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US Gold Corp. (UXG)

The Wall Street Analyst Forum

August 14, 2007 11:50 am ET

Executives

Ian Ball - CEO and Assistant to the Chairman

Presentation

Moderator

I'd like to figure out whether I am saying good morning or good afternoon, so for the next four minutes, it remains good morning. So, good morning everyone and I would like to introduce you to the next company in this morning’s program, soon to be this afternoon’s program, from precious metals and mining, US Gold. US Gold Corporation is a United States-based gold exploration company, aggressively exploring Nevada’s Cortez Gold Trend. The company has a large land position, a strong treasury and a very experienced and talented exploration team. US Gold shares trade on the American and Toronto Stock Exchange under the symbol of UXG.

I'd like to introduce, with us, Ian Ball, Assistant to the Chairman and Chief Executive Officer of the company. He is accompanied by Stefan Spears and Ana Aguirre. And I want you to note that, following this 40-minute presentation and Q&A session, I will ask the management to repeat the question for the benefit of webcast attendees, if you could remember to do that, which is not easy to remember when you are eager to answer the question.

There will be a 15-minute lunch and breakout session, between the management’s and the attending analysts and portfolio managers. We deliberately -- we had a different format years ago, we don’t have any speakers during lunch, so it's really just a sort of a networking or breakout session opportunity to meet with management. So probably two out of three management teams represented today will stick around for it, so that'll take place immediately following this meeting.

So, Ian Ball, without any further introduction.

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Ian Ball

Thank you very much. I want to start this presentation today by saying gold is money. It is the ultimate form of currency. If you take a step back and you look at the long-term economic cycle, you will see there have been certain periods of time where gold's been the ultimate currency to hold. I believe as this decade continues to play out, we are going to do see gold outperform every major currency.

Gold is universally accepted. You can get your money back within two days, even faster if you sell it on the street. And I think we are going to see a premium being built into the gold price, because it’s liquid. You can sell it anywhere in the world.

The current bull market that we are experiencing with gold started back in 2001 and during this time period you had the price of gold rising, but it is only relative to a falling U.S. dollar. So if you were in Europe or you were in South America, gold wasn't that exciting, because it’s going flat in your local currency.

And then something interesting started to happen. In the summer of 2005, France and the Netherlands voted down the EU constitution, so investors were asking, where do I put my cash? I am not going to put it in the U.S. Dollar, because it’s going down, I am not going to put it in Euros, because there is uncertainty.

So people started to put it in gold and gold started to move against every major currency in the world. So instead of having a market of 300 million people, which would be the United States, we now have a market of 6 billion people, a 20-fold increase looking at the gold price. And as you can see from this chart, basically in the summer of 2005 gold has started to move, with the Euro and Pound, the South African Rand or the Australian Dollar. It started to get worldwide attraction.

I think the current state of ramp-up in gold is going to last until the end of 2008 when it’s going to touch its old high of $850 an ounce and then you are going to see gold move higher, and by the end of 2010, we think gold is going to touch $2,000 an ounce.

What you are seeing here is a graph, and we have taken the Dow Jones Industrial Average and divided it by the price of gold, and then historically there has been a ratio that has linked the two together.

If you look back to 1896, one ounce of gold bought the Dow, and then we entered the 1920s, and by the peak of the market in '29, it took 18 ounces of gold to buy the Dow. Now we all know what happened in '29. The market rolled over. We entered into the great depression and by 1932 it went to 2 ounces of gold to buy the Dow.

Look at the 1960s, this was really a golden era for stock, and by 1966 it took 28 ounces of gold to buy the Dow. Now if you were to pose the question back in '66, whether 1 ounce of gold would ever buy the Dow again, you would have found very few believers.

In 1980, 1 ounce of gold bought the Dow, the Dow wasn’t at 14,000, it wasn’t at 7,000, it was at 800. The price of gold was 800, and you had to come back down to the one-to-one ratio.

If you look at 1999, during the height of the tech market, it took 44 ounces of gold to buy the Dow. Once again, if you were in '99 and you were to ask the question whether the price of gold and the Dow will ever trade one-to-one again, you would've found very few believers. But that's exactly what's happening. We've cut that number in half.

Well, today it only takes 20 ounces of gold to buy the Dow. So the question for everybody is, are we going back down to the one-to-one, or one-to-two ratio? Or is this line going to invert and go higher? What we are betting on over the next three to four years is that you're going to see gold have more purchasing power than the Dow.

What you're seeing here is a lack of generation of knowledge among investors where a tremendous amount of confidence goes into financial assets and that confidence is lost and people return to hard assets and the number one asset has always been gold. So if you believe in gold and you want to get exposure of what you buy, you buy the physical metal or you buy gold shares.

Well, if you look at the period '29 to '39, the Dow was down 60%, you had the price of gold up 69% through government edict and you had a Homestake Mining, which was the largest gold mining company of its time, up 500%. You look at the second period, the Dow was up 8%, the price of gold up 2300% and you have Homestake Mining up about 500% again. You look at today's period, the Dow's at 20, you have the price of gold up at 160 and you have the XAU, which is really an index of large gold mining companies, it’s up about 140% and we have used it and replaced the Homestake, because Homestake was purchased back in 2001.

So during the first period you had gold box A performing. Second period gold A performed. Currently they are both even. For history it is really a good process to tell you what's going to perform in its current market. Our recommendation will be to own both, own the shares, own the bullion, because you'll hate to be right about the gold price, but wrong about the diversification strategy.

So what's possible for the gold price? Well, if you take the high of 1980, which is $850 an ounce and you adjusted for inflation, you get a price of $2,200 today. If you look at the period from 1929 to 1939 where the Dow declined by 60% and you were to assume that was going to happen again today and you apply the 2:1 gold ratio that we’re showing, you get a price of over $1,800 an ounce. If you look at the period 1966 to 1980 when the Dow was flat for 14 years and we were to assume that was going to happen again today and you apply the 2:1 goal ratio, you get a price of over $4,600 an ounce.

All prices are well in excess of what we are trading at today. We are quite bullish on the price of gold. The problem is a lot of the companies that are looking to put a mine to production or currently producing, are failing to deliver on the promise. We are seeing a lot of projects being recycled in this gold market, for the third and fourth time. And you are seeing a tremendous amount of inflationary cost. You are seeing record high energy prices, you are seeing labor shortages. These companies’ inability to deliver a mine on budget and on time is become comical.

At US Gold, we are focused on making a world class discovery, one that has the ability to generate serious wealth for investors. We are not focused on trying to put some little, historical mine back into production.

So if you were to take a look at how the various gold companies have performed over the past 10 years, you get a big difference. If you focus on the senior gold stocks, these are the companies with the CEOs that are making over $5 million a year, taking down a lot of stock options, yet their ownership in that company is microscopic, almost non-existent. And their share prices have been nothing over the past ten years. You have the price of gold up 70%, yet the best performing senior stock that’s only gone 23% Barrick Gold. You have Newmont Mining, which is the love of all the institutional investors, because it is the only gold stock in the S&P 500. It’s now 14%.

Then you have Kinross Gold, which is really a hodge-podge of company that’s grown through acquisition. It’s now 47%. Therefore, there is a perception among investors that if you put your money in a big company, it’s going to be safe. But there is real difference between perception and reality, because in the gold industry, the big companies have lost you a tremendous amount of money. Because the CEOs of these companies have gone out, they have done acquisitions and you've got to remember, it’s extremely easier to grow your top line, it’s very easy to grow your bottom line, but with regard of per share metrics, cash flow per share, earnings per share, that’s what matters.

If you look at the mid-tier gold companies, they have done better. The best performing company of this group is Goldcorp, it was founded and led for 18 years by US Gold’s Chairman and CEO, Robert McEwen. But if you look at the juniors, the juniors have been the real growth story of the gold sector. Now a lot of great fortunes in the United States have been made off of big metal discoveries. If you walk down 5th Avenue and you look at the Guggenheim, it was funded through major discoveries in Colorado, Alaska and Chile. If you look at the Gaby portion, it was founded through big oil discoveries in the United States and then the Middle East. I am willing to bet that nobody here is going to create America’s next portion by investing in a senior gold stock. It simply will not happen.

Now the downside of risk in investing in a junior exploration company is your investment can go to zero. But if you are fortunate enough to invest in a company that makes a big discovery, you are not looking at a percentage move in your share price. You are looking at multiples of your share price 10, 20, 30 times on your mine.

These are some of the companies that have made significant gold discoveries -- the last company that I was at with the Chairman and CEO of US Gold was Gold Corp, where we had a tremendous run over a period of about 15 years, which we are trying to replicate through US Gold.

What’s interesting though, especially with the mining sector, if you are familiar with it, is that if you look back to the 1960s there was the expectation in both the market and society. We used to watch movies like “Lawrence of Arabia” where you have the screen, which changed every 30 seconds; things were really slow and this is how mining companies reacted during the ‘60s and they just plodded along doing their thing.

But things have changed today, instead of having the 1960s expectations; you see movies that we are watching where the screen changes every three seconds, not every 30 seconds. For mining companies, most mining companies move at a glacial speed, they forget that you have hedge funds in the market, private equity, individual investors, all demanding more out of their investment. And these mining companies just don't seem to care, because most of their management teams don't own any stocks, they just do their thing. And if this market wants to be relevant in the broader scheme of things, the rates of return that we deliver are going to have to improve from what they've historically done.

So now I want to spend some time on US Gold. Our focus is Nevada. If you look at the size of the state, it is three times the size of England. It is larger than Germany and it is home to two million people and the fastest growing city in the United States, Las Vegas.

If you would think of it as a country, it would rate fourth in the world in terms of gold production. If you were to look at the number of million ounce deposits per square foot, it would rate number one in the world. This is the place to be if you want to be looking for gold.

We took over US Gold in September 2005 and we started to establish a number of corporate goals. The first was to bring in a new management team. We want to have a group of geologists that have made significant gold discoveries within Nevada.

Second, we want to have an extremely strong balance sheet. There were a number of pressing liabilities in this company when we entered the picture, so we put in $3 million of our own money to eliminate those liabilities; we raised $75 million last year to give us a very strong balance sheet.

Third, we want to have a very aggressive exploration program, because all too often you have these junior exploration companies go out, they drill three holes, they find no gold and they go back to the market to finance, and when they do that, they are going to loot their shareholder. We want to have enough money in the bank that we go flat out for three straight years. We moved the company from the OTC Exchange onto the America and Toronto Stock Exchange. Our last goal is to make a significant gold discovery.

Why Nevada? Why did we make the decision to go here? Well, it's become one of the most exciting places in the world if you are looking for gold. The state is dominated by the two largest gold producers, Barrick and Newmont.

Last year, Barrick paid $10.4 billion for a company called Placer Dome. Its most valuable assets were located in Nevada. Now $10.4 billion might seem like a lot of money but I am willing to bet the prices are going to go higher. One, I think the price of gold will go higher. But two, if you ever had the opportunity to meet a CEO of a large mining company you will see that they've got tremendously big egos. You have investment bankers walk into their office and the way they approach is, well, if you do my deal I can make you the 10th largest gold producer in the world or I can make you the fifth, or I can make you the second. So, the CEO does really have a lot of time on their hands, from what I see, to do these deals. Unfortunately it's really bad for the shareholders.

When we got in, because we came from a large company, Goldcorp had a market cap left at $8 billion. So, when we got into exploration we said, well, there are hundreds if not thousands of other exploration companies out there in the world, what's going to separate us? What's going to give us a competitive advantage? What's going to make an investor look at this company and say I want to own their shares?

So we have gone out and tried to create Nevada's premier exploration company. And what does the market currently lack in a junior company? We said well, we want to establish a company that had figure and position right up there with Barrick and Newmont, the two largest in the world. We want to have an exploration budget that will be up there with the senior gold producers. We want to have trade and liquidity of a mid-tier producer, so we will be attractive to both institutional and individual investors because too often these small companies, institutions can't touch. They can’t get in, they can’t get out, so basically the company has no service for their shareholders, because it is a big market that they can't touch.

We want to have all these qualities, but still have the potential upside of a junior. So to give you little bit of history on Nevada, I'll take you back to the mid 1980s and there was the property that came up for sale called Goldstrike. It was located in this region called the Carlin Trend. The asking price was $66 million. It had 600,000 ounces located on it, located in a number of small deposits at surface. This property was shot all over the street. Nobody would touch it. Not even Newmont, who has had the mine right next door. And then there was a small company called Barrick. They came along and they said, we will pay your asking price and everybody thought they were nuts. But their geologist had a hunch.

What you are seeing at the surface was actually connected to a much larger, richer system at depth. And they were right, that 600 thousand ounces turned to 50 million ounces and became the backbone for what is today the largest gold producing company in the world. This one mine currently produces two million ounces of gold annually. That represents about 25% of Barrick’s production. It is Barrick’s second largest mine, 16, 17 years after it was originally discovered.

So, once people saw that, they started thinking, well, maybe the potential of Nevada is to go deeper. That’s maybe where the rich ore bodies are to be found, not at the surface. Today, for the 180 million ounces that have been discovered in the Carlin Trend, 60 million ounces have been produced. This is one of the most significant areas in the world for gold.

30 miles to the west, there was another area. This was called the Cortez Trend. It has a number of gold showing at the surface, a number of small mines and people looked at it and they said, well it doesn’t have the same potential. Yeah, sure there is gold there, but the system is different in Carlin. So people at first wrote it off. This is the share price of Barrick after it made its discovery in Nevada, not a bad run, 3700% in about 7 years.

But if you look at the Cortez Trend in 1989, something interesting started to happen. There was a small discovery called Gold Acres. Its geology looked very similar to what they were seeing in Carlin, but people said well, that may be true, but it’s small, so it doesn’t matter. Then in 1991, there was a big Carlin discovery called Pipeline and people looked at it and said, well, sure, but it’s a one-off, it’s not important. And then in 2003, there was another large Carlin-type discovery called Cortez Hills, and people started to ask themselves how many more of these Carlin discoveries do we have to make before we say this is Carlin. We saw this coming at US Gold, so this is the trend that we want to be in, because this is very similar to what the Carlin Trend experienced back in the 1980s.

The company that discovered Cortez Hills in the span of six months tapped $4 billion in market cap. So it really had a tremendous impact on this company. Barrick Gold, the company that took over Placer Dome, they recently put out these drill results of the Cortez Hill deposits and I won't go into the details of them. But the greater richness that you are seeing here makes this deposit one of the biggest, probably most exciting gold discoveries in the past 10 years, anywhere in the world.

When we came into US Gold, this is what the Cortez Trend looked like. You had Barrick in the grey -- sorry Barrick in the red, Newmont in the grey, the top of the trend, they are also located at the bottom of the trend and you had a number of junior exploration companies right in the middle, US Gold being in the gold color property. So, if you are an investor and you want to get exposure to the Nevada exploration and you actually say, well who do I buy? I don't want to touch the seniors, but how could I tell which one is a junior exploration company? So, we thought we’d make the process very simple.

Earlier this year, we purchased three companies that surrounded us to give the 170 square miles in the heart of the trend. To show you the size of that, 170 square miles is three and a half times the size of Manhattan. It’s a very big piece of real estate to own. Now, there are a number of examples that I could show you just to basically demonstrate the importance of this land position. I think one of the most relevant is Cortez Burner; like a hamburger you have your top and bottom buns, and these are the senior gold stocks, they are the fatty carbohydrates, as an investor you don't want to be touching, and you have US Gold, which is the meat of the hamburger, we are the proteins, this is where the growth is. This is the best part of any burger and for investors that was the best part of any investment.

US Gold right now is focused on four key projects. Our exploration program is right up there with the senior gold stocks in Nevada, yet I believe we don't hold all the excess baggage. The early results that we retained from these properties have been extremely encouraging. The grades and width have been similar to what you've seen in other big discoveries within Nevada.

What's really interesting though is that one of the companies that we acquired, called Nevada Pacific, they are focused on gold exploration. Yet, we had an extreme high grade showing of base metal on their property. We came across this showing, which basically assayed if you put a dollar value of $2,200 per ton. Gold Port, the company that we came from, it owned the richest gold mine in the world and the value of its rock was $1,400 per ton. So you have this extremely high grade showing at the surface and there is an old historical mine, I have been there, which also mines high-grade base metal. So right now we have a drill there focusing on this, even though we are a gold company rather than a base metal.

The way that I look at it is that you can invest in the senior and if they make a discovery you're going to get maybe 20% to 30% move in your share price. If you make that same investment in a junior company who makes a large discovery, you are not looking at 20% move, you are pretty much on the rocket ride to the top four.

Now, I am willing to bet that if we are fortunate enough to continue to expand the size of what we found to-date or make a significantly new discovery, you have Barrick and Newmont, meaning pretty heavily over the property boundaries and I say that because Newmont already let the Goldstrike property slip through the fingers in the mid-90s.

And if you look at the size of that deposit it would equal half of Newmont's reserves today. So that one discovery had a big impact. And we also have the infrastructure already in place, the roads, the airport and the mill. So basically to increase your land position is a really incremental cost.

So we are quite active talking to institutional investors and we believe we are probably the only junior exploration company in Nevada that is relevant for institutional investors and I say that because you look at our trading volume versus all the other major junior explorers in Nevada, and we are 3.5 times their volume combined. We are probably the only one relevant for an institution of any size, and I would say that if you look at our shareholder list, most of the large shareholders are significant institutions, whether it be Fidelity at Boston or a [few at Toronto].

Now, I want to spend some time just very quickly talking about the people aspect, because in a junior exploration company the people are usually its most significant asset. As I mentioned earlier, Ron McEwen, who is Chairman and CEO of this company, led Goldcorp for 18 years. During the time he restructured the company; until the time he left it had a compound annual growth rate of over 31%, most of the time the gold price was going down.

Michael Milton, back in the 80s he set a very good example of the importance of people. He will ask his audience to think back 40 years and he would say, well I am going to give you three types of real estate investments. One is a small island off the coast of China. It had just been devastated by war and has no natural resources.

The second option, is those small islands off the coast of China, no natural resources, bad weather, and most of [the roads which] didn’t exist. The third option he'd give people was a country that had a tremendous amount of natural resource, great weather, a 2,000 mile border with the United States, and a lot of land around the Pacific and Atlantic Ocean.

So, he asked people what would be the good investment for real estate at that time? People would probably take the latter, but the three countries were Japan, Taiwan and Mexico. It wasn’t the assets that made Japan and Taiwan great, it was the people and as an exploration company, I believe that applies directly to us.

Through US Gold we are trying to bring back the owner-manager philosophy. Rob McEwen is the large shareholder of the company. He owns 19% of the shares. They currently have a market value of over $120 million. He has no salary, he has no stock options; the only way that he can be compensated is through a higher share price. I am asking you to look at the junior sector and see where you can find that; you will not see it.

So I just want to conclude by saying that, if you are interested in the junior sector, there are a lot of companies that are trying to find gold all over the world, but if you are in South America or in certain parts of Europe, you will find there are title issues, there are security issues, there are labor issues and a lot of the policies have swung to the left. It now takes between three to five years to put a mine into production, from $0.25 billion to $2 billion; and if you look at Bolivia, you look at Mongolia, you look at Venezuela, the governments that are coming in, they have taken the properties, they are putting excess tax, because they say, “Well, we have noticed the deposits were quite so big, so maybe you shouldn’t have all of it.”

Last year you had the President of Bolivia say that he was the United States’ worst nightmare. And you have to wonder if you are dealing with an investment or you are dealing with a ticking time bomb. And I know there are some companies that have their mine operations in Bolivia, but it’s not where I would want to be. For US Gold, we try to create a package that will be attractive to investors. All too often you have a junior exploration company that’s not focused, they are underfinanced, and the CEOs are selling off stock. That’s not the case for US Gold, and so we have gone out there and we have put our beliefs into this company; it’s what an explorations firm should look like.

We trade on the American and Toronto Stock Exchanges. We have 93 million shares outstanding, 109 fully diluted, we trade about a half million shares a day. We have a 52 week high and low of $7.50 down to $3.70, and our current share price US $6.50 a share, giving us a market capital of about US $600 million.

That concludes the US Gold presentation. I want to thank everybody for their time. I would be happy to answer any questions that you may have. Yes.

Question-and-Answer Session

Unidentified Audience Member

I have two questions. One, in showing us some fascinating statistics, did you select the time period out of it -- probably periods in between those that I am not sure are favorable, did you show those?

Ian Ball

Which ones are you looking at here?

Unidentified Audience Member

[Question Inaudible]

Ian Ball

So just to repeat that for the web audience -- the first question was, during some of the earlier graphs that selective time periods were used to show the performance of gold and I agree that I stated right at the beginning, there have been certain time periods where gold outperformed, and we believe we are entering one of those periods. If you look at sort of the Dow chart that I used, we believe that this gold bull market is going to run until 2010, 2011. We are not believers that you should be in gold all the time. We think that the environment that we are seeing today is a place where you should be having some of your money in gold.

Right now personally, we'll be about 90% of our net worth in gold. So, but, we don't tend to be there when we see the environment shift, because you are right, there are periods of time where gold had gone down. We think there's just going to be sort of a mania stage to end this gold bull market as you saw back in '79, '80, and when you start to see that you'd be trying to get out or when you have the Dow to gold ratio, it goes from 5:1 to 3:1, that’s when we tend to make our exit strategy from the bull market. So you are exactly correct.

And the second question was if you can put your money in bonds or other types of investments you are getting interest and dividend, and if you put it in gold you are probably just earning dust; I guess you could say and that's quite correct. You don't earn any interest off gold and how we counter that would be, go ask the Bank of England when they sold -- finished all the gold back at 250, 280 an ounce and put it in US treasuries where they are at today. They probably wish they would have hung on to their gold during that time period, and you are quite correct, you look at the ‘80s where you had junk bonds doing very well and you had gold going sideways, and that was in a place where you probably wouldn't want to have your money tied up in gold, but for the most part, I think you're going to see the US dollar going down. You can see the dollar viewed at a lot less because the interest can be very minimal.

And I think just the relative attractiveness of gold, you are going to see outperforming so much over the next three to four years, but the interest and dividend that you would have received are going to be pretty much miniscule. The price of gold has gone up about 160% in the past four years, compared with almost any other major asset class and you are really nowhere near, so I think just for the time being gold is the place to be despite not getting interest on the bullion. Yes?

Unidentified Audience Member

[Question Inaudible]

Ian Ball

The question was maybe the acquisition of three companies, earlier in the year, there was a fourth company involved in that process called Coral Gold and US Gold didn't proceed to take over that company, so the question was why was that? Well, quite simply when we brought the issue to the SEC, because they had to review all the registration statements -- the SEC looked at the company and said their financials are just not in order, they are going to have to restate their financials and there is no way that you are going to be able to take over this company. We are not going to allow you, because there's such a -- what they sort of saw as a financial mess, that they had to straighten out, before that they would allow such an acquisition to go through. The SEC told us that it would take a minimum of six months to get that sorted out. From our experiences you could probably take the SEC timeframe and times it by four and with this takeover we'd already been hung up for a year, due to various accounting problems that the company has had. So, we decided to proceed without it. Ron McEwen, who is the CEO of the company, he owns 20% of Coral Gold. So the option was always there that we could go back and acquire it, if we felt that it was desirable. At this time, we have no desire to acquire the company.

Unidentified Audience Member

[Question Inaudible]

Ian Ball

I think, they are interesting, but we haven’t seen anything that would tell us that, sort of, whether they are going to have it fixed with the SEC. Yes?

Unidentified Audience Member

So with some of these large gold producers you can look at their reserves, [seeing about their] earnings or cash flow or whatever, and sort of try to value, how would you -- looking at US Gold with the market…?

Ian Ball

Reasonable value.

Unidentified Audience Member

Reasonable valuation or maybe unreasonable?

Ian Ball

Well, I would say, how you look at the value is you look at, sort of you look at US Gold and say well, they have interesting land positions, where you are squeezed between the two major gold producers that on one side of it there has been 33 million ounces of gold discovered, on the other it has been a little bit less, but you have some major discoveries on each side. The last gold discovery in 2003 was Cortez Hills, and through all of the sort of NAV reports that we had seen, basically contributed about 30% to 40% of Placer Domes market cap, which would have came to about $4 billion.

They own 60% of that property, but 40% was owned by Rio Tinto. So the market was already placing a lot of value on that discovery. And if you were to think, well, if you were to make something similar, you go from a market cap of $600 million to $4 billion, you are looking at a large multiple of your current share price. And I think a lot of people are treating US Gold, and saying, well, this company has a really good shot at making a discovery, because they have a strong treasury.

We have $50 million in cash, we have no debt, we have access to capital that most juniors don’t have. I think you are sort of seeing those and the the liquidity factor that we have in the share price is sort of contributing to where the share price is. I think people believe that we have -- there is no guarantee in an exploration, but a reasonable shot from what they are seeing and the potential for making something similar to that Cortez Hills discovery.

Unidentified Audience Member

Can you just briefly mention your current income statement run rate?

Ian Ball

Right now, to talk about the US Gold income statement, it’s very simple, we are cash flow negative, we have no revenue, and we have approximately $45 million to $50 million in the bank. So we are well-funded to carry on our exploration programs for the next two years. If you look at the burn rates, right now we are scheduling about $20 million in exploration expenditures over the next, for the -- I guess you would be looking for the remainder of this year, we would have about $10 million, next year $30 million, and then you would be looking at $23 million or $25 million in G&A for geologists overhead to get the company through. That’s sort of how you would see it play out. The burn rate does sort of dip and rise as the season changes, in winter it slows down, and in the summertime or fall it would speed up, because we can do more explorations during those periods.

Unidentified Audience Member

[Question Inaudible]

Ian Ball

You are welcome.

Unidentified Audience Member

You know, I suppose Nevada has many [charges as a] gold region, but if you look at these Newmont costs, it feels like every quarter their cost affects the development in Nevada, and the costs go up and up and up.

Ian Ball

That’s correct. If you look at the --

Unidentified Audience Member

What's the rate of returns if those investments go down?

Ian Ball

If you look at the mines that Newmont are focused on -- they have one new mine that’s just going into production, Phoenix. If you look at most of the mines, they are old mines, they were discovered back in the 70s, so they are really -- they are [worning] out right now, they are sort of on probably in the last leg of their life, they are going deeper. The pits are getting bigger; they’ve got bigger equipment because the grades are going lower, so all these factors are contributing to this higher price. If you want to look at, sort of some of the new mines that are being put into production, Cortez Hills, for instance, you are looking at probably a cash cost of $240 an ounce. So, it’s sort of well below what it seems for an industry average.

And so that’s really where we see the majors kind of needing these new discoveries in Nevada, because their costs are rising. They currently have all the infrastructures in place, but they themselves are not making enough discoveries to sort of supplement the capacity that they have. So, I would agree with that, and that’s why I think a discovery in Nevada would probably get a premium on it, versus another part of the world.

I think our time is up. So, I thank you very much everybody for your time. It was a pleasure to be here today. Thank you.

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