Vol. 222 - Our New Featured Gold Company: Ethos Capital (ECC:TSXV) (ETHOF:OTCQX)

Dear member,

Before investing in any 'speculative' company, our team has a very specific number of qualities and characteristics we look for.

Below are the questions we asked, and the answers we discovered, before introducing and selecting our new Featured Company as an investment for our portfolio and opportunity for our members.


Q: Does its management team have a proven track record?

A: Yes. Its CEO and President's last company, one many of you have heard of, Pediment Gold, was bought out by Argonaut Gold for $137 million in January 2011.


Q: Is the company operating in a favourable sector from a technical and fundamental standpoint? Do we believe investment dollars will find this sector appealing, above most others, in the coming few years?

A: We strongly believe the answer to that two pronged question is yes. As you know from last week's newsletter, this company operates in the gold sector and in the heart of Yukon Gold Country. Gold has been a top performing asset, worldwide, for the past decade and we expect this to continue.


Q: Have institutional investors taken a large stake in the company at similar price levels?

A: Yes. The company recently closed a $15 million dollar financing at $1 per share and has over $20 million in its treasury - with a potential to have up to $33 million if all warrants are exercised. Its market cap is just $50 million (roughly).


Q: Is the company planning on completing a large work program on its flagship asset immediately?

A: The answer is yes, to say the very least. This company has just initiated a very aggressive 2011 exploration budget and plan. The company has budgeted $6 million for its flagship assets located in the White Gold District. Work on the projects has just begun. The program will include diamond drilling, soil sampling, airborne and ground geophysics, trenching, geology and prospecting. This program began this week.

Our newest Featured Company, and next addition to our portfolio, is Ethos Capital (ECC:TSXV)(ETHOF:OTCQX).

Ethos Capital is positioned in the heart of today's Yukon Gold Rush as one of the largest landholders within the White Gold District. If you believe in gold and believe changes are coming to our global financial system, namely the world reserve currency (the USD), then this report is worth reading.

As you know, our team is actively pursuing ways to insure our wealth and position ourselves to profit from the gold bull market which is upon us.

Ethos' story really begins with a man named Shawn Ryan who, along with record high gold prices, is responsible for sparking the current gold rush in the Yukon.

Shawn Ryan discovered the White (Kinross K:TSX) and Coffee (Kaminak KAM:TSXV) gold deposits. The White Gold Deposit was originally drilled and discovered by Underworld Resources, which we documented a few weeks ago. Shawn Ryan was behind the entire operation as he staked the claims and sold them to Underworld who was quickly bought out by Kinross in a deal valued at nearly $140 million. That first discovery revolutionized the region. It is now known as the White Gold District.

Today's report is about Ethos Capital and what will separate it from the competition in the Yukon this summer.

Shawn Ryan has developed and honed a systematic exploration technique which has brought him fame following the first two discoveries in the Yukon in decades. Ethos will be utilizing these techniques as Shawn Ryan is heading up the company's entire summer program. Ryan, or 'Mr. Yukon' as we like to call him, has hand-picked, identified and optioned all of Ethos' claims to it - just as he did with Underworld.

Ryan is coming off a string of awards, including Prospector of the Year awards in both the Yukon and British Columbia.

Learn about Ryan and the man leading Ethos' exploration program by clicking here.


Other companies have Shawn as an advisor as well. But this combination of attributes is what they don't have:

• Ethos has a top 5 land position in the White Gold District at 762 sq km. The White Gold District covers the historic Klondike goldfields where recent gold discoveries by Shawn Ryan for Underworld Resources Inc. / Kinross Gold Corporation and Kaminak Gold Corporation have re-ignited exploration interest.

• Gary Freeman (ex-CEO of Pediment Gold which was bought out by Argonaut Gold for $137 million) is at the helm of Ethos as its CEO and President.
• Over $20 million in cash (a tight capital structure) and the ability to raise money efficiently and quickly because of management's past successes.
• Treasury has the potential to expand to $33 million upon exercising of warrants. Market cap is currently $50 million (roughly).
• A top Advisor and Director of Ethos is Geologist Peter Mordaunt. Mr Mordaunt was the Founder of Corner Bay Silver Inc. which was bought out by Pan American Silver Inc. in 2003. In 2009 Stingray Copper Inc., which he also founded and managed, was bought out by Mercator Minerals. That is two buy outs in 6 years. He was a director of Pediment Gold, working closely with Gary Freeman, before being bought out by Argonaut Gold - which he is a Director of as well; add another buyout to the list. With Mr. Mordaunt being a director of Argonaut, a mid-tier producer, it gives Ethos a unique perspective into the mindset of potential buyers of its assets.

With Ethos' management and land holdings it has positioned itself to try and capitalize on this bull market and the modern day gold rush going on in the Yukon.

On Ethos' Corporate Presentation they discuss the Tintina Gold Belt which runs from central-west Alaska through the middle of the Yukon, to the bottom of the Canadian Territory. It is in this 'Gold Belt' that Ethos' flagship assets reside.

* As central banks from around the world purchase gold bullion to back up their currencies and protect themselves against a falling US Dollar, this region of the world will become even more desired by global investors.

The Tintina Gold Belt in Alaska has mined roughly 75 million ounces of gold over 30 years.

Since 1897, 20 million ounces of gold have been mined from placer creeks in the White Gold District of the Tintina Gold Belt. The White Gold District appears to be the source of the Klondike. Our team discussed this two weeks ago and acknowledge that this is the reason more than $300 million will be spent in the Yukon this summer alone (on mining/exploration).

The Tintina Gold Belt has had roughly 10 million ounces of gold identified in the last 3 years alone. Things are moving very quickly in the region.

As stated above, Ethos has one of the largest land positions (762 sq km) in the White Gold District and is within a few kilometres of some of the largest discoveries made to date. We have always stated that the best place to find a new deposit is near a current deposit or mine.

Below is a great map of the Tintina Gold Belt and Ethos' proximity to key discoveries.

Now that we've got your attention, let's talk about what Ethos is going to be up to this summer and why we are telling you about its story today.

Ethos Summer Program:

On May 10th, Ethos reported that field preparations are well underway for its aggressive 2011 exploration programs in the White Gold District of the Yukon, anticipated to begin on or about June 1st, 2011 (today). The White Gold District covers the historic Klondike goldfields, where recent gold discoveries by Shawn Ryan for Underworld Resources Inc./Kinross Gold Corporation and Kaminak Gold Corporation have re-ignited exploration interest.

Ethos is one of the leading land-holders in this emergent gold district, with in excess of 762 square kilometers under option from Shawn Ryan. Kinross and Kaminak are two companies with more land in the region.

Ethos is focusing its exploration efforts in the White Gold District looking for epithermal-mesothermal gold and porphyry copper-molybdenum-gold systems; both styles of mineralization are historically documented by Shawn Ryan and others within the 762 square kilometer claim package.

View the location of Ethos' claims:

(note: all of Ethos' claims are not shown here as it has acquired 762 sq km)

Kinross has a market cap of roughly $17.8 billion.

Kaminak has a market cap of roughly $236.2 million.

Ethos has a market cap of roughly $50 million.

Obviously, Ethos can't be compared to Kinross, one of the top 10 gold producers on earth - which has seen its market cap expand with the gold bull market. Kaminak, on the other hand, was a very small company in regards to market cap not too long ago. It has had success drilling and has seen its market cap expand tremendously in just the past 18 months. What we have gathered from our research is that Kaminak is about a season and a half ahead of Ethos in regards to exploration and drilling in the Yukon.

Kaminak's core asset is the 100% owned Coffee Gold Project located in the emerging White Gold District of the Yukon Territory, Canada (shown in above map). In 2010, Kaminak successfully executed the first ever drill program on the 150,000 acre Coffee property and drilled 8 separate and closely-spaced gold discoveries within a 15km by 5km area. Since then, it's been a very profitable ride for Kaminak shareholders.

You can see from Kaminak's 2 year chart that there has been very few significant pullbacks over the past 18 months. This company has managed itself well and delivered on drill results up in the Yukon.

To give you an idea of how explosive this region of the Yukon can be, we've taken an excerpt from Luke Burgess, Investment Director, Hard Money Millionaire who recently wrote about Ethos.

"When gold companies look to select gold exploration targets, they complete a series of soil samples, which test mineral levels near the surface.

Where most exploration companies will complete 2,000 to 4,000 soil samples on a particular land package, Shawn will do 30,000 to 50,000 soil samples in a massive grid pattern on the same project to more accurately know where to drill later.

This work has been key in both the Golden Saddle and Coffee projects.

Now, Shawn is preparing to do this same kind of extensive soil sampling work again in Ethos Capital's Yukon projects."

"During the 2011 summer field program, Shawn will collect, assay, and map out nearly 33,000 soil samples from Ethos' Yukon gold projects. To put that into perspective, Kaminak only completed approximately 4,000 soil samples over the past four years to make its Coffee discovery."

-Luke Burgess

Ethos has the land claims - now it has to come with the results.

Although Ethos will be drilling its Wolf Project this year (located in White Gold District), there is a great deal of science and exploration needed before a company can go out and spend $10 million drilling its project. Ethos has more in its treasury than any of the competing gold companies we've reviewed ($20 million) in respect to market cap size. This is a company with a market cap of roughly $50 million. It's trading just over double cash value. It's not easy finding companies in this position. Raising capital is not the issue at hand for Ethos.

Ethos plans to examine its projects thoroughly before diving into a costly drill program. This can also heighten its chance of success when it does drill and also limit dilution.

On Site at Yukon Asset

The company's board of directors has approved a $6 million program to initiate the 2011 exploration work on Ethos' White Gold District properties which began this week. A comprehensive and systematic exploration field program is planned. The program is comprised of soil sampling, airborne and ground geophysics, trenching, geology and prospecting, with diamond drilling on the already defined gold anomalies. A detailed description of the multi-disciplinary program is outlined below.

Soil Surveys

The field soil survey program will consist of the collection and analysis of approximately 33,000 soil samples; anecdotally one of the largest single-season soil surveys ever undertaken in the White Gold District. This will actually cover an area of roughly 1500 kilometres. A first-phase "ridge and spur" soil sampling survey is designed to rapidly and cost effectively screen all areas of Ethos' properties. Simultaneous detailed follow-up soils will provide greater definition and extensions of gold-in-soil anomalies at Wolf and copper-molybdenum soil anomalies at Bridget. The soil sampling program has begun.

Airborne Geophysics (Magnetics and Radiometrics)

Detailed airborne magnetic and radiometric surveying is planned for all of Ethos' properties. The magnetic signature of the rocks is useful in helping to outline the distribution of lithologies and for locating structural features which may be gold-bearing. Radiometric surveying is also useful for determining the distribution of lithologies and for locating larger porphyry copper-molybdenum-gold targets. The airborne surveying is expected to begin in July. Preliminary results are expected daily while the survey is in progress; post-processing and final product delivery will be completed later in the season.

Trenching, Ground Magnetics Surveying, Prospecting, and Geology

A systematic program evaluating anomalous areas of gold, copper and molybdenum will include trenching, detailed ground geophysics surveys, prospecting, and geological mapping. Initially, the focus of this work will be at the Bridget copper-molybdenum porphyry area and the Wolf gold-in-soil anomaly. Trenching, prospecting, and geological mapping of various target areas is scheduled to begin in early June and continue for several months.

Diamond Drilling

A 2,000 meter diamond drill program is planned to test the Wolf property and its extensive gold-in-soil anomalies. The drill is scheduled to be mobilized in mid-August. A series of drill holes are planned to test gold-in-soil anomalies that collectively extend over 2,800 meters in length and remain open-ended. A detailed soil survey in July is expected to refine and further define this drill target.

The Wolf is Drill Ready

The Wolf Claims are located approximately 150 kilometers south of Dawson City, Yukon. The claim group consists of 238 claims covering 4,815 hectares in the newly discovered, White Gold District, Dawson Range, west-central Yukon. The Wolf claims are helicopter accessible from Dawson City. The Wolf claims are located 35 km west of the Coffee Project (Kaminak Gold Corp.) and 40 km southwest of the Golden Saddle deposit (Kinross Gold Corp.). These claims are considered prospective for near-surface, bulk tonnage gold analogues to the recently discovered Coffee and Golden Saddle deposits.

Prospecting, geochemical sampling (601 soil samples) and ground magnetic surveying on the Wolf property has delineated 3 robust anomalies. Anomaly 1, the highest priority target measuring 710 meters in length, is defined by elevated gold (Au), arsenic (As) and antimony (Sb). This is similar to anomalies defined by Kaminak Gold Corporation on the Coffee Project and Underworld Resources on the White Gold project where subsequent trenching and drilling led to the discovery of significant bedrock gold mineralization.

Ethos has an option from Shawn Ryan (Wildwood Exploration Inc.) to acquire a 100% interest in the Wolf properties. The Wolf property option agreement calls for Ethos to make cash payments aggregating $550,000, incur exploration expenditures aggregating $2.5 million and issue up to 1.75 million shares staged over the five-year term of the option.

Ethos' Yukon soil sampling exploration program is the most comprehensive of any company in the region. The program is a week young and our team will be patiently awaiting results and updates.

Ethos is not a one trick pony limited to the Yukon.

Its second project is the Corrales Project, located in northern Mexico. It will allow Ethos to pursue 2 projects year round, allowing for continual development and a degree of balance. The Yukon, as many of you know, is basically unworkable for a few months in the winter. Having a Mexican Project diversifies Ethos and gives it an advantage over companies with only a summer operable project.

The Corrales Project has excellent access and infrastructure, being roughly 40 minutes by road from the city of Ciudad Jimenez.

The Corrales Property is at the very top of a polymetallic, mineralized system and is exposed here. It is open in 3 directions at surface for an unknown distance. There has been no previous exploration work other than reconnaissance mapping and sampling by Cardero and the mineralized system could be much larger and have significant depth potential. Examples of similar types of deposits in production in Mexico at the present time include the Naica, as well as Grupo Mexico's San Martin and Charcas mines.

The project is essentially 'drill ready'. All that is required is an induced polarization/ resistivity survey to get a sense of the size and geometry of the system so that drill targets may be prioritized.

As soon as Ethos completes its summer program in the Yukon, its attention will turn to Corrales. As the Corrales work program begins, news from work done on the Yukon will begin to surface. Don't think this is just a coincidence. Management at Ethos wanted to make sure its project portfolio was suitable for year round work. Something very few explorers have.

Ethos' CEO and President, Gary Freeman, has achieved the ultimate success working in Mexico. His last company, Pediment Gold, was bought out for $137 million. All of its key gold projects were located in Mexico. Mr. Freeman knows how to operate with the utmost capacity in Mexico and has proven it. Ethos can work all winter on its Mexican project while it analyzes the work done in the Yukon over the summer months.

At the moment, we do not own shares in Ethos Capital, but that will be changing following the release of this report. Consider us bias when it comes to Ethos Capital as they are a client of ours and we plan on taking a large position in the company - it wouldn't make sense if we didn't. We do not set price targets for any of our Featured Companies. The price we decide to sell at will depend on the results from Ethos' work programs and the future price of gold. We will be positioning ourselves following the release of this report and ahead of Ethos' upcoming work program results.

Gold is not a fad investment. We have been in a gold bull market for more than ten years now and it will not end and putter out anytime soon according to some of the world's most accurate forecasters. The debt laden United States will continue to print money, devaluing its currency because that is its only option. If interest rates rise, the US will default. The only way to keep interest rates low is to create money to buy US Treasuries. We have gone over this time and again. Gold will be our core position when hyper-inflation rears its nasty head.

Companies like Ethos, with world class proven management in the gold sector are developing assets in preparation for a gold rush that comes around once in a lifetime.

Our new investment selection and Featured Company is Ethos Capital (ECC:TSXV)(ETHOF:OTCQX) - currently trading at $1.31.

We will have further update reports on Ethos Capital in the coming weeks.

All the best with your investments,

PINNACLEDIGEST.COM