are looking to expand operations, as all growing businesses do in boom times, Kimber, with its resource base, will be there as a great addition for them to help fulfill their ambitions for expansion.

Remember, we are in the midst of an historic gold bull market. Gold is going to go much, much higher from here. Don't misunderstand me. I am not making a prediction, but rather stating a reality that has already declared itself. It is as if I am observing a pregnant woman, knowing what must happen nine months down the road. I am not prognosticating, just observing what must be.

This upward move in gold and silver is no less predictable when viewed through the eyes of economic history than the birth of a child. As all things do, it has had its beginning, and like a tide, must proceed in a certain way to its inevitable end. I have trained my eyes and mind through study and careful observation to know what must now happen. How powerful will this move in precious metals be? Who can say? I can tell you this, however, I can see a bidding war for Kimber and I can see it happening in the next few years. The result will be a great increase in wealth for all of us involved. I'm looking at a buyout in the $10 range. Could that price go to $20 or $40, absolutely. Many small miners made similar and much higher moves during the last gold bull market in the late 70's. We are approaching that now. I'm glad you will all be along for the ride. Hold tightly. All the best, Bull