Newmont's Wisdom Apparent in Its Magellan Minerals Investment

Some companies are very aggressive when it comes to proving up major economic mineral deposits. Magellan Minerals [TSX.V:MNM] came out of the chute firing on all cylinders, and its success to date underscore’s the wisdom of Newmont Mining’s (NEM) investment in 8% of Magellan’s outstanding shares.

Two weeks after its debut on the TSX Venture Exchange in February 2008, the company began issuing press releases that demonstrated the potential of its flagship asset, the Cuiú Cuiú project in the Tapajos Region in Northern Brazil. Drilling yielded a 65.8 metre core intercept assaying 3.54 grams per tonne gold. Two weeks after that a spectacular 174.2 metre intercept assayed 1.46 grams per tonne gold, that was only eclipsed in June 08 with a 220 metre section that assayed just over 2 grams per tonne gold. Within that hole, intercepts such as 4.2 metres grading 25.69 grams per tonne gold demonstrate the presence of high grade veins throughout the lower grade broadly disseminated mineralization.

Newmont typically seeks to acquire deposits with the potential for a minimum of 5 million gold ounces, and continuing exploration success on Cuiú Cuiú seems to confirm that potential so far.

The Cuiu Cuiu project covers an entire gold district, and has an estimated historic alluvial gold production of 1.5 to 2 million ounces. Magellan controls mineral exploration licenses totaling over 47,000 hectares (>470 km2) at Cuiu Cuiu which is one of 14 projects (11 of which are 100% owned) currently held by Magellan in the Tapajós Mineral Province of northern Brazil.

The Tapajós province has yielded a total of between 20 to 30 million ounces of gold, primarily to alluvial miners. Old workings from these operations pockmark the jungle throughout the region and are easily visible from the air.

The discovery in Brazil is no fluke. Both Dr. Alan Carter, Magellan’s CEO, and Dennis Moore, VP of Business Development, have extensive experience in the region, and were responsible for the Tocantinzho gold discovery that is the flagship asset of Brazauro Resources [TSX.V:BZO].

Tocantinzinho has so far proved to contain a N.I. 43-101 compliant resource of 2.1 million ounces of gold, and last year Brazauro inked an agreement with Eldorado Gold Corporation (EGO) whereby Eldorado can earn up to 75 % of the TZ project for a total of C$ 123 million in expenditures and cash- payments. Carter and Moore retain a royalty in the deposit.

All of Magellan’s projects are along the same structural trend as Tocantinzinho (except Uniao) that bisects Tapajós, and only 15 out of a total of 250 gold occurrences have so far been drill tested. The potential for further discovery remains significant.

Within the Cuiú Cuiú district, Magellan has conducted an extensive soil sampling program collecting over 7000 soil samples. This work has resulted in the identification of five major regional soil anomalies, all of which are within close proximity to each other, suggesting that the likelihood of multiple deposits with the project boundaries is very good.

As if the focus on gold wasn’t enough to provide opportunities for investors who seek to leverage the rising global demand for gold, Magellan also has a significant bauxite project that will bring additional value when economic conditions return to normal.

The Nhamundá bauxite property is located NW of the town of Nhamundá and access to it is via the Nhamundá and Daguari Rivers.

Magellan Minerals owns a 100% interest in the Nhamundá bauxite property which comprises a large 9434 hectare (94.3 km2) exploration license hosting a large plateau area 65km west of the world class Trombetas bauxite mine and 100km northwest of the Juruti bauxite deposit, which is under development by Alcoa (AA) and expected to begin production in the latter half of this year.

Magellan recently optioned three additional tenements for bauxite which are granted exploration licenses totaling 19,394 hectares which occupy upland plateaus near and adjacent to Magellan's Nhamunda license. The three properties; Nhamunda North, Aduaca and Japura were acquired through an option agreement with ASM, a private exploration company, whereby Magellan has an option to earn a 100% interest in the properties. Magellan has agreed to pay US$80,000, $90,000 and $100,000 for each respective license if quantities of bauxite are discovered within the respective license areas.

A first round of drilling completed last year resulted in 6 of 10 holes encountering “economic” grades of bauxite of up to 48%.

Magellan Minerals' approach is to rapidly evaluate mineral properties and either terminate them, if they fail to demonstrate potential to host economic ore, or retain and advance them, if the initial exploration is positive. This keeps the pipeline of potential projects dynamic, and precludes wasting management resources on projects with slight potential.

Since the sell-off in equities across the board last year, Magellan’s share price now trades in the $0.70 range, which gives astute investors the opportunity to invest alongside Newmont Mining at a 30% discount to the price Newmont paid. Considering the scale and potential of these projects, and the rapid and decisive exploration planning and execution, Magellan could quickly become one of the winners of 2009, which is why it is our top pick for February.