Winston's Growth Stock Report

Your Source for High Potential Stocks

Issue 28, June 28, 2010

Edgewater Exploration (EDW, TSX-V)
Gold Exploration in Ghana

Red Back Mining has enjoyed a lot of success in Western Africa, with operations in Mauritania and Ghana, seeing its stock price rise by almost 400% since the beginning of 2009. Based on this performance, it is quite clear that they know what they are doing when it comes to gold in Africa; no doubt they have a knack for picking the right projects to develop.

For a junior exploration company to have the chance to earn into their top exploration target would be quite the coup.

This is exactly what Edgewater Exploration, a junior gold exploration company, has done, recently closing an earn in agreement on the Enchi Gold Project in Ghana- what Red Back considered to be one of their top exploration target.

The Enchi Gold Project has a 40 km strike length and is part of the Bibiani Shear Zone that hosts a number of major gold mines and deposits. Just 70 km to the north-east is Red Back’s Chirano Gold Mine and the Bibiani Gold Deposit located 90 km north-east of the Enchi Gold Project.

As many of you long time readers will attest, I’m not a big fan of following mining plays in Africa however Ghana is one of the few exceptions. Ghana has Africa’s longest standing democracy (which may not be saying much) but for the last 18 years there have been multiparty free elections. In addition, the Fraser Institute in 2008 named it the second most politically stable country in Africa.

What makes Ghana interesting to us as investors is that it is well endowed with natural resources, particularly gold. Ghana is the second biggest gold producer in Africa with 2009 production of 2.9 million ounces. The country’s top source of revenue is gold and its mining laws have been the same since 1994.

There are an abundance of gold discoveries and producers in within 300 km of Enchi. These include:

· Obuasi is a 48 Million Ounce Gold Deposit

· AGC/Anglo Teberebie Iduapriem 16m oz deposit,

· Goldfields 17m oz mine,

· Golden Star’s 9m oz mine,

· AGC and Anglo have another mine to the east that has a reported 48m oz

· Newmont has a 7 million ouncer,

· AGC/Anglo has the 5 million ounce Bibiani mine to the north east

· Resolute has a 3 million ounce deposit to the north-east

The big speculative money has already been made on the aforementioned deposits but I think Edgewater could provide some excitement for us over the coming months. One stock I’ve been following from a distance is Keegan’s Esaase Project. Keegan has done a good job in developing their deposit which has a total inferred and indicated resource 3.93 million ounces. Over the last 18 months the stock has grown from under a dollar to a recent price of about $6. That’s the kind of performance I’m hoping for with Edgewater.

Being on trend with the Chirano and Bibiani deposits and part of the the Bibiani Shear Zone, some historical drilling and development work on Enchi gives me some reason for optimism.

Enchi Gold Project, Ghana

The Enchi Gold Project has 8 licenses comprising of 568 km 2 which are easily accessible and close to infrastructure. To date, Red Back and previous workers have discovered and identified 16 separate gold mineralized zones on the Enchi Project that have the characteristics of quartz vein style gold, Ashanti-type deposits. This style of gold mineralization is the most important type of gold occurrence in West Africa. Edgewater has plans to focus their exploration efforts on two zones initially, the Boin Gold and the Nyamebekyere Gold Zones.

Boin Gold Zone

On the Enchi Project, the Boin Zone gold mineralization has been traced for over 10 km along strike Red Back has completed 26 trenches and 23,000m of drilling, split mostly between RAB and RC drilling.The 112 RC drill holes generated a total of 80 separate drill hole intercepts that assayed greater than 1.0 g/t Au. Selected RC drilling results greater than 1.0 g/t Au from the Boin Zone are summarized in Table 1.

Table 1
Boin Gold Zone
Selected RC Drilling Results

1. All reported drill intercepts are 'core length' and
true widths are estimated at 80% of core length.

Nyamebekyere Gold Zone

The Nyamebekyere gold zone strikes over a distance of 1,600 m and is located 200 to 300 m west of the Nyamebekyere Shear Zone. Nyamebekyere mineralization is part of a continuous 15 km strike length of gold prospects on the Enchi Project RC drilling has been conducted to a depth of approximately 80m along the entire strike length of the zone. RC drilling results greater than 1.0 g/t Au from the Nyamebekyere Gold Zone are summarized in Table 2.

Table 2
Nyamebekyere Gold Zone
RC Drilling Results

1. All reported drill intercepts are 'core length' and
true widths are estimated at 80% of core length.

SHARE STRUCTURE

One of the key factors helping Keegan Resources go from under $1 to $6 in 18 months is the company’s share structure. Holders were able to see true value for the company’s assets with the tight, efficient structure. To date they have approx. 44m shares out.

Sticking with that theme, Edgewater’s structure is as follows:

*If Edgewater is able to delineate a 3m oz NI 43-101 Compliant gold resource (M&I Category) then Red Back Mining can exercise an additional 2.5m warrants at $0.50 and 2.5m warrants at $1.00.

Furthermore, of all the shares issued, approximately 60% of them are hold by Management & Insiders, Institutions and Red Back Mining (who own 8% of the company).

The Spanish Connection

In addition to the exciting Enchi Project in Ghana, Edgewater has also signed a letter of intent (LOI) with Lundin Mining to acquire its wholly owned subsidiary, Rio Narcea. The acquisition has yet to be finalized, and as such, complete details will not be available to then.

The Corcoesto Project is a development project, as it does have a 43-101 resource that is being updated. Previous resource estimate, showed 323,000 oz in all categories using a gold price of $350/oz. A new resource estimate is being calculated using higher gold prices and some additional drill holes. We expect the in-situ resource will go higher.

In Summary

Edgewater Exploration has many of the factors I look for in picking a company to invest in:

· Projects

o Great Exploration upside in the Enchi Project, a high quality property, formerly Red Back Mining’s top exploration project.

o A near-term gold development story in the Corcoesto Project, complete with a resource calculation, with room for expansion

· People

o Management team with a proven track record

o President & CEO George Salamis has built mines and run producing companies, formerly with Rusoro Mining (Gold) and Caledon Resources (Coal) and has successfully built resource asset bases which have been the subject of very large M +A transactions

· Share Structure

o Tight share structure, with 26m shares outstanding and approx. 60% held between management, insiders, institutions, and Red Back Mining.

In today’s gold market, with a top tier exploration project and potentially a development project as well, Edgewater is well positioned with a great share structure and strong management team to bring a lot of value to investors.