This is quite a coup for such a small but politically well-connected mining junior. It means that Golden Reign (http://www.goldenreign.com/) is being guaranteed exploration and development rights to a huge swathe of the gold-rich Magadan Oblast (Province) of Far East Russia for the duration of the license held by the Company’s Russian partner, Magadan Geology.

This is strategically significant as it has allowed the Company to “cherry pick” as its inaugural project an established, partially developed gold discovery at the heart of the Kolyma Placer Mining District. This is known as the Stahanovski Project. On a particularly encouraging note is the fact that the project area’s two main drainage creeks have yielded no less than two million ounces of placer gold. 

Of equal importance is the fact that Golden Reign has teamed up with a politically powerful and geologically strong Far East Russian partner. One that was created a few years ago by the Russian federal government with a mandate to promote the development of the Magadan Region’s vast gold reserves.

Specifically, Golden Reign entered into a joint venture agreement with the Russian state-owned organization, Magadan Geology, a little over a year ago to explore and develop the district-scale Pravo-Berelehskoe Property.

Magadan Geology is a shrewdly-managed, vertically-integrated mineral exploration and development agency that has stacked the odds in Golden Reign’s favour. This is a tactical initiative that truly reflects Russia’s overriding preoccupation with winning over foreign investors. In this particular instance, it is believed that the future success of Golden Reign would strongly motivate many other overseas mining interests to infuse much needed capital investments into the regional economy.

Thus, the fledgling partnership is jointly developing a gold discovery in which Magadan Geology has already mitigated much of the risk. This has happened by way of the expenditure at least US $5 million in exploration and development from 2004 to 2005 just prior to Golden Reign’s arrival.

Since then, the Canadian mining junior has enthusiastically and seamlessly taken on the challenge of maximizing the Stahanovski deposit’s full potential. This involves continuing to better define the deposit’s known mineral base, while also working towards doubling these existing resources with a reasonable target of approximately 1.5 million ounces of near-surface gold.

In the mining industry, this would constitute a modestly sized deposit. However, its extremely favourable project logistics suggest that it would nonetheless make for one of the lowest cost mines in the world. In turn, this translates into the prospect of a very lucrative quarry-like gold mining operation.

It would also provide the perfect financial springboard for Golden Reign’s graduation to the exploration and development of larger, high-impact projects within its sprawling jointly held 250-square-kilometre property. We’re talking about the type of world-class projects that are still very much available in a largely under-developed mineral frontier where an estimated mineral inventory of 128 million ounces of gold has yet to be unearthed.

This is particularly relevant in that Magadan Geology has sole possession of a comprehensive, computerized database of all the geological work that has historically been conducted throughout the entire Magadan gold fields (which encompass over one million square kilometers).

This includes everything from grass roots opportunities to advanced stage discoveries, including more than 1,500 known deposits that span the whole mineral spectrum, from coal to gold and silver. With the potential for world-class precious metals discoveries, Golden Reign investors have excellent future exposure to one or more “home run” successes.

Stahanovski Project Overview

As a well-financed North American mining junior with enviable technological expertise and experience, Golden Reign is establishing itself as an early-stage entrant in one of the most geologically fertile frontier gold territories anywhere on the planet. (Please refer further to Part II of this article to the section entitled Russia’s Final Frontier: A Land of Lustrous Untapped Gold Wealth).

As previously mentioned, the Company’s initial focus is the Stahanovski Project where Golden Reign’s partner, Magadan Geology, has already spent in excess of US $5 million in developmental work, including definition drilling. All of which has successfully outlined an open-pittable inferred gold resource of 8.5 million tonnes hosting 773,120 ounces of gold – as defined by Russia’s stringent mineral classification system.

This internationally-recognized Russian resource classification is very comparable to both Australian and Canadian reporting standards and is therefore believed by Golden Reign’s management to be an accurate estimate of Stahanovski’s gold resource base.

Collectively, the four discovery zones that constitute the Stahanovski Project cover an area of 12 square kilometers and benefit from the fact that they are all within a one-kilometre radius of one another. 

Key to Golden Reign’s future prospects is the fact that there is considerable scope to double the size of the deposit’s resource base within the next 24 months. During the same time, it is also believed that this significantly expanded resource projection of approximately 1.5 million ounces can also be upgraded from an “inferred” category to a “measured and indicated” category.  

“Measured and indicated” means that the drill-delineated resource measurements are spaced so closely and the geologic character of the mineralization is so well defined by way of size, shape, depth and mineral content that the resource figure will be very well established. By comparison, “inferred” resources are based on approximate estimations that are supported by assumptions made from limited drilling, trenching and other sampling techniques.

Golden Reign is taking the Stahanovski Gold Deposit to the Next Level

The Company undertook US $300,000 in direct exploration expenditures at Stahanovski during 2006. This included 19 diamond drill holes totaling 1,000 metres of drilling, trenching and additional geophysical surveys.

Assay results are still pending on the 19 shallow drill holes and are expected to be returned within the next few weeks. Much of this drilling was focused on outlining the lateral and vertical parameters of the deposit to develop a better understanding of the overall potential for its size and scope.

Accordingly, more in-fill and step-out drilling is scheduled for the 2007 field season. Much of this drilling is expected to go a long way towards upgrading the deposit’s mineral inventory from an inferred to a measured and indicated category. At the same time, step-out drilling and further trenching is expected to continue to trace the extent to which this emerging deposit extends along strike to the southwest.

Past Stahanovski Project Development Highlights

Mineralization at the Stahanovski Prospect is related to a series of porphyritic dykes and sills (both of which are fracture zones) that intrude sedimentary rocks. The dykes have been shattered by faulting and shearing (structural fissures or cracks in the earth’s surface that are the result of tectonic forces). Consequently, they have been extensively altered and flooded with hydrothermal fluids that are key to the emplacement of high-grade, gold-infused sheeted quartz veins. 

A number of these sills and dykes are clustered among the Zabolochenyi, Burovoe, Berezitovi and Stahanovets discovery zones. Gold grades in the vein systems at each of these zones vary extensively, running from modest ones to eye-catching bonanza values where feeder zones are present. By way of explanation, feeder zones (also known as shoots) are transporters for what is typically rich mineralization that is injected by hydrothermal fluids into the overlying vein systems.

A sizeable portion of the US $5,000,000 spent by Magadan Geology on the Pravo-Berelehskoe Property in 2004 and 2005 was focused on developing a preliminary geological model of the Stahanovski deposit. This involved 2,193 metres of drilling spanning 18 holes at the discovery zones, as well as 3,703 metres of trenching and extensive geochemical surveying. Hence, an impressive overall grade of 2.86 g/t was determined for the deposit’s four main mineralized zones.

The importance of the prevalence of such encouraging grades is underscored by the fact that virtually all of the mineralization is in close proximity to the surface (averaging depths of no greater than 40-50 metres). This includes several key “sweet spots” such as 22,800 square metres averaging an attention-grabbing 10 g/t gold.

In fact, much of the gold is emplaced in exposed surface showings and is therefore amenable to being easily and cheaply extracted. For instance, gold at the largest and most advanced of these zones, the Berezitovi Zone, has been traced along surface for more than 390 metres along strike (the direction of the mineralized system).

Furthermore, extensive ground-based geophysics and corroborative gold-in-soil geochemical sampling at Berezitovi have identified a sizeable mineralized surface footprint measuring approximately 500 metres by 400 metres. This strongly suggests that the known vein structures within this target area may yet prove to be far more prolific once more drilling and trenching is conducted in 2007.

Indeed, mineralization is “open” (continuous) in several directions including to the southwest which is the trend or direction of the mineralized quartz vein system’s strike length. This is where surface gold showings have also been found about 200 metres to the southwest of the main trench. Encouragingly, this emerging new mineralized extension is overlain by a large geophysical anomaly.

All of this points to the fact that the size and scope of this northern quadrant of an emerging multi-zone deposit may offer considerable scope for growth along a lateral plane.

Similarly, the lateral parameters of all three of the other main gold zones have yet to be fully determined, as demonstrated by the presence of hundreds of metres of strike length that remain open in several directions.

The fact that nearly all of the gold throughout the four discovery zones is either at surface or in close proximity means that it is all ideally suited to the development of a large tonnage, open-pittable deposit. In other words, such deposits can typically be excavated in much the same way as a quarry-like operation, translating into significant ore recovery cost savings when compared to underground mining.

Furthermore, the economies of scale that can be realized by way of bulk tonnage ore excavation paint a very favourable logistical picture in favour of the realization of a very profitable mining operation.

The project area also benefits from existing infrastructure, including adequate power and water supplies, as well as an all-year-round road and a network of placer mining roads that provide full access to all the mineralized zones.

The second most populous town in the region, Susuman, with about 8,000 inhabitants, is also situated a mere 40 kilometres from the project area. Susuman has been a service centre for this placer mining district for nearly 70 years and is home to a skilled mining workforce.

Strong Management is Always the Key to Success

With a quarter of a century’s experience in the mining business, Company President and CEO Andrew Milligan also benefits from extensive experience in running publicly traded companies. They include a term as President and CEO of one of the world’s most profitable mining companies, Glamis Gold Ltd. (now part of Goldcorp Inc.). 

 

Another industry luminary who serves as Special Advisor, Exploration is William Meyer, P. Eng. With 44 years of experience in the mining business, his career highlights include serving as Vice-President, Exploration for global mining heavyweight Teck Corporation from 1993 to1998, as well as President of Teck Exploration Ltd. from 1979 to 1998. He is currently Chairman of Minco Mining & Metals Corporation and also serves as a director and officer of a number of public and privately owned Canadian companies.

 

Golden Reign’s Vice President of Exploration is Zoran Pudar, a seasoned geologist who has over a decade’s worth of experience in exploring the Magadan Region. During this time, he has developed a strong rapport with the Far East Russian mining community and has forged close ties with senior pro-mining government officials.

 

Investment Summary

Since the demise of communism, Russia has made slow but steady progress towards the full implementation of a market-driven economy. This transition is now gathering considerable momentum, thereby setting the stage for the rapid growth of Russia’s mining industry.

 

Such a momentous economic resurgence translates into timely and tantalizing opportunities for shrewdly-managed, politically well-connected North American companies like Golden Reign. Furthermore, a healthy economy, liberalized business regulations, and an aggressive pursuit of foreign investment, have clearly set the stage for a modern day “gold rush” among Far East Russia’s frontier gold fields.

 

Golden Reign has therefore formulated a winning strategy by being a front-runner in this pursuit of the Magadan Region’s mineral wealth. This reality offers the very real prospect of the exponential growth of the Company’s mineral inventory and in turn, its cash flow.

 

Likewise, the Company’s future exposure to world-class gold discoveries provides the Company’s share price with plenty of “blue sky” upside. All of which suggests that the right dynamics are already in place to power a sustained uptrend in the Company’s share price during 2007 and beyond.

On a technical note, Golden Reign Resources has a relatively tight share structure with approximately 25.8 million shares outstanding (about 41.4 million fully diluted). Such a scenario, matched with positive news flow, typically acts as a surefire catalyst to higher share price multiples.