Featured Article July 30, 2010:

New NI 43-101 compliant 542,000 oz Gold resource estimate at Red Mountain, Yukon dramatically increases intrinsic value of AMG.V & positions Company as strong presence in Tintina Gold Belt

 

AM Gold Inc. (TSX-V: AMG) (US Listing: ACERF)

AM Gold has 666,000 oz Gold & 385 Million pounds of Copper at its project in Peru and a new updated resource estimate is imminent

Share price appears destined higher based on accepted valuation metrics • Only ~38M shares outstanding with a combined total of ~2.3 million ounces gold equivalent*

• Stable, mining friendly regions.

• Exceptional management & skilled technical leadership.

• Shares of AM Gold Corporation (symbol TSX-V: AMG) poised for substantial upside revaluation according to accepted valuation metrics.

• Red Mountain gold property within the Tintina Gold Belt, Yukon Canada AM Gold has just released its first NI 43-101 compliant resource estimate on Red Mountain of ~542,000 ounces gold (23.6 million tonnes grading 0.7g/t gold). AM Gold has aggressive plans to add to estimate targeting buried intrusive structure for this Summer 2010.

• 100% owned Pinaya gold-copper deposit, Peru contains NI 43-101 compliant resource estimate of 666,000 ounces gold and 385 Million Pounds of Copper which was calculated over 90 drill holes ago -- an updated resource estimate is expected by the end of July 2010. Pinaya possesses very large bulk tonnage potential similar to Goldfields 5.6M oz gold equivalent Chucapaca only 80km away on same trend.

Notes from the Editor on Featured Article:

Valuation Commentary: In addition to  43-101 compliant 666,000 ounces of gold and 385 million pounds of copper resource at their 100% owned Pinaya property located in Peru, Am Gold Inc. (TSX-V: AMG) (US Listing: ACERF) also boasts a new first resource estimate of 542,000 ounces gold on their 100% owned Red Mountain gold project located within the Tintina Gold Belt, Yukon. With a combined total of ~2.3M ounces gold equivalent*,  ~38M shares outstanding (~$18M market cap) and trading under $0.60 cents, shares of AMG.V now offer one of the best vehicles for investors seeking serious intrinsic value and strong growth prospects on two fronts;

1) Red Mountain gold project within the Tintina Gold Belt, Yukon: AM Gold has just released its first NI 43-101 compliant resource estimate on Red Mountain revealing 542,000 ounces gold (23.6 million tonnes grading 0.7g/t gold). This first resource estimate appears to represent just the very tip of the iceberg at Red Mountain as the interpretation of the geophysics indicates the target size is very large and extends to depth. The project is in the same geological belt as Underworld and several very large multi-million oz gold type bulk tonnage open-pit world class deposits including gold producer Kinross's Fort Knox mine and International Tower's 12M oz discovery. The project contains a large aeromagnetic anomaly and AM Gold Corporation anticipates expenditures in excess of CDN$2 million on the Red Mountain property this summer targeting the buried intrusive structure. [See overview of Red Mountain and its potential below]

2) 100% owned Pinaya gold-copper deposit in Peru: The project contains a NI 43-101 compliant 666,000 ounces of gold and 385 million pounds of copper resource and also possesses near term open pit mine potential at Pinaya. The Pinaya gold-copper project possesses very large bulk tonnage potential. [See overview of Pinaya and its potential below]

The risk-reward characteristics are highly advantageous for investors establishing a long position in AMG.V as the current market cap of AMG.V relative to the inherent value of their properties seem disproportionate. Shares of AM Gold Corporation appear poised for significant upward price movement with only ~38M shares outstanding (~51M fully diluted) and is trading under CDN$0.60.

"AM Gold’s current in-situ gold resource (Market Cap/Oz Au In-Situ) valuation is one of the best bargains in the mining sector and shares of AMG.V are poised for significant upward price revaluation; Market Cap/Oz Au Equivalent In-Situ as of June 16, 2010 under US$8/oz based on 2.31 million ounces gold equivalent* in-situ from NI 43-101 compliant resource of 542,000 ounces gold at Red Mountain plus 666,000 ounces gold and 385,000,000 pounds copper at Pinaya."

 *Source: Market Equities Research Group using US$1,100 gold and US$3.15 copper

Au eq. Valuation Comparison (may 2010)

AM Gold’s first resource of 542,000 ounces gold appears to represent just the very tip of the iceberg at Red Mountain
 
       News last month from AM Gold Inc. (TSX-V: AMG) (US Listing: ACERF) of the first resource estimate on their Red Mountain gold project, Yukon (See related June 16, 2010 release entitled "AM Gold Releases Inferred Gold Resource, Red Mountain Project, Yukon Territory, Canada") dramatically increases the intrinsic value of AMG.V and documents the Company’s presence and potential in the Tintina Gold Belt. The Red Mountain gold project appears to possess strikingly similar characteristics to other success stories and has the potential to rival Kinross’s Fort Knox deposit. Exploration is now aimed at stepping out and building on what is now understood to be the tip of a very large intrusive which peeks through the top of Red Mountain.
 
This first resource estimate of ~542,000 ounces gold (23.6 million tonnes grading 0.7g/t gold) thus appears to represent just the very tip of the iceberg at Red Mountain as the interpretation of the geophysics indicates the target size is very large and extends to depth.
 
Size of this first resource estimate & plans for 2010 targeting a multiple of the current resource
AM Gold drilled a series of holes into the top of the intrusive which is exposed at the top of Red Mountain. Mining MarketWatch Journal contacted AM Gold's geologist and Director, Dr. Stewart Jackson, P.Geol. to help us understand the size perspective. “The geophysical interpretation is that there is a very large intrusive which is just peeking through the top of Red Mountain and comprises the centre of the mountain. So we have a very large intrusive, with a little bit of over burden on the sides. We drilled a series of holes into the top of area where it is exposed . The potential here, from my perspective, is that the whole mountain is prospective and we’re just starting to drill into it. Consequently I think that we have enormous potential and from an explorationist’s viewpoint our objective is to scope that entire target . We are starting to do that this year with some deeper holes and step out holes. We are going to drill the lateral extent, extending out from the current zone, and to greater depth.”
 
“The current zone is contained within an area of modest size; 150m x 125m wide. The deepest hole in it is 331m deep. If one is to compute that volume at a rate of 3 cubic meters per tonne, one comes up in the order of ~20M tonnes. Within that generalized volume of rock our resource is estimated at 23.6M tonnes with a contained 542,000 troy ounces of gold. Now if we expand on that basis and step it out to a couple thousand metres, with similar width and depth, it becomes a zone in the order of 10 times that large. This is the way one expands a mineral resource, particularly if it is not closed off in any direction. The drill program this year will evaluate this potential to expand; go out a multiple of the current length, and also expand the width and depth. When it is demonstrated to go all of those directions then a subsequent drill program would get more expansive and more expansive until we have an ultimate measure of the deposit.”
 
Near and Long Term Target Objectives
The biggest area reference is a Fort Knox (Kinross - currently producing open pit at average grade of 0.45g/t with only a modest cost of production) type target, so AM Gold’s target objective from an exploration viewpoint is 10M oz plus. Within this season AM Gold is looking at a modest multiple of what has been established already. This season’s program will basically enable AM Gold to design an aggressive program for the subsequent season. The objective is to have the maximum-sized resource scoped within three seasons – ideally within two.
 
Dr Jackson offered the following synopsis “The interpretation of the geophysics indicates the target size is very large. It comprises much of the mountain and is modeled quite effectively with the magnetic program – the magnetic low encompasses much of the mountain top and goes down into the mountain. That is our target – that coincides with the geological model. The drilling to date has been in the heart of that and only a portion of our drilling was included in the resource. We actually had a few holes on our previous drilling pattern that didn’t have close enough spacing to be included in the resource calculation. … The current program will focus on expansion of the already established zone. We are extremely optimistic that the total package will expand by a multiple this summer.“

------ ------ ------     ------ ------ ------

Details of Red Mountain project  

The Red Mountain project, located about 135km east of Dawson City, Yukon, lies within the Tintina Gold Belt, a part of the Yukon-Tanana gold belt extending across central Yukon Territory and the state of Alaska, which contains several large producing and developing properties, and a host of evolving gold prospects. Intense exploration in the Yukon region has been spurred by activity of Underworld Resources, recently acquired by Kinross, south of Dawson City and the Eagle Gold Project, owned by Victoria Gold, 29 km east of Red Mountain and Atac’s discovery north-east of Keno Hill, among others. Activity has also been intensified by the recent delineation of 12 million ounces of gold resources by International Tower Resources Ltd., some fifty miles north of Fairbanks Alaska, and the continued production from Kinross’ large Fort Knox open pit at Fairbanks, averaging 0.45 gm/t at a cash cost of under $450/oz. Both are within this major structural belt. Road improvements during 2009 will assist in the efficient operation and service of the proposed drill programs.

The property hosts significant gold mineralization and sits in the middle of "elephant country" within the world famous Tintina Gold Belt, long known for significant Gold deposits:

Figure 5. Neighboring Yukon Gold Discoveries Red Mountain is strategically located on trend within the Tintina Gold Belt - a review of local successes will provide insight into what shareholders of AMG.V might look forward to should the first resource estimate prove promising and built upon;

• To the south-west you have Underworld's White gold property (1Moz indicated and 400K inferred) -- it was acquired by Kinross in an all share transaction worth between $120-$140M.
• To the west is the last commercial mine to be in production in the Yukon; was held by Viceroy at Brewery Creek where 278,484oz of gold was produced between 1996 & 2002. Gold hit a bottom of ~$250/oz and they were producing at a cash cost of ~$192 per ounce which was extremely low. The gold mineralization was at surface, it was all heap leachable oxide material, and that is why the production costs were so low. Viceroy (not thinking gold would ever rise significantly again) stopped mining and reclaimed the land – leaving several hundred ounces of gold under this reclaimed land -- Alexco Resource Corp. took over the property, they are mainly silver focused so they joint ventured the project to Golden Predator.
• Keno Hill (seen on the far right) is owned by Alexco. Between 1946 – 1992 over 217M oz silver was mined. They believe they have ~30M ounce of silver still there. Alexco is sitting at ~US$3.20/share with a market cap of ~$170M.
• To the east of Red Mountain (~20Km to the West of Keno Hill) is Dublin Gulch, owned by Victoria Gold Corp. Their Eagle Gold Project at Dublin Gulch currently has a 2.7M ounces gold resource (98.6 million tonnes grading 0.85 g/t).

The most advanced mine in the region that is anticipated to go into production at some point over the next few years is Victoria Gold's Dublin Gulch. Mining MarketWatch notes that Victoria Gold is ~20% owned by Kinross. With Kinross now owning Underworld and a major share position in Victoria Gold, the positioning of Red Mountain (subject to a favourable resource estimate ) would make it an ideal target for Kinross.

Red Mountain Historic Drilling and Technical Data are provided below:

Significant assay results from AM Gold's 2003-2005 Drill Programs:

Figure 7. Drill Hole Values in Histogram (above) [click to enlarge PDF] The pink area is the tombstone intrusive quartz monzonite at surface. Note there are several yellow legend 3 -30g/t Au. The material is widely disseminated porphyry-related gold mineralization. NOTE the road access mapped on Figure 7.

Figure 8. Drill Hole Values in Histogram Blocked off According to Spacing (above)

Observations:

• Mining MarketWatch notes there was sufficient spacing between holes in the magenta coloured zone to be relied upon for delineating a resource. The tail end blue zone was too far spaced to be included in the last resource estimate. Details of the new/current resource estimate from the release dated June 16, 2010 are as follows:

• There were some of holes that ended in higher grade, some over 8g/t.

• This area that contains the resource estimate (seen in figure 8) is only within ~150m strike length which lends one to ponder the size potential....

Figure 9. Magnetic Road Map (above) The yellow cluster(s) are the drill holes to date. The target material is believed to be buried intrusive and the white area is the part exposed at surface -- the deposit is open to expansion to East, to the North-East, and the North....

Figure 10. Where to Drill Next (above) BUILDING OUNCES The Company anticipates expenditures in excess of $2 million on the Red Mountain property this summer. The orange outline area is going to be AM Gold's area of focus for the 2010 season. Remember, the target material is a buried intrusive and that white area is the part that is exposed at surface. It is believed that it slants to the west on an angle, obviously not exposed at surface but it is believed to be quite large. As you can see from the scale that the target zone to the North-West is probably 2km strike length, to the west is 1.5km. AMG.V also has an additional area to the south and the south west on Red Mountain that is also believed to be part of a porphyry (but not the focus of this season’s efforts).

Investigating the heart of a magnetic anomaly centered on the claim block: Potential targets for the 2010 season are marked on figure 10 above. AMG.V intends to step out and test those targets at depth -- the plan is to drill between 4,000 – 6,000m, ideally doing fourteen 300m holes as well as three 600m holes to test the expanse and depth of the buried intrusive.

A Class III Exploration Permit has been approved (see related July 20, 2010 release "AM Gold Inc.: Announces Granting of Class 3 Approval and Red Mountain Exploration Program". In addition to the planned drill program, the Company had contracted a detailed airborne hyperspectral survey of its Red Mountain property from HyVista Corporation. Hyperspectral imaging is a relatively new, but powerful technology designed for a rapid identification and classification of surface cover and mineralogy, which are very useful in localizing zones of precious metal mineralization. AM Gold hopes to use the new high-resolution survey data to characterize the subtle hydrothermal alteration mineralogy and trends in the Red Mountain area and highlight the zones permissive to Au-mineralization beyond the established 542,000 oz. Au resource area. The hyperspectral imaging data will be complemented with the detailed topographic and spatial detail from the high-resolution (196 pixel) Ultracam digital aerial camera, improving spatial awareness and orientation for future planning efforts.

Figure 17. AMG.V Drilling at Pinaya.

Location/size/100% Acero-Martin ownership

The Pinaya Gold-Copper Project is located approximately 775 kilometers southeast of Lima, the capital of Peru, and 110 kilometers north-northeast of Arequipa, the second largest city in Peru. The property area is comprised of mineral concessions totalling over 19,000 hectares. The Company holds 100% interest in the concessions through its Peruvian subsidiary Canper Exploraciones S.A.C..

Access to the property is excellent, proceeding northeastwardly from the city of Arequipa, via paved Peruvian Highway Number 30B, for 142 kilometers to the Tintaya Copper Mine access road, and then northward on a well-maintained gravel road for 22 kilometers to the small community of Occopaica. At Occopaica, a gravel access road leads 7 kilometers eastwardly to the property. Arequipa international airport has daily flights to and from Lima. A nearby airstrip capable of accepting small jets is located at the Tintaya mine approximately 100 kilometres north of Pinaya.

100% Ownership; 100% owned by Canper Exploration S.A.C., AM Gold's 100% owned operating company in Peru. Mining MarketWatch Journal has researched and confirmed Acero-Martin has no long term debt and no issues surrounding debt or creditors since restructuring.

Peru is unanimously agreed in the mining community to be a stable, mining friendly region. Ranking within the Fraser Institute's Annual Survey of Mining Companies released this April 2010 may be viewed here. The mining claim and permitting process in Peru is highly transparent and clearly laid out.

Regional Geology

Regionally, Pinaya is located within the southeastern end of the emerging Andahuaylas-Yauri metallogenic belt which hosts the Tintaya Mine (Xstrata PLC), the Las Chancas deposit (Southern Peru Copper Corporation), the Las Bambas deposit (Xstrata PLC), as well as numerous other copper-gold-molybdenum porphyry and skarn occurrences. The Tintaya Mine, one of the largest copper producers in Peru, and situated 100 km north of the Pinaya Project, was recently purchased by Xstrata from BHP Billiton for US$750 million.
 
Most of the stratigraphy, structure, magmatism, volcanism and mineralization in Peru is spatially- and genetically-related to the tectonic evolution of the Andean Cordillera which is situated along a major convergent subduction zone where the oceanic crust, the Nazca Plate, slips beneath the overriding South American continental plate. The Andean Cordillera has a metamorphic rock basement of Proterozoic age on which Hercynian Paleozoic sedimentary rocks accumulated and were in turn deformed by plutonism and volcanism to Upper Paleozoic time. Beginning in the Late Triassic time, following Atlantic Ocean rifting, two periods of subduction along the western margins of South America have resulted in the formation of the present Andes; the Mariana-type subduction from the Late Triassic to Late Cretaceous and Andean-style subduction from the Late Cretaceous to the present.
 
Peru can be divided into physiographic regions which correspond to tectonic elements of the Andean Cordillera. In southern Peru there are, from west to east, the Coastal Belt, Western Cordillera, Altiplano, Eastern Cordillera, and sub-Andean zones. Heterogeneous Precambrian basement lithologies, underlying the Coastal Belt and comprising part of the Western Cordillera in southern Peru, are called the ‘Arequipa Massif’. The northern extent of the Precambrian basement corresponds to the termination of the Altiplano and the start of the Nazca Ridge. There is an intervening northeasterly trending tectonic element, called the ‘Arica’ deflection or ‘Bolivian Orocline’, that is underlain by basement lithologies where the Andes widen and bend easterly.
 
Late Triassic to Late Cretaceous Mariana-type subduction resulted in an environment of extension and crustal attenuation producing an oceanic trench, island arcs, and back arc basin from west to east. The back arc basin reportedly has two basinal components, the Western Basin and Eastern Basin, which are separated by the Cusco – Puno high, probably part of the Maranon Arch. The basins are largely comprised of marine clastic and minor carbonate lithologies of the Yura and Mara Groups overlain by carbonates of the Ferrobamba Formation. The western back-arc basin, called the ‘Arequipa Basin’, is the present Western Andean Cordillera of Peru; the site of a Holocene magmatic belt that spans the Andes and was emplaced from Late Oligocene to 25 Ma.
 
The Western Andean Cordillera is famous for its world-class base- and precious-metal deposits; many of which have been intermittently mined since Incan time. Most of the metal deposits in Peru are spatially and genetically associated with metal-rich hydrothermal fluids generated along magmatic belts that were emplaced along convergent plate tectonic lineaments. Furthermore, many of these primary base-metal deposits have undergone significant secondary enrichment over the last 30 Ma as a result of periodic continental uplift and leaching followed by volcanic cover preservation.
 
Radiometric studies have correlated the igneous host rocks and attendant hydrothermal alteration for some of the largest and richest porphyry copper deposits in the world along the Western Andean Cordillera from 6 degrees to 32 degrees south, including the Chalcobamba – Tintaya iron-gold-copper skarn and porphyry belt (30-35 Ma) in the main magmatic arc, southward through the Santa Lucia district (25-30 Ma) and into Chile. The Andahuaylas-Yauri Porphyry Copper Belt, a well known 300-kilometre long porphyry copper belt related to middle Eocene to early Oligocene calc-alkaline plutonism, is situated along the northeastern edge of the Western Andean Cordillera. The Pinaya property is situated near the south-southeastern end of this belt.

Property Geology

Pinaya can be characterized as a porphyry copper-gold, gold-copper skarn-epithermal, and supergene copper deposit. The deposit is developed in Lower Tertiary Puno Group sediments, which have been intruded and mineralized by Mid-Eocene to Oligocene dioritic intrusive bodies thought to be related to the Incaic Orogeny and the coeval tectonomagmatic emplacement of the Andahuaulas-Yauri Batholith.

 
Copper mineralization on the property is both hypogene and supergene in character. Structurally controlled mineralization is present in the form of narrow skarn zones and local narrow high grade gold and silver veins on different parts of the property.

Shallow marine and continental clastic sediments with intercalated volcanic sediments, belonging to the late Cretaceous to early Tertiary Puno Group, dominate the Pinaya Project area. The package of rocks can reach a thickness of 800 metres. It has been intruded by stocks of dioritic and monzonitic composition and it is overlain by the Tertiary volcanic Tacaza Group. The dominant structural feature, the Lagunillas Fault Zone (the “LFZ”) appears to have controlled the local deposition of continental clastic sediments.

The Pinaya mineralized deposits may be characterized as being of the porphyry copper gold skarn and supergene types. They are described as typical of a porphyry environment and similar to some of those found in other parts of southeastern Peru and in northern Chile. They appear to be spatially related to a series of prominent, northwestsoutheast trending faults and shear zones, and genetically associated with metal-bearing hydrothermal fluids related to the emplacement of alkaline intrusions and their associated alteration zones. The structures might be tectonically related to either the LFZ or a similarly orientated, subsidiary fault. The copper-gold tenor with the mineralized centres varies according to the associated intrusive phase, structural complexities and alteration overprints.

 
The mineral deposits occur in five main zones: the Gold Oxide Skarn Zone; the Pinaya Intrusive Complex (that includes the Northwestern Porphyry, Western Porphyry and Vizcachani Zones), the Montaña de Cobre y Oro Zone, the Pedro Dos Mil Mineralized Complex (that includes the Minas Jorge and Pedro 2000 mineralized occurrences that might be structurally linked with the Montaña de Cobre y Oro Zone) and the Saitocco Zone. The Zones may be classified into three main types: copper-gold deposits associated with karn zones (mainly the Gold Oxide Skarn Zone); classic porphyry copper-gold deposits; and copper-gold deposits in sheared and oxidized country rocks (mainly in the area of the Montaña de Cobre y Oro Zone).

Figure 27. Hand dug workings at Pinaya

Figure 28. Drill Core Warehouse

Fig. 29. The grazing economy

Welcome to Mining MarketWatch

We provide insight into resource companies, many which are so often overlooked gems and can provide exceptional potential to richly reward investors.  The companies we select offer outstanding properties, management and experience in the mining/exploration industry.