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Gold - It's Real, This Time

Bre-X Mine Entrance

A New Gold Rush: East Asia Minerals and Centurion Minerals

We last visited Indonesia last November after a twelve year absence. Then General Suharto had ruled the country and Bre-X had somehow found 200 million ounces of gold. Of course, it all came to an end. Today, Indonesia is home to the world's fourth largest population benefiting from China's rapid economic growth. Most importantly the various conflicts that erupted in resource rich areas like Aceh have ended with both governments today pursuing pro-business and pro-mining policies.

Indonesia, the world's largest archipelago, sits on a "ring of fire", an arc of live and extinct volcanoes where the earth's crust or plates converge. This ring of fire is a belt of volcanic activity that contains much of the world's gold and copper deposits such as Freeport's mammoth Grasberg gold complex. Normally high-sulphidation epithermal deposits occur as shallow, flat lying bodies, derived from deeper intrusion rocks associated with porphyry advanced argillic mineralization. The porphyry deposits in turn are generally lower grade but contain large tonnage (often over 100 million tonnes). Miwah is a high sulphidation epithermal gold deposit.

Miwah - Historic Background

Vancouver-based East Asia Minerals was one of the first companies to capitalize on this new environment as its CEO Michael Hawkins, formally VP of Exploration and President Lyndon Bradish of Highland Pacific, returned a couple of years ago to assemble a 440,000 hectare land package in Aceh, North Sumatra. Highland had explored Miwah in 1995 spending about $5 million but abandoned its concessions following the 1997 Asian crisis collapse and Bre-X implosion. In fact Highland had drilled over a dozen holes with some 3,000 meters of drilling. Barrick was also in the area. Both companies believed there were similarities, comparing the Miwah system to the Yanacocho system in Peru.

The structural history of Sumatra is a northwest trending fault line of highly mineralized volcanic and intrusive rocks along the middle of country, called the Sumatra Transform Fault system. There are also a well developed series of east/west cross-trending faults with some dilation at the fault intersections where active faulting and igneous activity have resulted in the formation of mineral deposits. Highland's work investigated the high sulphidation mineralizaton of Miwah. Of interest, Miwah was ranked number three among Highland's top eight targets.

Simon Meldum, a renowned structural geologist has noted that there are striking geological similarities between the Guempang District, where Miwah and other gold showings and the Cajamarca District of Northern Peru, site of Newmont's huge 35 million ounce Yanacocha complex. Simon was the project manager at Newmont's Batu Hijau giant porphyry copper-gold deposit and worked at East Asia's Miwah as well as Centurion's properties. Simon found similarities with comparable structural models, including the impact of variations in direction, inclination angles, cross- faulting, uplifts and tertiary age volcanism. The key feature is that these deposits tend to cluster.

Another report was prepared by Barrick who also worked the area in 1995. The report refers to the Miwah prospect which lied on the eastern boundary of the project area. Barrick noted that the prospect became the first documented occurrence of a high sulphidisation system in Sumatra. Barrick had done stream sampling, geochem, geophysics looking for drill targets. Barrick suggested the reassessment of this area for its high sulphidisation gold potential. Of note is that the Highland and Barrick ground is now held by East Asia Minerals and Centurion Minerals.

Bre-X Minerals the world's biggest fraud?

Of course the work by Highland and Barrick ended when investors lost $6 billion as Bre-X collapsed in a notorious stock fraud. Bre-X was a gold scandal of monumental proportions that crashed and burned forever changing the mining landscape. However, for those of you who may have forgotten, there are differences between then and now.

  1. Resource
    Busang's reserves and resource were wild-eyed estimates ranging from 50 million ounces to over 200 million plus ounces. Most analysts projected Busang to contain some 71 million ounces. Regretfully, some 48,000 samples were salted. As a result, Canadian regulators introduced new rules requiring scientific and technical information be reported by an independent "Qualified Person", who is licensed and recognized to author a National Instrument or NI 43-101. East Asia has drilled some 40 odd holes with a drill validated strike length over an area 1.2 km by 450 metres to a depth of 250 metres. All 40 holes have intersected gold. We believe that there is a 10 million ounce resource here.

  2. Mining Law
    We were always negative on Bre-X because they operated under a preliminary exploration permit (aka SIPP) which left the mineral rights to the deposit in the name of H. Syakerani a local Indonesian landowner. A new mining law concerning Mineral and Coal Mining was passed by parliament and signed by Indonesian president Yudhoyono on January 12th, 2009 which replaced the largely 40 year old laws. The new mining law allows the exploration and exploitation under new permits (Izin Usaha Pertanbagan or IUP). granting the holder of an exploration IUP to be consecutively granted an exploitation IUP upon a positive feasibility study. In addition, under the new mining law, direct foreign ownership is permitted. Of interest is that both East Asia Mineral's and Centurion's Indonesian partners have secured important IUPs on their properties.

  3. Core Samples
    Bre-X core samples were prepared in the jungle not the testing lab. Indeed, there was an absence of core other than a 10-cm long core chip. The core samples were "salted" with gold dust. On the other hand, East Asia splits core, keeping half at camp, and ships the other half to independent Intertek labs in Jakarta. Mining Associates of Australia has verified sampling, completing a full QC and QA review up to September 10 of all holes drilled. East Asia will also build their fourth core shack.

  4. Market Value
    By September 1996, Bre-X market capitalization hit an all time high of $6.2 billion after finding the world's richest deposit at which time other gold companies were rumoured to be buying Bre-X. Freeport, Barrick and Placer Dome were lusting after the prize. East Asia's market cap today is about half a billion dollars.

  5. Location
    Bre-X was on Busang in East Kalimantan. East Asia is on the northern part of Sumatra, a separate island.

East Asia Minerals Corporation (EAS:TSXV)

52 week range $8.73-$1.70   Market capitalization (mil) 525
Shares outstanding (MM) 75.5   Risk High
Fully diluted (MM) 80   Cash(MM) $20

When we visited East Asia Minerals in October, a year ago they had outlined about 3 million ounces at their flagship Miwah gold project. Work to date has outlined Miwah as a high sulphidation, epithermal gold system with about 10 million ounces. Miwah is the important driver of our valuation. The respective interests of East Asia and a local company PT Bayu Kamona Karya on the project is 85 percent and 15 percent. East Asia has begun a phase II drill program that is designed to aggressively expand the aforementioned resource with significant blue sky potential to the north, east and at depth. The Company has about $20 million of cash, sufficient to fund a three drill program into the new year.

Miwah has an impressive batting average encountering gold mineralisation with more than 95 percent of all holes analysed to date. East Asia has traced a large 1,200 metre by 450 metre by 250 metre thick envelope grading (1.2gt) with high-grade vertical diatreme breccias feeder zones that could augment the resource material, both at surface and depth. However, the bulk of holes are less than 1 g/t with periodic high grades at surface and recently at depth. There are at least three satellite or cluster deposits which potentially join up at depth. The main Miwah zone is flat lying but our site visit leads us to believe that there is much more resource potential at depth, to the north and east. Three drill rigs are operating at the moment. Geophysics indicates tremendous potential to the north. Since there is only 14 months left in the exploration permit, the company is fast tracking exploration and a NI 43-101 is expected and likely next year. Metallurgical, geotechnical and hydrogeological test work are also needed. A large bulk sample would be needed to test metallurgical, ore characteristics and quality.

Aceh is serviced by flights from Jakarta directly or via Medan. In Medan, helicopters brought us to visit East Asia's and Centurion's properties. Closeby both properties is the village of Geumpang which serves as a logistical point which is linked with other major towns by paved roads. The concessions lie within a rugged mountainous territory which is sparsely populated.

Our recent short visit to Miwah was led by three geologists, Henry Wong, Darryl Clark, the newly appointed VP of Exploration from Australia and Marcilinus PHS. The group showed me four sections of drill holes (#33, #19, #24 and #3). EMD # 33 was the deepest hole at 349.6 metres grading 1.4 grams. The sections were consistent and noteworthy was that grade tapered off when the vuggy silica changed to clay. I was also shown hole EMD #24 which got better at depth with free gold, bottoming at 209 metres. Most exciting was recently completed high grade drill hole EXD # 3, drilled with a due south azimuth and 55 degree dip about 100 metres north from EMD 24. The results of EXD #3 are important because they give a good indication of higher grade mineralisation down dip and in a northerly direction linking to Moon River. EXD #3 intersected favourable mineralisation at 160 m downhole continuing to 220m with the bottom 3.5 metres grading a whopping 11.78 g/t. This hole was drilled with the shallow 200 metre rig. East Asia will drill EXD #6 to test EXD #3 at depth and to the north towards Sipopok.

Since most holes bottomed in mineralisation, another deep machine will be swapped with a shallow machine shortly. East Asia moved the shallow rig to drill 100 metres to the east EXD #4, which would be the most easterly hole, following up Highland's MWD #7 which ran 9.7 m @ 0.88 g/t . There is potential to add another 400 metres towards the east, which if successful would extend East Asian's strike length to 1,600 metres. This drill campaign continues to show promise.

East Asia samples every metre and splits core in-house where they check SG (specific gravity) every 10 metres. I saw two cutting machines and East Asia ships core in sealed bags, half to Medan, where they prep and send core to Intertek labs in Jakarta to be assayed. East Asia currently has a 100 person camp, surrounded by barbed wire and 10 guards. The geologists are on rotation and supplies are brought in by helicopter and porters. East Asia has three core shacks but with increased drilling, there are plans to build another shack, likely where the helicopter pad is situated. East Asia also has a radio station, needed since it rains about four metres a year. In our opinion, the project is well organized and managed.

However the lack of a NI 43-101 compliant resource estimate and of course a feasibility study suggests that investors will discount the valuation because of increased risked. That risk would be diminished by a NI 43-101 or feasibility study as well as metallurgical work. However, we believe Miwah is a high quality project that is well poised to become a high quality mine.

East Asia's management is a group of experienced geologists led by Michael Hawkins and Lionel Martin who discovered a large uranium deposit in Mongolia which was subsequently sold and the proceeds dividended out to shareholders. It is our opinion that East Asia will drill off Miwah, to expand the mineralised footprint and as before, hold an auction to sell Miwah that will attract the majors. The main Miwah zone has been drilled on an east-west strike over 1.2 kilometres. A second zone, the South Miwah Bluff, may be part of the main zone. The geology and location suggests that there are other cluster deposits, in fact to the south, the Chinese are developing the 5 million ounce Martabe gold deposit. We thus do not believe permitting is a problem and the forestry issue is a non event.


The site tour solidified my views that there is still much blue-sky potential. East Asia Minerals has 75 million shares. Sprott Asset Management owns 20 percent and Tocqueville owns about 10 percent. Although still relatively early, based on the assay and drill collar information published to date, we believe there is an in-situ resource of about 10 million ounces in the main Miwah zone. There is also potential to expand Miwah multiple times from this estimate to the north, east and at depth. Although, drilling is irregularly spaced, applying a lowly $100 an ounce in situ value, we estimate a target of $13.33 a share. Based on the market capitalisation of similar companies, East Asia's stock price appears to have significant upside potential and we view East Asia as a prospective takeover target. As for upside, while we do not expect East Asia to go for $1,000 or $1,200 an ounce, we believe that $200-$400 an ounce would be achievable with a NI 43-101 technical report. Buy.


Centurion Minerals Limited (CTN:TSXV)

52 week range $1.95-$0.35   Market capitalization (mil) 48
Shares outstanding (MM) 27.8   Risk High
Fully diluted (MM) 37.4   Cash(MM) $6

Vancouver based Centurion Minerals completed a NI 43-101 technical report on 80 percent owned Banda Raya and Halimon which have IUPs on the two northerly blocks, adjacent to East Asia's Miwah. A major advantage is like East Asia, Centurion has benefited from the previous historic work performed by other companies and acquired only the concessions which had promising work and targets. There are numerous high sulfidation and porphyry copper-gold showings on Centurion's blocks and previous work suggests the potential for a significant find. Both properties are located in the Pidie Regency, Aceh and total 20,000 hectares. Gold grades up to 15.35 g/t have been reported. Access is by foot and helicopter. Mineralization on both is epithermal. Both properties host favourable volcanic and structural geology similar to Miwah. An exploration contract was signed with a local Indonesian company, PT Sigma Mineral Exploration that is conducting field work with the objective of choosing two or three targets to be drilled next year. Two camps, one field office and an office in Jakarta have been set up. There are at least two high sulfidation epithermal targets on Banda Raya. Leuping is northeast of Miwah and Lee Cuko (Halimon), north of Sipopok. Centurion has a dominant land position in the area which is geologically prospective and strategically located.

Upon a visit to Centurion's Leuping site, an extinct volcano, I was met by Centurion's two local geologists, Tjandra and Abraham and about 18 locals. Leuping is higher in elevation than Miwah, but on trend within the east-northeast trending Miwah-Menawan structural-mineralized corridor. An outcrop was visited and samples taken. The Company has begun geochemical exploration work to date already uncovering a number of outcrops where they have taken samples. Geochemical exploration work to date has already uncovered vug-bearing silica or silicified rocks and it appears that this is lithogenic in origin, as opposed to structural controlled. Preliminary assays from the two prospects returned assays up to 0.4 g/t Au. Drilling is expected early next year, likely concentrating on Lee Cuko (Sipopok north) and Leuping. It's worthwhile to state that previous explorers reported the presence of altered and pyrite-bearing diatreme; similar rock that hosts the higher gold grade Miwah bluff zone of the Miwah deposit. Centurion continues to pursue other properties to augment its well located property portfolio.

Centurion will spend $5 million on exploration and begin drilling in the new year. Centurion acquired additional properties to the east of Miwah, securing the Menawan property, a 10,000 hectare tenement. There are at least six gold and copper targets or leads on the property discovered by Highland. Centurion enjoys extensive support with the community and local government. Management are experienced Indonesian hands, led by Alfred Lenarciak, the past Chairman and architect of Minorca Resources. Management has a long history in Indonesia. Centurion recently added Mr. Fred Turnbaum to its board, a highly successful and respected senior corporate lawyer in Indonesia.

North Sipopok will likely be the first target. Channel sampling will also be done on the various silica cliffs. Apparently there are two roads that have been completed with the closest being three kilometres away from Halimon. Helicopter access is still needed to shift supplies and move rigs.

Banda Raya

Banda Raya is directly to the northeast of the Miwah discovery. The property was previously explored by Highland in the nineties. Highland did regional geo-chem reconnaissance and identified many gold and base metal anomalies. There are two interesting epithermal gold prospects, Leuping and Lee Cuko. Centurion is performing a field assessment program at these two. The Leuping anomaly spans two claim areas and is lithologically correlated to the Leuping volcanic formation.


Halimon is situated north of the Miwah epithermal deposits and west of the Banda Raya tenement. Haliman was explored by Amax in the 80s and briefly by Barrick in the late 90s. Previous work by Barrick identified four geo-chem target areas south and east of the Puet Sague volcanic region. One target straddles Halimon and the Miwah claim areas and another three are in the northeast. Within these areas are quartz veins and intensely argillic rocks, including breccia, that were interpreted to be of epithermal origin. A number of circular features and area cross-cut faults occur in the middle of Halimon. These structures are generally considered explorations targets, as such features control mineral deposits elsewhere, like the Miwah deposit which is located just eight kilometres to the southeast. The priority target is a diatreme, as it represents a favourable host rock for gold mineralization. Barrick has done previous work and the helipads were cleared with additional helipads planned to allow access. A three month reconnaissance program of collection stream sediment, rock chip and rock float samples with a radar satellite image is to be done under Dylan Jeffiries. A three-month geochemical work involving rock sampling and geologival mapping is under way. Recently acquired high resolution radar Satellite imagery and their structural interpretation show the relation between structure and nature of the prospect, thus providing meaningful aids in understanding ground controls and in locating mineralization.Following a review of results, a drilling programme is planned in the new year.

Centurion also has Sable which was one of the old Contract of Work (COW) tenements. Sable is a 25,000 ha tenement that is located about 15 km southwest of Miwah. We visited Sable in November and there are a number of porphyry targets to the north. Badak was picked up and this 10,000 hectare property is to the southeast of Miwah which hosts a number of epithermal targets. Centurion has also acquired the Jimue property situated 20 kilometres southeast of Miwah. Centurion is slowly surrounding Miwah.

In addition to adding to its land portfolio, upgrading its board, Centurion has and recently acquired an important stake in East Asia's Miwah deposit. Centurion announced an agreement with PT Bayu Kamona Karya which is the Indonesian company that holds a 15 percent interest in Miwah whereby Centurion has secured the exclusive rights to finance and a right of first refusal providing the funding necessary for PT Bayu Kamona Karya to maintain its current 15 percent stake. The agreement gives Centurion an effective 10.8 percent financial interest in the Miwah deposit. Should Miwah grow beyond 10 million ounces, Centurion has agreed to a bonus arrangement of $5 million (cash or equivalent shares). In essence, upon achievement of certain milestones, Centurion has a potential vital equivalent 10.8 percent interest in the Miwah deposit for less than $25 an ounce as well as a seat at the table should there be takeover discussions - this deal is a game changer.


We believe there its huge potential here and Centurion should be purchased in a package with East Asia. We consider Centurion a look-alike to East Asia, but with better value. Centurion has ideal real estate with IUPs, NI 43-101reports, and now an effective interest in Miwah. Also, a drill program is planned in the first quarter on two or three of Centurion's prime prospects which will attract attention. Centurion's currently has $6 million of cash, sufficient to fund its exploration plans. Maison completed a brokered private placement for Centurion for 5 million units @ $1.00 per unit with ½ warrant exercisable at $1.20 for 18 months and $1.20 per unit plus ½ warrant exercisable at $1.50 for 18 months. We continue to recommend the shares here.


Analyst Disclosure
Company Name Trading Symbol *Exchange Disclosure code
Centurion Minerals Ltd. CTN V 1,5,6,8,9
East Asia Minerals EAS V 1,8
Disclosure Key: 1=The Analyst, Associate or member of their household owns the securities of the subject issuer. 2=Maison Placements Canada Inc. and/or affiliated companies beneficially own more than 1% of any class of common equity of the issuers. 3=<Employee name> who is an officer or director of Maison Placements Canada Inc. or it's affiliated companies serves as a director or advisory Board Member of the issuer. 4=In the previous 12 months a Maison Analyst received compensation from the subject company. 5=Maison Placements Canada Inc. has managed co-managed or participated in an offering of securities by the issuer in the past 12 months. 6=Maison Placements Canada Inc. has received compensation for investment banking and related services from the issuer in the past 12 months. 7=Maison is making a market in an equity or equity related security of the subject issuer. 8=The analyst has recently paid a visit to review the material operations of the issuer. 9=The analyst has received payment or reimbursement from the issuer regarding a recent visit. T-Toronto; V-TSX Venture; NQ-NASDAQ; NY-New York Stock Exchange


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