I think the market action today is just the usual trader response to news during a correction. It matters not what the company reported, the news event creates volume and allows people who wanted out with a big block to unload and move on. And regardless of the fundamentals for KXL, there are a lot of people who just want out right now. Tax loss selling is probably still a factor at this point in time too. So anyone that wants to suggest to me that its all about the news, I beg to differ.

However, I do understand if people are impatient because all of that news basically amounted to the statement that we are getting closer, but we are not there yet. Everything that I have learned about the mining business tells me that there is no way that the resources outlined up to now will be economic to mine under the current conditions. Those who believe we have a deposit here that can support a mine should re-check their figures.

There are mines in the world that can operate with much lower average grades, but those deposits are close to surface with bulk tonnage resource zones. It is similar in effect to a quary. One need only look at the geometry of the Golden Mile to understand that is not the case for us, and never will be. Sure we can point out various places where there is very high grade, and the metallurgical considerations are positive, but there is not enough of it to make a mine development profitable yet.

What we have is a treasure map. These narrow veins continue to yield very promising indicators that an economically significant deposit may be encountered further along the system. That is why I am invested in KXL and why I have been bullish for a long time. If I was only hanging around in the hope that we would take all of the discovery to date and build a mine, then I would have sold by now.

Lets compare apples to apples. Archean greenstone deposits tend to be very high grade, and extent to great depths. There are many examples of profitable mines in Ontario and Quebec that we could look to. The average minimum grade to make money is well north of 6 gpt gold, and a mine plan today would probably require 8-9 gpt before development went ahead, with several million tonnes defined. Look up the resources at projects in Kirkland Lake, San Gold in Manitobe, Red Lake, Timmins, Val D'Or, etc. What do they all have in common? High grade, relatively narrow veins, development to depths below 1000m, structurally controlled deposits... That is what we are looking to discover at Hercules.

KXL does control some other projects with different geology, but for the most part, we should just keep the expectations to what is realistic for the deposit type that has produced so much gold in other districts nearby. Anyone that was hoping to see that we have a mine in the data from drilling so far is dreaming. Sorry, but thats the reality.

My guess is that KXL is going to have to continue following the discovery along to depth and along strike until they hit a convergence zone with some clout. It comes down to grade and tonnage, and always has. The great continuity that has been established so far, and the very high local grades of gold that have been encountered along the way are very encouraging. We are on the right track. The fact that similar early stage results have been reported now at so many distinct projects elsewhere in the district is also very encouraging.

Some of the resource zones that have been outlined up to now may become part of the mine plan if a much more significant deposit is proven up in the future, but for now we do not have a mine and its just a good start in a great district.

Most of the other juniors are trading below cash, so KXL is just taking the same market punishment right now. Thats how I see it. Once the traders, and the dreamers and the tax loss sellers have all moved on, then perhaps KXL can find traction and start moving higher. At least we can be very confident that we have excellent management, and a strong treasury, plus ownership of most of the district and full leverage to upside if and when a big economic discovery zone is finally encountered. This story is going to go on for years. I am not panicking over what happens this month or next.

cheers!

mike