Magellan Minerals

Junior Gold Exploration and Development Company in Brazil

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The company is moving its small but economic Coringa project towards production as well as expanding the resource at Cuiu Cuiu. Both projects are located in the Tapajos region of Brazil, famous for its estimated 20-30 million ounces of alluvial gold production between 1978 and 1995. In particular, Cuiu Cuiu is located about 25km northwest of Tocantizinho, a joint venture between Brazauro and Eldorado Gold. [June 10, 2010] [David Zurbuchen]

At current metal prices, our valuation model gives Coringa a value of about $0.70 per share. With a low CAPEX and reasonable operating costs, the project has a good chance of moving forward into production with strong potential for an expansion of the current resource as drilling remains ongoing.

Then there's Cuiu Cuiu, which has returned some impressive drill intercepts such as 220m @2.02g/t Au, 39m @ 5.13g/t Au, and 17.3m @ 13.69 g/t. Similarities exist between Cuiu Cuiu and the nearby Tocantizinho project*, with the potential that Cuiu Cuiu could be even larger given its historical alluvial production profile and ongoing drilling success. Two rigs are currently turning on the project with an initial resource estimate expected by the end of 2010.

*In May 2010 Eldorado Gold made an all-share offer (currently valued at about $110 million) for Brazauro Resources. The centerpiece of the deal was the Tocantizinho project, a 2.3 million ounce deposit where Eldorado was already a joint venture partner earning up to a 75% interest.

Magellan isn't cheap, but given the quality of its assets, a talented management team, a nice looking chart, and significant shareholders of Newmont Mining and Kinross Gold (both of which are active in this area of Brazil), we're considering adding it to our portfolio. [June 10, 2010] [David Zurbuchen]