Winston's Growth Stock Report

Your Source for High Potential Stocks

Issue 20 May 18 , 2011

Encanto Potash (EPO, TSXV)

On Monday, Encanto Potash issued an operational update which help propel the stock by 31% over the last couple of days to close at 29.5 cents today. Clearly, a number of investors have been relieved to hear that the company is on track to fulfill their objective of nearly doubling the Muskowekwan Project's resource. As I will point out shortly, this will put EPO in a very prospective position as potentially the next big Canadian junior potash buyout story.

Everything is in place to make this happen. They have the cash in the bank for the upcoming drilling program, Preliminary Economic Assessment, an updated 43-101and the costs involved in securing the new lands which will essentially double the prospective potash resource.

Let me delve into the last point for a moment as there seems to be some confusion about these new lands.

Just to reiterate again, the Muskowekwan Project is on Indian Reserve lands in the Province of Saskatchewan. The leaders of the Indian Band would dearly love to see a producing potash mine on their lands as it would provide royalties and much needed jobs for perhaps 100 years to an otherwise quite impoverished community. In fact, Chief Reginald Bellerose and his eight council members were voted in on a "potash platform."

The success Encanto has had on the Muskowekwan Project has been one heck of a great lottery ticket for the Band and so far the first numbers are all winners.

The next winning number on the lottery ticket will be based on some additional paperwork to complete a successful designation vote on the Treaty Land Entitlement (TLE) Reserve Land. This vote is to bring the TLE land into the jurisdiction of the Indian Reserve land. This TLE land in question is the land that will prospectively double the potash resource.

Back in the 1950's the Canadian Government set aside the Indian Reserve lands. In the 1990's the Saskatchewan Government recognized that the Reserve lands were too small so they created TLE lands adjacent to the reserve lands. The Indian Bands can officially bring these TLE lands into their recognized "Reserve" lands anytime by simply going through the bureaucratic process of acquiring the land from the Province of Saskatchewan and then registering the title through the Federal Government of Canada. Most Bands haven't bothered to do this. Who cares about a bunch of moose pasture? However when you've got a valuable resource sitting there, well, it's time to take action.

So that's the next step.

A vote is needed by the band to bring the TLE lands in question into their jurisdiction.

So once this vote is done, Encanto will only need a couple of more drill holes, an updated 43 101 report to get what we expect to be a double in the potash tonnage. This we think will equate to a doubling of the resource and a stiff rise in the share price.

Right now Encanto's resource is, excluding the TLE Reserve lands 79.1 Mt Indicated KCl and 60.5 Mt Inferred KCl. The estimated projected resource given the TLE lands are added in would prospectively give us 150.29 Mt Indicated and 115.01 Mt Inferred.

Since the grades of the potash are at least equal to Western Potash numbers and better than Potash One, we can further extrapolate that the value per tonne and therefore the market cap of Encanto should nearly double given the resource numbers correlate. The current market cap is around 78 cents per tonne. Potash One was bought out for $1.73 per tonne. At the peak of the market back in February, Western Potash was valued at 84 cents per tonne.

It seems reasonable to hypothesize Encanto could nearly double their share price given a doubling of their resource.

The chart below show's some interesting comparables.

Solution Mining Method Comparables:

Note:

Encanto Potash Resource based on 17,000 acres, potential to increase acreage by an additional 15,500 acres. This will increase current resource size by 90%.

If solution mining is determined to be the optimal strategy the 3rd zone Esterhazy will also be included in the resource estimate.

Hathor Exploration (HAT, TSX)

Hathor also has some big news this week on their resource numbers. An initial resource statement for the East Zone has effectively doubled the amount of U308 pounds at the Roughrider project.

The East Zone has now 30.13 million pounds of uranium contained bringing the total pounds in the ground for the project to 57.9 million.

Even better, there's still more exploration work to come. The Far East Zone has still yet to be fully drill tested but initial drilling so far is finding excellent mineralization. This summer more drilling will be completed here which will hopefully build up the resource numbers and continue to drive the share price ( and potential buyout price) upward.

Having broken the 50 million pound threshold, talk on the street is that Hathor is becoming a prime takeover target. The coming months should be very interesting indeed.

Aside from the great drilling data, Hathor's share price will also benefit from an upward price of uranium itself. The V.P. of Ux Consulting, Jonathan Hinze, stated at a conference in Beijing that China's growing demand has put a floor on uranium prices and has helped to drive the prices higher. China currently has 26 nuclear reactors under construction plus another 8 which have had approval.

We are holding our Free shares with the anticipation of a future buyout of Hathor.

Nevsun Resources (NSU,TSX)

Nevsun is one of our more stellar winners over the last couple of years. Given the company's smooth ramp up of gold production, low cash costs of $299 in Q1 and operating in what appears to be a friendly environment in Eritrea, Africa; Nevsun could become a takeover target itself.

We are continuing to hold our Free shares for future growth or an eventual buyout.

Stock List

AQM Copper (Apoquindo) (AQM) April 24, 2009 54 cents; holding Dec 9/10 sell $1.02 hold Free shares.

Catalyst Copper (CCY) Entered Jan 6/10 25 cents; accumulating

Donner (DON, TSXV) Dec 4/09 heads up alert 0.15 cents, Jan 17/10 doubles holding free shares

Edgewater Exploration (EDW, TSXV) Entered June 28/10 90 cents accumulating

Encanto Potash (EPO, TSXV) Entered July 31, 2009 .27 holding; Feb 11 2011 doubles Take Profits, holding free shares.

Endeavour Mining (EDV, TSX) Entered Feb 4/10 $1.73; Profits taken Ap 9@ $2.42 Holding Free Shares

Grand Colombia Gold Corp (GCM, TSX) accumulating Dec 3/10 $2.24

Hathor (HAT, TSXV) Top Uranium Pick Entered March 28, 2006 $1.32; Ap 21/08 sold $2.64, Oct 21/10 sold $2.33 holding free shares. Bottom Fishing March 17/11 @ $1.70

Nevsun (NSU, TSX) Feb 4/10 Buy Alert 2.19, profits Oct 20/10 $5.39 holding free shares

New Gold (NGD, TSXV) Dec 29/08 Best Speculative Pick $1.76; June 11/10 doubles holding free shares

Orsu Metals (OSU, TSXV) Bottom Fishing Pick July 23/10 @16 cents, Sell Oct 3 @32 cents and holding free shares

Petroamerica (PTA, TSXV) Nov 6, 2009 Speculative at 70 cents, Jan 8 new pick accumulate slowly 71 cents; Oct 16/10 buy @0. 405 cents; accumulating

Petromanas (PMI, TSXV) Feb 24/10 30 cents. Profits taken Apr 9/10 @ 72 cents; holding free shares; May 2/10 re-accumulating at 33 cents

Potash One (KCL, TSX) Top Potash Pick Entered May 14, 2008@ $3.19 holding Nov 22/10 buyout announced at $4.50 per share

Prima Colombia Hardwood (PCT, TSXV) Introduced March 7 @ 0.285 accumulating

Uracan (URC, TSXV) Speculative Uranium Pick Apr 30, 2010 Alert 18 cents; holding

Ventana Gold (VEN, TSXV) Entered Mar 18/09 $1.33, holding free shares. Buyout bid Nov 17/10 @ $12.6; Revised buyout price February 14/11 @ 13.06

Wildcat Silver (WS, TSXV) Entered July 10th, 2009 0.485 holding; Sell Alert February 14/11, Feb 15 close 88 cents. Holding Free shares