I was at the Cambridge Show all day so I did not have to watch the drama for the juniors. But I am hugely relieved that the stock took a big hit today. We needed a break in the action to consolidate the gains. No junior can continue to rise indefinately, and the level of hype on the forums was rising to hysterical levels.

There is great potential at Hercules, and the shallow drilling they have done so far confirms that the trenching results are not just a matter of surface enrichment. The lateral extension of the veins is impressive and if deeper drilling continues to hit high grade zones, then the total resource is going to be impressive. However, that is going to take several months for any confirmation of that potential to come in, and in the mean time, KXL will be riding on hope and positive expectations.

I think a pretty good argument can be made for about 1 million ounces of gold in the ground, assuming the veins run relatively continuous to 100m depth and along the 2 km strike at the Golden Mile. The above assumptions are not overly aggressive. That would mean that KXL even at the current market cap has fully priced in the upside.

To get to a higher market value we need more evidence of gold at depth. I am optimistic that Hercules continues to more than a kilometer in depth, and probably further along strike too, but that will take a lot of time and money to demonstrate.

So take the action as a crappy day across the board, and a shakeout of the tourists and traders that hang around a story like this. These guys were not going to be around for the long term anyway, and I am glad to get rid of them now when we only have to deal with a short term selloff. This will allow new, stronger shareholders to get into the picture and build the base for the next run.

I think we can look forward to lots more high grade results. The market will begin to price that in too, btw. But I do not consider the selloff today to be a sign of disappointment in the news. It was great news and good to see the high grades continue to be encountered. I suspect we can still look forward to the best zones in future exploration results.

cheers!

COACH247