Winston’s Growth Stock Report

Your Source for High Potential Stocks

Issue 26 June 11, 2010

This week gold and gold stocks continue be the right place to be with your money. As worries about the European debt crisis mount, gold bullion is pushing to all-time highs in dollars, pounds, euros and Swiss francs. Meanwhile the rest of the equity markets are getting creamed.

Too bad I didn’t take my European vacation this year. Last year at this time it cost CDN $1 to buy 0.65 euros. Today I can buy 80 euros for a buck. Aside from vacations though, my spare cash is going mostly into gold and gold equities.

One of our old favorites is New Gold (NGD, TSX) which has done very well over the last several months having doubled in price.

Starting on June 21, 2010 the company will be getting extra exposure as it will be added to the FTSE Gold Mine Index. Part of their eligibility to this index is having production of over 300 ounces per year and the majority of their income coming from gold production.

New Gold is targeting 330 to 360 ounces of production in 2010 and continues to be a buy for future growth.

Our top near term gold production pick is Nevsun (NSU, TSX) which we’ve done really well with over the last 12 months. A few months ago we reloaded our positions in the low $2 range once the news hit about the financing they completed. With the stock now trading at over $3, I figure $4 is in their future once production starts up at the end of the year. Nevsun is still a good buy for growth.

Nevsun’s near surface Bisha deposit has three unique layered zones. At the top is a 35-meter thick oxide zone which has high gold and silver values. This gold cap is adjoining and overlying a 30 meter thick copper enriched supergene zone which itself overlies a primary sulphide zone containing zinc and copper.

The rich gold cap contains an estimated 1.06 million ounces. This will be mined first with a projected production rate of 400,000 ounces per year over 2.5 years.

This will be followed by the copper phase that will produce an estimated 100 million pounds of copper over three years. Cliff Davis said that the timing of the copper production will be good. The current credit crunch has put the development of some copper mines on hold. As a result some analysts are predicting that there will be a shortfall of copper production versus demand during that future time frame. Many copper gurus are calling for higher copper prices by yearend.

And lastly, the zinc will be mined at a rate of 130 million pounds over 5 years.

The estimated mine life is 10 years though the primary massive sulphides are open to depth.

Most of the production offtake has already been spoken for so the expectation is for continuous strong cash flow with a conservative rate of return of about 80%.

Encanto Potash (EPO, TSX)

Encanto has been frustrated by weather related delays in getting their 3D seismic completed. However they are moving forward and the drill targets should be picked out soon with drilling starting later this summer.

Encanto is a hold.

Hathor Exploration (HAT,TSX) Roughrider Records Record Breaking Results

This week Hathor came out with the final set of drill results from the 2009-2010 winter program. All in all the results were very good and have expanded the uranium mineralization from the Roughrider and Roughrider East zone discoveries.

The latest data showed two eye-popping results with 55.91% U3O8 over 9.5 meters and 43.64% U3O8 over 7.5 meters. These are the highest grades ever recorded at Roughrider. We now have expanded the known mineralized zone with high grade uranium thus the overall resource seems set to grow from the current 49 million pounds.

The next news release from Hathor should outline the summer drill program which will likely include step out drilling to increase the resource size and provide more infill holes to increase the resource numbers.

Given a more robust uranium market Hathor’s share price would be quadrupled to reflect the net present value of the deposit which is currently about $1 billion.

Hathor is well positioned to capitalize on the next bullish upswing in uranium stocks. Hold or buy on the current price weakness.

URACAN DRILL RESULTS CONFIRM CONSISTENT GRADE

Uracan Resources (URC,TSX) is on a steady course to become Canada’s first open-pit uranium mine.

Assay results have just been released from the eight remaining drill holes completed during its 2010 winter drilling campaign on the Costebelle A4 zone, part of the company's 100-per-cent-owned North Shore project in Quebec.

Highlights include 8.4 meters of 0.046% (0.92 lbs/t) in, 13.55 meters of 0.038% U3O8 (0.76 lbs/t) U3O8 in CA4-10-15, and 4 meters of 0.062% U3O8 (1.24 lbs/t) and 3.8 meters of 0.055% U3O8 (1.1 lbs/t) in CA4-10-17.

These results look almost identical to the results from the previous 12 drill holes, indicating a consistent mineable grade along a strike length of about half a kilometre.

Uracan, with a market cap of only $13 million, appears to be an undervalued company, in a beaten down sector. One thing is for sure, Uracan is an extremely efficient driller.

Bannerman Resources (BAN-TSX) and Forsys Metals (FSY-TXS) - also using a bulk tonnage/near surface model - have market caps of $50 million and $200 million respectively. Close examination of their drill results confirm that Uracan is gaining ground.

URC grab samples have confirmed open pit grades of about 1 lb U308/tonne ($40 rock at current spot prices).

How long the uranium spot prices can remain this low is a hot topic of conversation amongst resource analysts.

Currently, 30 nations use nuclear power to produce about 15% of global electricity. Nuclear power is a proven, clean energy alterative to fossil fuels. It produces 75% of France’s electricity, 30% for Europe and Japan and 20% for America – the world’s largest energy consumer.

There are plans to build about 480 new reactors globally over the next 20 years. China, Russia, India and the U.K. all have escalating nuclear power programs.

Mainland China has 11 operating nuclear power reactors, 20 under construction, and dozens more in the planning stage. Chinese domestic nuclear power production is expected to increase by 600% in the next eight years.

All the nuclear power plant construction data suggests that current uranium supply will not meet future demand.

With only 40 of 1000 square km explored on the Quebec property, Uracan has discovered over 40.7 million lbs. of U3O8 since 2006. The property has excellent infrastructure with highways, inexpensive hydro power, and deep sea port access. In 2008, Quebec was voted the "Best Mining Jurisdiction in the World" by the Fraser Institute Mining Survey.

For those wishing to invest in a long term bullish resource trend, Uracan is an interesting opportunity.